UNACEM Corp S.A.A. ($UNACEMC1)

Greetings. Welcome to Grupo UNACEM First Quarter 2026 Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Monica Paucar, Investor Relations Manager. Thank you, Monica, you may begin.

Thank you, Sheryl. Good morning, everyone, and welcome to our earnings conference call. This morning, Pedro Lerner, our CEO, will discuss the latest developments that affected our operations during the first quarter of the year. Later, Alvaro Morales, Grupo UNACEM's Corporate CFO, will present the first quarter financials in detail. Please note that we may might disclose some forward-looking statements related to Grupo UNACEM based on currently known facts, expectations and forecasts, circumstances and assumptions regarding future events. Many factors could cause the future results, performance or achievements of Grupo UNACEM to be different from those expressed or assumed herein. So this should be considered for reference only. Pedro, you may begin.

Thank you, Monica. Ladies and gentlemen, good morning. It is a pleasure once again to share with you our performance this past quarter. Our consolidated EBITDA for the quarter reached PEN 320 million which represents a 17.9% decline compared to the first quarter of 2025. However, there is a main onetime effect that impacted negatively our result. The TGP gas pipeline incident, which caused a stoppage in our thermal generating capacity from March 1 to March 14 and force us to supply our clients through the spot market at the [ National Green ] average marginal generation cost of $63.35 per megawatt hour. Where not for this external factor, our consolidated results for the quarter would have been 4.1% above year-over-year, which would have been even higher if the shutdown of our U.S. cement operation kills had not been scheduled during the first quarter, but in the second quarter as last year. Having said this, we see most of the markets in which we operate with positive trends both in volume and pricing. In Peru, our cement and precast units recorded double-digit volume growth, while ready-mix volumes have declined given the completion of large infrastructure projects last year. Ecuador and Chile operations posted strong volume growth driven by market momentum, which is also reflected in better pricing. Furthermore, in Chile, we have entered an agreement with Cementos transit which allows us to manufacture cement using the full capacity at the Puente Anton mill in Santiago, [ Chile Rescue Metropolitana ] as of April. All in all, we remain optimistic in the perspectives of our Latin American markets. UNACEM North America also recorded a sound volume performance, although pricing still remains challenging given the market slowdown. Under the new management, we are confident that our focus on the value proposition of our portfolio and our customer centricity, together with a more integrated approach doing business will bear fruit in the coming months. Finally, I would like to highlight the Grupo UNACEM is not part of the Dow Jones Sustainability Latin American Pacific Alliance Index. Like our recent inclusion to the Standard & Poor's Global Sustainability Yearbook in the top 10% distinction category in the construction materials industry. This is once again a recognition of our thorough efforts to incorporate sustainability as a key element of our decision-making and strategy. We are honored by both recognitions. That will be all on my side. Thanks very much for your attendance this morning. And now I will pass it over to Alvaro for a detailed analysis of our financial results.

