IN CONSTRUCTION MATERIALS

Transcription

2 012 A N N UA L R E P O R T
PO N I E NTE 134 # 719,
C O LO N I A I N D U S T R I A L VA L L E J O
0 2 5 0 0 M É X I C O , D . F.
STRENGTH
I N C O N S T R U C T I O N M AT E R I A L S
COMPANY PROFILE
C O R P O R AT E O F F I C E S
Poniente 134 # 719,
Colonia Industrial Vallejo
02500 México, D.F.
Mexico
Elementia is a leading company in the
manufacture and distribution of copper,
fiber cement, concrete, polystyrene, and
polypropylene products. Since 2013, it
has also included our cement division,
which serves the industrial sector, construction and infrastructure, in Mexico,
Latin America, the United States, and
Europe. We offer a wide range of products to more than 6 thousand customers, 2,500 of whom are independent
distributors who integrate an extensive
network of sales points into our distribution pipeline. All of these are customers
of the Group through four business sectors: Metals, Construsystems, Plastics,
and Cement. We have 22 plants, located
in Mexico, Colombia, Ecuador, Bolivia,
Costa Rica, El Salvador, Honduras, and
Peru. We export our products to more
than 40 countries through a network of
10 distribution centers.
VISION
To be the leader in developing
integrated solutions in the materials
sector for construction and general
industry, generating economic,
social, and environmental value for
our stakeholders.
I N V E S T O R R E L AT I O N S
Juan Francisco Sanchez Kramer
Director of Investor Relations
Tel. +52 (55) 5279 8300
[email protected]
MISSION
To create integrated solutions
for the construction sector and
general industry by using efficiency
TA B L E O F C O N T E N T S
Financial highlights
I N D E P E N D E NT AU D ITO R
Galaz, Yamazaki, Ruiz Urquiza, S.C.
Member of Deloitte Touche Tohmatsu
and innovation to develop high2
quality products that surpass
Highlights3
official standards. Our purpose
Message to Stockholders
4
is to generate value for our
Elementia at a glance
6
stockholders, customers, vendors,
Global presence
7
employees, and the Elementia
Construsystems 8
community.
Metals10
VALUES
Plastics 12
Cement 14
Sustainability 16
• Integrity
Corporate governance 17
• Commitment
Board of Directors
18
• Innovation
Officers 18
• Results-oriented
• Respect
Analysis and discussion of results 19
• Safety
Financial statements • Teamwork
21
design: signi.com.mx
Strength is the overriding concept through which
Elementia and its four business divisions achieve
their goals: the strength of our leading brands in
our markets—Mexalit, Eureka, Eternit, Nacobre,
Maxitile, Plycem, Cobrecel, and more; the strength
of our production capacity—22 plants in Latin
America; the strength of our distribution capacity—
we export to more than 40 countries; and most
important, the strength of our people.
FINANCIAL
HIGHLIGHTS
Elementia, S.A. de C.V. – Figures in millions of Mexican pesos at December 31, 2012 and 2011
2011
Chg. %
13,506
14,505
(7)
3,233
3,042
6
315
(305)
NA
1,877
1,748
7
22,008
22,417
(2)
2012
Net sales
Gross profit
Consolidated net profit (loss)
Operating cash flow (EBITDA)
Total assets
1,762
3,540
(50)
Accounts receivable trade
1,826
2,375
(23)
Inventories
2,471
2,186
13
Other liquid assets
1,701
1,145
49
Long-term assets
14,248
13,172
8
11,019
13,137
(16)
Current liabilities
3,520
4,905
(28)
Long-term liabilities
7,499
8,232
(9)
10,989
9,280
18
Minority interest
22
31
(30)
Majority interest
10,967
9,249
19
1,748
1,193
09
10
2
08
09
10
11
08 08 08
12
32
3,582
212
630
867
1,271
13,506
14,505
12,698
11,072
Total stockholders’ equity
1,244
Total liabilities
1,877
Cash and short-term investments
1,366
09
10
11
12
08
11
12
SALES
O P E R AT I N G I N C O M E
EBITDA
in millions of Mexican pesos
RELEVANT
EVENTS
$13,506
HIGHLIGHTS
At Elementia’s ordinary General
Stockholders’ Meetings held on July
13 and December 6, 2012, it was
agreed to increase the variable portion of the company’s share capital to
MXN1.166 billion.
On March 21, 2012, we signed a contract for the sale of the shares representing the share capital of Almexa
Aluminio, S.A. de C.V., and Aluminio
Holdings, S.A. de C.V., to Industria Mexicana de Aluminio, S.A. de C.V.
2012
2011
2010
2009
s
quire
c
a
a
enti
ora
Elem Triturad
nd
rte a
o
f
a
r
Fib
$14,505
ires
ia acqu l
t
n
e
m
Ele
o ce
and Frig
e
r
b
o
c
Na
$11,072
$12,698
$3,584
2008
2007
Mexalit acquires Plycem
$3,309
2006
Mexalit acquires Duralit
$2,714
SUBSEQUENT EVENTS
On January 8, 2012, a contribution
agreement was signed with the French
company Lafarge; this agreement
concerns an association between
Elementia’s cement division and Lafarge’s cement manufacturer in Mexico.
Elementia will hold the majority interest, and we hope to consolidate both
operations during the second quarter
of 2013 after receiving authorization
from the federal competition commission.
2005
2004
2003
2002
2001
2000
1999
MILESTONES
Sales in millions of Mexican pesos
$2,036
Mexalit a
cquires T
echolit
$1,760
Mexal
it ac
Eterni quires
t Ecua
dor
$1,565
Mex
alit a
cqui
res E
urek
a
Kal
uz a
and cquire
Ete s M
rnit exa
Col lit
omb
ia
$1,265
$1,054
$1,021
$612
3
MESSAGE TO OUR
STOCKHOLDERS
DEAR STOCKHOLDERS:
The year 2012 was one of challenges
for Elementia, during which we worked to
strengthen and consolidate our businesses.
The process included shedding those enterprises that were not generating the flows or
the profitability that Elementia required, as
well as building and implementing our SAP
information and control platform, a change
that is already generating results. In this
year, we also focused our efforts on achieving triple-bottom-line (social, environmental,
and economic) performance. 4
The most noteworthy figures at the close of
2012 are:
2011
2012
14,505
13,506
EBITDA
1,748
1,877
Net debt
2,847
4,620
1.63
2.46
7,566
5,883
Sales
Net debt to EBITDA
(times)
Employees
Financial figures in millions of Mexican pesos
The figures show a 7% reduction in sales
compared to the previous year. The primary cause was a drop in the price of metals
(copper, zinc, and nickel). Another factor
was the rescheduling of infrastructure and
construction projects by the Mexican and
Colombian governments. Those countries
in which we do business are expected to
experience growth in 2013, however, which
will come mainly in the construction sector, the driving force for growth in developing economies.
The operating cash flow (EBITDA) improved
7.3% over 2011, reaching MXN1.877 billion.
Sales margins also improved, climbing from
12.1% in 2011 to 13.9% in 2012.
At Elementia, we have set out on the path
toward integration, resulting in products with
greater added value and growth. A prime
example of this is the construction of our
cement factory in Hidalgo, Mexico, which will
have a production capacity of 1 million tons
per year. This factory began operations in
the first quarter of 2013, with an acceptable
reception in the construction and DIY
markets. Starting in the second half of 2013,
the cement division will also benefit from the
association with Lafarge, one of the most
important cement producers in the world.
I would like to thank all of the people who
work at Elementia for their commitment and
enormous dedication. I would also like to
thank our stockholders, customers, and vendors, whose support has been an important part of our growth and success. In spite
of difficult economic times, we have had the
strength to deliver positive results; a proof of
our enormous effort, dedication, and commitment at Elementia.
Francisco Javier del Valle Perochena
Chairman of the Board of Directors
5
ELEMENTIA
AT A GLANCE
Fiber cement
CONSTRUSYSTEMS
M E TA L S
PLASTICS
Copper
laminates,
alloys, copper
tubing
Automotive industry,
electrical terminals,
cartridges, coins, hardware,
construction, cable
cladding, flat stock and
connections, refrigeration,
soldering
Thermoforming and
laminated products,
tanks.
Drinkware, cutlery,
water tanks, industrial
containers, printed
containers, food
industry, translucent
laminates
Cement
Construction and DIY
industry
PRODUCTS
A P P L I C AT I O N
CEMENT
6
Roofing tiles, panels,
laminated roofs, planks,
finishing materials, septic
tanks, cisterns
GLOBAL
PRESENCE
Mexico ·
El Salvador ·
·
Honduras
CONSTRUSYSTEMS
Costa Rica ·
MEXICO
·
Nuevo Laredo
Guadalajara
Ecuador ·
Santa Clara
Villahermosa
Colombia
METALS
EL SALVADOR
MEXICO
HONDURAS
Copper Division
COSTA RICA
San Luis Potosí
COLOMBIA
Celaya
Bogotá
Toluca
Barranquilla
Vallejo
·
Peru
·
Bolivia
Cali
ECUADOR
PLASTICS
BOLIVIA
MEXICO
Construction Division
CEMENT
Cuautitlán Izcalli “Cuamatla”
MEXICO
Cuautitlán Izcalli “La Luz”
Hidalgo
PERU
7
CONSTRUSYSTEMS
Accumulated sales in 2012 in the Construsystems division totaled MXN4.9315 billion, which equals 36.5% of Elementia’s total sales and an operating cash flow (EBITDA) of
MXN1.0115 billion, 53.9% of the consolidated total.
MAR K ETS
The Construsystems division consists of two regional
groups: Mexalit Industries and Maxitile Inc. (USA), and Plycem in Central America form the Northern region; Eternit Colombia, Eternit Ecuador, Duralit Bolivia, and Fibraforte
Peru form the Andean region. Below are the main products
we manufacture:
• Corrugated laminates, which are fiber cement tiles, used
mainly in the housing industry for roofs or as a primary
cladding. They are also used for decorative elements and
for concrete roof tile accessories. The company produces
two sizes of corrugated laminates, P7 and P10, in lengths
that range from 1.22 up to 3.66 meters, all 1.22 meters
wide and 6 millimeters thick.
• Fiber cement flat laminated ceilings or roofs, used mainly
in the residential and commercial construction industry.
• Fiber cement planks, used mainly in the housing and
construction industry to reinforce facades and implement
modern architectural designs. The planks are sold in a
large variety of sizes and shapes and can be used for both
interiors and exteriors.
• Profile stock used mainly in the residential and commercial construction industry. These are produced in different
sizes and shapes and can be used for corners, facades,
windows, doors, column cladding, wall cladding, patterned
08
borders, decorative profiles, and other nonstructural architectural designs to add an elegant finishing touch to homes
and buildings.
• Prestressed concrete piping, which is used in infrastructure in the construction industry to conduct liquids and water. The company produces prestressed and reinforced
concrete in lengths that range from 2.4 to 7 meters, with
widths between 0.10 and 2.75 meters and thicknesses
from 1.2 to 19.25 centimeters.
8
SALES DISTRIBUTION
65% Sheet stock, roof tiles,
and cast stock
19% Panels
9% Trimwork
7% Other
Corrugated fiber cement tiles
(simulated Spanish roof tiles) and flat
roof tiles are some of our advanced
construction systems.
08
O P E R AT I N G
INCOME
811
Millions of Mexican pesos
• Corrugated and flat roof
tiles
• Planks and profile stock
for facades
• Prestressed concrete
piping for liquid transport
497
11
The fiber cement solutions
that Construsystems
provides to customers
contribute to their improved
quality of life:
12
9
METALS
08
10
423
The only
producer of
cupronickel
tubing in the
Americas
615
11
12
We produce and distribute
copper and copper
alloys for the automotive,
electrical, coinage,
hardware, refrigeration, and
construction industries, with
products such as tubing,
ducts, conductors and
cables, coils, sheet stock,
bars, coin blanks, etc.
At the close of 2012, this division
reported sales of MXN8.0846 billion,
which equals 59.9% of Elementia’s
total sales, as well as an operating
cash flow (EBITDA) of MXN716.4
million, 38.2% of the total reported.
MARKETS
08
SALES DISTRIBUTION
43% Tubing and pipe
31% Sheet stock
13% Solid bars
The metals division originated with
the acquisition of Nacobre in 2009.
It has four plants in Mexico (Vallejo, Federal District; Toluca, Mexico
State; Celaya, Guanajuato; and San
Luis Potosí) that produce copper
and copper alloy sheet ranging in
thickness from 0.001 in to 2.50 in.
These products are used in both
industrial and artisanal markets,
including in the automotive industry,
electrical terminals, cartridges, coin
blanks, hardware, and construction.
The plants manufacture sheet stock
made of copper, brass, leaded brass,
bronze, nickel silver, and cupronickel
for coins, copper-brass for radiators,
sheets for cable cladding, as well as
many different industrial and domestic connectors.
13% Other
11
PLASTICS
The plastics division had total sales
in 2012 of MXN797.1 million, which
equals 5.9% of Elementia’s total
sales, and had an operating cash flow
(EBITDA) of MXN121.68 million,
equal to 6.5% of the total EBITDA.
08
MARKETS
08
With three plants located in Mexico
State and Peru, we manufacture laminates and thermoformed products
such as disposable plates and cups,
printed industrial containers, and
products and materials for construction. We also manufacture polystyrene water tanks and cisterns, which
are used mainly in the housing industry for drinking water storage. The
company produces water tanks and
cisterns in a variety of sizes, which
range in capacity from 450 to 5,000
liters, between 0.91 and 1.53 meters
in height, with a thickness from 4 to
5 millimeters. The tanks are manufactured to different local and mechanical specifications.
SALES DISTRIBUTION
104
73% Laminates and
thermoformed plastics
9% Other
12
85
18% Water tanks
11
12
We produce plastic food and
industrial packaging, sheets,
and rolls (PE and PP) for the
packaging and advertising
industries, as well as
disposable plates and glasses.
We produce water
tanks and drinking
water cisterns with
capacities of up
to 5,000 liters.
13
CEMENT
It has been 70
years since a
new brand has
appeared on the
Mexican market.
14
The investment of USD315 million included
world-class technology and all of the
infrastructure needed for an undeveloped
area; this generated new employment
opportunities for the company.
CEMENTOS
FORTALEZA
We built a cement
production plant
in Hidalgo with a
capacity of more than
1 million tons per year.
Elementia began its cement plant
project in 2009 with an investment of
USD315 million in the construction of its
plant in the state of Hidalgo, Mexico.
Production at the plant, which incorporates world-class technology, went online
at the start of 2013. As a supplement
to this division, Cementos Fortaleza
signed a contribution agreement with the
French cement manufacturing company
Lafarge. The agreement established
the creation of a partnership in which
Elementia will hold the majority interest.
The documents have already been
submitted to the Mexican authorities on
the federal competition commission, and
if they are approved, both operations
would be consolidated starting in the
second half of 2013.
MARKETS
The Cementos Fortaleza plant will
have an installed capacity of 1 million
tons per year and will serve mainly the
self-construction industry (85%), with
the remaining production destined for
industrial use.
15
SUSTAINABILITY
At Elementia, our commitment to social responsibility has been transformed into a
conscious effort to fully meet the expectations of all stakeholders in the economic, social, human, and environmental realms.
We declare our respect for ethical values,
persons, communities, and the environment.
As it is a part of our culture and values,
social responsibility is applied to each and
every one of the activities we perform day
in and day out. We know that the only way
to achieve long-term viability is through
sustainable development. That is why
we have support programs in place to
serve the communities where we operate.
We have established education and
training programs to develop our human
16
resources and to teach new generations
about the needs and problems of industry,
ecology, and society.
In 2012, for the second year in a row,
Elementia received recognition as a Socially
Responsible Company (SRC) by CEMEFI,
The Mexican Center for Philanthropy,
reflecting the commitment made and actions
taken to benefit the community and the
environment.
CORPORATE
GOVERNANCE
At Elementia, we abide by principles of corporate governance that frame our operations and
support our results. As a public company registered on the Mexican Stock Exchange (BMV),
we adhere to Mexican law and, specifically, to
the Securities Market Act. We also adhere to
the principles set out in the Code of Corporate
Best Practices, endorsed by the Business Coordination Council (CCE).
In carrying out our duties—determining corporate strategy, defining and monitoring the implementation of the vision and values that identify
us, and approving related party transactions and
those that are carried out in the ordinary course
of business—and according to our bylaws, the
Board of Directors relies on the Audit Committee, whose members, including its chairman,
must be independent directors.
AUDIT COMMITTEE
The functions of the Audit Committee include
the following: evaluate internal control systems
and internal audits of the company to identify
any major deficiencies; follow up on corrective
or preventive measures to be taken in the event
of any noncompliance with guidelines and operational and accounting policies; evaluate the
performance of external auditors; describe and
evaluate the services of external auditors not related to the audit; review the company’s financial
statements, assessing the impact of any change
in the accounting policies adopted during the
year; follow up on the measures taken in relation to comments from stockholders, directors,
officers, employees, or third parties regarding
accounting, internal control systems, and inter-
nal and external audits, as well as any complaints
related to management irregularities, including
anonymous and confidential methods for handling
reports submitted by employees; oversee compliance with resolutions from general stockholder assemblies and the Board of Directors.
EXECUTIVE COMMITTEE
The core activity of the Executive Committee is to
address and resolve urgent issues that must be
addressed prior to the regularly scheduled meetings of the full Board of Directors. However, in no
case will it exercise powers designated by law or
by the corporate by-laws reserved for the Board
of Directors, Audit Committee, or the Stockholders’ Meeting. It is empowered to analyze, evaluate, and, if necessary, propose investment in productive assets and corporate acquisitions to the
Board of Directors for its approval, as well as to
discuss the business plan, financing operations,
trade names and brands, and establish and validate strategies for the medium and long term,
among other duties.
INFORMATION FOR INVESTORS
Our primary goal in this report is to ensure that
our stockholders and investors have sufficient information to evaluate the performance and progress of the organization; to do so, we have a department that is responsible for maintaining open
and transparent communication with them.
17
BOARD OF
DIRECTORS
EXECUTIVE COMMITTEE
DI R ECTORS
ALTE R NATE DI R ECTORS
M E M B E RS
SE R I ES “A”
SE R I ES “A”
Ricardo Gutiérrez Muñoz
Ricardo Gutiérrez Muñoz
Chairman
Antonio del Valle Ruiz
Antonio del Valle Ruiz
Antonio del Valle Perochena
Francisco Javier
Juan Pablo del Valle Perochena
del Valle Perochena
Armando Santacruz González
Jaime Ruiz Sacristán
Eduardo Domit Bardawil
Antonio Gómez García
Jaime Ruiz Sacristán
Alfonso Salem Slim
DI R ECTORS
ALTE R NATE DI R ECTORS
ALTE R NATE M E M B E RS
SE R I ES “B”
SE R I ES “B”
Antonio del Valle Perochena
José Kuri Harfush
Juan Rodríguez Torres
Juan Antonio Pérez Simón
María José Pérez Simón Carrera
AUDIT COMMITTEE
Gerardo Kuri Kaufmann
Francisco Javier Cervantes
Fernando B. Ruiz Sahagún
Alfonso Salem Slim
Antonio Gómez García
Sánchez Navarro*
Chairman
* Indistinct alternate to Gerardo Kuri Kaufmann
and Alfonso Salem Slim
Francisco Moguel Gloria
CHAR I MAN OF TH E BOAR D
S E C R E TA R Y
Juan Pablo del Río Benítez
Juan Pablo del Río Benítez
Secretary
Gerardo Kuri Kaufmann
(nonmember)
(not a member of the Board)
OFFICERS
Santiago Bernard Covelo
DI R ECTOR OF
CONSTR USYSTE MS DIVISON
AN DEAN R EG ION
CH I E F EXECUTIVE OFFICE R
DI R ECTOR OF M ETALS DIVISION
Eduardo Musalem Younes
Milton Barrera Sánchez
Gustavo Arce del Pozo
CH I E F FI NANCIAL OFFICE R
DI R ECTOR OF
DIVISION
José Sotelo Lerma
CONSTR USYSTE MS DIVISON
Alberto Astorga Zúñiga
I NVESTOR R E LATIONS OFFICE R
Fernando Benjamín
Ruiz Jacques
DI R ECTOR OF CE M E NT
Juan Francisco Sánchez Kramer
CH I E F COU NSE L
DI R ECTOR OF PLASTICS
DIVISION
Antonio Taracena Sosa
18
MANAGEMENT
DISCUSSION & ANALYSIS
Elementia, S.A. de C.V. – Figures in millions of Mexican pesos at December 31, 2012 and 2011
Income Statements Net sales
Cost of sales
Gross profit
Operating expenses
Other income
Operating income
Interest paid
Interest earned
Foreign exchange gain (loss)
Other financial costs
Comprehensive financing cost
Pre-tax earnings
Income taxes
Earnings from continuing operations
Discontinued operations, losses
Participation in subsidiaries
Consolidated net income
EBITDA
2012
2011Var.%
13,506 14,505(7)
10,273 11,463(10)
3,233 3,0426
1,888 1,8592
(21)
(89)(76)
1,366 1,2717
(289)
(467)(38)
31
34(9)
(345)
138NA
(19)
(14)41
(623)
(309)102
743
963(23)
39 (440)NA
782
52350
(501)
(827)(39)
35
-NA
315 (305)NA
1,877 1,7487
Consolidated sales revenue in 2012 totaled
MXN13.506 billion, 6.9% less than revenues
in 2011. This was due mainly to the drop in
the price of metals (Copper -10%, Zinc -11%,
and Nickel -27%), which impacted the sales
prices of our products in the metals division.
Another factor in the drop was that the Mexican and Colombian governments have rescheduled their infrastructure and construction projects. However, we see 2013 as a
year of growth in the countries in which we
operate. This growth will be mainly in the construction sector, which is the driving force behind growth in developing economies.
Growth
Margin
METALS DIVISION
Gross profit increased by 6%, reaching
MXN3.232 billion and representing an increase of 24% in reported sales, better than
the 21% reported in 2011. This increase is
the result of lower costs of sales.
EBITDA
Operating income plus accumulated depreciation and amortization (EBITDA) for the
year was MXN1.877 billion, 7% higher than
in 2011. This increase is the result of better
gross profits.
Accumulated net income in 2012 was
MXN315 million, versus a loss of MXN305
million reported for 2011.
Leverage
Net debt at the end of 2012 totaled
MXN6.382 billion, very similar to the
MXN6.386 billion reported at the end of
2011. The net-debt–to-EBITDA ratio was at
2.46x, well below the 3.5x reported by creditor banks. Only 7% of the total debt is short
term.
