ANNUAL REPORT - Unacem · the General Management of UNACEM, as well as Inversiones Andino S.A. and...
Transcript of ANNUAL REPORT - Unacem · the General Management of UNACEM, as well as Inversiones Andino S.A. and...
ANNUALRE
PORT
2013 UNACEM 32013
ANNUALRE
PORT
2013 UNACEM ANNUAL REPORT 5
2013 UNACEM ANNUAL REPORT 7
CONDORCOCHA PLANT, TARMA (3,950 MASL)
2013 UNACEM ANNUAL REPORT 9
2013 UNACEM 11
CONTENTSRESULTS 12
LETTER FROM THE CHAIRMAN OF THE BOARD 14
BOARD OF DIRECTORS AND MANAGEMENT 16
CHAPTER 1. MACROECONOMIC ENVIRONMENT 18
CHAPTER 2. THE COMPANY 26
CHAPTER 3. OPERATIONS 36
CHAPTER 4. SUSTAINABLE MANAGEMENT 50
CHAPTER 5. FUTURE PROJECTS 68
CHAPTER 6. SUBSIDIARIES AND AFFILIATES 78
CHAPTER 7. ECONOMIC-FINANCIAL RESULTS 90
ADMINISTRATION, MANAGEMENT, AND TECHNICAL ASSISTANCE 192
ACKNOWLEDGMENTS 192
RESULTS(in millions of Nuevos Soles) (in millions of Nuevos Soles)
EBITDASALES
2,000
1,800
1,600
1,400
1,200
1,000
800
600
400
200
0
1,3241,510 1,514
2009 2010 2011 2012 2013
1,726 1,785
600
400
200
002009 2010 2011 2012 2013
(en millones de soles)
0
100
200
300
400
500
600
700
800
495
587 573 621
2009 2010 2011 2012
701
20130
100
200
02009 2010 2011 2012 2013
2013 UNACEM 13ANNUAL REPORT UNACEM 2013
(in millions of Nuevos Soles)
times
CAPEX DEBT/EBITDA
200
300
400
500
600
700
560610
345 333 356
0
100
200
02009 2010 2011 2012 2013
1 00
1.50
2.00
2.50
3.00
3.50
2.08
2.662.97 3.01 3.03
0 00
0.50
1.00
0.002009 2010 2011 2012 2013
LETTER FROM Last October 1 marked one year since our merger with Cemento Andino S.A. After this lapse of time, it is with great
satisfaction that I am able to say we are achieving the objectives, synergies, and competitive advantages we have set
for ourselves. The merger enabled us to integrate processes and save on the cost of production, procurements, and
maintenance, as well as streamlining our product portfolio. The successful implementation of the SAP system as a
management instrument and the outstanding commitment of all our employees have been essential to the merger,
inspiring us to take on new challenges for growth and innovation.
In 2013, we completed the expansion of our Condorcocha (Junín) and Atocongo (Lima) plants with excellent results. The
expansion of Condorcocha was finished in June 2012, and this year, the plant produced 1.9 million tons of cement. The expansion
of the Atocongo plant was recently finished in December 2013, with production totaling 3.73 million tons of cement. Thanks
to these expansions, savings of 4% were achieved in the consumption of fuels and electrical energy per ton produced at both
plants, compared to the average for the previous three years. As a result of the expansions, the annual production capacity of
UNACEM rose to 6.7 million tons of clinker and 7.6 million tons of cement, consolidating the company as the leading producer
in Peru and one of the largest in the region.
In 2014, we will be able to operate at 100% of the expanded capacity of both plants, which will allow us to decrease our fuel and
electrical energy costs even more, giving us a very advantageous position in terms of meeting the growing national demand and
recommencing our exports. As of the close of February 2014, we have already accumulated a clinker stock of over 750,000 tons.
This year, we have also managed to strengthen our distribution network, thanks to our close relationship with our clients
and the work we have been carrying out for the last five years with independent home improvement entrepreneurs who
belong to the Progre-Sol Network, in addition to the 40 direct distributors in the cities of the central highlands and the
northeast jungle of the country. Together with our wide-reaching distribution network, we achieved a new historical record
of annual cement dispatches, totaling 5.6 million tons.
Our production and sales increased by 5.1% and 5.6%, respectively, over 2012, resulting in operating profits of S/. 520 million,
7.3% higher than last year. It is worth noting that these higher profits were achieved despite maintaining our cement sale
prices and absorbing the higher cost of sales experienced during 2013 due to the import of 983,000 tons of clinker due to the
stoppage of Kiln 1 in Atocongo from January to August for its expansion and upgrading.
In contrast to our positive operating performance, we had higher financial expenses in 2013, totaling S/. 88 million, along
with foreign exchange losses of S/. 139 million, impacts which we are dealing with so as to avoid them or at least diminish
them in 2014 and subsequent fiscal years. As of the close of 2012, short-term financial debt accounted for 45% of our
total financial debt, while debt in dollars accounted for 70% of our total financial debt. As of the close of 2013, we achieved
our objective of reducing short-term debt to 30% and debt in dollars to 49%, respectively, of the total financial debt, thus
strengthening our current ratio and decreasing the future foreign exchange impact. The higher financial expenses were
due to the substitution of short-term debt in dollars for medium-term debt in soles, inevitably at higher rates, as well as
the increase of our debt to S/. 378 million to cover the cost of the final stage of the expansion of the Atocongo plant and the
higher imports of clinker, factors that will not be repeated in 2014, during which time we will firmly continue with our policy
of reducing exposure to foreign exchange risk and to the rise in interest rates.
TO THE SHAREHOLDERS OF UNACEM:
2013 UNACEM 15
THE CHAIRMAN OF THE BOARD
The growth and strengthening of UNACEM would not be possible if we were not so dedicated to forging and consolidating
a business operation committed to its sustainable development, where our employees, the local communities, the
environment, suppliers, and clients are our priority. Through the Asociación UNACEM, which has spent more than ten
years joining forces with us in an effort to add value for all our stakeholders, we have sought to promote and facilitate the
development and performance of our corporate sustainability strategy. I am convinced that our investment in a sustainable,
ethical, and responsible management has enabled us to consolidate our leadership in the sector and strengthen the trust
of our stakeholders.
This year was also an important one for our subsidiaries. Through these companies, we are diversifying our investments in
a direct line with our business: UNICON and Firth continue to be leaders in the premixed concrete market; PREANSA has
opened doors to new markets such as Chile and Colombia; CELEPSA continues to achieve strong operating results and grows
in its search for electricity projects using renewable sources. We have been especially focused on our subsidiaries in Arizona,
U.S.A.—which are still in the beginning stages, with production and sales at only half of their installed capacity—to make sure
they are in optimum operating order when that market recovers, after showing shaky growth in 2013. As of the close of 2013,
the operations of Drake Cement were starting to overcome the initial difficulties and the premixed concrete and aggregates
business of Drake Materials registered positive operating results, for which reason we feel optimistic about the favorable
evolution of these investments.
I would be remiss not to thank Sindicato de Inversiones y Administración S.A., which continued under the responsibility of
the General Management of UNACEM, as well as Inversiones Andino S.A. and ARPL Tecnología Industrial S.A., companies
that provide us administrative, financial, and technical advisory services; and especially each one of our employees, whose
hard work and commitment have enabled us to achieve the goals we set for ourselves.
We move ahead into 2014 with the unwavering commitment to continue betting on the country’s development. We will
continue to prioritize our offer of a wide range of high-quality products at competitive prices, delivered on a timely basis, to
the satisfaction of our clients and consumers. Likewise, together with our subsidiaries, we will continue to promote growth
in Peru and the region, always prioritizing sustainable development, ready to take on new challenges and seek out new
opportunities.
I invite you to take a look at the most important results of UNACEM’s performance during 2013.
Sincerely,
Ricardo Rizo Patrón de la PiedraChairman of the Board
BOARD OF DIRECTORS
CHAIRMANMr. Ricardo Rizo Patrón de la Piedra
VICE CHAIRMANMr. Alfredo Gastañeta Alayza
DIRECTORSMr. Marcelo Rizo Patrón de la PiedraMr. Jaime Sotomayor BernósMr. Carlos Ugás DelgadoMr. Roque Benavides Ganoza Mr. Diego de la Piedra Minetti Mr. Oswaldo Avilez D’AcunhaMr. Hernán Torres Marchal Mr. Martín Naranjo Landerer Mr. Drago Kisic Wagner Mr. Leslie Pierce Diez Canseco
TECHNICAL ADVISORSARPL Tecnología Industrial S.A.
ADMINISTRATION AND FINANCE ADVISORS Inversiones Andino S.A.
BOARD OF AND MANA
MANAGEMENTSINDICATO DE INVERSIONES Y ADMINISTRACIÓN S.A. (SIA)
GENERAL MANAGER Mr. Carlos Ugás DelgadoRepresentative of SIA in the General Management LEGAL MANAGERMr. Julio Ramírez BardálezFINANCE AND CORPORATE DEVELOPMENT MANAGER Mr. Álvaro Morales Puppo CENTRAL MANAGERMr. Víctor Cisneros Mori ADMINISTRATIVE MANAGERMr. Jorge Trelles Sánchez COMMERCIAL MANAGER Mr. Kurt Uzátegui Dellepiane PROJECT PERFORMANCE MANAGER Mr. Jeffery Lewis Arriarán ATOCONGO OPERATIONS MANAGERMr. Juan Asmat Siquero CONDORCOCHA OPERATIONS MANAGERMr. Ricardo Ramírez Zurita HUMAN RESOURCES MANAGERMr. Pablo Castro Horna
ASOCIACIÓN UNACEM
GENERAL MANAGER Mr. Armando Casis Zarzar
DIRECTORSAGEMENT
2013 UNACEM ANNUAL REPORT 17
1
MACROEENVIR
2013 UNACEM 19
ECONOMIC RONMENT
During 2013, the international economy showed slight signs of recovery. It is estimated that global
growth will total 2.9%, a figure achieved in an adverse and, above all, volatile environment, where
emerging countries were the major contributors to growth.
Starting in the second quarter of the year, Europe came out of its recession, and it is estimated
that its GDP will fall by only 0.4%. China, on the other hand, will grow by 7.7% thanks to greater
external demand and the specific measures of its tax and public spending policy. In the United
States, growth (1.9%) is still weak, considering that neither investment nor employment in said
country have returned to pre-crisis levels. After several years of solid economic performance,
the emerging economies experienced a significant deceleration, which the majority of them
were able to handle thanks to the adoption of adequate policies and the fact that they had
sufficient reserves and more flexible foreign exchange rates.
After a decade of bonanza, the Latin American economy exhibited moderate and heterogeneous
growth (2.6%), partially explained by the drop in the performance of its largest economies, Brazil
(2.3%) and Mexico (1.2%), which account for half of the region’s aggregated GDP. This reduction
was counteracted by higher growth in countries such as Paraguay (12.3%), Panama (8.8%), and
Peru (5.0%). Generally speaking, the region demonstrated that it is prepared to face the impact
of external turbulence. However, its heterogeneous structures and development gaps continue
to be a major challenge.
During 2013, the Peruvian economy kept up its growth streak, standing out for its macroeconomic
strength despite persisting global uncertainty, and registering growth of 5.0% over 2012. This lower
rate may be explained by lesser growth in private investment and private consumption, in addition
to reduced exports.
The construction sector grew by 8.6% over 2012, continuing to be the driving force of the GDP
among non-primary economic sectors. While there was a drop in the rhythm of execution
of roadway infrastructure and mining projects during the year, this was offset by the strong
demand for housing and mall construction. It is important to note that during 2013, the sector
exhibited unequal growth among regions: the south and east were the most dynamic zones,
achieving growth of approximately 14.0% and 16.0%, respectively, while central Peru grew by
around 7.4%.
Annual inflation closed out the year at 2.9%, with the target range of the Central Reserve
Bank (BCR), despite the fact that it fluctuated near the upper limit of this range for the first
eight months of the year (as a result of the increase in hydrocarbon and grain prices). The
decelerations of September and November helped keep the annual inflation rate within the
established target range for monetary policy.
2013 UNACEM 21
The following are some of the most important figures on the performance of the Peruvian
economy according to the information published by the BCR:
Deficit of US$ 365 million in the trade balance (after eleven consecutive years of surpluses),
due mainly to lower sales of traditional and non-traditional products. Exports totaled
US$ 41.826 billion (9.5% less than in 2012), while imports totaled US$ 42.191 billion (2.6%
higher than in 2012), primarily due to the effect of the international crisis on exports and
increased capital investments which affected imports.
Net international reserves as of December 31, 2013 totaled US$ 65.663 billion, or US$ 1.672
billion (2.6%) higher than in 2012, when reserves totaled US$ 63.991 billion.
For the third consecutive year, a fiscal surplus was registered, totaling S/. 3.666 billion,
equivalent to 0.7% of the GDP and 1.4% higher than that registered in 2012. It should be
noted that Peru was the only emerging country that registered this positive indicator.
Based on recent estimates, private investment grew by 3.6%. On the external side, this
decreased expansion is the result of lower global liquidity levels; while on the internal side,
it was caused by the increase in risk perception and the reduced return on investments, two
factors that had partially dissipated by the end of the year.
Public investment continued to grow after last year, reaching a new record level of S/. 31.310
billion, as a result of the greater investments by local governments (S/. 11.918 billion),
regional governments (S/. 7.016 billion), and the federal government (S/. 9.860 billion).
The year 2013 was characterized by a highly volatile foreign exchange rate, influenced by the
drop in metal prices and the announced deceleration in the printing of money in the U.S.A.
Consequently, the Nuevo Sol depreciated against the U.S. dollar by 9.6%, with an exchange rate
of S/. 2.796 per dollar as of the close of the period (S/. 2.551 per dollar at the close of 2012).
In a highly volatile environment, Peru demonstrated that it has reduced its vulnerability to
external shocks, leading Standard and Poor’s to improve its risk rating from BBB to BBB+ in
August. This rating was backed by Fitch Ratings in October.
I LIKED MY JOB A LOT RIGHT FROM THE START. WHEN I FINISH MY TIME HERE, I’LL BE ABLE TO RETIRE IN PEACE BECAUSE I’LL HAVE DONE MY DUTY FOR MY COMPANY AND MY FAMILY, I GAVE MY KIDS A GOOD EDUCATION.”
CIPRIANO ARELLANO ZURITA ELECTRICITY AND GENERATION
MAINTENANCE DIVISION 2013 EMPLOYEE OF THE YEAR
CONDORCOCHA
2013 UNACEM ANNUAL REPORT 23
EXTRACTION OF RAW MATERIALS
2013 UNACEM ANNUAL REPORT 25
2
C
THECOMPANY
MERGEROctober 1, 2013 marked one year since our merger with Cemento Andino. To date, we have
obtained competitive advantages as a result of the synergies in commercialization, production,
costs, and improvements in operations, procurements, and maintenance. Special note should
be made of the full use of staff capacities, energy savings due to the operation of the new kilns
in both plants, and the increased value of our company, as synergies that have been achieved
as of this date.
One of our most important landmarks during the year was the rollout in real time of the
world-class SAP computer program on June 3, 2013. The decision to implement an ERP
(Enterprise Resource Planning) System will enable us to streamline the management of
the different areas of the merged company, integrating and standardizing the processes and
operations performed by both companies before the merger, as well as allowing us to:
Obtain reliable and secure information in real time, made available to all employees from
anywhere in our network.
Improve the control of operations, avoiding overlap in tasks and reducing manual activities
with low added value.
Implement the technological infrastructure necessary to ensure the correct support of
SAP® ERP transactions.
Integrate and align all business operations with UNACEM’s Strategic Plan.
Improve the percent of efficiency over time for each month- and year-end closing.
Provide a broader vision of the real expenses and costs compared to those planned, thus
achieving better preventive control.
As of this date, the system has been completely implemented and we are streamlining the
business and control processes in order to ensure greater efficiency in these processes
and the increased reliability of information management. It should be emphasized that this
achievement is owed to the professionalism, dedication, integrity, passion, and creativity of a
team of 55 people from different areas, all of whom played a key role in tackling this challenge.
We are currently developing new projects such as the improvement of our Business Intelligence
platform, our processes and reports, as well as supporting the implementation of the SAP in our
subsidiary Drake Cement.
EXPANDED CAPACITY IN OUR PLANTS
In Condorcocha, after the commissioning of the plant expansion in 2012, we successfully
achieved the operation of the new Kiln 4 in 2013, managing to produce 629,899 tons of clinker,
equivalent to 90% of capacity, with average heat consumption of 835 kcal/kg, at an altitude of
3,950 meters above level, and electricity consumption of 61 kW-h per ton of clinker, generating
significant savings in production costs.
This investment has enabled us to increase the clinker production capacity at the Condorcocha
Plant from 1.18 million to 1.88 million tons annually, and the cement milling capacity to 2.1
million tons annually. In all, fuel consumption during the year at the Condorcocha Plant totaled
902 kcal/kg of clinker, lower than the average of 939 kcal/kg of clinker registered in the three
years prior to the expansion (2009 to 2011). Likewise, we improved our consumption of electrical
energy, registering a consumption of 64 kW-h/t of clinker for the four kilns, lower than the
consumption of 65.7 kW-h/t of clinker registered in the three years prior to the expansion
(2009 to 2011).
At Atocongo, we continued during 2013 with the works related to the project for the upgrading
and expansion of the production capacity of Kiln 1, which involved the construction of a
new six-stage heat exchanger and the construction of a new cross-bar clinker cooler and
electrofilter. The commissioning of the calcination line was commenced in June, with the
trial period. With the entry into operation of this kiln, the consumption of heat and electrical
energy has been substantially reduced, achieving a production as of the close of the year of
1,073,011 tons of clinker with an average heat consumption on the order of 731 kcal/kg in this
production line, and an average electricity consumption of 28.6 kW-h/t of clinker produced, in
addition to a reduction in the monthly water consumption by approximately 12,000 m3. These
conditions should continue to improve as the production of this equipment stabilizes. As with
the Condorcocha Plant, we reduced the consumption of fuels at the Atocongo Plant in 2013,
dropping from 801 kcal/kg of clinker (from 2009 to 2011) to 771 kcal/kg. Similar savings were
registered in the consumption of electrical energy, where we dropped from 38.8 kW-h/t of
clinker (from 2009 to 2011) to 30.7 kW-h/t clinker produced in 2013.
For the modification of the calcination line, it was necessary to halt the operation of Kiln 1 at
Atocongo starting on July 1, 2012, in order to perform a series of modifications that included
metal-mechanical machining, new mechanical and electrical equipment, the implementation
of modern particulate capture systems, as well as new civil works that improved the efficiency
of the process and the kiln’s environmental performance. In February of 2013, the new roller
presses entered into operation for the milling of raw meal and cement.
2013 UNACEM 29
This investment has enabled us to increase the clinker production capacity at the Atocongo
Plant to 4.8 million tons annually, and the cement milling capacity to 5.5 million tons annually.
With the constant operation of Kiln 4 at the Condorcocha Plant and the entry into operation
of the upgraded Kiln 1 at the Atocongo Plant, UNACEM ceased to import clinker. In 2014, we
will decrease our cement manufacturing cost and we expect the heat and electrical energy
consumption to be even lower than that registered this year.
This excellent operating performance was achieved despite the breakdown of Kiln 2 at the
Atocongo Plant, which decreased production to 5,300 t/day, offset with increased imports of
clinker, resulting in the clinker stocks at the close of 2012 (279,160 t) to jump to 520,010 t as of
the close of 2013, reaching over 750,000 t as of the close of February 2014, giving us complete
confidence in our ability to supply cement to our market.
From September 2 to 5, the 30th FICEM – APCAC Technical Congress was held for the first time
in Peru, aimed at bringing together, training, and promoting the exchange of knowledge among
the cement companies that are members of the federation, suppliers, and consultants from the
industry throughout Latin America, the Caribbean, Spain, and Portugal.
Through the Cement Producers’ Association (ASOCEM), and together with the other
representatives of the Peruvian cement industry, UNACEM played an active role in carrying
out congress activities. This year marked a record attendance, with the presence of 358
participants, including 109 industry representatives, 197 suppliers, 7 conference speakers, and
29 representatives with commercial stands.
During the congress, we offered four talks: “The Atocongo – Conchán Underground Ecological
Conveyor Belt”; “Application of Blast Vibration Management Tools at Atocongo”; “Responsible
Water Management”; and “Contribution of the Cement Industry to Access to Water and Sewerage
Services in Communities of Southern Lima.” This latter talk, presented by Asociación UNACEM,
received an award from the evaluation committee, recognizing UNACEM for its good sustainability
practices and innovation with regard to its social responsibility model.
30TH TECHNICAL CONGRESS OF THE INTER-AMERICAN CEMENT FEDERATION (FICEM – APCAC)
2013 UNACEM 31
We carry out our management actions within the framework of the Principles of Good Corporate
Governance, through good business practices that enable us to guarantee the positive performance
of UNACEM, ensuring transparency while striving to benefit all our stakeholders. As such, we seek
to obtain the satisfaction of our shareholders, our management, our employees, and all our interest
groups along the entire value chain.
The Board of Directors met monthly, according to an established schedule, and has directed the
Company in an effort to equally safeguard the interests of all shareholders, taking care that the
interests of UNACEM are given priority at all times.
The Audit Committee, made up of three directors (two of whom are independent directors of the
controlling shareholder), continued to hold periodic meetings throughout the year in order to review
the information provided by the Company and revised by the independent auditors.
The Mandatory Annual Shareholders’ Meeting, held on March 26, 2013, approved the financial
statements for fiscal year 2012, as well as the unqualified opinion of the independent auditors.
During 2013, we maintained our policy for the quarterly payment of dividends in January, April,
July, and October. We have also continued to send shareholders the Annual Report and quarterly
reports with the partial financial statements and a summary of the most significant activities for
each quarter. Said information is also available on our website.
GOOD CORPORATE GOVERNANCE
ATOCONGO PLANT, LIMA
UNACEM IS A COMPANY THAT MOTIVATES ME TO ALWAYS DO BETTER. IT’S A PLEASURE FOR ME TO PERFORM MY DAILY DUTIES, TO PUT IN MY EFFORT AND DEDICATION.”
LEANDRO MANTILLA MEDINA QUALITY CONTROL DIVISION
2013 WORKER OF THE YEARATOCONGO
2013 UNACEM ANNUAL REPORT 33
PRIMARY AND SECONDARY CRUSHING
2013 UNACEM ANNUAL REPORT 35
3
OPERA
RATIONS
PRODUCTION AND DISPATCHES IN THE LOCAL MARKET
In 2013, our total cement production came to 5,631,076 t, 5.1% higher than that registered in
2012 (5,355,447 t). Of the total cement production, 3,731,102 t correspond to production of the
Atocongo Plant (Lima); and 1,899,974 t to the Condorcocha Plant (Junín), fully meeting the
local cement demand. Due to the shutdown of Kiln 1 for upgrading, we had to import nearly
one million tons of clinker to meet demand and carry out plant expansion. As previously
mentioned, the upgrading of Kiln 1 commenced the trial period in June, and we closed out the
year with a production of 1,073,011 t of clinker in this line.
GRAPHIC N.º 1
(in thousands of metric tons)
CEMENT PRODUCTION BY PLANT 2009 - 2013
Condorcocha Atocongo UNACEM
0
1,000
2,000
3,000
4,000
5,000
6,000
2009 2010 2011 2012 2013
4,248
4,774 4,731
5,3555,631
000
1,000
0
2009
Co
2010
Atocong
2011
ondorcocha ACEM
2012
go UNA
2013
2013 UNACEM 39
Our cement dispatches in 2013 reached a new historical record for both plants. The total volume
dispatched was 5,610,572 t, 5.6% higher than that registered in 2012 (5,310,830 t). The construction
sector remained dynamic, growing more than the economy as a whole, due to increased
construction of housing, malls, and public works.
Nationwide cement demand, according to recent estimates, totaled 11,093,004 t, making for
a 9.1% increase over demand in 2012, which was estimated at 10,167,907 t. This demand
was calculated including the dispatches of domestic producers and an estimate of imported
cement entering the country.
DOMESTIC CEMENT DISPATCHES 2004 - 2013
Domestic dispatches
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
5,000
6,000
5,500
0
0
Domestic dispatches
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
5,311
5,611
4,7024,709
4,2094,126
3,452
2,6832,481
3,056
(in thousands of metric tons)
GRAPHIC N.º 2
EACH DAY, THE COMPANY PLACES ITS TRUST IN US, ALLOWING US TO FEEL COMFORTABLE AND PROGRESS IN THE BEST POSSIBLE WAY AS WORKERS AND AS PEOPLE, WITH THE CONSTANT GOAL OF BETTERING OURSELVES.”
DAVID REYES NATEROSMECHANICAL MAINTENANCE DIVISION
2013 WORKER OF THE YEAR CONDORCOCHA
2013 UNACEM ANNUAL REPORT 41
We sell our products through two business units: bagged cement and bulk cement, which
account for 73.0% and 27.0% of all sales, respectively.
The products sold by the bagged cement business unit are as follows: Type I Portland cement,
under the brand names “Cemento Andino” and “Cemento Sol”; Type IP Portland cement, under
the brand names “Cemento Atlas” and “Cemento Andino”; and Type IPM and Type V, under the
brand name “Cemento Andino.” Additionally, in the second quarter of 2013, we incorporated
“Cemento Apu” into our portfolio. This is a general-use blended cement used as a more
economical alternative to cement, with excellent performance results.
