The growth of this prime product of the machinery that we are selling across different industries allows us to continue deliver new equipment, and therefore we're enhancing and expanding the installed base, which secures a long-term relationship with our clients, assuring we will stand by to them to make sure they will have the best Physical Availability on the iron, and the best operative procedures with our consultation and advice. Assuring at the same time a long stream of revenues in aftermarket services and solutions. Profitability and capital returns remain healthy as reflected in our ROIC of 9.4% and an ROE of 14.4%. Our disciplined focus on operational efficiency yielded a 6.6% reduction in operating expenses year-over-year, improving our SGA to sales ratio to 14.2%. Now let's go to slide six, please.
Turning to our broader macroeconomic environment, I would like to briefly address the political landscape in Peru. The conclusion of the presidential runoff has significantly reduced the uncertainty that we had during the electoral period, providing clear long-term visibility for the country's economic trajectory. The government plan of the winning candidate has many signs of positive outlook for the economy as a whole and for the sectors we serve. Furthermore, with the official inauguration scheduled next Tuesday, July 28, the political transition is now nearly complete, establishing a solid foundation for renewed business confidence and strategic planning. In the next few days, precisely on Tuesday, we will know who will be the members of the cabinet, and we will start to listen their plans. For Ferreycorp, this improved clarity is a constructive development that supports our strategic outlook.
We view the market's focus on macroeconomic stability and private investment as highly positive. In fact, we are already observing a marked recovery in business confidence among our key clients, which is translating into sustained demand across our sectors. The economic momentum is primarily driven by strong activity in the private sector, highlighted by a 10% growth in the construction industry and a significant 13% increase in private investment, factors which together provide a very solid foundation for our ongoing growth. Looking at the second quarter of 2026, the country has maintained a resilient economic performance with the GDP growth reaching 3%. Regarding inflation, the rate stood at 3.8% during this period. Although it is currently above the central bank's parameters, monetary measures are already being implemented to ensure it converts back to the target range in the upcoming quarters.
This strong commitment to macroeconomic stability continues to provide a predictable and healthy environment for our business operations. Please turn to slide eight for our earnings presentation to discuss financial highlights as of June 2026. As mentioned, for the second quarter of 2026, consolidated sales reached PEN 2.04 billion, up 11% year-over-year in local currency. Measured in dollars, our primary invoicing currency, total sales reached $592 million, as we just mentioned, representing the 18% growth that we mentioned also, compared to the $501 million recorded in the second quarter 2025. Crucially, this strong top-line expansion was primarily driven by new equipment sales across key sectors. In terms of our sales mix for the quarter, spare parts and services remain our largest revenue contributor at 49%, followed by prime products, which includes new Caterpillar machinery and Allied brands at 39%.
It is important to highlight the significant expansion of prime products in our sales mix compared to the same period in 2025, surging from 30%- 39%. Other business lines accounted for 8%, while rental and used equipment represented the remaining 4%. Before diving deeper into our margins, we must highlight that we recorded a positive non-recurring event at our Chilean subsidiary, Trex, involving the recovery of an overdue account receivable that had been provisioned in prior years, as was previously disclosed in our quarterly reports. The payment was finally received in April, driving an increase of approximately PEN 34 million in the operating profit and PEN 25 million in the consolidated net income, impacts that we don't anticipate are going to repeat in the following quarter. This is a one-off. From an accounting perspective, this collection involved movements in different accounts.
You see a positive impact of PEN 65 million under other income and expenses. However, it came along with other adjustments in commercial and cost of goods sold items that generate this final impact of PEN 34 million and PEN 25 million in the operating profit and the net income. Given the substantial magnitude of this non-recurring event, the numbers we will present from here on will isolate the impact of this extraordinary recovery, so it was possible to compare to previous quarters where we didn't have that non-recurring income. This will allow us to share a clear and transparent view of our underlying business and core ongoing operations. Let's go to the financial highlights. During a quarter of solid revenue growth, our operating expenses totaled PEN 289 million, representing a 6.6% reduction compared to the PEN 310 million recorded in the second quarter of 2025.
