a50853070.htm

Cementos Pacasmayo S.A.A. and Subsidiaries

Interim condensed consolidated statements of other comprehensive income

For the three-month periods ended March 31, 2014 and March 31, 2013 (both unaudited)

		For the three-month periods ended March 31,

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

Profit for the period			39,803			45,105


Other comprehensive income
Other comprehensive income to be reclassified to profit or loss in subsequent periods:
Change in fair value of available-for-sale financial investments	11		(6,980	)		4,950
Deferred income tax related to component of other comprehensive income	8		2,093			(1,483	)
Exchange differences on translation of foreign currency			-			155

Other comprehensive income for the period, net of income tax			(4,887	)		3,622


Total comprehensive income, net of income tax			34,916			48,727


Total comprehensive income attributable to:
Equity holders of the parent			35,706			49,664
Non-controlling interests			(790	)		(937	)


			34,916			48,727

The accompanying notes are an integral part of the interim condensed consolidated financial statements.

Cementos Pacasmayo S.A.A. and Subsidiaries

Interim condensed consolidated statements of changes in equity

For the three-month periods ended March 31, 2014 and March 31, 2013 (both unaudited)

	Attributable to equity holders of the parent
	Capital stock		Investment shares		Additional paid-in capital			Legal reserve		Unrealized gain on available-for- sale investments			Foreign currency translation reserve			Retained earnings			Total			Non- controlling interests			Total equity
		S/.(000)		S/.(000)		S/.(000)			S/.(000)		S/.(000)			S/.(000)			S/.(000)			S/.(000)			S/.(000)			S/.(000)

Balance as of January 1, 2013		531,461		50,503		558,478			105,221		18,226			(1,515	)		570,878			1,833,252			60,863			1,894,115
Profit for the period		-		-		-			-		-			-			46,061			46,061			(956	)		45,105
Other comprehensive income		-		-		-			-		3,467			136			-			3,603			19			3,622

Total comprehensive income		-		-		-			-		3,467			136			46,061			49,664			(937	)		48,727

Appropriation of legal reserve		-		-		-			4,441		-			-			(4,441	)		-			-			-
Contribution of non-controlling interests, note 1		-		-		-			-		-			-			-			-			1,152			1,152
Others adjustments of non-controlling interests, note 1		-		-		(1,355	)		-		-			-			-			(1,355	)		1,355			-


Balance as of March 31, 2013		531,461		50,503		557,123			109,662		21,693			(1,379	)		612,498			1,881,561			62,433			1,943,994



Balance as of January 1, 2014		531,461		50,503		556,294			119,833		19,045			-			653,704			1,930,840			78,630			2,009,470
Profit for the period		-		-		-			-		-			-			40,593			40,593			(790	)		39,803
Other comprehensive income		-		-		-			-		(4,887	)		-			-			(4,887	)		-			(4,887	)

Total comprehensive income		-		-		-			-		(4,887	)		-			40,593			35,706			(790	)		34,916

Appropriation of legal reserve		-		-		-			3,627		-			-			(3,627	)		-			-			-
Contribution of non-controlling interests, note 1		-		-		-			-		-			-			-			-			819			819
Other adjustments of non-controlling interests, note 1		-		-		(2,232	)		-		-			-			-			(2,232	)		2,232			-


Balance as of March 31, 2014		531,461		50,503		554,062			123,460		14,158			-			690,670			1,964,314			80,891			2,045,205

Cementos Pacasmayo S.A.A. and Subsidiaries

Interim condensed consolidated statements of cash flows

For the three-month periods ended March 31, 2014 and March 31, 2013 (both unaudited)

	For the three-month period ended March 31,
	2014			2013
	S/.(000)			S/.(000)

Operating activities
Profit before income tax		57,708			65,759
Non-cash adjustments to reconcile profit before income tax to net cash flows
Depreciation and amortization		15,432			12,267
Finance costs		9,754			7,676
Unrealized exchange difference related to monetary transactions		2,335			-
Long-term incentive plan		1,626			1,625
Amortization of costs of issuance of senior notes		411			-
Net loss on disposal of property, plant and equipment		313			-
Unwinding of discount of long-term incentive plan		169			-
Finance income		(4,629	)		(7,505	)
Recovery of impairment of inventories		(5	)		(791	)
Other operating, net		(880	)		256

