Unión Andina de Cementos S.A.A. and Subsidiaries€¦ · Net income - - - - 300,686 300,686 (1,414) 299,272 Other comprehensive income for the year, net of income tax - - 1,707 60,357

Unión Andina de Cementos S.A.A. and Subsidiaries

Consolidated financial statements as of December 31, 2014 and 2013 together with the Independent Auditor’s Report


Consolidated financial statements as of December 31, 2014 and 2013

together with the Independent Auditor’s Report

Content

Independent Auditor’s Report

Consolidated financial statements

Consolidated statement of financial position

Consolidated statement of income

Consolidated statement of comprehensive income

Consolidated statement of changes in equity

Consolidated statement of cash flows

Notes to the consolidated financial statements

Inscrita en la partida 11396556 del Registro de Personas Jurídicas de Lima y Callao

Miembro de Ernst & Young Global

Independent Auditors’ Report

Paredes, Zaldívar, Burga & Asociados Sociedad Civil de Responsabilidad Limitada

To the Shareholders of Unión Andina de Cementos S.A.A. and Subsidiaries

We have audited the accompanying consolidated financial statements of Unión Andina de Cementos

S.A.A. (a Peruvian corporation), which comprise the consolidated statements of financial position as

of December 31, 2014 and 2013, and the related consolidated statements of income,

comprehensive income, changes in equity and cash flows for the years ended December 31, 2014

and 2013, and a summary of significant accounting policies and other explanatory notes.

Management responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial

statements in accordance with International Financial Reporting Standards and for the internal

control that Management determines is appropriate to the preparation of consolidated financial

statements that are free from material misstatement, whether due fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our

audits. We conducted our audit in accordance with International Standards on Auditing approved for

application in Peru by the Board of Deans of Institutes of Peruvian Certified Public Accountants.

Those standards require that we comply with ethical standards, and to plan and perform the audit to

obtain reasonable assurance about whether the consolidated financial statements are free from

material misstatements.

An audit involves performing procedures to obtain audit evidence about the amounts and

disclosures in the consolidated financial statements. The procedures selected depend on the

auditor’s judgment, including the assessment of the risks of material misstatement of the

consolidated financial statements, whether due to fraud or error. In making those risk assessments,

the auditor considers internal control relevant to the entity’s preparation and fair presentation of

the consolidated financial statements in order to design audit procedures that are appropriate in the

circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s

internal control. An audit also includes evaluating the appropriateness of accounting policies used

and the reasonableness of accounting estimates made by Management, as well as evaluating the

overall presentation of the consolidated financial statements.

Independent Auditors’ Report (continued)

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis

for our audit opinion.

Opinion

In our opinion, the accompanying consolidated financial statements, present fairly, in all material

aspects, the consolidated financial position of Unión Andina de Cementos S.A.A. and Subsidiaries as

of December 31, 2014 and 2013, and its financial performance and cash flows for the years ended

December 31, 2014 and 2013, in accordance with International Financial Reporting Standards.

Lima, Peru,

March 26, 2015

Countersigned by:

__________________________

Mayerling Zambrano R.

C.P.C.C. Registration No. 23765

The accompanying notes are an integral part of this consolidated statement.


Consolidated statement of financial position As of December 31, 2014 and 2013

Note 2014 2013 S/.(000) S/.(000)

Assets

Current assets

Cash and cash equivalents 6 135,982 322,348

Trade and other receivables, net 7 566,898 415,575

Inventories, net 8 699,682 559,244

Prepaid expenses 9 30,884 29,861

___________ ___________

Total current assets 1,433,446 1,327,028 ___________ ___________

Non-current assets

Trade and other receivables, net 7 61,974 51,837

Investment in associate 3.3(g) 14,812 12,951

Mining concessions and property, plant and

equipment, net 10 7,025,281 6,154,657

Deferred stripping cost 11 135,952 142,815

Intangible assets, net and goodwill 12 1,383,536 220,902

Deferred income tax assets 18(a) 186,084 127,811

Other non-financial assets 13 13,617 1,159

___________ ___________

Total non-current assets 8,821,256 6,712,132 ___________ ___________

Total assets 10,254,702 8,039,160

___________ ___________

Note 2014 2013 S/.(000) S/.(000)

Liability and equity

Current liabilities

Other financial liabilities 14 742,308 892,908

Trade and other payables 15 590,689 390,512

Deferred income 16 62,733 44,495

Liability for income tax 29,522 661

Provisions 17 57,775 24,766 ___________ ___________

Total current liabilities 1,483,027 1,353,342 ___________ ___________

Non-current liabilities

Other financial liabilities 14 4,137,487 2,339,277

Trade and other payables 15 45,265 46,069

Derivative financial instruments 33 41,439 52,307

Deferred income tax liability 18(a) 590,100 598,295

Provisions 17 23,765 13,663 ___________ ___________

Total non-current liabilities 4,838,056 3,049,611 ___________ ___________

Total liabilities 6,321,083 4,402,953 ___________ ___________

Equity 20

Capital stock 1,646,503 1,646,503

Legal reserve 299,214 270,303

Unrealized net loss on hedging financial derivative

instruments (38,096) (39,803)

Result from foreign currency translation 25,292 (35,065)

Retained earnings 1,784,952 1,606,202 ___________ ___________

Equity attributable to equity holders of the parent 3,717,865 3,448,140

Non-controlling interests 19 215,754 188,067 ___________ ___________

Total equity 3,933,619 3,636,207 ___________ ___________

Total liabilities and equity 10,254,702 8,039,160 ___________ ___________



Consolidated statement of income For the years ended December 31, 2014 and 2013

Note 2014 2013 S/.(000) S/.(000)

Net sales 21 3,096,107 2,884,705

Cost of sales 22 (2,074,862) (1,934,587) __________ __________

Gross profit 1,021,245 950,118 __________ __________

Operating income (expenses)

Administrative expenses 23 (261,701) (236,091)

Selling expenses 24 (122,230) (98,561)

Other operating income (expenses), net 26 28,562 (12,221) __________ __________

Total operating expenses, net (355,369) (346,873) __________ __________

Operating profit 665,876 603,245 __________ __________

Other income (expenses)

Gain on sharing in associate, net 3.3(g) 3,165 3,321

Finance income 27 6,506 10,801

Finance costs 28 (221,095) (156,753)

Exchange difference, net 32.1(ii) (145,376) (187,482) __________ __________

Total other income (expenses), net (356,800) (330,113) __________ __________

Income before tax 309,076 273,132

Income tax expense 18(b) (9,804) (79,841) __________ __________

Net income 299,272 193,291 __________ __________

Attributable to:

Equity holders of the parent 300,686 195,294

Non-controlling interests 19 (1,414) (2,003) __________ __________

299,272 193,291 __________ __________

Earnings per share

Basic and diluted, profit for the year attributable to

ordinary equity holders of the parent (S/. per

share) 30 0.183 0.119 __________ __________



Statements of comprehensive income For the years ended December 31, 2014 and 2013

2014 2013 S/.(000) S/.(000)

Net income 299,272 193,291 _________ _________

Other comprehensive income

Changes in the fair value of hedging derivative financial

instruments, note 32.1(i) 6,493 22,422

Income tax effect, note 32.1(i) and 18 (2,042) (5,157)

Result from foreign currency translation 61,753 77,291 _________ _________

Other comprehensive income, net of income tax 66,204 94,556 _________ _________

Total comprehensive income 365,476 287,847 _________ _________

Attributable to:

Equity holders of the parent 362,750 285,609

Non-controlling interests 2,726 2,238 _________ _________

365,476 287,847 _________ _________

Las Notas a los estados financieros consolidados adjuntos son parte integrante de este estado.


Consolidated statement of changes in equity For the years ended December 31, 2014 and 2013

Equity attributable to equity holders of the parent __________________________________________________________________________________________________________

Capital

stock

Legal

reserve

Unrealized net

loss on hedging

financial

derivative

instruments

Result from

foreign currency

translation

Retained

earnings Total

Non-controlling

interests

Total

equity S/.(000) S/.(000) S/.(000) S/.000 S/.(000) S/.(000) S/.(000) S/.(000)

Balance as of January 1, 2013 1,646,503 249,871 (56,321) (108,862) 1,529,497 3,260,688 183,410 3,444,098 __________ __________ __________ __________ __________ __________ __________ __________

Net income - - - - 195,294 195,294 (2,003) 193,291

Other comprehensive income for the year, net of

income tax - - 16,518 73,797 - 90,315 4,241 94,556 __________ __________ __________ __________ __________ __________ __________ __________

Total comprehensive net income - - 16,518 73,797 195,294 285,609 2,238 287,847

Dividend distributions, note 20(d) - - - - (83,971) (83,971) - (83,971)

Transfer to legal reserve, note 20(b) - 20,475 - - (20,475) - - -

Changes in non-controlling interests and other - (43) - - (14,143) (14,186) 2,419 (11,767) __________ __________ __________ __________ __________ __________ __________ __________

Balance as of December 31, 2013 1,646,503 270,303 (39,803) (35,065) 1,606,202 3,448,140 188,067 3,636,207

Net income - - - - 300,686 300,686 (1,414) 299,272

Other comprehensive income for the year, net of

income tax - - 1,707 60,357 - 62,064 4,140 66,204 __________ __________ __________ __________ __________ __________ __________ __________

Total comprehensive net income - - 1,707 60,357 300,686 362,750 2,726 365,476

Dividend distributions, note 20(d) - - - - (85,619) (85,619) - (85,619)

Transfer to legal reserve, note 20(b) - 29,011 - - (29,011) - - -

Changes in non-controlling interests and other - (100) - - (3,278) (3,378) 3,378 -

Non-controlling interests arising on a business

combination, note 2(a) and (b) - - - -

-

-

23,228

23,228

Acquisition of non-controlling interests, note 2(b) - - - - (4,028) (4,028) (1,645) (5,673) __________ __________ __________ __________ __________ __________ __________ __________

Balance as of December 31, 2014 1,646,503 299,214 (38,096) 25,292 1,784,952 3,717,865 215,754 3,933,619 __________ __________ __________ __________ __________ __________ __________ __________



Consolidated statement of cash flows For the years ended December 31, 2014 and 2013

2014 2013 S/.(000) S/.(000)

Operating activities

Collections from customers 3,708,772 3,790,120

Payments to suppliers (2,353,929) (2,765,713)

Payments to employees (300,271) (258,845)

Taxes paid (179,911) (124,824)

Interest paid (194,712) (129,091)

Other payments, net (42,802) (57,327) __________ __________

Net cash flows from operating activities 637,147 454,320 __________ __________

Investing activities

Sale of property, plant and equipment 827 2,240

Purchase of property, plant and equipment (461,891) (356,604)

Purchase of intangible assets (9,345) (15,768)

Acquisition of a subsidiary, net of cash acquired (1,502,675) -

Capital contribution to related (1,950) -

Dividends received 3,322 2,892

Acquisition of land available for sale (13,220) -

Other collections (payments) 2,131 2,313 __________ __________

Net cash flows used in investing activities (1,982,801) (364,927) __________ __________

Financing activities

Proceeds from bank overdrafts and loans 455,536 1,002,382

Proceeds from financial obligations 2,160,655 627,763

Payment of bank overdrafts and loans (649,186) (973,126)

Payment of financial obligations (729,317) (526,758)

Dividends paid (85,619) (83,971)

Acquisition of non-controlling interests (5,673) - __________ __________

Net cash flows from financing activities 1,146,396 46,290 __________ __________

(Net decrease) net increase in cash and cash equivalents (199,258) 135,683

Foreign exchange difference on cash and cash equivalents 12,892 5,456

Cash and cash equivalents at the beginning of the year 322,348 181,209 __________ __________

Cash and cash equivalents at the end of the year 135,982 322,348 __________ __________

Significant non-cash transactions -

Acquisition of property, plant and equipment under finance leasing 69,931 70,229

Otther property, plant and equipment 20,765 -

Other intangible assets 37 -

Compensation of leaseback - 138,156

Capitalized interest - 25,381


Note to the consolidated financial statements As of December 31, 2014 and 2013

1. Economic activity

Unión Andina de Cementos S.A.A. (hereinafter “the Company” or “UNACEM”) was incorporated in

December 1967. The Company is a subsidiary of Sindicato de Inversiones y Administración S.A.

(hereinafter “the Principal”) which holds 43.38 percent of the Company’s capital stock, which in turn is

a subsidiary of Nuevas Inversiones S.A., ultimate parent of the consolidated economic group.

The registered office of the Company is located at Av. Atocongo 2440, Villa María del Triunfo, Lima,

Peru.

The Company’s main activity is the production and sale, for local and foreign sales of cement and

clinker. For this purpose, the Company owns two plants located at Lima and Junin, whose capacity is

6.68 million tonnes of clinker and 7.60 million tonnes of cement.

The consolidated financial statements of the Company and Subsidiaries (hereinafter “the Group”) as of

December 31, 2013 were approved by General Shareholders Meeting held on March 27, 2014. The

consolidated financial statements the year 2014 were approved by Management of Group.

As of December 31, 2014 and 2013, the consolidated financial statements include the financial

statements of the Company and the following subsidiaries:

- Skanon Investments, Inc. – SKANON

It is an entity incorporated in February 2007 in the state of Arizona, United States of America, in

which the Company owns directly and indirectly 95.36 percent share of the capital stock as of

December 31, 2014 (95.06 percent as of December 31, 2013), whose main activity is

investment in securities.

As of December 31, 2014 and 2013, SKANON holds a share in the capital of Drake Cement LLC

of 93.98 and 93.95 percent, respectively. DRAKE is an entity located in the United States of

America, whose main business is the production and marketing of cement in the states of Arizona

and Nevada.

Additionally, SKANON maintains 100 percent stake in the capital of Sunshine Concrete &

Materials, Inc. ("Drake Materials"), an entity located in the United States of America, whose main

activity is the sale of ready-mix concrete, sand and gravel.

Notes to the consolidated financial statements (continued)

2

- Inversiones Imbabura S.A. - IMBABURA

On July 2014, the Company established IMBABURA and owns directly and indirectly the 100

percent of the shares of capital. IMBABURA main activity is investment in securities in entities

domiciled in Ecuador, mainly dedicated to the cement industry related activities, ready-mixed

concrete, building materials and related activities.

IMBABURA´s subsidiaries are entities that belong to the group UNACEM Ecuador S.A. ("UNACEM

Ecuador" formerly Lafarge Cement S.A.) and subsidiaries, whose main activity is the exploitation,

industrialization cement and its derivatives and related services. Due to that the acquisition of

UNACEM Ecuador was realized on November 25, 2014, the income for the consolidated

statements of income correspond to 37 days after the date of control´s took until December 31,

2014, for more details see note 2(b).

- Compañía Eléctrica El Platanal S.A. – CELEPSA

It is an entity incorporated in December 2005, direct subsidiary of the Company who owns 90

percent share of the capital stock. The main activity of CELEPSA is the generation and sale of

electricity using water resources.

On November 2014, CELEPSA acquired Hidroeléctrica Marañón S.C.R.L. ("HIDRO Marañón") with

purpose of to implement the project of the future Marañon´s Hydroelectric Central. CELEPSA

owns directly and indirectly 100 percent share of the capital stock, for more details see note

2(c).

- Inversiones en Concreto y Afines S.A. - INVECO

It is an entity constituted in Lima in April 1996, Company´s direct subsidiary, who owns 93.38

percent share of the capital stock. It is dedicated to investing in companies principally engaged in

supplying concrete pre-mixed, building materials and related activities through its subsidiary

Union Concreteras S.A., which holds 99.99 per cent stake, which in turn owns 99.99 percent of

Firth Industries Perú S.A., dedicated to the same category.

- Unión de Concreteras S.A. – UNICON

It is an entity constituted in December 1995, Company´s indirect subsidiary, through INVECO

holds 99.99 percent share of the capital stock. UNICON main activity is the development and

commercialization of concrete, and to a lesser extent related products such as bricks and

concrete sleepers. For the preparation of concrete, UNICON requires mainly cement, stone, sand

and additives.

- Firth Industries Perú S.A. – FIRTH

It is an entity constituted in March 1995, Company´s indirect subsidiary, through INVECO holds

99.99 percent share of the equity shares of UNICON who in turn holds 99.99 percent of the

shares of capital FIRTH since October 10, 2011. The main activity FIRTH is the development and

commercialization of concrete, and to a lesser extent related products such as pre-stressed

beams, bagged products and aggregates.


3

- Prefabricados Andinos Perú S.A.C. – PREANSA Perú

It is an entity constituted in October 2007, Company´s direct subsidiary, who holds 50.02 and

50.00 percent share of the capital stock as of December 31, 2014 and 2013, respectively. The

main activity is the manufacture PREANSA Perú prestressed concrete and precast concrete

structures, as well as marketing, both in Peru and abroad.

In May 2013, PREANSA Perú constituted Prefabricados Andinos Colombia S.A.S. (Preansa

Colombia), an indirect subsidiary of the Company, with a share of the capital stock of 100

percent. Preansa Colombia is in pre-operational stage and its main activity is the manufacture of

prestressed and precast concrete structures as well as commercial activities in Colombia. In

2015 the construction of the plant will start in 2016 and begin operations.

- Prefabricados Andinos S.A. – PREANSA Chile

It is an entity constituted in November 1996, Company´s direct subsidiary since January 2014,

which owns 51 percent share of the capital stock. PREANSA Chile´s main activity is the

manufacture prestressed and precast concrete structures as well as marketing in Chile, see

details in note 2(a).

- Transportes Lurín S.A. – LURIN

It is an entity constituted in June 1990, Company´s direct subsidiary, which holds 99.99 percent

share of the capital stock. LURIN main activity is investment in securities, mainly in Skanon

Investment Inc. (a company incorporated in the United States of America).

- Generación Eléctrica de Atocongo S.A. - GEA

It is an entity constituted in May 1993, Company´s direct subsidiary, which holds directly and

indirectly 100 percent ownership of the shares of capital. GEA's main activity is the generation

and sale of electricity to the Company. As of February 15, 2013, the Ministry of Energy and

Mines granted the authorization to UNACEM to perform activities of power generation directly,

consequently, from that date; the Company signed a contract with GEA to take charge Operation

of the power plant.

- Depósito Aduanero Conchán S.A. - DAC

It is an entity constituted in July 1990, Company´s direct subsidiary, who owns 99.50 percent

share of the capital stock. DAC's main activity is the provision of warehousing services, goods

and merchandise Authorized owned and third customs warehouse and promotion services,

transportation, storage, management and delivery of cement manufactured by the Company.


4

The table below shows the summary of the main items of the financial statements of subsidiaries controlled by the Group as of December 31, 2013 and 2014:

Percentage of participation Assets Liabilities Equity Income (loss) ________________________________________________________ _________________________ _________________________ _________________________ ______________________

Entity Economic activity 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 ____________________________ ____________________________

Direct Indirect Direct Indirect S/.(000) S/.(000) S/.(000) S/.(000) S/.(000) S/.(000) S/.(000) S/.(000)

Skanon Investments Inc. and Subsidiaries (*)

Cement and

concrete 86.85 8.51 86.03 9.03 1,449,753 1,305,761 504,392 416,622 945,361 889,139 (72,270) (62,537)

Inversiones Imbabura S.A and Subsidiaries (**) Cement 100.00 - - - 1,817,120 - 276,332 - 1,540,788 - 10,669 -

Compañía Eléctrica El Platanal S.A. and

Subsidiaries (***)

Electrical energy

and power 90.00 - 90.00 - 1,169,937 1,119,839 498,846 470,525 671,091 649,314 17,614 1,812

Unión de Concreteras S.A. Concrete - 93.37 - 93.37 713,713 625,093 378,203 366,106 335,510 258,987 82,958 39,198

Firth Industries Perú S.A. Concrete - 93.36 - 93.36 183,667 183,948 101,965 86,840 81,702 97,108 4,594 9,129

Inversiones en Concreto y Afines S.A. Holding 93.38 - 93.38 - 132,286 132,311 391 400 131,895 131,911 (16) (13)

Prefabricados Andinos Perú S.A.C. and

Subsidiary

Prefabricated 50.02 - 50.00 - 44,324 47,369 8,688 12,990 35,636 34,379 1,488 3,377

Prefabricados Andinos S.A., nota 2(a) Prefabricated 51.00 - - - 87,113 - 53,187 - 33,926 - 3,486 -

Transportes Lurín S.A. Holding 99.99 - 99.99 - 34,889 34,779 22 119 34,867 34,660 51 (17)

Generación Eléctrica de Atocongo S.A. Services 99.85 0.15 99.85 0.15 1,662 4,168 491 803 1,171 3,365 806 1,332

Depósito Aduanero Conchán S.A.

Storage

management 99.50 - 99.50 - 1,608 1,772 627 694 981 1,078 (97) 284

(*) This entity mainly includes the subsidiaries located in the United States of America, which are: Drake Cement, LLC, Sunshine Concrete & Materials, Inc., Maricopa Ready Mix, LLC, Ready Mix, Inc., Staten Island Terminal. , LLC, Staten Island Holdings, LLC and Desert Ready

Mix.

(**) Entity constituted in the year 2014, which acquired Ecuadorian entities: UNACEM Ecuador S.A. (formerly Lafarge Cement S.A.), Lafarge Cementos Services S.A. and Canteras y Voladuras S.A., see more detail in note 2 (b).

(***) CELEPSA´s subsidiaries, are: Ambiental Andina S.A., Celepsa Renovables S.A.C. and Hidroeléctrica Marañón S.C.R.L. On November 2014, acquired Hidroeléctrica Marañón S.C.R.L., see more detail in note 2(c).


5

2. Business combinations and acquisition of non-controlling interests

(a) Acquisition of Prefabricados Andinos S.A. –

On January 2014, the Group acquired 51 percent of the voting shares of Prefabricados Andinos

S.A. (hereinafter “Preansa Chile”) an unlisted company, dedicated in manufacturing, sales and

rentals of all kinds of construction products especially precast concrete structures.

The Group acquired Preansa Chile because it significantly helps to form a group of companies in

South American (Peru, Colombia and Chile), that generates synergies, optimizations of expenses

and can share engineering experience between countries.

