Business Context and Reporting Period
This Form 6-K filing by Cementos Pacasmayo S.A.A. (Pacasmayo Cement Corporation) covers the month of October 2018, with financial data as of September 30, 2018. The report specifically details the company's monthly position regarding financial derivatives, filed pursuant to Rule 13a-16 of the Securities Exchange Act of 1934.
Key Financial Metrics
The filing focuses exclusively on derivative instruments rather than full financial statements. Key metrics include:
- Derivative Instrument: Cross Currency Swaps.
- Notional Amount: USD 300 million (total).
- Purpose: Coverage for a corporate bond liability.
- Underlying Liability Currency: Peruvian Sol (PEN).
- Fair Value (Current Month): PEN 11,436,000 (Liability).
- Fair Value (Previous Month): PEN 17,230,000 (Liability).
- Cumulative Profit/Loss (Year-to-Date): PEN -24,183,000 (Loss).
Material Changes and Composition of Loss
The cumulative loss of PEN 24,183,000 for the year is composed of the following movements recorded in the books during 2018:
- Unrealized Exchange Rate Loss: PEN 17,100,000 (due to holding bonds in U.S. dollars).
- Accrued Commissions: PEN 19,845,000 (recorded as interest expense in the profit and loss account).
- Increase in Fair Value: PEN 10,947,000 (includes PEN 1,721,000 due to counterparty risk).
- Deferred Income Tax: PEN 1,815,000.
Most items are recorded in equity accounts, except for counterparty risk (financial cost) and commissions (interest expense).
Outlook, Risks, and Contingencies
Valuation Methodology: Fair values for Cross Currency Swaps are estimated internally using International Financial Reporting Standards (IFRS) and market data. The filing explicitly states these amounts are preliminary and subject to change.
Risk Factors: The company is exposed to currency exchange rate fluctuations (USD vs. PEN) and counterparty risk, both of which impact the fair value of the derivatives and the consolidated financial position.
Investor Verification Checklist
- Verify the final audited figures for the derivative fair value, as the current filing notes they are preliminary estimates.
- Confirm the impact of the PEN 19,845,000 in accrued commissions on the company's net interest expense and EBITDA.
- Review the full 20-F annual report to understand the total exposure of the USD 300 million corporate bond being hedged.
- Assess the counterparty risk exposure of PEN 1,721,000 included in the fair value adjustment.