Thank you, Pedro. Good morning, everyone. Thank you for joining us today. I am going to present our first quarter results. As Pedro mentioned, this period reflected 2 onetime effects that significantly impacted our results. Nevertheless, the trend in most of our markets remains solid. Our consolidated revenues increased by 7.1% year-over-year in the first quarter of 2026, our portfolio volumes performed well across the board with the exception of ready mix in Peru. Peru, cement dispatches registered 1.5 million tons, an increase of 10.9% versus the first quarter of 2025 which reflects both cement sold and internal transfer for ready-mix production. This confirms the positive trend in self-construction demand that we started to see the second half of last year. On the other hand, clinker exports through the contract terminal reached 143,000 tons, 21.5% lower than those of the first quarter 2025, in line with our commitment to clients this year. Our ready-mix business in Peru recorded 519,000 cubic meters compared to 588,000 cubic meters in the first quarter 2025, a decrease of 11.7%, due to lower demand in the mining segment and the completion of infrastructure projects. This was partially offset by dispatches to housing and private clicks, which remains strong in Lima. Celepsa consolidated volume was 23.6% higher than in the first quarter of 2025. Energy sales reached 1,300 gigawatt hours. As we announced last year, we incorrated Minera abaca contract this quarter. Our higher demand to be supplied by the system injection at higher marginal costs given pipe incident. In Ecuador, cement volumes increased by 11.2% to 306,000 tons sold compared to 275 Southstone sold in the first quarter 2025. Additionally, ready-mix volume was 57,000 cubic meters, up to 16.4%. Overall, we are seeing a pickup in activity in the market after the national strike that took place in the fourth quarter of 2025. U.S. operations. UNACEM North America reported 326,000 meter tons of cement issues materials during the first quarter of 2026, versus 282,000 metric tons in the first quarter 2025, 15.9% higher. Trade volumes grew by 23.7% in while the shapes grew by 9.2%. Ready-mix operation recorded 255,000 cubic meters sold 10% higher than in the first quarter 2025. Aggregates volumes were higher by 7.4%, amounting to 388,000 metric tons. Prices in cement and ready-mix declined while in aggregates remained stable. Despite that, the market is still slowing down. Chile, cement dispatches recorded 137,000 tons during the quarter, which is 8.2% higher year-over-year. Ready-mix dispatches were up by 13.4% with 294,000 cubic meters dispatch. Average prices for both were higher. Consolidated cost of goods sales were 15.7% higher in the first quarter 2026, an increase above the growth in revenues. The main driver behind this was that TGP pipeline incident is limited Termochilca injection capacity between March 1 and March 14, leading to greater exposure to the spot market to meet contractual commitments, is significantly higher operating costs. Likewise, our U.S. cement operation reported temporarily higher maintenance costs recorded during the quarter due to the overhaul of both plants. Last year, in the first quarter, only [indiscernible] cement overhaul were recognized in March. The Haapiplant maintenance was executed in the second quarter of 2025. Our administrative expenses in the first quarter were 9% lower than in the first quarter of 2025 due to lower advisory and third-party services incurred during the period and the effect of some accounting reclassifications to cost of sales. Selling expenses were higher by 5.6% and as we strengthened our sales force across all markets and in line with the higher volumes in most of our geographies. In the first quarter, other income and expenses net recorded an expense of PEN 12 million compared to an income of PEN 5 million in the first quarter 2025. Last year, we recorded nonrecurring income such as proceeds from the sale of land in Ecuador, PEN 2.3 million, insurance recoveries in UNACEM Peru, PLN 1.3 million and tax processes in UNACEM core PLN 3.9 million. On the other hand, this quarter, we recorded several statements to employees as part of the implementation of our global business services unit. Consolidated EBITDA for the quarter was PEN 320 million, 17.9% lower than the EBITDA of PEN 318 million in the first quarter 2. The main driver of this result was the TGP pipeline incident in the impact -- in the impact in the Energy platform. Excluding this event, EBITDA for the first quarter 2026 would have been 4.1% higher year-over-year. Also, lower economies of scale for the quarter due to the maintenance stoppage for both plants in the U.S. will lead to higher costs. This offset the better volumes, prices and operating margins of UNACEM Peru, Ecuador, ready-mix in Chile and our precast operations in Peru. EBITDA margin for the first quarter reached -- first quarter 2026 reached 17.9% versus 23.3% achieved in the first quarter 2025. EBITDA for the last 12 months, PEN 1,316 million compared to PEN 1,631 million in the first quarter 2025. Last 12 months EBITDA margin was directly impacted by the first quarter 2026 results at 21.5% compared to the 23.6% in the same period of last year. Excluding [ TDP ] pipeline incent effect, last 12-month EBITDA margin will have been 26.3%, 4.8% higher. Financial expenses were slightly lower by 0.2% and in the first quarter 2026 compared to the first quarter 2025 with favorable market conditions. Foreign exchange in the quarter achieved from a gain of PEN 28.3 million in the first quarter of 2025 to a loss of PEN 21.4 million. as the Peruvian sol devaluated against the U.S. dollar. For the quarter, we recorded a net loss of PEN 1 million lower than the PLN 112 million of the first quarter. Net income was impacted by lower operating margins due to the 2 one-off events. FX losses and nonrecurring other income in the first quarter 2025. We are confident that in the following quarter, our performance will translate into improved results and mitigate these effects to the greatest extent possible. Consolidated net debt was PEN 5.3 billion higher compared to the end of last year. This comes on the back of a new debt for the construction of Al our new line plant in the [ Condorcocha ] area and nonrecurring events that affected our cash flow generation during the quarter. The net debt-to-EBITDA ratio was 3.2x above the figure at the end of the previous year. In terms of CapEx, disbursements totaled PEN 158 million compared to the PEN 202 million of last year. Our main invested investments are mostly related to the projects in Peru, namely the new primary crusher the new drooping of the clinker fields and the reduction system in [indiscernible] #1 at the [ Tocomgo ] plant. We have also invested in new mixture trucks and pumps at UNACEM Peru as well as the maneuvering dispatch in Ecuador and equipment upgrade to existing facilities in the U.S. Thank you. That will be all from my side. Now we'll open the microphone for your questions.

