EXPAnSIon WItHOut BORDeRs

Transcription

1 Annual report 2014 EXPAnSIon WItHOut BORDeRs AnnuAl RepoRt 3

2 Annual report 2014 EXPAnSIon WItHOut BORDeRs AnnuAl RepoRt 5

3 metropolitano CEnTrAL STATIon, LImA. we HAve positioned unacem AS A LEADIng ComPAny CounTryWIDE AnD WE ArE fully CommITTED To ConTInuE our growth beyond our borders, thus unceasingly ContRIbutIng to the SuStAInAble development of the CoMMunIty AnnuAl RepoRt 7

4 the purchase of 98.57% of ThE ShArES of unacem ECuADor S.A. became the MIleStone that MARked our expansion In the RegIon. road InTErChAngE Av. PrImAvErA, LImA AnnuAl RepoRt 9

5 ThE national LIBrAry, LImA. the placement of InteRnAtIonAl bonds In the AMount of us$ MilliOn AChIEvED By unacem represents ThE LArgEST CorPorATE high-yield ISSuAnCE of A PEruvIAn ComPAny AnnuAl RepoRt 11

6 letter from the Chairman of the board expansion Acquisition of unacem ecuador S.A. (formerly lafarge Cementos S.A.) International issuance of corporate bonds Acquisition of preansa CHIle the CoMpAny And ItS SubSIdIARIeS Macroeconomic environment operations Subsidiaries and affiliates ongoing projects Concrete blocks plant in Cajamarquilla Modernization and capacity expansion of the Atocongo plant Cement mill 8 and bagging unit 5 at the Condorcocha plant Carpapata III hydroelectric power plant new cement bagging unit 6 at the Atocongo plant new production line of kiln 5 works for taxes StAkeHoldeRS our employees occupational safety and health environmental management development of our communities economic-financial ReSultS AdMInIStRAtIon board of directors Management good corporate governance Administration, direction and technical assistance Recognition SECTIon 2 of ThE LImA metro LInE 1, LImA. CONteNt AnnuAl RepoRt 13

7 Results SALES EBITDA CAPEX (in millions of nuevos soles) (in millions of nuevos soles) (in millions of nuevos soles) (times) DEBT/EBITDA 2, , , ,510 1,514 1,726 1,775 1,883 1, , % growth in our sales in Purchase of 51.0% of shares of PREANSA CHILE Annual Report 15

8 GROWtH letter from the IN CHAIRMAn DIsPAtCHes AND of the ebitda board MAINlY OWING to COst efficiency. the CONDORCOCHA AND AtOCONGO PlANts ReACHeD 100.0% OF their expanded CAPACItY. stock surpluses enabled ResuMPtION OF exports. the PROGRe-sOl NetWORK Is the largest NetWORK OF HARDWARe stores IN the COuNtRY. To ThE ShArEhoLDErS of unacem: During 2014, a significant slowdown has been observed in Peru: the country went from 5.5% growth in 2013, to 2.4% in the impact of suspending public works and the reduced private investment during the first half of the year had a considerable effect on self-construction, causing our cement dispatches to grow only 1.6% as of the end of the year. Nevertheless, the ebitda grew 14.3%, mainly explained by the increasing cost efficiency. With regard to our operations, in 2014 both our Condorcocha and Atocongo plants reached virtually 100.0% of their expanded capacity. For our clinker production, we worked with a combined utilization rate of 89.0%, and for cement, with a combined utilization rate of 75.0%, which enabled us to lower our fuel and electric power costs; furthermore, the reduced growth of the local cement market, added to the increased clinker production, generated stock surpluses so that we were able to resume our export operations, which this year reached a volume of 423,835 tons of clinker in the last eight months of the year. Meanwhile, we continued working in strengthening our commercial relations through the entire value chain. the Progre-sol network reached 288 hardware points of sale and, for the sixth year in a row, is the leading hardware stores network in the country and adds to the 40 direct points of sale in the central and northeastern Andean regions. In addition, Cemento sol entered the ranking of most valued brands in latin America, according to the consulting firm Millward Brown. this was also a great year for our subsidiaries, which have kept their operating and resource generation levels. unicon and Firth continue leading the ready mix industry, with more than 56.0% share of the national market and, despite the slowdown in important infrastructure projects, they were able to keep the combined dispatch of both companies at levels similar to those of the previous year. CelePsA had a slightly higher electricity production than in 2013; however, on the other hand, its revenues were 1.5% lower due to the unfavorable commercial situation of the energy market. Furthermore, this year was quite meaningful for CelePsA, as it started to grow. In November, it acquired Hidro Marañón, a 20 MW generation project with renewable energy resources (ReR) that will demand a total investment of us$ 60.0 million and will be entirely funded with CelePsA cash flow. In the united states we continue our efforts to achieve that both Drake Cement and Drake Materials streamline their operations in order to have the adequate conditions to meet the surge of demand in Arizona. this year, Drake Cement produced almost 315,000 short tons of cement and we feel confident that finally, the projections of the Portland Cement Association for the next five years will reach an average growth of more than 10.0% per year in Arizona, which will enable Drake to generate positive cash flows. With our subsidiaries PReANsA PeRÚ and PReANsA CHIle and with the forthcoming execution of the PReANsA COlOMBIA project, we are committed to the development of efficient and safe engineering solutions so that we may expand the products and services we offer. growth RegISteRed by CeMent dispatches was 1.6% AnnuAl RepoRt 17

