Cementos Pacasmayo Saa 6-K, filed Apr 27, 2023
Cementos Pacasmayo Saa (CPAC)
About this 6-K
Cementos Pacasmayo Saa filed this 6-K on April 27, 2023.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN ISSUER
PURSUANT TO RULE 13a-16 OR 15b-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
For the month of April 2023
Commission File Number 001-35401
CEMENTOS PACASMAYO S.A.A.
(Exact name of registrant as specified in its charter)
PACASMAYO CEMENT CORPORATION
(Translation of registrant’s name into English)
Republic of Peru
(Jurisdiction of incorporation or organization)
Calle La Colonia 150, Urbanización El Vivero
Surco, Lima
Peru
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.
Form 20-F ☒ Form 40-F ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ☐
CEMENTOS PACASMAYO S.A.A.
The following exhibit is attached:
| EXHIBIT NO. | DESCRIPTION | |
| 99.1 | Unaudited interim condensed consolidated financial statements as of March 31, 2023 and for the three-month period then ended |
1
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| CEMENTOS PACASMAYO S.A.A. | ||
| By: | /s/ CARLOS JOSE MOLINELLI MATEO | |
| Name: | Carlos Jose Molinelli Mateo | |
| Title: | Stock Market Representative | |
| Date: | April 27, 2023 | |
2
Exhibit 99.1
Cementos Pacasmayo S.A.A. and Subsidiaries
Unaudited
interim condensed consolidated financial statements
as of March 31, 2023 and for the three-month period then ended
Cementos Pacasmayo S.A.A. and Subsidiaries
Unaudited interim condensed consolidated financial statements as of March 31, 2023 and for the three-month period then ended
Report on review of interim condensed consolidated unaudited financial statements
To the Board of Directors and Shareholders of Cementos Pacasmayo S.A.A.
Introduction
We have reviewed the accompanying interim condensed consolidated unaudited statement of financial position of Cementos Pacasmayo S.A.A. and its Subsidiaries (together the "Group") as of March 31, 2023, and the related interim condensed consolidated unaudited statements of profit or loss, other comprehensive income, changes in equity and cash flows for the three-month period then ended, and explanatory notes. Management is responsible for the preparation and presentation of these interim condensed consolidated unaudited financial statements in accordance with IAS 34 Interim Financial Reporting (IAS 34). Our responsibility is to express a conclusion on these interim condensed consolidated unaudited financial statements based on our review.
Scope of review
We conducted our review in accordance with International Auditing Standard on Review Engagements (ISRE) 2410, Review of Interim Financial Information Performed by the Independent Auditor of the Entity. A review of interim financial information consists of making inquiries, primarily of the persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
1
Report on review of interim condensed consolidated unaudited financial statements (continued)
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the accompanying interim condensed consolidated unaudited financial statements are not prepared, in all material respects, in accordance with IAS 34.
Lima, Peru
April 26, 2023
Countersigned by:
| Manuel Arribas | |
| C.P.C. Register No. 45987 |
2
Cementos Pacasmayo S.A.A. and Subsidiaries
Interim condensed consolidated unaudited statements of financial position
As of March 31, 2023 (unaudited) and December 31, 2022 (audited)
| Note | As
of March 31, 2023 | As
of December 31, 2022 | ||||||||||
| S/(000) | S/(000) | |||||||||||
| Assets | ||||||||||||
| Current assets | ||||||||||||
| Cash and cash equivalents | 3 | 45,273 | 81,773 | |||||||||
| Derivative financial instruments | 15 | - | 86,893 | |||||||||
| Trade and other receivables | 4 | 101,735 | 101,491 | |||||||||
| Income tax prepayments | 12,137 | 8,268 | ||||||||||
| Inventories | 5 | 930,233 | 884,969 | |||||||||
| Prepayments | 26,204 | 25,059 | ||||||||||
| Total current asset | 1,115,582 | 1,188,453 | ||||||||||
| Non-current assets | ||||||||||||
| Trade and other receivables | 4 | 43,546 | 43,543 | |||||||||
| Financial instruments designated at fair value through other comprehensive income | 15 | 274 | 274 | |||||||||
| Property, plant and equipment | 6 | 2,048,678 | 2,007,838 | |||||||||
| Intangible assets | 58,651 | 56,861 | ||||||||||
| Goodwill | 4,459 | 4,459 | ||||||||||
| Deferred income tax assets | 9,158 | 9,005 | ||||||||||
| Right-of-use asset | 7 | 3,209 | 3,639 | |||||||||
| Other assets | 86 | 89 | ||||||||||
| Total non-current asset | 2,168,061 | 2,125,708 | ||||||||||
| Total assets | 3,283,643 | 3,314,161 | ||||||||||
| Liability and equity Current liabilities | ||||||||||||
| Trade and other payables | 8 | 219,738 | 284,554 | |||||||||
| Financial obligations | 9 and 15 | 306,055 | 618,907 | |||||||||
| Lease liabilities | 7 | 2,004 | 2,005 | |||||||||
| Income tax payables | 17,184 | 16,340 | ||||||||||
| Provisions | 10 | 42,480 | 31,333 | |||||||||
| Total current liabilities | 587,461 | 953,139 | ||||||||||
| Non-current liabilities | ||||||||||||
| Financial obligations | 9 and 15 | 1,306,153 | 974,264 | |||||||||
| Lease liabilities | 7 | 1,798 | 2,350 | |||||||||
| Non-current provisions | 10 | 15,881 | 47,638 | |||||||||
| Deferred income tax liabilities | 132,208 | 141,635 | ||||||||||
| Total non-current liabilities | 1,456,040 | 1,165,887 | ||||||||||
| Total liability | 2,043,501 | 2,119,026 | ||||||||||
| Equity | ||||||||||||
| Capital stock | 423,868 | 423,868 | ||||||||||
| Investment shares | 40,279 | 40,279 | ||||||||||
| Investment shares held in treasury | (121,258 | ) | (121,258 | ) | ||||||||
| Additional paid-in capital | 432,779 | 432,779 | ||||||||||
| Legal reserve | 168,636 | 168,636 | ||||||||||
| Other accumulated comprehensive loss | (16,272 | ) | (17,787 | ) | ||||||||
| Retained earnings | 312,110 | 268,618 | ||||||||||
| Total equity | 1,240,142 | 1,195,135 | ||||||||||
| Total liability and equity | 3,283,643 | 3,314,161 | ||||||||||
The accompanying notes are an integral part of the interim condensed consolidated unaudited financial statements.