The fair value of the identifiable assets and liabilities of Preansa Chile as of the date of acquisition

were:

Fair value

recognized on

acquisition

S/.(000)

Assets

Cash and cash equivalents 924

Trade and other receivables, net 26,301

Inventories 18,191

Property, plant and equipment, net 36,871

Intangible assets, net 218

Other assets 2,627 _________

85,132 _________

Liability

Trade and other payables (8,900)

Other financial liabilities (30,257)

Other liabilities (13,007) _________

(52,164) _________

Total identifiable net assets at fair value 32,968

Non-controlling interest measured at fair value (16,154)

Goodwill arising on acquisition, note 12(c) 3,207 _________

Purchase consideration transferred 20,021 _________

Net cash acquired with the subsidiary 924

Cash paid (20,021) _________

Net cash flow on acquisition (19,097) _________


6

The Group elected to measure the non-controlling interest in the acquiree at the proportionate

share of its interest in the acquiree’s identifiable net assets.

At the date of the acquisition, the fair value of the trade receivables was S/.26,301,000. The

gross amount of trade receivables is S/.27,007,000. The difference between the fair value and

the gross amount is the result of discounting over the expected timing of the cash collection and

an adjustment for counterparty credit risk. As of December 31, 2014, none of the trade

receivables have been impaired.

As of December 31, 2014, the valuation was completed and was determined the final fair value

of the identifiable net assets of Preansa Chile.

Since the acquisition date, has contributed Preansa Chile S/.61,630,000 and S/.3,486,000 for

income and income before income taxes, respectively, for continuing operations.

The goodwill recognized is mainly attributed to the expected synergies and other benefits from

combining the assets and activities of Preansa Chile with the Group.

The transaction costs of buying Preansa Chile for approximately S/.109,000 are included in

administrative expenses in the consolidated statement of income and are part of operating cash

flows in the consolidated statement of cash flows.

(b) Acquisition of UNACEM Ecuador S.A. (formerly Lafarge Cementos S.A.) and Subsidiaries -

On July 16, 2014, the Company constituted Inversiones Imbabura S.A. with the purpose of which

is the vehicle to purchase shares of UNACEM Ecuador S.A. (formerly Lafarge Cement S.A.)

On November 25, 2014, IMBABURA acquired 98.57 percent of total shares representing of

Lafarge´s capital and took control of the operations thereof, whose economic activity is the

production and sale of cement in Ecuador with a capacity of production of 1.4 million tonnes of

cement per year. At the date of acquisition, UNACEM Ecuador are:

(i) Lafarge Cementos Services S.A., dedicated to the activity of advice in accounting,

advertising, audit and legal; and

(ii) Canteras y Voladuras S.A. which is dedicated to conducting mining activities, operation

and sales of all kinds of mineral, smelting, refining and alloys of non-ferrous metals such

as copper, lead, chromium, magnesium, zinc, aluminum, nickel, and tin.

The Group acquired UNACEM Ecuador and Subsidiaries, as part of the strategy of consolidation

and diversification of our cement and prefabricated in the region. It also seeks to generate

synergies, cost optimization and engineering experience sharing among countries.


7

The fair value of the assets and liabilities of UNACEM Ecuador and Subsidiaries as of the date of

acquisition were:

Fair value

recognized on

acquisition

S/.(000)

Assets

Cash and cash equivalents 41,328


Inventories, net 70,053

Property, plant and equipment 529,875

Intangible assets, net 129,373

Deferred income tax asset 101

Other assets 88 _________

800,017 _________

Liabilities

Other financial liabilities (147,347)

Trade and other payables (91,685)

Deferred income tax liability (57,335)

Provisions (10,591) _________

(306,958) _________

Total identifiable net assets at fair value 493,059

Non-controlling interest measured at fair value (7,074)

Goodwill arising on acquisition, note 12(c) 1,029,058 _________

Purchase consideration transferred 1,515,043 ________

Net cash acquired with the subsidiary 41,328

Cash paid (1,515,043) _________

Net cash flow on acquisition (1,473,715) ________

As of December 31, 2014, the Group´s Management has made its best estimate regarding this

transaction; however, according to IFRS 3, the Group´s Management has a period of one year

from the date of purchase to establish the final asset and liability fair values of UNACEM Ecuador.

In the opinion Group´s Management, significant changes in its initial assessment should not exist.

The Group decided to measure the non-controlling interest at its proportionate interest in the

identifiable net assets acquired.


8

Since the date of acquisition, UNACEM Ecuador and Subsidiaries have contributed

S/.52,041,000 and S/.10,756,000 of income and income before income taxes, respectively,

from continuing operations. If the combination had taken place at the beginning of the year,

income from continuing operations would have been S/.558,311,000 and income before tax

from continuing operations would have been S/.167,583,000.

The goodwill is mainly attributable to the expected synergies and other benefits from combining

the assets and activities UNACEM Ecuador and Subsidiaries with the Group.

Acquisition of an additional interest in UNACEM Ecuador and Subsidiaries –

In December 2014, the Group acquired an additional 0.32 percent of the shares with right to

vote of UNACEM Ecuador and increasing its ownership interest to 98.89 percent. Non-controlling

shareholders received a cash payment of US$1,916,000 (equivalent to S/.5,673,000). The

carrying amount of the net assets of UNACEM Ecuador (excluding the gain arising on the original

acquisition) at that date was S/.514,072,000. Then the additional interest acquired is as follows:

S/.(000)

Cash consideration paid to non-controlling shareholders 5,673

Carrying value of the additional interest (1,645) _________

Difference recognized in retained earnings 4,028 ________

(c) Acquisition of Hidroeléctrica Marañón S.C.R.L. –

On November 2014, CELEPSA and its subsidiary Celepsa Renovables S.A.C. acquired 100

percent of the shares of Hidroeléctrica Marañón S.C.R.L. with the purpose of implement the

future project Hydroelectric Central´s Marañon, with waters of the Marañon River to 2,900

m.s.n.m., near the town of Nuevas Flores, Huamalíes province, Huanuco city, Peru.

The project, with a final generation concession to 88 MW, has been recast in 20 MW to increase

factor of firm ground, while reducing construction (geological), environmental and social risks.

The work is already underway and is expected to be operating the plant on December 2016.


9

The fair value of the assets and liabilities of Hidroeléctrica Marañón as of the date of acquisition

were:

Fair value

recognized on

acquisition S/.(000)

Assets

Cash and cash equivalents 4,638


Mining concessions and property, plant and equipment, net 34,712

Intangible assets, net 933

Deferred income tax asset 1,871 _________

45,122 _________

Liabilities

Trade and other payables (30,621) _________

Total identifiable net assets at fair value 14,501 _________

Goodwill arising on acquisition - _________

Purchase consideration transferred 14,501 _________

Net cash acquired with the subsidiary 4,638

Cash paid (14,501) _________

Net cash flow on acquisition (9,863) _________

3. Summary of significant accounting policies

3.1 Basis of preparation -

The consolidated financial statements have been prepared in accordance to International

Financial Reporting Standards (hereinafter “IFRS”) issued for the International Accounting

Standards Board (hereinafter “IASB “) prevailing as of December 31, 2014.

The financial consolidated statements have been prepared on a historical cost basis, except for

derivative financial instruments that have been measured at fair value, from the accounting

records of each of the subsidiaries in the Group. The consolidated financial statements are

presented in Nuevos Soles and all values are rounded to the nearest thousand (S/.000), except

when otherwise indicated.

The accounting policies adopted are consistent with those applied in previous years, the only

exception being t that the Group has adopted the new IFRS and revised IAS that are mandatory

for periods beginning on or after January 1, 2014, as described below; however, due to the

structure of the Company and nature of its operations, the adoption of these standards did not,

have a significant effect on its financial position and results, therefore, it has not been necessary

to modify the comparative consolidated financial statements of the Group.


10

- Investment entities. Amendments to IFRS 10, IFRS 12 and IAS 27

These amendments provide an exception to the consolidation requirement for entities that

meet the definition of an “investment entity” under IFRS 10 Consolidated Financial

Statements and must be applied retrospectively, subject to certain transition relief. The

exception to consolidation requires investment entities to account for subsidiaries at fair

value through profit or loss. These amendments have no impact on the Company, since

none of the entities in the Group qualifies to be an investment entity under IFRS 10.

- Offsetting financial assets and financial liabilities. Amendments to IAS 32

These amendments clarify the meaning of “currently has a legally enforceable right to set-

off” and the criteria for non-simultaneous settlement mechanisms of clearing houses to

qualify for offsetting and is applied retrospectively. These amendments have no impact on

the Group, since none of the entities in the Company has any offsetting arrangements.

- Novation of derivatives and continuation of hedge accounting. Amendments to IAS 39

These amendments provide relief from discontinuing hedge accounting when novation of

a derivative designated as a hedging instrument meets certain criteria and retrospective

application is required. These amendments have no impact on the Group since it has not

novated its derivatives during the current or prior periods.

- IFRIC 21 Levies

IFRIC 21 clarifies that an entity recognizes a liability for a levy when the activity that

triggers payment, as identified by the relevant legislation, occurs. For a levy that is

triggered upon reaching a minimum threshold, the interpretation clarifies that no liability

should be anticipated before the specified minimum threshold is reached. Retrospective

application is required for IFRIC 21. This interpretation has no impact on the Group as it

has applied the recognition principles under IAS 37 Provisions, Contingent Liabilities and

Contingent Assets consistent with the requirements of IFRIC 21 in prior years.

- Annual Improvements 2010-2012 Cycle

In the 2010-2012 annual improvements cycle, the IASB issued seven amendments to six

standards, which included an amendment to IFRS 13 Fair Value Measurement. The

amendment to IFRS 13 is effective immediately and, thus, for periods beginning on

January 1st, 2014, and it clarifies in the Basis for Conclusions that short-term receivables

and payables with no stated interest rates can be measured at invoice amounts when the

effect of discounting is immaterial. This amendment to IFRS 13 has no impact on the

Group.

- Annual Improvements 2011-2013 Cycle

In the 2011-2013 annual improvements cycle, the IASB issued four amendments to four

standards, which included an amendment to IFRS 1 First-time Adoption of International

Financial Reporting Standards. The amendment to IFRS 1 is effective immediately and,

thus, for periods beginning a on January 1st, 2014, and clarifies in the Basis for

Conclusions that an entity may choose to apply either a current standard or a new

standard that is not yet mandatory, but permits early application, provided either


11

standard is applied consistently throughout the periods presented in the entity’s first IFRS

financial statements. This amendment to IFRS 1 has no impact on the Group, since it

already prepares its financial statements consistent with IFRS and is not a first-time

adopter of IFRS.

3.2 Basis of consolidation -

The consolidated financial statements comprise the financial statements of the Group and its

subsidiaries as of December 31, 2014. Control is achieved when the Group is exposed, or has

rights, to variable returns from its involvement with the investee and has the ability to affect

those returns through its power over the investee.

Specifically, the Group controls an investee if, and only if, the Group has:

- Power over the investee (i.e., existing rights that give it the current ability to direct the

relevant activities of the investee).

- Exposure, or rights, to variable returns from its involvement with the investee.

- The ability to use its power over the investee to affect its returns.

When the Group has less than a majority of the voting or similar rights of an investee, the Group

considers all relevant facts and circumstances in assessing whether it has power over an

investee, including:

- The contractual arrangement with the other vote holders of the investee.

- Rights arising from other contractual arrangements.

- The Group’s voting rights and potential voting rights.

The Group re-assesses whether or not it controls an investee if facts and circumstances indicate

that there are changes to one or more of the three elements of control. Consolidation of a

subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group

loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired

or disposed of during the year are included in the consolidated financial statements from the date

the Group gains control until the date the Group ceases to control the subsidiary.

Profit or loss and each component of other comprehensive income (OCI) are attributed to the

equity holders of the parent of the Group and to the non-controlling interests, even if this results

in the non-controlling interests having a deficit balance. When necessary, adjustments are made

to the financial statements of subsidiaries to bring their accounting policies into line with the

Group’s accounting policies. All intra-group assets and liabilities, equity, income, expenses and

cash flows relating to transactions between members of the Group are eliminated in full on

consolidation.

A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as

an equity transaction.


12

If the Group loses control over a subsidiary, it derecognizes the related assets (including

goodwill), liabilities, non-controlling interest and other components of equity while any resultant

gain or loss is recognized in profit or loss. Any investment retained is recognized at fair value.

3.3 Summary of significant accounting policies -

The following are the significant accounting policies applied by the Group’s Management in

preparing its consolidated financial statements:

(a) Business combinations and goodwill -

Business combinations

Business combinations are accounted for using the acquisition method. The cost of an

acquisition is measured as the aggregate of the consideration transferred measured at

acquisition date fair value and the amount of any non-controlling interests in the acquiree.

For each business combination, the Group elects whether to measure the non-controlling

interests in the acquiree at fair value or at the proportionate share of the acquiree’s

identifiable net assets. Acquisition-related costs are expensed as incurred and included in

the caption “Administrative expenses” in the consolidated statement of income.

When the Group acquires a business, it assesses the financial assets and liabilities

assumed for appropriate classification and designation in accordance with the contractual

terms, economic circumstances and pertinent conditions as at the acquisition date.

If the business combination is achieved in stages, any previously held equity interest is re-

measured at its acquisition date fair value and any resulting gain or loss is recognized in

profit or loss.

Any contingent consideration to be transferred by the acquirer will be recognized at fair

value at the acquisition date. Contingent consideration classified as an asset or liability

that is a financial instrument and within the scope of IAS 39 “Financial Instruments:

Recognition and Measurement”, is measured at fair value with changes in fair value

recognized either in either profit or loss or as a change to OCI. Contingent consideration

that is classified as equity is not re-measured and subsequent settlement is accounted for

within equity.

Goodwill

Goodwill is initially measured at cost, being the excess of the aggregate of the

consideration transferred and the amount recognized for non-controlling interests, and

any previous interest held, over the net identifiable assets acquired and liabilities

assumed. If the fair value of the net assets acquired is in excess of the aggregate

consideration transferred, the Group re-assesses whether it has correctly identified all of

the assets acquired and all of the liabilities assumed and reviews the procedures used to

measure the amounts to be recognized at the acquisition date.

If the re-assessment still results in an excess of the fair value of net assets acquired over

the aggregate consideration transferred, then the gain is recognized in profit or loss.


13

After initial recognition, goodwill is measured at cost less any accumulated impairment

losses. For the purpose of impairment testing, goodwill acquired in a business combination

is, from the acquisition date, allocated to each of the Group’s cash-generating units that

are expected to benefit from the combination, irrespective of whether other assets or

liabilities of the acquire are assigned to those units.

Where goodwill has been allocated to a cash-generating unit and part of the operation

within that unit is disposed of, the goodwill associated with the disposed operation is

included in the carrying amount of the operation when determining the gain or loss on

disposal. Goodwill disposed in these circumstances is measured based on the relative

values of the disposed operation and the portion of the cash-generating unit retained.

(b) Cash and cash equivalents -

Cash and cash equivalents in the consolidated statement of financial position comprise

petty cash, funds to deposit, demand deposits and time deposits with a maturity of three

month or less. For the purpose of the consolidated statement of cash flows, cash and cash

equivalents consist of cash and short–term deposits as defined above.

(c) Financial instruments: initial recognition and subsequent measurement -

(i) Financial assets -

Initial recognition and measurement –

Financial assets within the scope of the International Accounting Standard (IAS) 39

"Financial Instruments: Recognition and Measurement", at the moment of initial

recognition, as financial assets at fair value through profit or loss, loans and

receivables, held-to-maturity investments, available-for-sale financial investments,

or as derivatives designated as hedging instruments in an effective hedge, as

appropriate.

All financial assets are recognized initially at fair value plus, in the case of assets

not at fair value with changes through profit or loss, the transaction costs are

attributable to the acquisition of the financial asset.

Purchases or sales of financial assets that require delivery of assets within a time

frame established by regulation or convention in the market place are recognized

on the date that the Group commits to purchase or sell such assets.

The Group financial assets include cash and cash equivalents, trade and other

receivables and derivative financial instruments.


14

Subsequent measurement -

For purposes of subsequent measurement, financial assets are classified in four

categories:

- Financial assets at fair value through profit or loss;

- Loans and receivables;

- Held-to-maturity investments; and

- Available-for-sale financial investments

Financial assets at fair value through profit or loss -

Financial assets at fair value through profit or loss includes financial assets held for

trading and financial assets designated upon initial recognition as at fair value

through profit or loss. Financial assets are classified as held for trading if they are

acquired for the purpose of selling or repurchasing in the near term.

This category includes derivative financial instruments entered into by the

Company that are not designated as hedging instruments in hedge relationships as

defined by IAS 39.

Loans and receivables -

Loans and receivables are non-derivative financial assets with fixed or

determinable payments that are not quoted in an active market. After initial

measurement, such financial assets are subsequently measured at amortized cost

using the effective interest rate method (EIR), less impairment provisions. The

amortized cost is calculated by taking into account any discount or premium on

acquisition and fees or costs that are an integral part of the EIR. The amortization

of EIR is included in the finance income in the income statement. The losses arising

from impairment are recognized as finance cost in the consolidated statements of

income.

Held-to-maturity investments -

Non-derivative financial assets with fixed or determinable payments and fixed

maturities are classified as held-to-maturity investments when the Group has the

positive intention and ability to hold them to maturity.

The Group did not have any held-to-maturity investments as of December 31, 2014

and 2013.

Available-for-sale financial assets -

Are those designated as such, as they are kept indefinitely and may be sold due to

liquidity needs or changes in interest rates, exchange rates or equity prices; or not

qualified to be classified as at fair value through the income statement or held to

maturity.


15

After initial recognition, available-for-sale financial investments are measured at

fair value. The unrealized gains or losses are recognized directly in the equity,

under caption “unrealized gains or losses”, net of deferred income tax. When the

financial investment is sold, the cumulative gain or loss previously recognized

under net equity is now recognized in the income statement under caption “Finance

costs” or “Finance income”, accordingly.

Dividends earned throughout the investment timeframe are recognized in the

consolidated income statement when the right to collect is established.

The Group has not classified any financial asset as an available-for-sale financial

assets as of December 31, 2014 and 2013.

Derecognition -

A financial asset (or, where applicable, a part of a financial asset or part of a group

of similar financial assets) is derecognized when:

- The rights to receive cash flow from such asset have expired;

- The Group has transferred its rights to receive cash flows from the asset or

has assumed an obligation to pay the received cash flows in full without

material delay to a third party under a “pass through” agreement; and

either (a) the Group has transferred substantially all the risks and rewards of

the asset, or (b) the Group has neither transferred nor retained substantially

all the risks and rewards of the asset, but has transferred control of the

asset.

When the Group has transferred its contractual rights to receive cash flows from an

asset or has entered into a pass-through arrangement, and has neither transferred

nor retained substantially all of the risks and rewards of the asset nor transferred

control of it, the asset is recognized to the extent of the Company’s continuing

involvement in it. In that case, the Group also recognizes an associated liability.

The transferred asset and the associated liability are measured on a basis that

reflects the rights and obligations that the Group has retained.

(ii) Impairment of financial assets -

The Group assess at each reporting date whether there is any objective evidence

that a financial asset or a group of financial assets is impaired. A financial asset or

a group of financial assets is deemed to be impaired if, and only if, there is

objective evidence of impairment as a result of one or more events that has

occurred after the initial recognition of the asset (an incurred “loss event”) and

that loss event has an impact on the estimated future cash flows of the financial

asset or the group of financial assets that can be reliably estimated. Evidence of

impairment may include indications that the debtors or a group of debtors is

experiencing significant financial difficulty, default or delinquency in interest or

principal payments, the probability that they will enter bankruptcy or other


16

financial reorganization and where observable data indicate that there is a

measurable decrease in the estimated future cash flows, such as changes in arrears

or economic conditions that correlate with defaults.

Financial assets carried at amortized cost -

For financial assets carried at amortized cost, the Group first assesses whether

objective evidence of impairment exists individually for financial assets that are

individually significant, or collectively for financial assets that are not individually

significant. If the Group determines that no objective evidence of impairment for an

individually assessed financial asset, whether significant or not, it includes the

asset in a group of financial assets with similar credit risk characteristics and

collectively assesses them for impairment. Assets that are individually assessed for

impairment and for which an impairment loss is, or continues to be, recognized are

not included in a collective assessment of impairment.

If there is objective evidence that an impairment loss has been incurred, the

amount of the loss is measured as the difference between the assets carrying

amount and the present value of estimated future cash flows (excluding future

expected credit losses that have not yet been incurred). The present value of the

estimated future cash flows is discounted at the financial asset’s original effective

interest rate. If a loan has a variable interest rate, the discount rate for measuring

any impairment loss is the current effective interest rate.

The carrying amount of the asset is reduced through the use of an allowance

account and the amount of the loss is recognized in the consolidated income

statement. Interest income continues to be accrued on the reduced carrying

amount and is accrued using the interest rate used to discount the future cash

flows for the purpose of measuring the impairment loss.

The interest income is recorded as part of finance income in the consolidated

statement of income. Loans together with the associated allowance are written off

when there is no realistic prospect of future recovery and all collateral has been

realized or has been transferred to the Group. If, in a subsequent year, the amount

of the estimated impairment loss increases or decreases because of an event

occurring after the impairment was recognized, the previously recognized

impairment loss is increased or reduced by adjusting the allowance account. If the

estimated loss decreases, the reversal shall not result in a carrying amount of the

financial asset that exceeds what the amortized cost would have been had the

impairment not been recognized at the date the impairment is reversed. If a future

write-off is later recovered, the recovery is credited to finance costs in the

consolidated statement of income.


17

(iii) Financial liabilities -

Initial recognition and measurement -

Financial liabilities within the scope of IAS 39 are classified as financial liabilities at

fair value through profit or loss, loans and borrowings, or as derivatives designated

as hedging instruments in an effective hedge, as appropriate. The Group

determines the classification of its financial liabilities at initial recognition.

All financial liabilities are recognized initially at fair value and, in the case of loans

and borrowings, carried at amortized cost. This includes directly attributable

transaction costs.

As of December 31, 2014 and 2013, the Group’s financial liabilities include other

financial liabilities, trade and other payables and derivative financial instruments.

Subsequent measurement -

The subsequent measurement of financial liabilities depends on their classification

as follows:

Financial liabilities at fair value through profit or loss -

Financial liabilities at fair value through profit or loss include financial liabilities held

for trading and financial liabilities designated upon initial recognition as at fair

value through profit or loss.

Financial liabilities are classified as held for trading if they are acquired for the

purpose of selling in the near term. This category includes financial derivative

instruments which are not designated as hedge instruments as required by IAS 39.

The embedded derivatives are also classified as negotiable, unless they are

designated as effective hedge instruments. Gains or losses on liabilities held for

trading are recognized in the consolidated statement of income.

Loans and borrowings -

After their initial recognition, interest-bearing loans and borrowings are

subsequently measured at amortized cost using the effective interest rate method.

