Cementos Pacasmayo S.A.A. — FY2022 Form 20-F
Reporting period: Year ended December 31, 2022; filed April 27, 2023. This is an annual report, not a standalone fourth-quarter filing. Consolidated statements are prepared under IFRS in Peruvian soles (S/). The auditor issued an unqualified opinion on the financial statements and internal controls.
Business context and financial performance
Pacasmayo produces and sells cement and related building products, principally in northern Peru, where it is the only cement manufacturer. Cement shipments were approximately 3.4 million metric tons, or 23.9% of Peru’s total, while installed cement capacity was 4.94 million tons per year.
| Metric | FY2022 | FY2021 | Change |
|---|---|---|---|
| Sales of goods | S/2,115.7 million | S/1,937.8 million | +9.2% |
| Gross profit | S/652.0 million | S/559.4 million | +16.5% |
| Gross margin | 30.8% | 28.9% | +1.9 percentage points |
| Operating profit | S/355.3 million | S/318.3 million | +11.6% |
| Profit for the year | S/176.8 million | S/153.2 million | +15.4% |
| Profit margin | 8.4% | 7.9% | +0.5 percentage points |
| EBITDA (non-IFRS) | S/493.9 million | S/453.9 million | +8.8% |
| EBITDA margin | 23.3% | 23.4% | -0.1 percentage points |
| Operating cash flow | S/111.8 million | S/170.6 million | -34.5% |
| Capital expenditures | S/190.1 million | S/97.3 million | +95.4% |
EBITDA is management-defined and is not an IFRS measure or a substitute for profit or operating cash flow. Cement, concrete, mortar and precast generated 92.8% of 2022 sales. Cement revenue rose 13.5%, primarily from higher prices and a more favorable product mix, despite lower volume. Cement shipment volume fell about 5.4% from the record 2021 level.
Liquidity, debt and balance sheet
- Cash and cash equivalents were S/81.8 million at year-end, down from S/273.4 million. Current assets were S/1,188.5 million and current liabilities S/953.1 million; the resulting current ratio is approximately 1.25.
- Inventories increased to S/885.0 million from S/605.2 million, a major working-capital use. Management attributed weaker operating cash flow mainly to inventory purchases and higher interest and tax payments.
- Net cash used in investing was S/176.2 million; net cash used in financing was S/121.5 million. Cash decreased S/185.8 million during the year.
- Total financial obligations were S/1,593.2 million at December 31, 2022, compared with S/1,545.4 million a year earlier. S/618.9 million was classified as current. Debt included local-currency bonds, the Club Deal loan, short-term notes and U.S.-dollar Senior Notes.
- Cross-currency swaps hedged US$132 million of dollar exposure at year-end. The remaining US$131.6 million of 4.50% Senior Notes matured and was repaid on February 8, 2023, using the Club Deal credit line; the related swaps were settled. The Club Deal carries a 5.82% rate and has a stated maturity in 2028.
- The company reported compliance with its debt covenants at December 31, 2022. Total liabilities were S/2,119.0 million and equity was S/1,195.1 million.
Material changes and management commentary
- Higher selling prices and improved cement mix supported revenue and gross-margin growth, offsetting higher coal, electricity and other input costs. Energy represented approximately 31% of cement production costs in 2022, versus 25% in 2021; imported clinker remained a significant cost.
- Operating expenses increased 23.0% to S/296.7 million, including higher personnel, administrative, selling and distribution expenses. Finance costs increased 6.9% to S/95.1 million.
- Management’s stated priority is to sustain cement sales volumes in 2023; the filing provides no quantified revenue, profit or volume guidance. It expects recurring capital expenditure of about S/75 million annually over the next three years, plus spending on the Pacasmayo plant project.
- The approximately US$70 million Pacasmayo optimization project is intended to add an estimated 600,000 metric tons of annual clinker capacity. Completion was expected in the second half of 2023 and could reduce or eliminate clinker imports if demand remains near then-current levels.
- Peru’s GDP grew 2.9% in 2022 after 13.2% growth in 2021; construction-sector growth was 3.5% after 34.7%. The company cited inflation, political uncertainty, social unrest and weaker private investment as pressures on demand and costs.
Risks, contingencies and unusual items
- Operations, customers and sales are concentrated in northern Peru. Flooding and Cyclone Yaku in early 2023 caused temporary road interruptions, workforce and delivery constraints, and interruptions affecting a road between a quarry and the Piura plant; management reported no severe physical damage to its properties.
- Energy and imported-input price volatility, foreign-exchange mismatch, inflation, political instability, construction demand, natural disasters, regulation and potential competition are material disclosed risks. Coal accounted for 21.3% of cement production cost in the risk discussion; imported materials represented approximately 37.9% of production costs.
- A S/28.9 million non-current receivable relates to mining royalty payments made under protest for 2008–2009. The tax authority’s position conflicts with a prior Constitutional Court ruling; management and external counsel consider recovery highly probable. The auditor identified this uncertain tax position as a critical audit matter.
- Management reported no material legal or administrative proceedings. The filing also disclosed S/3.4 million of claims for which counsel considered success possible but not probable.
- In January 2023, the company acquired Corporación Materiales Piura S.A.C. for approximately US$9 million. The annual report states there were no other financial-condition changes known since the financial-statement date.
Important facts for investors to verify
- Whether 2023 sales volumes and pricing can hold up after the 2021 record, given the 2022 volume decline and the company’s dependence on self-construction demand.
- Actual completion, cost and capacity impact of the Pacasmayo clinker project, and whether it materially reduces imported clinker needs.
- Post-February 2023 debt balances, repayment schedule and covenant headroom following refinancing of the Senior Notes with the Club Deal facility.
- Inventory quality and turnover, cash conversion and liquidity after the substantial 2022 inventory build and fall in cash.
- Outcome and timing of the S/28.9 million mining royalty dispute, along with exposure to future tax assessments.
- Operational and distribution effects of northern Peru flooding, road access, energy costs, political unrest and inflation.