Our portfolio of products is sold mainly through two distribution channels: the traditional home
improvement channel (made up of the Progre-Sol Hardware Store network and independent
home improvement stores); and the modern home improvement channel (made up of the large
self-service home improvement stores).
In 2013, we decided to streamline our product portfolio by regions and cities, in an effort to serve
our consumers more efficiently while also increasing our market coverage levels. Thus, in cities
such as Iquitos, Pucallpa, and Ayacucho, priority was given to products from the Condorcocha
Plant (where such products used to compete with products from the Atocongo Plant), thus
achieving savings efficiency for over S/. 3 million, added to coverage levels surpassing 94% in
points of sale in Iquitos achieved in less than one year.
The bulk cement business unit sells Types I, IP, IPM, and Type V Portland cement, mainly
supplying premixed concrete vendors, mining, oil, and construction companies, as well as
companies that manufacture cement byproducts. During 2013, dispatch by this business
unit rose by 11.8% over 2012, explained primarily by the sale of cement to premixed concrete
vendors as a result of the growth experienced in the construction sector related to housing
works and infrastructure works nationwide.
Our sales strategy is focused on strengthening a sustainable commercial relationship
throughout the entire value chain, from the plant to the points of sale, as well as investing
in improving the service provided to our clients and the end users of our products. For this
reason, we have maintained strong bonds since 2008 with independent home improvement
store owners, with outstanding performance in distribution in coverage, through the Progre-Sol
Home Improvement Store Network. During 2013, the Network continued to grow, surpassing
270 points of sale.
In addition to the points of sale of the Progre-Sol Network, we have over 40 direct points of sale
in the form of distributors in cities of the central highlands and the northeast jungle of Peru,
which enables us to achieve higher levels of coverage nationwide.
SALES
2013 UNACEM 43
We are dedicated to innovating with regard to both our products and our business model.
For this reason, in 2013 we continued to design different operating, manufacturing, and final
consumer studies in order to evaluate possible new packaging as well as new formulas that
better meet the demands of cement buyers and users.
CONCHÁNPIER
INTEGRATED MANAGEMENT SYSTEM
Our port operations, expressed in metric tons, totaled 1,487,373 t, representing an increase
of 89.7% over 2012. During the year, the Conchán Pier serviced 46 ships. This considerable
increase in tonnage handled in 2013 was the result of the higher imports of clinker due to
the stoppage of Kiln 1 as part of the project for the expansion of capacity. Note should be
made of the strategic importance of our port facilities at the Conchán Pier, connected by an
underground conveyor belt to the Atocongo Plant.
After the merger, we decided to unify certain processes, such as human resources, commercial,
logistics, and legal management, among others. This gave rise to changes which we have
incorporated into both integrated management systems. For this purpose, we have two
systems: one at the Condorcocha facilities and another at the Atocongo facilities. The latter
includes the Conchán Pier and mining concessions.
During the first half of the year, we conducted a cement client satisfaction and loyalty study,
which helped us to determine opportunities for improvement in our commercial processes,
such as the variable “Credits and Collections” (valorizing the allocated amount, followed by
a complete report on credit options). Additionally, thanks to the six internal audits performed
during the year, we have verified our compliance with the requirements established by ISO
9001, ISO 14001, OHSAS 18001, BASC, and PBIP standards, as well as the legal requirements
for safety, occupational health, and environmental aspects at UNACEM. With the formal review
of the Integrated Management System Area, we have made sure that this system will remain
effective, adequate, and advisable.
In September, SGS performed a follow-up audit on ISO 9001 certification, with positive results,
enabling us to continue with our ISO 9001:2008 certification obtained in 2012 for the Atocongo
Plant and Conchán Pier.
In November 2013, after the second-phase audit performed by SGS, we obtained ISO
14001:2004 and OHSAS 18001:2007 certifications for the “Manufacture and Sale of Clinker
and Cement at the Atocongo Plant; Loading and Unloading of Vessels at the Conchán Pier.”
Beyond compliance with the requirements for standards, these certifications confirm our
commitment to orient our efforts at the prevention of pollution, maintain adequate control of
our environmental matters, and prevent occupational accidents and diseases, thanks to the
planning and controls we use to manage the health and safety risks posed to our employees.
Additionally, we have renewed our BASC (Business Alliance for Secure Commerce) certification
for the Atocongo Plant and Conchán Pier; and PBIP (Ship and Port Facility Protection)
certification for our port operations.
In September 2013, SGS performed the independent follow-up audit for ISO 14001:2004
standards and ISO 9001:2008 and OHSAS 18001:2007 recertification for the processes of the
Condorcocha Plant. The auditing team concluded that UNACEM has established and maintains
quality and occupational health and safety management systems at the Condorcocha Plant
in accordance with the requirements of ISO 9001:2008 and OHSAS 18001:2007 standards,
respectively, recommending recertification and the follow-up of ISO 14001:2004, under the
scope of the “Manufacture and Sale of Cement at an Industrial Plant.”
Over the course of the year, we performed three internal audits focused on the occupational
health, safety and environmental management of our contractors, which is an important tool to
improve contractor performance in environmental and occupational health and safety matters.
Furthermore, in August we performed an integrated internal audit of the processes of UNACEM
Condorcocha, which made it possible for us to identify the areas in which we may strengthen
out Integrated Management System.
ATOCONGO PLANT AND CONCHÁN PIER INTEGRATED MANAGEMENT SYSTEM (IMS)
CONDORCOCHA PLANT INTEGRATED MANAGEMENT SYSTEM (IMS)
PRODUCTION LINE 4, CONDORCOCHA PLANT, TARMA
2013 UNACEM ANNUAL REPORT 45
THE COMPANY HAS GIVEN ME EVERYTHING AND I’VE GIVEN MY ALL TO THE COMPANY. IT’S MY SECOND FAMILY.”YOLANDA CASTILLO CALDERÓN
HUMAN RESOURCES AND ADMINISTRATIVE SERVICES MANAGEMENT
ATOCONGO
2013 UNACEM ANNUAL REPORT 47
PREHOMOGENIZATION AND MILLING OF RAW MEAL
2013 UNACEM ANNUAL REPORT 49
4
SUSTAMANAG
2013 UNACEM 51
AINABLEAGEMENT
At UNACEM, the development of our business is associated with a sustainability strategy
that starts with our employees, as ambassadors of the Company’s responsible management,
aligning, articulating, and integrating our corporate values.
Along these same lines, suppliers, contractors, and clients are given our undivided attention
in order to establish responsible practices in their processes and each one of their companies’
areas.
Another of our essential commitments to sustainable development involves our local
communities, with whom we work on capacity-building and institutional strengthening for
self-sustainability. We are also committed to mitigating the effects of climate change and
promoting good environmental practices.
We have joined forces in an effort to generate value for our stakeholders. With the goal of
strengthening our sustainable vision, we created Asociación UNACEM (previously Asociación
Atocongo), which promotes and fosters the development and execution of UNACEM’s corporate
sustainability strategy, as well as boosting social investment initiatives aligned with our
business objectives.
This sustainability model has three pillars of action: economic management, environmental
management, and social management. All of these are grounded in the basic challenges faced
by the industry, and carried out based on our Corporate Social Responsibility policy.
Likewise, each one of the Group’s companies manages its own sustainability model. Thus, for
example, UNICON focuses on the responsible use of natural resources such as water, through
the implementation of projects for green concrete and the promotion of new initiatives that
involve reductions in the use of energy and other materials for its production processes.
On the other hand, CELEPSA—a hydropower generator—contributes clean energy, for which
reason its strategy is based around the promotion of the adequate use of water in its area of
activity and the social development of the community.
This business vision has enabled us to consolidate our leadership in the sector and build trust
among our stakeholders, promoting a sustainable, ethical, and responsible management.
2013 UNACEM 53
UNACEM has eight stakeholder groups, with whom it seeks to build a rapport and generate
trust so that we may grow together in the development of our activities.
With this purpose in mind, we have implemented dialogue spaces in an effort to learn about
the expectations, concerns, and needs of our stakeholders, so that we may prioritize them
and incorporate them into our management. We have also developed tools that enable us to
maintain direct and transparent communication, providing stakeholders with information on
the Company’s performance.
STAKEHOLDERS
UNACEM’S STAKEHOLDERSGRAPHIC N.º 3
SUPPLIERSSUSUPPPPPLLILIERERSSS
COMMUNITY
STAFF
FUTUREGENERATIONS
ENVIRONMENT GOVERNMENT
SHAREHOLDERS
CUSTOMERS
AS SOON AS I STARTED WORKING FOR THE COMPANY, I LEARNED THE IMPORTANCE OF TEAMWORK, THE POSITIVE ATTITUDE OF THE EMPLOYEES IN THE FACE OF NEW CHALLENGES. THAT’S WHAT SETS US APART.”EDGARDO MONTOYA MORALES
WAREHOUSES DEPARTMENT 2013 EMPLOYEE OF THE YEAR
ATOCONGO
2013 UNACEM ANNUAL REPORT 55
Our employees’ commitment is one of the main pillars necessary to take on the challenges of
the industry. The harmony of our relations with our employees has made it possible to achieve
high levels of performance and productivity in all of our operations during 2013.
Graphic 4 shows the variation in the numbers of employees during 2012 and 2013 (as of
December 31 of each year). It should be noted that the data shown for 2012 is for the total
number of employees starting on October 1, the date on which the merger entered into effect,
and includes the entire staff of UNACEM.
In April 2013, we entered into a Collective Agreement with the Sindicato Único de Trabajadores
de Unión Andina de Cementos S.A.A. workers’ union, which will expire in December 2015. This
agreement joins that signed in July of 2012 with the Sindicato de Trabajadores de Cementos
Lima S.A. – Canteras de Atocongo union, which was established for a term of three years,
ending in 2015.
The signing of agreements with both unions, for a term of three years apiece, confirms the
trust and commitment of our employees with regard to UNACEM’s goals. It will also help us
to standardize human resources management procedures during this term so that we can
merge both units and improve the work environment.
OUR EMPLOYEES
VARIATION IN EMPLOYEES ON PAYROLLGRAPHIC N.º 4
Administrative Staff
Employees
Workers
0
100
200
300
261
152
207
283
137
234
Total 2013: 654
Total 2012: 620
20132012
2013 UNACEM 57
CLASSIFICATION OF TRAINING MAN-HOURS
TRAINING AND DEVELOPMENT OF OUR EMPLOYEES In keeping with our commitment to continuous improvement, we aim to strengthen the skills of our employees through the regular implementation of training programs.
Currently, we have a skill-based management model that involves processes for the analysis of job profiles, recruiting and selection, performance evaluation, development, and training of the members of our team.
To guarantee the skills of our employees, we seek to promote and facilitate their professional and technical development through constant training in Peru and abroad. As such, during 2013 courses were organized for a total of 23,637 man-hours, equivalent to an average of 30.22 hours per employee.
GRAPHIC N.º 5
14,489 horasINSIDE THE COMPANY
8,636 horasPERÚ
OUTSIDE THE COMPANY
23,637 hoursTOTAL
512 horasABROAD
The 21st Professional Training Program finished in September, having brought together young
professionals from different specialties. At the same time, we initiated the 22nd Program, with the
participation of 31 recently-graduate professionals.
On the other hand, as part of our commitment to contribute to the education of young people in
our country, we received technical visits by over 1,730 students from different universities, thus
contributing to the training of the country’s future professionals.
OCCUPATIONAL HEALTH AND SAFETY We have an occupational health and safety management system that enables us to identify the
main risks and incidents in each area and promptly follow up on them in order to prevent and
reduce them.
Thanks to our good practices, we obtained very good results in 2013 in the health and safety
indices. For example, the accident rate dropped by an average of 90.0% at Atocongo and
Condorcocha. Likewise, a 52.8% reduction was achieved in the days lost rate at the Condorcocha
Plant.
TABLE N.º 1
OCCUPATIONAL HEALTH AND SAFETY INDICATORS 2013 VS. 2012
ATOCONGO CONDORCOCHA
2012 2013 2012 2013
Absentee Rate 5.85 6.65 4.98 2.35
Accident Rate 19.00 1.80 19.05 2.14
N.° of fatalities 0 0
Severity index 925.30 115.10 2,206.30 203.35
* In 2012 we reported one fatality at the Atocongo plant, whose case is still being investigated by the Ministry of Labor
2013 UNACEM 59
We have an environmental management system aimed at promptly identifying the impacts
caused by our operations, as well as establishing prevention and mitigation plans for these
impacts. The system has four areas of action, based on the impacts identified: environmental
quality; natural and cultural resources management; capacity building; and environmental
certifications.
ENERGY, EMISSIONS, AND CLIMATE CHANGE One of the primary impacts of the cement sector is the emission of greenhouse gases (GHG).
Our management is focused on reducing the emission of greenhouse gases in the production
process via the implementation of cleaner and more efficient technologies.
In our operations, we seek to use clean energy via our hydroelectric plants Carpapata I and
II, CELEPSA, and our Atocongo thermal power plant. The latter uses 94.0% natural gas and
6.0% diesel fuel in its operations.
As part of the Clean Development Mechanism of the United Nations Framework Convention
on Climate Change (UNFCCC), we have registered our fuel switching project. On September 9,
2013, the Secretariat of the UNFCCC issued the 137,754 Certified Emission Reductions (CERs)
corresponding to the third periodic verification. On December 4, we initiated the transfer of
134,998 CERs, in accordance with the established procedure, which were sold to EDF Trading
Ltd., in compliance with the agreement in force with said company since March 2010. We
constantly monitor the emission reductions generated by our fuel switching project.
Additionally, we are working to raise awareness among our employees, organizing seven
talks during Environment Week, as well as providing inductions for all contractors who enter
our facilities.
ENVIRONMENT
RESPONSIBLE USE OF WATEROur initiatives with regard to water management allowed us to accomplish the following in
2013:
Implement a new “Biocleaner” technology in the Condorcocha water treatment plant, in
which microbes are responsible for cleaning the water. This ecological process requires less
space, maintenance, and operating costs. At Atocongo, the water treatment plan operates
using a system of sub-surface cushion bogs, in which different plants are responsible for
cleaning the water. The treated water in both plants is reused in the watering of green
areas, roadways, as well as the firefighting system and the industrial process.
Measure the Water Footprint at the Atocongo Plant, in order to establish the baseline for our
consumption based on the lifecycle analysis. This made us one of the first five companies
in Peru to conduct this study, positioning as leaders in the promotion of these initiatives in
the country. The work was performed together with the Swiss Agency for Development and
Cooperation (COSUDE), which provided the technical support for the study through the NGO
Agualimpia. The Project is known as “Suizagua,” and will continue during 2014.
Create a responsible culture for the optimization of water use among our employees and
contractors, through the “Make the Difference” program.
OUR COMMUNITIES
We implemented a grassroots development methodology, which promotes a proactive attitude
among stakeholders with regard to their own development, through their positive performance
in the social fabric. For such purpose, we built capacities among community members that will
help them to engage with different social actors in their surroundings, both public and private.
Our community strategy is based on three areas of action: social infrastructure, relations, and
human and social development. Additionally, we form cross-cutting strategic alliances with
different local stakeholders, in order to promote group initiatives, cooperating with the actors
to promote development in our area of influence.
We also created different spaces for dialogue with the community members in our area
of influence, with whom we have established continuous and transparent communication,
enabling us to forge lasting relationships based on trust. We have thus consolidated ourselves
as a key actor in the promotion of the economic, social, and cultural development of our
surroundings.
2013 UNACEM 61
COMMUNITY STRATEGYTABLE N.º 2
Our areas of direct influence include five districts in Lima and four in Tarma, where
we carry out our principal social development actions.
AREAS OF INFLUENCE OF UNACEMGRAPHIC N.º 6
COMMUNITY RELATIONS
Strengthening of
company-community
relations
Promotion of dialogue
spaces
Environmental projects
Contribution of cement
and other construction
materials
Technical advisory
HUMAN AND SOCIAL DEVELOPMENT
Production, social,
and entrepreneurial
development projects
SOCIALINFRASTRUCTURE
VILLA MARÍA DEL TRIUNFO
PACHACÁMAC VILLA EL SALVADOR
SAN JUAN DE MIRAFLORES LURÍN
LIMA TARMA
CONDORCOCHA
HUANCOY CHANCHA
PALCA
In 2013, we made a total investment in development programs of S/. 9,686,055, 20.0% more
than in 2012. We thus benefitted approximately 148,000 community members. Below is a
summary of some of the most notable results of the work we performed with the community:
Construction and remodeling of 14 social infrastructure works in Lima and Tarma: over
51,300 bags of cement donated, benefitting 118 works, as well as 226 lots benefitted through
the Techo Propio program, representing an investment of over S/. 1.4 million.
The “Math for Everyone” program benefitted a total of 35 public schools in the province of
Tarma, in the districts of La Unión Leticia, and Palca, and the Populated Area of Condorcocha.
A total of 35 principals, 104 teachers, and 1,482 primary school students were benefitted.
Additionally, an improvement of 11.0% was achieved in the results of the final evaluation for
2013. The program is currently still underway.
The “Promoting Successful Youth” (PSY) program is carried out in alliance with the World
University Service of Canada (WUSC), with the additional support of Canadian Technical
Cooperation, helping to benefit 554 youths with student scholarships. Of all graduates,
66.0% are currently employed, 65.0% of whom are women. A total of 62 undertakings
received seed capital.
To learn more about our sustainable management, we invite you to read the 2013 Sustainability
Report that accompanies this Report, prepared using the Global Reporting Initiative (GRI)
methodology.
EQUIPMENT COOLING SYSTEM, CONDORCOCHA PLANT, TARMA
2013 UNACEM ANNUAL REPORT 63
WHEN I WAS LITTLE, I WANTED TO BE A NURSE, BUT I NEVER GOT THE CHANCE… ASOCIACIÓN UNACEM HAS GIVEN ME THAT CHANCE NOW, TRAINING IN MEDICAL MATTERS SO THAT I CAN HELP MY COMMUNITY.”
MARÍA FELÍCITA YUPANQUI LUNA COMMUNITY AGENT OF THE JOSÉ GÁLVEZ
MOTHER AND CHILD HEALTH CENTER
2013 UNACEM 65202020202013313313111313 UNUNUNUNUUNUNUNUNNAAAAAAAAAAAACCCCCCCCCCCCCCCAAAAAAAAAA EEEEEEEEEEEEEMMMMMMMM 6556656
MAKING CLINKER
2013 UNACEM ANNUAL REPORT 67
5
FUTURPR
2013 UNACEM 69
EOJECTS
KILN 5 AND CEMENT MILL 9
At the Condorcocha Plant, taking into account the growing demand projected for the coming
years, we have initiated the feasibility studies and detailed engineering for the performance of
the “New Kiln 5 Production Line” project, which is scheduled to enter into operation by the end
of 2017. This new line will contribute an installed capacity of 1 million tons of clinker.
This new production line includes the installation of Cement Mill 9, which would contribute an
installed capacity of 1.2 million tons of cement. Like Mill 8, it will be able to manufacture Types
I and IP cement.
With the performance of these two projects at the Condorcocha Plant, we will increase our
capacity for the production of clinker from 1.88 million to 2.82 million starting at the end
of 2017. Likewise, the milling capacity will rise from 2.1 million tons of cement annually to
2.9 million tons annually in 2015, which will later be increased to nearly 4.0 million tons by the
end of 2017.
Our joint capacity will grow from 6.7 million tons of clinker in 2013 to 7.6 million tons by the end
of 2017. The cement milling capacity will increase from 7.6 million to 9.5 million tons annually
during the same period.
UPGRADING AND PRODUCTION CAPACITY INCREASE OF THE ATOCONGO PLANT
As described in Chapter 2, the startup and commissioning of the upgraded Kiln 1 was a
resounding success, and is currently operating at full capacity.
As of the close of 2013, the civil works for the modification of the four raw meal storage
silos had been concluded, for their conversion into mixing silos. During the first half of
2014, the electromechanical assembly and commissioning of the last of these four silos will
be performed.
2013 UNACEM 71
In August 2013, we began construction on the building for the new Cementer Bagger 6, which
was concluded in later December. This new bagger is fully automatic and has a bagging capacity
of 3,000 bags of cement per hour.
During 2014, we will continue with metal-mechanical works and electromechanical assemblies
so that the system may enter into operation by September 2014.
NEW CEMENT BAGGER 6 AT THE ATOCONGO PLANT
FIREFIGHTING SYSTEM OF THE ATOCONGO – CONCHÁN CONVEYOR BELT
Over the course of this year, we carried out the project for the installation of the firefighting
system of the conveyor belt and tunnel that run from the Atocongo Plant to the Conchán Pier.
This system has a reservoir with a capacity of 750 m3 of water coming from our Wastewater
Treatment Plant.
During 2013, we initiated the construction of a new concrete block plant located in Cajamarquilla.
The principal products that will be manufactured are floor cobblestones, joist filler block (roofing
bricks), and King Kong bricks. The plant’s annual capacity varies from 20 million to 60 million units
annually, approximately, depending on the product to be manufactured.
CAJAMARQUILLA CONCRETE BLOCK PLANT
NEW CEMENT MILL 8 AND BAGGER 5 AT THE CONDORCOCHA PLANT
Over the course of the year, we continued to develop the engineering and procure the equipment
for these systems. In January 2014, pilot works were begun for the foundations of the new
mill building.
The new cement mill will have a capacity of 125 t/hour, i.e., a nominal capacity of 825,000 t
annually, via a combined milling system comprising a roller press and ball mill.
Likewise, the new bagger will have a bagging capacity of 3,000 bags per hour, with two cement
storage silos with a capacity of 7,500 tons each.
The electromechanical works are scheduled to begin in July 2014, and the commissioning
of the system is set for April 2015, concluding in July of that year.
2013 UNACEM 73
CARPAPATA III HYDROPOWER PLANT
In 2013, we performed the final and definitive studies for the performance of the project for the
new Carpapata III hydropower plant, which will have a generation capacity of 12.8 MW, via a net
water height of 125 meters and two Francis turbines.
We also continued with the procurement process for the equipment, which will be supplied by
the Austrian company Gugler Water Turbines GmbH. In April 2014, the tender process for the
construction works for the tunnels and engine room will begin, with construction scheduled to
commence in July. The plant should enter into operation during the second half of 2016.
CARPAPATA I HYDROELECTRIC PLANT, TARMA
THE COMPANY HAS HELPED ME DEVELOP AS A PERSON, TO PUT MY IDEAS INTO PRACTICE, TO GROW IN THE SECTOR. SOMETIMES, YOU’VE LEARNED THE THEORY BEHIND THINGS, BUT YOU NEED THE CHANCE TO FULFILL THE OBJECTIVES… WITH THE MERGER, THAT IS EXACTLY WHAT HAS BEEN ACHIEVED.”
CARLOS ATENCIO HERRERA REPRESENTACIONES SAN JORGE E.I.R.L.
DISTRIBUTOR IN LIMA
2013 UNACEM ANNUAL REPORT 75
COOLING AND MILLING OF CEMENT
2013 UNACEM ANNUAL REPORT 77
6
SUBSIDIAAF
2013 UNACEM 79
RIES ANDFILIATES
Through our subsidiaries, we have diversified our investments in premixed concrete,
industrialized prefabricated concrete, as well as cement byproducts and the energy sector.
In 2013, UNICON and Firth maintained their position as leaders in the premixed concrete industry.
CELEPSA reinforces our commitment to seek out renewable energy matrices with excellent
results; and via PREANSA, a large-scale prefabricated structures plant, we have expanded
our vision in South America to Chile. In the near future, we will also be initiating operations in
Colombia.
During 2013, premixed concrete dispatches nationwide totaled 2,353,679 m³, making for an increase
of 15.2% over the shipments of 2,043,476 m³ registered in 2012, explained mainly by the higher
demand from infrastructure and housing works.
In Lima, dispatches totaled 1,823,528 m³, 16.3% higher than the previous period (1,568,635 m³).
Likewise, shipments in the provinces rose by 11.7%, to 530,151 m³.
Commercial agreements during 2013 totaled 2,442,325 m³ of concrete, surpassing the 2,225,388
m³ registered in 2012. During the year, the capacity to meet demand was expanded with the
installation of the Villa, Oquendo 2, Collique, and Muelle Norte Plants. Likewise, as of the close of
2013, the fleet of mixers and pumps had been increased, with a total capacity of 1,540 m³/h in 16
fixed plants, 332 mixer trucks, and 90 concrete pumps.
The audited financial statements of UNICON as of December 31, 2013 showed the following results:
Net sales of S/. 764.7 million (S/. 637.6 million in 2012).
Net results of S/. 39.2 million (S/. 48.1 million in 2012).
Net shareholders’ equity of S/. 259.0 million (S/. 219.0 million in 2012).
FIRTH INDUSTRIES PERÚ S.A.UNICON holds 100.0% of the shares in Firth Industries Perú S.A. In 2013, the company’s premixed
concrete dispatches nationwide totaled 594,207 m³, a volume that was 3.7% less than the 617,148 m³
registered in 2012. This is due to the fact that the company centered its operations point in Lima. Over
the course of the year, dispatches in Lima rose by 26.2%, in contrast to the 66.9% drop in the provinces,
thus generating this slight decrease in Firth’s overall results.
The audited financial statements as of December 31, 2013 showed the following results:
Net sales of S/. 218.6 million (S/. 233.8 million in 2012).