3
Cementos Pacasmayo S.A.A. and Subsidiaries
Interim condensed consolidated unaudited statements of profit or loss
For the three-month period ended March 31, 2023 and March 31, 2022 (unaudited)
| For
the three-month period ended March 31, | ||||||||||||
| Note | 2023 | 2022 | ||||||||||
| S/(000) | S/(000) | |||||||||||
| Sales of goods | 12 | 479,995 | 525,409 | |||||||||
| Cost of sales | (319,400 | ) | (360,444 | ) | ||||||||
| Gross profit | 160,595 | 164,965 | ||||||||||
| Operating income (expense) | ||||||||||||
| Administrative expenses | (57,729 | ) | (53,389 | ) | ||||||||
| Selling and distribution expenses | (17,534 | ) | (16,970 | ) | ||||||||
| Other operating income (expense), net | 1,403 | (1,024 | ) | |||||||||
| Total operating expenses, net | (73,860 | ) | (71,383 | ) | ||||||||
| Operating profit | 86,735 | 93,582 | ||||||||||
| Other income (expenses) | ||||||||||||
| Finance income | 1,355 | 558 | ||||||||||
| Finance costs | (25,721 | ) | (22,795 | ) | ||||||||
| Net profit (loss) for valuation of trading derivative financial instruments | 15(a) | 19 | (109 | ) | ||||||||
| Gain (loss) from exchange difference, net | 823 | (6,514 | ) | |||||||||
| Total other expenses, net | (23,524 | ) | (28,860 | ) | ||||||||
| Profit before income tax | 63,211 | 64,722 | ||||||||||
| Income tax expense | 11 | (19,719 | ) | (18,997 | ) | |||||||
| Profit for the period | 43,492 | 45,725 | ||||||||||
| Earnings per share | ||||||||||||
| Basic profit for the period attributable to equity holders of common shares and investment shares of the parent (S/ per share) | 14 | 0.10 | 0.11 | |||||||||
The accompanying notes are an integral part of the interim condensed consolidated unaudited financial statements.
4
Cementos Pacasmayo S.A.A. and Subsidiaries
Interim condensed consolidated unaudited statements of other comprehensive income
For the three-month period ended March 31, 2023 and March 31, 2022 (unaudited)
| For
the three-month period ended March 31, | ||||||||||||
| Note | 2023 | 2022 | ||||||||||
| S/(000) | S/(000) | |||||||||||
| Profit for the period | 43,492 | 45,725 | ||||||||||
| Other comprehensive income | ||||||||||||
| Other comprehensive income to be reclassified to profit or loss in subsequent periods: | ||||||||||||
| Net gain on cash flow hedges | 15(a) | 2,154 | 2,046 | |||||||||
| Deferred income tax | 11 | (634 | ) | (604 | ) | |||||||
| Other comprehensive income for the period, net of income tax | 1,520 | 1,442 | ||||||||||
| Total comprehensive income for the period, net of income tax | 45,012 | 47,167 | ||||||||||
The accompanying notes are an integral part of the interim condensed consolidated unaudited financial statements.
5
Cementos Pacasmayo S.A.A. and Subsidiaries
Interim condensed consolidated unaudited statements of changes in equity
For the three-month period ended March 31, 2023 and March 31, 2022 (unaudited)
| Capital
stock | Investment shares | Investments shares held in treasury | Additional paid-in capital | Legal reserve | Unrealized gain (loss) on financial instruments designated at fair value | Unrealized
gain (loss) on cash flow hedge | Retained earnings | Total
equity | ||||||||||||||||||||||||||||
| S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | ||||||||||||||||||||||||||||
| Balance as of January 1, 2022 | 423,868 | 40,279 | (121,258 | ) | 432,779 | 168,636 | (15,869 | ) | (4,225 | ) | 271,595 | 1,195,805 | ||||||||||||||||||||||||
| Profit for the period | - | - | - | - | - | - | - | 45,725 | 45,725 | |||||||||||||||||||||||||||
| Other comprehensive income for the period, net of income tax | - | - | - | - | - | - | 1,442 | - | 1,442 | |||||||||||||||||||||||||||
| Total comprehensive income | - | - | - | - | - | - | 1,442 | 45,725 | 47,167 | |||||||||||||||||||||||||||
| Balance as of March 31, 2022 | 423,868 | 40,279 | (121,258 | ) | 432,779 | 168,636 | (15,869 | ) | (2,783 | ) | 317,320 | 1,242,972 | ||||||||||||||||||||||||
| Balance as of January 1, 2023 | 423,868 | 40,279 | (121,258 | ) | 432,779 | 168,636 | (16,267 | ) | (1,520 | ) | 268,618 | 1,195,135 | ||||||||||||||||||||||||
| Profit for the period | - | - | - | - | - | - | - | 43,492 | 43,492 | |||||||||||||||||||||||||||
| Other comprehensive income for the period, net of income tax | - | - | - | - | - | - | 1,520 | - | 1,520 | |||||||||||||||||||||||||||
| Other | - | - | - | - | - | (5 | ) | - | - | (5 | ) | |||||||||||||||||||||||||
| Total comprehensive income | - | - | - | - | - | (5 | ) | 1,520 | 43,492 | 45,007 | ||||||||||||||||||||||||||
| Balance as of March 31, 2023 | 423,868 | 40,279 | (121,258 | ) | 432,779 | 168,636 | (16,272 | ) | - | 312,110 | 1,240,142 | |||||||||||||||||||||||||
The accompanying notes are an integral part of the interim condensed consolidated unaudited financial statements.
6
Cementos Pacasmayo S.A.A. and Subsidiaries
Interim condensed consolidated unaudited statements of cash flows
For the three-month period ended March 31, 2023 and March 31, 2022 (unaudited)
| Note | For
the three-month period ended March 31, | |||||||||||
| 2023 | 2022 | |||||||||||
| S/(000) | S/(000) | |||||||||||
| Operating activities | ||||||||||||
| Profit before income tax | 63,211 | 64,722 | ||||||||||
| Non-cash adjustments to reconcile profit before income tax to net cash flows (used in) provided by operating activities | ||||||||||||
| Depreciation and amortization | 33,943 | 33,891 | ||||||||||
| Finance costs | 25,721 | 22,795 | ||||||||||
| Long-term incentive plan | 13 | 2,068 | 1,902 | |||||||||
| Estimate expected credit loss | 4 | 1,284 | 1,497 | |||||||||
| Unrealized exchange difference related to monetary transactions | 148 | 7,699 | ||||||||||
| Finance income | (1,355 | ) | (558 | ) | ||||||||
| Net gain on disposal of property, plant and equipment | 6 | (111 | ) | (176 | ) | |||||||
| (Gain) loss on the valuation of trading derivative financial instruments | (19 | ) | 109 | |||||||||
| Other operating, net | 696 | (579 | ) | |||||||||
| Working capital adjustments | ||||||||||||
| Increase in trade and other receivables | (1,177 | ) | (8,174 | ) | ||||||||
| Increase in prepayments | (4,672 | ) | (1,707 | ) | ||||||||
| Increase in inventories | (45,812 | ) | (32,768 | ) | ||||||||
| (Decrease) increase in trade and other payables | (65,162 | ) | 5,419 | |||||||||
| 8,763 | 94,072 | |||||||||||
| Interest received | 1,370 | 510 | ||||||||||
| Interest paid | (36,274 | ) | (34,603 | ) | ||||||||
| Income tax paid | (32,953 | ) | (32,865 | ) | ||||||||
| Net cash flows (used in) provided by operating activities | (59,094 | ) | 27,114 | |||||||||
The accompanying notes are an integral part of the interim condensed consolidated unaudited financial statements.
