Good afternoon and welcome to Cementos Pacasmayo’s Fourth Quarter and Full-Year 2015 results conference call. With us today are Humberto Nadal Chief Executive Officer, Manuel Ferreyros Chief Financial Officer and Claudia Bustamante Head of Investor Relations. As a reminder all participants will be in listen only mode. After today's presentation, there will be an opportunity to ask questions [Operator Instructions] Please note that today's conference is being recorded. During the conference call management will make Forward-Looking Statements to assist you in understanding it's expectation for future performance. These statements are subject to a number of risks that could cause actual results and events to differ materially and I refer you to the Company's press release of February 16, 2016 and the Company's most recent regulatory filing for discussion of those risk. In addition, statements during this call are based on management to use as of today and it is anticipated that future developments may cause their views to change. Please refer to the information presented in the slide. The company may at some point elect to update the forward-looking statements made today but specifically declaimed any obligation to do so except where required by law. I will now turn the call over to Mrs. Claudia Bustamante, Head of Investor Relations.

Good morning everyone and welcome to Cementos Pacasmayo’s fourth quarter and full-year 2015 results conference call. Our presenters today will be Mr. Humberto Nadal Chief Executive Officer and Mr. Manuel Ferreyros, Chief Financial Officer. After today's presentation there will be a question and answer session. Please note that today's call is being recorded and the contents of this call cannot be reproduce in whole or in-part without expressed content from the company. I will now turn the call over to Humberto Nadal, Chief Executive Officer.

Thank you Claudia. Good morning everyone and thank you for joining us on today's conference call. The fourth quarter of 2015 are really turning point for Cementos Pacasmayo as it was the first quarter in which we started seeing a contribution from our Piura facility the most advanced cement plant in Latin America. Furthermore, two weeks ago green care production began and we can proudly say that the plant is a 100% operational as we speak. We are very pleased to also inform that we completed the project under the budget and right on scale. The completion of the Piura facility is the milestone in the history of the company. We are being working towards completing plants for more than three years. This 1.6 million tons facility is one of the most advanced in the world. Its strategic location will allow us to serve demand in different locations with a greater degree of efficiency, lowering our logistic costs. It also has a capacity of 1 million tons of clinker allowing us to eliminate completely the use of imported clinker which can add volatility and high prices or expense base. The rough facility continues for the fourth quarter and we expect it to run at close to 60% in mid-year which we feel is an appropriate level given the current market dynamics. Turning now to demand environment, we saw as we have predicted earlier in the year, continued improvement in the fourth quarter of 2015. The local government in Peru has now completed their bidding in Peru, bidding in Peru following elections at the beginning of the year and consequently we are seeing increased spending on infrastructure projects. Looking at the three major projects in outside of operation the biggest project was made at the Longitudinal de la Sierra Highway. We…

Thank you, Humberto. Good morning everyone. As a confirmation we had a strong end to the year with robust fourth quarter financial. Revenues for the fourth quarter were up 8.7% to 351 million. The main factor in this as Humberto mentioned, was improved cement, concrete and blocks with sales growth 12% compared to the fourth quarter of 2014. Gross profit was up 3.1% with the gross margin of 42.6%, the slightly lower gross margin was due to the fact that we use had a 180 thousand metric tons of imported clinker to meet increased demand. It is important to mentioned that we plan to stop using imported clinker altogether now that the Piura plant has began producing clinker. Looking at the results for the different segments. Cement sales were up 7.6% due to increased demand from all sectors, but mostly from the private sector, which increased shares of sales from 17% in the third quarter 2015 to 22% in the fourth quarter of 2015. Sales of ready-mix concrete and blocks to reported very well increasing 35% and 69.6% respectively, compared to the fourth quarter of 2014 reflecting the increasing demand from infrastructure projects. Quicklime sales decreased 33.3%, compared to the previous year, mainly due to decreasing demand. However, the gross margin increased 15.7 percentage points, because of our sustain effort to increase sales of the ground Quicklime, which as a higher sales price. Turning now to operating expenses, we achieved a decrease in administrative expenses thanks to efficiency measures implemented throughout the company. Our reduction in the headcount as well as a lower taxable income and an accounting diversification. Selling and expenses were up by approximately 1.1 million in line with higher cement volumes. The results in the fourth quarter of 2014 benefited from 10.4 million of extraordinary income from…

Now we are ready to take any questions please.