As a percentage of sales, operating expenses improved significantly to 14.2%, down from the 16.8% a year ago. This progress clearly reflects our disciplined focus on cost optimization and continuous operational efficiency. Turning to profitability, operating profit for the quarter reached to PEN 194 million, up 30% year-over-year. On an adjusted basis, isolating foreign exchange translation effects, operating profit rose to PEN 200 million, an increase of 20% compared to that of the second quarter 2025, also adjusted by foreign exchange. Furthermore, our EBITDA for the second quarter reached to PEN 266 million, reflecting a strong 18% growth interannually, while adjusted EBITDA reached PEN 272 million, up 12% year-over-year. These metrics demonstrate the fundamental strength of our customer value proposition and the operational resilience of our underlying business.
Regarding profitability for the second quarter, consolidated gross margin reached 23.4% compared to the 24.7% in the second quarter of 2025. This variance is fundamentally driven by a shift of the sales mix that we already mentioned, went from 30%- 39% in prime product. During the period, we recorded outstanding growth in new equipment sales, which naturally carry a lower percentage margin than our aftermarket business. However, expanding our equipment placements is a core priority. Driven by effective SG&A cost control, our operating margin expanded to 9.4%, up from the 8.1% in the second quarter of 2025, while our EBITDA margin reached to 12.9% compared to the 12.2% in the prior year period. When analyzing our adjusted gross margin, which stood at 23.7%, the variance responds fundamentally to a shift in our sales mix.
On a year-to-date basis, both our adjusted operating margin and net margin demonstrate an improvement compared to the same period last year. I will turn the call over to Patricia Gastelumendi, our CFO, to discuss more details of our financial results of this quarter in detail. Please, Patricia.
Thank you, Mariela. Moving to net financial expenses, this amounted to PEN 25 million for the second quarter of 2026, representing a slight increase from PEN 23 million in second quarter 2025. This variation was driven by two offsetting factors. First, average debt increased by 11% to $708 million to support inventory growth aligned with strong market. Second, proactive liability management helped contain overall cost of debt. Consequently, our average interest rate decreased from 4.74% in second quarter 2025 to 4.53% in second quarter 2026, benefited by a reduction in short-term borrowing rates from 4.64%- 4.02%. Ultimately, this underscores our ability to maintain strict financial discipline and access competitive funding even as we scale our business operations. Let's go to slide 16.
We have noted previously, our business maintains a natural operational match against exchange rates change, given that the vast majority of our sales, invoicing, procurement, and debt are denominated in U.S. dollars. During the second quarter of 2026, we recorded a foreign exchange gain of $40 million, driven by the appreciation of the PEN as the exchange rate moved from 3.495 at the end of March to 3.4541 at end of June. This compares to an FX gain of $52 million reported in the second quarter last year. These fluctuations represent non-cash accounting timing difference that naturally neutralize to our gross margin as inventory is realized and sold. It is vital to emphasize that these fluctuations represent non-cash accounting timing mismatch. Let's move to slide 17 to review the net profit. Net profit during the second quarter reached PEN 141 million, an outstanding 16% increase year-over-year.
This result was primarily driven by greater commercial dynamism and optimization of our expenses, as previously stated. Excluding the foreign exchange impact, adjusted net profit stood at PEN 119 million, representing a strong 21% increase compared to PEN 98 million reported for the same period last year. Please, let's go to slide 18 to review financial resources and cash generation. Total financial debt at the end of the semester stood at $708 million, compared with $637 million reported last year. Currently, the liability profile is split between 57% short-term and 43% long-term debt. We plan to optimize this structure during the second half of the year to preserve our balanced financial structure. On cash generation, we achieved a positive cumulative Free Cash Flow of PEN 120 million year-to-date, supported by strong EBITDA performance and disciplined working capital management.
Additionally, our Net Debt to EBITDA leverage ratio closed June 2026 at 2.13 x, well within our 3.5 covenant limit, reinforcing the strength of our balance sheet. As of June, our total assets reached PEN 7.1 billion, representing a 7% increase compared to June 2025. This growth was primarily driven by strategic inventory expansion to support client demand. Notably, approximately half of this inventory increase consists of mining trucks that are already committed for delivery in the coming months, securing future revenue streams. Turning to operation efficiency, our Cash Conversion Cycle improved to 148 days at the close of the quarter. This trend was supported by inventory days standing at 149 and payable days of 44, while collection days improved from 46 days to 43 days, reflecting enhanced working capital and receivables management. Finally, our Asset Turnover Ratio reached 1.16 as of June 30.