7
Interim condensed consolidated unaudited statements of cash flows (continued)
| Note | For
the three-month period ended March 31, | |||||||||||
| 2023 | 2022 | |||||||||||
| S/(000) | S/(000) | |||||||||||
| Investing activities | ||||||||||||
| Purchase of property, plant and equipment | (75,579 | ) | (12,664 | ) | ||||||||
| Purchase of intangibles assets | (4,027 | ) | (2,213 | ) | ||||||||
| Loan to third party | (370 | ) | (141 | ) | ||||||||
| Proceeds from sale of property, plant and equipment | 330 | 443 | ||||||||||
| Net cash flows used in investing activities | (79,646 | ) | (14,575 | ) | ||||||||
| Financing activities | ||||||||||||
| Paid bank loans | 9 | (507,338 | ) | (159,000 | ) | |||||||
| Payment of bank overdraft | (85,333 | ) | - | |||||||||
| Payment of hedge finance cost | (7,708 | ) | (7,682 | ) | ||||||||
| Payment of lease liabilities | 7 | (626 | ) | (460 | ) | |||||||
| Dividends paid | (263 | ) | (156 | ) | ||||||||
| Loan received | 9 | 525,000 | 159,000 | |||||||||
| Proceeds from sale of derivative financial instruments | 93,323 | - | ||||||||||
| Proceeds from bank overdraft | 85,333 | - | ||||||||||
| Net cash flows provided by (used in) financing activities | 102,388 | (8,298 | ) | |||||||||
| Net (decrease) increase in cash and cash equivalents | (36,352 | ) | 4,241 | |||||||||
| Net foreign exchange difference | (148 | ) | (13,045 | ) | ||||||||
| Cash and cash equivalents at the beginning of the period | 81,773 | 273,402 | ||||||||||
| Cash and cash equivalents at the end of the period | 3 | 45,273 | 264,598 | |||||||||
| Transactions with no effect in cash flows: | ||||||||||||
| Outstanding accounts payable related to acquisition of property, plant and equipment | 6 | 11,415 | 5,984 | |||||||||
| Unrealized exchange difference related to monetary transactions | 32 | 7,699 | ||||||||||
8
Cementos Pacasmayo S.A.A. and Subsidiaries
Notes to interim condensed consolidated unaudited financial statements
As of March 31, 2023 and 2022, and December 31, 2022
| 1. | Economic activity |
| (a) | Economic activity - |
Cementos Pacasmayo S.A.A. (hereinafter "the Company") was incorporated in 1957 and, in accordance with the Law of Peruvian Companies, is an open stock corporation, its shares are listed in the Lima and New York Stock Exchange. The Company is a subsidiary of Inversiones ASPI S.A., which holds 50.01 percent of the Company's common shares as of March 31, 2023, December 31, 2022 and March 31, 2022.
The address registered by the Company is Calle La Colonia No.150, Urbanización El Vivero, Santiago de Surco, Lima, Peru.
The main activity of the Company is the production and commercialization of cement, precast, concrete and quicklime in the northern region of Peru.
The interim condensed consolidated unaudited financial statements of the Company and its subsidiaries (hereinafter the "Group") as of March 31, 2023 and for the three-month period then ended, were approved for issuance by the Company’s Management on April 26, 2023. The consolidated audited financial statements as of December 31, 2022 have been approved by the General Meeting of Shareholders, on March 24, 2023.
| 2. | Basis of preparation and changes to the Group’s accounting policies |
| 2.1 | Basis of preparation - |
The interim condensed consolidated unaudited financial statements of the Group have been prepared in accordance with IAS 34 Interim Financial Reporting as issued by the International Accounting Standards Board (IASB) and have been prepared on a historical cost basis, except for financial instruments designated at fair value through other comprehensive income (OCI) and derivatives financial instruments that have been measured at fair value. The interim condensed consolidated unaudited financial statements are presented in soles and all values are rounded to the nearest thousand (S/000), except when otherwise indicated. The Group has prepared the financial statements on the basis that it will continue to operate as a going concern. The Management consider that there are no material uncertainties that may cast doubt significant doubt over this assumption. They have formed a judgement that there is a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future, and not less than 12 months from the end of the reporting period.
The interim condensed consolidated unaudited financial statements do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with Group’s annual consolidated financial statements as of December 31, 2022.
9
Notes to interim condensed consolidated unaudited financial statements
(continued)
New standards, interpretations and amendments
The accounting policies adopted in the preparation of the interim condensed consolidated unaudited financial statements are consistent with the policies considered in the preparation of the consolidated financial statements of the Group at December 31, 2022, except for the adoption of new standards effective as of 1 January 2023. The standards and interpretations relevant to the Group, that are effective since January 1, 2023 are disclosed below.
Definition of Accounting Estimates - Amendments to IAS 8
The amendments to IAS 8 clarify the distinction between changes in accounting estimates, and changes in accounting policies and the correction of errors. They also clarify how entities use measurement techniques and inputs to develop accounting estimates.
The amendments had no impact on the Group’s interim condensed consolidated unaudited financial statements.
Disclosure of Accounting Policies - Amendments to IAS 1 and IFRS Practice Statement 2
The amendments to IAS 1 and IFRS Practice Statement 2 Making Materiality Judgements provide guidance and examples to help entities apply materiality judgements to accounting policy disclosures. The amendments aim to help entities provide accounting policy disclosures that are more useful by replacing the requirement for entities to disclose their ‘significant’ accounting policies with a requirement to disclose their ‘material’ accounting policies and adding guidance on how entities apply the concept of materiality in making decisions about accounting policy disclosures.
The amendments had no impact on the Group’s interim condensed consolidated unaudited financial statements but are expected to affect the accounting policy disclosures in the Group’s annual consolidated financial statements.
Deferred Tax related to Assets and Liabilities arising from a Single Transaction – Amendments to IAS 12
The amendments to IAS 12 Income Tax narrow the scope of the initial recognition exception, so that it no longer applies to transactions that give rise to equal taxable and deductible temporary differences such as leases and decommissioning liabilities. The amendments had no impact on the Group’s interim condensed consolidated financial statements.
| 2.2 | Basis of
consolidation - |
The interim condensed consolidated unaudited financial statements comprise the financial statements of the Company and its subsidiaries as of March 31, 2023 and December 31, 2022 and for the three-month period ended March 31, 2023 and 2022 (unaudited).
For the three-month period ended March 31, 2023 and 2022, there was no changes in the participation of the common shares that the Company’s had on its subsidiaries; the main activities and information about subsidiaries are revealed on the consolidated financial statements as of December 31, 2022.
| 2.3 | Seasonality
of operations - |
Seasonality is not relevant to the Group's activities.
10
Notes to interim condensed consolidated unaudited financial statements
(continued)
| 3. | Cash and cash equivalents |
| (a) | This caption consists of the following: |
| As
of March 31, 2023 | As
of December 31, 2022 | |||||||
| S/(000) | S/(000) | |||||||
| Cash on hand | 157 | 161 | ||||||
| Cash at banks (b) | 36,116 | 39,112 | ||||||
| Term deposits with original maturities of ninety days or less (c) | 9,000 | 42,500 | ||||||
| 45,273 | 81,773 | |||||||
| (b) | Cash at banks is denominated in local and foreign currencies, is deposited in domestic and foreign banks and is freely available. The cash at banks interest yield is based on daily bank deposit rates. |
| (c) | The short-term deposits held in domestic banks were freely available and earned interest at the respective short-term market rates and original maturity less than three months. |
| 4. | Trade and other receivables |
As of March 31, 2023 and December 31, 2022, this caption mainly includes trade receivables, value-added tax credit (VAT), interest receivables and accounts receivables from related parties. At those dates, approximately 57% and 63% of the trade receivables were guaranteed by bank guarantees and mortgages amounting to S/46,684,000 and S/49,162,000, respectively.
