Gold Flora Corporation

Yes. Thank you, and good afternoon everyone.

And welcome to Grupo Graña y Montero third quarter 2016 conference call. Thanks for joining us and for joining us in the conference.

I will start by mentioning the most important remarks on the third quarter of the year. A result regarding the involvement and the fact that they have no majority in the Congress, I will like to mention that for the first time in 90 year, we have a Congress who is actually doing his role professionally.

And this have been acknowledged by many political analyst to [indiscernible]. We hope we will continue.

Regarding the results, fiscal year we have [indiscernible] $500 million in new contract being the most well around [indiscernible] $6 million. The situation of a submission line in Columbia for a $149 million, rule off the addition of $81 million new [indiscernible].

Even though, there is a government willingness to spit up a more positive [indiscernible] again it had to do it. So, we are not foreseeing an increase in private and foreign investment in the short term.

As Monica will finish off me. Our [indiscernible] have liquidated by 25% compared to the third quarter of 2015.

We have also mentioned in the past conference calls that work very hard to incorporate our [indiscernible] which in operating margin of 5.6%, an EBITDA margin of 13.9%. However, it is in a [indiscernible] is we have been able to achieve [indiscernible] that's recorded revenues of $4.7 billion at the end of this quarter which is the highest in our history.

All these give us a very positive expectations of 2017. In the past conference call, we mentioned as there were three offers to purchase [indiscernible] participation you guys [indiscernible].

As of today, any rotation are balancing with one of them. However, we cannot provide more detailed view to our non-disclosure advent.

Now, I will turn the call to Monica for financial results.

Thank you, Mario. The decrease of 25% in consolidated revenues from the third quarter of 2015 to the third quarter of 2016 is explained mainly by lower revenues in the new instruction area due to the fact that there were fewer projects on the [indiscernible].

On the other hand, revenues also decrease in the infrastructure area due to lower revenues in GMP. Even though the level of daily barrels per day but you have maintained similar levels, the oil price was lower than in the third quarter of 2016, in fact in the November revenues.

Also the maintainers work in [indiscernible] have been less than in 2015 which is partially offset by an increase in revenues in [indiscernible] Metro line 1. On the other hand, revenues in the real-estate area increased due to the sale of piece of land [indiscernible] and more tune into the lever than in the second or third quarter of 2015.

Finally the technical service area registered an increase of 18% mainly explained by the subsidiary income and the consolidation of other excess things both 2016. Gross profit decreased due to the reduction of revenues but margin increased from 8.3% to 10.6%.

This is mainly explained by the profit generated in the server [indiscernible] results in GyM even though we are the leaders day-to-day and welcoming point at lower result, which is quite partially offset by lower margins in GMP due to the decline in oil price. In addition, the technical service area before the better results during the period.

Even though a plan to reduce general expenses to our group is in place, as seen in a reduction of general expenses from $296 million falls to $289 million solid. As a percentage of revenues, it have increased from 5.3% to 6.8% due to the lower levels of revenues in the AMC area.

Other operation and expenses line reflects the profit from the sale of machinery equipment, higher than in the third quarter of 2015, as well as [indiscernible] provisions. And also the extraordinary income from the agreement based in [indiscernible] projects.

As explaining the first quarter, 1) The profit from sales of investments in subsidiary's reflect the profit from the sales of our 1.64% [indiscernible] in Peru which also have an impending the income tax due to the reversal on the [indiscernible] from tax. Therefore the operating income increased from $181 million solid to $239 million solid.

With margins improving from 3.2% to 5.6%. The increase in financial expenses is mainly explained by the increase in the [indiscernible] to finance our capital contribution in southern gas pipeline project.

The [indiscernible] associate accounts registered the profit generated in projects were our subsidiaries have a minority stake and are not consolidated. This number includes mainly the south gas pipeline stake and the [indiscernible] project as well as our minority investments such as [indiscernible].

Given the year, the [indiscernible] relatively stable, therefore the exchange difference for the period was [indiscernible]. As a consequence of the results explained [indiscernible] the net profit of the year was significantly higher than in the third quarter of 2015, going from $7 million solid to $137 million solid, improving margins from almost 0% to 3.3%.

The consolidated EBITDA increased from $491 million solid to $587 million solid reached a margin of 13.9%, better than previous quarters in line with the Peruvian [indiscernible] explained above. Turning to the next page, the consolidated [indiscernible] of 4.2 billion plus a recurrent business of $529 million which a total amount of $4.7 billion in their third quarter of 2016, which represent 2.65 years of revenues.

The main contract added during the year were registering the [indiscernible] in the EMC area. In the technical service area, the [indiscernible] services for it will not for $48 million as well as an electric service contract for [indiscernible] for $63 million.

