UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

FORM 6-K

 

REPORT OF FOREIGN ISSUER
PURSUANT TO RULE 13a-16 OR 15b-16 OF
THE SECURITIES EXCHANGE ACT OF 1934

 

For the month of February 2024

 

Commission File Number 001-35401

 

CEMENTOS PACASMAYO S.A.A.
(Exact name of registrant as specified in its charter)

 

PACASMAYO CEMENT CORPORATION
(Translation of registrant’s name into English)

 

Republic of Peru
(Jurisdiction of incorporation or organization)

 

Calle La Colonia 150, Urbanización El Vivero
Surco, Lima
Peru
(Address of principal executive office)

 

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

 

Form 20-F  ☒          Form 40-F  ☐

 

 

 

 

 

CEMENTOS PACASMAYO S.A.A.

 

The following exhibit is attached:

 

EXHIBIT NO.   DESCRIPTION
99.1  

Consolidated financial statements as of December 31, 2023 and 2022

 

1

 

 

Signatures

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

CEMENTOS PACASMAYO S.A.A.  
   
By: /s/ CARLOS JOSE MOLINELLI MATEO  
Name:   Carlos Jose Molinelli Mateo  
Title: Stock Market Representative  
     
Date: February 15, 2024  

 

 

2

 

Exhibit 99.1

 

 

 

 

 

 

Cementos Pacasmayo S.A.A. and Subsidiaries

 

Consolidated financial statements as of December 31, 2023 and 2022 and

for the years ended December 31, 2023, 2022 and 2021, together with the

Report of Independent Registered Accounting Firm

 

 

 

 

 

 

Cementos Pacasmayo S.A.A. and Subsidiaries

 

Consolidated financial statements as of December 31, 2023 and 2022 and for the years ended December 31, 2023, 2022 and 2021, together with the Report of Independent Registered Accounting Firm

 

Contents

 

Report of Independent Registered Accounting Firm

 

Consolidated financial statements

 

Consolidated statement of financial position 5
Consolidated statement of profit or loss 6
Consolidated statement of other comprehensive income (loss) 7
Consolidated statement of changes in equity 8
Consolidated statement of cash flows 9
Notes to the consolidated financial statements 11

 

i

 

 

Independent Auditors’ Report

 

To the Board of Directors and Shareholders of Cementos Pacasmayo S.A.A. and Subsidiaries

 

Opinion

 

We have audited the consolidated financial statements of Cementos Pacasmayo S.A.A. and subsidiaries (the Group), which comprise the consolidated statement of financial position as of December 31, 2023, and the consolidated statement of profit or loss, the consolidated statement of other comprehensive income (loss), the consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, including information about material accounting policies.

 

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as of December 31, 2023 and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRSs) as issued by the International Accounting Standard Board (IASB).

 

Basis for opinion

 

We conducted our audit in accordance with International Standards on Auditing (ISAs) approved for its application in Peru by the Board of Deans of Peruvian Public Accounting Associations. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the consolidated financial statements section of our report. We are independent of the Group in accordance with the Code of Ethics for Professional Accountants of International Ethics Standards Board for Accountants (IESBA Code) together with the ethical requirements that are relevant to our audit of the consolidated financial statements in Peru, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

 

1

 

 

Independent Auditors’ Report (continue)

 

Key audit matters

 

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context.

 

We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the consolidated financial statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the consolidated financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying consolidated financial statements.

 

    Uncertain tax positions
Description of the Matter  

As disclosed in Note 7(c) to the consolidated financial statements, the Group has identified certain income tax-related contingencies associated to the mining royalties of years 2008 and 2009. In these years, relevant taxation authorities have challenged the tax treatment applied by the Group under the royalty law for metallic and non-metallic mining activity in Peru. As of December 31, 2023 the Group has recognized an asset for claim to the SUNAT for an amount of S/29,559,000, resulting from payments made to the taxation authorities as part of the tax claim process in Peru but for which the Group is disputing the validity of the taxation authorities’ assessment. The Group has disclosed, but has not recorded a provision related to these matters, as management has concluded that the criteria for recognition of an income tax liability under IFRS has not been met and that the amounts paid to date are recoverable based upon the technical merits of the income tax positions of royalty law for metallic and non-metallic mining activity taken by the Group.

 

Uncertainty in a tax position may arise where there is an uncertainty as to the meaning of the tax law, or the applicability of the tax law (General Mining Law) to a particular transaction or both.The Group uses significant judgment to determine whether, based on the technical merits, a tax position is likely than not to be sustained and in the determination of the recoverable amount of the mining royalties paid under protest.

 

Auditing the estimation of the outcome and measurement of the uncertain tax positions and the related recoverability of the claim for the payments made under protest, before the uncertain tax treatment is resolved, requires a high degree of auditor judgment and significant audit effort due to the complexity and judgement used by the Group in the assessment based on interpretations of the income tax legislation and legal rulings in Peru.

 

How We Addressed the Matter in Our Audit  

We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Group’s accounting process for income taxes, including uncertain tax positions and tax contingencies, for example, we tested the controls over management’s review of the technical merits of tax positions, disputed tax assessments and the determination and approval of the recoverable amount of the payments made under protest.

 

Our audit procedures included, among others, evaluating the assumptions used by the Group to develop its uncertain tax positions based on relevant Peruvian income tax laws (General Mining Law), including the inspection of the Group´s internal and external counsel analysis of these matters.

 

In addition, we involved our tax subject controversy matter professionals to assess the technical merits of the Group’s tax position and to evaluate the application of relevant tax law and accounting guidance in assessing the recognition and recoverability of the related income tax receivables.

 

Furthermore, we evaluated the disclosure of this matter in Note 7(c) to the consolidated financial statements.

 

Other information included in The Group’s 2023 Annual Report

 

Other information consists of the information included in the Annual Report, other than the consolidated financial statements and our auditor’s report thereon. Management is responsible for the other information.

 

Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

 

2

 

 

Independent Auditors’ Report (continue)

 

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

 

Responsibilities of management for the consolidated financial statements

 

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRSs as issued by the IASB, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

 

In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

 

Those charged with governance are responsible for overseeing the Group’s financial reporting process.

 

Auditor’s responsibilities for the audit of the consolidated financial statements

 

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

 

3

 

 

Independent Auditors’ Report (continue)

 

As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

 

-Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

 

-Obtain an understanding of internal control relevant to the audit 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 Group’s internal control.

 

-Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

 

-Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.

 

-Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

 

-Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

 

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

 

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied.

 

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

 

Lima, Peru

February 14, 2024

 

Signed by:

 

/s/ Manuel Arribas Zevallos  
Manuel Arribas Zevallos  
C.P.C. Register N° 45897  

 

4

 

 

Cementos Pacasmayo S.A.A. and Subsidiaries

 

Consolidated statement of financial position

As of December 31, 2023 and 2022

 

   Note  2023   2022 
      S/(000)   S/(000) 
Assets           
Current assets           
Cash and cash equivalents  6   90,193    81,773 
Other financial instruments  26   -    86,893 
Trade and other receivables, net  7   99,688    101,491 
Income tax prepayments      4,485    8,268 
Inventories  8   791,074    884,969 
Prepayments      6,809    25,059 
Total current assets      992,249    1,188,453 
Non-current assets             
Trade and other receivables, net  7   43,397    43,543 
Financial investments designated at fair value through other comprehensive income      249    274 
Property, plant and equipment, net  9   2,099,351    2,007,838 
Intangible assets, net  10   62,920    56,861 
Goodwill      4,459    4,459 
Deferred income tax assets  14   11,428    9,005 
Right of use assets      7,609    3,639 
Other assets      73    89 
Total non-current assets      2,229,486    2,125,708 
Total assets      3,221,735    3,314,161 
Liabilities and equity             
Current liabilities             
Trade and other payables  11   231,511    284,554 
Financial obligations  13   383,146    618,907 
Lease liabilities      3,999    2,005 
Income tax payable      14,222    16,340 
Provisions  12   56,510    31,333 
Total current liabilities      689,388    953,139 
Non-current liabilities             
Financial obligations  13   1,189,880    974,264 
Lease liabilities      4,130    2,350 
Provisions  12   27,453    47,638 
Deferred income tax liabilities  14   120,876    141,635 
Total non-current liabilities      1,342,339    1,165,887 
Total liabilities      2,031,727    2,119,026 
Equity  15          
Capital stock      423,868    423,868 
Investment shares      40,279    40,279 
Investment shares held in treasury      (121,258)   (121,258)
Additional paid-in capital      432,779    432,779 
Legal reserve      168,636    168,636 
Other accumulated comprehensive loss      (16,290)   (17,787)
Retained earnings      261,994    268,618 
Total equity      1,190,008    1,195,135 
Total liabilities and equity      3,221,735    3,314,161 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

