Cementos Pacasmayo S.A.A.

Today, ladies and gentlemen, welcome to Pacasmaia First Quarter 2026 Earnings Conference Call. At this time, all participants are in 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, Investor Relations Managing Director. Mrs. Bustamante, you may begin.

Thank you, Rafael. Good morning, everyone. Joining me on the call today is Mr. Humberto Nadal, our Chief Executive Officer, and Ms. Eli 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. Nihayashi 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, protections, 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 this risk are set forth in the company's regulatory file. With that, I'd now like to turn the call over to Mr. Humberto.

Thank you, Gloria. Welcome, everyone, to today's conference call, and thank you for joining us today. As we discussed last quarter, our company has entered a transcendental new chapter in its almost 70-year history. On March 30, 2026, a significant milestone was finalized with the completion of the acquisition of the Inversiones ASPEE, by Holcim Limited, which now holds a 50.01% controlling interest in Cementos Pacasmayo. This change of control marks a powerful new stage in evolution, opening global opportunities for our teams, and promoting responsible, sustainable construction on a much wider scale. While we look forward to collaborating with a global leader like Holcim, I want to express my deepest and sincere gratitude to the Hoxha Group for a decade of vision and leadership that build the strong foundations upon which we stand today. Our essence, values, and commitment to the development of Peru remain absolutely intact. I would like now to move on to an overview of our results for the first quarter of 2026. In this period, We achieved significant growth and demonstrated remarkable resilience. We saw strong momentum in sales volume with an 11.7% increase year over year, driven primarily by higher demand for cement and concrete. Our solid operational performance was further reflected in our profitability. Consolidated EBITDA reached $177.9 million, an outstanding 32.1% increase compared to the first quarter of 2025. We achieved a significant expansion in our EBITDA margin, which reached 32% up from 27% in the first quarter of 2025. This was driven by discipline, cost control, and gross margin expansion in our core businesses due to operational efficiency. Driven by our commitment to leading the industry responsibly, we reached historic achievements in sustainability this quarter. For the sixth consecutive year, we secured a position in the S&P Global Sustainability Yearbook 2026. Most notably, we have now entered the global top 10% of the construction materials industry, validating the continuous evolution of our ESG management. In terms of social impact, we recently formalized a strategic partnership with the Inter-American Segmental Federation, ISEM, and Habitat for Humanity. This alliance integrates our local Sueños en Concreto program into the 100,000 Floors to Play On initiative, aiming to replace dirt floors with concrete to improve the health and quality of life for thousands of families in northern Peru. As you mentioned, we are very happy with the beginning of this year, and we hope the year will continue in a similar manner. I will now turn the call over to Ellie to go into a more detailed financial analysis.

Thank you very much. Good morning, everyone. For the first quarter of 2026, our revenue growth was very encouraging. Total revenues reached $555.7 million, representing an 11.3% increase compared to the first quarter of 2025. This growth was primarily driven by a robust 11.7% increase in total sales volumes across cement, concrete, and precast. Specifically, cement values show strong resilience, particularly in the fast cement segment. which continues to be our primary driver in the self-construction market in the north of Peru. Additionally, we saw a kick-off in concrete sales as infrastructure projects in the region began to retain momentum. Gross profits for the quarter increased significantly, supported by higher volumes and improved operational efficiency. We are seeing the continued benefits of our optimized production at the Pacasmayo plant. Turning on to operating expenses, administrative expenses for the first quarter decreased slightly by 0.7% compared to the first quarter of 2025, mainly due to lower personal expenses primarily resulting in a lower collective bargaining bonus than in the first quarter of 2025. Selling expenses increased 33.5% in the first quarter of 2020 compared to the first quarter of 2025, making use of higher advertising and promotion expenses, related to marketing and loyalty programs for our associated retailers, as well as an increase in provision for output payments. Moving to profitability, our co-modelator, Delisa, reached 179.9 million dollars, A remarkable 32.1% increase compared to the first quarter of 2025. This was driven by the combination of higher revenues and moderate price adjustment in the segment, as well as a significant reduction in unit costs across our segment and country business lines. Along this same line, our education margin expanded to 32%, a 5% improvement over the first quarter of 2025. This level of profitability reflects our focus on operational estimates and discipline expense management. Moving on to the second segment, Cement revenues grew 16% to $466.4 million, representing 86.5% of our total sales of the quarter. This performance was permanently triggered by higher sales volumes of back cement for the self-construction admin. The gross margin for cement expanded to 48.2% at 1.3% from first quarter 25. This improvement was driven by higher volumes, as large improvements in average prices and lower unit cost resulted from reduced sales time of our clients. For the sandwiched segment and mortar segments, revenue decreased 15.2% to $56 million. This decline was mainly due to a higher comparative base in the first quarter of 2025, which included significant volume from the Pura Airport project. Despite lower volume, the growth margin saw a remarkable expansion of 18.3% between 16.1%. This increasing profitability was mainly driven by sales to the Diana Pocha project, which required most specialized higher-margin concrete solutions compared to a lower-margin effort work. We saw sales increase 4.8% to $6.6 million this quarter, when compared to the same period of last year. This growth was supported by increased demand from the public sector. Gross margin for free cash reached 9.1%, a significant increase improvement of 7.5% over the previous year. We were primarily achieved through higher sales volumes, which allowed for better dilution of fixed costs. Consolidated net income for the quarter was $81.9 million, remarkable 65.4% increase year over year. This growth is a direct result of higher operating profits and a decrease in financial expenses, and we continue to successfully reduce our leverage. Our net debt-to-emission ratio is 2.6 times. To summarize, we continue to deliver solid financial results to these questions by capitalizing a favorable market condition while willingly managing costs to achieve sustained profitability. Operators, can we now end the call for questions?