Two contracts for the service and maintenance of roads in the highland of Peru for $99 million and $81 million of target from [indiscernible]. Additionally, in the EMC area, the main contracts awarded were the contracts for the construction of [indiscernible] in Columbia for $130 million and the expansion of infrastructure.

The expansion of their infrastructure of [indiscernible] for $123 million. The construction of a transmission line in Columbia and the construction of the remaining of the land [indiscernible] in Lima.

In the battle of by end markets, [indiscernible] represents 36% which includes the contracts for block three and four as well as the southern gas pipeline project. On the other hand, mining projects represents only 1% of the total amount of [indiscernible] a reduction in mining investment in Lima.

And turning to the next page in the presentation. The total amount of CapEx as of September 2016 was $170 million.

The most relevant investments of this period are the equity contribution to the southern gas pipeline and [indiscernible]. Quarterly [indiscernible] financial growth rate towards the third quarter of 2016 amounted $880 million.

From the total debt, $396 million corresponds to working capital as [indiscernible] clients' accounts receivable and [indiscernible] of machinery and equipment. $337 million dollar corresponds to a debt of infrastructure projects and $146 million corresponds to the financing of the equity contribution of the southern gas pipeline.

The reduction in working capital debt on the first -- from the first quarter to the second quarter to the third quarter of 2016, $125 million mainly from collections in the [indiscernible] state area. Which was partially offset by the cost elevation of the [indiscernible].

The amount of projects left has maintained the same levels of previous quarter. This is a restructured [indiscernible] with guarantees and cash wins from the project.

The cross rate [indiscernible] ratio for the infrastructure area is 5.88 times. Therefore the consolidation of that with the ratio for the group is the 3.5 times at the end of the third quarter maintaining a total amount of cash of $204 million.

From a total amount of that, 55% is the [indiscernible] 36% in US dollars. The maturity of the debt it will lean into the [indiscernible] of the businesses or projects.

Thank you for your attention. We can start now with the Q&A.

Good morning, Mario and Monica and congratulations for the results. My question refers to Mario's initial statement, where you wouldn’t see any significant portion in terms of projects for from on behalf of the government in the short term.

But when would you think that you'll see a visible push and hopefully reflected within the financial statements of Graña y Montero. Thank you.

Hello, how are you doing? First, [indiscernible] to understand and are writing our backlog.

That it seems using any [indiscernible] is going to be a very strong year. Independently of the new police that the government are going to put in place.

Our comment is [indiscernible] of the whole economy not in our police because our police are quite okay. Government is doing in some, we have [indiscernible] who is going to run that.

And that’s new [indiscernible] is going to take a little bit of time. So, the process for those two is I'm going to see some of [indiscernible] changes.

You change your [indiscernible] is going to take time for that now. Our expectation is that in will start seeing and [indiscernible] in private and public [indiscernible] in the first quarter of last year at [indiscernible].whatever bold thing that is going to [indiscernible] they are speculating that we're going to win a case.

All right, Mario, thank you, understood. And if I may, are you seeing any anecdotic evidence of a pick-up in mining investment, considering that the large expanses have already been made and some companies in Peru are starting to talk about doing Greenfield and Brownfield projects.

Perhaps not in the expanse or the size of let's say sir aware of they but are you seeing some discussion, are you seeing feeling that news will coming on your side?

Yes. Especially an older police has a relation with the goal, where they have some gold in [indiscernible] for the Pradarshan those are the one that are always start talking going some third party in -- I'm trying to through the [indiscernible] not you mention.

They are big [indiscernible].

All right. Thank you, very much, gentlemen.

Thank you.

Hello. I was wondering what is missing for [indiscernible] for the section with [indiscernible].

After that, how long does it take approximately to get this the financial closing done? Do you have like a little view on the timing?

And another -- my other question is how is the real-estate going in the [indiscernible]?

Around the first question. I really not answer that.

If you have a [indiscernible] in the papers there are many comments about that. In all with our quoting the common regarding somebody there is a knowing this because of that financing [indiscernible].

We have not talked about thus and we are not going to do that. We have a [indiscernible] history, a strong non-disclosure agreement and so we I will like you to attain that somehow.

I cannot comment on that. But the other question [indiscernible] the sales win we deliver.

Meaning, by packets. The actual weight to see that, the how many do we sell?

By [indiscernible] in the financial because we can look on with liberty. [Indiscernible].

What we are seeing is that this it can be [indiscernible] in the amount of [indiscernible]. At the beginning [indiscernible] in the first quarter that we with the [indiscernible] that we had, we couldn’t say that [indiscernible].

