Good morning, everyone, and welcome to Ferreycorp's Q3 2024 Earnings Conference Call. Joining me on the call today is Mrs. Mariela García, our Chief Executive Officer, and Mrs. Patricia Gastelumendi, our Chief Financial Officer. We will begin our call with an overview of the quarter, focusing on our financial results. At the conclusion of our prepared remarks, we will open a Q&A session. At that point, if you wish to make a question, please let us know it through the chat box below, or raise your hand and we will announce you. At this time, and through our leaders' presentation, we ask all participants to keep their microphones off. Please note that this call may include certain forward-looking statements.
These statements relate to expectations, beliefs, projections, and other matters that are not historical facts, and are therefore subject to risks and uncertainties that might affect future events or results. With that, I'd like to turn the call over to Mariela García. Mariela, please go ahead.
Thank you, Jimena, and good morning, everyone. It's always a pleasure to have you here and to have our quarterly conference call. Today, we will review a brief presentation, which is available in our website, that supports the discussion of the company's results and main highlights for the Q3, as well as for the accumulated results of the nine months as of September 2024, according to the financial statements that we published last Wednesday. Before going to the results, I would like to highlight an important event of the quarter that was informed last month. That is, the board of directors, on its meeting held on July 2024, and in exercise of what's stated in our dividend policy, approved to pay an advanced cash dividend of PEN 100 million, which corresponds to this year's result.
This amount is equivalent to PEN 0.10 per share, in fact, PEN 0.1064, and was paid last August 27, with August 16 as the record date. Now, let's go to slide 3. As an introduction, I would like to highlight that through this Q3 of 2024, Ferreycorp delivered strong operational results, and was able to keep a solid financial position, as shown by the PEN 163 million soles net profits, that represent an ROE of 19.5% and a ROIC of 13.2%. The main drivers for these results were higher sales, with a relevant boost in Caterpillar equipment for construction clients and mid-sized mining. And not only Caterpillar equipment, but also other brands, as well as the maintenance of a strong gross margin. Let me give you an overview of the present business, business environment in Peru.
Estimated GDP for 2024 is around 3.2%, compared to the -0.6% recorded last year. GDP growth has been positive all year long. The Q1 showed an increase of 1.4%, the growth was 3.6% in the Q2, and in this third one, it's also expected to be 3.6%. A stronger sector this year are being fishing, with a growth of 22%, explained by a very low comparison figure last year. Mining, that is expected to grow 2%, and construction, expected to grow 4.8%. Other sectors, such as commerce and services and manufacturing, are projected to have growth rates of 6.6% and 2.7% this year.
Regarding investment, private investment, is still subdued due to the lack of business confidence, and it has shown an increase of only 3.7% in this Q3, and is estimated to show a modest growth of 2.5% for the whole year. As for public investment, it showed an important growth of 16.2% in the Q3, and is projected to increase for the full year in about 14%. Please turn now to slide five of our earnings presentation to discuss financial highlights as of September 2024, and later, we'll get into details for only the Q3. Consolidated sales as of September 2024 amounted to PEN 5.6 billion, which is an increase of 12% year-over-year.
In dollars, the total sales amounted to $1.5 billion, 11% higher than in 2023, when sales reached $1.3 billion. It's worth mentioning that Caterpillar equipment for mining clients and Cat equipment for mid-size and underground mining, as well as for construction, showed an increase of 28% and 21% respectively, while parts and services had an increase of 14%, comparing results to the same period in 2023. Gross profit was 16% higher year-over-year, and amounted to PEN 1.5 billion, led by greater sales and the maintenance of good margins. If we look at the gross margin, it was 26.8% higher than 2023's level, that was 26%.
As we always explain, this margin has been distorted by the movements in exchange rate during the semester, during that period, which needs to be corrected in order to have a more accurate comparison. In our release, we showed adjusted figures. When we remove this FX impact, the adjusted gross profit would be PEN 1,498 million, which represent a growth of 11% year-over-year, where an adjusted gross margin would be 26.7, below the 27.1 adjusted gross margin recorded last year, but very close to it. Sale of spare parts and services accounted for 56% this nine-month period. Regarding the operating profit, it experienced a 32% boost compared to the same period of 2023, and reached PEN 649 million.
