Cementos Pacasmayo S.A.A. (CPACASC1) Earnings Call Transcript & Summary

Good day, ladies and gentlemen. Welcome to Pacasmayo's Second Quarter 2026 Earnings Conference Call. [Operator Instructions] I would now like to introduce your host for today's call, Mrs. Claudia Bustamante, Investor Relations Managing Director. Mr. Bustamante, you may begin.

Thank you, Daniel. Good morning, everyone. Joining me on the call today is Mr. Humberto Nadal, our Chief Executive Officer; and Ms. Ely Hayashi, our Chief Financial Officer. Mr. Nadal will begin our call with an overview of the quarter, focusing primarily on our strategic outlook for the short and medium term. Ms. Hayashi will then follow with additional commentary on our financial results. We'll then turn the call over to your questions. Please note that this call will include certain forward-looking statements. These statements relate to expectations, beliefs, projections, trends and other matters that are not historical facts and are therefore subject to risks and uncertainties that might affect future events or results. Descriptions of these risks are set forth in the company's regulatory filings. With that, I'd now like to turn the call over to Mr. Humberto Nadal.

Thank you, Claudia. Welcome, everyone, to today's conference call, and thank you for joining us today. During the second quarter of 2026, we demonstrated outstanding operational execution and financial discipline. We experienced a strong 15.5% increase in our sales volume for cement, concrete and free cash. This was primarily driven by a robust performance in the self-construction segment and higher demand for bag cement. Consequently, our revenues grew by 15.4%, reaching PEN 558.9 million. Even more impressive is the profitability we achieved from this top line growth. Our consolidated EBITDA reached PEN 174.8 million, an impressive 34.3% increase compared to the second quarter of last year. This resulted in our EBITDA margin expanding by 4.4 percentage points to 31.3%. Furthermore, our net income surged by 61% to PEN 77 million. This speaking profitability is direct result of operational efficiencies, our extremely solid commercial strategy and a shift towards higher-margin concrete solutions. The [indiscernible] financial metrics, which are always important, we continue to lead the industry through sustainability, innovation and specialized solutions. We recently received official verification of our 2025 organizational carbon footprint from [indiscernible], Peru which validates real emission reductions, which are achieving across our operations. On the innovation front, we successfully secured a tax benefit from ConciTech following the approval of our technological innovation project reinforcing our commitment to long-term competitives and R&D. Our technical expertise is also shaping high-impact infrastructure across the country. To give you a couple of examples, we successfully refabricated [indiscernible] at over 5,000 meters of [indiscernible] level for the Yanacocha Sutures project. We also secured the specification of an additional 4.4 kilometers of concrete sheet pilots on the River Mark defense project in Piura, a crucial endeavor as you refer for a media phenomenon. None of these will be possible without our absolutely exceptional team. We are deeply honored to have into the 15 of the American Talent 2026 index nationwide, maintaining our position as the #1 company to attract and retain talent in the cement sector for the 11th consecutive year. We also recently concluded a new addition of our [indiscernible] equipment that inspire program empowering 25 women with Pacasmayo to drive our inclusive culture forward. Recently, [indiscernible] apart is ranking of the most profitable CEOs in Peru, placing us in the top 6. And let me stress the word us because there's no me in CEO. I received this reformation with [indiscernible] knowing full well that profitability is never driven by a leader behind the desk. This is direct or part of the daily effort resilience and a very commitment on every single personal [indiscernible]. This achievement belongs truly entirely to our team. I will now turn the call over to Ely to go into a more detailed financial analysts.

