As filed with the U.S. Securities and Exchange Commission on April 29, 2025 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 20-F

 

☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

 

OR

 

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended December 31, 2024

 

OR

 

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

OR

 

☐ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission file number 001-35401

 

 

CEMENTOS PACASMAYO S.A.A.

(Exact name of Registrant as specified in its charter)

 

PACASMAYO CEMENT CORPORATION

(Translation of Registrant’s name into English)

 

Republic of Peru

(Jurisdiction of incorporation or organization)

 

Calle La Colonia 150, Urbanización El Vivero
Surco, Lima
Peru

(Address of principal executive offices)

 

Javier Durand, Esq., General Counsel
Tel. +51-1-317-6000
Calle La Colonia 150
Urb. El Vivero - Lima, Peru

(Name, telephone, email and/or facsimile number and address of company contact person)

 

Securities registered pursuant to Section 12(b) of the Act.

 

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Shares, par value S/1.00 per share, in the form of American Depositary Shares, each representing five Common Shares		CPAC		New York Stock Exchange

 

Securities registered pursuant to Section 12(g) of the Act: None

 

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None

 

 

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:

 

At December 31, 2024

423,868,449 common shares 4,238,397 investment shares*

 

*

Excluding 36,040,497 investment shares held in treasury.

 

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

 

If this report is an annual or transition report, indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.  Yes ☐ No ☒

 

Note- Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

 

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 203.405 of this chapter) during the preceding 12 months (or for such other period that the registrant was required to submit and post such files). Yes ☒ No ☐

 

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer ☐	Accelerated filer ☒	Non-accelerated filer ☐
		Emerging growth company ☐

 

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☐

 

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

 

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

 

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the Registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

 

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the Registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

 

Indicate by check mark which basis of accounting the Registrant has used to prepare the financial statements included in this filing:

 

U.S. GAAP ☐

International Financial Reporting Standards as issued by the International Accounting Standards Board ☒

Other ☐

 

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the Registrant has elected to follow. Item 17 ☐ Item 18 ☐

 

If this is an annual report, indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

 

 

 

PART I
INTRODUCTION

 

Certain Definitions

 

Yes ☐ No ☒ All references to “we,” “us,” “our,” “our company,” “Pacasmayo,” and “Cementos Pacasmayo” in this annual report are to Cementos Pacasmayo S.A.A., a publicly held corporation (sociedad anónima abierta) organized under the laws of Peru, and, unless the context requires otherwise, its consolidated subsidiaries. References to “our controlling shareholder” are to Inversiones ASPI S.A. The term “U.S. dollar” or “U.S. dollars” and the symbol “US$” refer to the legal currency of the United States; and the term “sol” or “soles” and the symbol “S/” refer to the legal currency of Peru.

 

Financial Information

 

Our consolidated financial statements included in this annual report have been prepared in soles and in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and audited in accordance with the standards of the Public Company Accounting Oversight Board (United States).

 

We have translated some of the soles amounts appearing in this annual report into U.S. dollars for convenience purposes only. Unless the context otherwise requires, the rate used to translate soles amounts to U.S. dollars was S/3.764 to US$1.00, which was the average accounting exchange rate (tipo de cambio contable) reported on December 31, 2024, by the Peruvian Superintendence of Banks, Insurance and Private Pension Fund Administrators (Superintendencia de Banca, Seguros y AFPs, or “SBS”). The Federal Reserve Bank of New York does not report a noon buying rate for soles. The U.S. dollar equivalent information presented in this annual report is provided solely for convenience of the reader and should not be construed as implying that the soles amounts represent, or could have been or could be converted into, U.S. dollars at such rates or at any other rate.

 

Certain figures included in this annual report have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables may not be arithmetic aggregations of the figures that precede them.

 

In this annual report, we present EBITDA, EBITDA margin, adjusted EBITDA and adjusted EBITDA margin, which are financial measures that are not recognized under IFRS. We refer to such financial measures as “non-IFRS” financial measures. A non-IFRS financial measure is generally defined as one that purports to measure financial performance, financial position or cash flows of the subject reporting company but excludes or includes amounts that would not be so adjusted in the most comparable IFRS measure. We present EBITDA and adjusted EBITDA, and EBITDA margin and adjusted EBITDA margin because we believe they provide the reader with supplemental measures of the financial performance of our core operations that facilitate period-to-period comparisons on a consistent basis. EBITDA, adjusted EBITDA, EBITDA margin and adjusted EBITDA margin should not be used as an alternative to profit or operating profit, operating margin as an indicator of operating performance, as an alternative to cash flow provided by operating activities or as a measure of liquidity (in each case, as determined in accordance with IFRS). EBITDA, EBITDA margin, adjusted EBITDA and adjusted EBITDA margin, as calculated by us, may not be comparable to similarly titled measures reported by other companies, including those in the cement industry. For a calculation of EBITDA and adjusted EBITDA and a reconciliation of EBITDA and adjusted EBITDA to the most directly comparable IFRS financial measure, see “Item 4. Information on the Company—B. Business Overview—Overview.” EBITDA margin is equal to EBITDA divided by sales of goods. Adjusted EBITDA margin is equal to adjusted EBITDA divided by sales of goods.

 

Market Information

 

We make estimates in this annual report regarding our competitive position and market share, as well as the market size and expected growth of the construction sector and cement industry in Peru. We have made these estimates on the basis of our management’s knowledge and statistics and other information available from the following sources:

 

●

the Central Bank of Peru (Banco Central de Reserva del Perú, or the “BCRP”);

 

●

the National Statistical Institute of Peru (Instituto Nacional de Estadística e Informática, or “INEI”);

 

 

●

the Association of Cement Producers of Peru (Asociación de Productores de Cemento, or “ASOCEM”);

 

●

the Ministry of Housing, Construction and Sanitation (Ministerio de Vivienda, Construcción y Saneamiento);;

 

●

ADUANET, a website administered by the Peruvian Tax Superintendence (Superintendencia Nacional de Administración Tributaria, or “SUNAT”);

 

●

the Peruvian Chamber of Construction (Cámara Peruana de la Construcción); and

 

●

the Global Competitiveness Index prepared by the World Economic Forum.

 

We believe these estimates to be accurate as of the date of this annual report.

 

Forward-Looking Statements

 

This annual report contains forward-looking statements. Forward-looking statements convey our current expectations or forecasts of future events. These statements involve known and unknown risks, uncertainties and other factors, including those listed under “Item 3. Key Information – D. Risk Factors,” which may cause our actual results, performance or achievements to differ materially from the forward-looking statements that we make.

 

Forward-looking statements typically are identified by words or phrases such as “may,” “will,” “expect,” “anticipate,” “aim,” “estimate,” “intend,” “project,” “plan,” “believe,” “potential,” “continue,” “is/are likely to,” or other similar expressions. Any or all of our forward- looking statements in this annual report may turn out to be inaccurate. Our actual results could differ materially from those contained in forward-looking statements due to a number of factors, including:

 

●

political, economic and social risk inherent to conducting business in Peru;

 

●

exchange rates, inflation rates and interest rates;

 

●

the entry of new competitors into the market we serve;

 

●

construction activity levels, particularly in the northern region of Peru;

 

●

private investment and public spending in construction projects;

 

●

natural disasters, such as floods and earthquakes affecting the northern region of Peru, and global events, such as public health crises and epidemics/pandemics and the worldwide effects thereof and responses thereto;

 

●

availability and prices of energy, admixtures and raw materials;

 

●

changes in the regulatory framework, including tax, environmental and other laws;

 

●

the effects of climate change

 

●

the successful expansion of our production capacity;

 

●

our ability to compete with potential substitutes of cement products that may be introduced in the Peruvian construction industry;

 

●

our ability to maintain and expand our distribution network;

 

 

●

international conflicts, such as the current one between Russia and Ukraine, the one in Gaza, among others, and the worldwide effects and responses thereto;

 

●

changes in international trade tariffs, such as those between the United States and China, Mexico and Canada, among others, and the worldwide effects and responses thereto;

 

●

increased cybersecurity threats;

 

●

our ability to retain and attract skilled employees; and

 

●

other factors discussed under “Item 3. Key Information—D. Risk Factors.”

 

The forward-looking statements in this annual report represent our expectations and forecasts as of the date of the filing of this annual report. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date of this annual report.

 

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

 

Not applicable.

 

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

 

Not applicable.

 

ITEM 3. KEY INFORMATION

 

A.

[Reserved]

 

B.

Capitalization and Indebtedness

 

Not applicable.

 

C.

Reasons for the Offer and Use of Proceeds

 

Not applicable.

 

D.

Risk Factors

 

Global Macroeconomic Conditions

 

Global macroeconomic conditions may have an adverse effect on economic conditions in Peru and, therefore, on our business, financial condition and results of operations.

 

Our operations and customers are located in Peru. As a result, our business, financial condition and results of operations, like those of most companies in Peru, may be adversely affected by the level of economic activity in the country. However, economic activity in Peru is significantly affected by global factors. For example, the United States, China and Europe are important recipients of Peru’s exports, and therefore a slowdown in one or more of these economies will affect Peru’s economic activity. Further, natural resources exports, particularly mining, are the main source of income of the Peruvian economy, and therefore any reduction in demand and/or pricing for these exports will have a significant effect on economic activity in Peru, and hence could adversely affect the demand for our products. During 2024, world economic activity was affected by the continuing Russia-Ukraine war, as well as the war between Israel and Hamas. The global economy experienced a deceleration during the year, with growth projections adjusted downward due to escalating trade tensions and rising inflation.

 

In particular, the cement sector is closely related to the following main macroeconomic variables: (i) the expansion or contraction of the economy as measured by gross domestic product (“GDP”), (ii) domestic demand, (iii) private investment and (iv) public spending. In this regard, prolonged conditions, at the global level, that adversely affect one or more of these variables would negatively affect the cement sector, which may have an adverse effect on our business, financial condition and results of operations.

 

In addition, the occurrence of global or regional health crises, such as pandemics or epidemics, and governments’ responses thereto, may have a material adverse impact on the global macroeconomic conditions and, in turn, on the Peruvian economy.

 

 

International conflicts, such as the current war between Russia and Ukraine, and the war between Israel and Hamas, as well as other geopolitical tensions or conflicts have put upward pressure on international prices, increasing inflation, and therefore could adversely affect our business, financial condition, and results of operations.

 

Russia’s full-scale invasion of Ukraine in February 2022 and Israel’s invasion of Gaza in October 2023 have created economic uncertainty, volatility and disruption in global markets. Although the length and impact of these conflicts are highly unpredictable, as of the date of this annual report, they have had an adverse effect on global economic conditions and business activity globally and have led to (i) credit and capital market disruptions, (ii) lower global growth, among others. In addition, the Russia-Ukraine war has caused interruptions in the trade flows of goods produced in those countries (mainly energy and grains) which, in turn, generated upward pressure on international prices of those goods.

 

Similarly, although the dynamics have evolved since the beginning of the war in 2022, the Russia-Ukraine conflict is still impacting energy prices. Russia is a major producer of natural gas, oil and coal; however, production and commercial activities were affected by direct and indirect sanctions relating to the conflict. Peru is a net importer of oil, and as such it has been affected by increased prices. Moreover, we use coal in our operations that, although mostly sourced locally, has a price that is correlated to the global price of energy. Likewise, according to our electricity contracts, payments for electricity are based on a formula that takes into consideration certain market variables, such as the U.S. purchase price index, the global price of oil, the local price of natural gas and the import price of bituminous coal. If energy prices increase globally, our local price of energy will also increase, therefore affecting our results of operations.

 

In 2024 and more recently, global economic stability has been threatened by escalating trade tensions, particularly between major economies. The imposition of new tariffs by the United States on countries like Canada, Mexico and China and on Europe and Asia sparked fears of a global trade war, leading to significant market volatility. The application of tariffs on Peruvian exports, such as agricultural products and fishmeal, could adversely affect the demand for these products and hence reduce the disposable income of Peruvian entities and persons engaged in producing these exports. Since our customers, mainly from the self-construction segment, are employed by companies in these sectors, a decrease in their income could adversely affect the demand for our products.

 

Additionally, energy security has continued to be a pressing issue, with conflicts and geopolitical maneuvers affecting global energy supplies and prices.

 

The foregoing conflicts and any other geopolitical tensions may lead, among others, to a de-globalization of the world economy, an increase in protectionism or barriers to immigration, a general reduction of international trade in goods and services, or a reduction in the integration of financial markets. For our company, the inflationary pressures generated by these conflicts and/or de-globalization could adversely affect our business, financial condition and results of operations.

 

Increases in global freight costs could adversely affect international prices, which, in turn, may increase inflation and therefore adversely affect our business, financial condition and results of operations.

 

Although global freight prices have decreased from the peak levels experienced in 2022, certain adverse developments in 2023 and 2024 continued to put pressure on these prices. Container freight rates experienced volatility throughout 2024. After reaching a peak in July, freight rates decreased by late November. This volatility was attributed to supply chain disruptions and varying demand levels. Global events and high demand in the second quarter of 2024 led to reduced capacity and increased rates, sometimes reaching premium levels. Shippers faced challenges securing space, especially for urgent shipments from Asia, prompting a need for flexible logistics strategies. In addition, global risks to the supply chain relating to climate effects, which impact maritime transport (such as the low water levels in the Panama Canal), continue to adversely affect global freight prices. Likewise, geopolitical tensions in Europe, the Middle East and China, as well as continued trade tensions between China and the United States, could generate new risks to the supply chain and corresponding increases in freight prices. All of these global freight disruptions, could potentially affect our business and results of operations, since some of the raw materials we use are sourced internationally and could therefore be affected by global freight disruptions or increased pricing.

 

 

Risks Relating to Peru

 

Political, social and economic developments in Peru including political instability, rates of inflation and unemployment could have a material adverse effect on our business, financial condition and results of operations.

 

All of our operations and customers are located in Peru. Accordingly, our business, financial condition and results of operations depend on the level of economic activity in Peru. Our business, financial condition and results of operations could be affected by changes in economic and other policies of the Peruvian government, and by other economic and political developments in Peru, including devaluation or depreciation, currency exchange controls, inflation, economic downturns, political instability, corruption scandals, social disturbances and terrorism.

 

During the 1980s and the early 1990s, Peru experienced severe terrorist activity targeted against, among others, the government and the private sector. Since then, terrorist activity in Peru has been mostly confined to small-scale operations in the Huallaga Valley and the Valleys of the Rivers Apurimac, Ene and Mantaro, or “VRAEM,” areas, both in the Eastern part of the country. The Huallaga Valley and VRAEM constitute the largest areas of coca cultivation in the country and thus serve as a hub for the illegal drug trade. Terrorist activity and the illegal drug trade continue to be key challenges for Peruvian authorities. Any violence derived from the drug trade or a resumption of large-scale terrorist activities which may occur could hurt our operations and could disrupt the economy of Peru and our business. In addition, Peru has recently experienced social and political turmoil, including riots, nationwide protests, strikes and street demonstrations, as well as overall lack of safety in the streets, extortions, among other crimes that affect personal security, and could therefore have an effect on demand for our products and services and affect our business and results of operations.

 

In 2024, illegal mining in Peru continued to pose serious environmental, social and economic challenges, particularly in the Amazon region. Despite government crackdowns, unregulated gold mining operations expanded, driven by high global demand and limited enforcement capacity. These activities led to widespread deforestation, mercury contamination of rivers, and negative impacts on Indigenous communities. The infiltration of organized crime into illegal mining operations has exacerbated insecurity and violence, further hindering economic development and deterring investment, therefore potentially affecting our business and results of operations.

 

In the past, Peru has experienced political instability that included a succession of regimes with disparate economic policies and programs that created uncertainty for domestic and foreign investors. Pedro Castillo became President of Peru, after a disputed election result in 2021. He faced political opposition in the Peruvian Congress, which was highly fragmented, as no political party had achieved a clear majority and at least 10 political parties had minority representation, which led some groups in the Peruvian Congress to ask for his resignation. On December 7, 2022, President Castillo announced his decision to dissolve Congress, to intervene in the Judiciary, the Public Ministry, the Attorney General’s Office, and the Constitutional Court, in addition to the scheduling of an election of a new Congress. These efforts by President Castillo failed due to the immediate rejection by all government bodies, including the cabinet and the armed and police forces. President Castillo was impeached that same day by Congress and arrested in transit to the Mexican embassy in Lima to request political asylum. The then Vice President Dina Boluarte was sworn in as President in accordance with the line of constitutional succession.

 

President Boluarte’s mandate is currently scheduled to end in 2026. However, the political opposition in the Peruvian Congress remains strong, which could lead to impeachment motions being presented to the Peruvian Congress against President Boluarte during the remainder of her term. In addition, the Peruvian government may seek to modify and reform the Peruvian Constitution to expand the role of the government in activities currently undertaken by the private sector in accordance with statements made during the campaign of former President Castillo. Although it is expected that a majority of the Peruvian Congress would oppose certain new policies and reforms, we can provide no assurance that policymaking by the government will not be unpredictable. We cannot assure you whether President Boluarte or any of her successors will pursue business-friendly and open-market economic policies that stimulate economic growth and stability, and that measures negatively impacting private investment, such as higher taxation or exchange controls, will not be implemented.

 

Variations in economic indicators such as inflation, GDP, the balance of payments, the appreciation and depreciation of the national currency, access to credit, interest rates, investment and savings, consumption, spending and fiscal income and employment rates, among other variables, over which we have no control, could affect the development of the Peruvian economy and, therefore, could adversely affect our business, financial condition and results of operations.

 

 

Despite Peru’s ongoing economic growth and continued stabilization, the social and political tensions and high levels of poverty and proper employment continue. Future government policies to preempt or respond to social disturbances could adversely and materially affect the Peruvian economy and our business.

 

A depreciation or devaluation of the sol could have a material adverse effect on our business, financial condition and results of operations.

 

A significant depreciation or devaluation of the sol may affect us due to the fact that our revenues are denominated in soles while 20.5% of our costs, as of December 31, 2024, was denominated in U.S. dollars. As a result, we are exposed to currency mismatch risks. We expect to continue reducing our U.S. dollar-denominated costs, since we stopped requiring imported clinker when our new kiln came on line during the second half of 2023. Nonetheless, a depreciation or devaluation of the sol against the U.S. dollar and increased exchange rate volatility would increase the cost of our debt service obligations which could have a material adverse effect on our business, financial condition and results of operations.

 

The implementation of restrictive exchange rate policies and other similar laws by the Peruvian government could adversely affect our business, financial condition and results of operations.

 

Since 1991, the Peruvian economy has undergone a major transformation from a highly protected and regulated system to a free market economy. During this period, protectionist and interventionist laws and policies have been dismantled. Currently, foreign exchange rates are determined by market conditions, with regular open-market operations by the BCRP in the foreign exchange market to reduce volatility in the value of Peru’s currency against the U.S. dollar.

 

However, we cannot assure you that the Peruvian government will not institute restrictive exchange rate policies in the future. Any such restrictive exchange rate policy could have a material adverse effect on our business, financial condition and results of operations and restrict our access to international financing. In addition, any such restrictive exchange rate policy could require us to seek an authorization from the Peruvian government to make payments in U.S. dollars, which, in turn, could materially and adversely affect our ability to pay dividends on our common shares to holders of the American Depositary Shares (“ADSs”) representing our common shares and to fulfill any contractual obligations we may have to make payments in currencies other than soles.

 

Increased rates of inflation in Peru could have an adverse effect on the Peruvian long-term credit market, as well as the Peruvian economy generally and, therefore, on our business, financial condition and results of operations.

 

In the past, Peru has suffered through periods of high and hyper-inflation, which has materially undermined the Peruvian economy and the government’s ability to create conditions that support economic growth. In response to increased inflation, the BCRP, which sets the Peruvian basic interest rate, may increase or decrease the basic interest rate in an attempt to control inflation or foster economic growth. Increases in the base interest rate could adversely affect our results of operations, increasing the cost of certain funding. Additionally, a return to a high-inflation environment would also undermine Peru’s foreign competitiveness, with negative effects on the level of economic activity and employment, while increasing our operating costs and adversely impacting our operating margins if we are unable to pass the increased costs on to our customers. Although inflation was 2.1% for 2024, below the previous five-year average of 4.4%, inflation rates in Peru may rise in the future as a result of supply shocks, including rises in prices of energy, increased freight costs, and/or an increase in domestic demand. In addition, geopolitical conflicts, such as the war between Russia and Ukraine and trade tensions between the United States and Mexico, Canada,China, and other countries, are likely to exacerbate inflationary pressures.

 

 

Changes in tax laws or their interpretation may increase our tax burden and, as a result, negatively affect our business.

 

The Peruvian Congress and government regularly implement changes to tax laws that may increase our tax burden, or the tax burden of our subsidiaries. These changes may include modifications in our taxable base, tax rates and, on occasion, the enactment of temporary taxes that in some cases have become permanent taxes or changes to VAT (value added tax) exemptions applicable to certain of our operations in the Amazonian region. We are unable to estimate the outcomes that these changes may have on business. In that sense, the Peruvian government recently introduced several changes related to transfer pricing rules and formal obligations in order to comply with BEPS (base erosion and profit shifting) Guidelines on transactions performed between related parties or with the intervention of low or no-tax jurisdictions, such as the obligation to file new local-files, master-files and country-by-country reports with the Peruvian tax authority, and to adjust taxable bases accordingly for income tax purposes.

 

The effects of any tax reforms that could be proposed in the future and any other changes that result from the enactment of additional reforms have not been, and cannot be, quantified. However, any changes to our tax regime or interpretations thereof (including in connection with the tax rates, tax base (base imponible), deductions rules, payments in advance regime (regimen de pagos a cuenta), time of payment or the establishment of new taxes thereof) may result in increases in our overall costs and/or our overall compliance costs, which could negatively affect our results of operations.

 

Our operations could be adversely affected by an earthquake, flood or other natural disasters.

 

Severe weather conditions and other natural disasters in areas in which we operate may materially adversely affect our operations. Peru is affected by El Niño, an oceanic and atmospheric phenomenon that causes a warming of temperatures in the Pacific Ocean, resulting in heavy rains off the coast of Peru and various other effects in other parts of the world. The effects of El Niño, which typically occurs every two to seven years, which affected both 2023 and 2024, include flooding and the destruction of fish populations and agriculture, and, accordingly, have a negative impact on Peru’s economy. For example, in March 2023, Cyclone Yaku generated intense rainfall, which resulted in flooding and landslides, which severely damaged some areas in the north of Peru. Although our facilities were not significantly affected, our ability to ship cement was compromised by the destruction of infrastructure and flooding of roads.

 

Peru also is located in an area that experiences seismic activity and occasionally is affected by earthquakes. For example, in 2007, an earthquake with a magnitude of 7.9 on the Richter scale struck the central coast of Peru, severely damaging the region south of Lima. Although the North is not typically affected by earthquakes, we cannot assure you that such an event will not occur and if it does, it could adversely affect our business and results of operations.

 

Our operations could be adversely affected by government-mandated plant closures.

 

Public health crises, such as epidemics or pandemics, as well as other events deemed to be public emergencies, may result in the government requiring us to cease our operations. For example, in March 2020, the Peruvian government ordered a state of emergency due to the COVID-19 outbreak, and required us to close our operations for approximately two months in 2020. This closure had a materially adverse effect on our business, financial condition, and results of operations, in particular during the state of emergency. Although our business recovered well following the required period of closure, we cannot assure you that the government will not take similar measures in the future as a result of public health crises or other public emergencies that may have an impact on the Peruvian economy as a whole, the construction sector, our customers’ ability to purchase cement and cement-based products, and/or our customers’ ability to pay for products we have previously sold to them.

 

 

Our operations are subject to physical challenges related to climate change.

 

Climate change may have an adverse impact on the regions where our operations are located. Some of the risks of climate change include heavy precipitation or extremely high temperatures. Extreme precipitation, leading to floodings, may damage the roads and potentially reduce our productivity and increase our costs. Roads blocked as a consequence of floods could also affect our ability to both ship our finished products and receive raw materials, negatively affecting our business and results of operations.

 

The Peruvian economy could be adversely affected by economic developments in regional or global markets.

 

Although economic conditions vary from country to country, investors’ perceptions of the events occurring in one country may adversely affect cash flows and securities from issuers in other countries, including Peru. Peru’s economy is highly susceptible to fluctuations in regional and global markets due to its significant dependence on commodity exports, particularly minerals. A decline in global demand or disruptions in international trade could lead to reduced export revenues and, in turn, government income. Additionally, tighter financial conditions or geopolitical instability can trigger capital outflows, currency depreciation, and inflationary pressures, affecting private and public investment and exacerbating social inequality in the country. Recently, Peru has experienced the effects of fluctuating commodity prices, decreased export volumes and foreign direct investment, resulting in a decline in foreign reserves and an increase in its current account deficit. Adverse developments in regional or global markets or a perceived increase in risks associated with investing in emerging markets could adversely affect the Peruvian economy and, consequently, our business, financial condition and results of operations.

 

A decline in the prices of certain commodities in the international markets could have a material adverse effect on our financial condition and results of operations.

 

In 2024, traditional exports, in particular mineral products, fishing products, agricultural products and petroleum and its derivatives, represented 72.8% of Peru’s total exports, according to the figures published by the BCRP. Changes in commodity prices in the international markets may have an adverse impact on Peruvian government finances, which could affect both investor confidence and the sustainability of government expenditure and social programs. Thus, a decline in commodity prices could, ultimately, affect the political environment in Peru, especially as regional and local governments are particularly reliant on tax revenue from mining operations. Lower commodity prices could also affect the retail sector, leading to, for example, a decline in purchasing power and consumer spending.

 

Corruption and ongoing high-profile corruption investigations may hinder the growth of the Peruvian economy and have a negative impact on our business and operations.

 

Starting in 2017, Peru has suffered a series of government institutional crises due to, among other things, several corruption scandals involving prominent political figures, mainly past Presidents, and some large construction companies. Some of these corruption scandals resulted in impeachment or resignations, such as that of former President Pedro Pablo Kuczynski in 2018 and former President Martín Vizcarra in 2020, and more recently former President Pedro Castillo in 2022.

 

In addition, several corruption scandals regarding authorities at municipal, regional and national government levels are also ongoing, and former and current government officials have been detained.   President Boluarte is currently under investigation for alleged illegal campaign contributions in2021 and for appointing political allies to public positions, including her brother Nicanor who was recently arrested. Peruvian authorities are currently conducting several high-profile corruption investigations relating to the activities of certain Brazilian companies and their Peruvian partners in the construction and infrastructure sectors, which have resulted in suspension or delay of important infrastructure projects, which were otherwise operational and permitted. We cannot predict how these or future corruption scandals or investigations may affect the Peruvian economy, hinder the growth of the Peruvian economy and indirectly have a material adverse effect on our business, financial condition and results of operations.

 

Although recent history indicates that the macroeconomic stability of the country may remain unaffected by political turmoil, we cannot provide any assurance that political turmoil will not in the future have a material effect on the political or economic stability of the country, and therefore, could have a material adverse effect on our business, financial condition and results of operations.”

 

 

The surge in extortion-related crime may undermine public security and stability in Peru, posing operational risks and potential disruptions to our business and results of operations.

 

In 2024, extortion became a pervasive threat across Peru, with reported cases escalating to over 22,800—more than quadruple the number from 2017. Organized crime groups targeted a wide array of sectors, including transport, retail, and education, often employing violent tactics to enforce their demands. Despite government measures like declaring states of emergency and deploying military forces, the persistence of these crimes underscores the challenges the country faces in restoring public security and trust. Our customers, which are small business owners, are currently suffering from these extortions, therefore affecting their ability to purchase cement, due to decreased disposable income

 

Risks Relating to our Business and Industry

 

We are subject to the possible entry of domestic or international competitors into our market, which could decrease our market share and profitability.

 

The cement market in Peru is competitive and is currently served mainly by three main groups, which together supply most of the cement consumed in the country, although there are smaller producers and some imports. In August 2024, Holcim Ltd., a Swiss-based company, entered the Peruvian construction market with the acquisition of two Peruvian companies (Compañía Minera Agregados Calcareos S.A. (Comacsa), and Mixercon S.A.,, one of the former cement grinding facilities with concrete located in the Lima area).  At the beginning of 2025, it also purchased Compañía Minera Luren, specialized in the marketing of quicklime and silico-lime bricks. In the cement industry, the location of a production plant tends to limit the market a plant can serve because transportation costs are high, reducing profit margins. Historically, we have supplied the northern region of Peru while two other groups have supplied the central (which includes the Lima metropolitan area) and southern regions of Peru, driven principally by the location of production facilities and distribution focus. However, competition could intensify if other manufacturers decide to enter our market.

 

We may face increased competition if the other Peruvian cement manufacturers, despite incremental freight costs, expand their distribution of cement to the northern region of Peru, or if they develop a cement plant in the north, particularly if the cement markets in Lima or other areas of Peru become saturated. In the past, some foreign cement manufacturers have announced plans to build cement plants in the central region of the country. If competition intensifies in the central region of Peru as a result of the construction of any such plants or otherwise, it may have price repercussions in our market.

 

We also face the possibility of competition from the entry into our market of imported clinker for grinding facilities, cement or other materials or products from foreign manufacturers, which may have significantly greater financial resources than us, particularly as production capacity continues to exceed depressed demand in other parts of the world and transportation costs decrease.

 

We may not be able to maintain our market share if we cannot match our competitors’ prices or keep pace with the development of new products. If any of these events were to occur, our business, financial condition and results of operations could be adversely affected.

 

Demand for our cement products is highly related to housing construction in northern Peru, which, in turn, is affected by economic conditions in the region.

 

Cement consumption is highly related to construction levels. Demand for our cement products depends, in large part, on residential construction in the north of Peru, which consists mostly of low-income families gradually building or improving their own homes without technical assistance, which we refer to as auto-construcción. We estimate that in 2024, auto-construcción accounted for approximately 74.8% of our cement sales. Residential construction, in turn, is highly correlated to prevailing economic conditions in Peru. A decline in economic conditions would reduce household disposable income and cause a significant reduction in residential construction, leading to a decrease in demand for cement. As a result, a deterioration of economic conditions in the northern region of Peru would have a material adverse effect on our financial performance and results of operations. We cannot assure you that growth in Peru’s GDP, or the contribution to GDP growth attributable to the northern region of the country, will continue at the recent pace or at all, as the economy continues to be affected by external factors such as inflationary pressure, and political uncertainty continues.

 

 

A reduction in private or public construction projects in the northern region of Peru would have a material adverse effect on our business, financial condition and results of operations.

 

We estimate that in 2024, approximately 15.3% of our cement sales were derived from private construction (other than auto-construcción) and 9.9% from public construction in the north of Peru. Significant interruptions or delays in, or the termination of, private or public construction projects may adversely affect our business, financial condition and results of operations. Private and public construction levels in our market depend on investments in the region which, in turn, are affected by economic conditions.

 

The level of public infrastructure construction also depends, to a great extent, on the priorities and financial resources of the national, regional and local governmental authorities. Although the anticipated increase in Peru’s large infrastructure projects has been delayed, this remains an important growth driver for the country and also a necessity due to Peru’s significant infrastructure deficit. In the North, spending was directed towards reconstruction works to address the damage caused by Coastal El Niño, based on Peru’s “Reconstruction with Changes” Plan. This Plan had an approved budget of S/25.7 billion (US$7.6 billion), and in June 2020, the Peruvian government signed an agreement with the government of the United Kingdom, for the execution of a package of S/7 billion. Through the agreement, the United Kingdom provided the structure, strategy and governance processes necessary for the timely delivery of all works, promoting efficiency and avoiding corruption. This agreement expired on December 31, 2023. However, we cannot assure you that public spending for construction projects will continue in the upcoming years. A reduction in public infrastructure spending in our market would adversely affect our business, financial condition and results of operations.

 

Our business, financial condition and results of operations may be adversely affected by increases in energy prices or shortages in the supply of energy, as well as third-party raw materials.

 

Electricity and coal account for a significant percentage of our production costs. In 2024, the cost of electricity represented approximately 14.3% of our cement production costs, compared to 16.0% in 2023 and 14.2% in 2022, and coal represented approximately 17.0% of our cement production costs in 2024, compared to 23.1% in 2023 and 16.8% in 2022. We use a substantial amount of coal in our production process. Most of the coal we use is anthracite coal which we purchase from domestic suppliers and import a small amount of bituminous coal from suppliers primarily in Colombia, in each case, at market prices. We do not have long-term coal supply agreements, and we do not engage in hedging transactions in connection with the price of coal. Any shortage or interruption in the supply of coal could also disrupt our operations. In addition, the price of coal is largely driven by the price of oil, and, as a result, increases in international oil prices are likely to affect the price of coal and adversely affect our results of operations.

 

We have a long-term electricity supply agreement with Electroperú S.A. (“Electroperú”), a government-owned company, to serve the electricity requirements of our Pacasmayo and Piura facilities until 2026. We have also entered into a supply agreement with Electro Oriente S.A. (“ELOR”) to supply the Rioja facility until December 2025 (subject to extension). During 2023, there was a disruption in the energy supply in the Rioja facility, initially estimated as maintenance works that should have lasted 2 to 3 days, but that ended up lasting around seven weeks. During this period, we were unable to operate our plant and had to transport the cement from our coastal plants in order to satisfy demand, resulting in increased costs.

 

Our business, financial condition and results of operations could be materially and adversely affected by higher costs, interruptions, and unavailability or shortage of electricity. We have no back-up power system at our plants and cannot assure you that, in case of interruption or failure in Electroperú’s or ELOR’s operations, we will have access to other energy sources at the same prices and conditions, which could adversely affect our business, financial condition and results of operations. Moreover, electricity to our plants is transmitted through the Peruvian Electricity Interconnection System (Sistema Eléctrico Interconectado Nacional del Perú, or “SEIN”). Any interruptions or failures in SEIN’s system would also have a material adverse effect on our business, financial condition and results of operations.

 

 

In recent years, we have experienced electricity rationing, limiting our use of electricity to certain times of the day. In such cases, we were forced to readjust our production schedules in order to ensure that our production process was not interrupted. In the event of any future rationing of electricity, we may not be able to readjust quickly enough, and our production process may be interrupted. Future shortages or efforts to respond to or prevent shortages, such as rationing, may adversely impact the cost or supply of electricity for our operations.

 

A significant increase in the prices of coal or electricity would increase our costs of production. We may not be able to increase the prices of our cement products in the future if the prices of coal, gas or electricity rises, which would adversely affect our business, financial condition and results of operations

 

Changes in the cost or availability of admixtures and raw materials supplied by third parties may adversely affect our business, financial condition and results of operations.

 

We use certain admixtures and raw materials in the production of cement, such as gypsum, blast furnace slag and iron that we obtain from third parties. In 2024, our cost of admixtures and raw materials supplied by third parties as a percentage of our cement production costs was approximately 2.7%, compared to approximately 5.3% in 2023. Moreover, although we expanded our clinker capacity in 2023, we continue to use a small amount of imported clinker, representing 4.8% of our cement production costs, compared to 4.0% in 2023. We do not have long-term contracts for the supply of admixtures or raw materials that we use and if existing suppliers cease operations or reduce or eliminate production of these products, our costs to procure these materials may increase significantly or we may be obligated to procure alternatives to replace these products.

 

We may undertake future acquisitions that may not achieve expected benefits.

 

Our strategic initiatives include pursuing acquisitions that tend to diversify our existing portfolio of products and services and expand our geographic footprint. In the future, we may decide to expand by acquiring other companies in Peru or abroad. Any future acquisitions will depend on our ability to identify suitable candidates, negotiate acceptable terms, and obtain financing for the acquisitions. If future acquisitions are significant, they could change the scale of our business and expose us to new geographic, political, operating and financial risks. In addition, each acquisition involves a number of risks, such as the diversion of our management’s attention from our existing business to integrating the operations and personnel of the acquired business, possible adverse effects on our results of operations during the integration process, our inability to achieve the intended objectives of the combination and potential unknown liabilities associated with the acquired assets.

 

We may not be able to obtain the funding required to implement future strategies.

 

Our strategies to continue to expand our cement production capacity and distribution network require significant capital expenditures. We cannot assure you that we will generate sufficient cash flow from operations, or that we will have access to external financing sources, to adequately fund such capital expenditures. Our access to external sources of financing will depend on many factors, including factors beyond our control, such as conditions in the global capital markets and investors’ risk perception of investing in Peru and in emerging markets generally. Any equity or debt financing, if available, may not be on terms that are favorable to us. If our access to external financing is limited, we may not be able to execute our strategy, which could adversely affect our business, financial condition and results of operations.

 

In addition, our local bonds due 2029 and 2034, and the “club deal” loan we entered into in 2021, contain covenants that limit our ability and that of our restricted subsidiaries to incur additional indebtedness if we do not meet certain financial ratios. If we are unable to incur additional debt to fund our future strategies, our business could be adversely affected.

 

We are subject to risks related to litigation and administrative proceedings that could adversely affect our business and financial performance in the event of an unfavorable ruling.

 

The nature of our business exposes us to litigation relating to product liability claims, labor, health and safety matters, environmental matters, regulatory, tax and administrative proceedings, governmental investigations, tort claims and contract disputes, among other matters. In the past, we have been subject to antitrust and tax proceedings or investigations. While we contest these matters vigorously and make insurance claims when appropriate, litigation is inherently costly and unpredictable, making it difficult to accurately estimate the outcome of actual or potential litigation. Although we establish provisions as we deem necessary, the amounts that we reserve could vary significantly from any amounts we actually pay due to the inherent uncertainties in the estimation process. We cannot assure you that these or other legal proceedings will not materially affect our ability to conduct our business, financial condition and results of operations in the event of an unfavorable ruling.

 

 

Our business is subject to a number of operational risks, which may adversely affect our business, financial condition and results of operations.

 

Our business is subject to several industry-specific operational risks, including accidents, natural disasters, labor disputes and equipment failures. Such occurrences could result in damage to our production facilities and equipment, and/or the injury or death of our employees and others involved in our production process. Moreover, such accidents or failures could lead to environmental damage, loss of resources or intermediate goods, delays or the interruption of production activities and monetary losses, as well as damage to our reputation. Our insurance may not be sufficient to cover losses from these events, which could adversely affect our business, financial condition and results of operations.

 

In addition, key equipment at our facilities, such as our mills and kilns, may deteriorate sooner than we currently estimate. Such deterioration of our assets may result in additional maintenance or capital expenditures and could cause delays or the interruption of our production activities. If these assets do not generate the cash flows we expect, and we are not able to procure replacement assets in an economically feasible manner, our business, financial condition and results of operations may be materially and adversely affected.

 

Our business depends on the continued operation of our Pacasmayo and Piura facilities.

 

Our production facilities in Pacasmayo and Piura are essential to our business. In 2024, approximately 84.2% of our total cement and all of our quicklime was produced at our Pacasmayo and Piura facilities. These plants are subject to normal hazards of operating any cement production facility, including accidents, natural disasters and unexpected malfunctioning of the equipment. Any interruption in the operation of our Pacasmayo or Piura facilities or a decrease in the effective capacity of these facilities would adversely affect our results of operations.

 

The introduction of cement substitutes into the market and the development of new construction techniques could have a material adverse effect on our business, financial condition and results of operations.

 

Materials such as plastic, aluminum, ceramics, glass, wood and steel can be used in construction as a substitute for cement. In addition, other construction techniques, such as the use of drywall, could decrease the demand for cement and concrete. In Peru, drywall has only been introduced into the housing construction market in recent years and it is not widely used. However, the use of drywall for housing construction could increase significantly in the future as it becomes more popular. In addition, research aimed at developing new construction techniques and modern materials may introduce new products in the future. The use of substitutes for cement could cause a significant reduction in the demand and prices for our cement products.

 

Our success depends on key members of our management and board of directors

 

Our success depends largely on the efforts and strategic vision of our executive management team and our board of directors. The loss of the services of some or all of our executive management team or members of our board of directors could have a material adverse effect on our business, financial condition and results of operations.

 

The execution of our business plan also depends on our ongoing ability to attract and retain additional qualified employees capable of operating our plants. Due to the limited pool of skilled workers in the north of Peru or workers from other regions willing to relocate to the north of Peru, we may not be successful in attracting and retaining the personnel we require. If we are unable to hire, train and retain qualified employees at a reasonable cost, we may be unable to successfully operate our business or reach full planned production levels in a timely manner and, as a result, our business, financial condition and results of operations could be adversely affected.

 

 

Our operations and sales are highly concentrated in the northern region of Peru.

 

All of our operations are located in the northern region of Peru, including our production facilities and the quarries from where we obtain limestone to produce cement. In addition, substantially all our cement products are sold to consumers in this market. As a result, any adverse economic, political, or social conditions affecting the northern region of Peru, as well as natural disasters and weather conditions, such as the El Niño climate pattern, among other factors that may affect this region, could have a material adverse effect on our business, financial condition and results of operations. For example, in March 2023, Cyclone Yaku generated intense rainfall, which resulted in flooding and mudslides, which severely damaged some areas in the north of Peru, particularly the city of Pacasmayo, where we operate. Although there was no severe physical damage to our properties, we were affected by temporary road interruptions, inadequate workforce turnout, temporary disruptions in the supply of products, delays in the delivery of our products.

 

We are subject to environmental regulations and may be exposed to liability and political cost as a result of our handling of hazardous materials and potential costs for environmental compliance.

 

We are subject to various environmental protection and health and safety laws and regulations that regulate, among other things, the generation, storage, handling, use and transportation of hazardous materials; emissions and discharge of hazardous materials; and the health and safety of our employees. Pursuant to Peruvian law, in order to conduct mining and industrial activities, we are required, among other things, to (i) submit an environmental impact assessment to the Ministry of Production (Ministerio de la Producción) and a mining closure plan to the Ministry of Energy and Mines (Ministerio de Energía y Minas, or “MINEM”) prior to initiating mining activities, (ii) comply with certain air emission and wastewater discharge standards, (iii) obtain approval from the water management authority to discharge wastewater into natural water sources or soil, (iv) dispose solid waste generated by us in special landfills exclusively through companies registered with the environmental agency, and (v) store fuel in compliance with environmental and safety standards. In addition, we are required to have a health and safety committee and develop an internal health and safety code. Although we believe we are in compliance with all these regulations in all material respects, we cannot assure you that we have been or will be at all times in full compliance with these laws and regulations. Any violation of such laws or regulations could result in substantial fines, criminal sanctions, revocations of operating permits and shutdowns of our facilities. In addition, current or future governments may also impose stricter regulations which may require us to incur higher compliance costs.

 

Pursuant to certain applicable environmental laws, we could be held liable for all or substantially all of the damages caused by pollution at our current or former facilities or those of our predecessors or at disposal sites. We could also be held liable for all incidental damages due to the health effects of exposure of individuals to hazardous substances or other environmental damage.

 

We cannot assure you that our costs of complying with current and future environmental and health and safety laws and regulations, and any liabilities arising from past or future releases of, or exposure to, hazardous substances will not adversely affect our business, financial condition and results of operations.

 

 

Social disturbances by local communities may have an adverse effect on our business and results of operations.

 

Mining is an important part of the Peruvian economy. As of December 31, 2024, mining and oil and gas accounted for approximately 11.5% of the country’s GDP, according to the BCRP. On several occasions, local communities have opposed these operations and accused them of polluting the environment and hurting agricultural and other traditional economic activities. In recent years, Peru has experienced protests against mining projects in several regions around the country. For example, since 2019, there have been on-and-off conflicts in Las Bambas between local communities and China Minmetals Corp, resulting in road blockages and halt in operations repeatedly throughout this period, and is still ongoing. We conduct some extraction activities in our quarries and operate in areas close to local communities. Although we have historically had very good relationships with the local communities where we operate and nearby, we provide no assurance that this will continue to be the case in the future. During 2022, certain local communities made social demands relating to agriculture, transportation, mining, which caused instability.

 

Illegal mining has also generated conflicts. During the last three years, Compañía Minera Poderosa, a gold mining company operating in Peru, has suffered repeated attacks by illegal miners colluding with national and foreign criminal organizations. See also ““—Risks Relating to Peru Political, social and economic developments in Peru including political instability, rates of inflation and unemployment could have a material adverse effect on our business, financial condition and results of operations.”

 

Social conflicts in the future for reasons detailed elsewhere in this annual report may have an effect on the Peruvian economy, and on our business and results of operations.

 

International agreements related to climate change may result in an increase in our costs.

 

There are ongoing international efforts to address greenhouse emissions. The United Nations and certain international organizations have taken action against activities that may increase the atmospheric concentration of greenhouse gases. Regulatory measures, such as the Kyoto Protocol, aimed at addressing greenhouse gas emissions and climate changes, are in various stages of negotiation and implementation. Such measures may result in increased costs to us for installation of new controls aimed at reducing greenhouse gas emissions, purchase of credits or licenses for atmospheric emissions, and monitoring and registration of greenhouse gas emissions from our operations. These measures, if adopted in Peru, could adversely affect our business, financial condition and results of operations.

 

Changes in regulations or in the interpretation of regulations may adversely affect our business, financial condition and results of operations.

 

Our business is subject to extensive regulation in Peru, including, among others, relating to tax, environmental, labor, health and safety, and mining matters, including mining royalties. We believe that our facilities are currently operating in all material respects in accordance with all applicable concessions, laws and regulations. Future regulatory changes, changes in the interpretation of such regulations or stricter enforcement of such regulations, including changes to our concession agreements, may increase our compliance costs and could potentially require us to alter our operations. We cannot assure you that regulatory changes in the future will not adversely affect our business, financial condition and results of operations.

 

Any dispute with the labor unions that represent our employees could have an adverse effect on our business, financial condition and results of operations.

 

As of December 31, 2024, approximately 19.7% of our employees were members of employee unions. Although we consider our relations with our employees are currently positive, we cannot assure you that we will not experience work slowdowns, work stoppages, strikes or other labor disputes in the future, which could adversely affect our business, financial condition and results of operations.

 

 

New projects may require the prior approval of local indigenous communities.

 

On September 7, 2011, Peru enacted Law No. 29785, regarding the Prior Consultation Right of Local Indigenous Communities, in accordance with the International Labor Organization Convention No. 169 (Ley del Derecho a la Consulta Previa a los Pueblos Indígenas y Originarios, Reconocido en el Convenio 169 de la Organización Internacional del Trabajo). This law, which became effective on December 6, 2011, establishes a prior consultation procedure (procedimiento de consulta previa) that the Peruvian government must carry out with local indigenous communities, whose rights may be directly affected by new legislative or administrative measures, including the granting of new mining concessions. Local indigenous communities do not have a veto right; upon completion of this prior consultation procedure, the Peruvian government retains the discretion to approve or reject the applicable legislative or administrative measure. However, to the extent that in the future our new projects may require implementation of legislative or administrative measures that impact local indigenous communities, we may not be able to undertake such projects, unless the Peruvian government first conducts the foregoing consultation procedure. We cannot assure you that this law will not adversely affect our new projects and have an adverse effect on our business, financial condition and results of operations.

 

The instruments pursuant to which our principal indebtedness was issued contain financial and other covenants, and any default under any of these instruments may have a material adverse effect on our financial condition and cash flows.

 

In January 2019, we issued an aggregate of S/570 million in debt securities in two issuances under our local bond program: one in the aggregate principal amount of S/260 million bearing interest a rate of 6.68750% with a term of 10 years, and another in the aggregate principal amount of S/310 million bearing interest at a rate of 6.84375% with a term of 15 years. These issuances contain covenants limiting our ability to incur additional indebtedness. And, in 2021, we entered into a “club deal” loan in the amount of S/ 860 million, which also contains restrictive covenants, as well as financial covenants requiring us to meet certain financial ratios tests. Failure to meet or satisfy any of these covenants could result in an event of default under the indenture, the agreements governing our local bonds or our “club deal” loan.

 

Failures in our information technology systems and information security (cybersecurity) systems can adversely impact our operations and reputation.

 

Our operations are to a certain extent dependent on information technology and automated operating systems to manage or support our operations. The proper functioning of these systems is critical to the efficient operation and management of our business. In addition, these systems may require modifications or upgrades as a result of technological changes or growth in our business. These changes may be costly and disruptive to our operations. Our systems may be vulnerable to damage, disruption or intrusion caused by circumstances beyond our control, such as physical or electronic break-ins, catastrophic events, power outages, natural disasters, computer system or network failures, viruses or malware, unauthorized access and cyberattacks. Although we take actions to secure our systems and electronic information through cybersecurity tools, backup and recovery solutions, procedures and policies which are based on Cybersecurity framework NIST 1.1 and ISO/IEC 27001:2013, have disaster recovery plans in case of incidents that could cause major disruptions to our business, these measures may not be sufficient since cybersecurity threats continue to evolve. Any significant information leakage or theft of information could affect our compliance with data privacy laws and damage our relationship with our employees, customers and suppliers, and also adversely impact our business, financial condition and results of operations. Our insurance does not cover any risk associated with any cyber-security risks.

 

We are incorporating artificial intelligence technologies into our processes. These technologies may present business, compliance, and reputational risks.

 

Recent technological advances in artificial intelligence and machine-learning technology both present opportunities and pose risks to us. If we fail to keep pace with rapidly evolving technological developments in artificial intelligence, our competitive position and business results may suffer. At the same time, use of artificial intelligence has recently become the source of significant media attention and political debate. The introduction of these technologies, particularly generative AI, into our operations may result in new or expanded risks and liabilities, including due to enhanced governmental or regulatory scrutiny, litigation, compliance issues, ethical concerns, confidentiality or security risks, as well as other factors that could adversely affect our business, reputation, and financial results. In addition, our personnel could, unbeknownst to us, improperly utilize artificial intelligence and machine learning-technology while carrying out their responsibilities. The use of artificial intelligence can lead to unintended consequences, including generating content that appears correct but is factually inaccurate, misleading or otherwise flawed, or that results in unintended biases and discriminatory outcomes, which could harm our reputation and business and expose us to risks related to inaccuracies or errors in the output of such technologies and the risk that using such technologies could result in leakage of our confidential information.

 

 

Risks Relating to our Common Shares and ADSs

 

The market price of ADSs may fluctuate significantly, and you could lose all or part of your investment.

 

Volatility in the market price of the ADSs may prevent you from being able to sell your ADSs at or above the price you paid for them. The market price and liquidity of the market for the ADSs may be significantly affected by numerous factors, some of which are beyond our control and may not be directly related to our operating performance. These factors include, among others:

 

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actual or anticipated changes in our results of operations, or failure to meet expectations of financial market analysts and investors;

 

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investor perceptions of our prospects or our industry;

 

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operating performance of companies comparable to us and increased competition in our industry;

 

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new laws or regulations or new interpretations of laws and regulations applicable to our business;

 

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general economic trends in Peru;

 

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catastrophic events, such as earthquakes and other natural disasters; and

 

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developments and perceptions of risks in Peru and in other countries.

 

Our controlling shareholder has significant influence over us and his interests could conflict with the interests of other shareholders.

 

As of March 31, 2025, our controlling shareholder beneficially owned 50.01% of our outstanding common shares. As a result, our controlling shareholder has the ability to determine the outcome of substantially all matters submitted for a vote to our shareholders and thus exercise control over our business policies and affairs, including, among others, the following:

 

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the composition of our board of directors and, consequently, any determinations of our board with respect to our business direction and policy, including the appointment and removal of our executive officers;

 

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determinations with respect to mergers, other business combinations and other transactions, including those that may result in a change of control;

 

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whether dividends are paid or other distributions are made and the amount of any such dividends or distributions;

 

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whether we offer preemptive and accretion rights to holders of our common shares in the event of a capital increase;

 

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sales and dispositions of our assets; and

 

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the amount of debt financing we incur.

 

Our controlling shareholder may direct us to take actions that could be contrary to the interests of our other shareholders and may be able to prevent other shareholders from blocking these actions or from causing different actions to be taken. Also, our controlling shareholder may prevent change of control transactions that might otherwise provide the shareholders with an opportunity to dispose of or realize a premium on their investment in our common shares and ADSs. We cannot assure you that our controlling shareholder will act in a manner consistent with our other shareholders’ best interests.

 

 

Holders of ADSs may be unable to exercise voting rights with respect to our common shares underlying the ADSs at our shareholders’ meetings.

 

Holders of ADSs may exercise voting rights with respect to the common shares represented by the ADSs only in accordance with the deposit agreement relating to the ADSs. Holders of our common shares will receive notice of shareholders’ meetings through publication of a notice 25 days in advance, pursuant to Peruvian law, in the official gazette in Peru, a Peruvian newspaper of general circulation, the bulletin of the Lima Stock Exchange and the website of the Superintendencia del Mercado de Valores (the “Peruvian Securities Commission”), and will be able to exercise their voting rights by either attending the meeting in person or voting by proxy. ADS holders will not receive notice directly from us. Instead, pursuant to the deposit agreement, we will notify the depositary, which will mail to holders of ADSs the notice of the meeting and a statement as to the manner in which voting instructions may be given. To exercise their voting rights, ADS holders must instruct the depositary how to exercise the voting rights for the common shares which underlie their ADSs. Due to these additional procedural steps involving the depositary, the process for exercising voting rights may take longer for ADS holders than for holders of our common shares.

 

Holders of ADSs also may not receive voting materials in time to instruct the depositary to vote the common shares underlying their ADSs. In addition, the depositary and its agents are not responsible for failing to carry out voting instructions of the holders of ADS or for the manner of carrying out such instructions, unless such failure can be attributable to gross negligence, bad faith or willful misconduct on the part of the depositary or its agents. Accordingly, holders of ADSs may not be able to exercise voting rights, and they will have little, if any, recourse if the underlying common shares are not voted as requested.

 

The ability of holders of ADSs to receive payments of cash dividends may be limited.

 

Our shareholders’ ability to receive cash dividends may be limited by the ability of the depositary to convert cash dividends paid in soles into U.S. dollars. Under the terms of our deposit agreement with the depositary for the ADSs, the depositary will convert any cash dividend or other cash distribution we pay on the common shares underlying the ADSs into U.S. dollars, if it can do so on a reasonable basis and can transfer the U.S. dollars to the United States. If this conversion is not possible or if any government approval is needed and cannot be obtained, the deposit agreement allows the depositary to distribute the foreign currency only to those ADS holders to whom it is possible to do so. If the exchange rate fluctuates significantly during a time when the depositary cannot convert the foreign currency, holders of ADSs may lose some or all of the value of the dividend distribution.

 

Holders of ADSs may be unable to exercise pre-emptive or accretion rights with respect to the common shares underlying their ADSs.

 

Under Peruvian corporate law, if we issue new common shares as part of a capital increase, unless otherwise agreed to by holders of 40% of our outstanding common shares, our shareholders will generally have the right to subscribe to a proportional number of common shares of the class held by them to maintain their existing ownership percentage, which is known as preemptive rights. In addition, shareholders are entitled to the right to subscribe for the unsubscribed common shares of either the class held by them or other classes which remain unsubscribed at the end of a preemptive rights offering, on a pro rata basis, which is known as accretion rights. Holders of ADSs may not be able to exercise the preemptive or accretion rights relating to common shares underlying the ADSs unless a registration statement under the U.S. Securities Act of 1933, as amended (the “Securities Act”), is effective with respect to those rights or an exemption from the registration requirements of the Securities Act is available. We are not obligated to file a registration statement with respect to the common shares relating to these preemptive and accretion rights and we cannot assure you that we will file any such registration statement. Unless we file a registration statement or an exemption from registration is available, holders of ADSs may receive only the net proceeds from the sale of their preemptive and accretion rights by the depositary or, if the preemptive and accretion rights cannot be sold, they will be allowed to lapse. As a result, U.S. holders of ADSs may suffer dilution of their interest in our company upon future capital increases.

 

We are entitled to amend the deposit agreement under which the ADSs were issued, and to change the rights of ADS holders under the terms of such agreement, without the prior consent of the ADS holders.

 

We are entitled to amend the deposit agreement and to change the rights of the ADS holders under the terms of such agreement, without the prior consent of the ADS holders. Any change related to an increase in deposits or charges for book-entry securities services or any modification that might hinder the rights of the ADS holders will be effective within 30 days after the ADS holders have received notice of such change or modification and such holders will have no right to any compensation whatsoever.

 

 

Our status as a foreign private issuer allows us to follow alternate standards to the corporate governance standards of the New York Stock Exchange, which may limit the protections afforded to investors.

 

We are a “foreign private issuer” within the meaning of the New York Stock Exchange corporate governance standards. Under New York Stock Exchange rules, a foreign private issuer may elect to comply with the practices of its home country and not to comply with certain corporate governance requirements applicable to U.S. companies with securities listed on the exchange. We currently follow certain Peruvian practices concerning corporate governance and intend to continue to do so. Accordingly, holders of ADSs will not have the same protections afforded to shareholders of companies that are subject to all New York Stock Exchange corporate governance requirements.

 

For example, the New York Stock Exchange listing standards provide that the board of directors of a U.S. listed company must have a majority of independent directors at the time the company ceases to be a “controlled company.” Under Peruvian corporate governance practices, a Peruvian company is not required to have a majority of independent members on its board of directors.

 

The listing standards for the New York Stock Exchange also require that U.S. listed companies; at the time they cease to be “controlled companies,” have a nominating/corporate governance committee and a compensation committee (in addition to an audit committee). Each of these committees must consist solely of independent directors and must have a written charter that addresses certain matters specified in the listing standards. Under Peruvian law, a Peruvian company may, but is not required to, form special governance committees, which may be composed partially or entirely of non-independent directors.

 

In addition, New York Stock Exchange rules require the independent non-executive directors of U.S. listed companies to meet on a regular basis without management being present. There is no similar requirement under Peruvian law.

 

The New York Stock Exchange’s listing standards also require U.S. listed companies to adopt and disclose corporate governance guidelines. In November 2013, the Peruvian Securities Commission and a committee of regulatory agencies and associations prepared and published a list of suggested non-mandatory corporate governance guidelines called the “Good Corporate Governance Code for Peruvian Companies.” Although we have implemented a number of these measures, we are not required to comply with the corporate governance guidelines by law or regulation, only to disclose whether or not we are in compliance.

