Good day, ladies and gentlemen. Welcome to the Cementos Pacasmayo's First Quarter 2018 Earnings Conference Call. At this time all participants are in a listen-only mode. And please note that this call is being recorded. At the conclusion of our prepared remarks we will conduct a question-and-answer session. I would now like to introduce your host for today's call, Ms. Claudia Bustamante, Head of Investor Relations. Ms. Bustamante, you may now begin.

Thank you, good morning, everyone. Joining me on the call me today is Mr. Humberto Nadal, our Chief Executive Officer; and Mr. Manuel Ferreyros, our Chief Financial Officer. Mr. Nadal, will begin our call with an overview of the quarter and our strategic outlook. Mr. Ferreyros will then follow with additional commentary on our financial results. We will then turn the call over to your questions. Please note that this call will include certain forward-looking statements. These statements relate to expectations, beliefs, projections, plans, and other matters that are not historical facts and are subject to risks and uncertainties that might affect future events or results. Descriptions of these risks are set forth in the company's regulatory filing. With that I'd now like to turn the call over to Mr. Nadal.

Thank you, Claudia. Good morning everyone, and thanks for joining us on today's call. We had a strong start to 2018 with solid results for the first quarter seeing increases in nearly all key financials and the baseline metrics and the continued [indiscernible] trend of revenue volumes. Our net income increased 37% compared to the first quarter of previous year, mainly as a result of a 12.8% increase in sales. This is a clear reflection of a rebound in demand which has been a tough quarter as well as encouraging signs of an uptick in both public sector spending and in self-construction segment as Peruvians rebuild their homes and properties. Coastal El Nino caused billions of dollars in damages to Peru's already strained construction, and our country's new government has indicated, it will remain focused on the construction networks which has led into rising public investment. President Vizcarra has already shown his commitment to speeding the execution of important projects, including changes in the [indiscernible] of government sites. Prime Minister Villanueva has also called for a [indiscernible] to accelerate projects implementation. It's a strong indicator of improvement, which we believe will become more relevant going into the second half of 2018. As you may have already noted we have launched a new company logo, a new commercial name and new designs for our current products as well as some new products. This is part of our long-term strategy and vision, evolving from a cement producer to a construction solutions company placing the client at the center of our overall strategy. We firmly believe that this new strategy will allow us to anticipate the client's needs, resulting in overall growth for the company and continue to generate value to our shareholders. As our immediate focus will be then primarily to continue…

Thank you, Humberto. Good morning, everyone. And let me go over some key financial highlights for the quarter. As Humberto said, first quarter sales volume of cement, concrete and blocks increased 7.8% year-on-year driven by strong cement sales for the public sector and self-construction segment. This reflects continued volume expansion with encouraging signs that Peruvian construction is beginning to materialize. In line with the strong volumes we saw, first quarter 2018 revenues increased 12.8%. Consolidated EBITDA increased 14.4% compared to last year mainly driven by increased cement sales volumes as well as lower costs due to higher dilution of fixed costs and higher average price of cement. Cement EBITDA margin reached 30% for the first quarter 2018 in line with the same quarter 2017. As Humberto mentioned, during this quarter, Pacasmayo made a decision to repair the highway that linked our primary seashell quarry to the Piura plant. So while this road investment incurred a 4.8 million solid charge during the first quarter. We expect to recover the cost of this investment over the next month. Further we expect EBITDA margins to normalize and further improve in the quarters ahead assuming continued volume growth as we benefit of this new growth. Without this expense cement EBITDA margins would have been 31.6%. Turning to operating expenses, they have decreased year-over-year, as personnel related expenses have decreased with fewer severance payments and reduced mining rights with the Salmueras Sudamericanas brine project impairment. First quarter development and key administrative expenses therefore decreased 13.2% compared to the same quarter 2017 to PEN 42 million. Selling expenses remained in line with the same period last year reaching PEN 11.7 million for the first quarter of 2018 as compared with PEN 11.4 million in 2017. Moving on to a different segment, cement sales increased 13.4% during the first quarter of 2018 compared to the same period of 2017, with margins remaining flat due to increased transportation costs and slight increase in the price of the coal. Concrete sales increased 10% compared to first quarter 2017. Concrete margins was negatively affected by the higher fixed costs as large dedicated plant have ceased operations due to decreased demand from the large infrastructure projects. Finally, in the first quarter of 2018 net income increased 37.3% compared to the same period of 2017, mainly as a result of increased sales and improving operating profit. To summarize this quarter we have experienced the operational benefit of an improving demand environment. We expect to see further improvement as capacity [utilization] of our facilities continue to run and reap the benefit of our commitment to operational efficiency. Operator, can we now please take the conference questions?