Net results of S/. 9.1 million (S/. 11.5 million in 2012).
Net shareholders’ equity of S/. 97.1 million (S/. 92.6 million in 2012).
INVECO S.A. / UNICON S.A.(OWNERSHIP SHARE: 93.4% OF INVECO / 100.0% OF UNICON)
2013 UNACEM 81
BASF CONSTRUCTION CHEMICALS PERÚ S.A.UNICON holds a 30.0% share in the capital stock of BASF Construction Chemicals Perú S.A., a
supplier of additives for concrete, adhesives, and grouts for masonry, grouts for the assembly of
industrial equipment, and products for the repair of concrete structure, among others.
The audited financial statements as of December 31, 2013 showed the following results:
Net sales of S/. 64.0 million (S/. 53.9 million in 2012).
Net results of S/. 11.1 million (S/. 9.6 million in 2012).
Net shareholders’ equity of S/. 23.5 million (S/. 22.0 million in 2012).
ENTREPISOS LIMA S.A.C.UNICON holds a 50.0% share of the stock in the company Entrepisos Lima S.A.C., engaged
in investments in the activities of construction, concrete prefabrication, and the rental of
equipment and machinery for construction and related activities.
As of the close of fiscal year 2013, the company had showed the following results:
Net sales of S/. 12.7 million (S/. 11.6 million in 2012).
Net results of S/. 1.8 million (S/. 1.6 million in 2012).
Net shareholders’ equity of S/. 4.7 million (S/. 3.4 million in 2012).
COMPAÑÍA ELÉCTRICA EL PLATANAL S.A. – CELEPSA
(OWNERSHIP SHARE: 90.0%)
During 2013, as a result of the hydrological conditions, the total energy production of the Power
Plant came to 1,149,137 MW-h (1,149 GW-h), slightly higher than the production for 2012, which
totaled 1,122,768 MW-h (1,123 GW-h).
The company’s commercial management enabled it to identify business opportunities that
resulted in an increase in energy sales by 32.7% over the previous year.
The energy sold by CELEPSA during 2013 as a result of contractual commitments totaled 1,535
GW-h, of which 840 GW-h were used to meet the needs of the regulated market, while 695
GW-h were used to meet the needs of the company’s clients in the free market.
Additionally, the monthly power billed to the company’s free and regulated clients fluctuated
between a high of 221 MW and a low of 85 MW.
The net revenues of CELEPSA for power and energy in fiscal year 2013 totaled US$ 67.8 million,
exceeding revenues for 2012 by 7.3%. CELEPSA occupies eighth place in the production
ranking for the National Grid System (SEIN), with a 2.9% share of national production in
2013. During said year, CELEPSA generated 1,149 GW-h of the total 39,669 GW-h of the SEIN.
CARBON CREDITSDuring 2013, a total of 286,312 CERs were issued (January 1 to April 30), which will be sold in
the future when adequate conditions are determined.
Likewise, during the period between January 1 and December 31, 2013, the Company injected
a total of 1,149 GW-h into the system, equivalent to 577,947,000 tons of CO2 reduced.
The CERs issued for the Plant’s generation from the start of operations to date total 2,141,261,
representing an annual average of 658,850 CERs. This means that El Platanal continues to be
the leading CDM emissions reduction project in Peru.
FINANCIAL ASPECTSCELEPSA has been meeting the profitability indicators promised to its investors and complying
on a timely basis with its financial obligations, in addition to making the mandatory prepayment
of the final installments required by its financing (60.0% of the cash flow surplus from the
previous year).
During 2013, CELEPSA signed a leaseback for the electromechanical equipment at a term
of seven years, replacing the debt of the original financing, specifically the final installments
(“balloon” installments). Considering the foregoing, CELEPSA’s total debt shrank from
US$ 134.7 million at the close of 2012 to US$ 108.8 million at the close of 2013.
This decrease in the debt caused interest expenses to drop from S/. 26 million in 2012 to
S/. 23 million in 2013. However, because the debt is held in dollars, a net foreign exchange loss
of S/. 32 million was registered (compared to a net foreign exchange gain of S/. 22.4 million in
2012), causing the net profit to drop from S/. 36 million in 2012 to S/. 1.8 million in 2013.
The audited financial statements of CELEPSA as of December 31, 2013 showed the following
results:
Net sales of S/. 225.6 million (S/. 182.6 million in 2012).
Net profit of S/. 1.8 million (S/. 36.0 million in 2012).
Net shareholders’ equity of S/. 650.0 million (S/. 643.2 million in 2012).
CELEPSA RENOVABLES S.A.C.This company is the vehicle established by CELEPSA for the development of hydroelectric
projects with a power of up to 20 MW, as well as other activities related to the generation,
production, commercialization, distribution, transmission, and supply of electrical energy with
renewable energy resources.
2013 UNACEM 83
The Company has made capital contributions to Skanon Investments, Inc. for US$ 332 million
(US$ 31.3 million in 2013), making it the direct owner of 87.4% of the shares in this subsidiary.
Additionally, its related companies hold 10.7% of the rest of the stock.
Skanon Investments, Inc. is in turn the owner of 93.9% of Drake Cement and 100% of Drake
Materials.
In 2013, the total cement sales of Drake Cement came to 329,800 short tons, 20.9% higher than
sales during the previous year, which totaled 272,689 short tons. In 2014, Drake Cement’s sales
are expected to exceed 400,000 short tons of cement.
Over the course of the year, Drake Materials registered premixed concrete sales of 500,000 m³,
an increase of 15.0% over the previous year. Additionally, in 2013 it completed the procurement
of a CEMCO mobile concrete batching plant, capable of producing 150 m³ per hour, which may be
set up and start producing concrete in one day. This plant is currently at the Sky Harbor Airport
in Phoenix, at a job awarded to Drake for 42,000 m³.
The cement market in Arizona grew by 11.3% during 2013. According to the Portland Cement
Association (PCA), projections for the next five years show an average annual growth of 11.0%.
The consolidated financial statements for Skanon Investments, Inc. showed the following results:
Net sales of US$ 68.8 million (US$ 50.6 million in 2012).
Net loss of US$ 19.5 million (US$ 22.2 million in 2012).
Net shareholders’ equity of US$ 318.3 million (US$ 307.0 million in 2012).
SKANON INVESTMENTS, INC. / DRAKE CEMENT, LLC
(OWNERSHIP SHARE: 87.4% OF SKANON INVESTMENTS / 93.9% OF DRAKE CEMENT)
AMBIENTAL ANDINA S.A.Company in which CELEPSA holds a 50.0% share. It was established for the purpose of
positioning itself as the leading private company in meteorology, hydrology, and hydropower
project origination in Peru, providing solutions that help companies detect investment
opportunities, as well as minimizing risks and reducing the impact of weather on business
operations.
During 2013, operations moved forward as scheduled in the annual plan. Contracting levels
totaled S/. 26.5 million, meaning a 11.0% increase over the previous period. Sales for erection
were also achieved for S/. 28.1 million, 25.0% higher than the amount registered in the previous
period, thus meeting one of the established objectives.
As a consequence of the foregoing, production levels exceeded 7,453 m³, achieving a figure
very similar to that of 2012 (7,422 m³). Erection totaled 8,210 m³, 19.1% higher than in 2012
(6,888 m³).
The crane rental service, following the same pattern as the rest of the activities, achieved an
increase of 47.0% in billing over 2012, with a total of S/. 2.2 million.
It is important to note that during the second half of the year, the company supplied concrete
structures for public works, including those carried out at the Alipio Ponce and San Pedro
bridges on the Panamericana Sur highway.
The audited financial statements of PREANSA PERÚ showed the following results:
Net sales of S/. 28.1 million (S/. 22.1 million in 2012).
Net profit of S/. 4.2 million (S/. 3.8 million in 2012).
Net shareholders’ equity of S/. 35.2 million (S/. 31.0 million in 2012).
PREFABRICADOS ANDINOS PERÚ S.A.C. (PREANSA PERÚ)
(OWNERSHIP SHARE: 50.0%)
2013 UNACEM 85
PREFABRICADOS ANDINOS S.A. (PREANSA CHILE)
(OWNERSHIP SHARE: 51.0%)
The Board of Directors’ Meeting held on January 17, 2014 approved the purchase of 51.0%
of the capital stock in the company Prefabricados Andinos S.A., equivalent to the sum of
US$ 7.14 million. The other 49.0% of the stock in this company is owned by the Spanish
company Prefabricados Agrícolas e Industriales S.A.
PREANSA CHILE is a company engaged in the manufacture and sale of industrialized concrete
structures, with over 17 years of experience in the Chilean market.
SALOG WAREHOUSE ERECTION-WORK PERFORMED BY PREANSA, PERU
I HAVE GREAT MEMORIES OF THE COMPANY, WHERE I WORKED FOR THIRTY-FIVE YEARS OF MY LIFE. TODAY, AT THE AGE OF 93, IT CONTINUES TO BE PART OF MY LIFE. THANKS TO THE COMPANY’S SUPPORT, I’VE BEEN ABLE TO TRAVEL ABROAD TO COMPETE AND WIN SEVERAL MEDALS.”
EUGENIO MEJÍA JULCARETIREE
SOUTH AMERICAN CHAMPION MASTER CATEGORY
ATOCONGO
2013 UNACEM ANNUAL REPORT 87
BULK PACKAGING AND DISPATCH
2013 UNACEM ANNUAL REPORT 89
7
ECONOMIFINAN
RESU
2013 UNACEM 91
IC-CIAL ULTS
The audited itemized financial statements of UNACEM as of December 31, 2013 showed the
following results:
Net sales of S/. 1.7852 billion (S/. 1.7259 billion in 2012).
Net profit of S/. 204.7 million (S/. 358.3 million in 2012).
Net shareholders’ equity of S/. 3.4181 billion (S/. 3.2899 billion in 2012).
Net sales grew by 3.4% over sales for 2012. This increase is based on the higher physical
volume dispatched, totaling 4.7%, as a result of increased construction activity driven by higher
private and public investment, net of the lower average price of the product mix.
On the other hand, the cost of local sales increased by 2.8%, due to the higher volume of cement
dispatches and the higher cost of the imported clinker purchase. However, as a consequence
of higher revenues, and the control of costs and expenses, the gross profit was maintained
following the previous period, with operating profits totaling S/. 520.0 million, 7.3% higher
than in 2012. Despite maintaining the same sale prices for cement and the large volume of
clinker imported in 2013 (983,130 t in 2013 vs. 333,513 t in 2012), which cost twice that of
manufacturing it ourselves, we achieved an operating profit in 2013 equal to that of 2012. The
EBITDA for 2013 was 9.5% higher than in 2012, thanks to the operating efficiency and synergies
achieved through the merger.
Financial expenses were 35.3% higher than in the previous fiscal year, as a result of the
increase in the debt on the order of 19.5% and higher rates due to the partial substitution
of the short-term debt in dollars for a medium-term debt in Nuevos Soles at higher rates.
At the start of the fiscal year, 70.3% of the debt was expressed in U.S. dollars, resulting in
significant foreign exchange losses. In order to avoid exposure to greater fluctuations in the
exchange rate and increases in interest rates, the Management reduced the exposure of the
debt in U.S. dollars to 49.0% of the total debt. As of the close of 2013, the long-term debt
represented 70.0% of the total financial debt, compared to 55.0% as of the close of 2012.
During the fiscal year in course, we will continue with the policy of reducing exposure to
foreign exchange risk and increases in interest rates.
FINANCIAL DEBT 2013 VS. 2012
5781,3651,1861,135
2012
Short-Term: 45% Long-Term: 55% Short-Term: 30% Long-Term: 70%
2013
In Nuevos Soles
In U.S. dollars
(in millions of Nuevos Soles)
GRAPHIC N.º 7
2013 UNACEM 93
Finally, the positive performance in operating terms was negatively impacted by the foreign
exchange losses, as a result of which the net profit totaled S/. 204.7 million, 42.9% lower than
that booked in 2012.
The consolidated financial statements as of December 31, 2013 showed the following results:
Net sales of S/. 2.8947 billion (S/. 2.6747 billion in 2012).
Net profit of S/. 193.3 million (S/. 399.8 million in 2012).
Net shareholders’ equity of S/. 3.6362 billion (S/. 3.4441 billion in 2012).
The itemized and consolidated financial statements for fiscal year 2013 were prepared in
accordance with the International Financial Reporting Standards (IFRSs).
By delegation of the Shareholders’ Meeting, the Board of Directors adopted the decisions
summarized herein below over the course of fiscal year 2013, with their respective effects on
the Company’s net shareholders’ equity:
January 18: Payment to the shareholders of UNACEM S.A.A. of dividends totaling S/. 0.017 per
ordinary share, charged to the retained profits corresponding to fiscal year 2012.
April 19: Payment to the shareholders of UNACEM S.A.A. of dividends totaling S/. 0.013 per
ordinary share, charged to the partial profits corresponding to fiscal year 2013.
July 19: Payment to the shareholders of UNACEM S.A.A. of dividends totaling S/. 0.008 per
ordinary share, charged to the partial profits corresponding to fiscal year 2013.
October 18: Payment to the shareholders of UNACEM S.A.A. of dividends totaling S/. 0.013 per
ordinary share, charged to the partial profits corresponding to fiscal year 2013.
The Shareholders’ Meeting held on April 7, 2010 approved the Second Debt Security Issue
Program—for up to a maximum amount in circulation of US$ 150,000,000 or its equivalent
in Nuevos Soles—approved via Issue Director’s Resolution 095-2010-EF/94.06.3. In
accordance with the provisions established and the approval given by the Board of Directors,
the following corporate bond issues were performed under the Second Program:
March 7: Placement of the First Issue, for S/. 60.0 million at a term of 7 years, with an
annual rate of 4.9375%, for a bullet payment at the end of the seventh year.
March 7: Placement of the Second Issue, for S/. 60.0 million at a term of 10 years, with an
annual rate of 5.15625%, for a bullet payment at the end of the tenth year.
December 12: Placement of the Third Issue, for S/. 60.0 million at a term of 3 years, with an
annual rate of 5.5625%, for a bullet payment at the end of the third year.
The fully subscribed and paid-in capital stock is S/. 1,646,503,408 (One Billion, Six Hundred
Forty-Six Million, Five Hundred and Three Thousand, Four Hundred and Eight with 00/100
Nuevos Soles), represented by 1,646,503,408 (One Billion, Six Hundred Forty-Six Million, Five
Hundred and Three Thousand, Four Hundred and Eight) ordinary shares with a par value of
S/. 1.00 each.
In light of the foregoing, and in accordance with the International Financial Reporting Standards
(IFRSs), the figures in Nuevos Soles as of December 31, 2013 and 2012, respectively, are as follows:
Different tax, legal, and labor proceedings are currently pending with regard to the Company’s
operations. In the opinion of the Management and the legal counsels, the final results of these
proceedings will not involve significant expenses for the Company, for which reason, as of
December 31, 2013, we have not registered any allowance whatsoever with regard thereto.
The independent auditing duties during fiscal year 2013 were under the responsibility of Medina,
Zaldívar, Paredes & Asociados (member firm of Ernst & Young). The opinion with regard to the
Statement of Financial Position, the Results Statement, the Comprehensive Results Statement,
and the itemized Statement of Changes in Net Shareholders’ Equity and Cash Flow Statement
as of December 31, 2013, which form part of this Report, are free of objections.
SHAREHOLDERS’ EQUITY ACCOUNT AS OF DEC. 31, 2013 AS OF DEC. 31, 2012
Capital Stock 1,646,503,408 1,646,503,408
Legal Reserve 270,202,711 249,728,493
Unrealized Results -1,677,519 -5,010,952
Cumulative Results 1,503,095,246 1,398,671,356
TOTAL SHAREHOLDERS’ EQUITY 3,418,123,851 3,289,892,305
SHAREHOLDERS’ EQUITY ACCOUNT AS OF DECEMBER 31, 2013
AS OF DECEMBER 31,2012
Capital Stock 1,646,503,408 1,646,503,408
Legal Reserve 270,202,711 249,728,493
Unrealized Results -1,677,519 -5,010,952
Cumulative Results 1,503,095,246 1,398,671,356
TOTAL SHAREHOLDERS’ EQUITY 3,418,123,851 3,289,892,305
BAG OF TYPE I ANDINO CEMENT
2013 UNACEM ANNUAL REPORT 95
PACKAGING AND DISPATCH OF BAGGED CEMENT
2013 UNACEM ANNUAL REPORT 97
INDEPENDENT AUDITOR’S REPORT
TO THE SHAREHOLDERS OF UNIÓN ANDINA DE CEMENTOS S.A.A. We have audited the accompanying separate financial statements of Unión Andina de Cementos
S.A.A. (a Peruvian entity), which comprise the statements of financial position as of December
31, 2013 and 2012, and the related statements of income, statements of comprehensive income,
statements of changes in equity and statements of cash flows for the years then ended, and a
summary of significant accounting policies and other notes.
MANAGEMENT RESPONSIBILITY FOR THE SEPARATE FINANCIAL STATEMENTSManagement is responsible for the preparation and fair presentation of these financial
statements in accordance with International Financial Reporting Standards and for the internal
control that Management determines is appropriate to the preparation of financial statements
that are free from material misstatement, whether due fraud or error.
AUDITOR’S RESPONSIBILITYOur responsibility is to express an opinion on these financial statements based on our audit. We
conducted our audit in accordance with generally accepted auditing standards in force in Peru.
Those standards require that we comply with ethical requirements and plan and perform the
audit to obtain reasonable assurance whether the financial statements are free from material
misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the separate financial statements. The procedures selected depend on the
auditor’s judgment, including the assessment of the risks of material misstatement of the
financial statements, whether due to fraud or error. In making those risk assessments, the
auditor considers internal control relevant to the entity’s preparation and fair presentation
of the financial statements in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
entity’s internal control. An audit also includes evaluating the appropriateness of accounting
policies used and the reasonableness of accounting estimates made by Management, as well
as evaluating the overall presentation of the separate financial statements.
2013 UNACEM 99
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our audit opinion.
OPINIONIn our opinion, the accompanying separated financial statements, present fairly, in all material
aspects, the financial position of Unión Andina de Cementos S.A.A. as of December 31, 2013
and 2012, and its financial performance and cash flows for the years then ended, in accordance
with International Financial Reporting Standards.
EMPHASIS OVER THE SEPARATE INFORMATIONThe separate financial statements of Unión Andina de Cementos S.A.A. have been prepared in
compliance with the legal requirements in force in Peru for the filing of financial information.
These financial statements reflect the value of the investments in subsidiaries at cost and
not on a consolidated basis; as a result, they should be read together with the consolidated
financial statements of Unión Andina de Cementos S.A.A. and Subsidiaries, which are separately
presented.
Lima, Peru
February 13, 2014
Countersigned by:
__________________________
Marco Antonio Zaldívar
C.P.C.C. Register No. 12477
STATEMENTS OF FINANCIAL POSITIONAs of December 31, 2013 and 2012
ASSET NOTE 2013 2012(NOTE 3.3)
AT JANUARY 1, 2012
(NOTE 3.3)
S/. (000) S/. (000) S/. (000)
CURRENT ASSETS
Cash and cash equivalents 7 196,750 74,189 63,473
Investments - 33 170
Trade and other receivables, net 8 259,003 160,012 141,606
Inventories 9 497,835 419,775 353,114
Prepaid taxes and expenses 11,204 9,277 11,803
TOTAL CURRENT ASSETS 964,792 663,286 570,166
NON CURRENT ASSETS
Trade and other receivables, net 8 5,024 7,474 11,700
Investments in subsidiaries and other 10 1,645,786 1,558,675 1,503,326
Property, plant and equipment, net 11(a) 3,706,550 3,605,739 3,346,367
Deferred stripping cost 11(b) 142,815 132,386 115,806
Intangible assets, net 12 77,817 76,992 72,909
TOTAL NON CURRENT ASSETS 5,577,992 5,381,266 5,050,108
TOTAL ASSET 6,542,784 6,044,552 5,620,274
2013 UNACEM 101
CURRENT LIABILITIES
Bank overdrafts and loans 13 266,766 532,476 396,016
Trade and other payables 14 209,148 234,606 211,230
Financial obligations 15 426,640 341,009 141,054
Deferred income 16 9,932 7,262 72,173
Income tax payable - - 14,499
Provisions 17 15,814 25,604 37,321
TOTAL CURRENT LIABILITIES 928,300 1,140,957 872,293
NON CURRENT LIABILITIES
Bank loans 13 450,154 - -
Trade and other payables 14 11,883 12,755 -
Financial obligations 15 1,177,800 1,069,495 1,228,313
Derivative financial instruments 31(i) 5,557 7,159 9,328
Deferred income tax liability, net 18 537,303 513,232 487,418
Provisions 17 13,663 11,062 10,590
TOTAL NON CURRENT LIABILITIES 2,196,360 1,613,703 1,735,649
EQUITY 19
Capital stock 1,646,503 1,646,503 1,499,023
Legal reserve 270,203 249,728 213,749
Unrealized net loss on hedging derivative financial instruments (1,678) (5,011) (6,529)
Retained earnings 1,503,096 1,398,672 1,306,089
TOTAL EQUITY 3,418,124 3,289,892 3,012,332
LIABILITY AND EQUITY NOTE 2013 2012(NOTE 3.3)
AT JANUARY 1, 2012
(NOTE 3.3)
S/. (000) S/. (000) S/. (000)
TOTAL LIABILITIES AND EQUITY 6,542,784 6,044,552 5,620,274
TOTAL LIABILITIES 3,124,660 2,754,660 2,607,942
STATEMENTS OF INCOMEFor the years ended December 31, 2013 and 2012
NOTE 2013 2012
S/. (000) S/. (000)
Net sales 20 1,785,163 1,725,896
Cost of sales 21 (1,021,726) (994,207)
OPERATING INCOME (EXPENSES)
Administrative expenses 22 (152,425) (171,125)
Selling expenses 23 (89,889) (82,517)
Other operating (expenses) income, net 25 (1,077) 6,630
TOTAL OPERATING EXPENSES, NET (243,391) (247,012)
OTHER INCOME (EXPENSES)
Finance income 26 10,488 16,956
Finance costs 27 (90,835) (67,125)
Exchange difference, net 31(ii) (138,260) 75,973
TOTAL OTHER INCOME (EXPENSES), NET (218,607) 25,804
INCOME BEFORE TAX 301,439 510,481
Income tax expense 18(b) (96,697) (152,141)
NET INCOME 204,742 358,340
Basic and diluted earnings per share (stated in thousands of Nuevos Soles)
29 0.124 0.218
( ) ( )
( ) ( )
OPERATING PROFIT 520,046 484,677
GROSS PROFIT 763,437 731,689
2013 UNACEM 103
STATEMENTS OF COMPREHENSIVE INCOMEFor the years ended December 31, 2013 and 2012
2013 2012
S/. (000) S/. (000)
NET INCOME 204,742 358,340
OTHER COMPREHENSIVE INCOME
Changes in the fair value of hedging derivative financial instruments
4,762 2,169
Income tax effect (1,429) (651)
Other comprehensive income, net of income tax 3,333 1,518
TOTAL COMPREHENSIVE INCOME, NET OF INCOME TAX 208,075 359,858
STATEMENTS OF CHANGES IN EQUITYFor the years ended December 31, 2013 and 2012
CAPITAL STOCK
LEGALRESERV
S/. (000) S/. (000
Balance as of January 1, 2012 1,499,023
Change in accounting policy, note 3.3 -
BALANCE AS OF JANUARY 1, 2012, RESTATED, SEE NOTE 3.3 1,499,023
Net income -
Changes in the fair value of hedging derivative financial instruments, net -
TOTAL COMPREHENSIVE NET INCOME -
Capitalization of earnings, note 19(a) 147,480
Transfer to legal reserve, note 19(b) -
Dividend distributions, note 19(d) -
Others -
BALANCE AS OF DECEMBER 31, 2012, RESTATED, SEE NOTE 3.3 1,646,503
Net income -
Changes in the fair value of hedging derivative financial instruments, net -
TOTAL COMPREHENSIVE INCOME
Transfer to legal reserve, note 19(b) -
Dividend distributions, note 19(d) -
Others -
BALANCE AS OF DECEMBER 31, 2013 1,646,503
2013 UNACEM 105
L VE
UNREALIZED RESULTS
RETAINED EARNINGS
TOTAL
0) S/. (000) S/. (000) S/. (000)
213,749 (6,529) 1,317,306 3,023,549
- - (11,217) (11,217)
213,749 (6,529) 1,306,089 3,012,332
- - 358,340 358,340
- 1,518 - 1,518
- 1,518 358,340 359,858
- - (147,480) -
35,979 - (35,979) -
- - (84,472) (84,472)
- - 2,174 2,174
249,728 (5,011) 1,398,672 3,289,892
- - 204,742 204,742
- 3,333 - 3,333
3,333 204,742 208,075
20,475 - (20,475) -
- - (83,971) (83,971)
- - 4,128 4,128
270,203 (1,678) 1,503,096 3,418,124
STATEMENTS OF CASH FLOWSFor the years ended December 31, 2013 and 2012
2013 2012
S/. (000) S/. (000)
OPERATING ACTIVITIES
Collections from customers 2,114,729 2,031,861
Payments to suppliers (1,472,938) (1,396,475)
Payments to employees (141,329) (159,032)
Taxes paid (92,401) (153,950)
Interest paid (85,047) (70,195)
Other payments (collections), net (17,815) 16,950
NET CASH PROVIDED FROM OPERATING ACTIVITIES 305,199 269,159
INVESTING ACTIVITIES
Sale of property, plant and equipment - 6,091
Dividends income 2,850 1,371
Additions of stripping assets (227,641) (240,344)
Purchase of financial investments (89,527) (48,944)
Purchase of property, plant and equipment (32,158) (32,199)
Purchase of intangible assets (6,817) (17,320)
NET CASH USED IN INVESTING ACTIVITIES (353,293) (331,345)
FINANCING ACTIVITIES
Proceeds from bank loans 771,651 416,329
Proceeds from financial obligations 626,308 145,514
Payment of bank overdrafts and loans (753,457) (255,189)
Payment of financial obligations (389,876) (147,980)
Dividends paid (83,971) (85,772)
NET CASH PROVIDED FROM FINANCING ACTIVITIES 170,655 72,902
2013 UNACEM 107
2013 2012
S/. (000) S/. (000)
Net decrease in cash and cash equivalents 122,561 10,716
Cash and cash equivalents at the beginning of the year 74,189 63,473
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR 196,750 74,189
SIGNIFICANT NON-CASH ACTIVITIES
Acquisition of property, plant and equipment under financial leases 7,171 104,620
Capitalization of retained earnings - 147,480
Capitalized interest 25,381 38,752
Provision for impairment of investments 2,415 917
NOTES TO THE SEPARATE FINANCIAL STATEMENTS
1. IDENTIFICATION AND ECONOMIC ACTIVITYUnión Andina de Cementos S.A.A. (hereinafter the “Company”) was incorporated in 1967. The
Company is a subsidiary of Sindicato de Inversiones y Administración S.A. (hereinafter “the
Principal”), which holds 43.4 percent of the Company’s capital stock, which is also a subsidiary
of Nuevas Inversiones S.A., ultimate parent of the consolidable economic group. As approved
by General Shareholders’ Meeting dated July 24, 2012; the Company’s name changed from
Cementos Lima S.A.A. to Unión Andina de Cementos S.A.A.