 

Minority shareholders in Peru are not afforded equivalent protections as minority shareholders in other jurisdictions and investors may face difficulties in commencing judicial and arbitration proceedings against our company or our controlling shareholder.

 

Our company is organized and existing under the laws of Peru, and our controlling shareholder is resident in Peru. Accordingly, investors may face difficulties in serving process on our company, our officers and directors or our controlling shareholder in other jurisdictions, and in enforcing decisions granted by courts located in other jurisdictions against our company, our officers and directors or our controlling shareholder that are based on securities laws of jurisdictions other than Peru.

 

In Peru, there are no proceedings to file class action suits or shareholder derivative actions with respect to issues arising between minority shareholders and an issuer, its controlling shareholders or directors and officers. Furthermore, the procedural requirements to file actions by shareholders differ from those of other jurisdictions, such as in the United States. As a result, it may be more difficult for our minority shareholders to enforce their rights against us, our directors, officers or controlling shareholder as compared to the shareholders of a U.S. company. The deposit agreement provides that the depositary has no obligation to commence or become involved in any judicial proceedings and any other legal actions relating to the ADSs or the deposit agreement, either on behalf of the ADS holders or on behalf of any other person.

 

 

The ability of investors to enforce civil liabilities under U.S. securities laws may be limited.

 

Most of our directors or executive officers are not residents of the United States. All or a substantial portion of our assets and those of our directors and executive officers are located outside of the United States. As a result, it may not be possible for investors in our securities to affect service of process within the United States upon such persons or to enforce in U.S. courts or outside of the United States judgments obtained against such persons outside of the United States.

 

We are a company organized and existing under the laws of Peru, and there is no existing treaty between the United States and Peru for the reciprocal enforcement of foreign judgments. It is not clear whether a Peruvian court would accept jurisdiction and impose civil liability if proceedings were commenced in a foreign jurisdiction predicated solely upon U.S. federal securities laws.

 

ITEM 4. INFORMATION ON THE COMPANY

 

A.

History and Development of the Company

 

Our History

 

Cementos Pacasmayo S.A.A. was incorporated in Lima, Peru in 1949, by a group of private investors that founded the company to serve the cement market in the northern region of Peru. Cementos Pacasmayo began its operations in 1957 and is a publicly held corporation (sociedad anónima abierta) organized under the laws of Peru. Our executive offices are located at Calle La Colonia 150, Urbanización El Vivero, Surco, Lima, Peru. Our telephone number at this location is + (511) 317-6000. Our website address is www.cementospacasmayo.com.pe. Information on or accessible through our website is not a part of, nor incorporated by reference in, this annual report.

 

Cementos Pacasmayo S.A.A. and Hochschild Mining plc together constitute the two businesses of the Hochschild Group, which has operated in Latin America for more than 100 years. Hochschild Mining plc is incorporated in the United Kingdom and its shares have been listed on the London Stock Exchange since 2006. Cementos Pacasmayo has been listed on the Lima Stock Exchange since 1995. As of March 31, 2025, Eduardo Hochschild, directly and indirectly, owned and controlled 38.32% of the shares of Hochschild Mining plc. Through Inversiones ASPI S.A.(“ASPI”), as of that same date, Eduardo Hochschild, directly and indirectly, owned and controlled 50.01% of the outstanding common shares of Cementos Pacasmayo. S.A.A.

 

The Hochschild Group traces its origins to 1911, when Mauricio Hochschild, a German mining engineer, founded a group of companies in South America that came to be known as the Hochschild Group. Following World War I, the Hochschild Group expanded into Bolivia where it developed significant interests in tin. The Hochschild Group commenced operations in Peru in 1925 and in 1945 Luis Hochschild, the nephew of Mauricio Hochschild (and the father of Eduardo Hochschild), joined the Hochschild Group’s Peruvian operations.

 

During the first decades of its operations, the Hochschild Group focused on the commercialization of minerals, although it later began operating its own mines and other industrial companies. During World War II, the Hochschild Group was a key supplier of tin and other metals to the allied forces.

 

The Hochschild Group acquired its initial ownership interest in us in 1956. Set forth below are key developments in our company’s history.

 

●

In 1957, we began our operations with the installation of our first clinker line with an installed production capacity of approximately 110,000 metric tons per year. In 1966 and 1977, we added a second and third clinker line, respectively, increasing our installed clinker production capacity to approximately 830,000 metric tons per year.

 

●

In November 1984, the South American mining and industrial operations of the Hochschild Group were sold to the Anglo American Corporation of South Africa which, in the same month, sold the Peruvian operations of the Hochschild Group, including its interest in Cementos Pacasmayo and predecessors of Hochschild Mining plc, to a group of companies controlled by Luis Hochschild.

 

 

●

In 1995, we launched our distribution network to commercialize and distribute our products throughout the northern region of Peru. In that same year, we also listed our common shares for trading on the Lima Stock Exchange, currently under the ticker symbol “CPACASC1.”

 

●

In 1998, we acquired from the Peruvian government our Rioja facility, located in the northeast of Peru. At the time, the Rioja facility had one clinker line with an installed cement production capacity of approximately 35,000 metric tons per year.

 

●

In 2003, we acquired Zemex Corporation, a U.S. company engaged in non-metallic mining and industrial activities in the United States and Canada, which we sold in 2007 in a series of transactions.

 

●

In 2009, we created Fosfatos del Pacífico in order to explore phosphate rock deposits from our concession at Bayóvar in the north of Peru.

 

●

In 2010, we reached an aggregate total installed cement production capacity of 3.1 million in our Pacasmayo and Rioja facilities and completed the conversion of our Waelz kiln, retrofitting it to produce quicklime or calcine zinc interchangeably. That same year, we also sold our copper mining concessions in the central region of Peru known as “Mina Raul,” which were previously leased to a third party, for US$28.0 million.

 

●

In December 2011, we sold a minority equity interest in Fosfatos to an affiliate of Mitsubishi to develop our phosphate deposits in the Bayóvar fields, in the northwest of Peru.

 

●

In March 2012, we completed our initial equity offering of 22,296,800 ADSs in the United States and listed the ADSs on the New York Stock Exchange.

 

●

In February 2013, we issued US$300 million in our inaugural international bond offering. A portion of the proceeds from this offering were used to prepay amounts outstanding on our secured loan agreement with BBVA Banco Continental, and the remaining proceeds were used to fund a portion of the capital expenditures related to the construction and operation of our new Piura plant and our cement business.

 

●

In September 2015, we began producing cement at our new plant in Piura, adding 1.6 million metric tons of annual cement production capacity. In January 2016, we began producing clinker at our new plant in Piura, finishing the start-up of the plant, adding one million metric tons of annual clinker production capacity.

 

●

In March 2017, we completed the spin-off of Fostatos del Pacífico.

 

●

In December 2017, our board of directors resolved to focus our strategy on our core business of developing cement and building solutions. In furtherance of this strategy, we have focused on disposing of our non-core investments. In the fourth quarter of 2017, we discontinued our brine project.

 

●

In March 2018, we launched our new brand image and updated its vision: to further enhance our position as a leader in developing building solutions and innovations that anticipate the needs of our clients and that contributes to the progress of our country.

 

●

During 2018, we implemented the ISO 37001 anti-bribery management systems, obtaining certification in January 2019. This certification confirms that our management systems are designed to help prevent, detect and respond to bribery and comply with anti-bribery laws and voluntary commitments applicable to our activities.

 

●

In November 2018, we launched an offer to purchase for cash a portion of the US$300 million principal amount of our outstanding 4.50% Senior Notes due 2023. The offer expired on December 7, 2018 and we purchased a total of US$168,388,000, or approximately 56.13% of the total outstanding amount of our 4.500% Senior Notes due 2023.

 

 

●

On January 8, 2019, the General Shareholders’ Meeting approved the creation of a local bond program in an aggregate principal amount up to S/1,000 million. On January 31, 2019, we issued an aggregate principal amount of S/570 million in debt securities under our local bond program: one in the aggregate principal amount of S/260 million accruing interest at a rate of 6.68750% per annum with term to maturity of 10 years, and the other in the aggregate principal amount of S/310 million accruing interest at a rate of 6.84375% per annum with a term to maturity of 15 years. The proceeds were used to purchase a portion of our 4.50% Senior Notes due 2023. The rates and terms obtained reduce our financial cost structure, with lower cost of capital, an extended maturity and less exposure to exchange rate fluctuations.

 

●

In 2020, we were included on the Dow Jones Sustainability (“DJS”) MILA Pacific Alliance Index for the second consecutive year. This index is made up of those companies that demonstrate superior performance among their peers based on social, environmental, and economic criteria.

 

●

In 2021, given the exponential growth in the demand for cement, in October 2021, the optimization of the capacity of our Pacasmayo plant was approved, in order to produce an additional estimated 660,000 metric tons of clinker, and thus reduce the consumption of imported clinker.

 

●

In 2022, for the fourth consecutive year, we managed to be part of the annual DJS MILA Pacific Alliance Index, achieving a score of 79 points, which was an improvement of four points compared to the previous year. We were the only Peruvian cement company present in DJS MILA Pacific Alliance Index for 2022. During 2022, we implemented the ISO 37301 compliance management system, obtaining the certification in January 2023.

 

●

In 2023, we finished investing approximately US$ 83.5 million in a more efficient kiln for our Pacasmayo plant. This investment is fully aligned with our medium- and long-term strategy as it demonstrates on the one hand, our firm belief in the future growth of our country and, on the other hand, our commitment to carbon neutrality, as this new kiln lowers our emissions. In addition, for the fifth consecutive year we were part of the annual DJS MILA Pacific Alliance Index and for the fourth consecutive year we were included in The Sustainability Yearbook 2024. This yearbook includes companies that obtain a score in the top 15% of their sector worldwide and present a difference of less than 30% with respect to the Global ESG score of the leader.

 

●

In 2024, we were included again on the annual Dow Jones Sustainability Index (DJSI MILA), and we continue to be the only Peruvian cement company present in this prestigious index. Additionally, for the fifth consecutive year, we were included in The Sustainability Yearbook 2025.

 

Capital Expenditures

 

We expect to spend approximately S/ 80 million per year over the next three years on recurring capital expenditures necessary to operate our plants and equipment. The table below sets forth our total capital expenditures incurred in 2024, 2023 and 2022.

 

		Year ended December 31,
(in millions of S/)		2024				2023				2022
Pacasmayo plant projects			30.1				251.1				149.7
Concrete and aggregates equipment			37.0				18.2				18.8
Rioja plant projects			6.6				9.4				4.5
Piura plant projects			15.8				17.6				17.1
Other investing activities			7.4				3.0				-
Total			96.9				299.3				190.1

 

B.

Business Overview

 

Overview

 

We are a Peruvian cement company, and the only cement manufacturer serving in the northern region of Peru. With more than 67 years of operating history, we produce, distribute and sell cement and cement-related materials, such as precast products and ready-mix concrete. Our products are primarily used in construction, which has been one of the fastest growing segments of the Peruvian economy in recent years. We also produce and sell quicklime for use in mining operations, although it represents a very small percentage of our overall revenues.

 

 

In 2024, our cement, concrete and precast shipments were approximately 2.8 million metric tons, representing an estimated 22.8% share of total cement shipments in Peru according to INEI. Our sales volumes in 2024 decreased by 3.7% compared to 2023. We believe the construction sector has significant potential to grow with the continued deficit in infrastructure and the persistent housing deficit in the country, as well as the reconstruction of northern Peru following Cyclone Yaku in the first half of 2023.

 

We own three cement production facilities, our flagship Pacasmayo facility located in the northwest region of Peru, our Piura facility located around 300 kilometers north of Pacasmayo, and our smaller Rioja facility located in the northeast. Our facilities have a total installed annual cement production capacity of approximately 4.9 million metric tons. We also have an installed annual production capacity of 240,000 metric tons of quicklime. We own concession rights to several quarries with reserves of limestone and other raw materials located near our facilities.

 

We provide consumers with high-quality and value-added cement products and, as a result, we believe we have developed strong brand recognition and customer loyalty in our market. We have developed one of the largest independent retail distribution networks for construction materials in Peru. Through our network of 289 independent retailers and 315 hardware stores as of December 31, 2024, we distribute our cement products as well as other construction materials manufactured by third parties, such as steel rebar, cables and pipes, in the northern region of Peru. We also sell our cement products directly to other retailers that are not part of our distribution network and to private construction companies and government entities.

 

The following table sets forth certain macroeconomic data for Peru and operating and financial data for our company for the periods indicated.

 

		As of and for the year ended December 31,
		2024				2023				2022
Economic data(1):
Change in GDP			3.2	%			(0.7	)%			2.9	%
Change in construction sector in Peru			3.5	%			(8.0	)%			3.5	%
Operating data:
Capacity (thousands of metric tons per year):
Installed cement capacity			4,940				4,940				4,940
Installed clinker capacity			3,035				3,035				2,780
Production (thousands of metric tons):
Cement production			2,832				2,946				3,436
Clinker production			2,123				2,097				2,198
Utilization rate at Pacasmayo plant(2):
Cement			57.5	%			57.1	%			61.0	%
Clinker			72.5	%			61.6	%			62.3	%
Utilization rate at Rioja plant(2):
Cement			72.8	%			58.8	%			69.8	%
Clinker			83.7	%			69.0	%			85.7	%
Utilization rate at Piura plant(2):
Cement			52.7	%			64.5	%			85.1	%
Clinker			61.5	%			80.7	%			100.0	%
Gross profit (S/ million)			728.5				689.4				652.0
Gross profit margin(3):			36.8	%			35.4	%			30.8	%
EBITDA (S/ million)			549.3				481.8				493.9
EBITDA margin(4)			27.8	%			24.7	%			23.3	%
Adjusted EBITDA(5) (S/ million)			549.3				518.3				493.9
Adjusted EBITDA margin(6)			27.8	%			26.6	%			23.3	%
Profit (S/ million)			198.9				168.9				176.8
Profit margin			10.1	%			8.7	%			8.4	%

 

(1)

Source: BCRP.

(2)

Utilization rate is calculated by dividing production for the specified period by installed capacity of that period.

(3)

Gross profit margin is equal to gross profit as a percentage of net sales.

(4)

EBITDA margin is equal to EBITDA divided by sales of goods.

(5)

Adjusted EBITDA is equal to EBITDA minus the effect of the impairment of our vertical kilns.

(6)

Adjusted EBITDA margin is equal to adjusted EBITDA divided by sales of goods.

 

 

Non-IFRS Financial Measures and Reconciliation

 

We define EBITDA as net profit minus finance income and plus finance costs, income tax expense, and depreciation and amortization, and plus or minus gain from exchange difference, net. We define adjusted EBITDA as EBITDA minus the impairment of our vertical kilns.

 

EBITDA and adjusted EBITDA should not be construed as alternatives to profit or operating profit, as indicators of operating performance, as alternatives to cash flow provided by operating activities or as measures of liquidity (in each case, as determined in accordance with IFRS). EBITDA and adjusted EBITDA, as calculated by us, may not be comparable to similarly titled measures reported by other companies, including those in the cement industry.

 

The following table sets forth the reconciliation of our profit to EBITDA and adjusted EBITDA:

 

		Year ended December 31,
		2024				2024				2023				2022
		(in millions of US$)(1)				(in millions of S/)				(in millions of S/)				(in millions of S/)
Net profit			52.8				198.9				168.9				176.8
Income tax expense			25.9				97.3				76.8				85.6
Finance income			(1.7	)			(6.3	)			(7.2	)			(3.3	)
Finance costs			26.6				100.3				104.0				95.2
(Gain) Loss from exchange difference, net			0.3				0.9				(4.9	)			1.1
Depreciation and amortization			42.0				158.2				144.2				138.5
EBITDA			145.9				549.3				481.8				493.9
Impairment of vertical kilns			—				—				36.6				—
Adjusted EBITDA			145.9				549.3				518.3				493.9

 

(1)

Calculated based on an average accounting exchange rate of S/3.764 to US$1.00 as of December 31, 2024.

 

 

Peruvian Cement Market

 

Peru had GDP growth of 3.2% in 2024, mainly due to the recovery of primary sectors, particularly metallic mining, fishing and related manufacturing, as well as an increase in construction supported by higher public investment. Additionally, lower demand for non-traditional exports, mainly due to less demand from the North American market, affected external sector performance. Furthermore, climatic anomalies and supply chain disruptions posed challenges to production in key industries, contributing to volatility in private sector income and business confidence. From 2020 to 2024, GDP grew at a compound annual growth rate (“CAGR”) of 4.6%. Growth during this period was accompanied by low inflation, which averaged 4.4% per year. In addition, as of December 31, 2024, the government had accumulated foreign exchange reserves of approximately US$83.2 billion, and the sovereign’s long-term debt rating was investment grade from each of the three major international credit rating agencies. This economic growth resulted, among other key trends, in significant poverty reduction, with a decrease in the percentage of the country’s population living below the poverty line from approximately 48.6% in 2004 to approximately 27.2% in 2022.

 

We sell substantially all our cement in the northern region of Peru, which in 2024 accounted for approximately 32.8% of the country’s population and 19.9% of national GDP. Two other groups sold most of the cement consumed in each of the central and southern regions of Peru, with 1.7% of all the cement consumed in the country coming from imports, and approximately 3.4% coming from a small domestic producer. From 2020 to 2024, total cement consumption in Peru increased 4.8% according to the INEI. Peru continues to have a significant housing deficit, estimated by the INEI at 1.7 million homes nationwide. In Peru, cement is mainly sold to a highly fragmented consumer base, consisting primarily of households that buy cement in bags to gradually build or improve their own homes without professional technical assistance, a segment known in our industry as auto-construcción. We estimate that in 2024 sales to the auto-construcción segment accounted for approximately 74.8% of our total sales of cement, private construction projects accounted for 15.3%, and public construction projects accounted for the remaining 9.9%. Approximately 84.3% of our total cement sales in 2024 were in the form of bagged cement, substantially all of which was sold through retailers.

 

Even though our ready-mix sales are still a small proportion of our sales, we expect this trend to change as infrastructure becomes a bigger driver of demand in the upcoming years.

 

Impairment of Vertical Kilns

 

At the end of 2023, our board of directors, advised by management, recognized a specific impairment for the net value of the assets of the vertical clinker kilns located at the Pacasmayo cement plant for a net cost of S/36,551,000. This deterioration estimate was carried out as a consequence of replacing the old technology of these kilns due to the entry into operation of a new horizontal kiln in the Pacasmayo plant, which is more efficient and produces fewer emissions. This amount was recorded in the impairment of property, plant and equipment item in the consolidated statement of profit or loss.

 

Competitive Strengths

 

Our principal competitive strengths include the following:

 

Strong corporate governance standards and international recognition

 

Our common shares are listed on the Lima Stock Exchange and the ADSs are listed on the New York Stock Exchange. We are subject to the disclosure requirements of the U.S. Securities and Exchange Commission (the “SEC”) and the Peruvian Securities Commission and we must comply with and adopt internal compliance standards to increase transparency and improve corporate governance standards including an audit committee and appointment of independent directors. Since 2009, every year we have been selected as part of the Good Corporate Governance Index of the Lima Stock Exchange (recently renamed S&P/BVL Peru General ESG Index), designed to measure the performance of securities in the S&P/BVL Peru General Index that meet sustainability criteria. Furthermore, we were included for the sixth consecutive year as part of the 2024 DJSI MILA Pacific Alliance Index. This index is made up of those companies that demonstrate superior performance among their peers under social, environmental and economic criteria. This achievement comes as a result of Pacasmayo’s effort to improve in all of these criteria and to work towards ambitious goals in terms of long-term sustainability. We are committed not only to remain in the Index but to improve our performance, as we are convinced that the focus on sustainability is key to our business and our stakeholders. In February 2025, we were selected to be part of The Sustainability Yearbook 2025, for the fifth consecutive year. To appear in the Yearbook, companies must score within the top 15% of their industry globally and have a gap of less than 30% from the leader’s Global ESG score. With around 7,690 companies evaluated around the world, an inclusion in the yearbook is a true statement of excellence in corporate sustainability.

 

 

Track record of cash flow generation and strong results through multiple business cycles

 

We have historically generated strong cash flow and high profit margins mainly due to the following key factors:

 

●

our leadership position in the northern region of Peru; and

 

●

our extensive distribution network, operational flexibility and efficiency, and focus on innovation.

 

These factors helped us generate EBITDA of S/549.3 million during 2024, the highest in company history. This solid financial position and our ability to consistently generate operating cash flow also allows us to obtain relatively low interest rates.

 

Leader in attractive and expanding market with solid macroeconomic fundamentals

 

We are currently the only cement manufacturer in the northern region of Peru and we produce and sell substantially all of our cement in the region. In 2024, the northern region accounted for approximately 32.8% of the country’s population and 19.9% of its GDP. From 2020 to 2024, GDP in the northern region increased at a CAGR of 3.9%. During the same period, our cement sales volume grew at a CAGR of 2.5%, above northern region GDP mainly due to the resilience of the auto-construcción segment, driven by high employment levels in the agriculture, fishing and services sectors, which are prominent in the North.

 

Best-in-class operating efficiencies with vertical integration and strong brand recognition

 

Our quarries are located in close proximity to our plants, enabling us to minimize transportation costs. We strive to enhance our operational efficiency by focusing on lowering costs and improving profitability. We also benefit from our vertically integrated operations, participating in the entire chain of production from the quarries, which we own directly, to the related products such as quicklime, ready–mix, precast and our large distribution network. We have developed one of the largest independent retail distribution networks for construction materials in Peru, known as “DINO,” consisting of 289 independent retailers and 315 hardware stores as of December 31, 2024, primarily small, local stores in the northern region, through which we distribute our cement products, as well as construction materials manufactured by third parties. We use our distribution network, together with our strategically located commercial offices, to promote our products and stay abreast of market developments. We have developed this network through years of fostering relationships with retailers in the region, which we believe would be difficult for a competitor to replicate. Our distribution network has enabled us to build strong recognition for our Pacasmayo brand among retailers and end-consumers in our market, which we believe is important to our business, particularly because our cement is principally sold in bags to retail consumers.

 

Disciplined capital expenditure plan with attractive risk / return profile

 

We seek to minimize risk while securing an adequate return on our development projects. In 2015, we completed construction of our new plant in Piura, the third largest city in northern Peru, which has an annual production capacity of 1.6 million metric tons of cement. The Piura plant improved our competitive position in the northern region of Peru. With production from three plants, we are able to serve our market more efficiently. This state-of-the-art plant is one of the most modern in Latin America. It also reduces transportation costs by enabling the dispatching of cement from plants within closer proximity to the point of sale.

 

 

In 2021, we decided to invest approximately US$83.5 million to optimize our current capacity at our Pacasmayo plant, in order to produce an additional estimated 660,000 metric tons of clinker per year. This optimization was completed during the second half of 2023, allowing us to stop using imported clinker, and therefore achieving higher margins.

 

Emphasis on innovation and research and development

 

We place significant emphasis on research and development to ensure our products meet the needs of consumers in our market and to improve the efficiency of our operations. For example, we have developed cement products suitable to coastal construction that tend to be more exposed to erosion from sulfate. Moreover, we have recently developed an HE (High Early-Strength) cement, intended to gradually replace traditional Portland cement. This novel cement formulation adheres to the ASTM C1157 standard and has a reduced clinker content, with approximately 8% reduction when compared to the traditional Type I cement. Initially, the HE is targeted for the handcrafted precast segment but is part of an ambitious product development strategy to expand its use across other business units. We believe that, by educating retailers and end consumers of these attributes of our products, we have been successful in building demand and realizing higher margins for our differentiated product offering.

 

In terms of innovation, we have embraced digital transformation as a strategic pillar to close technological gaps in the construction sector, enhance competitiveness, and deliver innovative, customer-centered solutions. Through initiatives like Mundo Experto, the company empowers construction workers via Construye Experto, a platform with over 68,000 users and 85,700 hours of training. In the industrial segment, our Pacas Pro platform stands out by offering comprehensive and innovative tech-driven solutions, achieving 81% customer satisfaction in concrete services.

 

Additionally, we have launched user-focused initiatives such as Metros Habitables and Ayu, aimed at improving the auto-construcción processes and facilitating access to building materials without the incurrence of debt. Internally, Pacasmayo fosters organizational innovation and has strengthened its data and AI strategy, reaching an advanced level of digital maturity. This comprehensive transformation reflects our commitment to building a more efficient, sustainable, and people-centered future in construction.

 

Strong relationship with local communities

 

Since we began operations over 67 years ago, we have been committed to improving the quality of life of the communities surrounding our plants, whose members we regularly employ. We have developed close and cooperative relationships with the local communities, which are supported by several social responsibility initiatives we have undertaken. For example, the family of our controlling shareholder founded Asociación Tecsup, a leading non-profit institute in Peru that provides technical education to students as well as UTEC, a leading technical university. We provide scholarships and financial aid to local qualified students interested in studying at Tecsup.

 

We are committed to building the future by strengthening opportunities in the communities where we operates. In 2024, the Community Relations team established four strategic objectives with short-, medium-, and long-term goals (2024–2030). A key part of this strategy is fostering trust-based relationships, guided by principles such as the Community Engagement and Good Conduct Decalogues. We have also embarked in a project to improve the infrastructure conditions of houses through the replacement of dirt floors with concrete floors to contribute to improving the quality of life and habitable conditions in our areas of direct influence.No community conflicts were reported in 2024, reflecting the effectiveness of these measures.

 

Highly experienced and professional management and board of directors

 

Our management team, with an average of 13 years of experience in the cement industry in Peru, has extensive technical and local market expertise and has led our company through our recent growth. We have developed a strong professional business culture and a team of highly qualified executives. We also have a well-regarded and experienced board of directors that includes business leaders from Peru and abroad.

 

 

Our Strategies

 

Our objective is to maximize shareholder value, while honoring our commitment to the environment and abiding by our social responsibility goals. We aim to be a leading company that provides building solutions anticipating the needs of our clients and that contributes to the continued development of our country. We intend to achieve our objective through the following principal strategies:

 

Continue to focus on our core business of supplying the demand for cement

 

We plan to continue to meet the demand for cement in our market, while controlling production costs. We intend to continue to serve the current cement market, as well as increasing cement demand through the production of new cement-based products. Our principal goal is to maintain our market share in the northern region of Peru without reducing the profitability of our business, as to continue developing building solutions to satisfy our clients’ needs.

 

Deepen our commercial relationship with retailers and end-consumers

 

We plan to enhance our commercial relationships with retailers and end-consumers in our market, both to maintain brand loyalty and to foster demand for our cement products. We will continue to support retailers in our DINO distribution network by providing product education, training sessions, rewards programs, and assistance in financing purchases of our products. In addition, we continue with our door-to-door commercial strategy for cement sales. We believe that these initiatives have been successful in strengthening our relationship with retailers and end-consumers.

 

Continue to focus on being the preferred provider of building solutions

 

We strive to be the supplier of choice for cement consumers in the northern region of Peru, whether its individuals building their homes or private construction companies or governmental entities undertaking projects of any size. We continue to focus on providing consumers with efficient and customized building solutions for their construction needs. Over the past several years, we have evolved from being a single type cement manufacturer to offering six different types of cement products, under two brands, and other building solutions, such as assembly gravity walls, sheet piles, precast beams, among others. Moreover, in 2018 we launched a new corporate image and future vision, transforming ourselves from a cement producer to a building solutions company. We focus on innovation and are constantly searching for ways to improve building practices, inspired by our culture based on sustainability. For example, we offer cement that contains special properties that protect against sulfate erosion, as well as other products designed to meet the needs of consumers in the northern region of Peru. For the industrial segment and under our PacasPro brand, we continue with the digitalization of the purchasing process and of the use of our products and services. For our mass channel and self-builders we have Mundo Experto, an ecosystem that integrates physical and digital solutions, improves the purchasing experience and contributes to the professionalization and formalization of the construction market. Our mission is to provide a comprehensive solution for all project types and thus respond to the unique needs of each client, generating savings and efficiencies in the construction processes. During 2023, the company began the reconstruction of the two runways and the perimeter fence of Piura Airport, not only as a cement and concrete provider, but with direct involvement in the construction, as well as part of a consortium. The modernization of the airport aims to stimulate the tourism industry in the region and exceed the 1.08 million passengers transported during 2023.

 

Selectively pursue acquisitions

 

We will continue to evaluate and may selectively pursue strategic acquisitions of cement and complementary businesses that expand our geographic footprint and diversify our portfolio of products. Our management team has significant operating experience and industry knowledge in the production and commercialization of cement and cement-related materials, and we believe this experience will enable us to identify and pursue attractive acquisitions that will maximize shareholder value.

 

 

 

Continue to strengthen our enterprise risk management

 

We continue to strengthen our enterprise risk management methods and processes that allow us to identify, assess and monitor the legal, commercial, operational, financial and reputational risks, as well as fraud, corruption, bribery and money laundering and financing of terrorism risks, determining the existing controls and establishing a plan along with other areas in order to mitigate existing risks. Along these lines, since 2018, we have implemented the ISO 37001 Anti-bribery management systems obtaining the certification every year since 2019. This certification confirms that our management system is designed to help prevent, detect and respond to bribery and comply with anti-bribery laws and voluntary commitments applicable to its activities. We believe this certification reiterates our commitment to global anti-bribery best practices and high standards of transparency and good corporate governance. Also, to continue to strengthen our management systems, during 2022 we implemented the ISO 37301 compliance management system, obtaining certification in January 2023, with a first audited follow-up in September 2023. The second follow-up audit of the ISO 37301 (conducted with AENOR) was carried out on August 14 and 15, 2024.

 

Maintain high environmental, social and governance standards

 

We are committed to maintaining high environmental, social and corporate governance standards. We are focused on developing and strengthening a favorable social environment for the continuity and growth of our operations, prioritizing our social investment in innovative education, health and local development programs in coordination with other stakeholders to contribute to sustainable development. Since 2009, every year we have been selected as part of the S&P/BVL Peru General ESG Index (formerly known as the Good Corporate Governance Index of the Lima Stock Exchange), designed to measure the performance of securities in the S&P/BVL Peru General Index that meet sustainability criteria. Furthermore, we were included for the sixth consecutive year as part of the 2024 DJSI MILA Pacific Alliance Index. This index is made up of those companies that demonstrate superior performance among their peers under social, environmental and economic criteria. This achievement comes as a result of Pacasmayo’s effort to improve in all of these criteria and to work towards ambitious goals in terms of long-term sustainability. We are committed not only to remain in the Index but to improve our performance, as we are convinced that the focus on sustainability is key to our business and our stakeholders.

 

In 2023, we launched the EcoSaco, a cement bag that completely disintegrates within the concrete mix, generating zero waste. For us, this is much more than a cement bag, it’s a solution that has the potential to revolutionize the market, particularly the auto-construcción segment. As with any transformational change, it requires much effort in order to gradually change culturally established paradigms and consumer habits. This is precisely why we are so glad that the EcoSaco won the Semana Economica ESG Sustanaibility Price, both in the Sustainable Product Innovation Category and the Grand Prize, awarded to the project with the greatest environmental, social and economic impact. The EcoSaco also obtained the “Gran Effie”, as well as a Gold Effie that was awarded in the “Innovation in product marketing” category and a Silver Effie in the “Positive change in the environment” category. The Effie awards are a symbol of outstanding achievement, recognized worldwide, that honor all types of effective marketing.

 

In February 2025, we were selected to be part of The Sustainability Yearbook 2025, for the fifth consecutive year. To appear in the Yearbook, companies must score within the top 15% of their industry globally and have a gap of less than 30% from the leader’s Global ESG score. With around 7,690 companies evaluated around the world, an inclusion in the yearbook is a true statement of excellence in corporate sustainability. This achievement is a recognition of our extraordinary efforts to improve in all of these criteria and to work towards ambitious goals in terms of long-term sustainability. We are committed not only to remain in the Index but to improve our performance, as we are convinced that the focus on sustainability is key to our business and our stakeholders.

 

Our Products

 

Our core products are cement and other cement-related materials. We also produce quicklime. In 2024, Cement, concrete, mortar, pavement and precast accounted for 96.4% of our net sales and quicklime accounted for 0.7%. We also sell and distribute construction materials, such as steel rebar, cables and pipes, manufactured by large third-party manufacturing companies, and others which in 2024 represented 2.9% of our net sales.

 

 

The following table sets forth a breakdown of our shipments by type of product for the periods indicated:

 

		Year ended December 31,
(in thousands of metric tons)		2024				2023				2022
Cement, concrete, mortar, pavement and precast			2,846				2,953				3,432
Quicklime			18				30				46

 

The following table sets forth a breakdown of our total net sales by product for the periods indicated:

 

		Year ended December 31,
(in millions of S/)		2024				2023				2022
Cement, concrete, mortar, pavement and precast			1,906.8				1,850.2				1,963.8
Construction Supplies (1)			56.9				74.1				114.0
Quicklime			14.2				25.7				37.9
Others			0.2				0.1				—
Total			1,978.1				1,950.1				2,115.7

 

(1)

Refers to construction materials manufactured by third parties that we distribute. Construction supplies include the following products: steel rebar, wires, nails, corrugated iron, electric conductors, plastic tubes and accessories, among others.

 

Cement

 

Cement is a powdered mixture of ground minerals that, when mixed with water, adheres to other materials and hardens to form a rock-like substance. Cement is generally mixed with other materials, such as gravel and sand, forming concrete with a high degree of compressive strength that is able to withstand substantial pressure.

 

Cement types are generally classified as either Portland cement or blended hydraulic cement. Portland cement is a hydraulic cement produced by pulverizing clinker, consisting essentially of crystalline hydraulic calcium silicates and calcium sulfate. Blended hydraulic cement consists of a mixture of Portland cement clinker and mineral admixtures, such as blast furnace slag, pozzolanic materials and limestone

 

We produce predominantly blended cement, which represented 84.0% of our cement sales in 2024. Cementos Pacasmayo has been promoting the use of blended cement in the Peruvian market for over 25 years. This type of cement requires less clinker and reduces carbon dioxide emissions of our operations and production. Our global clinker/cement ratio is estimated at 71.5%, below the average value for similar producers globally of approximately 77.6%, according to ‘Getting the Numbers Right (GNR)’ by the Global Cement and Concrete Association (the “GCCA”) in 2021.

 

We produce a range of cement products suitable for various uses, such as residential and commercial construction and civil engineering. We currently offer seven types of cement products, each designed for specific applications and various technical requirements:

 

●

Type ICo. Extraforte Cement: Portland composite cement (Type ICo) with excellent workability and compressive strength. Suitable for general construction, flooring, and structural applications. It has a lower carbon footprint due to mineral additions. This cement is widely used in northern Peru, known for its versatility, ease of application, and strong compressive strength development. Ideal for general-purpose use where no special conditions are required.

 

●

Type HS. Cement used in concrete that is exposed to severe sulfate action, principally where soil or ground water has high sulfate content. It is recommended for port construction, industrial plants and construction of sewage sites.

 

●

Type HE.  High-early-strength cement, optimized for structural elements like columns and foundations. Ideal for precast elements and quick formwork removal. It is a cement with strengths similar to Type I but has a lower carbon footprint.

 

 

●

Type GU. Mochica GU:Cement is a general-purpose hydraulic cement, ideal for non-specialized applications. Ensures good workability and consistent performance in construction projects.

 

●

Type MS. Mochica MS Cement: Sulfate-resistant cement designed for humid and saline soils. Contains mineral additives that enhance durability and protect structures from moisture and salt damage.

 

●

Type I. This type of cement is for general purposes and suitable if special properties are not needed. It is generally used for constructing pavements, floors, reinforced concrete buildings, bridges, reservoirs, pipes, masonry units and precast concrete products. Commonly used in general construction, but has a higher carbon footprint compared to blended cements.

 

●

Type V. Type V cement is used in concrete exposed to severe sulfate action, principally in places where soil or ground water has high sulfate content. It is generally used in hydraulic construction, such as irrigation canals, tunnels, water conduits and drains. While highly durable, it has a higher carbon footprint than blended cements.

 

We believe that our Type MS, Type HS and Type V cement products are particularly suitable for construction in the northern coastal region of Peru, where sulfate and chloride concentrations from soil, ground water and sea water affect the durability of construction structures. By educating retailers about the different cement characteristics and conducting marketing campaigns, we believe we have been successful in building demand for our cement products. Our research and development department is also equipped to produce custom-tailored cement products on demand. In addition, through our dedicated research and development team, we have significantly reduced the amount of clinker required for cement production, minimizing capital expenditures and substantially lowering carbon dioxide (CO2) emissions. As a company, our goal is to continue increasing the use of blended cements due to their technical, economic and most importantly, environmental benefits.

 

We market and distribute our cement primarily in 42.5 kilogram bags. Most of our bagged cement is sold to the retail sector consisting primarily of households that buy bags of cement to build or expand their own homes over time with little or no formal technical assistance (commonly referred to as auto-construcción). The bags are made of Kraft paper to preserve the quality of the cement. Our bags include information relating to the composition of our cement, handling instructions, production dates and storage instructions. Our cement bags have different colors to easily identify the different types of cement. Once bagged at our Pacasmayo, Rioja and Piura facilities, our cement is loaded onto trucks operated by third parties. Cement in bulk is sold to large industrial consumers.

 

In 2023, we began certifying all of our products under the rigorous scheme 5 of ICONTEC, an international certification body for products, services and management systems. We obtained this certification for our entire cement portfolio, complying with the most rigorous level for products established by the Supreme Decree that regulates the commercialization of cement in Peru. Product certification is carried out based on the requirements of the Cement Technical Regulations, which establish the characteristics that cement must meet at the production and marketing level. Likewise, the Cement Technical Regulations require that all cement producing and importing companies in Peru comply with the requirements indicated therein in order to be able to market their products. The certification process consisted of a rigorous audit of the quality management system at the production, manufacturing and marketing level in our three plants and at authorized points of sale.

 

 Furthermore, in 2024, we implemented Environmental Product Declarations (EPDs) for our Extraforte, Fortimax, and Type I cements, making us the first cement company in Peru to achieve this milestone. These declarations align with the latest requirements of Peru’s Sustainable Building Code, reinforcing our commitment to environmental responsibility and sustainable construction practices.

 

Concrete Products

 

We also produce and sell concrete products principally in the form of ready-mix concrete used in large construction sites, as well as precast, bricks, pavers and other precast materials.

 

●

Ready-mix concrete. Ready-mix is a blend of cement, aggregates (sand and stone), admixtures and water. It is manufactured and delivered to construction sites in a form that is ready to use. This mixture hardens to form a building material, ranging from sidewalks to skyscrapers. We have 19 fixed and mobile ready-mix plants.

 

 

●

Precast. We produce and sell concrete precast products, such as paving units, or paver stones for pedestrian walkways, as well as other bricks for partition walls and concrete precast for structural and non-structural uses. Some examples of concrete precast are:

 

o

New Jersey Walls: safety barriers used to separate traffic flows.

 

o

Corner block: a product that complements the structures built with our precast, giving better functionality to any corner.

 

o

Beam block: a product that is used to confine the upper part of walls built with our precast.

 

o

Concrete pipes: precast reinforced concrete pipes that are installed without the need to open pit ditches or dredging of maritime floors. The main use of concrete pipe is to collect seawater (inlet pipe) and to bring brackish water back out to sea (outfall pipe). For example, we have built a 1.5 kilometer long underwater outfall project for the Talara Refinery, where it is necessary to build a water collection system for its fire and cooling system using concrete pipes.

 

o

Sheet piles presented and assembled: concrete piles that can be pre-stressed or reinforced (they are two different types of manufacturing) that sink one alongside the other, forming a containment structure, used as riparian defenses. We manufacture pre-stressed and reinforced sheet piles that can form a coastal defense for rivers, ensuring the containment of water during rainy events, reducing the vulnerability of cities to floods.

 

●

New cement-based products. We have developed, and are in the process of developing more cement-based products that are innovative and easy building solutions. Some of these products are:

 

⮚

Mortar for brick laying: Pre-dosed and bagged dry masonry mortar for block and brick laying.

 

⮚

Mortar for plaster: Pre-dosed mortar to plaster interiors and exteriors, walls and ceilings. Allows smooth finishes and thin applications

 

⮚

Caravista Concrete: Concrete designed to be exposed without any additional coating or paint.

 

⮚

Tremie Concrete: Concrete designed to be placed under water at depths greater than 1.5 meters.

 

⮚

Mortar for brick laying: Pre-dosed and bagged dry masonry mortar for block and brick laying.

 

⮚

Viaforte Type MH: Cement of moderate heat of special hydration for stabilization of soils and road bases. The cement provides greater workability and less risk of cracking on site, also ensuring greater durability to the structure

 

⮚

Bagged Dry Concrete: Pre-dosed mixture of cement, aggregates (Stone and Sand) and additives, that only requires the addition of water indicated on the package and mixing (manual or mechanical) to be used immediately

 

Quicklime

 

We produce and distribute quicklime, which has several industrial uses. Quicklime serves as a neutralizer, lubricant, drying and absorbing material, disinfectant, and as a raw material. Quicklime has various applications, including in the steel, food, fishing and chemical industries. It is also used in mining operations to treat water and industrial residues, in agriculture as a fertilizer enhancer and, to a lesser extent, in other industries. In Peru, quicklime is mainly used in the mining industry, as an additive to treat water residues. We produce quicklime in finely and coarsely ground varieties and sell it either in bags of one metric ton or in bulk, according to clients’ requirement. Quicklime currently represents a small percentage of our revenues.

 

Production Process

 

Cement Production Process

 

The diagram below depicts the standard cement production process, which consists of the following main stages:

 

●

extraction and transportation of limestone or coquina (seashells) from the quarry;

 

 

●

grinding and homogenization to make the raw material of consistent quality;

 

●

clinkerization;

 

●

cement grinding;

 

●

storage in silos; and

 

●

packaging, loading and distribution.

 

 

Extraction of raw materials. To produce cement, limestone/coquina are extracted from our quarries. We use explosives to loosen the limestone and deploy bulldozers to remove dirt and the overburden covering the limestone. We crush the limestone in our primary and secondary cone crusher and the resulting limestone is loaded into trucks and hauled to our Pacasmayo facility from the adjacent quarry where it is stored. In the case of Piura, our surface miner drills out our coquina quarry and then it is also loaded into trucks and hauled to the Piura plant.

 

Grinding and homogenization. Limestone/coquina, clay and sand are mixed with iron that is acquired from third parties. The quality of the resulting raw meal is monitored by examining samples of each batch and processing them through our quality control x-ray software that automatically measures the mix of materials to confirm the blend is in compliance with our quality standards. Subsequently, the raw meal is sent to a blending silo and then to a storage silo from where it is fed into the pre-heater.

 

Clinkerization. The raw meal is heated at a temperature of approximately 1,450 degrees Celsius in our kilns. The intense heat causes the limestone and other materials in the mixture to react inside the kiln, turning the mixture into clinker. Clinker is then cooled to a temperature of approximately 200 degrees Celsius and stored in a silo or in an outdoor yard.

 

Cement grinding. After being cooled, clinker, together with gypsum and some admixtures, is fed into a ball mill or into a vertical roller mill where it is ground into a fine powder to produce cement. In this form, cement reacts as a binding agent that, when mixed with water, sand, stone and other aggregates, is transformed into concrete or mortar.

 

 

Storage in silos. After passing through the ball mills, the cement is transferred on conveyor belts and stored in concrete silos in order to preserve its quality until distribution.

 

Packaging, loading and transport. Cement is transferred through another conveyor belt from the silo to be packaged in 42.5 kilogram bags and then loaded into trucks operated by third parties to be transported for distribution. Bulk cement may be transported (unpackaged) on especially designed trucks that deliver large amounts of cement directly to the work site.

 

Quicklime Production Process

 

Quicklime is produced by crushing limestone with a calcium carbonate content of at least 95% by calcinating it in a rotary kiln. The limestone for quicklime comes from our quarries. The crushing of the limestone is done at the quarry and the calcination process takes place only at our Pacasmayo facility. We produce quicklime in finely and coarsely ground varieties and sell both varieties in big bags as well as in bulk.

 

Raw Materials and Energy Sources

 

Limestone and Other Calcareous Resources

 

We obtain limestone required to produce clinker and quicklime principally from land where we have concession rights. For our Pacasmayo plant, we extract limestone from our Acumulación Tembladera quarry located approximately 60 kilometers from the plant, and for our Rioja plant, we extract limestone from our Calizas Tioyacu quarry which is adjacent to our Rioja plant. For our Piura plant, we extract coquina from Virrilá quarry, located approximately 120 kilometers from the plant.

 

Acumulación Tembladera. We have a concession with an indefinite term to extract limestone and other minerals from our Acumulación Tembladera quarry, a 3,390 hectares open-pit mine located in the district of Yonan, in the department of Cajamarca. We acquired this concession in November 2002.

 

Calizas Tioyacu. For our Rioja production, we have a concession with an indefinite term to extract limestone and other minerals from a 400 hectares open-pit mine near our Rioja facility in the district of Elias Soplin Vargas, in the department of San Martín. We acquired this concession in February 1998.

 

Virrilá. For our Piura production, we also have a group of concessions with an indefinite term to extract coquina and other minerals from our Virrilá quarry, a 931 hectares open-pit mine located in the district of Sechura, in the department of Piura. We acquired these concessions between 2000 and 2008.

 

In addition to our Acumulación Tembladera, Calizas Tioyacu, Bayovar 4 and Virrilá quarries, we also own concession rights to various other calcareous material quarries consisting, in total, of approximately 40,767 hectares located in the northern region of Peru. None of these quarries are in operation as of the date of this annual report.

 

Clay, Sand and Other Raw Materials and Admixtures

 

The other raw materials that we use to produce clinker are clay, sand and iron, as well as other admixtures.

 

Clay

 

For cement production in our Pacasmayo facility, we extract clay from our Cerro Pintura quarry, a 400 hectares open-pit concession located in the district and province of Pacasmayo, department of La Libertad. We were granted this concession by the MEM in 1996. The term of the concession is indefinite, provided we pay an annual concession fee and meet minimum annual production requirements.

 

For cement production in our Rioja facility, we extract clay from our Pajonal quarry, a 400 hectares open-pit concession located in the district and province of Rioja, department of San Martin. This concession was granted to us by the MEM in 1998. The term of the concession is indefinite, provided we pay an annual concession fee and meet minimum annual production requirements.

 

 

We have not calculated our clay reserves, as we believe there is an abundant supply of clay in our concessions and more broadly in the northern region where we operate.

 

Sand

 

For cement production in our Pacasmayo facility, we use sand extracted from our Cerro Pintura quarry. Our Rioja facility does not utilize sand as a raw material given the type of cement it produces.

 

We have not calculated our sand reserves, as we believe there is an abundant supply of sand in our concessions and more broadly in the northern region where we operate.

 

Iron

 

We use small quantities of iron in our cement production, which we purchase from third parties at market prices.

 

Coal

 

We purchase mostly anthracite coal from local suppliers and import small amounts of semi-bituminous coal from local suppliers, in each case at spot market prices. Anthracite coal tends to be less expensive than bituminous coal. We store coal at our premises and in our warehouse facilities, adjacent to the Salaverry port and in Trujillo, where we have sufficient stock of coal to maintain our production levels for the next year.

 

In December 2009 and February 2010, we entered into option agreements to acquire coal mining concessions as a means to secure a steady and reliable source for our coal requirements and to reduce the volatility in costs related to coal. In 2011, we exercised certain options under these agreements to acquire coal mining concessions for 908.5 hectares near our Pacasmayo facility for a total purchase price of US$4.5 million. In 2013, we exercised our remaining options to purchase an additional coal mining concession for 501.2 hectares for US$1.0 million, thereby completing the acquisition of the related coal mining concessions.

 

Pozzolanic Materials and Other Admixtures

 

Our cement production also requires small amounts of other admixtures, such as pozzolanic materials, gypsum and blast furnace slag.

 

For cement production in our Pacasmayo facility, we use pozzolanic materials obtained from our Cunyac quarry, a 200 hectares open-pit concession located in the district of Sexi, province of Santa Cruz, department of Cajamarca. The concession was granted to us by the MEM in 2008. The term of the concession is indefinite, provided we pay an annual concession fee and meet minimum annual production requirements.

 

For cement production in our Rioja facility, we use pozzolanic materials obtained from our Fila Larga quarry, a 1,000 hectares open-pit concession located in the district of El Milagro, province of Utcubamba, department of Amazonas. The concession was granted to us by the MEM in 1998.

 

We also own several other concessions containing pozzolanic material which have not been exploited. In addition, our use of pozzolanic materials may be substituted with clinker or other admixtures. Other admixtures, such as gypsum and blast furnace slag, are purchased at market prices from third-party suppliers. If we are unable to acquire raw materials or admixtures from current suppliers, we believe that other sources of raw materials and admixtures would be available without significant interruption to our business.

 

Energy Sources

 

Electricity

 

As of December 31, 2024, all of the electricity requirements for our Pacasmayo and Piura facilities were supplied by Electroperú and for our Rioja facility by ELOR.

 

 

We have an electricity supply contract with Electroperú currently valid until 2026. Electroperú has agreed to provide us with sufficient energy to operate our Pacasmayo and Piura facilities at pre-determined maximum amounts during the term of the contract. Payments for electricity are based on a formula that takes into consideration our energy consumption and certain market variables, such as the U.S. purchase price index, the global price of oil, the local price of natural gas and the import price of bituminous coal.

 

In addition, we have an electricity supply contract with ELOR to supply the Rioja facility, valid until December 2025. ELOR supplies the Rioja facility with 6.7 megawatts of electricity at peak hours and eight megawatts at non-peak hours. Payments for electricity are based on a formula that takes into consideration our energy consumption and certain market variables, such as the U.S. dollar price, inflation, the local price of natural gas, the global price of oil and the import price of bituminous coal

 

Other Production Materials

 

We use other materials in the cement production process, including paper bags to package cement, which we purchase principally from local suppliers; plastic bags used to package quicklime, which we purchase from local suppliers; and water to cool the kiln exhaust gases and for our crushing operations at our Acumulación Tembladera quarry, which we obtain principally from a well located at our Pacasmayo facility and from the Jequetepeque river. Water used in our production process is maintained in a closed system at our plants and re-processed for utilization in our production process.

 

Consumer Base

 

The retail cement sector in Peru is characterized by households that purchase single bags of cement to gradually build or improve their homes with little or no professional assistance. This sector is known as auto-construcción. Families in this sector tend to invest a large portion of their savings in building or improving their own homes. Auto-construcción is often conducted with the help of a foreman (maestro de obra) who generally has experience in construction. Our retail marketing plans typically target the maestro de obra who is usually the decision maker when buying cement and other related construction materials.

 

We also sell directly to small, medium and large private construction companies working on a variety of construction projects, from housing complexes to commercial developments. In the public sector, we provide cement for national, regional and local governments carrying out construction projects including housing complexes and public construction, ranging from local schools and hospitals to large infrastructure.

 

Sales and Distribution

 

Distribution

 

Our market extends from the Ecuadorian border in the north of Peru to the city of Barranca in the south (approximately 180 kilometers north of Lima), to the rainforest in the east and the Pacific Ocean in the west. Our market covers the provinces of Amazonas, Cajamarca, La Libertad, Lambayeque, Piura and Tumbes in the north; and San Martín and Loreto in the northeast.

 

Our Pacasmayo, Piura and Rioja facilities supply the entire northern region of Peru, interchangeably subject to where it is most efficient to ship from at the moment, depending on the distance and type of cement being produced, among other factors.

 

In 2024, approximately 84.3% of our total cement shipments were in the form of bagged cement, substantially all of which was sold through retailers both within and outside of our distribution network. The remaining 15.7% of our cement was sold in bulk or in shipments of precast products or ready-mix concrete directly to large construction companies.

 

We have developed one of the largest independent retail distribution networks for construction materials in Peru, consisting of 315 hardware stores, with which we have a distribution agreement. In addition, we also distribute to other independent retailers located throughout the northern region of Peru with whom we do not have contractual relationships. We have built our distribution network by investing in strengthening our relationship with retailers.

 

 

Even though our ready-mix sales are still a small proportion of our sales, we expect this trend to change as infrastructure becomes a bigger driver of demand in the upcoming years. Additionally, we sell and distribute other construction materials manufactured by third parties that are used alongside cement, such as steel rebar, plastic pipes and electrical wires, among others.

 

Marketing and Brand Awareness

 

We use our distribution network, together with our strategically located local commercial offices, to promote our products and brands, as well as to keep us informed of market developments. We believe our distribution network has enabled us to build strong recognition for our Pacasmayo brand among maestros de obra, retailers and end consumers which we believe is important to our business, particularly because our cement is principally sold in bags to retail consumers.

 

Our marketing expenses in 2024 were approximately S/9.1 million, or 0.46% of our sales. Historically, our marketing strategy has been to develop brand loyalty by providing high-quality products, tailored to the needs of our customers, and customer service accompanied by complimentary training for the maestros de obra, who are typically the decision makers in the auto-construcción segment.

 

We develop strong ties with our distributors by promoting income generating opportunities for them. For instance, we give them priority when hiring transportation to distribute our cement throughout our territory. Also, our large salesforce has the ability to cover most of the construction sites in northern Peru generating business opportunities that are then channeled through our distributors. Finally, our distributors enjoy various commercial and marketing benefits such as rebates, special promotions, special credit conditions, and loyalty programs.

 

We have been working consistently in recent years to focus time and attention on our client’s needs, in an effort to go beyond just selling cement and its byproducts, to providing solutions and innovating. Consequently, we were well-positioned to leverage these initiatives during the ongoing pandemic period. The self-construction segment has been the primary driver behind the growth in sales volume during 2024. We have focused on several fronts to enhance the customer experience and to facilitate access to our solutions. We have developed Mundo Experto, which is a virtual ecosystem made up of digital solutions that serves to join supply and demand and offers a superior purchasing experience leveraged on intensive use of technology to generate more value for our users. The digital solutions are targeted and customized for the different users, such as foremen, hardware stores, and the self-builder.

 

Quality Control

 

In Peru, cement production is subject to standardization (normalización) regulations approved by the National Institute for the Protection of Competition and Intellectual Property (Instituto Nacional de Defensa de la Competencia y de la Protección de la Propiedad Intelectual, or “INDECOPI”). Although the standardization regulations are not mandatory, they are useful in achieving an optimum level of management. As of the date of this annual report, we comply with all standardization regulations applicable to our products.

 

We have established a quality assurance program in accordance with ISO Standard 9001-2008, certified by SGS del Perú S.A.C., a company that provides inspection, verification, testing and certification services. We monitor quality at every stage of the cement production process. In our facilities, we periodically test the quality of our raw materials. These tests include chemical, physical and x-ray tests. We perform similar examinations of the clinker we produce. Additionally, we also perform regular quality tests on our finished products.

 

We have a quality control area with computerized systems to access real-time information on the quality of our products. As part of our quality control process, we monitor the performance of our different cement products, monitor the performance of additives in our cement and review monthly statistical analysis on the resistance of cement, among other things.

 

 

During 2023, we began certifying all of our products under the rigorous scheme 5 of ICONTEC, an international certification body for products, services and management systems. We obtained this certification for our entire cement portfolio, complying with the most rigorous level for products established by the Supreme Decree that regulates the commercialization of cement in Peru. Product certification is carried out based on the requirements of the Cement Technical Regulations, which establish the characteristics that cement must meet at the production and marketing level. Likewise, the Cement Technical Regulations require that all cement producing and importing companies in Peru comply with the requirements indicated therein in order to be able to market their products. The certification process consisted of a rigorous audit of the quality management system at the production, manufacturing and marketing level in our three plants and at authorized points of sale.

 

This certification is evidence that our corporate culture motivates us to exceed the quality standards of our products with focus on sustainability, as we are going above and beyond the legal requirements and using this certification as a tool for continuous improvement for the benefit of our clients and the sector as a whole.

 

Competitive Position

 

Peru’s cement production is segmented into three main geographic regions: the northern region, the central region, including Lima’s metropolitan area, and the southern region. We are the only cement manufacturer in the northern region of Peru. The central region is principally served by UNACEM (formerly known as Cementos Lima and Cemento Andino), some imports, Caliza Cemento Inca and Mixercon. The south is principally served by Cementos Yura. In 2024, our cement shipments were approximately 2.8 million metric tons, representing an estimated 22.8% share of total cement shipments in Peru according to INEI.

 

Regulatory Matters

 

Overview

 

Although our core business is the production of cement, we hold a number of mining concessions granted by the Peruvian government for the supply of limestone and other raw materials required for cement production. As a result, we are subject both to the mining and the general industrial legal framework in Peru. The regulatory framework applicable to our cement production may be divided into rules and regulations relating to (i) the mining and crushing of limestone and clay, and (ii) the production process.

 

Mining Regulations

 

The General Mining Law (Texto Único Ordenado de la Ley General de la Minería) approved by Supreme Decree No. 014-92-EM, published in the Peruvian Official Gazette, El Peruano, on June 3, 1992, is the primary law governing both metallic and non-metallic mining activities in Peru and is supplemented by implementing guidelines and policies regarding mining and the processing of minerals enacted by the MEM. Under the General Mining Law, mining activities (except storage, reconnaissance, prospecting and trade) are carried out exclusively through various forms of concessions. Mining concessions are granted by the Geological, Mining and Metallurgical Institute (Instituto Geológico Minero y Metalúrgico, or “INGEMMET”), and all other concessions, including our mineral processing concessions, are granted by the Directorate General for Mining of the MEM. Any act, transfer, termination or agreement related to these concessions must be registered with the Mining Rights Registry, which is part of the National Public Registry System, to be effective against the Peruvian government and third parties.

 

Holders of concessions or mining claims must comply with several obligations, including the payment of an annual concession fee (derecho de vigencia) of US$3.00 per applicable hectare. The annual concession fee is due and payable on or prior to June 30 of each year. Failure to pay the annual concession fee for two consecutive years will result in the termination of the mining concession.

 

Mining activities require holders to obtain title to the surface land from individual landowners, peasant communities or the Peruvian government. Mining concessions are granted for an unlimited period, subject to the achievement of minimum annual production levels. Two different regimes apply depending on the date the concession was granted:

 

 

Under Legislative Decree 1320 and Supreme Decree No. 011-2017-EM, since January 1, 2019, if the annual minimum production or investment has not been met, the annual penalty and the causes to terminate a mining concession will be determined by the General Mining Law for all concessions, as described below.

