Rafael Borja - Corporate Communications Humberto Nadal - CEO Manuel Ferreyros - CFO.

Vanessa Quiroga - Credit Suisse Andres Soto - Santander Benjamin Theurer - Barclays Capital Francisco Suarez - Scotia Bank Felipe Ucros - BTG Daniel Rojas - Merrill Lynch Adrian Huerta - JPMorgan.

Good morning and welcome to Cementos Pacasmayo’s Fourth Quarter 2014 conference call. All lines have been placed on mute to prevent any background noise. After the presentation we will open the floor for questions. At that time instructions will be given as to the procedure to follow, if you would like to ask a question.

It is now my pleasure to turn the call over to Rafael Borja of i-advize Corporate Communications. Sir, you may begin..

Thank you Katy, and good morning to everyone. I’m very pleased to welcome you to Cementos Pacasmayo’s conference call, to discuss today February 17, 2015, fourth quarter and full year 2014 results. This call is for investors and analysts only, therefore, questions from the media will not be taken.

If you are a member of the media and have questions, please contact i-advize following the call at 212-406-3693. I will now introduce our speakers, presenting on behalf of Cementos Pacasmayo are Mr. Humberto Nadal, Chief Executive Officer; Mr. Manuel Ferreyros, Chief Financial Officer; and Ms. Claudia Bustamante, Head of Investor Relations.

They will be discussing Cementos Pacasmayo’s results per the press release distributed on Friday February 13th. If you have not yet received a copy of the earnings report, please visit www.cementospacasmayo.com.pe, in the investors section to download a copy or contact i-advize in New York.

Comments made today by Cementos Pacasmayo’s management may contain forward-looking statements, which are subject to various conditions that may differ materially. We ask that you refer the disclaimer as guidance on these matters. It is now my pleasure to introduce Mr. Humberto Nadal, Chief Executive Officer of Cementos Pacasmayo for his presentation.

Please go ahead, Humberto..

Thank you Rafael and good morning everyone. So always thank you very much for joining this morning to discuss our performance for fourth quarter and full year 2014. I will begin with an overview of the main operational highlights during that year and then I will provide an update also on Pacasmayo’s main political achievements.

And then will turn the call over to Manuel so he can go into more detail on the financial review for the period. And then of course we will be more happy to take any questions. I am very, very pleased to say that we closed the year 2014 with positive results and there have been a year of many achievements despite also a year of many challenges.

We believe that we have made the best of all these factors by continuing to make operating improvements and investments in our projects. During 2014 we have relatively faced slower growth impacting of course consumption and therefore cement demand. As a consequence our cement sales throughout the year remain flat compared to the previous year.

However we continue to achieve healthy margin research and operations.

Our commitment to improve our gross margins of course starting an operational efficiencies are allowed to achieve a very good last quarter of 2014 with our consolidated EBITDA of PEN113 million which represents an increase of over 32% compared to the same period of previous year while on a year basis we are happy to say that the consolidated EBITDA grew by almost 5% as compared to previous year.

Looking ahead in terms of both GDP and the construction sector in Peru, after some months of decline, we have seen a slight recovery than the last quarter of 2014, due respect with remain an increase in strength during the next two years.

We believe this because it was mainly driven by an increase in government investment infrastructure also a much high anticipated local and regional government spending and of course the recovery of internal demand as the government stimulus packages begin to take effect.

The Peruvian GDP is expected to grow at around 4% for the coming year, which is up from a 2.3% as which we closed 2014. As we mentioned in the year in previous calls the current administration has expressed their intention to increase and accelerate the investment infrastructure according to Proinversion.

The government has already granted their largest amount of public-private partnership in history really. As of January of this year such number has been unlocked at PEN1.7 billion investment infrastructure.

Similarly the government is actively promoting a higher number of public wealth tax deductions and in 2014 Proinversion reached an amount of over 600 million in investment commitments in over 80 projects.