Let's turn to slide 20 to discuss our CapEx. Net investment in fixed assets and intangibles as of June reached negative PEN 56 million. This figure was primarily comprised of PEN 26 million allocated to machinery for our rental fleet, which was offset by PEN 115 million in transfers from the rental fleet into inventory, resulting in a net value of negative PEN 89 million for this specific line, as well as PEN 17 million invested in workshop machinery and equipment and PEN 6 million dedicated to infrastructure development. I will turn back to Mariela now for the closing remarks. Thank you.
I would like to close today's presentation with some financial reflections. With some final reflections, excuse me. During this quarter, we continued to deliver high-quality results, demonstrating a deep expertise and comprehensive understanding of our core business that is unique to Ferreycorp's more than 100-year history. Regarding our value proposition, the strong demand and robust sales performance of our machinery and equipment reflect our solid market positioning and the trust that our customers place in Ferreycorp as a strategic long-term partner. This active machine delivery expands our installed footprint, which allows us to continue to build long-term relationships and the opportunity to provide more sales and solutions, aftermarket sales and solutions. Our leadership continues to be reinforced by our world-class after-sales infrastructure and a highly specialized technical workforce with a customer-centric focus.
Central to our financial resilience is a disciplined approach to operational efficiency, which led to a notable reduction of operating expenses relative to sales. Thank you for the period. Furthermore, we remain dedicated to the active pursuit of synergies across our portfolio and the continuous optimization of our process. Looking ahead, we maintain this positive outlook. The political and macroeconomic stability following the recent election cycle is expected to encourage investment and stimulate demand across key sectors. Moreover, the favorable metal price environment, particularly for copper and precious metals, continues to provide the strong fundamentals for Peru's mining sector, encouraging sustained operational activity. Lastly, I want to emphasize that despite global market dynamics and currency volatility, our financial strength, clear strategy, and operational adaptability have successfully protected our core business. Reaffirming this financial strength during the quarter, credit rating agencies ratified Ferreycorp's top-tier ratings.
These ratings highlight our solid competitive position as representatives of Caterpillar and other global brands, as well as the proven stability of our margins and solvency. Our century-long heritage and proven operational strength continue to shield our business, allowing us to generate reliable and sustained value for our shareholders. This concludes our presentation for today. Thank you for your time and continued support, and now we will be glad to take your questions. As always, you can raise your hand, or you can put your questions in the chat, and we will be looking for both of them. Thank you.
Milagros.
Okay.
Thank you very much, Mariela. We have a question from Omar Avellaneda. Thanks Ferreycorp team for this call. I was wondering if you can comment further demand perspective in the construction segment from phenomenon El Niño point of view.
Thank you for your participation and for your question. I was looking for my pen. I don't know where it goes. Thank you for that question. Yes, unfortunately, we are expecting a very strong El Niño phenomenon that can cause several severe impact in different regions of the country, flooding in the northern part and dry temperatures in the southern part of the country. That's sad. However, we are very optimistic of the preparation that the new government is taking into consideration. We understand that even without being in office yet until next Tuesday, they have already started to walk the regions and assess the needs to complete some works and some buildings, the build of roads that should have started some years ago under a program called the Reconstruction, but it seems that they didn't receive all the budget that was needed.
Now we need to overcome that situation. On one way, I feel optimistic because I see the government putting the phenomenon of El Niño at a very high priority, and they are starting to assess not only the works that need to be done, but also the capabilities that we have in country, precisely of machinery. They are starting to ask us what's the population in the country for construction equipment, and, of course, we're going to support by providing information. The machines connect, so we also have information on where those machines are located, who has those machines, so they can be accessed in an emergency.
At the moment, we don't have clear information on what purchases the government might be launching in public bids, but our estimation is that this could represent around a $30 million expansion in sales, both in Ferreyros, most of it in Ferreyros, but also a smaller portion in Unimaq. All together, $30 million-$33 million can be increased sales of machinery. On the other side, we don't expect severe impact in sales on other business lines. We see that maybe in our Soltrak company, there can be a negative impact of, I would say, $500,000. Nothing relevant that could offset the approx $30 million that we could get as new sales. Again, all of this is just some assumptions. First of all, El Niño can have a severe impact or a mid impact. Experts are still wondering on three scenarios.