5

 

 

Cementos Pacasmayo S.A.A. and Subsidiaries

 

Consolidated statement of profit or loss

For the years ended December 31, 2023, 2022 and 2021

 

   Note  2023   2022   2021 
      S/(000)   S/(000)   S/(000) 
                
Sales of goods  16   1,950,075    2,115,746    1,937,767 
Cost of sales  17   (1,260,623)   (1,463,715)   (1,378,336)
Gross profit      689,452    652,031    559,431 
                   
Operating income (expenses)                  
Administrative expenses  18   (234,711)   (227,577)   (196,069)
Selling and distribution expenses  19   (66,825)   (65,237)   (51,520)
Other operating (expense) income, net      (13,810)   (3,899)   6,408 
Impairment to retirement of property, plant and equipment  9(b)   (36,551)   -    - 
Total operating expenses, net      (351,897)   (296,713)   (241,181)
Operating profit      337,555    355,318    318,250 
                   
Other income (expenses)                  
Finance income      7,246    3,306    2,891 
Finance costs  21   (104,045)   (95,105)   (88,965)
Net gain (loss) on derivative financial instruments recognized at fair value through profit or loss  26(a)   19    (59)   589 
Net loss on settlement of derivative financial instruments recognized at fair value through profit or loss  26(a)   -    -    (1,569)
Loss from exchange difference, net  5   4,933    (1,040)   (7,086)
Total other expenses, net      (91,847)   (92,898)   (94,140)
Profit before income tax      245,708    262,420    224,110 
                   
Income tax expense  14   (76,808)   (85,592)   (70,940)
                   
Profit for the year      168,900    176,828    153,170 
                   
Earnings per share                  
Basic and diluted earnings per share attributable to equity holders of common shares and investment in shares of Cementos Pacasmayo S.A.A. (S/ per share)  23   0.39    0.41    0.36 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

6

 

 

Cementos Pacasmayo S.A.A. and Subsidiaries

 

Consolidated statement of other comprehensive income (loss)

For the years ended December 31, 2023, 2022 and 2021

 

   Note  2023   2022   2021 
      S/(000)   S/(000)   S/(000) 
                
Profit for the year      168,900    176,828    153,170 
Other comprehensive income (loss)                  
Other comprehensive income (loss) that will not be reclassified to profit or loss in subsequent years:                  
Change in fair value of financial instruments designated at fair value through other comprehensive loss      (25)   (565)   (1,995)
Deferred income tax  14   7    167    589 
Other comprehensive income (loss) to be reclassified to profit or loss in subsequent years:                  
Net gain on cash flows hedges  26(a)   2,154    3,838    20,836 
Deferred income tax  14   (634)   (1,133)   (6,146)
Other comprehensive income (loss) for the year, net of income tax      1,502    2,307    13,284 
                   
Total other comprehensive income for the year, net of income tax      170,402    179,135    166,454 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

7

 

 

Cementos Pacasmayo S.A.A. and Subsidiaries

 

Consolidated statement of changes in equity

For the years ended December 31, 2023, 2022 and 2021

 

   Capital
stock
   Investment
shares
   Treasury
shares
   Additional
paid-in
capital
   Legal
reserve
   Unrealized
loss on
financial
instruments
designated
at fair value
   Unrealized
gain (loss)
on cash
flow hedge
   Retained
earnings
   Total 
   S/(000)   S/(000)   S/(000)   S/(000)   S/(000)   S/(000)   S/(000)   S/(000)   S/(000) 
                                     
Balance as of January 1, 2021   423,868    40,279    (121,258)   432,779    168,636    (14,463)   (18,915)   456,629    1,367,555 
Profit for the year   -    -    -    -    -    -    -    153,170    153,170 
Other comprehensive income (loss)   -    -    -    -    -    (1,406)   14,690    -    13,284 
Total comprehensive income   -    -    -    -    -    (1,406)   14,690    153,170    166,454 
Dividends, note 15(g)   -    -    -    -    -    -    -    (338,204)   (338,204)
                                              
Balance as of December 31, 2021   423,868    40,279    (121,258)   432,779    168,636    (15,869)   (4,225)   271,595    1,195,805 
Profit for the year   -    -    -    -    -    -    -    176,828    176,828 
Other comprehensive income (loss)   -    -    -    -    -    (398)   2,705    -    2,307 
Total comprehensive income   -    -    -    -    -    (398)   2,705    176,828    179,135 
Dividends, note 15(g)   -    -    -    -    -    -    -    (179,805)   (179,805)
                                              
Balance as of December 31, 2022   423,868    40,279    (121,258)   432,779    168,636    (16,267)   (1,520)   268,618    1,195,135 
Profit for the year   -    -    -    -    -    -    -    168,900    168,900 
Other comprehensive income (loss)   -    -    -    -    -    (18)   1,520    -    1,502 
Total comprehensive income   -    -    -    -    -    (18)   1,520    168,900    170,402 
Dividends, note 15(g)   -    -    -    -    -    -    -    (175,524)   (175,524)
Others   -    -    -    -    -    (5)   -    -    (5)
                                              
Balance as of December 31, 2023   423,868    40,279    (121,258)   432,779    168,636    (16,290)   -    261,994    1,190,008 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

8

 

 

Cementos Pacasmayo S.A.A. and Subsidiaries

 

Consolidated statement of cash flows

For the years ended December 31, 2023, 2022 and 2021

 

   Note  2023   2022   2021 
      S/(000)   S/(000)   S/(000) 
                
Operating activities               
Profit before income tax      245,708    262,420    224,110 
Non-cash adjustments to reconcile profit before income tax to net cash flows from operating activities                  
Depreciation and amortization      144,195    138,539    135,567 
Finance costs  21   104,045    95,105    88,965 
Impairment to retirement of property, plant and equipment  9(b)   36,551    -    - 
Long-term incentive plan  12(c) y 20   7,632    8,272    9,763 
Provision for inventory obsolescence  8(b)   2,956    1,977    3,348 
Allowance for expected credit losses  7(d)   1,707    1,972    563 
Net (gain) loss on derivative financial instruments recognized at fair value through profit or loss  26(a)   (19)   59    (589)
Accumulated net loss due to settlement of derivative financial instruments at fair value through profit or loss  26(a)   -    -    1,569 
Finance income      (7,246)   (3,306)   (2,891)
Exchange difference related to monetary transactions      (973)   3,804    (9,114)
Net gain on disposal of property, plant and equipment and intangible assets      (813)   (591)   (1,775)
Other items that do not generate operating flows, net      18,021    10,413    3,761 
Working capital adjustments                  
Increase in trade and other receivables      (1,870)   (3,695)   (47,713)
Decrease (increase) in inventories      90,581    (282,554)   (151,530)
Decrease (increase) in prepayments      13,210    (10,099)   (12,956)
(Decrease) increase in trade and other payables      (48,680)   60,571    48,834 
       605,005    282,887    289,912 
Interest received      7,315    3,668    4,484 
Interest paid      (96,907)   (80,573)   (68,433)
Income tax paid      (103,090)   (94,163)   (55,401)
                   
Net cash flows from operating activities      412,323    111,819    170,562 

 

 

9

 

 

Consolidated statement of cash flows (continue)

 

   Note  2023   2022   2021 
      S/(000)   S/(000)   S/(000) 
                
Investing activities               
Opening of term deposits with original maturity greater than 90 days      (10,000)   -    - 
Redemption of term deposits with original maturity greater than 90 days      10,000    -    - 
Purchase of property, plant and equipment  9(a)   (272,600)   (162,785)   (85,594)
Purchase of intangible assets  10(a)   (16,707)   (15,712)   (8,953)
Purchase of investments available for sale      -    (363)   (1,779)
Loans granted      (1,679)   (141)   (174)
Loan to related party  22   -    -    (17,121)
Cash flow proceeds from sale of property, plant and equipment      1,392    2,664    4,152 
Proceeds from loans      150    149    524 
Collection of loans from related parties  22   -    -    17,121 
Net cash flows used in investing activities      (289,444)   (176,188)   (91,824)
Financing activities                  
Proceeds from bank overdraft      85,333    -    - 
Payment of bank overdraft      (85,333)   -    - 
Payment of bank loans  25   (661,520)   (448,984)   - 
Dividends paid  25   (175,431)   (179,820)   (336,821)
Payment for hedging instrument  25   (7,708)   (15,390)   (15,214)
Lease payments      (3,564)   (2,511)   (2,419)
Bank loans received  25   639,000    525,000    220,000 
Dividends returned  25   465    229    481 
Cash flow from settlement of derivative financial instruments      93,323    -    3,879 
Net cash flows used in financing activities      (115,435)   (121,476)   (130,094)
Net increase (decrease) in cash and cash equivalents      7,444    (185,845)   (51,356)
Net foreign exchange difference      976    (5,784)   15,846 
Cash and cash equivalents as of January 1  6   81,773    273,402    308,912 
                   