Today we believe that we can [indiscernible] this quarter that there's a tendency that be a real-estate is start to move. There is an increase in the amount of [indiscernible] every month continuously for the whole year.

Speaker? Hi, Mario.

This is Padilla here. I have a three small questions.

First, I know you cannot talk about as I looked I have only one question with that. Is if we go to year-end and there is no closing, are you going to start previsioning some of your investments there.

That is my first question. The second one, you can have an update about hotel in Larcomar, [indiscernible].

You can give us a little bit of sense so far. Were you standing in those?

And the last one is about the receivables. You have any politics about provision some of those?

Okay. And would you repeat me the first question?

Yes, if we end --.

Okay. No, we are not going to, the [indiscernible] and how it works.

About in the contract. If you move the plan the amount that is a contract is console that and you the [indiscernible] and then multiply the amount of that going to have to pay to [indiscernible] That is a 72.5% of [indiscernible] We only will have approving of the timing of collecting the amount.

[Indiscernible]. So, we will need to do that in that case scenario.

[Indiscernible] The hotel we are going [indiscernible] and we'll start very soon. We are plan to close down the financing before starting.

And then when he's finished the hotel will move back the highway then that is in [indiscernible]. Okay?

Okay.

And whatever [indiscernible]. You have to start a [indiscernible] and for a percentage that will comes up.

We will leave that that will start before the answer is here. The [indiscernible] is going to be -- it would some delay the course.

As we mentioned thus [indiscernible] that has decided with the Metro line number 4, is going to go. Now I have to go through a [indiscernible].

So, we have we are [indiscernible] we are coordinating with end solution for them to do that in construction. That’s our field.

Thank you, Mario.

Hi, thank you for the call. I am Dean.

The question that I have are twofold. On one hand, what are your views on funding currently?

How do you think that things have worked much more favorable in terms of potential availability for you and your projects and funding in general after the election? And secondly on the follow-up question on [indiscernible] and do it relates more with the profitability on the [indiscernible].

Can you discuss a little beat of what are your expectations in gross margins on the EMC business, on the new set of [indiscernible] for next year? Thank you very much.

There is and now. The funding it well, we are seeing is that in [indiscernible] just to put an example, we ask a few current [indiscernible] to finance that expansion of the nine [indiscernible].

And it was compressed air. Finance because has many difference ways to finance it.

It's done by the [indiscernible] working capital. Many different utilities.

And we call five banks and naturally kind of [indiscernible] one cause into book on the poker. They want him to beaten [indiscernible].

They are really in place by the amount of spanned internationally pangs and local ones are words intelligent in that, they increased the finance. And that's what we've seen and deploy it.

Then the funding is not going to be an earlier issue. Not only in terms of a [indiscernible] and also the terms of equity if we're required by [indiscernible].

We are receiving, a lot of people are intrinsic [indiscernible] especially any infrastructure. Where is where we require lot of high capital?

And is also a depositor eating. As you know, we, whenever him make makes a NE and preemptions.

Past, let me start to put this way. We haven’t allies, so have a bad flow for next year and a level of which of the place that we have always on hand and EMC play back to it.

I'm trying to understand in what level of risk and we are. And is we feel confident that we are going to be in a more comfortable situation with those [indiscernible].

We are very positive and possess them this situation of this [indiscernible] continue this and now our view is going to this that [indiscernible] in the market is better than the past. Okay.

So, we feel also about how the -- of all the -- and is the [indiscernible] EMC.

Interesting. So, is it hard to state that you are going to be because of your position you are going to be a little bit more selective on the projects that you may be engaging with?

We already have been a lot more selected on those range.

Interesting, good to hear.

And of course there are lot of things in the table in order to be able to [indiscernible]. And we will we have reduce the size of the -- for that we are very strong and to be able to be selective.

Okay? And so we say that we automated in and we have the [indiscernible] and that’s why the results are what we have now.

And it -- we will have any pressure today to say that [indiscernible] and that's provide as [indiscernible].

Very interesting. And just return very quickly to the funding question.

You mentioned something very interesting that if I understood correctly, it seems that from the banks perspective, not only they are more willing to lend you and be willing to re adding exposure to your projects but. It seems that the relationship between that and equity in general because we cannot speak on every single price about that.

But in general it seems that that is more favorable I guess. Is that correct?

Yes. It is correct.

Our feeling is that [indiscernible] strong.

Thank you, so much.

Thank you, very much. I will repeat what we said in the last conference call.

And that is that even though really we had decrease, we have enabled some large margins of the [indiscernible]. We continue on the [indiscernible] we have mentioned.

And our backlog with current business have increased giving out an indication that we may be [indiscernible]. Thank you very much.