On top of what the phenomenon itself will be, we also have assumptions of what purchases can be. It can be bigger, it can be smaller, depending on the assessment of the fleet that the government is trying to do at the present moment. I would also like, now that we received this question on El Niño, to highlight that it's not only that we see the opportunity to sell more equipment, but also other activities and functions that we are doing in order to make sure it doesn't affect our capabilities throughout the country. Anticipate some purchases, anticipate the transportation of units to our branches, and not be stopped to move them once the highways are damaged.
We're taking certain measures also in the infrastructure in our facilities, in our branches, so we can continue to serve our customers, and of course, also driving messages to our employees so they do the same at the personal level in their households. Thank you for the question, and we hope that we don't have a severe El Niño and that we don't have a severe impact, even though that would erase the opportunity to sell more products. We think it would be beneficial for the country not to have a severe El Niño. Thank you for the question.
Question from Cesar Perez. Cesar, thank you for joining us. Please go ahead.
Thank you. First of all, congratulations for your results. They were quite strong, everyone, so that's a very good job. My first question actually relates to your overall guidance. We saw a very important uptick in revenues during the second quarter. I was wondering if your guidance for revenues for the remainder of the year has actually varied as a result of the accelerated machineries that you did in the second quarter, potential effects from El Niño, and certainly along those lines, which would lead to my second question, is the two contracts that you won, I assume that's Las Bambas and Volcan, have you actually delivered those machines? If not, could we get some sort of schedule on when those machines will be delivered? Hopefully on a quarterly basis. That would be very helpful. Thank you.
Thank you, Cesar. Thank you for your participation and for your questions. We won these two deals. One is in Bambas. I think we mentioned about it in our last call. About two weeks ago, or three weeks ago, we received a purchase order from Antamina, which is 27 trucks. We are very happy to have these two opportunities. One, 27 trucks for Bambas and 27 trucks for Antamina, altogether 54 trucks. We are optimistic about the possibility to deliver some of them throughout this year and, of course, another portion that will come by next year. This brings us an opportunity to have another record year after many years, another record of $300 million in a prime product for mining.
Remember, for several years, we have been explaining that we had a peak, more than 10 years ago, of $300 million. We said now we are in the area of $100 million-$150 million per year. That's why we had $161 million in 2021, $140 million in 2022, a very low one in 2023 with less than $100 million. Last year also, we were under $100 million. This year we are preparing to have a peak of $300 million. I don't think that's going to be repeated in 2027 or 2028. I am talking about another peak. I don't think that's going to be a sustained level, no.
We think that the business confidence. We are very optimistic now of what can be the next government regarding many things, not only economic-wise, but economic-wise and boosting investment, we are very optimistic. We also expect that we won't go back to the $100 million arena in prime product, but at the same time, at the peak of $300 million that we are going to have this year, if all the deliveries that we are expecting throughout this year happen, no? We are expecting to have an average of $90 million deliveries on the third and fourth quarter.
All right. If I heard, nine zero, right? In the third and fourth-
Yeah
quarter. Okay.
Yeah.
What about your annual guidance? Has that shifted?
Yeah, it has shifted. I think we were talking about low one digit, and now we are talking about a growth in top line of a very low two digits. Very low two digit, no? Starting two digits. In net income, we expect something stabilized compared to last year, because we're going to have a very strong top line. You know that the mixed sales is going to change significantly. We know this. Very large equipment brings a little gross profit, but then it brings a long-term revenue, a long-term opportunity to serve this iron through its lifetime.
All right. Thank you very much, Mariela.
Thank you, Mariela. We have a question coming from Luis Alarco from AFP Integra. Luis, please go ahead.
Hi, Mariela. Hi, Milagros. I add up to Cesar, congratulations to the results. I wanted to ask about two things. The first is that if you can give more details about the one-off impact in Chile, the other is what are your views on the competence you have for other Chinese companies. How does this compare with this new recent win in the Antamina concession, and how are you seeing if these companies are getting market share? What's your view about these variables? Thanks.