Elementia and Subsidiaries
Operating Income
The Metals division reported total sales
in 2012 of MXN8.085 billion, 14.3% less
than 2011, resulting from the drop in
metals prices (mainly copper, with its 10%
drop). Consequently, operating income is
31.1% less than the previous year, totaling
MXN423.4 million.
19
Markets
Nacional de Cobre is the leader in Latin America in the manufacturing of pipes,
sheet goods, bars and profiled products,
wires, prefabricated and machined parts, as
well as copper and copper alloy connectors.
Due to the greater use of plastic in the construction sector, caused by the high cost of
copper, we have increased our participation
in different market sectors such as automotive, electrical and electronics, construction,
keys and hardware, air-conditioning and refrigeration, minting, ammunition, costume
jewelry, crafts, and industry in general.
CONSTRUSYSTEMS DIVISION
Operating Income
Sales for the Construsystems division
reached MXN4.931 billion in 2012, 13%
greater than in 2011, as a result of better volumes and product mix. Operating incomes increased by 63.3% compared to
2011, totaling MXN811 million.
Markets
The Construsystems division is the leader in
Latin America in the manufacture of materials for construction; our markets are concentrated in the North, Central, and Andean
regions. The main products include tiles,
sheet goods, panels, planks, molding, and
piping. The company manufactures its fiber
cement products at 12 plants, which are located in Mexico, Costa Rica, Honduras, El
Salvador, Colombia, Ecuador, and Bolivia.
Our products are principally sold in the construction sector, through independent distributors, wholesalers, retailers, and government entities, under the following brands:
Mexalit, Eureka, Maxitile, Comecop, Eternit,
Duralit, and Plycem.
20
PLASTICS DIVISION
Operating Income
The Plastics division reported total sales of
MXN797 million in 2012, 13% greater than
2011, caused by better volume, better sales
prices, and better performance in the water
tank market. As a result, operating incomes
closed at MXN104.3 million, 22.6% higher
than reported for 2011.
Markets
The Plastics Division comprises the companies Frigocel in Mexico and Fibraforte in Peru,
which are dedicated to the manufacture and
sale of plastic products, including expandable
and extruded Polystyrene and water tanks,
which are used mainly in construction, agriculture, and the food industry, as well as polypropylene sheeting for roofs. These products
are manufactured and distributed through two
plants, one located in Mexico and one in Peru.
The main brands of this division are Frigocel,
Eternit, Fibraforte, Mexalit, Eureka, Plycem,
and Duralit.
CEMENT DIVISION
Markets
By creating this division, we have vertically integrated the production of construction materials in the group and made Elementia the
leader for this sector in Latin America.
Growth
Elementia finished construction on its cement
factory in Hidalgo, Mexico, in 2012, with an
installed capacity of 1 million tons per year.
This plant will be used primarily to serve the
self-construction sector (85%), with 15% of
the output going toward the industrial sector, with an estimated national market share
of 3%. In February 2013, Elementia signed a
Contribution Agreement with the French cement manufacturing company Lafarge. This
agreement establishes the creation of an association between Cementos Fortaleza and
Lafarge in which Elementia will have majority interest and will increase its capacity to 2
million tons per year. Pending approval from
the antitrust authorities, the operations will be
consolidated as of the second half of 2013.
Elementia, S.A. de C.V. and Subsidiaries
(Subsidiary of Kaluz, S.A. de C.V.)
Independent auditors’ report
To the Board of Directors and Stockholders of Elementia, S.A. de C.V.
We have audited the accompanying consolidated financial statements of Elementia, S.A. de C.V. and Subsidiaries (“the Entity”),
which comprise the consolidated statements of financial position as of December 31, 2012, 2011 and January 1, 2011
(transition date), and the consolidated statements of comprehensive income, changes in stockholders’ equity and cash flows
for the years ended December 31, 2012 and 2011, and a summary of significant accounting policies and other explanatory
information.
Management´s responsibility for the consolidated financial statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance
with International Financial Reporting Standards, and for 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.
Auditor´s responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our
audits in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements
and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free
from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated
financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risk of material
misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers
internal control relevant to the Entity’s preparation and fair presentation of the financial statements in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness
of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial
statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Elementia, S.
A. de C. V, S.A. de C.V. and subsidiaries as of December 31, 2012 and 2011 and January 1, 2011 (transition date), and of their
financial performance and their cash flows for the years ended December 31, 2012 and 2011, in accordance with International
Financial Reporting Standards.
Other matters
As described in Note 2, the administration of the Entity adopted the International Financial Reporting Standards on January
1, 2011. This decision had an impact on the amounts previously reported in the financial statements of the Entity which
were presented and prepared in accordance with the Mexican Financial Reporting Standards. The effects of the transition to
International Financial Reporting Standards are presented in Note 29. This paragraph does not change our opinion regarding the
reasonableness of these consolidated financial statements.
The accompanying consolidated financial statements have been translated into English for the convenience of readers.
Galaz, Yamazaki, Ruiz Urquiza, S. C.
A Member of Deloitte Touche Tohmatsu Limited
C. P. C. José A. Rangel Sánchez
March 15, 2013
25
Consolidated statements of financial position
As of December 31, 2012 and 2011 and January 1, 2011 (transition date)
(Thousands of Mexican pesos)
January 1, 2011
Note
2012
2011 (transition date)
Assets
Current assets:
Cash and cash equivalents 7
$
1,761,935
$
3,539,537
$ 1,503,506
Derivative financial instruments
12
8,549
-
40,433
Accounts receivable – Net
8
2,926,398
3,267,543
2,992,168
Due from related parties – Net
23
-
54,979
52,712
Inventories - Net
9
2,471,265
2,186,086
2,744,152
Prepaid expenses
592,029
196,723
121,780
Total current assets
7,760,176
9,244,868
7,454,751
Long-lived assets:
Building, properties and equipment – Net
13
11,822,531
11,186,892 10,110,232
Investment in shares of associated companies and others 15
813,415
777,288
10,930
Asset for the employee benefits
21
239,068
319,374
362,263
Goodwill and intangibles and other assets - Net
14
1,107,855
837,671
830,013
Long-term due from related parties
23
50,553
50,553
142,655
Accounts receivable, long-term
214,774
-
Total long-lived assets 14,248,196 13,171,778 11,456,093
Total
$ 22,008,372
$ 22,416,646
$ 18,910,844
Liabilities and stockholders’ equity
Current liabilities:
Notes payable to financial institutions and
current portion of long-term debt
18
$
Trade accounts payable
16
Direct employee benefits
Accrued expenses and taxes other
than income taxes
17
Due to related parties
23
Current deferred benefit from tax consolidation
20
Advances from customers
12
Total current liabilities
Long-term liabilities
Long-term debt
18,19
Long-term due to related parties
23
Deferred income taxes
20
Tax liabilities from tax consolidation
20
Other long-term liabilities
Total long-term liabilities
Total liabilities
Stockholders’ equity
Capital stock
22
Subscribed capital exhibited
Additional paid-in capital
Retained earnings
Translation effects of foreign operations
Valuation effects of financial instruments
Surplus on revaluation of property, plant and equipment
Actuarial loss
Controlling interest
Noncontrolling interest
Total stockholders’ equity
Total
$
26
See accompanying notes to consolidated financial statements.
456,267
$
2,330,471
19,163
120,474
$
3,220,722
92,151
2,688,338
1,073,500
120,819
458,386
205,918
5,057
45,023
-
3,520,285
1,213,752
586,563
227,159
278,188
5,846
5,312
23,599
191,022
1,068
4,904,771 4,943,742
5,926,129
6,265,907
2,950,664
40,462
-
78,791
1,490,324
1,797,189
1,954,515
17,530
124,265
149,410
24,725
44,589
9,412
7,499,170 8,231,950 5,142,792
11,019,455 13,136,721 10,086,534
2,012,905
847,815
847,816
(5,825)
-
4,598,877
4,598,877
4,598,891
3,338,951
3,013,695
3,330,633
900,345
584,588
5,984
(748)
28,303
260,535
269,299
(144,650)
(64,446)
10,967,122
9,249,080
8,805,643
21,795
30,845
18,667
10,988,917 9,279,925 8,824,310
22,008,372 $22,416,646 $
18,910,844
Consolidated statements of comprehensive income
For the Years Ended December, 31 2011 and 2010
(In thousands of Mexican pesos)
Note
Continuing operations:
Net sales
Cost of sales
28b
$
25
20122011
13,505,892
$ 14,505,221
10,273,432 11,463,233
Gross profit
Operating expenses
25
Exchange loss (gain) - Net
Interest income
Interest expense
Bank charges
Other income – Net
Equity in income of associated entity
15
Income before income taxes and discontinued operations
3,232,460
1,887,734
345,400
(31,019)
288,745
19,478
(21,054)
(34,760)
777,936
Income tax expense
20a
Income before discontinued operations
(38,621)
816,557
440,071
522,529
Discontinued operations:
Loss from discontinued operations, net
26
Consolidated net income (loss)
501,152
315,405
827,432
(304,903)
Other comprehensive income:
Actuarial loss
Surplus on revaluation of buildings, property and equipment
Total other comprehensive income:
Consolidated comprehensive income
$
(79,260)
6,732
(8,907)
315,757
234,322
549,727 $
(64,694)
(29,051)
269,690
584,588
760,533
455,630
Consolidated net income (loss) attributable to:
$
Non-controlling interest
$
325,256
$
(316,938)
(9,851)
12,035
315,405 $ (304,903)
Comprehensive income attributable to:
$
Non-controlling interest
558,777
$
(9,050)
$
549,727 $ 455,630
Basic income (loss) per share:
From continuing operations
$
30.6109
$
20.3856
From discontinued operations
$
(18.7871)
$
(32.2809)
Basic income (loss) per share
$
11.8238
$
(11.8953)
Weighted average shares outstanding
26,675,385
3,041,988
1,859,251
(137,998)
(34,231)
467,192
13,782
(88,608)
962,600
443,452
12,178
25,632,237
27
Consolidated statements of changes in stockholders’ equity
For the years ended December 31, 2012 and 2011
Subscribed
Additional
Capital
capital
paid-in
Retained
stock
exhibited
capital
earnings
Balances at January 1, 2011 (transition date)
$
847,816
$
-
$
4,598,891
$
3,330,633
Decrease in capital(1)-
(14)-
Comprehensive income
Balances as of December 31, 2011
-
847,815
Additional capital contribution 1,165,090
28
-
$2,012,905 $
-
-
(5,825)
-
- (316,938)
4,598,877
-
-
3,013,695
-
325,256
(5,825)$4,598,877$3,338,951
Other comprehensive income
Surplus on
Translation
Valuation
revaluation of
effects
effects of
property, of foreign
financial
plant and
Controlling
Noncontrolling
operations
instruments
equipment
Actuarial loss
interest
interest
$
-
$
28,303
$
-
$
-
$
8,805,643
$
18,667
Total
stockholders’
equity
$ 8,824,310
----
(15)-
(15)
584,588
584,588
-
315,757
$ 900,345 $
(29,051)
(748)
-
6,732
269,299
(64,446)
269,299
(64,446)
-
(8,764)
443,452
9,249,080
- 1,159,265
(80,204)
558,777
5,984$ 260,535$ (144,650)$10,967,122$
12,178 455,630
30,845
9,279,925
-1,159,265
(9,050)
549,727
21,795$
10,988,917
29
Consolidated statements of cash flows
For the years ended December 31, 2012 and 2011
30
Items related to operating activities:
Consolidated net loss income
$
Income tax recognized in profit
20122011
315,405
$
(38,621)
Items related to investing activities:
Depreciation and amortization Interest income
Impairment of long-lived assets
Loss on sale of subsidiary
510,782
(31,019)
40,010
(34,760)
456,496
476,933
(34,231)
142,103
217,895
Items related to financing activities:
Interest expense
288,745
467,192
341,145
54,979
(214,774)
(285,179)
(395,306)
(105,218)
(275,375)
89,835
558,066
(74,943)
(78,631)
(304,903)
440,071
(Increase) decrease in:
Accounts receivable
Due from related parties
Inventories
Prepaid expenses
Employee benefits - Net
Increase (decrease) in:
Accrued expenses and taxes other than income taxes and others
Income taxes paid Discontinued operations
Net cash flow (used in) provided by operating activities
(890,251)
2,147,222
19,221
(51,029)
21,424
(167,423)
(879,306)
452,081
(2,885)
12,450
(347,566)
(660,206)
(797,462) (984,253)
(1,974,140)
2,372,854
Acquisition of property, plant and equipment Sale of property, plant and equipment
Net cash flow generated from the sale of subsidiaries
Acquisition of other investments
Acquisition of other assets
Interest received
Net cash flow used in investing activities
(2,112,575)
1,132,694
340,966
(1,367)
(334,128)
31,019
(943,391)
Proceeds from bank loans
Borrowings
Borrowings from related parties
Interest paid
Additional capital contribution
Decrease in capital
Net cash provided by financing activities
176,405
3,476,448
(180,390) (2,729,069)
-
(78,791)
(288,745)
(467,192)
1,159,265
-
(15)
866,535
201,381
(1,834,993)
954,727
(19,801)
34,231
(865,836)
Effects of exchange rates on cash 273,394
327,632
Net (decrease) increase in cash and cash equivalents
(1,777,602)
2,036,031
Cash and cash equivalents at beginning of year
3,539,537
1,503,506
Cash and cash equivalents at end of year
1,761,935
3,539,537
$
$
Notes to consolidated financial statements
As of December 31, 2012 and 2011 and January 1, 2011 (transition date)
(In thousands of Mexican pesos, unless stated otherwise)
1.Activities
The principal activity of Elementia, S. A. de C.V. and subsidiaries (“Elementia” and together with its subsidiaries, the “Entity”) is the
manufacture and sale of fiber-cement products, copper, cement, aluminum products and plastic for the construction industry. The
Entity’s ultimate parent is Kaluz, S.A. de C.V.
2. Adoption of International Financial Reporting Standards (IFRS)
a. Adoption of International Financial Reporting Standards - As of January 1, 2012, the Entity adopted the International
Financial Reporting Standards (hereinafter IFRS or IAS) and their adaptations and interpretations issued by the International
Accounting Standards Board (IASB), in effect at December 31, 2012; consequently applies IFRS 1, First-time adoption of
International Financial Reporting Standards. These consolidated financial statements have been prepared in accordance with
the standards and interpretations issued and effective as of the date thereof.
b. Transition to IFRS - The financial statements at December 31, 2011, were the last prepared in accordance with Mexican
Financial Reporting Standards (hereinafter in Spanish NIF); these reports differ in some areas from IFRS. In preparing the
consolidated financial statements at December 31, 2012 and 2011 and for the years then ended, management of the
Entity has changed certain accounting methods of presentation and valuation accounting standards applied in the financial
statements NIF bound to comply with IFRS. The comparative figures as of December 31, 2011 and for the year ended on that
date were modified to reflect these adoptions.
Reconciliations and descriptions of the effects of the transition from NIF to IFRS in the consolidated statements of financial
position, comprehensive income and cash flow are explained in Note 28.
The date that the Entity transitioned to IFRS is January 1, 2011. In preparing its consolidated financial statements under
IFRS, the Entity have applied transition rules to the figures previously reported under MFRS. IFRS 1 generally requires
retrospective application of the standards and interpretations applicable to the date of the first report. However, IFRS 1 allows
certain exemptions from the application of certain rules to previous periods in order to assist entities in the transition process.
The Entity has implemented some of the exceptions and chose certain optional exemptions of adoption for the first time as
described below:
i) Accounting estimates - The Entity, applied the mandatory exception concerning accounting estimates that the transition
date are consistent with those used for the same date of IFRS, except for those corresponding to differences in accounting
policies under IFRS.
ii) Non-controlling interests - The Entity applied prospectively certain requirements of IAS 27 (2008), Consolidated and
Separate Financial Statements, as of the transition date.
In addition, the Entity has applied the optional exemptions adopted first as described below:
a. Applied prospectively from the transition date, accounting for business combination in accordance with IFRS 3, therefore it
does not reformulate business combinations that occurred before the date of transition, leaving in its initial financial statements,
values and classification of assets acquired and liabilities assumed determined under MFRS.
b. According to the circumstances of each asset, the Entity chose to use the fair value determined by appraisal in some asset
classes (property, plant and equipment) to the transition date, or MFRS revalued amount at the date of transition as its cost
incurred for the item of property, plant and equipment.
c. Decided to recognize in the transition date, all actuarial gains and losses not recognized at the end of the period in accordance
with NIIF. Also adopted in advance the modifications to IAS 19 (2011), “Employee Benefits” which imply the recognition of all
the service costs at the same date of transition.
d. The Entity chose to take the exemption from applying the conversion effects foreign operations against retained earnings at
the transition date. This optional exemption was applied to all conversions of subsidiaries whose functional currency is the
Mexican peso.
31
e. The Entity applied the transitional provisions of IAS 23 Borrowing Costs, for designating the transition date as the start date
to capitalize borrowing costs relating to all qualifying assets with a commencement date for capitalization is designated date
or after that date.
f. The Entity has operations that require setting an environmental damage or removal of assets provision. It applied the exemption
referred to environmental damage or removal of assets.
3. Significant events
a. On April 20, 2012, the Entity sold 100% of the shares of Almexa Aluminio, S.A. de C.V., devoted to industrial processing of
aluminum in its various blends, with inputs occurring as sheet, plate, paste, powder and foil, mainly for the food industry, to
Industria Mexicana the Aluminio, S.A. de C.V. subsidiary of Group Vasconia, S.A. de C.V.. The sale price was approximately
$340,000, generating a loss of approximately $456,000 which was recorded net of the operations of the discontinued
business within the discontinued operations line item. The loss on the sale of shares was due primarily to the difference
between the carrying value of capital and the sale price.
b. On June 30, 2011, the Entity informed the public that it settled, in advance, syndicated loans it held with various banks totaling
approximately $2,700,000, which were replaced by a new loan under a “Club Deal” scheme, which had improved interest rates,
maturity profile and financial flexibility that would allow the Entity to reduce its interest expense by an estimated USD$11.4
million. Additionally, the early settlement helped the Entity resolve its non-compliance with respect to certain covenants that
limited its financial leverage abilities and for which the Entity obtained a waiver dated March 15, 2011.
c. On June 6, 2011, the Entity sold 100% of the shares of Aluminio Conesa, S.A. de C.V., entity which was primarily dedicated
to aluminum smelting and recycling for extrusion and the sale of anodized and machined aluminum ,to Grupo Cuprum, S.A.P.I.
(“Cuprum”). The sale price was approximately $458,000, generating a loss of approximately $220,000 which was recorded
net of the operations of the discontinued business within the discontinued operations line item. The loss on the sale of shares
was due primarily to the difference between the carrying value of capital and the sale price. On the same date, the Entity
acquired 20% of the shares of Cuprum at an acquisition cost of $766,000.
4. Basis of preparation and consolidation
a. Basis of preparation - The consolidated financial statements as of December 31, 2012 and 2011 and for the years then
ended have been prepared in accordance with IFRS.
The consolidated financial statements of the Entity have been prepared on the historical cost basis except for certain financial
instruments and property, machinery and equipment, which are valued at fair value. Historical cost is generally based on the
fair value of the consideration given in exchange for assets. The financial statements are prepared in pesos, legal currency of
Mexico and are presented in thousands, except when indicated.
The policies set out below have been consistently applied to all the periods presented
b. Explanation for translation into English - The accompanying financial statements have been translated from Spanish into
English for use outside of Mexico.
c. These consolidated financial statements are presented on the basis of International Financial Reporting Standards (“IFRS”).
32
d. Consolidation basis - The consolidated financial statements include the financial statements of Elementia, S.A. de C.V.
and those of its subsidiaries, as of December 31, 2012 and 2011 and for the years then ended. Elementia’s shareholding
percentage in the capital stock of its significant subsidiaries and their activities are set forth below:
Country
México:
Ownership percentage
December December 31, 2012
31, 2011
January 1
2011
Activity
Mexalit Industrial, S.A de C.V. 100%
100%
100%
Manufacture and distribution of fibercement
(Mexalit Industrial) construction products
Distribuidora Promex, 100%
100%
100%
Investments in shares and distribution of
S.A. de C.V. and Subsidiaries fibercement construction products and pipes
(Promex)
Maxitile Industries, S.A. de C.V. -
100%
100%
Manufacture and sale of fibercement construction
(Maxitile) (7) products
Mexalit Servicios Administrativos (formerly Eureka Servicios
Industriales, S.A. de C.V.
(Mexalit Servicios))
100%
100%
100%
Administrative services
Nacobre Servicios Administrativos (formerly Maxitile Servicios
Industriales, S.A. de C.V.)
(Nacobre Servicios)
100%
100%
100%
Versalit Inmobiliaria, S.A. de C.V. (Versalit) (1)
-
-
100%
Asset leasing (Dormant)
Compañía Mexicana de Concreto pipes
Pretensado Comecop,
S.A. de C.V. (Comecop) (4)
99.96%
99.96%
96.67%
Manufacture and sale of pre-stressed concrete
Nacional de Cobre, S.A. de C.V. 100%
100%
100%
Manufacture of copper products for the construction
(Nacobre) industry
Productos Nacobre, -
-
100%
Distribution and sale of copper products for the
S.A. de C.V. (Pronaco) (2)
construction industry
Grupo Aluminio, S.A. de C.V.
(Grupo Aluminio) (3)
-
-
100%
Holding entity
99.99%
99.99%
99.99%
Asset leasing
-
100%
-
Asset leasing
Almexa Aluminio, S.A de C.V. (Almexa Aluminio) (6)
-
100%
100%
Manufacture and sale of aluminum products
Procenal Servicios, S.A. de C.V. (Procenal)
100%
100%
100%
Frigocel, S.A. de C.V. and Subsidiary (Frigocel)
100%
100%
100%
Distribution and sale of plastic products
Operadora de Inmuebles Elementia, S.A. de C.V.
(formerly Almexa, S.A de C.V.)
(Operadora)
Aluminio Holdings, S.A de C.V.