Cash and cash equivalents as of December 31  6   90,193    81,773    273,402 
Transactions with no effect on cash flows:                  
Unrealized exchange difference related to monetary transactions      (973)   3,804    (9,114)
Outstanding accounts payable related to acquisition of property, plant and equipment  9(e)   9,379    14,560    7,615 
Addition of right-of-use assets and lease liabilities      6,915    613    217 
Additions of quarry rehabilitation costs  12   4,458    2,745    - 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

10

 

 

Cementos Pacasmayo S.A.A. and Subsidiaries

 

Notes to the consolidated financial statements

As of December 31, 2023, 2022 and 2021

 

1.Corporate information

 

Cementos Pacasmayo S.A.A. (hereinafter “the Company”) was incorporated in 1957 and, under the Peruvian General Corporation Law, is an open stock corporation, its shares are listed in the Lima and New York Stock Exchange. The Company is a subsidiary of Inversiones ASPI S.A., which holds 50.01 percent of the Company’s common shares as of December 31, 2023, 2022 and 2021. The Company’s registered address is Calle La Colonia No.150, Urbanización El Vivero, Santiago de Surco, Lima, Peru. All the subsidiaries are domiciled and operate in Peru.

 

The Company’s main activity is the production and marketing of cement, blocks, concrete and other minors in La Libertad region of the northern of Peru.

 

The issuance of the consolidated financial statements of the Company and its subsidiaries (hereinafter “the Group”) for the year ended December 31, 2023 was authorized by the Company’s Board of Directors on February 14, 2024. The consolidated financial statements as of December 31, 2022 and for the year then that date were approved by the General Shareholders’ Meeting on March 24, 2023.

 

For the years ended December 31, 2023, 2022 and 2021, the consolidated financial statements comprise the financial statements of the Company and its subsidiaries: Cementos Selva S.A.C. and subsidiaries, Distribuidora Norte Pacasmayo S.R.L., Empresa de Transmisión Guadalupe S.A.C., Salmueras Sudamericanas S.A., Calizas del Norte S.A.C. (liquidated during 2022), Soluciones Takay S.A.C., 150Krea Inc. and Corporación Materiales Piura S.A.C. To these dates, the Company maintains a 100 percent interest in all its subsidiaries.

 

The main activities of the subsidiaries incorporated in the consolidated financial statements are described as follows:

 

-Cementos Selva S.A.C. is engaged in production and marketing of cement and other construction materials in the northeast region of Peru.Also, it holds 100 percent of the shares in Dinoselva Iquitos S.A.C. (a cement and construction materials distributor in the north of Peru, which also produces and sells precast, cement bricks and ready-mix concrete) and in Acuícola Los Paiches S.A.C. (a fish farm entity).

 

-Distribuidora Norte Pacasmayo S.R.L. is mainly engaged in selling cement produced by the Company.Additionally, it produces and sells precast, cement bricks and ready-mix concrete. It is the main partner of the Northern Peru Construction Consortium.

 

-Empresa de Transmisión Guadalupe S.A.C. is mainly engaged in providing electric energy transmission services to the Company.

 

-Salmueras Sudamericanas S.A.(“Salmueras”) In December 2017, the Company decided not to continue with the activities related to this project of Salmueras.

 

11

 

 

Notes to the consolidated financial statements (continued)

 

-Calizas del Norte S.A.C. On May 31, 2016, the Company decided to liquidate the subsidiary Calizas del Norte S.A.C. Thjs liquidation was completed during 2022.

 

-Soluciones Takay S.A.C., entity constituted on March 29, 2019 whose corporate purpose is to provide advisory services and information, promotion, acquisition and intermediation services for the management and development of real estate projects by natural and/or legal persons.

 

-150Krea Inc., entity constituted on June 3, 2021 whose corporate purpose is the lease of intangible assets.

 

-Corporación Materiales Piura S.A.C., entity acquired on January 4, 2023 whose corporate purpose is the extraction of stone, sand and clay.

 

2.Significant accounting policies

 

2.1Basis of preparation –

 

The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB).

 

The consolidated financial statements have been prepared on a historical cost basis, except for financial instruments designated at fair value through other comprehensive income (OCI) and derivative financial instruments that have been measured at fair value. The carrying values of recognized assets and liabilities that are designated as hedged items in fair value hedges that would otherwise be carried at amortized cost are adjusted to record changes in fair value attributable to the risks that are being hedged in effective hedge relationships. The consolidated financial statements are presented in Soles and all values are rounded to the nearest thousand (S/000), except when otherwise indicated.

 

The consolidated financial statements provide comparative information in respect of the previous period or periods. There are certain standards and amendments applied for the first time by the Group during 2022 that did not require the restatement of previous financial statements, as explained in note 2.3.16.

 

12

 

 

Notes to the consolidated financial statements (continued)

 

2.2

Basis of consolidation -

 

The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as of December 31, 2023 and 2022 and for the years ended December 31, 2023, 2022 and 2021. 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 it has: (i) power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee), (ii) exposure, or rights, to variable returns from its involvement with the investee, and (iii) the ability to use its power over the investee to affect its returns.

 

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.

 

The 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.

 

2.3Summary of significant accounting policies -

 

2.3.1Cash and cash equivalents -

 

Cash and cash equivalents presented in the statement of financial position and statement of cash flows comprise cash at banks and on hand and short-term deposits with an original maturity of three months or less.

 

2.3.2Financial instruments-initial recognition and subsequent measurement –

 

A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.

 

(i)Financial assets -

 

Initial recognition and measurement -

 

Financial assets are classified at initial recognition as measured at amortized cost, fair value through OCI or fair value through profit or loss.

 

The Group’s financial assets include cash and cash equivalents, commercial and other receivables and financial assets at fair value through OCI.

 

13

 

 

Notes to the consolidated financial statements (continued)

 

Subsequent measurement -

 

For purposes of subsequent measurement, financial assets are classified into the following categories:

 

-Financial assets at amortized cost (debt instruments).

 

-Financial assets at fair value through OCI with recycling of cumulative gains and losses (debt instruments).

 

-Financial assets designated at fair value through OCI without recycling of cumulative gains and losses upon derecognition (equity instruments).

 

-Financial assets at fair value through profit or loss.

 

The classification depends on the business model of the Company and the contractual terms of the cash flows.

 

Financial assets at amortized cost (debt instruments) -

 

The Group measures financial assets at amortized cost if both of the following conditions are met:

 

-The financial asset is held within a business model with the objective to collect contractual cash flows and not sale or trade it, and,

 

-The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding

 

Financial assets at amortized cost are subsequently measured using the effective interest (EIR) method and are subject to impairment. Gains and losses are recognized in profit or loss when the asset is derecognized, modified or impaired.

 

Financial assets are not reclassified after their initial recognition, except if the Group changes its business model for its management.

 

As of December 31, 2023 and 2022, the Group held trade and other receivables in this category; because they meet the conditions described above.

 

Financial assets at fair value through OCI (equity instruments) -

 

Upon initial recognition, the Group can elect to irrevocably classify its equity investments as equity instruments designated at fair value through OCI when they meet the definition of equity and are not held for trading. The classification is determined on an instrument-by-instrument basis.

 

14

 

 

Notes to the consolidated financial statements (continued)

 

Gains and losses on these financial assets are never recycled to profit or loss. Dividends are recognized as other income in the statement of profit or loss when the right of payment has been established, except when the Group benefits from such proceeds as a recovery of part of the cost of the financial asset, in which case, such gains are recorded in OCI. Equity instruments designated at fair value through OCI are not subject to impairment assessment.

 

As of December 31, 2023 and 2022 the Group elected to classify irrevocably its non-listed equity investments under this category.

 

(ii)Impairment of financial assets -

 

The Group recognizes an allowance for expected credit losses (ECLs) for all debt instruments not held at fair value through profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to receive, discounted at an approximation of the original effective interest rate. The expected cash flows will include cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms.

 

ECLs are recognized in two stages. For credit exposures for which there has not been a significant increase in credit risk since initial recognition, ECLs are provided for credit losses that result from default events that are possible within the next 12-months (a 12-month ECL). For those credit exposures for which there has been a significant increase in credit risk since initial recognition, a loss allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL).

 

For trade receivables and contract assets, the Group applies a simplified approach in calculating ECLs. Therefore, the Group does not track changes in credit risk, but instead recognizes a loss allowance based on lifetime ECLs at each reporting date. The Group has established a provision matrix that is based on its historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment.