On March 22, 2021, the Company received Tax Court Resolution N° 00905-4-21 that declares the calculation of Mining Royalty should be based on gross sale of the final product (cement) for the years 2008 and 2009. This is an opposite position to what is established by the Constitutional Court in the STC Exp. N° 1043-2013-PA/TC that declares founded the writ of protection presented by the Company and its right to calculate the Mining Royalty exclusively based on the value of the mining component, without considering in any way the value of the final products derived from industrial and manufacturing processes.
The Company has made, under protest, partial payments of the debts arbitrarily placed in collection. These payments as of March 31, 2023 and December 31, 2022 amount to approximately S/28,922,000 and are presented in the caption “Trade and other receivables”, non-current assets. To date, the Company has already initiated the corresponding legal actions to recover said payments and in the opinion of Management and its external legal advisors, it has a high probability of obtaining a favorable result.
For the three-month period ended March 31, 2023 and 2022, the Group recorded S/1,284,000 and S/1,497,000, respectively, related to the provision for expected credit losses for trade receivables, which are presented in the caption “Selling and distribution expenses” of the interim condensed consolidated unaudited statement of profit or loss and corresponds to the best estimate of Management considering the current situation. The Group's Management will continue evaluating the conditions of its client portfolio and, if deemed necessary, the corresponding provisions will be made.
11
Notes to interim condensed consolidated unaudited financial statements
(continued)
The movement of the allowance for expected credit losses on trade and others receivable for the three-month period ended as of March 31, 2023 and 2022 is as follows:
| 2023 | 2022 | |||||||
| S/(000) | S/(000) | |||||||
| Opening balance | 16,467 | 14,573 | ||||||
| Additions | 1,284 | 1,497 | ||||||
| Recoveries and others | (46 | ) | (62 | ) | ||||
| Ending balance | 17,705 | 16,008 | ||||||
| 5. | Inventories |
As of March 31, 2023 and December 31, 2022 includes goods and finished products, work in progress, raw materials and other supplies to be used in the production process.
| 6. | Property, plant and equipment, net |
During the three-month period ended March 31, 2023 the Group’s additions amounted approximately to S/74,064,000 (S/11,033,000 during the three-month period ended March 31, 2022).
Assets with a net book value of S/115,000 were disposed during the three-month period ended March 31, 2023 (S/307,000 for the three-month period ended March 31, 2022), resulting in a net gain on disposal of S/111,000 (S/176,000 for the three-month period ended March 31, 2022).
As of March 31, 2023 the Group maintains accounts payable related to the acquisition of property, plant and equipment for S/11,415,000 (S/14,560,000 as of December 31, 2022).
12
Notes to interim condensed consolidated unaudited financial statements
(continued)
| 7 | Leases |
The Group has lease contracts with third parties, mainly a 5-year lease contract of trucks.
The annual incremental interest rate used for the initial recognition of the right-of-use asset and the lease liability ranges between 5.2 and 6.2 percent.
The Group also leases certain minor equipment for less than 12 months, the Group has decided to apply the recognition exemption for short term leases (less than 12 months) and for leases of low value assets. The expense for this type of lease amounted to S/428,000 for the three-month period ended March 31, 2023 (S/309,000 as of March 31, 2022) and was recognized in the “Administrative expenses” caption of the interim condensed consolidated unaudited statements of profit or loss.
The movement of the right of use assets recognized by the Group is shown below:
| Transportation units | Other | Total | ||||||||||
| S/(000) | S/(000) | S/(000) | ||||||||||
| Cost - | ||||||||||||
| Balance as of January 1, 2022 | 7,721 | - | 7,721 | |||||||||
| Balance as of March 31, 2022 | 7,721 | - | 7,721 | |||||||||
| Balance as of January 1, 2023 | 8,029 | 307 | 8,336 | |||||||||
| Balance as of March 31, 2023 | 8,029 | 307 | 8,336 | |||||||||
| Accumulated depreciation - | ||||||||||||
| Balance as of January 1, 2022 | 3,053 | - | 3,053 | |||||||||
| Additions | 390 | - | 390 | |||||||||
| Balance as of March 31, 2022 | 3,443 | - | 3,443 | |||||||||
| Balance as of January 1, 2023 | 4,672 | 25 | 4,697 | |||||||||
| Additions | 404 | 26 | 430 | |||||||||
| Balance as of March 31, 2023 | 5,076 | 51 | 5,127 | |||||||||
| Net book value | ||||||||||||
| As of December 31, 2022 | 3,357 | 282 | 3,639 | |||||||||
| As of March 31, 2023 | 2,953 | 256 | 3,209 | |||||||||
13
Notes to interim condensed consolidated unaudited financial statements
(continued)
The movement of the lease liabilities recognized by the Group is shown below:
| 2023 | 2022 | |||||||
| S/(000) | S/(000) | |||||||
| Balance as of January 1 | 4,355 | 5,829 | ||||||
| Financial interest expense | 57 | 71 | ||||||
| Lease payments | (626 | ) | (460 | ) | ||||
| Others | 16 | (460 | ) | |||||
| Balance as of March 31 | 3,802 | 4,980 | ||||||
| Maturity | ||||||||
| Current portion | 2,004 | 1,756 | ||||||
| Non-current portion | 1,798 | 3,224 | ||||||
| Balance as of March 31 | 3,802 | 4,980 | ||||||
| Net book value | ||||||||
| As of December 31, 2022 | 4,355 | |||||||
| As of March 31, 2023 | 3,802 | |||||||
The future cash disbursements in relation to lease liabilities have been disclosed in note 9.
| 8. | Trade and other payables |
As of March 31, 2023 and December 31, 2022, this caption includes trade payables, account payables to related parties, interest payable, dividends payable among other minor payables.
As of March 31, 2023 dividends payable amounted to S/9,500,000 (S/9,764,000 as of December 31, 2022).
| 9. | Financial Obligations |
| (a) | Corporate bonds |
On January 31, 2019, corporate bonds were issued in soles for S/260,000,000 at a rate of 6.688 percent per year and maturity of 10 years and; 15-year bonds for S/310,000,000 at a rate of 6.844 percent per year. As of December 31, 2022 the corporate bonds issued in US Dollars amounts to US$131,612,000 with an annual rate of 4.5 percent and these have been paid with the corporate loan indicated in section (d) in February 2023.
For the three-month period ended March 31, 2023 and 2022, the corporate bonds generated interests that have been recognized in the interim condensed consolidated unaudited financial statements of profit or loss for S/11,136,000 and S/14,888,000, respectively.
14
Notes to interim condensed consolidated unaudited financial statements
(continued)
| (b) | Short-term promissory notes |
As of March 31, 2023 and December 31, 2022, the Company maintains two loans of S/38,000,000 each, with maturity in December 2023 and at an effective annual interest rate of 8.93 percent. In addition, the Company acquired two promissory notes in January 2023 for S/38,000,000 each, with a maturity in January 2024 and an effective annual interest rate of 9.78 percent and 9.44 percent, respectively. In March 2023, the Company acquired two promissory notes of S/19,000,000 each, with maturity in March 2024 and an effective annual interest rate of 8.83 percent.
| (c) | Financial covenants – |
The contracts for corporate bonds issued in soles have the following covenants to limit incurring indebtedness for the Company and its guarantor subsidiaries, which are measured prior to the following transactions: issuance of debt or equity instruments, merger with another company or disposal or rental of significant assets. The covenants are the following:
| - | The debt service coverage ratio (includes amortization plus interest) must be at least 2.5 to 1. |
| - | The financial debt to Ebitda ratio may not be greater than 3.5 to 1. |
| (d) | Medium-term Corporate Loan under “Club deal” modality - |
On August 6, 2021, the Company established the conditions of a medium-term corporate loan under “Club Deal” modality with Banco de Crédito del Perú S.A. and Scotiabank Perú S.A.A. The loan amounts to S/860,000,000 that allowed the payment of all the financial obligations that the Company maintained with maturity until February 2023. The loan conditions include a grace/availability period of 18 months from August 6 and a payment term of 7 years from the last disbursement, which was in February 2023. Since that date, the loan will be paid in 22 equal quarterly installments and has an annual interest rate of 5.82 percent.
