Earnings Call: Q4 2024

Mar 6, 2025

Summary

FY2024 revenue rose 7.5% and EBITDA 11.1%, with EBITDA margin reaching 24.2%. Adjusted for PEN 77.9 million of non-recurring expenses, net income was PEN 548 million, up 4.7%; 2025 CapEx is budgeted at $210 million.

Greetings, and welcome to the Grupo UNACEM fourth quarter 2024 results conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation, which you may ask via the telephone or the webcast. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Monica Pujar, Head of Investor Relations. Thank you, Monica. You may begin. Thank you. Good morning, everyone, and welcome to our earnings conference call. This morning, Pedro Lerner, our CEO, will discuss the latest developments that affected our operations during the fourth quarter of the year. Later, Álvaro Morales, Grupo UNACEM's Corporate CFO, will present the fourth quarter and the full year financials in detail. Please note that we might disclose some forward-looking statements related to Grupo UNACEM based on currently known facts, expectations, and forecasts, circumstances, and assumptions regarding future events. Many factors could cause the future results, performance, or achievements of Grupo UNACEM to be different from those exposed or assumed herein, so these should be considered for reference only. Pedro, you may begin. Thank you, Monica. Ladies and gentlemen, good morning. It is a pleasure once again to share with you our performance this past quarter and 2024 record high results for Grupo UNACEM. Our consolidated EBITDA for the quarter reached PEN 434 million. That is a 13% increase year-over-year and 3.4% sequentially, supported both by a margin improvement of 110 basis points to 24.2%, on top of an 8.2% revenue increase to PEN 1.8 billion. Results had a one-time effect on the back of extraordinary income from Celepsa for PEN 42.7 million and an incremental EBITDA of PEN 14.6 million from our Tehachapi operations that were incorporated on November 1, 2023. In spite of these non-recurring revenues and full quarter impact, the quarter brought strong performance from our energy operations, which reported 1,063 megawatt hours of volume sold, 8.1% higher compared to the fourth quarter of 2023. Celepsa's integrated business, which combines hydro and thermal operations, resulted in strong EBITDA of PEN 51 million for the quarter, excluding the one-time extraordinary revenue. Additionally, we are seeing favorable trends in our Peruvian cement market. Although cement volumes during the fourth quarter of 2024 were still slightly below the fourth quarter 2023, construction has started to show signs of recovery, and we believe the trend should continue this year. UNACEM Perú has also achieved high efficiency in its operations, reflected in stronger EBITDA margins of 32.4% for the quarter, compared to 31.2% for the fourth quarter of 2023. In the ready-mix segment, volumes declined 18.1% in the last quarter, explained mostly by the completion of large infrastructure projects, such as the Chancay Port and the Lima Airport. I would like to highlight that we have been recognized as a best-in-class supplier by the Chancay Port and are very proud to have been part of such an important infrastructure project for our country. For this year, we'll keep several relevant projects in our portfolio, such as the line 2 of the metro, and we'll refocus our commercial efforts in the housing segment. In the North American market, cement volumes reached 304,000 metric tons last quarter, up 29%, in part due to the fact that Tehachapi contributed with a full quarter compared to 2 months for the fourth quarter of 2023. Our California operations had the best quarter so far, both in terms of volumes and EBITDA results. It contributed with 169,782 metric tons, up 3.9% sequentially, and EBITDA reached $5.1 million, 44.4% of UNACEM North America Cement EBITDA. While the California market shows an upward trend, we're experiencing a slowdown in our Arizona operations, with volumes declining 11.2% compared to the fourth quarter 2023. We believe this is a temporary setback and expect volumes to pick up in Arizona, where the influx of public investment and private infrastructure in the coming quarters. Our Ecuador unit had a strong quarter, with cement volumes up by 3.3% to achieve 300,000 metric tons. Ready-mix is keeping its consistent upward trend, up 108%, average from a modest initial volume. EBITDA grew by 61.1% to PEN 46 million, with an important margin expansion reaching 27.3% in the fourth quarter of 2024, up from 19.7% in the fourth quarter, mostly explained by lower fuel costs, a combination of pricing, and better mix. Moving on to our Chilean operations, I'm pleased to report strong cement and ready-mix volumes, up 11.7% and 17.1% compared to the fourth quarter of 2023, respectively. We are seeing an uptick in construction demand, as well as the launch of the new private infrastructure projects. On that front, we have been granted the Temuco Solar Generation Project