Working capital adjustments
Increase in trade and other receivables		(18,028	)		(1,416	)
Increase in prepayments		(9,559	)		(7,519	)
Decrease in inventories		11,261			8,355
Decrease in trade and other payables		(17,389	)		(36,947	)
		48,519			41,760

Interests received		9,196			1,287
Interests paid		(21,197	)		(1,443	)
Income tax paid		(21,301	)		(18,640	)

Net cash flows provided from operating activities		15,217			22,964

Interim condensed consolidated statements of cash flows (continued)

	For the three-month period ended March 31,
	2014			2013
	S/.(000)			S/.(000)

Investing activities
Purchase of property, plant and equipment		(117,831	)		(57,719	)
Purchase of evaluation and exploration assets		(230	)		(491	)
Proceeds from sale of property, plant and equipment		91			-
Increase in time deposits with original maturities greater than 90 days		-			(500,000	)
Purchase of other assets		-			(51	)
Net cash flows used in investing activities		(117,970	)		(558,261	)

Financing activities
Proceeds from issuance of senior notes		-			762,067
Proceeds from bank overdraft		-			19,914
Contribution of non-controlling interests		819			1,152
Payment of borrowings		-			(202,200	)
Payment of bank overdraft		-			(13,255	)
Dividends paid		(96	)		(157	)
Net cash flows provided from financing activities		723			567,521

Net (decrease) increase in cash and cash equivalents		(102,030	)		32,224
Net foreign exchange difference		1,564			(99	)
Cash and cash equivalents at the beginning of the period		976,952			69,835

Cash and cash equivalents at the end of the period		876,486			101,960

Cementos Pacasmayo S.A.A. and Subsidiaries

Notes to interim condensed consolidated financial statements

As of March 31, 2014 and 2013 (both unaudited), and December 31, 2013 (audited)

1.	Economic activity

Cementos Pacasmayo S.A.A. (hereinafter "the Company") was incorporated in 1957 and, under the Peruvian General Corporation Law, is an open stock corporation, with publicly traded shares. The Company is a subsidiary of Inversiones ASPI S.A. (previously known as Inversiones Pacasmayo S.A. or IPSA), which holds 50.94% of the Company’s common and investment shares and 52.63% of its common shares as of March 31, 2014 and December 31, 2013. The registered office is located at Calle La Colonia No.150, Urbanizacion El Vivero, Santiago de Surco, Lima, Peru.

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

The interim condensed consolidated financial statements of the Company and its subsidiaries (hereinafter “the Group”) as of March 31, 2014 and for the three-month period then ended, were authorized for issuance by the Management of the Company on April 28, 2014.

As of March 31, 2014, there were no changes in the main activities of the subsidiaries incorporated in the interim condensed consolidated financial statements of the Group, in relation to December 31, 2013.

Contributions of non-controlling interest -

Salmueras Sudamericanas S.A.

In order to finance the Salmueras project, the General Shareholders´Meeting of the subsidiary held on March 6, 2014, agreed a contribution of S/.7,100,000. During the three-month period ended March 31, 2014 the contribution made by Quimpac S.A. amounts to S/.819,000 (S/.1,152,000 during the three-months period ended March 31,2013).

All these contributions are partial payments of the capital commitment assumed by the Company and Quimpac S.A. for the brine project up to US$100,000,000 and US$14,000,000, respectively, to maintain its interests in this subsidiary.

The effect of the difference on capital contributions and interests acquired by each shareholder amounted to S/.963,000 during the three-month period ended March 31, 2014, and these were recognized as a debit in additional paid-in capital and a credit in non-controlling interest (S/.1,355,000 as of March 31, 2013).

Notes to interim condensed consolidated financial statements (continued)

Fosfatos del Pacifico S.A.