(Aluminio Holdings) (5) (6)
Trituradora y Procesadora de 100%
100%
100%
Manufacture and production of stony materials for
Materiales Santa Anita, the construction industry (pre-operational stage)
S. A. de C.V. (Trituradora)
ELC Tenedora de Cementos,
S.A.P.I. de C.V. and
Subsidiaries (ELC)
100%
-
-
Holding entity
Buenavista Elementia, S.A. de C.V. (Buenavista)
100%
100%
100%
Holding entity
33
Country
Panama:
General de Bebidas y Alimentos, S.A. de C.V. and Subsidiaries
(General de Bebidas)
December December 31, 2012
31, 2011
100%
100%
January 1
2011
100%
Activity
Holding entity
Colombia:
Eternit Colombiana, S.A 100%
100%
100%
Holding entity
(Colombiana)
construction products
Eternit Pacífico, S.A. (Pacífico)
98.20%
98.20%
98.20%
Manufacture and distribution of fiber-cement
Eternit Atlántico, S.A. (Atlántico)
96.52%
96.52%
96.52%
United States of America:
Maxitile Inc. (Maxitile Inc)
100%
100%
100%
Cooper & Brass Int. Corp. 100%
100%
100%
Distribution and sale of copper and aluminum
(Cooper) products for the construction industry in
the United States of America
Costa Rica and Central America:
The Plycem Company, Inc and Subsidiaries.
(Plycem and subsidiaries)
100%
100%
100%
Holding entity
Peru:
Industrias Fibraforte, S.A. 100%
100%
100%
Manufacture of slight covers of polypropylene and
(Fibraforte)
polycarbonate
Ecuador:
Eternit Ecuatoriana, S.A. 100%
100%
100%
(Ecuatoriana)
(3)
(4)
(5)
(6)
(7)
(1)
(2)
Versalit, merged with Mexalit Industrial, S.A. de C.V. on September 1, 2011, the latter prevails as the merged entity.
Pronaco merged with Nacobre on September 1, 2011, the latter prevailm as the merged entity.
Grupo Aluminio merged with Elementia on December 7, 2011, the latter prevailing as the merged entity.
Operadora de Aguas, S.A. de C.V. merged into Comecop on September 1, 2011, the latter prevailing as the merged entity.
Aluminum Holdings spun off Almexa on November 22, 2011.
Almexa Aluminio, S.A. de C.V. and Aluminio Holdings, S.A. de C.V. sold on April 20, 2012.
Maxitile Industries, S.A. de C.V. merged with Mexalit Industrial, S.A. de C.V. on January 2, 2012 the latter prevailing as the merged entity.
These percentages of participation of the entity in domestic and international subsidiaries, are considering both direct and indirect
holdings through companies exercised for which is in control.
The share of results and changes in equity of subsidiaries acquired or sold during the year are included in the financial statements
or from the date of the transactions carried out
5. Summary of significant accounting policies
The accompanying consolidated financial statements have been prepared in conformity with IFRS issued by the IASB, which
require that Entity management make certain estimates and use certain assumptions that affect the amounts reported in the
consolidated financial statements and their related disclosures. However, actual results can differ from those estimates. The Entity
management, upon applying professional judgment, considers that estimates made and assumptions used were adequate under
the circumstances. The significant accounting policies followed by the Entity are as follows:
34
a. Accounting changes
The following modifications to IFRS have been applied in the current year and have affected the consolidated financial
statements.
- IAS 1 Presentation of Financial Statements - The Entity has applied the amendments to IAS 1 Presentation of items of
other comprehensive income in advance of the effective date (annual periods beginning on or after July 1, 2012). The
amendments introduce a new terminology for the statement of comprehensive income and statement. The amendments to
IAS 1 are: the “statement of comprehensive income” is renamed to “statement of profit and loss and other comprehensive
income” and “income statement” is renamed to “statement of profit and loss.” The amendments to IAS 1 retain the option
to present results and other comprehensive income in a single statement or in two separate but consecutive statements.
However, the amendments to IAS 1 require items of other comprehensive income that are grouped into two categories
in the other comprehensive income section: (a) items that will not be reclassified subsequently to profit or loss and (b)
items that can be reclassified subsequently to profit or loss when specific conditions are met. It is required that the income
tax on items of other comprehensive income is allocated in the same and the amendments do not change the option
of presenting items of other comprehensive income either before tax or after tax. The amendments have been applied
retrospectively and therefore the presentation of items of other comprehensive income has been modified to reflect the
changes. In addition to the aforementioned presentation changes, the application of the amendments to IAS 1 does not
result in any impact on earnings, other comprehensive income and total comprehensive income.
- IAS 1 Presentation of financial statements - The Entity has applied the amendments to IAS 1 as part of the Annual
Improvement to IFRSs 2009-2011 in advance of the effective date (annual periods beginning on or after 1 January 2013).
- IAS 1 requires an Entity that changes accounting policies retrospectively, or makes a retrospective restatement or
reclassification to present a statement of financial position as at the beginning of the preceding period (third statement
of financial position). The amendments to IAS 1 clarify that the Entity is required to present a third statement of financial
position only when the retrospective application, restatement or reclassification has a material effect on the information
in the third statement of financial position and that related notes are no required to accompany the third statement of
financial position.
b. Transactions in foreign currency - The consolidated financial statements of foreign operations are translated from functional
currency to presentation currency, using the following methodology:
Operations whose functional and recording currency is the same, translate their financial statements using the following
exchange rates: (i) the closing exchange rate in effect at the balance sheet date for monetary assets and liabilities; and
(ii) historical exchange rates for non-monetary assets and liabilities and stockholders’ equity, as well as revenues cost and
expenses. Translation effects are recorded under comprehensive financing income (loss). Differences in exchange rate, from
items of financial instruments which are initially recognized in comprehensive financing income (loss) are reclassified from
equity to profit or loss when selling wholly or partially the net investment. Non-monetary items carried at fair value denominated
in foreign currencies are retranslated at the exchange rates prevailing at the date on which the fair value was determined.
Non-monetary items calculated in terms of historical cost, in foreign currency, are not retranslated.
The exchange differences are recognized in income for the period, except by exchange rate differences from foreign currency
denominated loans relating to assets under construction qualifying for capitalization of interest, which are included in the cost
of such assets when considered as an adjustment to interest cost on those foreign currency denominated loans.
The adjustments to goodwill and fair value generated in the acquisition of a foreign operation are treated as assets and
liabilities of the operation and translated at the exchange rate prevailing at the end.
Foreign currency transactions are recorded at the applicable exchange rate in effect at the transaction date. Monetary assets
and liabilities denominated in foreign currency are translated into Mexican pesos at the applicable exchange rate in effect
at the balance sheet date. Exchange fluctuations are recorded as a component of net comprehensive financing result in the
statements of income.
The functional currency of the entity registration and all its subsidiaries is the Mexican peso, except for the subsidiary whose
currencies registration and / or function are different as follows:
Subsidiary
Recording currency
Functional currency
Report currency
Pacífico
Colombian peso
Colombian peso
Mexican peso
Atlántico.
Colombian peso
Colombian peso
Mexican peso
Colombiana
Colombian peso
Colombian peso
Mexican peso
Maxitile
US dollar
US dollar
Mexican peso
Cooper
US dollar
US dollar
Mexican peso
US dollar
US dollar
Mexican peso
Soles
Soles
Mexican peso
Plycem and subsidiaries
Fibraforte
Ecuatoriana
US dollar
US dollar
Mexican peso
Nacobre
Mexican peso
US dollar
Mexican peso
35
Therefore these subsidiaries are considered foreign operations under IFRS.
In preparing the financial statements of the individual entity, transactions in currencies other than the entity’s functional
currency (foreign currencies) are recorded using the exchange rates prevailing at the dates of transactions are conducted.
c. Cash and cash equivalents – Cash and cash equivalents consist mainly of bank deposits in checking accounts and shortterm investments that a) are highly liquid and easily convertible into cash, b) mature within three months from their acquisition
date and c) are subject to low risk of material changes in value. Cash is stated at nominal value and cash equivalents are valued
at fair value; any fluctuations in value are recognized in comprehensive financing (cost) income of the period. Cash equivalents
are comprised mainly of investments in investment funds.
d. Inventories and cost of sales - Inventories are stated at the lower of cost and net realizable value. Costs of inventories are
determined on an average basis including the cost of materials, direct costs and an appropriate portion of fixed and variable
overhead costs that are incurred in the transformation process. Reductions in value of inventories are compound of reserves
that represent the impairment of inventories.
e. Assets available for sale - Long-term assets and groups of assets for sale are classified as held for sale if their carrying
amount will be recovered through a sale transaction rather than through continuing use. This condition is considered as met
only when the sale is highly probable and the asset (or group of assets for sale) is available for immediate sale in its present
condition.
f. Non-current assets classified as available for sale are measured at the lower of carrying amount and fair value less costs of
sale.
g. Property, machinery and equipment - Land, property, machinery and equipment held for use in the production or supply
of goods and services, or for administrative purposes, are presented in the statement of financial position at their revalued
amounts, calculating the fair value at the date of revaluation less any accumulated depreciation and accumulated impairment
losses. Revaluations are performed with sufficient frequency such that the carrying amount does not differ significantly from
what would be determined using fair values at the end of the period over which it is reported.
Any increase in the value of such land, property and equipment is recognized as a revaluation surplus in other comprehensive
income items, unless reverses a revaluation decrease of the same asset previously recognized in profit or loss, in which
case the increase is credited to income as it reduces spending by decreasing previously made. A decrease in the value
that originated from the revaluation of such land, property and machinery, is recorded in income to the extent it exceeds the
balance, if any, of the property revaluation reserve relating to a previous revaluation of that asset.
Depreciation on revalued property and machinery is charged to results. In case of subsequent sale or disposal of revalued
property, the attributable revaluation surplus to the remaining revaluation reserve property is transferred directly to retained
earnings. Any transfer of the revaluation reserve to retained earnings is not performed, except when an asset is no longer
recognized.
Properties in the course of construction for production, supply or administrative purposes are carried at cost, less any recognized
impairment loss. Cost includes professional fees and, for qualifying assets, borrowing costs capitalized in accordance with the
Entity’s accounting policy. Such properties are classified to the appropriate categories of property, plant and equipment when
completed and ready for intended use. Depreciation of these assets, on the same basis as other property assets, commences
when the assets are ready for their intended use.
Depreciation is recognized to write off the cost or valuation of assets (other than properties under construction) less their
residual values over their useful lives using the straight line method. The estimated useful lives, residual values and depreciation
method are reviewed at the end of each year, and the effect of any changes in the estimate recorded is recognized on a
prospective basis. Depreciation is calculated under the straight-line method based on the useful lives of the assets, as follows:
%
Residual value
Buildings
Industrial machinery and equipment Vehicles Computers Office furniture and equipment -
-
5
-
-
Average years of useful life
December 2012
December 2011
10 to 70
10 to 30
4 to 5 3
10
10 to 70
10 to 30
4 to 5
3
10
Any gain or loss arising on the disposal or retirement of an item of property, machinery and equipment is determined as the
difference between the sales proceeds and the carrying amount of the asset and is recognized in profit or loss.
h. Leasing - Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and
rewards of ownership to the lessee. All other leases are classified as operating leases.
Operating lease payments are recognized as an expense on a straight-line basis over the lease term, except where another
systematic basis is more representative of the time pattern in which economic benefit from the leased asset are consumed.
Contingent rentals are recognized as expenses in the period in which they are incurred.
36
i. Loan cost - Costs for general loans or directly attributable the acquisition or construction of assets for use by the Entity and
constitute qualifying assets that require a substantial period of time until they are ready and useful, are added to the cost of
those assets during that time until the time they are ready for use. Costs subject to capitalization include exchange differences
relating to foreign currency denominated loans, and these are regarded as an adjustment to interest expense equivalent to
interest expense in local currency.
j. Investment in associated and other permanent investments - Investment in the shares of associated entity is valued by
the equity method, which establishes that the acquisition of shares must be modified proportionally based on the changes
made to the stockholders’ equity accounts of the associated entity after the acquisition date. The Entity’s equity in the results
of associated entity is presented separately in the statement of comprehensive income.
The permanent investments made by the Entity in entities in which it does not have control, joint control, or significant influence,
are initially recorded at acquisition cost, while earned dividends are recognized in the results of the period, unless derived from
the profits of periods prior to the acquisition date, in which case they are subtracted from the permanent investment.
k. Goodwill - Goodwill arising from a business combination is recognized as an asset at the date that control is acquired (the
acquisition date) less impairment losses recognized, if any. Goodwill is the excess of the consideration transferred, the amount
of any noncontrolling interest in the acquire over the fair value of the acquirer’s interest in the equity of the acquired and / or
on the net at the date of acquisition identifiable assets acquired and liabilities assumed.
When the fair value of the identifiable net assets acquired exceeds the sum of the consideration transferred, the amount of
such excess is recognized in the income statement as a gain on purchase.
Goodwill is not amortized and is subject to annual impairment testing. For purposes of impairment testing, goodwill is allocated
to each cash-generating units for which the entity expects to obtain benefits. If the recoverable amount of the cash-generating
unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of goodwill
allocated to the unit and then to the other assets of unit, proportionately, based on the carrying amount of each asset in the
unit. The impairment loss recognized for goodwill purposes cannot be reversed in a subsequent period.
The availability of a subsidiary, the amount attributable to goodwill is included in determining the gain or loss on disposal.
l. Intangible assets and other assets - Correspond to exclusive distribution rights, use of trademarks and licenses and others.
Intangible assets acquired separately are recorded at cost less accumulated amortization and any accumulated impairment
losses. Amortization is based on the straight line method over its estimated useful life. The estimated useful lives, residual
values and depreciation method are assessed at the end of each year, with the effect of any change in the estimate recorded
on a prospective basis.
m.Impairment of tangible and intangible assets - The Entity reviews the carrying amounts of its tangible and intangible
assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication
exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). When
it is not possible to estimate the recoverable amount of an individual asset, the Entity estimates the recoverable amount of
the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified,
corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group
of cash-generating units for which a reasonable and consistent allocation basis can be identified.
Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least
annually, and whenever there is an indication that the asset may be impaired.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future
cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the
time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying
amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognized
immediately in profit or loss.
When an impairment loss subsequently reverses, the carrying amount of the asset (or a cash-generating unit) is increased
to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying
amount that would have been determined had no impairment loss been recognized for the asset (or cash-generating unit) in
prior years. A reversal of an impairment loss is recognized immediately in profit or loss.
n. Business combinations - Are transactions or other events whereby assets acquired and liabilities assumed constitute a
business. The acquisition of subsidiaries and businesses are accounted for using the purchase method. The consideration for
each acquisition is valued at its fair value at the date of acquisition and the net assets and liabilities acquired. The acquisitionrelated costs are recognized in income when incurred.
The identifiable assets, liabilities and contingent liabilities of the acquire that meet the conditions for recognition under IFRS
3 “Business Combinations” are recognized at their fair value at the acquisition date, except that:
37
o. Assets or deferred tax liabilities and liabilities or assets related to agreements employee benefits are recognized and valued
in accordance with IAS 12 Income Taxes and IAS 19 Employee Benefits respectively;
p. Assets (asset group for sale) that are classified as held for sale in accordance with IFRS 5 Non-current Assets Held for Sale
and Discontinued Operations are measured in accordance with that Standard.
If the initial recognition of a business combination is not completed at the end of the reporting period in which the combination
occurs, the entity reports provisional amounts for the items for which recognition is incomplete. During the measurement period,
the acquirer shall recognize adjustments to the provisional amounts recognized assets or liabilities or additional requirements
to reflect new information obtained about facts and circumstances that existed at the acquisition date, which if known, would
have affected the valuation of the amounts recognized at that date.
The measurement period is from the acquisition date until the entity obtains complete information about facts and circumstances
that existed at the date of acquisition which is subject to a maximum of one year.
In the event that the consideration for the acquisition includes any asset or liability caused by a contingent consideration
arrangement, valued at their fair value at the acquisition date subsequent changes in fair value are adjusted against the
cost of acquisition when they are qualify as measurement period adjustments. All other changes in fair value of contingent
consideration classified as an asset or liability in accordance with the relevant IFRS are recognized directly in income. Changes
in fair value of contingent consideration classified as equity are not recognized.
In the case of a purchase business combination in stages prior investment of the entity in the capital of the acquired is
remeasured to fair value at the acquisition date (ie the date on which the entity obtains control) and the resulting gain or loss,
if any, is recognized in income. The amounts resulting from participation in the acquiree prior to the acquisition date that have
previously been recognized in other comprehensive income items are reclassified to income, provided that such treatment
would be appropriate in the case to be sold such participation.
Contingent liabilities acquired in a business combination are measured initially at their fair values at the acquisition date. At the
end of the subsequent periods over which is reportedly such contingent liabilities are valued at the higher of the amount that
would have been recognized in accordance with IAS 37, Provisions, Contingent Liabilities and Contingent Assets and the net
amount recognized in accumulated depreciation in accordance with IAS 18, Revenue.
q. Financial instruments - Financial assets and financial liabilities are recognized when a group entity becomes a party to the
contractual provisions of the instruments.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the
issue of financial liabilities (other than financial liabilities at fair value through profit or loss) are deducted from the fair value
of the financial liabilities on initial recognition. Transaction costs directly attributable to the acquisition of financial liabilities at
fair value through profit or loss are recognized immediately in profit or loss.
i. Financial assets - All financial assets are recognized and derecognised for accounting at the trade date and are measured
initially at fair value plus transaction costs except for those financial assets classified at fair value through profit or loss,
which are initially measured at fair value.
Financial assets are classified into the following specified categories: “financial assets at fair value through profit or loss”,
“investments held to maturity”, “financial assets available for sale” and “loans and receivables”. The classification depends
on the nature and purpose of the financial assets and is determined at the time of initial recognition.
− Financial assets at fair value through profit or loss
Financial assets are classified at fair value through profit or loss when the financial asset is held for trading or is designated
as a financial asset at fair value through profit or loss.
A financial asset is classified as held for trading if:
• It is bought primarily for the purpose of selling in the near term, or
• Upon initial recognition it is part of a portfolio of identified financial instruments that the Entity managed together and
for which there is recent actual pattern making short-term profits, or
• It is a derivative that is not designated and effective as a hedging instrument
A financial asset other than a financial asset held for trading may be designated as a financial asset at fair value through
profit or loss upon initial recognition if:
• With such designation eliminates or significantly reduces a measurement or recognition inconsistency valuation that
would otherwise arise, or
• The financial asset forms part of a group of financial assets, financial liabilities or both, which is managed and its
performance is evaluated on a fair value basis, in accordance with a risk management strategy and investment
Documented Institution and information is provided internally on that group, on the basis of their fair value or
• It forms part of a contract containing one or more embedded derivatives, and IAS 39 permits the entire hybrid contract
(asset or liability) to be designated as fair value through profit or loss.
38
Financial assets at fair value through profit or loss are measured at fair value, recognizing any gain or loss arising from
the remeasurement loss. The net gain or loss recognized in the statement includes any dividend or interest earned on the
financial asset and is included in the caption “Other (income) expense” in the consolidated statements of income and other
comprehensive income. The fair value is determined in the manner described in Note 11.
− Preserved at maturity investments
The investments held to maturity are non-derivative financial assets with fixed or determinable payments and fixed
maturities that the Entity plans and can hold to maturity. After initial recognition, investments held to maturity are valued at
amortized cost using the method of effective interest rate less any impairment exists.
− Financial assets available for sale
The shares listed on the stock exchange that maintains the entity and that are traded in an active market are classified
as held for sale and recorded at fair value. The fair value is determined in the way described in Note 11. Gains and
losses arising from changes in fair value are recognized in other comprehensive income and accumulated in investment
revaluation reserve, except for impairment losses, interest calculated using the effective interest method, and gains and
losses on changes, which are recognized in the results. Where an investment is available or determined impairment, the
cumulative gain or loss previously accumulated in the investment revaluation reserve is reclassified to the income.
Dividends on equity instruments available for sale are recognized in income when establishing the right of the Entity to
receive dividends.
The fair value of monetary assets available for sale denominated in foreign currency is determined in that foreign currency
and converted at the spot exchange rate at the end of the reporting period. Gains and losses on foreign exchange are
recognized in the results, are determined based on the amortized cost of the monetary asset. Other gains and losses on
changes recognized in other comprehensive income.
− Loans and receivables
The loans, accounts receivable and other receivables with fixed or determinable payments that are not quoted in an active
market are classified as loans and receivables. Loans and receivables are measured at amortized cost using the effective
interest method, less any impairment. It recognizes a provision for loan losses in income when there is objective evidence
that the receivables are impaired. Interest income is recognized by applying the effective interest rate, except for the
receivables in the short term in the event that the recognition of interest would be minor.
− Method of the effective interest rate
It is a method of calculating the amortized cost of a financial instrument and of allocating the interest income over the
relevant period. The effective interest rate is the rate that exactly discounts the estimated future cash flows receivable or
payable (including fees, points of interest paid or received, transaction costs and other premiums or discounts included in
the calculation the effective interest rate) over the expected life of the financial instrument (or, when appropriate, a shorter
period), with the net carrying amount of the asset or financial liability on initial recognition.
− Impairment of financial assets
Financial assets other than financial assets at fair value through profit or loss, are subject to testing for impairment
purposes at the end of each period being reported. It is considered that financial assets are impaired when there is
objective evidence that as a result of one or more events that occurred after the initial recognition of the financial asset,
the estimated future cash flows of the financial asset have been affected.
For listed equity instruments classified as available for sale, a significant or prolonged fair value of securities below its cost
is considered to be objective evidence of impairment.
For all other financial assets, objective evidence of impairment could include:
• Significant financial difficulties of the issuer or counterparty,
• Non-payment of interest or principal, or
• It is probable that the borrower will enter bankruptcy or financial reorganization.
For certain categories of financial assets, such as accounts receivable, assets that have been subjected to for the purpose
of impairment testing and have not been individually impaired are included in the assessment of impairment on a collective
basis. Among the objective evidence that a portfolio of receivables could be impaired, it could include the Entity´s past
experience regarding the collection, an increase in the number of delayed payments in the portfolio that exceed the
average credit period 90 days, as well as observable changes in national and local economic conditions that correlate with
default on payments.
For financial assets carried at amortized cost, the amount of the impairment loss recognized is the difference between the
asset’s carrying value and the present value of future receipts discounted at the original effective interest rate of the asset
Financial.
39
The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets, except for
accounts receivable, where the carrying amount is reduced through an allowance account for doubtful accounts. When
you consider that a receivable is uncollectible, it is eliminated against the estimate. Subsequent recoveries of amounts
previously written off loans becomes against the allowance. The changes in the carrying value of the account of the
estimate are recognized in income.
When you consider that a financial asset available for sale is impaired, the cumulative gain or loss previously recognized in
other comprehensive income are reclassified to profit or loss.
Except for equity instruments available for sale, whether in a subsequent period, the amount of the impairment loss
decreases and the decrease can be related objectively to an event occurring after the impairment was recognized,
the previously recognized impairment loss is reversed through profit or loss to the extent that the carrying value of the
investment at the date the impairment is reversed does not exceed the amortized cost would have been if no impairment
had been recognized.