The registered office of the Company is located at Atocongo Avenue 2440, Villa María del
Triunfo, Lima, Peru.
The Company’s main activity is the production and sale, for local and foreign sales of cement
and clinker. For this purpose, the Company owns two plants located at Lima and Junín, whose
capacity is 6.68 million tons of clinker and 7.60 million tons of cement.
The separate financial statements as of December 31, 2012 were approved by General
Shareholders Meeting held on March 26, 2013. The separate financial statements as of
December 31, 2013 were approved by Management on January 17, 2014 and will be presented
for the approval of the Board of Directors and the Shareholders within the terms established
by law. In Management’s opinion, the accompanying financial separate statements will be
approved without changes.
2. MERGER WITH CEMENTO ANDINO S.A.On July 24, 2012, the General Shareholders Meeting approved the merger of the Company with
Cemento Andino S.A. (an entity under common control). The merged company transferred its
total equity and was extinguished and not dissolved neither liquidated. The effective date of the
merger was October 1, 2012. The approved merger was made among entities under common
control and has not implied an effective change in the control of subsidiaries within the Group.
The accounting treatment of this merger is explained in note 3.2(a) Business combinations
among entities under common control.
The main activity of Cemento Andino S.A. was the production and sale of every type of cement,
concentrating its trading operations mainly in the coast, central east and central west of Peru.
For this purpose, the Company owned a plant located at Junín, whose capacity is 1.18 million
tons of clinker and 1.5 million tons of cement.
AS OF DECEMBER 31, 2013 AND 2012
2013 UNACEM 109
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES3.1 BASIS OF PREPARATIONThe separate financial statements have been prepared in accordance to International Financial
Reporting Standards (hereinafter “IFRS”) prevailing as of December 31, 2013. In accordance
with IFRS prevailing as of December 31, 2013, it is not necessary to prepare separate financial
statements; but in Peru, companies are required to prepare them in compliance with the
prevailing Law. For that purpose, the Company has prepared separate financial statements
according to IAS 27, Consolidated and Separate Financial Statements. The financial statements
are made public within the term established by the Superintendence of Securities Market (SMV
for its acronym in Spanish).
The financial separate statements have been prepared on a historical cost basis, except for
derivative financial instruments that have been measured at fair value. The separate financial
statements are presented in Nuevos Soles and all values are rounded to the nearest thousand
(S/.000), except when otherwise indicated.
The separate financial statements provide comparative information in respect of the previous
period. In addition, the Company presents an additional statement of financial position at
the beginning of the earliest period presented when there is: a retrospective application of
an accounting policy; a retrospective restatement; or a reclassification of items in financial
statements that has a material impact on the Company. An additional statement of financial
position as of January 1, 2012 is presented in these separate financial statements due to
retrospective application of IFRIC 20 Stripping costs in the production phase of a surface mine,
refer to note 3.3.
The accounting policies adopted are consistent with those applied in previous years, except
that the Company has adopted the new IFRS and revised IAS that are mandatory for periods
beginning on or after January 1, 2013, as described below; however, due to the structure of the
Company and nature of its operations, except as mentioned in note 3.3, the adoption of these
standards did not have a significant effect on its financial position and results, therefore, it has
not been necessary to modify the comparative financial statements of the Company.
IAS 1 "PRESENTATION OF ITEMS OF OTHER COMPREHENSIVE INCOME - CHANGES
TO THE IAS 1"
The grouping of items presented in Other Comprehensive Income changes (OCI, for its
acronym in English). Items that may be reclassified ("recycled") to results in a time future will
be presented separately from the elements that will never be reclassified. This change affects
only the presentation of Financial Statements and has no effect on the financial position or
results of operations.
NIC IAS 19 "EMPLOYEE BENEFITS (AMENDED)"
The amendment eliminates the option to defer the recognition of
gains and losses actuarial, that is to say, the mechanism of the corridor. All changes in the
value of the plans defined benefits are recorded in the statement of comprehensive income.
IAS 28 "INVESTMENTS IN ASSOCIATES AND JOINT VENTURES (REVISED)"
As a result of the new IFRS 11 "Joint Arrangements" and IFRS 12 "Disclosure
of Interests in Other Entities”, IAS 28 was renamed "Investments in Associates and Joint
Ventures", and describes the application of the equity method for joint investments and
investments in associates.
IFRS 7 "FINANCIAL INSTRUMENTS: DISCLOSURES - OFFSETTING FINANCIAL AS-
SETS AND LIABILITIES FINANCIAL (AMENDMENT)"
The amendment requires entities to disclose information about rights to set-off and related the
gross amounts of dutiable compensation arrangements. The disclosure would provide users
with information that is useful in evaluating the effect of netting arrangements on an entity’s
financial position.
IFRS 10 "CONSOLIDATED FINANCIAL STATEMENTS"
IFRS 10 replaces the portion of IAS 27 "Consolidated and Separate
Financial Statements" which describe the consolidation of financial statements. It also
includes considerations included in SIC-12 "Consolidation - Special Purpose Entities". IFRS 10
establishes a single control model that applies to all entities, including special purpose entities.
The changes introduced by the IFRS 10 require management to exercise significant judgment
to determine which entities are controlled, and, therefore, are required to be consolidated by
the parent, compared with the requirements that were in IAS 27
IFRS 11 "JOINT ARRANGEMENTS"
IFRS 11 supersedes IAS 31 "Interests in Joint Ventures and SIC 13 "Entities
jointly-controlled non-monetary contributions by participants." IFRS 11 removes the option to
register to jointly controlled entities (ECC) using proportionate consolidation. Instead, the ECC
that meet the definition of a joint venture must be recorded by the equity method.
IFRS 12 "DISCLOSURE OF INTERESTS IN OTHER ENTITIES"
IFRS 12 includes all disclosures that were previously in IAS 27, IAS 28
and IAS 31 in relation to the consolidated financial statements, an entity having interests in
subsidiaries, joint arrangements, associates and structured entities.
IFRS 13 "FAIR VALUE MEASUREMENT"
IFRS 13 establishes a single guide for all fair value measurements in
accordance with IFRS, giving guidelines on how to perform these measurements, but does not
change when an entity is required to use fair value. IFRS 13 defines fair value as an exit price.
As part of the implementation process of IFRS 13, the Company has reassessed its policies for
measuring the fair values of assets and liabilities, as a result of the application of IFRS 13, the
Company has not significantly affected the fair value measurement of its assets and liabilities.
Also, additional disclosures are made in the individual notes of assets and liabilities for which
fair values were determined. The fair value hierarchy is presented in note 27.
Disclosures over the recoverable value of non-financial assets - Amendments to IAS 36
"Impairment of Assets".
These amendments clarify certain matters not provided for by IFRS 13 with respect to the
disclosures required by IAS 36, likewise, require disclosure of the recoverable amounts of the
assets or cash-generating units for which it has been recognized or reversed a loss impairment
during the period. These amendments are effective for periods beginning on or after January
1, 2014, and can be taken in advance as long as the entity has also adopted the NIIF 13.
ANNUAL IMPROVEMENTS TO IFRSS (ISSUED IN MAY 2012)The IASB published a preview of the changes and improvements to IFRSs in May 2012. The
amendments made to IAS 1, IAS 16, IAS 32, IAS 34 and IFRS 1, included in this improvement
cycle, have no significant effect on the accompanying financial statements.
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3.2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The following are the significant accounting policies applied by the Company’s Management in
preparing its financial separate statements:
(A) MERGER OF ENTITIES UNDER COMMON CONTROL - MERGER
IFRS do not establish specific accounting treatment for the legal merger of a parent company
with an entity under common control; hence the Company based upon the criteria allowed by
IAS 8 and the IFRS Conceptual Framework has adopted the following accounting policy.
A legal merger where the Company merges a company under common control is in substance
an exchange of shares, and assets and liabilities of such entity.
Consequently, the assets and liabilities to be incorporated are recognized to the book values
kept in the financial statements of the merged entities as of the date of the legal merger. These
book values include any goodwill, intangible assets, net of any allowance for amortization,
depreciation or impairment, if applicable. Costs of this operation are recognized in the results
of the period.
In the accompanying financial statements and for comparative purposes, the assets, liabilities,
income and expenses of the merged entities are presented, as if they have always been an
only one entity, in that sense, the financial statements as of December 31, 2012 and January 1,
2012 were added to comprise the accompanying financial statements, eliminating the effect of
transaction among the merged companies.
(B) CASH AND CASH EQUIVALENTS
Cash and cash equivalents in the statement of financial position comprise cash at banks and
on hand, and short-term deposits with a maturity of three month or less. For the purpose of the
statement of cash flows, cash and cash equivalents consist of cash and short–term deposits as
defined above, net of outstanding bank overdrafts.
(C) FINANCIAL INSTRUMENTS-INITIAL RECOGNITION AND SUBSEQUENT MEASUREMENT
(i) Financial AssetsInitial recognition and measurement Financial assets are classified, at the moment of initial recognition, as financial assets at fair
value through profit or loss, loans and receivables, held-to-maturity investments, available-
for-sale financial investments, or as derivatives designated as hedging instruments in an
effective hedge, as appropriate.
All financial assets are recognized initially at fair value plus, in the case of assets not at fair value
with changes through profit or loss, the transaction costsare attributable to the acquisition of
the financial asset.
Purchases or sales of financial assets that require delivery of assets within a time frame
established by regulation or convention in the marketplace are recognized on the date that the
Company commits to purchase or sell the asset.
The Company financial assets include cash and cash equivalents, trade and other receivables.
Subsequent measurement For purposes of subsequent measurement financial assets are classified in four categories:
Financial assets at fair value through profit or loss;
Loans and receivables;
Held-to-maturity investments;
Available-for-sale financial investments.
Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss includes financial assets held for trading
and financial assets designated upon initial recognition as at fair value through profit or loss.
Financial assets are classified as held for trading if they are acquired for the purpose of selling
or repurchasing in the near term.
This category includes derivate financial instruments entered into by the Company that are
not designated as hedging instruments in hedge relationships as defined by IAS 39. As of
December 31, 2013 and 2012, the Company has designated one financial asset as at fair value
through profit or loss, the trading “Cross Currency Interest Rate Swap” maintained as of such
date, note 8.
Financial assets at fair value through profit and loss are carried in the statement of financial
position at fair value, with changes in fair value recognized in finance income or finance costs
in the statement of income.
Loans and receivablesLoans and receivables are non-derivative financial assets with fixed or determinable payments
that are not quoted in an active market. After initial measurement, such financial assets are
subsequently measured at amortized cost using the effective interest rate method (EIR), less
impairment. Amortized cost is calculated by taking into account any discount or premium
on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is
included in finance income in the income statement. The losses arising from impairment are
recognized in the statements of income in finance costs.
Held-to-maturity investments Non-derivative financial assets with fixed or determinable payments and fixed maturities are
classified as held-to-maturity investments when the Company has the positive intention and
ability to hold them to maturity.
The Company did not have any held-to-maturity investments as of December 31, 2013 and
2012.
Available-for-sale financial investments Available-for-sale financial investments include equity and debt securities. Equity investments
classified as available-for-sale are those, which are neither classified as held for trading nor
designated at fair value through profit or loss.
After initial measurement, available-for-sale financial investments are subsequently measured
at fair value, and the unrealized gains or losses are recognized directly in the statement of
changes in equity as unrealized results of available-for-sale investments, until the investments
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are disposed. When the financial investment is sold, the cumulative gain or loss previously
recognized in statement of changes in equity is recognized in the income statement in “finance
costs or income”, and the effect on equity is eliminated.
Dividends earned during the period the Company had the investment are credited to results
when the right to collect is established.
The Company has not designed any financial asset as an available for-sale-financial instrument
as of December 31, 2013 and 2012.
Derecognition A financial asset (or, where applicable a part of a financial asset or part of a group of similar
financial assets) is derecognized when:
The rights to receive cash flow from such asset have expired; or
The Company has transferred its rights to receive cash flows from the asset or has assumed
an obligation to pay the received cash flows in full without material delay to a third party under
a “pass through” agreement; and either (a) the Company has transferred substantially all
the risks and rewards of the asset, or (b) the Company has neither transferred nor retained
substantially all of the risks and rewards of the asset, but has transferred control of the
asset.
When the Company has transferred its rights to receive cash flows from an asset or has entered
into a pass-through arrangement, and has neither transferred nor retained substantially all of
the risks and rewards of the asset nor transferred control of it, the asset is recognized to the
extent of the Company’s continuing involvement in it. In that case, the Company also recognizes
an associated liability. The transferred asset and the associated liability are measured on a
basis that reflects the rights and obligations that the Company has retained.
(ii) Impairment of financial assets The Company assess at each reporting date whether there is any objective evidence that a
financial asset or a group of financial assets is impaired. A financial asset or a group of financial
assets is deemed to be impaired if, and only if, there is objective evidence of impairment as
a result of one or more events that has occurred after the initial recognition of the asset (an
incurred “loss event”), and that loss event has an impact on the estimated future cash flows
of the financial asset or the group of financial assets that can be reliably estimated. Evidence
of impairment may include indications that the debtors or a group of debtors is experiencing
significant financial difficulty, default or delinquency in interest or principal payments,
the probability that they will enter bankruptcy or other financial reorganization, and where
observable data indicate that there is a measurable decrease in the estimated future cash
flows, such as changes in arrears or economic conditions that correlate with defaults.
Financial assets carried at amortized cost For financial assets carried at amortized cost, the Company first assesses whether objective
evidence of impairment exists individually for financial assets that are individually significant, or
collectively for financial assets that are not individually significant. If the Company determines
that no objective evidence of impairment exists for an individually assessed financial asset,
whether significant or not, it includes the asset in a group of financial assets with similar credit
risk characteristics and collectively assesses them for impairment. Assets that are individually
assessed for impairment and for which an impairment loss is, or continues to be, recognized
are not included in a collective assessment of impairment.
If there is objective evidence that an impairment loss has been incurred, the amount of the
loss is measured as the difference between the assets carrying amount and the present value
of estimated future cash flows (excluding future expected credit losses that have not yet been
incurred). The present value of the estimated future cash flows is discounted at the financial
asset’s original effective interest rate. If a loan has a variable interest rate, the discount rate for
measuring any impairment loss is the current effective interest rate.
The carrying amount of the asset is reduced through the use of an allowance account and
the amount of the loss is recognized in the income statement. Interest income continues to
be accrued on the reduced carrying amount and is accrued using the rate of interest used to
discount the future cash flows for the purpose of measuring the impairment loss.
The interest income is recorded as part of finance income in the statement of income. Loans,
together with the associated allowance, are written off when there is no realistic prospect of
future recovery and all collateral has been realized or has been transferred to the Company.
If, in a subsequent year, the amount of the estimated impairment loss increases or decreases
because of an event occurring after the impairment was recognized, the previously recognized
impairment loss is increased or reduced by adjusting the allowance account. If the estimated
loss decreases, the reversal shall not result in a carrying amount of the financial asset that
exceeds what the amortized cost would have been, had the impairment not been recognized
at the date the impairment is reversed. If a future write-off is later recovered, the recovery is
credited to finance costs in the statement of income.
(iii) Financial liabilities Initial recognition and measurement Financial liabilities within the scope of IAS 39 are classified as financial liabilities at fair
value through profit or loss, loans and borrowings, or as derivatives designated as hedging
instruments in an effective hedge, as appropriate. The Company determines the classification
of its financial liabilities at initial recognition.
All financial liabilities are recognized initially at fair value and, in the case of loans and
borrowings, carried at amortized cost. This includes directly attributable transaction costs.
As of December 31, 2013 and 2012, the Company’s financial liabilities include bank overdrafts
and loans, trade and other payables, long-term debt and derivative financial instruments.
Subsequent measurement The subsequent measurement of financial liabilities depends on their classification as follows:
Financial liabilities at fair value through profit or loss Financial liabilities at fair value through profit or loss include financial liabilities held for trading
and financial liabilities designated upon initial recognition as at fair value through profit or loss.
Financial liabilities are classified as held for trading if they are acquired for the purpose of
selling in the near term. This category includes financial derivative instruments, which are not
designated as hedge instruments as required by IAS 39. The embedded derivatives are also
classified as negotiable, unless they are designated as effective hedge instruments. Gains or
losses on liabilities held for trading are recognized in the statement of income.
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Loans and borrowings After their initial recognition, interest-bearing loans and borrowings are subsequently measured
at amortized cost using the effective interest rate method. Gains and loss are recognized in the
statement of income when the liabilities are derecognized, as well as through the effective
interest rate method (EIR) amortization process. Amortized cost is calculated by taking into
account any discount or premium on acquisition and fees or costs that are an integral part of
the EIR. The EIR amortization is included in finance costs in the statement of income.
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 one from the
same lender on substantially different terms, or the terms are substantially modified, such
replacement or amendment is treated as a derecognition of the original liability and the
recognition of a new liability, and the difference in the respective carrying amount is recognized
in the statement of income.
(iv) Offsetting of financial instruments Financial assets and financial liabilities are offset and the net amount reported in the statement
of financial position if, and only if, there is a currently enforceable legal right to offset the
recognized amounts and there is an intention to settle on a net basis, or to realize the assets
and settle the liabilities simultaneously.
(v) Fair value of financial instruments The Company measures financial instruments, such as derivatives at fair value at each balance
sheet date. In addition, the value has financial instruments measured at amortized cost, which
are disclosed in note (c)(ii).
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 Company.
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 Company 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 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 on a recurring basis,
the Company 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 Company’s Management determines the policies and procedures for both recurring fair
value measurement. At each reporting date, the valuation committee analyses the movements
in the values of assets and liabilities which are required to be re-measured or re-assessed as
per the Company’s accounting policies.
For the purpose of fair value disclosures, the Company has determined classes of assets and
liabilities on the basis of the nature, characteristics and risks of the asset or liability and the
level of the fair value hierarchy as explained above.
An analysis of fair values of financial instruments and further details as to how they are
measured are provided in note 32.
Derivative financial instruments Initial recognition and subsequent measurementThe Company uses derivative financial instruments, such as forward currency contracts and
interest rate swaps contracts, to hedge its foreign currency risks and interest rate risks,
respectively. Such derivative financial instruments are initially recognized at fair value on the
date on which a derivative contract is entered into and are subsequently re-measured at fair
value. Derivatives are carried as financial assets when the fair value is positive and as financial
liabilities when the fair value is negative.
The purchase contracts that meet the definition of a derivative under IAS 39 are recognized
in the statement of profit or loss as finance costs. Commodity contracts that are entered
into and continue to be held for the purpose of the receipt or delivery of a non-financial
item in accordance with the Company’s expected purchase, sale or usage requirements are
held at cost.
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Any gains or losses arising from changes in the fair value of derivatives are taken directly to
profit or loss, except for the effective portion of cash flow hedges, which is recognized in OCI
and later reclassified to profit or loss when the hedge item affects profit or loss.
For the purpose of hedge accounting, hedges are classified as:
Fair value hedges when hedging the exposure to changes in the fair value of a recognized
asset or liability or an unrecognized firm commitment;
Cash flow hedges when hedging the exposure to variability in cash flows that is either
attributable to a particular risk associated with a recognized asset or liability, or a
highly probable forecast transaction or the foreign currency risk in an unrecognized firm
commitment; or
Hedges of a net investment in a foreign operation.
At the inception of a hedge relationship, the Company formally designates and documents
the hedge relationship to which the Company wishes to apply hedge accounting, the risk
management objective and strategy for undertaking the hedge. The documentation includes
identification of the hedging instrument, the hedged item or transaction, the nature of the risk
being hedged and how the Company will assess the effectiveness of changes in the hedging
instrument’s fair value in offsetting the exposure to changes in the hedged item’s fair value or
cash flows attributable to the hedged risk.
The Company expects that such hedges are to be highly effective in achieving offsetting
changes in fair value or cash flows, and are assessed on an ongoing basis to determine that
they actually have been highly effective throughout the financial reporting periods for which
they were designated.
Hedges that meet the strict criteria for hedge accounting are accounted for, as described below:
Fair value hedges The change in the fair value of a hedging derivative is recognized in the statement of profit or
loss as finance costs. The change in the fair value of the hedged item attributable to the risk
hedged is recorded as part of the carrying value of the hedged item, and is also recognized in
the statement of profit or loss as finance costs.
For fair value hedges relating to items carried at amortized cost, any adjustment to carrying
value is amortized through profit or loss over the remaining term of the hedge using the EIR
method. EIR amortization may begin as soon as an adjustment exists, and no later than when
the hedged item ceases to be adjusted for changes in its fair value attributable to the risk being
hedged.
If the hedged item is derecognized, the unamortized fair value is recognized immediately in
profit or loss.
When an unrecognized firm commitment is designated as a hedged item, the subsequent
cumulative change in the fair value of the firm commitment attributable to the hedged risk
is recognized as an asset or liability with a corresponding gain or loss recognized in profit
and loss.
Cash flow hedges The effective portion of the gain or loss on the hedging instrument is recognized in OCI in
the cash flow hedge reserve, while any ineffective portion is recognized immediately in the
statement of profit or loss as finance costs.
The Company uses swaps contracts as hedges of its exposure to interest rate risks in
transactions. The ineffective portion relating to swaps contracts is recognized in finance costs,
see details in note 27.
Amounts recognized as OCI are transferred to profit or loss when the hedged transaction affects
profit or loss, such as when the hedged financial income or financial expense is recognized, or
when a forecast sale occurs. When the hedged item is the cost of a non-financial asset or non-
financial liability, the amounts recognized as OCI are transferred to the initial carrying amount
of the non-financial asset or liability.
If the hedging instrument expires or is sold, terminated or exercised without replacement or
rollover (as part of the hedging strategy), or if its designation as a hedge is revoked, or when
the hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss
previously recognized in OCI remains separately in equity until the forecast transaction occurs,
or the foreign currency firm commitment is met.
Hedges of a net investment in a foreign operation Hedges of a net investment in a foreign operation, including a hedge of a monetary item that
is accounted for as part of the net investment, are accounted for in a way similar to cash flow
hedges.
As of December 31, 2013 and 2012, the Company has no hedging instruments of a net investment
in a foreign operation.
(D) CURRENT VERSUS NON-CURRENT CLASSIFICATION
The Company presents assets and liabilities in statement of financial position based on current/
non-current classification. An asset is current when:
it is expected to be realized or intended to sold or consumed in normal operating cycle;
it is held primarily for the purpose of trading;
expected to be realized within twelve months after the reporting period;
it is cash or cash equivalent unless restricted from being exchanged or used to settle a
liability for at least twelve months after the reporting period.
All other assets are classified as non-current. A liability is current when:
it is expected to be settled in normal operating cycle;
it is held primarily for the purpose of trading.
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(E) FOREIGN CURRENCY TRANSLATION
The Company’s financial statements are presented in Nuevos Soles. The Company has
determined the Nuevo Sol as the functional and presentation currency, because it reflects the
nature of economic events and circumstances relevant to the Company.
Transactions and balances in foreign currencyAre considered foreign currency transactions those made in a currency other than the functional
currency. Transactions in foreign currencies are initially recorded at the functional currency
rates prevailing at the date of the transaction. Monetary assets and liabilities denominated
in foreign currencies are converted to the functional currency using the exchange rate ruling
at the statement of financial position date. The differences between the closing rate at the
date of each financial statement presented and the exchange rate initially used to record the
transactions are recognized in the statement of income in the period in which they occur in the
“Exchange difference, net” caption. Non-monetary assets and liabilities acquired in foreign
currencies are translated at the exchange rate at the date of the initial transaction.