Fosfatos del Pacifico S.A. is the owner of a brick plant which is in a commissioning period. Regarding this project, Cementos Pacasmayo S.A.A. committed to assume the total capital expenditure than brick plant needs to achieve its nominal capacity. This commitment was formalized in the General Shareholders´ Meeting held on July 31, 2013 when it was agreed a contribution up to US$3,300,000 from Cementos Pacasmayo S.A.A. which will not include a change in the percentage of interests of the current shareholders´ structure. The effect of the difference on capital contributions and interests acquired by each shareholder amounted to S/.1,269,000 during the three-month period ended March 31, 2014, and it was recognized as a debit in additional paid-in capital and a credit in non-controlling interest.

2.	Basis of preparation and changes to the Group’s accounting policies

2.1

Basis of preparation -

The interim condensed consolidated financial statements of the Company have been prepared in accordance with IAS 34 Interim Financial Reporting as issued by the International Accounting Standards Board (IASB).

The interim condensed consolidated financial statements have been prepared on a historical cost basis, except for available-for-sale financial investments that have been measured at fair value. The interim condensed consolidated financial statements are presented in nuevos soles and all values are rounded to the nearest thousand (S/.000), except as otherwise indicated.

The interim condensed consolidated financial statements do not include all the information and disclosure required in the annual financial statements, and should be read in conjunction with Company’s annual consolidated financial statements as of December 31, 2013.

New standards, interpretations and amendments

The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group´s annual financial statements for the year ended December 31, 2013.

Several new standards and amendments apply for the first time in 2014. However, they do not impact the interim condensed financial statements or the annual consolidated financial statements of the Group.

The nature and impact of each new standard or amendment is described below:

Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27)

These amendments provide an exception to the consolidation requirement for entities that meet the definition of an investment entity under IFRS 10 Consolidated Financial Statements. The exception to consolidation requires investment entities to account for subsidiaries at fair value through profit or loss. These amendments have no impact to the Group, since none of the entities in the Group qualifies to be an investment entity under IFRS 10.

Offsetting Financial Assets and Financial Liabilities — Amendments to IAS 32

These amendments clarify the meaning of ’currently has a legally enforceable right to set-off’ and the criteria for non-simultaneous settlement mechanisms of clearing houses to qualify for offsetting. These amendments have no impact on the Group.

Notes to interim condensed consolidated financial statements (continued)

Novation of Derivatives and Continuation of Hedge Accounting – Amendments to IAS 39 These amendments provide relief from discontinuing hedge accounting when novation of a derivative designated as a hedging instrument meets certain criteria. These amendments have no impact to the Group as the Group has not novated its derivatives during the current or prior periods.

IFRIC 21 Levies

IFRIC 21 is effective for annual periods beginning on or after 1 January 2014 and is applied retrospectively. It is applicable to all levies imposed by governments under legislation, other than outflows that are within the scope of other standards (e.g., IAS 12 Income Taxes) and fines or other penalties for breaches of legislation. The interpretation clarifies that an entity recognises a liability for a levy no earlier than when the activity that triggers payment, as identified by the relevant legislation, occurs. It also clarifies that a levy liability is accrued progressively only if the activity that triggers payment occurs over a period of time, in accordance with the relevant legislation. For a levy that is triggered upon reaching a minimum threshold, no liability is recognised before the specified minimum threshold is reached. The interpretation requires these same principles to be applied in interim condensed consolidated financial statements. The Group does not expect that IFRIC 21 will have material financial impact in future financial statements.

The Company has not yet early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.

2.2

Basis of consolidation -

The interim condensed consolidated financial statements comprise the financial statements of the Company and its subsidiaries as of March 31, 2014 and 2013.

2.3

Seasonality -

Seasonality is not relevant for the activities of the Company.

Notes to interim condensed consolidated financial statements (continued)

3.	Cash and term deposits

(a)

This caption consists of the following:

	As of March 31, 2014		As of December 31, 2013		As of March 31, 2013
	S/.(000)		S/.(000)		S/.(000)

Cash on hand		1,810		1,788		2,003
Cash at banks (b)		765,676		446,244		46,857
Short-term deposits (c)		109,000		528,920		53,100
Cash balances included in statements of cash flows		876,486		976,952		101,960
Time deposits with original maturity greater than 90 days (c)		-		-		903,950

		876,486		976,952		1,005,910

(b)

Cash at banks is denominated in local and foreign currencies, is deposited in domestic and foreign banks and is freely available. The demand deposits interest yield is based on daily bank deposit rates.