With respect to equity instruments available for sale, impairment losses previously recognized in income are not reversed
through them. Any increase in fair value after recognition of the impairment loss is recognized in other comprehensive
income.
ii. Financial liabilities and equity instruments issued by the Entity
Classification as debt or equity - The debt and equity instruments are classified as liabilities or equity, according the
substance of the contractual arrangement.
Equity instruments - An equity instrument is any contract that evidences a residual interest in the net assets of an entity.
Equity instruments issued by the Entity are recorded at the proceeds received, net of direct issue costs.
Financial liabilities - Financial liabilities are classified as financial liabilities at fair value through profit or loss or other financial
liabilities.
− At fair value through profit or loss
A financial liability at fair value through profit or loss is a financial liability is classified as held for trading or designated as
at fair value through profit or loss:
A financial liability is classified as held for trading if:
• Acquired principally for the purpose of repurchasing in the near future, or
• It is part of a portfolio of identified financial instruments that are managed together and for which there is evidence of
a recent pattern of making short-term profits, or
• It is a derivative that is not designated as effective hedging instrument.
A financial liability other than a financial liability held for trading may be designated as a financial liability at fair value
through profit or loss upon initial recognition if:
• This eliminates or significantly reduces an inconsistency in the valuation or recognition that would otherwise arise, or
• The performance of a group of financial assets, financial liabilities or both is managed and evaluated on a fair value
basis, in accordance with an investment strategy or risk management that the entity’s documented, and is provided
internally information on this group, on the basis of their fair value or
• Be part of a contract containing one or more embedded derivatives, and IAS 39 permits the entire hybrid contract
(asset or liability) to be designated as at fair value through profit or loss.
Financial liabilities at fair value through profit or loss are measured at fair value, recognizing any gain or loss arising from
remeasurement in the income statement. The net gain or loss recognized in the income includes any interest paid on the
financial liability and is included under the heading of “other (income) expense in the consolidated statements of income
and other comprehensive income. The fair value is determined in the manner described in Note 11.
− Other financial liabilities
Financial liabilities and equity instruments issued by the Entity are classified as debt and equity instruments and in
accordance with the substance of the contractual agreement.
− Derecognition of financial liabilities
40
The Entity derecognizes financial liabilities when, and only when, the Entity’s obligations are discharged, cancelled or they
expire.
r. Financial derivative instruments - In order to hedge the financial risks derived from fluctuation in prices of natural gases
and some metals such as copper, aluminum, zinc, and nickel, the Entity selectively uses derivative financial instruments such as
swaps and futures (future contracts) on those underlying instruments. Note 12 includes further detail about derivative financial
instruments.
When derivatives are contracted for hedging risk and meet all the requirements to qualify for hedge accounting, their
classification is documented as of the beginning of the hedge transaction, describing the objective thereof, the hedging
strategy, the risk or primary position to hedge, the characteristics of the derivative financial instrument designated as a hedge,
how the effectiveness of the hedge will be measured, and how the accounting recognition will be made in connection the
overall heading relationship.
Derivatives are initially recognized at fair value at the date of the derivative contract subscribe and subsequently measured at
fair value at the end of the reporting period. The gain or loss is recognized in income unless the derivative is designated and
is effective as a hedging instrument, in which event the timing of the recognition in the results depend on the nature of the
hedge relationship. The Entity designates certain derivatives as either fair value hedges of recognized assets or liabilities or
firm commitments (fair value hedges), hedges of highly probable forecast transactions or hedges of foreign currency risk of
firm commitments (hedging cash flows).
A derivative with a positive fair value is recognized as a financial asset whereas a derivative with a negative fair value is
recognized as a financial liability. A derivative is presented as an asset or a liability in the long term if the maturity date of the
instrument is 12 months or more and not expected to make or cancel within those 12 months. Other derivatives are presented
as current assets and current liabilities.
− Hedge accounting
The Entity designates certain hedging instruments, which include derivatives, embedded derivatives and non-derivatives
with respect to foreign currency risk, as either fair value hedges, cash flow hedges or hedges of a net investment in a
foreign operation . The coverage of the foreign currency risk of a firm commitment is accounted for as cash flow hedges.
At the inception of the hedge, the entity documents the relationship between the hedging instrument and the hedged
item, as well as the objectives of risk management and management strategy for undertaking various hedge transactions.
Additionally, the inception of the hedge and on an ongoing basis, is documented if the hedging instrument is highly
effective in offsetting the exposure to changes in fair value or changes in cash flows of the hedged item.
Note 12 includes details on the fair value of derivatives used for hedging purposes.
− Cash flow hedges
Entity coverage at the beginning of the relationship documented and objective coverage and risk management strategy of
the organization, such documentation shall include the manner in which the entity shall measure the effectiveness of the
hedging instrument to offset the value of changes in the fair value of the hedged item or changes in cash flows attributable
to the hedged risk.
The Entity recognizes all assets or liabilities that arise from transactions with derivative financial instruments in the
statement of financial position at fair value, regardless of the purpose for holding. Fair value is determined based on
recognized market prices when quoted market prices are not, based on valuation techniques accepted in the financial
field. The decision to take economic or accounting coverage reflects market conditions and expectations expected in the
domestic and international economic context.
The effective portion of changes in fair value of derivatives that are designated and qualify as cash flow hedges is
recognized in other comprehensive income. Gains and losses relating to the ineffective portion of the hedging instrument
are recognized in the results, and are included under “Other (income) expense”.
Amounts previously recognized in other comprehensive income and accumulated in equity are reclassified to earnings
in the periods in which the hedged item is recognized in income in the same area of the statement of comprehensive
income of the hedged recognized. However, when a forecasted transaction that is covered results in the recognition of a
non-financial asset or non-financial liability, the gains or losses previously recognized in other comprehensive income and
accumulated in equity are transferred and included in the initial measurement of the cost of non-financial asset or nonfinancial liability.
Hedge accounting is discontinued when the hedging relationship reverses when the hedging instrument expires or is sold,
terminated, or exercised, or no longer meet the criteria for hedge accounting. Any cumulative gain or loss on the hedging
instrument that has been recognized in equity remain in equity until the forecast transaction is ultimately recognized in the
results. When no longer expects the forecast transaction occurs, the gain or loss accumulated in equity is reclassified to
the results immediately.
41
− Fair value hedges
Changes in fair value of derivatives that are designated and qualify as fair value hedges are recognized in the results,
together with any changes in fair value of the hedged asset or liability that are attributable to the hedged risk. The change
in fair value of the hedging instrument and the change in the hedged item attributable to the hedged risk are recognized
in the heading of the statement of comprehensive income relating to the hedged item.
Hedge accounting is discontinued when the Entity revokes the hedging relationship, when the hedging instrument expires
or is sold, terminated, or exercised, or no longer meet the criteria for hedge accounting. The fair value adjustment to the
carrying value of the hedged item arising from the hedged risk is amortized to income as of that date.
− Hedges of a net investment in a foreign operation
Hedges of a net investment in foreign operations are accounted for similarly to cash flow hedges. Any gain or loss
on the hedging instrument relating to the effective portion of the hedge is recognized in other comprehensive income
and accumulated in the translation reserve of foreign operations. The gain or loss relating to the ineffective portion is
recognized in earnings and included in the caption “Other (income) expense”.
Gains and losses on the hedging instrument relating to the effective portion of the hedge accumulated in the translation
reserve of foreign operations, are reclassified to the income in the same way that the exchange differences relating to the
foreign operation
The debt and equity instruments are classified as financial liabilities or as equity in accordance with the substance of the
contractual arrangement.
− Embedded Derivatives
The Entity carried out the review of contracts held to identify embedded derivatives to be separated from the host contract
for purposes of valuation and accounting records. When identifying an embedded in other financial instruments or other
contracts (hosts) are treated as separate derivatives when their risks and characteristics are not closely related to those of
host contracts as such contracts are not carried at fair value changes through income.
An embedded derivative is presented as assets or liabilities in the long term if the remaining maturity of the hybrid
instrument which is relative, is 12 months or more and are not expected to undertake or divest during those 12 months.
Other embedded derivatives are presented as current assets or current liabilities.
The Entity has no fair value hedges of net investment in a foreign operation or derivatives embedded in the reporting
period.
s. Provisions - Are recognized for current obligations (legal or implicit) that arise from a past event, that will probably result in
the probable use of economic resources, and that can be reasonably estimated.
The amount recognized as a provision is the best estimate of the expenditure required to settle the present obligation at the
end of the reporting period under review, considering the risks and uncertainties surrounding the obligation. When a provision
is valued using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those
cash flows
When it is expected to recover some or all of the economic benefits required to settle a provision, it is recognized a receivable
as an asset if it is virtually certain that they will receive the payment and the amount of the receivable can be measured reliably.
-Restructuring- A provision is recognized when the Entity restructuring has developed a detailed formal plan restructuring
and has raised a valid expectation in those affected that it will carry out the restructuring, either by starting the implementation
of the plan or announcing its main features to those affected by it. The restructuring provision should include only the direct
expenditures arising from the same, which include amounts arising restructuring necessarily, and not associated with the
activities of the entity continue.
t. Direct employee benefits - Direct employee benefits are calculated based on the services rendered by employees,
considering their most recent salaries. The liability is recognized as it accrues. These benefits include mainly statutory
employee profit sharing (PTU) payable, compensated absences, such as vacation and vacation premiums, and incentives.
u.Employee benefits from termination, retirement and other - Liabilities from seniority premiums, pension plans and
severance payments are recognized as they accrue and are calculated by independent actuaries based on the projected unit
credit method using nominal interest rates. Actuarial gains and losses are recognized immediately in other comprehensive
income items net of deferred income taxes, according to the net asset or liability recognized in the statement of financial
position to reflect the surplus (or deficit) of the employee benefit plan , while the past service costs are recognized in income
when performing the modification of the plan or when restructuring costs recognized.
The retirement benefit obligation recognized in the statement of financial position represents the present value of the defined
benefit obligation, adjusted for gains and losses and past service costs, less the fair value of plan assets. When plan assets
exceed the liabilities of the defined benefit plan, such assets will be valued at the lesser of: i) the surplus in a defined benefit
plan, and ii) the present value of any economic benefits available in the form of refunds from the plan or reductions in future
contributions to it.
42
v. Income taxes - Income tax expense represent the sum of the tax currently payable and deferred tax.
- Current taxes - The Entity is subject to the provisions of the Law on income tax (ISR) and the Law of the Business Flat Tax
(IETU). Taxes caused ISR and IETU, are based on taxable income and cash flows for each year determined in accordance
with the laws, respectively. Taxable profit differs from profit as reported in the income statement because it excludes items
of income or expense that are taxable or deductible. The Entity’s liability for current tax is calculated using tax rates that
have been enacted at the end of the period over which it is reported.
- Deferred taxes - To recognize deferred income taxes, the Entity determines if, based on financial projections, cause
ISR or IETU and recognizes deferred tax corresponding to bases and tax rates applicable according to tax according to
their estimated projections result in the following years. Deferred tax is recognized on temporary differences between
the value books of assets and liabilities included in the financial statements and the corresponding tax bases used in the
computation of taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences and tax loss to be amortized, to
the extent that it is probable that the Entity has future taxable income against which to apply those deductible temporary
differences. Deferred tax assets are recognized only when there is high probability of recovery.
The carrying amount of a deferred tax asset should be reviewed at the end of each period being reported and should be
reduced to the extent that it is considered probable that there will not be sufficient taxable income to allow the recovery of
all or a part of the asset.
Deferred tax assets and liabilities are offset when there is a legal right to offset short-term assets with short-term liabilities
and when they relate to income taxes relating to the same taxation authority and the Entity intends to liquidate its assets
and liabilities on a net basis.
Elementia has the authorization of the Ministry of Finance and Public Credit in Mexico (“Secretaría de Hacienda y Crédito
Público” or “SCHP”) to prepare its income tax calculations on a consolidated basis, which includes the proportional taxable
income or loss of the entity.
Current and deferred taxes are recognized as income or expense in the statement of comprehensive income, except when
it relates to items recognized in the caption other components of comprehensive income or directly in equity, in which case
the tax is also recognized in other comprehensive income components. In case of a business combination, the tax effect is
included in the recognition of the business combination.
w. Revenue recognition - Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced
for estimated customer returns, rebates and other similar allowances.
Sale of goods - Revenue from the sale of goods is recognized when the goods are delivered and titles have passed, at which
time all the following conditions are satisfied:
• The Entity has transferred to the buyer the significant risks and rewards of ownership of the goods;
• The Entity retains neither continuing managerial involvement to the degree usually associated with ownership nor effective
control over the goods sold;
• The amount of revenue can be measured reliably;
• It is probable that the economic benefits associated with the transaction will flow to the Entity; and
• The costs incurred or to be incurred in respect of the transaction can be measured reliably.
- Dividend and interest income - Dividend income from investments is recognized when the shareholder’s right to receive
payment has been established (provided that it is probable that the economic benefits will flow to the Entity and the
amount of income can be measured reliably).
Interest income is recognized when it is probable that the economic benefits will flow to the Entity and the amount of
income can be measured reliably. Interest income is recorded on a periodic basis, with reference to capital and the effective
interest rate applicable.
- Services - Revenues from services are recognized in the period in which such services are rendered.
- Rentals - Rentals are recognized monthly as leasing services and are provided and maintenance charges are recognized
in the period of the length of the lease agreement from which they come.
x. Cash flow statement - cash flow is used applying the indirect method used for the presentation of cash flows from operating
activities, therefore the income before tax is adjusted for items not required, nor used cash flows, as well as items corresponding
to investment and financing activities. Interest collected are presented as investing activities and interest paid as financing
activities.
y. Earnings per share - (i) Basic earnings per common share are calculated by dividing consolidated net income of controlling
interests by the weighted average number of common shares outstanding during the year., (ii) Basic earnings per common
share from discontinued operations are calculated by dividing net income of discontinued operations by the weighted average
number of common shares outstanding during the year.
43
6. Critical accounting judgments and key sources of estimation uncertainty
To apply the accounting policies, Entity management uses its judgment, estimates, and assumptions regarding certain asset and
liability amounts in the consolidated financial statements. The associated estimates and assumptions reflect a quantitative and
qualitative analysis based on an understanding of the various businesses considered relevant to the Entity. Actual results may
differ from such estimates.
The estimates and assumptions are reviewed regularly. Such accounting estimates are recognized in the period and future
periods if the revision affects both the current and subsequent periods.
The critical accounting judgments and key uncertainty aspects used when applying the estimates made as of the date of the
financial statements, and have a significant risk of deriving an adjustment to the carrying amounts of assets and liabilities during
the next financial period is as follows:
Critical accounting judgments
a. Allowances of inventories and accounts receivable - The Entity uses estimates to determine allowances of inventories
and accounts receivable. The factors considered by the Entity in allowances of inventory are the production and sales volumes
as well and movements on the demand for some products. The factors considered by the Entity in the estimation of doubtful
accounts are mainly the risk of the customer’s financial situation, unsecured accounts and significant delays in the collection
according to established credit limits.
Key sources of estimation uncertainty
a. Property, machinery and equipment - The Entity reviews the estimated useful lives of property, plant and equipment at the
end of each annual period. During 2011, based on a detailed analysis of the Entity management made some changes to the
life of certain components of property, plant and equipment, the effect in the depreciation amounted to $ 28.334. The degree
of uncertainty associated with estimates of useful lives is related to changes in the market and asset utilization for production
volumes and technological development.
b. Impairment of long-lived assets - The carrying value of non-current assets are reviewed for impairment if there are situations
or changes in circumstances indicate that the carrying value is not recoverable. If there is evidence of impairment, carried out
a review to determine if the carrying value exceeds its carrying value and is impaired. When performing impairment testing
of assets, the Entity requires to make estimates on the value assigned to use its property, plant and equipment, and cash
generating units, in the case of certain assets. The value in use calculation requires the entity to determine future cash flows
that should arise from the cash-generating units and an appropriate discount rate to calculate the present value. The Entity
uses cash flow projections of revenue using estimates of market conditions, pricing, and production and sales volumes.
c. Valuation of financial instruments - The Entity uses valuation techniques for its derivative financial instruments, which include
information that is not always based on observable market data to estimate the fair value of certain financial instruments. Note
11 shows detailed information about the key assumptions considered in determining the fair value of its financial instruments,
as well as detailed analyzes of sensitivity on these assumptions. The management of the Entity believes that the valuation
techniques and assumptions used are appropriate to determine the fair value of its financial instruments.
d. Contingencies - Due to the nature of its operations, the Entity is subject to transactions or events contingent on which uses
professional judgment in developing estimates of probability of occurrence, the factors considered in these estimates are the
current legal situation to date estimation and the opinion of legal counsel.
e. Employee retirement benefits - Assumptions are used to determine retirement benefits of employees, assumptions used
to calculate the best estimate of these benefits annually. These estimates, as alleged, are established in conjunction with
independent actuaries. These assumptions include demographic assumptions, discount rates and expected increases in
salaries and future permanence, among others. Although it is estimated that the assumptions used are appropriate, a change
in them could affect the value of assets (liabilities) for these benefits and the statement of comprehensive income in the period
in which it occurs
44
7. Cash and cash equivalents
For the purposes of the statements of cash flows, cash and cash equivalents include cash on hand and in banks and investment
funds, net of outstanding bank overdrafts. Cash and cash equivalents at the end of the reporting period as shown in the statements
of cash flows, can be reconciled to the related items in the statement of financial position as follows:
December 31, 2012
December 31, 2011
January 1, 2011
(Transition date)
Cash $
859,840$
1,816,616$
1,263,141
Cash equivalents Debt instruments NAFIN and CFE
902,095 1,722,921
240,365
$
1,761,935$
3,539,537$
1,503,506
8. Accounts receivable
December 31, 2012
December 31, 2011
January 1, 2011
(Transition date)
Trade accounts receivable
$ 2,002,616
$ 2,532,814
$ 2,320,040
Allowance for doubtful accounts
(176,853) (158,064)
(108,894)
1,825,763
2,374,750
2,211,146
Value added tax
941,716
681,400
675,867
Other receivables158,919211,393 105,155
$
2,926,398$
3,267,543$
2,992,168
a. Trade accounts receivable
The average credit period on sales of goods is between 30 and 60 days. No interest is charged on trade receivables.
Allowances for doubtful accounts are recognized against trade receivables for 100% of all trade accounts receivable with high
possibilities of not been collectable based on estimated unrecoverable amounts.
To accept any new customer, the Entity requested financial information for the last two years and subsequently supports it with
an external credit rating system to evaluate their potential client’s financial support and defines credit limits by customer. The
limits and qualifications attributed to customers are reviewed every two months through the Credit Committee established by
the Entity. No single customer represents more than 5% of the total balance of accounts receivable.
Trade receivables disclosed above include amounts (see below for aged analysis) that are past due at the end of the reporting
period for which the Entity has not recognized an allowance for doubtful accounts because there has not been a significant
change in credit quality and the amounts are still considered recoverable. The Entity does not hold any specific guarantees or
any other credit improvements on those amounts, nor does it have any legal right to compensate them against any amounts
payable. Below is a summary of accounts receivable due but not impaired:
Entity tracks the payment’s performance of the clients without any guarantees and that the only document supporting payment
are promissory notes without protest, and in some cases with support of the client’s owner, in case of delay in accordance with
its policies. In these cases, the Entity suspended the use of line of credit for future purchases. Further delays lead to judicial
and extrajudicial (legal) actions aimed to recover the balance. If the collection is still not accomplished, the Entity cancels the
credit line and the account receivable. The Entity has recognized an allowance for doubtful accounts for 100% of all accounts
receivable collectibility no high possibilities.
b. Allowance for doubtful accounts is the following:
December 31, 2012
December 31, 2011
January 1, 2011
(Transition date)
National trade receivables
$ 168,482
$ 152,333
$
102,126
Export trade receivables
8,371
5,731
6,768
$
176,853$
158,064$108,894
45
c. Change in the allowance for doubtful accounts
December 31, 2012
Balance at beginning of the year
$
Allowance of the period Cancellations and applications
Balance at the end of the year
$
December 31, 2011
January 1, 2011
(Transition date)
158,064
$ 108,894
$
90,652
75,877
(71,863)
(26,707)
176,853
$ 158,064
$
104,261
91,206
(86,573)
108,894
In determining the recoverability of a trade receivable, the Group considers any change in the credit quality of the trade receivable
from the date credit was initially granted up to the end of the reporting period. Concentration of credit risk is limited due to the
customer base is large and independent.
9.Inventories
December 31, 2012
December 31, 2011
January 1, 2011
(Transition date)
Raw materials and auxiliary materials $ 668,795
$ 702,623
$
730,476
Work in process
649,947
514,803
919,485
Finished goods985,109
1,024,839
1,061,533
Goods in transit
84,965
29,165
26,741
Spare parts and other inventories
245,468
14,092
132,350
2,634,284
2,285,5222,870,585
Less- allowance for obsolete and slow movement items
(163,019)
(99,436)
(126,433)
$
2,471,265$
2,186,086$
2,744,152
The allowance for obsolete and slow movement is determined based on the experience of previous years, considering the
movement of goods in the market. An increase to the reserve is recorded if items lack of movement, until it is considered the total
cost as a loss for impairment.
The allowance for decrease of goods is determined based on the experience of the physical inventories which are performed
cyclically, adjusting it with variable rates in the different plants.
Movements in the allowance for obsolete, slow moving inventories are presented below:
December 31, 2012
December 31, 2011
January 1, 2011
(Transition date)
Balance at beginning of the year
$
99,436
$ 126,433
$
69,222
Period judging 177,496150,579 110,834
Cancellations and applications
(113,913)
(177,576)
(53,623)
Balance at the end of the year
$ 163,019
$
99,436
$
126,433
46
10.Risk management
The Entity has exposure to market risks, operation and use derivative financial instruments such as interest rate, credit, liquidity
and risk, which are administered centrally by Corporate Treasury. The Entity seeks to minimize its exposure to these risks through
the use of hedging with derivative financial instruments. The use of financial derivatives is regulated by the policies of the Entity,
approved by the Board of Directors, which establish the principles to acquiring them. The internal audit area reviews annually the
compliance with these policies and exposure limits. The Board of Directors establishes and monitors policies and procedures to
measure other risks, which are described below:
a. Capital Risk Management - The Entity manages its capital to ensure that it will continue as a going concern while maximizing
the return to shareholders through the optimization of debt and equity balances. The Elementia’s capital structure is made up
of net debt (mainly bank loans and intercompany stock certificates, as seen in Notes 18, 19 and 23) and stockholders’ equity
of the Entity (issued capital, capital reserves, retained earnings and non-controlling participation, as detailed in Note 22). The
capital structure of the Entity is not subject to any capital requirements. The overall strategy of the Entity has not been modified
in comparison to 2011.