And we have mentioned also during the previous quarters, there are three projects that are particularly relevant for us in terms of cement demand in the northern region Peru. We are very pleased to inform that two of them are already underway and already buying cement.

We upgraded the Talara refinery and the highway in the highway in the northern part of Peru in the Selva. These are actually news as it materializes the demand we have been expecting also through year.

You will recall that our more cement sales have driven by house in the previous years while we are convinced by infrastructure deficit of the country would still stand at $90 billion will be result of increased demand over the coming years for cement.

In addition it is very important to note in the case of the north part of Peru where we operate that the Ministry of Housing, Construction and Sanitation has announced the construction of a brand-new city entirely planned around the hydraulic Olmos project in Lambayeque.

The construction of this city is expected to start in March this year and the government has already allocated PEN440 million for such investments.

In the fourth quarter cement production volume at Pacasmayo plant remained flat compared to the fourth quarter of 2013 but the Rioja plant continue to show very strong results increasing its production by 15% as compared to a previous year.

[Indiscernible] in the quarter we continue with our cost control and reduction program aimed in optimizing the administrative structure of the Company. This has been an enormous effort in the part of our management of the Company.

We are able to achieve the results and make us look with extreme confidence into the future and therefore our projects regarding [indiscernible] we are very pleased that we remain quite steady both in terms of budgets and in terms of timing as we can come close to this finalization date of the project, we’re very confident that in the second part of this year.

Pacasmayo, we will be able to enjoy the benefits having a brand new plant in Piura. Lastly, regarding the phosphate project currently and I think I mentioned recently in the last call, the project is in the process of incorporating the value engineering [technical difficulty].

Like I was mentioning about our phosphate project we have hired all the partners to act as a project management consultant, a PMC, and see a position they will work through our engineering process and of course on the rest of our projects.

And now we’re hoping it by the second part of the year we will have the final numbers and that would final investment decisions.

In conclusion, our foreign customer this year remains positive, based on what we've seen in the last quarter in terms of recovery in the economy and also and fundamentally based on the all improvements we have done over the last year and we’re convinced are sustainable and will help into recovery in the future.

And this will also be boosted by operation at Piura plant in the second part of this year. We will continue to work to become more efficient and competitive in order to deliver sustainable results to our shareholders. Now, that concludes my presentation and now I will hand it over to Manuel to discuss more in detail the financial results..

Thank you, Humberto. Good morning, everyone. Thank you for joining us today. I will be discussing the fourth quarter and full year financial results in more detail as per the press release issued last Friday focusing basically on the financial highlights before we proceed with the Q&A session.

Despite the slowdown in the Peruvian economy Pacasmayo delivered positive results for the last year. As a result of our tight cost and expense controls as well as operational efficiencies, I will like to point out that our market share position remains very strong.

For the full year and the fourth quarter of 2013, cement sales volumes remained flat mainly explained by the construction of consumption impacting directly the cement demand. During the 2014 a slight increase in the temperature of water affected the two main sources of income in the north, fishing and agriculture.

This has in turn affected jobs in the area directly impacting the sub-construction segment which continues to be our main driver. In terms of results by province, for the fourth quarter sales of cement concrete and block reached PEN284 million, a decrease of 0.5% compared to the fourth quarter of 2013.

This decrease was mainly due to the lower sales of concrete which were down 13.4% in the quarter due to a delay in execution of public and private projects, also sales of blocks decreased 11% during the period.

For the full year cement sales our main product increased 1% compared to the 2013 while for the fourth quarter increased 1.8%, it was explained by higher demand as a consequence of the slight recovery in the economy.

During the fourth quarter of 2014, the gross margin increased 5.4 percentage points compared to the fourth quarter of 2013 while for the two years it increased 0.9 percentage points compared to 2013 as a result of high operational efficiencies.

Quicklime sales posted an outstanding increase of 175% during the quarter, mainly due to a higher sales volume.

