Form 6-K CEMENTOS PACASMAYO SAA For: Oct 24

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 October 2016

 

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 offices)

 

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 ____X___ 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): [ ]

 

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

 

Yes _______ No ___X____

 

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): Not applicable.

 

 

Signature

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: October 24, 2016

 

 

 

 

Cementos Pacasmayo S.A.A. and Subsidiaries

 

Unaudited interim condensed consolidated financial statements
as of September 30, 2016 and for the three and nine-month periods then ended

 

 

Cementos Pacasmayo S.A.A. and Subsidiaries

 

Unaudited interim condensed consolidated financial statements as of September 30, 2016 and for the three and nine-month periods then ended

 

Content

Report on review of interim condensed consolidated financial statements

Interim condensed consolidated financial statements

Interim condensed consolidated statements of financial position

Interim condensed consolidated statements of profit or loss

Interim condensed consolidated statements of other comprehensive income

Interim condensed consolidated statements of changes in equity

Interim condensed consolidated statements of cash flows

Notes to the interim condensed consolidated financial statements

 

Report on review of interim condensed consolidated financial statements

 

To the Board of Directors and Shareholders of Cementos Pacasmayo S.A.A.

Introduction

We have reviewed the accompanying interim condensed consolidated statement of financial position of Cementos Pacasmayo S.A.A. (a Peruvian company) and its Subsidiaries (together the "Group") as of September 30, 2016, and the related interim condensed consolidated statements of profit or loss, other comprehensive income, changes in equity and cash flows for the three and nine-month periods then ended, and explanatory notes. Management is responsible for the preparation and presentation of these interim condensed consolidated financial statements in accordance with IAS 34 Interim Financial Reporting (IAS 34). Our responsibility is to express a conclusion on these interim condensed consolidated 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.

Conclusion

 

Based on our review, nothing has come to our attention that causes us to believe that the accompanying interim condensed consolidated financial statements are not prepared, in all material respects, in accordance with IAS 34.

Lima, Peru

October 24, 2016

Countersigned by:

---

                                                  

Carlos Valdivia Valladares

C.P.C.C. Register No. 27255

 

 

 

Cementos Pacasmayo S.A.A. and Subsidiaries

 

Interim condensed consolidated statements of financial position

As of September 30, 2016 (unaudited) and December 31, 2015 (audited)

 

 

 

Cementos Pacasmayo S.A.A. and Subsidiaries

 

Interim condensed consolidated statements of profit or loss

For the three and nine-month periods ended September 30, 2016 and September 30, 2015 (both unaudited)

 

 

The accompanying notes are an integral part of the interim condensed consolidated financial statements.

 

Cementos Pacasmayo S.A.A. and Subsidiaries

 

Interim condensed consolidated statements of other comprehensive income

For the three and nine-month periods ended September 30, 2016 and September 30, 2015 (both unaudited)

 

 

The accompanying notes are an integral part of the interim condensed consolidated financial statements.

 

 

Cementos Pacasmayo S.A.A. and Subsidiaries

 

Interim condensed consolidated statements of changes in equity

For the nine-month periods ended September 30, 2016 and September 30, 2015 (both unaudited)

 

 

The accompanying notes are an integral part of the interim condensed consolidated financial statements.

 

Cementos Pacasmayo S.A.A. and Subsidiaries

 

Interim condensed consolidated statements of cash flows

For the three and nine-month periods ended September 30, 2016 and September 30, 2015 (both unaudited)

 

 

 

Interim condensed consolidated statements of cash flows (continued)

 

The accompanying notes are an integral part of the interim condensed consolidated financial statements.

 

 

Cementos Pacasmayo S.A.A. and Subsidiaries

 

Notes to interim condensed consolidated financial statements

As of September 30, 2016 and 2015 (both unaudited), and December 31, 2015 (audited)

 

 

1.	Economic activity

Cementos Pacasmayo S.A.A. (hereinafter "the Company") was incorporated in 1957 and, under the Peruvian General Corporation Law, is an open stock corporation with publicly traded shares on Lima Stock Exchange 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 September 30, 2016 and December 31, 2015 (52.63 percent of the Company’s common shares as of September 30, 2015). The Company’s registered address is Calle La Colonia No.150, Urbanizacion El Vivero, Santiago de Surco, Lima, Peru.

The Company’s main activity is the production and selling of cement, blocks, concrete and quicklime in Peru’s northern region.

The interim condensed consolidated financial statements of the Company and its subsidiaries (hereinafter “the Group”) as of September 30, 2016 and for the three and nine-month periods then ended, were authorized for issuance by the Company’s Management on October 24, 2016.