The Entity is not subject to any externally imposed requirements for managing capital.
The administration of the entity revises monthly net debt and borrowing costs and their relation to EBITDA (Earnings before
taxes / less interest, exchange rate fluctuations, the effect of valuation of derivative financial instruments, depreciation and
amortization), this is done when files its financial projections as part of the business plan to the Board of Directors and
shareholders of the Entity. The entity has a practice of borrowing no more than 3.50 times EBITDA determined as the ratio of
net debt and interest and capital
The net debt ratio over the period reported is as follows:
December 31, 2012
December 31, 2011
January 1, 2011
(Transition date)
Debt with financial institutions
$ 3,382,396
$ 3,386,381
$ 2,639,002
Stock certificates
3,000,000
3,000,000
3,000,000
Cash and cash equivalents (1,761,935) (3,539,537) (1,503,506)
Net debt with financial institutions 4,620,461 2,846,844 4,135,496
EBITDA
1,876,562
1,748,278
1,186,339
Debt ratio
2.46 1.63
3.49
As mentioned in Note 18 to 1 January 2011, the Entity did not meet one of the reasons financial debt that was subject.
b. Categories of financial instruments December 31, 2012
December 31, 2011
January 1, 2011
(Transition date)
Financial assets
Cash and cash equivalents
$ 1,761,935
$ 3,539,537
$ 1,503,506
Derivative financial instruments in hedge accounting relationships
8,549
-
40,433
Accounts receivable, accounts due from related parties
and prepaid expenses 3,783,754 3,569,798 3,309,315
Equity investments held to maturity
12,297
10,930
10,930
Financial liabilities
At amortized cost:
Loans to financial institutions 3,382,396 3,386,381 2,639,002
Stock certificates
3,000,000
3,000,000
3,000,000
Trade accounts payable 2,330,471 3,220,722
1,073,500
205,918
227,159
278,188
Due to related parties long term
40,462
-
78,791
24,725
44,589
9,412
-
1,068 -
47
c. Objectives of financial risk management
The treasury function provides services to the Entity’s business, coordinates access to domestic and international financial
markets, monitors and manages the financial risks relating to the operations of the Parent Entity through internal risk reports,
which analyze the exposures by degree and magnitude of risks. These risks include market risk (including currency risk,
interest rates on fair value and price risk), credit risk, liquidity risk and the risk of interest rate cash flow.
The Entity seeks to minimize the effects of these risks by using derivative financial instruments to hedge exposures to risk. The
use of financial derivatives is governed by the policies of the Parent Entity approved by the Board of Directors, which provide
written principles on currency risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivatives and
investment of excess liquidity. Internal auditors regularly review compliance with policies and exposure limits. The Entity does
not subscribe or trade financial instruments, among which includes derivative financial instruments, for speculative purposes.
At the end of the reporting period, there are no concentrations of significant credit risk for loans and receivables designated
at fair value through profit or loss. The carrying amount reflected above represents the maximum credit risk exposure of the
Entity’s for such loans and receivables.
d. Interest rate risk management - The Entity is mainly exposed to interest rate risks because it has entered into debt at
variable rates. This risk is managed by maintaining an appropriate combination between fixed and variable rate loans. Hedging
activities are evaluated regularly so they align with interest rates and defined risk, ensuring that more profitable hedging
strategies are applied.
The Entity’s exposures to interest-rate risk are mainly related to changes in the TIIE and LIBOR with respect to the Entity’s
financial liabilities.
- Sensitivity analyses for interest rates The following sensitivity analysis have been determined based on the exposure to interest rates on its total financial
indebtedness unhedged, variable rate sustained, an analysis is prepared assuming that the amount of outstanding liability
at the end of the reporting period has been the outstanding liability for the whole year. The Entity reports internally to
the Board of Management about the risk in interest rates If the interest rates are between 100 and 200 basis points
(BPS) greater/lower and all the other variables remained constant, interest expense for the year of 2012 and 2011 for
the next period would have increased from $288,745 to $486,945 with 100 BPS and to $550,769 with 200 BPS and
from $467,192 to $558,776 with 100 BPS and to $622,640 with 200 BPS 2012 and 2011 respectively , this is mainly
attributable to the exposure of the Parent Entity to interest rates TIIE and LIBOR on its loans.
2012
TIIE 28 Rate
TIIE 91 Rate
LIBOR 6 months Rate
MaximumMinimum
4.8562%
4.8700%
0.8120%
4.7175%
4.7250%
0.5080%
Average
4.7901%
4.8069%
0.6870%
2011
TIIE 28 Rate
TIIE 91 Rate
LIBOR 6 months Rate
MaximumMinimum
Average
4.8500%
4.8500%
0.8210%
4.8200%
4.8100%
0.6870%
4.7500%
4.7600%
0.5080%
e. Exchange risk management - The functional currency of the Entity is the Mexican peso. because the Entity had investments
in foreign subsidiaries, whose functional currency is the Mexican peso is exposed to the risk of foreign currency translation,
the coverage of this risk is mitigated conversion primarily functional currency each of the subsidiaries caring than monetary
assets are equal or greater monetary liabilities. Certain subsidiaries generate U.S. Dollars and in turn hold assets exceed its
liabilities. The Entity performs an analysis of variation in the exchange rates which serves to identify sales opportunities in the
market for corporate treasury dollars.
The following table details the Entity’s sensitivity to an increase and decrease of 10% in weight against dollars. The 10%
is the sensitivity rate used when reporting foreign exchange risk internally to key management personnel and represents
management’s assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis includes only
outstanding monetary items denominated in foreign currency and adjusts their translation at the period end for a 10% change
in exchange rates. The sensitivity analysis includes external loans as well as loans to foreign operations within the entity where
the denomination of the loan is in a currency other than the currency of the lender or the borrower. A positive (as shown in the
table below) indicates an increase in the results and other items of equity capital where the weight is strengthened by 10%
against USD. If you submit a weakening of 10% in weight with respect to the reference currency, there would be a comparable
impact on the results and other comprehensive income, and the balances below would be negative.
48
Asset position (Thousands of US dollar)
Projected exchange +(-)10%
$
Income (loss) results (Thousands Mexican pesos)
$
Increasing effect
Decrement effect
exchange rate US dollar
exchange rate US dollar
20122011 2012 2011
69,054
14,3111
$
89,839
$
62,412
15,3379
$
87,021
$
69,054
11,8273
$
(81,677)
$
62,412
12,6760
(79,112)
At December 31, 2012 foreign currency position by country is summarized as follows:
Mexico
Thousands of US dollar
Colombia
Costa Rica
Monetary assets 56,676 25,924 19,322
Monetary liabilities (25,221) (4,648) (13,718)
Position asset (liability), net
31,455
21,276
5,604
Thousands of US dollar
EcuadorBolivia Peru
Monetary assets 18,151 4,265
Monetary liabilities (5,977) (3,788)
Position asset (liability), net
12,174
477
334
(2,266)
(1,932)
Entity sensitivity to foreign currency has remained at a low level during the last periods mainly due to an active position has
been maintained as noted in paragraph a of footnote 24.
Credit Risk Management - Credit risk refers to the risk that one party fails to meet its contractual obligations resulting
in financial loss to the Entity, and arises principally on accounts receivables and liquid funds. The credit risk on cash and
cash equivalents and derivative financial instruments is limited because the counterparties are banks with high credit ratings
assigned by credit rating agencies. The maximum exposure to credit risk is represented by its carrying amount. The Entity
provides credit primarily to customers in Mexico, after assessing their creditworthiness, which constantly evaluates and follows
up accordingly to credit policies as explained in Note 8.
Accounts receivable consist of a large number of customers spread across diverse geographical areas. Continuous assessment
of credit is made on the financial condition of accounts receivable and there are no concentrations of credit risk in its customer
base, since the balances of these accounts receivable are represented by approximately 1,065 customers, which do not
represent a concentration of risk in the individual.
The Entity has credit guarantees to cover its credit risk associated with financial assets. Such guarantees are represented
by an insurance policy covering 90% of the portfolio of export customers and is effective from 1 June 2012. The estimated
insurable turnover is $ 56,000,000 USD with a rate of 0.125% annual premium on various countries and an annual estimated
premium of $ 70,000 USD and a minimum premium from $ 56,000 USD.
49
Liquidity risk management - Ultimate responsibility for liquidity risk management rests with Board of Director of the Entity,
which has established appropriate policies for the control of such risk through the monitoring of working capital, allowing
management of the Entity’s short-, medium-, and long-term funding requirements. The Entity maintains cash reserves and
available lines of credit lines, continuously monitoring projected and actual cash flows, reconciling the profiles of maturity of
financial assets and financial liabilities.
The following table details the remaining contractual maturities of the Entity’s financial liabilities, based on contractual
repayment periods. The table has been designed based on un-discounted projected cash flows of financial liabilities based
on the date on which the Entity makes payments. The table includes both projected cash flows related to interest and capital
on financial debt in the consolidated statements of financial position. Where the contractual interest payments are based on
variable rates, the amounts are derived from interest rate curves at the end of the period. The contractual maturity is based on
earliest date in which the Entity is required to make the payment.
The amounts included for debt with financial institutions includes both fixed and variable interest rate instruments as is
detailed in Note 18. The financial liabilities at variable rates are subject to change if the changes in variable rates differ from
the estimates of rates determined at the end of the reporting period is presented at fair value.
The Entity expects to meet its obligations with cash flows from operations and resources received from the maturity of
financial assets. In addition, the Entity has access to revolving credit lines with several banking institutions.
As of December 31, 2012
Rate weighted
Average effective Interest
6.3069%
$
Stock Certificates
7.5383%
Total
$
As of December 31, 2011
Rate weighted
6.3100%
$
Stock Certificates
7.5740%
Total
$
As of January 1, 2011
76,274
58,107
2,330,471
205,918
-
2,670,770
3 months
6,236
52,710
3,220,722
227,159
-
3,506,827
Rate weighted
3 months
6..4600%
$
Stock Certificates
7.6140%
Total
$
50
3 months
768
44,263
1,073,500
278,188
-
1,396,719
$
$
$
$
6 months
1 year
89,750
$
58,106
-
-
-
147,856
$
6 months
1 year
70,112
$
49,460
-
-
-
119,572
$
1,859
$
77,247
-
-
-
79,106
$
3,892,074
$
3,417,450
-
40,462
24,725
7,374,711
$
More than 1 year
61,094
$
115,790
-
-
-
176,884
$
6 months
1 year
$
$
More than 1 year
367,299
$
116,214
-
-
-
483,513
$
4,425,397
3,649,877
2,330,471
246,380
24,725
10,676,850
Total
4,309,828
$
3,649,877
-
-
44,589
8,004,294
$
More than 1 year
2,701,949
$
111,432
-
-
-
2,813,381
$
Total
1,009,299
$
3,867,837
-
78,791
9,412
4,965,339
$
4,447,270
3,867,837
3,220,722
227,159
44,589
11,807,577
Total
3,713,875
4,100,779
1,073,500
356,979
9,412
9,254,545
51
11.Fair value of financial instruments
The fair value of financial instruments presented below has been determined by the Entity using information available in the
markets or other valuation techniques that use assumptions that are based on market conditions existing at each reporting date,
but require judgment with respect to their development and interpretation. As a result, the estimated amounts presented below
are not necessarily indicative of the amounts that the Entity could obtain in a current market exchange. The use of different
assumptions and/or estimation methods could have a material effect on the estimated amounts of fair value disclosed below.
Following is a discussion of the hierarchy of fair values, grouped into Levels 1 to 3 based on the degree to which the fair value
is observable:
• Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or
liabilities;
• Level 2 fair value measurements are those derived from inputs other than quoted prices included within level 1, that are
observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
• Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that
are not based on observable market data (unobservable inputs).
Level 1
Financial assets at fair value
Hedging derivative financial instruments
Total
Level 2
Level 3
-
(8,549)
-(8,549)
Total
-
-
(8,549)
(8,549)
The Entity considers that the carrying amount of cash and cash equivalents, accounts receivable and accounts payable from
third parties and related parties and the current portion of bank loans approximate their fair values because they have short-term
maturities. The Entity’s long-term debt is recorded at amortized cost and incurs interest at fixed and variable rates that are related
to market indicators.
The long-term debt of the Entity is recorded at amortized cost and debt is interest at fixed and variable rates that are related to
market indicators.
To obtain and disclose the fair value of long-term debt, quoted market prices or quotations for similar instruments operators are
used. To determine the fair value of financial instruments, other techniques such as estimated cash flows are used, considering
the dates of flow in the market intertemporal curves and discounting these flows with rates that reflect the risk of the counterparty,
as well as the risk of the Entity by itself for the reference period.
The carrying amounts of financial instruments by category and their related fair values at each date are as follows:
31 de diciembre de 2012
Carrying amount
Fair value
Financial assets:
$
Instruments available for sale:
Other investments in shares
$
Loans and account receivable
Accounts receivable
$
Accounts receivable long term
$
1,761,935
$
1,761,935
12,297
1,774,232
$
12,297
1,774,232
2,002,616
$
50,553
214,744
4,042,145
$
2,002,616
50,553
214,744
4,042,145
Bank loans including current portion of long-term debt
$
3,382,396
$
3,024,695
Stock Certificates
3,000,000
3,062,280
(8,549)
(8,549)
Suppliers discounted in factoring
1,301,000
1,301,000
Accounts payable:
$
$
246,380
7,921,227
$
$
246,380
7,625,806
Fair values shown as of December 31, 2012 and 2011, are no different from their carrying values, except for the long-term debt,
since the values observed in the market are very similar to those recorded in this period. The fair value of the receivables and
liabilities at amortized cost are fair value hierarchy Level 3. During the period there were no transfers between Level 1, 2 and 3.
52
December 31, 2012
Carrying amount
$
$
3,539,537
$
10,930
3,550,467
$
December 31, 2011
Fair value
3,539,537
Carrying amount
$
10,930
3,550,467
$
1,503,506
Fair value
$
1,503,506
10,930
1,514,436
$
10,930
1,514,436
$
2,532,814
$
2,532,814
$
2,320,040
$
105,532
105,532
195,367
-
-
-
$
6,188,813
$
6,188,813
$
4,029,843
$
2,320,040
195,367
4,029,843
$
3,386,381
$
3,000,508
$
2,639,002
$
2,504,480
3,000,0003,082,2903,000,0003,025,110
1,068
1,068
(40,433)
(40,433)
1,895,000
1,895,000
-
$
$
227,159
8,509,608
$
$
227,159
8,206,025
$
$
356,979
5,955,548
$
$
356,979
5,846,136
53
12.Derivative financial instruments
The purpose of entering into contracts with derivative financial instruments is: to partially cover the financial risk exposures in
the prices of some metals such as copper, zinc and nickel. The decision to cover a position is due to market conditions, waiting
to be taken on it at a given date, as well as national and international economic context of economic indicators that influence
the operations of the Entity. The contracted hedging instrument relating to copper are traded mainly in the Commercial Metal
Exchange, and related to zinc and nickel are mainly quoted on the London Metal Exchange.
Transactions performed with futures and hedging swaps are summarized below:
Notional
Instrument
Designed as
Amount (‘000)
Unit
Maturity
Copper futures Hedging
1,678
Tons
Feb to Dec 2013
23
Tons
Jan 2014
Zinc futures
Hedging
283
Tons
Jan to Dec 2013
Nickel futures
Hedging
31
Tons
Jan to Feb 2013
Total as of December 31, 2012
Notional
Instrument
Designed as
Amount (‘000)
Unit
Maturity
Aluminium future Hedging
1,025
Tons
Jan to Dec 2012
2,825
Tons
During 2011
2,234
Tons
Jan a Dec 2012
23
Tons
Jan 2013
Zinc futures
Hedging
284
Tons
Jan to Aug. 2012
Nickel futures
Hedging
78
Tons
Jan to Feb 2012
Total as of December 2011
Notional
Instrument
Designed as
Amount (‘000)
Unit
Maturity
275
Tons
Jan to Jun 2011
2,235
Tons
During 2010
75
Tons
Jan to Apr 2011
100
Tons
During 2010
3,527
Tons
Jan to Dec 2011
165
Tons
Jan 2012
Zinc futures
Hedging
1,268
Tons
Jan to Oct 2011
Nickel futures
Hedging
119
Tons
Jan to Feb 2011
Total as of January 2011
54
Valuation as of December 31, 2012
Asset (Liability)
$
$
$
$
$
$
7,779
$
106
646
18
8,549
$
Gain (loss) on
settlement
Cost of sales
5,445
$
74
452
13
5,984
$
Financial cost (income)
(income)
(11,462)
$
-
239
1,783
(9,440)
$
(2,447)
(200)
(5)
(2,652)
Valuation as of December 31, 2011
Asset (Liability)
(565)
$
-
231
226
(720)
(240)
(1,068)
$
(395)
$
-
162
158
(504)
(169)
(748)
$
Instrument
-
$
4,284
30,154
-
3,569
7,871
45,878
$
Designed as
(1,435)
(394)
(757)
(2,586)
Valuation as of January 1, 2011
Asset (Liability)
1,081
$
-
294
-
36,068
958
1,314
718
40,433
$
757
$
-
206
-
25,248
671
920
501
28,303
$
Instrument
-
$
(1,011)
-
(72)
(79,467)
-
1,788
(4,579)
(83,341)
$
Designed as
72,823
(10,441)
17,452
79,834
55
13.Property, machinery and equipment - net
a. For the period ended December 31, 2012 and 2011
Balance as of
December 31, 2011
Revaluations
Investment:
Land
$2,470,503$
Buildings and constructions
3,986,712
Machinery and equipment
12,836,377
Vehicles 262,234
Office furniture
91,334
Computers 119,672
Constructions in process
2,191,852
Total investment 21,958,684
129,814
225,269
(82,448)
185
-
-
-
272,820
Accumulated depreciation:
(2,104,660)
(8,428,721)
Vehicles
(68,189)
Office furniture
(73,637)
Computers
(96,585)
Total accumulated depreciation
(10,771,792)
(177,406)
(127,700)
19,458
-
-
(285,648)
Net investment
$
11,186,892$ (12,828)
January 1, 2011
(Transition date)
Revaluations
Investment:
Land
$2,500,373$ 117,706
4,323,985
195,716
12,374,532
1,145,621
Vehicles 148,465
4,685
Office furniture
97,870
-
Computers 131,466
-
886,539
-
Total investment 20,463,230 1,463,728
Accumulated depreciation:
(2,160,796)
(122,468)
(7,900,465)
(954,269)
Vehicles (111,846)
(946)
Office furniture
(73,081)
-
Computers (106,810)
-
Total accumulated depreciation
(10,352,998)
(1,077,683)
Net investment
$
10,110,232$ 386,045
56
Transfers to
Translation
Additions
related assets
Impairment
Disposals
effect
Saldo al 31 de
December 31,
2012
$ 15,939$
-$
-$ (63,834)
$
(6,997)
$
2,545,425
32,236
8,271
-
(406,510)
(10,737)
3,835,241
287,304
184,008
(40,010)
(3,306,217)
136,256
10,015,270
10,766
4,426
-
(9,015)
(441) 268,155
8,229
238
- (17,464)
(688) 81,649
3,303
28
- (30,814)
(63) 92,126
1,754,798
(196,971)
-
(38,120)
(8,228)
3,703,332
2,112,575
- (40,010) (3,871,974)
109,10220,541,198
(60,791)
(361,240)
(11,017)
(1,925)
(5,901)
(440,874)
$1,671,701$
-
-
-
-
-
-
-
332,684
-
2,348,826
-
12,795
-
18,149
-
26,826
-
2,739,280
8,294
(2,001,879)
31,143
(6,537,692)
372 (46,581)
507 (56,906)
51 (75,609)
40,367
(8,718,667)
-$ (40,010)
$
(1,132,694)
$ 149,469$
11,822,531
Transfers to
Translation
Additions
related assets
Impairment
Disposals
effect
Saldo al 31 de
December 31,
2012
$ 12,680$ 4,986$
-$(156,279)
$
(8,963)
$2,470,503
45,905
7,254
(96,116)
(497,420)
7,388
3,986,712
206,250
92,466
(36,162)
(1,179,991)
233,661
12,836,377
128,064
6,390
(156) (22,356)
(2,858) 262,234
1,132
(1,155)
-
(6,006)
(507)
91,334
5,640
1,506
(151) (18,476)
(313) 119,672
1,435,322
(111,447)
(9,518)
(11,166)
2,121
2,191,852
1,834,993
- (142,103) (1,891,694)
230,52921,958,684
(60,342)
(385,486)
(5,216)
(7,880)
(5,867)
(464,791)
$1,370,202$
-
-
207,366
31,580
(2,104,660)
-
-
662,188
149,311
(8,428,721)
-
-
45,660
4,159 (68,189)
-
-
5,806
1,518
(73,637)
-
-
15,947
145 (96,585)
-
-
936,967
186,713
(10,771,792)
-$(142,103)
$(954,727)
$ 417,242$
11,186,892
57
Depreciation recorded in results amounted to $ 440,874 and $464,790 as of December 31, 2012 and 2011, respectively and in
inventories amounted to $ 22,044 and $ 25,539 in 2012 and 2011, respectively.
Accumulated losses by impairment
Balance as of
January 1, Increase to Reversal to 2011
impairment
impairment
Land
$
Vehicles
Office furniture
Computers
Development costs
Installation costs
Total investment
$
52,436
$
96,116
$
57,410
36,162
673
156
579
-
4
151
127,937
9,518
72,160
-
3,529
-
314,728$ 142,103$
At December 31, 2012 and 2011 and January 1, 2011 the Entity and certain of its subsidiaries serve as credited, guarantors,
sureties and / or guarantors in the credits shown in notes 18 and 19, the subsidiaries are integrated as follows:
December 31, 2012
December 31, 2011
January 1, 2011
(Transition date)
Elementia ElementiaElementia
Nacobre NacobreNacobre
Mexalit Industrial
Mexalit Industrial
Mexalit Industrial
Comecop ComecopComecop
Frigocel FrigocelFrigocel
Duralit DuralitDuralit
Maxitile Inc
Maxitile Inc
Maxitile Inc
TrituradoraTrituradora
-
Almexa Aluminio
Almexa Aluminio
-Maxitile
-
-
Aluminio Conesa
-
-Eureka
-
-Pronaco
The property, plant and equipment relating to those entities have a carrying value of $ 10,404,136,
$ 10,020,128 and $ 9,374,774 at December 31, 2012 and 2011 and January 1, 2011, respectively. The Entity is obligated to
maintain these fixed assets insured and can sell up to $ 25 million a year, in the event that the Entity plan to sell or terminate a
higher amount must request permission from the creditors.