The operating margin was 11.6, compared to 9.8 last year. But again, if we make the adjustments of the FX impact, operating profit would be PEN 643 million, showing a growth of 18%, and the adjusted margins would be 11.5 this year, compared to 10.9 last year, adjusted operating margins. In this nine-month period, SG&A expenses amounted to PEN 861 million, an increase by 6%, which is lower than the 12% sales growth that we mentioned. This increase resulted, in most part, from higher variable expenses, that are precisely associated with the better results because of higher employees' profit sharing. As a percentage of total sales, SG&E expenses represented 15.3%, lower than the 16.3 recorded last year.
As for EBITDA, the accumulated EBITDA as of September 2024 amounted to PEN 848 million, which showed a significant increase of 25% year-over-year. The corporation reported a 15.1% EBITDA margin, higher than the 13.6% obtained last year. After removing FX distortions, Adjusted EBITDA is PEN 842 million, 15% higher than last year's Adjusted EBITDA, and the margin would be 15% compared to 14.7%, both adjusted figures. Moving to the net financial expenses, they amounted to PEN 63 million in this nine-month period, which represent an 18% increase year-over-year, which is mainly a result of a higher average cost of debt, which is now 5.2--5.12, excuse me, percent, compared to last year's 4.94. We observe...
We are starting to observe a decrease in the average short-term debt interest rate, which fell from 6.68% in the Q3 last year to 6.04% this year. While our average medium-term debt interest rate increased from 3.88% to 4.06%, given a restructuring of a portion of debt done during the Q3. We are always evaluating market conditions among our diversified financing alternative, to control the financial expenses growth, and will take advantage of the expected decreased trend in interest rate in the following months. We need now to explain the FX results as of September. During the first semester, we saw the appreciation of the Peruvian sol and the Chilean peso, and therefore, the FX loss was PEN 55.5 million.
However, in this Q3, both currencies reversed that trend and experienced a revaluation, gaining 3.2% and 4.9%, respectively. The Peruvian sol fell from 3.837 to 3.714 during the quarter. Because of these currency movements, in the Q3, we recorded a gain of PEN 39.4 million. While in the Q3 last year, there was a loss of PEN 61 million. So there's almost a PEN 100 million difference in the results of the two quarters. That's why it's very important to see the adjusted numbers. As of September, the net effect is an FX loss of PEN 16.1 million, given that the Q3 gain was not enough to offset the first semester's accumulated loss of PEN 55 million that I just mentioned.
In comparison, in the same period of 2023, we recorded an accumulated FX gain of PEN 1.3 million. So you can see that for the nine months, the difference is only of PEN 17 million, while for the quarter, it would be PEN 100 million. We will explain the adjusted figures when we review the quarter numbers. Because an important portion of this FX gain has happened by the end of the quarter in September, we estimate that there is a remaining balance of FX gain of around PEN 23 million, that will be offset by the decrease in the gross margin in the next few months. The pace of such offset will depend on the future evaluation or evolution of exchange rates.
As we always explain, it is very important to remember that the exchange gains or losses generate an accounting impact, because the inventory is registered in soles, but will be sold in dollars, and the FX loss will be recovered in the upcoming months through the gross margin, and the opposite will happen when there is a gain. After reviewing all the figures I have been going through, the accumulated net profit as of September was PEN 389 million, 33% higher than the PEN 292 million last year. If we exclude the FX effect, the adjusted net profit would be PEN 396 million, 20% higher than the adjusted last year nine-month period of PEN 327 million.
After reviewing this nine-month period, figures and results, I would like to turn the call to Patricia Gastelumendi, our CFO, to discuss the results for the Q3 and also compare them to the Q3 last year. Please, Patricia.