Gains and loss are recognized in the statement of income when the liabilities are

derecognized as well as through the effective interest rate method (EIR)

amortization process. Amortized cost is calculated by taking into account any

discount or premium on acquisition and fees or costs that are an integral part of

the EIR. The EIR amortization is included in the finance costs in the statement of

income.

Derecognition -

A financial liability is derecognized when the obligation under the liability is

discharged or cancelled or expired. When an existing financial liability is replaced

by another one from the same lender on substantially different terms, or the terms

are substantially modified, such replacement or amendment is treated as a

derecognition of the original liability and the recognition of a new liability, and the


18

difference in the respective carrying amount is recognized in the consolidated

statement of income.

(iv) Offsetting of financial instruments -

Financial assets and financial liabilities are offset and the net amount reported in

the consolidated statement of financial position if, and only if, there is a currently

enforceable legal right to offset the recognized amounts and there is an intention

to settle on a net basis, or to realize the assets and settle the liabilities

simultaneously.

(v) Fair value of financial instruments -

The Group measures financial instruments, such as, derivatives at fair value at

each consolidated statement of financial position date.

Fair value is the price that would be received to sell an asset or paid to transfer a

liability in an orderly transaction between market participants at the measurement

date. The fair value measurement is based on the presumption that the transaction

to sell the asset or transfer the liability takes place either:

- In the principal market for the asset or liability, or

- In the absence of a principal market, in the most advantageous market for

the asset or liability.

The principal or the most advantageous market must be accessible by the Group.

The fair value of an asset or a liability is measured using the assumptions that

market participants would use when pricing the asset or liability, assuming that

market participants act in their economic best interest.

A fair value measurement of a non-financial asset takes into account a market

participant's ability to generate economic benefits by using the asset in its highest

and best use or by selling it to another market participant that would use the asset

in its highest and best use.

The Group uses valuation techniques that are appropriate in the circumstances and

for which sufficient data are available to measure fair value, maximizing the use of

relevant observable inputs and minimizing the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the

consolidated financial statements are categorized within the fair value hierarchy,

described as follows, based on the lowest level input that is significant to the fair

value measurement as a whole:

- — Quoted (unadjusted) market prices in active markets for identical

assets or liabilities.


19

- — Valuation techniques for which the lowest level input that is

significant to the fair value measurement is directly or indirectly observable.

- vel 3 — Valuation techniques for which the lowest level input that is

significant to the fair value measurement is unobservable.

For assets and liabilities that are recognized in the consolidated financial

statements on a recurring basis, the Group determines whether transfers have

occurred between Levels in the hierarchy by re-assessing categorization (based on

the lowest level input that is significant to the fair value measurement as a whole)

at the end of each reporting period.

The Group’s Management determines the policies and procedures for both

recurring fair value measurement. At each reporting date, the Group’s

Management analyses the movements in the values of assets and liabilities which

are required to be re-measured or re-assessed as per the Group’s accounting

policies.

For the purpose of fair value disclosures, the Group has determined classes of

assets and liabilities on the basis of the nature, characteristics and risks of the

asset or liability and the level of the fair value hierarchy as explained above.

An analysis of fair values of financial instruments and further details as to how they

are measured are provided in Note 33.

Derivative financial instruments -

Initial recognition and subsequent measurement -

The Group uses derivative financial instruments, such as forward currency

contracts and interest rate swaps contracts, to hedge its foreign currency risks and

interest rate risks, respectively. Such derivative financial instruments are initially

recognized at fair value on the date on which a derivative contract is entered into

and are subsequently re-measured at fair value. Derivatives are carried as financial

assets when the fair value is positive and as financial liabilities when the fair value

is negative.

The purchase contracts that meet the definition of a derivative under IAS 39 are

recognized in the consolidated statement of income as costs. Commodity contracts

that are entered into and continue to be held for the purpose of the receipt or

delivery of a non-financial item in accordance with the Group’s expected purchase,

sale or usage requirements are held at cost.

Any gains or losses arising from changes in the fair value of derivatives are taken

directly to consolidated profit or loss, except for the effective portion of cash flow

hedges, which is recognized in consolidated of other comprehensive income and

later reclassified to profit or loss when the hedge item affects profit or loss.


20

For the purpose of hedge accounting, hedges are classified as:

- Fair value hedges when hedging the exposure to changes in the fair value of

a recognized asset or liability or an unrecognized firm commitment;

- Cash flow hedges when hedging the exposure to variability in cash flows that

is either attributable to a particular risk associated with a recognized asset

or liability or a highly probable forecast transaction or the foreign currency

risk in an unrecognized firm commitment; or

- Hedges of a net investment in a foreign operation.

At the inception of a hedge relationship, the Group formally designates and

documents the hedge relationship to which the Company wishes to apply hedge

accounting, the risk management objective and strategy for undertaking the hedge.

The documentation includes identification of the hedging instrument, the hedged

item or transaction, the nature of the risk being hedged and how the Group will

assess the effectiveness of changes in the hedging instrument’s fair value in

offsetting the exposure to changes in the hedged item’s fair value or cash flows

attributable to the hedged risk.

The Group expects that such hedges are to be highly effective in achieving

offsetting changes in fair value or cash flows. The Group assessed on an ongoing

basis to determine that they actually have been highly effective throughout the

financial reporting periods for which they were designated.

Hedges that meet the strict criteria for hedge accounting are accounted for, as

described below:

Fair value hedges -

The change in the fair value of a hedging derivative is recognized in the

consolidated statement of profit or loss as finance costs. The change in the fair

value of the hedged item attributable to the risk hedged is recorded as part of the

carrying value of the hedged item and is also recognized in the consolidated

statement of income as finance costs.

For fair value hedges relating to items carried at amortized cost, any adjustment to

carrying value is amortized through profit or loss over the remaining term of the

hedge using the EIR method. EIR amortization may begin as soon as an adjustment

exists and no later than when the hedged item ceases to be adjusted for changes in

its fair value attributable to the risk being hedged.

If the hedged item is derecognized, the unamortized fair value is recognized

immediately in consolidated profit or loss.


21

When an unrecognized firm commitment is designated as a hedged item, the

subsequent cumulative change in the fair value of the firm commitment

attributable to the hedged risk is recognized as an asset or liability with a

corresponding gain or loss recognized in consolidated profit and loss.

Cash flow hedges -

The effective portion of the gain or loss on the hedging instrument is recognized in

OCI in the cash flow hedge reserve, while any ineffective portion is recognized

immediately in the consolidated statement of profit or loss as finance costs.

The Group uses swaps contracts as hedges of its risk exposure to the exchange rate

and interest rate expected transactions. The ineffective portion relating to swaps

contracts of exchange and /or interest rate is recognized as finance costs.

Amounts recognized as OCI are transferred to profit or loss when the hedged

transaction affects profit or loss, such as when the hedged finance income or

financial expense is recognized or when a forecast sale occurs. When the hedged

item is the cost of a non-financial asset or non-financial liability, the amounts

recognized as OCI are transferred to the initial carrying amount of the non-financial

asset or liability.

If the hedging instrument expires or is sold, terminated or exercised without

replacement or rollover (as part of the hedging strategy), or if its designation as a

hedge is revoked, or when the hedge no longer meets the criteria for hedge

accounting, any cumulative gain or loss previously recognized in OCI remains

consolidated in equity until the forecast transaction occurs or the foreign currency

firm commitment is met.

Hedges of a net investment in a foreign operation -

Hedges of a net investment in a foreign operation, including a hedge of a monetary

item that is accounted for as part of the net investment, are accounted for in a way

similar to cash flow hedges.

As of December 31, 2014 and 2013, the Group has no hedging instruments of a

net investment in a foreign operation.

(d) Current versus non-current classification -

The Group presents assets and liabilities in consolidated statement of financial position

based on current/non-current classification. An asset is current when it is:

- It is expected to be realized or intended to be sold or consumed within a normal

operating cycle;

- It is held primarily for trading purposes;

- Expected to be realized within twelve months after the reporting period;


22

- It is cash or cash equivalent, unless it is restricted from being exchanged or used to

settle a liability for, at least, twelve months after the reporting period.

All other assets are classified as non-current. A liability is current when it is:

- Expected to be settled within a normal operating cycle;

- Held primarily for trading purposes;

A liability is current when:

- It is expected to be settled in normal operating cycle;

- It is held primarily for the purpose of trading

- It is due to be settled within twelve months after the reporting period

- There is no unconditional right to defer the settlement of the liability for at least

twelve months after the reporting period.

The Group classifies all other liabilities as non-current.

Deferred tax assets and liabilities are classified as non-current assets and liabilities.

(e) Foreign currency translation -

The Group’s consolidated financial statements are presented in Nuevos Soles, which is

also the parent company’s functional currency. For each entity the Group determines the

functional currency and items included in the financial statements of each entity are

measured using that functional currency.

The accompanying consolidated financial statements have been prepared to show the

joint activity of the companies comprising the Group; so it has been established as the

presentation currency used by the Company, the Nuevo Sol. Accordingly, the balances of

the financial statements of companies operating in countries with a functional currency

other than the Nuevo Sol have been converted in accordance with the methodologies set

out in IAS 21 "The Effects of Changes in exchange rates of foreign currency".

Balances and transactions in foreign currency -

Balances or transactions in foreign currency are made in a currency other than the

functional currency. Transactions in foreign currency are initially recorded in the

functional currency using the exchange rates prevailing at the dates of the transactions in

which initially qualify for recognition. Monetary assets and liabilities denominated in

foreign currencies are subsequently translated into the functional currency using the

exchange rates prevailing at the date of the consolidated statement of financial position.

The differences between the exchange rates prevailing at the dates of the consolidated

financial statements presented and the exchange rate initially used to record transactions

are recognized in the consolidated income statement in the period in which they occur, in

the "Exchange difference, net".


23

Non-monetary assets and liabilities acquired in foreign currency are converted at the

exchange rate at the dates of the initial transactions.

As required by IAS 21, exchange differences arising from transactions between related

parties eliminated on consolidation and are not included as part of the net investment in a

foreign operation, should be recorded in profit or loss in the consolidated financial

statements.

Group companies -

On consolidation, the assets and liabilities of foreign operations are translated into Nuevos

Soles at the rate of exchange prevailing at the reporting date and their income statements

are translated at exchange rates prevailing at the dates of the transactions. The exchange

differences arising on translation for consolidation are recognized in other comprehensive

income.

Any goodwill arising on the acquisition of a foreign operation and any fair value

adjustments to the carrying amounts of assets and liabilities arising on the acquisition are

treated as assets and liabilities of the foreign operation and translated at the spot rate of

exchange at the reporting date.

(f) Inventories -

Inventories are valued at the lower of cost and net realizable value. Costs incurred in

bringing each product to its present location and conditions are accounted for as follows:

- Raw materials and supplies, packages and packing –

Purchase cost, using the weighted average method.

- Finished goods and work in progress -

At the cost of direct materials and supplies, services provided by third parties, raw

material, direct labor cost, other direct cost, general manufacturing expenses and

an overhead based on fixed and variable cost based on normal operating capacity,

using the weighted average method, but excluding borrowing costs and exchange

currency differences.

- Inventory in transit purchase cost.

Net realizable value is the sales price obtained in the ordinary course of business, less the

estimated costs of placing the inventories into a ready-for-sale condition and the

commercialization and distribution expenses.

The Group´s management periodically evaluates the impairment and obsolescence of

these assets. The estimation for impairment and obsolescence, if any, is recognized with

charge to the profit and loss.


24

(g) Investments in associate -

The Group’s investment in BASF Construction Chemicals Perú S.A. and Preinco Ltda. with

a 30 and 50 percent as of December 31, 2014, respectively (as of December 31, 2013, a

30 percent of BASF Construction Chemicals Peru S.A.) and are accounted for using the

equity method. An associate is an entity over which the Group has significant influence.

The considerations made in determining significant influence or joint control is similar to

those necessary to determine control over subsidiaries.

Under the equity method, the investment in an associate or a joint venture is initially

recognized at cost. The carrying amount of the investment is adjusted to recognize

changes in the Group’s share of net assets of the associate or joint venture since the

acquisition date. Goodwill relating to the associate or joint venture is included in the

carrying amount of the investment and is neither amortized nor individually tested for

impairment.

The statement of profit or loss reflects the Group’s share of the results of operations of

the associate. Any change in OCI of those investees is presented as part of the Group’s

OCI. In addition, when there has been a change recognized directly in the equity of the

associate, the Group recognizes its share of any changes, when applicable, in the

statement of changes in equity. Unrealized gains and losses resulting from transactions

between the Group and the associate are eliminated to the extent of the interest in the

associate or joint venture.

The Group's share of results of the associate is presented in a single line on the

consolidated income statement, operating profit outside. This participation includes the

net of tax and non-controlling interests in subsidiaries of the associate.

The financial statements of the associate are prepared for the same reporting period as

the Group. When necessary, adjustments are made to bring the accounting policies in line

with those of the Group.

After application of the equity method, the Group determines whether it is necessary to

recognize an impairment loss on its investment in its associate or joint venture. At each

reporting date, the Group determines whether there is objective evidence that the

investment in the associate is impaired. If there is such evidence, the Group calculates the

amount of impairment as the difference between the recoverable amount of the associate

and its carrying value, and then recognizes the loss as ‘Share of profit of an associate and

a joint venture’ in the consolidated statement of income.

Upon loss of significant influence over the associate, the Group measures and recognizes

any retained investment at its fair value. Any difference between the carrying amount of

the associate and the fair value of the retained investment and proceeds from disposal is

recognized in profit or loss.


25

(h) Borrowing costs -

Borrowing costs directly attributable to the acquisition, construction or production of an

asset that necessarily takes a substantial period of time to get ready for its intended use

or sale are capitalized as part of the cost of the respective assets. All other borrowing

costs are expensed in the period they occur. Borrowing costs consist of interest and other

costs that an entity incurs in connection with the contract of borrowing of funds.

(i) Leases -

The determination of whether an agreement is, or contains, a lease is based on the

substance of the arrangement at the inception date, whether fulfillment of the

arrangement is dependent on the use of a specific asset or the arrangement conveys a

right to use the asset, even it that right is not explicitly specified in an arrangement.

Finance leases which transfer to the Group substantially all the risks and benefits

incidental to ownership of the leased asset, are capitalized at the commencement of the

lease at the fair value of the leased property or, if lower, at the present value of the

minimum lease payments. Lease payments are apportioned between financial charges and

reduction of the lease liability so as to achieve a constant rate of interest on the remaining

balance of the liability. Finance charges are recognized in the finance costs in the

consolidated statement of income.

A leased asset is depreciated over the useful life of the asset. However, if there is no

reasonable certainty that the Group will obtain ownership by the end of the lease term,

the asset is depreciated over the shorter of the estimated useful life of the asset and the

lease term.

Operating lease payments are recognized as an operating expense in the consolidated

statement of income on a straight-line basis over the lease term.

(j) Property, plant and equipment -

Property, plant and equipment are stated at cost, net of accumulated depreciation and/or

accumulated impairment losses, if any. The initial cost of an asset comprises its purchase

price or construction cost, any costs directly attributable to bringing the asset into

operation. Such cost includes the cost of replacing component parts of the property, plant

and equipment and borrowing costs for long-term construction projects if the recognition

criteria are met. The present value of the estimate cost of dismantling the asset and

rehabilitating the site where it is located, is included in the cost of the respective assets,

see note 3.3(p). When significant parts of property, plant and equipment are required to

be replaced at intervals, the Group derecognizes the replaced part, and recognizes the

new part with its own associated useful life and depreciation. Likewise, when major

inspection is performed, its cost is recognized in the carrying amount of the plant and

equipment as a replacement if the recognition criteria are satisfied. All other maintenance

and repair costs are recognized in the consolidated statement of income in the period on

which they are incurred.


26

Depreciation is calculated using a straight-line-basis method over the estimated useful

lives of such assets as follows:

Years

Entities’ Peru

Buildings and constructions 10 a 50

Other installations 3 a 10

Machinery and equipment 7 a 25

Leasehold improvements 5 a 50

Transportation units 5 a 10

Furniture and fixtures 6 a 10

Other equipments 4 a 10

Years

Entities’ Ecuador

Buildings 10 a 30


Mobile machinery 8 a 30

Light vehicles 5


Computer equipment 3

Other equipments 10 a 30

Entities’ United States of America

Buildings 20 a 40


Transportation units 2 a 7


Computer equipment 2 a 3

An item of property, plant and equipment and any significant part initially recognized is

derecognized upon disposal or when no future economic benefits are expected from its

use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the

difference between the net disposal proceeds and the carrying amount of the asset) is

included in the consolidated statement of income when the asset is derecognized.

The asset’s residual value, useful lives and methods of depreciation/amortization are

reviewed at each reporting date, and adjusted prospectively if appropriate.


27

(k) Mining concessions -

Mining concessions correspond to the exploration rights in areas of interest acquired in

previous years. Mining concessions are stated at cost, net of accumulated amortization

and/or accumulated impairment losses, if any, and are presented within the property,

plant and equipment caption. Those mining concessions are amortized starting from the

production phase following the units-of-production method based on proved reserves to

which they relate. If the Group abandons the concession, the costs associated are written-

off in the consolidated statement of income.

(l) Intangible assets –

Intangible assets acquired separately are measured on initial recognition at cost. The cost

of intangible assets acquired in a business combination is their fair value at the date of

acquisition. Following initial recognition, intangible assets are carried at cost less any

accumulated amortization and accumulated impairment losses. Internally generated

intangibles, excluding capitalized development costs, are not capitalized and the related

expenditure is reflected in the consolidated of income in the period in which the

expenditure is incurred.

The useful lives of intangible assets are assessed as either finite or indefinite.

Intangible assets with finite lives are amortized over the useful economic life and assessed

for impairment whenever there is an indication that the intangible asset may be impaired.

The amortization period and the amortization method for an intangible asset with a finite

useful life are reviewed at least at the end of each reporting period. Changes in the

expected useful life or the expected pattern of consumption of future economic benefits

embodied in the asset are considered to modify the amortization period or method, as

appropriate, and are treated as changes in accounting estimates. The amortization

expense on intangible assets with finite lives is recognized in the statement of profit or

loss as the expense category that is consistent with the function of the intangible assets.

Intangible assets with indefinite useful lives are not amortized, but are tested for

impairment annually, either individually or at the cash-generating unit level. The

assessment of indefinite life is reviewed annually to determine whether the indefinite life

continues to be supportable. If not, the change in useful life from indefinite to finite is

made on a prospective basis.

Gains or losses arising from de-recognition of an intangible asset are measured as the

difference between the net disposal proceeds and the carrying amount of the asset and

are recognized in the statement of profit or loss when the asset is derecognized.

Licenses -

The licenses of computer software are at cost and include expenditures directly related to

the acquisition or entry into use of specific software. These costs are amortized over their

estimated useful life of three years.


28

Trademarks, customer lists -

Correspond to limited life intangible assets identified at the time of procurement. The

trademarks shall be amortized over a period of 4 to 6 years and the list of customers in a

period of 7 years.

(m) Deferred stripping costs -

The Group incurs waste removal costs (stripping costs) during the development and

production phases of its surface operations. During the production phase, stripping costs

(production stripping costs) can be incurred both in relation to the production of inventory

in that period and the creation of improved access and operational flexibility in relation to

the mineral expected to be mined in the future. The former are included as part of the

costs of production, while the latter are capitalized as a stripping activity asset, when

certain criteria are met. Significant judgment is required to distinguish between

development stripping and production stripping and to distinguish between the production

stripping that relates to the extraction of inventory and what relates to the creation of a

stripping activity asset.

Once the Group has identified its production stripping for each surface mining operation, it

identifies the separate components of the ore bodies for each of its mining operations for

the purposes of accumulating costs for each component and pay off based on their

respective useful lives. An identifiable component is a specific volume of the ore body that

is made more accessible by the stripping activity. Significant judgment is required to

identify and define these components, and also to determine the expected volumes (e.g.,

in tonnes) of waste to be stripped and ore to be mined in each of these components.

These assessments are undertaken for each individual mining operation based on the

information available in the mine plan. The mine plans and, therefore, the identification of

components, will vary between mines for a number of reasons. These include, but are not

limited to, the type of commodity, the geological characteristics of the ore body, the

geographical location and/or financial considerations.

The political of depreciation of the Group for asset stripping activity in the production

phase use calculated by the method of production units.

(n) Estimates of resources and reserves -

The mineral reserves are estimates of the amount of ore that can be economically and

legally extracted from the Company’s mining properties and concessions. The Group

estimates its ore reserves and mineral resources, based on information compiled by

appropriately qualified persons relating to the geological data on the size, depth and

shape of the ore body, and require complex geological judgments to interpret the data.

The estimation of recoverable reserves is based upon factors such as estimates of foreign

exchange rates, ore prices, future capital requirements, and production costs along with

geological assumptions and judgments made in estimating the size and grade of the ore

body.


29

Changes in the reserve or resource estimates may impact upon the carrying value of

property, plant and equipment, provision for rehabilitation and depreciation and

amortization charges.

(o) Impairment of non-financial assets -

The Group assesses at each reporting date whether there is an indication that an asset

may be impaired. If any indication exists, or when annual impairment testing for an asset

is required, the Group estimates the asset’s recoverable amount. An asset’s recoverable

amount is the higher of a fair value less the sales costs and its value in use and said value

is determined for an individual asset, unless the asset does not generate cash inflows that

are largely independent of those from other assets or groups of assets, in that case it is

considered the cash generating unit (CGU) related to those assets. When the carrying

amount of an asset of CGU exceeds its recoverable amount, the asset is considered

impaired and is written down to its recoverable amount. In assessing value in use, the

estimated future cash flows are discounted to their present value using a pre-tax discount

rate that reflects current market assessments of the time value of money and the risks

specific to the asset. In determining fair value less costs to sell, recent market

transactions are taken into account by the Group, if available. If no such transactions can

be identified, the Group can use an appropriate valuation model.

Impairment losses of continuing operations, including impairment on inventories, are

recognized in the consolidated statement of income in those expense categories

consistent with the function of the impaired asset.

For assets excluding goodwill, the Company assesses an impairment test to each reporting

date as to whether there is any indication that previously recognized impairment losses

may no longer exist or may have decreased. If such indication exists, the Group estimates

the recoverable amount of the asset or CGU.