9 2014 WAs AN IMPORtANt YeAR FOR OuR subsidiaries. ReleVANt MIlestONe IN OuR GROWtH strategy. ACQuIsItION OF 98.57% shares OF WHAt today Is unacem ecuador s.a. successful IssuANCe OF CORPORAte BONDs IN the INteRNAtIONAl MARKet. CONtINue CReAtING VAlue FOR OuR shareholders AND All OuR stakeholders. undoubtedly, 2014 also represents a relevant milestone in our growth strategy. the acquisition of 98.57% of lafarge Cements s.a., now unacem ecuador, the second largest cement producer in the ecuadorian market, turns us into a company that is becoming significant in the region. We are confident that this acquisition will produce great synergies aside from increasing our production capacity of cement by 18.0%. In 2014, unacem ecuador reached sales amounting to us$ million and an approximate market share of 22.0%. this new investment represents great potential to develop new business lines and offer new solutions to our clients in ecuador, always aligned with the purpose of fostering the development of society, as we have been doing for more than 60 years in Peru. to materialize this acquisition, we decided to enter the international capitals market. this process represented a challenge for unacem and all its subsidiaries, as the issuance involved arduous work for all the companies in the group. At the end of October, the trust of the international capitals market was reflected in a successful issuance of corporate bonds that totaled us$ million with 7 year maturity. this first international issuance of unacem achieved a demand of almost us$ 3.0 billion and represents the largest high-yield issuance in the history of Peru, confirming the trust of the international market in the company and compelling us to keep working towards creating value for our shareholders, our investors and, in general, all our stakeholders. Finally, but not less important, the gratitude of the Board of Directors to sindicato de Inversiones y Administración s.a., who continued to be in charge of the General Management of unacem; to Inversiones Andino s.a. and ARPl tecnología Industrial, who offer us administrative and technical consulting services; and our special recognition to each and every one of our employees who engage one hundred per cent of their efforts and commitment to stand up to the challenges presented. We will continue placing our bets on the continuous growth of our production activities, fostering the development of the country and the region and creating value in new markets, with new products for all our stakeholders. I invite you to learn about the most relevant events of the performance of unacem during Yours sincerely, ricardo rizo Patrón de la Piedra chairman of the board EBITDA growth: 14.3% AnnuAl RepoRt 19

10 expansion north PIEr ConTAInErS TErmInAL, LImA AnnuAl RepoRt 21

11 ThE CurrEnT CEmEnT ProDuCTIon CAPACITy of unacem And ItS SubSIdIARIeS totals 9.7 MilliOn TOnS, WhICh ConSoLIDATES ThE organization S growth AnD ITS CommITmEnT WITh ThE region AnnuAl RepoRt 23

12 AT ITS otavalo PLAnT, unacem ECuADor ProDuCES 1.5 MilliOn TOnS OF cement per year, WITh A market ShArE of 22.0%. ThE ACquISITIon of 51.0% OF preansa chile STrenGThenS Our presence in The region. ThE TruST of ThE InTErnATIonAL CAPITALS market EnABLED us To PLACE us$ WE InITIATED STuDIES for ThE ConSTruCTIon of preansa colombia. MilliOn in international bonds at 7 years maturity AnD 5.875% rate AnnuAl RepoRt 25

13 expansion without borders CeMent peru / ecuador / usa InStAlled CApACIty: 9.7 million tons/year 4 CeMent plants 1 terminal port ConCRete peru / usa / CHIle InStAlled CApACIty: 13.2 million m 3 /year 44 fixed plants 30 MobIle plants 640 MIxeR trucks 2 InduStRIAlIZed ConCRete StRuCtuReS plants energy peru / ecuador InStAlled CApACIty: 299 mw 3 HydRoeleCtRIC power plants 2 thermal power plants AnnuAl RepoRt 27

14 otavalo PLAnT, ImBABurA, ECuADor. this was an important year for unacem. In addition to the good operating results of our Atocongo and Condorcocha plants, which recorded historical monthly production and dispatch records in the local cement market, we have taken huge steps in the consolidation and diversification of our cement and precast products operations in the region. this has boosted our growth strategy which, through our subsidiaries, strengthens our commitment to our stakeholders MeMoRIA AnnuAl RepoRt AnuAl 29

15 The process lasted several months, as in order to complete the transaction we had to obtain the approval of the competent authorities of Ecuador. Thus, in October, we obtained the authorization for the direct acquisition from the Superintendence of Market Power Control and in November, we received the approval from the Superintendence of Companies and Securities. On November 25, 2014, through our subsidiary Inversiones Imbabura S.A., we acquired by public share offering in the Quito Stock Exchange, 98.57% of the shares of Lafarge Cementos S.A. and as of February 20, 2015, we completed the acquisition of 98.9%, for a total value of US$ million, thus consolidating our expansion in the region. UNACEM Ecuador has a plant in Otavalo, in the province of Imbabura. It has a production capacity of 1 million tons of clinker and almost 1.5 million tons of cement; an integrated operation with limestone reserves for more than 60 years; and a broad distribution network serving the Ecuadorian market efficiently. It is an operation that has been working with financial and operating efficiency, but, most importantly, it is located in a market with great potential for growth. With the addition of UNACEM Ecuador, UNACEM and its subsidiaries have a consolidated cement production capacity of approximately 9.7 million tons, which strengthens our growth and commitment with the region. Acquisition of UNACEM ECUADOR S.A. (formerly Lafarge Cementos S.A.) Undoubtedly, the most relevant milestone in 2014, the one that marked our consolidation as a company that starts to have a noticeable regional presence, was the acquisition of Lafarge Cementos S.A., today UNACEM Ecuador S.A. After several months of evaluation and negotiation, on May 27 we announced the acquisition of this large Ecuadorian company (subsidiary of the Lafarge group). That same day we executed the sale and purchase agreement to acquire 98.57% shares of the company; however, being a company listed in the Quito Stock Exchange, a public offer was made for 100.0% of the shares. International issuance of corporate bonds In order to materialize this important acquisition in Ecuador we had to obtain the funds required to finance the operation. This was guaranteed since May, through a firm commitment of a group of banks that granted to UNACEM a bridge loan for a total amount of US$ million: BBVA Banco Continental S.A. BBVA Securities Inc.; Deutsche Bank AG London Branch; and The Bank of Nova Scotia Scotiabank Perú S.A. This bridge loan did not have to be disbursed Annual Report 31

