Good morning, ladies and gentlemen. Welcome to Pacasmayo's Second Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. 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, Sustainability and Investor Relations Manager. Mrs. Bustamante, you may begin.

Thank you, Tim. Good morning, everyone. Joining me on the call today is Mr. Humberto Nadal, our Chief Executive Officer; and Mr. Manuel Ferreyros, 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. Mr. Ferreyros 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 are related to expectations, beliefs, projections, 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 these risks are set forth in the company's regulatory filings. With that, I'd now like to turn the call over to Mr. Humberto Nadal.

Thank you, Claudia. Welcome everyone to our quarterly results conference call and thank you so much for joining us today. This quarter revenues increased to 3.4% year-over-year, showing a reversal of a negative trend that started almost three years ago. The increase in revenues were mainly driven by concrete and pavement sales related to the Piura airport project, which almost -- in this quarter as compared to the second quarter of 2023. Furthermore, we were able to achieve a 6% increase in consolidated EBITDA, mainly due to operational efficiencies derived from our new kiln in Pacasmayo as well as favorable raw material prices. We are confident that the efficiency achieved will be sustainable over time, and top-line growth should sustain by the continued delivery of concrete and pavement for the airport project and increased participation on public investment projects. These factors certainly make for a more promising second half of the year. Despite this increasing infrastructure related demand, the housing sector in Peru is still by far the weakest driver of demand. According to a study conducted by GRADE, a private research center in Peru, there is a requirement of 142,000 new homes every single year. Social housing programs only cover 30% of this requirement, leaving the remaining 70% up to self-construction. On average, we have to mention that self-construction process takes an appalling 16 years from the acquisition or occupation of the property to the completion of the home. During this time, families spend about eight years in a completely precarious home and an additional eight years in a home under construction. Dirt floors are known to harbor parasites and bacteria that can cause serious illnesses, including respiratory illnesses and anemia, among many others. To tackle this extremely harsh reality, we are working on a variety of different fronts.…

Thank you, Humberto. Good morning, everyone. Our second quarter 2024 revenues were $457.1 million, a 3.4% increase when compared to the same period of last year, mainly due to increased sales of concrete, mortar, pavement, and precast, as Humberto mentioned beforehand. Gross profit increased 5.9%, achieving $161.6 million, mainly due to lower production costs as we discontinued the use of imported clinker and maximized the use of our new and more efficient kiln in Pacasmayo as well as lower cost of raw material, mainly the coal. Consolidated EBITDA increased 6.1%, this quarter, compared to the same period of last year, mainly due to deficiencies, as well as increased revenues. For the first six months of the year, revenues increased 1.3% when compared to the same period of 2023. Gross profit for the first six months of the year increased 7.1% when compared to the same period of previous year, mainly due to efficiencies derived from our optimization capacity, as well as lower cost of raw material. Likewise, EBITDA increased 8.1%, and the EBITDA margin increased 1.7 percentage points for the first six months of the year when compared to the same period of last year. Turning to operating expenses, administrative expenses increased 6% in the second quarter of 2024, and 2.1% in the six months 2024 compared to the same period of last year, mainly due to a slight increase in personnel expenses and property taxes. Selling expenses increased 11.5% and 10.2% in the second quarter of 2024 and the six month 2024 compared to the same period of last year, mainly due to increased software and licenses, third-party services and personnel expenses. Moving on to a different segment, sales of cement decreased 3.6% in the second quarter of 2024 and 4.1% during the first six months of the year…

[Operator Instructions] We have a question from Marcelo at Itau.

Yes, hi, everyone. Good morning. Can you hear me? Okay, thank you. So my question is related to cement volumes for the second half of the year. I mean, you guys mentioned that volumes from precast and concrete were better given the Piura airport project and also higher public investment and so on. But on the low light here, we had this is few weeks bagged cement and sales volume. So could you please give a little bit more color regarding in terms of what we can expect in terms of the bagged cement volumes for the second half as we also know could expect a better macro trend and so on if this could help to support a higher bagged cement for the second half. So this is my first question. And the second question is related to capital location as the company does have any major growth projects and the rate? If you could explain or give more color about what is the management views for capital location going forward. So these are my two questions. Thank you.