(c)

As of March 31, 2014, December 31, 2013 and March 31, 2013, the short-term deposits held in domestic banks were freely available and earned interest at the respective short-term market rates and have original maturities of less than three months.

As of March 31, 2014, these short-term deposits include approximately S/.69,000,000 related to the proceeds obtained on February 2013 through the issuance of Senior Notes.

4.	Inventories

During the three-month periods ended March 31, 2014 and 2013, the Company reversed the provision for inventory carried at net realizable value for S/.5,000 and S/.791,000, respectively.

Notes to interim condensed consolidated financial statements (continued)

5.	Property, plant and equipment

During the three-month periods ended March 31, 2014, the additions of the Company amounted to approximately S/.117,831,000 (S/.57,719,000 during the three-month period ended March 31, 2013), which are mainly related to the construction of a cement plant located in Piura and commissioning of a diatomites brick plant in the North of Peru.

In connection with the construction of the cement plant in Piura, the borrowings costs capitalized during the three-month period ended as of March 31, 2014 were approximately S/.1,344,000. The rate used to determine the amount of borrowings costs eligible for capitalization was 4.50%, which is the effective rate of the specific borrowing. The amount of borrowing costs eligible for capitalization include the actual borrowing costs incurred on the specific loan (Senior Notes), less the income obtained from short- term deposits related to this specific borrowing.

Dividends

As of March 31, 2014, dividends payable amounted to S/.4,458,000 (S/.4,554,000 as of December 31, 2013).

7.	Provisions

As of March 31, 2014 and December 31, 2013 this caption mainly includes workers’ profit sharing, long-term incentive plan and others minor. The decrease in this liability is mainly explained for the payment of the workers’ profit sharing made in the first quarter of 2014.

8.	Income tax

The Company calculates the period income tax expense using the tax rate that would be applicable to expected total annual earnings.

The major components of the income tax expense in the interim condensed consolidated statement of profit or loss and statement of other comprehensive income are:

	For the three-month periods ended March 31
	2014			2013
	S/.(000)			S/.(000)

Current income tax expense		(20,070	)		(17,724	)
Deferred income tax expense		2,165			(2,930	)
Income tax expense recognized in the consolidated statements of profit or loss		(17,905	)		(20,654	)
Income tax recognized in other comprehensive income		2,093			(1,483	)

Total income tax		(15,812	)		(22,137	)

Notes to interim condensed consolidated financial statements (continued)

9.	Related party transactions

During the three months ended March 31, 2014 and 2013, the Company carried out the following transactions with Inversiones ASPI S.A. and its affiliates:

	For the three-month periods ended March 31,
	2014		2013
	S/.(000)		S/.(000)

Income
Income from land and offices rental services		120		109
Fees for management and administrative services		93		129

Expense
Security services		307		12

As a result of these and other transactions, the Company had the following rights and obligations with Inversiones ASPI S.A. and its affiliates as of March 31, 2014 and December 31, 2013:

	March 31, 2014				December 31, 2013
	Accounts receivable		Accounts payable		Accounts receivable		Accounts payable
	S/.(000)		S/.(000)		S/.(000)		S/.(000)

Inversiones ASPI S.A.		68		14		62		14
Other		253		-		347		265

		321		14		409		279

The sales to and purchases from related parties are made on terms equivalent to those that prevail in arm’s length transactions. Outstanding balances are unsecured and interest free. There have been no guarantees provided or received from any related party receivables or payables. For the periods ended March 31, 2014 and December 31, 2013, the Company has not recorded any impairment of receivables from related parties. This assessment is undertaken each financial year by examining the financial position of the related party.

Compensation of key management personnel of the Group -

The expenses for profit-sharing, compensation and other concepts for members of the Board of Directors and the management payroll amounted to S/.6,623,000 , during the three-month period ended March 31, 2014, (S/.7,708,000 during the three-months ended March 31, 2013). The Company does not compensate management with post-employment or contract termination benefits or share-based payments.