 

For concessions granted until 2008, the following rules apply:

 

●

the minimum annual production target is equivalent to one tax unit (approximately S/ 5,350 or US$1,421) per year per hectare, in case of metallic mining concessions, and 10% of one tax unit (approximately US$142) per year per hectare, in the case of non-metallic mining concessions;

 

●

the minimum production level is to be achieved no later than the end of the tenth year from the date of grant;

 

●

if the minimum production level is not achieved within that period, an annual penalty equivalent to 2% of the minimum annual production level is due until such level is achieved;

 

●

if the minimum production level is not achieved by the end of the fifteenth year, an annual penalty equivalent to 5% of the minimum annual production level is due until such level is achieved;

 

●

if the minimum production level is not achieved by the end of the twentieth year, an annual penalty equivalent to 10% of the minimum annual production level is due until such level is achieved; and

 

●

if the minimum production level is not achieved by the end of the thirtieth year, the mining concession expires.

 

Any penalty must be paid prior to June 30 of each year. Failure to pay the penalty for two consecutive years results in the termination of the mining concession.

 

Since January 1, 2020, these penalties will be applied for concessions granted in 2009 and thereafter.

 

The foregoing penalties and fines are not applicable to mining concessions granted by the government through private investment promotion initiatives, which will be subject to the minimum production and investment levels set forth in such contracts.

 

In addition to the payment of the annual concession fee and the penalty, holders of mining concessions must, pursuant to the Mining Royalty Law, pay a royalty for the exploitation of metallic and non-metallic resources. Prior to the amendment of the Mining Royalty Law described below, the amount of the royalty was determined on a monthly basis. For those minerals with an international market price (gold, silver, copper, zinc, lead and tin), the amounts were computed by applying the rates to the value of the concentrate or its equivalent, according to the applicable international market price. The historic rate scales were established in the Mining Royalty Law’s regulations as shown in the following table:

 

Annual sales (in millions of US$)		Rate
Up to 60			1	%
Between 60 and up to 120			2	%
More than 120			3	%

 

In case of minerals without an international reference market price (minerals other than gold, silver, copper, zinc, lead and tin), the mining royalty amounted to 1% of the value of the final product obtained from the mineral separation process, net of any costs incurred in the mineral separation process (componente minero).

 

 

However, the Mining Royalty Law was amended on September 29, 2011 to increase the tax payable on metallic and non-metallic mineral resources. Effective October 1, 2011, the royalty for the exploitation of metallic and non-metallic resources is payable on a quarterly basis in an amount equal to the greater of (i) an amount determined in accordance with the following statutory scale of tax rates based on a company’s operating profit margin and applied to the company’s operating profit, as adjusted by certain non-deductible expenses, and (ii) 1% of a company’s net sales, in each case, during the applicable quarter. The royalty rate applied to the company’s operating profit is based on its operating profit margin according to the following statutory scale of rates:

 

Operating Margin		Applicable Rate (%)
0% - 10%			1.00
10% - 15%			1.75
15% - 20%			2.50
20% - 25%			3.25
25% - 30%			4.00
30% - 35%			4.75
35% - 40%			5.50
40% - 45%			6.25
45% - 50%			7.00
50% - 55%			7.75
55% - 60%			8.50
60% - 65%			9.25
65% - 70%			10.00
70% - 75%			10.75
75% - 80%			11.50
More than 80%			12.00

 

Mining royalty payments will be deductible for income tax purposes in the fiscal year in which such payments are made.

 

We believed that certain portions of the regulations of the Mining Royalty Law were unconstitutional, because they impose a mining royalty tax on non-mining activities. For instance, for cement companies, the amended Mining Royalty Law and its regulations established that the mining royalty tax was calculated based on the total operating profit or net sales, as opposed to operating profit or net sales attributable exclusively to mining products, such as limestone, used to produce cement. Accordingly, in December 2011, we filed a claim to declare that the mining royalty tax applicable for the exploitation of non-metallic mining resources be calculated based on the value of the final product obtained from the mineral separation process, net of any costs incurred in the mineral separation process (“componente minero”).

 

In November 2013, the Peruvian Constitutional Court affirmed the constitutional challenge we filed against the new regulation of the Mining Royalty Law, in a final and unappealable ruling, on the grounds that the new regulation violates the constitutional right of property, as well as the principles of legal reserve and proportionality. Therefore, the new regulation is rendered inapplicable to our operation. As a result, we will continue to use as a basis for the calculation of the mining royalty the value of the concentrate or mining component, and not the value of the product obtained from the industrial or manufacturing process. 

 

On March 22, 2021, the Company received Tax Court Resolution N° 00905-4-21 that declared the Mining Royalty should be calculated based on the total operating profit or net sales, as opposed to operating profit or net sales attributable exclusively to mining products, such as limestone, used to produce cement, for the years 2008 and 2009. This contradicted what was established by the Constitutional Court mentioned above. By virtue of the foregoing, the Company initiated two legal proceedings: (i) a constitutional proceeding for the complaint of repression of homogeneous harmful acts, filed on March 31, 2021; and (ii) a contentious-administrative lawsuit filed through the ordinary jurisdiction, seeking the annulment and refund of amounts, filed on June 22, 2021.

 

As of the date of this annual report, both processes have been resolved in favor of the Company. As a result such resolution, the SUNAT should, either directly or through enforcement, return the amounts paid by the Company in respect of the Tax Court Resolution described above, amounting to S/29,559,000. As of the date of this annual report, we are awaiting the aforementioned refund and the Company is taking the corresponding legal actions for the recovery of such payments, which, in the opinion of management and its external legal advisors, has a very high probability of obtaining a favorable result.

 

Finally, holders of mining concessions are required at the beginning of their operations to submit a mining closure plan that must contain a description of the steps to restore the areas and facilities of each mining operation area to pre-mining condition. Holders of mining concessions are required to secure completion of the restorative measures by means of the following guarantees: (i) banking guarantee or credit insurance; (ii) cash guarantees; (iii) trusts; or (iv) those indicated in the Peruvian Civil Code.

 

In August 2021, Law 31347, that modifies the Mine Closure Law (Law 28090), specifying aspects such as mandatory, administrative and oversight powers, opportunity for presentation and approval, applicable guarantees, periodic reports to be presented to various authorities, among others was approved.

 

As of the date of this annual report, we primarily owned non-metallic mining concessions and limited metallic mining concessions with respect to iron. Substantially all of our concessions were granted prior to 2008. Our mining rights and concessions are in full force and effect under applicable Peruvian laws. We believe that we are in compliance in all material respects with the terms and requirements applicable to our mining rights and concessions.

 

 

Production Process

 

The cement production process along with other manufacturing activities are governed by General Industry Law (Ley General de Industrias), Law No. 23407, published in El Peruano on May 29, 1982, which establishes basic rules that promote and regulate activities in the manufacturing industry. The Ministry of Production is vested with authority to promote private investments in connection with industrial, processing and manufacturing activities, the surveillance of sustainable exploitation of natural resources (except for those extractive activities involving primary transformation of natural products), the protection of the environment, and the supervision of the quality of manufactured products. All industrial companies are subject to the General Industry Law and its regulations to the extent that the company’s gross income is primarily derived from industrial activities. Pursuant to Supreme Decree No. 009-2011-MINAM, the supervisory and monitoring functions of the Ministry of Production were transferred to the OEFA in 2013.

 

Technical Regulation on Hydraulic Cement

 

On January 21, 2022, the Government published D.S. 1-2022-PRODUCE, which approves the Technical Regulation on Hydraulic Cement Used in Buildings and Constructions in General, through which various aspects are regulated that will allow verification of compliance with the minimum safety requirements of cement. Originally, the Regulation entered into force six months after its publication, later extended to July 22, 2023 by D.S. 10-2022-PRODUCE, a period in which all the parties involved (public entities, national manufacturers, importers, laboratories, chain of supply, among others) must adapt their protocols to comply with the provisions of the Regulation.

 

Environmental Regulations

 

Industrial companies, and in particular those in the cement sector, are required to comply with various environmental regulations, such as the Law on the National Environmental Impact Assessment System approved by Legislative Decree No. 27446 and its regulations approved by Supreme Decree No. 019-2009-MINAM, which establish the environmental impact assessment process. Public and private investment projects that involve activities, constructions or works that may cause negative environmental impacts must comply with this law. Projects are categorized according to environmental risk under this law.

 

The Environmental Management Regulations for the Manufacturing Industry and Internal Trade, approved by Supreme Decree No. 017-2015-PRODUCE, as amended, promote and regulate environmental management, as well as the conservation and sustainable use of natural resources in the development of manufacturing and domestic trade activities. It also regulates the application of management instruments, procedures, environmental protection measures and promotes cleaner production agreements, giving priority to the principle of prevention.

 

In terms of air emissions, the Ministry of the Environment has adopted legally binding environmental quality standards (Maximum Permissible Limits) for cement industries (approved by Supreme Decree No. 001-2020-MINAM). These standards are legally enforceable and must be met by all operations in the cement industry.

 

Resolution Nos. 004-2018-OEFA/CD and 006-2018-OEFA/CD define administrative infractions and establish a scale of penalties related to environmental management instruments and obligations related to monitoring, environmental management, the development of industrial activities and the handling of hazardous materials and inputs. applicable to those administered in the manufacturing industry and domestic trade sector that are under the scope of competence of the Environmental Assessment and Control Agency. Infractions are classified according to their severity as minor, serious and very serious offenses and the monetary penalty imposed will depend on this.

 

By means of Board of Directors Resolution No. 023-2013-OEFA/CD and No. 0312015-OEFA/CD, of the Environmental Assessment and Control Agency (OEFA), the OEFA assumes the functions of monitoring, supervision, control and sanction in environmental matters in the Cement and Concrete Sector of the Manufacturing Industry, of the Industrial Subsector of the Ministry of Production - PRODUCE.

 

 

The Law on Integrated Solid Waste Management approved by Decree Law No. 1278 and its regulations approved by Supreme Decree No. 014-2017-MINAM and its amendments, seek to ensure the constant maximization of efficiency in the use of materials, and to regulate the management and handling of solid waste, which includes the minimization of the generation of solid waste at the source. the material and energy recovery of solid waste, as well as the proper final disposal of the same.

 

Law 30754, published on April 18, 2018, approved the Framework Law on Climate Change. This law establishes the principles, approaches, and general provisions for coordinating, articulating, designing, executing, informing, monitoring, evaluating, and disseminating public policies for the comprehensive, participatory, and transparent management of climate change adaptation and mitigation. It also established that the Ministry of the Environment will establish guidelines to incorporate climate risk and vulnerability analysis, as well as climate change mitigation and adaptation measures, in the evaluation of investment projects subject to the National Environmental Plan Impact Assessment System.

 

This law aims to reduce the country’s vulnerability to climate change, take advantage of low-carbon growth opportunities, and comply with the international commitments assumed by the government of Peru before the United Nations Framework Convention on Climate Change, with an intergenerational approach.

 

The Regulations of the Framework Law on Climate Change were approved on December 31, 2019, by Supreme Decree No. 013-2019-MINAM. The objectives set out in these Regulations will be achieved through the implementation of climate change adaptation and mitigation measures, the creation of systems that contribute to the accounting of carbon dioxide emissions, the reduction of carbon dioxide emissions and the promotion of private sector participation in implementation. of sustainable and low-carbon projects. As of the date of this annual report,, however, no concrete measures or targets have been set, nor have any deadlines been set for their implementation.

 

There is no type of emissions trading scheme in Peruvian law.

 

On January 25, 2022, Supreme Decree No. 003-2022-MINAM was published, declaring a climate emergency of national interest and establishing guidelines and priority actions for climate change mitigation and adaptation.

 

In September 2023, the International Sustainability Standards Committee issued the first international sustainability and climate standards: IFRS S1 General Requirements for the Information to be Disclosed on Sustainability related to Financial Information and IFRS S2 Weather-related Disclosures. The purpose of these standards is for entities to disclose information about their risks and opportunities related to sustainability and climate that is useful to the primary users of financial information for decision-making. The Company is currently assessing these standards and the methodology for their implementation.

 

Prior Consultation with Local Indigenous Communities

 

On September 7, 2011, Peru enacted Law No. 29785, Prior Consultation Right of Local Indigenous Communities. The law was enacted in order to implement Convention No. 169 of the International Labor Organization on Local Indigenous Communities in Independent Countries, previously ratified by Peru through Legislative Decree No. 26253. This law, which became effective on December 6, 2011, establishes a prior consultation procedure to be undertaken by the Peruvian government in favor of local indigenous communities, whose collective rights may be directly affected by new legislative or administrative measures, including the granting of new mining concessions. Regulation implementing this law was approved on April 3, 2012, by Supreme Decree No. 001-2012-MC, which defines the local indigenous communities that are entitled to the prior consultation rights and establishes the different stages that comprise the prior consultation procedure.

 

Consultation procedures for mining and processing concessions are carried out by the MEM prior to the granting of a new processing concession.

 

According to the recent practice of the Geologic Institute of Mining and Metallurgy (Instituto Geológico Minero Metalúrgico), the granting of mining concessions does not qualify as an “administrative measure” that potentially affects the rights of indigenous people because it does not grant per se a right to explore and exploit mineral deposits. Accordingly, the granting of mining concessions has not been included among measures that require consultation procedures with indigenous people. According to Ministerial Resolution No. 003-2013-MEM-DM, the MEM has established that consultation procedures are applicable prior to the commencement of: (i) exploration activities (Autorización de inicio de actividades de exploración); (ii) exploitation activities (Autorización de inicio o reinicio de las actividades de desarrollo, preparación y explotación - incluye plan de minado y botaderos); and (iii) processing concessions (otorgamiento de concesión de beneficio).

 

 

Local indigenous communities do not have a veto right; upon completion of this prior consultation procedure, the Peruvian government can discretionarily approve or reject the applicable legislative or administrative measure. In addition, any sale, lease or other act of disposal of surface land owned by local indigenous communities is subject to the approval of an assembly composed of the members of such communities according to the following rules:

 

●

for local indigenous communities located on the coast, approval of not less than 50% of members attending the assembly is required; and

 

●

for local indigenous communities located in the highlands and the Amazon region, approval of at least 2/3 of all members attending the assembly is required.

 

Permits and Licenses

 

Mining Concessions

 

According to the General Mining Law, a mining concession is required in order to extract mineral resources needed to produce cement. The mining concession grants the right to explore and exploit the mineral resources located in a solid of indefinite depth, limited by the vertical plane corresponding to the sides of square, rectangle or polygon referred to by the Universal Transversal Mercator coordinates. The Geological Mining and Metallurgical Institute (Instituto Geológico Minero y Metalúrgico) is in charge of managing the procedure of granting mining concessions, which includes the receipt of the request, the granting and the termination of mining concessions.

 

Explosives.

 

Mining concessionaires are required to obtain the following permits to operate and store explosives:

 

●

Certificate of Mining Operation (Certificado de Operación Minera), granted by the MEM;

 

●

Semiannual Authorization for Use of Explosives, granted by the General Bureau of Explosives of the Ministry of Interior (Superintendencia Nacional de Control de Servicios de Seguridad, Armas, Municiones y Explosivos de Uso Civil, or “SUCAMEC”);

 

●

Manipulation of Explosives License for each individual that intends to handle explosives, granted by the SUCAMEC; and

 

●

Explosive’s Warehouse Operation License, granted by SUCAMEC.

 

Water and Wastewaters

 

To use water resources in cement industry activities, it is necessary to obtain a water right granted by the Water Management Authority (Autoridad Nacional del Agua, or “ANA”) prior to the use of underground or fresh water sources. If the proposed activities will generate domestic or industrial wastewaters, which will be discharged into natural water sources or soil, authorization from ANA is required, with a favorable opinion of the General Bureau of Environmental Health (Dirección General de Salud Ambiental, or “DIGESA”).

 

 

Hazardous Waste

 

Hazardous waste generated as a consequence of cement production activities must be disposed of in specialized landfills. The transportation of solid waste outside the limits of the industrial complex must be conducted exclusively through specialized companies registered with DIGESA and MINAM. Industries are free to contract with an EO-RS (a company that provides solid waste services such as transportation, treatment or disposal) or with an EC-RS (a company that carries out commercialization activities aiming at the reuse of solid waste). Yet in order to limit their liability in case of environmental harm, industries must make sure the EO-RS and EC-RS they retain count with all necessary permits to collect, transport and dispose of hazardous wastes.

 

Chemical Feedstock

 

The commercialization, transportation and use of controlled chemical feedstock (Insumos Químicos y Productos Fiscalizados, or “IQPF”) is restricted, because of their potential use in the production of illegal drugs or controlled substances. Companies that require an IQPF must obtain an IQPF User Certificate (Certificado de Usuario de IQPF) from the General Bureau of Chemical Feedstock of the Ministry of Interior (Unidad Antidrogas de la Policía Nacional del Perú, or “DIRANDRO”). Companies such as ours are also required to register with the Ministry of Production any IQPF activities they plan to carry out (Registro Único para el Control de IQPF).

 

Fuel Storage

 

Any company that purchases fuels for its own activities and has facilities to receive and store fuel with a minimum capacity of one meter cubed (264.170 gallons) is required to (i) receive from the Mining and Energy Investment Supervision Body (Organismo Supervisor de la Inversión en Energía y Minería, or “OSINERGMIN”) prior permission to build and operate said installations, and (ii) be registered with the Registry of Direct Fuel Consumers, in order to obtain the SCOP Code (Código del Sistema de Control de Órdenes de Pedido) necessary to purchase fuel.

 

Cultural Heritage Protection

 

If the design and development of cement industry activities involves the removal of topsoil, a Certificate of Non-Existence of Archaeological Ruins (Certificado de Inexistencia de Restos Arqueológicos, or “CIRA”) from the Ministry of Culture (Ministerio de Cultura) with respect to the area under construction must be obtained. The CIRA will either certify that on the surface of the evaluated area no archaeological sites or features were discovered or will identify their exact location and extent in order to implement precautionary measures to protect the archaeological artifact. The CIRA is valid for an unlimited period but will become void should any archaeological artifacts be accidentally discovered during the construction works or due to any natural cause. In such an instance, the company must stop the construction work immediately and notify the Ministry of Culture. Failure to stop the construction work may generate civil and criminal liabilities. Under certain exceptional circumstances, Peruvian legislation allows the removal of archeological artifacts when the area is required for development of projects that are of national interest.

 

Labor Regulations

 

Peruvian legislation allows hiring employees through: (i) a fixed-term contract, (ii) a contract for an indefinite duration; or (iii) a contract for part-time employment.

 

The minimum wage established in Peru is S/1,025 per month. Peruvian labor legislation establishes a maximum 8-hour work day or 48 hours per week for employees older than 18 years. For overtime, employers must pay at least an additional 25% and an additional 35% over the regular hourly wage for the first two hours and for any additional hours, respectively. Employees are entitled to a minimum rest of 24 consecutive hours per week.

 

On December 27, 2024, President Dina Boluarte announced that, effective January 1, 2025, the minimum monthly wage would be increased by S/105, bringing it to S/1,130.

 

Regardless of the type of employment contract, pursuant to Peruvian law full-time employees are entitled to receive:

 

(i)       an additional 10% of the minimum wage, provided that they are responsible for (a) one or more children under the age of 18 or (b) persons who are up to 24 years of age if they are pursuing higher education,

 

(ii) two additional months’ salary per year, one in July and one in December (pursuant to Law No. 29351, said payments were not subject to any social contribution, except for Income Tax; consequently, employers paid directly to their employees as an Extraordinary Bonus, the amount of the contribution to the Social Health Insurance (ESSALUD) for such payments, equivalent to 9% of the bonus paid), (iii) thirty calendar days of annual paid vacation per year,

 

 

 

(iv)       life insurance, since the first day at work,

 

(v)       a compensation for years of service (CTS) equal to 1.16% of a monthly salary and is deposited each year in May and November, provided they work an average of at least four hours per day for the same employer,

 

(vi)       benefits from the Peruvian Social Health Insurance (ESSALUD) to which employers must contribute a rate equivalent to 9% of their employees’ income, and

 

(vii)       a percentage of the company’s annual income net of taxes (10% in the case of income derived from industrial cement operations, and 8% in the case of income derived from our mining or commercial activities), provided the company has twenty or more employees.

 

On June 25, 2021, Law 31246 was published, which modified the current Law on Safety and Health at Work to guarantee the right of workers to safety and health at work in the face of epidemiological and health risk.

 

Free and Fair Competition Protection

 

In Peru, businesses are generally not required to receive the prior authorization of the antitrust authority, which in Peru is INDECOPI. However, in order to promote economic efficiency and protect consumers, anti-competitive behavior is subject to sanctions under applicable law. Behavior that is prohibited according to national law includes: (i) the abuse of a dominant market position, (ii) concerted horizontal practices and (iii) concerted vertical practices. Moreover, under the Unfair Competition Law it is illegal to act in a way that may hinder the competitive process. An unfair behavior is one that is objectively contrary to the entrepreneurial good faith, ethical behavior and efficiency in a market economy.

 

On January 7, 2021, Law No. 31112, Law that establishes the Prior Control of Business Concentration Operations, was published in the Official Gazette “El Peruano”, which entered into force in January 2021, together with its Regulations, approved by Supreme Decree No. 039-2021-PCM. This law establishes a system of prior control of business concentration operations in order to promote effective competition and economic efficiency in the markets for the welfare of consumers.

 

C.

Organizational Structure

 

Cementos Pacasmayo S.A.A. is part of the Hochschild Group. As of March 31, 2025, Eduardo Hochschild, directly and indirectly, owned and controlled 38.32% of the shares of Hochschild Mining plc. Through ASPI, as of that same date, Eduardo Hochschild, directly and indirectly, owned and controlled 50.01% of the outstanding common shares of Cementos Pacasmayo.

 

All of our operating subsidiaries are incorporated in Peru. The following chart sets forth our simplified corporate structure, operating subsidiaries only, as of the date of this annual report.

 

 

 

The following is a brief description of the principal activities of our consolidated subsidiaries.

 

●

Cementos Selva S.A.C. is engaged in the production and marketing of cement and other construction materials in the northeast region of Peru. It also owns all of the equity shares of Dinoselva Iquitos S.A.C. (a cement and construction materials distributor in the north of Peru, which also produces and sells precast, cement bricks and ready-mix concrete) and in Acuícola Los Paiches S.A.C. (a fish farm entity).

 

●

Distribuidora Norte Pacasmayo S.R.L. is mainly engaged in selling cement produced by the Company. Additionally, it produces and sells precast, cement bricks and ready-mix concrete.

 

●

Empresa de Transmisión Guadalupe S.A.C. is mainly engaged in providing electric energy transmission services to the Company.

 

Other immaterial, non-operating subsidiaries

 

●

Salmueras Sudamericanas S.A.C. (“Salmueras”) was engaged in the exploration of a brine project located in the northern region of Peru. In December 2017, the Company decided not to continue with the activities related to this project.

 

●

Soluciones Takay S.A.C. is a platform that connects families that want to build with certified professionals.

 

●

150Krea Inc., a company incorporated in June 2021 in the United States, is engaged in providing leasing services for intangible assets. It is not currently in operation.

 

●

Corporación Materiales Piura S.A.C. is a non-operating company that owns some mining properties located in Piura.

 

Other immaterial, operating subsidiaries

 

●

Créalo 150 Solutions: Business and information systems consulting.

 

Participation in Consortia

 

●

Consorcio Constructor del Norte del Perú began operating during 2023 and is mainly dedicated to the rehabilitation and improvement of the runway, as well as the  installation of the perimeter fence at Piura airport.

 

 

D.

Property, Plant and Equipment

 

Properties

 

We own our headquarters office in Lima, Peru, at Calle La Colonia 150, Urbanización El Vivero, Surco. We also own our plants, warehouses, transportation facilities and the office space at our production facilities, including our workers’ facilities. In addition, we own warehouse occupying approximately 25,000 square meters at the Salaverry port facility.

 

Area of Operation

 

We own and operate three cement production facilities. Our largest facility is located in the city of Pacasmayo, department of La Libertad, approximately 667 kilometers north of Lima. The second facility is located in the city of Piura, department of Piura, approximately 330 kilometers north of Pacasmayo. This facility started cement production in September 2015. We also own and operate a smaller cement facility, located in the city of Rioja, department of San Martín, approximately 468 kilometers east of the Panamericana Norte highway. From our Pacasmayo and Piura facilities we supply cement principally to the coastal and highland regions of northern Peru, including the cities of Piura, Chiclayo, Cajamarca, Trujillo and Chimbote. From our Rioja facility, we supply cement to the northeastern region of Peru, including the cities of Moyobamba, Tarapoto, Loreto, among others.

 

 

Pacasmayo Facility

 

As of December 31, 2024, our Pacasmayo facility had four horizontal kilns, which produce clinker (one of which also currently produces quicklime), and an additional Waelz rotary kiln that produces quicklime. One of these horizontal kilns with a total installed annual clinker production capacity of 660,000 metric tons was added in 2023. In addition, we formerly had six vertical shaft kilns with a total installed annual clinker production capacity of 465,120 metric tons. We made a provision for the impairment of these vertical shaft kilns at the end of 2023. As a result of these changes, the current clinker capacity at our Pacasmayo plant is 1,755,600 metric tons. Additionally, our facility has a primary and secondary cone crusher located near our Acumulación Tembladera limestone quarry. The main crusher has installed crushing capacity of 800 metric tons per hour and the secondary crusher has installed crushing capacity of 170 metric tons per hour. Our Pacasmayo facility also features three cement finishing mills with installed annual cement production capacity of 2.9 million metric tons. Our Pacasmayo facility is also equipped with silos containing storage capacity for 26,700 metric tons of cement.

 

As of December 31, 2024, our Pacasmayo facility had installed production capacity of approximately 240,000 metric tons of quicklime per year, including the annual installed capacity of one of our clinker kilns and our Waelz rotary kiln, which are equipped to also produce quicklime.

 

 

Piura Facility

 

Annual installed production capacity of our Piura plant is 1.6 million metric tons of cement and 990,000 metric tons of clinker. Our Piura plant operates with one horizontal kiln with installed clinker production capacity of 990,000 metric tons per year, as well as a cement mill with installed cement production capacity of 1.6 million metric tons per year. Our Piura plant also has three storage silos with storage capacity of 25,300 metric tons of cement.

 

Rioja Facility

 

Annual installed production capacity of our Rioja plant is 440,000 metric tons of cement and 289,080 metric tons of clinker.

 

Our Rioja facility currently operates with a small cone crusher and four vertical shaft kilns with total annual installed clinker production capacity of 289,080 metric tons and three cement finishing mills with total annual installed cement production capacity of 440,000 metric tons. Our Rioja plant is also equipped with silos with a storage capacity of 1,750 metric tons of cement.

 

Other Facilities

 

We also have 22 fixed and mobile ready-mix concrete and precast facilities located in the northern cities of Chimbote, Trujillo, Chiclayo, Piura, Cajamarca, Pacasmayo, Tarapoto and Tumbes, among others. These facilities allow us to supply ready-mix concrete and precast materials to small, medium and large construction projects throughout the entire northern region of Peru. As of December 31, 2024, our ready-mix operations had 175 mixer trucks, 34 concrete pumps and two pavers available to deliver ready-mix concrete.

 

Capacity and Volumes

 

The table below sets forth our clinker, cement and quicklime production capacity and volumes in our Pacasmayo and Rioja facilities for the periods indicated.

 

(in thousands of		As of and for the year ended December 31,
metric tons,		2024												2023												2022
except percentages)		Capacity				Production				Utilization rate(1)				Capacity				Production				Utilization rate(1)				Capacity				Production				Utilization rate(1)
Cement:
Pacasmayo facility			2,900				1,668				57.5	%			2,900				1,656				57.1	%			2,900				1,768				61.0	%
Piura facility			1,600				843				52.7	%			1,600				1,032				64.5	%			1,600				1,361				85.1	%
Rioja facility			440				320				72.8	%			440				259				58.8	%			440				307				69.8	%
Total			4,940				2,832				57.3	%			4,940				2,946				59.6	%			4,940				3,436				69.6	%
Clinker(2):
Pacasmayo facility			1,756				1,273				72.5	%			1,756				1,098				61.6	%			1,500				935				62.3	%
Piura facility			990				609				61.5	%			990				799				80.7	%			1,000				1,023				100.0	%
Rioja facility			289				242				83.7	%			289				200				69.1	%			280				240				85.7	%
Total			3,035				2,123				70.0	%			3,035				2,097				68.5	%			2,780				2,198				79.1	%
Quicklime(3):
Pacasmayo facility			240				19				7.9	%			240				29				12.1	%			240				46				19.2	%

 

(1)

Utilization rate is calculated by dividing production for the specified period by installed capacity.

(2)

Clinker capacity has been estimated using 330 production days.

(3)

Our Rioja facility does not produce quicklime. In addition, one of our clinker kilns and our Waelz rotary kiln are equipped to produce quicklime.

 

 

Summary Disclosure (229.1303)

 

Map of Mining Concessions of Cementos Pacasmayo S.A.A. and subsidiaries.

 

Figure 1 shows the map of Peru and the location of the Peruvian mining properties of Cementos Pacasmayo and subsidiaries, in the northern part of the country. The mining properties are located in Piura, Lambayeque, Cajamarca, Amazonas, Ica, Cusco, San Martin, La Libertad and Ancash regions.

 

Figure 1 General map of the mining properties and industrial facilities of Cementos Pacasmayo S.A.A. and subsidiaries

 

 

 

Salmueras Sudamericas S.A., a subsidiary of Cemento Pacasmayo S.A.A., during 2024 consisted of the following mining properties: Lobos 10, Lobo 12, Lobos 16, Lobos 17, Lobos 18, Lobos 19, Lobos 6, Lobos 7, Lobos 9 and Ñamuc 1.

 

General description of mining properties and operations

 

Cementos Pacasmayo’s access to its mining properties in Peru are obtained through mining rights granted by the INGEMMET.

 

Mineral properties in Peru are classified according to the type of material (i.e. metallic and non-metallic).

 

Cementos Pacasmayo has mining properties in exploration, development and production stages. Cementos Pacasmayo has three material properties (Tembladera, Virrilá, and Tioyacu), all of which are in the production stage.

 

Table 1 provides an overview of Cementos Pacasmayo’s material properties, including relevant information for each quarry.

 

 

Table 1 Main mining properties of Cementos Pacasmayo S.A.A. and subsidiaries

 

Mining Property

Mining concessions

Location of the mining concession

Percentage of ownership interests

Operator

Surface area (ha)

Stage of the mining concession

Permits

Key condition of permit

Type of mine / material

Beneficiation plant and other installations

Production 2024 (Ton)

Production 2023 (Ton)

Production 2022 (Ton)

Tembladera

Acumulación Tembladera

Cajamarca

100

%

San Martin Contratistas Generales SA

3,391

Production

Yes

EIA(2) and others

Open Pit / Limestone

Industrial facilities(3)

1,722,804

(4)

1,842,375

1,727,182

Virrilá

UEA(1) Virrilá

Piura

100

%

Sechura Ingeniería y Construcción E.I.R.L

38,226

Production

Yes

EIA(2) and others

Open Pit / Coquina

Industrial facilities(3)

901,977

(5)

932,933

1,766,003

Tioyacu

UEA(1) Rioja

San Martin

100

%

Cementos Selva S.A.C

9,600

Production

Yes

EIA(2) and others

Open Pit / Limestone

Industrial facilities(3)

267,009

(6)

351,644

421,636

 

(1)

Unidad Economica Administrativa represents a grouping of two or more mining concessions incorporated to the National Mining Cadastre with definitive character, of the same kind of substance and of the same mining owner.

(2)

Environmental Impact Assessment (EIA).

(3)

Cement plants are governed by the laws of the industrial sector.

(4)

The 2024 production of the Tembladera quarry was lower compared to 2023, due to the limestone requirement of the Pacasmayo plant.

(5)

The 2024 production of the Virrilá quarry was lower compared to 2023, due to the limestone requirement of the Piura plant.

(6)

2024 production from the Tioyacu quarry was lower compared to 2023, no blasting activities were carried out from May to September due to delays from the authority for permits for storage, purchase and use of explosives.

 

 

A.

Summary of Mineral Resources and Mineral Reserves

 

Tables 2 and 3 summarize the mineral resources and reserves, respectively, of the mining properties of Cementos Pacasmayo and its subsidiaries.

 

Table 2 Summary of Mineral Resources (exclusive of Reserves) of Cementos Pacasmayo S.A.A. and subsidiaries as of December 31, 2024.

 

		Measured Mineral Resources								Indicated Mineral Resources								Measured + Indicated Mineral Resource								Inferred Mineral Resources
		Amount (Million Tonnes)				Grades/ Qualities (% CaO)				Amount (Million Tonnes)				Grades/ Qualities (% CaO)				Amount (Million Tonnes)				Grades/ Qualities (% CaO)				Amount (Million Tonnes)				Grades/ Qualities (% CaO)
Limestone:
Acumulación Tembladera			131.1				49.61				39.2				50.58				170.3				49.83				41.3				50.59
UEA Rioja			22.5				48.41				4.9				47.56				27.4				48.26				9.0				50.33
Coquina:
UEA Virrilá			20.5				49.81				30.2				48.94				50.7				49.29				4.4				46.61

 

*

Table 2 is based on the following cement prices: Tembladera/Pacasmayo (S/648.5 per ton), Virrilá/Piura (S/705.9 per ton) and Tioyacu/Rioja (S/748.3 per ton). The mineral resource estimates are at the point of delivery to the cement plant (point of reference). Also the assumptions (e.g., prices, costs and other economic assumptions) used to establish economic viability during the mineral reserves estimation can be found in the Cementos Pacasmayo S.A.A. and Cementos Selva S.A.C Technical Report Summaries (TRS) 20-F 229.601 (Item 601) Exhibits 96.1, 96.2 and 96.3 of our 2024 20-Ffilling.

 

Table 3 Summary of Mineral Reserves of Cementos Pacasmayo S.A.A. and subsidiaries’ properties at December 31, 2024.

 

		Proven Mineral Reserves								Probable Mineral Reserves								Total Mineral Reserves
		Amount (Million Tonnes)				Grades/ Qualities (%CaO)				Amount (Million Tonnes)				Grades/ Qualities (%CaO)				Amount (Million Tonnes)				Grades/ Qualities (%CaO)
Limestone:
Acumulación Tembladera			75.3				49.85				4.9				50.59				80.2				49.90
UEA Rioja			6.3				51.54				4.9				50.95				11.2				51.28
Coquina:
UEA Virrilá			38.7				51.82				0.6				48.86				39.3				51.77

 

*

Table 3 is based on the following cement prices: Tembladera/Pacasmayo (S/648.5 per ton), Virrilá/Piura (S/705.9 per ton) and Tioyacu/Rioja (S/748.3 per ton). The mineral resource estimates are at the point of delivery to the cement plant (point of reference). Also the assumptions (e.g., prices, costs and other economic assumptions) used to establish economic viability during the mineral reserves estimation can be found in the Cementos Pacasmayo S.A.A. and Cementos Selva S.A.C Technical Report Summaries (TRS) 20-F 229.601 (Item 601) Exhibits 96.1, 96.2 and 96.3 of our 2024 20-Ffilling.

 

 

Acumulación Tembladera Individual Disclosure (229.1304)

 

Property description

 

Location

 

AcumulaciónTembladera property is located in Yonan district, Contumaza province, Cajamarca region, Peru at longitude -79.123393° and latitude -7.245671°. It is located 60 kilometers from the cement plant.

 

The area of the mining concession is 3,390.97 hectares. The mining rights are granted by INGEMMET of the Energy and Mines Sector through a Presidential Resolution.

 

Cementos Pacasmayo S.A.A. owns the mining concession and it is registered with the name Acumulación Tembladera as a non-metallic mining concession.

 

The Pacasmayo cement plant and Acumulación Tembladera mining concession are shown in Figure 1 while the locations of the Acumulación Tembladera and the Pacasmayo cement plant are shown separately in Figures 2 and 3, respectively.

 

Figure 1 Pacasmayo cement plant and Acumulación Tembladera

 

 

 

 

Figure 2 Acumulación Tembladera

 

 

 

Pacasmayo cement plant is shown in Figure 3.

 

Figure 3 Pacasmayo cement plant

 

 

 

 

Infrastructure

 

The Tembladera quarry has the necessary infrastructure for normal operations. Facilities for electric power, water supply, fuel, access and roads have been installed.

 

Energy is supplied by Hidrandina S.A. Company, which obtains energy from the national grid. Energy distribution is overhead and at medium voltage of 2.3 kilovolts. The quarry also has an electrical sub-station. The sub-station area is 1,062 square meters.

 

Water is obtained from the village canal, which flows near the quarry. The water is used for minor activities within the quarry, such as access and road watering, limestone watering in mining areas, post-blasting watering, watering of green areas, and consumption by restrooms.

 

A contractor manages the fuel system. The fuel storage and dispatch system has the necessary equipment to supply fuel to the mobile and fixed units within the quarry. Trained personnel and safety measures are in place to handle fuel safely.

 

The Tembladera quarry can be accessed by air from Lima to Trujillo (1 hour) and by land from Trujillo to Tembladera Quarry. The route is from Trujillo to Pacasmayo (112.6 kilometers), from Pacasmayo to Ciudad de Dios (14.3 kilometers) and from Ciudad de Dios to Tembladera (50 kilometers) and Tembladera - Security point (0.8 kilometers), for a total of 747.1 kilometers. The entire route is paved. Alternatively, the quarry can be accessed by air from Lima to Chiclayo, time average 1.15 hours of flight, and from Chiclayo to Ciudad de Dios (86.8 kilometers) and from Ciudad de Dios to Tembladera (50 kilometers) and Tembladera – Security point (0.8 kilometers). The entire route is paved.

 

The Tembladera quarry’s personnel come from the town of Tembladera, adjacent to the quarry. Others come from Cajamarca and La Libertad region.

 

Personnel from the town of Tembladera are transported to the quarry in buses and pickup trucks.

 

Mining Concession Ownership and Area

 

Acumulación Tembladera was granted by Resolution No. 01989-2002-INACC/J of the National Institute of Concessions and Cadastre (Instituto Nacional de Concesiones y Catastro).

 

The procedure to obtain a mining concession is established in the General Mining Law (Supreme Decree 014-92-EM) and its Regulation Legislative Decree 020-2020-EM.

 

The mining concession is in the owner’s name of Cementos Pacasmayo S.A.A. and is also registered with the name Acumulación Tembladera as a non-metallic quarry.

 

Cementos Pacasmayo S.A.A has the surface rights to the area of operation in the Tembladera quarry.

 

Cementos Pacasmayo S.A.A. pays the right of use for the concession Acumulación Tembladera with unique code 010001801L. These payments must be made from the first working day of January to June 30th of each year, providing the financial entities the unique code of its mining right. The Acumulación Tembladera concession payment is equivalent to US$3.00 per hectare.

 

Royalties

 

Law No. 28258 approved the Peruvian Mining Royalty Law on June 24, 2004, which was amended by Law No. 29788 of September 28, 2011. Cementos Pacasmayo S.A.A. currently pays the Mining Royalty (see note 24 to the consolidated financial statements).

 

 

The payment to the Peruvian government is made through SUNAT, which is the entity designated to control this consideration for the use of natural resources. Such payment is made through an application that the tax authority has made available to those required to pay.

 

If the mining royalty is not declared or paid, penalties for infractions and default interest for non-compliance are incurred. However, failure to pay these fines is not a cause for the loss of the mining concession.

 

Mining activities on the property and industrial in the cement plant

 

Tembladera Quarry

 

The Tembladera quarry, located in the Acumulación Tembladera mining concession, is currently in the production stage. The Tembladera quarry is an open-pit mine that uses explosives to fragment the limestone rock. After crushing, the material is loaded onto trucks to be transported from the quarry to the cement plant located in Pacasmayo.

 

Figure 4 shows the flowsheet of mining processes at the Tembladera quarry. Further details of the process are provided in Exhibit 96.1 of this 20-F filing.

 

Figure 4 Diagram of mining process of the Tembladera quarry

 

 

The Tembladera quarry has been operating for 67 years. The amount of limestone to be mined is planned annually through the mining plan.

 

The equipment at the Tembladera quarry is in optimum condition to maintain continuity of operations. Maintenance and optimization of the equipment is carried out periodically and is supervised by the operator of the quarry. The equipment is in good condition and operational. Further details of the equipment are provided in Exhibit 96.1 of this 20-F filing.

 

 

Pacasmayo industrial cement plant

 

The cement plant is under the laws of the industrial sector, according to current Peruvian regulations.

 

The Pacasmayo plant is located at Pacasmayo District, Pacasmayo Province, La Libertad Region. This plant is 67.3 kilometers from Tembladera quarry. This facility receives material from the Tembladera quarry. The Pacasmayo plant produces various products for the construction industry, the main product being cement. Different types of cement are produced depending on their applications, using limestone, sand, iron and clays as raw materials. The specific mix of raw materials produces the clinker necessary to produce cement.

 

	●	Extraction and transportation of limestone;

	●	Raw material storage;

	●	Grinding and homogenization to make the raw material of consistent quality;

	●	Clinkerization;

	●	Cement grinding;

	●	Storage in silos; and

●

Packaging, loading and distribution.

 

Figure 5 shows the flowsheet for raw material processing, clinker and cement production. Further details of the process are provided in Exhibit 96.1 of this 20-F filing.

 

Figure 5 Pacasmayo industrial plant process block diagram

 

 

The Pacasmayo plant has been in operation for 67 years. The equipment at the Pacasmayo plant is in optimal condition to avoid any interruption in cement production. Maintenance and optimization of the equipment is carried out periodically and is supervised by Cementos Pacasmayo personnel. The Pacasmayo plant is currently being optimized with a modern, state-of-the-art clinker production line in order to increase production. The equipment is in good condition and operational. Further details of the equipment are provided in Exhibit 96.1 of this 20-F filing.

 

 

Facilities

 

The total cost of the mining concession, mine development costs, land, buildings and other facilities, machinery and equipment, furniture and fixtures, transportation units, computer equipment and tools, quarry rehabilitation costs, capitalized interest and work in progress amounted to S/731,827,338 as of December 31, 2024.

 

Tembladera Quarry

 

The Tembladera quarry has facilities such as offices, explosives magazine for blasting, electrical substation, maintenance shop, lubricant warehouse, gas station, oil tank, guardhouse, limestone field, dining room, laboratory, truck scale, ore belt, loading tunnel, meteorological station, safety trench and septic tank.

 

Pacasmayo Plant

 

The Pacasmayo plant has facilities such as maintenance workshops, warehouses, laboratories, administrative offices, and cement production lines that support cement production.

 

History

 

By means of Resolution No. 01989-2002-INACC/J dated November 4, 2002, the National Institute of Mining Cadastre and Concessions granted Cementos Pacasmayo S.A.A., the non-metallic concession title called “Acumulación Tembladera” with code No. 01-00018-01-L.

 

The property dates back to its oldest integral concession: “Norte No. 1” granted by the Regional Mining Office of Cajamarca by ministerial resolution No. 267 of June 30, 1950, for the benefit of Cementos Portland del Norte S.A., starting operations as Cementos Pacasmayo S.A.A., from 1957 until 2013 when Calizas del Norte S.A.C. (CALNOR) was incorporated. CALNOR started activities from January 2014 until May 2016. San Martin Contratistas Generales S.A. started activities from October 2016 to the present.

 

In December 2022, Cementos Pacasmayo started a diamond drilling campaign of eight drill holes to confirm mineral resources and reserves. Drilling activities continue in the first month of 2023.

 

Property Encumbrances

 

Cementos Pacasmayo S.A.A. does not make any payments with respect to encumbrances for the Acumulación Tembladera property. The Acumulación Tembladera mining concession currently has no outstanding payments with respect to infractions and penalties.

 

Concessions

 

The Acumulación Tembladera mining concession is a production stage property with estimated mineral reserves.

 

Geology

 

The ore deposit contains limestone with a grade suitable for cement production. The limestone is contained within the Cajamarca Formation, belonging to the Upper Cretaceous (Turonian floor, around 90 MA). This Formation overlies the Quilquiñan Group, and intrajacent to the Celendín Formation.

 

 

Table 1 shows the stratigraphic column of the area of the Tembladera quarry and briefly describes the Cajamarca Formation and the Upper Cretaceous Celendín Formation that outcrop in the project area. Figure 6 shows the local geology of the quarry.

 

Table 1 Stratigraphic Column of the Tembladera quarry

 

System	Series	Stratigraphic Unit		Intrusive rocks		Lithologic Description
Quaternary	Recent	Fluvial Deposit	Qr-fl			Fluvial origin
		Alluvial Deposit	Qr-al			Alluvial origin
Tertiary	Lower			Andesite	T-an	Intrusion of andesitic dykes longitudinally into the deposit rock mass.
Cretaceous	Upper	Celendin Formation	Ks-ce			Thin layers of clayey nodular limestone, interbedded with marls and lutites.
		Cajamarca Formation	Ks-c			Limestone of marine origin of whitish to light gray color.
		Quilquiñan Group	Ks-q			Lutites and marls with some calcareous intercalations.

 

Figure 6 Geological section of Tembladera quarry

 

 

 

 

Resources and Reserves

 

Table 2 shows the mineral resources at the Tembladera quarry at the end of the 2024 fiscal year.

 

Table 2 Mineral Resources (exclusive of Reserves) at the end of the 2024 fiscal year based on cement price of S/648.5 per ton. The mineral resource estimates are at the point of delivery to the cement plant (point of reference)

 

		Amount (Million Tonnes)				Grades/ qualities (% CaO)				Grades/ qualities (% SO3)				Grades/ qualities (% MgO)				Grades/ qualities (% Al2O3)				Cut-off grades (% CaO)
Measured resources			131.1				49.61				1.79				1.73				4.59				48.60
Indicated resources			39.2				50.58				1.56				1.39				4.01				48.60
Measured + Indicated resources			170.3				49.83				1.74				1.65				4.46				48.60
Inferred resources			41.3				50.59				1.56				1.39				4.00				48.60

 

The mineral resources estimation considered the expected price of cement, the complete forecast horizon contemplates 30-year projection. Clinker is used for cement production through the addition of other non-metallic minerals.

 

Table 3 shows the mineral reserves at the Tembladera quarry.

 

Table 3 Mineral Reserves at the end of the 2024 fiscal year based on cement price of S/648.5 per ton. Mineral reserve estimates are at the point of delivery to the cement plant (point of reference)

 

		Amount (Million Tonnes)				Grades/ qualities (% CaO)				Grades/ qualities (% SO3)				Grades/ qualities (% MgO)				Cut-off grades (% CaO)
Proven reserves			75.3				49.85				0.35				1.51				48.60
Probable reserves			4.9				50.59				0.19				1.27				48.60
Total Reserves			80.2				49.90				0.34				1.49				48.60

 

The mineral reserves estimation considered the expected price of cement. The complete forecast horizon contemplates a total of 30 years. Clinker is used for cement production through the addition of other non-metallic minerals.

 

 

Reconciliation of Mineral Resources and Reserves at the End of the Fiscal Year

 

Table 4 shows the difference between the mineral resource estimates at the end of 2024 and 2023.

 

Table 4 Resources for the last two fiscal years expressed in millions of tons.

 

		Resources as at Dec. 31, 2024				Resources as at Dec. 31, 2023				Discrepancy
Measured resources			131.1				122.6			Recategorization of inferred resources and restructuring of the model by diamond drilling.
Indicated resources			39.2				34.5			Recategorization of inferred resources and restructuring of the model by diamond drilling.
Measured + Indicated resources			170.3				157.1			Recategorization of inferred resources and restructuring of the model by diamond drilling.
Inferred resources			41.3				75.9			The difference is due to readjustments in the calcareous horizons in the model update process.

 

*

The prices assumed for the Mineral Resources estimation in the economic model can be found in the Cementos Pacasmayo S.A.A. Technical Report Summary (TRS) of the Tembladera Quarry and Pacasmayo Cement Plant 20-F 229.601 (Item 601) Exhibit 96.1 filing. All mineral resources are estimated at cement plant. The updated average price is S/648.5 per ton of cement at nominal values, perpetuity is included at the end of the 30-year projection.

 

Table 5 shows the difference between the mineral reserve estimates at the end of 2024 and 2023.

 

Table 5 Reserves for the last two fiscal years expressed in millions of tons.

 

		Reserves as at Dec. 31, 2024				Reserves as at Dec. 31, 2023				Discrepancy
Proven reserves			75.3				65.5			Mineral reserve estimation for 2024 considered 30 years as LOM due to economic issues of price and cost forecast. Main differences are supported by annual limestone consumption to produce cement.
Probable reserves			4.9				12.3			Recategorization of resources

 

*

The prices assumed for the Mineral Reserves estimation in the economic model can be found in the Cementos Pacasmayo S.A.A. Technical Report Summary (TRS) Tembladera Quarry and Pacasmayo plant 20-F 229.601 (Item 601) Exhibit 96.1 filing. All mineral Reserves are estimated at cement plant. The updated average price is S/648.5 per ton of cement, average of the 30-year projection, at nominal values.

 

Cementos Pacasmayo has previously disclosed mineral resources and reserves at the Tembladera quarry in its 20-F filed on April 29, 2024. Cementos Pacasmayo previously filed a TRS to support its disclosure of mineral resources and reserves at the Tembladera quarry as Exhibit 96.1 of its 20-F filed on April 29, 2024. Cementos Pacasmayo is updating that TRS with the new TRS filed as Exhibit 96.1 of this 20-F filing to ensure the material assumptions are current. The main reasons for this update are prices, costs, cement demand and other economic assumptions. Further details are provided in Exhibit 96.1 of that 20-F filing.

 

Exploration

 

Cementos Pacasmayo did not conduct any exploration activity at the Tembladera quarry during the 2024fiscal year.

 

 

Virrilá Individual Disclosure (229.1304)

 

Property description

 

Location

 

The Virrilá property is located in the Sechura District, Sechura Province, Piura Region, Peru at longitude -80.758952° and latitude -5.933999°. The concessions are registered in INGEMET (Instituto Geológico Minero y Metalúrgico) as Virrilá 3, Virrilá 4, Virrilá 6, Virrilá 7, Virrilá 8, Virrilá 9, Virrilá 10, Virrilá 11, Virrilá 12, Virrilá 13, Virrilá 14, Virrilá 15, Virrilá 16, Virrilá 17, Virrilá 18, Virrilá 19, Virrilá 20, Virrilá 21, Virrilá 22, Virrilá 23 and Bayovar N° 4 with mining activity.

 

The area of the mining property is 38,226.00 hectares. The mining rights are granted by INGEMMET of the Energy and Mines Sector through a Presidential Resolution.

 

Cementos Pacasmayo S.A.A. owns the mining property and it is registered with the name Unidad Económica Administrativa (UEA) Virrilá as a non-metallic quarry.

 

Cementos Pacasmayo currently has an agreement with the Fundación Comunal San Martin de Sechura for the use of the surface land associated with the production area of the Virrilá quarry.

 

Piura Cement Plant and UEA Virrilá are shown in Figure 1 while the locations of the UEA Virrilá property and Piura cement plant are shown in Figures 2 and 3, respectively.

 

 

Figure 1 Piura cement plant and UEA Virrilá

 

 

 

 

Figure 2 UEA Virrilá property

 

 

 

Figure 3 Piura cement plant

 

 

 

 

Infrastructure

 

The Virrilá quarry has the necessary infrastructure for normal operations. Facilities for electric power, water supply, fuels, access and roads have been installed.

 

Virrilá quarry is supplied with fuel by diesel oil tanker trucks. Fuel distribution is the responsibility of an authorized contractor company.

 

The Virrilá quarry is supplied with energy by electric generators.

 

The Virrilá quarry can be accessed by air from Lima to Piura (1.5 hour) and by land from Piura to Virrilá quarry, along the north Panamerican highway, to the Bayovar intersection and then to the Virrilá quarry. The estimated travel time is 2 hours.

 

Personnel for the Virrilá quarry come from the town of Sechura, near the quarry. Others are from Piura.

 

Personnel from the Sechura township are transported to the quarry in buses and pickup trucks. The contractor is responsible for the logistics of personnel operating in the quarry.

 

Mining Concession Ownership and Area

 

INGEMMET granted mining rights to Cementos Pacasmayo on March 31, 2016 by Presidential Resolution No. 0147-2016-INGEMMET/PCD/PM including nine (9) non-metallic mining rights in the ¨Unidad Económica Administrativa¨ (UEA) Virrilá, with code No. 01-00011-00-U of Cementos Pacasmayo S.A.A.

 

Presidential Resolution No. 2869-2015-INGEMMET/PCD/PM dated September 30, 2015 added twelve (12) non-metallic mining rights to ¨Unidad Económica Administrativa¨ (UEA) Virrilá, with code No. 01-00011-00-U of Cementos Pacasmayo S.A.A. bringing the total to 21 mining rights.

 

Royalties

 

Law No. 28258 is the Peruvian Mining Royalty Law, which was approved on June 24, 2004 and amended by Law No. 29788 of September 28, 2011. Cementos Pacasmayo S.A.A. currently pays the Mining Royalty (see note 24 to the consolidated financial statements).

 

The payment to the Peruvian government is made through SUNAT, which is the entity designated to control this consideration for the use of natural resources. Such payment is made through an application that the tax authority has made available to those required to pay.

 

If the mining royalty is not declared or paid, penalties for infractions and default interest for non-compliance are incurred. However, failure to pay these fines is not a cause for the loss of the mining concession.

 

Mining Activities on the Property

 

The Virrilá quarry located in the Virrilá EAU is currently in the production stage. This is an open-pit mine where surface miners are used to fragment the coquina, which is loaded onto trucks by front-end loaders and transported to the cement plant located in Piura which is 120 kilometers from UEA Virrilá.

 

 

Figure 4 shows the flowsheet of mining processes at the Virrilá quarry. Further details of the process are provided in Exhibit 96.2 of this 20-F filing.

 

Figure 4 Diagram of mining process of the Virrilá quarry

 

 

The Virrilá quarry has been operating for nine years. The amount of coquina to be mined is planned annually through the mining plan.

 

The equipment in operation at the Virrilá quarry is in optimum condition to maintain continuity of operations. Maintenance and optimization of the equipment is carried out periodically and is supervised by the operator of the quarry. The equipment is in good condition and operational. Further details of the equipment are provided in Exhibit 96.2 of this 20-F filing.

 

Piura Cement Plant

 

The cement plant is under the laws of the industrial sector, according to current Peruvian regulations.

 

The cement plant is located at Veintiséis de Octubre District, Piura Province and Piura Region. This facility receives material from the Virrilá quarry. The cement plant produces various products for the construction industry, the main product being cement. Different types of cement are produced depending on their applications, and using coquina, sand, iron and clays as raw materials. The specific mix of raw materials produces the clinker necessary to produce cement.

 

The standard cement production process consists of the following main stages:

 

	●	Extraction and transportation of coquina;

	●	Raw material storage;

	●	Grinding and homogenization to make the raw material of consistent quality;

	●	Clinkerization;

	●	Cement grinding;

	●	Storage in silos; and

●

Packaging, loading and distribution.

 

 

Figure 5 shows the flowsheet for raw material processing, clinker and cement production. Further details of the process are provided in Exhibit 96.2 of this 20-F filing.

 

Figure 5 Piura plant process block diagram

 

 

The equipment in operation at the Piura plant is in optimal condition to avoid any interruption in cement production. Maintenance and optimization of the equipment is carried out periodically and is supervised by Cementos Pacasmayo S.A.A. personnel. The equipment is in good condition and operational. Further details of the equipment are provided in Exhibit 96.2 of this 20-F filing.

 

Facilities

 

The total cost of the mining concession, mine development costs, land, buildings and other facilities, machinery and equipment, furniture and fixtures, transportation units, computer equipment and tools, quarry rehabilitation costs, capitalized interest and work in progress amounts to S/817,256,329 as of December 31, 2024.

 

Virrilá Quarry

 

The Virrilá quarry has facilities such as offices, dining room, infirmary, vehicle parking lots, lubricant warehouse, chemical baths, maintenance shop, sample preparation laboratory, industrial water tank, truck scale, hopper for weighing, wastewater treatment pond, and satellite and radio antenna.

 

Piura Plant

 

The Piura plant has facilities such as maintenance workshops, warehouses, laboratories, administrative offices, and cement production lines that support cement production.

 

History

 

The quarry is a non-metallic deposit of coquina material, source of different types of cements for construction; Cementos Pacasmayo S.A.A. owns the deposit.

 

The Virrilá quarry started operations in 2015. The mining contractor San Martin Contratistas Generales S.A. was in charge of the production from the beginning of operations until March 14, 2020. The mining contractor Posada Perú S.A.C started operations at the Virrilá quarry on September 14, 2020 until December 30, 2021.

 

On January 3, 2022, the mining contractor San Martin Contratistas Generales S.A. was hired to transport the coquina from the Virrilá quarry to the Piura plant.

 

From May to June 2023 Cementos Pacasmayo carried out a drilling campaign in order to confirm mineral reserves in Zone 2 and 4 (see Exhibit 96.2 of 20-F filed on April 29, 2024).

 

From May to September 2023, Virrilá quarry stopped operations due to the closure of the road caused by the overflow of the La Niña lagoon provoked by cyclone Yaku. Likewise, the Piura plant stopped its clinker production operations (raw meal milling, coal milling and reception of raw materials) from July to September to avoid exceeding the strategic inventories (clinker). The cement grinding, receiving (cement additions), packaging and dispatching processes remained active to cover the cement demand. Virrilá quarry restarted operations in October.

 

 

From January to March 2024, Virrilá quarry shipped coquina from its stockpiles to the Piura Plant. The company in charge of loading the material was Peruvian Master S.A. From May to October 2024, Sechura Ingenieria y Contrucción E.I.R.L. was in charge of operations of the quarry. After October 2024, the quarry stopped operations according to the 2024 mining plan. Likewise, the Piura plant stopped its clinker production operations (raw meal milling, coal milling and reception of raw materials) from March to May 2024 and from November to December 2024 was to avoid exceeding the strategic inventories (clinker). The cement grinding, receiving (cement additions), packaging and dispatching processes remained active to cover the cement demand.