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Our first question is from Daniel Rojas of Merrill Lynch. Please go ahead, sir.

Humberto, Manuel, Claudia, thank you for hosting the call today. My question is regarding your outlook for 2016. In the release, you mentioned that you're cautiously optimistic and you are also seeing a positive comparison versus this year? I was only hoping to get more information from you is if you think you could be able to see volumes growing at low single digits or higher mid-single digits given the recovery of the Peruvian economy and what we saw this quarter with volumes growing significantly? And my second question is regarding the phosphate project. You gave us a lot of detail on the last pages of the report on how you're moving forward. I just wanted to see if you could give us more out to confirm this? Thank you.

Sure. On the production, I mean as all you know we have a late summing up of already 41 days. So we will be cautiously optimistic, I think we should see sales moving up anywhere between I would say low one digit numbers. On our cost side, like I said I mean we remain cautiously because even though the last four quarters was very strong and we are still very optimistic with that. Turning on to Phosphate like I said in my last call and not this year. We have completely changed the basic engineering of the project, we have positive networking value and interesting IRR and now we are really very focused of our partners Mitsubishi to evaluate the next steps on that project. We are analyzing various strategic decision but the one thing that I think all investors have to be rest assured is, we will make the best decision to create shareholder value. We will not take any unnecessary risks that's all we're saying, we're starting more strategic options and hopefully we'll be able to move ahead into one of the targets in the coming months.

Let me follow-up with that. These first two months of the year, have you seen volumes increasing at a pace that we saw in the fourth quarter or do you think they will normalize towards the what you said the low one-digit number?

No, I think we got to be more close to what we saw at the end of the last year.

Okay. Thank you, that’s pretty good.

Thank you.

Thank you. The next question is from Andres Soto with Santander. Please go ahead.

Thank you, Humberto, Manuel and Claudia. Congratulations on the results. You mentioned that the main driver for the gross profit deterioration was the imported clinker that you had to use in the fourth quarter and you also mentioned that you already started producing clinker in your new Piura facility. With these how much improvement in EBITDA margin can we expect in 2016?

Hello, Andres. Yes, we have used 180,000 tones in the last quarter of 2015 compared with 75,000 tones of the last quarter 2014. This year we already started some as Humberto mentioned, producing clinker and producing cement in the Piura plant. So we shouldn't use any more imported clinker for the rest of the year. This should take us at EBITDA margin to be a little bit over 34%.

Okay. Thank you very much.

Thank you. The next question is from Benjamin Theurer of Barclays. Please go ahead.

Good afternoon, Humberto, Manuel, Claudia. I have a couple of follow-up questions. So, just out of curiosity on that clinker, obviously, the amount of imported clinker was quite intense for the fourth quarter. Was there any specific reason why you've decided to import that clinker instead of actually producing it at that Pacasmayo plant where according to the release at least I saw that capacity utilization on clinker would have been some spare capacity here? So, is it more of costs associated and it was just an economic situation that the short-term import was cheaper than producing it in Pacasmayo, what was the thinking behind? And then looking into 2016, if you could - well now having Piura basically finished the expansion, if you could share your thoughts on guidance 2016 onwards and also as a result of obviously, most likely less CapEx in 2016 to come in comparison to 2015 and 2014, what's your outlook on dividends if you're going to increase pay-out here in the coming years? Thanks.

Hello, Benjamin this is Manuel. We have used this amount of clinker because the demand went up very quickly and I agree with you, we have the spare capacity, but what you have to realize is that we've shutdown all the verticals here during the last year. That's the main reason why we've used imported clinker, mainly I would say in the Piura plant and Pacasmayo plant, because all the vertical kilns are in not operation right now, because we were preparing the whole plant or the whole company for the beginning of the Piura plant.

Another to add to Manuel is saying, we have to realize that we're at the end of the campaign of [indiscernible] was not strong as it was being over the year. So as part of your question, I mean, with Piura up in running, our CapEx would be very robust and focused and looking towards dividend this year, I mean we see going back last year, we had a higher dividend because like we announced we have faced a certain amount of mining in the Piura plant. So now we go back to our more regular levels which is what we had in 2014.