(F) INVENTORIES
Inventories are valued at the lower of cost and net realizable value. Costs incurred in bringing
each product to its present location and conditions are accounted for as follows:
Raw materials and suppliesPurchase cost, using the weighted average method.
Finished goods and work in progressAt cost of direct materials and supplies, services provided by third parties, raw material, direct
labor cost, other direct cost, general manufacturing expenses and an overhead based on fixed
and variable cost based on normal operating capacity, but excluding borrowing costs and
exchange currency differences.
Inventory in transit purchase cost
Net realizable value is the sales price obtained in the ordinary course of business, less
the estimated costs of placing the inventories into a ready-for-sale condition and the
commercialization and distribution expenses.
Management periodically evaluates the impairment and obsolescence of these assets. The
estimation, if any, is recognized with charge to the profit and loss.
(G) INVESTMENTS IN SUBSIDIARIES
These investments in subsidiaries are recorded at acquisition cost less the estimation for
impairment. The Company evaluates the impairment of the investments for events or changes
in the circumstances, which may indicate that the book value is not recoverable.
In case of an impairment indicator, the Company makes an estimation of the recoverable
amount. If the carrying value is higher than the recoverable amount, the investment is
considered impaired and is reduced to its recoverable amount. If in a subsequent period the
amount of the impairment loss is reduced, such loss is reversed. Any subsequent reversal is
recognized in the statement of income to the extent the book value of the asset is not higher
than the amortized cost at the date of reversal.
Dividends from investments are credited in the statement of income when declared.
(H) 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 assets. All other borrowing costs are expensed
in the period they occur. Borrowing costs consist of interest and other costs that an entity
incurs in connection with the borrowing of funds.
(I) LEASES
The determination of whether an agreement is, or contains, a lease is based on the substance
of the arrangement at the inception date, whether fulfillment of the arrangement is dependent
on the use of a specific asset or the arrangement conveys a right to use the asset, even it that
right is not explicitly specified in an arrangement.
Finance leases which transfer to the Company substantially all the risks and benefits incidental
to ownership of the leased asset, are capitalized at the commencement of the lease at the fair
value of the leased property or, if lower, at the present value of the minimum lease payments.
Lease payments are apportioned between financial charges and reduction of the lease liability,
so as to achieve a constant rate of interest on the remaining balance of the liability. Finance
charges are recognized in finance costs in the statement of income.
A leased asset is depreciated over the useful life of the asset. However, if there is no reasonable
certainty that the Company will obtain ownership by the end of the lease term, the asset is
depreciated over the shorter of the estimated useful life of the asset and the lease term.
Operating lease payments are recognized as an operating expense in the statement of income
on a straight-line basis over the lease term.
(J) PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are stated at cost, net of accumulated depreciation and/or
accumulated impairment losses, if any. The initial cost of an asset comprises its purchase price
or construction cost, any costs directly attributable to bringing the asset into operation. 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. The
present value of the estimate cost of dismantling the asset and rehabilitation the site where
it is located, is included in the cost of the respective assets, see note 3.2(o). When significant
parts of property, plant and equipment are required to be replaced at intervals, the Company
derecognizes the replaced part, and recognizes the new part with its own associated useful life
and depreciation. Likewise, when 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
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satisfied. All other maintenance and repair costs are recognized in the statement of income in
the period on which they are incurred.
Depreciation is calculated using a straight-line-basis method over the estimated useful lives
of such assets as follows:
ESTIMATED USEFUL LIVES OF ASSETSTABLE N.º 3
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
statement of income when the asset is derecognized.
The asset’s residual value, useful lives and methods of depreciation/amortization are reviewed
at each reporting period, and adjusted prospectively if appropriate.
(K) MINING CONCESSIONS
Mining concessions correspond to the exploration rights in areas of interest acquired in
previous years. 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. Those mining concessions are amortized starting from the production
phase following the units-of-production method, based on proved reserves to which they
relate. In the event the Company abandons the concession, the costs associated are written-
off in the statement of income.
(L) INTANGIBLE ASSETS
GoodwillGoodwill is initially measured at cost, being the excess of the aggregate of the consideration
transferred and the amount recognized for non-controlling interest over the net identifiable
assets acquired and liabilities assumed. Goodwill is presented within the intangible assets, net
caption in the statement of financial position.
YEARS
Buildings and other constructions 10 to 50
Installations and other 3 to 10
Machinery and equipment 7 to 25
Transportation units 5 to 10
Furniture and fixtures 6 to 10
Other equipment 4 and 10
y q p
g
p
After initial recognition, goodwill is measured at cost less any accumulated impairment losses.
For the purpose of impairment testing, goodwill acquired in a business combination is, from the
acquisition date, allocated to each of the Company’s cash-generating units that are expected to
benefit from the combination.
LicensesThe licenses of software are stated at cost and include expenditures directly related to the
acquisition or entry into use of specific software. These costs are amortized over their estimated
useful life of three years.
(M) DEFERRED STRIPPING COSTS
The Company incurs waste removal costs (stripping costs) during the development and
production phases of its surface operations. During the production phase, stripping costs
(production stripping costs) can be incurred, both in relation to the production of inventory
in that period and the creation of improved access and flexibility operational in relation to
be mined in the future. The former are included as part of the costs of inventory, while the
latter are capitalized as a stripping activity asset, where certain criteria are met. Significant
judgement is required to distinguish between development stripping and production stripping,
and to distinguish between the production stripping that relates to the extraction of inventory
and what relates to the creation of a stripping activity asset.
Once the Company has identified its production stripping for each surface mining operation,
it identifies the separate components of the ore bodies for each of its mining operations. An
identifiable component is a specific volume of the ore body that is made more accessible by the
stripping activity. Significant judgement is required to identify and define these components,
and also to determine the expected volumes (e.g., in tones) of waste to be stripped and ore to
be mined in each of these components. These assessments are undertaken for each individual
mining operation, based on the information available in the mine plan. The mine plans and,
therefore, the identification of components, will vary between mines for a number of reasons.
These include, but are not limited to, the type of commodity, the geological characteristics of
the ore body, the geographical location and/or financial considerations.
According to note 3.3, the depreciation of the assets of the stripping activity in the production
phase is calculated using the units of production method.
(N) ESTIMATES OF RESOURCES AND RESERVES
The mineral reserves are estimates of the amount of ore that can be economically and legally
extracted from the Company’s mining properties and concessions. The Company 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.
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Changes in the reserve or resource estimates may impact upon the carrying value of exploration
and evaluation assets, provision for rehabilitation and depreciation and amortization charges.
(O) IMPAIRMENT OF NON-FINANCIAL ASSETS
The Company 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,
the Company 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 the sales costs and its value
in use, said value 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 of CGU 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 to sell, recent market transactions are taken
into account, if available. If no such transactions can be identified, an appropriate valuation
model is used.
Impairment losses of continuing operations, including impairment on inventories, are
recognized in the statement of income in those expense categories consistent with the function
of the impaired asset.
For assets excluding goodwill, 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
may have decreased. If such indication exists, the Company estimates 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 statement of income.
The following criteria are also applied in assessing impairment of goodwill:
Goodwill is tested for impairment annually (as of December 31) and when circumstances
indicate that the carrying value may be impaired. Impairment is determined by assessing
the recoverable amount of each cash-generating unit which the goodwill relates. When this
amount is less than its carrying amount, an impairment loss is recognized. Impairment losses
relating to goodwill cannot be reversed in future periods.
(P) PROVISIONS
GeneralProvisions are recognized when the Company 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. Where the Company 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. Where discounting is used, the
increase in the provision due to the passage of time is recognized as finance cost.
Mine closure provisionThe Company 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. Mine closure 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 pre-tax rate that reflects the
risk specific to the rehabilitation provision. The unwinding of the discount is expensed as
incurred and recognized in the statement of income as a finance cost. The estimated future
costs of 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.
(Q) CONTINGENCIES
Contingent liabilities are disclosed when the existence of the liability is?is confirmed by future
events or when the amount of the liability can not be measured reasonably. Contingent assets
are not recognized in the financial statements, but they are disclosed when it is probable that
economic benefits flow to the Company.
(R) EMPLOYEES’ BENEFITS
The Company has short-term obligations for employees’ benefits that include salaries, social
contributions, gratifications, bonuses for performance, and workers’ sharing profits. These
liabilities are recorded monthly with charge to profit and loss, as they are accrued.
(S) REVENUE RECOGNITION
Revenues of ordinary activities are recognized to the extent it is probable that the economic
benefits will flow to the Company and the revenue can be reliably measured, regardless of
when the payment is being made. Revenue is measured at the fair value of the consideration
received or receivable, taking into account contractually defined terms of payment and
excluding taxes or duty.
The following specific recognition criteria must be also met before revenue is recognized:
Sales of goodsRevenue from sales of goods is recognized when the significant risks and rewards of ownership
have been transferred to the buyer, on delivery of the goods.
2013 UNACEM 125
Interest incomeThe revenue is recognized when the interest accrues using the effective interest rate. Interest
income is included in finance income in the statement of income.
Dividends incomeDividends from investments are credited in the statement of income when declared.
(T) TAXES
Current income taxCurrent income tax assets and liabilities are measured at the amount expected to be recovered
from, or paid to the taxation authorities. The tax rates and tax laws used to compute the amount
of tax are those that are enacted or substantively enacted, at the close of the reporting period
under review
Current income tax relating to items recognized directly in equity is recognized in equity and not
in the consolidated statement of income. Management periodically evaluates positions taken
in the tax returns with respect to situations in which applicable tax regulations are subject to
interpretation, and establishes provisions where appropriate.
Deferred income taxDeferred tax is provided using the liability method on temporary differences at the reporting
date between the tax bases of assets and liabilities, and their carrying amounts for financial
reporting purposes.
Deferred tax liabilities are recognized for all taxable temporary differences, except:
Where the deferred income tax arises from the initial recognition of goodwill, or from an
asset or liability in a transaction that is not a business combination and, at the time of the
transaction, affects neither the accounting profit nor taxable profit or loss; or
Where 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, carry forward of
unused tax credits and unused tax losses, 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:
When the deferred tax asset relating to deductible temporary difference arises from the
initial recognition of an asset or liability in a transaction that is not a business combination
and, at the time of the transaction, affects neither the accounting profit nor taxable profit or
loss.
In respect of deductible temporary differences associated with investments in subsidiaries
and associates, 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 reassessed
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 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.
Mining royalties and special tax on mining in PeruMining royalties and special mining tax are accounted for in accordance with IAS 12 because
they have the characteristics of an income tax.
Value added taxRevenues, expenses and assets are recognized net of the amount of sales tax, except:
Where the sales tax incurred on a purchase of assets or services is not recoverable from the
taxation authority, in which case the sales tax is recognized as part of the cost of acquisition
of the asset or as part of the expense item, as applicable;
Receivables and payables are stated with the amount of sales tax included.
The net amount of sales tax recoverable from, or payable to, the taxation authority is included
as part of receivables or payables in the statement of financial position.
(U) EARNINGS PER SHARE
Basic and diluted earnings per share have been calculated based on weighted average of
common shares at the date of the statement of financial position. As of December 31, 2013
and 2012, the Company has no dilutive financial instruments; therefore the basic and diluted
earnings per share are the same.
(V) RECLASSIFICATIONS
Besides the indicated in note 3.2(a) when necessary, the comparative amounts have been
reclassified to make them comparable to the current year’s presentation. Some transactions
were reclassified in the presentation of the current year and, in Management’s opinion, they
are not significant to the separate financial statements as of December 31, 2012.
2013 UNACEM 127
3.3 CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES
IFRIC 20 “STRIPPING COSTS IN THE PRODUCTION PHASE OF A SURFACE MINE”
The Interpretations Committee issued IFRIC 20, effective January 1, 2013.
Prior to the issuance of IFRIC 20, the accounting for production stripping costs had been based
on general IFRS principles and the Framework, as International Financial Reporting Standards
had no specific guidance.
Previously, the Company deferred the stripping costs incurred in the development of a mine
before production commences, This is the case of the exploited areas of Atocongo Norte
and Pucará. The amount of stripping costs deferred was based on the strip ratio obtained by
dividing the tonnage of waste mined by the quantity of ore to be mined during the life of the
mine. Stripping costs incurred in the period were deferred or amortized when the actual strip
ratio compared to the estimated one is higher or less, respectively.
IFRIC 20 now provides specific guidance on how to account for production stripping costs.
It requires such costs to be capitalized where certain recognition criteria are met. IFRIC 20
differs from the life of mine average strip ratio approach in a number of ways, including:
The level at which production stripping costs are to be assessed, i.e., at a component level
rather than a life-of-mine level;
The way in which any stripping activity assets are to be depreciated.
In addition, specific transitional rules are provided to deal with any opening deferred stripping
balances an entity may have recognized under its previous accounting policy.
IDENTIFICATION OF STRIPPING ACTIVITY ASSETS
Is the requirement to identify the components of each ore body. This will determine whether
any stripping activity assets should be recognized and, if so, the level at which such assets are
initially recognized, refer to note 3.2(m).
DEPRECIATION OF THE STRIPPING ACTIVITY ASSET
The Company will identify the way in which the stripping activity assets are depreciated. IFRIC
20 requires that any stripping activity asset is to be depreciated over the expected useful life of
the identified component of the ore body that has been made more accessible by the activity.
The method used should be the one that best reflects the consumption of economic benefits.
IFRIC 20 requires the use of the units of production method unless another method is more
appropriate, refer to note 3.2(m).
TRANSITION
IFRIC 20 is applied prospectively to production stripping costs incurred on, or after the
beginning of the earliest period presented, which is January 1, 2012 for the Company. Any
previously recognized asset balance that resulted from stripping activity undertaken during
the production phase (predecessor stripping asset) was required to be reclassified as a part
of an existing asset to which the stripping activity related, to the extent that there remains an
identifiable component of the ore body with which the predecessor stripping asset could be
associated. Such balances are then depreciated over the remaining expected useful life of
the identified component of the ore body to which each predecessor stripping asset balance
related.
If there was no identifiable component of the ore body to which the predecessor asset related,
it was written off via opening retained earnings at January 1, 2012.
IMPACT AS AT TRANSITION DATE (1 JANUARY 2012) AND ON THE COMPARATIVE FINANCIAL INFORMATION FOR THE YEAR ENDED 31 DECEMBER 2012
In accordance with the transitional provisions of IFRIC 20, this new policy has been applied
prospectively from the start of the comparative period, being January 1, 2012. As a result of
the adoption of the interpretation, the adjustments outlined below were made to the financial
statements.
The Company has two surface mining operations, which are in the production phase.
Previously, the Company had used an average extraction ratio to determine shipping production
costs, as explained above. As of January 1, 2012, the balances of the "Asset deferred stripping"
in the statement of financial position for Atocongo and Pucará sites were approximately
S/.99,396,000 and S/.28,855,000, respectively. In applying the requirements of IFRIC 20, the
Company has determined that Atocongo has two components (Atocongo and Atocongo Norte,
known as different phases in the plan of limestone vining of the Company), and Pucará has a
single component and phase.
Given the age and nature of the operations and the way in which the Company plans to mine
the remaining components of the ore body, it has been calculated the entire deferred stripping
balance related to components of the ore body that had already been extracted. Therefore, the
entire opening deferred stripping balance to S/.84,194,000, S/.15,202,000 and S/.28,855,000 for
components of Atocongo, Atocongo Norte y Pucará, respectively, has been written off through
retained earnings by approximately S/.12,445,000.
Given the nature of the operations of the limestone quarries and how ore will be extracted, the
Company was able to determine that 13,747,756 tons of limestone and 23,067,617 tons of waste
relative to components orev obtained that had been removed and the remaining 36,147,033
tons of limestone and 36,147,033 tons of waste related to ore that will be extracted in the
future. These amounts have been allocated to the respective phases and depreciated over the
useful life thereof by units of production method.
2013 UNACEM 129
The adoption of IFRIC 20 had the following impact at the transition date of January 1, 2012 and
for the year ended as of December 31, 2012:
(1) Adjustment to accumulated balance at January 1, 2012 by recording depreciation, according to the method of units of
production "Deferred stripping asset" balance and its effect on the income tax. Also, it was determined the effect of the
depreciation of the asset for the year 2012.
(2) Adjustment to accumulated balance at January 1, 2012, which is the correct presentation of "Deferred income tax
liability", as a result of the effect on the "Deferred stripping asset" for the change in accounting policy, in accordance with
the IFRIC 20.
(3) During the year 2012, the Company recorded additions of "Deferred stripping asset"; however, for comparative purposes
a stripping adjustment was recognized in profit or loss as a result of the change in ratio.
AS PREVIOUSLY REPORTED
S/. (000)
IFRS 20 ADJUSTMENTS
S/. (000)
ADJUSTED BALANCE
S/. (000)
RETAINED EARNING -
January 1, 2012 - opening balance 1,317,306 - 1,317,306
Opening deferred stripping balance (1) - (12,445) (12,445)
Income tax (1) - 3,734 3,734
Deferred income tax recorded in profit or loss (2) - (2,506) (2,506)
ADJUSTED OPENING RETAINED EARNINGSJANUARY 1, 2012 1,317,306 (11,217) 1,306,089
STRIPPING ACTIVITY ASSET -
January 1, 2012 - opening balance 128,251 - 128,251
Depreciation (1) - (12,445) (12,445)
Subtotal 128,251 (12,445) 115,806
Additions under IFRS 20 (3) 22,208 (1,162) 21,046
Depreciation (1) - (4,466) (4,466)
DECEMBER 31, 2012 CLOSING BALANCE 150,459 (18,073) 132,386
(1) Adjustment to accumulated balance as of December 31, 2012, which is the correct presentation of "Deferred income tax
liability", as a result of the effect on the "Deferred stripping asset" for the change in accounting policy, in accordance with
the IFRIC 20.
(2) During the year 2012, the Company recorded additions of "Deferred stripping asset"; however, for comparative purposes
a stripping adjustment was recognized in profit or loss as a result of the change in ratio.
(3) Adjustment to accumulated balance as of December 31, 2012, by recording depreciation according to the method of
units produced "Deferred stripping asset" balance and its effect on the income tax.
IMPACT ON EARNINGS PER SHARE
The effect on earnings per share related to the 2012 restatement was a reduction of S/. 0.219
to S/. 0.218 per share.
IMPACT ON THE STATEMENT OF CASH FLOWS
The effect on the statement of cash flows was a decrease to cash flows from operating activities
of S/. 1,137,000, as a higher amount of stripping costs was allocated directly to asset during
the year, and a decrease to cash flows used in investing activities of S/. 1,137,000, as a lower
amount was capitalized to the stripping activity asset during the year 2012.
AS PREVIOUSLY REPORTED
S/. (000)
IFRS 20 ADJUSTMENTS
S/. (000)
ADJUSTED BALANCE
S/. (000)
PROFIT OR LOSS -
Profit after tax 359,794 - 359,794
Deferred income tax recognized in profit or loss (1) - 2,468 2,468
Deferred stripping recognized in profit or loss and change average strip ratio (2) - (1,137) (1,137)
Depreciation (3) - (4,466) (4,466)
Income tax (3) - 1,681 1,681
PROFIT AFTER TAX 359,794 (1,454) 358,340
2013 UNACEM 131
4. SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONSThe financial statements preparation requires Management to make judgments, estimates
and assumptions to determine the reportable figures of assets and liabilities, the disclosure of
contingent assets and liabilities as of the financial statements date, and also the income and
expenses balances for the years ended as of December 31, 2013 and 2012.
The most significant estimates considered by Management related to the financial statements
are:
Fair value of derivatives financial instruments - note 3.2(c)(v)
Deferred stripping assets - note 3.2(m)
Estimates of resources and reserves – note 3.2(n)
Costs and depreciation of stripping assets - note 3.3
Estimation for impairment of non-financial assets - note 3.2(o)
Provisions - note 3.2(p)
Income tax - note 3.2(t)
Management considers that estimates are based on its best knowledge of the relevant facts
and circumstances, having regard to prior experience. Actual results may differ from the
amounts included in the financial statements.
5. NEW ACCOUNTING STANDARDS The Company has decided not to early adopt the following standards and interpretations were
issued by the IASB, but are not effective as of December 31, 2013:
IAS 32 "FINANCIAL INSTRUMENTS: PRESENTATION - OFFSETTING FINANCIAL
ASSETS AND FINANCIAL LIABILITIES (AMENDMENT)"
Effective for periods beginning on, or after, January 1, 2014. Defines the meaning of "currently
has a legal right to compensation" criteria and mechanisms for non-simultaneous solution
clearinghouses for entitlement to compensation modification. Additionally, this amendment
clarifies that to make two or more instruments financial institutions should have a right to
compensation that can not be conditioned on a fact future, and should be mandatory the
following circumstances: (i) the normal course of business, (ii) an event of default, and (iii) in
the event of insolvency or bankruptcy of the entity or any of the counterparties.
IAS 39 NOVATION OF DERIVATIVES AND CONTINUITY OF HEDGE ACCOUNTING
(AMENDMENTS)
Effective for periods beginning on, or after, January 1, 2014. These changes provide an
exception to discontinue hedge accounting when the novation occurs to a hedging instrument
designated that meets certain criteria.
IFRS 9 "FINANCIAL INSTRUMENTS: CLASSIFICATION AND MEASUREMENT"
This rule has an effective date of enactment. IFRS 9 reflects the first phase of
the IASB's work for the replacement of IAS 39, and refers to the classification and measurement
of financial assets as defined in IAS 39. The approval of the first phase of IFRS 9 will have an
effect on the classification and measurement of financial assets of the Company, but potentially
will have no impact on the classification and measurement of financial liabilities. IFRS 9 also
introduces new requirements for the use of hedge accounting, in order that it is aligned with
the risk management of a company.
"INVESTMENT ENTITIES"(AMENDMENTS TO IFRS 10, IFRS 12 AND IAS 27)Effective for periods beginning on, or after, January 1, 2014. These changes provide an exception
to the requirement to consolidate entities that qualify as an entity investment under the criteria
of IFRS 10. The exception to consolidation requires that investment entities are recorded as
subsidiaries at is fair value with changes in profit and loss.
IFRIC 21 "LEVIES"
Effective for periods beginning on, or after, January 1, 2014. IFRIC
21 clarifies that an entity recognizes a liability for a tax when the activity giving rise to the
payment, as identified in the relevant legislation, is performed. To a lien that is activated when
a minimum threshold, the interpretation clarifies that no person should be anticipated before
reaching the minimum threshold specified.
The Company is in the process of evaluating the impact of the application of these standards,
if any, on its financial statements and disclosures in the notes to the separate financial
statements.
2013 UNACEM 133
6. FOREIGN CURRENCY TRANSACTIONSForeign currency transactions are made at free market exchange rates. As of December 31,
2013, the weighted average market exchange rate for transactions in U.S. Dollars published
by the Superintendence of Banks, Insurance and Private Funds Managers (Superintendence
of Banking, Insurance and Private Pension Funds or "SBS" for its acronym in Spanish) was
S/. 2.794 for buying and S/.2.796 for selling (S/. 2.549 for buying and S/. 2.551 for selling as of
December 31, 2012), respectively.
As of December 31, 2013 and 2012, the Company had the following assets and liabilities in U.S.
Dollars:
2013 2012
US$ (000)
EQUIVALENT IN
S/. (000) US$ (000)
EQUIVALENT IN
S/. (000)
ASSETS
Cash and cash equivalents 45,968 128,435 6,723 17,137
Trade and other receivables, net 7,024 19,625 18,291 46,624
52,992 148,060 25,014 63,761
LIABILITIES
Bank overdrafts and loans 247,955 693,282 199,259 508,310
Trade and other payables 16,846 47,101 66,174 168,810
Financial obligations 582,244 1,627,954 335,748 856,493
Derivative financial instruments 1,514 4,233 2,806 7,158
848,559 2,372,570 603,987 1,540,771
Derivative financial instruments 473 1,323 - -
NET LIABILITY POSITION (796,040) (2,225,833) (578,973) (1,477,010)
7. CASH AND CASH EQUIVALENTS(a) This item is made up as follows:
(b) Demand deposits are maintained in local and foreign currency, kept in domestic and foreign
banks and are freely available. These deposits earn interest at market rates.
(c) Corresponds to time deposits in domestic banks, denominated in local and foreign currency,
earn interest at market rates and have original maturities shorter than 3 months.
2013 2012
S/. (000) S/. (000)
Petty cash 673 655
Demand deposits (b) 28,470 50,287
Time deposits (c) 167,607 23,247
196,750 74,189
2013 UNACEM 135
8. TRADE AND OTHER ACCOUNTS RECEIVABLE, NET(a) This item is made up as follows:
(b) Trade account receivables are mainly denominated in Nuevos Soles, have current maturities
(between 7 and 30 days), do not earn interest, have no specific guarantees and do not present
significant overdue balances.
(c) As of December 31, 2013 and 2012, this balance corresponds to prepaid income tax, paid on
those dates, in addition to payments of temporary tax to net assets.
In Management’s opinion, such prepayments will be applied to future taxes generated in the
current period.
(d) In February 2013, the kiln 2 of the Atocongo plant, suffered a breakdown and production of
clinker (main raw material for cement production) decreased. The net cost of the assets that
were affected totals S/. 9,029,000.
