Pacasmayo's ratings reflect the company's leading business position as the main cement producer in Peru's northern region. This position has resulted in pricing power, higher margins, and is supported by its extensive logistical network. The ratings further consider the company's group structure as a subsidiary of Grupo Hochschild, financial flexibility originating from robust pre-dividend FCF and access to funding. Pacasmayo's net leverage is currently high given its business scale and investment grade level. Fitch expects net debt/EBITDA ratio to reach 3.1x by fiscal 2022 and to decline to around 2.5x by 2024.
The negative outlook reflects the challenges Pacasmayo faces to deleverage in the next 12 to 18 months. The current scenario of high inflation and interest rates as well as political turbulence further delaying infrastructure investments are negative headwinds that could continue to pressure cement sales further down during 2023.