On May 31, 2016, the Company decided to liquidate the subsidiary Calizas del Norte S.A.C.  Furthermore, on September 26, 2016, in the General Shareholders’ Meeting of Cementos Pacasmayo, they approved the spin-off of the equity block of Fosfatos del Pacífico S.A. in favor of a new company named Fossal S.A.A.

Except the situation explained in the above-mentioned paragraph, as of September 30, 2016, there were no changes in the main activities of the subsidiaries incorporated in the interim condensed consolidated financial statements of the Group, in relation to December 31, 2015.

Contributions of non-controlling interest -

Salmueras Sudamericanas S.A.

In order to finance the Salmueras project, the General Shareholders’ Meeting of the subsidiary held on February 2, 2016, agreed a contribution of S/4,100,000.  During the nine-month period ended September 30, 2016, the contribution made by Quimpac S.A. amounted to S/473,000.

All these contributions are partial payments of the capital commitment assumed by the Company and Quimpac S.A. if they develop the brine project, up to US$100,000,000 and US$14,000,000, respectively.

The effect of the difference on capital contributions and interests maintained by each shareholder amounted to S/556,000 during the nine-month period ended September 30, 2016, and these were recognized as a debit in additional paid-in capital and a credit in non-controlling interest.

 

Notes to interim condensed consolidated financial statements (continued)

 

Fosfatos del Pacifico S.A.

The General Shareholders’ Meeting of the subsidiary Fosfatos del Pacifico S.A. held on August 2, 2016, agreed a contribution amounted to S/13,384,000. During the nine-month period ended September 30, 2016, the contribution made by MCA Phosphates Pte. amounted to S/4,015,000.

During February, July and September, 2016, the Company made additional capital contributions of S/23,216,000, S/1,000,000 and S/1,200,000, respectively; which were approved by the Board of Directors, these contributions did not include a change in the percentage interests held by the current shareholders.

The effect of the difference on capital contributions and interests acquired by each shareholder amounted to S/7,625,000 during the nine-month period ended September 30,2016, and it was recognized as a debit in additional paid in capital and a credit in non-controlling interest.

2.	Basis of preparation and changes to the Group’s accounting policies

2.1

Basis of preparation -

The interim condensed consolidated financial statements of the Company have been prepared in accordance with IAS 34 Interim Financial Reporting as issued by the International Accounting Standards Board (IASB).

The interim condensed consolidated financial statements have been prepared on a historical cost basis, except for available-for-sale financial investments, derivatives financial instruments and the call-option that have been measured at fair value. The interim condensed consolidated financial statements are presented in soles and all values are rounded to the nearest thousand (S/000), except as otherwise indicated.

The interim condensed consolidated 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, 2015.

New standards, interpretations and amendments

The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group´s annual financial statements for the year ended December 31, 2015.

Several new standards and amendments apply for the first time in 2016. However, they do not impact the interim condensed consolidated financial statements or the annual consolidated financial statements of the Group.

For information purpose, following is a summary of the nature and impact of each new standard:

-	Amendments to IAS 16 and IAS 38: Clarification of Acceptable Methods of Depreciation and Amortization

The amendments clarify the principle in IAS 16 Property, Plant and Equipment and IAS 38 Intangible Assets that revenue reflects a pattern of economic benefits that are generated from operating a business (of which the asset is a part) rather than the economic benefits that are consumed through use of the asset. As a result, a revenue-based method cannot be used to depreciate property, plant and equipment and may only be used in very limited circumstances to amortize intangible assets. The amendments are effective prospectively for annual periods beginning on or after 1 January 2016, with early adoption permitted. These amendments do not have any impact to the Group given that the Group has not used a revenue-based method to depreciate its noncurrent assets.

 

 

Notes to interim condensed consolidated financial statements (continued)

 

-	Annual Improvements 2012-2014 Cycle

These improvements are effective for annual periods beginning on or after 1 January 2016. They include:

IFRS 7 Financial Instruments: Disclosures

(i)

Servicing contracts

The amendment clarifies that a servicing contract that includes a fee can constitute continuing involvement in a financial asset. An entity must assess the nature of the fee and the arrangement against the guidance for continuing involvement in IFRS 7 in order to assess whether the disclosures are required. The assessment of which servicing contracts constitute continuing involvement must be done retrospectively. However, the required disclosures would not need to be provided for any period beginning before the annual period in which the entity first applies the amendments.

(ii)

Applicability of the amendments to IFRS 7 to condensed interim financial statements

The amendment clarifies that the offsetting disclosure requirements do not apply to condensed interim financial statements, unless such disclosures provide a significant update to the information reported in the most recent annual report. This amendment must be applied retrospectively.