Notes to interim condensed consolidated financial statements (continued)

10.	Earnings per share (EPS)

Basic earnings per share amounts are calculated by dividing net profit for the three-month periods ended March 31, 2014 and 2013 attributable to common shares and investment shares of the parent by the weighted average number of common and investment shares outstanding during those periods.

The Group has no dilutive potential common shares as of March 31, 2014 and 2013.

Calculation of the weighted average number of shares and the basic and diluted earnings per share is presented below:

	For the three-month periods ended March 31
	2014		2013
	S/.(000)		S/.(000)
Numerator
Net profit attributable to ordinary equity holders		40,593		46,061

	For the three-month periods ended March 31
	2014		2013
	Thousands		Thousands

Denominator
Weighted average number of common and investment shares		581,964		581,964

	For the three-month periods ended March 31
	2014		2013
	S/.		S/.

Basic and diluted earnings for common and investment shares		0.07		0.08

There have been no other transactions involving common shares or potential common shares between the reporting date and the date of completion of these interim condensed consolidated financial statements.

Notes to interim condensed consolidated financial statements (continued)

11.	Financial instruments

(a)

Financial asset and liabilities -

Financial assets -

	As of March 31, 2014		As of December 31, 2013
	S/.(000)		S/.(000)

Available-for-sale financial investments at fair value through OCI
Quoted equity shares		780		967
Unquoted equity shares		28,298		35,091
Total available-for-sale investments		29,078		36,058

Total financial assets at fair value		29,078		36,058

Except available-for-sale investments, all financial assets which include cash and term deposits and trade and other receivables, are classified in the category of loans and receivables, are held to maturity and generate fixed or variable interest income for the Group. The carrying value may be affected by changes in the credit risk of the counterparties.

Financial liabilities -

All financial liabilities of the Group including trade and other payables, bank overdraft and interest-bearing loans and borrowings are classified as loans and borrowings and are carried at amortized cost.

(b)

Fair values –

Set out below is a comparison of the carrying amounts and fair values of financial instruments as of March 31, 2014 and December 31, 2013:

	Carrying amount				Fair value
	2014		2013		2014		2013
	S/.(000)		S/.(000)		S/.(000)		S/.(000)

Financial assets
Available-for- sale financial investments		29,078		36,058		29,078		36,058
Total financial assets - non-current		29,078		36,058		29,078		36,058

Financial liabilities
Financial obligations:
Senior Notes/ Loans at fixed rates		828,333		824,022		792,085		738,527
Total financial liabilities		828,333		824,022		792,085		738,527

Management assessed that cash and term deposits, trade receivables, trade payables and other current liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments.

Notes to interim condensed consolidated financial statements (continued)

The following methods and assumptions were used to estimate the fair values:

Fair values of interest-bearing loans and borrowings are estimated by using discounting future cash flows method using discount rates that reflect the issuer´s borrowing rate as at the end of the reporting period. The own non-performance risk as of March 31, 2014 and December 31, 2013, was assessed to be insignificant.

Fair value of available-for-sale investments is derived from quoted market prices in active markets.

Fair value of unquoted available-for-sale financial investments is estimated using a technique for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly.

(c)

Fair value measurement -

All financial instruments for which fair value is recognised or disclosed are categorised within the fair value hierarchy, based on the lowest level input that is significant to the fair value measurement as a whole, as follows:

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 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.

Notes to interim condensed consolidated financial statements (continued)

The following table provides the fair value measurement hierarchy of the Group´s assets and liabilities.

Quantitative disclosures fair value measurement hierarchy for assets and liabilities as of March 31, 2014 –

	Fair value measurement using
	Total		Quoted prices in active markets (Level 1)		Significant observable inputs (Level 2)
	S/.(000)		S/.(000)		S/.(000)
Assets measured at fair value:
Available-for-sale financial investments:
Quoted equity shares		780		780		-
Unquoted equity shares		28,298		-		28,298

Total financial assets		29,078		780		28,298
Liabilities for which fair values are disclosed:
Senior Notes		792,085		-		792,085

Total financial liabilities		792,085		-		792,085

During the reporting period ending March 31, 2014, there were no transfers between Levels. There were no assets or liabilities measured or disclosed at fair value using significant unobservable inputs (Level 3).