16 We reassert our long-term commitment with our shareholders to continue creating shared value. After evaluating the different possibilities to finance the long-term operation, the Board of Directors, by delegation from the Shareholders Meeting, approved the issuance of international bonds for an amount of up to US$ million. For the placement of these bonds, UNACEM obtained the rating from two international risk agencies: Moody s, which assigned a Ba2 rating to UNACEM and its consolidated subsidiaries and Standard and Poor s, which awarded a BB+ rating. On October 28, UNACEM successfully placed a private offer of Senior Notes in the international market under Rule 144A of the Securities and Exchange Commission of the United States of America and Regulation S of the U.S. Securities Act, in the amount of US$ million, with 7 year maturity and 5.875% rate. The issuance funds were used to finalize the acquisition of Lafarge Cementos S.A. and refinance short-term obligations. The structuring and placement agents, joint bookrunners of the transaction, were BBVA Securities Inc., Deutsche Bank Securities Inc. and Scotia Capital (USA) Inc. Otavalo Plant, Imbabura, Ecuador. It is worth highlighting that the placement of UNACEM represents the largest high yield corporate issuance of a Peruvian company in the international market. It was a multi-jurisdictional transaction that required, in addition, a close follow-up of the international capitals markets, which finally led to a successful placement operation, with a demand that exceeded four times the amount issued. This fact confirms the trust of the international market in the company and our long-term commitment with our shareholders and investors to continue creating shared value Annual Report 33

17 ACquISItIon of preansa CHIle In January 2014, we finalized the acquisition of 51.0% of the shares of Prefabricados Andinos s.a. PReANsA CHIle for a value of us$ 7.14 million. It is a company that has been present in the Chilean market for more than 17 years, engaged in the development and manufacturing of industrialized concrete structures for industrial, commercial and infrastructure construction projects and whose plant in santiago has 24,000 m 3 of installed capacity. «the international expansion of unacem is the result of its accumulated experience, technological innovation and its firm commitment to continue creating value. As unacem ecuador, we feel proud of being a part of this expansion, aware of the challenges it entails». JoSÉ AnTonIo CorrEA GeNeRAl MANAGeR, unacem ecuador As in PReANsA PeRÚ, in this company we have partnered up with the spanish company PRAINsA. through PReANsA and its growth in the region, we are placing our bets on developing new markets that offer simple, efficient and safe solutions, guaranteeing quality and low maintenance cost for our clients, enabling us to find economic solutions in the shortest possible execution time and broadening the range of products and services as part of our vertical integration. with the growth of preansa In the RegIon, we place our bets on developing new markets that offer simple, efficient and safe solutions AnnuAl RepoRt 35

18 EXPAnSIon of ThE JorgE ChAvEZ AIrPorT, LImA. the COMPANY AND Its subsidiaries AnnuAl RepoRt 37

19 unacem has BEEn SuPPLyIng quality ProDuCTS FOr MOre Than 60 years, ContRIbutIng to the development of the CountRy AnnuAl RepoRt 39

20 ThAnKS To ThE ConSTAnT operation of BoTh PLAnTS, We achieved a production OF 5.7 MilliOn TOnS OF cement. WiTh 288 points OF SaleS, ThE ProgrE-SoL network IS, for ThE SIXTh year on A row, The leading network OF hardware STOreS In ThE CounTry. us$ MilliOn IS ThE CurrEnT value of CEmEnTo SoL, our LEADIng BrAnD. CEmEnTo AnDIno, PrEmIum BrAnD, WAS recognized WITh ThE 2014 effie GOlD award TO The MOST effective marketing IDEAS AnnuAl RepoRt 41

21 Condorcocha Plant, Junin, Peru Annual Report 43

22 Atocongo Plant, Lima, Peru Annual Report 45

23 Macroeconomic Environment During 2014, the world economy continued showing moderate signs of recovery. World growth is estimated in 3.3% for 2014, with respect to the previous year, explained by the still weak results of the leading economies and the slower performance of the emerging economies. As for the emerging economies, they presented weak growth rates as a result of the slow economic evolution of the developed countries. China s growth, according to estimates, was slower than in the previous years (7.4%) owing to a weak internal demand and lower export figures, which led the authorities to apply very specific stimulus measures to counteract the situation. Latin America, meanwhile, would have grown only 1.3% mainly owing to the hard impact of the external demand resulting from the lower prices of relevant raw material such as copper, gold, silver, soybean and oil, which have fallen to their lowest level in the past years. The growth shown by the leading economies was uneven. In the Eurozone, the sequels of the crisis and the recession are still slowing down its recovery (0.8% in 2014). In turn, the United States of America counteracted this situation with a growth that exhibited expected variations: a 2.2% rate in line with the International Monetary Fund estimates, as a result of the improved employment situation (unemployment rate closed at 5.6% in December, the lowest since June 2008), added to the increased internal demand. In Peru, the growth slowdown was notorious compared to the levels of the previous years, however, moderate with respect to the largest economies in the region (Brazil, Argentina and Chile). The Peruvian economy recorded a 2.4% growth. This low figure is mostly the result of the unfavorable performance of the global economy (raw material prices and more costly external financing) and of internal structural factors that caused delays in mining projects and the contraction of public investment by local governments, generating a downturn in private investment and lower consumption Annual Report 47

