Business Context and Reporting Period
Cementos Pacasmayo S.A.A. (Pacasmayo Cement Corporation), a Peruvian issuer, filed this Form 6-K on February 15, 2017. The report covers the month of February 2017 and provides an annex detailing the monthly position of financial derivatives as of January 31, 2017.
Key Financial Metrics
The filing focuses exclusively on financial derivative instruments and does not provide consolidated revenue, profit, cash flow, or general liquidity metrics for the company.
- Derivative Instrument: Cross Currency Swaps.
- Purpose: Coverage for a USD 300 million corporate bond liability.
- Fair Value (Current Month): PEN 48,810,000 (Liability).
- Fair Value (Previous Month): PEN 69,912,000 (Liability).
- Cumulative Profit/Loss (Year-to-Date): PEN (1,476,000) loss.
Material Changes
The fair value liability associated with the Cross Currency Swaps decreased from PEN 69,912,000 in the previous month to PEN 48,810,000 in the current month (January 2017).
During January 2017, the company recorded a decline in the fair value of derivative financial instruments of PEN 21,102,000. This figure includes PEN 706,000 attributed to counterparty risk. This decline was partially offset by an unrealized exchange rate gain of PEN 21,900,000 due to holding bonds in dollars.
Management Commentary and Risks
Accounting Treatment: The decline in fair value and unrealized exchange gains are recorded in equity accounts, except for the counterparty risk which is recorded in financial income. Commissions totaling PEN 2,039,000 are recorded as interest expense in the profit and loss account. A deferred income tax adjustment of PEN 235,000 was also applied.
Valuation Risk: Management notes that fair value amounts for the Cross Currency Swaps are estimated internally using IFRS and market data. These values are subject to change and are considered preliminary.
Investor Verification Checklist
- Verify the impact of the PEN 21,102,000 decline in derivative fair value on the company's equity and comprehensive income.
- Confirm the specific counterparty risk exposure of PEN 706,000 recorded in financial income.
- Review the full annual report (Form 20-F) for consolidated revenue, debt levels, and liquidity metrics not included in this derivative-specific filing.
- Assess the sensitivity of the USD 300 million bond liability to future exchange rate fluctuations given the reliance on Cross Currency Swaps.