As part of the loan conditions, the Company would assume the following obligations:
| I | Comply with the following financial safeguards: |
| (a) | Debt Ratio (Financial Debt / EBITDA) <= 3.50x |
| (b) | Debt Service Coverage Ratio (FCSD / SD)> = 1.15x |
| (c). | Debt Service Coverage Ratio (EBITDA / SD) = 1.50x |
These financial safeguards will be calculated and verified at the end of each calendar quarter, considering the information of consolidated financial statements of the Company for the last 12 months, prepared in accordance with International Financial Reporting Standards - IFRS.
15
Notes to interim condensed consolidated unaudited financial statements
(continued)
| II. | It maintains the following main obligations to do: |
| (a). | Subordinate any obligation the Company had or may have to this loan. |
| (b). | Maintain the loan with a status equal to other senior financing of the Company. |
| (c.) | Keep your assets in good condition and properly insured. |
| (d) | Maintain all licenses, authorizations, concessions, permits, titles and rights required by government authorities. |
| III. | It maintains the following obligations not to do: |
| (a). | Refrain from paying dividends, reducing capital stock or any other distribution to its shareholders if this event make the Company not comply with the obligations assumed. |
| (b.) | That the Company and its subsidiaries participate in processes of liquidation, transformation, corporate reorganization, acquisition of companies, merger or spin-off. |
| (c). | Transfer, sell, alienate, donate or give in usufruct, lease, give in fiduciary domain, encumber their assets, income flows and / or collection rights. |
| (d). | Grant financing, personal or real guarantees in favor of third parties. |
As of March 31, 2023, the Company complied with the ratios contained in the loan conditions.
The table below summarizes the maturity profile of the Group’s financial liabilities based on contractual undiscounted payments:
| Less than 3 months | 3 to 12 months | 1
to 5 years | More than 5 years | Total | ||||||||||||||||
| S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | ||||||||||||||||
| As of March 31, 2023 | ||||||||||||||||||||
| Financial obligations | - | 307,273 | 625,452 | 687,275 | 1,620,000 | |||||||||||||||
| Interests | 12,285 | 88,432 | 258,347 | 100,337 | 459,401 | |||||||||||||||
| Trade and other payables | 154,796 | 54,029 | - | - | 208,825 | |||||||||||||||
| Lease liabilities | 495 | 1,509 | 1,798 | - | 3,802 | |||||||||||||||
| As of December 31, 2022 | ||||||||||||||||||||
| Financial obligations | 414,290 | 116,818 | 326,544 | 651,638 | 1,509,290 | |||||||||||||||
| Interests | 36,222 | 45,282 | 213,427 | 119,201 | 414,132 | |||||||||||||||
| Trade and other payables | 231,698 | 41,510 | - | - | 273,208 | |||||||||||||||
| Hedge finance cost payable | 7,473 | - | - | - | 7,473 | |||||||||||||||
| Lease liabilities | 502 | 1,503 | 2,350 | - | 4,355 | |||||||||||||||
16
Notes to interim condensed consolidated unaudited financial statements
(continued)
| 10. | Provisions |
As of March 31, 2023 and December 31, 2022, this caption includes workers’ profit sharing, provision for contingencies, long-term incentive plan and rehabilitation provision.
| 11. | Income tax |
The Group calculates income tax expense of the period using the tax rate that would be applicable to the expected total annual earnings.
The major components of the income tax expense in the interim condensed consolidated unaudited statement of profit or loss and interim condensed consolidated unaudited statements of other comprehensive income are:
| For
the three-month period ended March 31, | ||||||||
| 2023 | 2022 | |||||||
| S/(000) | S/(000) | |||||||
| Current income tax | (29,933 | ) | (20,336 | ) | ||||
| Deferred income tax | 10,214 | 1,339 | ||||||
| Income tax expense | (19,719 | ) | (18,997 | ) | ||||
| Deferred income tax recognized in other comprehensive income | (634 | ) | (604 | ) | ||||
| Total income tax | (20,353 | ) | (19,601 | ) | ||||
The movement of the Group’s deferred income tax assets and liabilities is shown below:
| For
the three-month period ended March 31, | ||||||||
| 2023 | 2022 | |||||||
| S/(000) | S/(000) | |||||||
| Increase (decrease) of deferred income tax asset | 153 | (209 | ) | |||||
| Increase of deferred income tax liability | 9,427 | 944 | ||||||
| Total variation of deferred income tax | 9,580 | 735 | ||||||
| Deferred income tax expense recognized in interim condensed consolidated unaudited statements of profit or loss | 10,214 | 1,339 | ||||||
| Deferred income tax recognized in other comprehensive income | (634 | ) | (604 | ) | ||||
| Total variation of deferred income tax | 9,580 | 735 | ||||||
17
Notes to interim condensed consolidated unaudited financial statements
(continued)
Following is the composition of deferred tax related to items recognized in interim condensed consolidated unaudited statements of other comprehensive income:
| For the three-month period ended March 31, | ||||||||
| 2023 | 2022 | |||||||
| S/(000) | S/(000) | |||||||
| Loss unrealized on derivative financial instruments | (634 | ) | (604 | ) | ||||
| Total deferred income tax recognized in OCI | (634 | ) | (604 | ) | ||||
| 12. | Sales of goods |
This caption is made up as follows:
| For the three-month period ended March 31, 2023 | Cement,
concrete, mortar and precast | Construction Supplies | Quicklime | Other | Total | |||||||||||||||
| S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | ||||||||||||||||
| Revenue from external customers | 447,110 | 21,821 | 11,053 | 11 | 479,995 | |||||||||||||||
| Revenue from external customers | 447,110 | 21,821 | 11,053 | 11 | 479,995 | |||||||||||||||
| For the three-month period ended March 31, 2022 | ||||||||||||||||||||
| Revenue from external customers | 477,637 | 33,404 | 14,364 | 4 | 525,409 | |||||||||||||||
| Revenue from external customers | 477,637 | 33,404 | 14,364 | 4 | 525,409 | |||||||||||||||
18
Notes to interim condensed consolidated unaudited financial statements
(continued)
| 13. | Related party transactions |
During the three-months periods ended March 31, 2023 and 2022, the Group carried out the following main transactions with Inversiones ASPI S.A. and its related parties:
| For
the three-month period ended March 31, | ||||||||
| 2023 | 2022 | |||||||
| S/(000) | S/(000) | |||||||
| Income | ||||||||
| Parent | ||||||||
| Inversiones ASPI S.A. | ||||||||
| Fees from office lease | 4 | 5 | ||||||
| Fees for management and administrative services | 22 | 25 | ||||||
| Other related parties | ||||||||
| Compañía Minera Ares S.A.C. (Ares) | ||||||||
| Fees from land rental services | 293 | 290 | ||||||
| Fees from leasing of parking | 66 | 92 | ||||||
| Fosfatos del Pacífico S.A. (Fospac) | ||||||||
| Fees from office lease | 4 | 5 | ||||||
| Fees for management and administrative services | 36 | 10 | ||||||
| Fossal S.A.A. (Fossal) | ||||||||
| Fees from office lease | 4 | 5 | ||||||
| Fees for management and administrative services | 10 | 13 | ||||||