 

Property Encumbrances

 

Cementos Pacasmayo S.A.A. does not make any payments with respect to encumbrances for the UEA Virrilá concessions. The UEA Virrilá concessions currently have no outstanding payments with respect to infractions and penalties.

 

Concessions

 

The UEA Virrilá is a production stage property with estimated mineral reserves.

 

Geology

 

The lithostratigraphy of the area consists of Cenozoic sedimentary units, locally formed by Tertiary units and covered by Quaternary deposits; the Tablazo Lobitos and Quaternary deposits of ancient alluvial, lacustrine and Aeolian origin form these units. Table 1 shows the stratigraphic column of the area of the Virrilá quarry while Figure 6 shows a geologic section of the geology of the quarry.

 

Table 1 Stratigraphic Column of the Virrilá quarry

 

Era	System	Symbol	Serie	Stratigraphic Unit
Cenozoic	Quaternary	Qh-e	Holocene	Eolic deposits
		Qp-tt	Pleistocene	Tablazo Talara
	Tertiary	Tm-zi	Miocene	Lower Zapallal Formation

 

 

Figure 6 Geological section of the Virrilá quarry

 

 

Resources and Reserves

 

Table 2 shows the Mineral Resources at the Virrilá quarry at the end of the 2024 fiscal year.

 

Table 2 Mineral Resources (exclusive of Reserves) at the end of the 2024 fiscal year based on cement price of S/705.9 per ton. The mineral resource estimates are at the point of delivery to the cement plant (point of reference).

 

		Amount (Million Tonnes)				Grades/ qualities (% CaO)				Grades/ qualities (% SO3)				Grades/ qualities (% MgO)				Cut-off grades (% CaO)
Measured resources			20.5				49.81				0.68				0.64				48.50
Indicated resources			30.2				48.94				1.12				1.21				48.50
Measured + indicated resources			50.7				49.29				0.94				0.98				48.50
Inferred resources			4.4				46.61				2.17				1.61				48.50

 

The mineral resource estimation considered the expected price of cement. The complete forecast horizon contemplates a total of 30 years of projection. Clinker is used for cement production through the addition of other non-metallic minerals.

 

 

Table 3 Mineral Reserves at the end of the 2024 fiscal year based on cement price of S/705.9 per ton. Mineral reserve estimates are at the point of delivery to the cement plant (point of reference).

 

		Amount (Million Tonnes)				Grades/ qualities (% CaO)				Grades/ qualities (% SO3)				Grades/ qualities (% MgO)				Cut-off grades (% CaO)
Proven reserves			38.7				51.82				0.31				0.72				48.50
Probable reserves			0.6				48.86				0.72				0.89				48.50
Total reserves			39.3				51.77				0.32				0.72				48.50

 

The mineral reserves estimation considered the expected price of cement. The complete forecast horizon contemplates a total of 30 years of projection. Clinker is used for cement production through the addition of other non-metallic minerals.

 

Reconciliation of Resources and Reserves at fiscal year-end

 

Table 4 shows the difference between the mineral resource estimates at the end of 2024 fiscal year and the 2023 fiscal year.

 

Table 4 Resources for the last two fiscal years expressed in millions of tons.

 

		Resources as of Dec. 31, 2023				Resources as of Dec. 31, 2023				Discrepancy
Measured Resources			20.5				19.9			The difference is due to the annual consumption of coquina used in the cement plant.
Indicated Resources			30.2				28.0			The difference is due to the annual consumption of coquina used in the cement plant.
Measured + Indicated Resources			50.7				47.9			The difference is due to the annual consumption of coquina used in the cement plant.
Inferred Resources			4.4				4.4			There is no difference in tons.

 

*

The prices assumed for the Mineral Resources estimation in the economic model can be found in the Cementos Pacasmayo S.A.A. Technical Report Summary (TRS) of the Virrilá Quarry and Piura plant 20-F 229.601 (Item 601) Exhibit 96.2 filing. All Resources are estimated at cement plant. The updated average price is S/705.9 per ton of cement, average of the 30-year projection, at nominal values.

 

Table 5 shows the difference between the mineral reserve estimates at the end of 2024 and 2023.

 

Table 5 Reserves for the last two fiscal years expressed in millions of tons.

 

		Reserves as of Dec. 31, 2024				Reserves as of Dec. 31, 2023				Discrepancy
Proven Reserves			38.7				40.3			The difference is due to the annual consumption of coquina used in the cement plant.
Probable Reserves			0.6				2.7			The difference is due to the annual consumption of coquina used in the cement plant.

 

*

The prices assumed for the Mineral Reserves estimation in the economic model can be found in the Cementos Pacasmayo S.A.A. Technical Report Summary (TRS) Virrilá Quarry and Piura Cement Plant 20-F 229.601 (Item 601) Exhibit 96.2 1 filing. All Reserves are estimated at cement plant. The updated average price is S/705.9 per ton of cement, average of the 30-year projection, at nominal values.

 

 

Cementos Pacasmayo has previously disclosed mineral resources and reserves at the Virrilá quarry in its 20-F filed on April 29, 2024. Cementos Pacasmayo previously filed a TRS to support its disclosure of mineral resources and reserves at the Virrilá quarry as Exhibit 96.2 of its 20-F filed on April 29, 2024. Cementos Pacasmayo is updating that TRS with the new TRS filed as Exhibit 96.2 of this 20-F filing to ensure the material assumptions are current. The main reasons for this update are prices, costs and cement demand. Further details are provided in Exhibit 96.2 of that 20-F filing.

 

Exploration

 

Cementos Pacasmayo did not conduct any exploration activity at the Virrilá quarry during the 2024fiscal year.

 

Tioyacu Individual Disclosure (229.1304)

 

Property description

 

Location

 

The Tioyacu property is located in Elias Soplin Vargas district, Rioja province, San Martin region, Peru at longitude -77.284376° and latitude -5.999057°. It is located 5 kilometers from the cement plant.

 

The mining rights registered INGEMMET are as follows Moyobamba 98, Pajonal 2, Rioja 1, Rioja 2, Rioja 3, Rioja 5, Rioja 6, Rioja 7, Rioja 8, Rioja 9, Calizas Tioyacu, Arcillas el Pajonal, Pajonal 3 and Pajonal 4. The area of the mining property is 9,600 hectares.

 

The mining rights (the mining concession title) are granted by INGEMMET through a Presidential Resolution.

 

Cementos Selva S.A.C. owns the mining property and it is registered with the name Unidad Económica Administrativa (UEA) Rioja as a non-metallic mining property.

 

Rioja cement plant and UEA Rioja are shown in Figure 1 while the locations of the UEA Rioja property and Rioja cement plant are shown in Figures 2 and 3, respectively.

 

 

Figure 1 Rioja cement plant and UEA Rioja

 

 

 

Figure 2 UEA Rioja property

 

 

 

 

Figure 3 Rioja cement plant

 

 

 

Infrastructure

 

The Tioyacu quarry has the necessary infrastructure for normal operations. Facilities for electric power, water supply, fuel, access and roads have been installed.

 

The Rioja plant owned by Cementos Selva S.A.C., a wholly-owned subsidiary of Cementos Pacasmayo, currently has adequate infrastructure (such as workshops, service stations, restrooms, and others).

 

The Tioyacu quarry can be accessed from the coast by air from Lima to Tarapoto, time average 1.10 hrs. of flight, and from Tarapoto to Rioja (139 kilometers) and from Rioja to the Cementos Selva S.A.C. plant (15 kilometers). Alternatively, one can access the site by road from Lima to Rioja, a distance of 1107 km on paved road.

 

The personnel at Tioyacu quarry come from the Elias Soplin Vargas district. Others are from Rioja and Nueva Cajamarca.

 

Mining Concessions Ownership and Area

 

Calizas Tioyacu concession was approved by Resolution 0960-96-RPM granted by the Public Mining Registry.

 

The procedure to obtain a mining concession is stipulated in the General Mining Law (Supreme Decree 014-92-EM) and its Regulation Legislative Decree 020-2020-EM.

 

Cementos Selva S.A.C. is the owner of the mining concession and is registered under the name Calizas Tioyacu as a non-metallic quarry.

 

Tioyacu quarry has a Usufruct and Easement Agreement for the use and easement of the surface where mining activities are carried out. The agreement was signed with Corporación de Desarrollo de San Martin (COREDESAM).

 

Cementos Selva S.A.C. pays the concession fee for the Calizas Tioyacu concession with unique code 010912495. These payments must be made from the first working day of January to June 30th of each year, providing the Financial Entities the unique code of its mining right. In the case of the Calizas Tioyacu concession, the payment is equivalent to US$3 per hectare.

 

 

Royalties

 

The Peruvian Mining Royalty Law was approved on June 24, 2004 by Law No. 28258, which was amended by Law No. 29788 of September 28, 2011. Cementos Selva S.A.C. currently pays the Mining Royalty (see note 24 to the consolidated financial statements).

 

The payment to the Peruvian government is made through SUNAT, which is the entity designated to control this consideration for the use of natural resources.Ssuch payment is made through an application that the tax authority has made available to those required to pay.

 

In case the mining royalty is not declared or paid, fines for infractions and late payment interest for non-compliance are incurred. However, failure to pay these fines is not a cause for the loss of the mining concession.

 

Mining Activities on the Property

 

Tioyacu Quarry

 

The Tioyacu quarry located in the Calizas Tioyacu mining concession is currently in the production stage. The Tioyacu quarry is an open-pit mine that uses explosives to fragment the limestone rock, which is then loaded onto trucks by front-end loaders and transported to the Rioja plant.

 

Figure 4 shows a flowsheet of mining processes at the Tioyacu quarry. Further details of the process are provided in Exhibit 96.3 of this 20-F filing.

 

Figure 4 Diagram of mining process of the Tioyacu quarry

 

The Tioyacu quarry has been operating for 24 years for Cementos Selva S.A.C. The material extracted from the quarry is used to supply the Rioja Cement Plant, which has also been in operation for 24 years. The amount of limestone to be mined is planned annually through the mining plan.

 

The equipment in operation at the Tioyacu quarry is in optimum condition to maintain continuity of operations. Maintenance and optimization of the equipment is carried out periodically and is supervised by the operator of the quarry. The equipment is in good condition and operational. Further details of the equipment are provided in Exhibit 96.3 of this 20-F filing.

 

Rioja Cement Plant

 

The cement plant is under the laws of the industrial sector, per current Peruvian regulations.

 

The Rioja cement plant is located in the district of Elías Soplin Vargas, La Rioja province, San Martin region, 5 kilometers from the quarry. This facility receives material from the Tioyacu quarry. The cement plant produces various products for the construction industry, the main product being cement. Different types of cement are produced depending on their applications, using limestone, sand, iron and clays as raw materials. The specific mix of raw materials produces the clinker necessary to produce cement.

 

The standard cement production process consists of the following main stages:

 

	●	Extraction and transportation of limestone;

	●	Raw material storage;

	●	Crushing and Drying of Raw Materials;

	●	Grinding and homogenization to make the raw material of consistent quality;

	●	Clinkerization;

	●	Cement grinding;

	●	Storage in silos; and

●

Packaging, loading and distribution.

 

Figure 5 shows the flowsheet for raw material processing, as well as clinker and cement production. Further details of the process are provided in Exhibit 96.3 of this 20-F filing.

 

Figure 5 Rioja plant process block diagram

 

 

The equipment in operation at the Rioja plant is in optimal condition to avoid any interruption in cement production. Maintenance and optimization of the equipment is carried out periodically and is supervised by Cementos Selva S.A.C. personnel. The equipment is in good condition and operational. Further details of the equipment are provided in Exhibit 96.3 of this 20-F filing.

 

Facilities

 

The total cost of the mining concession, mine development costs, land, buildings and other constructions, machinery and equipment, furniture and fixtures, transportation units, computer equipment and tools, quarry rehabilitation costs, capitalized interest and work in progress amounted to S/128,832,759 as of December 31, 2024.

 

 

Tioyacu Quarry

 

The Tioyacu quarry does not have maintenance and administrative facilities because the Cementos Selva S.A.C. plant is near the quarry and provides the necessary facilities for quarry operations.

 

Rioja Plant

 

The Rioja plant has facilities such as maintenance workshops, warehouses, laboratories, administrative offices, and cement production lines that support cement production.

 

History

 

The Tioyacu quarry began operations as Cementos Rioja S.A. in 2000. Prior to this, Cementos Rioja S.A. had successfully won the bid for the “Cement Plant with Vertical Kiln of Rioja”, promoted by CEPRI Cemento Rioja at the Public Auction of February 6, 1998. Ownership was then transferred by the Regional Government of San Martin by public deed on March 28, 1988, to Cementos Rioja S.A.

 

The development of the project, and the non-metallic mining concession – Calizas Tioyacu, among others, were a part of the transfer in favor of Cementos Rioja S.A. by Empresa Minera del Perú, by public deed dated April 8, 1998.

 

According to the provisions of the General Mining Law (D.S. No. 014-92-EM) in its article 9°, the industrial cement plant is not an integral or accessory part of the mining concession, nor does it carry out mining activities, it is a different property dedicated to the industrial manufacturing of cement.

 

On March 1, 2022, Cementos Selva S.A. changed its corporate name to Cementos Selva S.A.C. (CSSAC). During December 2023, Cementos Selva started a diamond drilling campaign of 6 drill holes to confirm mineral reserves.

 

On 2024, no blasting activities were carried out from May to September in the Tioyacu quarry due to delays from the authority for permits. During the month of November diamond drilling was carried out at the Tioyacu quarry in order to update the quarry’s resources and mineral reserves.

 

Property Encumbrances

 

Cementos Selva S.A.C. does not make any payments with respect to encumbrances for the Tioyacu quarry. Tioyacu quarry currently has no outstanding payments with respect to infractions and penalties.

 

Concessions

 

The Calizas Tioyacu is a production stage property with estimated mineral reserves.

 

Geology

 

The ore deposit contains limestone with a grade suitable for cement production. The limestone is contained within the Condorsinga Formation. This Formation is part of the Pucará Group. Figure 6 shows the stratigraphic column of the area of the Tioyacu quarry while Figure 7 shows the local geology of the quarry.

 

 

Figure 6 Rioja plant process block diagram

 

 

 

Figure 7 Geological section of the Tioyacu quarry

 

 

Resources and Reserves

 

Table 1 shows the mineral resources at the Tioyacu quarry at the end of the 2024 fiscal year.

 

Table 1 Limestone Resources (exclusive of Reserves) at the end of the 2024 fiscal year based on cement price of S/748.3 per ton. The mineral resource estimates are at the point of delivery to the cement plant (point of reference).

 

		Amount (Million Ton)				Grades/ qualities (% CaO)				Grades/ qualities (% SiO2)				Grades/ qualities (% K2O)				Cut-off grades (%CaO)
Measured resources			22.5				48.41				9.51				0.25				51.00	(1)
Indicated resources			4.9				47.56				6.05				0.19				51.00	(1)
Measured + Indicated resources			27.4				48.26				8.90				0.24				51.00	(1)
Inferred resources			9.0				50.33				3.31				0.19				51.00	(1)

 

Table 2 Limestone Reserves at the end of the 2024 fiscal year based on cement price of S/748.3 per ton. The mineral reserve estimates are at the point of delivery to the cement plant (point of reference).

 

		Amount				Grades/ qualities (% CaO)				Grades/ qualities (% SiO2)				Grades/ qualities (% K2O)				Cut-off grades (%CaO)
Proven reserves			6.3				51.54				4.04				0.21				51.00
Probable reserves			4.9				50.95				2.67				0.30				51.00
Total reserves			11.2				51.28				3.45				0.44				51.00

 

 

The estimation of mineral reserves considered the expected price of cement. The complete forecast horizon contemplates a total of 26 years of projection. Clinker is used for cement production through the addition of other non-metallic minerals.

 

Reconciliation of Resources and Reserves at the end of the fiscal year

 

Table 3 shows the difference between the mineral resource estimates at the end of 2024 and 2023.

 

Table 3 Resources for the two fiscal years expressed in millions of tons.

 

		Resources as at December 31, 2024				Resources as at December 31, 2023				Discrepancy
Measured resources			22.5				0.05			Recategorization of inferred resources and restructuring of the model by diamond drilling.
Indicated resources			4.9				0.5			Recategorization of inferred resources and restructuring of the model by diamond drilling.
Measured + Indicated resources			27.4				0.5			Recategorization of inferred resources and restructuring of the model by diamond drilling.
Inferred resources			9.0				19.8			The difference is due to the readjustments in the calcareous horizons in the model update process.

 

*

The prices assumed for the Mineral Resource estimation in the economic model can be found in the Cementos Selva S.A.C. Technical Report Summary (TRS) of the Tioyacu Quarry and Rioja Cement Plant 20-F 229.601 (Item 601) Exhibit 96.3. All mineral resources are estimated as quantities at cement plant. The updated average price is S/748.3 per ton of cement, average of the 26-year projection, at nominal values.

 

Table 4 Reserves for the last two fiscal years expressed in millions of tons.

 

		Reserves as at December 31, 2024				Reserves as at December 31, 2023				Discrepancy
Proven reserves			6.3				5.9			The difference is due to the annual consumption of limestone used in the cement plant.
Probable reserves			4.9				4.4			The difference is due to the annual consumption of limestone used in the cement plant.

 

*

The prices assumed for the Mineral Reserves estimation in the economic model can be found in the Cementos Selva S.A.C. Technical Report Summary (TRS) of the Tioyacu Quarry and Rioja Cement Plant 20-F 229.601 (Item 601) Exhibit 96.3. All mineral reserves are estimated as quantities at cement plant. The updated average price is S/748.3 per ton of cement, average of the 26-year projection, at nominal values.

 

Cementos Pacasmayo has previously disclosed mineral resources and reserves at the Tioyacu quarry in its 20-F filed on April 29, 2024. Cementos Pacasmayo previously filed a TRS to support its disclosure of mineral resources and reserves at the Tioyacu quarry as Exhibit 96.3 of its 20-F filed on April 29, 2024. Cementos Pacasmayo is updating that TRS with the new TRS filed as Exhibit 96.3 of this 20-F filing to ensure the material assumptions are current. The main reasons for this update are price, cost and cement demand. Further details are provided in Exhibit 96.3 of that 20-F filing.

 

 

Other Activities

 

Cementos Selva S.A.C has carried out drilling at the Tioyacu quarry to confirm mineral reserves during the 2024. This activity will improve the accuracy of mineral reserves estimation. New drilling data is not included in the 2024 reserves model. The result will be included in the reports filed in connection with a future fiscal year.

 

Internal Control Disclosure (229.1305)

 

Cementos Pacasmayo S.A.A, has implemented the necessary controls and procedures for quality assurance (QA) and quality control (QC) of the company’s production activities and associated information for the estimation of mineral resources and reserves. Cementos Pacasmayo has also implemented quality management systems for its production activities and the quality management system has been ISO 9001 certified since 2015.

 

The QA and QC measures are applied to exploration, quarry production (mining), and cement plant processing activities. For laboratory analysis of exploration samples used in mineral resource and reserve estimates, Cementos Pacasmayo uses a program of duplicate samples, standards and blanks to evaluate the reliability of the laboratory results that its qualified persons rely on for mineral resource and reserve estimates. Its qualified persons also verify the data prior to using the data in their work.

 

As part of the quality control activities, Cementos Pacasmayo periodically hires an external laboratory to verify Cementos Pacasmayo´s laboratory results obtained during the exploration activities, which are part of the geological database and subsequently used in the estimation of resources and reserves.

 

In each of its operations, Cementos Pacasmayo, following the Quality Management System, applies the quality control procedures specific to each stage of the process such as exploration activities, limestone/coquina production, reception of raw materials in the cement plant, crushing of raw materials, coal grinding, cement grinding and raw materials or products in the Cement Plants (e.g., clinker, other materials and cement).

 

Quality control procedures include sample security such as chain of custody for reliable information.

 

Cementos Pacasmayo has a chemical analysis laboratory at each of its cement plants where procedures based on international standards are used for the chemical and physical analysis of raw materials, clinker, and other materials; mainly used in limestone and cement production. Methodologies including the insertion of blanks, duplicates, and standards are applied as part of the Quality Plan.

 

Cementos Pacasmayo has a data management department whose goal is to verify the quality of the information and its incorporation into the geological database, so that it can be used in studies and interpretations, geological modeling, and estimation of mineral resources and reserves.

 

Data verification activities apply to exploration, limestone/coquina production and cement processing data.

 

At the cement plant, the quality plan uses the PDCA (Plan, Do, Check, Act) cycle, which allows Cementos Pacasmayo to verify the quality of information during cement production activities.

 

Cementos Pacasmayo has implemented internal controls to ensure its mineral Resource and Reserves estimates are compliant with Regulation S-K 1300 requirements, including ensuring that mineral resource and reserve estimates are prepared by qualified persons who are members of the Peruvian Engineers Association, an organization that regulates the legal professional practice of engineers in Peru.

 

Mineral resource and reserve estimates at the end of each fiscal year are and will continue to be reviewed by our Mining Operations Department to ensure compliance with S-K 1300. Cementos Pacasmayo engineers and geologists reconcile actual production with estimates of mineral resources and reserves annually to verify accuracy of the estimates. The comprehensive risk inherent in Cementos Pacasmayo’s estimates of mineral resources and reserves are consistent with industry best practices.

 

 

Insurance

 

We maintain a comprehensive insurance program that protects us from certain types of property and casualty losses. Our plants and equipment are insured against losses. Additionally, our insurance policy provides coverage for business interruption in our cement manufacturing facilities. We also purchase commercial insurance to cover risks associated with workers’ compensation and other general liabilities. We believe our insurance programs and policy limits and deductibles are appropriate for the risks associated with our business and are in line with the insurance policies of similar cement manufactures that operate in Peru.

 

Sustainability Performance

 

We report our sustainability performance information to the Getting the Numbers Right (“GNR”) database, inspired by the guiding principles of the Cement Sustainability Initiative (the “CSI”), a sector-project of the World Business Council for Sustainable Development (the “WBCSD”) among other cement companies in Latin America through the Inter-American Cement Federation (the “FICEM”).

 

In August 2018, we joined the GCCA and the GCCA announced the formation of a strategic partnership with the WBCSD to facilitate sustainable development of the cement and concrete sectors and their value chains. As part of a new agreement, the work carried out by the CSI and the GNR database was transferred from the WBCSD to the GCCA on January 1, 2019. In 2023, our CEO, Humberto ReynaldoNadal was elected board member of the GCCA for the 2024-2026 period.

 

In 2019, we became members of Innovandi Global Cement and Concrete Research Network which is GCCA’s Innovation arm, which runs key programs to develop innovations to help the industry decarbonize and produce carbon neutral concrete by 2050.

 

In 2020, member companies of the Global Cement and Concrete Association came together as leaders in the sector to commit to producing carbon neutral concrete by 2050, in line with global climate targets – accelerating the Co2 reductions.

 

Since 2019, we have been included as part of the DJS MILA Pacific Alliance Index. This index is made up of those companies that demonstrate superior performance among their peers under social, environmental and economic criteria. This achievement comes as a result of Pacasmayo’s effort to improve in all of these criteria and to work towards ambitious goals in terms of long-term sustainability. We are committed not only to remain in the Index but to improve our performance, as we are convinced that the focus on sustainability is key to our business and our stakeholders. We participated in the Carbon Disclosure Project (CDP) for the first time, and we are committed to participate every year in this project going forward. CDP is a not-for-profit charity that runs the global disclosure system for investors, companies, cities, states and regions to manage their environmental impacts. We were also part of the S&P/BVL Peru General ESG index, which recognizes us as one of the most sustainable companies in the Peruvian stock market.

 

In 2023, we inaugurated a new kiln at our Pacasmayo plant, which, in addition to adding 660,000 metric tons of clinker capacity per year, will help us on our path to carbon neutrality and allow us to achieve energy efficiency.

 

In February 2025, we were selected to be part of The Sustainability Yearbook for the fifth consecutive year. To appear in the Yearbook, companies must score within the top 15% of their industry globally and have a gap of less than 30% from the leader’s Global ESG score.

 

Social Performance

 

We are committed to the development and quality of life of communities that surround the area where we operate. We have developed a good relationship with the local communities surrounding our plant facilities since we started operations in Pacasmayo. We have a number of social responsibility programs aimed at improving health and education in the area. Below is a brief description of a few of our social initiatives.

 

Tecsup. Tecsup is a leading not-for-profit institute in Peru that provides technical education. It was founded by the family of our controlling shareholder, and we support it by providing scholarships to promising students living near our plants to study at the Trujillo campus of Tecsup. Through its three campuses in Peru, Tecsup has graduated over 11,285 students in various technical fields, some of whom currently work for us and our affiliated companies.

 

 

Center for Technological Training. We have three training centers at our facilities where we teach students and adults business and technical skills. Our centers are staffed with instructors from Tecsup. The goal of the center is to help develop the professional skills of the local population, especially of students and teachers at the educational institutions in the towns of Tembladera, Pacasmayo and Sechura. In 2024, this program benefited over 2,601 stakeholders.

 

Abilities Strengthening. This program seeks to provide training to local stakeholders such as grassroots organizations, local entrepreneurs. The objective of the program is to strengthen their skills and knowledge by providing courses and seminars especially designed for that purpose. The program is funded by us and in 2024 benefited 151 stakeholders.

 

Universidad de Ingeniería y Tecnología – UTEC (University of Engineering and Technology) is an educational nonprofit proposal that since 2012 is aimed at the development of people in the engineering field, looking to satisfy the need for these types of professionals in the labor market by implementing a curriculum in line with the trends and demands that globalization poses to modern engineering, with an integrated approach to innovative teaching models. We support it by providing financial aid for its operations. To enhance students’ knowledge, UTEC also has various national and international alliances with top organizations.

 

Acuícola Los Paiches. Through our social venture, Acuícola Los Paiches S.A.C., we studied the reproductive forms of the “paiche” (arapaima giga), a native fish species that was on the edge of extinction. After years of studies and scientific testing, we have successfully bred this species in captivity, and we have obtained thousands of fingerlings.

 

Floor Improvement Project. To promote the urban development of our areas of influence, we set out to improve the infrastructure conditions of homes, through the substitution of dirt floors for concrete floors to contribute to the improvement of the quality of life and habitability conditions of the towns surrounding our operations. In 2024, 1,008 families joined this initiative and with our support they have managed to build concrete floors in their homes. Likewise, we have contributed 21,250 bags of cement to build a total of 35,000 square meters of concrete floors. This project has motivated the participants to invest financial resources and contribute labor to improve their homes.

 

Risk Management

 

Risk Management Description

 

Corporate Risk Management is a structured approach that allows us to manage all significant risks (operational, compliance and security information) that could affect our long-term objectives. The purpose of this approach is to support senior management in the decision-making process, in order to reduce adverse impacts and take advantage of opportunities; as well as to manage action plans for risk mitigation and prevention. Additionally, this management approach enables continuous improvement of our processes.

 

Risk Management Process

 

Our methodology is based on the COSO Enterprise Risk Management standard and the Australian Standard for Risk Management AS/NZ 4360, adapted in accordance with the ISO 31000: Risk Management standard.

 

1. Scope, Context, Criteria:

 

	●	Scope: Collaborators who play an active role in decision-making at Cementos Pacasmayo and its subsidiaries participate in the risk management process, including corporate projects.

●

Context: A comprehensive understanding of the external and internal environments in which the organization operates is established, considering them as key elements in the analysis process. To evaluate the external environment, the PESTEL tool is used, covering political, economic, social, technological, ecological, and legal aspects. Likewise, for internal analysis, a detailed evaluation of each process is conducted by the risk manager responsible

 

 

	●	Criteria: Risk Appetite: In situations where the assessment determines that the risk level is classified as “Very Low” or “Low,” the organization will assume the risk without taking additional mitigation measures, as it falls within the acceptable risk limits set by the organization.

	●	Risk Tolerance: In situations where the assessment determines that the risk level is classified as “Medium,” the organization considers the risk acceptable but may require control or monitoring measures to maintain or reduce the level.

●

Mandatory Treatment: When the risk level is classified as “High” or “Very High,” the process owner must implement stronger controls to mitigate the risk and establish more rigorous monitoring. The objective of these controls is to reduce the risk to at least a “Medium” level, in line with the limits of the company’s risk tolerance.

 

2. Risk Assessment:

 

Risk assessments are conducted on our new risk management platform, which makes the process more intuitive and dynamic while promoting self-management. It is also developed based on the best practices of ISO 31000.

 

●

Identification: Through discussions with those responsible for various areas of the company, we evaluate risks within our value chain, processes, and subprocesses, addressing both physical and transitional risks. This interaction fosters an environment where diverse perspectives on potential risks to the company are shared, helping to identify their consequences and determine the necessary measures to prevent or mitigate them. We classify risks as follows:

 

-

According to classification: Operational, Compliance or Information Security.

 

-

According to their economic impact: Strategic (12M to +), Tactical (2M to 12M), Operational (0 to 2M).

 

-

According to group: Paralyzing, Emerging, Others.

 

-

In terms of sustainability: Governance, Social, and Environmental.

 

	●	Analysis: We conduct a thorough evaluation that considers the probability of occurrence, the severity of impacts, and the effectiveness of controls. Additionally, we perform quantitative and qualitative analyzes to quantify the financial impact in the event the risk materializes.

●

Evaluation: Prioritization of risks requiring immediate attention is achieved through calibration forms shared with risk managers, where probability, impact level and mitigation controls are determined. The results obtained are calibrated with weights, resulting in five levels of residual risk. All this detailed information is reflected in our Corporate Risk Policy and Procedures. In addition, our methodology gives us a historical view of the evolution of risk and allows us to evaluate the effectiveness of the controls implemented.

 

Corporate risk calibrations are carried out at least once a year; however, for the 20 strategic and key risks, frequency and results are presented quarterly to the Risks Committee and Audit Committees.

 

3. Risk Treatment

 

We have designed and implemented action plans and controls aimed at preventing and mitigating risks, conducting regular meetings and assessments. There are five strategies to achieve this: accept, share, transfer, reduce, and avoid. These actions are aligned with the company’s risk appetite and tolerance. At the same time, we are in the testing phase of the Business Continuity Plan, which enables us to anticipate the materialization of risks.

 

 

4. Monitoring and Supervision

 

Through audits, we evaluated the effectiveness of our controls and, based on our findings, implemented additional preventive and corrective actions.

 

5. Communication and Consultation

 

Risk management involves all areas of the organization, both within and outside of specific processes. Annual training sessions are held to strengthen the understanding and application of risk management throughout the organization. Additionally, user feedback is gathered to identify opportunities for improvement.

 

6. Recording and Reporting

 

A risk report was presented outlining the 2024 management results in accordance with our management processes. This document includes the risk maturity index for the 2024 corporate targets. The goal of this measure is to generate improvements in several key areas, including stakeholders, risk culture, risk assessment methodology, risk structure, and leadership support. This approach is also aligned with the results of the annual risk feedback and collaborative work with the Sustainability department.

 

Risk Management Organization

 

Manager and team responsible for risk management		Risks management team		Risks committee		Audit Committee
They are responsible for evaluating and treating risks through preventive and mitigation controls. Risk management coordinates with them to develop and monitor these metrics.		The group responsible for implementing the corporate risk management strategy, also creates guidelines, such as procedures and policies, and provides managers and their teams with tools for managing risks, as well as, promoting a risk management culture, among other responsibilities.  This team works directly with the Compliance and Information Security departments, each responsible for managing their respective risks. All information is consolidated by the Risks Management Team for presentation to the Risk Committee.		Group established to develop and oversee the implementation of the corporate – level risk management strategy.		The control body, composed by (3) independent board members, reports directly to the Board. Participants included external and internal auditors, the compliance officer, the CFO and the Risk Manager. This body monitors the action plans for risk management and improvements. Additionally, it can suggest actions if it identifies opportunities or threats that could impact the organization.

 

Climate Related Risks

 

ESG risk management includes risks related to climate change. Therefore, they are analyzed through the same risk management stages and are part of Pacasmayo’s 2030 Sustainability Plan. This risk assessment includes risks that could occur in the short, medium or long term, and of different types, such as physical risks and transition risks, among others.

 

ESG risk management includes risks related to climate change. Therefore, they are analyzed through the same risk management stages and are part of Pacasmayo’s 2030 Sustainability Plan. This risk assessment includes risks that could occur in the short, medium or long term, and of different types, such as physical risks and transition risks, among others.

 

 

We have clear objectives to manage climate risks and opportunities, aiming to reduce our emissions by 20% and achieve more than 20% co-processing by 2030. All of this goes hand in hand with the implementation of operational contingency plans and the conditioning of plant infrastructure to ensure continuity, as well as the testing of emergency and crisis response plans.

 

For this purpose, we are aligned with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) for risks related to climate change. For example, one risk would be that our employees’ health would be affected by heat waves or lack of water, as well as a stop in our operations due to water stress, landslides or forest fires. We are also exposed to the possibility of not being able to dispatch finished products, as well as supplying raw materials to production plants due to disabled access roads.

 

In 2024, we have also identified and evaluated the risks and opportunities related to climate change and analyzed the impacts of these risks on our strategy. These risks have been incorporated into the risk matrix and our business continuity plan with measures for action and mitigation of impacts in the event of any of these risks.

 

The preparation of our business continuity plan has involved the development of a business impact analysis, the identification of risk scenarios, emergency plans, crisis management and response committees for each of the scenarios proposed. The scenarios include business interruptions as a result of the effects of climate change such as heavy rains and floods.

 

Emerging Risks

 

Emerging risks are those that have an impact in the long-term. The risks considered here include all recently identified risks that could have a long-term impact on the company’s business or industry, although in some cases they may have already begun to impact the company’s business.

 

Risk Description	Potential Impact	Mitigation Actions	Evidence of Mitigation Actions
Economic Risk:   At the ministerial level of the Peruvian government, technical working groups are being developed to implement a possible change in the regulations relating to the weight of cement bags. The new national regulation would aim to improve the safety and health of construction workers, trying to prevent injuries caused by lifting heavy loads.	Medium to high:   Economic impact for Cementos Pacasmayo by changing the infrastructure of the dispatch process and adapting the capacity of each plant to comply with the standard. This new regulation would imply a total change in the process of bagging, handling, storage, distribution, and transportation of cement.	Cementos Pacasmayo has developed The Napoleon Project, which aims to evaluate all the variables that would be impacted by the change in national regulations.	Impacts on the packaging management and commercialization process along the entire cement bag journey.   Expenditures, investments and returns on the different corporate fronts in the face of regulatory change.   Pilot industrial production of 85,000 bags of cement in compliance with the new regulations.
Social Risk:   The exacerbated social climate due to the political crisis in the country in 2024, led to several stoppages, uprisings and obstructions at the level of roads, and access to operations of various companies nationwide.	Medium to high:   The impact on Cementos Pacasmayo was translated into constant uncertainty due to the stoppage of some of operations, not only affecting the continuity of Cementos Pacasmayo’s operations as a whole, but also, and very importantly, the people who work directly or indirectly in the different locations of our company and therefore, their right to work.	Negotiation and signing of collective bargaining agreements with the different unions, regular meetings with union authorities, agreements and attention to their demands and claims. Work by the community relations group in neighboring communities.	Community projects defined in the strategic plan for social management.   Talks and trainings to the communities with the program “Conociendo Pacasmayo”.   Monitoring of the social climate and assessment with the Social Information System (SIGS).

 

 

ITEM 4A. UNRESOLVED STAFF COMMENTS

 

Not applicable.

 

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

 

A.

Operating Results

 

Overview

 

We are a Peruvian cement company, and the only cement manufacturer serving in the northern region of Peru. With more than 67 years of operating history, we produce, distribute and sell cement and cement-related materials, such as precast products and ready-mix concrete. Our products are primarily used in construction. We also produce and sell quicklime for use in mining operations.

 

In 2024, our cement sales volume was approximately 2.8 million metric tons, representing an estimated 22.8% share of Peru’s total cement sales that year according to INEI. That same year, we also sold approximately 46 thousand metric tons of quicklime.

 

We own three cement production facilities, our Pacasmayo and Piura facilities located in the northwest region of Peru, and our smaller Rioja facility located in the northeast. Our facilities have a total installed annual cement production capacity of approximately 4.9 million metric tons and 3.1 million metric tons of clinker capacity. We also have installed annual production capacity of 240,000 metric tons of quicklime. We own concession rights to several quarries with reserves of limestone/coquina and other raw materials located near our facilities.

 

In 2021, due to the exponential growth in cement sales, we decided to invest approximately US$83.5 million to optimize our current capacity at our Pacasmayo plant, in order to produce approximately 660,000 additional metric tons of clinker per year. This capacity came on line during the second half of 2023.

 

Factors Affecting our Results of Operations

 

Revenue Drivers

 

In 2024, approximately 84.3% of our total cement sales were in the form of bagged cement, substantially all of which was sold through retailers both within and outside of our distribution network. The remaining 15.7% of our cement was sold in bulk or in shipments of precast products or ready-mix concrete directly to large construction companies. Our retail sales are directed to both the auto-construcción segment and construction companies that buy cement for a variety of small construction works, including minor residential, commercial and infrastructure projects. Cement destined for large private and public projects, such as housing complexes, highways, irrigation channels, hospitals, schools, mining and industrial facilities, is typically sold in bulk or in shipments of precast products or ready-mix concrete.

 

We estimate that sales to the auto-construcción segment accounted for approximately 74.8% of our total cement sales in 2024, 73.0% in 2023 and 73.6% in 2022; private construction projects, both large and small, accounted for approximately 15.3% of our total cement sales in 2024, 16.2% in 2023, and 12.7% in 2022; and public construction projects accounted for the remaining 9.9% in of our total cement sales in 2024, 10.8% in 2023, and 10.7% in 2022. Since 2020, we have seen an increase in auto-construcción compared to other segments, mainly due to its resilience in times of crisis. As the Peruvian economy becomes less informal, and there is more stability and confidence from the private sector, private construction projects and infrastructure are expected to become increasingly more important to our business.

 

Our cement sales are largely driven by residential construction (both auto-construcción and small and large housing developments undertaken by construction companies), which is generally affected by economic conditions in the northern region of Peru. Auto-construcción is particularly affected by levels of disposable household income, as low-income families tend to invest most of their savings in developing their homes. Larger residential construction is more susceptible to the economic outlook, the availability of financing and prevailing investment levels in the region. GDP in the northern region of Peru is estimated to have increased by 3.9% in 2024, 0.8% in 2023, and 1.7% in 2022. Our cement volumes, which represented most of the cement sales in the northern region of Peru, grew by 4.1% in 2024, contracted by 9.1% in 2023 and contracted by 1.5% in 2022, in terms of metric tons.

 

Our cement sales are also driven, to a lesser extent, by commercial developments and infrastructure projects. Commercial and other private construction projects are also affected by the level of public and private investment in the region, while public infrastructure projects depend on the priorities and financial resources of the national, regional and local governments. Since 2020, there has been a significant reduction in activity relating to these projects, due initially to the economic impact of the COVID-19 pandemic, as well as subsequent political uncertainty. Although there was some recovery during 2024, there is still a substantial lag in private investment, which increased by 2.3% in 2024, and public investment increased 15.1% in 2024.

 

 

Cost Drivers

 

We obtain limestone and coquina required to produce clinker and quicklime, as well as sand, clay and pozzolanic materials required to produce cement principally from land where we have concession rights. In addition, we purchase from third parties admixtures and certain raw materials that we use in our production process, including gypsum, blast furnace slag, iron and other materials. Admixtures and raw materials used in our cement production process do not include construction supplies that we acquire from third-parties for resale through our distribution network along with our cement products. Raw materials accounted for an estimated 25.2% of our cost of production in 2024, 29.5% in 2023 and 37.2% in 2022.

 

Coal is one of the main raw materials used in our production process, in particular in our kilns. We purchase anthracite coal from nearby coal mines and ocasionally import a small amount of bituminous coal primarily from Colombia. We do not have long-term coal supply agreements, and we do not engage in hedging transactions in connection with the price of coal. In the past, the price of bituminous coal has been related to the international price of oil, as it is used as a substitute for oil. Coal accounted for an estimated 17.0% of our costs of production in 2024, 23.1% in 2023 and 16.8% in 2022.

 

Electricity is used in our facilities mainly to power our cement mills. We power our Pacasmayo and Piura facilities with electricity purchased from Electroperú, with which we have a supply agreement expiring in 2026. Our Rioja facility is powered primarily with electricity from ELOR, with which we have an agreement expiring in December 2025. Under these agreements, the price of electricity is based on a formula that takes into consideration our consumption of electricity and certain market variables, including the international price of oil. Electricity accounted for approximately 14.3% of our cost of production in 2024, 16.0% in 2023 and 14.2% in 2022. Electricity costs tend to be lower during the rainy season, from January to March of each year, as our region is served primarily by hydro-electric power plants.

 

In addition, we purchase from third parties admixtures and certain raw materials that we use in our production process, including gypsum, blast furnace slag, iron and other materials. Admixtures and raw materials used in our cement production process do not include construction supplies that we acquire from third-parties for resale through our distribution network along with our cement products. The cost of admixtures and raw materials purchased from third parties, excluding imported clinker, accounted for approximately 2.7% of our cost of production in 2024, 5.3% in 2023, and 5.1% in 2022.

 

Starting in 2021, due to a sharp increase in demand, we had to use imported clinker while our new capacity was being built. In 2023 our new kiln in Pacasmayo began operating, significantly reducing our need for imported clinker. The cost of imported clinker as a percentage of our cement production costs was approximately 4.8% in 2024, compared to 4.0% in 2023 and 16.3% in 2022.

 

Personnel expenses represented 5.8% of our total cost of production in 2024, 5.7% in 2023 and 5.8% in 2022.

 

Third-party Construction Supplies

 

In addition to selling our own products, we also sell and distribute construction supplies manufactured by third parties, such as steel rebar, wires and pipes that are typically used in construction along with our cement. Our profit margins from the sale of third party construction supplies are significantly lower than the margins on our cement products and they are affected by fluctuations in product prices and the exchange rate between the sol and the U.S. dollar between the time we purchase these products and the time we resell them. We sell these products primarily as a service to retailers in our distribution network in an effort to support the sale of our cement products.

 

Mining Royalty Tax

 

The mining royalty tax for the exploitation of metallic and non-metallic minerals is payable on a quarterly basis in an amount equal to the greater of (i) an amount determined in accordance with a statutory scale of tax rates based on a company’s operating profit margin that is applied to its operating profit, as adjusted by certain non-deductible expenses and (ii) 1% of a company’s net sales, in each case during the applicable quarter. These amounts are determined based on our unconsolidated financial statements and those of our subsidiaries with operations that are under the scope of the Mining Royalty Law. Mining royalty payments are deductible for income tax purposes in the fiscal year in which such payments are made. For additional information, see note 29 to our consolidated financial statements included in this annual report.

 

 

 

Operating Segments

 

We have three operating segments: (i) Cement, concrete, mortar, pavement and precast , (ii) quicklime and (iii) sales of construction supplies. For additional information on our operating segments, see note 27 to our consolidated financial statements included in this annual report.

 

New Accounting Pronouncements

 

For a description of new interpretations and improvements to IFRS in effect since 2024, see notes 2.3.17 and 4 to our consolidated financial statements included in this annual report.

 

Critical Accounting Policies

 

The following is a discussion of our application of critical accounting policies that require our management to make certain assumptions about matters that are uncertain at the time the accounting estimate is made, where our management could reasonably use different estimates, or where accounting changes may reasonably occur from period to period, and in each case would have a material effect on our financial statements. For additional information, see note 3 to our annual audited consolidated financial statements included in this annual report.

 

Determination of Useful Live of Assets for Depreciation and Amortization Purposes

 

Depreciation of mining concessions and mine development costs are charged to cost of production on a units-of-production basis using proved reserves. Other assets are depreciated on a straight-line-basis over their estimated useful lives, as follows:

 

Buildings and other construction:		Years
Administrative facilities		Between 20 and 51
Main production structures		Between 20 and 56
Minor production structures		Between 20 and 35
Minor facilities related to buildings		Between 10 and 35
Machinery and equipment:
Mills and horizontal furnaces		Between 24 and 45
Vertical furnaces, crushers and grinders		Between 23 and 36
Electricity facilities and other minors		Between 10 and 35
Furniture and fixtures		10
Transportation units:
Heavy units		Between 5 and 15
Light units		Between 5 and 10
Computer equipment		Between 3 and 10
Tools		Between 5 and 10

 

The assets’ residual value, useful lives and methods of depreciation/amortization are reviewed at each reporting period, and adjusted prospectively, if appropriate.

 

An item of property, plant and equipment and any significant part initially recognized is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the consolidated statement of profit or loss when recognition of the asset is derecognized.

 

 

Revenue Recognition

 

Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment, discounts and excluding taxes or duty.

 

The following specific recognition criteria must also be met before revenue is recognized:

 

Sales of goods

 

Revenue from sale of goods is recognized at the point in time when control of the asset is transferred to the customer, generally on delivery of the goods.

 

We consider whether there are other promises in the contract that are separate performance obligations to which a portion of the transaction price needs to be allocated. In determining the transaction price for the sale of goods, we consider the effects of variable consideration, the existence of significant financing components, noncash consideration, and consideration payable to the customer (if any).

 

Rendering of services

 

In the operating segments of cement, concrete, mortar, precast, quicklime and construction supplies, we provide transportation services. These services are sold together with the sale of the goods to the customer.

 

Transportation services are satisfied when the transport service is concluded, which coincides with the moment of delivery of the goods to the customers.

 

Paving services

 

In the paving business, to satisfy performance obligations over time, the Group shall recognise revenue by measuring progress as progress is made (transferring control of the services) in accordance with the relevant contract.

 

To measure the progress of the paving service, the Group uses the resource method, which states that revenue should be recognised on the basis of the efforts or resources incurred to satisfy the performance obligation (for example, resources consumed, labour hours expended, costs incurred, elapsed time or machinery hours used) in relation to the total resources expected to satisfy the performance obligation.

 

Interest income

 

For all financial instruments measured at amortized cost and interest-bearing financial assets, interest income is recorded using the effective interest rate (EIR). EIR is the rate that exactly discounts the estimated future cash payments or receipts over the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset or liability. Interest income is included in finance income in the consolidated statement of profit or loss.

 

Impairment of Non-Financial Assets

 

We assess at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, (goodwill and intangible assets with indefinite useful lives), we estimate the asset’s recoverable amount. An asset’s recoverable value is the higher of an asset’s or cash-generating unit’s fair value less costs of disposal and its value in use, and is determined for an individual asset, unless the asset does not generate net cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset’s cash-generating unit exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded companies or other available fair value indicators.

 

As of December 31, 2024, 2023 and 2022, goodwill related to the acquisition of assets made by our subsidiary Distribuidora Norte Pacasmayo S.R.L. amounted to S/4,459,000. We have assessed the recoverable amount of our goodwill and have determined that there are no indicators of an impairment loss of this asset as of December 31, 2024 and 2023. As of December 21, 2023, management recognized a specific impairment to retirement for the net value of the assets of the vertical clinker kilns located at the Pacasmayo cement plant for a net cost of S/36,551,000. This deterioration estimate was carried out as a consequence of replacing the old technology of these kilns due to the entry into operation of the Clinker Lines Optimization Project – Kiln 4 in the Pacasmayo plant, which is more efficient and produces fewer emissions. This amount was recorded in the impairment of property, plant and equipment item in the consolidated statement of profit or loss. As of December 31, 2024, management has not identified impairment for long-lived assets.

 

 

We base our impairment calculation on detailed budgets and forecast calculations, which are prepared separately from our cash generation units to which the individual assets are allocated. Impairment losses of continuing operations, including impairment on inventories, are recognized in the consolidated statement of profit or loss in expense categories consistent with the function of the impaired asset.

 

An assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or have decreased. If such indication exists, we estimate the asset’s or cash-generating unit’s recoverable amount. A previously recognized impairment loss is reversed only if there has been a change in the assumptions used to determine the asset’s recoverable amount since the last impairment loss was recognized. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in the consolidated statement of profit or loss. Exploration and evaluation assets are tested for impairment annually as of December 31, either individually or at the cash-generating unit level, as appropriate and when circumstances indicate that the carrying value may be impaired.

 

Deferred Tax

 

Deferred tax is provisioned using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date.

 

Deferred tax liabilities are recognized for all taxable temporary differences, except in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint arrangements, when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

 

Deferred tax assets are recognized for all deductible temporary differences, the carry forward of unused tax credits and unused tax losses. Deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilized, except in respect of deductible temporary differences associated with investments in subsidiaries, where deferred assets are recognized only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilized.

 

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized. Unrecognized deferred tax assets are re-assessed at each reporting date and are recognized to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.

 

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date. Deferred tax related to items recognized outside profit or loss is recognized outside profit or loss. Deferred tax items are recognized in correlation to the underlying transaction either in other comprehensive income or directly in equity.

 

Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current income tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

 

 

Results of Operations

 

Comparison of Year Ended December 31, 2024 to Year Ended December 31, 2023

 

		Year ended December 31,
(amounts in millions of S/)		2024				2023				Variation %
Sales of goods			1,978.1				1,950.1				1.4	%
Cost of sales			(1,249.5	)			(1,260.6	)			(0.9	)%
Gross profit			728.5				689.4				5.7	%
Operating income (expenses):
Administrative expenses			(253.4	)			(232.0	)			9.2	%
Selling and distribution expenses			(81.4	)			(69.6	)			17.0	%
Other operating (expense) income, net			(2.7	)			(13.8	)			(80.4	)
Impairment of assets			-				(36.6	)			N/A
Total operating expenses, net			(337.5	)			(352.0	)			(4.1	)%
Operating profit			391.0				337.5				15.9	%
Other income (expenses):
Finance income			6.3				7.3				(13.7	)%
Finance costs			(100.3	)			(104.0	)			(3.6	)%
Loss from exchange difference, net			(0.8	)			4.9				N/A
Total other expenses, net			(94.8	)			(91.8	)			3.3	%
Profit before income tax			296.2				245.7				20.6	%
Income tax expense			(97.3	)			(76.8	)			26.7	%
Profit for the year			198.9				168.9				17.8	%

 

Sales of Goods

 

The following table sets forth a breakdown of our sales of goods by segment for 2024 and 2023:

 

		Year ended December 31,
		2024				%				2023				%
Cement, concrete, mortar, pavement and precast			1,906.8				96.4				1,850.2				94.9
Quicklime			14.2				0.7				25.7				1.3
Construction supplies			56.9				2.9				74.1				3.8
Other			0.2				0.0				0.1				0.0
Total sales of goods			1,978.1				100.0				1,950.1				100.0

 

 

Our total sales of goods increased by 1.4%, or S/28.0 million, to S/1,978.1 million in 2024 from S/1,950.1 million in 2023. This increase was primarily due to the following factors:

 

●

a 3.1%, or S/56.6 million, increase in sales of Cement, concrete, mortar, pavement and precast mainly due to increased sales of concrete and mortar;

 

●

partially offset by a 44.7%, or S/11.5 million, decrease in quicklime sales, mainly due to decreased sales volume in 2024; and

 

●

a 23.2%, or S/17.2 million, decrease in the sale of construction supplies, mainly due to decreased sales of steel rebars.

 

The following table sets forth the composition of our sales of Cement, concrete, mortar, pavement and precast for 2024 and 2023:

 

		Year ended December 31,
		2024				2023				Variation
		(in millions of S/)								%
Cement			1,605.5				1,642.4				(2.2	)
Concrete and mortar			183.6				161.2				13.9
Pavement			87.6				21.1				N/R
Precast			30.1				25.5				18.0
Total			1,906.8				1,850.2				3.1

 

Our total sales of Cement, concrete, mortar, pavement and precast increased by 3.1%, or S/56.6 million, to S/1,906.8 million in 2024 from S/1,850.2 million in 2023. This increase was primarily due to the following factors:

 

●

a 2.2%, or S/36.9 million, decrease in cement sales revenues in 2024 mainly due to decreased demand ((5.8)%), partially offset by an increase in average pricing (3.6%);

 

●

a 13.9%, or S/22.4 million, increase in concrete and mortar sales revenue, mainly due to an increase in sales volume of concrete and mortar (8.5%), as public and private investment demand increased during 2024, partially offset by an increase in the average prices of concrete (5.4%);

 

●

a 315.2% or S/ 66.5 million, increase in pavement sales revenue, mainly due to revenues from the contract for the rehabilitation and improvement of the runway, as well as the installation of the perimeter fence, at Piura airport; and

 

●

a 18.0%, or S/4.6 million, increase in precast revenue, mainly due to increased demand from the public sector (9.0%) for reconstruction related projects, as well as an increase in the average price of precast products (9.0%).

 

 

Cost of Sales

 

The following table sets forth a breakdown of our cost of sales by segment for 2024 and 2023:

 

		Year ended December 31,
		2024								2023
		(in millions of S/)				%				(in millions of S/)				%
Cement, concrete, mortar, pavement and precast			(1,178.0	)			94.3				(1,162.5	)			92.2
Quicklime			(16.3	)			1.3				(24.2	)			1.9
Construction supplies			(54.9	)			4.4				(73.4	)			5.8
Other			(0.3	)			0.0				(0.5	)			0.1
Total cost of sales			(1,249.5	)			100.0				(1,260.6	)			100.0

 

Our total cost of sales decreased by 0.9%, or S/11.0 million, to S/1,249.5 million in 2024, from S/1,260.6 million in 2023, primarily due to the following factors:

 

●

a 1.3%, or S/15.5 million, increase in the cost of sales of Cement, concrete, mortar, pavement and precast, mainly due to the higher sales volumes.

 

●

a 32.6%, or S/7.9 million, decrease in the cost of sales of quicklime, mainly due to lower production volumes.

 

●

a 25.2%, or S/18.5 million, decrease in the cost of sales of construction supplies, mainly due to lower volumes.

 

The following table sets forth the composition of our cost of sales of cement, concrete, mortar, pavement and precast for 2024 and 2023:

 

		Year ended December 31,
		2024				2023				Variation
		(in millions of S/)								%
Cement			(878.1	)			(966.1	)			(9.1	)
Concrete and mortar			(169.2	)			(148.4	)			14.0
Pavement			(103.0	)			(21.8	)			N/R
Precast			(27.7	)			(26.2	)			5.7
Total			(1,178.0	)			(1,162.5	)			1.3

 

Our cost of sales represented 63.2% of our sales revenue in 2024, compared to 64.6% in 2023. Our total cost of sales of Cement, concrete, mortar, pavement and precast increased by 1.3%, or S/15.5 million, in 2024, primarily due to the following factors:

 

●

a 9.1%, or S/88.0 million, decrease in the cost of sales of cement, mainly due to a decrease in volume sold ((5.8)%), by a slight decrease in production costs ((3.3)%) due to cost optimization, derived from our new kiln in Pacsmayo, as well as lower costs of raw materials such as coal;

 

●

a 14.0%, or S/20.8 million, increase in the cost of sales of concrete and mortar mainly due to an increase in volume sold (8.5%), partially offset by an increase in production costs (5.5%);

 

●

a 372.5%, or S/81.2 million, increase in the cost of sales of pavement, mainly due to the contract for the rehabilitation and improvement of the runway, as well as the installation of the perimeter fence at Piura airport; and

 

●

a 5.7% or S/1.5 million, increase in the cost of sales of precast, mainly due to increased sales volume (9.0)% partially offset by a decrease in production cost ((3.3)%).

 

 

Gross Profit

 

The following table sets forth a breakdown of our gross profit and gross profit margin (gross profit as a percentage of net sales) by segment for 2024 and 2023:

 

		Year ended December 31,
		2024								2023
		Gross profit				Gross profit margin				Gross profit				Gross profit margin
		(in millions of S/)				%				(in millions of S/)				%
Cement, concrete, mortar, pavement and precast			728.8				38.2				687.7				37.2
Quicklime			(2.2	)			(15.5	)			1.5				5.8
Construction supplies			2.0				3.5				0.7				0.9
Other			(0.1	)			N/A				(0.4	)			N/A
Total gross profit			728.5				36.8				689.5				35.4

 

Total gross profit increased by 5.7%, or S/ 39.0 million, to S/728.5 million in 2024, from S/ 689.5 million in 2023, mainly due to operational efficiencies and lower cost of raw materials, mainly coal. Our gross profit margin for 2024 was 36.8%, 1.4 percentage points higher than in 2023.

 

The following table sets forth a breakdown of our gross profit and gross profit margin for the cement, concrete, pavement and mortar and precast segment for 2024 and 2023:

 

		Year ended December 31,
		2024								2023
		Gross profit				Gross profit margin				Gross profit				Gross profit margin				Gross profit margin variation
		(in millions of S/)				%				(in millions of S/)				%				percentage points
Cement			727.4				45.3				676.3				41.2				4.1
Concrete and mortar			14.4				7.8				12.8				7.9				(0.1	)
Pavement			(15.4	)			(17.6	)			(0.7	)			(3.3	)			(14.3	)
Precast			2.4				8.0				(0.7	)			(2.7	)			10.7
Total gross profit			728.8				38.2				687.7				37.2				1.1

 

Gross profit margin for cement, concrete, pavement, mortar, and precast segment increased by 1.1 percentage points in 2024 compared to 2023. This increase was due mainly to an increase in cement margin (4.1 percentage points) mainly due to cost efficiencies because of lower use of imported clinker, lower costs of raw materials, as well as higher average prices. This increase was partially offset by lower margins in concrete and pavements, as large infrastructure projects usually generate higher volumes with lower margins.

 

Operating Income (Expenses)

 

Our operating expenses primarily reflect administrative and selling and distribution expenses. In 2024, our operating expenses decreased by S/14.5 million to S/337.5 million from S/351.9 million in 2023, mainly due to increases in administrative and selling expenses.

