Cementos Pacasmayo S.A.A. (CPAC) Q2 2025 Earnings Call Transcript

Cementos Pacasmayo (CPAC) reported robust Q2 2025 results, with sales volume up 7.1% year-over-year and consolidated EBITDA rising 9% to PEN 130.2 million, driving a 29.9% surge in net profit. This strong performance was attributed to increased demand from infrastructure projects and disciplined execution, despite higher operating expenses from union negotiations. The company highlighted its strategic focus on Peru's infrastructure development, particularly through the 'Obras por Impuestos' program, and projects continued high single-digit volume growth for H2, maintaining EBITDA margins around 28-29%. With sufficient capacity and no major CapEx plans, CPAC anticipates consistent or potentially higher dividends, aiming for record full-year results.

Analysis

Cementos Pacasmayo (CPAC) reported a robust Q2 2025, with a 7.1% year-over-year increase in sales volume translating to a 9.0% rise in consolidated EBITDA to PEN 130.2 million and a 29.9% surge in net profit. This performance was primarily driven by strong demand from infrastructure projects, a trend the company is actively cultivating through its participation in Peru's 'Obras por Impuestos' (Works for Taxes) program, with over $100 million committed this year. While the core cement segment's gross margin expanded by 3.2 percentage points, the concrete and pavement segment experienced a margin contraction of 3.2 percentage points due to project-specific cost overruns and unfavorable FX rates, which management described as a short-term 'learning curve'. Operating expenses were elevated, with administrative and selling costs increasing 13.8% and 28% respectively, due to a non-recurring bonus related to a three-year union agreement. Looking ahead, management projects continued high-single-digit volume growth for the second half of 2025 with stable EBITDA margins of 28-29%. With capacity utilization in the 70% range and no major growth CapEx planned, the company appears well-positioned to absorb future demand and signaled the potential for higher dividend distributions.

Key Decisions for Investors

• Given the strong infrastructure-driven demand and positive guidance for high-single-digit volume growth, investors can maintain a constructive outlook on the company's performance.
• The lack of major CapEx plans coupled with management's shareholder-friendly capital return policy suggests investors should anticipate a stable to potentially increasing dividend yield.
• It is prudent to monitor gross margins in the concrete and pavement segment for improvement, as successful execution on large projects is critical to validating the company's strategy and meeting profitability targets.
• Investors should note the company's dependence on the rollout of public infrastructure projects, which introduces a timing risk that could impact near-term volume forecasts.