last month, which will start construction phase in mid 2025. Our precast business, Preansa, should operate at full capacity during this year. In terms of profitability, the high FX rate, together with relatively low cement prices, still impact us quite negatively. Finally, I would like to highlight our sound balance sheet position, as our net leverage ratios have come down to 3.08x EBITDA as of year-end, from 3.23x EBITDA the prior quarter. Moreover, we are close to finalizing the refinancing structure of our debt in local currency, equivalent to $480 million of our total debt of $1.5 billion, setting a smooth amortization calendar to competitive interest rates. That will be all on my side. Thank you very much for your attendance this morning, and now I will pass it over to Álvaro for a detailed analysis of our financial results. Thank you, Pedro. Good morning, everyone, and thank you for joining us today. We appreciate your time and continued interest in our company. As Pedro mentioned, our strong results during this quarter and the year demonstrate the resilience and consistency of our performance, even in the face of a disappointing economic environment. Despite market volatility and external headwinds, we have remained focused on operational efficiencies, strategic investments, and disciplined financial management, strengthening our position across key markets. I will now walk through our financials and operational performance, which show once again the advantages of our diversified platform. In terms of volume, Peru. UNACEM Perú cement dispatches reached 1.4 million tons in the fourth quarter of 2024, a decrease of 0.7% compared to the fourth quarter of 2023. While our dispatches for the full year reached 5.7 million tons, a decrease of 2.7% compared to 2023, which are still high volumes, even if we compare to pre-pandemic volumes of 5.3 million tons in 2019. Additionally, clinker exports through the Conchán Terminal reached 107,000 tons, 57% lower than those reached in the fourth quarter 2023, in line with our commitments to our clients this year. Full-year exports recorded a total volume of 503,000 tons, compared to 669,000 tons in 2023. Ready-mix volumes in Peru were lower during the quarter, 573,000 cubic meters, compared to 700,000 cubic meters in the fourth quarter 2023. Volumes for the full year were 7.5% higher than in 2023. The drop in volumes in the quarter was due to the completion of contracts for infrastructural projects, such as the expansion of the Jorge Chávez Airport and the Port of Chancay, which were active in the other quarters of the year. Celepsa's volumes in the fourth quarter 2022 were 8.1% higher than in the fourth quarter 2023. Energy sales reached 1,063 megawatt hours. Celepsa full year results, considering hydro and thermal generation, recorded a total volume sold of 4,039 megawatt hours versus 3,668 megawatt hours in 2023. The addition of Termochilca to our portfolio continues to demonstrate our investment and growth strategy in this business. Ecuador. UNACEM Ecuador, cement volumes for the fourth quarter increased by 3.3% to 300,000 metric tons, compared to 290,000 metric tons in the fourth quarter 2023. Total volumes for the year in Ecuador were 1.8% lower than in 2023, totaling 1,176,000 tons. Market conditions continue to be difficult throughout the country. Furthermore, in the fourth quarter, ready-mix volumes increased by 108%, driven by new urban projects on the outskirts of Quito, bringing plants to full capacity. For the full year, volume grew by 46.3% compared to 2023. The U.S. Our U.S. operations reported cement volumes of 304,000 tons, reflecting a 29.1% increase for the quarter. For the full year, volumes grew by 69.7%, primarily driven by the integration of the Tehachapi plant, which contributed a full year of dispatches in 2024 of 595,000 tons. However, our ready-mix operations sold 204,000 cubic meters, down 9.4% compared to the first quarter of 2023, with a full-year decline of 3.5%. Aggregate volumes decreased by 24.8% for the quarter, totaling 349,000 tons, a decline by 11.8% for the full year. Chile. UNACEM Chile dispatched 164,000 tons of cement in the quarter, marking an 11.7% increase over the fourth quarter 2023. For the full year, total dispatch reached 533,000 tons, reflecting a 5.1% year-over-year growth. Despite a sluggish market, volume continued to rise, bringing both plants close to full capacity. In the fourth quarter, ready-mix dispatches totaled 224,000 cubic meters, up 17.1% from the fourth quarter 2023. For the full year, volumes reached 795,000 cubic meters, reflecting an 11.7% increase compared to 2023. Our consolidated revenues in the first quarter 2024 increased by 8.2% compared to the first quarter 2023, driven by a full quarter of our Tehachapi operations, a strong U.S. market, and a one-off income from Celepsa for PEN 42.7 million. For the full year, revenues increased by 7.5% compared to 2023, supported by the factors mentioned, along with improved performance in