Cementos Pacasmayo S.A.A. (CPAC) on Q2 2021 Results - Earnings Call Transcript
Operator: Good day, ladies and gentlemen, and welcome to the Cementos Pacasmayo Second Quarter 2021 Earnings Conference Call. At this time, it's my pleasure to turn the floor over to your host, Claudia Bustamante. Ma'am, the floor is yours.
Claudia Bustamante: Thank you, operator. Good morning, everyone. Joining me on the call today is Mr. Humberto Nadal, our Chief Executive Officer and Mr. Manuel Ferreyros, 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 term and medium term. Mr. Ferreyros 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, strength 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.
Humberto Nadal: Thank you, Claudia. Welcome, everyone to today's conference call and thank you for joining us. This quarter Cementos volume continued strong despite political uncertainty, proving the resiliency once again. After a very tired runoff for the entire election on June 6, yesterday, Mr. Castillo was proclaimed the next President of the country. There are claims of fraud for Keiko Fujimori and her supporters which have brought people to the street to protest against the way the elections were conducted. On the other hand, Mr. Castillo showed mix signals of moderation and radicalization so there's no clarity on how the next government will conduct itself. Despite this uncertainty, we are confident that the cement sales will continue strong this year, mainly because our current customer base is not very dependent on macro factors. On the one hand, the self-construction segment continues to be our most relevant source of income. And yet historically are very well correlated with high level macro factor at least in the short term. On the other hand, the demand coming from the public sector is basically related to the government to government agreement between Peru and the UK for the reconstruction of El Nino, and staffs from the government bodies were put in place to offset the effects of COVID-19. We strongly and firmly believe that neither one of these policies should be affected by changes in government. They are well underway and others related finance. Although sales of cement have been and continue to be the main part of our goal, we're very pleased with the results of concrete and precast. As we mentioned last quarter, sales of precast materials such as precast blocks are substantially increased in the past year. Although, these are more representative of our sales, relative performance illustrates how successful strategy with our overall sales and provide a construction solutions and marketing. We have generated a new customer base mainly bringing the sales of precast blocks to housing projects. We believe this strategy will bring significant increase in sales volume, taking us one step closer to our long-term goals. This quarter, we also very proud of Silver Effie, the brand experience category for construyexperto.pe, an online platform created to redesign the foreman's experience, with training and tools that help them be very and much more efficient. And as we've seen in previous quarter, we are convinced that our solid results come from the fact that we have been able to reinvent ourselves. To be one step ahead in terms of digital integration and how we can provide a base of our experience to more of our customers. This award is again recognition of these efforts. Although things are definitely positive and absolutely business continuity, solid results would not be possible, if we do not look at our business in an integrated manner. This quarter, we have obtained recognitions that are very relevant in terms of stability and business continuity. First, this year we have improved 37 procedures in the Merco Talento Perú, which aims to identify the 100 most attractive companies to work in our country, where we saw significant progress, which shows our commitment to enhance human capital management, and we will strive to continue improving in this ranking every year.
Manuel Ferreyros: Thank you, Humberto. Good morning, everyone. Second quarter 2021 revenues were $449 million, a 285.7% increase when compared to the same period of last year, mainly due to the halting of precipitation during most of the second quarter of 2020, as well as an increased baggage cement shipment. However, even if we compare this quarter revenues to those from second quarter of 2019, there is still significant increase of 37%. Gross profit increased substantially this quarter compared to the second quarter of 2020, mainly due to the fact that it was close to zero during same year because of the whole variation and subsequent effects in gross profit. There was no dilution of fixed costs. Consolidated EBITDA was $90 million in the second quarter of 2021, representing a significant increase when compared to the second quarter of 2018, when EBITDA was negative, for the above mentioned reasons. We expect an important increase in EBITDA for the rest of the year. During the six months of 2021 revenues increase 119% and gross profit increase 116% when compared to the same period of 2020 mainly due to the increase in sales, as well as the above mentioned halting operations from mid March to mid May. Turning to operating expenses, administrative expenses for the second quarter increased 41.7% compared to the second quarter of 2020 in line with increased sales, but mainly due to the substantial reduction in expenses during the lockdown period in 2020. As well as an increase in workers profit share as a result of improved results. Selling expenses in the second quarter increased 71.1% compared to the second quarter of last year mainly due to the above mentioned decrease in expenses during 2020 and an increase profit share. During the six months of 2021, administrative expenses increased 28% and selling expenses increased 29% when compared to the same period last year, mainly due to increases in sales as well, a savings implemented during the six months of 2020, offset the negative effects of the housing operations.