IAS 19 Employee Benefits

The amendment clarifies that market depth of high quality corporate bonds is assessed based on the currency in which the obligation is denominated, rather than the country where the obligation is located. When there is no deep market for high quality corporate bonds in that currency, government bond rates must be used. This amendment must be applied prospectively.

IAS 34 Interim Financial Reporting

The amendment clarifies that the required interim disclosures must either be in the interim financial statements or incorporated by cross-reference between the interim financial statements and wherever they are included within the interim financial report (e.g., in the management commentary or risk report). The other information within the interim financial report must be available to users on the same terms as the interim financial statements and at the same time. This amendment must be applied retrospectively.

 

 

 

 

These amendments do not have any impact on the Group.

-	Amendments to IAS 1 Disclosure Initiative

The amendments to IAS 1 Presentation of Financial Statements clarify, rather than significantly change, existing IAS 1 requirements. The amendments clarify:

-

The materiality requirements in IAS 1.

-

That specific line items in the statement(s) of profit or loss and OCI and the statement of financial position may be disaggregated.

-

That entities have flexibility as to the order in which they present the notes to financial statements.

-

That the share of OCI of associates and joint ventures accounted for using the equity method must be presented in aggregate as a single line item, and classified between those items that will or will not be subsequently reclassified to profit or loss.

Furthermore, the amendments clarify the requirements that apply when additional subtotals are presented in the statement of financial position and the statement(s) of profit or loss and OCI. These amendments are effective for annual periods beginning on or after 1 January 2016, with early adoption permitted. These amendments do not have any impact on the Group.

-	Amendments to IFRS 10, IFRS 12 and IAS 28 Investment Entities: Applying the Consolidation Exception

The amendments address issues that have arisen in applying the investment entities exception under IFRS 10.The amendments to IFRS 10 clarify that the exemption from presenting consolidated financial statements applies to a parent entity that is a subsidiary of an investment entity, when the investment entity measures all of its subsidiaries at fair value.

Furthermore, the amendments to IFRS 10 clarify that only a subsidiary of an investment entity that is not an investment entity itself and that provides support services to the investment entity is consolidated. All other subsidiaries of an investment entity are measured at fair value. The amendments to IAS 28 allow the investor, when applying the equity method, to retain the fair value measurement applied by the investment entity associate or joint venture to its interests in subsidiaries.

These amendments must be applied retrospectively and are effective for annual periods beginning on or after1 January 2016, with early adoption permitted. These amendments do not have any impact on the Group as the Group does not apply the consolidation exception.

The Group has not yet early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.

 

 

Notes to interim condensed consolidated financial statements (continued)

 

2.2

Basis of consolidation - The interim condensed consolidated financial statements comprise the financial statements of the Company and its subsidiaries as of September 30, 2016 and 2015.

Seasonality is not relevant for the activities of the Group.

3.	Cash and term deposits

(a)

This caption consists of the following:

(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)

As of September 30, 2016, December 31, 2015 and September 30, 2015, the short-term deposits held in domestic banks were freely available and earned interest at the respective short-term market rates and have maturities of less than three months.

4.	Trade and other receivables

As of September 30, 2016 and December 31, 2015 this caption mainly include trade receivables, value-added tax credit (VAT), interest receivables and tax refund receivable.

These tax refund receivables are value-added tax credits originated from purchases made from 2005 to 2007 in the northeast region of Peru. The Group has a formal disagreement with the Peruvian tax authorities in connection with these refunds. In the Group´s legal advisors opinion, the Group has strong basis to recover these tax refunds, however, they consider that such recovery will occur in the long-term, considering the long time that this kind of procedures last due to all instances and formal processes that have to be completed.

 

Notes to interim condensed consolidated financial statements (continued)

 

5.	Inventories

As of September 30, 2016 and December 31, 2015 includes goods and finished products, work in progress, raw materials and other supplies to be used in the production process.

During the nine-month period ended September 30, 2016 the Group has recognized a provision for inventory carried at net realizable value of S/643,000.

6.	Property, plant and equipment

During the three and nine-month periods ended September 30, 2016 the additions of the Group amounted approximately to S/9,221,000 and S/80,213,000, respectively (S/133,403,000 and S/372,706,000 during the three and nine-month periods ended September 30, 2015), which are mainly related to  the construction of a cement plant located in Piura in the north of Peru. In September, 2015 part of this project began operations. On February, 2016 a significant part of this cement plant was launched to operations, nevertheless some final work will be performed among the period.

The borrowings costs capitalized for the construction of the cement plant in Piura during the nine-month period ended as of September 30, 2016 were approximately S/3,309,000 (S/29,608,000 for the nine-month periods ended September 30, 2015). The rate used to determine the amount of borrowings costs eligible for capitalization was approximately 5.00 percent, which is the effective rate of the only borrowing the Group has as of September 30, 2016. The amount of borrowing costs eligible for capitalization is determined by applying the capitalization rate to the expenditures on qualifying assets.

