Peru: Cementos Pacasmayo expands consolidated EBITDA margin

Peru: Cementos Pacasmayo expands consolidated EBITDA margin
Published: 24 July 2015


Peruvian producer Cementos Pacasmayo's consolidated EBITDA increased 8.4 per cent to PEN178.5m (US$59m) in the first half of this year from PEN169.7m in 1H14, achieving a margin of 31.5 per cent compared with 27.3 per cent a year earlier.

Net income increased 19.4 per cent to PEN96.5m. Gross margin increased to 43.1 per cent in 6M15 from 40.5 per cent in 6M14.

Second-quarter results were impacted by continued weakness in cement demand from the public sector. This led to a 9.4 per cent reduction in cement volumes sold, and also lowered YoY EBITDA, excluding PEN8.8m of income from the sale of a real estate asset. On a positive note, the self-construction market, which accounts for more than 50 per cent of Pacasmayo's output, remained resilient, with stable demand compared with a year ago.

Cement production volume at the Pacasmayo plant decreased by 10.4 per cent YoY in in 2Q15 and by  9.1 per cent in 6M15 compared to 6M14, due to lower cement demand, mainly from local and regional governments. Cement output from the Rioja plant fell 4.6 per cent in 2Q15 compared to 2Q14, and 2.1 per cent in 6M15 versus the same period of 2014.

Clinker production volume at the Pacasmayo works was 8.1 per cent lower in 6M15 compared to 6M14. Likewise, during 2Q15, 38,455t of imported clinker were consumed, 63.7 per cent less than the 105,977t used in 2Q14. During 6M15, a total of 114,983t of imported clinker was consumed, 51.3 per cent less than the 236,323t consumed in 6M14. The company expects to stop using imported clinker as soon as its new Piura plant is fully operational.

Clinker production volume at the Rioja plant decreased 3.8 per cent in 2Q15 compared to 2Q14. In 6M15 production increased 7.6 per cent compared to 6M14, mainly explained by a higher production for inventory purposes during 1Q15.

The company has now entered the final phase of construction at its Piura plant, and the US$386m facility is expected to begin cement production during 3Q15 and to begin clinker production by the fourth quarter, on time and on budget. The facility will reach 60 per cent capacity by year-end, a level which we have established as the optimal capacity utilisation given the current conditions in the Peruvian cement market.
This is then expected to lead to the elimination of clinker imports.

Looking ahead to the second half of 2015, independent forecasts point towards a recovery in Peruvian infrastructure spending. Local government spending improved slightly late in the quarter, and we expect this trend to continue through the second half, while the self-construction market is expected to remain at or near its current level. Based on this, full-year cement volumes are expected to be similar to those of 2014.

Pacasmayo expects to incur additional costs in the second half of the year, related to the start-up of the Piura plant. The efficiency measures the company has implemented in the last 12 months mean it will be in a position to absorb these additional costs without reducing full-year margins compared to 2014, Pacasmayo added.