Thank you, Maria. Let's start talking about sales. Q3 sales amounted to PEN 1.9 billion, 7% higher than the PEN 179 million soles achieved in Q3 2023. In dollars, Q3 sales amounted to $507 million, a 5% increase year-over-year, when last year's Q3 sales reached $483 million. During this quarter, Caterpillar mining equipment sales showed a decrease of 22% year-over-year. Important to remember, as we always explain, sales of large mining products may vary significantly among quarters due to its large value and specific delivery dates. As for sales related to equipment for non-mining clients, it is 13% higher than Q3 2023, driven by sales to infrastructure and construction projects originated from activity in local and regional governments, as well as small and medium-sized contractors.
Worth mentioning also is the other brands business unit, which showed an important growth of 33% year-over-year. As for sales of spare parts and services during the Q3 2024, these represented 55% of total sales and amounted to PEN 1,051 million, rising 6% year-over-year. Gross profit increased by 7% during the year and amounted to PEN 501 million. If we analyze this quarter gross, gross margin, it was 26.2%, same as in Q3 2023. When removing the FX impact in both cases, we observed that Q3 2024 adjusted gross margin is still 26.2%, lower than the Q3 last year, adjusted gross margin of 26.7%.
Sales of spare parts and services accounted for 55% in this quarter, same as in 2023. Regarding the operating profit, it jumped 19% and reached PEN 217 million. The operating margin this quarter was 11.3%, and doesn't change if we remove the FX impact. AG&A expenses amounted to PEN 290 million, an increase by 3% year-over-year. This increase resulted in most part from higher variable expenses associated with higher sales and because of higher employees' profit sharing. As a percentage of total sales, AG&A expenses represented 15.2%, lower than the Q3 2023 level of 15.8%. As for the EBITDA, Q3 amounted to PEN 283 million, which showed a 16% growth year-over-year.
The corporation reported a 14.8% EBITDA margin, higher than 13.6% obtained in the same period of 2023. When we remove the FX impact, the Adjusted EBITDA margin is still 14.8%, higher from the same period, 2023. Now, let's move on to slide 11 to review the next, the net profit during the Q3 2024. Net profit during the Q3 reached to PEN 163 million, showing a 149% increase year over year, mainly explained by, first, an FX gain of PEN 39.4 million as a result of the revaluation of the sol in this quarter, compared to the PEN 61.5 million FX loss in the Q3 of 2023.
Second, a boost in EBITDA of 16% or PEN 40 million, and third, at the financial expenses, slight decrease of 1% soles. All of which was partially offset by an increase in depreciation and amortization of 4% or PEN 6 million, and higher income taxes, which grew by PEN 37 million. As we explained before, FX rates showed some volatility within the year. In the first two quarters of 2024, we experienced a devaluation of the currencies, which negatively impacted the bottom line … and in the Q3, this trend reversed. But when looking at the net income adjusted result throughout the year, we can observe that all quarters are showing similar levels, and that 2024's quarter results are significantly higher compared to last year. Please, let's go to the slide 13 to review financial resources and cash generation.
Total debt as of 4 September 2024 amounted to $559 million, 3% higher than the $544 million reported as of September 2023. Of the total amount, 65% is current debt and 35% is long-term debt. In this quarter, we structured a portion of debt, but we are waiting for additional reduction in interest rates in the following months to continue with further restructuring. Regarding the cash balance as of September 2024, we have $37 million, significantly lower than the $62 million held in cash by September 2023. Currently, the corporation do not foresee the need to secure extra cash. We should point out that in September, Q3 of 2024, the company had a negative free cash flow of PEN 138 million, mainly because the higher working capital in the quarter.
Leverage ratio as of September stood at 1.78, showing an important decrease from last year's 2.01. Additionally, the adjusted net EBITDA ratio amount to 1.01 times, way below our common and leading of 3.5. Now move to slide 14 to review the state of financial position main accounts. As of September 2024, total assets amounted to PEN 6.5 billion, showing a 5% increase year-over-year. The main variations are: cash and cash equivalent decreased by PEN 98 million. Inventory went up by PEN 353 million, aligned by increase in sales. Accounts receivable were reduced in PEN 150 million.