24 To counteract these effects, the government has taken measures to boost growth aimed at, for example, increasing public expenditure and tax reductions. Inflation, in turn, closed the year at 3.3%, exceeding the target range of the Central Reserve Bank of Peru (BCR, for its acronym in Spanish) and the foreign exchange rate fluctuated significantly throughout the year: the currency lost value due to the deficit in the current account of the balance of payments and to an increasing perception of upcoming higher Federal Reserve (FED) rates. The nuevo sol quotation as of the closing of the year was S/ per US dollar (S/ at the closing of 2013). With regard to cement, our production totaled 5,717,525 tons, a 1.5% increase with respect to the 5,631,076 tons of the previous year, enabling us to meet the local cement demand. From this total, 3,792,918 tons correspond to the production of the Atocongo plant (Lima) and 1,924,607 tons to the Condorcocha plant (Junin) CEMENT PRODUCTION PER PLANT (in thousands of metric tons) The construction sector grew 1.7% during This reduction in its annual growth is mainly explained by the suspension of public and private works, in particular 7,000 Operations during the first half of the year, added to a lower growth rate in formal employment and the costlier real estate loans. 6,000 5,000 4,000 4,774 4,731 5,355 5,631 5,718 Production and dispatch in the local market 3,000 Our operations kept a steady performance throughout the year, yielding excellent 2,000 operating results. The kilns in both plants worked efficiently at 89.0% of their installed capacity. Clinker production reached 5,951,216 tons, that is, 35.8% more 1,000 than the production registered in 2013, owing basically to the operation of kiln 1 of the Atocongo plant, which was modernized at the end of This year, the production of clinker from both plants reached altogether a new historical monthly record, which in October totaled 578,861 tons. Condorcocha Atocongo Unacem January 2014 March 2014 We acquired 51.0% of shares of PREANSA CHILE. The Shareholders Meeting designated the Board of Directors. We started the works at cement mill 8 and bagging unit 5 at the Condorcocha plant Annual Report 49

25 Over the year and as part of the merger synergies, we have taken measures to streamline our operations and the associated costs: We suspended the operation of kiln 1 at the Condorcocha plant temporarily. This kiln had been working since 1958, at a production rate of 300 tons/day, with high costs because of its manufacturing technology. To compensate the effect of the suspension of this kiln, the Atocongo plant provided the necessary clinker. We started using a new raw material mixing system for the production of clinker, reducing the limestone stripping ratio of Atocongo. This results in a lower operating cost and improved raw material reserve. Thus, we rationalized the use of equipment in the quarries and exercised better control to avoid distortions in the quality of our products. In 2014, volume dispatched totaled 5,701,464 tons, 1.6% more than the volume reached in 2013, which totaled 5,610,572 tons. During the first half of the year, dispatch levels were similar to those in 2013; however, they were compensated with the growth registered in the second half, which continued increasing in the fourth quarter. Furthermore, our cement dispatches reached a new historical monthly record in November: 512,309 tons DOMESTIC CEMENT DISPATCH (in thousands of metric tons) 6,000 5,500 5,000 4,500 4,709 4,702 5,311 5,611 5,701 4,000 3,500 4,126 4,209 3,000 3,452 2,500 2,683 3,056 2,000 1,500 1, Annual Report 51

26 Meanwhile, according to recent estimates, cement demand in the country was 11,423,524 tons, up 2.9% from 2013, estimated in 11,099,100 tons. this demand includes dispatches from national producers and an estimate of imported cement entering the country. CoMMeRCIAlIZAtIon We sell our products through two business units: bagged cement and bulk cement, which during 2014, represented 73.9% and 26.1% of the total product dispatched, respectively. the products sold by the bagged cement business unit are: Portland cement type I, under the brands Cemento Andino and Cemento sol ; Portland cement type IP, under the brands Cemento Atlas and Cemento Andino ; and cement types IPM and V, under the brand Cemento Andino. Our most recent introduction, Cemento Apu, blended cement for general use, had a great performance, evidencing a 1,028.5% growth with respect to 2013, when it was first launched to the market. this contributed to a 2.8% growth of the bagged cement business unit in Our bagged products portfolio is mainly sold through two distribution channels: the traditional hardware stores channel (consisting of the network of Progre-sol hardware stores and independent stores) and the modern hardware channel (consisting of the large self-service hardware warehouses, such as sodimac, Maestro and PROMARt). Along this line, it is worth noting that the success of Apu was so impressive that it did not only replace the sales of other products, but the brand also grew even more at the expense of the main competitors. Despite the growth of Apu, the sales of bagged Cemento sol and Cemento Andino increased 1.1% and 2.6%, respectively, with respect to the previous year. As for return, the success of Apu was also quite significant, besides contributing to reducing CO 2 emissions due to its being blended cement. During 2014, we continued focusing on our goal to optimize our bagged products portfolio in the central Coast of the country. Meanwhile, the bulk cement business unit sells Portland cement type I, IP, IPM and V, mainly supplying the ready mix sellers, hydroelectric power plants, mining, oil and construction companies and companies that manufacture cement-based products. During 2014, dispatches from this unit dropped 1.6% with respect to Recovery in this line is expected with the incorporation of improvements in the bulk business unit of unacem, aimed at serving the specific needs of this type of client. Our commercial strategy continues to be focused on innovating, strengthening the sustainable commercial relation along the entire value chain (from our plants to the hardware points of sale) and on investing in improving the services offered to our clients and to the final users of our products. Accordingly, since 2008, we keep a close relationship with hardware sellers, entrepreneurs and independents, with outstanding performance in distribution and coverage, through the Progre-sol network of hardware stores. During 2014, the Progre-sol network reached 288 points of sale and was, for the sixth consecutive year, the leading network of hardware stores in the country. In addition, outside the area of influence of Progre-sol, we keep more than 40 direct points of sale corresponding to distributors in cities of the central and northeastern Andes regions in the country, providing us with greater coverage. the bagged CeMent business unit grew 2.8% AnnuAl RepoRt 53