[Operator Instructions] There are no phone questions at this time. I would like to turn the floor back over to Monica for questions via the webcast.

Thank you. We have our first question from Mariana Gone from Credicorp Capital. I'll read the question. EBITDA was down across all segments this quarter. Excluding one-offs, should we expect some pressure going forward? And how should we think about the margin recovery in the U.S. segment? I'm going to pass it over to Alvaro will answer that. Mariani?

Okay. Thank you for the question. Okay. EBITDA was down only in [ Celepsa ] project. in CELEPSA results due to the TGP pipeline incident. If we get out this pipeline incident, we will have a positive EBIT higher for the quarter in 4.1%. The other thing is that in the U.S. operations, it's a temporary effect that we registered maintenance all in the first quarter. Last year, only trade as we registered one of the plants was registered in the first quarter, and the other at teashop was recorded in the second quarter. It's a temporary effect that really do not affect the real EBITDA that we should achieve. So in that sense, we think that this quarter is better than last quarter because if you get out of the pipeline incident.

Thank you, Alvaro. The next question comes from [ Julio Cezar Placio ] from an [indiscernible]. I'll try to translate out to my best. He wants to know if we have -- if we want to incorporate a market maker for our share, considering that we have some space to improve liquidity and valuation multiples.

Thank you, [indiscernible]. For the time being, we have not considered incorporating a market maker. This is something that may change in the future. But at this point, no decision has been taken in that regard.

Thank you, Pedro. The next question comes from Mariani again. A follow-up question regarding the progress of the [indiscernible] project and whether if we remain on track to start on the second half of 2027. And we can share some guidance expected regarding the annual revenue generations once fully ramped up. I will let Alvaro to have that answer that question.

About the [indiscernible] project, we are on track. We expect to start operations at the middle of 2027. The total investment is around $70 million. In this moment, we are close to $35 million, half of the investment. So we are on track, and we don't see any problems to complete this important project for the growth.

The next question comes from [ Juan Sanchez from Brema ]. How much were the maintenance cost incurred in the U.S. in the first quarter, 26%? Is there any remaining costs to be recognized by the second quarter of 2026? And if so, how much? And it comes with another question. If we are -- what's the strategy that we are considering to mitigate further risk related to the dependence on the [ DVP ] infrastructure in the future, such as insurance coverage or anything else. So Joan, the first question, I'm going to pass it over to Alvaro. And the second question, Pedro is going to answer that to you. So first, we're going to the maintenance cost in the U.S.

Okay. Thank you for the question about maintenance. Last year, the total maintenance registered in the first quarter was $11 million. in 2026, the first quarter, we registered $26 million. It's $15 million less than this year. In the second quarter, it's only -- the remaining maintenance is in drag that is going to be $6 million additionally. So in total, we will have for [indiscernible] 2025 and $26 million for 2026. We made a more deep overhaul of the equipment, mainly in the Tehachapi plant and that's we're going to allow us to have a good operation in the future and stable operation in the future.

Thank you, Alvaro. And Pedro, can you help us answer the -- the second question regarding the dependence on the TGP restructure.

Sure. Our strategy to mitigate further risk is to increase our generation base with renewable energy. We are developing a pipeline of renewable projects, and we also are purchasing energy from renewable power developments at this point. We had already secured a [ PPA with Celesta ] for the Babilonia project to back up our, let's say, contracts with end users. And we're also developing a large photovoltaic our power plant, which is called the [indiscernible] project as well. So we will be backing up our, let's say, our commitments with our own generation portfolio, mainly renewable energy that will reduce our dependence on the TGP infrastructure.

Thank you, Pedro. Okay. And next question from Gerard [indiscernible]. Could you share your CapEx expectations for the remainder of the year, Alvaro?

Thank you for the question. Last year, our CapEx totaled $263 million. And for this year, our budget for CapEx is around $320 million, an increase from last year. That is -- of that amount, 20% to 25% is maintenance costs. and also includes $55 million of our [indiscernible] project.

Thank you. Sherri, we don't see any further questions in the webcast.

And there are no further phone questions. This will conclude today's conference. Do you have any closing remarks?

Well, thank you very much for your time this morning, and please do not hesitate to reach out to Monika should you have any follow-up questions. Have a great day.

Thank you. This will conclude today's conference. You may disconnect at this time, and thank you for your participation.