A previously recognized impairment loss is reversed only if there has been a change in the

assumptions used to determine the asset’s recoverable amount since the last impairment

loss was recognized. The reversal is limited so that the carrying amount of the asset does

not exceed its recoverable amount, nor exceed the carrying amount that would have been

determined, net of corresponding depreciation, had no impairment loss been recognized

for the asset in prior years. Such reversal is recognized in the consolidated statement of

income, unless the asset is carried at a revalued amount, in which case the reversal is

treated as a revaluation increase.

The following criteria are also applied in assessing impairment of goodwill:

Goodwill is tested for impairment annually (as of December 31). Impairment is determined

by assessing the recoverable amount of each cash generating unit which the goodwill

relates. When the recoverable amount of each cash generating unit is less than its

carrying amount, an impairment loss is recognized. Impairment losses relating to goodwill

cannot be reversed in future periods.


30

(p) Provisions -

General -

Provisions are recognized when the Group has a present obligation (legal or constructive)

as a result of a past event, it is probable that an outflow of resources embodying economic

benefits will be required to settle the obligation and a reliable estimate can be made of the

amount of the obligation. Where the Group expects some or all of a provision to be

reimbursed, for example under an insurance contract, the reimbursement is recognized as

a separate asset but only when the reimbursement is virtually certain. The expense

relating to any provision is presented in the consolidated statement of income net of any

reimbursement. If the effect of the time value of money is material, provisions are

discounted using a current pre-tax rate that reflects where appropriate, the risks specific

to the liability. Where discounting is used, the increase in the provision due to the passage

of time is recognized as finance cost.

Mine closure provision -

The Group records the present value of estimated costs of legal and constructive

obligations required to restore operating locations in the period in which the obligation is

incurred. Mine closure costs are provided at the present value of expected costs to settle

the obligation using estimated cash flows and are recognized as part of the cost of that

particular asset. The cash flows are discounted at a current pre-tax rate that reflects the

risk specific to the rehabilitation provision.

The unwinding of the discount is expensed as incurred and recognized in the consolidated

statement of income as a finance cost. The estimated future costs of rehabilitation are

reviewed annually and adjusted as appropriate. Changes in the estimated future costs or

in the discount rate applied are added to or deducted from the cost of the asset.

(q) Contingencies –

Contingent liabilities are disclosed when the existence of the liability is confirmed by

future events or when the amount of the liability cannot be measured reasonably.

Contingent assets are not recognized in the financial statements, but they are disclosed

when it is probable that economic benefits flow to the Group.

(r) Employees’ benefits -

The Group has short-term obligations for employees’ benefits that include salaries, social

contributions, gratifications, bonuses for performance, and workers’ sharing profit. These

liabilities are recorded monthly with charge to consolidated statement of income, as they

are accrued.

(s) Revenue recognition –

Revenues of ordinary activities are recognized to the extent it is probable that the

economic benefits will flow to the Group and the revenue can be reliably measured,

regardless of when the payment is being made. Revenue is measured at the fair value of


31

the consideration received or receivable, taking into account contractually defined terms

of payment and excluding taxes or duty.

The following specific recognition criteria must be also met before revenue is recognized:

Sales of goods -

Revenue from sales of goods is recognized when the significant risks and rewards of

ownership have been transferred to the buyer, on delivery of the goods.

Sales of energy and power –

Revenues of ordinary activities of sales energy and power are recognized monthly on

basic to cyclic metering of energy and are completely recognized in the period in which

they are provided.

Services -

Revenues of ordinary activities related to rental portal cranes, bridge cranes and

hydroelectric station are recognized in the period in which they are provided.

Interest income -

The revenue is recognized when the interest accrues using the effective interest rate.

Interest income is included in finance income in the consolidated statement of income.

Dividends income -

Dividends from investments are credited in the consolidated statement of income when

declared.

(t) Taxes -

Current income tax -

The income tax for the current period is calculated according to the legal regulations in

each country, based on non-consolidated financial statements, and current income tax

assets and liabilities are measured at the amount expected to be recovered from or paid to

the taxation authority. The tax rates and tax laws used to compute the amount of tax are

those that are enacted or substantively enacted, at the close of the reporting period under

review.

Current income taxes related to items that are directly recognized in net equity are also

recognized in net equity and not in the statement of income. The Group´s management

periodically evaluates positions taken in the tax returns with respect to situations in which

applicable tax regulations are subject to interpretation and establishes provisions where

appropriate.


32

Deferred income tax -

Deferred tax is provided using the liability method on temporary differences at the

reporting date between the tax bases of assets and liabilities and their carrying amounts

for date of the consolidated statement of financial position.

Deferred tax liabilities are recognized for all taxable temporary differences, except:

- Where the liabilities for deferred income taxes arises from the initial recognition of

goodwill, or from an asset or liability in a transaction that is not a business

combination and that, at the time of the transaction, does not affects neither the

accounting profit nor taxable profit or loss; or

- Where the timing of the reversal of the temporary differences can be controlled

and it is probable that the temporary differences will not reverse in the foreseeable

future.

Deferred tax assets are recognized for all deductible temporary differences and for the

future compensation of unused tax credits and unused tax losses, to the extent that it is

probable that future taxable profit will be available to offset such unused tax credits and

unused tax losses, except:

- When the deferred tax asset relating to deductible temporary difference arises

from the initial recognition of an asset or liability in a transaction that is not a

business combination and, at the time of the transaction, affects neither the

accounting profit nor taxable profit or loss, or

- In respect of deductible temporary differences associated with investments in

subsidiaries and associates, where deferred assets are recognized only to the

extent that it is probable that the temporary differences will reverse in the

foreseeable future and taxable profit will be available against which the temporary

differences can be utilized.

The carrying amount of deferred tax assets is reviewed at each reporting date and

reduced to the extent that it is no longer probable that sufficient taxable profit will be

available to allow all or part of the deferred tax asset to be utilized. Unrecognized deferred

tax assets are reassessed at each reporting date and are recognized to the extent that it

has become probable that future taxable profits will allow the deferred tax asset to be

recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply

in the year when the asset is realized or the liability is settled, based on tax rates and tax

laws that have been enacted at the reporting date consolidated statement of financial

position, or substantively enacted.


33

Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right

exists to set off current tax assets against current income tax liabilities and the deferred

taxes relate to the same taxable entity and the same tax authority.

Value added tax -

Revenues, expenses and assets of ordinary activities are recognized net of the general

sales tax, except:

- Where value added tax incurred on when a purchase of assets or services is not

recoverable from the tax authority, in which case the general sales tax is

recognized as part of the cost of acquisition of the asset or as part of the expense

item as applicable;

- Receivables and payables are stated with the value added tax included.

The net amount of VAT recoverable from, or payable to, the tax authority is included as

part of receivables or payables in the consolidated statement of financial position.

(u) Earnings per share -

Basic and diluted earnings per share have been calculated based on weighted average of

common shares at the date of the consolidated statement of financial position. As of

December 31, 2014 and 2013, the Group has no dilutive financial instruments; therefore

the basic and diluted earnings per share are the same.

(v) Reclassifications -

We have made the following reclassifications on the balances as of December 31, 2013 to

make them comparable with the consolidated financial statements as of December 31,

2014, the most significant are following:

S/.(000)

Consolidated statement of financial position

Reclassification of the caption “Other asset non-financial” to the caption

“Mining concessions and property, plant and equipment, net” for the major

value of assets relative to leaseback finance. 23,016

Reclassification of the caption “Trade and other payables, current” to the

caption “Deferred income” for the reclassification of concrete and

premixed billed and unpaid. 34,563

Consolidated statement of income-

Reclassification of the caption “Sales net” to the caption “Cost of sales” for

the freight of cement. 9,970

Reclassification of the caption “Administrative expenses” to the caption

“Other expenses” for amortization and dock service. 6,111


34

4. Significant accounting judgments, estimates and assumptions

Many of the amounts included in the consolidated financial statements involve the use of criteria and/or

estimates. These judgments and estimates are made based at best knowledge of relevant facts and

circumstances, taking into account previous experience; however, actual results could differ from the

estimates included in the consolidated financial statements. The details of these policies and estimates

are included in the accounting policies and/or the notes to the consolidated financial statements.

The preparation of the consolidated financial statements includes criteria and/or estimates used by the

Group´s Management, following:

- Estimation useful lives of assets, by depreciation and amortization - Note 3.3(j) and (l).

- Fair value of derivatives financial instruments - Note 3.3(c)(v).

- Estimation for impairment of inventories - Note 3.3(f).

- Cost and depreciation of stripping assets - Note 3.3(m).

- Estimates of resources and reserves – Note 3.3(n).

- Estimation for impairment of non-financial assets - Note 3.3(o).

- Provisions – Note 3.3(q).

- Income tax – Note 3.3(t).

5. New accounting standards

The IASB issued the following International Financial Reporting Standards, which are not yet in effect on

the date of the consolidated financial statements of the Group. The Group will adopt these standards, if

applicable, when they are in force:

- IFRS 9 ”Financial Instruments”: Classification and Measurement

In July 2014, the IASB issued the final version of IFRS 9 Financial Instruments which reflects all

phases of the financial instruments project and replaces IAS 39 Financial Instruments:

Recognition and Measurement and all previous versions of IFRS 9. The standard introduces new

requirements for classification and measurement, impairment, and hedge accounting. IFRS 9 is

effective for annual periods beginning on or after January 1st 2018, with early application

permitted. Retrospective application is required, but comparative information is not compulsory.

Early application of previous versions of IFRS 9 (2009, 2010 and 2013) is permitted if the date

of initial application is before 1 February 2015. The adoption of IFRS 9 will have an effect on the

classification and measurement of the Group’s financial assets, but no impact on the

classification and measurement of the Group’s financial liabilities.

- IFRS 14”Regulatory Deferral Accounts”

IFRS 14 is an optional standard that allows an entity, whose activities are subject to rate-

regulation, to continue applying most of its existing accounting policies for regulatory deferral

account balances upon its first-time adoption of IFRS. Entities that adopt IFRS 14 must present

the regulatory deferral accounts as separate line items on the statement of financial position and

present movements in these account balances as separate line items in the statement of profit or

loss and other comprehensive income. The standard requires disclosures on the nature of, and

risks associated with, the entity’s rate-regulation and the effects of that rate-regulation on its


35

financial statements. IFRS 14 is effective for annual periods beginning on or after January 1st

2016. Since the Group is an existing IFRS preparer, this standard would not apply.

- Amendments to IAS 19”Defined Benefit Plans: Employee Contributions”

IAS 19 requires an entity to consider contributions from employees or third parties when

accounting for defined benefit plans. Where the contributions are linked to service, they should

be attributed to periods of service as a negative benefit. These amendments clarify that, if the

amount of the contributions is independent of the number of years of service, an entity is

permitted to recognize such contributions as a reduction in the service cost in the period in which

the service is rendered, instead of allocating the contributions to the periods of service. This

amendment is effective for annual periods beginning on or after July 1st 2014. It is not expected

that this amendment would be relevant to the Group.

- Annual improvements 2010-2012 Cycle

These improvements are effective from July 1st 2014 and are not expected to have a material

impact on the Group. They include:

IFRS 2” Share-based Payment”

This improvement is applied prospectively and clarifies various issues relating to the definitions

of performance and service conditions which are vesting conditions, including:

- A performance condition must contain a service condition

- A performance target must be met while the counterparty is rendering service

- A performance target may relate to the operations or activities of an entity, or to those of

another entity in the same group

- A performance condition may be a market or non-market condition if the counterparty,

regardless of the reason, ceases to provide service during the vesting period, the service

condition is not satisfied.

- IFRS 3”Business Combinations”

The amendment is applied prospectively and clarifies that all contingent consideration

arrangements classified as liabilities (or assets) arising from a business combination should be

subsequently measured at fair value through profit or loss whether or not they fall within the

scope of IFRS 9 (or IAS 39, as applicable).

- IFRS 8”Operating Segments”

The amendments are applied retrospectively and clarify that:

- An entity must disclose the Management’s judgments when applying the aggregation

criteria in paragraph 12 of IFRS 8, including a brief description of operating segments that

have been aggregated and the economic characteristics (e.g., sales and gross margins)

used to assess whether the segments are ‘similar’.

- The disclosure of the reconciliation of segment assets to total assets is only required if the

reconciliation is reported to the chief operating decision maker, similar to the required

disclosure for segment liabilities.


36

- IAS 16”Property, Plant and Equipment” and IAS 38”Intangible Assets”

The amendment is applied retrospectively and clarifies in IAS 16 and IAS 38 that the asset may

be revalued by reference to observable data on either the gross or the net carrying amount. In

addition, the accumulated depreciation or amortization is the difference between the gross and

the carrying amounts of the asset.

- IAS 24”Related Party Disclosures”

The amendment is applied retrospectively and clarifies that a management entity (an entity that

provides key management personnel services) is a related party subject to the related party

disclosures. In addition, an entity that uses a management entity is required to disclose the

expenses incurred for management services.

- Annual improvements 2011-2013 Cycle

These improvements are effective from July 1st, 2014 and are not expected to have a material

impact on the Group. They include:

IFRS 3”Business Combinations”

The amendment is applied prospectively and clarifies for the scope exceptions within IFRS 3 that:

- Joint arrangements, not just joint ventures, are outside the scope of IFRS 3.

- This scope exception applies only to the accounting in the financial statements of the joint

arrangement itself.

- IFRS 13”Fair Value Measurement”

The amendment is applied prospectively and clarifies that the portfolio exception in IFRS 13 can

be applied not only to financial assets and financial liabilities, but also to other contracts within

the scope of IFRS 9 (or IAS 39, as applicable).

- IAS 40”Investment Property”

The description of ancillary services in IAS 40 differentiates between investment property and

owner-occupied property (i.e., property, plant and equipment). The amendment is applied

prospectively and clarifies that IFRS 3, and not the description of ancillary services in IAS 40, is

used to determine if the transaction is the purchase of an asset or business combination.

- IFRS 15”Revenue from Contracts with Customers”

IFRS 15 was issued in May 2014 and establishes a new five-step model that will apply to revenue

arising from contracts with customers. Under IFRS 15 revenue is recognized at an amount that

reflects the consideration to which an entity expects to be entitled in exchange for transferring

goods or services to a customer.

The principles in IFRS 15 provide a more structured approach to measuring and recognizing

revenue. The new revenue standard is applicable to all entities and will supersede all current

revenue recognition requirements under IFRS. Either a full or modified retrospective application

is required for annual periods beginning on or after January 1st 2017 with early adoption


37

permitted. The Group is currently assessing the impact of IFRS 15 and plans to adopt the new

standard on the required effective date.

- Amendments to IFRS 11”Joint Arrangements: Accounting for Acquisitions of Interests”

The amendments to IFRS 11 require that a joint operator accounting for the acquisition of an

interest in a joint operation, in which the activity of the joint operation constitutes a business

must apply the relevant IFRS 3 principles for business combinations accounting. The

amendments also clarify that a previously held interest in a joint operation is not re measured on

the acquisition of an additional interest in the same joint operation while joint control is retained.

In addition, scope exclusion has been added to IFRS 11 to specify that the amendments do not

apply when the parties sharing joint control, including the reporting entity, are under common

control of the same ultimate controlling party.

The amendments apply to both the acquisition of the initial interest in a joint operation and the

acquisition of any additional interests in the same joint operation and are prospectively effective

for annual periods beginning on or after January 1st, 2016, with early adoption permitted. These

amendments are not expected to have any impact to the Group.

- Amendments to IAS 16 and IAS 38: “Clarification of Acceptable Methods of Depreciation and

Amortization”

The amendments clarify the principle in IAS 16 and IAS 38 that revenue reflects a pattern of

economic benefits that are generated from operating a business (of which the asset is part)

rather than the economic benefits that are consumed through use of the asset. As a result, a

revenue-based method cannot be used to depreciate property, plant and equipment and may

only be used in very limited circumstances to amortize intangible assets.

The amendments are effective prospectively for annual periods beginning on or after January 1st

2016, with early adoption permitted. These amendments are not expected to have any impact to

the Group given that the Group has not used a revenue-based method to depreciate its non-

current assets.

- Amendments to IAS 16 and IAS 41 Agriculture: “Bearer Plants”

The amendments change the accounting requirements for biological assets that meet the

definition of bearer plants. Under the amendments, biological assets that meet the definition of

bearer plants will no longer be within the scope of IAS 41. , IAS 16 will apply instead. After initial

recognition, bearer plants will be measured under IAS 16 at accumulated cost (before maturity)

and using either the cost model or revaluation model (after maturity). The amendments also

require that produce that grows on bearer plants will remain in the scope of IAS 41 measured at

fair value less costs to sell. For government grants related to bearer plants, IAS 20 Accounting

for Government Grants and Disclosure of Government Assistance will apply. The amendments are

retrospectively effective for annual periods beginning on or after January 1st 2016, with early

adoption permitted. These amendments are not expected to have any impact to the Group as the

Group does not have any bearer plants.


38

- Amendments to IAS 27: “Equity Method in Separate Financial Statements”

The amendments will allow entities to use the equity method to account for investments in

subsidiaries, joint ventures and associates in their separate financial statements. Entities already

applying IFRS and electing to change to the equity method in its separate financial statements

will have to apply that change retrospectively.

For first-time adopters of IFRS electing to use the equity method in its separate financial

statements, they will be required to apply this method from the date of transition to IFRS. The

amendments are effective for annual periods beginning on or after January 1st 2016, with early

adoption permitted. These amendments will not have any impact on the Group’s consolidated

financial statements.

The Group is in the process of evaluating the impact of the application of these standards, if any, on its

consolidated financial statements and disclosures in the notes to the consolidated financial statements.

6. Cash and cash equivalents

(a) This caption is made up as follows:

2014 2013

S/.(000) S/.(000)

Petty cash 1,194 996

Funds to deposit (b) 1,076 326

Current accounts (c) 61,605 79,175

Time deposits (d) 72,107 241,851 __________ __________

135,982 322,348 __________ __________

(b) Funds to deposit correspond to collection made in cash that are pending of deposit in the

Company’s bank accounts, are freely available and do not earn interest.

(c) Current accounts are maintained in domestic and foreign banks, mainly in Nuevos Soles and U.S.

Dollars, are freely available and earn interest at market rates.

(d) Corresponds to time deposits in domestic and foreign financial entities, are denominated in local

and foreign currency, earn interest at market rates and have original maturities shorter than

three months.


39

7. Trade and other accounts receivable, net


Current Non current ____________________________ ____________________________

2014 2013 2014 2013

S/.(000) S/.(000) S/.(000) S/.(000)

Trade accounts receivable:

Invoices and bills of exchange

receivables (b) 344,458 219,817 10,946 8,693

Provision of invoices receivable (c) 32,491 23,875 - -

Accounts receivable from related

parties, note 29(c) 24,526 21,388 - -

Other receivables:

Claims to third parties (d) 75,916 45,170 - -

Claims to tax authority (e) 315 - 38,343 24,146

Advances to suppliers (f) 21,716 14,141 2,340 4,680

Loans to employees (g) 10,185 7,235 7,551 -

Derivative financial instruments, note

33 718 772 - -

Other accounts receivable 15,885 13,838 511 520 - ________ ________ ________ ________

526,210 346,236 59,691 38,039 - ________ ________ ________ ________

Prepaid income tax and temporary tax

on net assets (h) 32,869 69,229 - -

Value added tax credit (i) 10,819 3,448 12,652 22,248 - ________ ________ ________ ________

43,688 72,677 12,652 22,248 - ________ ________ ________ ________

Less – Estimation for doubtful accounts

(j) (3,000) (3,338) (10,369) (8,450) - ________ ________ ________ ________

566,898 415,575 61,974 51,837 _________ _________ _________ _________

(b) Trade receivables are mainly denominated in Nuevos Soles and U.S. Dollars, have current

maturities and do not earn interest. Bills of exchange receivables have current maturities and

earn interest at market rates.

(c) As of December 31, 2014 and 2013, correspond mainly to receivables for the sale of energy and

power occurred in the month of December of such years for S/.29,075,000 and S/.23,875,000,

respectively, which were invoiced and collected during the following year.

(d) Claims to third parties include mainly the claims to insurers related to a breakdown of kiln 2 of

the Company located in Atocongo plant, in February 2013.

Group Management and its advisors’ opinion, that amount will be returned in the year 2015.


40

(e) As of December 31, 2014 and 2013, this balance corresponds to claims to Tax Authority mainly

by excess paid income tax of prior years. See note 31.4. As at December 31, 2014 and 2013, the

Group of Management’s opinion estimates that recover S/.38,343,000 and S/.24,146,000,

respectively, in long-term.

(f) Mainly corresponds to advances granted to San Martín Contratistas Generales S.A., on January

7, 2011, for stripping and exploitation services over limestone and pozzolan’ mines in the

Cristina mining concession, which is to be collected in five years.

(g) As of December 31, 2014, correspond mainly to loans to employees made in 2014 for

approximately S/.9,439,000, which will be collected within four years according to the

agreements signed by the Company.

(h) As of December 31, 2014 and 2013, this balance corresponds to pre-paid income tax, paid on

those dates, in addition to payments of temporary tax to net assets. See note 31.3(b).

In Group of Management’s opinion, such prepayments will be applied to future taxes generated in

the current period.

(i) Mainly corresponds to the value added tax credit to the purchase of fixed assets and

constructions. As of December 31, 2014 and 2013, in the Group of Management’s opinion, the

value added tax credit for approximately S/.12,652,000 and S/.22,248,000, respectively, will be

recovered in the long-term through the development of the operations of the Group.

(j) The movement of the allowance for doubtful trade and other receivable was as follows:

2014 2013

S/.(000) S/.(000)

Opening balance 11,788 7,991

Estimation charged to income, note 23 204 3,338

Acquisition of Subsidiaries, note 2 1,172 -

Recoveries, note 26 (210) (77)

Exchange difference 415 536 ________ ________

Ending balance 13,369 11,788

________ ________

In Group of Management’s opinion, the estimation for doubtful accounts adequately covers the

credit risk for the years ended December 31, 2014 and 2013.


41

(k) The aging analysis of trade receivables and other as of December 31, 2014 and 2013 is as

follows:

As of December 31, 2014 _______________________________________________

Non-impaired Impaired Total

S/.(000) S/.(000) S/.(000)

Outstanding - 441,254 - 441,254

Past due -

- Up to 1 month 63,980 - 63,980

- From 1 to 3 months 29,107 - 29,107

- From 3 to 6 months 18,954 - 18,954

- More than 6 months 18,519 13,369 31,888 ________ ________ ________

Total 571,814 13,369 585,183 ________ ________ ________

As of December 31, 2013 _______________________________________________

Non-impaired Impaired Total

S/.(000) S/.(000) S/.(000)

Outstanding - 308,768 - 308,768

Past due -

- Up to 1 month 38,069 - 38,069

- From 1 to 3 months 9,263 - 9,263

- From 3 to 6 months 4,829 - 4,829

- More than 6 months 10,786 11,788 22,574 ________ ________ ________

Total 371,715 11,788 383,503 ________ ________ ________

Note 32.2, related to credit risk and accounts receivable, explains how the Group manages and

measures the credit risk of the trade receivables that haveneither expired nor are impaired.

