Peru: Pacasmayo 4Q15 boosted by public sector demand, new Piura facility

Peru-based Cementos Pacasmayo saw a nine per cent in fourth-quarter volumes which benefitted from the anticipated increase in demand from the public sector, the company said in a statement yesterday. Crucially, supplies were supported by its new Piura facility which improved Pacasmayo's competitive position in the northern region of the country, it added.

Fourth-quarter revenues rose by 8.7 per cent and EBITDA up more than 10 per cent, excluding the impact of extraordinary non-operating income booked in 4Q14. Gross margin for the quarter was lower, as a result of a temporary increase in the use of imported clinker to meet higher demand.

For the full year, strict cost-control measures both in production and in SG&A helped adjusted EBITDA rise by 7.4 per cent and gross margin expanded 180 basis points to 43.5 per cent. The advances were achieved despite a fall in full-year cement volumes due to weak public sector demand in the first half of the year. Revenues remained stable. Net income increased by 13 per cent, excluding the impact of extraordinary income in 4Q14 and 2Q15.

Performance by plant

Installed cement capacity at the Pacasmayo and Rioja plants was stable at 2.9Mta and 440,000t respectively. As of 4Q15, installed cement capacity at the Piura plant is 1.6Mta.

Installed clinker capacity at the Pacasmayo and Rioja plants remained stable at 1.5Mta and 280,000tpa respectively.

Pacasmayo plant
Clinker production volume at the Pacasmayo plant in 4Q15 decreased 5.7 per cent YoY. In 2015 clinker production fell by 4.6 per cent compared to 2014. Due to higher demand requirements, some 180,172t of imported clinker was consumed during 4Q15 – 139.6 per cent more than the 75,207t used in 4Q14. Clinker imports for over the whole year totalled 415,512t, down 6.3 per cent than the 443,526t consumed in 2014.

The cement utilisation rate at the Pacasmayo plant decreased 9.3 percentage points in 4Q15 compared to 4Q14, and decreased 5.8 percentage points in 2015 compared to 2014. This reflected lower demand during the first half of the year and the beginning of operations at the Piura plant during 4Q15.

Rioja works
Clinker production at the Rioja plant remained stable in 4Q15 compared to 4Q14. In 2015 production increased 3.2 per cent YoY, mainly explained by a higher production for inventory purposes during 1Q15.

Piura plant
The first tonne of cement from the Piura facility in nothern Peru was produced and shipped on 17 September 2015. . "The startup of the plant has gone as planned, reaching its desired production capacity level, with all of the cement related equipment working optimally," Pacasmayo said.

With production from three plants, the company said it is able to serve its market more efficiently. The Piura plant also reduces transportation costs. Pacasmayo expects to cease importing clinker in 1Q16, when the ramp-up of clinker capacity at Piura is complete.

As of 31 December 2015, the company has invested approximately US$353.7m in the project. At this point the project is under budget, with a total estimated investment below the original budget of US$386m.

Pacasmayo noted that the demand environment in the northern region of Peru continues to improve. Pacasmayo said it has seen progress in the three large infrastructure projects in its operating zones, as well as some spending on preparations for El Niño. The self-construction market, which accounts for approximately 55 per cent of total volume, remained stable with a slight improvement witnessed. "We expect to see continued progress in infrastructure spending throughout 2016, which will have benefits for the construction sector and for the economy as the whole," the company added.

Cautiously optimistic
Overall, Pacasmayo's outlook for the Peruvian market in 2016 is cautiously optimistic. Domestic economic growth and cement demand are expected to show positive comparisons against 2015, while the official forecast points towards an El Niño that will be more moderate than previously expected. "We will continue to reap the benefits of the cost-control measures executed in 2015, while the ramp-up of Piura and the increased clinker production will have a further positive impact on our results and margins."