Cementos Pacasmayo S.A.A.

Good day, ladies and gentlemen. Welcome to PACA SMILE's first quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode, and please note that this call is being recorded. At the conclusion of our prepared remarks, we will conduct a question and answer session. I would now like to introduce your host for today's call, Ms. Claudia Bustamante, Investor Relations Manager. Ms. Bustamante, you may begin.

Thank you very much. Good morning, everyone. Joining me on the call today is Mr. Humberto Nadal, our Chief Executive Officer, and Mr. Manuel Ferreiro, 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. Mr. Ferreiro will then follow with additional commentary on our financial results. 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 filing. 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. We hope all of you and your families continue to stay safe in this difficult time. This quarter's cement shipments were strong and proved once again our resilience. Despite partial lockdowns for the country in February, the main sales volume at the national level increased by 42.7% in the first year of 2021 compared to the previous year. The North clearly outperformed the rest of the country once again, as our shipments increased by 67.4% this quarter compared to the same period in 2020. Although this increase is partially due to the lack of sales during the last two weeks of the quarter in 2020, most of this growth comes from increased sales year over year without taking into account the holding operations. If we compare only January and February, both years, where there was no lockdown before, there is still an increase of almost 40% in the main sales volume when comparing both periods. Really remarkable. Although sales of cement have been and continue to be the main driver of our growth, we are very pleased with the results of concrete and precast. As we mentioned last quarter, concrete sales had already started picking up, and during this quarter they reached the peak levels we had achieved in 2019. And we are confident that these levels are sustainable and should even accelerate in the upcoming quarters. We are especially confident in this because as opposed to 2019, when we were serving demand from medium and large infrastructure and private projects, the demand now comes from small construction companies. We have generated a new customer base that is much more atomized and should therefore be less volatile as it is less reliant on government spending on our investment decisions by large private companies, which is especially important in these uncertain times. As reconstruction spending materializes during the upcoming quarters, concrete volumes should further accelerate. I would also like to mention the increasing sales of light precast materials, such as precast blocks. Although this is a small percentage of our sales, I strongly believe its performance illustrates a successful strategy to transform our sales and provide the construction and building solutions the market needs. Growth in this segment has also stemmed from changes to our strategy and from tackling new and a large number of smaller clients. As we concrete, this allows us for less volatility as we rely on a more optimized customer base. This growth has put some pressure on our margins due to the use of imported clinker. However, we have to always keep in mind it is important not to lose focus on two aspects that are key to understanding the reasoning behind using imported clinker. First, that the use of imported clinker is directly related to higher profitability, even if it comes at a slight margin decrease in terms of percentage. we would simply be unable to sell the amount of cement we are selling if we did not import some clinker and hence take a much higher loss in overall profit. Secondly, and more importantly, there is a clear benefit in delaying the investment of a new plant, both financially and in terms of strategy. In order for a new kiln to be more profitable than using imported clinker, there needs to be a minimum and steady utilization rate, which we cannot guarantee right now since we are still uncertain about sustainability of the current sales volume levels. We applied this strategy in 2017 for the Pira plant and it worked beautifully. 2021 has started as a very strong year for us in terms of sales. We continue to deliver substantial increases in cement, concrete, and precast shipments that come as a result of our constant effort to innovate, expand our markets, satisfy new niches, and always remember to be client-focused. We have already surpassed the most challenging year in our history, and we are willing and able to face the challenges that 2021 may bring. We have almost 65 years of successful operating history in a country that has undoubtedly had its share of political turmoil during that period. We will work as hard as ever to continue fulfilling our purpose to transcend as a company to sustainable development and better generation, always with our people and our country's best interests as our undeniable focus. Before closing, there's two points I need to touch. I would like to inform that based on the strong results of first quarter and considering the fact that the last year, as a precaution, we lowered our usual dividend, our board this morning has decided and approved a dividend of $366 million solid that we will pay in the first week of July. Our strong financial position and positive growth outlook are led us to this decision based on our old philosophy that the cash the company won't be needing belongs and should be given out to the shareholders. Finally, as I'm sure all of you are aware, Peru held presidential and congressional elections on April 11th, and the outcome generated great uncertainty as one of the candidates disputing the election in the runoff represents left-wing anti-free market ideas. This uncertainty has, of course, spread to the stock market, and almost all Peruvian stocks have accumulated losses in the past weeks. Although we are absolutely confident on the strong fundamentals of our company, we can't avoid country risk, and this volatility will remain until there is a final outcome in the first week of June. I will now turn the call over to Manuel for a more detailed analysis of the financial results. Manuel?