8. Inventories, net


2014 2013

S/.(000) S/.(000)

Finished goods 37,182 15,316

Work in progress (b) 220,168 152,821

Raw and auxiliary materials (c) 150,537 147,455

Packages and packing 42,828 44,510

Spare parts and supplies (d) 244,997 165,396

Inventory in transit 13,478 34,791 _________ _________

709,190 560,289

Estimate for impairment of inventories (e) (9,508) (1,045) _________ _________

699,682 559,244 _________ _________


42

(b) Work in progress includes coal, pozzolan, gypsum, clay, clinker in process and limestone

extracted from the Group’s mines, which according to Management estimates will be used in the

short-term production.

(c) Raw and auxiliary materials include mainly imported and domestic coal, pozzolan, iron and

clinker. As of December 31, 2014, the Group mainly has in stock coal for approximately

S/.52,669,000 (S/.92,819,000 as of December 31, 2013).

(d) As of December 2014 and 31, 2013, the Group maintain no significant and necessary supplies

parts to provide maintenance machinery and kilns of plants Atocongo and Condorcocha, this

plants are evaluated through technical reviews, and in turn comply with the provisions of quality

and are in proper storage conditions.

(e) Movement in the estimation for impairment of inventories for the years ended December 31,

2014 and 2013 was follow:

2014 2013

S/.(000) S/.(000)

Opening balance 1,045 1,312

Acquisition of Subsidiaries, note 2 8,495 -

Estimation charged to income, note 23 751 250

Recoveries, note 26 (258) (517)

Exchange difference (525) - _________ _________

Ending final 9,508 1,045 _________ _________

In Group of Management’s opinion, the estimation for impairment of inventories adequately

covers the impairment risk as of December 31, 2014 and 2013.

9. Prepaid expenses

This caption is made up as follows:

2014 2013

S/(.000) S/(.000)

Prepaid insurance 20,548 16,065

Publicity and prepaid expenses - 3,688

Others 10,336 10,108 __________ __________

30,884 29,861 __________ __________


43

10. Mining concessions and property, plant and equipment, net

(a) The table below presents the changes in mining concessions and property, plant and equipment, net:

Mining

concessions

(b) Land

Mine

closure

Buildings and

constructions

Other

installations

Machinery and

equipment

Transportation

units

Furniture and

fixtures

Other

equipment

Units in

transit

Work in

progress (e) Total

S/.(000) S/.(000) S/.(000) S/.(000) S/.(000) S/.(000) S/.(000) S/.(000) S/.(000) S/.(000) S/.(000) S/.(000)

Cost -

As of January 1, 2013 34,856 695,592 6,516 1,692,192 54,454 2,477,484 387,103 21,662 87,311 69,428 1,328,721 6,855,319

Additions 666 14,295 - 3,870 3,087 49,223 49,225 575 5,801 7,764 292,327 426,833

Transfers (g) - 5,414 - 313,142 6,758 1,098,303 17,668 164 9,063 (69,681) (1,380,831) -

Retirements and sell (947) - (529) (26) (792) (35,633) (25,359) (78) (1,496) - (3,966) (68,826)

Reclassifications - - - (11,202) - (36,868) (58) (586) (975) - - (49,689)

Adjustments - 5,436 - 34,097 - 57,836 2,542 60 299 - 393 100,663

__________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________

As of December 31, 2013 34,575 720,737 5,987 2,032,073 63,507 3,610,345 431,121 21,797 100,003 7,511 236,644 7,264,300

Additions (e) 58 6,191 - 9,532 2,258 58,488 56,190 671 6,671 167 412,361 552,587

Acquisition of Subsidiaries, note 2(a), (b) and (c) 7,505 8,165 - 104,346 1,888 359,154 13,973 505 11,086 - 94,836 601,458

Transfers - - - 728 1,362 42,921 11,245 134 1,246 - (57,636) -

Retirements and sell - (8,031) - - (140) (2,893) (7,361) (185) (35) - (89) (18,734)

Adjustments - 199 - 173 - (3,527) 468 - 1 (277) (258) (3,221)

Exchange differences - 4,071 - 26,714 (277) 53,404 1,864 66 275 - 3,234 89,351

__________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________

As of December 31, 2014 42,138 731,332 5,987 2,173,566 68,598 4,117,892 507,500 22,988 119,247 7,401 689,092 8,485,741

__________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________

Accumulated depreciation -

As of January 1, 2013 10,207 - 2,226 164,277 41,091 381,952 243,968 16,195 57,341 - - 917,257

Depreciation of the year (f) 466 - 420 67,285 2,349 173,614 46,498 1,003 6,048 - - 297,683

Transfers - - - (204) 210 (1,128) - - 1,122 - - -

Retirements and sell (947) - (2) 86 (10) (14,118) (23,522) (74) (1,313) - - (39,900)

Adjustments - - - (12,388) 59 (58,800) (58) (586) (975) - - (72,748)

Exchange differences - - - 1,563 - 4,239 1,275 47 227 - - 7,351 __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________

As of December 31, 2013 9,726 - 2,644 220,619 43,699 485,759 268,161 16,585 62,450 - - 1,109,643

Depreciation of the year (f) 267 - 368 72,941 2,124 212,990 51,762 1,036 8,377 - - 349,865

Transfers - - - - - (27) 27 - - - - -

Retirements and sell - - - - - (2,703) (7,130) (75) (16) - - (9,924)

Adjustments - - - 1 - - (25) (39) (512) - - (575)

Exchange differences - - - 2,571 (133) 7,465 1,204 51 293 - - 11,451

__________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________

As of December 31, 2014 9,993 - 3,012 296,132 45,690 703,484 313,999 17,558 70,592 - - 1,460,460

__________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________

Net book value -

As of December 31, 2014 32,145 731,332 2,975 1,877,434 22,908 3,414,408 193,501 5,430 48,655 7,401 689,092 7,025,281

__________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________

As of December 31, 2013 24,849 720,737 3,343 1,811,454 19,808 3,124,586 162,960 5,212 37,553 7,511 236,644 6,154,657

__________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________

Notes to the separate financial statements (continued)

44

(b) As of December 31, 2014 and 2013, mainly corresponds to the mining concessions of Atocongo,

Atocongo Norte, Pucara and Oyon of UNACEM; Selva Alegre, Cumbas y Pastavi of UNACEM

Ecuador and Jicamarca of UNICON.

(c) As of December 31, 2014, the carrying value of assets acquired through finance leases and

leaseback amounted to approximately S/.1,422,193,000 (S/.1,439,522,000 as of December

31, 2013). During the year 2014, there were additions of fixed assets under the system of

finance lease and leaseback to approximately S/.69,631,000 (S/.70,229,000 in the year 2013).

The leased assets guaranteed financial lease liabilities, see note 14.

(d) The amount of borrowing capitalized costs during the year ended December 31, 2013 was

S/.25,381,000 (as of December 31, 2014 non was capitalized interest). The rates used to

determine the amount of capitalized interest corresponded to specific fees related to syndicated

loans and leases that are mentioned in note 14(m).

(e) The main additions during the year 2014 correspond mainly to the work in progress related to

the second expansion of production capacity of kiln 1 in the Atocongo plant, cement mill VIII and

packing machine V, control of Kiln 3 system and the hydroelectric Carpapata III located in the

Condorcocha plant for approximately S/.329,422,000.

During year 2013; mainly correspond to the additions related to first phase of enlargement of

the production capacity of Kiln 1 and the construction of Kiln 4. During 2013, the transfers

include mainly the transfer of the work in progress of Kiln 1 and 4 of Atocongo and Condorcocha,

respectively, which were finished in November and March 2013, respectively.

(f) The depreciation for the year 2014 and 2013 was distributed as follows:

2014 2013

S/.(000) S/.(000)

Cost of sales, note 22 340,933 280,520

Administrative expenses, note 23 7,761 11,630

Selling expenses, note 24 39 44

Other operating income (expenses), net, note 26 - 23

Inventories 1,132 5,466 _________ ________

349,865 297,683 _________ ________

(g) As of December 31, 2014 and 2013, the Group's management conducted an assessment of its

property, plant and equipment and non-found the indicators of impairment on these assets.

Therefore, in its opinion the carrying net value of property, plant and equipment is recoverable

with future profits to be generated by the Group.


45

(h) As of December 31, 2014 and 2013, the Company has established two mortgages on its mining

concession Atocongo and a mortgage on its mining concession Cristina up to S/.149,400,000

and US$94,000,000, respectively, to guarantee loans obtained with the BBVA Banco

Continental, see note 14.

In December 2014, the Company signed off the contract of the lifting of the mortgage on the

mining concession Atocongo by S/.149,400,000, which remained in force until the related loan

repayment in January 2015.

It has been a mortgage on their mining concession Atocongo up to US$75,000,000, to guarantee

the loan obtained with the Bank of Nova Scotia, and a mortgage on their property sub-lot 1 at

Pachacamac and Lurin district, sub-lot 2 Lurin district and sub-lot 3 Pachacamac district up to

US$50,000,000 to guarantee the loan obtained with the Bank of Nova Scotia, see note 14.

On the other hand its subsidiaries maintain trust as security for the production line 2 (located in

Ecuador), mortgage contract Plant San Javier (located in Chile), plant, vehicles and equipment

(located in the United States of America) guaranteeing bank loans, see note 14.

(i) In Management’s opinion, the Group has insurance policies to adequately cover all of its fixed

assets.

11. Deferred stripping cost


S/.(000)

Cost -

As of January 1, 2013 149,297

Additions 15,205 _________

As of December 31, 2013 164,502

Additions - _________

As of December 31, 2014 164,502 _________

Accumulated depreciation -

As of January 1, 2013 (16,911)

Additions, note 22 (4,776) _________

As of December 31, 2013 (21,687)

Additions, note 22 (6,863) _________

As of December 31, 2014 (28,550) _________

Importe neto en libros -

As of December 31,2014 135,952 _________

As of December 31,2013 142,815 _________


46

As of December 31, 2014 and 2013, the Company has three identifiable components that allow a

specific volume of limestone quarries and waste: Atocongo quarry; North Atocongo and Pucara

quarry.

During 2014, the Company did not recognize deferred stripping asset additions due to; the

stripping costs in the year were required to access the limestone produced in the same period

and were recorded in the consolidated statement of income and are reclassified as "Cost of

sales", see note 22.

As of December 31, 2014, the Company and its technical advisors determined 148,428,584 and

91,323,415 tonnes of limestone reserves and related waste limestone to be extracted in the

future, respectively (153,153,537 and 93,755,871 tonnes at December 31, 2013, respectively),

which are determined and controlled by identifiable component.


47

12. Intangible assets, net and goodwill

(a) The table below presents the changes of the caption:

(b) This amount corresponds to the expenditures to develop the overall "El Platanal" project consisting of the construction of two hydroelectric reservoirs and a system for the irrigation of uncultivated lands, and also to obtain the final

concession to develop the activity of electricity generation, which was obtained by the Company, through Supreme Resolution N°130-2001-EM, dated July 25, 2001. On September 12, 2006, the transfer of the concession and the

assignment of use of the "El Platanal" project to its subsidiary Compañía Eléctrica El Platanal S.A. (CELEPSA) was approved by Supreme Resolution N°053-2006-EM for a period of 25 years from March 30, 2011, whereby the Company

receives royalties in exchange equivalent to 3.55 percent of net monthly income obtained by CELEPSA, on sales of energy and power to third parties. As of December 31, 2014 and 2013, the Company amortizes the cost incurred to

develop the project, during the term of the contract (25 years).

List of

customers Trademark

Concession for

electricity

generation (b) Goodwill (c)

Environmental

protection program

Exploration

expenses Software Other Total

S/.(000) S/.(000) S/.(000) S/.(000) S/.(000) S/.(000) S/.(000) S/.(000) S/.(000)

Cost -

As of January 1, 2013 27,730 19,346 61,330 114,745 18,269 12,886 20,683 35,286 310,275

Additions - 7,298 - - 230 - 3,362 4,878 15,768

Retirements - - - - (1,428) (10,434) (11,008) (23,858) (46,728)

Exchange differences 2,405 412 - - - 236 84 358 3,495

_________ _________ _________ _________ _________ _________ _________ _________ _________

As of December 31, 2013 30,135 27,056 61,330 114,745 17,071 2,688 13,121 16,664 282,810

Additions - 7 - - - - 2,021 7,354 9,382

Acquisition of Subsidiaries, note 2(a), (b) and (c) - 121,728 - 1,032,265 - - 7,863 933 1,162,789

Adjustments - - - - - - (1,023) (359) (1,382)

Exchange differences 1,836 2,432 - - - 180 353 3,188 7,989

__________ __________ __________ __________ __________ __________ __________ __________ __________

As of December 31, 2014 31,971 151,223 61,330 1,147,010 17,071 2,868 22,335 27,780 1,461,588

__________ __________ __________ __________ __________ __________ __________ __________ __________

Accummulated amortization -

As of January 1, 2013 12,931 7,623 4,137 - 18,065 10,596 12,112 24,463 89,927

Amortization of the year(g) 4,189 4,410 1,484 - 37 180 1,815 4,531 16,646

Retirements - - - - (1,428) (10,434) (11,008) (23,623) (46,493)

Exchange differences 1,217 300 - - - 16 (132) 427 1,828

__________ __________ __________ __________ __________ __________ __________ __________ __________

As of December 31, 2013 18,337 12,333 5,621 - 16,674 358 2,787 5,798 61,908

Amortization of the year(g) 4,065 2,577 1,484 - 123 191 2,738 3,798 14,976

Adjustments - - - - - - (715) (22) (737)

Exchange differences 1,191 266 - - - 24 229 195 1,905

__________ __________ __________ __________ __________ __________ __________ __________ __________

As of December 31, 2014 23,593 15,176 7,105 - 16,797 573 5,039 9,769 78,052

__________ __________ __________ __________ __________ __________ __________ __________ __________

Net book value -

As of December 31, 2014 8,378 136,047 54,225 1,147,010 274 2,295 17,296 18,011 1,383,536

__________ __________ __________ __________ __________ __________ __________ __________ __________

As of December 31, 2013 11,798 14,723 55,709 114,745 397 2,330 10,334 10,866 220,902

__________ __________ __________ __________ __________ __________ __________ __________ __________


48

(c) The balance of goodwill consists of higher amounts paid for the acquisition of the following

companies:

2014 2013

S/.(000) S/.(000)

UNACEM Ecuador S.A., nota 2(b) 1,029,058 -

Firth Industries Perú S.A. (d) 58,700 58,700

Maricopa Ready Mix & Subsidiaries (e) 21,538 21,538

Lar Carbón S.A. 9,745 9,745

Unión de Concreteras S.A. 8,683 8,683

Sunshine Concrete & Materials Inc. 8,080 8,080

Prefabricados Andinos S.A., nota 2(a) 3,207 -

SAG Concreto Premezclado S.A. 2,056 2,056

Otros 5,943 5,943 _________ _________

1,147,010 114,745 __________ __________

(d) This amount represents the higher value paid in the acquisition of the 100 percent of shares of

Firth Industries Perú S.A. Goodwill include the value of expected synergies arising from the

acquisition and is entirely allocated to the concrete segment.

(e) On November 19, 2009, a subsidiary of Skanon Investments, Inc. concluded a purchase

agreement to acquire substantially all the assets and assumed certain liabilities of Maricopa

Ready Mix, LLC, Maricopa Ready Mix Leasing Company, LLC and Maricopa, LLC. This acquisition

was performed with the purpose of extending operations segment concrete in Arizona. The

goodwill is attributable to the expected synergies and other intangible assets.

On July 6, 2007, Drake acquired the shares of Sunshine Concrete & Materials, Inc. ("Sunshine")

as a result of such acquisition added to the Group operations of sales mix, sand, gravel in the

cities of Lake Havasu, Drake and Kingman, Arizona. In January 2010, Drake sold his shares of

Sunshine Investments, Inc. to Skanon.

(f) The Group performed its annual impairment test as of December 31, 2014 and 2013. The

Group´s Management has determined the value in use of the CGU based on the Income Approach

and application of flow estimation method free cash (acronym in Spanish "FCFF") to be generated

by the CGU, and determining the economic value thereof based on your upgrade with a discount

rate appropriate to their level of risk.

The cash flows were budgeted for a period up to 10 years and will reflect the demand for

services. The discount rate applied to cash flow projections was adequate given the business

segment and geographical segment to which it belongs, besides the level of risk to which the

business is exposed. The cash flows used a rate similar to the average growth rate of long-term

industrial growth.


49

Sensitivity to changes in the key assumptions used -

Regarding to assessing value in use, the Group´s Management believes that no reasonably

possible change in any of the key assumptions used would cause the carrying amount of the unit

significantly exceeds its recoverable amount.

As of December 31, 2013 and 2014, based on projections made by Group´s Management on the

results expected for the next years, there are no indications that the recoverable value of

goodwill are less than their carrying amounts; so it is not necessary to record a provision for

impairment of these assets at the date of the consolidated statement of financial position.

(g) The amortization for the years 2014 and 2013 was distributed as follows:

13. Other non-financial assets


2014 2013

S/(.000) S/(.000)

Land available for sale (b) 13,220 -

Others 397 1,159 __________ __________

13,617 1,159 __________ __________

(b) In October 2014, CELEPSA purchased two land located in the city of Piura "Thermal Central

Paita" and "Thermal Central Sullana" approximately by US$2,600,000 and US$1,900,000,

respectively (equivalent to S/.7,638,000 and S/.5,582,000, respectively), include the payment

of tax by alcabala. In the Group Management’s opinion such land will not be used in the Group's

operations.

2014 2013

S/.(000) S/.(000)



Selling expenses, note 24 89 -

Other operating income (expenses) , net, note 26 5,428 5,757 _________ ________

14,976 16,646 _________ ________


50

14. Other financial liabilities


2014 2013 __________________________________________________ ___________________________________________________

Short-term Long-term Total Short-term Long-term Total

S/.(000) S/.(000) S/.(000) S/.(000) S/.(000) S/.(000)

Bank overdrafts 4,180 - 4,180 9,382 - 9,382

Bank loans (b) 98,996 431,080 530,076 277,490 450,154 727,644

Bonds and long-term loans (d) 639,132 3,706,407 4,345,539 606,036 1,889,123 2,495,159

_________ __________ __________ __________ __________ __________

742,308 4,137,487 4,879,795 892,908 2,339,277 3,232,185

_________ __________ __________ __________ __________ __________

(b) Bank loans correspond to working capital loans at fixed annual rates that range between 2.88 and 6.45 percent, have maturity lower than 12 months, do not have specific

guarantees and are renewed depending on the working capital needs of the Group. As of December 31, 2014 and 2013, the balance by bank is as follows:

Creditor - 2014 2013

S/.(000) S/.(000)

Citibank N.A. New York 258,466 258,466

Santander Overseas Bank Inc. 146,461 111,840

ITAU Unibanco 78,461 -

ITAU Private Bank 41,688 83,376

Scotiabank Peru S.A.A. 5,000 -

BBVA Banco Continental - 170,970

Banco de Crédito de Miami - 50,328

Bank of Nova Scotia New York - 41,940

Banco de Crédito del Perú S.A.A. - 10,724 ________ ________

530,076 727,644 _________ _________

(c) As of December 31, 2014 and 2013, interest payable on bank loans amounted to approximately S/.6,571,000 and S/.2,244,000, respectively, and is recorded in the caption

"Trade and other payable" in the consolidated statements of financial position, see note 15(a). As of December 31, 2014 and 2013, interest expense totaled approximately

S/.35,356,000 and S/.16,747,000, respectively, and are included in the caption "Finance costs" item in the consolidated statement of income, see note 28(a).


51

(d) The composition of the caption “Bonds and long-term loans” is as follows:

Annual interest rate Maturity Guarantee 2014 2013

% S/.(000) S/.(000)

Corporate Bonds -

International Bonds (e) 5.875 October 2021 No guarantees 1,868,125 -

Corporate bonds (f)

Between 4.93 and 6.25

Between January 2015 and March

2023 No guarantees 338,584 520,459

Bonds of Arizona State (g) Between 3.245 and 12 September 2035 Letter of Credit Bank 119,560 111,840 __________ __________

2,326,269 632,299

Amortized cost (31,858) (3,568) __________ __________

2,294,411 628,731 __________ __________

Syndicated loans -

Banco de Crédito del Perú S.A.A. – BCP (h) Libor to 3 months + 2.375 December 2016 Several guarantee by shareholders 3,795 4,734

Banco Scotiabank del Perú S.A.A. (h) Libor to 3 months + 2.375 December 2016 Several guarantee by shareholders 166 207 __________ __________

3,961 4,941 __________ __________

Bank loans -

Bank of Nova Scotia

Libor to 3 months +2.35 ,1.95 and

2.40

Between September 2015 and

September 2018

Property and mining concessions, note

10(h) 237,999 303,249

Banco Internacional del Perú S.A.A. – INTERBANK Between 5.25 and 6.24 Between July 2017 and March 2019 No guarantees 271,216 168,421

BBVA Compass

Libor to 3 months +1.35, Libor + 3

min 4 and Libor +4 min 4.25

Between June 2016 and May 2018

Plant, land and equipment 170,018 179,496

Banco de Crédito e Inversiones (BCI) 2.45 July 2016 No guarantees 156,923 -

Bank of Nova Scotia (i) Libor to 3 months + 2.25 January and April 2019 Guarantee on property 116,870 128,594

BBVA Banco Continental

Libor to 3 months + 2.90 ,4.35

and 6.0

Between January 2015 and June 2017

Mining concessions, see note 10(h) 113,358 154,890

Banco Internacional S.A.