Operator: Our first question today comes from
UnidentifiedAnalyst: Thank you, gentlemen for the call. I have one question. And I was wondering if margins get being affected by clinker imports? If that is the case how much of does a ton of imported clinker costs?
HumbertoNadal: Yes, of course. I mean, you have to realize that we said year and a half ago when we were coming to close for facilitation of clinker capacity, in my case was important clinker. Can we have enough volume that makes sense to be the new plant? Even though they either fix the margins, I mean, we're still going to make more money in terms of solid the thing is the margin will go down because imported clinker is more expensive. Regarding how much more expensive it is normally around $20 but it all depends on the exchange rate and in terms of the freight costs.
UnidentifiedAnalyst: Okay and can we expect these lower margins to remain for the rest of the year? And then they should gradually should go up?
HumbertoNadal: I know I think I mean, the first part of the year, yes, we use an important component, important clinker because we have to do maintenance to our accounting unit Pacasmayo, this would be a lower rate in the second quarter of the year. And then like I say, it all depends. I mean, what happens to the exchange rate and the freight rates. So yes, margins could remain the same or could go a little bit higher.
Operator: We have one more question from Andrés Soto with Santander.
AndrésSoto: Perfect. Good morning, Humberto, Manuel and Claudia. Thank you for the presentation. My question is in your earnings release you mentioned political uncertainty as some of the causes for slowdown in volumes in the second quarter compared to the first quarter of this year. I would like to understand why are you seeing at this point? Do you believe that now that Pedro Castillo has been confirmed as president, we can expect an improvement in those projects, or were sort of understand by this point or you expect political uncertainty to persist. And if that's the case, what will you need or your clients will need to hear from Castillo administration in order to become more constructive on produce political outlooks?
HumbertoNadal: Hello, Andres and thank you for the question. I think I said in my opening remarks. I think our self builders and GPG agreements have little to do with the macroeconomic fundamentals that they are expecting a lot of things to be announced from President Castillo. I think they are growth dynamics. I think when we hear our daily dispatches, we see a very strong rate and we think we're going to for sure across this year of being a record year and demand we think for the time being, and this is my personal interpretation there not so much waiting for the time people will keep on working the same way they get on work into the COVID-19 crisis, and that's the central and formal economy, which is part of a robust economy of Peru.
Operator: There appear to be no further questions at this time; we'll turn the floor back to Mr. Humberto Nadal for closing remarks. Please go ahead, sir.
Humberto Nadal: Thank you so much. In summary, Pacasmayo is operating for 64 years, you know wonderful. I mean, this is wonderful as a given complex country. Always Peru has, we've had many kinds of governments going from the left, center and right and we know, we will not only prevail, but accumulated valuable experience. We see every new chapter on opportunity to learn and grow. And we are ready to take on the challenges that may come due to the confidence and our solid fundamentals, our integrity, and our capacity to adapt to lead a way to a promising and sustainable future. We remain a single cement of our company, and we will always remain very optimistic about future of our country. Thank you very much for your interest in our company. And as always, Manuel, Claudia and myself, we are always here in case you have any further questions. Thank you very much. Have a very nice day, and please stay safe.
Operator: Ladies and gentlemen, this does conclude today's teleconference. We thank you again for your participation. You may disconnect your lines at this time and have a great day.