Thank you, Luis, for your participation, for the congratulations, and for your question. This event in Chile, we were doing provisions in the last two years because we had a very extreme and unique situation in our subsidiary there. We sold to a very important contractor to a very important mining company in Chile, I would say to one of the largest ones in Chile and in the world. Our contractor had difficulties, they were not able to pay us, the legal framework didn't allow us to take the equipment back soon as we always expect. We're an asset-based lender when we finance to our customers, the legal details and specifics didn't allow us to get the equipment back. We made very important provisions, now we have collected.
Of course, in order to get to an agreement, we had to make some discount on the face value of the debt, but we got an important amount. That's why we're showing this other income for PEN 69 million. We're doing some provisions because of the conditions of the agreement that could be offset in the next couple of years. That's why the final impact is PEN 35 million in the operating profit. This is a one-off. We've concluded the agreement. There are some contingencies, tax contingencies or even some concessions that we need to give to get to an agreement. That's why we have been in the safe side doing some provisions that could be offset in the years to come. The impact is PEN 35 million in the operating profit, as we mentioned through the call.
Going to competitors, we're in a market where we have competition from many different players. In the truck business, in the off-highway truck business, in the mines, it's mainly against Komatsu. It's not necessarily Chinese competitors there. It's very strong competition. We have always been side by side. I remember in some call where we lost deals, we have the opposite situation. We're not a monopoly. We're not intending to be a monopoly. We win one, we lose others. I would say altogether, we continue to have leadership. Based on the amount of resources and dedicated people we have in the field, so our mining division has more than 1,000 people distributed throughout the country in the field supporting our customers.
We're very proud to say that one key metric that we follow with our mining customers, which is Physical Availability, and that's measured throughout the world. Caterpillar and the dealers measure this throughout the world. I'm very proud to say that here in Peru, we have one of the highest Physical Availabilities of the population in mining in the fields here in Peru. That's because of the service that we give. We are not reluctant to put the people, the parts, the components, the shops where needed in order to solve our customers' toughest challenges, as we say with Caterpillar in their value proposition, in our value proposition. That's what pays off at times we have these bids, and we're very happy and proud to win these deals. In the construction space, there's several competitors, legacy brands, even as Komatsu, Volvo, Deere, and these newcomers.
I don't know if still newcomers because they are in the place for some years already. The Chinese, of course. Again, our value proposition that the workshops that we have, the branches that we have, the level of inventory that we have, and that's why we have significant inventory in place because one of our value proposition is to have the product here and not make customers wait three, four, or five months to have the machine when they need it, and the same with the parts. We have a significant inventory of parts here, and we need to add to this value proposition, which is having the product support and the capability for product support, also the digital solutions and the technology solutions that Caterpillar is putting in the iron, in the products that we sell.
We are always revising and updating our value proposition to keep ourselves competitive. We have the largest market share also in the construction sector. It is showing stable in the last years with a lot of focus, a lot of coverage of the market, very disciplined coverage in the market, a revised value proposition. We have a commitment, which is called the Service Commitment. When a customer needs a part, it's going to be there in 24 hours. When a customer needs a technician, it's going to be there in 48 hours. That's a very deep commitment that no other players are showing us of today. We feel very confident on the capabilities to continue our competitive edge in the market. Of course, we cannot relax ourselves, and we're always, with Caterpillar, revising and including new elements to our value proposition.
Having the inventory on the field, having the product support on the field with parts, with technicians, the branches. Having the digital solutions, the more technology in the iron, having these Service Commitment that I mentioned, financing to the customers through Caterpillar Financial, all of them put ourselves in a very well position. Thank you, Luis.
Thank you.
Thank you very much. We want to thank you all participants in today's conference call. I guess there's no further questions.
Thank you again for all of you coming here. We are very optimistic. We're close to our celebration of July the 28th, our national holiday, our Independence Day, where every five years we have a change in government, although we have had too many other changes throughout the last five years. We expect we are facing an index point in which we will have a stable five-year government, and we are very optimistic with the first signs we are seeing from the new government on the things they're planning to do with the country that will impact positive our business, and we are ready to get all the opportunities. Thank you because we know you, as our shareholders and investors, are ready with us for the same. Thank you.