8.0

5 to 7 years

Guarantee trust (machinery production

line 2) 88,848 -

Banco de Crédito del Perú S.A.A. – BCP Between 5.57 and 5.80 Between July and October 2016 No guarantees 39,853 42,859

Mack (mixers) 6.59 Between July 2019 and October 2019 Equipment 13,651 -

Citibank 6.65 - No guarantees 12,853 -

Other less than S/.10,000,000 32,614 13,497 __________ __________

1,254,203 991,006

Amortized cost (5,401) (5,248) __________ __________

1,248,802 985,758 __________ __________

Finance leasebacks -

Banco de Crédito del Perú S.A.A. (h) 7.21 December 2020 Leased goods 104,299 97,564

Scotiabank del Perú S.A.C. (h) 7.21 December 2020 Leased goods 45,151 42,236

Banco Internacional del Perú – INTERBANK 5.4 November 2016 Leased goods 5,372 7,419 __________ __________

154,822 147,219 __________ __________


52

Annual interest rate Maturity Guarantee 2014 2013

% S/.(000) S/.(000)

Finance leases -

Banco de Crédito del Perú S.A.A. – BCP (j) Libor + 2.35 February 2018 Leased goods 287,202 326,420

Banco de Crédito del Perú S.A.A. – BCP (h)

Between 5.03, 8.60 and Libor to 3

months + 2.375

Between December 2016 and January

2019

Leased goods 90,688 108,125

Banco Internacional del Perú S.A.A. –

INTERBANK (k)

5.8

October 2018


Banco Scotiabank del Perú S.A.A. (h)

Libor to 3 months + 2.375, Libor

to 3 months +5.8

Between December 2016 and December

2017


Consorcio Transmantaro S.A. 12 July 2039 Leased goods 47,945 45,097

Scotiabank del Perú S.A.C. Between 4.13 and 6.30 Between 2015 and 2018 Leased goods 33,133 38,822

BBVA Banco Continental Between 2.62 and 6.0 Between 2015 and 2017 Leased goods 17,359 20,460

Other less than S/.10,000,000 32,097 43,291 __________ __________

633,137 728,802

Commissions (303) (292) __________ __________

632,834 728,510 __________ __________

Factoring 10,709 - __________ __________

Total 4,345,539 2,495,159

Less - Current portion 639,132 606,036 __________ __________

Non-current portion 3,706,407 1,889,123 __________ __________


53

(e) On May 26, 2014, the Board of Meeting of the company approved the acquisition of 98.57

percent of the shares of UNACEM Ecuador S.A. (formerly Lafarge Cementos S.A.) (a public

company located in Quito, Ecuador, subsidiary of Lafarge S.A. of France. On October 20, 2014

the Board of Meeting agreed the international bond issue (“Senior Notes”) under the Rule 144A

of the US Securities and under the regulation S of the US Securities Act of 1933, on the

Luxembourg Stock Exchange for a nominal value of US$625 million, at a nominal interest rate of

5.875 percent with maturity on 2021, resulting a total net collection of fees and expenses of

US$615 million (approximately equivalent to S/.1,839 million).

The Company used the funds to purchase the shares of UNACEM Ecuador S.A. (formerly Lafarge

Cementos S.A.) and Subsidiaries through its subsidiary Imbabura for a total amount of US$519

million (equivalent to S/.1,520.7 million), see note 2(b). On November 25, 2014, Imbabura took

control UNACEM Ecuador´s operations.

(f) Also includes the "First Program of Corporate Bonds Cemento Andino S.A." (transferred later as

result of the merger with the Company) up to the amount of issuance of US$40,000,000 or its

equivalent in Nuevos Soles. As of December 31, 2014, the balance amounted to approximately

S/.280,000,000 and S/.58,584,000, respectively (as of December 31, 2013, approximately

S/.450,000,000 and S/.70,459,000, respectively).

The purpose of issuances was raise funds to finance medium-term investments.

(g) On November 18, 2010, Drake Cement, LLC obtained a bond financing of the Development

Authority of Yavapai County, Arizona, for the purpose of finance part of the investment in the

cement plant of the subsidiary amounting to US$40,000,000, maturing in September 2035 and

a monthly interest payments on the basis a variable interest rate (Securities Industry and

Financial Markets Association Index rate) currently at 0.38 percent from 3.245 percent, up to a

maximum interest rate 12 percent). The bonds are secured by a letter of credit from the bank.

(h) On April 12, 2007, Banco de Crédito del Perú - BCP, Scotiabank del Perú S.A.A. (Scotiabank) and

CELEPSA signed leasing agreement and syndicated loan for that the designated financial

institutions are charge of finance civil works construction of the hydroelectric G-1 Platanal, up to

an amount of US$120,000,000, to nominal annual interest rate equal to LIBOR (3 months) plus

2.375 percent, structured as follows: US$80,000,000 and US$40,000,000 financed by BCP and

Scotiabank, respectively.

Due to the increased value of the work generated during the development of project, on June 30,

2009, the creditors agreed to extend financing; in that sense, the BCP and Scotiabank agreed to

give to CELEPSA a new financing through finance leases by US$60,000,000 of which

US$40,000,000 corresponded to BCP with an annual fixed rate of 8.6 percent and

US$20,000,000 corresponded to Scotiabank with a variable rate LIBOR plus 5.8 annual nominal

percent.


54

On December 20, 2013, CELEPSA signed leaseback contracts to pre-pay the syndicated loans. In

that sense, BCP and Scotiabank agreed to give US$51,000,000 of which US$36,000,000

corresponded to BCP and US$15,000,000 corresponded to Scotiabank, both loans to annual

fixed rate of 7.21 percent.

(i) Corresponds to UNICON's loan granted by Bank of Nova Scotia, on December 2011, which

mature in the year 2019 and has two years of grace loan. The loan’s recourses were used to

acquire 99.9 percent of the shares of Firth Industries S.A.

(j) On December 17, 2008, UNACEM signed with BCP a contract of terms and conditions of financial

leasing for the extension of the production capacity through the installment of a new line of

production (Kiln 4) in the plant of Condorcocha. The financing ascends to US$162,000,000,

which were disbursed in three parts: US$25,000,000, US$85,000,000 and US$52,000,000. On

March 2013 was disbursed the third part.

The Company completed this expansion project in year 2013. As of December 31, 2014, the net

carrying value of the assets of the kiln 4 is approximately S/.565,369,000 (S/.602,225,000 as

of December 31, 2013) which guarantee the financing described, see note 10(e).

(k) In General Shareholders Meeting dated May 19, 2010, approved the sign of the lease agreement

to increase the production capacity with Banco Internacional del Perú (Interbank), this project

increase the production capacity of Kiln 1 from 3,200 to 7,500 tones clinker/day, located in

Atocongo´s plant. The Company completed the project in the year 2013. As of December 31,

2014, the net carrying value of the assets is approximately S/.614,766,000 (S/.644,037,000 as

of December 31, 2013), which guarantee the described financing, see note 10(e).

(l) As of December 31, 2014 and 2013, interests payable related to bonds and long-term debt are

amounted to approximately S/.29,967,000 and S/.15,692,000, respectively and are recorded in

the caption “Trade and other accounts payable”, of the consolidated statement of financial

position, note 15.

(m) In 2014, no was capitalized interest. In 2013 was capitalized interest by approximately

S/.25,381,000 and recorded in the caption "Property, plant and equipment, net" in the

consolidated statement of financial position, see note 10(d). The balance ascend approximately

S/.129,797,000 and S/.105,267,000 as of December 31, 2014 and 2013, respectively, is

included in the caption "Finance costs" in the consolidated statement of income, note 28(a).

(n) The financial covenants are monitored quarterly and must be calculated on the basis of separate

financial information and calculation methodologies required by each financial institution.

Compliance with financial covenants is monitored by the Group Management and the

Representative of the Noteholders. In case of deafault of the above safeguards will be incurred in

the event of early termination. In the opinion of management, the Group has complied with the

financial covenants required by financial institutions with which maintains funding at December

31, 2014.


55

15. Trade and other payables


2014 2013

S/.(000) S/.(000)

Trade payables (b) 380,795 257,033

Accounts payable to related entities, note 29(c) 75,395 63,456

Tax payable 39,209 4,394

Remunerations and vacations payable 38,461 30,281

Interest payable, note 14(c) and (l) 36,538 17,936

Accounts payable to third parties (c) 19,489 23,016

Director’s remunerations payable 5,259 3,774

Other accounts payable 40,808 36,691 _________ _________

635,954 436,581 _________ _________

Term -

Current portion 590,689 390,512

Non-current portion 45,265 46,069 _________ _________

635,954 436,581 _________ _________

(b) The trades payable arising, mainly, by acquisition of assets and services for Group’s activities of

production and correspond to payable invoices to supplier local and foreign, have current

maturity, do not earn interests and do not have guarantees.

(c) During the year 2013, CELEPSA realized a financing transaction of finance leaseback and

obtained a higher value of the assets recorded as a result of a valuation of the assets, this

increased value caused the recognized of a liability in the caption "Other accounts payable" by

S/.19,489,000 as of December 31, 2014 (S/.23,016.000 as of December 31, 2013), which will

be amortized to income in the period of the finance leaseback agreement.

16. Deferred income

As of December 31, 2014 and 2013, correspond mainly to cement, clinker and concrete sales invoiced

and not shipped and will be performed in the first quarter of year, as well as the advances billed to

supply ready-mix concrete amounting to approximately S/.62,733,000 and S/.44,495,000,

respectively.


56

17. Provisions


Current Non-current _________________________ _________________________

2014 2013 2014 2013

S/.(000) S/.(000) S/.(000) S/.(000)

Workers’ profit sharing (b) 53,682 21,895 - -

Severance indemnities 3,029 2,534 8,417 -

Mine closure provision (c) 1,038 337 15,348 13,663

Other provisions 26 - - - - ________ ________ ________ ________

57,775 24,766 23,765 13,663 ________ ________ ________ ________

(b) In accordance with Peruvian legislation, the Group’s entities maintain a workers’ profit sharing

plan ranging between 5 and 10 percent of the annual taxable income depending on the economic

sector in which they operate. Distributions to employees under the plan are based 50 percent on

the number of days that each employee worked during the preceding year and 50 percent on

proportionate annual salary levels.

According to Ecuadorian legislation, group entities within the scope of Ecuador´s workers have

right to participate in 15 percent of net income. In the case of subsidiary Canteras y Voladuras

S.A., 3 percent of net income is distributed between workers and 12 percent is delivered to the

Internal Revenue Service (acronym in Spanish “SRI”).

(c) As of December 31, 2014 and 2013, the Group maintains in Peru a provision for future closure

costs of its mines to be occurring between 30 and 46 years.

Additionally, the Environmental Management Law and the Environmental Regulations for Mining

Activities in Ecuador, requires the completion of a restoration plan for the concessions of Selva

Alegre, Cumbas and Pastaví, the same that hold a future closure plan based on assessment such

quarries.

The provision was created on the basis of studies conducted by internal specialists using a

discount rate. Based on the current economic environment, Management adopted certain

assumptions which are considered reasonable to make an estimation of future liabilities. These

estimates are reviewed annually to take into account any significant change in the assumptions.

However, the actual costs of mine closure finally depend on future market prices for the

necessary works of abandonment that will reflect market conditions at the relevant time. In

addition, the actual closing time depends on when the mines ceases to produce economically

viable products.


57

18. Income tax

(a) The composition of the liability for deferred income tax arises, according to the caption that originated:

As of January

1, 2013

Efect in

Consolidated

Statement of

income

Exchange

differences

Charged to

Comprehensive

income Other

As of December

31, 2013

Efect in

Consolidated

Statement of

income

Exchange

differences

Acquisition of

Subsidiaries,

note 2(a), (b)

and (c)

Charged to

Comprehensive

income

As of December

31, 2014

S/.(000) S/.(000) S/.(000) S/.(000) S/.(000) S/.(000) S/.(000) S/.(000) S/.(000) S/.(000) S/.(000)

Movement of deferred tax assets:

Deferred tax asset

Tax loss carryforwards 94,625 12,864 9,418 - - 116,907 44,942 9,832 - - 171,681

Provision for vacation and other provision 1,232 2,357 172 - - 3,761 1,354 289 2,008 144 7,556

Depreciation and amortization (19,466) 27,746 (1,137) - - 7,143 (700) 440 (36) - 6,847 ________ _________ _________ _________ ________ _________ _________ _________ _________ _________ ________

Total deferred tax asset 76,391 42,967 8,453 - - 127,811 45,596 10,561 1,972 144 186,084 ________ _________ _________ _________ ________ _________ _________ _________ _________ _________ ________

Deferred tax liability

Depreciation and recalculation for useful life and residual

value 460 (460) - - - - - - - - -

Other (383) 383 - - - - - - - - - ________ _________ _________ _________ ________ _________ _________ _________ _________ _________ ________

Total movement of deferred tax assets, net 76,468 42,890 8,453 - - 127,811 45,596 10,561 1,972 144 186,084 ________ _________ _________ _________ ________ _________ _________ _________ _________ _________ ________

Movement of deferred tax liabilities:

Deferred tax asset

Tax loss carryforwards 46,153 10,896 - 397 - 57,446 260 - - - 57,706

Deferred income 1,639 (376) - - 76 1,339 15,245 - - - 16,584

Derivative financial instruments 15,731 952 - (5,157) 95 11,621 (314) - 17 (2,042) 9,282

Provision for vacation 4,410 2,016 - - (273) 6,153 (424) 6 270 - 6,005

Mine closure provision 2,856 603 - - - 3,459 (594) - 5 - 2,870

Other provisions 2,784 2,740 - - 1,350 6,874 (1,997) - - - 4,877 ________ _________ _________ _________ ________ _________ _________ _________ _________ _________ ________

Total deferred tax asset 73,573 16,831 - (4,760) 1,248 86,892 12,176 6 292 (2,042) 97,324 ________ _________ _________ _________ ________ _________ _________ _________ _________ _________ ________

Deferred tax liability

Differences on fixed assets tax bases (557,763) (33,422) - - - (591,185) 50,587 (510) (25,325) - (566,433)

Stripping cost (39,716) (3,128) - - - (42,844) 6,136 - - - (36,708)

Amortization of intangibles assets (1,312) (3,452) - - - (4,764) 500 (637) (31,645) - (36,546)

Borrowing cost (27,085) (6,606) - - - (33,691) 3,155 - - - (30,536)

Deferred commissions and net interest (9,186) 1,206 - - 216 (7,764) (6,273) 10 530 - (13,497)

Other (4,971) 32 - - - (4,939) 2,443 (21) (1,187) - (3,704) _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________

Total movement of deferred tax liabilities, net (566,460) (28,539) - (4,760) 1,464 (598,295) 68,724 (1,152) (57,335) (2,042) (590,100) _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________

Total deferred tax liability, net (489,992) 14,351 8,453 (4,760) 1,464 (470,484) 114,320 9,409 (55,363) (1,898) (404,016) _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ _________


58

(b) The current and deferred portions of the provision for income tax for the years ended 2014 and

2013 are comprised as follows:

2014 2013

S/.(000) S/.(000)

Current (124,124) (94,192)

Deferred 32,624 14,351

Effect of exchange rate in the income tax, note 31.3(a.1) 81,696 - _________ _________

(9,804) (79,841) _________ _________

(c) The table below presents the conciliation of the effective tax rate and the legal tax rate for the

years 2014 and 2013:

2014 2014 2013 2013

S/.(000) % S/.(000) %

Income before tax 309,076 100.0 273,132 100.0 ________ ________ ________ ________

Income tax according tax rate 92,723 30.0 81,940 30.0

Effect of exchange rate in the

income tax, note 31.3(a.1) (81,696) (26.4) - -

Tax effect on permanent items (1,223) (0.4) (2,099) (0.8) ________ ________ ________ ________

Income tax expense 9,804 3.2 79,841 29.2 ________ ________ ________ ________

In December 2014, the Peruvian Government approved a gradual reduction in the rate of income

tax, see note 31.3(a). This reduction in future rates of income tax had a net impact of

S/.81,696,000 as a reduction of the liability for deferred income tax. This amount has been

recognized as a reduction to tax income in the consolidated statement of income for the year

2014.


59

19. Non-controlling interests

Non-controlling interests are included in the consolidated statement of financial position, consolidated statement of changes in equity and consolidated statement of income according to the table presented

below:

Percentage of participation of third

Income (loss) of the Company Equity of the Company

Participation of non-controlling interests in the income of the

Company Non-controlling interests in

equity of the Company

_____________________________ _____________________________ _____________________________ _____________________________ _____________________________

Company 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013

% % S/.(000) S/.(000) S/.(000) S/.(000) S/.(000) S/.(000) S/.(000) S/.(000)

Skanon Investments Inc. and Subsidiaries 4.64 4.94 (72,270) (62,537) 945,362 889,139 (11,542) (7,184) 78,568 80,547

Compañía Eléctrica El Platanal S.A. and Subsidiaries 10.00 10.00 17,614 1,812 671,091 649,314 1,827 181 67,476 64,951

Inversiones en Concreto y Afines S.A. and Subsidiaries 6.62 6.62 68,244 44,298 405,279 344,837 5,731 3,754 29,598 25,019

Prefabricados Andinos Perú S.A.C. and Subsidiaries 49.98 50.00 1,488 3,374 35,636 34,381 744 1,687 17,811 17,190

Prefabricados Andinos S.A. 49.00 - 3,486 - 33,926 - 1,708 - 16,623 -

Inversiones Imbabura S.A. and Subsidiaries - - 10,670 - 1,540,789 - 119 - 5,674 -

Other

(1) (441) 4 360

_______ _______ ________ ________

(1,414) (2,003) 215,754 188,067

_______ _______ ________ ________


60

20. Equity

(a) Capital stock –

As of December 31, 2014 and 2013, the capital stock is represented by 1,646,503,408 common

shares totally subscribed and paid at a nominal value of S/.1 per share. The common shares

representing the Company’s capital stock are traded on the Lima Stock Exchange.

Shareholders Number of shares

Percent of

participation

%

Sindicato de Inversiones y Administración S.A. 714,311,308 43.38

Inversiones Andino S.A. 399,979,008 24.29

AFP 351,394,094 21.34

Other 180,818,998 10.99 ______________ ________

1,646,503,408 100.00 ______________ ________

As of December 31, 2014, the share price of each share was S/.2.93 (S/.3.77 as of December

31, 2013).

(b) Legal reserve -

Under the terms of the General Corporation Law, it is required that at least 10 percent of the

distributable profit for each year, less income tax, has to be transferred to a legal reserve until

such reserve equals to 20 percent of the share capital. The legal reserve may offset any losses or

may be capitalized, existing in both cases the obligation to replenish it.

(c) Unrealized results -

It corresponds to the fair value changes on hedging financial instruments, net of its

corresponding tax effect.

(d) Dividend distributions –

On Board of Directors meetings held on January 17, April 28, July 18 and November 3, 2014, it

was agreed to distribute dividends with charge to retained earnings for approximately

S/.85,619,000 (S/.1 per common share), such payments were made on February 19, May 29,

August 21 and December 3, 2014 respectively.

On Board of Directors Meetings held on January 18, April 19, July 19 and October 18, 2013, it

was agreed to distribute dividends with charge to retained earnings for approximately

S/.83,971,000 (S/.1 per common share), such payments were made on February 21, May 23,

August 22 and November 21, 2013, respectively.


61

21. Net sales


2014 2013

S/.(000) S/.(000)

Cement 1,688,586 1,526,661

Concrete 1,240,872 1,161,442

Energy and power 166,649 196,602 __________ __________

3,096,107 2,884,705 ________-_ __________

22. Cost of sales


2014 2013

S/.(000) S/.(000)

Beginning balance of finished goods and in process goods,

note 8(a) 168,137 109,250

Cost of production:

Consumption of raw material 400,284 742,827

Fuel 311,103 241,672

Depreciación, note 10(f) 340,933 280,520

Personnel expenses, note 25(b) 325,353 225,817

Electrical energy 112,112 98,975

Packaging 71,807 59,279

Stripping costs 11,985 22,731

Depreciation for stripping cost, note 11(a) 6,863 4,776

Amortization, note 12(g) 3,331 3,623

Other manufacturing expenses 550,106 313,254

Acquisition of subsidiaries finished goods and in the process,

note 2 30,198 -

Ending balance of finished goods and in process goods, note 8(a) (257,350) (168,137) __________ __________

2,074,862 1,934,587 __________ __________


62

23. Administrative expenses


2014 2013

S/.(000) S/.(000)

Personnel expense, note 25(b) 99,447 92,729

Services rendered by third parties 47,120 42,062

Management services 42,037 36,578

Taxes 19,490 15,144

Donations 15,765 13,374

Depreciation, note 10(f) 7,761 11,630

Amortization, note 12(g) 6,128 7,266

Service charges of different management 4,366 4,296

Estimation for doubtful accounts, note 7(j) 204 3,338

Other 19,383 9,674 _________ _________

261,701 236,091 _________ _________

24. Selling expenses


2014 2013

S/.(000) S/.(000)

Sales commissions 53,254 42,958

Advertising and marketing 39,629 37,767

Personnel expenses, note 25(b) 19,594 11,247

Amortization, note 12(g) 89 -

Depreciation, note 10(f) 39 44

Other 9,625 6,545 _________ _________

122,230 98,561 _________ _________


63

25. Personnel expenses

(a) Personnel expenses made up as follows:

2014 2013

S/.(000) S/.(000)

Remunerations 264,102 181,098

Workers’ profit sharing, note 17(b) 44,977 32,876

Bonuses 28,916 27,077

Employer contributions 26,680 6,597

Vacations 18,382 15,147

Severance indemnities 16,955 14,412

Mobility and meals 13,062 10,004

Director’s Fees 7,225 5,781

Other 27,146 36,801 _________ _________

447,445 329,793 _________ _________

(b) Personnel expenses are allocated as follows:

2014 2013

S/.(000) S/.(000)



Selling expenses, note 24 19,594 11,247

Other operating (expenses) income, net, note 26 3,051 - _________ _________

447,445 329,793 _________ _________

(c) The average number of employees during 2014 was 4,018 (3,417 in the year 2013).