 

 

Administrative Expenses

 

The following table sets forth the composition of our administrative expenses for 2024 and 2023:

 

		Year ended December 31,
(in millions of S/)		2024				2023
Personnel expenses			136.8				125.1
Third-party services			75.8				68.3
Board of directors compensation			6.0				5.9
Depreciation and amortization			17.1				15.3
Taxes			7.6				6.8
Other			10.1				10.6
Total			253.4				232.0

 

Our administrative expenses increased by 9.2%, or S/21.4 million, to S/253.4 million in 2024 from S/232.0 million in 2023. Personnel expenses increased by S/11.7 million because of a larger workforce, as well as higher workers’ profit sharing.

 

Administrative expenses related to the Cement, concrete, mortar, pavement and precast segment accounted for approximately 97.9% of total administrative expenses for 2024 remaining in line with 2023. Administrative expenses related to the construction supplies and other segments accounted for approximately 1.1% and 1.0%, respectively, of total administrative expenses for 2024 compared to approximately 1.2%, and 0.8%, respectively, for 2023.

 

Selling and Distribution Expenses

 

The following table sets forth the components of our selling and distribution expenses for 2024 and 2023:

 

		Year ended December 31,
(in millions of S/)		2024				2023
Personnel expenses			43.7				41.6
Advertising and promotion expenses			9.1				7.5
Other			28.6				20.5
Total			81.4				69.5

 

Our total selling and distribution expenses increased by 17.0%, or S/11.9 million, to S/81.4 million in 2024 from S/69.6 million in 2023, primarily due to increased personnel expenses because of a larger workforce, as well as higher workers’ profit sharing, advertising and promotion, as well as software and licenses.

 

Selling and distribution expenses related to the Cement, concrete, mortar, pavement and precast segment represented approximately 97.9% of total selling and distribution expenses for 2024, from 98.0% in 2023. Selling and distribution expenses related to construction supplies and other segments represented approximately 1.1% and 1.0% respectively, of total selling and distribution expenses for 2024, compared to 1.2% and 0.8%, respectively, for 2023.

 

Other Operating (Expense) Income, Net

 

Our other operating income, net decreased S/11.1 million, to a net expense of S/2.7 million in 2024 from a net expense of S/13.8 million in 2023, mainly due to the expenses related to the reconstruction of La Niña road in 2023, which connects our main quarry and the Piura plant and during the first quarter of 2023, rains interrupted our ability to use this road normally and we therefore invested in its reconstruction in order to normalize transit between the quarry and our plant.

 

Impairment of Our Vertical Kilns

 

At the end of 2023, the board of directors, advised by management, recognized a specific impairment for the net value of the assets of the vertical clinker kilns located at the Pacasmayo cement plant for a net cost of S/36,551,000. This deterioration estimate was carried out as a consequence of replacing the old technology of these kilns due to the entry into operation of a new kiln in the Pacasmayo plant, which is more efficient and produces fewer emissions. This amount was recorded in the impairment of property, plant and equipment item in the consolidated statement of profit or loss Our total other expenses, net increased by S/3.0 million, to S/94.8 million in 2024 from S/91.8 million in 2023.

 

 

Total Other Expenses, Net

 

 

Income Tax Expense

 

Our income tax expense increased by 26.7%, or S/20.5 million, to S/97.3 million for 2024 from S/76.8 million for 2023, mainly due to an increase in profit before income tax. Our effective tax rate for 2024 was 33.0% and was 31.0% in 2023.

 

Profit for the Year

 

As a result of the foregoing, our profit for 2024 increased by 17.8%, or S/30.0 million, from S/168.9 million for 2023 to S/198.9 million for 2024, mainly due to increased operating profit.

 

For a comparison of our results of operations for the year ended December 31, 2023, to the year ended December 31, 2022, please see our annual report on Form 20-F, filed on April 29, 2024.

 

Liquidity and Capital Resources

 

Our main cash requirements are our operating expenses, capital expenditures relating to the maintenance and expansion of our facilities, the servicing of our debt, the payment of dividends and payment of taxes. Our primary sources of cash have been cash flow from operating activities, and our issuance of debt securities and, to a lesser extent, loans and other financings. We believe that these sources of cash will be sufficient to cover our working capital needs in the ordinary course of our business.

 

Cash Flows

 

The table below sets forth certain components of our cash flows for the years ended December 31, 2024, 2023 and 2022.

 

		Year ended December 31,
(in millions of S/)		2024				2023				2022
Net cash flows from operating activities			321.1				412.3				111.8
Net cash flows used in investing activities			(76.6	)			(289.4	)			(176.2	)
Net cash flows used in financing activities			(261.3	)			(115.4	)			(121.5	)
Increase (decrease) in cash			(16.8	)			7.4				(185.8	)

 

Cash Flows from Operating Activities

 

Net cash flows from operating activities decreased by 22.1% or S/91.2 million, to S/321.1 million in 2024 from S/412.3 million in 2023, mainly due to less use of stock of inventories during 2024 compared to 2023 and increase of accounts receivable due to consortium in 2024.

 

Net cash flows from operating activities increased by 268.8% or S/300.5 million, to S/412.3 million in 2023 from S/111.8 million in 2022, mainly due to a decrease in inventory purchases, accounts payable and prepaid expenses.

 

Cash Flows used in Investing Activities

 

Net cash flows used in investing activities were S/76.6 million for 2024, as compared to S/289.4 million for 2023, and were primarily related to the investment activities that were high in fiscal year 2023, due to the construction of the Clinker Line Optimization Project - Kiln 4 in the city of Pacasmayo.

 

Net cash flows used in investing activities were S/289.4 million for 2023, as compared to S/176.2 million for 2022, and were primarily related to the construction of the new kiln in our Pacasmayo plant.

 

Cash Flows used in Financing Activities

 

Net cash flows used in financing activities were S/261.3 million for 2024, as compared to S/115.4 million for 2023 and were primarily due to the increase in financing activities, corresponding mainly to higher loan repayments.

 

Net cash flows used in financing activities were S/115.4 million for 2023, as compared to S/121.5 million for 2022 and were primarily due to dividends paid to our shareholders.

 

 

Indebtedness

 

On February 8, 2023, we repaid in full at scheduled maturity the outstanding US$131,612,000 aggregate principal amount of our 4.50% Senior Notes due 2023 using proceeds from our “club deal” credit line described below, and we also settled the US$132,000,000 in related derivative financial instruments.

 

As of December 31, 2024, the Company’s total outstanding debt reached S/1,493.2 million (equivalent to US$ 396.07 million).

 

As of December 31, 2024		Amount (in millions of S/)				Interest Rate				Maturity Date
Mid-term promissory notes:
Banco de Crédito del Perú			38.0				6.51	%		January 13, 2025
Banco de Crédito del Perú			38.0				6.51	%		January 16, 2025
Banco de Crédito del Perú			38.0				6.35	%		February 21, 2025
Scotiabank			37.2				5.94	%		March 10, 2025
Banco GNB Perú			38.0				4.88	%		November 17, 2025
Banco de Crédito del Perú			38.0				4.85	%		November 24, 2025
Banco de Crédito del Perú			76.0				4.85	%		December 15, 2025
Club deal:
Banco de Crédito del Perú			310.3				5.82	%		December 1, 2028
Scotiabank			310.3				5.82	%		December 1, 2028
Senior Notes due:
2029			259.7				6.69	%		February 1, 2029
2034			309.5				6.84	%		February 1, 2034

 

 

Local Bonds. On January 8, 2019, the General Shareholders’ Meeting approved the issuance of a local bond program for up to S/1,000 million. On January 31, 2019, we issued two series of local bonds in the aggregate principal amount of S/570 million. One in the aggregate principal amount of S/260 million bearing interest at a rate of 6.68750% for a term of 10 years, and the other in the aggregate principal amount of S/310 million bearing interest at a rate of 6.84375% for a term of 15 years. The rates and terms obtained benefit our financial costs structure, with lower cost of capital, an extended maturity and less exposure to currency fluctuations.

 

The Senior Notes in soles issued in 2019 are guaranteed by the following Company’s subsidiaries: Cementos Selva S.A.C., Distribuidora Norte Pacasmayo S.R.L., Empresa de Transmisión Guadalupe S.A.C. and Dinoselva Iquitos S.A.C.

 

The corporate bond contracts have the following covenants limiting the incurring of indebtedness for the Company and its collateral subsidiaries, which are measured prior to the following transactions: issuance of debt or equity instruments, merger with another company or disposition or rental of significant assets. The agreements are the following:

 

- A fixed charge covenant ratio of at least 2.5 to 1.

 

- A consolidated debt-to-EBITDA ratio of no greater than 3.5 to 1.

 

As of December 31, 2024 and 2023, these covenants have not been activated because no situation has occurred that requires their measurement, as indicated in the previous paragraph.

 

Medium-term “Club Deal” Corporate Loan. On August 6, 2021, we entered into a medium-term corporate loan in a “Club Deal” format with Banco de Crédito del Perú S.A. and Scotiabank Perú S.A.A. The loan amounted to S/860,000,000 and we used the proceeds for the payment of all of the Company’s financial obligations that the Company maintains with a maturity of February 2023 or earlier. The loan includes a grace / availability period of 18 months from August 6, 2021 and a payment term of seven years from the last disbursement in February 2023. The loan will be paid in 22 equal quarterly installments and amounts due under it accrue interest an annual rate of 5.82%.

 

Under this loan, the Company must comply with the following financial covenants:

 

	a.	maintain a debt ratio (Financial Debt / EBITDA) of no more than 3.50 to 1;

	b.	maintain a debt service coverage ratio (FCSD / SD) of at least 1.15 to 1; and

c.

maintain a debt service coverage ratio (EBITDA / SD) of at least 1.50 to 1.

 

In addition, the Company is required to comply with certain customary restrictive and affirmative covenants. As of December 31, 2024 and 2023, the Company was in compliance with the ratios and other obligations contained in the Club Deal.

 

Short-term loans. As of December 31, 2024, we had obtained seven loans, each in the amount of S/303,200,000, five with Banco de Crédito del Perú S.A., one with Scotiabank and one with Banco GNB Perú, for working capital. Each of these loans has a medium-term maturity and accrues interest at an effective annual rate of between 4.85 and 6.51 percent.

 

During 2024, the net gain generated by the exchange difference was approximately S/836,000 and, during 2023, the net loss from exchange difference amounted to S/4,933,000. These results are presented in the caption “Loss from exchange difference, net” of the consolidated statement of profit and loss.

 

Capital Expenditures

 

See “Item 4—Information on the Company—A. History and Development of the Company—Capital Expenditures.”

 

B.

Research and Development, Patents and Licenses, Etc.

 

Since 2016, Pacasmayo embarked on the path of innovation and digital transformation, a journey that has allowed us to explore new ways of doing things, interact with environments with a lot of uncertainty, as well as propose a cultural change. After all this time and with much experience gained, we were ready to rethink a new strategy, seeking to accelerate and extend the adoption of innovation and digital transformation initiatives in all areas of the company, making it necessary to decentralize their execution.

 

Pacasmayo has become a company that provides building solutions not only derived from cement, but that satisfy the needs of any actor in the construction sector. That is why today Pacasmayo complements its product research capacity with research focused on people. In other words, knowing who the hardware sellers, self-builders, construction foremen, transporters or construction residents really are, allows us to find new opportunities for Pacasmayo.

 

In 2024, we opened the research and development laboratory, designed to optimize the performance of our cement through tests in its different applications. This space reinforces our commitment to innovation and quality in each project.

 

 

C.

Trend Information

 

Cement Market

 

The Peruvian Cement Market

 

Peru’s cement production is segmented into three principal geographic regions: the northern region, the central region, including Lima’s metropolitan area, and the southern region. The table below sets forth selected data with respect to each region in Peru and the corresponding cement manufacturers. Market share data is based on metric tons of cement delivered during 2024.

 

Geographic Breakdown

 

Northern Region (thousands of metric tons)

 

Plant		% share				2024				2023				2022				2021				2020
Pacasmayo Group			22.8				2,835				2,951				3,437				3,614				2,576
Imports			-				-				-				2				40				38
Total			22.8				2,835				2,951				3,439				3,654				2,614

 

Central Region (thousands of metric tons)

 

Plant		% share				2024				2023				2022				2021				2020
UNACEM			44.0				5,462				5,617				6,297				5,838				4,172
Caliza Inca			6.0				751				585				515				492				382
Imports			1.7				206				145				202				691				493
Total			51.7				6,419				6,347				7,014				7,021				5,047

 

Southern Region (thousands of metric tons)

 

Plant		% share				2024				2023				2022				2021				2020
Grupo Yura			20.4				2,535				2,581				3,047				2,904				2,019
Imports			0.5				68				65				67				150				189
Total			21.0				2,603				2,646				3,114				3,054				2,208
Others			4.5				562				423				427				877				732
Total All Regions			100.0				12,419				12,367				13,994				14,618				10,601

 

Sources: ASOCEM, INEI, ADUANET (SUNAT).

 

Although a large part of housing construction is mainly concentrated in the Lima metropolitan area, located in the central region of Peru, the housing market in the provinces of Peru, including the northern region, has grown significantly in recent years. Despite this trend, Peru continues to have significant shortages in housing, estimated by the INEI at 1.7 million homes nationwide. Economic growth, particularly in the mining and agribusiness sectors, rising employment levels and the implementation of real estate projects, resulted in the creation of higher paying jobs, which ultimately resulted in the expansion of the housing market. However, the COVID-19 pandemic took a toll on it and, in 2020, poverty levels increased 9.9 percentage points. Fortunately, poverty levels for 2023, which is the last available data, decreased by 1.5 percentage points, reaching 29.0%, compared to 27.5% in 2022.

 

 

Peru continues to have a significant deficit in infrastructure. In recent years, significant efforts have been made to channel investments into the infrastructure sector through a series of initiatives that range from the creation of financial instruments (such as the infrastructure investment and trust funds) to regulatory changes, to promotion of more public private partnerships (for example “taxes for infrastructure” which allows private companies to use part of their tax payments to directly finance infrastructure works) to allowing for other executors, such as the government to government agreements that have recently been signed by Peru and other governments to ensure promptly execution without corruption.

 

Distribution and Logistics

 

Peru’s cement market is divided into three regions circumscribed primarily by the location of established production facilities. Our facilities are located in the northern region of Peru, UNACEM is the main producer in the central region, and Yura in the southern region. Cement is mainly sold in bags of 42.5 kilograms (approximately 94 pounds). However, cement can also be sold in bulk according to customer requirements.

 

The transportation and storage of cement requires specialized equipment. A favorable location of the production facilities not only reduces the time required to transport cement products to distributors and third-party merchants but also diminishes the costs of necessary equipment and resources. The location of a cement plant relative to its distribution network provides operational efficiencies and advantages that translate into stronger market share.

 

Cement can be stored in silos for up to 12 months if the silo is completely humidity proof. The typical vehicles used for the transport of cement are adapted to maintain the necessary environment during shipment. The proximity of production plants and storage centers to distribution centers, third-party vendors and retail outlets, creates a more efficient supply chain and minimizes the time and resources required to transport products from the production line to the construction site. The streamlined nature of this process ensures that cement products in the northern region of Peru, for example, reach customers within approximately one week of production. A cement company’s success is inherently linked to the sophistication of its distribution network and its emphasis on quality assurance throughout the supply chain.

 

Competitive Dynamics

 

The Peruvian cement market is comprised basically of three groups and 2 other plants:

 

●

Cementos Pacasmayo and Cementos Selva, which principally serve the northern region;

 

●

UNACEM, which principally serves the central region;

 

●

Cementos Yura, which primarily serve the southern region;

 

●

Caliza Cemento Inca, located in Cajamarquilla, Lima which principally serves the central region as well as other regions throughout the country; and

 

●

Mixercon, located in the city of Lima, mainly serves this city, and to a lesser extent some provinces of the country. Acquired by Holcim in August 2024.

 

Additionally, there are cement importers, according to the ADUANET, that mainly supply the cities of Lima and, to a lesser extent, other provinces of the country.

 

The level of competitiveness of cement companies generally depends on their cost structure, which is a function of the cost of energy, fuel, costs of raw materials and transportation. Cement companies in Peru generally compete within the limits of their distribution market, which is determined principally by their geographic locations.

 

 

The following are the main characteristics of the cement sector in Peru:

 

●

highly fragmented consumer base;

 

●

relatively low cost of energy and raw materials;

 

●

operations and distribution primarily determined by geographic location; and

 

●

high correlation to auto-construcción and public and private investments.

 

D.

Critical Accounting Estimates

 

Our consolidated financial statements are prepared in conformity with IFRS, as issued by the IASB. See note 3 to our consolidated financial statements included in this annual report.

 

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

 

A.

Directors and Senior Management

 

General

 

Our business and affairs are managed by the board of directors in accordance with our by-laws and Peruvian Corporate Law No. 26887 (“Peruvian Corporate Law”). Our by-laws provide for a board of directors of between seven and eleven members. Between three and five alternate directors may be elected by the shareholders to act on behalf of any director who is absent from meetings or who is unable to exercise his or her duties, when and for whatever period fixed by the chairman of the board. Alternate directors have the same responsibilities, duties and powers of directors to the extent they are called to replace them.

 

Directors are elected at a shareholders’ meeting and hold office for three years. Directors may be elected to multiple terms. Our current board of directors is composed of seven directors. In the first board meeting held after the annual shareholders’ meeting where members of the board are elected, the board of directors must elect among its members a chairman and a vice chairman.

 

The board of directors typically meets in regularly scheduled bi-monthly meetings and when called by the chairman of the board or a person representing the chairman. Resolutions must be adopted by a majority of the directors present at the meeting and the chairman is entitled to cast the deciding vote in the event of a tie.

 

Duties and Liabilities of Directors

 

Pursuant to Article 177 of Peruvian Corporate Law, directors are jointly and severally liable to a corporation, shareholders and third parties for any damages caused by abuse of power, fraud, willful misconduct or gross negligence. In addition, pursuant to Article 3 of Law No. 29720, as of June 26, 2011, directors of companies listed on the Lima Stock Exchange are also strictly liable for any damages caused as a result of any transactions in which they were involved and which resulted in damages or other losses to the corporation. A director cannot be found liable if the director expressed disagreement at the time the vote was cast or upon learning of such transaction and if there is a record expressing such opposition.

 

Our by-laws prohibit a director from voting on matters in which such director has an interest. In addition, Article 180 of the Peruvian Corporate Law requires a director with a conflicting interest on a specific matter to disclose such interest and abstain from the deliberation and decision-making process with respect to such matter. A director who violates this requirement is liable for any damages caused to us and may be removed by a majority of the board of directors upon request of any member of the board or by a majority vote of the shareholders.

 

Our by-laws stipulate that Directors’ compensation is determined by the Mandatory Annual General Shareholders’ Meeting at the time it reviews our annual audited financial statements. The fixed portion of the Chairman’s compensation shall be twice the amount allocated to any other director. If directors are part of one or more committees, their compensation may include an additional amount for the work performed as members of such committees. The additional compensation of the directors may not exceed the aggregate fixed portion of the compensation that the directors are entitled to receive. Our by-laws do not restrict Directors from voting upon matters relating to their own compensation.

 

 

Our by-laws do not prohibit our directors from borrowing from us. However, Article 179 of the Peruvian Corporate Law provides that directors of a company may enter into an agreement with such company only if the related loan agreement relates to operations the company performs in the regular course of business and in an arms’-length transaction. Further, a company may provide a loan to a director or grant securities in such director’s favor only in connection with operations that the company usually performs with third parties. Agreements, credits, loans or guarantees that do not meet the requirements set forth above require prior approval from at least two thirds of the members of the Company’s Board of Directors. Directors are jointly liable to the company and the Company’s creditors for contracts, credit, loans or securities executed or granted without complying with Article 179 of the Peruvian Corporate Law.

 

Neither our by-laws nor Peruvian Corporate Law contain age limit requirements for the retirement or non-retirement of directors.

 

Board of Directors

 

The following sets forth our directors and their respective positions as of December 31, 2024.

 

Name		Position		Year of Birth
Eduardo Hochschild Beeck		Chairman of the Board		1963
José Raimundo Morales Dasso		Vice Chairman of the Board		1946
Ana María Botella Serrano		Independent Director		1953
Esteban Chong León		Independent Director		1958
Ana Sofía Hochschild Correa		Director		1998
Venkat Krishnamurthy		Independent Director		1971
Humberto Reynaldo Nadal Del Carpio		Director, Chief Executive Officer		1964

 

The following sets forth selected biographical information for each of the members of our board of directors. The average tenure of board members is 10.71 years. The business address of each of our current directors is Calle La Colonia 150, Urb. El Vivero, Surco, Lima, Peru.

 

Eduardo Hochschild Beeck. Mr. Hochschild has been a Director since April 1991 and is currently Chairman of the Board of Directors. He is a Mechanical Engineer from Tufts University, Boston, United States. Mr. Hochschild is also Chairman of Hochschild Mining plc, Aclara Resources Inc., Inversiones ASPI and the Board of Directors of UTEC, Asociación Amanatari and TECSUP.

 

José Raimundo Morales Dasso. Mr. Morales has been a Director since March 2008 and currently serves as Vice Chairman of the Board of Cementos Pacasmayo. He is Vice Chairman of the Board of Directors of Credicorp LTD., Banco de Crédito del Perú S.A. and Pacífico Cía. Seguros y Reaseguros. He is also a member of the Board of Directors of Atlantic Security Holding Corporation, Grupo Crédito S.A., Solución Empresa Administradora Hipotecaria S.A., Fosfatos del Pacífico S.A. and Grupo Romero. He served as General Manager of BCP from 1990 to 2008 and previously held various positions at Bank of America and Wells Fargo Bank between 1970 and 1980. Mr. Morales holds a degree in Economics and Business Administration from Universidad del Pacífico in Lima, Peru, and a Master’s in Business Administration from the Wharton Graduate School of Finance at the University of Pennsylvania, United States.

 

Ana María Botella Serrano. Mrs. Botella has been a Director since July 9, 2020. Previously, she was Alternate Director from September 1, 2019 to July 9, 2020. She holds a degree in Law from the Complutense University of Madrid and belongs by competitive examination to the Senior Corps of Civil Administrators of the Spanish State. As a civil servant she has worked in the Ministry of the Interior, the Civil Government of La Rioja, the Ministry of Public Works, the Treasury Delegation of Valladolid and the Ministry of Finance. In 2003 she was elected Councilwoman of the Madrid City Council and has been Second Deputy Mayor. In the Madrid City Council she has held the Government Delegation of Employment and Social Services, from where she directed development cooperation projects. Several of these projects were developed in Peru and it is worth mentioning the water purification in the Peruvian Amazon for 300,000 people. She was decorated by the Quito City Council, by the city of Lima, by the Congress of the Republic of Peru and by the Peruvian Diplomatic Service. She also occupied the Delegation of Environment and Mobility. In December 2011 she was sworn in as Mayor of Madrid City Council, a position she held until June 2015. She is currently Executive President of the Integra Foundation and Program Director of the Atlantic Institute of Government.

 

 

Esteban Chong León. Mr. Chong has been a Director since March 24, 2023. Mr. Chong holds a Bachelor’s degree in Accounting from Universidad del Pacífico and a Master’s in Business Administration from the University of Pittsburgh (United States). He holds a diploma in International Financial Reporting Standards from The Association of Chartered Certified Accountants (United Kingdom) and in Corporate Governance of Board of Directors from Northwestern University – Kellogg School of Management (United States). He is Head Professor, at the Universidad del Pacífico. He is a retired partner at PricewaterhouseCoopers Peru with more than 36 years of professional experience, 20 of them as a partner. He held various positions at PricewaterhouseCoopers including Territory Senior Partner for Peru and Bolivia, Head of Assurance for Peru, partner in charge of Risk Management, Member of the Regional Executive Committee and Representative to the Regional Board (Theater Oversight Board), where he was Chairman of the Admissions Committee. He is currently a Director of Inmobiliaria Los Alerces, KR Comercial and KR Proyectos and is a member of the Audit, Risk and Finance Committee of CGIAR (formerly Consultative Group on International Agricultural Research).

 

Ana Sofia Hochschild Correa. Ms. Hochschild has been a Director since March 24, 2023. She holds a bachelor’s degree in Psychology from IE University in Madrid, with a special focus on organizational psychology and knowledge in digital transformation. She is a graduate of the Master’s Degree in Educational Leadership, Organizations, and Entrepreneurship at Harvard University, and has experience at companies such as Sony, Ernst& Young, and XR Ventures. She currently serves as Director of Voxel School and leads various initiatives focused on the education sector.

 

Venkat Krishnamurthy. Mr. Krishnamurthy has been a Director since July 9, 2020. He holds a Bachelor of Science from the Indian Institute of Technology in Kanpur, where he received the Presidential Gold Medal and a PhD in Computer Science from Stanford University. Mr. Krishnamurthy is a serial entrepreneur, who has created disruptive business and technology breakthroughs in Computer Graphics, Enterprise Software, Social Networks, Internet Marketing, IOT, CAD, Laser Scanning, Manufacturing, Metrology, Orthodontics, EAS/Security and Supply Chain. He is currently co-founder at Alignable, North America’s largest network for small and medium businesses and Gita Krishnamurthy Vidyalaya, a free school for under-privileged children in South India, as well as board member at privately held internet travel business Grand Circle Corporation. He is an Academy Award winner for Technical Achievement (2001) for pioneering inventions in the area of animation-ready higher order (polynomial) surface reconstruction from 3-D scanners. Previously, he co-founded Invisalign, Paraform/Metris, now Nikon Metrology, CTO at OATSystems, now Checkpoint’s RFID/IOT division and Instructor at MIT Professional Education on Radical Innovation. For his achievements, Mr Krishnamurthy was awarded the Distinguished Alumnus Award from IIT Kanpur in 2024.

 

Humberto Reynaldo Nadal Del Carpio. Mr. Nadal joined the Company as Corporate Development Manager in June 2007, has been a Director since March 2008 and CEO since April 2011. He is currently Vice Chairman of Ferreycorp S.A.A. and Ferreyros S.A. since August 2020, and independent member of the Board of Directors of Ferreycorp S.A.A. and Ferreyros S.A. since March 2017 and a Director of HCIG S.A. since 2024. He is also CEO of ASPI, Fosfatos del Pacífico and FOSSAL, director of the Asociación de Productores de Cemento (Asocem); and former president and current member of the Board of Trustees of Universidad del Pacífico. He is a director of the GCCA, a global association that brings together most of the world’s cement producing companies. He is director of FICEM, an association of cement producers in Latin America that comprises 80% of the companies in the region. He is a member of the Advisory Board of the Faculty of Humanities, Arts and Social Sciences of the Universidad de Ingeniería y Tecnología (UTEC). Previously, he was Chairman of the Board of Directors of Fondo Mi Vivienda. Member of the G-50 group. He is an economist graduated from Universidad del Pacífico and has an MBA from Georgetown University.

 

 

Executive Officers

 

Our executive officers oversee our business and are responsible for the execution of the decisions of the board of directors. The following table presents information concerning the current executive officers of the company and their respective positions:

 

Name		Position		Year of Birth		Year of Appointment
Humberto Reynaldo Nadal Del Carpio		Chief Executive Officer		1964		2008
Manuel Bartolomé Ferreyros Peña(1)		Chief Financial Officer		1966		2008
Jorge Javier Durand Planas		Legal Vice – President/General Counsel		1966		2008
Diego Arispe Silva		Corporate Social Responsibility Managing Director		1981		2021
Aldo Bertoli Estrella		Commercial Managing Director		1969		2016
Ibrahim Chahuan Riveros		Building Solutions Managing Director		1988		2021
Ely Adriana Hayashi Hirahoka		Finance Managing Director		1982		2021
Tito Alberto Inope Mantero		Corporate Excellence Managing Director		1972		2015
Diego Reyes Pazos		Supply Chain, Administration and Risks Managing Director.		1977		2013
Inés Roggero Cilloniz		Innovation and Digital Transformation and Data and Analytics Managing Director		1981		2022
Julio Oropeza Reyes		Operations Managing Director		1978		2022

 

(1)

Mr. Ferreyros retired effective March 31, 2025, as part of an orderly succession plan and Ms. Hayashi took over his CFO responsibilities as of April 1, 2025.

 

The following sets forth selected biographical information for each of our executive officers:

 

See the information set forth under “Board of Directors” for biographical information for Mr. Nadal.

 

Manuel Bartolomé Ferreyros Peña. Mr. Ferreyros was Chief Financial Officer from January 2008 until March 31, 2025. He was Alternate Director from March 2008 until July 9, 2020. He was a member of the Board of Directors of Fosfatos del Pacífico S.A. and FOSSAL S.A.A. until April 2025. Mr. Ferreyros has a bachelor’s degree in business administration from the Universidad de Lima, a multinational MBA from the Adolfo Ibáñez School of Management, Miami and an MBA from the College of Insurance in New York. Mr. Ferreyros has participated in the Senior Management Program of the Central American Institute of Business Administration (INCAE) and in the CEO’s Management Program at the Kellogg School of Management, among others. Before joining the Company, Mr. Ferreyros was CEO at La Positiva Seguros y Reaseguros and member of the Asset Restructuring Commission of INDECOPI. Distinguished among the three best CFOs in the construction industry in Latin America by Institutional Investor magazine between 2014 and 2023. After a successful 17 year career as CFO, Mr. Ferreyros left the Company on March 31, 2025, following an orderly succession plan where Ms. Hayashi took on his responsibilities as CFO as of April 1, 2025. 

 

Jorge Javier Durand Planas. Mr. Durand joined the Hochschild Group in 1994 and has been the General Counsel and Legal Vice President of the Company since 2008. Previously, he was Legal Vice President of Hochschild Mining plc. He is a lawyer graduated from the Universidad de Lima and a Master of Business Administration from the Universidad del Pacífico. Among other studies, he participated in the Management Program for Lawyers and in the Corporate Governance and Performance Program of the Yale School of Management (United States), in the Strategic Negotiations Program of Harvard Business School (United States) and in the Prince of Wales Business & Sustainability Program of the University of Cambridge Institute for Sustainability Leadership (United Kingdom). Currently, Mr. Durand is a member of the Board of Directors of ASPI, UTEC and TECSUP. He has also been a Director of FOSPAC since March 30, 2021, a Director of FOSSAL since March 24, 2023 and a Director of HCIG S.A. since 2024.

 

Diego Arispe Silva. Mr. Arispe has been the Corporate Social Responsibility Managing Director since June 2019 and of Corporate Social Responsibility since January 2022. He holds a law degree from the Pontificia Universidad Católica del Perú (PUCP) and a MBA from Columbia Business School (United States). He has worked in the company for more than 15 years, having held various positions in the areas of Human Management, Social Responsibility, and Legal, and was part of the team in charge of the implementation of our cement plant in Piura, as Project Controller.

 

 

Aldo Bertoli Estrella. Mr. Bertoli has been the Commercial Managing Director since May 2016. He holds a degree in Business Administration from the Universidad del Pacífico and a master’s degree in Business Administration from the Universidad de Piura. Before joining our company, Mr. Bertoli worked for five years as Peru-Ecuador-Bolivia Sales Manager at Pepsico Inc. Previously, he spent 12 years at Procter & Gamble in various commercial positions, including four years in Bolivia as Country Manager.

 

Ibrahim Chahuan Riveros. Mr. Chahuan has been Buildings Solutions Managing Director since January 2022. He holds a bachelor’s degree in Business Administration from Universidad del Pacífico and an Executive MBA from Northwestern University - Kellogg School of Management. Mr. Chahuan has 11 years of experience with Cementos Pacasmayo, having held various positions mainly in the marketing , finance and operations area. He participated in key corporate finance projects for the development of the company, such as the issuance of bonds by Cementos Pacasmayo in the international capital markets and for nearly seven years he has been in charge of promoting and developing Cementos Pacasmayo’s building solutions.

 

Ely Adriana Hayashi Hirahoka. Ms. Hayashi was Finance Managing Director from January 2022 until March 31, 2025. She is currently the Company’s CFO. She is a member of the Board of Directors of Fosfatos del Pacífico S.A. and FOSSAL S.A.A. since April 2025. She holds a Bachelor’s degree in Business Administration from Universidad del Pacífico and a Master’s degree in Business Administration (MBA) from IE Business School in Madrid, Spain. Ms. Hayashi joined Cementos Pacasmayo in 2006 and has held various positions in operational and financial areas throughout her more than 18 years with the company.

 

Tito Alberto Inope Mantero. Mr. Inope has been the Corporate Excellence Managing Director at Cementos Pacasmayo. Previously, he held the position of Construction Solutions Managing Director. He holds a degree in economics from the Universidad de Lima and holds a Master’s degree in Business Administration (MBA) from the Universidad de Ciencias Aplicadas (UPC), as well as the Programa de Alta Dirección (PAD). Mr. Inope joined Cementos Pacasmayo in 1996 and has held various management positions in Operations, Projects and Planning during his 25 years with the company.

 

Diego Reyes Pazos. Mr. Reyes has served as Supply Chain Manager since 2013 and subsequently assumed also the management of Administration and Risks. He has solid experience in supply chain, project development, system/process design and implementation, and financial analysis. He holds a bachelor’s degree in Business Administration from the Universidad de Lima and a masters degree in Business Administration from the Universidad de Piura. Before joining Cementos Pacasmayo, Mr. Reyes worked as Operations and Finance Manager at Belcorp, as senior business process expert for Latin America at SAB Miller, Project Manager in the Supply Chain Vice-Presidency at UCPBackus & Johnston, among others.

 

Inés Roggero Cilloniz. Mrs. Roggero has been the Innovation and Digital Transformation Managing Director since June 2022. In January 2023 she was assigned the leadership of the Data and Analytics tribe and in July 2024 the information technology leadership. Before joining Cementos Pacasmayo, she was the Corporate Innovation Manager at Alicorp, where she was in charge of identifying process improvement initiatives, new analog and digital products. In addition, Mrs. Roggero has more than 17 years of experience in mass marketing in companies such as Johnson & Johnson and Coca-Cola company. During this time, she won more than 10 marketing awards and has successfully launched more than 10 new products on the market. She holds a Master’s degree in Design Management from IED Barcelona.

 

Julio Oropeza Reyes.  Mr. Oropeza has been the Operations Managing Director since November 2022. He is also in charge of the company’s Climate Change and R&D Committees. He has 24 years of experience in the cement industry, holding different positions and functions in Venezuela, Ecuador, Chile, Argentina and Peru. His areas of expertise include: production, process optimization, quality control, KPI and cost optimization, high performance team building, environmental management, safety, innovation, project development and plant management. He holds a degree in Chemical Engineering from Universidad Nacional Experimental Francisco de Miranda (Venezuela, 2002), certified as Process Engineer (Holcim, 2012) and an MBA in Integrated Management System: Quality, Environment and Safety from Universidad de Viña del Mar (Chile, 2015).

 

 

B.

Compensation

 

For the year ended December 31, 2024, the total short-term compensation recognized as an expense for our executive officers amounted to S/27,704,000 (2023: S/28,922,000 and 2022: S/26,066,000) and the total long-term compensation paid to our executive officers amounted to S/7,167,000 (2023: S/7,632,000 and 2022: S/8,272,000). There were no post-employment or contract termination benefits or share-payments.

 

Since 2011, we have paid each of our board members a yearly compensation of US$200,000 (US$400,000 in the case of our Chairman). In addition, compensation paid to certain of our board members for serving on board committees will be, in aggregate per year, not higher than the total amount paid to our board members for serving on our board. Our 2024 board member compensation was approved at our annual shareholders’ meeting.

 

Neither we nor any of our subsidiaries have entered into any agreement that provides for any benefit or compensation to any director or executive officer after expiration of his or her term.

 

Executive Compensation Plan

 

Our business operates in a competitive environment where highly trained professionals and executives are in demand. Continued expansion of the Peruvian economy over the past several years has created new opportunities resulting in additional competition for local talent. As a result, we have in place compensation plan to retain our key executives and attract new executives with the skills and experience required to achieve our strategic objectives and create long-term value for our shareholders. We believe that executive compensation should reward individual performance and the achievement of our strategic objectives.

 

Our executive compensation plan has been designed to achieve the following primary objectives:

 

●

recruit, retain and incentivize highly talented and dedicated executives with the skills and experience required to manage and operate our business and create long-term value for our shareholders;

 

●

provide our executive officers with compensation opportunities that are fair, reasonable and competitive in the market;

 

●

compensate based on our performance and individual performance;

 

●

promote transparency by using clear and straightforward compensation metrics; and

 

●

align the interests of our executive officers with the interests of our shareholders, both in the short-term and long-term.

 

Our executive compensation plan is in addition to workers’ profit sharing requirements applicable to all of our employees, including our executive officers, under Peruvian labor laws.

 

Our compensation plan has been designed to compensate our executives through a combination of base salary, a cash bonus incentive and other benefits that we believe are fair and equitable to us and our shareholders and competitive in the market. We believe that the combination of salary, cash bonus incentive and other benefits help distinguish us from other companies in the cement industry in Peru and serve as an important retention tool as we compete for executive talent. We also believe that it will provide an appropriate compensation structure to retain our executives, reward them for individual performance, and induce them to contribute to the creation of long-term value. For more information about our Compensation Plan please see note 19 to our consolidated financial statements included in this annual report.

 

Components of Executive Compensation

 

The key components of our executive compensation plan are:

 

●

base salary;

 

●

short-term cash bonus incentives; and

 

●

long-term cash bonus incentives.

 

We believe that the use of few and straightforward compensation components promotes the effectiveness and transparency of our executive compensation plan and enables us to be competitive. No formula or specific weightings or relationships are used to allocate the various components in our executive compensation plan. Each component has an important role in implementing our executive compensation philosophy and in meeting the executive compensation objectives described above.

 

 

Base Salary

 

We compensate our executive officers and other employees with a base salary to compensate them for services rendered on a day-to-day basis during the fiscal year. Base salaries provide stable compensation to executives, allow us to recruit and retain highly talented and dedicated executives and, through periodic merit increases, provide a basis upon which executives may be rewarded for individual performance.

 

Short-Term Cash Bonus Incentives

 

As a key component of our compensation plan, we currently provide our executive officers the opportunity to earn annual cash bonuses based on the achievement of our short-term business objectives. As additional cash compensation that is contingent on achieving our business objectives, cash incentives augment the base salary component while being tied directly to corporate and individual performance objectives.

 

Long-Term Cash Bonus Incentives

 

In addition, as a tool to promote retention of our executive officers, we have implemented a deferred cash incentive program that we believe aligns compensation with corporate performance, allows us to recruit and retain competent executive talent, and rewards for superior performance measured over the long-term. Our plan provides for the payment of bonuses in addition to the annual bonuses that are paid to our executive officers.

 

Our long-term bonus incentive program features the following key components:

 

●

available to senior executives who have been employed by our company at this level for at least four years;

 

●

at the end of each year, the cash bonus will be accrued in a “personal virtual account” for the benefit of the relevant executive;

 

●

at the beginning of the sixth year the relevant executive will receive the amount accrued during the first four years;

 

●

additional annual bonuses will be accrued for the following four years and a final payout will be made at the end of the eighth year from the creation or beginning of the plan; and

 

●

if the employee decides to voluntarily leave the company before a scheduled distribution, he will not receive this compensation.

 

Our plan provides that the executive must meet the following eligibility criteria:

 

●

must be no older than 58 years at the time his or her participation in the incentive program begins;

 

●

must have at least four years as senior executives with either our company, or our subsidiaries or affiliates;

 

●

is a professional who is deemed to have characteristics that are attractive to the market; and

 

●

the executive’s departure is deemed by the board of directors or a committee thereof to have an adverse effect on our performance.

 

 

C.

Board Practices

 

For information about the date of expiration of the current term of office and the period during which each director has served in such office, see “Item 6. Directors, Senior Management and Employees—A. Directors and Senior Management.”

 

Benefits upon Termination of Employment

 

There are no contracts providing for benefits to directors upon termination of employment.

 

Board Committees

 

We have four board committees composed by members of our board of directors, which are described below. The members of these committees were elected at the Board meeting held on April 17, 2023, for a three year period.

 

Executive Committee

 

Our by-laws permit us to delegate an executive committee composed of three to five members of the board of directors. Mr. Eduardo Hochschild Beeck (chairman), Mr. Raimundo Morales Dasso and Mr. Humberto Reynaldo Nadal Del Carpio are currently members of our executive committee. Our executive committee is mainly responsible for (i) supervising and supporting our management in executing the resolutions passed by our board of directors, (ii) executing the strategy approved by our board of directors, (iii) meeting short-term and medium-term goals, as well as designing action plans to meet such goals in accordance with the long-term strategy and goals approved by our board of directors, (iv) approving agreements or transactions involving amounts greater than US$3 million but less than US$20 million, (v) monitoring compliance with the annual budget and approving any significant deviations from approved levels of working capital, (vi) making strategic decisions that do not rise to the level of a full board approval, and (vii) approving and executing new projects in amounts up to US$20 million.

 

Our executive committee also performs the functions of a compensation committee.

 

Antitrust Best Practices Committee

 

The antitrust best practices committee is composed of three members: Mr. Raimundo Morales Dasso, Mr. Humberto Reynaldo Nadal Del Carpio and Mr. Eduardo Hochschild Beeck. The antitrust best practices committee is responsible for informing our employees about our competition best practices and for monitoring compliance with such practices, including compliance with antitrust regulations.

 

Audit Committee

 

Our audit committee is composed of three directors: Mr. Esteban Chong Leon, who is the chairman of the audit committee, Mr. Venkat Krishnamurthy and Mrs. Ana María Botella Serrano. All of the members of the audit committee qualify as independent in accordance with the SEC rules applicable to foreign private issuers Mr. Esteban Chong Leon also qualifies as a financial expert under SEC rules. The audit committee is responsible for (i) reviewing our financial statements; (ii) evaluating our internal controls and procedures, and identifying deficiencies; (iii) the appointment, compensation, retention; and (iv) oversight of our external auditors. Additionally, it is responsible for informing our board of directors regarding any issues that arise with respect to the quality or integrity of our financial statements, our compliance with legal or regulatory requirements, the performance and independence of the external auditors, or the performance of the internal audit function; and overseeing measures adopted as a result of any observations made by our shareholders, directors, executive officers, employees or any third parties with respect to accounting, internal controls and internal and external audit, as well as any complaints regarding management irregularities, including anonymous and confidential methods for addressing concerns raised by employees.

 

 

Good Corporate Governance Committee

 

Our good corporate governance committee is composed of three directors. The current members are Mr. Eduardo Hochschild Beeck (chairman), Mr. Raimundo Morales Dasso and Mr. Humberto Reynaldo Nadal Del Carpio. The good corporate governance committee is responsible for overseeing director nomination and committee assignments, and board and CEO successions. Similarly, it is responsible for assisting in the implementation of committee and board self-assessment surveys and the review of governance principles.

 

Sustainability Committee

 

Our sustainability committee is composed of three directors. The current members are Mrs. Ana Botella (chairman), Ms. Ana Sofia Hochschild Correa and Mr. Humberto Reynaldo Nadal Del Carpio. The sustainability committee is responsible for approving our sustainability strategy, overseeing its implementation, and monitoring key ESG indicators.

 

D.

Employees

 

As of December 31, 2024, we had a total of 1,976 permanent employees. The following table sets forth a breakdown of our employees by category as of the periods indicated.

 

		As of December 31,
		2024				2023				2022
Senior Management			53				50				46
Administrative personnel			1,086				988				993
Plant workers (cement)			334				331				324
Plant workers (concrete)			503				403				350
Total(1)			1,976				1,772				1,713

 

(1)

Workers from our social venture Acuícola Los Paiches S.A.C. are excluded from these calculations.

 

As of December 31, 2024, approximately 19.7% of our employees were members of labor unions (Sindicato Único de Trabajadores de Cementos Pacasmayo S.A.A, o) and 04 unions of Distribuidora Norte Pacamasyo S.R.L.) that represent their affiliated members in collective bargaining negotiations. Our management and administrative personnel are not members of a labor union. Labor relations for unionized and non-unionized employees in our production facilities, including compensation and benefits, are governed by collective bargaining agreements that are renewed every three years. During the first semester of 2022, three-year Union Agreements were signed with our unions.

 

Under Peruvian law, it is illegal to lay off employees without cause or without following certain formal procedures. In addition, employees who are laid off are entitled to severance payments upon termination of their employment in an amount equal to one and a half month’s salary for each full year of work performed with a maximum payment equal to 12 monthly salaries provided they are indefinite term employees. In case of fixed term employment relationship the severance payment is equal to 1.5 monthly salaries for each month, until the completion of the contract, with a maximum of 12 monthly salaries.

 

Our employees are enrolled in either the national public pension fund or a privately managed pension fund. In both cases the applicable payment (approximately 13%) is withheld by the employer from the employees’ monthly salary. As of December 31, 2024, approximately 9.6% of our employees were enrolled with the national public pension fund and 89.7% with a private social pension plan.

 

We seek to build a company with a high level of engagement with collaborators, with the aim of achieving a sense of belonging for our people and, therefore, their happiness in the organization. Our engagement strategy seeks to measure the following components:

 

	●	Engagement - It measures the employee’s strong connection with their work (a psychological state of energy, dedication and total involvement in their work).

●

Leadership - It measures the leadership style adapted to the individual needs of its employees and that focuses on helping them grow and succeed.

 

This involvement and identification will allow us to consolidate ourselves as a committed team, that shares the same objectives and values, that co-creates the success of the company and at the same time focuses on growing and improving their personal well-being. The resources we use for our engagement strategy consist of two large measurements that are carried out in July and November, which are complemented with periodic measurements (pulses) to know the feeling and think about a specific dimension and/or situation. Our goal for 2024 was to have an Engagement Index of 86.57%, and thanks to the joint work of leaders, promoters and teams in general, we achieved an index of 87.70%.

 

We believe we have a good relationship with our employees. In the past, we have not experienced any material strikes, work stoppages or any other significant disruptions.

 

 

E.

Share Ownership

 

As of March 31, 2025, people who are currently members of our board of directors and our executive officers held as a group 1,650,995 of our common shares and no investment shares (not including common shares held by Mr. Eduardo Hochschild through ASPI). This amount represented less than 1% of our outstanding share capital as of March 31, 2025. Mr. Eduardo Hochschild through ASPI indirectly controlled 211,985,547 common shares, representing 50.01% of common shares.

 

Mr. Manuel Ferreyros, Mr. Humberto Reynaldo Nadal, Mr. Raimundo Morales, own individually and in the aggregate less than 1% of our common shares.

 

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

 

A.

Major Shareholders

 

As of March 31, 2025, our issued and outstanding share capital was composed of 423,868,449 common shares. In addition, as of March 31, 2025, we had 40,278,894 non-voting investment shares outstanding, 36,040,497 of which were held in treasury.

 

The following table sets forth the beneficial ownership of our common shares and non-voting investment shares as of March 31, 2025.

 

		As of March 31, 2025
		Common shares								Investment shares								Total
Shareholder		Number of shares (in millions)				Percentage				Number of shares (in millions)				Percentage				Number of shares (in millions)				Percentage
ASPI(1)			211,985.5				50.0	%			—				—				211,985.5				45.7	%
Cementos Pacasmayo  (treasury shares)			—				—				36,040.5				89.5	%			36,040.5				7.8	%
Carlos De Ferrari Brignole			34,300.0				8.1	%			—				—				34,300.0				7.4	%
AFP Integra			28,711.0				6.8	%			—				—				28,711.0				6.2	%
AFP Prima			25,535.9				6.0	%			—				—				25,535.9				5.5	%
Profuturo AFP			20,910.1				4.9	%			—				—				20,910.1				4.5	%
Directors and officers(2)			2,220.5				0.5	%			—				—				2,220.5				0.5	%
American Depositary Share Program			34,113.5				8.0	%			—				—				34,113.5				7.3	%
Other shareholders			66,091.9				15.6	%			4,238.4				10.5	%			70,330.3				15.2	%
Total			423,868.4				100.0	%			40,278.9				100.0	%			464,147.3				100.0	%

 

(1)

ASPI is indirectly controlled by Mr. Eduardo Hochschild through Farragut Holdings, Inc. (Cayman Islands). Mr. Eduardo Hochschild is a member of the board of directors of our company. The shares expressed here include those held through ASPI.

(2)

See “Item 6. Directors, Senior Management and Employees—Share Ownership” for information regarding shares of our common stock owned by members of our board of directors and executive officers. The number of common shares held by directors and executive officers excludes any shares that may be deemed to be beneficially owned by Mr. Eduardo Hochschild through ASPI.

 

Changes in Ownership

 

The following sets forth the composition of ownership from December 31, 2020 to December 31, 2024, including common share and investment (non-voting) shares.

 

		As of December 31,
Shareholder		2024				2023				2022				2021				2020
ASPI			45.7	%			45.7	%			45.7	%			45.7	%			45.7	%
Cementos Pacasmayo (treasury shares)			7.8	%			7.8	%			7.8	%			7.8	%			7.8	%
Carlos De Ferrari Brignole			6.5	%			2.8	%			1.3	%			0.8	%			0.5	%
IN—Fondo 2 (AFP Integra)			3.6	%			3.0	%			3.0	%			3.2	%			2.9	%
RI—Fondo 2 (AFP Prima)			4.3	%			4.8	%			5.0	%			5.2	%			4.6	%
RI—Fondo 3 (AFP Prima)			1.4	%			3.8	%			4.0	%			4.0	%			3.6	%
American Depositary Receipt Program			7.3	%			7.7	%			7.3	%			7.4	%			6.8	%
IN—Fondo 3 (AFP Integra)			2.0	%			3.4	%			4.3	%			4.9	%			4.1	%
PR—Fondo 3 (AFP Profuturo)			3.1	%			3.6	%			4.2	%			4.4	%			3.7	%
Other shareholders			18.2	%			17.4	%			17.5	%			16.7	%			20.3	%
Total			100.0	%			100.0	%			100.0	%			100.0	%			100.0	%

 

 

Differences in Voting Rights

 

Our major shareholders do not have different voting rights.

 

Securities Held in the Host Country

 

On February 7, 2012, we completed our initial public offering of 20,000,000 ADSs, each representing five common shares, in the United States. On March 2, 2012, we sold an additional 2,296,800 ADSs pursuant to an over-allotment option granted to the underwriters in that offering. The ADSs are listed on the New York Stock Exchange. As of March 31, 2025, we estimate that there were 6,822,700 ADSs outstanding, which represented 8.0% of our common shares outstanding as of such date.

 

Arrangements for Change in Control

 

We are not aware of any arrangements that may, when in force, result in a change in control.

 

B.

Related Party Transactions

 

Peruvian Law Concerning Related Party Transactions

 

Under Peruvian law, board members and executive officers of a publicly held company may not (i) engage in transactions with the company or any related party of the company, except for transactions entered into in the ordinary course of business and on an arm’s length basis, (ii) appropriate for their own benefit a business opportunity that belongs to the company, or (iii) participate in any transaction or decision that presents a conflict of interest with the company.

 

Peruvian law sets forth certain restrictions and limitations on transactions with certain related parties.

 

For instance, from a tax standpoint, the value of those transactions must be equal to the fair market value assessed under transfer pricing rules (i.e., the value agreed to by unrelated parties under the same or similar circumstances). Similarly, companies with securities registered in the Peruvian Public Registry of Securities (Registro Público del Mercado de Valores), such as us, are required to comply with the following rules:

 

●

The directors and managers of the company cannot, without the prior authorization of the board of directors, (i) receive in the form of a loan money or assets of the company; or (ii) use, for their own benefit or for the benefit of related parties, assets, services or credits of the company.

 

●

The execution of agreements that involve at least 5% of the assets of the company with persons or entities related to directors, managers or shareholders that own, directly or indirectly, 10% of the share capital, requires the prior authorization of the board of directors (with no participation of the director involved in the transaction, if any).

 

●

The execution of agreements with a party controlled by the company’s controlling shareholder requires the prior authorization of the board of directors and an evaluation of the terms of the transaction by an external independent company (audit companies or other to be determined by the Peruvian Securities Commission).

 

The external independent company that reviews the transaction should not be related to the parties involved therein, nor to directors, managers or shareholders that own at least 10% of the share capital of the company.

 

Related Party Transactions

 

As a general policy, we do not enter into transactions with related parties, including our board members and officers, on terms more favorable than what we would offer third parties. Any related party transaction we have entered into in the past has been in the ordinary course of business and on an arm’s length basis.

 

 

As of December 31, 2024, we had no accounts payable balance with ASPI, our controlling shareholder.

 

The following transactions have been entered into by us with related parties:

 

●

We lease a plot of land adjacent to our headquarters to our affiliate, Compañía Minera Ares S.A.C., a subsidiary of Hochschild Mining plc. We received rental payments of S/1,200,000 in 2022, S/1,150,000 in 2023 and S/1,224,000 in 2024.

 

●

We provide back office management and administrative services to ASPI, Fossal and Fosfatos del Pacifico, for which we received S/198,000 in 2022, S/275,000 in 2023 and S/276,000 in 2024.

 

●

We receive a reimbursement of security services from our affiliate Compañía Minera Ares S.A.C., a subsidiary of Hochschild Mining plc. We paid a total of S/2,110,000 in 2022, S/1,940,000 in 2023 and S/2,570,000 in 2024 for these services.

 

ASPI and Hochschild Mining plc are majority-owned and controlled, directly and indirectly, by Mr. Eduardo Hochschild.

 

For more information about our related-party transactions please see note 22 to our consolidated financial statements included in this annual report.

 

C.

Interests of Experts and Counsel

 

Not applicable.

 

ITEM 8. FINANCIAL INFORMATION

 

A.

Consolidated Statements and Other Financial Information.

 

See “Item 19.—Exhibits.”

 

Legal and Administrative Proceedings

 

From time to time, we may become subject to various legal and administrative proceedings that are incidental to the ordinary conduct of our business. We are currently not party to any material legal or administrative proceedings.

 

Dividends and Dividend Policy

 

Our ability to pay dividends is subject to our results of operations for each year. Holders of our common shares and investment shares are entitled to receive dividends on a pro rata basis in accordance with their respective number of shares held

 

Under our dividend policy, shareholders must take the following factors into consideration prior to declaring dividends: our financial and economic condition, including committed and budgeted expenses and obligations, and previously approved investments. In addition, our dividend policy states that (a) our board of directors may declare advanced dividends based on either the net income resulting from financial statements prepared for such purpose or the cumulative net income corresponding to previous years, provided that shareholders delegated such authority to the board of directors, and (b) holders of common shares representing no less than 20% of our total share capital may request the distribution of dividends up to 50% of the net income corresponding to the previous year, net of any legal reserve requirements. Our board of directors makes a recommendation at the annual shareholders’ meeting with respect to the amount and timing of dividend payments, if any, to be made on our common shares and investment shares.

 

Under Peruvian law, companies may distribute up to 100% of their profit (after payment of income tax) subject to a 10% legal reserve until the legal reserve equals 20% of shareholders’ equity. According to Article 40 of the Peruvian Corporate Law, in order to distribute dividends, profits must be determined in accordance with the individual financial statements of the company.

 

 

Payment of Dividends

 

Dividends are paid to holders of our common shares and investment shares, as of a record date determined by us. In order to allow for the settlement of securities, under the rules of the Peruvian Securities Commission, investors who purchase shares of a publicly held company three business days prior to a dividend payment date do not have the right to receive such dividend payment. Dividends on issued and outstanding common shares and investment shares are distributed pro rata.

 

Holders of common shares and investment shares are not entitled to interest on accrued dividends. In addition, under Article 232 of the Peruvian Corporate Law, the right to collect accrued dividends declared by a publicly held company expires 10 years from the original dividend payment date.

 

Previous Dividend Payments

 

The following table sets forth the amounts of cash dividends declared and paid from 2012 through the date hereof for our common shares and our investment shares.

 

Year ended December 31,		Dividends paid (in S/)				Per share (in S/)
2024			190,300,411				0.41000
2023			190,300,411				0.41000
2022 2021			194,941,884 366,676,401				0.42000 0.79000
2020			106,753,888				0.23000
2019			154,118,465				0.36000
2018			161,396,280				0.37700
2017			149,837,396				0.35000
2016			155,236,000				0.28500
2015			162,950,000				0.28000

 

At the annual shareholders’ meeting held on March 24, 2025, the shareholders of the Company approved the financial statements for fiscal year 2024 including the net income for such year and delegated to the Board of Directors the authority to decide the distribution of dividends from the retained earnings account and fiscal year 2024 operating results.

 

B.

Significant Changes

 

We are not aware of any changes bearing upon our financial condition since the date of the financial statements included in this annual report.

 

ITEM 9. THE OFFER AND LISTING

 

A.

Offer and Listing Details

 

Market Price of Our Common Shares and ADSs

 

ADSs

 

On February 7, 2012, we completed our initial public offering of 20,000,000 ADSs, each representing five common shares, in the United States. On March 2, 2012, we sold an additional 2,296,800 ADSs pursuant to an over-allotment option granted to the underwriters in that offering.

 

The ADSs are listed on the New York Stock Exchange under the symbol “CPAC.”

 

 

B.

Plan of Distribution

 

Not applicable.

 

C.

Markets

 

Trading in the Peruvian Securities Market

 

The Lima Stock Exchange

 

As of December 31, 2024, there were 339 companies with securities listed on the Lima Stock Exchange. Established in 1970, the Lima Stock Exchange is Peru’s only securities exchange. On November 19, 2003, the members of the Lima Stock Exchange approved to convert its corporate status to a publicly held corporation effective as of January 1, 2003. As of December 31, 2024, The Lima Stock Exchange had a share capital of S/132,893,960 divided into 182,092,340 shares with a par value S/0.73 each, fully subscribed and paid. As of December 31, 2024, the Lima Stock Exchange had 124 shareholders.

 

Trading on the Lima Stock Exchange is primarily done on an electronic trading system that became operational in August 1995. From the first Monday of November through the second Sunday of March of each year, trading hours are Monday through Friday (except holidays) as follows: 8:20 a.m.-8:30 a.m. (pre-market ordering); 8:30 a.m.-2:55 p.m. (trading); 2:55 p.m.-3:00 p.m. (after-market sales); and 3:00 p.m.-3:10 p.m. (after-market trading). At all other times, trading hours are from Monday to Friday (except holidays) as follows: 9:00 a.m.-9:30 a.m. (pre-market ordering); 9:30 a.m.-3:55 p.m. (trading); 3:55 p.m.-4:00 p.m. (after-market sales); and 4:00 p.m.-4:10 p.m. (after-market trading).