58
-
-
-
-
-
-
-
-
-
Layout assets
Balance as of
December 31,
Increase to
Reversal to
2011
impairment
impairment
Layout assets
$
-
$
148,552
$
-
93,572
-
829
-
579
-
155
(129,204)
8,251
(72,160)
-
(3,529)
-
$ (204,893) $ 251,938 $
-
$
40,010
-
-
-
-
-
-
40,010 $
-
$
-
-
-
-
-
-
-
-$
Balance as of
December 31,
2012
-
$
148,552
-
133,582
-
829
-
579
-
155
-
8,251
-
-
-$ 291,948
14.Intangible assets and other assets - Net
Intangible assets with a definite life and long-term prepaid expenses and others are comprised as follows:
Years of amortization
December 31, 2012
December 31, 2011
January 1, 2011
(Transition date)
Indefinite-lived intangible assets:
Indefinite
$507,507$
507,507$507,507
Goodwill (1)
Assets with definite lives:
Exclusive distribution rights
2 years
$ 164,517
$ 164,517
$
164,517
Trademarks and other rights (2)
Variety 79,125 77,459 77,459
Advertising agreement
10 years
12,065
12,065
10,710
SAP implementation
5 years
296,630
81,067 63,204
Non-compete contract (Fibraforte)
10 years
46,986
46,986
46,986
Software licenses
2 years
51,856
6,619
Installation costs
5 years
31,309
15,794
11,907
Accumulated amortization(269,949)(200,041) (187,898)
412,539204,466 186,885
Long-term prepaid expenses – fixed assets
177,815
113,299
116,139
Assets held for sale
9,625
9,625
15,703
Guarantee deposits 369
2,272
3,333
Others
-
502
446
187,809125,698 135,621
Net investment
$
1,107,855$
837,671$830,013
Includes goodwill generated by the acquisition of Fibraforte, S.A., Trituradora and Procesadora de Metales Santa Anita, S.A. de C.V., Frigocel,
S.A. de C.V. and Frigocel Mexicana, S.A. de C.V. and Grupo Nacobre.
(2)
Includes Ps.60,001 related to an indefinite-lived trademark generated from the Nacobre acquisition and Ps.40,834 related to an indefinitelived trademark generated from the Fibraforte acquisition, among others.
(1)
59
Cost
Exclusive
distributionTrademarks
rights
and other rights
Balances as of January 1, 2011
$
164,517
$
77,459
Translation effect
-
-
Additions
-
-
Disposals - -
164,517
77,459
Translation effect
-
-
Additions
-1,666
Disposals - -
$
164,517
$
79,125
Accumulated amortization
Exclusive
distributionTrademarks
rights
and other rights
Balances as of January 1, 2011
$
(164,517)
$
Amortization expenses
-
Disposals
-
(13,748)
(551)
-
(164,517)
(14,299)
Amortization expenses--
$
(164,517)
$
(14,299)
Amortization recorded in results amounted to $ 69,908 and $ 12,143 in 2012 and 2011, respectively.
15.Investment in shares of associated companies and others
a. At December 31, 2012 and 2011, the balance of investment in shares is comprised as follows:
Associated
2012
Grupo Cuprum, S. A. P. I. de C. V. and Subsidiaries
20.00
Shares held to maturity
Others investment in shares from entities in Colombia and South America
2011
20.00
2012
2011
Variety
Variety
b. The recognition of the equity method over the associate was as follows:
Grupo Cuprum, S. A. P. I. de C. V. and Subsidiaries (1)
Stockholders’
equity
$
2,520,000
Comprehensive
income
$
174,000
Variety
Variety
Total
Investment in shares includes a full fair value of approximately $308,000.
(1)
Stockholders’
equity
Comprehensive
income
Grupo Cuprum, S.A. P.I. de C.V. and Subsidiaries (1)
$
2,426,000
$
120,000
Various
Various
Total Investments in share include a full fair value of approximately $308,000.
(1)
60
Advertising
SAP
agreement
implementation
Non-compete Software
contract
licenses
Installation
costs
Total
$
10,710
$
63,204
$
46,986
$
-
$
11,907
$
374,783
1,355
520
-
-
4,089
5,964
- 80,547
-
6,619
- 87,166
-
(63,204)--
(202)
(63,406)
12,065
81,067
46,986
6,619
15,794
404,507
-
2,941
-
-
-
2,941
-212,899-45,237
15,515275,317
-
(277)-- -
(277)
$
12,065
$
296,630
$
46,986
$
51,856
$
31,309
$
682,488
Advertising
SAP
agreement
implementation
$
-
$
-
-
Non-compete Software
contract
licenses
-
$
(1,701)
-
(1,946)
$
(4,700)
-
Installation
costs
-
$
(2,417)
-
Total
(7,687)
$
(187,898)
(2,774)
(12,143)
-
-
-
(1,701)
(6,646)
(2,417)
(10,461)
(200,041)
-
(58,813)
(4,700)
(6,394) -
(69,907)
$
-
$
(60,514)
$
(11,346)
$
(8,811)
$
(10,461)
$
(269,948)
Activity
Manufacture and sale of aluminum products
Activity
Variety services
2012
Ownership
percentage
20
Investment
in shares
$
Variety
$
801,118 Equity in
income
$
34,760
12,297 813,415
$
34,760
2011
Ownership
percentage
Investment
in shares
20
$
Various
$
766,358 $
10,930 777,288
$
Equity in
income
-
61
16.Financial factoring to vendors
As from May 17, 2010, the Entity has entered into financial factoring to vendors with several banking institutions. The operation
consists in buying documents to such vendors by the Entity, up to an amount of $ 3,287 million and 650,000 USD. As of
December 31, 2012, vendors have made use of this instrument in the amount of $ 1,269,000 and 32,000 USD, which the Entity
includes within the suppliers line in the accompanying balance sheet.
Integration by each bank as of December 31, 2012 is shown below:
2012
Banamex
Santander
HSBC (MXN)
(Thousands (Thousands
(Thousands of
of pesos)
of pesos)
pesos)
Boundary
HSBC
(USD)
Total
(Thousands of
pesos)
Total
(USD)
$
1,087,000$
1,200,000$
1,000,000$650,000$
3,287,000$650,000
Balance used $
1,010,000$31,000$
228,000$32,000$
1,269,000$ 32,000
Balance available
$ 77,000$
1,169,000$
772,000$618,000$
2,018,000$618,000
17.Provisions
The provisions presented below represent charges incurred during 2012 and 2011, or contracted services attributable to the
year, which is expected to be settled within a period not exceeding one year. Final amounts to be paid as well as the schedule
of outflow of economic resources, involve uncertainty and could therefore change, which the Entity includes within the accrued
expenses and taxes other than income taxes line in the accompanying balance sheet.
2012
InitialFinal
balance AdditionsApplications balance
$
Services
For supplies or consumables and energetic
Others
$
84,095
$ 631,331
$ (606,300)
$
109,126
54,347 733,960(736,574) 51,733
1,854
17,905
(265)
19,493
17,415 1,573,449(1,566,845)
24,019
157,711
$ 2,956,645
$(2,909,984)
$
204,371
2011
InitialFinal
balance AdditionsApplications balance
$
62,843
$
Services 57,064
For supplies or consumables and energetic
19,281
Others
7,406
$ 146,594 $
62
238,617
$ (217,365)
$
84,095
324,610(327,327) 54,347
18,123
(35,550)
1,854
123,834(113,825)
17,415
705,184 $(694,067) $ 157,711
18.Long-term debt
At the dates indicated, bank loans are comprised as is shown below:
Stock Certificates for Ps.3,000,000 bearing monthly interest rate
at the Mexican Interbank Equilibrium Offered rate (“TIIE”) plus
275 basis points, with maturity on October 22, 2015
December 31, 2012
$ 3,000,000
Promissory notes with HSBC Bank (Nacional de Cobre, S.A. de C.V.
and Mexalit Industrial, S.A. de C.V.), bearing interest at the TIIE
rate applicable to each interest period (three months) plus 150
basis points, with principal payable beginning in September
2012 and quarterly interest repayments beginning in September
2011, maturing in 2016. The Entity’s subsidiaries Maxitile Industries,
S.A de C.V. and Frigocel, S.A de C.V. have provided mortgage
guarantees as collateral.
Promissory notes with BBVA Bancomer (Nacional de Cobre,
S.A. de C.V. and Mexalit Industrial, S.A. de C.V.) bearing interest
at the TIIE rate applicable to each interest period (three months)
plus 150 basis points, with principal payable beginning in
September 2012 and quarterly interest repayments beginning
in September 2011, maturing in 2016. The Entity’s subsidiaries
Maxitile Industries, S.A de C.V. and Frigocel, S.A de C.V. have
provided mortgage guarantees.
December 31,
2011
January 1, 2011
(Transition date)
$ 3,000,000
$ 3,000,000
1,300,550 1,369,000
840,750
-
884,999
-
Promissory notes with Banamex (Nacional de Cobre, S.A. de C.V.
and Mexalit Industrial, S.A. de C.V.) bearing interest at the
TIIE rate applicable to each interest period (three months) plus
150 basis points, with principal payable beginning in September
2012 and quarterly interest repayments beginning in September
2011, maturing in 2016. The Entity’s subsidiaries Maxitile
Industries, S.A. de C.V. and Frigocel, S.A. de C.V. have provided
mortgage guarantees.451,250475,000
-
Promissory notes with HSBC Bank PLC HSBC Branch Spain
(Trituradora y Procesadora de Materiales Santa Anita, S. A. de C. V.)
denominated in USD bearing interest at the 6-month London Interbank
Offered Rate (“LIBOR”) applicable to each interest period (6 months)
plus 130 basis points, payable over a maximum period of 10 years
from the date of commencement of the project. Elementia,
S.A. de C.V. and subsidiaries provide certain guarantees as collateral.
795,307
660,276
-
Syndicated loan with 12 banks, for Ps.1,567,781, represented by
promissory notes bearing quarterly interest at LIBOR plus 350
basis points. Principal is paid in quarterly installments of varying
amounts beginning November 19, 2011, with maturity on
August 19, 2015.
-
-
1,567,781
Syndicated loan with Citibank, N.A. for $86.94 million, represented by
promissory notes bearing quarterly interest at LIBOR plus 350 basis
points. Principal is paid in quarterly installments of varying amounts
beginning on November 19, 2011, with maturity on August 19, 2015.
-
-
1,076,486
Simple credit issued by Industrias Duralit, S. A. (foreign subsidiary)
with Banco Bisa amounting to $1.9 million maturing through 2014,
bearing interest at a rate of 5.50% plus the average TRE
(reference rate calculated by Banco Central of Bolivia), requiring
quarterly payments. 10,489 18,856 22,285
6,398,346
6,408,131
5,666,552
Less – current portion
(456,267) (120,474) (2,688,338)
Long-term debt
5,942,079
6,287,6572,978,214
Less-placement expenses on short-term debt
(15,950)
(21,750)
(27,550)
Long-term debt, excluding current maturities and placement expenses
$ 5,926,129
$ 6,265,907
$ 2,950,664
63
At December 31, 2012 maturities of long-term debt are as follows:
(1)
Year
2014
$765,053
20153,761,788
2016 and thereafter 1,415,238
$5,942,079
In December 2012 financial reasons restrictive loan agreements of the Entity were renegotiated.
Certain loan agreements contain restrictive covenants under which if the Entity is not compliant, the banks could demand payment.
The most significant covenants relate to the payment of dividends, compliance with certain financial ratios, insuring of assets
provided as guarantees, prohibition on the sale or disposition of assets, prohibition on acquiring any other contingent liabilities or
contractual liabilities. At December 31, 2011 the Entity was in compliance with all covenants.
On June 30, 2011, the Entity informed the public that it settled, in advance, syndicated loans it held with various banks totaling
approximately $2,700,000, which were replaced by a new loan under a “Club Deal” scheme, which had improved interest rates,
maturity profile and financial flexibility that would allow the Entity to reduce its interest expense by an estimated USD$11.4
million. Additionally, the early settlement helped the Entity resolve its non-compliance with respect to certain covenants that
limited its financial leverage abilities and for which the Entity obtained a waiver dated March 15, 2011
At January 1, 2011, the Entity did not comply with one of the financial ratio covenants and consequently, the debt was reclassified
to short-term in the accompanying consolidated financial statements.
19.Stock certificates
The Entity issued on October 22, 2010 under a 5 year program, stock certificates in pesos, specifically unsecured interest rate
discount ranging between 7.5383% and 7.5740%, maturing in 28 days revocable, up to an amount of $ 5,000,000. At December
31, 2012, the outstanding amount was $ 3,000,000 maturing on May 25, 2015.
The bonds contain obligations to do and not do, and compliance with certain financial ratios, which have been met to date. In
December 2012 were renegotiated restrictive financial ratios of stock certificates.
20.Income taxes
ISR is based on taxable income, which differs from the profit reported in the statement of comprehensive (loss) income due to
the items of income or expenses taxable or deductible in other years and items that are never taxable or deductible. The liability
of the Parent Entity for the concept of current tax is calculated using tax rates enacted or substantially approved at the end of
the reporting period.
The Entity is subject to ISR and IETU in México.
ISR - The rate is 30% for the years 2012 and 2011, and will be 29% for 2013 and 28% by 2014.
On December 7, 2009, amendments to the ISR Law were published, to become effective beginning in 2010. These amendments
state that: a) ISR relating to tax consolidation benefits obtained from 1999 through 2004 should be paid in installments beginning
in 2010 through 2014, and b) ISR relating to tax benefits obtained in the 2005 tax consolidation and thereafter, should be
paid during the sixth through the tenth year after that in which the benefit was obtained. Payment of ISR in connection with
tax consolidation benefits obtained from 1982 (tax consolidation starting year) through 1998 may be required in those cases
provided by law.
IETU - Revenues, as well as deductions and certain tax credits, are determined based on cash flows of each fiscal year. Beginning in
2010, the IETU rate is 17.5%. The Asset Tax (IMPAC) Law was repealed upon enactment of the IETU Law; however, under certain
circumstances, IMPAC paid in the ten years prior to the year in which ISR is paid for the first time, may be recovered, according to
the terms of the law. In addition, as opposed to ISR, the parent and its subsidiaries will incur IETU on an individual basis.
Additionally, unlike the income tax, the flat tax is incurred individually by the parent and its subsidiaries.
Income tax incurred will be the higher of ISR and IETU.
Based on its financial projections, the Entity determined that it will pay ISR, therefore only recognizes deferred ISR.
64
a. Income taxes are as follows:
December 31, December 31,
20122011
ISR current $ 229,002
$
489,263
IETU current
4,931
10,656
ISR deferred (272,554)
(59,848)
$ (38,621) $ 440,071
b. The income tax rates in foreign companies was as follows:
% Rate ISR
December 31, December 31, January 1, 2011
20122011
(Transition date)
Panama Colombia
Ecuador :
Over retained earnings
Over retained earnings subject to capitalization
United States of America
Bolivia
Peru30%
25%
25%
25%
33%33% 33%
24%
24%
25%
15%
15%
15%
35%
35%
35%
25%25% 25%
30%
30%
c. Deferred income taxes and benefit in tax consolidation are as follows:
Deferred ISR
December 31, 2012
December 31, 2011
January 1, 2011
(Transition date)
$
1,490,324$
1,797,189$
1,954,515
d. The reconciliation of the statutory and effective tax rate on amounts expressed as a percentage of income before income
taxes is as follows:
2012% 2011 %
Income (loss) before income taxes
$ 777,936
(5)
$ 962,600
46
More (less) effect of permanent differences:
Non-deductible expenses
108,963440,7411
Non-taxable income
-
-
(59,217)
(2)
Effects of inflation – Net
186,254
7
55,140
2
Equity in income of associated Entity
(34,760)
(1)
165,083
5
Income in sale shares subsidiaries -Net (1,292,367)
(50)
211
Effect of tax loss carryforwards
-
-
211
IETU effect
4,931
-
40,640
1
Tax effect due to tax rate changes
18,201
1
101,732
3
Others
102,1064
155,9736
Total of permanent differences (906,672)
(35)
504,303
16
Income (loss) basis of income taxes
$ (128,736)
30
$ 1,466,903
30
65
e. The main items that give rise to a deferred ISR liability are:
Other
Recognized
comprehensive
in income
income
Deferred ISR asset:
$ 140,058
$
Recoverable IMPAC paid
-
52,562
Provisions 1,170
11,440
PTU liability
(459)
Allowance for obsolete inventories
31,577
Intangible assets 40,864
Other assets 8,504
Deferred ISR asset
285,716
December 31,
2012
-
$
140,058
-
-
52,562
- 1,170
-
11,440
-
(459)
-
31,577
-
40,864
-
8,504
-
285,716
Deferred ISR (liability)
Property, plant and equipment (1,200,635) (112,433) (1,313,068)
Inventories
(81,495)
-
(81,495)
Employee benefits
(229,952)
61,242
(168,710)
Negative goodwill carried to results of operations
(141,873)
-
(141,873)
-
(2,565)
(2,565)
Prepaid expenses
(61,084)
-
(61,084)
Others
(7,245)
-
(7,245)
(1,722,284) (53,756)(1,776,040)
Allowance for tax loss carryforwards
-
-
Valuation allowance for recoverable IMPAC paid
-
-
Net deferred ISR liability
$ (1,436,568)
$ (53,756)
$ (1,490,324)
Other
Recognized
comprehensive
in income
income
Deferred ISR asset:
$ 149,732
$
Recoverable IMPAC paid
41,428
48,491
Provisions 61,069
7,463
PTU liability 30,916
Allowance for obsolete inventories
22,885
Intangible assets 55,479
Other assets 1,350
Deferred ISR asset
418,813
December 31,
2011
-
$
149,732
-
41,428
-
48,491
- 61,069
-
7,463
- 30,916
-
22,885
-
55,479
-
1,350
-
418,813
Deferred ISR (liability)
Property, plant and equipment (1,406,095) (116,354) (1,522,449)
Inventories (264,088)
- (264,088)
Employee benefits
(143,393)
27,967
(115,426)
Negative goodwill carried to results of operations
(141,873)
-
(141,873)
-
320
320
Prepaid expenses
(35,345)
-
(35,345)
Others
(16)
-
(16)
(1,990,810) (88,067)(2,078,877)
Allowance for tax loss carryforwards
(95,697)
-
(95,697)
Valuation allowance for recoverable IMPAC paid
(41,428)
-
(41,428)
Net deferred ISR liability
$ (1,709,122)
$ (88,067)
$ (1,797,189)
66
f. Tax consolidation
The balances of deferred tax liabilities are as follows:
20122011
(Transition date)
Liabilities from consolidated tax loss
$
Less - Deferred tax liabilities short-term fiscal
Deferred tax liabilities long-term fiscal
$
22,587
$
(5,057)
17,530
$
130,111
$
(5,846)
124,265
$
154,722
(5,312)
149,410
g. The benefits from tax loss carryforwards and for those who already partially recognized deferred tax liabilities and prepaid ISR,
respectively, can be recovered subject to certain conditions. The maturity date of the tax losses of the individual entities, and
restated amounts to December 31, 2012 are:
Year of maturity
Total
Tax loss carry
forwards
2014
$70,777
20161,642
20179,476
2018 and there after
16,103
$97,998
Liabilities from consolidated tax loss
$
29,047
Less historical partial payments
(6,460)
Liabilities payable from consolidated tax loss
22,587
$
21.Employee Benefits
The Entity has plans to payments for retirement, death or total disability non-union staff in most of its subsidiaries, and seniority
premium payments for all staff, in accordance with the terms of employment contracts. The related liability and annual cost of
benefits are calculated by an independent actuary on the bases defined in the plans using the unit credit method.
a. Present value of these obligations and the rates used for the calculations are:
20122011
(Transition date)
Defined benefit obligation
$
Plan assets at fair value
Funded status - Overfunded
$
(510,815)
$ (452,505)
$
749,883
771,879
239,068
$ 319,374
$
(402,388)
764,651
362,263
b. Nominal rates used in actuarial calculations are as follows:
Discount of the projected benefit obligation at present value
Salary increase
Expected yield on plan assets
20122011
(Transition date)
% %%
6.75
4.50
7.75
7.75
4.50
7.75
7.75
4.5 a 5.0
7.70 a 9.25
In the Colombian entities, the liability corresponds mainly to the legal obligations those entities have with their personnel which
are adjusted at year end in accordance with the legal requirements of each country and the labor obligations in effect.
In accordance with the local law of the countries where Elementia operates, necessary provisions have been recorded for the
corresponding amounts taking into consideration the related obligations.
Net cost for the period includes the following items:
20122011
Service cost
$
Interest cost
Expected yield on plan assets
Net cost for the period
$
14,721
$
32,542
(57,656)
(10,393)
$
18,405
27,839
(58,580)
(12,336)
67
c. Changes in the present value of the defined benefit obligation:
20122011
Present value of defined benefit obligation at beginning of period
$
Service cost
Interest cost
Benefits paid
Acquisition / disposal or demerger of business
Actuarial losses
Present value of defined benefit obligation at end of period
$
452,505
$
14,721
32,542
(60,163)
(22,818)
94,028
510,815
$
402,388
18,405
27,839
(28,114)
(22,131)
54,118
452,505
d. Changes in the present value of plan assets in the current period:
20122011
Opening fair value of plan assets
$
Expected return on plan assets
Actuarial losses
Sale of business
Benefits paid
Closing fair value of plan assets
$
771,879
$
57,656
(18,508)
(15,097)
(46,047)
749,883
$
764,651
58,580
(38,543)
(12,809)
771,879
e. Major categories of plan, and the expected rate of return at the end of the reporting period is reported for each category:
Expected return
Fair value of plan assets
20122011 2012 2011
%%
Equity instruments
Debt instruments
Weighted average expected
7.96
7.54
7.75
7.92
$ 261,393
$
7.58
488,490
7.75
$ 749,883
$
154,376
617,503
771,879
The overall expected rate of return is a weighted average of the expected returns of the various categories of plan assets. The
evaluation of the directors on the expected returns based on historical return trends and analysts’ predictions on the market
for assets over the life of the related obligation.
The current yield on plan assets amounted to $ 40.737 and $ 20.037 at December 31, 2012 and 2011, respectively.
The Entity has not quantified the amount of contributions made to defined benefit plans in fiscal 2013.