| Asociación Sumac Tarpuy | ||||||||
| Fees from office lease | 4 | 5 | ||||||
| Expenses | ||||||||
| Other related parties | ||||||||
| Security services provided by Compañía Minera Ares S.A.C. | (660 | ) | (660 | ) | ||||
19
Notes to interim condensed consolidated unaudited financial statements
(continued)
As a result of these and other transactions, the Group had the following rights and obligations with Inversiones ASPI S.A. and its related parties as of March 31, 2023 and December 31, 2022:
| March 31, 2023 | December 31, 2022 | |||||||||||||||
| Accounts receivable | Accounts payable | Accounts receivable | Accounts payable | |||||||||||||
| S/(000) | S/(000) | S/(000) | S/(000) | |||||||||||||
| Parent | ||||||||||||||||
| Inversiones ASPI S.A. | 22 | - | - | 5 | ||||||||||||
| 22 | - | - | 5 | |||||||||||||
| Other related parties | ||||||||||||||||
| Fosfatos del Pacífico S.A. | 1,181 | 146 | 1,123 | 461 | ||||||||||||
| Compañía Minera Ares S.A.C. | 658 | 2,445 | 564 | 2,220 | ||||||||||||
| Fossal S.A.A | 15 | - | 75 | - | ||||||||||||
| Other | 108 | - | 96 | - | ||||||||||||
| 1,962 | 2,591 | 1,858 | 2,681 | |||||||||||||
| 1,984 | 2,591 | 1,858 | 2,686 | |||||||||||||
Outstanding balances are unsecured and interest free. There have been no guarantees provided or received, from any related party. As of March 31, 2023 and December 31, 2022, the Group has not recorded any allowance for expected credit losses on receivables from related parties.
Compensation of key management personnel of the Group -
The compensation paid to key management personnel includes expenses for profit-sharing, compensation and other concepts for members of the Board of Directors and the key management. The total short-term compensation expense amounted to S/6,127,000 during the three-month period ended March 31, 2023 (S/5,389,000 during the three-month period ended March 31, 2022), and the total long-term compensations expense amounted to S/2,068,000 during the three-month period ended March 31, 2023 (S/1,902,000 during the three-month period ended March 31, 2022). The Group does not compensate Management with post-employment or contract termination benefits or share-based payments.
| 14. | Earnings per share (EPS) |
Basic earnings per share amounts are calculated by dividing net profit for the three-month period ended March 31, 2023 and 2022 by the weighted average number of common and investment shares outstanding during those periods.
The Group has no dilutive potential common shares as of March 31, 2023 and 2022.
20
Notes to interim condensed consolidated unaudited financial statements
(continued)
Calculation of the weighted average number of shares and the basic earnings per share is presented below:
| For the three-month period ended March 31, | ||||||||
| 2023 | 2022 | |||||||
| S/(000) | S/(000) | |||||||
| Numerator | ||||||||
| Net profit attributable to ordinary equity holders of the Parent | 43,49 2 | 45,725 | ||||||
| Denominator | ||||||||
| Weighted average number of common and investment shares (thousands) | 428,107 | 428,107 | ||||||
| Basic profit for common and investment shares | 0.10 | 0.11 | ||||||
There have been no other transactions involving common and investment shares between the reporting date and the date of completion of these interim condensed consolidated unaudited financial statements.
| 15. | Financial assets and liabilities |
| (a) | Financial asset – |
Derivatives assets of hedging -
Foreign currency risk –
As of December 31, 2022 the Group maintained Cross currency swap contracts for a nominal amount of US$132,000,000, with maturity in February 2023 and a rate of 2.97%. Of this total, US$131,612,000 has been designated as hedging instruments for Senior notes that are denominated in U.S. dollars, with the intention of reducing the foreign exchange risk.
The cash flow hedge of the expected future payments was assessed to be highly effective and in the interim condensed consolidated unaudited statements of other comprehensive income is included an unrealized gain of S/2,154,000 and S/2,046,000 for the three-month period ended March 31, 2023 and 2022.
As of March 31, 2023 the Group settled the Cross currency swap contracts on their maturity date in relation with the payment of international bonds in dollars mentioned in note 9(a).
21
Notes to interim condensed consolidated unaudited financial statements
(continued)
Derivative assets from trading -
In February 2023, cross currency swaps from trading have been settled and obtained a gain of S/19,000 which was recognized in the interim condensed consolidated unaudited statement of profit or loss for the three-month period ended March 31, 2023 presented in “Net profit (loss) for valuation of trading derivative financial instruments” caption. As of March 31, 2022, cross currency swaps that do not have an underlying relationship amounts to US$388,000, have been designated as trading. The effect on profit or loss from its measurement at fair value was a loss of S/109,000 for the three-month period ended March 31, 2022.
| (b) | Fair values and fair value accounting hierarchy – |
Set out below is a comparison of the carrying amounts and fair values of financial instruments of the Group, as well as the fair value accounting hierarchy:
| Carrying amount | Fair value | Fair value hierarchy | ||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | 2023/2022 | ||||||||||||||||
| S/(000) | S/(000) | S/(000) | S/(000) | |||||||||||||||||
| Financial assets | ||||||||||||||||||||
| Cash and cash equivalents | 45,273 | 81,773 | 45,273 | 81,773 | Level 1 | |||||||||||||||
| Trade and other receivables | 145,143 | 145,034 | 145,143 | 145,034 | Level 2 | |||||||||||||||
| Derivative financial assets -"cross currency swaps" | - | 86,893 | - | 86,893 | Level 2 | |||||||||||||||
| Financial instruments at fair value through other comprehensive income | 274 | 274 | 274 | 274 | Level 3 | |||||||||||||||
| Total financial assets | 190,690 | 313,974 | 190,690 | 313,974 | ||||||||||||||||
| Financial liabilities | ||||||||||||||||||||
| Trade and other payables | 219,738 | 284,554 | 219,738 | 284,554 | Level 2 | |||||||||||||||
| Senior notes | 569,109 | 1,071,781 | 513,885 | 996,156 | Level 1 | |||||||||||||||
| Fixed rate notes | 1,043,099 | 521,390 | 905,969 | 459,117 | Level 2 | |||||||||||||||
| Total financial liabilities | 1,831,946 | 1,877,725 | 1,639,592 | 1,739,827 | ||||||||||||||||
All financial instruments for which fair value is recognized or disclosed are categorized within the fair value hierarchy, based on the lowest level input that is significant to the fair value measurement as a whole, as follows:
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 at fair value on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy. As of March 31, 2023 and December 31, 2022, there were no transfers between the fair value hierarchies.
Management assessed that cash and cash equivalents, trade and other receivables and other current liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments.