64

26. Other operating income (expenses), net


2014 2013

S/.(000) S/.(000)

Other income -

Insurance indemnity 21,787 35

Income from services 7,795 2,351

Sale of fixed assets, goods and supplies 4,974 5,001

Rental income 3,044 3,117

Income from prior years 1,024 1,993

Income from services 501 308

Recovery of inventories, note 8(e) 258 517

Recovery of doubtful accounts, note 7(j) 210 77

Other 6,111 2,218 _________ _________

45,704 15,617 _________ _________

Other expense -

Amortization, note 12(g) (5,428) (5,757)

Cost of fixed assets, goods and supplies (3,110) (5,563)

Personnel expenses, note 25(b) (3,051) -

Cost of services (802) (2,009)

Estimate for impairment of inventories, note 8(e) (751) (250)

Reimbursement of expenses - (5,670)

Depreciation, note 10(f) - (23)

Other (4,000) (8,566) ________ ________

(17,142) (27,838) ________ ________

28,562 (12,221) _________ _________

27. Finance income


2014 2013

S/.(000) S/.(000)

Interest on deposits and loans 5,182 7,514

Other 1,324 3,287 _________ _________

6,506 10,801 _________ _________


65

28. Finance costs


2014 2013

S/.(000) S/.(000)

Interest on bond an debt banks, note 14(m) 129,797 105,267

Interest on bank notes, note 14(c) 35,356 16,747

Other 8,505 6,807 __________ __________

173,658 128,821

Commissions for structuring other liability financial, (b) 17,028 2,017 __________ __________

190,686 130,838 __________ __________

Interest on derivative instruments -Swap, note 32.1(i) 27,660 18,651

Financial expenses on derivatives –MTM 2,749 5,788

Loss on re-measurement to fair value of liabilities - 1,476 __________ __________

30,409 25,915 __________ __________

221,095 156,753 __________ __________

(b) In May 2014, the Company paid a commission for structuring a bridge loan that came negotiating

with local and foreign financial institutions; however, on October 2014, the Company chose other

funding through a bond issue, see note 14(e) the amount paid and recognized as expenses in the

year of approximately S/.14,527,000.

29. Related parties transactions

(a) Nature of the relationship –

During the years 2014 and 2013, the Group has made transactions with the following related

entities:

- Nuevas Inversiones S.A. - NISA

As of December 31, 2014, NISA owns 58.73 percent of the share capital of SIA (57.90

percent at December 31, 2013) through which holds investments in Group companies.

- Sindicato de Inversiones y Administración S.A. - SIA

SIA’s main activity is to provide management services to the Company, in exchange for an

annual payment up to 7.2 percent of its profits before taxes. As of December 31, 2014

and 2013, Sindicato de Inversiones y Administración S.A. owned 43.38 percent of the

share capital of the Company.


66

- Inversiones Andino S.A. - IASA

On December 28, 1981, Cementos Andino S.A. and Inversiones Andino S.A. signed a

service contract administrative and managerial advice, it was transferred to the Company

at the date of the merger. The remuneration for services corresponds to an annual rate of

2.8 percent of income before taxes of the Company. At December 31, 2014 and 2013,

IASA owns 24.3 percent of the share capital of the Company.

- ARPL Tecnología Industrial S.A. - ARPL

The shareholders of the Company have significant influence in ARPL. The Group receives

services related to advisory and technical assistance, development and management of

engineering projects.

- La Viga S.A. - VIGA

A director of the Company has influences in VIGA. The entity is dedicated to distribution of

cement and is one of the main distributors of the Company in the city of Lima.

- Vigilancia Andina S.A. - VASA

VASA dedicated to the provision of surveillance, control and security of all facilities and

public and private buildings, shows, festivals and events in Peru.

- BASF Contruction Chemicals Perú S.A. - BASF

It is entity dedicated to the manufacture, importation, sale and supply of chemicals used

mainly as additives for the manufacture of concrete and associated investment is a

subsidiary of the Company (UNICON).

(b) The main transactions with related during the years 2014 and 2013 were as follows:

2014 2013

S/.(000) S/.(000)

Cement sales -

La Viga S.A. 370,265 358,978

Management service -

Sindicato de Inversiones y Administración S.A. 28,304 26,338

Inversiones Andino S.A. 11,007 10,243

Project Management Services -

ARPL Tecnología Industrial S.A. 14,834 23,836

Engineering services and technical assistance -


Service Support system paid -


Purchase additives -

BASF Contruction Chemicals Perú S.A. 29,314 28,779


67

2014 2013

S/.(000) S/.(000)

Dividend income -

BASF Construction Chemicals Perú S.A. 3,322 2,892

Ferrocaril Central Andino S.A. 486 308

Expense monitoring service -

Vigilancia Andina S.A. 23,762 23,372

Commission and freight for cement sales -

La Viga S.A. 23,414 18,260

Other expense -


Inversiones Andino S.A. 935 876

Other income -

Sindicato de Inversiones y Administración S.A. - 108

(c) As a result of these and other transactions lesser, as of December 31, 2014 and 2013, the Group

had the following balance with its related entities:

2014 2013

S/.(000) S/.(000)

Trade receivable, note 7(a)

La Viga S.A. 19,664 14,971

Sindicato de Inversiones y Administración S.A. 691 4,650

BASF Contruction Chemicals Perú S.A. 390 267

Other 3,781 1,500 _________ _________

24,526 21,388 _________ _________

Trade payable, note 15(a)

Sindicato de Inversiones y Administración S.A. 33,702 30,142


BASF Contruction Chemicals Perú S.A. 10,918 5,775

Inversiones Andinos S.A. 6,333 8,166

Vigilancia Andina S.A. 3,267 1,891

La Viga S.A. 1,288 1,607 _________ _________

75,395 63,456 _________ _________

Current portion 49,618 40,403

Non current portion 25,777 23,053 _________ _________

75,395 63,456 _________ _________


68

(d) The Group conducts its operations with related entities under the same conditions as those made

with third parties, therefore there is no difference in pricing policies or the settlement of tax

base, in relation to the payment, and they do not differ with the policies issued to third parties.

(e) The total remuneration paid to Group´s directors and key members of management as of

December 31, 2014 is amounting to approximately S/.22,812,000 (approximately

S/.21,800,000 in 2013), which include short-term benefits and compensation for time served.

(f) Guarantees given -

- UNACEM maintains a "Comfort Letter" Scotiabank Peru S.A.A. with for UNICON, dated

July 31, 2009, by ensuring a line of credit up to US$8,500,000 (equivalent to

approximately S/.25,406,000), under which they will be held various credit operations.

- As of December 31, 2014 and 2013, UNICON has a contract of guarantee for Citigroup

Inc., aiming to secure payment of loans or debts of their related Skanon Investments Inc.

and Drake Cement LLC. UNICON must comply with certain financial covenants required by

the bank, quarterly and annual monitoring, which must be calculated based on the

combined financial information of UNICON and FIRTH. In the opinion of management of

the Group, UNICON has complied with these obligations at December 31, 2014 and 2013.

30. Earnings per share

Basic earnings per share amounts are calculated by dividing net income for the year by the weighted

average number of common shares outstanding during the year.

Calculation of the weighted average number of shares and the basic and diluted earnings per share is

presented below:

2014 2013

S/.(000) S/.(000)

Numerator

Net income attributable to common shares 300,686 195,294 __________ __________

2014 2013

Thousand Thousand

Denominator

Weighted average number of common shares 1,646,503 1,646,503 ___-_______ ________-__

2014 2013

S/. S/.

Basic and diluted earnings for common shares 0.183 0.119 ___-_______ ________-__


69

31. Commitments and contingencies

31.1 Financial commitments -

(a) As of December 31, 2014, the Group has “Comfort letters” with some financial entities

guaranteed of obligations acquired by its related entities by approximately

S/.129,444,000 (S/.146,058,000 as of December 31, 2013).

(b) As guarantee for the payment of its financial obligations, CELEPSA have two trusts, the

same as below:

(i) Trust of management and guarantee: include credit rights and futures-cash flows

by CELEPSA, which is intended to secure the payment of the obligations under the

funding and serving as a means of payment. Activation of this trust was given

immediately after the start of operations of Platanal hydroelectric power station.

(ii) Trust of guarantee: include the concession, property and trade receivables from

any such disposition of concession or assets and cash flows from their sale, which

to guarantee the payment of obligations under the syndicated loan.

In turn, the following additional legal relations were established:

- Guarantees of stockholders: through contracts several guarantee, shareholders of

CELEPSA were forced to assume the payment obligations of the same in case of

default, in proportion to their shareholding (UNACEM and Corporación Aceros

Arequipa S.A.A.).

- Surface rights: For purposes of construction of the assets which form part of the

lease, CELEPSA has given, free of charge, surface rights to each bank lenders.

31.2 Finance leases -

The future minimum payments for leases and leaseback are as follow:

2014 2013 __________________________________ __________________________________

Minimum

payments

Present value of

minimum lease

payments

Minimum

payments

Present value

of minimum

lease payments

S/.(000) S/.(000) S/.(000) S/.(000)

Up to 1 year 172,575 159,364 215,493 189,093

Between one and five years 791,712 606,301 839,897 648,396 __________ _________ _________ _________

Total payments 964,287 765,665 1,055,390 837,489

Less - finance costs (176,631) - (179,661) - __________ _________ _________ _________

Present value of minimum

lease payments 787,656 765,665 875,729 837,489 __________ _________ _________ _________


70

31.3 Tax situation -

(a) The entities comprising the Group are subject to taxation in the country in which they

operate and taxed separately on the basis of its non-consolidated results.

(a.1) As of December 31, 2013 and 2014, the rate of income tax in Peru is 30 percent

on taxable income after deducting the participation of workers.

From the fiscal year 2015, according to law No.30296, "Law that promotes

Economic Reactivation", the income tax rate applicable to taxable income, after

deducting the workers participation will be as follows:

- Fiscal year 2015 and 2016: 28 per cent.

- Fiscal year 2017 and 2018: 27 per cent.

- As of Fiscal year 2019: 26 per cent.

Legal persons not domiciled in Peru and individuals are subject to retention of an

additional tax on dividends received.

In this regard, considering Law No.30296, the additional tax on dividend generated

by profits is as follows:

- 4.1 per cent by profits generated until December 31, 2014.

- By the profits generated from 2015, whose distribution is made from that

date and will be the following:

- 2015 and 2016: 6.8 per cent.

- 2017 and 2018: 8 per cent.

- As of 2019 : 9.3 per cent.

(a.2) The entities domiciled in the United States America have not determined income

tax due to tax loss carryforwards, see next paragraph(c), the applicable tax rate of

41.7 percent.

(a.3) For the entities domiciled in Ecuador, the rate for income tax is calculated 22

percent on profits subject to distribution. However, the rate could be increased to

25 percent on taxable income corresponding to the direct or indirect participate of

partners, shareholders, beneficiaries or similar, who are resident in tax havens or

with lower tax regimes.

(a.4) For entities domiciled in Chile, the rate of income tax applicable to 2014 is 21

percent.


71

In September 2014, the Tax Reform Law N° 20.780, which introduces several

changes to the current tax system in Chile, considered a progressive increase in the

rate of income tax first class for commercial years 2014, 2015, 2016 , 2017 and

2018 onwards, changing the tax rate of 20 percent to 21 percent, 22.5 percent,

24 percent, 25.5 percent and 27 percent, respectively, in the event that is applied

the System Partially Integrated or, for commercial years 2014, 2015, 2016 and

2017 onwards, increasing the tax rate to a 21 percent, 22.5 percent, 24 percent

and 25 percent, respectively, in case you opt for System Application Income

Attributed.

(b) The Tax Authority in each country has the right to review and if necessary, adjust the

corresponding income tax calculated by the Company and its subsidiaries in the four years

after the filing of the tax return. The affidavits of income tax are open to inspection by the

Tax Authority as follows:

Periods open to review

Peru -

Unión Andina de Cementos S.A.A. 2010-2014

Compañía Eléctrica el Platanal S.A.

2006-2009 and 2011-

2014

Generación Eléctrica Atocongo S.A. 2010 and 2012-2014

Unión de Concreteras S.A. 2010 and 2012-2014

Firth Industries Perú S.A. 2012-2014

Inversiones en Concreto y Afines S.A. 2010-2014

Prefabricados Andinos Perú S.A.C. 2010 and 2012-2014

Transportes Lurin S.A. 2010-2014

Depósito Aduanero Conchán S.A. 2010 and 2012-2014

Ecuador -

UNACEM Ecuador S.A. 2010 -2014

United States of America 2010-2014

Due to the interpretations likely to be given by the Tax Authority on current legal

regulations, it is not possible to determine, as of this date, whether the reviews to be

conducted will result in liabilities for the Company and subsidiaries; therefore, any

increased tax or surcharge that could arise from possible tax reviews will be applied to the

results of the year in which it is determined. In the Management’s and its legal advisors’

opinion, any additional tax settlement would not be significant for the consolidated

financial statements as of December 31, 2014 and 2013.

As of December 31, 2014, the Group recorded a provision for income taxes of

S/.124,124,000 and credits related to payments in advance of S/.152,750,000

(S/.94,192,000 and S/.163,421,000, respectively as of December 31, 2013). This


72

balance amounting to S/.28,626,000 and other tax credits S/.4,243,000, are presented

in "Trade receivable and others" of the consolidated statement of financial position, note

7(h).

(c) As of December 31, 2014 and 2013, the tax loss carryforwards determined by the

subsidiaries in Peru amounted approximately to S/.221,785,000 and S/.191,409,000,

respectively. The managers of each subsidiary with tax loss carryforwards have therefore

chosen the option to offset the tax loss up to 50 percent of the taxable income generated

each year, indefinitely, as well as the option to offset the tax loss in the four years starting

from the date of his generation. The amount of the tax loss carryforwards is subject to the

outcome of the reviews referred to in the preceding paragraph.

Also, the tax loss carryforwards of subsidiaries in the United States of America were

approximately S/.813,119,000 and S/.568,652,000, respectively, and will be offset

against future profits of the subsidiaries in accordance with state and federal tax

requirements related.

The tax loss carryforwards of the subsidiary in Chile as of December 31, 2014 amounted

to approximately S/.8,883,000, and will be offset against future profits of the subsidiary

in accordance with the tax requirements of the country.

31.4 Contingencies –

In the normal course of business, the Company and subsidiaries have received some complaints

of such tax, legal (labor and management) and regulatory matters, which are recorded and

disclosed in accordance with International Financial Reporting Standards as set out in note

3.3(q).

The Group´s legal advisers consider that it is only possible, not probable tax, legal and regulatory

matters. In accordance with the foregoing and in Group’s Management opinion no provision was

recorded in the consolidated financial statements as of December 31, 2014 and 2013.

Peru -

As a result of audits for the years 2002 to 2006, the Company has been notified by the Tax

Authority (SUNAT) with different resolutions for alleged omissions in income tax. In some cases,

the Company has filed appeals for not finding the appropriate resolutions in accordance with the

laws in force in Peru and in other cases it has proceeded to pay the assessments received. As of

December 31, 2014 and 2013, the Company has recorded the necessary provisions, leaving as

possible contingency amounting to approximately S/.60,277,000 plus interest and costs on both

dates.

Likewise, as of December 31, 2014, the Company holds claims to Tax Authority (SUNAT),

corresponding to demands and requirements of refund of income tax paid in excess for the years

2004, 2005, 2006 and 2009, in such demands it is requested the decisions of annulment of the

Tax Court set aside and will devolution of the money paid for the amount of approximately

S/.32,089,000 (approximately S/.17,900,000 as of December 31, 2013).


73

The Group´s management and its legal advisors estimate that there are legal arguments to

obtain a favorable outcome in these processes, in which case they will not have a significant

impact on the consolidated financial statements of the Group.

Furthermore, through Resolution N° 004-2010/ST-CLC-INDECOPI of March 25, 2010, the

Technical Secretary of the Committee for the Defense of Free Competition declared admissible

the complaint by the Ferretería Malva S.A., against to the Company and others related to

commission of anticompetitive behavior, and initiate an infringement procedure against the

complained companies. In 2013, through Resolution N° 010-2013/CLC, the Committee for the

Defense of Free Competition sanctions to the Company at the end of the unjustified refusal sales,

imposing a penalty of 1,488.20 UIT and absolves the offense relating to boycott. Given the

resolution of the Commission, the Company filed an appeal to the Court of Competition, at the

end of the penalty for the alleged refusal of unjustified sales, which confirmed the decision

appealed, whereupon the Company has decided to bring contentious administrative proceedings

before the Judiciary, for the annulment of the decision of INDECOPI is declared. The Company

expects to obtain a favorable ruling in court.

Ecuador –

(a) Acts of determination income tax and advances of income tax -

As of December 31, 2014, there are judgments presented by UNACEM Ecuador S.A.

(formerly Lafarge Cement S.A.) against the SRI by the objection of the Acts of tax

determination of income tax for the tax years 2005 to 2009 by approximately

US$5,208,000. In the opinion of Group´s Management and its legal advisors are possible

contingencies and provision is not necessary.

(b) Report of the General Controller State -

At the end of September 2013, the General Controller State issued and adopted a report

on the situation of compliance with environmental regulations by UNACEM Ecuador SA

(formerly Lafarge Cement SA) and Canteras y Voladuras S.A. - CANTYVOL, and the role of

certain authorities of the Ministry of Environment of Ecuador, Ministry of Health, Agency

of Mining Regulation and Control Ministry of Nonrenewable Resources, among others. This

report was submitted by the State Comptroller General to the Prosecution, which began a

research process. On February 13, 2015, the Judge of Otavalo solved the final closing of

the investigation requested by the Prosecutor's Office to Otavalo.

(c) Interpretative Law Act Employees Retirement Cement Industry -

This Law searches an interpretation of Art. 4 of the Law on Retirement of workers in the

cement industry, to establish the currency should be performed the calculation of

pensions in the Law is indicated. In the opinion of its legal counsel a possible contingency

between US$500,000 and US$1,500,000 is estimated.


74

(d) Compensation -

In the year 2012, a claim was presented against Canteras y Voladuras S.A. - CANTYVOL

for alleged moral damage, which the claimants required the payment of compensation by

US$2,000,000. In the year 2013, this claim was known primarily by the Judge of the Civil

and Commercial Unit Imbabura, which in its judgment rejected the claim for considering

that the petition lacked support. The claimants presented an appeal to the National Court

of Justice, which so far has not been admitted. In the opinion the Group´s Management

and its legal advisors are possible contingencies and provision is not necessary.

31.5 Mining royalties –

Peru -

On November 20, 2013, Peru’s Constitutional Court, in a final and unappeasable decision stated

that the new regulation of the Royalty Mining Law in the year 2011, violates the constitutional

right of property, as well as, the principles of legal reservation and proportionality, consequently,

this modification is rendered inapplicable to the Company. Accordingly, the Company will

continue using as basis for the calculation of the mining royalty the value of the concentrate or

mining component and not the value of the product obtained by the industrial and manufacturing

process.

Mining royalty expense paid to the Peruvian Government for the years 2014 and 2013 amounted

to S/.3,451,000 and S/.2,853,000, respectively, and were recorded in the consolidated

statement of income, note 3.3(k).

Ecuador -

Mining royalty expense paid by UNACEM Ecuador to the Ecuadorian Government for the years

2014 US$621,000 (equivalent to S/.1,856,000), and were recorded in the consolidated

statement of income, note 3.3(k).

31.6 Environmental commitments -

The Group’s activities are subject to environmental protection standards and have to meet the

following regulations:

(a) Industrial activities -

Peru -

Law N° 28271 regulates environmental liabilities generated by mining activities, and

seeking to regulate the identification of environmental liabilities of mining and funding for

remediation of affected areas. Under said law, an environmental liability corresponding to

the impact caused to the environment by mining operations abandoned or inactive.

In accordance with the above mentioned law, the Company filed the Environmental Impact

Assessments (EIA by its acronym in Spanish), the Environmental Impact Statement (EIS)

and the Environmental Adaptation Programs (PAMA by its acronym in Spanish) for its

operating units.


75

Currently, the Company has an EIA for the modernization of its industrial plant facility

approved by the Ministry of Production in May 2011, and has been executing

environmental protection activities with an accumulated investment as of December 31,

2014 of US$54,433,578 (US$53,725,000 as of December 31, 2013) for implementation

of the environmental management plan in the cement manufacturing process.

Furthermore, UNICON has invested in the implementation of environmental protection

programs approximately S/.450,000 and S/.500,000 in the years 2014 and 2013,

respectively.

(b) Mining and port activities –

Peru -

In relation to its mining and port activities, the Company in the environmental impact

studies (EIA by its acronym in Spanish), which are in compliance with the terms and

amounts determined in such studies, and the accumulated investment in mining and port

activities as of December 31, 2014 amounts to approximately US$19,301,000

(approximately US$17,603,000 as of December 31, 2013).

On October 14, 2003, the Congress of the Republic of Peru issued Law N° 28090,

regulating mine closures. This law standardizes the obligations and procedures that

companies must comply with respect to statements of the mining activity to preparing,

submit ting implementing a Mine Closure Plan, as well as the environmental guarantees

that ensure the compliance of the investments subject to the principles of environment

protection, preservation and restoration of the environment. The Company has submitted

the closure plans of its mining units to the Ministry of Production and the Ministry of

Energy and Mines within the statutory terms. The Closure Plans Studies have established

the guaranties and investments to be made in the future, when the incremental and final

closures of the mining activities in each unit of production are made. The provision for

mine closure corresponds to the activities that must be performed for restoring the areas

affected by the exploitation activities. The main works are related to earth movements

and reforesting.

Ecuador -

In Ecuador, the subsidiaries are required to the implementation of the Environmental

Management Law and the Environmental Regulations for Mining Activities.

As of December 31, 2014 and 2013, the Group’s provision for mine closure amounts to

approximately S/.16,386,000 and S/.14,000,000, respectively and it is included in the

caption “Provisions” in the consolidated statement of financial position, see note 17(a).

The Group believes that this liability is sufficient to meet environmental protection laws in

force approved.


76

(c) Use of hydrocarbons –

Peru -

Supreme Decree N° 046-93-EM for the Regulation of Hydrocarbon Activities enacted on

November 12, 1993. It regulates the activities performed by the Company related to the

use of hydrocarbons as final user. In compliance with this regulation, the Company has a

PAMA that was approved by the Ministry of Energy and Mines in 1996. As of December

31, 2014, the Group has made an accumulated investment of approximately US$104,273

(US$98,000 as of December 31, 2013) in said PAMA.

(d) Special projects –

As of December 31, 2014, the main projects is implementing the Group relate to

construction of the hydroelectric Carpapata III, Mill VIII and packaging V in Condorcocha

Plant and the second phase of the expansion of the productive capacity of the kiln 1

Atocongo Plant of the Company.

During the year 2014, the main projects completed the Group correspond to Multisilo of

20 thousand tonnes of cement Atocongo Pant and cooler Electrostatic of kiln 1 Atocongo

Plant of the Company.

(e) Carbon credits –

As of December 31, 2014, the Group has the project “Fuel Switching at Atocongo Cement

Plant and Natural Gas Pipeline Extension, Cementos Lima, Peru”, registered with the

Executive Board of the United Nations Framework Convention on Climate Change

(UNFCCC) on November 10, 2008. As of to date the Company has made 3 emissions of

CERs by 316,306 CERs this project.