Okay. So you're basically reducing a little bit the payout for 2016 onwards, but nonetheless CapEx is going to be less than that in prior years, right?

The total CapEx for 2000 or estimated CapEx for 2016 will be around $30 million and in that it's around $10 million left from the Piura plant.

And just to complement that what I'm saying that the dividends, we'll remain stable and I mean, it could be at least little bit, but we don't see any dramatic changes over the last two or three years.

Okay. And then just one follow-up question on Piura clinker? So, you've mentioned about two weeks ago, so meaning 1st of February you launched clinker production in Piura. Did you still import some clinker during January or have you been self-sufficient out of the other two plants in the northern part?

That was January 29 to be absolutely exact, because a are very important day for us, I know we have not imported any more clinker, what we're doing is, we are just finishing now the stock we had for the clinker but we have stopped completely all imports of clinker.

Okay. Perfect.

Thank you. The next question is from Adrian Huerta from JPMorgan. Please go ahead.

Thank you. Good morning, everyone. My question has to do with the SG&A, if you can just explain further the decrease that we saw on SG&A and the accounting change that you did? And the second question, if you can comment on average cement prices in December, how do they compare year-on-year? Thanks.

How are you. Basically as you mentioned in the press release there are two or three main issues, one it is less expenses, because we have reduced some headcount and some personnel expenses, but I will say the most important one is that lower taxable income, because here in Peru the law -you have financial statement you can use - the hedge is protecting our FX effects. So we don’t have FX effect financially in our financial statement, but in our taxable statements you can consider the hedge as an income. So, we are as a fact we are paying the tax during the next nine years and then the year number 10 tax will be increased. That’s the reason why you see how much tax we will pay there is very important amount of tax deferred in our balance sheet. And going on to your price question, if we were to look at a whole year [indiscernible] price increase a little bit more 3%.

Perfect thank you. And what was the accounting changes that took place on the SG&A?

Basically the reclassification of some tax issues and the duration of some [indiscernible].

And how can we measure the reduction? I mean on a quarter-over-quarter basis it was around 12 million. How much was due to the tax and how much was due to the headcount reduction?

Yes I would say that the headcount reduction should be around 30% of that.

Thank you so much.

Thank you. The next question is from Dario Valdizan of Onyx. Please go ahead.

Hi guys. Thank you very much for your time. I just got three questions. In the report, when you discuss cement, yes cement results, you mentioned that gross margin decreased 4.3 percent points in 4Q 2015 due to production costs in Piura and ramp-up in the start-up process. My question is kind of like a follow-up to what was asked before. How much of that drop in margins? Your gross margin was 48.2% compared to 51.4% on the third quarter. How much of that 300 basis points drop was from the use of higher imported clinker and how much was related to other costs?

Yes I would say that the imported clinker should be around 75% of that decrease. So the rest if fixed cost of the Piura plant, it's not working at full capacity. So basically I would say the biggest amount is for imported clinker.

Okay. So, of the increase of 17.5% year-over-year on cost imported clinker represents much of that difference?

Yes.

Okay, perfect. Thank you. And then does the clinker utilization rate for the Rioja plant becomes a problem as it is pretty high? Will you be using clinker from Piura sending there or will you use clinker from Pacasmayo because the utilization rates for the Rioja plant look pretty high for clinker?

Dario this is Humberto how are you. You know really what we are doing now is we are going to supplying some markets from the Piura plant which is more profitable, now that we have our own clinker, you should see that utilization of clinker rate from real high drop in the coming months and Piura will be taking that part of the demand.

Perfect. And last question if I may, regarding the phosphate project, do you guys have an estimated date when the Fosfatos del Pacifico Board will meet to take a decision on this project?

No, we don’t. We are evaluating our options, I think one we are very much more clear on the financial decisions and we will call on the board to discuss it.

Okay. Do you think this is more something for the second half of the year then?

Yes.

Okay, perfect. Well thank you very much and congratulations for the results.

Thank you Dario.

Thank you. Our next question is from Pablo Ricalde of Credit Suisse. Please go ahead.

Hey, Thanks for taking my questions. I have two questions if I may. The first one is regarding your pricing strategy for 2016. I don't know if you already have raised prices for the cement business in the first two months of the year. And the second one is, if you expect any delays in public spending from this year presidential election??