Thank you. Thank you very much for the presentation. So we will now move to the question and answer section. If you would like to ask a question, please press star 2 on your phone and wait to be prompted. If you are a Dalian, by the way, you can type your question in the box provided or request to ask a voice question. You will just wait a moment or two for the questions to come in. Once again, if you are connected at the phone and you would like to ask a voice question, please press star 2 on your phone keypad and wait for your name to be prompted. If you are connected at the web, you can also request to ask a voice question or send your question as a text. Okay, looks like there are no questions from the audience. So I'm going to pass the line back to the team for their closing remarks.

In closing, our remarkable results this quarter reflect both the resilience of the northern Peruvian market and our team's exceptional execution. While our double-digit revenue growth highlights the strength of our region, it is our discipline management that delivers such a 32% EBITDA market, one of the highest we have achieved in recent years. This peak in profitability is matched by historic sustainability milestones, not only our entry to the top 10% of S&P Global Sustainability Yearbook and our tangible social impact to the 100,000-plus initiative. Ultimately, this research and our finalized partnership with Holcim serve as a powerful endorsement of our clarity and our unwavering belief in the long-term potential of Peru as we focus on driving the sustainable progress of our country. We have one question from Integra.

Yes, so maybe I will quickly read that question from Gerard Ford. Congratulations on the strong Q1 2026 results. Margins and profitability clearly exceeded expectations. I have two questions. Gross margins expanded materially and exceeded expectations. How much of the improvement in cement unit cost do you consider structural operational efficiencies, energy bagging versus more cyclical factors such as volume and mix? Selling expenses increased meaningfully this quarter, driven by marketing and higher credit provisions. How much of this increase should we view as recurring versus one-off or timing-related?

Yes, thank you. In terms of your question, I mean, these are not really cyclical factors. As you know, I mean, our cement sales in the past is very little cyclical in the second semester of the year. Usually the first quarter is the weakest one, but not by a long shot. So I think in terms of selling expenses, we keep investing in positioning our brand. We keep investing in securing a lot of ID notes. A lot of people are very happy. So I think, I mean, our challenge now is to maintain the current market in terms of a bit of profitability. Just to add in terms of the marketing, I mean, to be absolutely precise, I mean, in the second semester, they may be a little more independent of how we are doing the provision.

Thank you. We also got a voice question from Gabriel from Scotiabank. Gabriel, please go ahead. Your line is now open.

Hi, thank you. Congrats on the results. Well, just a quick follow-up question. Now that Holstein has completed the acquisition and the controlling state, can you elaborate on any change that should we expect on capital allocations, strategic priorities, perhaps dividends? Thank you.

Thank you for your question. I mean, I think so far we've We'll have to wait to see what they decide as new shareholders. By the time we keep the course steady.

Okay. Thank you very much.

Okay.

Thank you. Thank you very much. So maybe just a quick final reminder for the rest of the participants. If you would like to ask a voice question and you're connected via the phone, please press star 2 on your phone keypad and wait for your name to be prompted. If you're connected via the web, you can also request to ask your voice question or send your question as a text.

Okay.

We are seeing no further questions. So maybe I will pass the line back to the management team to finalize the call.

Like I said before, Amir had a very exciting beginning of the quarter. And I think, Amir, it's all a reflection of an incredible team always pushing forward. but it's also an enormous reflection on the potential and the durability and the resilience of a country and specifically of a region that has shown always good attitude forward and we are very convinced of the future and the best is yet to come. Thank you everybody for joining us today. Should you have any further questions, you know where to find us. Thank you.

Thank you. This concludes our call for today. We are now closing all the lines. Goodbye.