Fair value hierarchy for financial instruments measured at fair value as of December 31, 2013

Quantitative disclosures fair value measurement hierarchy for assets and liabilities as of December 31, 2013 –

	Fair value measurement using
	Total		Quoted prices in active markets (Level 1)		Significant observable inputs (Level 2)
	S/.(000)		S/.(000)		S/.(000)
Assets measured at fair value:
Available-for-sale financial investments:
Quoted equity shares		967		967		-
Unquoted equity shares		35,091		-		35,091

Total financial assets		36,058		967		35,091
Liabilities for which fair values are disclosed:
Senior Notes		738,527		-		738,527

Total financial liabilities		738,527		-		738,527

Notes to interim condensed consolidated financial statements (continued)

There have been no transfers between Levels during the period ending December 31, 2013. There were no assets or liabilities measured or disclosed at fair value using significant unobservable inputs

(Level 3).

Risk management activities-

As a result of its activities, the Company is exposed to foreign currency risk. The three month period ended March 31, 2014 and the year ended December 31, 2013 experienced significant volatility in the US Dollar exchange rate against the Nuevo Sol, resulting in significant net losses mainly related to the borrowings of the Company denominated in US dollars. The net losses were recorded in the consolidated statement of profit or loss in the caption “Net loss of exchange difference”.

As of March 31, 2014 and December 31, 2013, the Company had no financial instruments to hedge its foreign exchange risk, interest rates or market price (purchase price of coal) fluctuations.

12.	Commitments and contingencies Operating lease commitments – Group as lessor

As of March 31, 2014, the Company, as lessor, has a land lease with Compañía Minera Ares S.A.C. a related party of Inversiones ASPI S.A. This lease is annually renewable and for the three-month period ended March 31, 2014 provided an income of S/.116,000 (S/.109,000 for the three-months ended March 31, 2013).

Operating lease commitments – Group as lessee

In May 2012, the Company signed a contract with a third party to lease a land located in the north of Peru. The lease has a term of maturity of 30 years and accrued an annual rent of US$200,000 from 2012 to 2015, and from 2016 to the maturity date of the contract the rent will be equivalent to 0.64% of the sales of phosphoric rock, but may not be less than US$1,600,000 annually. The expense for the three-month period ended as of March 31, 2014 amounted to S/.140,000 and it was recognized in the administrative expenses caption in the consolidated statement of profit or loss.

Capital commitments

As of March 31, 2014, the Group had the following main commitments:

Construction of a cement plant located in Piura by S/.144,765,000.

Commissioning of a diatomites brick plant in the North of Peru by S/.1,771,000.

Development activities of phosphoric rock by S/.4,711,000.

Commitment for development of brine Project up to US$100,000,000, see note 1. In connection with this commitment, as of March 31, 2014 the Group has made contributions for US$16,761,000.

Other commitments

Commitment of future sales of phosphoric rock to Mitsubishi Corporation when the project starts production.

The Group maintains long-term electricity supply agreements which billings are determined taking into consideration consumption of electricity and other market variables.

Since November 2013, the Group has a five-year period natural gas supply agreement for its diatomite brick plant, which billings are determined taking into account consumption of natural gas and other market variables. Also, the volumes are subject to take or pay clauses that establish minimum levels of natural gas consumption. As of March 31, 2014, the Group has accomplished the minimum requirements established in this agreement.

Notes to interim condensed consolidated financial statements (continued)

Environmental matters

The Company’s exploration and exploitation activities are subject to environmental protection standards. Such standards are the same as those disclosed on the consolidated financial statement as of December 31, 2013 and the only change on this subject in the interim consolidated financial statements as of March 31, 2014 in comparison to the consolidated financial statement as of December 31, 2013, is the approval by the Peruvian authorities as of March 2014, of the EIS (Environmental Impact Study) presented by the Group for its Phosphates project.

Tax situation

During the four years following the year tax returns are filed, the tax authorities have the power to review and, as applicable, correct the income tax computed by each individual company. The income tax and value-added tax returns for the following years are open for review by the tax authorities.