Property, plant, and equipment increased PEN 223 million because of the acquisition of a new facility for Ferreyros in 2023, which we explained last year. Machinery and equipment for workshops, and also because of an important increase in rental unit, rental fleet units. The cash conversion cycle improved from 154 to 151. This result is impacted by inventory days turnover, which decreased from 158 days to 151. Collection days was declined from 51 to 48 days, and by payable days, that decreased from 59 to 48 days. Regarding the asset turnover ratio as of September 2024, it was 1.19, showing a significant improvement from 1.09 level achieved of September 2023. Now, please, let's turn to slide 15 to discuss our CapEx.
Net investment in fixed asset as of September 2024 reached to $446 million, and the main items were $22 million in infrastructure investment, and $17 million in machinery and equipment for workshops, $6 million net investment in rental fleets. I will turn the call back to Mariela now for the closing remarks.
Thank you, Patricia. After having explained commercial results and the PNL and balance sheet for the Q3 2024, and I did before for the nine-month period, I want to close the presentation with some remarks. The company continued to achieve robust results during this Q3, thanks to our strong business model and our efforts in a business scenario that is still challenging. We kept focusing on covering the different segments of the market and taking all the opportunities by emphasizing our value proposition to our customers, where we keep providing them with the machinery needed in their operations to build or to build infrastructure, as well as accompanying them in their everyday operations, maintaining and repairing their existing fleets, thanks to the capabilities we have built throughout the country.
Moreover, we remain optimistic about the future boost to new investments. This concludes our presentation for today, and thank you for your time. But now we will be glad to take your questions. As always, please, if you can write your questions in the chat here, in order, just in case we don't hear clearly. But please, let's go to the Q&A, Jimena.
As, as always.
Thank you, Mariela. César, please go ahead. You have the first question, as always.
Thank you very much, and, congratulations for your results. My first question-
No, excuse me, excuse me. Go ahead, César, because I had our mic, our—
The audio off.
Speakers were off.
Okay. No, no, no problem, Mariela. So my first question actually relates to the performance of the non-Cat business, your logistical solutions segment. There was a significant growth in revenue for the period, so I would like to dig a little bit more on what drove that expansion, mainly Soltrak and Trex. Perhaps you can provide a little bit of narrative on what improved the performance of that business. And then my second question has to do with your mining trucks. Perhaps you could make a comment on the outlook for future deliveries, and if there's a preliminary figure for 2025, that would be extremely useful. And I have one more.
Third, and finally, Peru is undergoing, you know, an electoral process, which will start next year and conclude in July of 2026. Do you think that there is a possibility that politicians get back to work next year, and will that be reflective of adding activity in the construction business? So those three questions, if you could provide a little bit of color, it would be extremely helpful. Thank you.
Thank you, César. Yeah. So when we reported our sales divided by business lines, now we showed that in allied equipment, we have a growth, as you just mentioned. So we went from quarters where we had last year, for example, PEN 123, or earlier this year, in the Q2, PEN 106. It was very low in the Q1 of PEN 83, and this quarter, we're having PEN 164. So it has been a change this quarter. What has happened, and one of the contributors there, has been Trex, that is our allied equipment for lifting operations, no? And it was mainly in Chile.
The fact is that we had a very nice forecast for the year, a very nice budget, but we had some delays from the factory. So those equipment arrived for this Q3. So in a way, we are replenishing what we were supposed to be doing in the first two quarters, okay? So it's not that we are seeing a boost this quarter, and it's a change, a trend that has changed, but it's recovering what we didn't do in the first two quarters. And we're still expecting to have a nice year in Q4 for that line, but not to continue this 164, okay?
Going to your second question on mining equipment, we also, as you can see in our figures there of sales by lines, the 3 or 4 quarters that we have been recording there, the 3 quarters of this year and Q3 last year, have been around PEN 100 million or $20-something million, no? We're expecting somewhat better this year, and the same happened last year. We had the first 2 quarters low, and then we had a better result in the third and fourth. The deliveries from factory seemed to accumulate by the end. We're still going to have, in this Q4, probably 2 times what we have been showing the first 3 quarters, okay? And again, it's because of the deliveries.