our ready-mix business in Peru and the United States. Consolidated cost of goods sold increased by 5.4% in the first quarter 2024. Operating efficiency in Peru, Ecuador compensate lower economies of scale in cement operations and higher raw material costs in ready-mix. For the full year, consolidated cost of goods sold rose by 5.5% compared to 2023, further impacted by the full-year contribution of Tehachapi and Termochilca. Despite these cost pressures, our gross margin improved significantly to 26.2%, up from 24.8% in 2023. Our administrative expenses in the fourth quarter were 6.2% lower compared to the first quarter 2023, primarily due to a non-recurring expense of PEN 18.8 million related to the acquisition of Tehachapi in the first quarter 2023. Excluding this one-time cost, administrative expenses increased by 6.7%. Selling expenses for the quarter were 54.4% higher in the fourth quarter 2023, driven by a non-recurring expense by Celepsa related to an allocation of budgets from the courts. Administrative expenses for 2024 increased by 9.1%, primarily due to higher consulting services and personnel costs needed to implement our strategy across all business units. Selling expenses were 20.7% higher compared to 2023. In the fourth quarter, net other expenses and income shifted from an income of PEN 17 million in the first quarter 2023 to an expense of PEN 24.5 million in the first quarter of 2024. This change was mainly due to a non-recurring income in the first quarter 2023, from the sale of part of our San Antonio Chilean operation, which was required by the authorities for the expansion of a highway, without affecting our operations. For the full year, net other expenses and incomes recorded a loss of PEN 44.1 million, compared to a gain of PEN 6.6 million in 2023. As a result, our consolidated operating income for the quarter reached PEN 283 million, an 8.5% increase compared to the first quarter 2023. For the full year, consolidated operating income totaled PEN 1,089 million, a 9.6% increase over the PEN 993 million recorded in 2023. Our operating margin was 15.9% in 2024, compared to 15.6% in 2023. Consolidated EBITDA for the quarter totaled PEN 434 million, marking a 13% increase compared to the previous year. For 2024, consolidated EBITDA reached PEN 1,660 million, an 11.1% increase from the PEN 1,495 million achieved in 2023. The EBITDA margin for the quarter was 24.2%, an improvement from the 23.1% in the fourth quarter 2023. For the full year, the EBITDA margin reached 24.2% compared to the 23.4% in 2023. This increase was primarily driven by higher prices and cost efficiencies, which more than offset the impact of lower volumes in Latin America and good results from our energy plants. These factors, alongside our continued focus on operational improvements, allowed us to maintain strong margins despite the challenges faced in the region. Financial expenses rose by 10% in the quarter. For the full year, they increased by 52.7% in 2024, primarily due to higher debt levels associated with inorganic growth and the increase in the average cost of debt driven by market conditions. Along with non-recurring financial expenses due to tax processes, that was PEN 34 million. Foreign exchange results from the quarter shifted from a gain of PEN 22.9 million in the first quarter 2023 to a loss of PEN 30.34 million in the first quarter 2024. On a full year basis, this changed from a gain of PEN 4.7 million in 2023 to a loss of PEN 30.4 million in 2024, driven by the impact of converting dollar-denominated debt into soles. At the end of 2024, consolidated net debt stood at PEN 5,131 million, remaining nearly unchanged from the PEN 5,097 million recorded at the close of 2023. Thanks to strong EBITDA growth, our net debt/EBITDA ratio improved to 3.08x in 2024, down from 3.42x at the end of the previous year. While we are currently slightly above our target leverage ratio, we continue to make steady progress towards achieving our goal. Net income for the quarter amounted PEN 171 million. For the full year, net income totaled PEN 407 million, down from PEN 573 million in 2023, primarily due to the factors outlined earlier. It is worth to mention that this year we recorded PEN 77.9 million of non-recurring operating expenses, financial expenses, and income tax as a result of some tax litigation process. If we exclude this effect, our net income for the year would have been PEN 548 million, 4.7% higher than 2023. In 2024, CapEx disbursement totaled PEN 565 million, marking a 12.3% increase compared to the previous year. Major investments focused on key operational improvements, including the roofing of clinker field and the dewatering system for kiln number three at UNACEM Perú. The integral mill project at Drake Cement, and the expansion of fixed assets for the ready-mix division in the U.S. The acquisition of mixer trucks and pumps at UNICON Peru, the optimization of kiln number one to enhance production capacity at UNACEM Ecuador, and the adoption of the Talca plant at UNACEM Chile. We expect an increase in our CapEx this year as we should recover the pace on the execution of some important projects, mainly related to our environmental strategy, and some of these have a delayed execution due to local government permits and licenses, especially in Peru. Thank you. That will be all from my side. Now we open the microphone for your questions. Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing these star keys. One moment please while we poll for questions. There are no questions at this time over the phone. Let's wait a couple of minutes to see if we have some questions from the webcast, please. Sure. We have our first question from Gerald Port. Can you comment on the expected effective rate for the following year, considering the carry-forward tax losses of the U.S. subsidiaries amounting to PEN 1.2 billion? There is actually two questions. The second one is, in June 2024, the company paid PEN 62 million for the 2010 income tax, which was recognized as an expense. When do you estimate it can be recovered, considering that in December 2024, a precautionary measure was granted in favor of UNACEM, ordering SUNAT to return all amounts collected? Regarding the first one, I'm going to It's the same question that we answered before. Yeah. As effective tax rate, if you want to have a ratio to project, you can use the same as 2024, only excluding the effect of this tax expense that is non-recurrent. So that will give you guidance on that. We can have a follow-up question later on, and I'm going to leave the other question to Alvaro. About that PEN 62 million soles, we obtained medida cautelar. What's the question again? Medida cautelar, but that doesn't mean that we have win our claim. We need to wait the acción de amparo, the habeas corpus maybe. Injunctive relief. No, it is an injunctive relief. Yeah. Injunction is relief against statute. We need to wait to win that injunctive relief to consider that this is going to be an income for 2025. But we have to wait, please. Thank you. Mm-hmm. We have a second question from Marco Mejía. The company's liquidity remains weak, current ratio of 0.7, with more than PEN 2.2 billion in short-term debt in the next 12 months. We hope that the company will be able to refinance its obligation soon. What are our plans? I think we already covered that question, but I am going to pass it over to Alvaro. Thank you for the question. Our debt strategy remains unchanged. We are already implementing our long-term refinancing program. As Pedro mentioned, we already closed the terms to refinance $480 million equivalent in your calculation, that will be executed in the following weeks. We already closed this refinancing in order to have more long-term debt. Thank you, Álvaro. We have two questions that are quite similar, so I'm going to read them both. The first one comes from Francisco Miranda from Habitat. If we could repeat our plan to increase CapEx this year, and that is connected with a similar question from Justine Ibáñez. Thank you for the comment, Justine. If we could provide expectations or guidance for our operations and what will be the CapEx expected for this year. So Álvaro, can you help us with the CapEx expectations for the year? Yes. Well, we have a very important CapEx for 2025. The main investments are going to be in UNACEM Perú. There is electric conveyor belt from Manchay to Atocongo to increase our limestone reserves. We are now building the roofing of the Atocongo pre-clinker yard. Also working in alternative fuel for Atocongo. We are also invested in calcining clinker in kiln number one in our Condorcocha plant, and also working in alternative fuels in Condorcocha. In the case of Celepsa, in our energy business, we have announced our Solimana solar power plant, 250 megawatts capacity. For this year, 2025, our budget is $210 million in CapEx. Thank you. Thank you. We have another question from Gonzalo Pichatoste from Profuturo regarding our revenue growth rate for this year, considering that next year we have elections. I will pass it over to Alvaro. Okay. Thank you for the question. For 2025, we are very conservative about growth. We think that if we continue with our efficiencies in terms of cost, maintaining our revenues, it is going to be a more profitable year. The political elections bring some instability. But in past processes, we do not have a significant disruption in our demands of our cement. So that means that our business is resilient. Thank you, Alvaro. Okay, let us wait just a minute, please, if we have any other questions. I think we are good. I am going to pass it over to Pedro for his final remarks. Thank you, Monica. We invite all our shareholders to join us in our next general shareholders meeting that will be held on March 31st. Please do not hesitate to reach out to Monica should you have any follow-up questions. Thank you very much for your time this morning. Thank you. Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.