22
Notes to interim condensed consolidated unaudited financial statements
(continued)
The following methods and assumptions were used to estimate the fair values:
| - | The fair value of cross currency swaps is measured by using valuation techniques where inputs are based on market data. The most frequently applied valuation techniques include swap valuation models, using present value calculations. The models incorporate various inputs, including the credit quality of counterparties, foreign exchange, forward rates and interest rate curves. |
A credit valuation adjustment (CVA) is applied to the “Over-The-Counter” derivative exposures to take into account the counterparty’s risk of default when measuring the fair value of the derivative. CVA is the mark-to market cost of protection required to hedge credit risk from counterparties in this type of derivatives portfolio. CVA is calculated by multiplying the probability of default (PD), the loss given default (LGD) and the expected exposure (EE) at the time of default.
A debit valuation adjustment (DVA) is applied to incorporate the Group’s own credit risk in the fair value of derivatives (that is the risk that the Group might default on its contractual obligations), using the same methodology as for CVA.
| - | The fair value of the quoted senior notes is based on the current quotations value at the reporting date. |
| - | The fair value of the promissory note is calculated using the results of cash flow discounted at the indebtedness market rates effective as of the date of estimation. |
| - | The fair value of financial instruments designated at fair value through other comprehensive income has been determined using the percentage of shareholding of the Company equity of Fossal S.A. |
| 16. | Commitments and contingencies |
Operating lease commitments – Group as lessor
As of March 31, 2023, the Group, as lessor, has a land lease with Compañía Minera Ares S.A.C., a related party of Inversiones ASPI S.A. This lease is annually renewable and provided a rent for the three-month period ended March 31, 2023 and 2022 for S/293,000 and S/290,000, respectively.
Consortium contract –
On December 19, 2022, Distribuidora Norte Pacasmayo S.R.L., subsidiary of the Group, has subscribed a collaboration contract with Flujo Libre S.A.C., with the purpose to participate together in the project “Mejoramiento del Sistema de Pistas y Cerco Perimétrico del Aeropuerto de Piura”. The mentioned contract is valid for a maximum of 2 years and 11 months.
On this matter, the Company has communicated to the tax authority the subscription of the collaboration contract which will not take independent accounting and Distribuidora Norte Pacasmayo S.R.L. will be the contracting party that will act as operator of the contract.
Capital commitments
As of March 31, 2023, the Group had no significant capital commitments.
23
Notes to interim condensed consolidated unaudited financial statements
(continued)
Environmental matters
The Group exploration and exploitation activities are subject to environmental protection standards. Such standards are the same as those disclosed on the consolidated financial statement as of December 31, 2022.
Tax situation
The Company is subject to Peruvian tax law. As of March 31, 2023 and 2022, the income tax rate is 29.5 percent of the taxable profit after deducting employee participation, which is calculated at a rate of 8 to 10 percent of the taxable income.
For purposes of determining income tax, transfer pricing transactions with related companies and companies resident in territories with low or no taxation, must be supported with documentation and information on the valuation methods used and the criteria considered for determination. Based on the analysis of operations of the Group, Management and its legal advisors believe that as a result of the application of these standards will not result in significant contingencies for the Group as of March 31, 2023 and December 31, 2022.
During the four years following the year tax returns are filed, the tax authority has the power to review and, as applicable, correct the income tax computed by each individual company.
The income tax and value-added tax returns for the following years are open for review by the tax authority:
| Years open to review by Tax Authorities | |||
| Entity | Income tax | Value-added tax | |
| Cementos Pacasmayo S.A.A. | 2018-2022 | Dec.2018-2023 | |
| Cementos Selva S.A.C. | 2018-2022 | Dec.2018-2023 | |
| Distribuidora Norte Pacasmayo S.R.L. | 2018-2022 | Dec.2018-2023 | |
| Empresa de Transmisión Guadalupe S.A.C. | 2018-2022 | Dec.2018-2023 | |
| Salmueras Sudamericanas S.A. | 2018-2022 | Dec.2018-2023 | |
| Soluciones Takay S.A.C. | 2019-2022 | May to Dec.2019-2023 | |
Due to possible interpretations that the tax authorities may give to legislation in effect, it is not possible to determine whether any of the tax audits that may be performed will result in increased liabilities for the Group. For that reason, tax or surcharge that could arise from future tax audits would be applied to the income during the period in which it is determined. However, in management’s opinion, any possible additional payment of taxes would not have a material effect on the interim condensed consolidated unaudited financial statements as of March 31, 2023 and the consolidated financial statements as of December 31, 2022.
24
Notes to interim condensed consolidated unaudited financial statements
(continued)
Legal claim contingency
As of March 31, 2023, the Group has received claims from third parties in relation with its operations which in aggregate represent S/3,353,000. From this total amount, S/2,753,000 corresponded to labor claims from former employees, S/596,000 is related to the tax assessments received from the tax administration corresponding to 2009 tax period, which was reviewed by the tax authority during 2012 and S/4,000 corresponded to contentious-administrative claims.
Management expects that these claims will be resolved within the next five years based on prior experience; however, the Group cannot assure that these claims will be resolved within this period because the authorities do not have a maximum term to resolve cases.
The Group has been advised by its legal counsel that it is only possible, but not probable, that these actions will succeed. Accordingly, no provision for any liability has been made in these interim condensed consolidated unaudited financial statements.
Mining royalty
The Group signed agreements with third parties and with Peruvian Government related to the use of concessions for extraction activities on process of cement production. The information of the payment of royalties are reveled on the consolidated financial statements of the Group as of December 31, 2022.
| 17. | Segment information |
For management purposes, the Group is organized into business units based on their products and activities, and have three reportable segments as follows:
| - | Production and marketing of cement, concrete, mortar and precast in the northern region of Peru. |
| - | Sale of construction supplies in the northern region of Peru. |
| - | Production and marketing of quicklime in the northern region of Peru. |
No operating segments have been aggregated to form the above reportable operating segments.
Management monitors the profit before income tax of each business units separately for the purpose of making decisions about resource allocation and performance assessment.
25
Notes to interim condensed consolidated unaudited financial statements
(continued)
Transfer prices between operating segments are on an arm’s length basis in a similar manner to transactions with third parties.