CURRENT NON CURRENT
2013 2012 2013 2012
S/. (000) S/. (000) S/. (000) S/. (000)
Trade accounts receivable (b) 63,850 73,388 344 454
Accounts receivable from related parties, note 28(c) 51,535 42,982 - -
Prepaid income tax (c) 51,399 579 - -
Claims to third parties (d) 45,026 1,614 - -
Claims to tax authority (e) 24,146 17,597 - -
Advances to suppliers (f) 13,765 14,480 4,680 7,020
Loans to employees 6,355 1,633 - -
Derivative financial instruments, note 32(a) 772 3,399 - -
Other accounts receivable 3,839 4,443 - -
260,687 160,115 5,024 7,474
LESS – ESTIMATION FOR DOUBTFUL ACCOUNTS (G) (1,684) (103) - -
259,003 160,012 5,024 7,474
To date, the Company has made efforts to negotiate with the insurers and reinsurers for the
collection of compensation of approximately US$ 15,000,000 (equivalent to S/. 41,940,000),
according to the conditions of insurance contracts that found effect on the date of the accident
and reports issued by the independent expert appointed by the reinsurers. As of December 31,
2013, the Company reported revenues of approximately S/. 41,940,000, which is included in
other manufacturing costs under "Cost of sales" in the income statement, see note 21. In the
month of January 2014, the kiln 2 has recovered its production capacity after technical repairs
required.
In Management and its advisors’ opinion, that amount will be returned during the first quarter
of 2014.
(e) As of December 31, 2013 and 2012, this balance corresponds to claims to tax authorities for
the refund of the overpayment of income tax in prior years, note 30.
In management’s opinion, expectations are to recover these balances in the short-term.
(f) Mainly corresponds to advances granted to San Martín Contratistas Generales S.A., on
January 7, 2011, for stripping and exploitation services in the Cristina mining concession,
which is to be collected in five years.
(g) The movement of the allowance for doubtful trade and other accounts receivable for the
years ended December 31, 2013 and 2012, was as follows:
In Management’s opinion, the estimation for doubtful accounts adequately covers the credit
risk for the years ended December 31, 2013 and 2012.
2013 2012
S/. (000) S/. (000)
OPENING BALANCE 103 50
Provision of the year, note 22 1,553 53
Exchange differences 28 -
ENDING BALANCE 1,684 103
2013 UNACEM 137
9. INVENTORIES (a) This item is made up as follows:
(b) Work in progress includes coal, puzulana, gypsum, clay, clinker production and limestone
extracted from the Company’s mines, which according to the Company estimates will be used
in the short-term production.
(c) The raw and auxiliary materials include imported and national coal. As of December 31,
2013, the Company keeps in coal stock for approximately S/. 92,800,000 (S/. 92,100,000 as of
December 31, 2012).
(d) As of December 31, 2013, this item mainly corresponds to the imports of coal for approximately
S/. 28,674,000 (approximately S/. 84,085,000 for clinker and coal as of December 31, 2012).
(e) In management’s opinion, according to the assessment made by the operative areas, it is
not necessary to create an estimation for impairment of inventories as of December 31, 2013
and 2012.
2013 2012
S/. (000) S/. (000)
Finished goods 10,486 5,705
Work in progress (b) 139,277 88,617
Raw and auxiliary materials (c) 127,844 104,987
Packages and packing 44,510 23,087
Sundry supplies 141,381 96,407
Inventory in transit (d) 34,337 100,972
497,835 419,775
10. INVESTMENTS IN SUBSIDIARIES AND OTHER(a) This item is made up as follows:
A brief summary of the activities of the most significant subsidiaries of the Company is
presented below:
SKANON INVESTMENTS INC. – SKANON
It is a non-resident company incorporated in February 2007 under the laws of the State of
Arizona in the United States of America. Skanon owns 93.56 percent of Drake Cement LLC,
a company domiciled in the U.S., which core business is a cement plant in Yavapai County, in
northern Arizona.
During the year 2013, the Company made a capital contribution of approximately US$ 32,920,000
(equivalent to S/. 89,121,000), receiving 34,914,774 shares of the capital stock of the subsidiary
(approximately US$ 11,000,000 and equivalent to S/. 28,901,000); receiving 11,666,577 shares
of the capital stock of the subsidiary.
DIRECT PARTICIPATION
CARRYING VALUE
2013 2012 2013 2012
% % S/. (000) S/. (000)
Skanon Investments Inc. 86.03 84.58 952,514 863,393
Compañía Eléctrica El Platanal S.A. 90.00 90.00 567,829 567,829
Inversiones en Concreto y Afines S.A. 93.38 93.38 67,036 67,036
Transportes Lurín S.A. 99.99 99.99 63,937 63,688
Prefabricados Andinos Perú S.A.C. 50.00 50.00 17,527 17,527
Ferrocarril Central Andino S.A. 14.69 14.69 5,617 5,617
Minera Adelaida S.A. 100.00 100.00 2,053 1,902
Generación Eléctrica de Atocongo S.A. 99.85 99.85 125 125
Depósito Aduanero Conchán S.A. 99.98 99.98 63 63
Other 225 220
1,676,926 1,587,400
Estimation for impairment of investments (b)
(31,140) (28,725)
1,645,786 1,558,675
2013 UNACEM 139
COMPAÑÍA ELÉCTRICA EL PLATANAL S.A. - CELEPSA
It is a company incorporated in Lima in December 2005, dedicated to the generation and sale
of electricity, using water resources, geothermal and thermal, as well as to the operation of its
property and facilities in general.
INVERSIONES EN CONCRETO Y AFINES S.A. - INVECO
It is a company incorporated in Lima in April 1996, dedicated to investing in companies
principally engaged in supplying concrete ready-mix, building materials and related activities,
through its subsidiary Unión Concreteras S.A.,on which holds a participation of 99.9 percent,
which is also the owner in 99.99 percent of Firth Industries Perú S.A., dedicated to the same
activity.
TRANSPORTES LURÍN S.A. - LURÍN
It is a company incorporated in Lima in July 1990. As of December 31, 2012, Transportes
Lurín S.A. has a participation of 100 percent in Staten Island Terminal LLC (80 percent as of
December 31, 2011), a company incorporated in the United States of America, whose activity
is the construction and operation of a port to discharge, storage and shipping of cement and
aggregates, with a participation of 3.03 percent in Skanon Investments Inc. as of December 31,
2013 and 2012.
During the year 2013, the Company paid capital contributions to LURÍN for approximately
S/. 249,000 (S/. 19,794,000 during 2012). During the year 2012, LURÍN acquired 20 percent of
additional participation in Staten Island Terminal LLC.
As of December 31, 2013 and 2012, the Company recorded an estimation for impairment on its
investment on this subsidiary, amounting to approximately S/. 31,140,000 and S/. 28,725,000,
respectively, as result of the impairment of the investment that LURÍN recorded on its
investment in Staten Island Terminal LLC. Nowadays, the Company has decided to stop the
operations in the port and expects to restart them in mid-term.
PREFABRICADOS ANDINOS PERÚ S.A.C. - PREANSA
It is a company founded in Lima in October 2007. PREANSA manufactures prestressed concrete
structures and precast concrete, and sells these products in Peru and abroad.
(b) The movement of the estimation for impairment of investments for the years ended
December 31, 2013 and 2012 is as follows:
2013 2012
S/. (000) S/. (000)
OPENING BALANCE 28,725 27,808
Additions, note 25 2,415 917
ENDING BALANCE 31,140 28,725
11. PROPERTY, PLANT AND EQUIPMENT(a) The table below presents the components of this caption:
MINING CONCESSIONS (C)
LAND MINE CLOSURE
BUILDINGS AND CONSTRUCTIONS
OTHER INSTALLATIONS
MACHINAND
EQUIPM
S/. (000) S/. (000) S/. (000) S/. (000) S/. (000) S/. (00
COST -
As of January 1, 2013 34,856 551,481 6,516 417,664 50,206 1,498
Additions 666 6,599 - 315 1,441 12
Transfers (f) - 5,543 - 310,927 5,087 1,084
Retirements (g) (947) - (529) (22) (792) (31
Adjustments (h) - - - (11,202) - (59
BALANCE AS OF DECEMBER 31, 2013 34,575 563,623 5,987 717,682 55,942 2,504
ACCUMULATED DEPRECIATION -
As of January 1, 2013 10,207 - 2,226 67,730 40,047 224
Depreciation of the year 466 - 420 24,214 1,834 109
Transfers (f) - - - (210) 210 (1
Retirements (g) (947) - (2) 90 (10) (11
Adjustments (h) - - - (11,202) - (59
BALANCE AS OF DECEMBER 31, 2013 9,726 - 2,644 80,622 42,081 261
NET BOOK VALUE -
As of December 31, 2013 24,849 563,623 3,343 637,060 13,861 2,242
As of December 31, 2012 24,649 551,481 4,290 349,934 10,159 1,273
2013 UNACEM 141
ERY ENT
TRANSPORTATION UNITS
FURNITURE AND FIXTURES
OTHER EQUIPMENT
UNITS IN TRANSIT
WORK IN PROGRESS (F)
TOTAL
00) S/. (000) S/. (000) S/. (000) S/. (000) S/. (000) S/. (000)
8,464 23,974 17,068 43,607 69,428 1,296,761 4,010,025
2,997 847 202 1,604 7,487 234,812 266,970
4,521 4,393 126 11,129 (69,681) (1,352,045) -
,902) (6,283) - (18) - (858) (41,351)
9,884) (58) (586) (975) - - (72,705)
,196 22,873 16,810 55,347 7,234 178,670 4,162,939
4,973 14,395 13,637 31,071 - - 404,286
9,578 3,252 637 3,510 - - 143,911
,128) - - 1,128 - - -
,949) (6,285) - - - - (19,103)
9,884) (58) (586) (975) - - (72,705)
,590 11,304 13,688 34,734 - - 456,389
2,606 11,569 3,122 20,613 7,234 178,670 3,706,550
3,491 9,579 3,431 12,536 69,428 1,296,761 3,605,739
(b) The following is the movement of deferred stripping assets:
(c) As of December 31, 2013 and 2012, corresponds mainly to the concessions of the quarries
of Atocongo, Atocongo Norte, Pucará and Oyón.
(d) As of December 31, 2013, the carrying value of assets acquired through finance leases
amounted to approximately S/. 599,491,000 (S/. 592,320,000 as of December 31, 2012). Additions
in 2013 include S/. 7,171,000 (S/. 104,620,000 in 2012). The leased assets guaranteed financial
lease liabilities, see note 15.
(e) The amount of borrowing costs capitalized during the year ended December 31, 2013 was
S/. 25,381,000 (S/. 38,752,000 as of December 31, 2012). Interest rates used to determine the
amount of borrowing costs eligible for capitalization were between Libor 0.308 and 0.581, plus
a spread between 2.35 and 5.52 percent as of December 31, 2013 and 2012.
S/. (000)
COST -
As of January 1, 2012 128,251
Change in accounting policy, note 3.3 -
As of January 1, 2012 128,251
Additions 21,046
Balance as of December 31, 2012 149,297
Additions 15,205
BALANCE AS OF DECEMBER 31, 2013 164,502
ACCUMULATED DEPRECIATION -
As of January 1, 2012 -
Change in accounting policy, note 3.3 (12,445)
As of January 1, 2012 (12,445)
Additions, note 21 (4,466)
Balance as of December 31, 2012 (16,911)
Additions, note 21 (4,776)
BALANCE AS OF DECEMBER 31, 2013 (21,687)
NET BOOK VALUE -
AS OF DECEMBER 31, 2013 142,815
AS OF DECEMBER 31, 2012 132,386
AS OF DECEMBER 31, 2011 115,806
( )
2013 UNACEM 143
(f) As of December 31, 2012, corresponded mainly to the work in progress to the Project of
enlargement of the production capacity of Kiln 1 and the construction of Kiln 4. During 2013 the
transfers include mainly the transfer of the work in progress of Kiln 1 and 4 and Condorcocha
and Atocongo, respectively, which began operations in November and March 2013, respectively.
(g) During the year 2013, the Company made a technical analysis and derecognized certain
components of the account Machinery and Equipment, because they would not continue to
be used and others were reclassified from significant parts to supplies for approximately
S/. 4.627,000 (S/. 7,286,000 and S/. 11,913,000 cost and accumulated depreciation, respectively)
( all these included in the caption "Retained earnings" and S/. 22,777,000 in the caption
"Inventories" in the statement of financial position.
(h) During the year 2011, cost and depreciation were recorded to present the net assets
attributable cost of Condorcocha plant located in the city of Junín, whose net balance was zero.
Such cost and depreciation were reversed in the year 2013, and had no effect on profit and loss
of the Company.
(i) The depreciation for the years 2013 and 2012 was distributed as follows:
(j) As of December 31, 2013 and 2012, the Company's management conducted an assessment
of its property, plant and equipment and found no indicators of impairment on these assets.
Therefore, the carrying value of property, plant and equipment is recoverable with future profits
to be generated by the Company.
(k) As of December 31, 2013 and 2012, the Company has granted two mortgages on its
mining concession Atocongo and one mortgage on its mining concession Cristina for up to
S/. 149,4000 and US$ 94,000,000, respectively, to guarantee loans obtained with BBVA Banco
Continental. In addition, it has granted a mortgage over its Atocongo mining concession for up to
US$ 75,000,000, to secure the loan obtained from the Bank of Nova Scotia and a mortgage on
land in Pachacámac and Lurín districts for up to US$ 50,000,000 to secure the loan obtained
from the Bank of Nova Scotia, see note 15.
(l) In Management’s opinion, the Company has insurance policies to adequately cover all of its
fixed assets.
2013 2012
S/. (000) S/. (000)
Cost of sales, note 21 129,228 85,972
Administrative expenses, note 22 9,217 9,441
Inventories 5,466 3,590
143,911 99,003
12. INTANGIBLE ASSETS, NET(a) The table below presents the components of this caption:
CONCESSION FOR ELECTRICITY GENERATION (B)
GOODWILL (C) SOFTWAREP
S/. (000) S/. (000) S/. (000)
COST -
As of January 1, 2013 61,330 9,745 18,772
Additions - - 2,948
Retirements - - (11,008)
AS OF DECEMBER 31, 2013 61,330 9,745 10,712
ACCUMULATED AMORTIZATION -
As of January 1, 2013 4,137 - 11,007
Amortization of the year, notes 22 and 25 1,484 - 1,075
Retirements - - (11,008)
AS OF DECEMBER 31, 2013 5,621 - 1,074
NET BOOK VALUE -
AS OF DECEMBER 31, 2013 55,709 9,745 9,638
AS OF DECEMBER 31, 2012 57,193 9,745 7,765
2013 UNACEM 145
ENVIRONMENTAL PROTECTION PROGRAM
EXPLORATION EXPENSES
OTHERS TOTAL
S/. (000) S/. (000) S/. (000) S/. (000)
18,269 10,434 22,895 141,445
230 - 3,639 6,817
(1,428) (10,434) (23,858) (46,728)
17,071 - 2,676 101,534
18,065 10,433 20,811 64,453
37 1 3,160 5,757
(1,428) (10,434) (23,623) (46,493)
16,674 - 348 23,717
397 - 2,328 77,817
204 1 2,084 76,992
(b) This amount corresponds to the expenditures to develop the comprehensive project
"El Platanal," consisting of the construction of two hydroelectric reservoirs and a system for
the irrigation of uncultivated land, and to obtain the final concession to develop the activity
of electricity generation, which was obtained by the Company, through Supreme Resolution
130-2001-EM, dated July 25, 2001. On September 12, 2006, the transfer of the concession
and the assignment of use of the "El Platanal" project to Compañía Eléctrica El Platanal
S.A. (CELEPSA) was approved by Supreme Resolution 053-2006-EM for a period of 25 years
from March 30, 2011, whereby the Company receives royalties in exchange equivalent to 3.55
percent of net monthly income obtained by CELEPSA, on sales of energy and power to third
parties. As of December 31, 2013 and 2012, the Company amortizes the cost during the term
of the contract (25 years).
(c) Effective 2003, the Company acquired 100 percent of the shares representing the capital
stock of Lar Carbón S.A. The acquisition was accounted for using the purchase method, by
means of which the Company recorded adjustments to its financial separate statements to
reflect the assets and liabilities acquired at their fair values at the acquisition date. As a result
of this acquisition, the Company recognized a goodwill of S/. 9,745,000.
The recoverable amount of coal grinding plant (generating unit) is established on the basis
of calculation of value in use, which uses projections of cash flows on preliminary financial
budgets prepared by Management covering a 5-year period, calculated on the resource base.
As a result of this analysis, no impairment loss on this unit was found. The coal grinding
plant has a production horizon of 11 years as of December 31, 2013. Management believes
that there will not be significant changes in estimated production volumes, which would
produce that the book value of these assets exceeds its recoverable value . The Company
has projected its operating costs in relation to their current cost of coal grinding. In relation
to the assessment of value in use of the cash-generating unit, Management believes that no
reasonable change in assumptions would cause the carrying amount of the unit exceeds its
recoverable amount significantly.
(d) As of 31 December 2013 and 2012, the Company's Management conducted an assessment
on its intangibles assets, finding no indicators of impairment in those assets. Accordingly,
the carrying value of intangibles assets is recoverable with future profits to be generated by
the Company.
2013 UNACEM 147
13. BANK OVERDRAFTS AND LOANS(a) The table below presents the components of this caption:
(b) As of 31 December 2013 and 2012, the balance is made up as follows:
2013 2012
S/. (000) S/. (000)
Bank overdrafts - 163
Bank loans (b) 716,920 532,313
716,920 532,476
2013 2012
S/. (000) S/. (000)
CREDITOR -
Citibank N.A. New York 258,466 121,764
BBVA Banco Continental 170,970 31,888
Santander Overseas Bank Inc. 111,840 63,776
ITAU Private Bank 83,376 -
Banco de Crédito de Miami 50,328 136,315
Bank of Nova Scotia New York 41,940 38,265
Banco Internacional del Perú S.A.A. - INTERBANK - 140,305
716,920 532,313
TERM -
Current portion 266,766 532,313
Non current portion 450,154 -
716,920 532,313
(c) Bank loans correspond mainly to loans for working capital at fixed annual rates that range
from 2.0 to 5.3 percent, have maturity lower than 12 months, do not have specific guarantees
and are renewed depending on the needs of working capital for the Company.
(d) As of December 31, 2013 and 2012, the interest payable amounts to approximately
S/. 2,244,000 and S/. 2,965,000, respectively, and are recorded in the caption "Trade and other
accounts payable" of the separate statement of financial position. As of December 31, 2013
and 2012, the interest expenses amounted to approximately S/. 16,338,000 and S/. 17,666,000,
respectively, and are included in the caption "Financial costs" of the separate statement of
income, see note 27.
2013 UNACEM 149
14. TRADE AND OTHER PAYABLES(a) This caption is made up as follows:
(b) Trade accounts payable are generated mainly by services of extraction of minerals and
acquisition of supplies and additives for the Company’s production, are nominated in local and
foreign currencies, have current currency, do not yield interests and do not have guarantees.
CURRENT NON CURRENT
2013 2012 2013 2012
S/. (000) S/. (000) S/. (000) S/. (000)
Trade payables (b) 122,716 164,776 - -
Accounts payable to related entities, note 28(c) 43,380 33,053 11,883 12,755
Interest payable notes 13(d) and 15(k) 16,391 13,327 - -
Remunerations and vacations payable 13,914 7,846 - -
Director’s remunerations payable 1,919 2,934 - -
Dividends payable 28 - - -
Value added tax payable - 5,071 - -
Other accounts payable 10,800 7,599 - -
209,148 234,606 11,883 12,755
15. LONG-TERM DEBT (a) This caption is made up as follows:
ANNUAL RATE MATURITY
%
BONOS CORPORATIVOS -
First to eighth issuance programs (b) Between 5.91 and 6.81 Between April 2014 and March 2015
First and third issuance of the second program (c) Between 4.93 and 5.56 December 2016, March 2020 and 202
First and third issuance of the first program (d) Between 3.75 and 6.25 Between January 2014 and January 20
BANK LOANS -
Bank of Nova Scotia (f) Libor to 3 months + 2.35 August 2018
BBVA Banco Continental (g) Libor to 3 months + 2.90 September 2016
BBVA Banco Continental (g) 6.00 January 2015
Bank of Nova Scotia (f) Libor to 3 months + 1.95 September 2015
BBVA Banco Continental (g) 4.35 June 2017
Banco de Crédito del Perú (e) 5.80 October 2016
Banco de Crédito del Perú (e) 5.57 July 2016
Bank of Nova Scotia (f) Libor to 3 months + 2.40 September 2018
Banco International del Perú (h) 5.25 March 2019
Amortized cost
FINANCIAL LEASE -
Banco de Crédito del Perú (i) Libor + 2.35 February 2018
Banco Internacional del Perú (j) 5.80 October 2018
(-) Fondo de Garantía BCP Panamá (i)
TOTAL BANK LOANS
LESS – CURRENT PORTION
NON-CURRENT PORTION
2013 UNACEM 151
GUARANTEE 2013 2012
S/. (000) S/. (000)
None 270,000 385,000
23 None 180,000 -
018 None 70,459 89,285
520,459 474,285
Guarantee on property, see note 11 (k) 110,675 122,235
Guarantee on property, see note 11 (k) 76,890 95,663
Guarantee on property, see note 11 (k) 18,675 93,375
Guarantee on property, see note 11 (k) 58,716 84,183
Guarantee on property, see note 11 (k) 59,325 77,097
None 25,164 22,959
None 17,695 20,963
None 133,858 -
None 168,421 -
669,419 516,475
(5,248) (4,182)
664,171 512,293
Assets under leasing 326,420 476,120
Assets under leasing 93,390 80,355
- (132,549)
419,810 423,926
1,604,440 1,410,504
426,640 341,009
1,177,800 1,069,495
(b) On May 9, 2006, the General Shareholders meeting approved the proposal for the issuance
of the "First Program Debt Instruments of US$ 150,000,000 or its equivalent in Nuevos Soles."
On August 24, 2006, the Company signed with BBVA Banco Continental, as Representative of the
Bondholders, the framework contract bond, and in October signed the prospectus framework
for the First Program of Issuance of Corporate Bonds and and Short-Term Instruments of
Unión Andina de Cementos S.A.A."
The first and second emissions by S/. 50,000,000 each were awarded in the first quarter of
2007, the third emission by S/. 60,000,000 was awarded in the second quarter of 2007, the
fourth emission by S/. 60,000,000 was awarded in the second quarter of 2008, the fifth, sixth
and seventh emissions by S/. 55,000,000 each were awarded in the second quarter of 2009, and
the eighth emission by S/. 55,000,000 was awarded in the fourth quarter of 2009. All awards
were under the form of Dutch auction.
Financial covenants are monitored quarterly, and must be calculated on the basis of separate
financial information and the calculation methods required by the financial entity. Below are
the results obtained by the Company as of December 31, 2013 in relation to these safeguards:
The compliance of the financial covenants is overseen by the Management and the Representative
of the Bondholders. In case of breach of the above safeguards and early termination will
proceed. In Management’s opinion, the Company was in compliance with these obligations as
of December 31, 2013 and 2012.
(c) On April 7, 2010, the General Meeting approved the "Second Program of Issuance of
Corporate Bonds and Short-Term Debt Instruments of Unión Andina de Cementos S.A.A.”, up
to a maximum outstanding amount of US$ 150,000,000 or its equivalent in Nuevos Soles".
On September 15, 2010, the Company signed with Scotiabank Perú S.A.A. as Representative
of the Noteholders, under contract bond, and in October the prospectus was signed under the
"Second Issuance Program Corporate Bonds and Short-Term Instruments of Unión Andina de
Cementos S.A.A."
LIMITS ESTABLISHED
PERIODICITY RESULTS OBTAINED IN
2013
Non-taxed assets on total amount of financial debt ratio
Higher than 1.20 Quarterly 3.08
Debt ratio Less than 1.50 Quarterly 0.74
Receivable accounts from related on total assets ratio
Less than 0.08 Quarterly 0.01
2013 UNACEM 153
In March 2013, the Company placed the First and Second Issuance of the Corporate Bondstotaling
S/. 60,000,000 each, and in December 2013, placed the Third Issuance of the same program for
S/. 60,000,000.
The financial covenants for this program are similar to those of the First Program for the
Issuance of Debt Instruments, see paragraph (b) above. In the opinion of Management, the
Company has complied with these obligations as of December 31, 2013.
(d) On March 26 and June 19, 2009, the Board of Directors and General Shareholders’
Meeting, respectively, approved the First Program of Corporate Bonds of Cemento Andino S.A.
(transferred later than the date of merger to the Company) up to an amount of issuance of
US$ 40,000,000 or its equivalent in Nuevos Soles.
On June 17, 2009, the Company signed, as Debtors’ Representative, the agreement and prospect
framework with Banco de Crédito del Perú for the First Program of Corporative Bonds. The
first and third issuances for US$ 7,000,000 and US$ 28,000,000, respectively, were sold under
the Dutch auction modality on January 21, 2010.
Financial covenants are monitored on a quarterly basis, and must be calculated on the basis
of separate financial information and the calculation methods required by the financial entity.