 

The Group considers a financial asset in default when contractual payments are 360 days past due. However, in certain cases, the Group may also consider a financial asset to be in default when internal or external information indicates that the Group is unlikely to receive the outstanding contractual amounts in full before taking into account any credit enhancements held by the Group. A financial asset is written off when there is no reasonable expectation of recovering the contractual cash flows.

 

15

 

 

Notes to the consolidated financial statements (continued)

 

(iii)Financial liabilities -

 

Initial recognition and measurement -

 

Financial liabilities are classified at initial recognition as financial liabilities at fair value through profit or loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.

 

All financial liabilities are recognized initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.

 

The Group’s financial liabilities include trade and other payables, interest-bearing loans and borrowings.

 

Subsequent measurement -

 

The subsequent measurement of financial liabilities depends on their classification, the Group maintains Loans and Borrowings, which accounting treatment is explained below:

 

After their initial recognition, interest-bearing loans and borrowings are subsequently measured at amortized cost using the EIR method.Gains and losses are recognized in the consolidated statement of profit or loss when the liabilities are derecognized as well as through the EIR amortization process.

 

Amortized cost is calculated by considering any discount or premium on acquisition and fees or costs that are an integral part of the EIR.The EIR amortization is included as finance costs in the consolidated statement of profit or loss.

 

As of December 31, 2023 and 2022, the Group includes trade and other payables and financial liabilities in this category, for more information refer to notes 11 and 13.

 

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 from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability.The difference in the respective carrying amount is recognized in the consolidated statement of profit or loss.

 

16

 

 

Notes to the consolidated financial statements (continued)

 

(iv)Derivative financial instruments and hedge accounting –

 

The Group maintained derivative financial instruments, cross currency swaps, to hedge its foreign currency exchange rate risk, these instruments were current until February 2023, date when there were paid in foreign currency. These derivative financial instruments are initially recognized at their fair values on the date on which the derivative contract is entered into and subsequently are remeasured at their fair value. Derivatives are accounted for as financial assets when their fair value is positive and as financial liabilities when their fair value is negative, variation ay fair value were registered in equity.

 

As of December 31, 2023, the Group doesn’t maintain derivative financial instruments.

 

(v)Fair value measurement -

 

The Group measures financial instruments such as derivatives, and equity investments, at fair value at each period end.

 

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.

 

17

 

 

Notes to the consolidated financial statements (continued)

 

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value accounting hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

 

-Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities

 

-Level 2 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable

 

-Level 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 financial statements at fair value 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 recurring and non-recurring fair value measurements.

 

At each reporting date, the Financial Management analyzes the changes in the values of the assets and liabilities that must be measured or determined on a recurring and non-recurring basis according to the Group’s accounting policies. For this analysis, Management contrasts the main variables used in the latest assessments made with updated information available from valuations included in contracts and other relevant documents.

 

Management also compares the changes in the fair value of each asset and liability with the relevant external sources to determine whether the change is reasonable.

 

For purposes of disclosure of fair value, the Group has determined classes of assets and liabilities based on the inherent nature, characteristics and risks of each asset and liability, and the level of the fair value accounting hierarchy as explained above, see note 26(b).

 

2.3.3Foreign currencies -

 

The functional and presentation currency for the consolidated financial statements of the Group is soles, which is also the functional currency for its subsidiaries.

 

Transactions and balances

 

Transactions in foreign currencies are initially recorded at their respective functional currency spot rates at the date the transaction first qualifies for recognition.

 

Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of exchange at the reporting date. Differences arising on settlement or translation of monetary items are recognized in profit or loss.

 

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions.

 

18

 

 

Notes to the consolidated financial statements (continued)

 

2.3.4Inventories -

 

Inventories are valued at the lower of cost or net realizable value.Costs incurred in bringing each product to its present location and conditions are accounted for as follows:

 

Raw materials, spare part and supplies

 

-Initially at cost and are recorded at the lower of cost and net realizable value.

 

Finished goods and work in progress

 

-Cost of direct materials and supplies, services provided by third parties, direct labor and a proportion of manufacturing overheads is based on normal operating capacity, excluding borrowing costs and exchange currency differences.

 

Inventory in transit

 

-Cost.

 

Net realizable value is the estimated selling price in the ordinary course of business, less estimated cost of completion and the estimated costs of inventory necessary to make the sale.

 

2.3.5Borrowing 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 asset. All other borrowing costs are expensed in the period in which they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.

 

Where the funds used to finance a project form part of general borrowings, the amount capitalized is calculated using a weighted average of interest rates applicable to relevant general borrowings of the Group during the period. All other borrowing costs are recognized in the consolidated statement of profit or loss in the period in which they are incurred.

 

19

 

 

Notes to the consolidated financial statements (continued)

 

2.3.6Property, plant and equipment -

 

Property, plant and equipment is stated at cost, net of accumulated depreciation and/or accumulated impairment losses, if any. 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 (see note 2.3.5).The capitalized value of a finance lease is also included within property, plant and equipment. When significant parts of plant and equipment are required to be replaced at intervals, the Group recognizes such parts as individual assets with specific useful lives and depreciates them separately based on their specific useful lives.Likewise, when a 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 repair and maintenance costs are recognized as operation cost or expense in profit or loss as incurred.

 

The present value of the expected cost for the decommissioning of an asset after its use is included in the cost of the respective asset if the recognition criteria for a provision are met. Refer to significant accounting judgments, estimates and assumptions (note 3) and quarry rehabilitation cost provisions (note 12).

 

Depreciation of assets is determined using the straight-line method over the estimated useful lives of such assets as follows:

 

    Years
Buildings and other construction:    
Administrative facilities   Between 20 and 51
Main production structures   Between 20 and 56
Minor production structures   Between 20 and 35
Machinery and equipment:    
Mills and horizontal furnaces   Between 24 and 45
Vertical furnaces, crushers and grinders   Between 23 and 36
Electricity facilities and other minors   Between 10 and 35
Furniture and fixtures   10
Transportation units:    
Heavy units   Between 5 and 15
Light units   Between 5 and 10
Computer equipment   Between 3 and 10
Tools   Between 5 and 10

 

The asset’s residual value, useful lives and methods of depreciation are reviewed at each reporting period and adjusted prospectively if appropriate.

 

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 profit or loss when the asset is derecognized.

 

20

 

 

Notes to the consolidated financial statements (continued)

 

2.3.7Mining concessions -

 

Mining concessions correspond to the exploration rights in areas of interest acquired.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 of consolidated statement of financial position. Those mining concessions are amortized following the straight-line method. In the event the Group abandons the concession, the costs associated (see note 9(b)) are written-off in the consolidated statement of profit or loss.

 

For the years ended December 31, 2023, 2022 and 2021, mining concessions of the Group correspond to areas that contain raw material necessary for cement production.

 

2.3.8Quarry development costs and stripping costs -

 

Quarry development costs -

 

Quarry development costs incurred are stated at cost and are the next step in development of quarries after the exploration and evaluation stage. Quarry development costs are, upon commencement of the production phase, presented net of accumulated amortization and/or accumulated impairment losses, if any, and are presented within the property, plant and equipment caption. The amortization is calculated using the straight-line method based on the useful life of the quarry to which it relates. Expenditures that significantly increase the economic life of the quarry under exploitation are capitalized.

 

Stripping costs -

 

Stripping costs incurred in the development of a mine before production commences are capitalized as part of mine development costs and subsequently amortized over the life of the mine on a units-of-production basis, using the proved reserves.

 

Stripping costs incurred subsequently during the production phase of its operation are recorded as part of cost of production.

 

2.3.9Intangible 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 profit or loss in the period in which the expenditure is incurred. The useful lives of intangible assets are assessed as either finite or indefinite.

 

21

 

 

Notes to the consolidated financial statements (continued)

 

Intangible assets with finite lives are amortized over the economic useful 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 in the expense category that is consistent with the function of the intangible assets.

 

The Group’s intangible assets with finite useful lives are amortized over an average term between three and ten years.

 

Any gain or loss arising upon derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of profit or loss.

 

Exploration and evaluation assets -

 

Exploration and evaluation activity involve the search for mineral resources, the determination of technical feasibility and the assessment of commercial viability of an identified resource.Exploration and evaluation activity include:

 

-Researching and analyzing historical exploration data.

 

-Gathering exploration data through geophysical studies.

 

-Exploratory drilling and sampling.

 

-Determining and examining the volume and grade of the resource.

 

-Surveying transportation and infrastructure requirements.

 

-Conducting market and finance studies.

 

Once the legal right to explore has been acquired, exploration and evaluation costs are charged to the consolidated statement of profit or loss, unless management concludes that a future economic benefit is more likely than not to be realized, in which case such costs are capitalized, see note 10(b).These costs include directly attributable employee remuneration, materials and fuel used, surveying costs, drilling costs and payments made to contractors.

