Cementos Pacasmayo (CPAC) Q2 2025: 7.1% Volume Growth Drives Margin Expansion Amid Infrastructure Demand

July 22, 2025 | By EarningsIQ Research

Cementos Pacasmayo delivered strong volume growth fueled by infrastructure and self-construction demand, supporting margin expansion despite rising labor costs. Operational efficiencies and disciplined cost management bolstered profitability while the company maintains a conservative capital expenditure approach amid steady capacity utilization. Management signals sustained high-single-digit volume growth and stable margins into the second half, underpinned by public-private infrastructure programs and resilient cement demand in Northern Peru.

Summary

• Infrastructure-Led Demand Growth: Cement and concrete volumes rose driven by public infrastructure projects and self-construction.
• Margin Expansion Through Efficiency: Operational improvements offset wage inflation and project-related cost pressures.
• Conservative CapEx and Capacity Leverage: No major capacity expansion planned, with utilization rates supporting near-term volume growth.

Business Overview

Cementos Pacasmayo is a leading Peruvian cement producer primarily serving the northern region of Peru. The company generates revenue through the production and sale of cement, ready-mix concrete, precast materials, and construction supplies. Its major segments include cement (the largest contributor), concrete and pavement, precast materials, and construction supplies, with a focus on infrastructure and self-construction markets.

Performance Analysis

The second quarter of 2025 saw Cementos Pacasmayo achieve a 7.1% year-over-year increase in cement, concrete, and precast sales volumes, driven by heightened demand for bagged cement and infrastructure-related concrete projects. This volume growth translated into a 5.9% rise in revenues to S/484.1 million. Gross profit expanded by 11.2%, reflecting operational efficiencies and lower raw material costs, which contributed to a 0.8 percentage point improvement in EBITDA margin to 26.9%. Despite a 13.8% increase in administrative expenses and a 28% rise in selling expenses—mainly due to union bonuses and increased advertising—consolidated EBITDA grew 9.0% to S/130.2 million.

Cement sales, comprising 83.7% of cement, concrete, and precast revenue, increased by 6.3%, with gross margins expanding by over three percentage points to 46.7%, supported by lower cementitious material costs and optimized production scheduling. Concrete, pavement, and mortar sales grew nearly 10%, driven by large infrastructure projects such as the Piura Airport, though gross margins contracted due to exchange rate variations and extended project timelines. Precast sales also rose modestly, supported by public sector demand, despite slight margin compression. The company’s disciplined cost management and debt amortization lowered interest expenses, contributing to a 29.9% jump in net income to S/47.8 million.

• Volume Growth Aligned with Infrastructure Projects: Cementos Pacasmayo’s 7.1% sales volume increase was underpinned by public infrastructure initiatives and self-construction demand, reflecting the company’s strategic focus on resilient building solutions.
• Margin Gains Despite Cost Pressures: Operational efficiencies and lower raw material costs offset wage-related expense increases from collective bargaining agreements, resulting in expanded gross and EBITDA margins.
• Financial Health Supported by Debt Reduction: Net debt to EBITDA ratio stood at a comfortable 2.6 times, enabling reduced financing costs and supporting profitability.

The quarter’s results demonstrate Cementos Pacasmayo’s ability to capitalize on Peru’s ongoing infrastructure development needs while managing cost inflation and maintaining stable financial leverage.

Executive Commentary

Strategic Positioning

1. Infrastructure and Public-Private Collaboration

Cementos Pacasmayo leverages the innovative "Obras por Impuestos" (Works for Taxes) program, where private companies finance prioritized public infrastructure projects in exchange for tax credits. The company is among the top five contributors, committing over $100 million this year, reinforcing its role in building resilient infrastructure that withstands Peru’s climate challenges and supports regional development.

2. Focus on Operational Efficiency and Cost Management

Despite rising personnel expenses from union agreements, the company has achieved margin expansion through lower raw material costs and optimized production plans, including scheduled kiln maintenance and clinker production strategies that maximize capacity utilization and cost efficiency.