27 Exports and port operations In 2014, we resumed our exports of clinker through the Conchan pier, with a total volume of 423,835 tons, representing revenues in the amount of US$ 18.6 million for the company. Main export destinations included Venezuela, Chile and Brazil. We resumed export of 423,835 tons through the Conchan pier. In turn, the tonnage of bulk solids operated through the Conchan pier dropped 31.0% with respect to 2013, as we do not import clinker anymore and, on the contrary, we have started exporting. Furthermore, there was a reduction in our coal imports due to the greater use of natural gas and the reduction of CO 2 emissions from the kilns. Integrated management system (IMS) The integrated management system is one of the most important mainstays of our operation that supports each and every one of the company s areas in streamlining their processes and, thus, our competitiveness in the sector. We currently hold ISO 9001, ISO and OSHAS certifications for the Atocongo and Condorcocha plants; and BASC (Business Alliance for Secure Commerce) certification and ISPS (International Ship and Port Facility Security) certification for the Conchan pier. Furthermore, the internal audits performed during 2014 have verified that the processes meet the goals set out and the standard requirements, and have enabled us to identify improvement opportunities in our performance. In 2014, we conducted a customer satisfaction study in Atocongo, through an independent consultant, with respect to our domestic cement clients; we verified improvements in our indicators as compared with the survey made in Along the year, we also performed environmental impact and risk assessments of the relevant processes, to ensure that the proper operating controls are in place to keep environmental impacts and safety risks within the established limits. At Condorcocha, we performed integrated audits with our contractors with regard to environmental and occupational safety and health management, to ensure that pertinent regulations are complied with. We have placed emphasis in achieving that our contractors are able to identify correctly the hazards in their work area, to evaluate the risks they represent and to implement the established controls to minimize the risk and protect workers integrity and health Annual Report 55

28 SubSIdIARIeS And AffIlIAteS InveCo S.A. / unicon S.A. (ownership: 93.4% of InveCo / 100.0% of unicon) unicon is the country s leading company in distribution and sales of ready mix and related services and products. In addition to ready mix, the company produces and sells aggregates for construction, blocks and bricks and offers shotcrete application service for tunnel bracing. During 2014, ready mix dispatches at national level reached 2,298,357 m 3, that is, 2.0% less than in 2013, mostly explained by the slowdown in both the economy and in infrastructure projects. Meanwhile, in lima, dispatches totaled 1,752,595 m 3, 4.0% less than in the previous year. Dispatches outside the capital increased 3.0%, reaching 545,762 m 3. the commercial closing of cubic meters for new projects increased 33.0% with respect to the previous year. Among the main milestones achieved by unicon, we have the OHsAs certification for the Occupational Health and safety Management covering the san Juan plant and the Jicamarca quarry. Within the framework of the company s commitment to sustainability, we invited sgs del Perú to perform a certification process for measurement of the carbon footprint in the san Juan and Materiales plants. As a result, we were able to confirm the adequate level of emissions from the production and distribution process in plant. this sound resource management generated a 50.0% reduction of costs in fuel consumption, mainly due to the greater use of natural gas for vehicles (NVG) instead of diesel. the audited financial statements of unicon as of December 31, 2014, record the following results: firth InDuSTrIES PErú S.A. Firth is a subsidiary of unicon, a company that owns 100.0% of its shareholding. In 2014, ready mix dispatches at national level reached 652,980 m 3, a volume 10.0% higher than the one recorded in this was the result of the successful implementation of the strategy in lima that led to a 19.0% growth of the company. Firth continues strengthening its presence in lima, expanding its production capacity and coverage through a new ready mix plant in the district of Puente Piedra and the expansion of the production capacity of the plants in santa Anita and Villa. Firth has three business units: distribution of ready mix, bagged dry mixes and prestressed roof beams. In addition, during 2014, it launched the new ready mix brand CONCReMAX, which will replace Firth as an umbrella for all its products. the audited financial statements of Firth as of December 31, 2014, recorded the following results: firth ACHIeved 19.0% growth as a result of its greater coverage in lima with its puente piedra plant. Net sales of s/ million (s/ million in 2013). Net income of s/ million (s/ million in 2013). Net stockholders equity of s/ million (s/ million in 2013). Net sales of s/ million (s/ million in 2013). Net income of s/. 4.6 million (s/. 9.1 million in 2013). Net stockholders equity of s/ million (s/ million in 2013) AnnuAl RepoRt 57