 

In evaluating if costs meet the criteria to be capitalized, several different sources of information are used, including the nature of the assets, extension of the explored area and results of sampling, among others. The information that is used to determine the probability of future benefits depends on the extent of exploration and evaluation that has been performed.

 

22

 

 

Notes to the consolidated financial statements (continued)

 

Exploration and evaluation costs are capitalized when the exploration and evaluation activity is within an area of interest for which it is expected that the costs will be recouped by future exploitation and active and significant operations in relation to the area are continuing or planned for the future.

 

All capitalized exploration and evaluation costs are monitored for indications of impairment. Where a potential impairment indicator is identified, an assessment is performed for each area of interest in conjunction with the group of operating assets (representing a cash generating unit) to which the exploration is attributed.

 

The Group assesses at each reporting date whether there is an indication that exploration and evaluation assets may be impaired, see note 10(c).

 

2.3.10Ore reserve and resource estimates -

 

Ore reserves are estimates of the amount of ore that can be economically and legally extracted from the Group’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 requires complex geological judgments to interpret the data.The estimation of recoverable reserves is based upon factors such as estimates of foreign exchange rates, commodity prices, future capital requirements, and production costs along with geological assumptions and judgments made in estimating the size and grade of the ore body.Changes in the reserve or resource estimates may impact upon the carrying value of exploration and evaluation assets, provision for quarry rehabilitation and depreciation and amortization charges, see notes 9, 10 y 12.

 

2.3.11Provisions -

 

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.When 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 profit or loss 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.When discounting is used, the increase in the provision due to the passage of time is recognized as finance cost in the consolidated statement of profit or loss.

 

23

 

 

Notes to the consolidated financial statements (continued)

 

Quarry rehabilitation 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. Quarry rehabilitation 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 risk-free rate. The unwinding of the discount is expensed as incurred and recognized in the consolidated statement of profit or loss as a finance cost. The estimated future costs of quarry 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, see note 12.

 

Environmental expenditures and liabilities -

 

Environmental expenditures that relate to current or future revenues are expensed or capitalized as appropriate. Expenditures that relate to an existing condition caused by past operations and do not contribute to current or future earnings are expensed.

 

Liabilities for environmental costs are recognized when a clean-up is probable, and the associated costs can be reliably estimated. Generally, the timing of recognition of these provisions coincides with the commitment to a formal plan of action or, if earlier, on divestment or on closure of inactive sites.

 

The amount recognized is the best estimate of the expenditure required. Where the liability will not be settled for a number of years, the amount recognized is the present value of the estimated future expenditure.

 

2.3.12Employees benefits -

 

The Group has short-term obligations for employee benefits including salaries, severance contributions, legal bonuses, performance bonuses and profit sharing. These obligations are recorded monthly on an accrual basis.

 

Additionally, the Group has a long-term incentive plan for key management. This benefit is settled in cash, measured on the salary of each officer and upon fulfilling certain conditions such as years of experience within the Group and permanency. The Group recognizes the long-term obligation at its present value at the end of the reporting period using the projected credit unit method. To calculate the present value of these long-term obligations the Group uses a government bond discount rate at the date of the consolidated financial statements. This liability is annually reviewed on the date of the consolidated financial statements, and the accrual updates and the effect of changes in discount rates are recognized in the consolidated statement of profit or loss.

 

2.3.13Revenue recognition -

 

The group is dedicated to the production and trading of cement, concrete, blocks and other minors, as well as trade of construction supplies. These goods are sold in contracts with customers.

 

Revenue is measured at the fair value of the consideration received or receivable, considering contractually defined terms of payment and excluding taxes or duties.

 

24

 

 

Notes to the consolidated financial statements (continued)

 

The following specific recognition criteria must also be met before revenue is recognized:

 

Sales of goods -

 

Revenue from sale of goods is recognized at the point in time when control of the asset is transferred to the customer, generally on delivery of the goods.

 

The Group considers whether there are other terms in the contract that are separate performance obligations to which a portion of the transaction price needs to be allocated. In determining the transaction price for the sale of goods, the Group considers the effects of variable consideration, the existence of significant financing components, noncash consideration, and consideration payable to the customer (if any).

 

Rendering of services -

 

In the business segments cement, concrete, blocks and construction supplies, the Group provides transportation services. These services are sold together with the sale of the goods to the customer.

 

Transportation services are satisfied when the transport service is concluded, which coincides with the moment of delivery of the goods to the customers.

 

2.3.14Taxes -

 

Current income tax -

 

Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the tax authorities.The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date in Peru, where the Group operates and generates taxable income.

 

Deferred tax -

 

Deferred tax is determinate on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date.

 

Deferred tax liabilities are recognized for all taxable temporary differences, except in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint arrangements, when 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, the carry forward of unused tax credits and unused tax losses.

 

25

 

 

Notes to the consolidated financial statements (continued)

 

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 re-assessed 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 or substantively enacted at the reporting date.

 

Deferred tax related to items recognized outside profit or loss is recognized outside profit or loss.Deferred tax items are recognized in correlation to the underlying transaction either in OCI or directly in equity.

 

2.3.15Treasury shares-

 

Own equity instruments which are reacquired (treasury shares) are recognized at cost and deducted from equity.No gain or loss is recognized in the consolidated statement of profit or loss on the purchase, sale, issue or cancellation of the Group’s own equity instruments.

 

2.3.16New amended standards and interpretations –

 

The Group applied for the first-time certain standards and amendments, which are effective for annual periods beginning on or after January 1, 2023. The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.

 

Definition of Accounting Estimates - Amendments to IAS 8

 

The amendments to IAS 8 clarify the distinction between changes in accounting estimates, changes in accounting policies and the correction of errors. They also clarify how entities use measurement techniques and inputs to develop accounting estimates.

 

The amendments had no impact on the Group’s consolidated financial statements.

 

Disclosure of Accounting Policies - Amendments to IAS 1 and IFRS Practice Statement 2

 

The amendments to IAS 1 and IFRS Practice Statement 2 Making Materiality Judgements provide guidance and examples to help entities apply materiality judgements to accounting policy disclosures. The amendments aim to help entities provide accounting policy disclosures that are more useful by replacing the requirement for entities to disclose their ‘significant’ accounting policies with a requirement to disclose their’material’ accounting policies and adding guidance on how entities apply the concept of materiality in making decisions about accounting policy disclosures.

 

The amendments have had an impact on the Group’s disclosures of accounting policies, but not on the measurement, recognition or presentation of any items in the Group’s financial statements.

 

Deferred Tax related to Assets and Liabilities arising from a Single Transaction – Amendments to IAS 12

 

The amendments to IAS 12 Income Tax narrow the scope of the initial recognition exception, so that it no longer applies to transactions that give rise to equal taxable and deductible temporary differences such as leases and decommissioning liabilities.

 

The amendments had no impact on the Group’s consolidated financial statements.

 

26

 

 

Notes to the consolidated financial statements (continued)

 

3.Significant accounting judgments, estimates and assumptions

 

The preparation of the Group’s consolidated financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.

 

If signs of impairment are identified, the most significant estimate considered by the Company’s Management will correspond to the evaluation of the impairment of long-lived assets. As of December 31, 2023 and 2022, Management has not identified signs of impairment for long-lived assets, which is why it considers that there are no significant estimates for those dates.

 

4.Standards issued but not yet effective

 

The standards and interpretations relevant to the Group, that will have effect at January 1, 2024 are below:

 

-Amendments to IFRS 16: Lease Liability in a Sale and Leaseback

 

-Amendments to IAS 1: Classification of Liabilities as Current or Non-current

 

-Supplier Finance Arrangements - Amendments to IAS 7 and IFRS 7

 

The amendments are not expected to have a material impact on the Group’s financial statements.

 

5.Transactions in foreign currency

 

Transactions in foreign currency take place at the open-market exchange rates published by the Superintendence of Banks, Insurance and Pension Funds Administration. As of December 31, 2023 the exchange rates for transactions in United States dollars, published by this institution, were S/3.705 for purchase and S/3.713 for sale (S/3.808 for purchase and S/3.82 for sale as of December 31, 2022).

