Business Context and Reporting Period
Cementos Pacasmayo S.A.A. (Pacasmayo Cement Corporation), a Peruvian cement manufacturer, filed this Form 6-K on April 14, 2016. The report discloses the monthly position of financial derivatives as of March 31, 2016, in compliance with local regulatory requirements.
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.
- Purpose: Coverage (hedging) for a total corporate bond of USD 300 million.
- Notional Amount: USD 300 million.
- Underlying Asset: Corporate bond denominated in US Dollars.
- Reporting Currency: Peruvian Soles (PEN).
- Fair Value (Current Month): S/. 124,797,000.
- Fair Value (Previous Month): S/. 177,337,000.
- Accumulated Gain/Loss (2016 YTD): S/. 11,725,000.
Material Changes
The fair value of the Cross Currency Swaps decreased from S/. 177,337,000 in the previous month to S/. 124,797,000 as of March 31, 2016. The filing attributes the year-to-date accumulated gain/loss of S/. 11,725,000 to the following components:
- Unrealized loss from exchange rate differences on US$ bonds: S/. 25,500,000.
- Increase in fair value of financial derivative instruments: S/. 27,000.
- Income tax impact: S/. 6,637,000.
- Commission on Cross Currency Swap contracts: S/. 7,165,000 (recorded as a financial expense).
Outlook, Risks, and Management Commentary
Management notes that the fair value amounts for the Cross Currency Swaps are estimated internally following International Financial Reporting Standards (IFRS) using valuation techniques based on market data. The filing explicitly states that these values are subject to change. The accumulated gain/loss is split between net equity (other components of equity) and the statement of profit and loss (commissions).
Investor Verification Checklist
- Verify the current exchange rate impact on the USD 300 million corporate bond liability.
- Confirm the classification of the S/. 7,165,000 commission as a financial expense in the full income statement.
- Review the full 2016 interim financial statements to contextualize the S/. 11,725,000 derivative gain/loss against total net income.
- Assess the company's overall liquidity position given the significant unrealized loss on exchange rate differences (S/. 25.5 million).