As of September 30, 2016 the Group maintains accounts payable related to property, plant and equipment for S/5,043,000 (S/28,625,000 as of December 31, 2015).

7.	Trade and other payables

As of September 30, 2016 and December 31, 2015, this caption includes trade payables, interest and swap commissions, dividends among other minor payables. As of September 30, 2016 dividends payable amounted to S/159,360,000 (S/4,235,000 as of December 31, 2015).

The declared dividend for the year 2016 amounts to S/165,860,000, of which S/10,624,000 correspond to treasury shares

8.	Provisions

As of September 30, 2016 and December 31, 2015, this caption mainly includes workers’ profit sharing, long-term incentive plan and rehabilitation provision.

9.	Income tax

The Company 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 statement of profit or loss and statement of other comprehensive income are:

Following is the composition of deferred tax related to items recognized in OCI:

 

 

 

10.	Related party transactions

During the three and nine months periods ended September 30, 2016 and 2015, the Group carried out the following main transactions with Inversiones ASPI S.A. and its related parties:

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 September 30, 2016 and December 31, 2015:

Outstanding balances are unsecured and interest free. There have been no guarantees provided or received from any related party receivables or payables. For the periods ended September 30, 2016 and December 31, 2015, the Group has not recorded any impairment of receivables from related parties. This assessment is undertaken each financial year by examining the financial position of the related party.

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 compensations expense amounted to S/6,338,000  and  S/15,676,000, during the three and nine-month periods ended September 30, 2016, respectively (S/6,964,000 and S/16,612,000 during the three and nine-month periods ended September 30, 2015) , and the total long term compensations expense amounted to S/2,664,000 and S/7,408,000 during the three and nine-month periods ended September 30, 2016, respectively (S/6,151,000 and S/10,511,000 during the three and nine-month periods ended September 30, 2015).  The Company does not compensate Management with post-employment or contract termination benefits or share-based payments.

 

Notes to interim condensed consolidated financial statements (continued)

 

11.	Earnings per share (EPS)

Basic earnings per share amounts are calculated by dividing net profit for the three and nine-month periods ended September 30, 2016 and 2015 attributable to common shares and investment shares of the parent by the weighted average number of common and investment shares outstanding during those periods.

The Group has no dilutive potential common shares as of September 30, 2016 and 2015.

Calculation of the weighted average number of shares and the basic and diluted earnings per share is presented below:

There have been no other transactions involving common shares or potential common shares between the reporting date and the date of completion of these interim condensed consolidated financial statements.

 

Notes to interim condensed consolidated financial statements (continued)

 

12.	Financial instruments

(a)

Financial asset and liabilities –

Financial assets –

Financial instruments at fair value through other comprehensive income reflect the change in fair value of cross currency swaps contracts, designated as cash flow hedges to hedge the Senior Notes balance denominated in US dollars.

Except cash flow hedge and available-for-sale investments, all financial assets which included cash and cash equivalents and trade and other receivables are classified in the category of loans and receivables, are non-derivative financial assets carried at amortized cost and generate a fixed or variable interest income for the Group. The carrying value may be affected by changes in the credit risk of the counterparties.

Financial liabilities -

All financial liabilities of the Group including trade and other payables and interest-bearing loans and borrowings are classified as loans and borrowings and are carried at amortized cost.

(b)

Hedging activities and derivatives -

Cash flow hedges -

Foreign currency risk -

As of September 30,2016 the Group maintain Cross currency swap contracts for a notional amount of US$300,000,000, which are measured at fair value through other comprehensive income and designated as hedging instruments in cash flows hedges of Senior Notes denominated in US dollars.

 

The cross currency swap contracts balances vary with the level of expected forward exchange rates.

The terms of the cross currency swaps contracts match the terms of the related Senior Notes.

The cash flow hedge of the expected future payments was assessed to be highly effective and an unrealized loss of S/42,222,000 and a unrealized gain of S/38,879,000 for the three and nine-month periods ended September 30, 2016; respectively (S/58,594,000  and S/51,349,000 for the three and nine-month periods ended September 30, 2015, respectively), is included in other comprehensive income.  The amounts retained in other comprehensive income as of September 30, 2016 are expected to mature and affect the consolidated statement of profit or loss in each of the future years until 2023.

 

Notes to interim condensed consolidated financial statements (continued)

 

(c)

Fair values –

Set out below is a comparison of the carrying amounts and fair values of financial instruments as of September 30, 2016 and December 31, 2015:

Management assessed that cash and term deposits, trade receivables, trade payables and other current liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments.

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.