Business Context and Reporting Period
Cementos Pacasmayo S.A.A. (Pacasmayo Cement Corporation), a Peruvian issuer, filed this Form 6-K on April 19, 2018. The filing discloses the monthly position of financial derivatives as of March 31, 2018.
Key Financial Metrics
The filing focuses exclusively on financial derivative instruments and does not provide consolidated revenue, profit, cash flow, or debt figures for the company.
- Derivative Instrument: Cross Currency Swaps.
- Notional Amount: USD 300 million (covering corporate bonds).
- Purpose: Coverage (Hedging).
- Underlying Liability: Corporate bond denominated in USD.
- Reporting Currency: Peruvian Sol (PEN).
- Fair Value (Current Month): PEN -9,929,000 (Liability).
- Fair Value (Previous Month): PEN -7,752,000 (Liability).
- Cumulative Profit/Loss (Year-to-Date): PEN -10,352,000.
Material Changes
The fair value of the derivative liability increased (became more negative) by PEN 2,177,000 from the previous month to March 31, 2018. The cumulative loss for the year is attributed to the following components:
- Decline in fair value of derivative instruments: PEN 10,418,000 (includes PEN 1,061,000 due to counterparty risk).
- Unrealized exchange rate loss on USD-denominated bonds: PEN 4,800,000.
- Deferred income tax: PEN 1,657,000.
- Less: Accrued commissions from swap contracts: PEN 6,391,000.
Management Commentary and Risks
Management notes that the fair value amounts are estimated internally in accordance with International Financial Reporting Standards (IFRS) using market data. These figures are preliminary and subject to change. The filing highlights specific accounting treatments:
- Items related to fair value decline, exchange rate loss, and deferred tax are recorded in equity accounts, except for the counterparty risk component which is recorded as a financial cost.
- Accrued commissions are recorded as interest expense in the profit and loss account.
Investor Verification Checklist
- Verify the preliminary nature of the fair value estimates and potential for future adjustments.
- Confirm the impact of the PEN 1,061,000 counterparty risk charge on the financial cost line item.
- Review the full annual report (Form 20-F) for consolidated revenue, profit, and total debt figures, as this filing only covers derivatives.
- Monitor the USD/PEN exchange rate volatility given the company's exposure to USD-denominated corporate bonds.