29 BASF Construction Chemicals Perú S.A. UNICON participates with 30.0% of the capital of BASF Construction Chemicals Perú S.A. BASF is a German multinational company with presence in more than 170 countries. It supplies additives for concrete, as well as masonry glues and grouts, grouts for assembly of industrial equipment and products for repair of concrete structures, among other related products. The audited financial statements as of December 31, 2014, recorded the following results: Net sales of S/ million (S/ million in 2013). Net income of S/. 9.1 million (S/ million in 2013). Net stockholders equity of S/ million (S/ million in 2013). Entrepisos Lima S.A.C. UNICON participates with 50.0% of the shares of Entrepisos Lima S.A.C. COMPAÑÍA ELÉCTRICA EL PLATANAL S.A. CELEPSA (Ownership: 90.0%) During 2014, CELEPSA s net income from power and energy totaled US$ 61.0 million. As a result of the good hydrological conditions, total power production at the plant reached 1,167,034 MW h (1,167 GW h), slightly higher than in the previous year, which reached 1,149,137 MW-h (1,149 GW-h). Energy sold by CELEPSA during 2014 under contracts totaled 1,265 GW-h, of which 393 GW-h correspond to needs met within the regulated market and 872 GW-h to the needs of its free market clients. In addition, monthly power turnover from free and regulated clients fluctuated from a maximum of 188 MW to a minimum of 85 MW. CELEPSA has a 2.8% share of the 2014 national production of the National Interconnected Energy System (SEIN, for its acronym in Spanish) and 5.7% if we only consider the country s hydroelectric power production. During 2014, the company generated 1,167 GW-h of the total of 41,796 GW-h of the SEIN. This company offers prefabricated concrete products as a construction solution for different structural elements in building and infrastructure works. They are specialists in light prefabricated products weighing up to 10 tons per unit. As of the closing of 2014, the company had the following results: Net sales of S/ million (S/ million in 2013). Net income of S/. 2.6 million (S/. 1.8 million in 2013). Net stockholders equity of S/. 5.9 million (S/. 4.7 million in 2013) Annual Report 59

30 CELEPSA is recognized by its high operating, safety and environmental protection standards and its commitment to sustainable development. Presented during four consecutive years with the Sustainability Award of the National Society of Mining, Oil and Energy Companies ( ), it was the first mining-energy company to have been recognized with the National Environmental Award, granted in 2014 by the Ministry of the Environment. Furthermore, CELEPSA is promoter of the first private patronage, recognized by the National Service of Protected Natural Areas (SERNANP, for its acronym in Spanish) for the preservation of a protected natural area. This company is also recognized for its contribution to mitigating climate change within the Clean Development Mechanism of the United Nations Framework Convention on Climate Change, due to the largest assignment of carbon bonds achieved to date by a Peruvian company. The Certified Emission Reductions (CER) issued for the generation at the hydroelectric power plant from the startup of operations to May 2014, reached a total of 2,141,262. Each additional year of production will generate around 660,000 tons of equivalent CO 2. During 2014, CELEPSA has reached the return rates offered to its investors (despite a less favorable business situation) and has timely complied with its financial obligations. its purchase and construction, CELEPSA will use own resources from its positive cash flow, as well as from a modification of the timelines in its financing contracts with Banco de Crédito del Perú and Scotiabank. The audited financial statements of CELEPSA as of December 31, 2014, recorded the following results: Net sales of S/ million (S/ million in 2013). Net income of S/ million (S/. 1.8 million in 2013). Net stockholders equity of S/ million (S/ million in 2013). It is worth noting that net earnings during 2013 amounted to S/. 1.8 million due to a specific difference adjustment in the foreign exchange rate. Hidro Marañón S.R.L. In November 2014, CELEPSA acquired the company Hidro Marañón S.R.L. seeking to execute the future hydroelectric power plant project with water from the Marañón River, at 2,900 meters above sea level, close to the town of Nuevas Flores, province of Huamalíes, region of Huánuco. The total debt of the company went from US$ million as of the closing of 2013, to US$ 94.5 million as of the closing of In 2014, CELEPSA concentrated its efforts in the development of projects that will enable it to increase its generation capacity and EBITDA in the short term. Along that line, the most relevant project is the construction of the Marañón Hydroelectric power plant, expected to start operating in December To fund The project, which has a final generation concession of 88 MW, has been restated to 20 MW, as a generation project with renewable energy resources (RER) in order to increase its firm plant factor, while reducing constructive (geological), environmental and social risks. Total investment estimated for the project, including acquisition costs, is US$ 60.0 million. Work has already started and it is estimated that the plant will be operating by December April 2014 We inaugurated the concrete blocks and bricks plant in Cajamarquilla, Chosica, Lurigancho. Our subsidiary, UNICON, initiated the casting of section 2 of the line 1 of the Metro of Lima Annual Report 61