Thank you, Humberto, and good morning, everyone. For the second quarter of 2026, our revenue growth remained very strong, reaching PEN 58.9 million up 15.4% as compared to the second quarter of 2025. This brought our total cumulative revenue for the first 6 months of the year to PEN 1,045 million. representing a roof 13.3 percentage increase over year-over-year. This performance was primarily driven by strong core demand with total shipment increased by 15.5 percentage in the second quarter of '26 and 13.6 percentage for the 6 months less consistently by the vast Cement segment in the self-construction market across Northern Peru. Cumulative gross profit for the 6 months grew significantly by 25.4% to PEN 355.5 million, following a 23% increase in the quarter, supported by structured operational efficiencies and higher shipments. Turning to operating expenses. Administrative expenses decreased by 7.5 percentage in the second quarter of '26 to PEN 65.1 million and by 4.1% for the 6 months to PEN 124.6 million. This reduction across both periods was mainly driven by lower personnel expenses and specifically reaching PEN 75.5 million in the fixed month of 36 million, primarily driven -- primarily reflecting a lower collective again in bonus compared to last year. On the other hand, selling expenses for the quarter remained completely stable year-over-year at PEN 22.4 million. However, for the first 6 months, selling expenses increased by 16.9 percentage to PEN 52.7 million, as higher advertising and promotional initiatives related to marketing and loyalty program for operate retailers were partially offset by decreased provision for telco payments. Moving to overall profitability. Our consolidated EBITDA reached PEN 134.8 million for the quarter, an outstanding 34.3 percentage increase. For the first half of the year, cumulative EBITDA rose to 33.1 percentage to PEN 352.7 million. Consequently, our EBITDA margin expanded by 4.4 percentage points to 31.3% in the second quarter of '26 and expanded by 4 percentage points to 31.6% for the 6 months of '26. This remarkable profitability across both the quarter and the 6-month period reflects our continued focus on operational experience discipline, expense management and a care profitability from. Breaking down our results by business segments. Cement continues to be our primary driver. Cement revenues grew 90.5% to PEN 169.5 million in the second quarter '26, representing 86.3% of our quarterly shipments. For the first 6 months, cement revenues reached PEN 925.9 million a 17.7% increase year-over-year. In terms of margins, the gross margin for cement in the second quarter 2 adjusted is slightly down by 1.5 percentage points to 45.2%, affected by a slight increase in coal prices and higher consumption of imported clinker during the stretch of to maintenance. For the 6 months of site, however, the gross margin remained incredibly stable even at 46.7%. For the account risk statement and mortgage segment, quarterly revenues decreased slightly by 2.6% on to 66.8 million, while 6 months revenue decreased 9.3% to PEN 132.8 million. This decline across both areas is necessarily due to a high comparative base last year, which includes substantial volume from the Piura airport projects that concluded. Despite lower volumes, that segment profitability experienced a massive search, gross margin expanded by a remarkable 17.9 percentage points in the second quarter 266% and 80.1% as to reach 16.2%. This is a secular expansion reflects a regulation of profitability as a segment shift away from low-margin infrastructure towards highly especially, higher-margin cope solution part of our work for the Yanacocha project. Our precast segment also delivered solid progress. Revenues rose 2.6 percentage to PEN 7.9 million in the second quarter, '26 and 3.6% to PEN 14.5 million for the fixed month due primarily by steady part sector infrastructure demand. Driven by higher volumes and optimal dilution of fixed production cost per ton, free cash flow margins jumped 6.2 percentage points to 10.1% in the quarter. And a 68% at it 9.7% for the cumulative 6-month period. Finally, our consolidated net income for the second quarter increased by 1.5% to PEN 77.2 million, bringing cumulative paratonet income to PHP 159.2 million, a remarkable 8.4% increase year-over-year. This strong bottom line growth extends directly from higher operating profit and reduced financial expenses as we continue to constantly reduce leverage. Our net debt to EBITDA are to 218. So summer as both our quarterly and safe performance reflects a highly successful execution of our commercial operational strategy allowing us to capture market upside while strictly depending on our markets. Operator, I will now open the cover questions.

[Operator Instructions] Our first question comes from Francisco Suarez from Scotiabank.

Congrats for such an outstanding results. My question relates with the following. I mean you have for years developed Cementos Pacasmayo from single -- basically from a single plant or isolated set of plants to a multi-plant ecosystem. You have also developed a lot of building solutions, precast model. And I wonder now that you are part of the ecosystem of Holcim, where do you see the opportunities to integrate further in building solutions or perhaps with other operations with Holcim. Can you give us an idea of what to expect the cap?

Thank you, Francisco. It was nice to hear from you. Definitely, if we share something with Holcim because there many things is our vision in terms of building solutions. I mean, they are an outstanding building solution provider on a worldwide basis. We're trying to do the same thing in Latin America as well, of course. I mean we're looking into things that they can help us with, I mean, in terms of collaboration, the operations of it solutions, the plants and the kilns ready-mix operations. So yes, I mean we're talking -- trying to tropicalize the solutions they may have to make our solutions to our customers even better.

Got you. And if I may, a follow-up question on that. Do you think that there is room for opportunity to provide those building solutions also in the city of [indiscernible] now that, as you know, Holcim already about a couple of assets up there. So perhaps you can actually create some sort of synergies over there? Or it is -- or the synergies will be at mostly obtained in the Northern Peru.

I think -- I mean, I can only talk for Pacasmayo. We are an independent company. So these I'm talking are things that I think we are learning and we are going to be able to do a much better job in the region we supply, which is fundamentally a northern part on the [indiscernible].

[Operator Instructions] Our next question comes from Gerard Fort from AFP Integra. Concrete margins improved from minus 1.9% to 16%, largely driven by the Yanacocha project. Given that Yanacocha is expected to contribute only until around the third quarter, how should we think about the sustainability of these margins going forward?