 

27

 

 

Notes to the consolidated financial statements (continued)

 

As of December 31, 2023 and 2022, the Group had the following assets and liabilities in United States dollars:

 

   2023   2022 
   US$(000)   US$(000) 
Assets        
Cash and cash equivalents   5,887    4,426 
Trade and other receivables   3,259    3,262 
Advances to suppliers for work in progress   4,829    18,899 
    13,975    26,587 
           
Liabilities          
Trade and other payables   (19,082)   (18,399)
Interest-bearing loans and borrowings   -    (131,612)
    (19,082)   (150,011)
Cross currency swap position   -    132,000 
           
Net monetary position    (5,107)   8,576 

 

As of December 31, 2022, the Group had cash currency hedging agreements for its bonds (denominated in US dollars), see note 16. Of the US$132,000,000 shown in the swap position as of December 31,2022, there were underlying liabilities in the amount of US$131,612,000 and the difference of US$388,000 was maintained as derivative financial instruments at fair value through profit or loss. On February 2023 the cross currency was settled.

 

During 2023, the net gain originated by the exchange difference was approximately S/4,933,000 (the net loss from exchange difference amounted to S/1,040,000 during 2022). All these results are presented in the caption “Gain (loss) from exchange difference, net” in the consolidated statement of profit or loss.

 

6.Cash and cash equivalents

 

(a)This caption was made up as follows:

 

   2023   2022 
   S/(000)   S/(000) 
         
Cash on hand   182    161 
Cash at banks (b)   46,611    39,112 
Short-term deposits (c)   43,400    42,500 
           
    90,193    81,773 

 

(b)Cash at banks is denominated in local and foreign currency and U.S. dollars, is deposited in local and foreign bank are freely available. The demand deposits interest yield is based on daily bank deposit rates.

 

(c)The short-term deposits held in domestic banks were freely available and earned interest at the respective short-term market rates and original maturity less than three months.

 

28

 

 

Notes to the consolidated financial statements (continued)

 

7.Trade and other receivables

 

(a)This caption was made up as follows:

 

   Current   Non-current 
   2023   2022   2023   2022 
   S/(000)   S/(000)   S/(000)   S/(000) 
                 
Trade receivables (b)   83,840    78,519    -    - 
Other accounts receivable   13,179    6,789    -    - 
Accounts receivable from Parent company and affiliates, note 22   1,973    1,858    -    - 
Funds restricted to tax payments   1,322    244    -    - 
Interest receivable   1,091    1,163    -    - 
Loans to employees   1,061    676    -    - 
Loans granted   1,014    1,001    -    - 
Other receivables from sale of fixed assets   82    215    -    - 
Allowance for expected credit losses (d) and (e)   (9,014)   (7,433)   -    - 
Financial assets classified as receivables (e)   94,548    83,032    -    - 
Value-added tax credit   5,140    18,459    1,193    1,874 
Claim to the SUNAT (c)   -    -    29,559    29,559 
Other accounts receivable   -    -    12,645    12,110 
Tax refund receivable   -    -    9,034    9,034 
Allowance for expected credit losses (d)   -    -    (9,034)   (9,034)
Non-financial assets classified as receivables   5,140    18,459    43,397    43,543 
    99,688    101,491    43,397    43,543 

 

(b)Trade account receivables presented net of discounts and bonuses, have current maturity (30 to 90 days) and those overdue bear interest.

 

(c)On March 22, 2021, the Company received Tax Court Resolution N° 00905-4-21 that declares the calculation of Mining Royalty should be based on gross sale of the final product (cement) for the years 2008 and 2009. This is an opposite position to what is established by the Constitutional Court in the STC Exp. N° 1043-2013-PA/TC that declares founded the writ of protection presented by the Company and its right to calculate the Mining Royalty exclusively based on the value of the mining component, without considering in any way the value of the final products derived from industrial and manufacturing processes.

 

29

 

 

Notes to the consolidated financial statements (continued)

 

Company has made, under protest, payments of the debts arbitrarily placed in collection. These payments as of December 31, 2023 and 2022 amount to S/29,559,000. To date, the Company has initiated the corresponding legal actions to recover said payments and in the opinion of Management and its external legal advisors, it has a high probability of obtaining a favorable result.

 

(d)The movement of the allowance for expected credit losses is as follows:

 

   2023   2022   2021 
   S/(000)   S/(000)   S/(000) 
             
Opening balance   16,467    14,573    14,358 
Additions, note 19   1,707    1,972    563 
Recoveries   (126)   (78)   (348)
                
Ending balance   18,048    16,467    14,573 

 

As of December 31, 2023, the additions include S/1,707,000 related to the provision for expected credit losses for trade receivables (S/1,972,000 as of December 31, 2022), which are presented in the caption “selling and distribution expenses” on the consolidated statement of profit and loss, see note 19.

 

30

 

 

Notes to the consolidated financial statements (continued)

 

(e)The aging analysis of trade and other accounts receivable as of December 31, 2023 and 2022, is as follows:

 

       Neither past
 due nor
   Past due but not impaired 
As of December 31, 2023  Total   impaired   < 30 days   30-60 days   61-90 days   91-120 days   > 120 days 
   S/(000)   S/(000)   S/(000)   S/(000)   S/(000)   S/(000)   S/(000) 
                             
Expected credit loss rate  8.7%  0.2%  1.0%  0.8%  7.6%  20.5%  64.4%
Carrying amount 2021   103,562    62,120    20,566    4,525    2,435    1,195    12,721 
Expected credit loss   9,014    147    206    37    186    245    8,193 

 

       Neither past
due nor
   Past due but not impaired 
As of December 31, 2022  Total   impaired   < 30 days   30-60 days   61-90 days   91-120 days   > 120 days 
   S/(000)   S/(000)   S/(000)   S/(000)   S/(000)   S/(000)   S/(000) 
                             
Expected credit loss rate  8.2%  0.1%  1.5%  3.5%  2.1%          -   59.4%
Carrying amount 2022   90,465    63,676    8,538    3,807    2,573    -    11,871 
Expected credit loss   7,433    64    124    135    55    -    7,055 

 

31

 

 

Notes to the consolidated financial statements (continued)

 

8.Inventories

 

(a)This caption is made up as follows:

 

   2023   2022 
   S/(000)   S/(000) 
         
Goods and finished products   16,488    18,903 
Work in progress   173,569    186,281 
Raw materials   329,598    397,096 
Packages and packing   3,944    5,245 
Fuel   3,899    3,642 
Spare parts and supplies   251,006    260,742 
Inventory in transit   12,570    13,060 
    791,074    884,969 

 

(b)As of December 31, 2023 and 2022, the amount of the provision for inventory obsolescence amounts to S/27,525,000 and S/24,905,000, respectively. In the years 2023 and 2022, the net effect recognized in the consolidated statement of profit or loss for S/2,956,000 and S/1,977,000, respectively.

 

32

 

 

Notes to the consolidated financial statements (continued)

 

9.Property, plant and equipment

 

(a)The composition and movement in property, plant and equipment for two years ended December 31, 2022 is presented below:

 

   Mining concessions (b)   Mine development costs (b)   Land   Buildings and other construction   Machinery, equipment and related spare parts   Furniture and accessories   Transportation units   Computer equipment and tools   Quarry rehabilitation costs   Capitalized interest (f)   Work in progress (d) and units
in transit
   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, 2022   75,914    58,002    256,552    693,085    1,697,655    10,706    113,351    34,428    9,030    65,007    62,140    3,075,870 
Additions   -    7,311    868    -    13,085    318    658    2,849    2,745    3,158    143,540    174,532 
Sales and/or retirement   -    -    (2,285)   -    (4,978)   (14)   (2,654)   (228)   -    -    (398)   (10,557)
Disposals   -    -    -    (1,600)   (17,075)   (28)   (4,460)   (481)   -    -    -    (23,644)
Transfers, note 10   -    529    -    3,069    22,853    98    442    4,736    -    -    (32,461)   (734)
As of December 31, 2022   75,914    65,842    255,135    694,554    1,711,540    11,080    107,337    41,304    11,775    68,165    172,821    3,215,467 
Additions   36,184    19,870    3,449    -    25,891    432    160    3,209    4,458    6,132    174,435    274,220 
Sales and/or retirement   -    (101)   -    -    (41,075)   (162)   (2,064)   (316)   -    -    (559)   (44,277)
Transfers, note 10   -    (14,521)   -    127,675    186,727    (271)   (50)   990    -    -    (300,616)   (66)
As of December 31, 2023   112,098    71,090    258,584    822,229    1,883,083    11,079    105,383    45,187    16,233    74,297    46,081    3,445,344 
                                                             
Accumulated depreciation                                                            
                                                             
As of January 1, 2022   12,328    10,484    -    158,455    705,454    7,871    78,163    22,456    2,382    9,021    -    1,006,614 
                                                             