Your third part of your question, which is what we're expecting for next year regarding authorities, we think it's gonna be a somewhat complicated year regarding the politically wise, no? We were talking with some analysts recently to forecast the year, and we think that the first semester could be better than the second one because of the temperature that is going to start to raise in the second semester of these political discussions and events, no? However, that's on, let's say, the discussion for the election of probably president and Congress, no? But going into the regions, as we have been explaining, now and I think also in the previous call, we're seeing more demand in the regions in the country.
We expect that activity to continue going on, which is what causes a better result in the Caterpillar equipment for other sectors, ex-large mining. So we are still expecting that to continue to happen, small provinces or the regions buying equipment to do some works, or even themselves, or they calling into auctions for smaller contractors to do the works. So that's what we're doing now, covering very well our customers in all the regions, because they are the ones doing the works. And we're expecting that to continue going on.
Thank you very much, Mariela. Thank you.
There's another question through the chat box, from Gerard Ford. I'm gonna read it. It says, "Given Ferreycorp's impressive and consistent dividend yield, coupled with the possibility that the company has already allocated the necessary capital expenditure for future growth, I'm curious about the potential for distributing extraordinary dividends in the short term. Thanks.
Thank you, Gerard, for the question. So, as you know, we have a dividend policy, which... And we stick to that. Every year, we are giving the maximum of, or limit of the policy, with some advanced payments. We have done one that I explained at the beginning of the call, which doesn't mean that there's always the possibility to approve an extraordinary dividend, which has to be approved at a shareholders' meeting. At the moment, we are finalizing our budgets for next year. We have in Ferreyros, our main company, some projects to update some of their shops. You know, we constructed a second CRC in the southern part of Peru, La Joya, four or five years ago.
We continue to do more investments in that facility with complementary workshops. We did also, a couple of years ago, the investment in our distribution center for some automation technology and capabilities. And now we're planning to do next year an update of the shops here in Lima that accompany the CRC. So we're finalizing numbers. At the same time, we are seeing more demand for rental, so we're increasing the rental fleet. You can see some increase, a slight increase in our fixed assets, and it's coming from the rental fleet. And also, we are expecting growth in prime product for mining because of new projects, one that is being very active right now, commenting on the possibilities to go live, no?
Which is Tía María, and also other companies that might be needing, as a brownfield, more equipment. So those three elements could pose a financial burden on our balance sheet, and we need to make sure that, with all of that, we are still able to free more cash. So at the moment, I cannot confirm if there will be an extraordinary dividend, but we are making all these evaluations and analysis and running scenarios, and in order to determine if there is cash for an extraordinary dividend. We did one, I think it was six years ago, five years ago, when we freed cash because we sold an investment that we had.
At the moment, we're freeing cash that comes from the business, but we are also seeing some some need both in working capital or in fixed assets. So let us finish our estimations for next year, and we will go back by the in the shareholders' meeting, or we can if there's something that we can anticipate in our next call, that will happen in February. Thank you.
Mariela, our next question come from Gonzalo Picatoste. Gonzalo, go ahead.
Yes. Hi, Mariela. Well, my question is about the certain aspects that I, I know that you have mentioned, but I want to clarify this. How much money do you expect to spend in terms of capital expenditure for the next couple of years? I wonder if you can commit a range, maybe.
Yeah. So we, some years ago, our range was around PEN 30 million. In the last three years, I think it's been more in the, around PEN 50-60 million, and I think we could be there for the next couple of years with all of this that I just mentioned.
All right. Thank you.
We don't have more questions, I think.
I don't think there are any more questions at the moment. Do you have any final remarks, Mariela?
Yes. So now, thank you. I see 42 people. Well, more than 50-
Fifty
... More than 50 people, 50 friends here in the line. Thank you for your continuous interest in the company, for your continuous comments. We always value your comments, your questions, to continue improving our results. So thank you for your participation, and rest assured that we are covering very well the market, taking all the opportunities, and also focused on in having a strong asset utilization and allocation of capital. Thank you very much, and see you soon.