 

Transactions during the electronic sessions are executed through brokerage firms and stock brokers on behalf of their clients. Brokers submit orders in the order in which they are received. The orders must specify the type of security as well as the amount and price of the proposed sale or purchase. In order to control price volatility, for Peruvian companies there are volatility auctions for variations of +/- 7% during trading session and +/- 4% during the last half-hour of continuous trading, when a stock reaches the 15% limit there is an auction and a consequent price formation. For non-Peruvian companies there is no limit because it is the price in the foreign market the main reference.

 

Regulation of the Peruvian Securities Market

 

The Securities Market Law regulates certain securities matters, such as transparency and disclosure, corporate takeovers, capital market instruments and operations, the securities markets and broker-dealers, and credit-rating agencies. In 1996, the Peruvian Securities Commission, “Superintendencia del Mercado de Valores – SMV” , formerly known as the National Supervisory Commission for Securities and Companies (Comisión Nacional Supervisora de Empresas y Valores, or “CONASEV”), was given additional responsibilities relating to the supervision, regulation and development of the securities market, while the Lima Stock Exchange was granted the status of a self-regulatory organization. Additionally, a unified system of guarantees and capital requirements was established for the Lima Stock Exchange.

 

Pursuant to Law No. 29782, published in the Peruvian Official Gazette, El Peruano, on July 28, 2011, the Peruvian Securities Commission is a governmental entity reporting to Peru’s Ministry of Economy and Finance with functional, administrative, economic, technical and budgetary autonomy.

 

The Peruvian Securities Commission is governed by the Superintendent and a five board-members confirmed by the Superintendent (who acts as President of the board) and four members appointed by the Peruvian Executive Power (one suggested by the Ministry of Economy and Finance, one suggested by the BCRP, one suggested by the Peruvian Superintendence of Banking, Insurance and Private Pension Funds and one independent member). The Peruvian Securities Commission has broad regulatory powers, including reviewing, promoting, and making rules regarding the securities market, supervising its participants, and approving the registration of public offerings of securities.

 

 

The Peruvian Securities Commission supervises the securities markets and the dissemination of information to investors. It also (i) governs the operations of the Public Registry of Securities, (ii) regulates mutual funds, publicly placed investment funds and their respective management companies and broker-dealers, (iii) monitors compliance with accounting regulations by companies under its supervision as well as the accuracy of financial statements and (iv) registers and supervises auditors who provide accounting services to those companies registered with the Peruvian Securities Commission.

 

Pursuant to the Securities Market Law, broker-dealers must maintain a guarantee fund. This guarantee fund must be managed by an entity supervised by the Peruvian Securities Commission. Contributions to the guarantee fund must be made by the 25 broker-dealers that are members of the Lima Stock Exchange and are based on the volume traded over the exchange. In addition to the guarantee fund managed, each broker-dealer is required to maintain a guarantee in favor of the Peruvian Securities Commission to guarantee any liability that broker-dealers may have with respect to their clients. Such guarantees are generally established through letters of credit issued by local banks.

 

Disclosure Obligations

 

Issuers of securities registered with the Peruvian Securities Commission are required to disclose material information relating to the issuer. Pursuant to the Securities Market Law and relevant regulations enacted thereunder, all material information in connection with the issuer of registered securities (such as our common shares and investment shares), its activities or securities issued or secured by such issuer which may influence the liquidity or price of such securities must be disclosed. Accordingly, issuers must file with the Peruvian Securities Commission mainly two types of information: (a) financial information, including interim unaudited financial statements on a quarterly basis (which are not required to be subject to limited review), and annual audited consolidated financial statements on an annual basis, and (b) material information relating to the issuer and its activities that may significantly affect the price, offering or negotiation of the issued securities, and in general, all the information that may be relevant for investors to be able to make investment decisions.

 

In order to comply with the foregoing disclosure obligations, issuers must disclose reaffirmation to the Peruvian Securities Commission and, if the securities are listed, with the Lima Stock Exchange as soon as practicable but not later than one business day after having become aware of such information.

 

D.

Selling Shareholders

 

Not applicable.

 

E.

Dilution

 

Not applicable.

 

F.

Expenses of the Issue

 

Not applicable.

 

ITEM 10. ADDITIONAL INFORMATION

 

A.

Share Capital

 

Not applicable.

 

 

 

B.

Memorandum and Articles of Association

 

Set forth below is certain information relating to our share capital, including brief summaries of the material provisions of our by-laws, Peruvian corporate law and certain related laws and regulations of Peru, all as in effect as of the date hereof.

 

General

 

We are a publicly held corporation under Peruvian Corporate law registered with the Public Registry of Corporations in Lima. We are currently listed on the Lima Stock Exchange.

 

The second article of our by-laws provides that our principal corporate purpose is mining and the production and sale of cement, quicklime and other construction materials in Peru and internationally.

 

We have common shares and investment shares.

 

See “Item 6. Directors, Senior Management and Employees—A. Directors and Senior Management” for information regarding our Board of Directors.

 

Common Shares

 

Common shares represent 100% of our voting shares. As of March 31, 2025, 423,868,449 of our common shares were outstanding. As of March 31, 2025, there were 34,114 owners of record of our common shares (considering the ADSs listed in the New York Stock Exchange are held by one registered owner). Our common shares have a par value of S/1.00 per share and have been fully subscribed and are fully paid. Our common shares are registered in the Securities Public Registry of the Peruvian Securities Commission and are listed on the Lima Stock Exchange.

 

Investment Shares

 

As of March 31, 2025, 4,238,397 of our investment shares were outstanding excluding 36,040,497 investment shares that were held in treasury. Investment shares have no voting rights and are not, under Peruvian law and accounting regulations, characterized as share capital. However, investment shares are still considered part of a company’s equity. As of March 31, 2025, there were 530 owners of record of our investment shares. Our investment shares have a par value of S/1.00 per share and have been fully subscribed and are fully paid. Our investment shares are registered in the Securities Public Registry of the Peruvian Securities Commission and are listed on the Lima Stock Exchange.

 

Shareholders’ Liability

 

Under Peruvian Corporate Law, holders of our common shares cannot vote on matters with respect to which they have a conflict of interest.

 

Under Article 133 of the Peruvian Corporate Law, a shareholder must abstain from voting if such shareholder has a conflict of interest. A resolution approved in disregard of this provision may be challenged under Article 139 of the Peruvian Corporate Law and any shareholder that participated in the determination in breach of this provision, if such shareholder’s vote was key in attaining the required majority, may be held liable individually, or jointly with any other shareholder voting in breach of the provision.

 

Redemption and Rights of Withdrawal

 

Under Article 200 of the Peruvian Corporate Law, holders of our common shares have redemption rights if: (i) we change our corporate purpose; (ii) a change occurs in the place of organization to a foreign country; or (iii) any transformation, merger or significant spin-off occurs with respect to our company.

 

 

Preemptive and Accretion Rights

 

If we increase our share capital, holders of our common shares and investment shares have the right to subscribe to new common shares and investment shares, respectively, on a pro rata basis. Holders of common shares have preemptive rights in order to maintain their share interest in our share capital, unless the capital increase (i) results from a conversion of debt to common shares; (ii) is approved by shareholders representing at least 40% of the subscribed voting shares provided that the capital increase does not favor, directly or indirectly, certain shareholders to the detriment of others; and (iii) results from a corporate reorganization. Holders of investment shares have preemptive rights to maintain their proportional ownership in our share capital.

 

Shareholders who are in default of any payments relating to a capital call may not exercise their preemptive rights.

 

Preemptive rights are exercised in two rounds. During the first round, shareholders may subscribe to the new shares on a pro rata basis. During the second round, shareholders who participated in the first round may subscribe to any remaining shares on a pro rata basis up to the amount of shares such shareholders subscribed for in the first round. The first round must remain open for at least 15 business days. The second round must remain open for at least three business days.

 

Voting Rights and Dividends

 

Common Shares

 

Holders of common shares are entitled to one vote per share, with the exception of the election of the board of directors, where each holder is entitled to one vote per share per nominee. Each holder’s votes may be cast for a single nominee or distributed among the nominees at the holder’s discretion. To that effect, each of our common shares gives the holder the rights to as many votes as there are directors to be elected. Shareholders may pool votes in favor of one person or distribute them among various persons. Those candidates for the board who receive the most votes are elected directors. Holders of common shares may attend and vote at shareholders’ meetings either in person or through a proxy.

 

Holders of common shares have the right to participate in the distribution of dividends and shareholder equity resulting from liquidation. Our by-laws do not establish a maximum time limit for the payment of the dividends. However, according to Article 232 of the Peruvian Corporate law, the right to collect past-due dividends in the case of companies that are publicly held companies, such as ours, expires 10 years after the date on which the dividend payment was due.

 

Our share capital may be increased by a decision of holders of common shares at a shareholders’ meeting. Capital reductions may be voluntary or mandatory and must be approved by holders of common shares at a shareholders’ meeting. Capital reductions are mandatory when accumulated losses exceed 50% of the capital and to the extent such accumulated losses are not offset by accumulated earnings and capital increases within the following fiscal year. Capital increases and reductions must be communicated to the Peruvian Securities Commission, the Lima Stock Exchange and the SUNAT. Voluntary capital reductions must also be published in the official gazette El Peruano and in a widely circulated newspaper in the city in which we are located.

 

Investment Shares

 

Under Peruvian Corporate Law, investment shares do not represent share capital. Accordingly, our balance sheet reflects the investment shares as a separate account from our share capital. Holders of investment shares are neither entitled neither to vote nor to participate in shareholders’ meetings. However, investment shares confer upon the holders thereof the right to participate in the dividends distributed according to their par value, in the same manner as common shares. Investment shares also confer to the holders thereof the preemptive right to (i) maintain the current proportion of the investment shares in the case of a capital increase through new contributions; (ii) increase the number of investment shares upon capitalization of retained earnings, revaluation surplus or other reserves that do not represent cash contributions; (iii) participate in the distribution of assets resulting from a liquidation in the same manner as common shares; and, (iv) redeem the investment shares in case of a merger and/or change of business activity.

 

 

Liquidation Rights

 

If we are liquidated, our shareholders have the right to receive net assets resulting from the liquidation, after we comply with our obligation to pay all our creditors and after discounting any existing dividend liabilities. For this reason, we cannot assure that we will be able to reimburse 100% of the book value of the common shares and investment shares in case of bankruptcy or liquidation.

 

Ordinary and Extraordinary Meetings

 

Pursuant to Peruvian Corporate Law and our by-laws, the annual shareholders’ meeting must be held during the three-month period after the end of each fiscal year. Additional shareholders’ meetings may be held during the year. Because we are a publicly held corporation, we are subject to the special control of the Peruvian Securities Commission, as provided in Article 253 of the Peruvian Corporate Law. If we do not hold the annual shareholders’ meeting during the three-month period after the end of each fiscal year or any other shareholders’ meeting required by our by-laws, a public notary or a competent judge shall call for such a meeting at the request of at least one shareholder of the common shares. Such meeting will take place within a reasonable period of time.

 

Other shareholders’ meetings are convened by the board of directors when deemed convenient by our company or when it is requested by the holders of at least 20% of our common shares. If, at the request of holders of 20% of the common shares, the shareholders’ meeting is not convened by the board of directors within 15 business days of the receipt of such request, or the board expressly or implicitly refuses to convene the shareholders’ meeting, a public notary or a competent judge will call pursuant to Law No. 29560 for such meeting at the request of holders of at least 20% of our common shares. If a public notary or competent judge calls for a shareholders’ meeting, the place, time and hour of the meeting, the agenda and the person who will preside shall be indicated on the meeting notice. If the meeting called is other than the annual shareholders’ meeting or a shareholders’ meeting required by the Peruvian Corporate Law or the by-laws, the agenda will contain those matters requested by the shareholders who requested the meeting.

 

Holders of investment shares have no right to request the board to call a shareholders’ meeting.

 

Notices of Meetings

 

Since we are a publicly held corporation, notice of shareholders’ meetings must be given by publication of a notice. The publication shall occur at least 25 days prior to any shareholders’ meeting in the Peruvian Official Gazette, El Peruano, and in a widely circulated newspaper in the city in which we are located. The notice requirement may be waived at the shareholders’ meeting by agreement of the holders of 100% of the outstanding common shares.

 

Quorum and Voting Requirements

 

According to Article 25 of our by-laws and Article 257 of the Peruvian Corporate Law, shareholders’ meetings called for the purpose of considering a capital increase or decrease, the issuance of obligations, a change in the by-laws, the sale in a single act of assets with an accounting value that exceeds 50% of our share capital, a merger, division, reorganization, transformation or dissolution, are subject to a first, second and third quorum call, each of the second and third quorum call to occur upon the failure of the preceding one. A quorum for the first call requires the presence of shareholders holding 50% of our total common shares. For the second call, the presence of shareholders holding at least 25% of our total common shares is adequate, while for the third call there is no quorum requirement. These decisions require the approval of the majority of the common shares represented at the shareholders’ meeting. Shareholders’ meetings convened to consider all other matters are subject to a first and second quorum call, the second quorum call to occur upon the failure of the first quorum.

 

In accordance with Peruvian Corporate Law, only those holders of common shares whose names are registered in our stock ledger not less than 10 days in advance of a meeting will be entitled to attend the shareholders’ meeting and to exercise their rights.

 

 

Limitations on the Rights of Non-residents or Foreign Shareholders

 

There are no limitations under our by-laws or Peruvian Corporate Law on the rights of nonresidents or foreign shareholders to own securities or exercise voting rights with respect to our securities.

 

Disclosure of Shareholdings and Tender Offer Regulations

 

Disclosure of Shareholdings

 

There are no provisions in our by-laws governing the ownership threshold above which share ownership must be disclosed.

 

However, according to Article 10 of CONASEV Resolution No. 090-2005-EF-94.10, as amended, we must inform the Peruvian Securities Commission of the members of our economic group and a list of our holders of common shares owning more than a 4% share interest, as well as any change to such information.

 

Tender Offer Regulations

 

Peruvian security regulations include mandatory takeover rules applicable to the acquisition of control of a listed company.

 

Subject to certain conditions, such regulations generally establish the obligation to make a tender offer when a person or group of persons acquires a relevant interest in a listed company. According to Peruvian law, a person acquires a relevant interest in a listed company when such person (a) holds or has the power to exercise directly or indirectly 25%, 50% or 60% of the voting rights in a listed company, or (b) has the power to appoint or remove the majority of the board members or to amend its by-laws.

 

In general, the tender offer must be launched prior to the acquisition of the relevant interest. The tender offer may be launched after the “relevant interest” is acquired if it is acquired (a) by means of an indirect transaction, (b) as a consequence of a public sale offer, or (c) in no more than four transactions within a three-year period.

 

This mandatory procedure has the effect of alerting other shareholders and the market that an individual or financial group has acquired a significant percentage of a company’s voting shares, and gives other shareholders the opportunity to sell their shares at the price offered by the purchaser. The purchaser is required to launch a tender offer unless: (a) shareholders representing 100% of the voting rights consent in writing, (b) voting shares are acquired by a depositary in order to subsequently issue ADSs, or (c) voting shares are acquired pursuant to the exercise of preemptive rights.

 

Changes in Capital

 

Our by-laws do not establish special conditions to increase or reduce our share capital beyond what is required under Peruvian Corporate Law.

 

Anti-Takeover Provisions

 

Our by-laws do not contain any provision that would have the effect of delaying, deferring or preventing a change of control. However, acquisitions of shares of our capital stock that involve a change of control may be subject to Peruvian securities and exchange regulations (Ley de Mercado de Valores y Reglamento de Oferta Pública de Adquisición y de Compra de Valores por Exclusión) applicable to tender offers.

 

Form and Transfer

 

Common shares and investment shares may be either physical share certificates in registered form or book-entry securities in the CAVALI S.A. ICLV book-entry settlement system, also in registered form.

 

Furthermore, the Peruvian Corporate Law forbids publicly held corporations, such as us, from including in their by-laws stipulations limiting the transfer of their shares or restraining their trading in other ways. In addition, pursuant to our by-laws, we cannot recognize a shareholders’ agreement that contemplates limitations, restrictions or preferential rights on the transfer of shares, even if such an agreement is recorded in our stock ledger (matrícula de acciones) or in CAVALI S.A. ICLV.

 

 

C.

Material Contracts

 

On December 31, 2007, we entered into a contract for the general management and provision of services with ASPI, pursuant to which we provide legal and corporate services to it. See “Item 7. Major Shareholders and Related Party Transactions—A. Related Party Transactions.”

 

On February 1, 2008, we entered into a surface rights agreement with Compañía Minera Ares S.A.C., pursuant to which we lease a plot of land adjacent to our headquarters to our affiliate, Compañía Minera Ares S.A.C., a subsidiary of Hochschild Mining plc. See “Item 7. Major Shareholders and Related Party Transactions—A. Related Party Transactions.”

 

On June 30, 2008, we entered into a property lease agreement with ASPI pursuant to which we lease part of our headquarters as office space to ASPI. See “Item 7. Major Shareholders and Related Party Transactions—A. Related Party Transactions.”

 

On June 3, 2010, we entered into a long-term electricity supply agreement with Electroperú, a government-owned company, which was set to expire in July 2020, to serve the electricity requirements of our Pacasmayo facility. Electroperú has agreed to provide us with sufficient energy to operate our Pacasmayo facility (later expanded to include our Piura facility) at pre-determined maximum amounts during the term of the contract. Payments for electricity are based on a formula that takes into consideration our energy consumption and certain market variables, such as the U.S. purchase price index, the global price of oil, the local price of natural gas and the import price of bituminous coal. We entered into an addendum to this agreement, effective February 1, 2016, which extended the term of the agreement until December 31, 2025, reduced the prices for the 2016-2020 period and established new prices for the 2020-2026 period. See “Item 4. Information on the Company—A. History and Development of the Company—Raw Materials and Energy Sources.” We subsequently entered into another addendum to extend this agreement until May 31, 2026.

 

On February 8, 2013, we issued US$300,000,000 aggregate principal amount of our 4.50% Senior Notes due 2023, in our inaugural international bond offering, pursuant to an indenture. A portion of the proceeds were used to prepay amounts outstanding our secured loan agreement with BBVA Banco Continental, and the remaining proceeds were used to cover a portion of the capital expenditures in connection with the construction and development of the new Piura plant and our cement business. We prepaid a portion of the Senior Notes in a cash tender offer in 2018, and we repaid the remaining amount upon maturity in February 2023. See “Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources.”

 

On August 6, 2021, we established the conditions of a medium-term corporate loan in the form of a “Club Deal” with Banco de Crédito del Perú S.A. and Scotiabank Perú S.A.A. The loan amounted to S / 860,000,000 that will allow the payment of all the financial obligations that the Company maintains with maturity until February 2023 and will be disbursed based on the maturity of each of them.

 

On November 29, 2021, we entered into a supply contract with FLSmidth A/S for the supply of the equipment and engineering for a new 2000 tons per day pyro line for our Pacasmayo Plant for a total amount of €19,254,150.

 

On February 16, 2022, we entered into a construction and erection contract with Ingeniería y Construcción Sigdo Koppers Perú S.A.C. for the construction and erection required for our new 2000 tons per day pyro line for our Pacasmayo plant for a referential amount of S/ 66,083,227.

 

 

D.

Exchange Controls

 

Since August 1990, there have been no exchange controls in Peru and all foreign exchange transactions are based on free market exchange rates. Prior to August 1990, the Peruvian foreign exchange market consisted of several alternative exchange rates. Additionally, during the 1990s, the Peruvian currency experienced a significant number of large devaluations, and Peru has consequently adopted, and operated under, various exchange rate control practices and exchange rate determination policies, ranging from strict control over exchange rates to market determination of rates. Current Peruvian regulations on foreign investment allow the foreign holders of equity shares of Peruvian companies to receive and repatriate 100 percent of the cash dividends distributed by such companies. Such investors are allowed to purchase foreign exchange at free market currency rates through any member of the Peruvian banking system and transfer such foreign currency outside Peru without restriction.

 

E.

Taxation

 

The following summary contains a description of certain Peruvian and United States federal income tax consequences of the acquisition, ownership and disposition of common shares or ADSs, but it does not purport to be a comprehensive description of all the tax considerations that may be relevant to a decision to purchase common shares or ADSs. The summary is based upon the tax laws of Peru and regulations thereunder and on the tax laws of the United States and regulations thereunder as in effect on the date hereof, which are subject to change.

 

Prospective holders of common shares or ADSs should consult their own tax advisors as to the tax consequences of the acquisition, ownership and disposition of common shares or ADSs in their particular circumstances.

 

Peruvian Tax Considerations

 

The following are the principal tax consequences of ownership of common shares or ADSs by non-resident individuals or entities (“Non-Peruvian Holders”) as of the date hereof. Legislative, judicial or administrative changes or interpretations may, however, be forthcoming. Any such changes or interpretations could affect the tax consequences to holders of common shares or ADSs and could alter or modify the conclusions set forth herein. This summary is not intended to be a comprehensive description of all the tax consequences of acquisition, ownership and disposition of common shares or ADSs and does not describe any tax consequences arising under the laws of any taxing jurisdiction other than Peru or applicable to a resident of Peru or to a person with a permanent establishment in Peru.

 

For purposes of Peruvian taxation:

 

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individuals are residents of Peru, if they are Peruvian nationals who have established their principal place of residence in Peru or if they are foreign nationals with a permanence in Peru of 183 days in any 12-month period (the condition of Peruvian resident can only be acquired as of the 1st of January of the year following the fulfillment of residence conditions); and

 

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legal entities are residents of Peru if they are established or incorporated in Peru.

 

Peruvian Income Tax Rate

 

The Peruvian income tax rate is 29.5% .

 

Cash Dividends and Other Distributions

 

Cash dividends paid with respect to common shares and amounts distributed with respect to ADSs are currently subject to a Peruvian withholding tax, at a rate of 5.0% of the dividend paid. As a general rule, the distribution of additional common shares representing profits, distribution of shares which differ from the distribution of earnings or profits, as well as the distribution of preemptive rights with respect to common shares, which are carried out as part of a pro rata distribution to shareholders, will not be subject to Peruvian tax or withholding taxes.

 

 

Capital Gains

 

Pursuant to Article 6 of the Peruvian income tax law, individuals and entities resident in Peru are subject to Peruvian income tax on their worldwide income while Non-Peruvian Holders are subject to Peruvian income tax on Peruvian source income only.

 

The general rule of the Law of Income Tax in Peru provides that income derived from the disposal of securities issued by Peruvian entities is considered Peruvian source income and is therefore subject to income tax. Peruvian income tax law also provides that capital gains resulting from the disposal of ADSs that represent shares issued by Peruvian entities are considered Peruvian source income and therefore also subject to Peruvian income tax. Peruvian income tax law also provides that taxable income resulting from the disposal of securities is determined by the difference between the sale price of the securities at market value and the tax basis.

 

Notwithstanding the foregoing, capital gains resulting from the disposal of ADSs or beneficial interest in ADSs that represent shares issued by a Peruvian entity are not considered Peruvian source income as long as the ADSs issued by the foreign depositary are held in the name of a nominee and such ADSs are not transferred to a third party as a result of the disposal of the ADSs.

 

In the event ADSs are exchanged into common shares and such common shares are disposed of, capital gains resulting therefrom will be subject to an income tax rate of either 5% or 30%, depending on where the transaction takes place. If the transaction is consummated in Peru, the income tax rate is 5%; if the transaction is consummated outside of Peru, capital gains are taxed at a rate of 30%. Peruvian income tax law regulations have stated that transactions are deemed to be consummated in Peru if the common shares are transferred through the Lima Stock Exchange. Any gain resulting from the conversion of ADSs into common shares or common shares into ADSs will not be subject to taxation in Peru.

 

Any Non-Peruvian Holder who acquires common shares will have the following tax basis: (i) for common shares purchased by the transferor, the acquisition price paid for the shares; (ii) for common shares received by the transferor as a result of a share capital increase because of a capitalization of net profits, the face or nominal value of such common shares; (iii) for other common shares received free of any payment, the stock market value of such shares if listed on the Lima Stock Exchange or, if not, the face or nominal value of such common shares and (iv) for common shares of the same type acquired at different opportunities and at different values, the tax basis will be the weighted average cost. In cases where common shares are sold by Non-Peruvian Holders outside the Lima Stock Exchange, the tax basis must be certified by the Peruvian tax administration prior to the time payment is made to the transferor; otherwise it would not be possible to deduct the tax basis and a 30% Peruvian income tax would apply to the total sale price. Under Peruvian income tax law, tax basis certification is granted by the tax authorities within 30 days from the date of the application (which application must contain supporting evidence with respect to the tax basis) is made by the transferor. If the tax authorities do not respond within such 30 day period, the tax basis presented for approval by the transferor is deemed automatically approved.

 

On December 31, 2010, Law No. 29645 was enacted and took effect from January 1, 2011. This law states that in transactions relating to Peruvian securities through the Lima Stock Exchange, CAVALI S.A. ICLV (the Peruvian clearing house) will act as withholding agent to the extent that such transactions are settled in cash through CAVALI’s account (liquidación en efectivo). The implementing regulations of Law No. 29645 enacted on July 9, 2011 provide that CAVALI began acting as a withholding agent as from November 1, 2011. As a result, while such regulations do not apply to securities transferred though the Lima Stock Exchange by a Non-Peruvian Holder, such transferor must still self-assess and pay its income tax liability directly to Peruvian tax authorities within the first 12 working days following the month in which Peruvian source income was earned. With respect to transactions of Peruvian securities conducted through the Lima Stock Exchange that are settled directly without CAVALI’s intervention (liquidación directa), Non-Peruvian Holders are required to self-assess and pay income taxes directly to the Peruvian tax authorities within the first 12 working days following the month in which income from a Peruvian source was earned. Finally, if the purchaser is resident in Peru and the sale is not performed through the Lima Stock Exchange, the purchaser will act as withholding agent.

 

 

Other Considerations

 

No Peruvian estate or gift taxes are imposed on the gratuitous transfer of ADSs or common shares. No stamp, transfer or similar tax applies to any transfer of ADSs or common shares, except for commissions payable by seller and buyer to the Lima Stock Exchange (0.15% of value sold), fees payable to the Peruvian Securities Commission (0.05% of value sold), brokers’ fees (about 0.05% to 1% of value sold) and Value Added Tax (at the rate of 18%) on commissions and fees. Any investor who sells its common shares on the Lima Stock Exchange will incur these fees and taxes upon purchase and sale of the common shares.

 

United States Federal Income Tax Considerations

 

The following are the material United States federal income tax consequences as of the date hereof to a United States Holder (as defined below) of the ownership and disposition of ADSs and our common shares. This summary deals only with ADSs and common shares held as capital assets (generally, property held for investment). As used herein, the term “United States Holder” means a beneficial owner of ADSs or common shares that is for United States federal income tax purposes:

 

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an individual who is a citizen or resident of the United States;

 

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a corporation (or other entity treated as a corporation for United States federal income tax purposes) created or organized in or under the laws of the United States, any state thereof or the District of Columbia;

 

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an estate the income of which is subject to United States federal income taxation regardless of its source; or

 

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a trust if it (1) is subject to the primary supervision of a court within the United States and one or more United States persons have the authority to control all substantial decisions of the trust, or (2) has a valid election in effect under applicable United States Treasury regulations to be treated as a United States person.

 

 

This summary does not represent a detailed description of the United States federal income tax consequences applicable to you if you are subject to special treatment under the United States federal income tax laws, including if you are:

 

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a dealer or broker in securities or currencies;

 

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a financial institution;

 

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a regulated investment company;

 

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a real estate investment trust;

 

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an insurance company;

 

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a tax-exempt organization;

 

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a person holding ADSs or our common shares as part of a hedging, integrated or conversion transaction, a constructive sale or a straddle;

 

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a trader in securities that has elected the mark-to-market method of accounting for your securities;

 

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a person liable for alternative minimum tax;

 

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a person who owns or is deemed to own 10% or more of our stock (by vote or value);

 

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a partnership or other pass-through entity for United States federal income tax purposes;

 

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a person required to accelerate the recognition of any item of gross income with respect to ADSs or our common shares as a result of such income being recognized on an applicable financial statement; or

 

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a person whose “functional currency” is not the U.S. dollar.

 

The discussion below is based upon the provisions of the U.S. Internal Revenue Code of 1986, as amended (the “Code”), and regulations, rulings and judicial decisions thereunder as of the date hereof, and such authorities may be replaced, revoked or modified so as to result in United States federal income tax consequences different from those discussed below. There is currently no income tax treaty between the United States and Peru that would provide for United States federal income tax consequences different from those discussed below. In addition, this summary assumes that the deposit agreement, and all other related agreements, will be performed in accordance with their terms.

 

If a partnership (or other entity or arrangement treated as a partnership for United States federal income tax purposes) holds ADSs or our common shares, the tax treatment of a partner in the partnership will generally depend upon the status of the partner and the activities of the partnership. If you are a partnership or a partner of a partnership holding ADSs or our common shares, you should consult your tax advisors.

 

This summary does not contain a detailed description of all the United States federal income tax consequences to you in light of your particular circumstances and does not address the Medicare tax on net investment income, United States federal estate and gift taxes or the effects of any state, local or non-United States tax laws. If you are considering the acquisition of ADSs or our common shares, you should consult your own tax advisors concerning the United States federal income tax consequences to you in light of your particular situation as well as any consequences arising under other United States federal tax laws and the laws of any other taxing jurisdiction.

 

 

ADSs

 

If you hold ADSs, for United States federal income tax purposes, you generally will be treated as the owner of the underlying common shares that are represented by such ADSs. Accordingly, deposits or withdrawals of common shares for ADSs will not be subject to United States federal income tax.

 

Taxation of Dividends

 

The gross amount of distributions on the ADSs or common shares (including amounts withheld to reflect Peruvian withholding taxes) will be taxable as dividends, to the extent paid out of our current or accumulated earnings and profits, as determined under United States federal income tax principles.

 

To the extent that the amount of any distribution (including amounts withheld to reflect Peruvian withholding taxes) exceeds our current and accumulated earnings and profits for a taxable year, as determined under United States federal income tax principles, the distribution will first be treated as a tax-free return of capital, causing a reduction in the adjusted basis of the ADSs or common shares, and the balance in excess of adjusted basis will be taxed as capital gain recognized on a sale or exchange. However, we do not expect to keep earnings and profits in accordance with United States federal income tax principles. Therefore, you should expect that a distribution will generally be reported as a dividend. Such dividends (including withheld taxes) will be includable in your gross income as ordinary income on the day actually or constructively received by you, in the case of the common shares, or by the depositary, in the case of ADSs. Such dividends will not be eligible for the dividends received deduction generally allowed to corporations under the Code.

 

Subject to applicable limitations (including a minimum holding period requirement), dividends received by non-corporate United States Holders from a qualified foreign corporation may be treated as “qualified dividend income” that is subject to reduced rates of taxation. A non-United States corporation is generally treated as a qualified foreign corporation with respect to dividends paid by that corporation on common shares (or ADSs backed by such shares) that are readily tradable on an established securities market in the United States. United States Treasury Department guidance indicates that the ADSs, which are listed on the New York Stock Exchange, but not our common shares, are readily tradable on an established securities market in the United States. Thus, we believe that dividends we pay on our common shares that are represented by ADSs, but not our common shares that are not so represented, will be eligible for the reduced tax rates. There can be no assurance, however, that the ADSs will be considered readily tradable on an established securities market in the United States in later years. You should consult your own tax advisors regarding the application of these rules given your circumstances.

 

The amount of any dividend paid in soles will equal the U.S. dollar value of the soles received, calculated by reference to the exchange rate in effect on the date the dividend is actually or constructively received by you, in the case of the common shares, or by the depositary, in the case of ADSs, regardless of whether the soles are converted into U.S. dollars at that time. If the soles received as a dividend are converted into U.S. dollars on the date they are received, you generally will not be required to recognize foreign currency gain or loss in respect of the dividend income. If the soles received as a dividend are not converted into U.S. dollars on the date of receipt, you will have a tax basis in the soles equal to their U.S. dollar value on the date of receipt. Any gain or loss realized on a subsequent conversion or other disposition of the soles will be treated as United States source ordinary income or loss.

 

Subject to certain conditions and limitations (including a minimum holding period requirement), Peruvian withholding taxes on dividends may be treated as foreign taxes eligible for credit against your United States federal income tax liability. For purposes of calculating the foreign tax credit, dividends paid on the ADSs or common shares will be treated as foreign source income and will generally constitute passive category income. However, Treasury regulations addressing foreign tax credits (the “Foreign Tax Credit Regulations”) impose additional requirements for foreign taxes to be eligible for a foreign tax credit, and there can be no assurance that those requirements will be satisfied. The United States Treasury Department and the Internal Revenue Service (the “IRS”) are considering proposing amendments to the Foreign Tax Credit Regulations. In addition, recent notices from the IRS provide temporary relief by allowing taxpayers that comply with applicable requirements to apply many aspects of the foreign tax credit regulations as they previously existed (before the release of the current Foreign Tax Credit Regulations) for taxable years ending before the date that a notice or other guidance withdrawing or modifying the temporary relief is issued (or any later date specified in such notice or other guidance). Instead of claiming a foreign tax credit, you may be able to deduct Peruvian withholding taxes on dividends in computing your taxable income, subject to generally applicable limitations under United States law (including that a United States Holder is not eligible for a deduction for otherwise creditable foreign income taxes paid or accrued in a taxable year if such United States Holder claims a foreign tax credit for any foreign income taxes paid or accrued in the same taxable year). The rules governing the foreign tax credit and deductions for foreign taxes are complex. You are urged to consult your tax advisors regarding the availability of a foreign tax credit or a deduction under your particular circumstances.

 

 

Distributions of ADSs, common shares or rights to subscribe for ADSs or common shares that are received as part of a pro rata distribution to all of our shareholders generally will not be subject to United States federal income tax.

 

Taxation of Capital Gains

 

For United States federal income tax purposes, you will recognize taxable gain or loss on any sale, exchange or other taxable disposition of ADSs or common shares in an amount equal to the difference between the amount realized for the ADSs or common shares and your tax basis in the ADSs or common shares, both as determined in U.S. dollars. Such gain or loss will generally be capital gain or loss. Capital gains of non-corporate United States Holders derived with respect to capital assets held for more than one year are eligible for reduced rates of taxation. The deductibility of capital losses is subject to limitations.

 

If Peruvian income tax is withheld on the sale, exchange or other taxable disposition of ADSs or our common shares, your amount realized will include the gross amount of the proceeds of that disposition before deduction of the Peruvian income tax. Any gain or loss recognized by you will generally be treated as United States source gain or loss. Consequently, in the case of gain from the disposition of ADSs or common shares that is subject to Peruvian income tax, you may not be able to benefit from a foreign tax credit for that Peruvian income tax (i.e., because the gain from the disposition would be United States source), unless you can apply the credit (subject to applicable limitations) against United States federal income tax payable on other income from foreign sources. However, pursuant to the Foreign Tax Credit Regulations, any such Peruvian income tax would generally not be a foreign income tax eligible for a foreign tax credit (regardless of any other income that you may have that is from foreign sources). In such case, the non-creditable Peruvian income tax may reduce the amount realized on the sale, exchange or other taxable disposition of the ADSs or common shares. As discussed above, however, recent notices from the IRS provide temporary relief by allowing taxpayers that comply with applicable requirements to apply many aspects of the foreign tax credit regulations as they previously existed (before the release of the current Foreign Tax Credit Regulations) for taxable years ending before the date that a notice or other guidance withdrawing or modifying the temporary relief is issued (or any later date specified in such notice or other guidance). If a Peruvian income tax is imposed on the sale, exchange or other taxable disposition of the ADSs or common shares and you apply such temporary relief, such Peruvian income tax may be eligible for a foreign tax credit or deduction, subject to the applicable conditions and limitations. You are urged to consult your tax advisors regarding the tax consequences if Peruvian income tax is imposed on a disposition of ADSs or common shares, including the availability of a foreign tax credit or a deduction under your particular circumstances.

 

Passive Foreign Investment Company

 

We do not believe that we are, for United States federal income tax purposes, a passive foreign investment company (“PFIC”), and we expect to operate in such a manner so as not to become a PFIC. If, however, we are or become a PFIC, you could be subject to additional United States federal income taxes on gain recognized with respect to the ADSs or common shares and on certain distributions, plus an interest charge on certain taxes treated as having been deferred under the PFIC rules. Non-corporate United States Holders will not be eligible for reduced rates of taxation on any dividends received from us (as discussed above under “—Taxation of Dividends”) if we are a PFIC in the taxable year in which such dividends are paid or in the preceding taxable year.

 

Information Reporting and Backup Withholding

 

In general, information reporting will apply to dividends in respect of ADSs or our common shares and the proceeds from the sale, exchange or other taxable disposition of ADSs or our common shares that are paid to you within the United States (and in certain cases, outside the United States), unless you establish that you are an exempt recipient. Backup withholding may apply to such payments if you fail to provide a taxpayer identification number and a certification that you are not subject to backup withholding or if you fail to report in full dividend and interest income.

 

 

Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against your United States federal income tax liability provided the required information is furnished to the IRS in a timely manner.

 

The above description is not intended to constitute a complete analysis of all tax consequences relating to the ownership or disposition of ADSs or our common shares. You should consult your own tax advisors concerning the overall tax consequences to you, including the consequences under laws other than United States federal income tax laws, of an investment in ADSs or our common shares.

 

F.

Dividends and Paying Agents

 

Not applicable.

 

G.

Statement by Experts

 

Not applicable.

 

H.

Documents on Display

 

We make our filings in electronic form under the EDGAR filing system of the SEC. Our filings are available through the EDGAR system at www.sec.gov. In addition, our filings are available to the public over our website www.cementospacasmayo.com.pe. Such filings and other information on our website are not incorporated by reference in this annual report. You may request a copy of this filing, and any other report, at no cost, by writing to us at the following address or telephoning us:

 

Investor Relations Department
Calle La Colonia 150,
Urbanización El Vivero, Surco,
Lima, Peru
Tel.: + (511) 317-6000
E-mail: cbustamante@cpsaa.com.pe

 

I.

Subsidiary Information

 

See note 1 to our consolidated financial statements included in this annual report for a description of our subsidiaries.

 

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

For a description of our market risks, see note 31 to our consolidated financial statements included in this annual report.

 

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

 

A.

Debt Securities

 

Not applicable.

 

B.

Warrants and Rights

 

Not applicable.

 

 

C.

Other Securities

 

Not applicable.

 

D.

American Depositary Shares

 

Fees and expenses

 

JPMorgan Chase Bank, N.A., as depositary, pursuant to our Deposit Agreement, dated as of February 7, 2012, and the amendment dated December 4, 2020 (as so amended the “Deposit Agreement”), may charge each person to whom ADSs are issued, including, without limitation, issuances against deposits of common shares, issuances in respect of common share distributions, rights and other distributions, issuances pursuant to a stock dividend or stock split declared by us or issuances pursuant to a merger, exchange of securities or any other transaction or event affecting the ADSs or deposited securities, and each person surrendering ADSs for withdrawal of deposited securities or whose ADSs or American Depositary Receipts representing ADSs (“ADRs”) are cancelled or reduced for any other reason, US$5.00 for each 100 ADSs (or any portion thereof) issued, delivered, reduced, cancelled or surrendered, as the case may be. The depositary may sell (by public or private sale) sufficient securities and property received in respect of a common share distribution, rights and/or other distribution prior to such deposit to pay such charge.

 

The following additional charges shall be incurred by the ADR holders, by any party depositing or withdrawing common shares or by any party surrendering ADSs or to whom ADSs are issued (including, without limitation, issuance pursuant to a stock dividend or stock split declared by us or an exchange of stock regarding the ADRs or the deposited securities or a distribution of ADSs), whichever is applicable:

 

●

a fee of US$1.50 per ADR or ADRs for transfers of certificated or direct registration ADRs;

 

●

a fee of US$0.05 or less per ADS for any cash distribution made pursuant to the deposit agreement;

 

●

a fee of US$0.05 or less per ADS per calendar year (or portion thereof) for services performed by the depositary in administering the ADRs (which fee may be charged on a periodic basis during each calendar year and shall be assessed against holders of ADRs as of the record date or record dates set by the depositary during each calendar year and shall be payable in the manner described in the next succeeding provision);

 

●

reimbursement of such fees, charges and expenses as are incurred by the depositary and/or any of the depositary’s agents (including, without limitation, the custodian and expenses incurred on behalf of holders in connection with compliance with foreign exchange control regulations or any law or regulation relating to foreign investment) in connection with the servicing of the common shares or other deposited securities, the delivery of deposited securities or otherwise in connection with the depositary’s or its custodian’s compliance with applicable law, rule or regulation (which charge shall be assessed on a proportionate basis against holders as of the record date or dates set by the depositary and shall be payable at the sole discretion of the depositary by billing such holders or by deducting such charge from one or more cash dividends or other cash distributions);

 

●

a fee for the distribution of securities (or the sale of securities in connection with a distribution), such fee being in an amount equal to US$0.05 per ADS issuance fee for the execution and delivery of ADSs which would have been charged as a result of the deposit of such securities (treating all such securities as if they were common shares) but which securities or the net cash proceeds from the sale thereof are instead distributed by the depositary to those holders entitled thereto;

 

 

●

stock transfer or other taxes and other governmental charges;

 

●

cable and facsimile transmission and delivery charges incurred at your request in connection with the deposit or delivery of common shares;

 

●

transfer or registration fees for the registration of transfer of deposited securities on any applicable register in connection with the deposit or withdrawal of deposited securities; and

 

●

expenses of the depositary in connection with the conversion of foreign currency into U.S. dollars.

 

We will pay all other charges and expenses of the depositary and any agent of the depositary (except the custodian) pursuant to agreements from time to time between us and the depositary. The charges described above may be amended from time to time by agreement between us and the depositary.

 

Our depositary has agreed to reimburse us for certain expenses we incur that are related to establishment and maintenance of the ADR program, including investor relations expenses and exchange application and listing fees. The amounts of reimbursements available to us are not based upon the amounts of fees the depositary collects from investors. The depositary collects its fees for issuance and cancellation of ADSs directly from investors depositing common shares or surrendering ADSs for the purpose of withdrawal or from intermediaries acting on their behalf. The depositary collects fees for making distributions to investors by deducting those fees from the amounts distributed or by selling a portion of distributable property to pay the fees. The depositary may collect its annual fee for depositary services by deduction from cash distributions, or by directly billing investors, or by charging the book-entry system accounts of participants acting for them. The depositary will generally set off the amounts owing from distributions made to holders of ADSs. If, however, no distribution exists and payment owing is not timely received by the depositary, the depositary may refuse to provide any further services to holders that have not paid those fees and expenses owing until such fees and expenses have been paid. At the discretion of the depositary, all fees and charges owing under the deposit agreement are due in advance and/or when declared owing by the depositary.

 

The Deposit Agreement is incorporated by reference as Exhibit 2.2 to this annual report, and Amendment No. 1 thereto is incorporated by reference in this annual report as Exhibit 2.2A, and Amendment No. 2 thereto is incorporated by reference in this annual report as Exhibit 2.2B. We encourage you to review these documents carefully if you are a holder of ADRs.

 

 

PART II

 

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

 

Not applicable.

 

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

 

Not applicable.

 

ITEM 15. CONTROLS AND PROCEDURES

 

A.

Disclosure Controls and Procedures

 

As of the end of the period covered by this annual report, the Company’s management, with the participation of our Chief Executive Officer and Chief Financial Officer, performed an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the U.S. Securities Exchange Act of 1934, as amended  (the “Exchange Act”). Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including the Chief Executive Officer and the Chief Financial Officer, to allow timely decisions regarding required disclosures. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objective. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2024, the design and operation of our disclosure controls and procedures were effective at the reasonable assurance level.

 

B.

Management’s Annual Report on Internal Control Over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with generally accepted accounting principles.

 

Because of its inherent limitations, internal control over financial reporting may not necessarily prevent or detect some misstatements. It can only provide reasonable assurance regarding financial statement preparation and presentation. Also, projections of any evaluation of effectiveness for future periods are subject to the risk that controls may become inadequate because of changes in conditions or because the degree of compliance with the policies or procedures may deteriorate over time.

 

Management assessed the effectiveness of its internal control over financial reporting for the year ended December 31, 2024. The assessment was based on criteria established in the framework “Internal Controls—Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) (COSO). Based on this assessment, our management has concluded that as of December 31, 2024, our internal control over financial reporting was effective.

 

The effectiveness of internal control over financial reporting as of December 31, 2024, has been audited by Tanaka, Valdivia & Asociados SCRL, member firm of Ernst & Young Global Limited, an independent registered public accounting firm, as stated in their attestation report, which is included under “Item 15—Controls and Procedures —C. Attestation Report of Independent Registered Public Accounting Firm.”

 

 

C.

Attestation Report of Independent Registered Public Accounting Firm

 

To the Shareholders and the Board of Directors of

Cementos Pacasmayo S.A.A. and subsidiaries

 

Opinion on Internal Control over Financial Reporting

 

We have audited Cementos Pacasmayo S.A.A. and subsidiaries’ internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Cementos Pacasmayo S.A.A. and subsidiaries (the “Company”) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on the COSO criteria.

 

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated statements of financial position of the Company as of December 31, 2024 and 2023, the related consolidated statements of profit or loss, other comprehensive income or (loss), changes in equity, and cash flows for each of the three years in the period ended December 31, 2024, and the related notes and our report dated April 29, 2025, expressed an unqualified opinion thereon.

 

Basis for Opinion

 

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

 

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

 

Definition and Limitations of Internal Control Over Financial Reporting

 

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

/s/ Tanaka, Valdivia & Asociados Sociedad Civil de Responsabilidad Limitada

A member of Ernst & Young Global Limited

Lima, Peru

 

April 29, 2025

 

 

D.

Changes in Internal Control Over Financial Reporting

 

There have been no changes in our internal control over financial reporting identified in connection with the evaluation required under Rules 13a-15 or 15d-15 that occurred during the period covered by this annual report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

ITEM 16. [RESERVED]

 

ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT

 

Our Board of Directors has determined that Mr. Esteban Chong Leon, President of the audit committee, is a “financial expert,” as such term is defined in the SEC rules. We have determined that Ms. Ana Maria Botella, Mr. Venkat Krishnamurti and Mr. Esteban Chong Leon are independent under the standards of the New York Stock Exchange listing rules and Rule 10A-3 under the Exchange Act.

 

ITEM 16B. CODE OF ETHICS

 

We have adopted a code of ethics that applies to our directors, officers and employees. Our code of ethics is available on our website http://www.cementospacasmayo.com.pe. Information on our website is not incorporated by reference in this annual report.

 

If we make any substantive amendment to our code of ethics or if we grant any waivers, including any implicit waiver, from a provision of the code of ethics, we will disclose the nature of such amendment or waiver by filing a current report on a Form 6-K or in our subsequent annual report on Form 20-F to be filed with the SEC. During the year ended December 31, 2024, no such amendment was made nor did we grant any waiver to any provision of our code of ethics.

 

ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES

 

Audit and Non-Audit Fees

 

The following table presents the aggregate fees for professional services and other services rendered by our independent auditors, Tanaka, Valdivia y asociados, SCRL, member firm of Ernst & Young Global Limited, responsible for auditing the annual consolidated financial statements included in the annual report, during the fiscal years ended December 31, 2024, 2023 and 2022.

 

		Year Ended December 31,
(in thousands of S/)		2024				2023				2022
Audit fees			1,247				1,190				1,244
All other fees			8				117				45
Tax fees			294				206				497
Total fees			1,549				1,513				1,786

 

 

Audit fees in the above table are the aggregate fees billed and billable by our independent auditors in connection with the audit of our annual consolidated financial statements and review of our quarterly financial information.

 

Tax fees in the above table are fees billed relating to tax compliance services.

 

All other fees in the above table are fees billed relating to advisory services.

 

Audit Committee Pre-Approval Policies and Procedures

 

We have adopted pre-approval policies and procedures under which our audit committee is responsible for the oversight of the independent auditors and has established pre-approval procedures for the engagement of its independent registered public accounting firm for audit and non-audit services. Such services can only be contracted if they are approved by the audit committee, they comply with the restriction provided under applicable rules and they do not jeopardize the independence of our auditors.

 

ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

 

Not applicable.

 

ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

 

Not applicable.

 

ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT

 

Not applicable.

 

ITEM 16G. CORPORATE GOVERNANCE

 

We are a “foreign private issuer” within the meaning of the New York Stock Exchange corporate governance standards. Under New York Stock Exchange rules, a foreign private issuer may elect to comply with the practices of its home country and not to comply with certain corporate governance requirements applicable to U.S. companies with securities listed on the exchange.

 

We currently follow certain Peruvian practices concerning corporate governance and intend to continue to do so. There are significant differences in the Peruvian corporate governance practices as compared to those followed by United States domestic companies under the New York Stock Exchange’s listing standards.

 

The New York Stock Exchange listing standards provide that the board of directors of a U.S. listed company must have a majority of independent directors at the time the company ceases to be a “controlled company.” Under Peruvian corporate governance practices, a Peruvian company is not required to have a majority of independent members on its board of directors.

 

The listing standards for the New York Stock Exchange also require that U.S. listed companies, at the time they cease to be “controlled companies,” have a nominating/corporate governance committee and a compensation committee (in addition to an audit committee). Each of these committees must consist solely of independent directors and must have a written charter that addresses certain matters specified in the listing standards. Under Peruvian law, a Peruvian company may, but is not required to, form special governance committees, which may be composed partially or entirely of non-independent directors.

 

 

In addition, New York Stock Exchange rules require the independent non-executive directors of U.S. listed companies to meet on a regular basis without management being present. There is no similar requirement under Peruvian law.

 

The New York Stock Exchange’s listing standards also require U.S. listed companies to adopt and disclose corporate governance guidelines. In November 2013, the Peruvian Securities Commission and a committee of regulatory agencies and associations prepared and published a list of suggested non-mandatory corporate governance guidelines called the “Good Corporate Governance Code for Peruvian Companies.” These principles are disclosed on the Peruvian Securities Commission web page at http:// http://www.smv.gob.pe/ and the Lima Stock Exchange web page at http://www.bvl.com.pe. Although we have implemented a number of these measures and are part of the Best Corporate Governance Practices Index of the Lima Stock Exchange, we are not required to comply with the referred corporate governance guidelines by law or regulation, only to disclose whether or not we are in compliance.

 

ITEM 16H. MINE SAFETY DISCLOSURE

 

Not applicable.

 

ITEM 16I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

 

Not applicable.

 

ITEM 16K. CYBERSECURITY

 

Risk Management and Strategy

 

Cementos Pacasmayo considers risk management to be a fundamental pillar of its strategy. The Company therefore evaluates threats and vulnerabilities, identifies its critical assets and quantifies the associated risk at least twice a year or sooner if warranted. Identified risks are confirmed by senior management to determine whether, due to their importance, they should be considered strategic risks, and different remediation or mitigation mechanisms relating to such risks are evaluated. For example, cybersecurity risks have been evaluated and determined to be strategic risks for the following reasons:

 

●

economic impact due to loss of information and interruption of our operations due to attacks on our information systems and failures of our systems that support business processes and guarantee continuity; and

 

●

economic and reputational impact due to cyberattacks (phishing, malware, etc.) due to lack of patches or inadequate patch management, lack of secure identification and authentication mechanisms (AD authentication, complex passwords, tokens, captcha, etc.), poor password management and lack of protection against new generation threats.

 

Cementos Pacasmayo’s cybersecurity strategy is based on the NIST 1.1 framework. Specifically, when referring to the identification and management of cybersecurity risks and threats that could compromise the Company, Cementos Pacasmayo has developed a methodology for risk management of information security based on ISO/IEC 27005. This systematic method allows the Company’s management to make appropriate decisions. Based on this and as part of our focus on the continuous improvement of information security in the company, during 2024 an internal audit was carried out to evaluate our Information Security Management System (ISMS) based on the guidelines and controls of ISO27001, as well as the respective external audit, which allowed us to obtain the ISO27001:2022 certification for our cement production and distribution process issued by AENOR, being the first cement company in Peru to obtain this certification.

 

The Company identifies and oversees risks internally. The audit committee of the Company has defined what a material cybersecurity risk is, so that the occurrence of a cybersecurity incident can be reported to the SEC. During 2024, Cementos Pacasmayo did not identify any threats that materially affected, or were reasonably likely to materially affect, its business strategy, results of operations or financial condition. As part of our information security policies, we have established the standards for access to and use of our information systems by employees or by third parties. In addition, we have established a new policy specifically relating to the access to and use of our information systems by third parties, which sets forth the conditions any third party must comply with in order to have any access to our information systems, which are being progressively incorporated into contracts with suppliers that are subject to these guidelines.

 

 

Finally, twice a year we run ethical hacking and pen-testing to evaluate our risks and vulnerabilities, and we have engaged an ethical hacking service which runs automatically when we perform spot exercises in our information systems (in-house and third-party solutions).

 

However, despite our efforts to identify and respond to cybersecurity threats, we cannot eliminate all risks from cybersecurity threats, or provide assurances that we have not experienced an undetected cybersecurity incident. For more information about these risks, see “Item 3D. Risk Factors—Risks Relating to Our Business and Industry—Failures in our information technology systems and information security (cybersecurity) systems can adversely impact our operations and reputation.”

 

Governance

 

Role of the Board

 

The Board, in coordination with the Audit Committee, which is the corporate body in charge of centralizing corporate risks, oversees the Company’s risk management program, which includes risks arising from cybersecurity threats. The Audit Committee meets quarterly and reviews the corporate risk matrix in detail, including cybersecurity risks. At each regularly scheduled Board meeting, the Audit Committee Chair provides the full Board with an update on all significant matters discussed, reviewed, considered and approved by the committee since the last regularly scheduled.

 

Additionally, the Audit Committee is promptly apprised of any cybersecurity incident that meets established reporting thresholds, and receives ongoing updates regarding any such incident until it has been resolved. We have established a Policy for Response to Cybersecurity Incidents, and a related plan, which includes four playbooks (covering ransomware, phishing, DOS and malware) on how to respond to each type of incident and the specificities to communications matters, to our legal, compliance, risk management and audit committee. This policy and these plans are part of our Disaster Recovery Plan (DRP) which is also part of our Business Continuity Plan (BCP).

 

Role of Management

 

Senior management is highly committed to maintaining corporate cybersecurity, and is cognizant of cybersecurity risks and threats and the potential impact of the occurrence of cybersecurity incidents, which is evidenced by the review and oversight of such matters by the audit committee and the cybersecurity subcommittees, and has provided the necessary resources for the mitigation of such risks. In addition to the audit committee at the Board level, we also have two cybersecurity sub committees (IT & OT), each of which meets quarterly, with the presence of the Company’s senior executive officers. All participants in the subcommittee meetings receive a copy of the presentation for each meeting, which sets forth the applicable subcommittee’s role, strategy, project status (culture, risks, IT/OT and policies) and relevant information (our key performance metrics and POCs on cybersecurity technology, cybersecurity lab results, etc.), and meeting minutes, which include a summary of the information to be discussed and the principal action points.

 

In 2024, the Information Security Department was established as an independent Information Technology department, reporting directly to the Chief Financial Officer (CFO), with the goal of providing it with the autonomy and strategic position it deserves.

 

The Chief Information Security Office (CISO) is primarily responsible for overseeing, maintaining, and improving our cybersecurity strategy. He also leads our two cybersecurity subcommittees (IT and OT) and works closely with the Technology, Human Resources, Legal and Compliance, Operations departments, among others. He also has over eight years of experience managing and leading cybersecurity projects and holds the following certifications:

 

●

Certiprof - Lead Cybersecurity Professional Certificate - January 2023

 

●

ESAN Graduate School of Business (Lima, Peru) - International Diploma in Cybersecurity and Privacy Management - July 2020

 

●

Ramon Llull University (Barcelona, Spain) - Master in Information Technology Management - August 2015

 

All of Cementos Pacasmayo’s senior executive officers have been trained in cybersecurity matters and are the main promoters of our corporate cybersecurity culture and compliance with the established internal framework, which includes policies, guidelines and cybersecurity standards, among others.

 

 

ITEM 16J. INSIDER TRADING POLICIES

 

Cementos Pacasmayo has adopted an insider trading policy governing the purchase, sale, and other dispositions of its securities by directors, senior management, and employees with access to material non-public information.This policy is outlined in our "Manual de Políticas Relacionadas con Información Material No Pública y la Prevención de la Transferencia de Valores con Información Privilegiada" (Manual of Policies Related to Non-Public Material Information and the Prevention of Insider Stock Transfers). The manual is designed to promote compliance with insider trading laws, including the Exchange Act, applicable stock exchange listing standards, and local regulations. For further information on our insider trading policy, please refer to Exhibit 11 of this annual report.

 

SECTION 1.02 PART III

 

ITEM 17. FINANCIAL STATEMENTS

 

Not applicable.

 

ITEM 18. FINANCIAL STATEMENTS

 

See our consolidated financial statements beginning at page F-1 of this annual report. Our financial statements have been prepared in accordance with IFRS as issued by the IASB.

 

ITEM 19. EXHIBITS

 

The following documents are filed as part of this Annual Report on Form 20-F or incorporated by reference herein.