3. Capacity Utilization and Conservative Capital Allocation

With consolidated cement production utilization at 55.7% and clinker at 71.1%, the company has significant headroom to meet growing demand without major capacity expansion. CapEx remains focused on sustaining existing assets, with no plans for substantial growth investments this year, preserving financial flexibility.

4. Talent as a Competitive Advantage

For the seventh consecutive year, Cementos Pacasmayo ranks as a top employer in the American Talent Index, reflecting its commitment to attracting and retaining skilled professionals, which management identifies as a core driver of sustained execution and innovation.

5. Strategic Market Position in Northern Peru

Serving approximately 32.9% of Peru’s population concentrated in the northern region, the company capitalizes on regional infrastructure growth and self-construction demand, benefiting from limited competition and strong local market dynamics.

Key Considerations

Cementos Pacasmayo’s second quarter results underscore the company’s strategic alignment with Peru’s infrastructure development agenda and its operational discipline amid cost pressures.

Key Considerations:

• Resilient Demand Drivers: Continued infrastructure projects and self-construction trends are expected to sustain volume growth in the near term.
• Margin Sustainability Challenges: While operational efficiencies have supported margins, wage inflation and project-specific cost overruns pose ongoing risks to profitability.
• CapEx Discipline: The company’s decision to maintain CapEx at sustaining levels reflects confidence in current capacity but limits near-term growth acceleration.
• Currency and Contract Risks: Exchange rate fluctuations impact project margins, notably in infrastructure contracts with foreign currency components.
• Debt Profile Stability: A manageable leverage ratio and debt amortization reduce financial risk and support future investment capacity.

Risks

Potential risks include delays or cancellations of infrastructure projects, which could dampen volume growth. Exchange rate volatility poses margin risks, especially for contracts with foreign currency exposure. Additionally, rising labor costs from union agreements may pressure operating expenses if not offset by productivity gains. Competitive pressures from imports and regional players could also affect market share in key areas.

Forward Outlook

For the second half of 2025, management expects:

• Continued high-single-digit volume growth driven by infrastructure projects and self-construction demand.
• Stable EBITDA margins in the range of 28% to 29%, supported by operational efficiencies and cost control.

Management reiterated no plans for significant capacity expansion or increased CapEx beyond sustaining levels (~S/100 million annually). Dividend policy remains consistent, with potential for increases aligned with excess cash generation.

Takeaways

Cementos Pacasmayo’s Q2 2025 results reinforce its strategic positioning as a key beneficiary of Peru’s infrastructure development, leveraging public-private programs and operational discipline to drive volume and margin expansion.

• Volume and Margin Momentum: The company’s focus on infrastructure and self-construction markets is translating into robust volume growth and improved profitability despite cost headwinds.
• Operational and Financial Discipline: Efficient production scheduling, cost management, and debt reduction underpin a healthy financial profile and margin resilience.
• Watch for Project Execution and Currency Impact: Investors should monitor infrastructure project timelines and foreign exchange exposure as key factors influencing near-term margin stability.

Conclusion

Cementos Pacasmayo’s solid volume growth, margin expansion, and prudent capital management in Q2 2025 demonstrate its effective execution of a strategy aligned with Peru’s infrastructure needs. Stable financial leverage and a strong talent base position the company well for sustained performance amid evolving market dynamics.

Industry Read-Through

This quarter’s results highlight the critical role of cement producers in emerging markets where infrastructure deficits persist despite economic growth. Public-private financing mechanisms like Peru’s "Works for Taxes" program offer a replicable model for accelerating infrastructure delivery and cement demand. Operational efficiency gains remain essential to offset inflationary pressures in raw materials and labor. The cautious CapEx stance amid rising utilization rates signals a broader industry focus on maximizing existing assets before committing to expansion in uncertain macro environments. Other regional cement producers should note the importance of aligning product offerings with resilient infrastructure needs and maintaining financial flexibility.

CPAC Materials Cement Infrastructure Operational Efficiency Public-Private Partnerships Capital Expenditure Debt Management