Employee benefits granted to key management personnel (and / or directors of the Entity) were as follows:
20122011
(Transition date)
Postretirement benefits
$68,035$37,041$ 32,374
Termination benefits
705
572
481
Short and long term benefits
$
68,740
$
37,613
$
32,855
68
22.Stockholders’ equity
a. Common stock at par value (historical pesos) as of December 31, is as follows:
Series “A” Series “A” and sub-series “L”
Series “B” Series “B” and
sub-series “L”
Total capital stock (historical pesos)
Effects of restatement for inflation through 1998
Total capital stock
Number of shares Amount
20122011 2012 2011
4,855,533
10,917,191
4,136,221
9,299,865
29,208,810
-
29,208,810
4,260,976
$
9,580,388
3,629,775
269,853
$
606,736
229,875
76,173
171,268
64,889
8,161,071
516,851
25,632,210 1,623,315
-
389,590
25,632,210
$ 2,012,905
$
145,895
458,225
389,590
847,815
b. At the General Meeting of Shareholders on December 20, 2012, it was decided to carry out a capital increase variable $
582.545, by issuing 1,788,300 common shares, nominative, without par value Class II, representing the variable portion capital
of the Entity at a subscription price of $ 325.75 pesos each.
c. At the General Meeting of Shareholders on July 13, 2012, it was decided to carry out a capital increase variable $ 582.545,
by issuing 1,788,300 common shares, nominative, without par value Class II, representing the variable portion capital of the
Entity at a subscription price of $ 325.75 pesos each.
d. At the Special General Meeting held on June 13, 2011, the Entity adopted a variable capital scheme and accordingly approved
the reorganization of its capital stock. Additionally, the Entity approved the reduction of capital by 64 shares for a nominal value
of $1 and additional paid-in capital of $14.
e. Retained earnings include the statutory legal reserve. The General Corporate Law requires that at least 5% of net income
of the year be transferred to the legal reserve until the reserve equals 20% of capital stock at par value (historical pesos).
The legal reserve may be capitalized but may not be distributed unless the entity is dissolved. The legal reserve must be
replenished if it is reduced for any reason. As of December 31, 2011 and 2010, the legal reserve, in historical pesos, was
Ps.26,916.
f. Stockholders’ equity, except for restated paid-in capital and tax retained earnings will be subject to ISR payable by the Entity
at the rate in effect upon distribution. Any tax paid on such distribution may be credited against annual and estimated ISR of
the year in which the tax on dividends is paid and the following two fiscal years.
g. The balances of the stockholders’ equity tax accounts as of are:
20122011
(Transition date)
Contributed capital account
$ 7,350,815
$ 5,960,264
$ 5,741,720
Net tax income account 3,048,677 5,103,596 4,091,598
$ 10,399,492
$11,063,860
$ 9,833,318
69
23.Transactions and balances with related parties
a. Transactions with related parties, carried out in the ordinary course of business, were as follows:
20122011
(Transition date)
Income:
Sales
$15,866$ 9,628$ 10,514
Sale Litho project
-
128,049
Sale fixed assets
37,562
-
Interest
733
-
leasing
145
-
Services 5,312 1,100
$59,618$
138,777$ 10,514
Expenses:
Technical assistance
$
162,802$
140,741$133,151
Purchase of materials
3,422
1
98,049
128,487
Freight
-126,777135,896
Interest 25,322 4,865 6,809
SAP implementation 21,519 31,341
Donations
- 6,000 6,000
Purchase of land
-
-
30,000
-
- 1,957
Purchase fixed assets
37,867
-
Technical services 27,573
-
Safe 8,537
-
Other services 7,121
356
238
Total
$
294,163$
508,129$442,538
Related parties are comprised of Kaluz, S.A. de C.V., Fundación Kaluz, A.C., Inmobiliaria Patriotismo, S.A., Grupo Carso, S.A.B.
de C.V., Mexichem Servicios Administrativos, S.A. de C.V., Logtec, S.A. de C.V., Servicios Condumex, S.A. de C.V., Mexicana de
Servicios para la Vivienda, S.A. de C.V., Cobre de Mexico, S.A. de C.V., Pochteca Materias Primas, S.A. de C.V, Precitubo, S.A.
de C.V., PAM PAM, S.A. de C.V., Mexichem Soluciones Integrales, S.A. de C.V., Nacional de Conductores Eléctricos, S.A. de C.V.,
Mexichem Compuestos, S.A. de C.V., Mexichem Colombia, S.A.S and Grupo Financiero Inbursa, S.A. de C.V.
The Entity performed financial factoring transactions with Banco Ve por Más, S. A. and Casa de Bolsa Arka, S.A., which such
transactions were carried out based on existing market conditions.
b. Balances with related parties are as follows:
20122011
(Transition date)
Due from related parties:
Kaluz, S.A. de C.V.
$
Others
Total short-term
$
70
-
$
54,979
$
-
- 52,712
-$54,979$ 52,712
Long-term accounts receivable – Long-term accounts receivable represent amounts owed from Grupo Carso, S. A. B. de C.
V. for $ 50,553, $ 50,553 and $87,301 at December 31, 2012, 2011 and January 1, 2011, respectively, which correspond
to asset tax that Productos Nacobre, S.A. de C.V., Grupo Aluminio, S.A. de C.V. y Almexa Aluminio, S.A. de C.V. paid to Grupo
Carso for the majority participation in fiscal consolidation through 2009, at which time Grupo Carso elected not to consolidate
such entities from a fiscal standpoint. Grupo Carso has the right to recover such amounts as it recovers minority tax on assets.
As a result of the sale of Aluminio Conesa, S.A. de C.V. in June 2011, explained in Note 3, the balance to be recovered at
December 31, 2010, of $55,354, are canceled.
20122011
(Transition date)
Due to related parties:
Kaluz, S.A. de C.V.
$
6,543
$
-
$
21,625
Fundación Kaluz, A.C.
1,000
-
Inmobiliaria Patriotismo, S.A.
693
1,232
132
Grupo Carso, S.A.B. de C.V. (2)150,266215,369 255,187
Cobre de Mexico, S.A. de C.V.
558
-
Radiomovil Dipsa, S.A. de C.V.
5,034
-
PAM PAM, S.A. de C.V.
273
-
Conductores Mexicanos Eléctricos y de
Telecomunicación, S.A. de C.V.
9,083
-
Precitubo, S.A. de C.V.
7,730
-
Grupo Pochteca, S.A.B. de C.V.
-
164
Pochteca Materias Primas, S.A. de C.V.
30
-
Conticon , S.A. de C.V.
41
-
Telgua, El salvador, Honduras y Nicaragua
769
-
Nacional de Conductores Eléctricos, S.A. de C.V.
48
-
Mexichem Soluciones Integrales, S.A. de C.V.
43
-
Mexichem Compuestos, S.A. de C.V.
288
-
Mexichem Colombia, S.A.S.
18
-
-
Mexichem Servicios Administrativos, S.A. de C.V. (1) 19,895
Mexichem, S.A.B. de C.V.
1,392
10,394
1,244
Others Kaluz 2,214
-
Total short-term
$
205,918$
227,159$278,188
20122011
(Transition date)
Accounts payable-long term
Kaluz, S.A. de C.V. (3)
$
-$
Mexichem Servicios Administrativos, S.A. de C.V. (1) 40,462
Total long-term
$40,462$
-$ 78,791
-
-$ 78,791
The account payable to Mexichem Administrative Services, S.A. de C.V. corresponds to the use of SAP licenses indefinitely which fully billed
in February 2012 and will be paid over a period of five years in quarterly maturities.
(2)
The account payable to Grupo Carso, S.A.B. de C.V. asset tax includes $ 145.687, $ 172.465 and $ 232.387 at December 31, 2012,
December 31, 2011 and January 1, 2011, respectively.
(3)
The Entity had entered into a contract with Kaluz, S.A. de C.V. for an amount up to $ 70, 000, which accrue interest at the TIIE rate plus 300
basis points annually. At December 31, 2010, the balance includes $67,108 capital and interest of $11,683. On June 30, 2011, a contract
was signed whereby the Entity sold to Kaluz, S.A. de C.V. the “Litho” project for an amount of $128,049. The transaction includes the transfer
of all tangible and intangible assets used under the project. Through such date, interest was incurred and paid.
(1)
71
24.Foreign currency balances and transactions
a. As the foreign currency monetary position is as follows:
Thousands of U.S. dollars
20122011
(Transition date)
U.S. dollar:
Monetary assets124,672131,213 250,240
Monetary liabilities (55,619) (68,801) (291,891)
Net monetary (liability) asset position
69,053
62,412
(41,651)
Equivalent in Mexican pesos
$
898,399
$
870,497
$
(515,710)
b. Transactions denominated in foreign currency were as follows:
Thousands of U.S. dollars
20122011
(Transition date)
Sales 21,348 10,990 58,251
Purchases 39,633 19,177 67,160
Industrial machinery and equipment
880
35,289
18,642
Interest
957
-
Services 2,058
-
Spare parts
158
-
SAP implementation
29
-
Technical assistance
324
-
Other services
537
-
Air services
294
-
Thousands of euros
20122011
(Transition date)
Industrial machinery and equipment
15,150
18,662
10,263
c. Mexican peso exchange rates in effect at the dates of the consolidated statement of financial position and at the date of
issuance of these consolidated financial statements were as follows:
Mexican pesos per one U.S. dollar
72
20122011
(Transition date)
$
13.0101
$
13.9476
$
12.4545
25.Main operating cost and expenses
2012
Cost of
Operating
salesexpenses
Labor cost
$ 773,949
$
Raw materials and auxiliary materials 8,193,423
Other expenses output
260,864
Repair and maintenance
352,625
Wages and salaries
-
467,261
Others
- 729,259
Leasing39,187
Tax and rigths
-
45,793
PTU liability
-
63,079
Advertising
- 8,430
Safe
27,076
31,349
External services
250,767
407,322
Depreciation and amortization
414,728
96,054
$10,273,432
$ 1,887,734
2011
Cost of
Operating
salesexpenses
Labor cost
$ 788,730
$
Raw materials and auxiliary materials 9,350,406
Other expenses output
216,306
Repair and maintenance
-
603,010
Wages and salaries
343,483
Others
- 573,498
Leasing
- 22,638
Tax and rigths
-
28,004
PTU liability
-
94,387
Advertising
- 5,027
Safe
25,276
32,396
External services
360,239
402,151
378,793
98,140
Total
$11,463,233
$ 1,859,251
73
26.Discontinued operations
The Entity decided to discontinue certain operations as it determined that they are not viable operations given the Entity’s new
business prospects. The operations of the following legal entities, engaged in manufacturing and marketing concrete pipe within
the Fibre-Cement segment were discontinued: Compañía Mexicana de Concreto Pretensado Comecop, S.A. de C.V., Comecop
Servicios Industriales, S. A. de C.V. and Operadora de Aguas, S.A. de C.V. Additionally, the Entity decided to discontinue the
operations at the Mexalit Industrial, S.A. de C.V. plant located in the state Chihuahua (Chihuahua).
As mentioned in Note 3, on March 24, 2012, the Entity sold 100% of the shares of Almexa Aluminio, S.A. de C.V. and Aluminio
Holdings, S.A. de C.V.
Additionally, as mentioned in Note 2, on June 6, 2011, the Entity sold 100% of the shares of Aluminio Conesa, S.A. de C.V. and
Industrializadora Conesa, S.A. de C.V..
Due to the above income statements are presented net of the loss generated by the sale under the heading of discontinued
operations.
Combined condensed financial information for the aforementioned discontinued operations is as follows:
20122011
Statements of comprehensive income:
Net sales
$ 233,921
$
Cost of sales (228,993)
Operating expenses
(27,893)
Other (income) expenses – Net
(552)
Comprehensive financing cost – Net
(12,661)
Income taxes
(6,873)
Income on discontinued operations
(43,051)
Loss on sale of shares (456,496)
Loss (gain) from other discontinued operations
(1,605)
Loss from discontinued operations - Net
$ (501,152)
$
311,205
(853,361)
(30,630)
(209,903)
14,830
79,953
(687,906)
(217,895)
78,369
(827,432)
27.Contingencies and commitments
a. On January 8, 2013, the Entity agreed with the French entity Lafarge whose activities are in the Cement Industry, a “Contribution
Agreement”, the agreement provides for the association between the cement division of the Entity and Lafarge’s subsidiary
established in Mexico. Due to the above, the Entity has a majority stake of 53% and 47% Lafarge, once it obtains approval
from the competition authorities, the combined capacity will be 2 million tons per year, with a market share of approximately
5% national.
b. On March 22, 2012, one of the Entity’ subsidiaries signed a contract of sale with reservation of title and ad corpus of a
building, with San Martin Tulpetlac, S. A. de C.V. (San Martin), where the subsidiary reserved the ownership of the property while
the price stated in the contract is not paid. In this sense, the price shall be paid by San Martin within 12 months from the date
on which the subsidiary conducted the regularization of property.
c. On February 27, 2012, one of the Entity’ subsidiaries signed a services contract and sponsorship advertising media with Club
Pachuca to carry advertising and promotional activities, which consists in the placement of the logo and name of Cementos
Fortaleza in the uniform of teams Pachuca and Leon. Club Pachuca is obliged to deliver to the Entity fortnightly reports
that will include specific details of the promotional activities. The parties agree that the subsidiary will pay Pachuca as total
consideration for carrying out promotional activities in the amount of $ 101,000 and that amount will be paid as follows: $
11,000 on signing the contract and as of June 30, 2013 and until 30 June 2016 will be held partial payments.
d. On February 27, 2012, one of the Entity’ subsidiaries signed a services contract with Mexichem Servicios Administrativos,
S. A. de C.V. (related party), in which the latter undertakes among other things the implementation of SAP system including
licensing, use of infrastructure and other software and generally any other kind of technology services subsidiary information
required for the operation thereof.
74
e. On January 25, 2012, one of the Entity’ subsidiaries through a tender signed a supply contract called the “Aquos el Realito”
“ by the Institution of Constructora de Infraestructura de Aguas Potosi, S.A. de C.V. (CIAPSA), which has initial force in
December 2012, completion of the work or rescission of the contract, whichever occurs later. This project represents gross
income amounting to approximately $ 159,000 by the concept of supplies, also an amount of approximately $ 19,000 by way
of special parts. The model for sale is made under a scheme of Free on Board and delivery confirmation to the requirements
expressed by CIAPSA. The Entity reserve the right to change prices during the project if it exceeds December 2012 and is
established an obligation to grant a bond for an advance of $ 30,000, if the funds are used in other various projects to “Aquos
the Realito “would cause rescission of the contract.
f. On February 3, 2012, one of the Entity’ subsidiaries signed a contract with Comision Federal de Electricidad (government
entity), for the supply of electricity to the plant in the municipality of Santiago de Anaya, Hidalgo, Mexico, the contract mainly
includes 5,000 kw supply in June 2012, 10,000 kw in October 2012 and 22,000 kw in January 2013. The contract covers a
total cost of approximately $ 85,000.
g. On July 22, 2011, one of the Entity’ subsidiaries signed a construction contract as part of the construction and installation
of the pipeline that will supply electricity to the plant that input, line construction of 85 kW (in form turnkey) with Sinergia
Soluciones Integrales para la Construcción, S.A. de C.V. (related party), which amounts to approximately U.S. $ 6.1 million.
h. On January 20, 2010, one of the Entity’ subsidiaries signed two contracts with Polisyus de México, S.A. de C.V., for engineering
in the plant in the municipality of Santiago de Anaya, Hidalgo, Mexico, one of the contracts includes activities of: mechanical,
electrical, civil, service monitoring, electrical and mechanical assembly, transportation equipment and supervision commissioning
of plant equipment as well as production activities: import, supply and equipment technical specifications and other contract
the supply of machinery and equipment. Contracts harbors a total cost of approximately $ 84 million and Euro 34 million,
respectively. On June 6, 2011, the Entity signed an amendment agreement for both contracts agreeing to an increase in the
production capacity of the plant 1,600 to 2,000 tons of clinker per day. Due to the above, the contractual amounts modified
by this extension amounted to approximately U.S. $ 109 million and Euros $ 43 million.
i. At December 31, 2012, 2011 and January 1, 2011, certain of the Entity’ subsidiaries are part of a preliminary anti-dumping
investigation initiated by the government of the United States of America against Mexico and China, to determine whether a
reasonable doubt that the copper tubing industry in this country has been materially injured by reason of the imports by Mexico
and China. The November 15, 2010 the U.S. government demand a fee, to date there is no set amount. In December 2012
issued a preliminary ruling by the authority which states that no dumping in the first review.
j. On June 1, 2009, the Entity signed a contract with Kaluz, S.A. de C.V. (related party) whereby the latter agrees to provide
administrative services and corporate advisory consisting of economic, financial, commercial and management, process and
business strategy, as consideration, the Entity shall pay monthly amount equal to 0.51% of consolidated sales in the previous
month.
k. On June 1, 2009, the Entity signed an agreement with Grupo Carso, S.A.B. de C.V. (related party) whereby the latter agrees
to provide administrative services and corporate advisory consisting of economic, financial, commercial and management,
process and business strategy, as consideration, the Entity shall pay monthly amount equal to 0.49% of consolidated sales in
the previous month. The August 17, 2010 he signed an amendment agreement with which the entity is obliged to pay monthly
an amount equal to 0.46% of consolidated sales for Grupo Carso, S.A.B. de C.V. (related party) and 0.03% of consolidated
sales to other shareholders.
l. The Entity is involved in various trials and claims arising in the normal course of its operations, which are not expected to have
a material effect on its financial condition and future operating results.
m. Under current tax law, the tax authorities are entitled to examine the five fiscal years prior to the last income tax return filed.
(Nacobre).
n. According to the Income Tax Law, companies carrying out transactions with related parties are subject to certain limitations
and requirements in terms of the determination of prices, since they must be equivalent to the ones used with or between
independent parties in comparable transactions.
75
28.Business segment information
Segment information is presented according to the productive sectors, which are grouped according to the vertical integration of
raw materials. Based on this segmentation, operating decisions are made for the purpose of allocating resources and assessing
performance of each segment.
The following are the segments of the Entity Construsystems, Metals, Plastic and Cement. Construsystems sector includes
the production of Fibro-cement, Plastics sector includes the production of plastic; the Metals segment includes the production
of copper and aluminum; and the Cement segment includes mining, milling and calcination of nonmetallic minerals for the
production of clinker. The products of the four segments are mainly used in the construction industry.
Below is a summary of the most significant line items in each segment included in the consolidated financial statements:
ConstrusystemsPlastics
Net sales
$
Cost of sales
Operating expenses
4,931,457
$
(2,674,698)
(1,395,307)
861,452
797,113
(565,107)
(128,612)
103,394
Other expenses – Net
Income before income taxes
(50,420)
(27,281)
483,739
1,267,490
878
3,895
3,372
111,539
Income taxes
79,673
(494,294)
852,869
(26,584)
-
84,955
8,865,322
3,474,651
9,582,250
(185,155)
558,138
50,553
-
22,345,759
432,236
156,506
9,230
(2,550)
103,294
-
-
698,716
Current assets
Property, plant and equipment – Net
Investment in shares of associated entity
Employee benefits
Total assets
Total liabilities
$
8,249,839
$
242,952
Net sales
$
Cost of sales
Operating expenses
4,375,675
$
(2,601,644)
(1,292,880)
481,151
708,157
(538,215)
(76,559)
93,383
15,632
(182,243)
(276,424)
38,116
(8,315)
(7,454)
1,431
79,045
Income taxes
(207,899)
(395,500)
(565,283)
(21,849)
(586)
56,610
6,093,918
3,574,477
11,905,978
(78,160)
452,769
-
21,948,982
265,069
161,057
5,858
-
102,543
-
534,527
Current assets
Employee benefits
Total assets
76
Total liabilities
$
8,297,685
$
148,607
2012
Metals
$
8,084,637
$
(7,065,556)
(670,643)
348,438
Cement Eliminations
8,176
$
(1,665)
(8,663)
(2,152)
(315,491)
$
33,594
315,491
33,594
Total
13,505,892
(10,273,432)
(1,887,734)
1,344,726
74,936
(571,067)
-
(147,693)
(501)
(30,320)
(53,531)
(86,504)
(3,839)
2,169
(398,820)
(366,896)
21,054
(622,604)
34,760
777,936
5,900
(2,944)
(144,737)
(20,368)
-
(106,872)
-
(3,914)
(370,810)
38,621
(501,152)
315,405
6,220,196
5,047,260
60,001
429,208
316,139
-
214,774
12,287,578
285,595
3,206,586
(6,441)
(2,435)
146,234
-
-
3,629,539
(8,043,173)
(62,472)
(8,831,625)
-
(15,950)
-
-
(16,953,220)
$
6,967,390
$
2011
Metals
3,647,114
$
(8,087,840)
$
Cement Eliminations
7,760,176
11,822,531
813,415
239,068
1,107,855
50,553
214,774
22,008,372
11,019,455
Total
$
9,437,690
$
(8,146,179)
(819,990)
471,521
128,049
$
-
(56)
127,993
(144,350)
$
(177,195)
330,234
8,689
143,171
(78,166)
746,536
1,283,062
(340)
(14,296)
-
113,357
(61,540)
(26,586)
(471,543)
(550,980)
88,608
(308,745)
962,600
(111,496)
(416,152)
755,414
(49,972)
(15,194)
48,191
(48,855)
-
(599,835)
(440,071)
(827,432)
(304,903)
5,130,757
5,948,627
806,599
498,645
81,189
50,553
12,516,370
255,871
1,840,850
-
222
350
-
2,097,293
(2,500,747)
(338,119)
(11,941,147)
(101,333)
200,820
-
(14,680,526)
$
4,895,031
$
2,155,571
$
(2,360,173)
$
14,505,221
(11,463,233)
(1,859,251)
1,182,737
9,244,868
11,186,892
777,288
319,374
837,671
50,553
22,416,646
13,136,721
77
Net saless
$
Cost of sales
Operating expenses
Utilidad antes de impuestos a la utilidad
4,738,777
$
(3,396,797)
(1,141,297)
200,683
483,902
(326,521)
(75,540)
81,841
(208,050)
(166,347)
(79,825)
(253,539)
(7,945)
(1,123)
-
72,773
Income taxes
(159,102)(21,601)
(33,551)
-
(446,192)
51,172
Current assets
7,060,989
187,992
3,610,254
264,401
9,773,402
505
Employee benefits
(7,264)
1,381
532,341
-
-
-
Total assets
20,969,722
454,279
Total liabilities
$
9,968,283
$
164,289
a. Consolidated statements of cash flows
- Cash flows from operating activities:
20122011
– Construsystems
$ (1,564,578)
$ 3,238,523
– Plastics
(34,834)
60,059
– Metals (1,599,031) (1,433,604)
– Cement 1,224,303
492,896
Total
$ (1,974,140)
$ 2,357,874
- Cash flows from investing activities:
20122011
– Construsystems
$ (118,154)
$ (249,036)
– Plastics
12,612
(12,492)
– Metals
554,261
500,880
– Cement (1,392,110) (1,090,208)
Total
$(943,391) $ (850,856)
- Cash flows from financing activities:
20122011
– Construsystems
$
– Metals
– Cement
Total
$
778,823
$ (2,167,034)
(88,693)
1,773,850
176,405
594,565
866,535 $ 201,381
b. Segment information by geographic area:
The Entity operates in different geographical areas and has distribution channels in Mexico, United States and other countries,
through industrial plants, commercial offices or representatives.