As Humberto mentioned, this quarter been exceptional in terms of operational results, the gross profit during the fourth quarter increased 30.7% compared to the fourth quarter of 2013 mainly driven by cost optimization in the production of cement.

Specifically, gross profit of cement which represents the largest portion of our sales increased 13.6%, this result was partially by the decrease in concrete and blocks gross profit.

During the fourth quarter of 2014, operating expenses decreased 14% compared to the fourth quarter of '13 mainly due to a decrease in the administrative expenses and also decrease 5.4 for the full year.

Finally the net income was impacted positively by a combination of shares increase of 2%, cement cost of inflation, production and the administrative expenses positively impacted our hedging strategy, lower tax paid and accelerating our income.

Compared to the fourth quarter 2013 the net income increased 92.9% and for the full year the net income increased year-on-year basis 24%. As a result consolidated EBITDA for the quarter increased from PEN85.8 million in the fourth quarter of 2013 to PEN113.6 million in the fourth quarter ’14 equals to an increase of 32.4%.

In terms of profits as of December 31, the company invested PEN587 million allocated towards the following. Basically the Piura plant, which the Company invested PEN506 maintaining our Pacasmayo and Rioja plants, concrete and various equipment, the phosphate project, as well as some minor activities.

To conclude, we like to highlight that notwithstanding the challenging environment and the challenges in environment in which we face weaker demand for the region, we managed to achieve the stable financial results, which were driven mainly by cost optimization in our core business, cement as well as expenses control initiatives and FX hedging and strategies which proved positive for our bottom-line.

In 2015 we expect to continue strength our gains achieved in our 2014 results and we look forward to beginning operation of our new Piura plant during the second half of this year, which will create even more efficiencies in our operations. With this I conclude my -- the portion of my presentation. Thank you all of you for your attention.

Operator we will begin with the Q&A session. .

[Operator Instructions]. Our first question comes from Vanessa Quiroga from Credit Suisse..

Hi, thank you for the call and good morning. My question is regarding the projects that are starting a construction phase, the Talara refinery, the hydraulic infrastructure of Chavimochic and the North Highway.

And I was wondering if you could provide an estimate of how much tons of cements or cubic meters of concrete will be needed for these projects? And the other question would be about the projects that you mentioned that are being promoted by Proinversion.

If you could mention some examples of the projects that would be located in the area of influence of Pacasmayo and approximate timing for the start of construction phase for those? Thank you. .

Thank you for the question. Our three main projects which I mentioned are Talara refinery, the Highway in the North and the regional projects amount altogether to a little bit of a 0.5 million tons of cement demand.

And this should be calculated over a period of probably 2.5 to three years like I said in the past we don’t control the timing of the project. By the time -- the two of them are already working and buying cement gives us an [additional] that these will carry out demand over next two years or three years.

And then the second part of your question, there is a very large list of projects that we have offering north part of Peru all ready for construction. We have for example I mean a huge project which is [indiscernible] regional project that [indiscernible] work, I mean that will require around 850,000 tons of cement.

It is still in an early stage it is pushed by the other great firm in Peru.

But it is an example of very large projects, Rioja lots of penetration highway [indiscernible] for example, now we have seen already a proof that the [indiscernible] airport is going to be shut down, so we can remove all the landing strips, which we also done in concrete and that could go to one-by-one, I mean we are taking a very big example to smaller example but [indiscernible] in generally the degree of infrastructure deficit in the North as in the rest of the country is substantial and I think Proinversion is finally getting their act together on pushing for a public-private partnerships to get into this kind of project.

I think the last example, there is a bypass road in to Piura that is a project I believe PEN90 that accounts for 20 something kilometers. And like I said the list is very long hopefully during the next five years or eight years we will see many of these projects go down from the project phase into the execution stage. .

Thank you our next question will come from Andres Soto from Santander..