Yes, Marcel, thank you for the question. Like I mentioned in my brief speech, I mean, we are optimistic about the second semester in terms of volumes. Usually, I mean, if you take the history, the second semester usually comes better. And we are seeing quite a few public projects getting traction over the last weeks. So I think the volumes on the second semester for sure will be higher than the volumes on the first semester. And regarding capital location, I think, like Manuel said, I mean, we are on a comfortable debt level at this point. We have a club deal that we have to honor over the last six years and we intend to do strictly with that. And we have no need for any further debt or capital at this moment.

Our next question comes from Natalia Leo at JPMorgan.

Thank you. Good morning, everyone. Thank you for taking my question. I just wanted to understand a bit better the dynamics for concrete. And if you expect this volume of sales or this amount of sales to continue in the second half and maybe in 2025, and also what can you tell us about the margins on concrete as well that we saw EBITDA low in the second quarter? Thank you.

Yes. I mean, to complement my answer to Marcelo, one will also be besides the fact that I mentioned the value investment is getting a lot of traction, we have to understand that, I mean, the fishing season has been extremely good this past month, and that will translate on the coming months on higher demand for cement and concrete. The same applies to agriculture. As you know, both fishing and agriculture are crucial to our business because they employ thousands of people, and these people, usually what they do with their exceeding income is invested in improving or starting to build a home. So besides the public investment, which I think will come stronger, we're going to see a higher pull in terms of self-construction, in terms of people that are employed and are having higher salaries. Regarding the demands, concrete and cement also, I mean, are very affected by the level of activity. It has completely recuperated, I mean, their urgency, we would also see better numbers.

We have a text question from Gerard Fort at Integra. He asks, what explained the lower gross margins in concrete and pavement, considering revenue increased 91%, but we saw a decrease on margins year-on-year?

Yes, hello. Good morning. Basically -- it’s basically the mix of the products that we sell in concrete. The bigger the infrastructure project is the lower margin you have. So the big advantage of that is that you can dilute fixed costs better.

[Operator Instructions] So we have a text question from Marco Mejia at Calpa who asks, do you see a recovery of cement dispatches for the second semester? You mentioned new projects for the next quarters. Do you think that this will maintain a concrete demand at these levels?

Thank you for question, Marco. Like I mentioned in the previous questions, I see a much stronger second semester than the first one, absolutely. And I think the fact that public works are going to come into place. Yes, concrete, I think will be a very good second semester also.

We have a question from Steven Matos. Please go ahead. Your line is open.

You're paying dividends.

That's the question.

Yes.

Well, the dividend policy is something that is a decision of the board. The only thing I can say, I mean, we've been pretty consistent over the last years on our dividend policy. And I think I see no reason why that should change this year. But like I said, that's a decision that has to be made by the board.

Okay. What is this company do?

Sorry. Can you repeat the question?

Yes. What is this company do?

What do you mean by what is this company do? I'm confused by the question.

Like what kind of business is the company in?

Well, I would think that if you join the call, we are fundamentally a cement and building solutions company.

Thank you. I'm not seeing any more questions. I'll just give it one more prompt. [Operator Instructions] Otherwise, perhaps we can move to closing remarks. We'll just give it another 10 seconds or so. Okay, so I'm not seeing any more questions, so perhaps we can pass the line back over to Humberto for closing remarks.

Thank you so much. Well, I'm surprised by lot of questions, but this quarter we started seeing some signs of recovery in demand, which we hope can be sustained in the upcoming quarters. The effect that even a moderate increase in public and private investment can happen on our revenues has been evident this quarter. We foresee this positive trend to continue and are very confident that our focus on innovation and overall business of sustainability provide us with tools to take advantage of this positive scenario. Overall, we also have a very promising second semester. Thank you everybody for joining this call and as always, if you should have any further questions, you can always contact us. Thank you and have a very nice day.

That concludes the call for today. Thank you and have a nice day.