Below are the results obtained by the Company as of December 31, 2013 in relation to these
safeguards:
The compliance of the financial covenants is overseen by the Management and the Representative
of the Bondholders. In case of breach of the above safeguards, early termination will be
incurred. In Management’s opinion, the Company was in compliance with these obligations as
of December 31, 2013 and 2012.
(e) As of December 31, 2013 and 2012, bank loans in local and foreign currency obtained from
local and foreign financial institutions were used primarily for working capital, see paragraph
(f), (g) and (h) below.
LIMITS ESTABLISHED
PERIODICITY RESULTS OBTAINED IN
2013
Interest coverage ratio Higher than 4.00 Quarterly 9.79
Debt service coverage ratio Higher than 1.25 Quarterly 2.27
Cash ratio Higher than 1.00 Quarterly 1.04
Leverage ratio Less than 1.50 Quarterly 0.76
(f) The Company must comply with some financial covenants on a quarterly basis as part of
the contractual obligation with Bank of Nova Scotia. Below are the results obtained by the
Company as of December 31, 2013:
(g) The Company must comply with some financial covenants on a quarterly basis as part of
the contractual obligation with BBVA Banco Continental. Below are the results obtained by the
Company as of December 31, 2013:
LIMITS ESTABLISHED
PERIODICITY RESULTS OBTAINED IN
2013
Debt ratio Less than 1.50 Quarterly 0.91
Debt service coverage ratio Higher than 1.30 Quarterly 1.53
Debt ratio/EBITDA Less than 3.50 Quarterly 3.13
LIMITS ESTABLISHED
PERIODICITY RESULTS OBTAINED IN
2013
Total liabilities/equity ratio Less than 1.50 Quarterly 0.76
Debt coverage ratio Less than 3.00 Quarterly 2.92
Interests coverage ratio Higher than 4.00 Quarterly 8.00
2013 UNACEM 155
(h) The Company is required to meet certain financial covenants which are quarterly monitored
as part of contractual commitments with Banco Internacional del Perú (Interbank). The results
obtained by the Company as of December 31, 2013 relating to these safeguards are:
(i) On February 7, 2008, the Company signed an understanding agreement for a future financial
leasing with Banco de Crédito del Perú (BCP) for an amount up to US$ 25,000,000 for the
extension of the production capacity through the installment of a new line of production in
the plant of Junín (Kiln 4), whose estimated cost is US$ 162,000,000; the interest rate is Libor
+ 2.35 percent, with an availability term of three years and a financing term, including the
availability term, of six years for machinery and equipment and eight years for construction.
Then, on December 17, 2008, the Company signed a summary of terms and conditions of
financial leasing with BCP, in order to establish some basic understanding points on which the
financing can be structured.
LIMITS ESTABLISHED
PERIODICITY RESULTS OBTAINED IN
2013
Debt ratio Less than 1.15 Quarterly 0.91
Coverage of debt service ratio Higher than 1.30 Quarterly 1.53
Interest coverage ratio Higher than 4.00 Quarterly 8.00
On December 9, 2011, the Company signed the second amendment to such agreement with
BCP, related to the components that allow obtaining the service debt coverage ratio. The
summary of other terms of the agreement is as follows:
Financing amounts up to US$ 162,000,000, to be disbursed in three parts: US$ 25,000,000,
US$ 85,000,000 and US$ 52,000,000.
Interest rate corresponds to: i) Part 1, nominal annual Libor + 2.35 percent, ii) Part 2, nominal
annual Libor + 4.95 percent and iii) Part 3, nominal annual Libor + 4.20 percent.
Availability term of financing is three years and quarterly payments on five years.
All payments related to the leasing will be made on a quarterly basis, since the date all the
agreement’s conditions are met.
Financing has as guarantee: i)surface right on the land when the project is built; ii) assets
under financial leasing; iii) funds in guarantee amounting to Part 3 (at least 32 percent of the
financing received) and to be applied to the payment of the initial pre-payment. Likewise,
the credit part, Corporación Andina de Fomento (CAF), has guaranteed the Company with
Banco de Crédito del Perú for an amount of US$ 50,000,000.
As of December 31, 2012, the Company had a guarantee fund in Banco de Crédito del Perú in
Panama for an amount of US$ 50,000,000 (equivalent to S/. 132,549,000), which was applied
as initial payment of the leasing in March 2013. As of December 31, 2013, the net book value
of the assets is approximately S/. 602,225,000 (S/. 620,953,000 as of December 31, 2012).
2013 UNACEM 157
(j) In General Shareholders Meeting dated May 19, 2010, the lease agreement to increase the
production capacity with Banco Internacional del Perú (Interbank) was approved, said project
increase the production capacity of Kiln 1 from 3,200 to 7,500 tones clinker/day. As of December
31, 2013, the net book value of the assets is approximately S/. 645,090.000 (S/. 503,700,000 at
as of December 31, 2012).
The financial covenants for this lease are similar to bank loans, see paragraph (h) above. In
the opinion of Management, the Company has complied with these obligations as of December
31, 2013.
(k) As of December 31, 2013 and 2012, interest payable amounted to approximately S/.
14,147,000 and S/.10,362,000, respectively, and are recorded in the caption "Trade and other
accounts payable", note 14.
(l) Interests generated by financial liabilities held as of December 31, 2013 and 2012, amounted
to approximately S/. 78,959,000 and S/. 74,962,000, respectively. From the total interests
generated, interests have been capitalized for approximately S/. 25,381,000 and S/. 38,752,000,
respectively, and are included in the caption "Property, plant and equipment, net" of the
separate statement of financial position, see note 11(d). The balance ascending approximately
to S/. 53,578,000 and S/. 36,210,000, respectively, is included in the caption "Financial costs" in
the separate statement of income, note 27.
16. DEFERRED INCOME As of December 31, 2013, it mainly relates to cement sales invoiced and not shipped by
S/. 9,932,000, which will be performed in the first quarter of 2014 (S/. 7,262,000 as of December
31, 2012 delivered during January 2013).
17. PROVISIONS (a) This item is made up as follows:
WORKERS’ PROFIT
SHARING (B)
PROVISION FOR MINE
CLOSURE (C)
SEVERANCE INDEMNITIES
TOTAL
As of January 1, 2013 23,549 11,976 1,141 36,666
Additions 26,109 - 5,676 31,785
Accretion expense - 2,610 - 2,610
Payments (35,274) (586) (5,724) (41,584)
AS OF DECEMBER 31, 2013 14,384 14,000 1,093 29,477
CLASSIFICATION:
Current 14,384 337 1,093 15,814
Non current - 13,663 - 13,663
14,384 14,000 1,093 29,477
As of January 1, 2012 32,540 14,540 831 47,911
Additions 47,173 - 6,758 53,931
Accretion expense - 1,168 - 1,168
Payments (56,164) (3,732) (6,448) (66,344)
AS OF DECEMBER 31, 2012 23,549 11,976 1,141 36,666
CLASSIFICATION:
Current 23,549 914 1,141 25,604
Non current - 11,062 - 11,062
23,549 11,976 1,141 36,666
2013 UNACEM 159
(b) Workers’ profit sharing -
In accordance with Peruvian legislation, the Company maintains an employee profit sharing
plan of 10 percent of annual taxable income. Distributions to employees under the plan are
based 50 percent on the number of days that each employee worked during the preceding year
and 50 percent on proportionate annual salary levels.
(c) Provision for mine closure -
As of December 31, 2013 and 2012, the Company maintains a provision for future closure costs
of its mines, based on an estimated life between 30 and 46 years. The provision was created
on the basis of studies conducted by internal specialists using a discount rate of approximately
2.87 per cent in 2013 (3.00 per cent in 2012). Based on the current economic environment,
Management adopted certain assumptions which are considered reasonable to make an
estimation of future liabilities. This estimate is reviewed annually to take into account any
change in the assumptions. However, the actual costs of closing the mines finally depend on
future market prices for the necessary works of abandonment that reflect market conditions
at the relevant time. In addition, the actual closing time depends on when the mines ceases to
produce economically viable products.
18. DEFERRED INCOME TAX LIABILITY, NET(a) The following table presents the composition of the deferred income tax asset and liability:
AS OF JANUARY 1, 2012
STATEMENT OF INCOME
CHARGE TO EQUITY
AS OF
S/. (000) S/. (000) S/. (000)
DEFERRED LIABILITY
Differences on fixed assets bases 452,153 (7,499) -
Stripping cost 34,742 4,974 -
Capitalized interests 7,077 20,008 -
Exchange difference on leasings - 7,839 -
Deferred commissions of financial obligations 10,694 (9,347) -
Amortization of "El Platanal" studies 644 668 -
Amortization of software - - -
505,310 16,643 -
DEFERRED ASSETS
Derivative financial instruments (2,147) 463 651
Provision for mine closure (2,528) (328) -
Provision for vacation (1,654) (533) -
Deferred income (net) (9,503) 8,355 -
Workers’ profit sharing charged to inventories (178) - -
Sundry provisions (1,882) 563 -
(17,892) 8,520 651
DEFERRED LIABILITY, NET 487,418 25,163 651
2013 UNACEM 161
DECEMBER 31, 2012
STATEMENT OF INCOME
CHARGE TO EQUITY
OTHER AS OF DECEMBER 31, 2013
S/. (000) S/. (000) S/. (000) S/. (000) S/. (000)
444,654 17,744 - - 462,398
39,716 3,128 - - 42,844
27,085 6,606 - - 33,691
7,839 (1,568) - - 6,271
1,347 362 - (216) 1,493
1,312 668 - - 1,980
- 2,784 - - 2,784
521,953 29,724 - (216) 551,461
(1,033) (1,737) 1,429 (95) (1,436)
(2,856) (603) - - (3,459)
(2,187) (1,329) - 273 (3,243)
(1,148) 214 - (76) (1,010)
(178) (93) - - (271)
(1,319) (2,126) - (1,294) (4,739)
(8,721) (5,674) 1,429 (1,192) (14,158)
513,232 24,050 1,429 (1,408) 537,303
(b) The current and deferred portions of the provision for income tax for the years ended 2013
and 2012 are comprised as follows:
As of December 31, 2013 and 2012, the Company does not need to recognize a liability for
deferred income taxes by the tax that would be payable on the profits of its subsidiaries. The
Company has determined that the temporary differences will reverse through dividends to
be received in the future, which according to current tax legislation in Peru are not subject to
income tax.
(c) The table below presents the reconciliation of the effective tax rate and the legal tax rate for
the years ended December 31, 2013 and 2012:
2013 2012
S/. (000) % S/. (000) %
Profit before income tax 301,439 100.0 510,481 100.0
Theoretical expense 90,432 30.0 153,144 30.0
Tax effect on permanent items 6,265 2.1 (1,003) (0.2)
EXPENSE FOR INCOME TAX 96,697 32.1 152,141 29.8
2013 2012
S/. (000) S/. (000)
Current (72,647) (126,978)
Deferred (24,050) (25,163)
(96,697) (152,141)
2013 UNACEM 163
19. EQUITY(a) Capital stock -
As of December 31, 2013 and 2012, the capital stock is represented by 1,646,503,408 common
shares, totally subscribed and paid at a nominal value of S/. 1 per share. The common shares
representing the Company’s capital stock are traded on the Lima Stock Exchange.
On September 7, 2012, the Board of Directors, as result of the merger with Cemento Andino
S.A. approved by the General Shareholders’ Meeting held on July 24, 2012, approved to increase
the capital stock of the Company for the amount of S/. 460,800,000, from S/. 1,185,703,000
to S/. 1,646,503,000, through the issuance of 460,800,000 new common shares at a same
nominal value (S/. 1 per share), considering the capital stock of the merged company and
the capitalization of the retained earnings of S/. 313,320,000 and S/. 147,480,000, respectively,
which will be distributed among the shareholders of Cemento Andino S.A.
As of December 31, 2013, the share price of each share has been S/. 3.77 (S/. 3.24 as of
December 31, 2012).
(b) Legal reserve -
Under the terms of the General Corporation Law, it is required that at least 10 percent of the
distributable profit for each year, less income tax, has to be transferred to a legal reserve until
such reserve equals to 20 percent of the share capital. The legal reserve may offset any losses
or may be capitalized, existing in both cases the obligation to replenish it.
(c) Unrealized hedging derivatives -
Corresponds to the fair value changes on hedging financial instruments, net of its corresponding
tax effect.
(d) Dividend distributions -
The Board of Directors meetings held on January 18, April 19, July 19 and October 18, 2013,
agreed to distribute dividends with charge to retained earnings for approximately S/. 83,971,000
(S/. 1 per share), such payments were made on February 21, May 23, August 22 and November
21, 2013 respectively.
The Board of Directors meetings held on January 20, April 20, July 20 and September 7, 2012,
agreed to distribute dividends with charge to retained earnings for approximately S/. 84,472,000
(S/. 1 per common share), such payments were made on February 21, May 23, August 23 and
November 19, 2012, respectively.
21. COST OF SALESThis item is made up as follows:
20. NET SALESThis item is made up as follows:
2013 2012
2013 2012
S/. (000) S/. (000)
Beginning balance of finished goods and work in process 94,322 120,086
Cost of production:
Consumption of raw material, add clinker importation 220,049 132,906
Fuel 196,237 231,131
Depreciation, note 11(i) 129,228 85,972
Power 95,500 90,907
Personnel expenses, note 24 (b) 86,291 93,074
Packaging 59,279 59,027
Stripping costs 22,731 22,416
Depreciation for stripping cost, note 11(b) 4,776 4,466
Other manufacturing expenses (includes personnel expenses
for S/.4,629,000 of year 2012, note 24(b)) 263,076 248,544
Ending balance of finished goods and work in process (149,763) (94,322)
1,021,726 994,207
2013 2012
S/. (000) S/. (000)
Cement 1,751,402 1,705,294
Concrete blocks, bricks and pavers 33,758 20,595
Clinker 3 7
1,785,163 1,725,896
2013 UNACEM 165
22. ADMINISTRATIVE EXPENSESThis item is made up as follows:
23. SELLING EXPENSESThis item is made up as follows:
2013 2012
S/. (000) S/. (000)
Personnel expense, note 24(b) 46,395 50,850
Management services 36,578 56,210
Services rendered by third parties 20,885 13,754
Taxes 16,220 12,998
Donations 13,374 13,284
Depreciation, note 11(i) 9,217 9,441
Amortization, note 12(a) 4,273 7,271
Estimation for doubtful accounts, note 8(g) 1,553 53
Other 3,930 7,264
152,425 171,125
2013 2012
S/. (000) S/. (000)
Sales commissions 42,958 34,306
Advertising and marketing 37,767 37,338
Personnel expenses, note 24(b) 3,978 4,827
Warehouse managing services 2,653 3,832
Other 2,533 2,214
89,889 82,517
(b) Employee benefits expenses are allocated as follows:
(c) The average number of employees during 2013 was 755 (729 in the year 2012).
24. PERSONNEL EXPENSES(a) This item is made up as follows:
2013 2012
S/. (000) S/. (000)
Cost of sales, note 21 86,291 93,074
Administrative expenses, note 22 46,395 50,850
Selling expenses, note 23 3,978 4,827
Cost of sales (other production costs), note 21 - 4,629
Other operating income, net, note 25 3,112 4,011
139,776 157,391
2013 2012
S/. (000) S/. (000)
Remunerations 69,893 64,014
Employee profit sharing 26,109 47,173
Bonuses 10,500 10,083
Social contributions 7,143 5,553
Vacations 6,652 6,406
Severance compensation 5,676 5,693
Medical aid 4,237 4,631
Fees and remunerations to Directors 3,833 7,623
Voluntary sharing profit - 4,420
Other 5,733 1,795
139,776 157,391
2013 UNACEM 167
26. FINANCIAL INCOMEThis item is made up as follows:
25. OTHER OPERATING INCOME (EXPENSES), NETThis item is made up as follows:
2013 2012
S/. (000) S/. (000)
OTHER INCOMEIncome from services 12,351 16,633
Income from royalties, note 28(b) 6,110 5,659
Sale of goods and supplies 3,182 6,586
Rental income 2,609 5,552
Indemnity insurance 35 96
Revenue from carbon credits - 391
Other 5,729 6,881
30,016 41,798
OTHER EXPENSESExpenses of pier 7,272 5,242
Cost from services 7,009 12,637
Staff costs, note 24(b) 3,112 4,011
Provision for impairment of investments, note 10(b) 2,415 917
Amortization of power concession, note 12(a) 1,484 1,484
Cost of goods and supplies 1,248 6,305
Other 8,553 4,572
31,093 35,168
(1,077) 6,630
2013 2012
S/. (000) S/. (000)
Interest on deposits 6,643 12,446
Income from dividends 2,850 1,423
Change in fair value derivative financial instruments - 2,848
Other 995 239
10,488 16,956
27. FINANCIAL EXPENSESThis item is made up as follows:
2013 2012
S/. (000) S/. (000)
Interest on financial obligations, note 15(l) 53,578 36,210
Interest on borrowings, note 13(d) 16,338 17,666
Financial expenses on derivatives, note 31 6,293 4,853
Change in fair value of trading derivatives 5,788 -
Loss on remeasurement to fair value of liabilities 1,476 3,793
Other 5,345 2,949
88,818 65,471
Commissions for structuring financial obligations 2,017 1,654
90,835 67,125
2013 UNACEM 169
28. TRANSACTIONS WITH RELATED PARTIES(a) Nature of the relationship -
During the years 2013 and 2012, the Company has made transactions with the following related
entities:
Sindicato de Inversiones y Administración S.A. - SIA
SIA’s main activity is to provide management services to the Company, in exchange for an
annual payment up to 10 percent of its profits before taxes. As of December 31, 2013 and
2012, Sindicato de Inversiones y Administración S.A. owned 43.4 and 68.03 percent of the
share capital of the Company, respectively
Unión de Concreteras S.A. - UNICON
UNICON’s main activity is the commercialization of cement with the Company, which is an
indirect subsidiary of the Company through Inversiones en Concreto y Afines S.A. Likewise,
UNICON provides the service of producing concrete blocks, bricks and pavers.
Firth Industries Perú S.A. - FIRTH
FIRTH’s main activity is the commercialization of cement with the Company, which is a
subsidiary of the Company, through Unión de Concreteras S.A.
Compañía Eléctrica El Platanal S.A. - CELEPSA, see note 10 and 12(b).
Prefabricados Andinos Perú S.A.C. - PREANSA, see note 10.
Depósito Aduanero Conchán S.A. - DAC
DAC’s main activity is to provide storage services, authorized warehouse for own and third
parties goods, as well as the promotion of services, transportation, storage, management
and delivery of cement manufactured by the Company, which also rents DAC the warehouse
facilities for the development of its activities.
Generación Eléctrica de Atocongo S.A. - GEA
GEA’s main activity is the generation and sale of electricity to the Company, which also
leases GEA the equipment for the development of its business.
ARPL Tecnología Industrial S.A. - ARPL
The shareholders of the Company have significant influence in ARPL. The Company receives
services related to advisory and technical assistance, development and management of
engineering projects.
(b) The main transactions with related companies during the years 2013 and 2012 were as
follows:
2013 2012
S/. (000) S/. (000)
CEMENT SALES -
Unión de Concreteras S.A. 190,060 147,017
Firth Industries Perú S.A. 56,214 52,945
Prefabricados Andinos Perú S.A.C. 1,664 973
Depósito Aduanero Conchán S.A. - 5
BLOCKS, BRICKS AND PAVERS SALES -
Unión de Concreteras S.A. 32,242 21,554
Firth Industries Perú S.A. 1,400 45
LEASES OF PLANT, EQUIPMENT AND FACILITY -
Generación Eléctrica Atocongo S.A. 798 3,553
Unión de Concreteras S.A. 624 538
Depósito Aduanero Conchán S.A. 354 638
Prefabricados Andinos Perú S.A.C. 197 160
INCOME FROM ROYALTIES -
Compañía Eléctrica el Platanal S.A., nota 25 6,110 5,659
DIVIDENDS INCOME -
Generación Eléctrica Atocongo S.A. 2,496 -
Ferrocarril Central Andino S.A. 308 289
Prefabricados Andinos Perú S.A.C. - 1,371
ADMINISTRATIVE, TECHNOLOGY AND MANAGEMENT SUPPORT -
Drake Cement LLC 377 222
Prefabricados Andinos Perú S.A.C. 289 253
Depósito Aduanero Conchán S.A. 160 156
Generación Eléctrica Atocongo S.A. 88 85
Vigilancia Andina S.A. 66 60
Compañía Eléctrica el Platanal S.A. 37 41
OTHER INCOME -
Compañía Eléctrica el Platanal S.A. 593 91
Prefabricados Andinos Perú S.A.C. 545 274
Unión de Concreteras S.A. 281 512
Generación Eléctrica Atocongo S.A. 250 1,099
Sindicato de Inversiones y Administración S.A. 108 91
Depósito Aduanero Conchán S.A. 8 11
2013 UNACEM 171
2013 2012
S/. (000) S/. (000)
PURCHASES OF ELECTRIC ENERGY -
Compañía Eléctrica el Platanal S.A. 80,112 75,165
Generación Eléctrica Atocongo S.A. 3,536 17,868
MANAGEMENT SERVICES -
Sindicato de Inversiones y Administración S.A. 25,370 21,905
Inversiones Andino S.A. 4,437 19,710
MANAGEMENT PROJECT SERVICES -
ARPL Tecnología Industrial S.A. 23,836 5,601
TECHNICAL ASSISTANCE AND ENGINEERING SERVICES -
ARPL Tecnología Industrial S.A. 16,029 16,171
MAQUILA SERVICE -
Unión de Concreteras S.A. 11,178 4,806
WAREHOUSE MANAGEMENT SERVICES -
Depósito Aduanero Conchán S.A. 4,348 8,147
PURCHASES OF ADDITIONAL MATERIAL -
Unión de Concreteras S.A. 3,360 4,981
Generación Eléctrica Atocongo S.A. 1,202 -
PRECAST STRUCTURES -
Prefabricados Andinos Perú S.A.C. 814 1,304
EXPENSE REIMBURSEMENTS -
Unión de Concreteras S.A. 1,894 4,872
Depósito Aduanero Conchán S.A. 435 -
ARPL Tecnología Industrial S.A. 333 -
OTHERS -
Vigilancia Andina S.A. 19,293 4,581
Unión de Concreteras S.A. 6,794 997
Generación Eléctrica Atocongo S.A. 4,453 25
Firth Industries Perú S.A. 1,235 791
Inversiones Andino S.A. 876 516
ARPL Tecnología Industrial S.A. 835 395
Prefabricados Andinos Perú S.A.C. 184 119
Drake Cement L.L.C. 31 -
Compañía Eléctrica el Platanal S.A. 4 -
Depósito Aduanero Conchán S.A. - 307
(c) As a result of these transactions, the Company had the following rights and obligations with
its related entities as of December 31, 2013 and 2012:
2013 2012
S/. (000) S/. (000)
ACCOUNTS RECEIVABLE -
Unión de Concreteras S.A. 23,948 26,203
Firth Industries Perú S.A. 14,085 6,056
Compañía Eléctrica El Platanal S.A. 6,255 5,543
Sindicato de Inversiones y Administración S.A. 4,650 4,223
Prefabricados Andinos Perú S.A.C. 813 251
Generación Eléctrica de Atocongo S.A. 250 403
Others 1,534 303
51,535 42,982
ACCOUNTS PAYABLE -
Unión de Concreteras S.A. 16,669 17,493
Inversiones Andino S.A.A. 12,297 5,110
Sindicato de Inversiones y Administración S.A. 10,558 11,772
Compañía Eléctrica El Platanal S.A. 6,752 6,416
ARPL Tecnología Industrial S.A. 5,485 1,669
Vigilancia Andina S.A.A. 1,381 544
Firth Industries Perú S.A. 1,063 233
Generación Eléctrica de Atocongo S.A. 898 1,346
Depósito Aduanero Conchán S.A. 97 831
Prefabricados Andinos Perú S.A.C. 32 394
Drake Cement LLC. 31 -
55,263 45,808
TERM -
Current portion, note 14(a) 43,380 33,053
Non current portion, note 14(a) 11,883 12,755
55,263 45,808
2013 UNACEM 173
The Company conducts its operations with related entities under the same conditions as those
made with third parties, therefore there is no difference in pricing policies or the settlement
of tax base in relation to the payment, and they do not differ with the policies issued to third
parties.
(d) The total remuneration paid to directors and key members as of December 31, 2013 totaled
approximately S/. 21,800,000 (approximately S/. 28,300,000 in 2012), which includes short-
term benefits and compensation for time served.
(e) Guarantees given -
The Company maintains a "Comfort Letter" with Scotiabank Perú S.A.A. in favor of Unión de
Concreteras S.A., dated July 31, 2009, guaranteeing a line of credit amounting to US$ 8,500,000
(equivalent to S/. 21,684,000), under which UNICON will perform various credit transactions.
29. EARNINGS PER SHARE Basic earnings per share amounts are calculated by dividing net income for the year by the
weighted average number of common shares outstanding during the year.
Calculation of the weighted average number of shares and the basic and diluted earnings per
share is presented below:
2013 2012
S/. (000) S/. (000)
NUMERATOR Net income attributable to common shares 204,742 358,340
DENOMINATOR Weighted average number of common shares 1,646,503 1,646,503
Basic and diluted earnings for common shares 0.124 0.218
30. COMMITMENTS AND CONTINGENCIESCOMMITMENTS As of December 31, 2013, the Company has " Comfort letters" with BBVA Banco Continental
and Scotiabank Perú S.A.A. in guarantee of obligations acquired by its related entities by
S/. 39,144,000 (S/. 35,714,000 as of December 31, 2012).
