Business Context and Reporting Period
Cementos Pacasmayo S.A.A., a Peruvian cement manufacturer, filed this Form 6-K on December 14, 2016. The report covers the month of December 2016 and provides specific financial data regarding derivative instruments as of November 30, 2016.
Key Financial Metrics
The filing focuses exclusively on financial derivatives 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.
- Purpose: Hedging liability associated with corporate bonds.
- Fair Value (Current Month): PEN 126,321,000 (Liability).
- Fair Value (Previous Month): PEN 77,177,000 (Liability).
- Cumulative Profit/Loss (Year-to-Date): PEN (24,461,000) loss.
Material Changes
The fair value liability associated with the Cross Currency Swaps increased significantly from PEN 77,177,000 in the previous month to PEN 126,321,000 in the current month (November 2016). The cumulative loss for the year stands at PEN 24,461,000.
Management Commentary and Risks
The cumulative loss of PEN 24,461,000 is composed of:
- An increase in fair value of derivative instruments of PEN 1,551,000 (recorded in equity/other comprehensive income).
- Deferred income tax of PEN 403,000 (recorded in equity).
- Commissions from Cross Currency Swap contracts totaling PEN 25,609,000 (recorded as interest expense in the profit and loss account).
Valuation Risk: The company notes that fair value amounts are estimated internally using IFRS and market data techniques. These figures are subject to change and are considered preliminary.
Investor Verification Checklist
- Verify the impact of the PEN 25,609,000 commission expense on the company's net interest costs and overall profitability.
- Confirm the exchange rate fluctuations driving the increase in the fair value liability from PEN 77M to PEN 126M.
- Review the full annual report (Form 20-F) for consolidated revenue and debt figures, as this filing only details derivative positions.
- Assess the sensitivity of the company's financial position to further changes in the fair value of the USD 300 million swap.