Cementos Pacasmayo SAA :CPAC-US: Earnings Analysis: Q2, 2017 By the Numbers : July 26, 2017

Cementos Pacasmayo SAA reports financial results for the quarter ended June 30, 2017.


  • Gross margins narrowed from 41.89% to 38.95% compared to the same period last year, operating (EBITDA) margins now 27.43% from 31.27%.
  • Change in operating cash flow of -41.43% compared to same period last year is about the same as change in earnings, likely no significant movement in accruals or reserves.
  • Narrowing of operating margins contributed to decline in earnings.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2017-06-30 2017-03-31 2016-12-31 2016-09-30 2016-06-30
Relevant Numbers (Quarterly)
Revenues (mil) 86.94 85.78 93.86 92.82 91.13
Revenue Growth (%YOY) -4.59 -4.68 -10.25 -4.63 3.94
Earnings (mil) 6.58 7.06 3.1 13.15 9.81
Earnings Growth (%YOY) -32.93 -14.64 -82.9 -24.84 -31.62
Net Margin (%) 7.57 8.23 3.3 14.17 10.77
EPS N/A 0.06 0.05 0.19 0.14
Return on Equity (%) 1.31 1.3 0.53 2.16 1.55
Return on Assets (%) 2.95 3.01 1.24 5.12 3.82

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Earnings Growth Analysis

The company’s year-on-year decline in earnings was influenced by a weakening in gross margins from 41.89% to 38.95%, as well as issues with cost controls. As a result, operating margins (EBITDA margins) went from 31.27% to 27.43% in this time frame. For comparison, gross margins were 40.32% and EBITDA margins were 29.67% in the previous period.

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

CPAC-US‘s decline in gross margins were offset by some improvements on the balance sheet. The management of working capital, for example, shows progress. The company’s working capital days have fallen to 121.47 days from 125.52 days for the same period last year. This leads Capital Cube to conclude that the gross margin decline is not altogether bad.

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

CPAC-US‘s year-on-year change in operating cash flow of -41.43% is around its change in earnings. This suggests that there are likely no significant movement in accruals or reserves for managing earnings this period.


The company’s decline in earnings has been influenced by the following factors: (1) Decline in operating margins (EBIT margins) from 22.26% to 17.54% and (2) one-time items that contributed to a decrease in pretax margins from 15.40% to 10.58%

EBIT Margin History
PreTax Margin History

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Company Profile

Cementos Pacasmayo SAA is engaged in the production and marketing of cement, quicklime, aggregates, ready-mix concrete, precast concrete products and other construction materials. It operates through the following segments: Cement, Concrete, and Blocks; Quicklime; and Sales of Construction Supplies. The company was founded in 1949 and is headquartered at Lima, Peru.

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