Cementos Pacasmayo S.A.A.

Good day, ladies and gentlemen. Welcome to Pagas Mayo's second quarter 2023 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, Mrs. Claudia Bustamante, Sustainability and Investor Relations Manager. Mrs. Bustamante, you may begin.

Thank you, Jenny. Good morning, everyone. Joining me on the call today is Mr. Humberto Nadal, our Chief Executive Officer, and Mr. Manuel Ferreiros, 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. Ferreiros 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 filing. With that, I'd now like to turn the call over to Mr. Humberto Navarro.

Thank you, Claudia. Welcome everyone to today's conference call and thank you for joining us today. This quarter, we experienced some demand side challenges as heavy rain during March and April caused a decrease in demand. Since May, we have seen a consistent decrease in our cement daily shipments, which gives us the confidence to believe that the second half of the year should be much stronger in terms of demand. It is also important to note that even though revenues were down 12.1% in the second quarter, when compared to the second quarter of last year, a beta margin reached 25.5%, an increase of 1.5 percentage points year over year. This is a very clear indicator of how we are maximizing profitability by striving for efficiencies in this complex demand environment. I would like now to focus on a remarkable event that happened this quarter. As I mentioned before, last year we launched the COSACO, a new technology that allows the cement bag to disintegrate completely within the concrete mix, achieving zero waste. This is a significant innovation in a country like Peru, where most cement is still sold in bags, but it is also a challenging one. Most foremen have learned how to build empirically through experience that is passed on from generation to generation. Innovating in this context is indeed difficult. Moreover, many of these families put their life savings in these houses. They need to be absolutely confident that the quality, properties, and the final product will not be affected at all by this new technique. And this is precisely why a strong marketing campaign is so important. The COSACO Innovation obtained the Grand Effie this quarter, as well as a Gold Effie in the Innovation in Product Marketing category, and a Silver Effie in the Positive Change in the Environment category. The Effie Awards are a symbol of outstanding achievement recognized worldwide that honor all types of effective marketing. It is truly remarkable that a cement company with original scope, such as Pacasmayo, obtained the greatest prize that is usually awarded to companies with a national presence and in the mass consumption segment. We are indeed very proud of this outstanding achievement, especially because the product truly represents our DNA. The effective marketing of this innovation is key to the achievement of its full potential as a zero waste product, as well as to gather to the gradual change in consumers' mindset towards eco-friendly and more sustainable products. As we have mentioned before, we have been producing cement with a lower clinker factor for over 25 years. Pacasmayo's portfolio is mostly made up of blended cements, which have a lower impact on the environment since they use less clinker in their production. Currently, over 85% of our cement sales come from blended cements, which have an average of 22% less clinker than traditional portal cements. achieving significant savings in CO2 emissions during production. However, we consider that this is not enough. We are voluntarily, and I repeat, voluntarily committed to a reduction of 20% in our emissions by 2030, which means we have to decrease our average clinical factor to at least 68% by then, at the case of 3.5 percentage points compared to our 2022 average. We continue innovating to find alternative materials can deliver the same or even better quality cement with an even lower carbon footprint. After speaking about sustainability, I would like now to focus on another fundamental pillar of our strategic model, digital transformation. This is no doubt a popular term these days, but one has to be at the center of those businesses that truly want to be at the forefront. Changes in purchasing behavior of consumers and open access to digital technologies are catalysts of this new wave of digitalization. These trends create both opportunities and risks, as they challenge the status quo. In this changing world, with ever more demanding consumers, a clear digital transformation strategy that seeks to guide and accelerate the company towards its vision, with a focus on collaboration and constant innovation, is even more relevant. And although we have talked about this before, I want to tell you about a great milestone for Pacasmayo, as we have taken the first step towards becoming a fully data-driven organization. We now have a clear strategy for data management. We have established a data and analytics committee to both prioritize and sponsor initiatives. We have now founded the first Agile unit within Pacasmayo, and we are designing and making available an ecosystem of corporate data to our own data lake. And finally, developing case studies to lead and implement data and analytic solutions that add value to our businesses. We are aware that we still have a long way to go, but we believe we are now better prepared to face the future and will continue to promote flexibility, agility, and innovation through our business model and culture to continue along this path. Finally, I would like to briefly update you on the status of our Pacasmayo plant drug optimization. We are very pleased to inform that the kill number four is now operational and wrapping up its production and expect to reach its full capacity during the next couple of weeks. This newer technology will allow us to save 15% in the consumption of kilowatts per hour per ton of clinker and an estimated reduction of 30% in the consumption of the kilocalories per ton. We were able to deliver this project on time with an overall investment of $80 million for the original 600,000 metric tons of clinker per year. I will now turn the call over to Manuel to go into a more detailed financial analysis.