Business Context and Reporting Period
Company: CEMENTOS PACASMAYO S.A.A. (Pacasmayo Cement Corporation)
Filing Type: Form 6-K (Report of Foreign Issuer)
Reporting Period: Monthly position as of October 31, 2016, filed on November 14, 2016.
Jurisdiction: Republic of Peru
Primary Activity: The filing specifically details the company's monthly position regarding financial derivative instruments used for hedging purposes.
Key Financial Metrics
The filing focuses exclusively on financial derivatives and does not provide consolidated revenue, profit, cash flow, or general debt figures for the period.
- Derivative Instrument: Cross Currency Swaps.
- Purpose: Coverage (Hedging) of a USD 300 million corporate bond liability.
- Notional Amount: USD 300 million.
- Fair Value (Current Month - Oct 2016): PEN 77,177,000 (Liability).
- Fair Value (Previous Month - Sep 2016): PEN 82,891,000 (Liability).
- Total Accumulated Gain/Loss (2016 YTD): PEN (47,796,000) (Loss).
Material Changes and Composition of Loss
The total cumulative loss of PEN 47,796,000 as of October 31, 2016, is composed of the following specific items:
- Decline in Fair Value: PEN 47,593,000 loss (Recorded in equity/other comprehensive income).
- Unrealized Exchange Rate Gain: PEN 14,400,000 gain on holding dollar-denominated bonds (Recorded in equity/other comprehensive income).
- Deferred Income Tax: PEN 8,630,000 (Recorded in equity/other comprehensive income).
- Commissions: PEN 23,233,000 expense from Cross Currency Swap contracts (Recorded as interest expense in the profit and loss account).
The fair value of the Cross Currency Swaps decreased from PEN 82,891,000 in the previous month to PEN 77,177,000 in the current month.
Management Commentary and Risks
Valuation Methodology: The amounts relating to the fair value of the Cross Currency Swaps are estimated internally in accordance with International Financial Reporting Standards (IFRS) using valuation techniques based on market data.
Contingency/Disclaimer: The filing explicitly states that these valuation amounts are preliminary and subject to change.
Accounting Treatment: Most components of the derivative gain/loss (fair value changes, exchange gains, deferred tax) are recorded in equity accounts (other comprehensive income), while swap commissions are recorded as interest expense in the profit and loss statement.
Investor Verification Checklist
- Verify the final audited fair value of the Cross Currency Swaps, as the current figures are marked as preliminary.
- Confirm the impact of the PEN 23,233,000 commission expense on the company's net interest expense and EBITDA for the full year.
- Review the full 20-F annual report to understand the total corporate debt structure beyond the specific USD 300 million bond being hedged.
- Assess the sensitivity of the company's financial position to further fluctuations in the PEN/USD exchange rate given the hedging strategy.