Additions   72    387    -    18,818    95,486    575    7,398    3,595    140    1,521    -    127,992 
Sales and/or retirement   -    -    -    -    (3,990)   (12)   (2,269)   (194)   -    -    -    (6,465)
Disposals   -    -    -    (795)   (13,425)   (26)   (4,278)   (428)   -    -    -    (18,952)
Transfers, note 10   -    (3)   -    -    -    -    -    -    -    -    -    (3)
As of December 31, 2022   12,400    10,868    -    176,478    783,525    8,408    79,014    25,429    2,522    10,542    -    1,109,186 
Additions   72    422    -    20,113    98,915    516    6,252    3,606    128    1,625    -    131,649 
Sales and/or retirement   -    (56)   -         (22,620)   (153)   (1,896)   (201)   -    -    -    (24,926)
Transfers, note 10   -    -    -    2,065    (2,030)   -    (35)   -    -    -    -    - 
As of December 31, 2023   12,472    11,234    -    198,656    857,790    8,771    83,335    28,834    2,650    12,167    -    1,215,909 
                                                             
Impairment (b)                                                            
As of December 31, 2022   42,859    24,048    3,624    13,579    12,918    200    26    454    -    -    735    98,443 
                                                             
Additions   9,197    525    361    17,459    17,669    8    1    -    -    1,413    2,686    49,319 
Disposals   -    -    -    -    (17,669)   (8)   (1)   -    -    -    -    (17,678)
As of December 31, 2023   52,056    24,573    3,985    31,038    12,918    200    26    454    -    1,413    3,421    130,084 
                                                             
Net book value                                                            
As of December 31, 2022   20,655    30,926    251,511    504,497    915,097    2,472    28,297    15,421    9,253    57,623    172,086    2,007,838 
                                                             
As of December 31, 2023   47,570    35,283    254,599    592,535    1,012,375    2,108    22,022    15,899    13,583    60,717    42,660    2,099,351 

 

33

 

 

Notes to the consolidated financial statements (continued)

 

(b)Mining concessions mainly include net acquisition costs of S/15,488,000 related to coal concessions acquired through a purchase option executed from 2011 to 2013.The caption also includes some concessions acquired by the Group for exploration activities related to the cement business, such as that acquired in January 2023 for S/34,350,000, through the purchase of the company Corporación Materiales Piura S.A.C.

 

In previous years management recognized a full impairment related to the total net book value of a closed zinc mining unit which included concession costs, development costs and related facilities and equipment.

 

At the end of 2023, Management recognized a specific impairment to retirement for the net value of the assets of the vertical clinker kilns located at the Pacasmayo cement plant for a net cost of S/36,551,000. This deterioration estimate was carried out as a consequence of replacing the old technology of these kilns due to the entry into operation of the Clinker Lines Optimization Project – Kiln 4 in said plant, which is more efficient and produces fewer emissions. This amount was recorded in the impairment of property, plant and equipment item in the consolidated statement of profit or loss.

 

Likewise, Management recognized an impairment to retirement of the value of the coal concessions (northern zone) for S/11,393,000, recorded in other operating income (expenses) item of the consolidated statement of profit or loss.

 

(c)The Group has assessed the recoverable amount of its remaining long-term assets and, except the assets as specifically mentioned in (b), did not find indicators of an impairment for these assets as of December 31, 2023 and 2022.

 

(d)Work in progress included in property, plant and equipment as of December 31, 2023 and 2022 is mainly related to complementary facilities of the cement plants.

 

(e)As of December 31, 2023, the Group maintains accounts payable related to the acquisition of property, plant and equipment for S/9,379,000 (S/14,560,000 as of December 31, 2022), see note 11.

 

(f)The borrowing costs are mainly related to the construction of the cement plant located in Piura and to a lesser extent to the construction of the Clinker Lines Optimization Project – Kiln 4 in the city of Pacasmayo. Both plants are already in operation.

 

34

 

 

Notes to the consolidated financial statements (continued) 

 

10.Intangibles assets, net

 

(a)The composition and movement of this caption as of the date of the consolidated statement of financial position is presented below:

 

  

IT

applications

  

Finite life

intangible

   Indefinite life intangible   Exploration cost and mining evaluation (b)   Total 
   S/(000)   S/(000)   S/(000)   S/(000)   S/(000) 
Cost                    
As of January 1, 2022   41,423    24,543    1,975    51,279    119,220 
                          
Additions   14,564    -    -    417    14,981 
Disposals   (27)   -    -         (27)
Transfers and reclassifications, note 9   107    -    -    627    734 
As of December 31, 2022   56,067    24,543    1,975    52,323    134,908 
                          
Additions   15,667    -    -    523    16,190 
Sales and/or retirement   (593)   -    -    -    (593)
Transfers and reclassifications, note 9   66    -    -    -    66 
As of December 31, 2023   71,207    24,543    1,975    52,846    150,571 
                          
Accumulated amortization                         
As of January 1, 2022   18,025    8,165    71    8,996    35,257 
Additions   5,833    2,454    -    575    8,862 
Transfers and reclassifications, note 9   -    -    -    3    3 
As of December 31, 2022   23,858    10,619    71    9,574    44,122 
Additions   6,939    2,454    -    313    9,706 
Sales and/or retirement   (554)   -    -    -    (554)
As of December 31, 2023   30,243    13,073    71    9,887    53,274 
                          
Impairment (b)                         
                          
As of December 31, 2022   456    -    -    33,469    33,925 
                          
Additions   -    -    -    452    452 
As of December 31, 2023   456    -    -    33,921    34,377 
                          
Net Carrying Value                         
As of December 31, 2022   31,753    13,924    1,904    9,280    56,861 
                          
As of December 31, 2023   40,508    11,470    1,904    9,038    62,920 

 

(b)As of December 31, 2023 and 2022, the exploration cost and mining evaluation include mainly capital expenditures related to the coal project and to other minor projects related to the cement business.

 

(c)As of December 31, 2023 and 2022, the Group evaluated the conditions of use of the projects related to the exploration and mining evaluation costs and its other intangibles, not finding any indicators of impairment in said assets, except specific additions to retirements for the year 2023.

 

35

 

 

Notes to the consolidated financial statements (continued) 

 

11.Trade and other payables

 

(a)This caption is made up as follows:

 

   2023   2022 
   S/(000)   S/(000) 
         
Trade payables (b)   107,327    156,586 
Interest payable (d)   29,828    26,611 
Remuneration payable   27,792    22,245 
Advances from customers   15,726    14,702 
Taxes and contributions   17,225    11,347 
Dividends payable, note 15(g)   10,322    9,764 
Accounts payable related to the acquisition of property, plant and equipment, note 9(e)   9,379    14,560 
Board of Directors’ fees   4,700    5,191 
Guarantee deposits   3,488    4,127 
Account payable to the principal and affiliates, note 22   516    2,686 
Hedge finance cost payable   -    5,978 
Other accounts payable   5,208    10,757 
           
    231,511    284,554 

 

(b)Trade accounts payable result from the purchases of material, services and supplies for the Group’s operations, and mainly correspond to invoices payable to domestic suppliers. Trade payables are non-interest bearing and are normally settled within 60 to 120 days term.

 

(c)Other payables are non-interest bearing and have an average term of 3 months.

 

(d)Interest payable is normally settled semiannually throughout the financial year.

 

36

 

 

Notes to the consolidated financial statements (continued) 

 

12.Provisions

 

(a)This caption is made up as follows:

 

   Workers’
profit-sharing (b)
   Long-term incentive plan (c)   Quarry
Rehabilitation provision (d)
   Provision of legal contingencies   Total 
   S/(000)   S/(000)   S/(000)   S/(000)   S/(000) 
                     
At January 1, 2022   24,269    22,513    11,036    3,090    60,908 
Additions (b), note 20   32,161    8,272    -    1,368    41,801 
 Exchange difference   -    -    (495)   -    (495)
Unwinding of discounts, note 21   -    1,200    91    -    1,291 
Change in estimate   -    -    2,745    -    2,745 
Payments and advances   (25,097)   -    -    (2,182)   (27,279)
                          
At December 31, 2022   31,333    31,985    13,377    2,276    78,971 
                          
Current portion   31,333    -    -    -    31,333 
Non-current portion   -    31,985    13,377    2,276    47,638 
                          
    31,333    31,985    13,377    2,276    78,971 
At January 1, 2023   31,333    31,985    13,377    2,276    78,971 
Additions (b), note 20   35,258    7,632    -    -    42,890 
 Exchange difference   -    -    (292)   -    (292)
Unwinding of discounts, note 21   -    1,691    133    -    1,824 
Change in estimate   -    -    4,458    -    4,458 
Payments and advances   (32,263)   (11,625)   -    -    (43,888)
                          
At December 31, 2023   34,328    29,683    17,676    2,276    83,963 
Current portion   34,328    22,182    -    -    56,510 
Non-current portion   -    7,501    17,676    2,276    27,453 
    34,328    29,683    17,676    2,276    83,963 

 

37

 

 

Notes to the consolidated financial statements (continued) 

 

(b)Workers’ profit sharing -

 

In accordance with Peruvian legislation, the Group is obliged to pay its employees profit sharing of between 8% and 10% of annual taxable income. Distributions to employees under the plan are based 50% on the number of days that each employee worked during the preceding year and 50% on proportionate annual salary levels.