	Years open to review by Tax Authorities
Entity	Income tax	Value-added tax

Cementos Pacasmayo S.A.A.	2011-2014	2009-2014
Cementos Selva S.A.	2009-2014	2009/2011-2014
Distribuidora Norte Pacasmayo S.R.L.	2010-2014	2009-2014
Empresa de Transmisión Guadalupe S.A.C.	2009-2014	2009-2014
Fosfatos del Pacífico S.A.	2009-2014	2009-2014
Salmueras Sudamericanas S.A.	2011-2014	2011-2014
Calizas del Norte S.A.C.	2014	2013-2014
Corianta S.A. (*)	2009-2011	(**)
Tinku Generacion S.A.C. (*)	2009-2011	2009-2011

(*)

These subsidiaries were merged with the Company in December 2011.

(**)

The period open to review by tax authorities for this entity are from January to May 2010 and from September to December 2011.

Due to possible interpretations that the tax authorities may give to legislation in effect, it is not possible to determine whether any of the tax audits that may be performed will result in increased liabilities for the Company. For that reason, tax or surcharge that could arise from future tax audits would be applied to the income during the period in which it is determined. However, in management’s opinion, any possible additional payment of taxes would not have a material effect on the interim condensed consolidated financial statements as of March 31, 2014 and the consolidated financial statements as of December 31, 2013.

Notes to interim condensed consolidated financial statements (continued)

Legal claim contingency

As of March 31, 2014, some third parties have commenced actions against the Group in relation with its operations in the amount of S/.2,792,000. Of this total amount, S/.494,000 corresponds to labor claims from former employees and S/.2,298,000 is related to the tax assessments received from the tax administration corresponding to 2009 tax period, which was reviewed by the tax authority during 2012.

Management expects that these claims will be resolved within the next five years based on prior experience; however, the Company cannot assure that these claims will be resolved within this period because the authorities do not have a maximum term to resolve cases. The Group has been advised by its legal counsel that it is only possible, but not probable, that these actions will succeed. Accordingly, no provision for any liability has been made in these interim condensed consolidated financial statements.

Mining royalty

Third parties

The subsidiary Fosfatos del Pacífico S.A., signed an agreement with the Peruvian Government, Fundación Comunal San Martin de Sechura and Activos Mineros S.A.C. related to the use of the Bayovar concession, which contains phosphoric rock and diatomites. As part of this agreement, the Subsidiary Fosfatos del Pacífico S.A. is required to pay to Fundación Comunal San Martin de Sechura and Activos Mineros S.A.C. an equivalent amount to US$3 for each metric tons of diatomite extracted. The annual royalty may not be less than the equivalent to 40,000 metric tons during the second year of production and 80,000 metric tons since the third year of production. The related royalty expense amounted to S/.172,000 for the three-month period ended March 31, 2014 (S/.160,000 for the three-month period ended March 31, 2013).

In December 2013, the Company signed an agreement with a third party, related to the use of the Bayovar concession, to carry out other non-metallic mining activities. This agreement has a term of maturity of 30 years, with fixed annual payments of US$600,000 for the first three years and variables to the rest of the contract. As of the date of this report the Group has paid US$300,000.

Interest-bearing loans and borrowings covenants

Senior Notes

In February 2013, the Company issued Senior Notes by US$300,000,000 with interest rate of 4.50% and maturity on 2023. As of March 31, 2014, the Senior Notes accrued interest for S/.8,805,000.

In the case that the Company and Guarantee Subsidiaries requires to issue debt or equity instruments or merges with another company or dispose or rent significant assets, the Senior Notes will activate the following covenants, calculated on the Company and Guarantee Subsidiaries annual consolidated financial statements:

The fixed charge covenant ratio would be at least 2.5 to 1.

The consolidated debt-to-EBITDA ratio would be no greater than 3.5 to 1.

As of March 31, 2014, the Company has not entered in any of the operations mentioned above.

Notes to interim condensed consolidated financial statements (continued)

13.	Segment information For management purposes, the Group is organized into business units based on their products and activities, and have three reportable segments as follows:

Production and marketing of cement, concrete and blocks in the northern region of Peru.