 

Exhibit Number		Description of Document
1.1		Amended and Restated By-laws of the Registrant, as currently in effect, incorporated by reference to Exhibit 1.1 of the Registrant’s Annual Report on Form 20-F filed with the SEC on May 1, 2017 (File No. 001-35401)
2.1		Registrant’s Form of American Depositary Receipt, incorporated by reference to Exhibit 4.1 to the Registrant’s Registration Statement on Form F-1 filed with the SEC on January 6, 2012 (File No. 333-178922)
2.2		Deposit Agreement dated January 19, 2012 among the Registrant, J.P. Morgan Chase N.A., as depositary, and the holders from time to time of American depositary shares issued thereunder, incorporated by reference to Exhibit 4.2 to the Registrant’s Registration Statement on Form F-1 filed with the SEC on January 6, 2012 (File No. 333-178922)
2.2A		Amendment No. 1, dated as of February 21, 2017, to the Deposit Agreement dated as of February 7, 2012, among the Registrant, J.P. Morgan Chase Bank, N.A., as depositary, and all holders from time to time of American depositary receipts issued thereunder, incorporated by reference to the Registrant’s Registration Statement on Form F-6 filed with the SEC on February 21, 2017 (File No. 333-216152)
2.2B		Amendment No. 2, dated as of December 4, 2020, to the Deposit Agreement dated as of February 7, 2012, among the Registrant, J.P. Morgan Chase Bank, N.A., as depositary, and all holders from time to time of American depositary receipts issued thereunder, incorporated by reference to the Registrant’s Registration Statement on Form F-6 filed with the SEC on December 4, 2020 (File No. 333-216152)
2.3		Indenture, dated as of February 8, 2013, among the Registrant, the Subsidiary Guarantors named therein and Deutsche Bank Trust Company Americas incorporated by reference to Exhibit 2.3 of the Registrant’s Annual Report on Form 20-F filed with the SEC on April 30, 2014 (File No. 001-35401)
2.4		Local bond issuance agreement (Contrato Marco de Emisión de Bonos Corporativos correspondiente al Segundo Programa de Bonos Corporativos de Cementos Pacasmayo S.A.A.) dated January 8, 2019, between Scotiabank Perú S.A.A. as administrative agent and Cementos Pacasmayo S.A.A. as issuer (English summary of principal terms), providing for the issuance of up to S/1,000,000,000 in one or more series, and related issuances of series 1 in an aggregate principal amount of S/260,000,000 and series 2 in an aggregate principal amount of S/310 million, incorporated by reference to Exhibit 4.3 of the Registrant’s Annual Report on Form 20-F filed with the SEC on April 30, 2019 (File No. 001-35401)
2(d)		Description of securities registered under Section 12(d) of the Exchange Act incorporated by reference to Exhibit 2(d) of the Registrant’s Annual Report on Form 20-F filed with the SEC on April 29, 2024 (File No. 001-35401)
4.1		Power Supply Agreement, dated June 3, 2010, between the Registrant and Electroperú S.A., incorporated by reference to Exhibit 4.1 of the Registrant’s Annual Report on Form 20-F filed with the SEC on April 30, 2012 (File No. 001-35401)

 

 

Exhibit Number

Description of Document

4.2		Contract of General Management and Provision of Services, dated December 31, 2007, between the Registrant and Inversiones ASPI S.A. (formerly Inversiones Pacasmayo S.A.), incorporated by reference to Exhibit 4.2 of the Registrant’s Annual Report on Form 20-F filed with the SEC on April 30, 2012 (File No. 001-35401)
4.3		Property Lease Agreement, dated June 30, 2008, between the Registrant and Inversiones ASPI S.A. (formerly Inversiones Pacasmayo S.A.), incorporated by reference to Exhibit 4.3 of the Registrant’s Annual Report on Form 20-F filed with the SEC on April 30, 2012 (File No. 001-35401)
4.4		Surface Rights Agreement, dated February 1, 2008, between the Registrant and Compañía Minera Ares S.A.C., incorporated by reference to Exhibit 4.4 of the Registrant’s Annual Report on Form 20-F filed with the SEC on April 30, 2012 (File No. 001-35401)
4.5		Addendum, effective February 1, 2020, to the Power Supply Agreement, dated June 3, 2010, between the Registrant and Electroperú S.A., incorporated by reference to Exhibit 4.5 of the Registrant’s Annual Report on Form 20-F filed with the SEC on May 1, 2020 (File No. 001-35401)
4.6		Summary of Principal Terms for Equipment and Engineering supply contract between the Registrant and FL SMIDTTH A/S dated November 29, 2021, incorporated by reference to Exhibit 4.6 of the Registrant’s Annual Report on Form 20-F filed with the SEC on April 28, 2022 (File No. 001-35401)
4.7		Summary of Principal Terms for Construction and Assembly Contract between the Registrant and Ingeniería y Construcción Sigdo Koppers Perú S.A.C. dated February 16, 2022, incorporated by reference to Exhibit 4.7 of the Registrant’s Annual Report on Form 20-F filed with the SEC on April 28, 2022 (File No. 001-35401)
8.1		List of Subsidiaries.
11		Insider Trading Policy
12.1		Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
12.2		Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
13.1*		Certification pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for Chief Executive Officer
13.2*		Certification pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for Chief Financial Officer

 

 

Exhibit Number		Description of Document
96.1		Technical Report Summary (TRS), Tembladera Quarry and Pacasmayo Cement Plant 20-F 229.601 (Item 601)
96.2		Technical Report Summary (TRS), Virrilá Quarry and Piura Cement Plant 20-F 229.601 (Item 601)
96.3		Technical Report Summary (TRS), Tioyacu Quarry and Rioja Cement Plant 20-F 229.601 (Item 601)
97		Compensation Recovery Policy incorporated by reference to Exhibit 97 of the Registrant’s Annual Report on Form 20-F filed with the SEC on April 29, 2024 (File No. 001-35401)
101.INS		Inline XBRL Instance Document.
101.SCH		Inline XBRL Taxonomy Extension Schema Document.
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

 

*

This certification will not be deemed “filed” for purposes of Section 18 of the Exchange Act (15 U.S.C. 78r), or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the Registrant specifically incorporates it by reference.

 

 

SIGNATURES

 

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on Form 20-F on its behalf.

 

	CEMENTOS PACASMAYO S.A.A.
	By:	/s/ Humberto Reynaldo Nadal Del Carpio
		Humberto Reynaldo Nadal Del Carpio
		Chief Executive Officer

 

	By:	/s/ Ely Adriana Hayashi Hirahoka
		Ely Adriana Hayashi Hirahoka
		Chief Financial Officer

 

Date: April 29, 2025

 

 

Cementos Pacasmayo S.A.A. and Subsidiaries

 

Consolidated financial statements as of December 31, 2024 and 2023, together with the
Report of Independent Registered Accounting Firm

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cementos Pacasmayo S.A.A. and Subsidiaries

 

Consolidated financial statements as of December 31, 2024 and 2023, together with the Report of Independent Registered Accounting Firm

 

Contents

 

Report of Independent Registered Accounting Firm (PCAOB ID: 1315)	F-2
Consolidated financial statements
Consolidated statement of financial position	F-4
Consolidated statement of profit or loss	F-5
Consolidated statement of other comprehensive income (loss)	F-6
Consolidated statement of changes in equity	F-7
Consolidated statement of cash flows	F-8
Notes to the consolidated financial statements	F-10

 

 

Report of Independent Registered Public Accounting Firm

 

To the Board of Directors and Shareholders of Cementos Pacasmayo S.A.A. and Subsidiaries

 

Opinion on the Financial Statements

 

We have audited the accompanying consolidated statements of financial position of Cementos Pacasmayo S.A.A. and subsidiaries (the Company) as of December 31, 2024 and 2023, and the related consolidated statements of profit or loss, other comprehensive income (loss), changes in equity and cash flows for each of the three years in the period ended December 31, 2024, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with IFRS Accounting standards as issued by the International Accounting Standards Board (“IASB”) (“IFRS Accounting Standards”).

 

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB) the Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated April 29, 2025, expressed an unqualified opinion thereon.

 

Basis for opinion

 

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

Critical audit matter

 

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

 

 

Independent Auditors’ Report (continue)

 

		Receivable related to Claims from Tax Authority
Description of the Matter		As disclosed in Note 7(c) to the consolidated financial statements, the Company has identified certain income tax-related contingencies associated to the mining royalties of years 2008 and 2009. In these years, relevant taxation authorities have challenged the tax treatment applied by the Company under the royalty law for metallic and non-metallic mining activity in Peru. As of December 31, 2024, the Company has recognized an asset for claims to the SUNAT for an amount of S/29,559,000, resulting from payments made to the taxation authorities as part of the tax claim process in Peru but for which the Company has a dispute on the validity of the taxation authorities’ assessment. The Company has disclosed, but has not recorded any accrual, related to these matters since at the beginning of 2025 the Company obtained a favorable result from the Constitutional Court, which considers that the Company’s claim had a high probability to recover the full amount of the payments completed under protest. Consequently, the Company concluded that the criteria for recognition of an income tax liability under IFRS has not been met and that the amounts paid are recoverable based upon the technical merits of the income tax positions of royalty law for metallic and non-metallic mining activity taken by the Company.   In accordance with IAS 12, if the amount already paid in respect of current and prior periods exceeds the amount due for those periods, the excess shall be recognized as an asset. The Company uses significant judgment to determine, based on interpretations of the income tax legislation and legal judgement, the recoverable amount of the mining royalties paid under protest in the past.   Auditing the estimation of the outcome and evaluating the recoverability of the claim for the payments made under protest, before the uncertain tax treatment is resolved required a high degree of auditor judgment and significant audit effort due to the complexity and judgement used by the Company in the assessment based on interpretations of the income tax legislation and legal rulings in Peru.

 

How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s accounting process for income taxes, including uncertain tax positions and tax contingencies. For example, we tested the controls over management’s review of the technical merits of tax positions, disputed tax assessments and the determination of the recoverable amount of the payments made under protest.   Our audit procedures included, among others, evaluating the assumptions used by the Company to develop its uncertain tax positions based on relevant Peruvian income tax laws, including the inspection of the Company’s internal and external legal counsel analysis of these matters. In addition, we involved our tax subject matter professionals to assess the technical merits of the Company’s tax position and to evaluate the application of relevant tax law and accounting guidance in assessing the recognition and recoverability of the related asset claim to the SUNAT.   Furthermore, we evaluated the disclosure of this matter in Note 7(c) to the consolidated financial statements.

 

/s/ Tanaka, Valdivia & Asociados Sociedad Civil de Responsabilidad Limitada

A member of Ernst & Young Global Limited

 

We have served as the Company’s auditor since 2002.

 

Lima, Peru

April 29, 2025

 

 

Cementos Pacasmayo S.A.A. and Subsidiaries

 

Consolidated statement of financial position

As of December 31, 2024 and 2023

 

		Note		2024				2023
				S/(000)				S/(000)
Assets
Current assets
Cash and cash equivalents		6			72,723				90,193
Trade and other receivables, net		7			131,168				99,688
Income tax prepayments					7,736				4,485
Inventories		8			773,997				791,074
Prepayments					6,872				6,809
Total current assets					992,496				992,249
Non-current assets
Trade and other receivables, net		7			43,224				43,397
Financial investments designated at fair value through other comprehensive income					239				249
Property, plant and equipment, net		9			2,031,139				2,099,351
Intangible assets, net		10			63,596				62,920
Goodwill					4,459				4,459
Deferred income tax assets		14			21,816				11,428
Right of use assets					9,023				7,609
Other assets					51				73
Total non-current assets					2,173,547				2,229,486
Total assets					3,166,043				3,221,735
Liabilities and equity
Current liabilities
Trade and other payables		11			242,051				231,511
Financial obligations		13			458,346				383,146
Lease liabilities					2,958				3,999
Income tax payable					17,937				14,222
Provisions		12			44,263				56,510
Total current liabilities					765,555				689,388
Non-current liabilities
Financial obligations		13			1,034,845				1,189,880
Lease liabilities					6,462				4,130
Provisions		12			28,146				27,453
Deferred income tax liabilities		14			117,937				120,876
Total non-current liabilities					1,187,390				1,342,339
Total liabilities					1,952,945				2,031,727
Equity		15
Capital stock					423,868				423,868
Investment shares					40,279				40,279
Investment shares held in treasury					(121,258	)			(121,258	)
Additional paid-in capital					432,779				432,779
Legal reserve					168,636				168,636
Other accumulated comprehensive loss					(16,551	)			(16,290	)
Retained earnings					285,345				261,994
Total equity					1,213,098				1,190,008
Total liabilities and equity					3,166,043				3,221,735

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

Cementos Pacasmayo S.A.A. and Subsidiaries

 

Consolidated statement of profit or loss

For the years ended December 31, 2024, 2023 and 2022

 

		Note		2024				2023				2022
				S/(000)				S/(000)				S/(000)
Sales of goods		16			1,978,071				1,950,075				2,115,746
Cost of sales		17			(1,249,545	)			(1,260,623	)			(1,463,715	)
Gross profit					728,526				689,452				652,031
Operating income (expenses)
Administrative expenses		18			(253,383	)			(231,967	)			(225,439	)
Selling and distribution expenses		19			(81,410	)			(69,569	)			(67,375	)
Other operating (expense) income, net					(2,700	)			(13,810	)			(3,899	)
Impairment to retirement of property, plant and equipment		9(g)			-				(36,551	)			-
Total operating expenses, net					(337,493	)			(351,897	)			(296,713	)
Operating profit					391,033				337,555				355,318
Other income (expenses)
Finance income					6,298				7,246				3,306
Finance costs		21			(100,308	)			(104,045	)			(95,105	)
Net gain (loss) on derivative financial instruments recognized at fair value through profit or loss					-				19				(59	)
(Loss) gain from exchange difference, net		5			(836	)			4,933				(1,040	)
Total other expenses, net					(94,846	)			(91,847	)			(92,898	)
Profit before income tax					296,187				245,708				262,420
Income tax expense		14			(97,312	)			(76,808	)			(85,592	)
Profit for the year					198,875				168,900				176,828
Earnings per share
Basic income attributable to holders of common and investment shares of Cementos Pacasmayo S.A.A. (S/per share)		23			0.46				0.39				0.41

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

Cementos Pacasmayo S.A.A. and Subsidiaries

 

Consolidated statement of other comprehensive income (loss)

For the years ended December 31, 2024, 2023 and 2022

 

		Note		2024				2023				2022
				S/(000)				S/(000)				S/(000)
Profit for the year					198,875				168,900				176,828
Other comprehensive income (loss)
Other comprehensive income (loss) that will not be reclassified to profit or loss in subsequent years:
Change in fair value of financial instruments designated at fair value through other comprehensive loss					(370	)			(25	)			(565	)
Deferred income tax		14			109				7				167
Other comprehensive income (loss) to be reclassified to profit or loss in subsequent years:
Net gain on cash flows hedges					-				2,154				3,838
Deferred income tax		14			-				(634	)			(1,133	)
Other comprehensive income (loss) for the year, net of income tax					(261	)			1,502				2,307
Total other comprehensive income for the year, net of income tax					198,614				170,402				179,135

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

Cementos Pacasmayo S.A.A. and Subsidiaries

 

Consolidated statement of changes in equity

For the years ended December 31, 2024, 2023 and 2022

 

		Capital stock				Investment shares				Treasury shares				Additional paid-in capital				Legal reserve				Unrealized loss on financial instruments designated at fair value				Unrealized gain (loss) on cash flow hedge				Retained earnings				Total
		S/(000)				S/(000)				S/(000)				S/(000)				S/(000)				S/(000)				S/(000)				S/(000)				S/(000)
Balance as of January 1, 2022			423,868				40,279				(121,258	)			432,779				168,636				(15,869	)			(4,225	)			271,595				1,195,805
Profit for the year			-				-				-				-				-				-				-				176,828				176,828
Other comprehensive income (loss)			-				-				-				-				-				(398	)			2,705				-				2,307
Total comprehensive income			-				-				-				-				-				(398	)			2,705				176,828				179,135
Dividends, note 15(g)			-				-				-				-				-				-				-				(179,805	)			(179,805	)
Balance as of December 31, 2022			423,868				40,279				(121,258	)			432,779				168,636				(16,267	)			(1,520	)			268,618				1,195,135
Profit for the year			-				-				-				-				-				-				-				168,900				168,900
Other comprehensive income			-				-				-				-				-				(18	)			1,520				-				1,502
Total comprehensive income			-				-				-				-				-				(18	)			1,520				168,900				170,402
Dividends, note 15(g)			-				-				-				-				-				-				-				(175,524	)			(175,524	)
Others			-				-				-				-				-				(5	)			-				-				(5	)
Balance as of December 31, 2023			423,868				40,279				(121,258	)			432,779				168,636				(16,290	)			-				261,994				1,190,008
Profit for the year			-				-				-				-				-				-				-				198,875				198,875
Other comprehensive income			-				-				-				-				-				(261	)			-				-				(261	)
Total comprehensive income			-				-				-				-				-				(261	)			-				198,875				198,614
Dividends, note 15(g)			-				-				-				-				-				-				-				(175,524	)			(175,524	)
Balance as of December 31, 2024			423,868				40,279				(121,258	)			432,779				168,636				(16,551	)			-				285,345				1,213,098

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

Cementos Pacasmayo S.A.A. and Subsidiaries

 

Consolidated statement of cash flows

For the years ended December 31, 2024, 2023 and 2022

 

		Note		2024				2023				2022
				S/(000)				S/(000)				S/(000)
Operating activities
Profit before income tax					296,187				245,708				262,420
Non-cash adjustments to reconcile profit before income tax to net cash flows from operating activities
Depreciation and amortization					158,246				144,195				138,539
Finance costs		21			100,308				104,045				95,105
Impairment to retirement of property, plant and equipment		9(g)			-				36,551				-
Long-term incentive plan		12(c) y 20			7,167				7,632				8,272
Provision for inventory obsolescence		8(b)			6,418				2,956				1,977
Allowance for expected credit losses		7(d)			2,751				1,707				1,972
Net (gain) loss on derivative financial instruments recognized at fair value through profit or loss					-				(19	)			59
Finance income					(6,298	)			(7,246	)			(3,306	)
Exchange difference related to monetary transactions					1,048				(973	)			3,804
Net gain on disposal of property, plant and equipment and intangible assets					(3,642	)			(813	)			(591	)
Other items that do not generate operating flows, net					7,347				18,021				10,413
Working capital adjustments
Increase in trade and other receivables					(34,194	)			(1,870	)			(3,695	)
Decrease (increase) in inventories					5,904				90,581				(282,554	)
(Increase) decrease in prepayments					(951	)			13,210				(10,099	)
(Decrease) increase in trade and other payables					(14,894	)			(48,680	)			60,571
					525,397				605,005				282,887
Interest received					6,422				7,315				3,668
Interest paid					(99,678	)			(96,907	)			(80,573	)
Income tax paid					(111,000	)			(103,090	)			(94,163	)
Net cash flows from operating activities					321,141				412,323				111,819

 

 

Consolidated statement of cash flows (continued)

 

		Note		2024				2023				2022
				S/(000)				S/(000)				S/(000)
Investing activities
Opening of term deposits with original maturity greater than 90 days					(32,782	)			(10,000	)			-
Redemption of term deposits with original maturity greater than 90 days					32,782				10,000				-
Purchase of property, plant and equipment					(64,318	)			(272,600	)			(162,785	)
Purchase of intangible assets					(16,563	)			(16,707	)			(15,712	)
Purchase of investments available for sale					(360	)			-				(363	)
Loans granted					(97	)			(1,679	)			(141	)
Cash flow proceeds from sale of property, plant and equipment					4,403				1,392				2,664
Proceeds from loans					326				150				149
Net cash flows used in investing activities					(76,609	)			(289,444	)			(176,188	)
Financing activities
Proceeds from bank overdraft					-				85,333				-
Payment of bank overdraft					-				(85,333	)			-
Payment of bank loans		25			(384,364	)			(661,520	)			(448,984	)
Dividends paid		25			(175,046	)			(175,431	)			(179,820	)
Payment for hedging instrument		25			-				(7,708	)			(15,390	)
Lease payments					(5,426	)			(3,564	)			(2,511	)
Bank loans received		25			303,200				639,000				525,000
Dividends returned		25			297				465				229
Cash flow from settlement of derivative financial instruments					-				93,323				-
Net cash flows used in financing activities					(261,339	)			(115,435	)			(121,476	)
Net (decrease) increase in cash and cash equivalents					(16,807	)			7,444				(185,845	)
Net foreign exchange difference					(663	)			976				(5,784	)
Cash and cash equivalents as of January 1		6			90,193				81,773				273,402
Cash and cash equivalents as of December 31		6			72,723				90,193				81,773
Transactions with no effect on cash flows:
Unrealized exchange difference related to monetary transactions					1,048				(973	)			3,804
Outstanding accounts payable related to acquisition of property, plant and equipment		9(e)			(17,122	)			9,379				14,560
Addition of right-of-use assets and lease liabilities					-				6,915				613
Additions of quarry rehabilitation costs		12			1,465				4,458				2,745

 

The accompanying notes are an integral part of this consolidated statement.

 

 

Cementos Pacasmayo S.A.A. and Subsidiaries

 

Notes to the consolidated financial statements

As of December 31, 2024, 2023 and 2022

 

1.

Corporate information

 

Cementos Pacasmayo S.A.A. (hereinafter "the Company") was incorporated in 1957 and, under the Peruvian General Corporation Law, is an open stock corporation, its shares are listed in the Lima and New York Stock Exchange. The Company is a subsidiary of Inversiones ASPI S.A., which holds 50.01 percent of the Company’s common shares as of December 31, 2024, 2023 and 2022. The Company’s registered address is Calle La Colonia No.150, Urbanización El Vivero, Santiago de Surco, Lima, Peru. All the subsidiaries are domiciled and operate in Peru.

 

The Company’s main activity is the production and marketing of cement, precast, concrete and other minors in La Libertad region of the northern of Peru.

 

The issuance of the Company's consolidated financial statements and notes as of December 31, 2024 and for the year then ended were authorized by the Company’s Board of Directors on February 13, 2025 and then approved by the General Shareholders’ Meeting on March 24, 2025, subsequent events have been considered as through April 29, 2025. The consolidated financial statements as of December 31, 2023 and for the year then ended were approved by the General Shareholders’ Meeting on March 21, 2024.

 

For the years ended December 31, 2024, 2023 and 2022, the consolidated financial statements comprise the financial statements of the Company and its subsidiaries: Cementos Selva S.A.C. and subsidiaries, Distribuidora Norte Pacasmayo S.R.L. and subsidiary, Empresa de Transmisión Guadalupe S.A.C., Salmueras Sudamericanas S.A., Soluciones Crealo 150 S.A.C , Soluciones Takay S.A.C., 150Krea Inc, Vanguardia Constructora del Perú S.A.C. and Corporación Materiales Piura S.A.C. As of these dates, the Company maintained a 100 percent interest in all its subsidiaries.

 

The main activities of the subsidiaries incorporated in the consolidated financial statements are described as follows:

 

-

Cementos Selva S.A.C. is engaged in production and marketing of cement and other construction materials in the northeast region of Peru. Also, it holds 100 percent of the shares in Dinoselva Iquitos S.A.C. (a cement and construction materials distributor in the north of Peru, which also produces and sells precast, cement bricks and ready-mix concrete) and in Acuícola Los Paiches S.A.C. (a fish farm entity).

 

-

Distribuidora Norte Pacasmayo S.R.L. is mainly engaged in selling cement produced by the Company. Additionally, it produces and sells precast, cement bricks and ready-mix concrete. It is the main partner of the Consorcio Constructor Norte del Peru, an entity established for the execution of the work “Mejoramiento del Sistema de Pistas y Cerco Perimétrico del Aeropuerto de Piura”.

 

-

Empresa de Transmisión Guadalupe S.A.C. is mainly engaged in providing electric energy transmission services to the Company.

 

-

Salmueras Sudamericanas S.A.(“Salmueras”) In December 2017, the Company decided not to continue with the activities related to this project of Salmueras.

 

 

Notes to the consolidated financial statements (continued)

 

-

Soluciones Takay S.A.C., entity constituted on March 29, 2019 whose corporate purpose is to provide advisory services and information, promotion, acquisition and intermediation services for the management and development of real estate projects by natural and/or legal persons.

 

-

150Krea Inc., entity constituted on June 3, 2021 whose corporate purpose is the lease of intangible assets.

 

-

Corporación Materiales Piura S.A.C., entity acquired on January 4, 2023 whose corporate purpose is the extraction of stone, sand and clay.

 

-

Soluciones Créalo 150 S.A.C., an entity established on June 21, 2024, under the trade name Makers150, is mainly dedicated to the research and development of digital solutions for companies in the construction sector in Latin America.

 

-

Vanguardia Constructora del Perú S.A.C., an entity established on June 21, 2024, whose corporate purpose is the performance of all construction activities, engineering services and management consulting.

 

2.

Significant accounting policies

 

2.1

Basis of preparation –

 

The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB).

 

The consolidated financial statements have been prepared on a historical cost basis, except for financial instruments designated at fair value through other comprehensive income (OCI) and derivative financial instruments that have been measured at fair value. The carrying values of recognized assets and liabilities that are designated as hedged items in fair value hedges that would otherwise be carried at amortized cost are adjusted to record changes in fair value attributable to the risks that are being hedged in effective hedge relationships. The consolidated financial statements are presented in Soles and all values are rounded to the nearest thousand S/(000), except when otherwise indicated.

 

The consolidated financial statements provide comparative information in respect of the previous period or periods. There are certain standards and amendments applied for the first time by the Group during 2024, that did not require the restatement of previous financial statements, as explained in note 2.3.17.

 

 

Notes to the consolidated financial statements (continued)

 

2.2

Basis of consolidation -   The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as of December 31, 2024 and 2023 and for the years ended December 31, 2024, 2023 and 2022. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if and only if it has: (i) power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee), (ii) exposure, or rights, to variable returns from its involvement with the investee, and (iii) the ability to use its power over the investee to affect its returns.

 

Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated financial statements from the date the Group gains control until the date the Group ceases to control the subsidiary.

 

The accounting policies into line with the Group´s accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.

 

A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction.

 

2.3

Summary of significant accounting policies -

 

2.3.1

Cash and cash equivalents -

 

Cash and cash equivalents presented in the statement of financial position and statement of cash flows comprise cash at banks and on hand and short-term deposits with an original maturity of three months or less.

 

2.3.2

Financial instruments-initial recognition and subsequent measurement –

 

A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.

 

(i)

Financial assets -

 

Initial recognition and measurement -

 

Financial assets are classified at initial recognition as measured at amortized cost, fair value through OCI or fair value through profit or loss.

 

The Group's financial assets include cash and cash equivalents, commercial and other receivables and other financial investments at fair value through OCI.

 

 

Notes to the consolidated financial statements (continued)

 

Subsequent measurement -

 

For purposes of subsequent measurement, financial assets are classified into the following categories:

 

-

Financial assets at amortized cost (debt instruments).

 

-

Financial assets at fair value through OCI with recycling of cumulative gains and losses (debt instruments).

 

-

Financial assets designated at fair value through OCI without recycling of cumulative gains and losses upon derecognition (equity instruments).

 

-

Financial assets at fair value through profit or loss.

 

The classification depends on the business model of the Company and the contractual terms of the cash flows.

 

Financial assets at amortized cost (debt instruments) -

 

The Group measures financial assets at amortized cost if both of the following conditions are met:

 

-

The financial asset is held within a business model with the objective to collect contractual cash flows and not sale or trade it, and,

 

-

The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding

 

Financial assets at amortized cost are subsequently measured using the effective interest (EIR) method and are subject to impairment. Gains and losses are recognized in profit or loss when the asset is derecognized, modified or impaired.

 

Financial assets are not reclassified after their initial recognition, except if the Group changes its business model for its management.

 

As of December 31, 2024 and 2023, the Group held trade and other receivables in this category; because they meet the conditions described above.

 

Financial assets at fair value through OCI (equity instruments) -

 

Upon initial recognition, the Group can elect to irrevocably classify its equity investments as equity instruments designated at fair value through OCI when they meet the definition of equity and are not held for trading. The classification is determined on an instrument-by-instrument basis.

 

 

Notes to the consolidated financial statements (continued)

 

Gains and losses on these financial assets are never recycled to profit or loss. Dividends are recognized as other income in the statement of profit or loss when the right of payment has been established, except when the Group benefits from such proceeds as a recovery of part of the cost of the financial asset, in which case, such gains are recorded in OCI. Equity instruments designated at fair value through OCI are not subject to impairment assessment.

 

As of December 31, 2024 and 2023, the Group elected to classify irrevocably its listed equity investments under this category.

 

(ii)

Impairment of financial assets -

 

The Group recognizes an allowance for expected credit losses (ECLs) for all debt instruments not held at fair value through profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to receive, discounted at an approximation of the original effective interest rate. The expected cash flows will include cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms.

 

ECLs are recognized in two stages. For credit exposures for which there has not been a significant increase in credit risk since initial recognition, ECLs are provided for credit losses that result from default events that are possible within the next 12-months (a 12-month ECL). For those credit exposures for which there has been a significant increase in credit risk since initial recognition, a loss allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL).

 

For trade receivables and contract assets, the Group applies a simplified approach in calculating ECLs. Therefore, the Group does not track changes in credit risk, but instead recognizes a loss allowance based on lifetime ECLs at each reporting date. The Group has established a provision matrix that is based on its historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment.

 

The Group considers a financial asset in default when contractual payments are 360 days past due. However, in certain cases, the Group may also consider a financial asset to be in default when internal or external information indicates that the Group is unlikely to receive the outstanding contractual amounts in full before taking into account any credit enhancements held by the Group. A financial asset is written off when there is no reasonable expectation of recovering the contractual cash flows.

 

 

Notes to the consolidated financial statements (continued)

 

(iii)

Financial liabilities -

 

Initial recognition and measurement -

 

Financial liabilities are classified at initial recognition as financial liabilities at fair value through profit or loss, loans and borrowings, payables, as appropriate.

 

All financial liabilities are recognized initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.

 

The Group’s financial liabilities include trade and other payables, interest-bearing loans and borrowings.

 

Subsequent measurement -

 

The subsequent measurement of financial liabilities depends on their classification, the Group maintains Loans and Borrowings, which accounting treatment is explained below:

 

After their initial recognition, interest-bearing loans and borrowings are subsequently measured at amortized cost using the EIR method. Gains and losses are recognized in the consolidated statement of profit or loss when the liabilities are derecognized as well as through the EIR amortization process.

 

Amortized cost is calculated by considering any discount or premium on acquisition and fees or costs that are an integral part of the EIR.The EIR amortization is included as finance costs in the consolidated statement of profit or loss.

 

As of December 31, 2024 and 2023, the Group included trade and other payables and financial liabilities in this category, for more information refer to notes 11 and 13.

 

Derecognition -

 

A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expired.When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability.The difference in the respective carrying amount is recognized in the consolidated statement of profit or loss.

 

 

Notes to the consolidated financial statements (continued)

 

(iv)

Fair value measurement -

 

The Group measures financial instruments such as equity investments, at fair value at each period end.

 

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

 

-

In the principal market for the asset or liability, or

 

-

In the absence of a principal market, in the most advantageous market for the asset or liability.

 

The principal or the most advantageous market must be accessible by the Group.

 

The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

 

A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

 

The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.

 

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value accounting hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

 

-

Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities

 

-

Level 2 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable

 

-

Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable

 

For assets and liabilities that are recognized in the financial statements at fair value on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

 

The Group's management determines the policies and procedures for recurring and non-recurring fair value measurements.

 

 

Notes to the consolidated financial statements (continued)

 

At each reporting date, the Financial Management analyzes the changes in the values of the assets and liabilities that must be measured or determined on a recurring and non-recurring basis according to the Group's accounting policies. For this analysis, Management contrasts the main variables used in the latest assessments made with updated information available from valuations included in contracts and other relevant documents.

 

Management also compares the changes in the fair value of each asset and liability with the relevant external sources to determine whether the change is reasonable.

For purposes of disclosure of fair value, the Group has determined classes of assets and liabilities based on the inherent nature, characteristics and risks of each asset and liability, and the level of the fair value accounting hierarchy as explained above, see note 26(b).

 

2.3.3

Foreign currencies -

 

The functional and presentation currency for the consolidated financial statements of the Group is soles, which is also the functional currency for its subsidiaries.

 

Transactions and balances

 

Transactions in foreign currencies are initially recorded at their respective functional currency spot rates at the date the transaction first qualifies for recognition.

 

Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of exchange at the reporting date. Differences arising on settlement or translation of monetary items are recognized in profit or loss.

 

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions.

 

2.3.4

Inventories -

 

Inventories are valued at the lower of cost or net realizable value. Costs incurred in bringing each product to its present location and conditions are accounted for as follows:

 

Raw materials, spare part and supplies

 

-

Initially at cost and are recorded at the lower of cost and net realizable value.

 

Finished goods and work in progress

 

-

Cost of direct materials and supplies, services provided by third parties, direct labor and a proportion of manufacturing overheads is based on normal operating capacity, excluding borrowing costs and exchange currency differences.

 

 

Notes to the consolidated financial statements (continued)

 

Inventory in transit

 

-

Cost.

 

Net realizable value is the estimated selling price in the ordinary course of business, less estimated cost of completion and the estimated costs of inventory necessary to make the sale.

 

2.3.5

Borrowing costs -

 

Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of the respective asset. All other borrowing costs are expensed in the period in which they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.

 

Where the funds used to finance a project form part of general borrowings, the amount capitalized is calculated using a weighted average of interest rates applicable to relevant general borrowings of the Group during the period. All other borrowing costs are recognized in the consolidated statement of profit or loss in the period in which they are incurred.

 

2.3.6

Property, plant and equipment -

 

Property, plant and equipment is stated at cost, net of accumulated depreciation and/or accumulated impairment losses, if any. Such cost includes the cost of replacing component parts of the property, plant and equipment and borrowing costs for long-term construction projects if the recognition criteria are met, see note 2.3.5. The capitalized value of a finance lease is also included within property, plant and equipment. When significant parts of plant and equipment are required to be replaced at intervals, the Group recognizes such parts as individual assets with specific useful lives and depreciates them separately based on their specific useful lives. Likewise, when a major inspection is performed, its cost is recognized in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognized as operation cost or expense in profit or loss as incurred.

 

The present value of the expected cost for the decommissioning of an asset after its use is included in the cost of the respective asset if the recognition criteria for a provision are met. Refer to significant accounting judgments, estimates and assumptions, see note 3, and quarry rehabilitation cost provisions, see note 12.

 

 

Notes to the consolidated financial statements (continued)

 

Depreciation of assets is determined using the straight-line method over the estimated useful lives of such assets as follows:

 

		Years
Buildings and other construction:
Minor installations related to buildings		Between 10 and 35
Administrative facilities		Between 20 and 51
Main production structures		Between 20 and 56
Minor production structures		Between 20 and 35
Machinery and equipment:
Mills and horizontal furnaces		Between 24 and 45
Vertical furnaces, crushers and grinders		Between 23 and 36
Electricity facilities and other minors		Between 10 and 35
Furniture and fixtures		10
Transportation units:
Heavy units		Between 5 and 15
Light units		Between 5 and 10
Computer equipment		Between 3 and 10
Tools		Between 5 and 10

 

The asset’s residual value, useful lives and methods of depreciation are reviewed at each reporting period and adjusted prospectively if appropriate.

 

An item of property, plant and equipment and any significant part initially recognized is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the consolidated statement of profit or loss when the asset is derecognized.

 

2.3.7

Mining concessions -

 

Mining concessions correspond to the exploration rights in areas of interest acquired. Mining concessions are stated at cost, net of accumulated amortization and/or accumulated impairment losses, if any, and are presented within the “Property, plant and equipment” caption of consolidated statement of financial position. Those mining concessions are amortized following the straight-line method. In the event the Group abandons the concession, the costs associated, see note 9(b), are written-off in the consolidated statement of profit or loss.

 

For the years ended December 31, 2024, 2023 and 2022, mining concessions of the Group correspond to areas that contain raw material necessary for cement production.

 

 

Notes to the consolidated financial statements (continued)

 

2.3.8

Quarry development costs and stripping costs -

 

Quarry development costs -

 

Quarry development costs incurred are stated at cost and are the next step in development of quarries after the exploration and evaluation stage. Quarry development costs are, upon commencement of the production phase, presented net of accumulated amortization and/or accumulated impairment losses, if any, and are presented within the property, plant and equipment caption. The amortization is calculated using the straight-line method based on the useful life of the quarry to which it relates. Expenditures that significantly increase the economic life of the quarry under exploitation are capitalized.

 

Stripping costs -

 

Stripping costs incurred in the development of a mine before production commences are capitalized as part of mine development costs and subsequently amortized over the life of the mine on a units-of-production basis, using the proved reserves.

 

Stripping costs incurred subsequently during the production phase of its operation are recorded as part of cost of production.

 

2.3.9

Intangible assets

 

Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair value at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortization and accumulated impairment losses. Internally generated intangibles, excluding capitalized development costs, are not capitalized and the related expenditure is reflected in profit or loss in the period in which the expenditure is incurred. The useful lives of intangible assets are assessed as either finite or indefinite.

 

Intangible assets with finite lives are amortized over the economic useful life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortization period and the amortization method for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to modify the amortization period or method, as appropriate, and are treated as changes in accounting estimates. The amortization expense on intangible assets with finite lives is recognized in the statement of profit or loss in the expense category that is consistent with the function of the intangible assets.

 

The Group’s intangible assets with finite useful lives are amortized over an average term between three and ten years.

 

Any gain or loss arising upon derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of profit or loss.

 

 

Notes to the consolidated financial statements (continued)

 

Exploration and evaluation assets -

 

Exploration and evaluation activity involve the search for mineral resources, the determination of technical feasibility and the assessment of commercial viability of an identified resource. Exploration and evaluation activity include:

 

-

Researching and analyzing historical exploration data.

 

-

Gathering exploration data through geophysical studies.

 

-

Exploratory drilling and sampling.

 

-

Determining and examining the volume and grade of the resource.

 

-

Surveying transportation and infrastructure requirements.

 

-

Conducting market and finance studies.

 

Once the legal right to explore has been acquired, exploration and evaluation costs are charged to the consolidated statement of profit or loss, unless management concludes that a future economic benefit is more likely than not to be realized, in which case such costs are capitalized, see note 10(b). These costs include directly attributable employee remuneration, materials and fuel used, surveying costs, drilling costs and payments made to contractors.

 

In evaluating if costs meet the criteria to be capitalized, several different sources of information are used, including the nature of the assets, extension of the explored area and results of sampling, among others. The information that is used to determine the probability of future benefits depends on the extent of exploration and evaluation that has been performed.

 

Exploration and evaluation costs are capitalized when the exploration and evaluation activity is within an area of interest for which it is expected that the costs will be recouped by future exploitation and active and significant operations in relation to the area are continuing or planned for the future.

 

All capitalized exploration and evaluation costs are monitored for indications of impairment. Where a potential impairment indicator is identified, an assessment is performed for each area of interest in conjunction with the group of operating assets (representing a cash generating unit) to which the exploration is attributed.

 

The Group assesses at each reporting date whether there is an indication that exploration and evaluation assets may be impaired, see note 10(c).

 

 

Notes to the consolidated financial statements (continued)

 

2.3.10

Ore reserve and resource estimates -

 

Ore reserves are estimates of the amount of ore that can be economically and legally extracted from the Group’s mining properties and concessions. The Group estimates its ore reserves and mineral resources, based on information compiled by appropriately qualified persons relating to the geological data on the size, depth and shape of the ore body, and requires complex geological judgments to interpret the data. The estimation of recoverable reserves is based upon factors such as estimates of foreign exchange rates, commodity prices, future capital requirements, and production costs along with geological assumptions and judgments made in estimating the size and grade of the ore body. Changes in the reserve or resource estimates may impact upon the carrying value of exploration and evaluation assets, provision for quarry rehabilitation and depreciation and amortization charges.

 

2.3.11

Provisions -

 

General -

 

Provisions are recognized when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. When the Group expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognized as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in profit or loss net of any reimbursement. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects where appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognized as finance cost in the consolidated statement of profit or loss.

 

Quarry rehabilitation provision -

 

The Group records the present value of estimated costs of legal and constructive obligations required to restore operating locations in the period in which the obligation is incurred. Quarry rehabilitation costs are provided at the present value of expected costs to settle the obligation using estimated cash flows and are recognized as part of the cost of that particular asset. The cash flows are discounted at a current risk-free rate. The unwinding of the discount is expensed as incurred and recognized in the consolidated statement of profit or loss as a finance cost. The estimated future costs of quarry rehabilitation are reviewed annually and adjusted as appropriate. Changes in the estimated future costs or in the discount rate applied are added to or deducted from the cost of the asset, see note 12.

 

Environmental expenditures and liabilities -

 

Environmental expenditures that relate to current or future revenues are expensed or capitalized as appropriate. Expenditures that relate to an existing condition caused by past operations and do not contribute to current or future earnings are expensed.

 

Liabilities for environmental costs are recognized when a clean-up is probable, and the associated costs can be reliably estimated. Generally, the timing of recognition of these provisions coincides with the commitment to a formal plan of action or, if earlier, on divestment or on closure of inactive sites.

 

The amount recognized is the best estimate of the expenditure required. Where the liability will not be settled for a number of years, the amount recognized is the present value of the estimated future expenditure.

 

Onerous contracts -

 

If the Group has an onerous contract, the present obligations arising from it should be recognised and measured as a provision. However, before recognising a provision for an onerous contract, the Group recognises any impairment loss on the assets used to fulfil the obligations arising from that contract.

 

An onerous contract is one in which the unavoidable costs (i.e. the costs that the Group cannot avoid because it has the contract) of fulfilling the obligations under it exceed the economic benefits expected to be received from it. Unavoidable costs correspond to the lower of the cost of complying with the terms of the contract and the amount of payments or penalties arising from non-compliance. The cost of fulfilling a contract includes costs directly related to the contract (i.e. incremental costs and an allocation of costs that directly relate to contract activities).

 

 

Notes to the consolidated financial statements (continued)

 

2.3.12

Employees benefits -

 

The Group has short-term obligations for employee benefits including salaries, severance contributions, legal bonuses, performance bonuses and profit sharing. These obligations are recorded monthly on an accrual basis.

 

Additionally, the Group has a long-term incentive plan for key management. This benefit is settled in cash, measured on the salary of each officer and upon fulfilling certain conditions such as years of experience within the Group and permanency. The Group recognizes the long-term obligation at its present value at the end of the reporting period using the projected credit unit method. To calculate the present value of these long-term obligations the Group uses a government bond discount rate at the date of the consolidated financial statements. This liability is annually reviewed on the date of the consolidated financial statements, and the accrual updates and the effect of changes in discount rates are recognized in the consolidated statement of profit or loss.

 

2.3.13

Revenue recognition -

 

The Group is dedicated to the production and trading of cement, concrete, precast and other minors, as well as trade of construction supplies. These goods are sold in contracts with customers.

 

Revenue is measured at the fair value of the consideration received or receivable, considering contractually defined terms of payment and excluding taxes or duties.

 

The following specific recognition criteria must also be met before revenue is recognized:

 

Sales of goods -

 

Revenue from sale of goods is recognized at the point in time when control of the asset is transferred to the customer, generally on delivery of the goods.

 

The Group considers whether there are other terms in the contract that are separate performance obligations to which a portion of the transaction price needs to be allocated. In determining the transaction price for the sale of goods, the Group considers the effects of variable consideration, the existence of significant financing components, noncash consideration, and consideration payable to the customer (if any).

 

Rendering of services –

 

Transport services

 

In the business segments cement, concrete, precast and construction supplies, the Group provides transportation services. These services are sold together with the sale of the goods to the customer.

 

Transportation services are satisfied when the transport service is concluded, which coincides with the moment of delivery of the goods to the customers.

 

Paving services

 

In the paving business, to satisfy performance obligations over time, the Group shall recognise revenue by measuring progress as progress is made (transferring control of the services) in accordance with the relevant contract.

 

To measure the progress of the paving service, the Group uses the resource method, which states that revenue should be recognised on the basis of the efforts or resources incurred to satisfy the performance obligation (for example, resources consumed, labour hours expended, costs incurred, elapsed time or machinery hours used) in relation to the total resources expected to satisfy the performance obligation.

 

The Group shall present the right or obligation it holds for the delivery of the transferred services to a customer as a contract asset or a contract liability in its statement of financial position when that right or obligation is conditioned by something other than the passage of time.

 

 

Notes to the consolidated financial statements (continued)

 

2.3.14

Taxes -

 

Current income tax -

 

Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the tax authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date in Peru, where the Group operates and generates taxable income.

 

Deferred tax -

 

Deferred tax is determinated on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date.

 

Deferred tax liabilities are recognized for all taxable temporary differences, except in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint arrangements, when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

 

Deferred tax assets are recognized for all deductible temporary differences, the carry forward of unused tax credits and unused tax losses.

 

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized. Unrecognized deferred tax assets are re-assessed at each reporting date and are recognized to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.

 

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.

 

Deferred tax related to items recognized outside profit or loss is recognized outside profit or loss. Deferred tax items are recognized in correlation to the underlying transaction either in OCI or directly in equity.

 

2.3.15

Treasury shares-

 

Own equity instruments which are reacquired (treasury shares) are recognized at cost and deducted from equity. No gain or loss is recognized in the consolidated statement of profit or loss on the purchase, sale, issue or cancellation of the Group’s own equity instruments.

 

2.3.16

Impairment of non-financial assets –

 

The Group assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required (goodwill and Intangible assets with indefinite useful lives), the Group estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s (CGU) fair value less costs of disposal and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.

 

 

Notes to the consolidated financial statements (continued)

 

In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, recent market transactions are considered. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded companies or other available fair value indicators.

 

The Group supports its impairment calculation by using detailed budgets and forecast calculations, which are prepared separately for each of the Group´s CGUs to which the individual assets are allocated.

 

Impairment losses related to continuing operations, including impairment on inventories, are recognized in the consolidated statement of profit or loss in expense categories consistent with the function of the impaired asset.

 

In addition, an assessment is made at each reporting date to determine whether there is any indication that previously recognized impairment losses may no longer exist or have decreased. If such an indication exists, the Group estimates the asset’s or CGU’s recoverable amount. A previously recognized impairment loss is reversed only if there has been a change in the assumptions used to determine the asset’s recoverable amount since the last impairment loss was recognized. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in the consolidated statement of profit or loss.

 

Exploration and evaluation assets are tested for impairment annually as of December 31, either individually or at the cash-generating unit level, as appropriate, and when circumstances indicate that the carrying value may be impaired.

 

As of December 31, 2024 and 2023 there were no signs of impairment for long-lived assets.

 

2.3.17

New amended standards and interpretations –

 

The Group applied for the first-time certain standards and amendments, which are effective for annual periods beginning on or after January 1, 2024. The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.

 

Amendments to IFRS 16 - Lease Liability in a Sale and Leaseback

 

The amendments in IFRS 16 specify the requirements that a seller-lessee uses in measuring the lease liability arising in a sale and leaseback transaction, to ensure the seller-lessee does not recognise any amount of the gain or loss that relates to the right of use it retains.

 

The amendments had no impact on the Group’s financial statements.

 

 

Notes to the consolidated financial statements (continued)

 

Amendments to IAS 1 - Classification of Liabilities as Current or Non-current

 

The amendments to IAS 1 specify the requirements for classifying liabilities as current or non-current. The amendments clarify:

 

-

What is meant by a right to defer settlement

 

-

That a right to defer must exist at the end of the reporting period

 

-

That classification is unaffected by the likelihood that an entity will exercise its deferral right

 

-

That only if an embedded derivative in a convertible liability is itself an equity instrument would the terms of a liability not impact its classification

 

In addition, an entity is required to disclose when a liability arising from a loan agreement is classified as non-current and the entity’s right to defer settlement is contingent on compliance with future covenants within twelve months.

 

The amendments had no impact on the Group’s financial statements.

 

Supplier Finance Arrangements - Amendments to IAS 7 and IFRS 7

 

The amendments to IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments: Disclosures clarify the characteristics of supplier finance arrangements and require additional disclosure of such arrangements.

 

The disclosure requirements in the amendments are intended to assist users of financial statements in understanding the effects of supplier finance arrangements on an entity’s liabilities, cash flows and exposure to liquidity risk.

 

The amendments had no impact on the Group’s financial statements.

 

3.

Significant accounting judgments, estimates and assumptions

 

The preparation of the Group’s consolidated financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.

 

If signs of impairment are identified, the most significant estimate considered by the Company's Management will correspond to the evaluation of the impairment of long-lived assets. As of December 31, 2024 and 2023, Management has not identified signs of impairment for long-lived assets, which is why it considers that there are no significant estimates for those dates.

 

 

Notes to the consolidated financial statements (continued)

 

4.

Standards issued but not yet effective

 

The standards and interpretations relevant to the Group, that will have effect at January 1, 2025 are below:

 

-

Lack of exchangeability – Amendments to IAS 21

 

The amendment is not expected to have a material impact on the Group’s consolidated financial statements.

 

On the other hand, during the period between January 1 and December 31, 2024, the IASB issued the following regulations, which are not yet in force:

 

-

New IFRS 19 Subsidiaries without public accountability: Disclosures.

 

-

New IFRS 18 Presentation and disclosures in financial statements.

 

-

Amendments to IFRS 9 and IFRS 7: Classification and Measurement of Financial Instruments.

 

The adoption of these new regulations is not expected to have a material impact on the Group's consolidated financial statements.

 

5.

Transactions in foreign currency

 

Transactions in foreign currency take place at the open-market exchange rates published by the Superintendence of Banks, Insurance and Pension Funds Administration. As of December 31, 2024 the exchange rates for transactions in United States dollars, published by this institution, were S/3.758 for purchase and S/3.770 for sale (S/3.705 for purchase and S/3.713 for sale as of December 31, 2023).

 

As of December 31, 2024 and 2023, the Group had the following assets and liabilities in United States dollars:

 

		2024				2023
		US$(000)				US$(000)
Assets
Cash and cash equivalents			6,690				5,887
Trade and other receivables, net			4,800				3,259
			11,490				9,146
Liabilities
Trade and other payables			(14,636	)			(19,082	)
			(14,636	)			(19,082	)
Net monetary position			(3,146	)			(9,936	)

 

During 2024, the net loss originated by the exchange difference was approximately S/836,000 (the net gain from exchange difference amounted to S/4,933,000 during 2023). All these results are presented in the heading "Loss (profit) from exchange difference, net" in the consolidated statement of income.

 

 

Notes to the consolidated financial statements (continued)

 

6.

Cash and cash equivalents

 

(a)

This caption was made up as follows:

 

		2024				2023
		S/(000)				S/(000)
Cash on hand			155				182
Cash at banks (b)			48,568				46,611
Short-term deposits (c)			24,000				43,400
			72,723				90,193

 

(b)

Cash at banks is denominated in local and foreign currency, are deposited in local and foreign bank and are freely available. The demand deposits interest yield is based on daily bank deposit rates.

 

(c)

The short-term deposits held in domestic banks were freely available and earned interest at the respective short-term market rates and original maturity less than three months.

 

7.

Trade and other receivables

 

(a)

This caption was made up as follows:

 

		Current								Non-current
		2024				2023				2024				2023
		S/(000)				S/(000)				S/(000)				S/(000)
Trade receivables (b)			95,419				83,840				-				-
Contract asset (d)			26,701				-				-				-
Other accounts receivable			8,613				13,179				-				-
Accounts receivable from Parent company and affiliates, note 22			1,969				1,973				-				-
Interest receivable			963				1,091				-				-
Loans to employees			910				1,061				-				-
Funds restricted to tax payments			393				1,322				-
Other receivables from sale of fixed assets			139				82				-				-
Loans granted			-				1,014				-				-
Allowance for expected credit losses (e) and (f)			(11,486	)			(9,014	)			-				-
Financial assets classified as receivables (f)			123,621				94,548				-				-
Value-added tax credit			7,547				5,140				643				1,193
Claim to the SUNAT (c)			-				-				29,559				29,559
Other accounts receivable			-				-				13,022				12,645
Tax refund receivable			-				-				9,034				9,034
Allowance for expected credit losses (e)			-				-				(9,034	)			(9,034	)
Non-financial assets classified as receivables			7,547				5,140				43,224				43,397
			131,168				99,688				43,224				43,397

 

(b)

Trade account receivables presented net of discounts and bonuses, have current maturity (30 to 90 days) and those overdue bear interest.

 

 

Notes to the consolidated financial statements (continued)

 

(c)

On March 22, 2021, the Company received Tax Court Resolution N° 00905-4-21 that declares the calculation of Mining Royalty should be based on gross sale of the final product (cement) for the years 2008 and 2009. This is an opposite position to what is established by the Constitutional Court in the STC Exp. N° 1043-2013-PA/TC that declares founded the writ of protection presented by the Company and its right to calculate the Mining Royalty exclusively based on the value of the mining component, without considering in any way the value of the final products derived from industrial and manufacturing processes.

 

Pursuant to this, the Company initiated two legal proceedings: (i) a constitutional process to denounce the repression of homogeneous harmful acts, filed on March 31, 2021; and, (ii) a contentious-administrative claim filed before the ordinary court, the object of which was the annulment and return of securities, filed on June 22, 2021.

 

To date, both processes have culminated with resolutions favorable to the Company's claim and it is noted that, with respect to the two aforementioned processes, the resolution issued by virtue of the Constitutional Court's Order, dated December 16, 2024, declares the constitutional grievance appeal well-founded and consequently the respective RTF void and orders the Tax Court to comply with the issuance of new resolutions complying with the judgment issued in STC 1043-2013-PA/TC regarding the calculation also applying to previous years, such as 2008 and 2009.

 

As a consequence of said administrative ruling, it is appropriate for SUNAT, either directly or through enforcement, to proceed with the return of the amounts paid by the Company amounting to S/29,559,000, since this constitutes a direct effect of the execution of the mandate ordered by the Constitutional Court. To date, we are awaiting the aforementioned refund and the Company is taking the corresponding legal actions for the recovery of said payments, which, in the opinion of Management and its external legal advisors, has a very high probability of obtaining a favorable result.

 

(d)

It corresponds mainly to paving services whose recognition is carried out according to the provisions of note 2.3.13.

 

(e)

The movement of the allowance for expected credit losses is as follows:

 

		2024				2023				2022
		S/(000)				S/(000)				S/(000)
Opening balance			18,048				16,467				14,573
Additions, note 19			2,751				1,707				1,972
Recoveries			(279	)			(126	)			(78	)
Ending balance			20,520				18,048				16,467

 

As of December 31, 2024, the additions include S/2,751,000 related to the provision for expected credit losses for trade receivables (S/1,707,000 as of December 31, 2023), which are presented in the caption "selling and distribution expenses” on the consolidated statement of profit and loss, see note 19.

 

 

Notes to the consolidated financial statements (continued)

 

(f)

The aging analysis of trade and other accounts receivable as of December 31, 2024 and 2023, is as follows:

 

										Past due but not impaired
As of December 31, 2024		Total				Neither past due nor impaired				< 30 days				30-60 days				61-90 days				91-120 days				> 120 days
		S/(000)				S/(000)				S/(000)				S/(000)				S/(000)				S/(000)				S/(000)
Expected credit loss rate			8.5	%			0.2	%			2.0	%			2.8	%			2.6	%			8.6	%			82.5	%
Carrying amount 2024			135,107				100,356				11,131				5,109				4,326				1,275				12,910
Expected credit loss			11,486				244				228				145				114				110				10,645

 

										Past due but not impaired
As of December 31, 2023		Total				Neither past due nor impaired				< 30 days				30-60 days				61-90 days				91-120 days				> 120 days
		S/(000)				S/(000)				S/(000)				S/(000)				S/(000)				S/(000)				S/(000)
Expected credit loss rate			8.7	%			0.2	%			1.0	%			0.8	%			7.6	%			20.5	%			64.4	%
Carrying amount 2023			103,562				62,120				20,566				4,525				2,435				1,195				12,721
Expected credit loss			9,014				147				206				37				186				245				8,193

 

8.

Inventories

 

(a)

This caption is made up as follows:

 

		2024				2023
		S/(000)				S/(000)
Goods and finished products			18,234				16,488
Work in progress			221,837				173,569
Raw materials			254,141				329,598
Packages and packing			3,441				3,944
Fuel			3,552				3,899
Spare parts and supplies			259,601				251,006
Inventory in transit			13,191				12,570
			773,997				791,074

 

(b)

As of December 31, 2024 and 2023, the amount of the provision for inventory obsolescence amounts to S/33,880,000 and S/27,525,000, respectively. In the years 2024 and 2023, the net effect of recoveries and write-offs recognized in the consolidated statement of profit or loss for S/6,418,000 and S/2,956,000, respectively.

 

 

Notes to the consolidated financial statements (continued)

 

9.