 

The workers’ profit sharing is recognized in the following line items:

 

   2023   2022 
   S/(000)   S/(000) 
         
Cost of sales, note 20   15,244    15,165 
Administrative expenses, note 20   15,210    12,520 
Selling and distribution expenses, note 20   3,804    3,287 
Investment   1,000    1,189 
           
    35,258    32,161 

 

(c)Long-term incentive plan -

 

In 2011, the Group implemented a compensation plan for its key management.This long-term benefit is payable in cash, based on the salary of each officer and depends on the years of service of each officer in the Group.According to the latest plan update, the executive would receive the equivalent of an annual salary for each year of service beginning to accrue from 2019. This benefit accrues and accumulates for each officer and is payable in two installments: the first payment will be made on the sixth year after the creation of this bonus plan, and the last payment at the end of the ninth year from the creation of the plan. If the executive decides to voluntarily leave the Group before a scheduled distribution, they will not receive this compensation. The Group used the Projected Unit Credit Method to determine the present value of this deferred obligation and the related current deferred cost, considering the expected increases in salary base and the corresponding current government bond discount rate (risk-free rate).

 

(d)Quarry Rehabilitation provision -

 

As of December 31, 2023 and 2022, it corresponds to the provision for the future costs of rehabilitating the quarries exploited in Company’s operations. The provision has been created based on studies made by internal specialists. Management believes that the assumptions used, based on current economic environment, are a reasonable basis upon which to estimate the future liability. These estimates are reviewed regularly to consider any material change to the assumptions. However, actual quarry rehabilitation costs will ultimately depend upon future market prices for the necessary decommissioning works required to reflect future economic conditions.

 

Future cash flows have been estimated based on financial budgets approved by Management. The range of the risk-free discount rate in dollars used in the calculation of the provision as of December 31, 2023 was from 0.52 to 4.20 percent and the risk-free discount rate in dollars used in the calculation of the provision as of December 31, 2022 was from 0.54 to 4.14 percent.

 

Management expects to incur a significant part of this obligation in the medium and long-term. The Group estimates that this liability is sufficient according to the current environmental protection laws approved by the Ministry of Energy and Mines of Peru.

 

38

 

 

Notes to the consolidated financial statements (continued) 

 

13.Financial obligations

 

(a)This caption is made up as follows:

 

   Currency  Nominal interest rate   Maturity  2023   2022 
             S/(000)   S/(000) 
Short -term promissory notes (b)                  
Banco de Crédito del Perú  S/   9.44%  January 22, 2024   38,000    - 
BBVA Perú  S/   9.78%  January 19, 2024   38,000    - 
BBVA Perú  S/   8.83%  March 15, 2024   19,000    - 
BBVA Perú  S/   8.83%  March 15, 2024   19,000    - 
BBVA Perú  S/   6.98%  December 12, 2024   25,300    - 
BBVA Perú  S/   6.98%  December 12, 2024   25,300    - 
BBVA Perú  S/   6.98%  December 12, 2024   25,400    - 
BBVA Perú  S/   7.32%  November 22, 2024   19,000    - 
BBVA Perú  S/   7.32%  November 22, 2024   19,000    - 
Banco de Crédito del Perú  S/   8.93%  December 18,2023   -    38,000 
Banco de Crédito del Perú  S/   8.93%  December 18,2023   -    38,000 
Totalcurrent              228,000    76,000 
                      
Senior Notes (c)                     
Principal, net of issuance costs  S/   6.69%  February 1, 2029   259,686    259,625 
Principal, net of issuance costs  S/   6.84%  February 1, 2034   309,506    309,457 
Principal, net of issuance costs  US$   4.50%  February 8, 2023   -    502,699 
               569,192    1,071,781 
                      
Short and long-term Corporate Loan under “Club deal” (d)                     
Banco de Crédito del Perú  S/   5.82%  December 1,2028   387,917    222,695 
Scotiabank  S/   5.82%  December 1,2028   387,917    222,695 
               775,834    445,390 
Total non-current              1,573,026    1,593,171 
                      
Maturity                     
Current              383,146    618,907 
Non-current              1,189,880    974,264 
               1,573,026    1,593,171 

 

39

 

 

Notes to the consolidated financial statements (continued) 

 

(b)Senior Notes-

 

(b.1)Senior Notes in US dollars

 

Until February 2023, the Company maintained corporate bonds which were denominated in US dollars, there were issued in January 2013. The cross currency swaps maintained by the Company to hedge the exchange rate variations of corporate bonds were executed and settled in full in correlation with the payment of international dollar bonds.

 

(b.2)Senior Notes in Soles

 

The General Shareholders’ Meeting held on January 8, 2019, approved the issuance of Senior Notes denominated in soles in the local market up to the maximum amount of S/1,000,000,000 through the Second Corporate Bonds Program of Pacasmayo, whose purpose was to settle the mid-term loans described in the previous paragraph. On January 31, 2019, senior notes were issued for: i) S/260,000,000 at a rate of 6.688 percent per year and maturity of 10 years and; ii) S/310,000,000 at a rate of 6.844 percent per year and maturity of 15 years.

 

The Senior Notes in soles issued in 2019 are guaranteed by the following Company’s subsidiaries: Cementos Selva S.A.C., Distribuidora Norte Pacasmayo S.R.L., Empresa de Transmisión Guadalupe S.A.C. and Dinoselva Iquitos S.A.C.

 

(b.3)Financial covenants

 

The financial covenants related to the Senior Notes denominated issued in US dollars and soles state that if the Company and its guarantor subsidiaries issue debt or equity instruments, merges with another company or dispose or rents significant assets, the Senior Notes will trigger the following financial covenants, calculated based on the Company and Guarantee Subsidiaries annual consolidated financial statements:

 

-A fixed charge covenant ratio of at least 2.5 to 1.

 

-A consolidated debt-to-EBITDA ratio of no greater than 3.5 to 1.

 

As of December 31, 2023 and 20222, these covenants have not been activated because no situation has occurred that requires their measurement, as indicated in the previous paragraph.

 

For the years ended December 31, 2023, 2022 and 2021, senior notes generated interest that has been recognized in the consolidated statement of profit or loss for S/38,690,000, S/60,225,000 and S/63,333,000, respectively, see note 21.

 

40

 

 

Notes to the consolidated financial statements (continued)

 

(c)Medium-term Corporate Loan under “Club Deal” modality:

 

On August 6, 2021, the Company established the conditions of a medium-term corporate loan under “Club Deal” modality with Banco de Crédito del Perú S.A. and Scotiabank Perú S.A.A. The loan amounts to S/860,000,000 that allowed the payment of all the financial obligations that the Company maintains with a maturity until February 2023. The loan conditions include a grace / availability period of 18 months from August 6 and a payment term of 7 years from the last disbursement, which was in February 2023. Since that date, the loan will be paid in 22 equal quarterly installments and has an annual interest rate of 5.82 percent.

 

As part of the loan conditions, the Company assumed the following obligations:

 

I.Comply with the following financial covenants:

 

a.Debt Ratio (Financial Debt / EBITDA) <= 3.50x

 

b.Debt Service Coverage Ratio (FCSD / SD) >= 1.15x

 

c.Debt Service Coverage Ratio (EBITDA / SD) >= 1.50x

 

These financial safeguards will be calculated and verified at the end of each calendar quarter, considering the information of the consolidated financial statements of the Company for the last 12 months, prepared in accordance with IFRS.

 

As of December 31, 2023 and 2022, the Company complies with the ratios contained in the conditions of the Club Deal and corporate bonds and has certain do’s and don’ts obligations that it has been complying with to date.

 

41

 

 

Notes to the consolidated financial statements (continued)

 

14.Deferred income tax assets and liabilities

 

The following is the composition of the caption according to the items that originated it:

 

   As of January 1,
2022
   Effect on profit or loss   Quarry
rehabilitation
provision
   Effect on OCI   As of December 31,
2022
   Effect on profit or loss   Effect on OCI   Quarry
rehabilitation
provision
   As of December 31,
2023
 
   S/(000)   S/(000)   S/(000)   S/(000)   S/(000)   S/(000)   S/(000)   S/(000)   S/(000) 
Movement of deferred income tax assets:                                    
Deferred income tax assets                                    
Allowance for expected credit losses for trade receivables   1,533    555    -    -    2,088    473    -    -    2,561 
Provision for vacations   1,905    196    -    -    2,101    114