I'll take the first one and then I would like [indiscernible]. I think public spending like we have to realize now that unlike 10 years ago central government which will be new in summer months is only responsible for one out of every $3 being spent to the regional governments which are already one year and I like I said in my presentation. I think they are spending at a pretty good rate. So, I think two-third of the spending should keep a very strong rate depending who gets elected and the experience in government we don’t foresee really any drops in public spending. if anything, I was reading our chart yesterday [indiscernible] governments and how in the first six months of the new government’s really public spending picked up really good. So we are very optimistic about that. And could you please repeat me the first part of the question I couldn’t hear?

Yes. The first one is - it's regarding the pricing strategy for 2016, and if you have already raised prices in January - cement prices in January?

Yes we did slight increasing in January and I guess we closed that year a little bit over 3%, this year, we are foreseeing probably a little bit higher of a price increase in that and we already started that.

Okay. Thanks a lot.

Thank you.

Thank you. The next question is from Francisco Suarez of Scotia Bank. Please go ahead.

Hi good morning, [indiscernible] gentlemen. Thanks for the call. Congrats on the results, gentlemen. A question on - one step we reached the 60% or so utilization rates at Piura. Are you expecting one of your long dry kilns in Pacasmayo to be shut down as well? And the second question relates a bit with how order purchases that you have done in coal. I mean, you usually do those kind of purchases during December for tax purposes. Did you make additional purchases of coal during December and what amount that would be?

HI Francisco this is Humberto [indiscernible]. There are no additional purchase of coal, I think we are really permanently optimizing our inventory of coal and we are many suppliers, so we are very comfortable with working coal capital we have right now, so that is no to that. On the first one and I said before let’s wait and see when Piura is up and running and its going to be cost decision whether we optimize the use of kiln number two in Pacasmayo or not. Kiln number three would remain in production as usual and then the other one is going to depend like I said - policy is going to, we’re going to dispatch the last time that we sell from the kiln and the plant and these are the higher margin. It has to do nothing with production efficiency and also where the market is located. So I think it’s something we’ll have to see in the coming months.

Fantastic. Thank you very much and congrats again.

Thank you.

[Operator Instructions] And the next question is from Samuel Bevan of Aberdeen Asset Management. Please go ahead.

Hi, good afternoon. Thanks very much for the call and congratulations on results. I wanted to discuss the phosphate project once more and how you intend to finance the project. Previously you've mentioned off-balance sheet project financing, but given that leverage ratio should be a bit better and you may have some [indiscernible] next year, just wanted to get a handle on why you feel comfortable in terms of your leverage ratios?

So like we've always said, I mean the finance of the project - the Phosphate project will be based on project finance. I think on the conservative side that project finance rate should be at least 50% of the total investment probably more into 50%. And that’s when I said that we are evaluating strategically how to move along in the project, one key part of the evaluation is the work within the banks right now in terms of how high can that number be. So I mean our strategy towards the results so I think in the end most of the structure finance will be through project finance. So this means if you go back now to Pacasmayo and I think Manuel mentioned that we are closing the year with 1.8 metric to EBITDA ratio decrease something but we are in a comfort zone as Piura steps up and comes in and really CapEx should be very low in the coming year. we should start going lower than that. So I think, I mean as you all know, we already proved it in Pacasmayo running a bit and we don’t intend to change that.

Okay, excellent. Thanks.

Thank you. At this time, I would like to turn the conference back over to management for any closing comments.

Thank you. To some up, we are cautiously optimistic about our Q4 2015. Even though with we've closed 2015 in a great rate. Full-year results 2015 were strong and I think more than anything demonstrated, our operating leverage in the fourth quarter. The end of clinker import, we improved cost basis further and we are very happy about this. With this stronger economic growth compared to the last year and lesser infrastructure spending which we have always said over the last years. El Nino remains a risk even though its lower now according to the recent forecast, but we still have to keeping it in mind. Based on these factors, we are like I said before forecasting our full-year cement volumes to grow between 1% to 3% for this year, being very prudent in that forecast. And this of course will impact our EBITDA and our margins for that year. I would like to thanks everybody for joining us today and especially the interest in our company. I would hope to comeback always with good results. Thank you very much.

Thank you. Ladies and gentlemen this does conclude today's teleconference. You may disconnect your lines at this time. And thank you for your participation.