31 CELEPSA Renovables S.A.C. CELEPSA Renovables is currently evaluating other hydroelectric projects of up to 20 MW of power, one of which is in the permitting and land acquisition stage. It is also conducting and supervising, with ARPL, the construction of the Carpapata III hydroelectric power plant of UNACEM. Ambiental Andina S.A. AMBIAND AMBIAND is a Peruvian company that provides meteorological and hydrological services and startup of hydroelectric projects, where CELEPSA participates with 50.0%. The meteorology area of AMBIAND has one of the most modern tools that generate accurate information in timely manner for climate monitoring and prediction. This enables clients from different sectors to minimize risks and reduce climate impacts on their operations. In 2014, AMBIAND developed the WRF version 3.6, Peruvian High Resolution Model (MPAR, for its acronym in Spanish), an operating model for the forecasting of more than 150 weather variables, including: rainfall, temperature, wind and humidity, with a 7-day horizon and with the highest horizontal resolution in Peru (10 km). AMBIAND serves close to 40 clients, mainly in the energy, agricultural, consumption and services and infrastructure sectors. In 2014, it achieved net sales of S/. 2.1 million, representing 34.0% growth with respect to the previous year, mostly supported by the expansion of the hydrology area (50.0%). SKANON INVESTMENTS, INC. / DRAKE CEMENT, LLC (Ownership: 88.0% of SKANON INVESTMENTS / 93.9% of DRAKE CEMENT) UNACEM has made contributions to the capital of Skanon Investments, Inc., in the amount of US$ 23.5 million in 2014, which means it is the direct owner of 88.0% of the shares of this subsidiary. In addition, our related companies own 10.0% of the balance. Skanon Investments, Inc., in turn, owns 94.0% of Drake Cement and 100.0% of Drake Materials. According to the estimates of the Portland Cement Association (PCA) the Arizona cement market dropped 3.0% during 2014 with respect to the previous year. As a result of this market decrease, Drake Cement s total sales were 314,941 short tons of cement and 140,000 tons of clinker. It should be noted that cement sales in the previous year were 329,800 short tons. Meanwhile, total sales recorded US$ 37.6 million, that is, 31.4% more than in the previous year (US$ 28.6 million). For 2015, it is expected that sales will reach 460,000 short tons of cement. Meanwhile, Drake Materials recorded ready mix sales of 500,700 m 3 during the year, similar to the previous year s figures. For 2015, sales projections are 560,000 m 3 (12.0% more than in the previous year), 72,000 m 3 of which will correspond to special projects: 47,000 m 3 in the Phoenix area (for the Sky Harbor and Mesa Gateway airports) and 25,000 m 3 in the State of Texas (El Pueblo wind energy plant). The favorable macro-economic conditions of the United States of America exhibited as of the end of 2014, allow the Portland Cement Association to forecast an average growth of more than 10.0% per year for the next 5 years in Arizona, with which we trust Drake Cement will increase its market share and revenues in the next years. May 2014 We signed the sale and purchase agreement for the shares of Lafarge Cementos S.A. of Ecuador, now UNACEM Ecuador. Cemento Andino received the 2014 Gold EFFIE award. We started the works for Mercado Unión, Tarma (Works for Taxes). We measured the water footprint at our Atocongo plant Annual Report 63

32 the consolidated financial statements of skanon Investments, Inc., as of December 31, 2014, recorded the following results: Net sales of us$ 82.5million (us$ 68.8 million in 2013). Net loss of us$ 21.4 million (us$ 19.5 million in 2013). Net stockholders equity of us$ million (us$ million in 2013). prefabricados AndInoS perú S.A.C. preansa perú (ownership: 50.0%) In 2014, despite the macro economic situation of the country and the suspension of large projects, especially in the first half of the year, PReANsA PeRÚ achieved adequate results. preansa perú HAd An outstanding growth in the execution of infrastructure works. Contracts in the prefabricated line reached s/ million, down 12.0% from the previous year sales; the turnover for assemblies performed reached s/ million and production surpassed 6,000 m 3, providing an acceptable scale cost performance, considering the margin contribution provided by the plant. In turn, in line with the rest of the activities, crane rental achieved a turnover similar to the previous year, reaching s/. 2.2 million. During the year, PReANsA PeRÚ recorded an outstanding growth in the execution of infrastructure works, which accounted for approximately 30.0% of all contracts executed in the most relevant contract in the period is the parking project of Av. Rivera Navarrete, in lima, which amounts to more than s/. 7.2 million. Mounting assembly is estimated to take place during the last quarter of the audited financial statements of PReANsA PeRÚ, as of December 31, 2014, recorded the following results: Net sales of s/ million (s/ million in 2013). Net income of s/. 2.5 million (s/. 4.2 million in 2013). Net stockholders equity of s/ million (s/ million in 2013) AnnuAl RepoRt 65

33 PREFABRICADOS ANDINOS S.A.S. PREANSA COLOMBIA (Ownership: 100.0% of PREANSA PERÚ) PREFABRICADOS ANDINOS S.A. PREANSA CHILE (Ownership: 51.0%) As of the closing of 2014, PREANSA PERÚ had made capital contributions amounting to S/. 4.6 million to its subsidiary Prefabricados Andinos S.A.S. PREANSA COLOMBIA, as this subsidiary will construct a large-scale industrialized concrete structures plant in the area of Cundinamarca, close to Bogota, which will have an annual capacity of 15,000 m 3. To date, the municipal permitting process that had delayed the construction of the plant has been completed and the purchase orders for supplies and equipment from Spain and Peru have been placed. Furthermore, the ground is being currently leveled for the civil works and mounting of equipment. On January 17, 2014, we started consolidating the activities of PREANSA CHILE as part of our subsidiaries. The performance of this company in this first year of integration has been fairly satisfactory. In 2014, large industrial and bridge construction contracts were executed for road concessions. During the year, the performance of the construction unit slowed down while the bridges unit kept a steady pace, driven by the public works policies of the Chilean government. Commissioning of the plant is expected to start during the last quarter of The approximate investment will be US$ 10.0 million and the plant is expected to start operating during the first quarter of Turnover during this period totaled US$ 19.6 million, representing a 14.0% growth with respect to Contracts for new works during the year totaled US$ 12.0 million, 80.0% of which correspond to bridges and 20.0% to industrial construction. Production reached 16,494 m 3, 19.0% increase over It is worth underscoring that during the year PREANSA CHILE was involved in large-scale mining works; incorporated new large-size BU type bridge beams; executed bridge projects in the North and South Panamericana Highway of Chile and participated as expositor in the First International Conference on Bridges, held in Santiago. The audited financial statements of PREANSA CHILE, as of December 31, 2014, recorded the following results: Net sales of S/ million. Net income of S/. 3.5 million. Net stockholders equity of S/ million Annual Report 67