| For the three-month period ended March 31, 2023 | For the three-month period ended March 31, 2022 | |||||||||||||||||||||||||||||||||||||||
| Cement,
concrete, mortar and precast | Construction supplies | Quicklime | Other (*) | Total consolidated | Cement,
concrete, mortar and precast | Construction supplies | Quicklime | Other (*) | Total consolidated | |||||||||||||||||||||||||||||||
| S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | |||||||||||||||||||||||||||||||
| Sales of goods | 447,110 | 21,821 | 11,053 | 11 | 479,995 | 477,637 | 33,404 | 14,364 | 4 | 525,409 | ||||||||||||||||||||||||||||||
| Gross profit | 159,119 | 129 | 1,570 | (223 | ) | 160,595 | 161,719 | 2,291 | 1,023 | (68 | ) | 164,965 | ||||||||||||||||||||||||||||
| Administrative expenses | (56,609 | ) | (695 | ) | (314 | ) | (111 | ) | (57,729 | ) | (52,354 | ) | (643 | ) | (290 | ) | (102 | ) | (53,389 | ) | ||||||||||||||||||||
| Selling and distribution expenses | (17,194 | ) | (211 | ) | (95 | ) | (34 | ) | (17,534 | ) | (16,641 | ) | (204 | ) | (92 | ) | (33 | ) | (16,970 | ) | ||||||||||||||||||||
| Other operating income (expense), net | 1,403 | (1 | ) | - | 1 | 1,403 | (1,040 | ) | 20 | - | (4 | ) | (1,024 | ) | ||||||||||||||||||||||||||
| Finance income | 1,337 | 1 | - | 17 | 1,355 | 541 | 11 | - | 6 | 558 | ||||||||||||||||||||||||||||||
| Finance cost | (25,720 | ) | - | - | (1 | ) | (25,721 | ) | (22,793 | ) | (1 | ) | - | (1 | ) | (22,795 | ) | |||||||||||||||||||||||
| Net profit (loss) for valuation of trading derivative financial instruments | 19 | - | - | - | 19 | (109 | ) | - | - | - | (109 | ) | ||||||||||||||||||||||||||||
| Gain (loss) from exchange difference, net | 815 | - | 12 | (4 | ) | 823 | (6,446 | ) | 2 | (68 | ) | (2 | ) | (6,514 | ) | |||||||||||||||||||||||||
| Profit before income tax | 63,170 | (777 | ) | 1,173 | (355 | ) | 63,211 | 62,877 | 1,476 | 573 | (204 | ) | 64,722 | |||||||||||||||||||||||||||
| Income tax expense | (19,706 | ) | 242 | (366 | ) | 111 | (19,719 | ) | (18,455 | ) | (433 | ) | (168 | ) | 59 | (18,997 | ) | |||||||||||||||||||||||
| Profit for the period | 43,464 | (535 | ) | 807 | (244 | ) | 43,492 | 44,422 | 1,043 | 405 | (145 | ) | 45,725 | |||||||||||||||||||||||||||
26
Notes to interim condensed consolidated unaudited financial statements
(continued)
| As of March 31, 2023 | As of December 31, 2022 | |||||||||||||||||||||||||||||||||||||||
| Cement, concrete
and precast | Construction supplies | Quicklime | Other | Consolidated | Cement, concrete
and precast | Construction supplies | Quicklime | Other | Consolidated | |||||||||||||||||||||||||||||||
| S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | |||||||||||||||||||||||||||||||
| Segment assets | 3,132,415 | 45,910 | 73,081 | 31,963 | 3,283,369 | 3,086,104 | 38,353 | 70,327 | 32,210 | 3,226,994 | ||||||||||||||||||||||||||||||
| Other assets (*) | - | - | - | 274 | 274 | 86,630 | - | - | 537 | 87,167 | ||||||||||||||||||||||||||||||
| Total assets | 3,132,415 | 45,910 | 73,081 | 32,237 | 3,283,643 | 3,172,734 | 38,353 | 70,327 | 32,747 | 3,314,161 | ||||||||||||||||||||||||||||||
| Operating liabilities | 1,983,780 | 58,894 | - | 745 | 2,043,419 | 2,041,923 | 76,780 | - | 323 | 2,119,026 | ||||||||||||||||||||||||||||||
| Capital expenditure (**) | 76,889 | - | - | - | 76,889 | 190,126 | - | - | - | 190,126 | ||||||||||||||||||||||||||||||
| (*) | As of March 31, 2023, corresponds to the financial instruments designated at fair value through other comprehensive income for S/274,000. As of December 31, 2022, corresponds to the financial instruments designated at fair value through other comprehensive income and to the fair value of derivative financial instruments (cross currency swap) for approximately S/274,000 and S/86,893,000, respectively. The fair value of hedge derivative financial instruments is allocated to the segment of cement, and the financial instruments designated at fair value through other comprehensive income and the fair value of the trading derivative financial instrument are presented as “Other”. |
| (**) | Capital expenditure consists of S/76,889,000 and S/190,126,000 during the three-month period ended March 31, 2023 and year ended December 31, 2022, respectively, and are related to additions of property, plant and equipment, intangible and other minor non-current assets . |
Geographic information
As of March 31, 2023 and December 31, 2022, all non-current assets are located in Peru and all revenues are from Peruvian clients.
| 18. | Financial risk management, objectives and policies |
The Group’s main financial assets include cash and short-term deposits (with maturity less than 360 days) and trade and other receivables that derive directly from its operations. The Group also holds financial instruments designated at fair value through OCI, cash flow hedges instruments and derivative financial instruments of trading. The Group’s main financial liabilities comprise trade payables and other payables, loans and borrowings, with short-term and long-term maturities. The main purpose of these financial liabilities is to finance the Group’s operations.
The Group is exposed to market risk, credit risk and liquidity risk. The Group’s senior management oversees the management of these risks. The Group’s senior management is supported by financial management that advises on financial risks and the appropriate financial risk governance framework for the Group. The financial management provides assurance to the Group’s senior management that the Group’s financial risk-taking activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with the Group’s policies and risk objectives.
The Management reviews and agrees policies for managing each of these risks as mentioned in the consolidated financial statements as of December 31, 2022.
27
Notes to interim condensed consolidated unaudited financial statements
(continued)
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 Group’s exposure to the risk of changes in foreign exchange relates primarily to the Group’s operating activities (when revenue or expense is denominated in a different currency from the Group’s functional currency).
As of December 31, 2022, the Group hedges its exposure to fluctuations on the translation into soles of its Senior Notes which are denominated in US dollars, by using cross currency swaps contracts, see note 15.
Foreign currency sensitivity
The following table demonstrates the sensitivity to a reasonably possible change in the US dollar exchange rate, with all other variables held constant. The impact on the Group’s profit before income tax is due to changes in the fair value of monetary assets and liabilities.
| For the three-month period ended March 31, 2023 | Change
in US$ rate |
Effect
on consolidated profit before income tax | ||
| U.S. Dollar | % | S/(000) | ||
| +5 | 1,891 | |||
| +10 | 3,782 | |||
| -5 | (1,891) | |||
| -10 | (3,782) |
| For the three-month period ended March 31, 2022 | Change in US$ rate |
Effect on consolidated profit before income tax | ||
| U.S. Dollar | % | S/(000) | ||
| +5 | 8,911 | |||
| +10 | 17,822 | |||
| -5 | (8,911) | |||
| -10 | (17,822) |
28
Notes to interim condensed consolidated unaudited financial statements
(continued)
Liquidity risk -
The Group monitors its risk of shortage of funds using a recurring liquidity planning tool.
The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank loans and debentures of long term. Access to fund sources is sufficiently available and debt maturing within 12 months can be rolled over under the same conditions with existing lenders, if necessary.
As of March 31, 2023 and December 31, 2022, no portion of the corporate bonds in soles will mature in less than one year.
Risk management activities –
As a result of its activities, the Group is exposed to the foreign currency exchange rate risk, thereof the Company has acquired hedging financial instruments to cover this risk. Since November 2014, the Group has hedged its exposure to foreign currency from its corporate bonds (denominated in US dollars). During the three-month period ended March 31, 2023 and 2022, there was moderate volatility in the US dollar exchange rate with respect to the soles, whose effects were partially mitigated by the exchange rate hedge maintained by the Company.
As of March 31, 2023 and December 31, 2022, except for the derivatives financial instruments (cross currency swaps) signed by the Company to hedge the foreign currency risk of its Senior Notes, the Group had no other financial instruments to hedge its foreign exchange risk, interest rates or market price (purchase price of coal) fluctuations.
As of March 31, 2023 derivatives financial instruments (cross currency swaps) were fully settled in relation with the payment of international bonds in dollars.
29