The distribution of sales is as follows:
2012% 2011 %
North America
$ 2,498,765
18.50
$ 2,406,457
Central, South America and the Caribbean 3,679,752
27.25 2,875,259
Total exports and foreign 6,178,517
45.75 5,281,716
Mexico 7,327,375 54.259,223,505
Sales Net
$ 13,505,892 100.00
$14,505,221
78
16.59
19.82
36.41
63.59
100.00
2010
Metals
$
8,443,822
$
(7,205,170)
(490,240)
748,412
(44,136)
(250,735)
-
453,541
Cement Eliminations
-
$
-
-
-
(141,797)
(8,297)
-
(150,094)
(968,985)
$
441,928
512,374
(14,683)
15,826
(14,073)
79,825
66,895
Total
12,697,516
(10,486,560)
(1,194,703)
1,016,253
(386,102)
(440,575)
189,576
(142,199) 33,788
-(289,114)
(6,643)
-
-
(40,194)
304,699
(116,306)
66,895
(139,732)
4,865,378
72,859
(4,732,467)
7,454,751
5,527,533
708,044
-
10,110,232
-
-
(9,762,977)
10,930
368,146--
362,263
(19,525)
-
317,197
830,013
142,655
-
-
142,655
10,884,187
780,903
(14,178,247)
18,910,844
$
3,985,677
$
901,460
$
(4,933,175)
$
10,086,534
79
29.Explanation of transition to IFRS
The date of transition to IFRS is January 1, 2011. In preparing the first IFRS financial statements, the Entity applied transition
rules to the figures previously reported under MFRS. As described in note 2 to the financial statements, the Entity has applied
the mandatory exceptions and certain options chosen first-time adoption under IFRS 1. The following reconciliations provide
quantification of transition effects and the impact on equity at the transition date of January 1, 2011 and December 31, 2011
and net income and cash flows for the transition period ends on December 31, 2011 as shown below:
a. Effects of adopting IFRS in the consolidated statement of financial position
2011
Effects of
2011
Note
Mexican FRS
Reclassifications
adopting IFRS
IFRS
Assets
Current assets:
$
3,539,537
$
-
$
-
$
3,539,537
Derivative financial instruments----
Accounts receivable – Net
3,158,839
108,704
-
3,267,543
Accounts receivable from
related parties – Net
54,979
-
-
54,979
Inventories – Net
a, i
2,269,182
(91,176)
8,080
2,186,086
Prepaid expenses
j
197,453
(730)
- 196,723
Discontinued operations
108,704 (108,704)
-
-
Total current assets
9,328,694
(91,906)
8,080
9,244,868
Noncurrent assets:
Property, machinery and
equipment – Net
b, i, k
Investment in shares of associated
companies and others
Employee benefits
d, e, j, k
Intangibles and other assets – Net
Assets held for sale
Accounts receivable, long term
Discontinued operations, long term
k
Total noncurrent assets
7,077,278
249,475
3,860,139
11,186,892
777,288
472,255
946,167
-
50,553
71,552
9,395,093
-
4,140
(108,496)
-
-
(71,552)
73,567
-
(157,021)
-
-
-
-
3,703,118
777,288
319,374
837,671
-
50,553
-
13,171,778
Total assets $18,723,787$
80
(18,339)$ 3,711,198$
22,416,646
Disposal
January 1, 2011
operations
Mexican FRS
discontinued
January 1, 2011
Mexican FRS
without discontinued
Effects of
operations
Reclassifications
adopting IFRS
January 1, 2011
(Transition date)
$
1,454,891
$
48,615
$
1,503,506
$
-
$
-
$
1,503,506
40,138
295
40,433- -
40,433
2,875,412
97,592
2,973,004
19,164
-
2,992,168
52,712
-
52,712
2,450,085
336,212
2,786,297
118,853
3,657 122,510
486,371 (486,371)
-
7,478,462
-
7,478,462
-
(81,973)
(730)
-
(63,539)
6,229,647
727,250
6,956,897
113,652
3,039,683
10,110,232
10,930
370,436
881,217
-
87,301
776,974
8,356,505
-
(32,819)
21,169
6,020
55,354
(776,974)
-
10,930
337,617
902,386
6,020
142,655
-
8,356,505
-
730
(72,373)
(6,020)
-
-
35,989
-
23,916
-
-
-
-
3,063,599
10,930
362,263
830,013
142,655
11,456,093
$
15,834,967 $
-
52,712
39,828
2,744,152
- 121,780
-
39,828
7,454,751
- $
15,834,967$ (27,550)
$ 3,103,427$
18,910,844
81
2011
Effects of
2011
Note
Mexican FRS
Reclassifications
adopting IFRS
IFRS
Liabilities and stockholders’ equity
Current liabilities:
Current portion of long-term debt
l
$
160,972
$
Accounts payable to suppliers
3,220,722
Direct employee benefits
95,902
Accrued expenses and taxes
other than income taxes
l
1,084,461
227,159
Current deferred benefit from
tax consolidation
5,846
23,599
1,068
k
81,699
Total current liabilities
4,901,428
Noncurrent liabilities:
Long-term debt 6,265,907
Long-term due to related parties
-
Deferred income taxes
f, k
1,192,656
Tax liabilities from benefits from
tax consolidation
-
Deferred statutory employee
profit sharing
c
77,300
44,589
Discontinued operations, long term
-
Total long-term liabilities
7,580,452
Total liabilities12,481,880
82
Capital stock
g
Additional paid-in capital
Retained earnings
a, b, c, d, e, f, g, h
Translation effects of
foreign operations
h
Valuation effects of
financial instruments
Surplus on revaluation of
property, plant and equipment
b
Actuarial loss
e
Noncontrolling interest
a, b, c, d, e, f, g, h
-
-
6,191,980
49,927
6,241,907
Total liabilities and stockholders’ equity
18,723,787
$
1,206,204
4,598,877
328,455
(40,498)
$
-
-
129,291
-
-
$
-
(3,751)
-
-
120,474
3,220,722
92,151
1,213,752
227,159
-
-
-
(81,699)
7,094
-
5,846
-
23,599
-
1,068
-
-
(3,751)
4,904,771
-
-
(149,698)
- 6,265,907
-
-
754,231
1,797,189
124,265
-
-
-
(25,433)
(18,339)
-
124,265
(77,300)
-
-
44,589
-
-
676,931
8,231,950
673,180 13,136,721
- (358,389) 847,815
-
-
4,598,877
-
2,685,240
3,013,695
59,192
-
525,396
584,588
(748)
-
-
(748)
$
-
269,299
269,299
-
(64,446)
(64,446)
- 3,057,100 9,249,080
-
(19,082)
30,845
- 3,032,018 9,279,925
(18,339)
$
3,711,198
$
22,416,646
Disposal
January 1, 2011
operations
Mexican FRS
discontinued
January 1, 2011
Mexican FRS
without discontinued
Effects of
operations
Reclassifications
adopting IFRS
$
2,727,384
$
1,026,880
123,201
-
$
46,620
734
2,727,384
$
1,073,500
123,935
(39,046)
$
-
-
529,035
278,188
46,032
-
575,067
278,188
11,496
-
5,312
-
5,312
178,367
12,655
191,022
-
-
-
106,041 (106,041)
-
4,974,408
-
4,974,408
2,950,664
78,791
1,278,588
-
January 1, 2011
(Transition date)
-
$
-
(3,116)
2,688,338
1,073,500
120,819
-
-
586,563
278,188
-
-
-
-
(27,550)
-
5,312
-
191,022
-
-
(3,116)
4,943,742
- 2,950,664
-
-
78,791
-
87,322
1,365,910
(149,410)
- 2,950,664
-
78,791
738,015
1,954,515
-
-
149,410
-
149,410
173,072
(3,443)
169,629
-
(169,629)
9,412
9,412
9,412
83,879
(83,879)
-
-
-
4,574,406
-
4,574,406
-
568,386
5,142,792
9,548,814
- 9,548,814
(27,550)
565,27010,086,534
1,206,205
4,598,891
404,999
-1,206,205
-
4,598,891
-
404,999
- (358,389) 847,816
-
-
4,598,891
-
2,925,634
3,330,633
8,897
-
8,897
-
(8,897)
-
28,303
-
28,303
-
-
28,303
-
-
-
-
- 6,247,295
-
38,858
- 6,286,153
-
-
-
-
-
-
-
6,247,295
38,858
6,286,153
$
15,834,967
$
-
$
15,834,967
$
(27,550)
$
-
-
2,558,348 8,805,643
(20,191)
18,667
2,538,157 8,824,310
3,103,427
$
18,910,844
83
b. Reconciliation of equity
December 31, 2011
(Latest period
presented under January 1, 2011
Note
Mexican FRS)
(Transition date)
Total equity under Mexican FRS
$ 6,241,907
$ 6,286,153
Inventory adjustment
a
8,080
39,828
Adjustment to fixed assets
b 3,860,139 3,039,683
Cancellation of deferred PTU
c
77,300
169,629
Adjusting labor obligations
d, e
(157,021)
23,916
Adjustment to contingent liabilities
3,751
3,116
Effect of deferred taxes
f (754,231)
(738,015)
Total equity under IFRS
$ 9,279,925
$ 8,824,310
c. Effects of adopting IFRS in the consolidated statement of comprehensive income for the year ended December 31, 2011.
Note
Mexican FRS
Reclassifications
Effects of
adopting IFRS
IFRS
Continuing operations:
Net sales
m
$14,540,134
$
(34,913)
$
-
$ 14,505,221
Cost of sales
a, b, n 11,554,563
(183,833)
92,503 11,463,233
Gross profit
2,985,571148,920(92,503)3,041,988
Operating expenses
b, d, e, n, 1,589,387
232,568
37,296 1,859,251
Exchange gain, Net
h (243,455)
-
105,457
(137,998)
Interest income(34,231)
-
- (34,231)
Interest expense
m, o
410,400
71,957
(15,165)
467,192
Bank charges
o
88,657
(74,875)
-
13,782
Other income – Net
n
132,456
(223,072)
2,008
(88,608)
and discontinued operations 1,042,357
142,342 (222,099)
962,600
Income tax expense
n
Income before discontinued operations
451,493
590,864
(30,044)
172,386
18,622
(240,721)
440,071
522,529
Discontinued operations:
Loss from discontinued operation, net
n
Consolidated net loss
656,339
(65,475)
172,386
-
(1,293)
(239,428)
827,432
(304,903)
-
(29,051)
-
-
(64,694)
-
(64,694)
(29,051)
-
50,295
21,244
-
-
-
269,690
534,293
739,289
269,690
584,588
760,533
(44,231)
-
Other comprehensive income:
Actuarial loss
e
Surplus on revaluation of property,
plant and equipment
b
h
Total other comprehensive income:
Consolidated comprehensive (loss) income
84
$
$
$ 499,861
$
455,630
d. Reconciliation of comprehensive income
December 31,
2011
(Latest period
presented under
Note
Mexican FRS)
Consolidated net loss under Mexican FRS
$
(65,475)
Inventory adjustment
a
(50,353)
Adjustment to fixed assets
b
(32,733)
Cancellation of deferred PTU
d, e
(88,464)
Labor liability adjustment
c
(95,772)
Effect of deferred taxes
f
73,260
h
(105,457)
Others60,091
Total adjustments to net income
(239,428)
Consolidated net loss under IFRS
Surplus on revaluation of property, plant and equipment
Actuarial loss
Comprehensive income under IFRS consolidated net
$
(304,903)
584,588
269,690
(64,694)
(29,051)
455,630
85
e. Effect of the adoption of IFRS in the consolidated statement of cash flows for the year ended December 31, 2011:
Mexican FRS
Effects of
adopting IFRS
IFRS
Consolidated net loss income
$ 1,042,357
$ (1,347,260)
$ (304,903)
Income tax recognized in profit
-
440,071
440,071
458,617
18,316
476,933
Gain on sale of property, plant and equipment
(14,980)
-
(14,980)
Impairment of long-lived assets
46,949
95,154
142,103
Loss on sale of subsidiary
-
217,895
217,895
Interest income
(34,231)
-
(34,231)
Interest expense410,400 56,792 467,192
1,909,112 (519,032) 1,390,080
(Increase) decrease in:
Accounts receivable
(283,427)
8,052
(275,375)
34,481
55,354
89,835
Inventories 180,903377,163 558,066
Prepaid expenses
(78,600)
3,657
(74,943)
Employee benefits - Net
(129,118)
50,487
(78,631)
Increase (decrease) in:
Accrued expenses and taxes other than income taxes and others
Income taxes paid
Net cash flow (used in) provided by operating activities
2,193,842
(46,620)
(51,029)
-
(42,058)
494,139
(154,768)
(12,655)
12,155
295
- (660,206)
318,529 (1,302,782)
3,910,022 (1,552,148)
2,147,222
(51,029)
452,081
(167,423)
12,450
(660,206)
(984,253)
2,357,874
Business Acquisition
(766,358)
766,358
Acquisition of property, plant and equipment (1,272,802)
407,516
(865,286)
Acquisition of other assets
(130,365)
110,564
(19,801)
Interest received 34,231
- 34,231
Net cash flow used in investing activities (2,135,294) 1,284,438
(850,856)
Proceeds from bank loans 3,476,448
-
3,476,448
Borrowings(2,727,619) (1,450)(2,729,069)
Borrowings from related parties
(78,791)
-
(78,791)
Interest paid(410,400) (56,792) (467,192)
Decrease in capital
(15)
-
(15)
Net cash provided by financing activities
259,623
(58,242)
201,381
Effects of exchange rates on cash
50,295
277,337
327,632
Net (decrease) increase in cash and cash equivalents 2,084,646
(48,615) 2,036,031
Cash and cash equivalents at beginning of year 1,454,891
48,615 1,503,506
Cash and cash equivalents at end of year
$ 3,539,537
$
-
$ 3,539,537
86
Notes to the reconciliations
The transition to IFRS resulted in the following changes to accounting policies and adjustments to the accounting records:
f. The Entity adopted the requirements of IAS 2 Inventories, valuing inventories at the lower of cost and net realizable value,
the cost includes a systematic allocation of fixed production costs are disbursed variable in converting materials into finished
goods. Under MFRS production costs were not included in the cost of inventories.
g. In accordance with IAS 16, Property, Plant and Equipment the Entity consider the cost assumed for some assets in accordance
with IFRS 1 as mentioned in Note 2, thus determined the significant components of the Property, Plant and Equipment; and
accordingly readjusted their useful lives and the related accumulated depreciation effect on the date of transition. Additionally,
capitalized the parts that qualify to be recognized as a fixed asset and the entity expects to use them during more than one
year previously fully recognized as inventories at the date of acquisition. Finally, for Properties and Machinery value was
determined considering the fair value through appraisals made by independent experts.
h. According to IAS 19, Employee benefits, expense recognized for profit sharng to employees refers only to that caused, it
requires, among other things, that the employee has rendered service to an entity, and that the present obligation, legal or
constructive obligation to make such payment, is a result of past events. Therefore the Entity eliminated Deferred PTU balance
from the transition date of the financial statements.
i. In accordance with NIF D-3, Employee Benefits, companies shall records a provision for severance expense, as the entity
estimates termination of employment before the retirement date, or deemed paid benefits as a result of an offer made to
employees to incentivize voluntary retirement. It is not required that previously exists a formal plan as indicated by IAS 19,
therefore it was adjusted by cancelling this provision since termination expense will be recognized as an expense in the period
it happens.
j. The Entity adopted early the amendments to IAS 19 (2011), therefore unrecognized past services were canceled against
retained earnings. As a consequence, adopting this IAS 19 (2011) there is only the accounting policy option, recognizing
immediately in comprehensive income, actuarial gains and losses generated on and past service costs and net interest in the
results of the year. In addition the Entity recorded at the transition date all cumulative actuarial gains and losses not recognized
at the end of the period in accordance with NIF under the corridor method, in accordance with IFRS 1 as is mentioned in Note
2.
k. The Entity adjusted its deferred income tax under IAS 12 Income Taxes, using the book value of assets and liabilities recognized
under IFRS.
l. According to IAS 29, Financial Reporting in Hyperinflationary Economies, the effects of inflation should be recognized only in
a hyperinflationary economy, which is identified by various characteristics of the economic environment of a country. The more
objective parameter to qualify as a hyperinflationary economy is when cumulative inflation over three years is approaching, or
exceeds, 100%. Since the Entity and its principal subsidiaries are located in a non-hyperinflationary economic environment,
the effects of inflation recognized under MFRS to 2007 were canceled for non hyperinflationary periods, except for assets
that used the assumed cost except IFRS 1 as mentioned in Note 2.
m.The functional currency of the Entity did not change as a result of the adoption of IFRS, however the functional currency of
a subsidiary was changed to consider greater emphasis on certain factors and economic indicators, in accordance with IAS
21, The Effects of Changes in exchange rates of foreign currency. Addition, the Entity use the option to cancel the cumulative
translation effect of these subsidiaries to be had under the previous rules in accordance with IFRS 1, and due to the above
we calculated the effect of translation of these subsidiaries in accordance with the provisions of IAS 21.
The transition to IFRS resulted in certain reclassifications to comply with IAS 1, Presentation of financial statements, as
follows:
n. Reclassification of spare parts inventory to property, machinery and equipment in accordance with IAS 16.
o. Reclassification of balances for labor obligations misrepresented in prepaid asset as part of employee benefits at retirement
p. Reclassification of balances of property, plant and equipment, employee benefits and retirement deferred taxes relating to
discontinued operations.
q. Reclassification of interest payable presented in current portion of long-term tax and accrued expenses.
r. Reclassification of financial discounts to net sales to present the discounts according to IAS 18.
s. Reclassification of subsidiary operations exercise sold as discontinued operations in accordance with IFRS 5.
t. Reclassification of interest expense by factoring misclassified as bank charges arising from the same concept.
87
30.New accounting pronouncements
The Issuer Board of International Accounting Standards Board (IASB, for its acronym in English) has promulgated a series of new
International Financial Reporting Standards (IFRS) and amendments to International Accounting Standards (IAS), which were
issued but not yet implemented at the date of these consolidated financial statements:
IFRS 9 Financial Instruments 3
IFRS 10 Consolidated Financial Statements 1
IFRS 11 Joint Arrangements 1
IFRS 12 Disclosure of Interests in Other Entities 1
IFRS 13 Fair Value Measurement 1
Modifications to IFRS 7, Disclosures - Offsetting Financial Assets and Financial Liabilities 1
Modifications to IFRS 9 and IFRS 7, Effective date of IFRS 9 and Transition Disclosures 3
Modifications to IFRS 10, IFRS 11 and IFRS 12, Consolidated Financial Statements, Joint
Arrangements and Disclosure of Interests in Other Entities: Transition Guide’s 4
IAS 19 (revised in 2011), Employee Benefits 1
IAS 27 (revised in 2011), Separate Financial Statements 1
IAS 28 (revised in 2011), Investments in Associates 1
Modifications to IAS 32, Disclosures - Offsetting Financial Assets and Financial Liabilities 2
Modifications to IFRS, Annual Improvements to IFRS 2009-2011, Except for the amendments to IAS 11:
1 Effective for annual periods beginning on or after January 1, 2013.
The Entity is evaluating the impact the adoption of this standard may have on this consolidated financial information.
31.Financial statement issuance authorization
On March 15, 2013, the issuance of the accompanying consolidated financial statements was authorized by Lic. José Sotelo
Lerma, Chief Financial Officer; consequently, they do not reflect events which occurred after that date. These consolidated
financial statements are subject to the approval of the Entity’s ordinary shareholders’ meeting, where they may be modified,
based on provisions set forth in the Mexican General Corporate Law.
88
COMPANY PROFILE
C O R P O R AT E O F F I C E S
Poniente 134 # 719,
Colonia Industrial Vallejo
02500 México, D.F.
Mexico
Elementia is a leading company in the
manufacture and distribution of copper,
fiber cement, concrete, polystyrene, and
polypropylene products. Since 2013, it
has also included our cement division,
which serves the industrial sector, construction and infrastructure, in Mexico,
Latin America, the United States, and
Europe. We offer a wide range of products to more than 6 thousand customers, 2,500 of whom are independent
distributors who integrate an extensive
network of sales points into our distribution pipeline. All of these are customers
of the Group through four business sectors: Metals, Construsystems, Plastics,
and Cement. We have 22 plants, located
in Mexico, Colombia, Ecuador, Bolivia,
Costa Rica, El Salvador, Honduras, and
Peru. We export our products to more
than 40 countries through a network of
10 distribution centers.
VISION
To be the leader in developing
integrated solutions in the materials
sector for construction and general
industry, generating economic,
social, and environmental value for
our stakeholders.
I N V E S T O R R E L AT I O N S
Juan Francisco Sanchez Kramer
Director of Investor Relations
Tel. +52 (55) 5279 8300
[email protected]
MISSION
To create integrated solutions
for the construction sector and
general industry by using efficiency
TA B L E O F C O N T E N T S
Financial highlights
I N D E P E N D E NT AU D ITO R
Galaz, Yamazaki, Ruiz Urquiza, S.C.
Member of Deloitte Touche Tohmatsu
and innovation to develop high2
quality products that surpass
Highlights3
official standards. Our purpose
Message to Stockholders
4
is to generate value for our
Elementia at a glance
6
stockholders, customers, vendors,
Global presence
7
employees, and the Elementia
Construsystems 8
community.
Metals10
VALUES
Plastics 12
Cement 14
Sustainability 16
• Integrity
Corporate governance 17
• Commitment
Board of Directors
18
• Innovation
Officers 18
• Results-oriented
• Respect
Analysis and discussion of results 19
• Safety
Financial statements • Teamwork
21
design: signi.com.mx
PO N I E NTE 134 # 719,
C O LO N I A I N D U S T R I A L VA L L E J O
0 2 5 0 0 M É X I C O , D . F.
STRENGTH
I N C O N S T R U C T I O N M AT E R I A L S

IN CONSTRUCTION MATERIALS

Transcription

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