34 INVERSIONES IMBABURA S.A. UNACEM ECUADOR S.A. (Ownership: 100.0% of Imbabura / 98.57% of UNACEM Ecuador) On November 25, 2014, when the public stock offer was made at the Quito Stock Exchange, we initiated the consolidation of UNACEM Ecuador S.A. as part of our subsidiaries. On November 28, 2014 the shareholders of Lafarge Cementos S.A. held a Special Shareholders Meeting that decided to change the name to UNACEM Ecuador S.A., a process that was completed on February 6, UNACEM Ecuador is engaged in the exploitation and production of cement and related products. The company has two subsidiaries, of which it holds 99.99% of the shares. During 2014, production totaled 1,458,851 tons and sales reached 1,452,511 tons, 76.0% of which correspond to bagged product and 25.4% to bulk sales. Lafarge Cementos Services S.A. «I feel very proud to be a part of the leading group in the market. The synergy between UNACEM and UNICON is given insofar as we are able to place high quality concrete in the construction activity, in the right amount and moment, at the lowest overall construction cost». Miguel Velasco General Manager, UNICON Company organized in Ecuador to engage, primarily, in activities related to specialized technical services for third parties and sales, import and storage of oil and gas and related products, among other activities. Canteras y Voladuras S.A. CANTYVOL This company, incorporated in Ecuador, is engaged in mining activities in general, cement related in particular; that is, exploitation of limestone, clay and puzzolan quarries, which it sells to its main client, UNACEM Ecuador. The consolidated financial statements of UNACEM Ecuador, audited as of December 31, 2014, recorded the following results, which have been consolidated by UNACEM from November 25 to December 31, 2014: Net sales of US$ 17.4 million. Net income of US$ 5.0 million. Net stockholders equity of US$ million Annual Report 69

35 ONGOING PROJeCts LugAr DE LA memoria memorial, LImA AnnuAl RepoRt 71

36 WE ConTInuE WITh ThE EXECuTIon of ProJECTS ThAT guarantee ThE efficiency OF Our OperaTiOnS AnD InITIATED our PArTICIPATIon In PuBLIC InfrASTruCTurE ProJECTS within the framework of the works for taxes ACt AnnuAl RepoRt 73

37 WE InAugurATED ThE ConCrETE BLoCKS PLAnT In CAJAmArquILLA, WITh A maximum ProDuCTIon CAPACITy of 60 MilliOn units per year. ThE new CEmEnT mill 8 AT ThE ConDorCoChA PLAnT WILL InCrEASE CEmEnT milling CAPACITy from 2.1 MilliOn TO 2.8 MilliOn TOnS. WE STArTED ThE EXECuTIon of ThE new carpapata iii hydroelectric power plant, WE ArE PArTICIPATIng In WOrKS FOr TaxeS projects, among TheM, The construction OF MercaDO unión, in TarMa, WhICh represents An InvESTmEnT of S/. 5.3 million. Which Will have a generation CAPACITy of 12.8 mw AnnuAl RepoRt 75

38 ConCRete blocks plant In CAJAMARquIllA During the first quarter of 2014, we completed the construction of a new concrete blocks plant in Cajamarquilla. the main products manufactured in this plant are: floor bricks, bovedillas (roof bricks) and King Kong type bricks. Annual capacity of the plant ranges from 20 million to 60 million units approximately, depending on the product to be manufactured. ModeRnIZAtIon And CApACIty expansion of the AtoCongo plant the ConCRete blocks plant In CAJAMARquIllA is equipped with cutting-edge technology machinery and an automated curing chamber. Following the commissioning and startup of the modernization of kiln 1 during 2013, in 2014 we continued working on the electro-mechanical assembly for the conversion of the four raw material storage silos to mix silos. We completed the works and started operation of the last one in October «Drake was the first experience of unacem outside Peru and its first greenfield project after many years and it represented not only diversifying the risk, but especially, stepping into the international market». marco gómez-barrios GeNeRAl MANAGeR, DRAKe CeMeNt AnnuAl RepoRt 77

39 Cement Mill 8 and Bagging Unit 5 at the Condorcocha Plant In May 2014, we started the construction of the main civil works of the new cement mill 8 and bagging unit 5, which concluded in December. That same month we commenced the works corresponding to the electro-mechanic assembly of the project, to be completed in June. It will be operating regularly in August Furthermore, we started working on the detail engineering of a puzzolan dryer to be installed in order to increase the milling capacity of the new mill for puzzolan cement. With the installation of the puzzolan dryer, the system will have a capacity of 100 tons/hour, that is, 700,000 tons/year of puzzolan, through a combined roller press and balls milling system, increasing current milling capacity from 2.1 million tons/year to 2.8 million tons/year as of September In turn, the new bagging unit will be able to fill 3,000 bags/hour and will have two cement storage silos with 7,500 tons capacity each, which have already been built. With the combined roller press milling we will increase current milling capacity at the Condorcocha Plant to 2.8 million tons per year Annual Report 79