Property, plant and equipment

 

(a)

The composition and movement of the item as of the date of the consolidated statement of financial position is presented below:

 

		Mining concessions (b)				Mine development costs (b)				Land				Buildings and other construction				Machinery, equipment and related spare parts				Furniture and accessories				Transportation units				Computer equipment and tools				Quarry rehabilitation costs				Capitalized interest (f)				Work in progress (d) and units in transit				Total
		S/(000)				S/(000)				S/(000)				S/(000)				S/(000)				S/(000)				S/(000)				S/(000)				S/(000)				S/(000)				S/(000)				S/(000)
Cost
As of January 1, 2023			75,914				65,842				255,135				694,554				1,711,540				11,080				107,337				41,304				11,775				68,165				172,821				3,215,467
Additions			36,184				19,870				3,449				-				25,891				432				160				3,209				4,458				6,132				174,435				274,220
Sales and/or retirement			-				(101	)			-				-				(41,075	)			(162	)			(2,064	)			(316	)			-				-				(559	)			(44,277	)
Transfers, note 10			-				(14,521	)			-				127,675				186,727				(271	)			(50	)			990				-				-				(300,616	)			(66	)
As of December 31, 2023			112,098				71,090				258,584				822,229				1,883,083				11,079				105,383				45,187				16,233				74,297				46,081				3,445,344
Additions			-				1,023				1,827				-				20,710				872				2,472				4,164				1,465				-				40,788				73,321
Sales and/or retirement			(1,668	)			(247	)			(268	)			-				(1,056	)			(136	)			(4,825	)			(227	)			-				-				(1,149	)			(9,576	)
Transfers, note 10			-				(8,077	)			-				214,297				(162,491	)			149				2,063				1,603				-				-				(47,778	)			(234	)
As of December 31, 20234			110,430				63,789				260,143				1,036,526				1,740,246				11,964				105,093				50,727				17,698				74,297				37,942				3,508,855
Accumulated depreciation
As of January 1, 2023			12,400				10,868				-				176,478				783,525				8,408				79,014				25,429				2,522				10,542				-				1,109,186
Additions			72				422				-				20,113				98,915				516				6,252				3,606				128				1,625				-				131,649
Sales and/or retirement			-				(56	)			-								(22,620	)			(153	)			(1,896	)			(201	)			-				-				-				(24,926	)
Transfers, note 10			-				-				-				2,065				(2,030	)			-				(35	)			-				-				-				-				-
As of December 31, 2023			12,472				11,234				-				198,656				857,790				8,771				83,335				28,834				2,650				12,167				-				1,215,909
Additions			72				424				-				21,858				104,237				484				5,300				4,184				167				1,646				-				138,372
Sales and/or retirement			(259	)			-				-				-				(760	)			(124	)			(4,339	)			(207	)			-				-				-				(5,689	)
Transfers, note 10			-				(171	)			-				86,734				(86,431	)			-				-				-				-				-				-				132
As of December 31, 2024			12,285				11,487				-				307,248				874,836				9,131				84,296				32,811				2,817				13,813				-				1,348,724
Impairment (b)
As of January 1, 2023			42,859				24,048				3,624				13,579				12,918				200				26				454				-				-				735				98,443
Additions			9,197				525				361				17,459				17,669				8				1				-				-				1,413				2,686				49,319
Lows			-				-				-				-				(17,669	)			(8	)			(1	)			-				-				-				-				(17,678	)
As of December 31, 2023			52,056				24,573				3,985				31,038				12,918				200				26				454				-				1,413				3,421				130,084
Lows			(1,092	)			-				-				-				-				-				-				-				-				-				-				(1,092	)
As of December 31, 2024			50,964				24,573				3,985				31,038				12,918				200				26				454				-				1,413				3,421				128,992
Net book value
As of December 31, 2023			47,570				35,283				254,599				592,535				1,012,375				2,108				22,022				15,899				13,583				60,717				42,660				2,099,351
As of December 31, 2024			47,181				27,729				256,158				698,240				852,492				2,633				20,771				17,462				14,881				59,071				34,521				2,031,139

 

 

Notes to the consolidated financial statements (continued)

 

(b)

Mining concessions mainly include acquisitions costs related to coal concessions acquired in previous years and the cost of certain concessions acquired in January 2023 for exploration activities in areas of interest to the cement business for S/34,350,000, through the purchase of the company Corporación Materiales Piura S.A.C.

 

(c)

The Group has assessed the recoverable value of its remaining property, plant and equipment and, except as specifically mentioned in (g), has not identified indications of impairment losses for these assets as of December 31, 2024 and 2023.

 

(d)

Work in progress included in property, plant and equipment as of December 31, 2024 and 2023 is mainly related to complementary facilities of the cement plants.

 

(e)

As of December 31, 2024, the Group maintains accounts payable related to the acquisition of property, plant and equipment for S/17,122,000 (S/9,379,000 as of December 31, 2023), see note 11.

 

(f)

The borrowing costs are mainly related to the construction of the cement plant located in Piura and to a lesser extent to the construction of the Clinker Lines Optimization Project – Kiln 4 in the city of Pacasmayo. Both plants are already in operation.

 

(g)

In previous years management recognized a full impairment related to the total net book value of a closed zinc mining unit which included concession costs, development costs and related facilities and equipment.

 

At the end of 2023, Management recognized a specific impairment to retirement for the net value of the assets of the vertical clinker kilns located at the Pacasmayo cement plant for a net cost of S/36,551,000. This deterioration estimate was carried out as a consequence of replacing the old technology of these kilns due to the entry into operation of the Clinker Lines Optimization Project – Kiln 4 in said plant, which is more efficient and produces fewer emissions. This amount was recorded in the impairment of property, plant and equipment item in the consolidated statement of profit or loss.

 

Likewise, in that year, Management recognized an impairment to retirement of the value of the coal concessions (northern zone) for S/11,393,000, recorded in other operating income (expenses) item of the consolidated statement of profit or loss.

 

 

Notes to the consolidated financial statements (continued)

 

10.

Intangibles assets, net

 

(a)

The composition and movement of this caption as of the date of the consolidated statement of financial position is presented below:

 

		IT applications				Finite life intangible				Indefinite life intangible				Exploration cost and mining evaluation (b)				Total
		S/(000)				S/(000)				S/(000)				S/(000)				S/(000)
Cost
As of January 1, 2023			56,067				24,543				1,975				52,323				134,908
Additions			15,667				-				-				523				16,190
Disposals			(593	)			-				-				-				(593	)
Transfers and reclassifications, note 9			66				-				-				-				66
As of December 31, 2023			71,207				24,543				1,975				52,846				150,571
Additions			15,357				-				-				1,412				16,769
Sales and/or retirement			(158	)			-				-				(887	)			(1,045	)
Transfers and reclassifications, note 9			805				-				-				(571	)			234
As of December 31, 2024			87,211				24,543				1,975				52,800				166,529
Accumulated amortization
As of January 1, 2023			23,858				10,619				71				9,574				44,122
Additions			6,939				2,454				-				313				9,706
Transfers and reclassifications, note 9			(554	)			-				-				-				(554	)
As of December 31, 2023			30,243				13,073				71				9,887				53,274
Additions			12,620				2,454				-				340				15,414
Transfers, note 9			-				-				-				(132	)			(132	)
As of December 31, 2024			42,863				15,527				71				10,095				68,556
Impairment (b)
As of January 1, 2023			456				-				-				33,469				33,925
Additions			-				-				-				452				452
As of December 31, 2023			456				-				-				33,921				34,377
As of December 31, 2024			456				-				-				33,921				34,377
Net Carrying Value
As of December 31, 2023			40,508				11,470				1,904				9,038				62,920
As of December 31, 2024			43,892				9,016				1,904				8,784				63,596

 

(b)

As of December 31, 2024 and 2023, the exploration cost and mining evaluation include mainly capital expenditures related to the coal project and to other minor projects related to the cement business.

 

(c)

As of December 31, 2024 and 2023, the Group evaluated the conditions of use of the projects related to the exploration and mining evaluation costs and its other intangibles, not finding any indicators of impairment in said assets.

 

 

Notes to the consolidated financial statements (continued)

 

11.

Trade and other payables

 

(a)

This balance is made up as follows:

 

		2024				2023
		S/(000)				S/(000)
Trade payables (b)			96,549				107,327
Remuneration payable			36,405				27,792
Interest payable (d)			28,280				29,828
Taxes and contributions			18,747				17,225
Accounts payable related to the acquisition of property, plant and equipment, note 9(e)			17,122				9,379
Dividends payable, note 15(g)			11,097				10,322
Advances from customers			10,380				7,383
Contract liabilities			-				8,343
Board of Directors’ fees			5,243				4,700
Guarantee deposits			3,242				3,488
Account payable to the principal and affiliates, note 22			23				516
Other accounts payable			14,963				5,208
			242,051				231,511

 

(b)

Trade accounts payable result from the purchases of material, services and supplies for the Group’s operations, and mainly correspond to invoices payable to domestic suppliers. Trade payables are non-interest bearing and are normally settled within 60 to 120 days term.

 

(c)

Other payables are non-interest bearing and have an average term of 3 months.

 

(d)

Interest payable is normally settled semiannually throughout the financial year.

 

 

Notes to the consolidated financial statements (continued)

 

12.

Provisions

 

(a)

This balance is made up as follows:

 

		Workers’ profit-sharing (b)				Long-term incentive plan (c)				Quarry Rehabilitation provision (d)				Provision of legal contingencies				Total
		S/(000)				S/(000)				S/(000)				S/(000)				S/(000)
At January 1, 2023			31,333				31,985				13,377				2,276				78,971
Additions (b), note 20			35,258				7,632				-				-				42,890
Exchange difference			-				-				(292	)			-				(292	)
Unwinding of discounts, note 21			-				1,691				133				-				1,824
Change in estimate			-				-				4,458				-				4,458
Payments and advances			(32,263	)			(11,625	)			-				-				(43,888	)
At December 31, 2023			34,328				29,683				17,676				2,276				83,963
Current portion			34,328				22,182				-				-				56,510
Non-current portion			-				7,501				17,676				2,276				27,453
			34,328				29,683				17,676				2,276				83,963
At January 1, 2024			34,328				29,683				17,676				2,276				83,963
Additions (b), note 20			39,223				7,167				-				-				46,390
Exchange difference			-				-				234				-				234
Unwinding of discounts, note 21			-				431				125				-				556
Change in estimate			-				-				1,250				-				1,250
Payments and advances			(35,288	)			(23,343	)			(280	)			(1,073	)			(59,984	)
At December 31, 2024			38,263				13,938				19,005				1,203				72,409
Current portion			38,263				6,000				-				-				44,263
Non-current portion			-				7,938				19,005				1,203				28,146
			38,263				13,938				19,005				1,203				72,409

 

 

Notes to the consolidated financial statements (continued)

 

(b)

Workers’ profit sharing -

 

In accordance with Peruvian legislation, the Group is obliged to pay its employees profit sharing of between 8% and 10% of annual taxable income. Distributions to employees under the plan are based 50% on the number of days that each employee worked during the preceding year and 50% on proportionate annual salary levels.

 

The workers’ profit sharing is recognized in the following line items:

 

		2024				2023				2022
		S/(000)				S/(000)				S/(000)
Cost of sales, note 20			19,334				15,244				15,165
Administrative expenses, note 20			15,669				15,210				12,520
Selling and distribution expenses, note 20			4,139				3,804				3,287
Investment			81				1,000				1,189
			39,223				35,258				32,161

 

(c)

Long-term incentive plan -

 

In 2011, the Group implemented a compensation plan for its key management. This long-term benefit is payable in cash, based on the salary of each officer and depends on the years of service of each officer in the Group. According to the latest plan update, the executive would receive the equivalent of an annual salary for each year of service beginning to accrue from 2019. This benefit accrues and accumulates for each officer and is payable in two installments: the first payment will be made on the sixth year after the creation of this bonus plan, and the last payment at the end of the ninth year from the creation of the plan. If the executive decides to voluntarily leave the Group before a scheduled distribution, they will not receive this compensation. The Group used the Projected Unit Credit Method to determine the present value of this deferred obligation and the related current deferred cost, considering the expected increases in salary base and the corresponding current government bond discount rate (risk-free rate).

 

(d)

Quarry Rehabilitation provision -

 

As of December 31, 2024 and 2023, it corresponds to the provision for the future costs of rehabilitating the quarries exploited in Company’s operations. The provision has been created based on studies made by internal specialists. Management believes that the assumptions used, based on current economic environment, are a reasonable basis upon which to estimate the future liability. These estimates are reviewed regularly to consider any material change to the assumptions. However, actual quarry rehabilitation costs will ultimately depend upon future market prices for the necessary decommissioning works required to reflect future economic conditions.

 

Future cash flows have been estimated based on financial budgets approved by Management. The range of the risk-free discount rate in dollars used in the calculation of the provision as of December 31, 2024 was from 0.53 to 4.86 percent and the risk-free discount rate in dollars used in the calculation of the provision as of December 31, 2023 was from 0.52 to 4.20 percent.

 

Management expects to incur a significant part of this obligation in the medium and long-term. The Group estimates that this liability is sufficient according to the current environmental protection laws approved by the Ministry of Energy and Mines of Peru.

 

 

Notes to the consolidated financial statements (continued)

 

13.

Financial obligations

 

(a)

This caption is made up as follows:

 

		Currency			Nominal interest rate			Maturity			20224				2023
											S/(000)				S/(000)
Short -term promissory notes
Banco de Crédito del Perú		S/			6.51	%		January 13, 2025			38,000				-
Banco de Crédito del Perú		S/			6.51	%		January 16, 2025			38,000				-
Banco de Crédito del Perú		S/			6.35	%		February 21, 2025			38,000				-
Scotiabank		S/			5.94	%		March 10, 2025			37,200				-
Banco GNB Perú		S/			4.88	%		November 17, 2025			38,000				-
Banco de Crédito del Perú		S/			4.85	%		November 24, 2025			38,000				-
Banco de Crédito del Perú		S/			4.85	%		December 5, 2025			76,000				-
Banco de Crédito del Perú		S/			9.44	%		January 22, 2024			-				38,000
BBVA Perú		S/			9.78	%		January 19, 2024			-				38,000
BBVA Perú		S/			8.83	%		March 15, 2024			-				19,000
BBVA Perú		S/			8.83	%		March 15, 2024			-				19,000
BBVA Perú		S/			6.98	%		December 12, 2024			-				25,300
BBVA Perú		S/			6.98	%		December 12, 2024			-				25,300
BBVA Perú		S/			6.98	%		December 12, 2024			-				25,400
BBVA Perú		S/			7.32	%		November 22, 2024			-				19,000
BBVA Perú		S/			7.32	%		November 22, 2024			-				19,000
											303,200				228,000
Senior Notes (b)
Principal, net of issuance costs		S/			6.69	%		February 1, 2029			259,748				259,686
Principal, net of issuance costs		S/			6.84	%		February 1, 2034			309,555				309,506
											569,303				569,192
Short and long-term Corporate Loan under “Club deal” (c)
Banco de Crédito del Perú		S/			5.82	%		December 1,2028			310,344				387,917
Scotiabank		S/			5.82	%		December 1,2028			310,344				387,917
											620,688				775,834
											1,493,191				1,573,026
Maturity
Current											458,346				383,146
Non-current											1,034,845				1,189,880
											1,493,191				1,573,026

 

 

Notes to the consolidated financial statements (continued)

 

(b)

Senior Notes -

 

(b.1)

Senior Notes in Soles

 

On January 31, 2019, senior notes were issued for: i) S/260,000,000 at a rate of 6.688 percent per year and maturity of 10 years and; ii) S/310,000,000 at a rate of 6.844 percent per year and maturity of 15 years.

 

The Senior Notes in soles issued in 2019 are guaranteed by the following Company’s subsidiaries: Cementos Selva S.A.C., Distribuidora Norte Pacasmayo S.R.L., Empresa de Transmisión Guadalupe S.A.C. and Dinoselva Iquitos S.A.C.

 

(b.2)

Financial covenants

 

The corporate bond contracts have the following covenants limiting the incurring of indebtedness for the Company and its collateral subsidiaries, which are measured prior to the following transactions: issuance of debt or equity instruments, merger with another company or disposition or rental . of significant assets. The agreements are the following:

 

-

A fixed charge covenant ratio of at least 2.5 to 1.

 

-

A consolidated debt-to-EBITDA ratio of no greater than 3.5 to 1.

 

As of December 31, 2024 and 2023, these covenants have not been activated because no situation has occurred that requires their measurement, as indicated in the previous paragraph.

 

For the years ended December 31, 2024, 2023 and 2022, senior notes generated interest that has been recognized in the consolidated statement of profit or loss for S/38,603,000, S/38,690,000 and S/60,225,000, respectively, see note 21.

 

(c)

Medium-term Corporate Loan under “Club Deal” modality:

 

On August 6, 2021, the Company established the conditions of a medium-term corporate loan under “Club Deal” modality with Banco de Crédito del Perú S.A. and Scotiabank Perú S.A.A. The loan amounts to S/860,000,000 that allowed the payment of all the financial obligations that the Company maintains with a maturity until February 2023. The loan conditions include a grace / availability period of 18 months from August 6 and a payment term of 7 years from the last disbursement, which was in February 2023. Since that date, the loan will be paid in 22 equal quarterly installments and has an annual interest rate of 5.82 percent.

 

As part of the loan conditions, the Company assumed the following obligations:

 

I.

Comply with the following financial covenants:

 

a.

Debt Ratio (Financial Debt / EBITDA) <= 3.50x

 

b.

Debt Service Coverage Ratio (FCSD / SD) >= 1.15x

 

c.

Debt Service Coverage Ratio (EBITDA / SD) >= 1.50x

 

These financial safeguards will be calculated and verified at the end of each calendar quarter, considering the information of the consolidated financial statements of the Company for the last 12 months, prepared in accordance with IFRS.

 

As of December 31, 2024 and 2023, the Company complies with the ratios contained in the conditions of the Club Deal and corporate bonds and has certain do’s and don’ts obligations that it has been complying with to date.

 

 

Notes to the consolidated financial statements (continued)

 

14.

Deferred income tax assets and liabilities

 

The following is the composition of the caption according to the items that originated it:

 

		As of January 1, 2023				Effect on profit or loss				Effect on OCI				Quarry rehabilitation provision				As of December 31, 2023				Effect on profit or loss				Effect on OCI				Quarry rehabilitation provision				As of December 31, 2024
		S/(000)				S/(000)				S/(000)				S/(000)				S/(000)				S/(000)				S/(000)				S/(000)				S/(000)
Movement of deferred income tax assets:
Deferred income tax assets
Impairment of investments in subsidiary			-				-				-				-				-				7,375				-				-				7,375
Provision for expected credit losses on trade accounts receivable			2,088				473				-				-				2,561				730				-				-				3,291
Provision of discounts and bonuses to customers			1,779				85				-				-				1,864				827				-				-				2,691
Provision for vacations			2,101				114				-				-				2,215				243				-				-				2,458
Effect of differences between book and tax bases of fixed assets			342				934				-				-				1,276				2				-				-				1,278
Effect of differences between book and tax bases of inventories			55				-				-				-				55				808				-				-				863
Estimate for devaluation of spare parts and supplies.			435				(13	)			-				-				422				177				-				-				599
Legal claim contingency			461				-				-				-				461				(148	)			-				-				313
Lease liability			700				(259	)			-				-				441				(297	)			-				-				144
Tax loss carryforward			693				(693	)			-				-				-				-				-				-				-
Others			894				1,537				-				-				2,431				417				-				-				2,848
			9,548				2,178				-				-				11,726				10,134				-				-				21,860
Deferred income tax liabilities
Right of use assets			(560	)			245				-				-				(315	)			254				-				-				(61	)
Others			17				-				-				-				17				-				-				-				17
			(543	)			245				-				-				(298	)			254				-				-				(44	)
Total deferred income tax liabilities, net			9,005				2,423				-				-				11,428				10,388				-				-				21,816

 

 

Notes to the consolidated financial statements (continued)

 

		As of January 1, 2023				Effect on profit or loss				Effect on OCI				Quarry rehabilitation provision				As of December 31, 2023				Effect on profit or loss				Effect on OCI				Quarry rehabilitation provision				As of December 31, 2024
		S/(000)				S/(000)				S/(000)				S/(000)				S/(000)				S/(000)				S/(000)				S/(000)				S/(000)
Movement of deferred income tax liabilities:
Deferred income tax assets
Project deterioration Salmueras			18,030				215				-				-				18,245				192				-				-				18,437
Impairment of fixed assets			-				8,928				-				-				8,928				(322	)			-				-				8,606
Provision for compensation to officials			9,435				(679	)			-				-				8,756				(4,645	)			-				-				4,111
Estimation for impairment of mining assets			7,655				(275	)			-				-				7,380				(295	)			-				-				7,085
Financial instrument at fair value with changes in other comprehensive income			6,807				-				7				-				6,814				-				109				-				6,923
Estimate for depreciation of spare parts and supplies			5,924				759				-				-				6,683				1,725				-				-				8,408
Provision for quarry closure			3,563				802				-				1,373				5,738				(532	)			-				439				5,645
Provision for vacations			3,884				336				-				-				4,220				176				-				-				4,396
Lease liability			428				798				-				-				1,226				708				-				-				1,934
Provision for expected credit losses on trade accounts receivable			653				454				-				-				1,107				(69	)			-				-				1,038
Legal claim contingency			210				-				-				-				210				(169	)			-				-				41
Others			328				1,118				-				-				1,446				1500				-				-				2,946
			56,917				12,456				7				1,373				70,753				(1,731	)			109				439				69,570
Deferred income tax liabilities
Effect of the difference between accounting and tax bases of fixed assets and the difference in depreciation rates			(187,236	)			199				-				(1,373	)			(188,410	)			4,867				-				(439	)			(183,982	)
Effect of costs incurred from bond issuance			(2,371	)			391				-				-				(1,980	)			392				-				-				(1,588	)
Right of use assets			(392	)			(805	)			-				-				(1,197	)			(698	)			-				-				(1,895	)
Net gain from cash flow derivatives			(8,511	)			9,145				(634	)			-				-				-				-				-				-
Others			(42	)			-				-				-				(42	)			-				-				-				(42	)
			(198,552	)			8,930				(634	)			(1,373	)			(191,629	)			4,561				-				(439	)			(187,507	)
Total deferred income tax liabilities, net			(141,635	)			21,386				(627	)			-				(120,876	)			2,830				109				-				(117,937	)
							23,809				(627	)											13,218				109

 

 

Notes to the consolidated financial statements (continued)

 

The Group offsets tax assets and liabilities if and only if it has a legally enforceable right to set off current tax assets and current tax liabilities, and the tax assets and deferred tax liabilities relate to income taxes levied by the same tax authority. The legal right is defined for each individual determination of the income tax of the Company and its Subsidiaries.

 

A reconciliation between tax expense and the product of the accounting profit multiplied by Peruvian tax rate for the years ended December 31, 2024, 2023 and 2022 are as follows:

 

		2024				2023				2022
		S/(000)				S/(000)				S/(000)
Profit before income tax			296,187				245,708				262,420
Income tax expense calculated at the statutory income tax rate of 29.5%			(87,375	)			(72,484	)			(77,414	)
Permanent differences
Non-deductible expenses, net			(3,114	)			(2,369	)			(7,415	)
Effect of tax-loss carry forward not recognized			(6,823	)			(1,955	)			(763	)
Income tax with effective rate
2024: 33% (2023: 31% 2022: 33%)			(97,312	)			(76,808	)			(85,592	)

 

The components of the deferred income tax related to the items recognized in the consolidated statements of profit or loss during the years ended December 31, 2024, 2023 and 2022, are as follow:

 

		2024				2023				2022
		S/(000)				S/(000)				S/(000)
Consolidated statement of profit or loss
Current			(110,530	)			(100,617	)			(93,286	)
Deferred			13,218				23,809				7,694
			(97,312	)			(76,808	)			(85,592	)

 

As of December 31, 2024, 2023 and 2022, the Group had not recognized a deferred tax liability for taxes that would be payable on the unremitted earnings of the Group’s subsidiaries. The Group has determined that the timing differences will be reversed by means of dividends to be received in the future that, according to the current tax rules in effect in Peru, are not subject to income tax.

 

As of December 31, 2024, certain subsidiaries of the Group had tax loss carryforwards of S/92,998,000 (2023 S/44,868,000). These tax loss carryforwards do not expire, are related to subsidiaries that have a history of losses for some time and cannot be used to offset future taxable profits of other Group subsidiaries. No deferred tax assets have been recognized in relation to these tax loss carryforwards, since there are no possibilities of tax planning opportunities or other evidence of recovery in the near future.

 

For information purposes, the temporary difference associated with investments in subsidiaries, would generate an aggregate deferred tax liability amounting to S/102,730,000 (2023: S/126,972,000), which should not be recognized in the consolidated financial statements as it is not expected to reverse in the foreseeable future and the Company is in control of such reversal.

 

 

Notes to the consolidated financial statements (continued)

 

15.

Equity

 

(a)

Capital stock -

 

As of December 31, 2024 and 2023, share capital was represented by 423,868,449 authorized common shares subscribed and fully paid, with a nominal value of one Soles per share. As of December 31, 2024, the total outstanding common shares were as follows; 34,103766 were listed on the New York Stock Exchange and 389,764,683 were listed on the Lima Stock Exchange. As of December 31, 2023, of the total outstanding common shares were as follow; 35,753,501 were listed on the New York Stock Exchange and 388,114,948 were listed on the Lima Stock Exchange

 

(b)

Investment shares -

 

Investment shares do not have voting rights or participate in shareholder’s meetings or the appointment of directors. Investment shares confer upon the holders thereof the right to participate in dividends distributed according to their nominal value, in the same manner as common shares. Investment shares also confer the holders thereof the right to:

 

(i)

maintain the current proportion of the investment shares in the case of capital increase by new contributions;

 

(ii)

increase the number of investment shares upon capitalization of retained earnings, revaluation surplus or other reserves that do not represent cash contributions;

 

(iii)

participate in the distribution of the assets resulting from liquidation of the Company in the same manner as common shares; and,

 

(iv)

redeem the investment shares in case of a merger and/or change of business activity of the Company.

 

As of December 31, 2024 and 2023, the Company had 40,278,894 investment shares subscribed and fully paid, with a nominal value of one Sol per share.

 

(c)

Treasury shares -

 

As of December 31, 2024 and 2023, the Company maintains 36,040,497 investment shares held in treasury amounting to S/121,258,000.

 

(d)

Additional paid-in capital -

 

As of December 31, 2024 and 2023, the additional capital amounted to S/432,779,000 and arises mainly as a result of the excess of total proceeds obtained versus par value in the issuance of 111,484,000 common shares and 927,783 investment shares corresponding to a public offering of American Depositary Shares (ADS) registered with the New York Stock Exchange and Lima Stock Exchange.

 

(e)

Legal reserve -

 

Provisions of the General Corporation Law require that a minimum of 10 per cent of the distributable earnings for each period, after deducting the income tax, be transferred to a legal reserve until such is equal to 20 per cent of the capital. This legal reserve can offset losses or can be capitalized, and in both cases, there is the obligation to replenish it.

 

(f)

Other accumulated comprehensive results -   This reserve records changes in the fair value of financial instruments at fair value through OCI.

 

(g)

Distributions made and proposed –

 

		2024				2023				2022
Approval date by Board of Directors		October 28, 2024				November 7, 2023				October 10, 2022
Declared dividends per share to be paid in cash S/.			0.41000				0.41000				0.42000
Declared dividends S/(000):			175,524				175,524				179,805

 

As of December 31, 2024 and 2023, dividends payable amounted to S/11,097,000 and S/10,322,000, respectively, see note 11.

 

 

Notes to the consolidated financial statements (continued)

 

16.

Sales of goods

 

This caption is made up as follows:

 

		For the year ended of December 31, 2024
		Cement				Concrete, pavement and mortar				Precast				Construction supplies				Other				Total
		S/(000)				S/(000)				S/(000)				S/(000)				S/(000)				S/(000)
Segments
Sale of cement, concrete, pavement, mortar and precast			1,605,472				271,276				30,101				-				-				1,906,849
Sale of construction supplies			-				-				-				56,873				-				56,873
Sale of other			-				-				-				-				14,349				14,349
			1,605,472				271,276				30,101				56,873				14,349				1,978,071
Timing of revenue recognition
Goods and services transferred at a point in time			1,605,472				183,686				30,101				56,873				14,349				1,890,481
Services transferred over time			-				87,590				-				-				-				87,590
			1,605,472				271,276				30,101				56,873				14,349				1,978,071

 

		For the year ended of December 31, 2023
		Cement				Concrete, pavement and mortar				Precast				Construction supplies				Other				Total
		S/(000)				S/(000)				S/(000)				S/(000)				S/(000)				S/(000)
Segments
Sale of cement, concrete, pavement, mortar and precast			1,642,420				182,278				25,540				-				-				1,850,238
Sale of construction supplies			-				-				-				74,096				-				74,096
Sale of other			-				-				-				-				25,741				25,741
			1,642,420				182,278				25,540				74,096				25,741				1,950,075
Timing of revenue recognition
Goods and services transferred at a point in time			1,642,420				161,222				25,540				74,096				25,741				1,929,019
Services transferred over time			-				21,056				-				-				-				21,056
			1,642,420				182,278				25,540				74,096				25,741				1,950,075

 

 

Notes to the consolidated financial statements (continued)

 

		For the year ended of December 31, 2022
		Cement				Concrete, pavement and mortar				Precast				Construction supplies				Other				Total
		S/(000)				S/(000)				S/(000)				S/(000)				S/(000)				S/(000)
Segments
Sale of cement, concrete, pavement, mortar and precast			1,742,704				189,945				31,177				-				-				1,963,826
Sale of construction supplies			-				-				-				114,024				-				114,024
Sale of other			-				-				-				-				37,896				37,896
			1,742,704				189,945				31,177				114,024				37,896				2,115,746
Time of revenue recognition
Goods and services transferred at a point in time			1,742,704				189,945				31,177				114,024				37,896				2,115,746
			1,742,704				189,945				31,177				114,024				37,896				2,115,746

 

For all segments the terms of payment are usually between 30 and 90 days from the date of dispatch.

 

For all segments, the amounts presented as sales of the different products are already net of discounts and bonuses.

 

17.

Cost of sales

 

This caption is made up as follows:

 

		2024				2023				2022
		S/(000)				S/(000)				S/(000)
Beginning balance of goods and finished products			16,916				20,037				25,304
Beginning balance of work in progress			174,224				186,937				135,008
Consumption of miscellaneous supplies			395,718				429,069				607,518
Maintenance and third-party services			282,045				244,722				277,250
Shipping costs			166,134				177,393				201,849
Depreciation and amortization			134,322				125,494				121,871
Personnel expenses, note 20(b)			158,103				125,318				125,683
Costs of packaging			54,889				66,456				81,023
Other manufacturing expenses			109,602				76,337				95,183
Ending balance of goods and finished products			(19,916	)			(16,916	)			(20,037	)
Ending balance of work in progress			(222,492	)			(174,224	)			(186,937	)
			1,249,545				1,260,623				1,463,715

 

 

Notes to the consolidated financial statements (continued)

 

18.

Administrative expenses

 

This caption is made up as follows:

 

		2024				2023				2022
		S/(000)				S/(000)				S/(000)
Personnel expenses, note 20(b)			136,776				125,072				116,748
Third-party services			75,774				68,329				72,172
Depreciation and amortization			17,107				15,258				14,529
Donations			8,598				9,028				8,494
Taxes			7,569				6,788				5,669
Board of Directors compensation			6,032				5,941				6,112
Consumption of supplies			1,527				1,551				1,715
			253,383				231,967				225,439

 

19.

Selling and distribution expenses

 

This caption is made up as follows:

 

		2024				2023				2022
		S/(000)				S/(000)				S/(000)
Personnel expenses, note 20(b)			43,700				41,642				42,300
Third-party services			13,292				12,270				11,106
Advertising and promotion			9,140				7,548				6,417
Depreciation			5,953				2,744				2,138
Allowance for expected credit losses, note 7(e)			2,751				1,707				1,972
Other			6,574				3,658				3,442
			81,410				69,569				67,375

 

 

Notes to the consolidated financial statements (continued)

 

20.

Employee benefits expenses

 

(a)

Employee benefits expenses are made up as follow:

 

		2024				2023				2022
		S/(000)				S/(000)				S/(000)
Wages and salaries			186,293				162,252				165,530
Social contributions			39,241				33,868				32,966
Workers ‘profit sharing, note 12(b)			39,142				34,258				30,972
Legal bonuses			27,205				23,013				20,556
Vacations			23,567				22,226				18,481
Cessation payments			12,513				6,308				4,511
Long-term incentive plan, note 12			7,167				7,632				8,272
Training			2,297				1,332				2,307
Other			1,496				1,143				1,136
			338,921				292,032				284,731

 

(b)

Employee benefits expenses are allocated as follows:

 

		2024				2023				2022
		S/(000)				S/(000)				S/(000)
Cost of sales, note 17			158,103				125,318				125,683
Administrative expenses, note 18			136,776				125,072				116,748
Selling and distribution expenses, note 19			43,700				41,642				42,300
Miscellaneous expenses			342				-				-
			338,921				292,032				284,731

 

21.

Finance costs

 

This caption is made up as follows:

 

		2024				2023				2022
		S/(000)				S/(000)				S/(000)
Interest on Club Deal promissory note and loan, note 13(c)			59,077				59,643				14,920
Interest on senior notes, note 13 (b.2)			38,603				38,690				60,225
Expenses for the purchase and amortization of issuance costs of senior notes			1,328				1,249				1,027
Interest on lease liabilities			730				573				317
Financial cost of cash flow hedging instruments			-				1,730				15,155
Counterparty credit risk in cross currency swaps			-				12				62
Interest for bank overdraft			-				31				-
Other			14				293				2,108
Total interest expense			99,752				102,221				93,814
Unwinding of discount of provisions, note 12			556				1,824				1,291
			100,308				104,045				95,105

 

 

Notes to the consolidated financial statements (continued)

 

22.

Related parties

 

Transactions with related entities -

 

During 2024, 2023 and 2022, the Company carried out the following transactions with its parent company Inversiones ASPI S.A. and its other related parties:

 

		2024				2023				2022
		S/(000)				S/(000)				S/(000)
Income
Parent
Inversiones ASPI S.A. (ASPI)
Fees for management and administrative services			88				88				100
Income from office lease			16				16				16
Other related parties
Compañía Minera Ares S.A.C. (Ares)
Income from land lease, note 24			1,224				1,150				1,200
Income from office lease			357				259				244
Fosfatos del Pacífico S.A. (Fospac)
Fees for management and administrative services			144				143				46
Income from office lease			16				16				16
Fossal S.A.A.(Fossal)
Fees for management and administrative services			44				44				52
Income from office lease			16				16				16
Asociación Sumac Tarpuy
Income from office lease			16				16				16
Expense
Other related parties
Security services provided by Compañía Minera Ares S.A.C.			(2,570	)			(1,940	)			(2,110	)

 

 

Notes to the consolidated financial statements (continued)

 

As a result of these transactions, the Company had the following rights and obligations as of December 31, 2024 and 2023:

 

		2024								2023
		Accounts receivable				Accounts payable				Accounts receivable				Accounts payable
		S/(000)				S/(000)				S/(000)				S/(000)
Parent
Inversiones ASPI S.A.			115				-				89				-
			115				-				89				-
Other related parties
Fosfatos del Pacífico S.A.			1,409				23				1,413				305
Compañía Minera Ares S.A.C.			231				-				315				211
Fossal S.A.A.			126				-				52				-
Other			88				-				104				-
			1,854				23				1,884				516
			1,969				23				1,973				516

 

Terms and conditions of transactions with related parties -

 

Outstanding balances with related parties at the year-end are unsecured and interest free and settlement occurs in cash. For the years ended December 31, 2024, 2023 and 2022, the Group had not recorded an allowance for expected credit losses relating to amounts owed by related parties. This assessment is undertaken each financial year through examining the financial position of the related party and the market in which the related party operates.

 

Compensation of key management personnel of the Group –

 

The compensation paid to key management personnel includes expenses for profit-sharing, compensation and other concepts for members of the Board of Directors and the key management. For the year ended December 31, 2024, the total short-term compensation amounted to S/27,704,000 (2023: S/28,922,000 and 2022: S/26,066,000) and the total long-term compensation amounted to S/7,167,000 (2023: S/7,632,000 and 2022: S/8,272,000), and there were no post-employment or contract termination benefits or share-payments.

 

23.

Earnings per share

 

Basic and diluted earnings per share amounts are calculated by dividing the profit for the year by the weighted average number of common shares and investment shares outstanding during the year.

 

The Group does not have potential common shares with a dilutive effect as of December 31, 2024, 2023 and 2022.

 

 

Notes to the consolidated financial statements (continued)

 

The calculation of basic and diluted earnings per share is shown below:

 

		2024				2023				2022
Numerator
Net profit attributable to the owners of the Holding Company			198,875				168,900				176,828
Denominator
Weighted average number of common and investment shares (thousands of shares)			428,107				428,107				428,107
Basic and diluted earnings per share (S/)			0.46				0.39				0.41

 

There have been no other transactions involving common shares or investment shares between the reporting date and the date of the authorization of these consolidated financial statements.

 

24.

Commitments and contingencies

 

Operating lease commitments – Group as lessor

 

As of December 31, 2024 and 2023, the Group, as lessor, has a land lease with Compañía Minera Ares S.A.C. a related party of Inversiones ASPI S.A.This lease is renewable annually, and provided an annual rent expense for the years ended December 31, 2024, 2023 and 2022 of S/1,224,000, S/1,150,000, and S/1,200,000, respectively; see note 22.

 

Consortium contract –

 

On December 19, 2022, Distribuidora Norte Pacasmayo S.R.L., subsidiary of the Group, had subscribed a collaboration contract with a third party., with the purpose to participate together in the project “Mejoramiento del Sistema de Pistas y Cerco Perimétrico del Aeropuerto de Piura”. The mentioned contract is valid for a maximum of 2 years and 11 months.

 

On this matter, the Company has communicated to the tax authority the subscription of the collaboration contract which will take independent accounting and Distribuidora Norte Pacasmayo S.R.L. will be the contracting party that will act as operator of the contract.

 

Capital commitments

 

As of December 31, 2024 and 2023, the Group had no significant capital commitments.

 

 

Notes to the consolidated financial statements (continued)

 

Usufruct Concessions

 

In December 2013, the Company signed an agreement with a third party, related to the use of the Virrilá concession, to carry out other non-metallic mining activities related to cement production.This agreement has a term of 30 years, with fixed annual payments of US$600,000 for the first three years and variable payments for the rest of the contract. The related expense for the years ended December 31, 2024, 2023 and 2022 amounted to S/5,546,000, S/5,273,000 and S/9,445,000 respectively, and was recognized as part of cost of inventory production. As part of this agreement, the Company is required to pay an equivalent amount of S/4.5 for each metric ton of calcareous extracted that is indexed by inflation after the first year of exploitation; the annual royalty may not be less than the equivalent to 850,000 metric tons after the beginning of the fourth year of production.

 

The Company signed an agreement with two third parties in October 2007, related to usufruct of the Bayovar 4 concession for an indefinite period to extract seashells and other minerals. As consequence, the Group made payments amounting to US$250,000 for each third party for the first five years and variable payments for the rest of the contract. The related expense as of December 31, 2024 and 2023 amounted to S/1,553,000 and S/1,514,000, respectively, and were recognized as part of the cost of inventory production. As part of this agreement, the Company is required to pay an equivalent amount of US$5.1 to each third party for every metric ton of calcareous extracted, with the minimum production level for the calculation of 20,000 metric tons every six months following the beginning of the sixth year of production.

 

Mining royalty

 

According with the Royalty Mining Law in force since October 1, 2011, the royalty for the exploitation of metallic and nonmetallic resources is payable on a quarterly basis in an amount equal to the greater of: (i) an amount determined in accordance with a statutory scale of rates based on operating profit margin that is applied to the quarterly operating profit, adjusted by certain items, and (ii) 1% of net sales, in each case during the applicable quarter. These amounts are estimated based on the unconsolidated financial statements of Cementos Pacasmayo S.A.A. and the subsidiaries affected by this mining royalty, prepared in accordance with IFRS. Mining royalty payments will be deductible for income tax purposes in the fiscal year in which such payments are made.

 

Mining royalty expense paid to the Peruvian Government for 2024, 2023 and 2022 amounted to S/1,266,000, S/983,000 and S/1,193,000 and, respectively, and is recognized as part of the cost of inventory production.

 

Tax situation

 

The Company is subject to Peruvian tax law. As of December 31, 2024, 2023 and 2022, the income tax rate is 29.5 percent of the taxable profit after deducting employee participation, which is calculated at a rate of 8 to 10 percent of the taxable income.

 

For purposes of determining income tax, transfer pricing for transactions with related companies and companies resident in territories with low or no taxation, must be supported with documentation including information on the valuation methods used and the criteria considered for determination. Based on the operations of the Group, Management and its legal advisors believe that as a result of the application of these standards will not result in significant contingencies for the Group as of December 31, 2024 and 2023.

 

 

Notes to the consolidated financial statements (continued)

 

The tax authority has the power to review and, if applicable, adjust the income tax calculated by each company in the four years subsequent after the year of filing the tax return.

 

The statements of income tax and value added tax corresponding to the years indicated in the attached table are subject to review by the tax authorities:

 

		Years open to review by Tax Authority
Entity		Income tax		Value-added tax
Cementos Pacasmayo S.A.A.		2020 / 2022– 2024		Dec. 2020-2024
Cementos Selva S.A.C.		2020 – 2024		Dec. 2020-2024
Distribuidora Norte Pacasmayo S.R.L.		2020 – 2024		Dec. 2020-2024
Empresa de Transmisión Guadalupe S.A.C.		2020 – 2024		Dec. 2020-2024
Salmueras Sudamericanas S.A.		2020 – 2024		Dec. 2020-2024
Calizas del Norte S.A.C. (liquidated during 2022)		2020 – 2022		Dec. 2020-2022
Soluciones Takay S.A.C.		2020 – 2024		Dec. 2020-2024
Corporación Materiales Piura S.A.C.		2020 – 2024		Dec. 2020-2024
Soluciones Crealo 150 S.A.C.		2024		Sep.-Dec. 2024
Vanguardia Constructora del Perú S.A.C.		2024		Oct.-Dec. 2024

 

Due to possible interpretations that the tax authority may give to legislation in effect, it is not possible to determine whether or not any of the tax audits will result in increased liabilities for the Group. For that reason, tax or surcharge that could arise from future tax audits would be applied to the income of the period in which it is determined. However, in management’s opinion and that of its legal advisors, any possible additional payment of taxes would not have a material effect on the consolidated financial statements as of December 31, 2024 and 2023.

 

Environmental matters

 

The Group’s exploration and exploitation activities are subject to environmental protection standards.

 

Environmental remediation -

 

Law No. 28271 regulates environmental liabilities in mining activities. This Law has the objectives of ruling the identification of mining activity’s environmental liabilities and financing the remediation of the affected areas. According to this law, environmental liabilities refer to the impact caused to the environment by abandoned or inactive mining operations.

 

In compliance with the above-mentioned laws, the Group presented environmental impact studies (EIS), declaration of environmental studies (DES) and Environmental Adaptation and Management Programs (EAMP) for its mining concessions.

 

 

Notes to the consolidated financial statements (continued)

 

The Peruvian authorities approved the EIS and EAMP presented by the Group for its mining concessions and exploration projects. A detail of plans and related expenses approved is presented as follows:

 

				Resolution		Year of		Program		Operating year expense
Project unit		Resource		Number		approval		approved		2024				2023				2022
										S/(000)				S/(000)				S/(000)
Rioja		Limestone		RD186-2014-PRODUCE/DVMYPE-I/DIGGAM		2014		EIA			851				879				810
Tembladera		Limestone		RD304-18-PRODUCE/DVMYPE-I/DIGGAM		2018		PAMA			329				320				299
											1,180				1,199				1,109

 

As of December 31, 2024 and 2023, the Group had no liabilities related to environmental remediation expenses because all were paid before the end of the year.

 

Quarry rehabilitation provision -

 

The Law No. 28090 regulates the obligations and procedures that must be met by the holders of mining activities for the preparation, filing and implementation of Quarry Closure Plans, as well as the establishment of the corresponding environmental guarantees to secure fulfillment of the investments that this includes, subject to the principles of protection, preservation and recovery of the environment. In connection with this obligation, as of December 31, 2024 and 2023, the Group maintained a provision for the closing of the quarries exploited by its operations amounting to S/19,005,000 and S/17,676,000, respectively. The Group believes that this liability is adequate to meet the current environmental protection laws approved by the Ministry of Energy and Mines, refer to note 12.

 

Legal claim contingency

 

As of December 31, 2024, the Group had received claims from third parties in relation with its operations which in aggregate represent S/835,000 that corresponded to labor claims from former employees.

 

Management expects that these claims will be resolved within the next five years based on prior experience; however, the Group cannot assure that these claims will be resolved within this period because the authorities do not have a maximum term to resolve cases.

 

The Group has been advised by its legal counsel that it is only possible, but not probable, that these actions will succeed. Accordingly, no provision for any liability has been made in these interim condensed consolidated unaudited financial statements.

 

 

Notes to the consolidated financial statements (continued)

 

25.

Financial risk management, objectives and policies

 

The Group’s main financial liabilities comprise loans and borrowings, trade payables and other payables. The main purpose of these financial liabilities is to finance the Group’s operations. The Group´s main financial assets include cash and short-term deposits and trade and other receivables that derive directly from its operations.

 

The Group is exposed to market risk, credit risk and liquidity risk. The Group’s senior management oversees the management of these risks. The Group’s senior management is supported by Financial Management that advises on financial risks and the appropriate financial risk governance framework for the Group. The financial management provides assurance to the Group’s senior management that the Group’s financial risk-taking activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with the Group´s policies and risk objectives.

 

Management reviews and implements policies for managing each of these risks, which are summarized below.

 

Market risk -

 

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprise three types of risk: interest rate risk, foreign currency risk and other price risk (such as equity price risk and commodity risk).

 

The sensitivity analyses shown in the following sections relate to the Group’s consolidated position as of December 31, 2024 and 2023.

 

Interest rate risk -

 

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.

 

As of December 31, 2024 and 2023, all of the Group’s borrowings are at a fixed rate of interest; consequently, the management evaluated that it is not relevant to do an interest rate sensitivity analysis.

 

Foreign currency risk -

 

Foreign exchange risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in foreign currency exchange rates. The Group's exposure to foreign exchange risk relates primarily to the Group's operating activities (when income or expenses are denominated in a currency other than the Group's functional currency).

 

As of December 31, 2023, derivative financial instruments (cross currency swaps) were fully settled in correlation with the payment of international bonds in dollars.

 

 

Notes to the consolidated financial statements (continued)

 

Foreign currency sensitivity

 

The following table demonstrates the sensitivity to a reasonably possible change in the US dollar exchange rate, with all other variables held constant. The impact on the Group’s profit before income tax is due to changes in the fair value of monetary assets and liabilities.

 

2024		Change in US$ rate				Effect on consolidated profit before tax
U.S. Dollar		%				S/(000)
			+5				(593	)
			+10				(1,186	)
			-5				593
			-10				1,186

 

2023		Change in US$ rate				Effect on consolidated profit before tax
U.S. Dollar		%				S/(000)
			+5				(1,845	)
			+10				(3,689	)
			-5				1,845
			-10				3,689

 

Credit risk -

 

Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Group is exposed to a credit risk from its operating activities (primarily for trade receivables) and from its financing activities, including deposits with banks and financial institutions, foreign exchange transactions and other financial instruments.

 

 

Notes to the consolidated financial statements (continued)

 

Trade receivables

 

Customer credit risk is managed by each business unit subject to the Group’s established policy, procedures and control relating to customer credit risk management. Credit quality of the customer is assessed, and individual credit limits are defined in accordance with this assessment. Outstanding customer receivables are regularly monitored and any shipments to major customers are generally covered by letters of credit. As of December 31, 2024 and 2023, the Group had 8 and 4 customers, that owed the Group more than S/3,000,000 each accounting for approximately 34 % and 29% of all trade receivables outstanding, respectively. There were 22 and 25 customers with balances greater than S/700,000 and less than S/3,000,000, which accounted for approximately 23% and 48% of the total trade receivables, respectively. The evaluation for allowance for expected credit losses is updated at the date of the consolidated financial statements and individually for the main customers. This calculation is based on actual historical data incurred.

 

The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets disclosed in note 7. The Group does not hold collateral as security.

 

Cash deposits

 

Credit risk from balances with banks and financial institutions is managed by the Group’s treasury department in accordance with the Group’s policy. Investments of surplus funds are made only with approved counterparties of first level. The limits are set to minimize the concentration of risks and therefore mitigate financial loss through potential counterparty’s failure to make payments. As of December 31, 2024 and 2023, the Group’s maximum exposure to credit risk for the components of carrying amounts as showed in note 6.

 

Liquidity risk -

 

The Group monitors its risk of shortage of funds using a recurring liquidity planning tool.

 

The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank loans and long term debentures. Access to sources of funding is sufficiently available and debt maturing within 12 months can be rolled over under the same conditions with existing lenders, if is necessary.

 

 

Notes to the consolidated financial statements (continued)

 

The table below summarizes the maturity profile of the Group’s financial liabilities based on contractual undiscounted payments:

 

		Less than 3 months				3 to 12 months				1 to 5 years				More than 5 years				Total
		S/(000)				S/(000)				S/(000)				S/(000)				S/(000)
As of December 31, 2024
Financial obligations			190,292				269,272				729,091				310,000				1,498,655
Interest			29,255				49,887				189,657				47,735				316,534
Trade and other payables			155,556				67,748				-				-				223,304
Lease liabilities			758				2,200				5,819				643				9,420
As of December 31, 2023
Financial obligations			115,092				269,272				625,455				570,000				1,579,819
Interest			31,769				57,356				231,220				77,643				397,988
Trade and other payables			175,847				38,439				-				-				214,286
Lease liabilities			986				2,957				4,186				-				8,129

 

Changes in liabilities arising from financing activities:

 

		Balance as of January 1,				Distribution of dividends				Finance cost on cross currency swaps				Cash inflow				Cash outflow				Amortization of costs of issuance of senior notes				Others				Balance as of December 31
		S/(000)				S/(000)				S/(000)				S/(000)				S/(000)				S/(000)				S/(000)				S/(000)
2024
Dividends payable			10,322				175,524				-				297				(175,046	)			-				-				11,097
Interest-bearing loans			1,573,026				-				-				303,200				(384,364	)			1,329				-				1,493,191
2023
Hedge finance cost payable			5,978				-				1,730				-				(7,708	)			-				-				-
Dividends payable			9,764				175,524				-				465				(175,431	)			-				-				10,322
Interest-bearing loans			1,593,171				-				-				639,000				(661,520	)			2,206				169				1,573,026

 

 

Notes to the consolidated financial statements (continued)

 

Capital management -

 

For the purpose of the Group’s capital management, capital includes capital stock, investment shares, additional paid-in capital and all other equity reserves attributable to the equity holders of the Company. The primary objective of the Group’s capital management is to maximize the shareholders’ value.

 

In order to achieve this overall objective, the Group’s capital management, among other things, aims to ensure that it meets financial covenants attached to the interest-bearing loans and borrowings that define capital structure requirements. Breaches in meeting the financial covenants would permit the creditors to immediately call the senior notes. There have been no breaches in the financial covenants of Senior Notes in any of the years presented.

 

The Group manages its capital structure and adjusts it in light of changes in economic conditions and the requirements of the financial covenants. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares.

 

No changes were made in the objectives, policies or processes for managing capital during the years ended December 31, 2024 and 2023.

 

26.

Fair value of financial assets and liabilities

 

Financial assets -

 

Except for derivative financial instruments and financial instruments designated at fair value through OCI, all financial assets which included trade and other receivables are classified in the category of loans and receivables, which are non-derivative financial assets carried at amortized cost, held to maturity, and generate a fixed or variable interest income for the Group. The carrying value may be affected by changes in the credit risk of the counterparties.

 

Financial liabilities -

 

All financial liabilities of the Group including trade and other payables financial obligations are classified as loans and borrowings and are carried at amortized cost.

 

 

Notes to the consolidated financial statements (continued)

 

(a)

Fair values and fair value accounting hierarchy -

 

Set out below is a comparison of the carrying amounts and fair values of financial instruments as of December 31, 2024 and 2023, as well as the fair value accounting hierarchy. The dates of valuations at fair value were as of December 31, 2024 and 2023, respectively.

 

		Carrying amount								Fair value								Fair value hierarchy
		2024				2023				2024				2023				2024/2023
		S/(000)				S/(000)				S/(000)				S/(000)
Financial assets
Cash and cash equivalents			72,723				90,193				72,723				90,193			Level 1
Trade and other receivables			174,399				143,085				174,399				143,085			Level 2
Financial investments designated at fair value through other comprehensive income			239				249				239				249			Level 3
Total financial assets			247,361				233,527				247,361				233,527
Financial liabilities
Trade and other payables			242,051				231,511				242,051				231,511			Level 2
Senior notes			569,303				569,192				541,508				532,987			Level 1
Promissory notes			923,888				1,003,834				916,415				931,014			Level 2
Total financial liabilities			1,735,242				1,804,537				1,699,974				1,695,512

 

 

Notes to the consolidated financial statements (continued)

 

All financial instruments for which fair value is recognized or disclosed are categorized within the fair value hierarchy, based on the lowest level input that is significant to the fair value measurement as a whole. The fair value hierarchies are those described in note 2.3.2 (iv).

 

For assets and liabilities that are recognized at fair value on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy. As of December 31, 2024 and 2023, there were no transfers between the fair value hierarchies.

 

Management assessed that cash and cash equivalents; trade and other receivables and other current liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments.

 

The following methods and assumptions were used to estimate the fair values:

 

-

The fair value of the quoted senior notes is based on the current quotations value at the reporting date as they trade on the exchange.

 

-

The fair value of the fixed rate promissory note it is calculated using the results of cash flow discounted at the average indebtedness rates effective as of the reporting date.

 

-

The fair value of financial instruments at fair value with changes in OCI has been determined through the percentage of the Company's shareholding in the equity of Fossal S.A.A.

 

27.

Segment information

 

For management purposes, the Group is organized into business units based on their products and activities and have three reportable segments as follows:

 

-

Production and marketing of cement, pavement, concrete, mortar and precast in the northern region of Peru.

 

-

Sale of construction supplies (steel rebar and building materials) in the northern region of Peru.

 

-

Production and marketing of quicklime in the northern region of Peru.

 

No operating segments have been aggregated to form the above reportable operating segments.

 

 

 

Notes to the consolidated financial statements (continued)

 

Management monitors the profit before income tax of each business unit separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on profit before income tax and is measured consistently with profit before income tax in the consolidated statement of profit and loss.

 

Transfer prices between operating segments are on an arm’s length basis in a manner similar to transactions with third parties.

 

		2024																2023																2022
		Cement, concrete, pavement, mortar and precast				Construction supplies				Others (*)				Total consolidated				Cement, concrete, pavement, mortar and precast				Construction supplies				Others (*)				Total consolidated				Cement, concrete, pavement, mortar and precast				Construction supplies				Others (*)				Total consolidated
		S/(000)				S/(000)				S/(000)				S/(000)				S/(000)				S/(000)				S/(000)				S/(000)				S/(000)				S/(000)				S/(000)				S/(000)
Revenues from external customers			1,906,849				56,873				14,349				1,978,071				1,850,238				74,096				25,741				1,950,075				1,963,826				114,024				37,896				2,115,746
Gross profit			728,850				2,006				(2,330	)			728,526				687,727				723				1,002				689,452				647,285				3,670				1,076				652,031
Administrative expenses			(248,047	)			(2,848	)			(2,488	)			(253,383	)			(227,459	)			(2,692	)			(1,816	)			(231,967	)			(221,024	)			(2,741	)			(1,674	)			(225,439	)
Selling and distribution expenses			(79,696	)			(915	)			(799	)			(81,410	)			(68,286	)			(766	)			(517	)			(69,569	)			(66,109	)			(786	)			(480	)			(67,375	)
Other operating (expense) income, net			(2,805	)			33				72				(2,700	)			(13,813	)			3				-				(13,810	)			(2,964	)			8				(943	)			(3,899	)
Finance income			6,201				33				64				6,298				7,160				9				77				7,246				3,252				20				34				3,306
Finance cost			(100,302	)			-				(6	)			(100,308	)			(104,045	)			-				-				(104,045	)			(95,102	)			(3	)			-				(95,105	)
Net (loss) gain on (settlement of) derivative financial instruments recognized at fair value through profit or loss			-				-				-				-				19				-				-				19				(59	)			-				-				(59	)
Impairment of assets			-				-				-				-				(36,551	)			-				-				(36,551	)			-				-				-				-
Gain (loss) from exchange difference, net			(828	)			(7	)			(1	)			(836	)			4,932				(6	)			7				4,933				(1,030	)			5				(15	)			(1,040	)
Profit before income tax			303,373				(1,698	)			(5,488	)			296,187				249,684				(2,729	)			(1,247	)			245,708				264,249				173				(2,002	)			262,420
Income tax expense			(99,673	)			558				1,803				(97,312	)			(78,050	)			853				389				(76,808	)			(86,189	)			(56	)			653				(85,592	)
Profit for the year			203,700				(1,140	)			(3,685	)			198,875				171,634				(1,876	)			(858	)			168,900				178,060				117				(1,349	)			176,828

 

(*)	The “other” segment includes activities that do not meet the threshold for disclosure under IFRS 8.13 and represent non-material operations of the Group (including brine projects).

 

 

Notes to the consolidated financial statements (continued)

 

		2024																2023																2022
		Cement, concrete, pavement, mortar and precast				Construction supplies				Others (*)				Consolidated				Cement, concrete, pavement, mortar and precast				Construction supplies				Others (*)				Consolidated				Cement, concrete, pavement, mortar and precast				Construction supplies				Others (*)				Consolidated
		S/(000)				S/(000)				S/(000)				S/(000)				S/(000)				S/(000)				S/(000)				S/(000)				S/(000)				S/(000)				S/(000)				S/(000)
Segment assets			3,021,210				40,583				104,011				3,165,804				3,074,279				46,941				100,266				3,221,486				3,086,104				38,353				102,537				3,226,994
Other assets (*)			-				-				239				239				-				-				249				249				86,630				-				537				87,167
Total assets			3,021,210				40,583				104,250				3,166,043				3,074,279				46,941				100,515				3,221,735				3,172,734				38,353				103,074				3,314,161
Operating liabilities			1,879,580				71,901				1,464				1,952,945				1,968,133				62,907				687				2,031,727				2,041,923				76,780				323				2,119,026
Capital expenditure (**)			96,912				-				-				96,912				299,326				-				-				299,326				190,126				-				-				190,126
Depreciation and amortization			(152,584	)			(1,189	)			(4,473	)			(158,246	)			(137,968	)			(1,468	)			(4,759	)			(144,195	)			(133,276	)			(1,545	)			(3,718	)			(138,539	)
Provision of inventory net realizable value and obsolescence			(3,465	)			-				-				(3,465	)			(2,956	)			-				-				(2,956	)			(2,027	)			-				-				(2,027	)

 

(*)	As of December 31, 2024 and 2023, it corresponds to the financial investment at fair value with changes in ORI for S/239,000 and S/249,000, respectively.

 

(**)	Capital investments amounting to S/96,912,000, S/299,326,000 and S/190,126,000 for the years 2024, 2023 and 2022, respectively, correspond to additions of property, plant and equipment, intangibles and other minor non-current assets.

 

Geographic information

 

As of December 31, 2024 and 2023, all non-current assets are located in Peru and all revenues are from clients located in the north region of the country.

 

28. Subsequent Events

 

The Company has evaluated the existence of subsequent events and determined that there have not been events that require a disclosure in this consolidated financial statements.