Thank you, Humberto and Rafael for the presentation.

My question is regarding guidance for 2015, can you give us an idea of what are your expectations in terms of volumes for this full year based on these projects and the ongoing recovery that you've already seen in the main business segment?.

Yes, our guidance for sales dispatches are basically around 3% with 2.5% to 3%, and the prices should grow with inflation say around 2% so altogether we should increase or increase sales in around 5%..

Thank you, our next question will come from Benjamin Theurer from Barclays Capital..

Hey, good morning, Humberto; good morning, Manuel. Thanks for the call.

Just one follow-up question actually on Andres' question in terms of guidance and looking into next year, so clearly, sales that makes sense and it sounds reasonable in terms of the assumption, but with the cost initiatives and the savings we've seen in the fourth quarter, what are you expecting in terms of gross margin and EBITDA margin going into 2015 and also considering that towards the end, you should get the benefits from the more efficient plant with Piura, et cetera? So do you have already some sort of a guidance in terms of profitability into next year? Thanks..

Theurer, what we have estimated is our EBITDA normalized cement should be around 30% for 2015..

Okay, perfect thanks you very much..

That means it will go around 1.5% higher than 2014 because we have an extraordinary in terms of 2014 that sales of some stocks that we made..

What was that exactly what you sold? Because that's basically driving a lot of the margin expansion in 2014? Well, there is not much left, at least from the balance sheet what I can see.

But what was that related, that sale, what you've basically done here in the fourth quarter?.

Yes, this is a small participation we had in a company called [SIA], SIA is a controlling company of UNACEM. So this is -- we had for quite a while and it came to a point where we just decided it made no sense for us to stay in it.

We have been talking to potential buyers for a year or so finally we got a price that we thought was reasonable so we also decided to sell it..

Thank you. Our next question comes from Francisco Suarez from Scotia Bank..

Hi, good morning, Humberto, Manuel, congrats on how you were handling this downturn, very well managed.

And the follow-up question to Benjamin's on the potential improvements in margins, I noticed that as a percentage of sales, do your overall sales means that your expense have fallen by roughly 200 basis points compared to the last year? How much of that reduction should be seen as a structural change and how much of that should be just as a temporary gain?.

We will see that all of the reduction we kind of stay that for the sale for 2015. .

If I may elaborate we are very careful because when you start the cost saving program you have to be indeed careful to take out things that mainly are a bit [indiscernible] enough to go into the bottom of the matter, here we’re seeing the results of a very long process of finalizing the processes and everything to make sure that we are achieving was somewhere company with lower and legal expenses and something that is sustainable as like at the beginning of my presentation that we believe that all the cost cutting programs are some that we will see into future because they’ve been done, they are a result of a very thorough thought process..

Got it. Very clear. Thank you for that. And lastly, if I may, so far, the weaker nuevo sol might provide you a little bit of leeway to increase prices if UNACEM increases prices as well.

Any comment on potential price hikes for this year in cement?.

Well, like I mentioned I mean the guidance is around inflation so that's within 2% to 2.5% of course we will remain very attentive on what happens in the markets and depending other players do, I mean we will make the best decision to give finance within market share and profitability..

Thank you. Our next question comes from Felipe Ucros from BTG..

Yes. Good morning and congratulations on the results. Two very short questions, the first one is, clearly, you're seeing lower SG&A and you think that most of it is going to be permanent.

Where are you seeing those cuts, is it personnel, is it letting go personnel from the existing plants and prepping for the new plant that's starting up or where are you seeing those changes on SG&A? And the second one is surrounding your cost of goods sold, it was clearly much better this quarter, but it seems that it is a one-time result from shutting down the vertical kilns and using a clinker that you had already purchased and have in storage, meaning that most of that didn't show up in this quarter, but I wanted to make sure that that's what we're seeing, if you could comment on that? Thank you..

