Business Context and Reporting Period
This Form 6-K, filed on March 7, 2014, by Cementos Pacasmayo S.A.A. (Pacasmayo), summarizes the company's Annual Report for the fiscal year ended December 31, 2013. Pacasmayo is a Peruvian cement manufacturer and distributor, part of the Grupo Hochschild conglomerate. The filing announces the upcoming Annual Shareholders' Meeting scheduled for March 25, 2014, and confirms that the Form 20-F will be issued by the end of April 2014.
Key Financial Metrics
The following consolidated financial results for the fiscal year 2013 are reported in Peruvian Soles (S/.):
- Revenue: S/. 1,239.7 billion (6.0% increase from 2012).
- Gross Profit: S/. 523.4 million (14.6% increase from 2012).
- Net Profit: S/. 152.3 million (decrease from S/. 155.6 million in 2012).
- EBITDA: S/. 348.9 million (increase from S/. 278.5 million in 2012).
- Operating Margin: 42.76% (up from 39.04% in 2012).
- Net Margin: 11.95% (down from 19.71% in 2012).
- Debt & Liquidity: Issued US$300 million in international bonds in February 2013. Current ratio improved to 9.0 (from 4.75 in 2012); Acid test ratio improved to 6.6 (from 3.02 in 2012).
- Dividends: Declared S/. 58.2 million (S/. 0.10 per share) charged against cumulative results.
Material Changes vs. Prior Period
While revenue and gross profit increased significantly due to operational efficiencies and volume growth, net profit declined slightly. The primary driver for the net profit decrease was a non-cash exchange rate loss of S/. 48.4 million resulting from the depreciation of the Nuevo Sol against the US dollar, which impacted the valuation of the US$300 million international debt. Conversely, EBITDA grew by approximately 25% due to cost reductions and process improvements. Production volumes increased, with the Pacasmayo plant producing 2.1 million metric tons and the Rioja plant increasing production by 19.9%.
Guidance, Outlook, and Strategic Initiatives
New Plant in Piura: Significant progress was made on the new cement plant in Piura, with a total estimated investment of US$385 million. Construction commenced in October 2013 following Environmental Impact Assessment approval. The plant is scheduled for completion in the second quarter of 2015, with a capacity of 1.6 million metric tons of cement and 1.0 million tons of clinker.
Expansion in Rioja: The expansion of the Cementos Selva plant in Rioja was completed in 2013, doubling cement production capacity to 440,000 metric tons per year.
Debt Management: Proceeds from the US$300 million bond issuance were used to prepay long-term debt with BBVA Banco Continental (S/. 202.2 million), with the remainder allocated to the Piura plant project.
Risks and Contingencies: The company reports no knowledge of judicial or administrative proceedings that would significantly impact operations or financial position as of December 31, 2013. However, the company notes exposure to exchange rate fluctuations, evidenced by the 2013 net profit impact.
Investor Verification Checklist
- Verify the impact of the S/. 48.4 million non-cash exchange rate loss on future earnings given the volatility of the Nuevo Sol.
- Confirm the timeline and budget adherence for the US$385 million Piura plant project scheduled for Q2 2015 completion.
- Review the full Form 20-F (expected by end of April 2014) for detailed audited financial statements and cash flow analysis.
- Monitor the utilization of the US$300 million bond proceeds and the company's debt service obligations.
- Assess the competitive landscape in Peru, noting Pacasmayo's 20.9% market share and the growth of private investment in the region.