[Operator Instructions]. Our first question is from the line of Daniel Sasson with Itau. Please proceed with your question.

Hi, good morning. Thanks for taking my questions. My first question is regarding your forecasted margins, EBITDA margins for 2018. I was wondering, how much can you improve your margins now that you've started to repair damaged infrastructure or infrastructure that was damaged by the heavy rains last year by the Coastal El Nino. So what would be your EBITDA margin forecast and how does that -- how would that be a factor impacted by the higher capacity utilization in Piura? And we should expect Piura to -- capacity utilization at Piura to increase throughout 2018 and throughout 2019 because of the construction works in the region. And my second question is more an overall question related to your volume growth estimates for 2018 and 2019 considering everything, the infrastructure project, the higher repair or self-construction demand so on and so forth? Thank you.

Thank you for the question, Daniel. The first part of it, I mean like Manuel mentioned I mean I think as you will know margins are going to be solely built by volume growth. But anyhow I mean 32% looking forward is something that we feel very comfortable as a base scenario with volumes growing around 4% to 6% which was what we said in our last call at the beginning of this year. Going to second part of your question, you have to bear in mind that self-construction is still the long pulley of demand right now. Around PEN 18.9 billion of reconstruction budgets are tied to the north, only 10% has been allocated so far. So we still feel that should continue in the coming years. This was looking at next year then of course they can [indiscernible] from the 4%, 6% to double-digit scenario. The reason we don't mention those numbers is because we are not really in the position to determine when and how that money will be spent. But we remain confident, [indiscernible] we will have this coming in the coming years.

Just as a follow up, what's the impact on cement demand on volumes stemming specifically from the PEN 18.9 billion that is budget for the reconstruction work in region?

If we were to bring more construction product into [indiscernible] will need 1 million tons of additional cement.

[Operator Instructions] Thank you. At this time, we have no additional questions. I will turn the floor back to management for further remarks. Actually we do have another question that just came in from the line of Froylan Mendez with JPMorgan. Please proceed with your question.

Hi, guys. Thank you very much for taking the question. Regarding SG&A, we saw impact last quarter on increased marketing networks. I want to know your thoughts going forward, what should the normalized level of SG&A should be and what are the drivers behind it?

Hello, Froylan. The SG&A, we should expect being flat for the next three quarters. We expect having a reduction of the whole compared -- expense last year compared with this year I would say 8% reduction.

Our next question is from the line of Julio Arantes with JPMorgan.

Hi, I am [back to Adrian Huerta]. Thank you very much for the call. I have a very quick question. If you could provide an update on the competitive environment, even other part of the country we saw late last year, early this year some headlines of a potential competitor trying to import cement and potentially bringing a grinding facility there as well. So if you could provide the company's view and if you have seen any new developments from this potential entrant? And also what would be the base case for price expectation throughout this year, if that strategy remains to actually pass the inflation or if you a different environment for 2018? Thank you.

Yes, Julio. Thank you very much for the question. In terms of the competitive scenario I mean we know [indiscernible], I mean yes, cement is being imported into other sides of Peru the amount is very small. We have heard rumors about a grinding facility being setup but so far I mean we have not seen anything concrete in that view. As I mentioned in my speech, I mean we've just launched our new logo and new strategy. You have to remember that Pacasmayo is riding the weight of 60 years of continued leadership and support for the client. So I think we remain very confident of capacity of our company, our brand and our different kinds of cement to fight any new visitor. In terms of price adjustment, we did some movement in the beginning of this year. So, yes, for sure we are going to be comfortably enough in place for this year and then we should regain a bigger part of [indiscernible] that in the coming months.

Thank you. At this time, I will turn the floor back to management for closing remarks.

Well, thank you all for joining us today. We are very happy with the results this quarter. We are even more excited about the future looking forward not only for this year but for the coming three years. We are convinced our revised vision of becoming a construction solution company is right on the mark and I'm sure we'll deliver strong value for our shareholders in the coming months and of course in the coming years. Thank you very much. And as usual, if you have any questions, we are always here available for that. Thank you. Have a nice day.

Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.