Well basically regarding certain questions clinker would use around 73,000 tones with quality we haven’t really bought for the next year some 250,000 that we will use and in the whole year around 450,000 tons of project clinker for next year.

Prices of project clinkers are going down so we should expect some recovery and in the cost the cost alternative for the clinker because of the cost on transportation has gone down. As a consequence of the cost of the oil. .

And regarding the first part of your question the cost cutting is all across the board, all the way from the reduction of personnel headcount has gone down in the last year dramatically and also have to do with energy optimization processes it has to do with higher operational efficiency of the machines, it has to do with the coal mix we are using.

So in the end, it's a combination, like I said when I answered Francisco's question, this is not about a cost cutting program this is about an optimization program.

And the focus has been to try to bring every single dollar we can bring from different area, with generally with personnel, whether it’s processes, whether it’s transportation to [indiscernible] the margins. .

Thank you next question comes from Daniel Rojas from Merrill Lynch. .

Hi, good morning gentlemen, thank you for the call. I just wanted to insist a bit on what my colleagues were asking before me in terms of your optimization of cement production costs.

Could you give us an idea, is this coming because you're reducing the clinker factor basically something related to the mix you're using, and just some granularity on how you're able to get into a gross margin of almost 50% in the fourth quarter? Thank you. .

Let me try to expand on the idea I was starting to develop before. It’s a combination of factors, for example in terms of the composition of cement we are going to lower clinker factors and then the factor [indiscernible] of lowering the clinker factor you have to do what you operate the clinker with.

So in this case we are increasing the proposition of lime or pro-lime into a mix which is cheaper than clinker. So in the end what we are achieving is the same quality cement with a lower with a composition of my peers becomes in a lower cost and of course may impact the gross margin.

And point number two, like I said, is indication of anthracite coal has been at record highs last year, this as you all know is lower than the imported Columbian coal. So all these things collaborated little by little to be able to obtain the margins we were obtaining.

And to us addressed also a previous question they were talking about is this a one-time event because we shut down the efficient working kilns, both kilns were already shut a while ago. So we have already explained that. This has more to do with a structural design of cement. .

And in terms of using alternative fuels, is this something you are contemplating or is this something we should expect in the future? What is your idea regarding alternative fuels?.

We are all for alternative fuels, in terms of environmentally friendly fuels. I think -- for us lot more you need to think, you need a company like us which is really believe in, but then you need the supply. So I can't bring Brazil for example use of used tire is very important.

Here there is no available supply of used tires, we have done some things very fast in the general plant and we are always looking for alternative fuels. At this point we don’t see any specific source of alternative fuels that we will jump into in the coming future..

Thank you. [Operator Instructions]. Our next question comes from Adrian Huerta from JPMorgan. .

Hi. Good morning, everyone. I have two questions. The first one is the guidance of a 3% increase in volumes for this year, does that include anything from the three infrastructure projects? And then, the second one is, what should we expect in terms of a dividend for this year? There was a nice increase last year.

So what should we expect this year? Thanks..

The guidance includes everything on of course the three main infrastructure projects. Like I said before I mean, depending how fast or how much a target they are it will be closer now to the guidance. In terms of our dividend we should probably expect something similar to last year.

But as we said before in the range between $20 million to $30 million is what we should be expecting. .

Thank you. I am showing no further questions at this time. I would now like to turn the call back over to Mr. Nadal for closing remarks. .

Well, like I said in beginning thanks everybody for joining us today. Thank you, especially for your regular interest in our company.

We are closing a year that I think was very important for us because there are some years where maybe things have been going to favor these are the years where I think we did a lot of internal work and that’s why we have such positive results. And I think this internal work will be especially meaningful for the coming two years.

We'll remain very optimistic about the guidance about the region of course of our company and you have any other questions, myself Manuel and Claudia, we're always available to take them at any convenient time for you. So thank you very much for your time. .

Thank you ladies and gentlemen this concludes today’s conference. You may now disconnect..