Sale of construction supplies in the northern region of Peru.

Production and marketing of quicklime in the northern region of Peru.

No operating segments have been aggregated to form the above reportable operating segments.

Management monitors the profit before income tax of each business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on profit before income tax and is measured consistently with profit before income tax in the interim condensed consolidated financial statements.

Transfer prices between operating segments are on an arm’s length basis in a similar manner to transactions with third parties.

	Revenues from external customers		Revenues from inter segments			Total revenue			Gross margin			Profit before income tax			Income tax			Profit for the period			Segment assets		Other assets		Total assets		Segment liabilities
	S/.(000)		S/.(000)			S/.(000)			S/.(000)			S/.(000)			S/.(000)			S/.(000)			S/.(000)		S/.(000)		S/.(000)		S/.(000)

2014
Cement, concrete and blocks		264,003		-			264,003			120,459			63,660			(19,752	)		43,908			2,602,401		-		2,602,401		1,044,366
Construction supplies		25,152		-			25,152			885			73			(23	)		50			26,222		-		26,222		29,860
Quicklime		10,791		-			10,791			500			(2,068	)		642			(1,426	)		133,884		-		133,884		-
Other		136		-			136			(156	)		(3,957	)		1,228			(2,729	)		331,544		29,078		360,622		3,698

Consolidated		300,082		-			300,082			121,688			57,708			(17,905	)		39,803			3,094,051		29,078		3,123,129		1,077,924

2013
Cement, concrete and blocks		257,083		1			257,084			118,608			69,486			(21,825	)		47,661			2,596,649		-		2,596,649		1,051,566
Construction supplies		24,372		48			24,420			718			48			(15	)		33			21,773		-		21,773		45,839
Quicklime		9,501		-			9,501			1,730			(197	)		62			(135	)		134,924		-		134,924		-
Other		371		581			952			(412	)		(3,578	)		1,124			(2,454	)		325,133		36,058		361,191		7,662
Adjustments and eliminations		-		(630	)		(630	)		-			-			-			-			-		-		-		-

Consolidated		291,327		-			291,327			120,644			65,759			(20,654	)		45,105			3,078,479		36,058		3,114,537		1,105,067

Notes to interim condensed consolidated financial statements (continued)

During the three-month period ended March 31, 2014 there were no inter-segment revenues. Inter-segment revenues of S/.630,000 during the three-month period ended March 31, 2013 were eliminated on consolidation.

The “other” column includes activities that do not meet the threshold for disclosure under IFRS 8.13 and represent non-material operations of the Group (including phosphates, brine, zinc and others).

Other assets

As of March 31, 2014 corresponds to the available-for-sale investments caption for approximately S/.29,078,000 (S/.36,058,000 as of December 31, 2013) which is not allocated to any segment.

Geographic information

All revenues are from Peruvian clients.

As of March 31, 2014 and December 31, 2013, all non-current assets are located in Peru.

			For the three-month periods ended March 31,
			_______________________________
	Note		2014			2013
				S/.(000)			S/.(000)

Sales of goods		13		300,082			291,327
Cost of sales				(178,394	)		(170,683	)
Gross profit				121,688			120,644

Operating income (expenses)
Administrative expenses				(48,995	)		(43,751	)
Selling and distribution expenses				(7,748	)		(7,489	)
Other operating income (expenses), net				287			(365	)
Total operating expenses , net				(56,456	)		(51,605	)
Operating profit				65,232			69,039



Other income (expenses)
Finance income				4,629			7,505
Finance costs				(9,754	)		(7,676	)
Net loss from exchange difference				(2,399	)		(3,109	)
Total other expenses, net				(7,524	)		(3,280	)
Profit before income tax				57,708			65,759

Income tax expense		8		(17,905	)		(20,654	)

Profit for the period				39,803			45,105

Attributable to:
Equity holders of the parent				40,593			46,061
Non-controlling interests				(790	)		(956	)

				39,803			45,105

Earnings per share		10
Basic and diluted profit for the period attributable to equity holders of common shares and investment shares of the parent (S/. per share)				0.07			0.08