FINANCIAL LEASES The future minimum payments for leases are as follows:
TAX SITUATIONThe Company is subject to the Peruvian tax system. As of December 31, 2013 and 2012, the
income tax rate is 30 percent on the taxable income.
Companies not domiciled in Peru and individuals must pay an additional tax of 4.1 percent over
received dividends.
The Tax authority have the power to review and, if necessary, adjust the income tax calculated by
the Company during the four years following the year of the filing of the affidavit. The affidavits
of income tax for the years 2009 to 2013 and the affidavits of General Sales Tax from monthly
periods of exercise 2009 to 2013 are open to inspection by the tax authorities. The returns of
income tax from the years 2009 to 2013 and the affidavits of General Sales Tax comprised of
monthly periods between December 2009 and September 2012 for Cemento Andino S.A. are
open to inspection as well.
2013 2012
MINIMUM PAYMENTS
PRESENT VALUE OF
MINIMUM LEASE PAYMENTS
MINIMUM PAYMENTS
PRESENT VALUE OF
MINIMUM LEASE PAYMENTS
S/. (000) S/. (000) S/. (000) S/. (000)
Between one to five years 419,810 380,865 423,926 399,660
Total payments 419,810 380,865 423,926 399,660
Less - financial costs (499) - (499) -
PRESENT VALUE OF MINIMUM LEASE PAYMENTS
419,311 380,865 423,427 399,660
2013 UNACEM 175
At the date of this report, the Company is in the process of audit of Income Tax by the SUNAT
with respect to 2007 and 2008 fiscal years, also a revision motivated by refund requested to the
same tax with respect to 2004 to 2006 fiscal years
Due to the interpretations likely to be given by the Tax Authority on current legal regulations,
it is not possible to determine, as of this date, whether the reviews to be conducted will result
or not in liabilities for the Company, therefore, any increased tax or surcharge that could arise
from possible tax reviews will be applied to the results of the year in which it is determined. In
the Management’s and its legal advisors’ opinion, any additional tax settlement would not be
significant for the financial statements as of December 31, 2013 and 2012.
CONTINGENCIES In the normal course of business, the Company has received several complaints of such tax,
legal (labor and management) and regulatory, which are recorded and disclosed in accordance
with International Financial Reporting Standards, as set out in note 3.2(q).
As a result of audits for the years 2002 to 2006, the Company has been notified by the Tax
Authority (SUNAT) with different resolutions for alleged omissions in income tax. In some cases,
the Company has filed appeals for not finding the appropriate resolutions in accordance with
the laws in force in Peru and in other cases it has proceeded to pay the assessments received.
As of December 31, 2013 and 2012, the Company has recorded the necessary provisions, leaving
as a possible contingency an amount of S/. 5,981,000, plus interest and costs.
Likewise, as of December 31, 2013, the Company holds three claims to SUNAT, corresponding
to the request of refund of income tax paid in excess for the years 2004, 2005 and 2006,
amounting to approximately S/. 17,900,000 (approximately S/. 17,013,000 as of December 31,
2012). In October 2012, Cemento Andino S.A. submitted to SUNAT a request of refund of value
added tax paid in excess for the month August 2012, for an amount ascending to approximately
S/. 584,000, see note 8(d), said amount and interest was recovered in July 2013.
Management and its legal advisors estimate that there are legal arguments to obtain a
favorable outcome in these processes, in which case they will not have a significant impact on
the financial statements of the Company.
MINING ROYALTIESOn September 28, 2011, Congress passed Law 29788, amending Law 28258 - Mining Royalty
Act. This law is to establish the mining royalty payable by holders of mining concessions against
the economic benefit of the the exploitation of metallic and nonmetallic mining. The mining
royalty is determined quarterly and the amount payable will be the highest when comparing
the 1% of net sales in the quarter and quarterly operating income by a rate that varies between
1 and 12. Mining royalty payments will be deductible for income tax purposes in the fiscal year
in which such payments are made.
On December 2, 2011, the Company filed a constitutional action before the Constitutional Court,
requesting to put things back to the state before they were previous to the effective date of the
Supreme Decrease 180-2011/EEFF and 209-2011 EF on the definition of nonmetallic mineral
resources and specifically on the determination of the base of calculation of the royalties.
As result of the review of the year 2008, the Company has been notified by the Tax Authority
(SUNAT) with several resolutions of assumed omissions to payment of Mining Royalties and its
corresponding fines, amounting approximately to S/. 11,587,000.
On November 20, 2013, Peru’s Constitutional Court, in a final and unappealable decision, stated
the new regulation of the Royalty Mining Law violates the constitutional right of property, as well
as the principles of legal reservation and proportionality: consequently, the new regulation is
rendered inapplicable to the Company. Accordingly, the Company will continue using 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 by the industrial and manufacturing process.
Mining royalty expenses paid to the Peruvian Government for the years 2013 and 2012 amounted
to S/. 2,853,000 and S/. 1,641,000, respectively, and were recorded in the statement of profit or
loss.
ENVIRONMENTAL COMMITMENTS The Company’s activities are subject to environmental protection standards and have to meet
the following regulations:
(A) INDUSTRIAL ACTIVITIES
In compliance with Supreme Decree 019-97-ITINCI "Regulation of Environmental
Protection for the Development of Manufacturing Activities", enacted on September 26,
1997, the Company filed on January 29, 2001 its Program for Environmental Management
(PAMA) before the Ministry of Production (PRODUCE), which was approved on February 1,
2002 and whose implementation program ended in May 2008, following the environmental
monitoring programs. As of December 31, 2013, the Company has incurred in expenditures
of approximately US$ 16,918,000 (US$ 16,600,000 as of December 31, 2012), related to
environmental remediation and management for the modernization of its industrial plant.
Additionally, the Company has currently an Environmental Impact Study (EIA by its acronym in
Spanish), for the modernization of its industrial facility approved by the Ministry of Production in
May 2011, and has been executing environmental activities with an accumulated investment of
US$ 53,725,000 as of December 2013 (US$ 21,300,000 as of December 2013) for improvements
to systems capturing particles in the cement manufacturing process.
(B) MINING AND PORT ACTIVITIES
In relation to its mining and port activities, the Company has filed before PRODUCE the
corresponding environmental impact studies (EIA by its acronym in Spanish), which are
in compliance with the terms and amounts determined in such studies. The cumulative
investment as of December 31, 2013 amounts to approximately US$ 15,344,000 (approximately
US$ 15,300,000 as of December 31, 2012).
2013 UNACEM 177
On October 14, 2003, the Congress of Peru issued Law 28090, regulating the mine closures. This
law regulates the obligations and procedures for the elaboration, filing and implementation of
the Mine Closure Plan, as well as the constitution of guarantees that secures the compliance
of the investments related to environmental matters. The Company has filed the closure
plans for the mining units within the terms established by law. The provision for mine closure
corresponds to the activities that must be performed for restoring the areas affected by the
exploitation activities. The main works are related to earth movements and reforesting.
As of December 31, 2013, the provision for mine closure amounts to approximately
S/. 14,000,000 (approximately S/. 11,976,000 as of December 31, 2012) and is included in the
"Provisions" caption in the statement of financial position, see note 17(a).
(C) USE OF HYDROCARBONS
Supreme Decree 046-93-EM "Regulation for the Protection of Hydrocarbon Activities", enacted
on November 12, 1993, regulates the activities performed by the Company related to the use
of hydrocarbons as final user. In compliance with this regulation, the Company has a Program
for Environmental Management (PAMA by its acronym in Spanish), that was approved by the
Ministry of Energy and Mines in 1996. As of December 31, 2013, the Company has made an
accumulated investment of approximately US$ 98,000 (US$ 95,000 as of December 31, 2012)
in said PAMA.
(D) SPECIAL PROJECTS
As of December 31, 2013, the projects that the Company is executing are:
(i) New silo for 20,000 tons of cement – Atocongo plant
This project consists in the construction of a new silo with a capacity of 20,000 tons of cement. It
has two systems that permit to feed the plant bulk systems and tubular belt. This silo is currently
operating. As of December 31, 2013, the Company has paid approximately S/. 79,600,000.
(ii) Kiln 1 – Electrostatic cooler
This project for the control of emissions will generate efficiencies in the particle caption (no se
entiende) (higher than 99.9 percent), in compliance with the PAMA. As of December 31, 2013,
the Company has paid approximately S/. 24,800,000.
During the year 2013, the Company completed the following projects:
(i) Expansion of productive capacity of the Atocongo plant This project consist in increasing the production capacity of Kiln 1, from 3,200 tons of clinker
per day to 7,500 tones, and increasing the production capacity of raw meal and cement by
installing new roller presses of 310 tons/hour to 120 tons/hour, respectively. The project has
been operating since November 2013, and only complementary worksneeds to be finished.
This project required approximately S/. 543,400,000 and commitments for approximately
S/. 4,700,000.
(ii) Expansion of productive capacity – Kiln 4 This project consists in increasing the production capacity of the plant. This new line will rise
the production capacity of the Company in 700,000 tones clinker/day and has been operational
since the end of March 2013, and only the complementary works are pending. This project
required approximately S/.123,600,000 and to commitments for approximately S/. 6,000,000.
(E) CARBON CREDITS
As of December 31, 2013 and 2012, the Company has the the project "Fuel Switching at Atocongo
Cement Plant and Natural Gas Pipeline Extension, Cementos Lima, Peru"”, registered with the
Executive Board of the United Nations Framework Convention on Climate Change (UNFCCC)
on November 10, 2008. To date the Company has made 3 CERs emissions
Under this project in March 2011, DOE Tuv Sud submitted to UNFCCC the issuance request
of 112,346 CERs. On April 19, 2011, and after concluding the process called "Completeness
check”, the Secretary of UNFCCC confirmed the reception of the issuance request and made
it public. The second tranche of CERs was issued by United Nations on May 23, 2011 and was
commercialized with EDF Trading ltd. The revenues generated in this second emission were
€ 1,304,000 (equivalent to S/. 5,052,000), which were fully collected, and are presented in
others, net in the statement of income.
The third verification of the project was on December 12, 13 and 14, 2011 and was under the
responsibility of the DOE Tüv Süd, covering the monitoring period of September 1, 2010 to
August 31, 2011. The total of reductions obtained in this period was 137,754 tons of CO2, the
verification process is undergoing its final phase and the issuance and subsequent sale of the
CERs is estimated to take place by the end of January 2014.
2013 UNACEM 179
31. FINANCIAL RISK MANAGEMENT, OBJECTIVES AND POLICIESThe Company’s principal financial liabilities comprise loans and borrowings, trade payables
and other payables. The main purpose of these financial liabilities is to finance the Company’s
operations. The Company has cash and short-term deposits and trade and other receivables
that arise directly from its operations. The Company also holds derivative financial instruments.
The Company is exposed to market risk, credit risk and liquidity risk.
The Company’s Senior Management oversees the management of these risks. The Company’s
Senior Management is supported by the Financial Management, that advises on financial
risks and the appropriate financial risk governance framework for the Company. The Financial
Management provides assurance to the Company’s Senior Management that the Company’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 Company policies
and Company risk appetite.
The Board of Directors reviews and agrees policies for managing each of these risks, which are
summarized below.
MARKET RISK Market risk is the risk that the fair value of future cash flows of a financial instrument
will fluctuate because of changes in market prices. Market prices comprise four types of
risk: interest rate risk, currency risk, commodity price risk and other price risk. Financial
instruments affected by market risk include loans and borrowings, deposits and derivative
financial instruments.
The sensitivity analyses shown in the following sections relate to the position as of December
31, 2013 and 2012.
The sensitivity analyses have been prepared on the basis that the amount of net debts, the
ratio of fixed to floating interest rate of the debt, and the proportion of financial instruments in
foreign currencies are all constant as of December 31, 2013 and 2012.
(i) 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. Exposure of the Company to the interest
rate risk is related mainly to the long-term debt with variable interest rates.
The Company has four contracts interest rate swap designated as cash flow hedges and are
recorded at their fair value. The detail of these operations is as follows:
(*) Corresponds to the same swap agreement with Bank of Nova Scotia.
COUNTERPARTY REFERENCE VALUE AS OF DECEMBER 31,
2013
MATURITY RECEIVVARIABLE R
US$ (000)
ASSETS -
Bank of Nova Scotia (*) 50,000 August 2018 LIBOR to 3 mon
Bank of Nova Scotia 50,000 September 2018 LIBOR to 3 mon
LIABILITIES -
Bank of Nova Scotia (*) 50,000 August 2018 LIBOR to 3 mon
Bank of Nova Scotia 60,000 September 2015 LIBOR to 3 mon
BBVA Banco Continental S.A. 40,000 September 2016 LIBOR to 3 mon
2013 UNACEM 181
VESRATE AT:
PAYS FIX RATE AT: FAIR VALUE
2013 2012
S/. (000) S/. (000)
ths + 2.35% 0.850% 307 -
ths + 2.40% 1.020% 465 -
772 -
ths + 2.35% 0.850% - 746
ths + 1.95% 3.680% 1,980 4,195
ths + 2.90% 4.455% 1,188 2,218
3,168 7,159
Financial instruments are intended to reduce exposure to the interest rate risk variable
associated with the financial obligations set out in note 15. These financings bear interest at a
variable rate equal to the 3-month Libor.
The Company pays or receives on a quarterly basis (on each interest payment date of the loan)
the difference between the Libor rate on the loan market in that period and the fixed rate
agreed upon in the contract coverage. Flows actually received or paid by the Company are
recognized as a correction of the financial cost of the loan period for the hedged loans.
In 2013, the Company recognized an expense on these derivative financial instruments
amounting to approximately S/. 6,293,000 (S/ .4,853,000 during the year 2012), whose amounts
were actually paid during the year and are presented as "Borrowing Costs" in the statement of
income, see note 27.
The effective portion of changes in the fair value of financial instruments that qualify as hedges
is recognized as assets or liabilities and affects equity. As of December 31, 2013 and 2012, the
Company has recognized under "unrealized results" in the statement of changes in equity, a
negative change in fair value of approximately S/. 1,678,000 and S/ .5,011,000, respectively,
which is presented net of the income tax effect.
Sensitivity to interest rate The following table shows the sensitivity to a reasonably possible change in interest rates
on the portion of the loans, after the impact of hedge accounting. With all other variables
remaining constant, the income before income tax would be affected by the impact on variable
rate loans, as follows:
The movement course in the basics related to the analysis of sensitivity to interest rate is
based on the current market environment.
INCREASE / DECREASE IN BASIS POINTS
IMPACT ON INCOME BEFORE INCOME TAXES
2013 2012
% S/. (000) S/. (000)
+10 (174) (212)
-10 174 212
2013 UNACEM 183
(ii) Foreign currency risk Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument
will fluctuate because of changes in foreign exchange rates. The Company’s exposure to the
risk of changes in foreign exchange relates primarily to the Company’s operating activities
(when revenue or expense is denominated in a different currency from the Company’s functional
currency).
Management monitors this risk through analysis of the country’s macroeconomic variables.
As of December 31, 2013 and 2012, the Company has two cross currency interest rate swap
amounting to S/. 2,389,000 to the bank (and a cross currency interest rate swap amounting
to S/. 3,399,000 on behalf of the Company as of December 31, 2012). These instruments were
designated as held for trading.
The result of holding balances in foreign currency for the Company in the years 2013 and 2012
was a loss and gain in exchange difference amounting to approximately S/. 138,260,000 and
S/.75,973,000, respectively, which are presented in the caption "Exchange difference, net" in
the statement of income.
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, of the Company’s profits before
income tax (due to changes in the fair value of monetary assets and liabilities, including
derivative financial instruments in foreign currency not classified as hedge).
CHANGE INUS DOLLARS RATE
EFFECT ON PROFIT BEFORE TAX
2013 2012
% S/. (000) S/. (000)
+ 5 (111,226) (73,851)
+10 (222,451) (147,693)
- 5 111,226 73,851
-10 222,451 147,693
Credit risk Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument
or customer contract, leading to a financial loss. The Company 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, and trade and other receivables. The
maximum credit risk of the components of the financial statements as of December 31, 2013
and 2012, is represented by the amount of the captions cash and cash equivalents, trade and
other accounts receivable.
Financial instruments and cash deposits Credit risk from balances with banks and financial institutions is managed by the Company’s
CFO in accordance with the Company’s policy. Counterparty credit limits are reviewed by
Management and Board of Directors to minimize the concentration of risks and, therefore,
mitigate financial loss through potential counterparty’s failure.
Trade accounts receivable Customer credit risk is managed by Management, subject to the Company’s established policies,
procedures and controls. Outstanding customer receivables are regularly monitored to assure
the collection. Sales are made in Peru and there is a client portfolio of 31 customers as of
December 31, 2013 (30 as of December 31, 2012). As of December 31, 2013, the Company had
4 significant customers that accounted for approximately 73.9 percent of sales (approximately
79.4 as of December 31, 2012).
Likewise, the Company evaluates the accounts receivable whose collection is estimated as
remote to determine the required allowance for no irrecoverability.
Other accounts receivable Accounts receivable correspond to balances pending of collection due to concepts not related
to the main operation activities of the Company. As of December 31, 2013 and 2012, other
accounts receivable correspond mainly to: advances to suppliers, claims to SUNAT and claims
to third parties. Company’s Management makes a continuous monitoring of the credit risk to
such items and it periodically assesses the balances that evidence an impairment to determine
the required allowance for irrecoverability.
2013 UNACEM 185
Liquidity risk The Company monitors its risk of shortage of funds using a recurring liquidity planning tool.
The Company’s objective is to maintain a balance between continuity of funding and flexibility
through the use of bank deposits and loans.
The table below summarizes the maturity profile of the Company’s financial liabilities, based
on contractual undiscounted payments:
AS OF DECEMBER 31, 2013
FROM 3 TO 12 MONTHS
FROM 1 TO 10 YEARS
TOTAL
S/. (000) S/. (000) S/. (000)
Bank overdrafts and loans 266,766 450,154 716,920
Trade and other accounts payable 209,148 11,883 221,031
Financial obligations
Amortization of capital 426,640 1,177,800 1,604,440
Flow of interest payments 91,218 153,947 245,165
TOTAL LIABILITIES 993,772 1,793,784 2,787,556
AS OF DECEMBER 31, 2013
FROM 3 TO 12 MONTHS
FROM 1 TO 10 YEARS
TOTAL
S/. (000) S/. (000) S/. (000)
Bank overdrafts and loans 532,476 - 532,476
Trade and other accounts payable 234,606 12,755 247,361
Financial obligations
Amortization of capital 341,009 1,069,495 1,410,504
Flow of interest payments 16,375 104,221 120,596
TOTAL LIABILITIES 1,124,466 1,186,471 2,310,937
Capital management The Company’s objective in managing capital is to safeguard its ability to continue al company in
order to generate returns for shareholders, benefits for other groups of interest, and maintain
optimal capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Company can adjust the amount of
dividends paid to shareholders, refund capital to shareholders, issue new shares or sell assets
to reduce its debt.
Consistent to the industry, the Company monitors its capital on the basis of leverage ratio. This
ratio is calculated dividing the net debt into the capital stock. The net debt corresponds to the
total of debt (including current and non-current debt) minus the cash and cash equivalents.
The total capital stock corresponds to the net equity and is presented in the separate statement
of financial position plus the net debt.
No changes were made in the objectives, policies or processes for managing capital during the
years ended December 31, 2013 and December 31, 2012.
32. FAIR VALUES (A) INSTRUMENTS RECORDED AT FAIR VALUE, ACCORDING TO HIERARCHY
The following table presents an analysis of the financial instruments recorded at fair value,
according to their hierarchy level:
2013 2012
S/. (000) S/. (000)
Asset for derivatives financial instruments:
Level 2 772 3,399
TOTAL 772 3,399
Liability for derivatives financial instruments:
Level 2 5,557 7,159
TOTAL 5,557 7,159
2013 UNACEM 187
LEVEL 1 The financial assets included in the Level 1 category are measured based
on quotations obtained from an active market. A financial instrument is
regarded as quoted in an active market if prices are readily and regularly available from a
centralized trading mechanism, agent, broker, industry group, pricing providers or regulatory
agencies; and those prices are from regular transactions in the market.
LEVEL 2 Financial instruments included in the Level 2 category are measured ba-
sed on market factors. This category includes instruments valued using
market prices of similar instruments, whether or not active markets, and other valuation tech-
niques (models) in which all significant inputs are directly or indirectly observable in the mar-
ketplace. A description of how the fair value of the Company’s principal financial instruments
is determined in this category is presented as follows:
Derivative financial instrumentsThe valuation technique most commonly used includes valuation of forwards and swaps,
calculating the present value. The models incorporate various data, including the credit quality
of counterparties, spot exchange rates and forward rates and interest rate curves. Options are
valued using recognized and generally accepted models.
LEVEL 3 As of December 31, 2013 and 2012, the Company does not maintain finan-
cial instruments in this category.
(b) In addition to the instruments carried at fair value, in Management’s opinion, the fair value
of the Company’s financial instruments is not materially different from its carrying values
and, therefore, disclosure of this information has no effect for the financial statements as of
December 31, 2013 and 2012.
2013 LEVEL 1 LEVEL 2 LEVEL 3 FAIR VALUE
CARRYING VALUE
S/. (000) S/. (000) S/. (000) S/. (000) S/. (000) S/. (000)
FINANCIAL ASSETS
Cash and cash equivalents 196,750 - - - 196,750 196,750
Trade and other accounts receivable, net 262,865 - 772 - 263,637 264,027
FINANCIAL LIABILITIES
Bank overdrafts and loans 716,920 - - - 716,920 716,920
Trade and others accounts payable 219,271 - - - 219,271 221,031
Financial obligations 1,287,365 - - - 1,287,365 1,604,440
Trade and others accounts payable - - 5,557 - 5,557 5,557
2013 LEVEL 1 LEVEL 2 LEVEL 3 FAIR VALUE
CARRYING VALUE
S/. (000) S/. (000) S/. (000) S/. (000) S/. (000) S/. (000)
FINANCIAL ASSETS
Cash and cash equivalents 74,189 - - - 74,189 74,189
Trade and other accounts receivable, net 163,631 - 3,399 - 167,030 167,486
FINANCIAL LIABILITIES
Bank overdrafts and loans 532,476 - - - 532,476 532,476
Trade and others accounts payable 247,361 - - - 247,361 246,613
Financial obligations 1,410,504 - - - 1,410,504 1,343,602
Trade and others accounts payable - - 7,159 - 7,159 7,159
2013 UNACEM 189
The methodologies and assumptions used by the Company to determine the estimated fair
values depend on the terms and risk characteristics of various financial instruments that are
carried at amortized cost and include the following:
(i) Assets whose fair value is similar to their book value For financial assets and liabilities that are liquid or have short-term maturity (less than three
months), it is considered that the carrying value is similar to the fair value. This assumption is
also applicable for time deposits, savings accounts without specific maturity and variable rate
financial instruments.
(ii) Financial instruments at fixed ratesThe fair value of financial assets and liabilities at fixed rate and amortized cost is estimated
by comparing market interest rates at the time of initial recognition with current market rates
for similar financial instruments. The estimated fair value of interest-bearing deposits is
determined by discounted cash flows using market interest rates for financial instruments
with maturities and similar credit risk. For debt issued, the fair value is determined based on
quoted market prices. When there is no market price, the model of discounted cash flow based
on the yield curve of interest rate for the term to overcome is used.
2013 UNACEM 191
IT’S A PRIVILEGE TO WORK AT SUCH A SOLID COMPANY, WHICH NOT ONLY GIVES OPPORTUNITIES TO ITS EMPLOYEES, BUT ALSO CARES FOR THE ENVIRONMENT AND PRACTICES SOCIAL RESPONSIBILITY.”
IMI MAVILA MARQUINA SECURITIES DEPARTMENT
2013 UNACEM ANNUAL REPORT 191
ADMINISTRATION, MANAGEMENT, AND TECHNICAL ASSISTANCE
ACKNOWLEDGMENTS
In accordance with the provisions established in the articles of incorporation of our Company, dated
December 28, 1967, and in accordance with the mandate of the Shareholders’ Meeting held on December 28,
1981, the General Management of Unión Andina de Cementos S.A.A. continued to be exercised by Sindicato
de Inversiones y Administración S.A., via the agreement renewed on April 12, 2012, in force as of this date.
Inversiones Andino S.A. provided administrative and financial advisory services, in accordance with the
agreement automatically renewed in January 2012 and in force as of this date.
ARPL Tecnología Industrial S.A. was responsible for the technical advisory service, in accordance with the
agreement renewed during 2013.
The Board of Directors acknowledges and values the important contributions of these three companies
throughout 2013.
The Board of Directors would like to express its sincere thanks to each one of the Company’s employees, whose
commitment throughout the year enabled us to achieve the objectives we set for ourselves and continue our
process of consolidation as a leader in the domestic and international market.
2013 UNACEM 193
CONCHÁN PIER, LIMA
2013 UNACEM ANNUAL REPORT 193
ATOCONGO PLANT, LIMA
2013 UNACEM 1952013 UNACEM ANNUAL REPORT 195
2013 ANNUAL REPORT
Unión Andina de Cementos S.A.A.
Avenida Atocongo 2440. Lima 35, Perú
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