Also, the hydroelectric El Platanal not only produce clean, renewable energy, it is the main

project of emission reductions in Peru, and one of the largest in the world in Development

Framework (CDM) of the Nations together. This project has issued a total of 2,141,261

CERs from February 1, 2010 to April 30, 2013.

32. Financial risk objectives and management policies

The Group’s financial liabilities comprise –along with derivative instruments, include other financial

liabilities and trade payables and others. The main purpose of these financial liabilities is to finance the

Group’s operations. The Group has cash and trade receivables and others that arise directly from its

operations. The Group also holds derivative financial instruments.

The Group is exposed to market risk, credit risk and liquidity risk.


77

The Group’s Senior Management oversees the management of these risks. The Company’s Senior

Management is supported by the Financial Management that advises on financial risks and the

appropriate financial risk governance framework for the Company. The Financial Management provides

assurance to the Company’s Senior Management that the Company’s financial risk-taking activities are

governed by appropriate policies and procedures and that financial risks are identified, measured and

managed in accordance with the Company policies and company risk appetite. All activities comprising

risk management – related derivative instruments are handled by a team of experts with suitable

capabilities, experience and oversight.

The Board of Directors reviews and agrees policies for managing each of these risks which are

summarized below:

32.1 Market risk –

Market risk is the risk that the fair value of future cash flows of a financial instrument will

fluctuate because of changes in market prices. In turn, market prices comprise four types of risk:

interest rate risk, currency risk, commodity price risk and other price risk. Financial instruments

affected by market risk include loans and borrowings, deposits and derivative financial

instruments.

The sensitivity analyses shown in the following sections relate to the financial position as of

December 31, 2014 and 2013.

The sensitivity analyses have been prepared on the basis that the amount of net debts, the ratio

of fixed to floating interest rate of the debt and the proportion of financial instruments in foreign

currencies are all constant as of December 31, 2014 and 2013.

(i) Interest rate risk –

Interest rate risk is the risk that the fair value or future cash flows of a financial

instrument will fluctuate because of changes in market interest rates. Company exposure

of the Group to the interest rate risk is related mainly to the long-term debt with variable

interest rates.


78

The Group has contracts interest rate swap designated as cash flow hedges and are recorded at their fair value. The detail of these operations is as

follows:

Counterparty

Reference

value as of

December 31,

2014 Maturity

Receives

variable rate at: Pays fix rate at: Fair value _________________________

2014 2013

US$(000) S/.(000) S/.(000)

Assets -

Bank of Nova Scotia 50,000 September 2018 Libor to 3 months + 2.40% 1.02 405 465

Bank of Nova Scotia 50,000 August 2018 Libor to 3 months + 2.35% 0.85 313 307 _______ _______

718 772 _____ _____

Liabilities -

Banco Bilbao Vizcaya, New York 83,000 May 2018 Libor to 3 months 8.5 12,196 14,394

Banco de Crédito del Perú S.A.A. 23,210 March 2017 Libor to 3 months + 2.995 % 5.320 8,900 14,330





Bank of Nova Scotia 34,000 January 2019 Libor to 3 months 1.2994 571 877

BBVA – Banco Continental S.A. 40,000 September 2016 Libor to 3 months + 2.90% 4.455 494 1,188

Bank of Nova Scotia 60,000 September 2015 Libor to 3 months + 1.95% 3.68 459 1,980

Bank of Nova Scotia 5,100 January 2019 Libor to 3 months 1.3037 87 134 ________ ________

31,376 46,874 ________ ________

Financial instruments are intended to reduce exposure to interest rate risk variable associated with the financial obligations set out in Note 14. These financings bear

interest at a variable rate equal to Libor rate to 3 months.

The Group pays or receives on a quarterly basis (on each interest payment date of the loan) the difference between the Libor rate on the loan market in that period and

the fixed rate agreed upon in the contract coverage. Flows actually received or paid by the Group are recognized as a correction of the financial cost of the loan period

for the hedged loans.

In the year 2014, the Group recorded an expense on these derivative financial instruments amounting to approximately S/.27,660,000 (S/.18,651,000 during the

year 2013), whose amounts were actually paid during the year and are presented as "Finance costs" in the consolidated statement of income, see note 28.

The effective portion of changes in the fair value of financial instruments that qualify as hedges is recognized as assets or liabilities with an impact on equity. As of

December 31, 2014 and 2013, the Group has recognized in the caption "Unrealized results" in the consolidated statement of changes in equity, a positive change in

fair value net of the income tax effect of approximately S/.4,451,000 and S/.17,265,000, respectively,


79

Sensitivity to interest rate -

The following table shows the sensitivity to a reasonably possible change in interest rates on the

portion of the loans, after the impact of hedge accounting. With all other variables remaining

constant, the profit before income tax of Group would be affected by the impact on variable rate

loans, as follows:

Increase / decrease in basis points Impact on income before income taxes __________________________________

2014 2013 % S/.(000) S/.(000)

+10 295 185

-10 (295) (185)

The movement course in the basics related to the analysis of sensitivity to interest rate is based

on the current market environment.

(ii) Foreign currency risk -

Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument

will fluctuate because of changes in foreign exchange rates. The Group’s exposure to the risk of

changes in foreign exchange relates primarily to the Group’s operating activities (when revenue

or expense is denominated in a different currency from the Group’s functional currency).

Management monitors this risk through the analysis of the country’s macroeconomic variables.

The result of holding balances in foreign currency for the Group in the years 2014 and 2013 was

a loss in exchange difference amounting approximately S/.145,376,000 and S/.187,482,000,

respectively, which are presented in the caption “Exchange difference, net” in the consolidated

statement of income.

As of December 31, 2014 and 2013, the Group has “Cross currency interest rate swap”

amounting to S/.10,063,000 and S/.5,432,000 in favor of bank, respectively, and hedging of

risks associated with exchange rate fluctuations.

Foreign currency sensitivity -

Foreign currency transactions are made at free market exchange rates published by the

Superintendence of Banks, Insurance and Private Pension Funds. As of December 31, 2014 , the

weighted average market exchange rate for transactions in Nuevos Soles published by the

Superintendence of Banks, Insurance and Private Pension Funds was S/.2.981 for buying and

S/.2.989 for selling (S/.2.794 for buying and S/.2.796 for selling as of December 31, 2013),

respectively.

The weighted average exchange rates for transactions in Euros as of December 31, 2014 were

S/.3.545 for buying and S/.3.766 for selling (S/.3.715 for buying and S/.3.944 for selling as of

December 31, 2013), respectively.


80

As of December 31, 2014 and 2013, the Group had the following assets and liabilities in foreign

currency:

(a) U.S. Dollars

2014 2013 _____________________________ _____________________________

US$(000) Equivalent in

S/.(000) US$(000) Equivalent in

S/.(000)

Asset

Cash and cash equivalents 10,687 31,888 68,940 192,618

Trade and other receivables, net 54,373 162,202 22,366 62,941 ____________ ___________ ___________ ___________

65,060 194,090 91,306 255,559 ____________ ___________ ___________ ___________

Liabilities

Other financial payables (1,176,497) (3,516,080) (1,026,408) (2,869,837)

Trade and other payables (61,237) (183,040) (31,922) (89,254)

Derivative financial instruments (10,497) (31,376) (16,389) (45,824) ____________ ___________ ___________ ___________

(1,248,231) (3,730,496) (1,074,719) (3,004,915) ____________ ___________ ___________ ___________

Financial derivatives foreign

currency (3,367) (10,063) (1,943) (5,432) ____________ ___________ ___________ ___________

Net liability position (1,186,538) (3,546,469) (985,356) (2,754,788) ____________ ___________ ___________ ___________

(b) Euros

2014 2013 _____________________________ _____________________________

€(000) Equivalent in

S/.(000) €(000) Equivalent in

S/.(000)

Asset

Trade and other receivables 3 9 3 12 _________ __________ _________ __________

Asset position 3 9 3 12 _________ __________ _________ __________

The following table demonstrates the sensitivity to a reasonably possible change in the US

dollar exchange rate, with all other variables held constant, of the Group’s profit before

income tax (due to changes in the fair value of monetary assets and liabilities, including

derivative financial instruments in foreign currency not classified as hedge).

Change in

US Dollars exchange rate

Impact on income before income taxes _________________________________ 2014 2013

% S/.(000) S/.(000)

+5 (177,354) (137,490)

+10 (354,708) (274,981)

-5 177,354 137,490

-10 354,708 274,981


81

32.2 Credit risk -

Credit risk is the risk that counterparty will not meet its obligations under a financial

instrument or customer contract, leading to a financial loss. The Group is exposed to a

credit risk from its operating activities (primarily for trade receivables) and from its

financing activities, including deposits with banks and financial institutions, and trade and

other receivables. The maximum credit risk of the components of the consolidated

financial statements as of December 31, 2014 and 2013 is represented by the amount of

the captions cash and cash equivalents, trade and other accounts receivable.

Financial instruments and cash deposits -

Credit risk from balances with banks and financial institutions is managed by the Finance

Manager in accordance with the Company’s policy. Counterparty credit limits are reviewed

by Group´s Management and Board of Directors to minimize the concentration of risks

and therefore mitigate financial loss through potential counterparty’s failure.

Trade accounts receivable –

Customer credit risk is managed by management, subject to the Group’s established

policies, procedures and controls. Outstanding customer receivables are regularly

monitored to assure the collection. The Group’s sales are made in Peru, Chile, Ecuador

and United States America. Likewise, the Group evaluates the accounts receivable whose

collection is estimated as remote to determine the required allowance for un-collectability.

Other accounts receivable –

Accounts receivable correspond to balances pending of collection due to concepts not

related to the main operation activities of the Group. As of December 31, 2014 and 2013,

other accounts receivable correspond mainly to: advances to suppliers, claims to Tax

Authority and claims to third parties. The Group’s Management made a continuously

monitors of the credit risk to such items and periodically, it assesses the balances that

evidence an impairment to determine the required allowance for un-collectability.

32.3 Liquidity risk -

The Group monitors its risk of shortage of funds using a recurring liquidity planning tool.

The Group’s objective is to maintain a balance between continuity of funding and flexibility

through the use of bank deposits and other financial liabilities.


82

The table below summarizes the maturity profile of the Group’s financial liabilities based

on contractual undiscounted payments:

As of December 31, 2014 ____________________________________________________

From 1 to 12

months

From 1 to 10

years Total

S/.(000) S/.(000) S/.(000)

Trade and other payable 590,689 45,265 635,954

Other financial liabilities

Amortization of capital 742,308 4,137,487 4,879,795

Flow of interest payments 257,338 1,057,980 1,315,318

Liability for income tax 29,522 - 29,522

Provisions 57,775 23,765 81,540 __________ __________ __________

Total liabilities 1,677,632 5,264,497 6,942,129 __________ __________ __________

As of December 31, 2013 ____________________________________________________

From 1 to 12

months

From 1 to 10

years Total

S/.(000) S/.(000) S/.(000)

Trade and other payable 390,512 46,069 436,581

Other financial liabilities

Amortization of capital 892,908 2,339,277 3,232,185

Flow of interest payments 100,913 167,705 268,618

Liability for income tax 661 - 661

Provisions 24,766 13,663 38,429 __________ __________ __________

Total liabilities 1,409,760 2,566,714 3,976,474 __________ __________ __________

32.4 Capital management -

The Group’s objective in managing capital is to safeguard its ability to continue as a going

concern in order to generate returns for shareholders, benefits for other groups of

interest and maintain optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Group can adjust the amount of

dividends paid to shareholders, refund capital to shareholders, issue new shares or sell

assets to reduce its debt.


83

Consistent with the industry, the Group monitors its capital on the basis of leverage ratio.

This ratio is calculated dividing the net debt and the capital stock. The net debt

corresponds to the total debt (including current and non-current debt) minus the cash and

cash equivalents. The total capital stock corresponds to the net equity and is presented in

the consolidated statement of financial position plus the net debt.

2014 2013

S/.(000) S/.(000)

Other financial liabilities, note 14 4,879,795 3,232,185

Trade and other payables, note 15 635,954 436,581

Less: Cash and cash equivalents, note 6 (135,982) (322,348)

Net debt (a) 5,379,767 3,346,418

Equity 3,933,619 3,636,207

Total capital and net debt (b) 9,313,386 6,982,625

Leverage ratio (a/b) 0.578 0.479

No changes were made in the objectives, policies or processes for managing capital during

the years ended December 31, 2014 and 2013.

33. Fair value

(a) Instruments recorded at fair value according to hierarchy -

The following table presents an analysis of the financial instruments recorded at fair value,

according to their hierarchy level:

2014 2013

S/.(000) S/.(000)

Asset for derivative financial instruments:

Level 2 718 772 _________ _________

Total asset 718 772 _________ _________

Liability for derivative financial instruments:

Level 2 41,439 52,307 _________ _________

Total liability 41,439 52,307 _________ _________

Level 1 -

The financial assets included in the Level 1 category are measured based on quotations obtained

from an active market. A financial instrument is regarded as quoted in an active market if prices

are readily and regularly available from a centralized trading mechanism, agent, broker, industry

group, pricing providers or regulatory agencies; and those prices stem from regular transactions

in the market.


84

Level 2 -

Level 2 Financial instruments are measured based on market factors. This category includes

instruments valued using market prices of similar instruments - whether it be an active market or

not – and other valuation techniques (models) where all significant inputs are directly or indirectly

observable in the marketplace. The following is a description of how the fair value of the Group’s

main financial instruments included in this category is determined:

- Derivative financial instruments–

The valuation technique most commonly used includes forwards and swaps valuation

methods that calculate the present value. These models consider various inputs, including

the counterparties’ credit quality, spot exchange rates, forward rates and interest rate

curves.

Level 3 -

As of December 31, 2014 and 2013, the Group does not maintain financial instruments in this

category.

The Group only carries derivative financial instrument at fair value, as indicated in paragraph (a);

therefore, they are considered in Level 2 of the fair value hierarchy.

Other financial instruments are carried at amortized cost and their estimated fair value. The level

of the fair value hierarchy is described as follows:

Level 1 –

- Cash and cash equivalents do not represent a credit risk or a significant interest rate;

therefore, their carrying amounts are close to their fair value.

- Since accounts receivable, are net of estimation for doubtful accounts and, mainly, have

maturities of less than three months; Group´s Management deems their fair value is not

materially different from its carrying value.

- Trade payables and others, due to its current maturity, the Group´s Management deems

that its accounting balances are close to its fair value.

Level 2 –

- The fair value of other financial liabilities was determined by comparing the market’s

interest rates at the time of its initial recognition against the market’s current interest

rates offered for similar financial instruments. The following is a comparison between the

carrying value and the fair value of these financial instruments.

2014 2013 ____________________________ _____________________________

Carrying

value

Fair value

Carrying

value

Fair value

S/.(000) S/.(000) S/.(000) S/.(000)

Other financial liabilities (*) 4,345,539 3,796,481 2,495,159 2,178,084

(*) As of December 31, 2014 and 2013, the balance does not include bank notes, see note 14(a).


85

34. Segment information

For management purposes, the Group is organized into business units based on their products and

activities and have three main reportable segments as follows:

- Manufacture and sale of cement.

- Manufacture and sale of concrete.

- Generation and sale of electrical energy generated using hydraulic resources.

No operating segments have been aggregated to form the above reportable operating segments.

Management of each entity monitors the operating profit of each business unit separately for

purposes of making decisions about resources allocation and performance assessment.

Segment performance is evaluated based on gain or less operating and is measured

consistently with gain or less operating in the consolidated financial statements.

Transfer prices between operating segments are on an arm’s length basis in a manner similar to

transactions with third parties.


86

2014 2013 _______________________________________________________________________________________________________ ________________________________________________________________________________________________________

Cement Concrete

Electrical

energy Other

Total

segments

Adjustments

and

eliminations Consolidated Cement Concrete

Electrical

energy Other

Total

segments

Adjustments

and

eliminations Consolidated

S/.(000) S/.(000) S/.(000) S/.(000) S/.(000) S/.(000) S/.(000) S/.(000) S/.(000) S/.(000) S/.(000) S/.(000) S/.(000) S/.(000)

Income

Third-party customers 1,688,586 1,240,872 166,649 - 3,096,107 - 3,096,107 1,526,661 1,161,442 196,602 - 2,884,705 - 2,884,705

Inter segments 265,449 86,978 108,296 7,942 468,665 (468,665) - 247,938 44,341 81,260 7,215 380,754 (380,754) -

__________ __________ __________ __________ ___________ __________ __________ __________ __________ __________ __________ __________ __________ __________

Total revenues 1,954,035 1,327,850 274,945 7,942 3,564,772 (468,665) 3,096,107 1,774,599 1,205,783 277,862 7,215 3,265,459 (380,754) 2,884,705

__________ __________ __________ __________ ___________ __________ __________ __________ __________ __________ __________ __________ __________ __________

Gross profit 793,999 156,374 82,506 1,854 1,034,733 (13,488) 1,021,245 651,904 204,649 86,316 1,819 944,688 5,430 950,118

__________ __________ __________ __________ ___________ __________ __________ __________ __________ __________ __________ __________ __________ __________

Operating income (expenses)

Administrative expenses (188,708) (58,523) (14,735) (3,045) (265,011) 3,310 (261,701) (168,343) (52,124) (13,059) (2,565) (236,091) - (236,091)

Selling expenses (104,325) (19,940) (1,148) - (125,413) 3,183 (122,230) (88,189) (11,756) (1,260) (9) (101,214) 2,653 (98,561)

Other operating income (expenses),

net 41,535 (2,099) 2,625 (1,659) 40,402 (11,840) 28,562 10,486 (17,545) 2,685 236 (4,138) (8,083) (12,221)

__________ __________ __________ __________ ___________ __________ __________ __________ __________ __________ __________ __________ __________ __________

Operating profit 542,501 75,812 69,248 (2,850) 684,711 (18,835) 665,876 405,858 123,224 74,682 (519) 603,245 - 603,245

__________ __________ __________ __________ ___________ __________ __________ __________ __________ __________ __________ __________ __________ __________

Other income (expenses)

Gain on sharing in associate, net - 3,165 - - 3,165 - 3,165 - 3,321 - - 3,321 - 3,321

Finance income 3,647 2,257 454 148 6,506 - 6,506 7,440 2,876 389 96 10,801 - 10,801

Finance costs (162,243) (23,290) (31,422) (4,140) (221,095) - (221,095) (100,829) (16,582) (35,685) (3,657) (156,753) - (156,753)

Exchange difference, net (119,638) (4,940) (20,795) (3) (145,376) - (145,376) (135,649) (19,815) (32,000) (18) (187,482) - (187,482)

__________ __________ __________ __________ ___________ __________ __________ __________ __________ __________ __________ __________ __________ __________

Income before tax 264,267 53,004 17,485 (6,845) 327,911 (18,835) 309,076 176,820 93,024 7,386 (4,098) 273,132 - 273,132

Income tax expense (7,725) (1,893) 129 (315) (9,804) - (9,804) (62,526) (12,172) (4,775) (368) (79,841) - (79,841)

__________ __________ __________ __________ ___________ __________ __________ __________ __________ __________ __________ __________ __________ __________

Net income for segment 256,542 51,111 17,614 (7,160) 318,107 (18,835) 299,272 114,294 80,852 2,611 (4,466) 193,291 - 193,291 __________ __________ __________ __________ ___________ __________ __________ __________ __________ __________ __________ __________ __________ __________

Income before tax for segment 422,863 70,872 48,453 (2,853) 539,335 (230,259) 309,076 270,209 103,409 42,682 (537) 415,763 (142,631) 273,132 __________ __________ __________ __________ ___________ __________ __________ __________ __________ __________ __________ __________ __________ __________

Operating assets 7,837,495 998,253 1,149,592 38,059 10,023,399 231,303 10,254,702 5,903,886 731,566 1,124,007 149,959 7,909,418 129,742 8,039,160 __________ __________ __________ __________ ___________ __________ __________ __________ __________ __________ __________ __________ __________ __________

Operating liabilities 405,625 292,153 105,806 1,144 804,728 5,516,355 6,321,083 247,307 217,995 44,217 6,873 516,392 3,886,561 4,402,953

__________ __________ __________ __________ ___________ __________ __________ __________ __________ __________ __________ __________ __________ __________


87

Eliminations and conciliation -

Finance income and expenses and gains and losses from changes in fair value of financial assets at the

individual segments are not charged because the underlying instruments are managed at centralized

level.

Current and deferred taxes and certain financial assets and liabilities to the segments are not charged

as also managed at centralized level.

2014 2013

S/.(000) S/.(000)

Reconciliation of income -

Income before tax per segment before adjustments and

eliminations 539,335 415,763

Finance income 6,506 10,801

Finance cost (221,095) (156,753)

Gain on sharing in associate, net 3,165 3,321

Inter segments (18,835) - __________ _________

Income before tax per segment 309,076 273,132 __________ _________

Reconciliation of assets -

Segment operating assets 10,054,283 7,909,418

Deferred income tax asset 186,084 127,811

Derivative financial instruments 718 772

Other non-financial assets 13,617 1,159 ___________ __________

Group’s operating assets 10,254,702 8,039,160 ___________ __________

Reconciliation of liabilities -

Segment operating liabilities 804,728 516,392

Other financial liabilities 4,879,795 3,232,185

Trade of payables to Directors 5,021 3,774

Deferred income tax liability 590,100 598,295

Derivative financial instruments 41,439 52,307 ___________ __________

Group’s operating liabilities 6,321,083 4,402,953 ___________ __________


88

Geographic information –

The income information contained above is based on customer location.

2014 2013

S/.(000) S/.(000)

Income of customers

Peru 2,747,570 2,697,449

United States of America 234,866 187,256

Chile 61,630 -

Ecuador 52,041 - ___________ ___________

Total income according to the consolidated statements of income 3,096,107 2,884,705 ___________ ___________

2014 2013

S/.(000) S/.(000)

Non-current operating assets:

Peru 6,733,768 5,460,657

United States of America 1,379,791 1,251,475

Ecuador 669,303 -

Chile 38,394 - ___________ ___________

Non – current assets according to the consolidated statements of

financial position 8,821,256 6,712,132 ___________ ___________

For purposes of this note, non-current assets consist of concessions and property, plant and equipment,

deferred stripping asset and intangible assets.

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Unión Andina de Cementos S.A.A. and Subsidiaries€¦ · Net income - - - - 300,686 300,686 (1,414) 299,272 Other comprehensive income for the year, net of income tax - - 1,707 60,357