F-1/A 1 d463062df1a.htm AMENDMENT NO.4 TO FORM F-1 Amendment No.4 to Form F-1
Table of Contents

As filed with the Securities and Exchange Commission on May 31, 2013.

Registration No. 333-187972

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

AMENDMENT NO. 4

TO

FORM F-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

VOTORANTIM CIMENTOS S.A.

(Exact Name of Registrant as Specified in its Charter)

 

 

VOTORANTIM CEMENT CORPORATION

(Translation of Registrant’s name into English)

 

 

 

The Federative Republic of Brazil   3241   Not Applicable

(State or Other Jurisdiction of

Incorporation or Organization)

 

(Primary Standard Industrial

Classification Code Number)

 

(I.R.S. Employer

Identification No.)

Votorantim Cimentos S.A.

Praça Professor José Lannes, 40 – 9o Andar

04571-100 São Paulo – SP

Brazil

Tel: +55 11 2162-0600

Fax: +55 11 2162-0670

(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)

 

 

Puglisi & Associates

850 Library Avenue, Suite 204

Newark, Delaware 19711

(302) 738-6680

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

Copies to:

 

Donald Baker

Mark Bagnall

White & Case LLP

Av. Brig. Faria Lima, 2.277 – 4° Andar

01452-000 São Paulo – SP

Brazil

Tel: +55 11 3147 5601

Fax: +55 11 3147 5611

 

Richard S. Aldrich, Jr.

Skadden, Arps, Slate, Meagher & Flom LLP

Av. Brig. Faria Lima, 3.311 – 7° Andar

04538-133 São Paulo – SP

Brazil

Tel: +55 11 3708 1830

Fax: +55 11 3706 2830

 

 

Approximate date of commencement of proposed sale to the public: As soon as practicable after effectiveness of this registration statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.  ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

 

 

CALCULATION OF REGISTRATION FEE

 

 

Title of Each Class of

Securities to be Registered

 

Proposed

Maximum

Aggregate

Offering Price(1)(2)

  Amount of
Registration Fee(5)

Units, each unit consisting of (3)(4):

  U.S.$5,400,000,000   U.S.$736,560

(i) one common share, no par value

       

(ii) two preferred shares, no par value

       

 

 

(1) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act of 1933.
(2) Includes ADSs to be sold by the selling shareholder.
(3) Includes units subject to the over-allotment option of the underwriters. See “Underwriting.”
(4) The units may initially be represented by the registrant’s American Depositary Shares, or ADSs, each of which represent two units. A separate Registration Statement on Form F-6 will be filed for the registration of ADSs issuable upon deposit of the units representing common shares and preferred shares registered hereby.
(5) Previously paid.

 

 

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

 

 

 


Table of Contents

The information in this preliminary prospectus is not complete and may be changed. We and the selling shareholder may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities, and neither we nor the selling shareholder are soliciting an offer to buy these securities in any state or jurisdiction where the offer or sale is not permitted.

Subject to completion, dated May 31, 2013

Preliminary Prospectus

400,000,000 Units

 

LOGO

 

 

Including Units in the Form of American Depositary Shares

This is an initial public offering of 400,000,000 units of Votorantim Cimentos S.A. We are selling 285,714,286 units and Votorantim Industrial S.A., or the “selling shareholder,” is selling 114,285,714 units. The units may be offered directly or in the form of American Depositary Shares, or ADSs, each of which represents two units. Each unit represents one common share and two preferred shares of Votorantim Cimentos S.A. This prospectus relates to the offering by the international underwriters of units, including in the form of ADSs in the United States and elsewhere outside Brazil. The Brazilian underwriters are offering units in Brazil. We refer to the international offering in the United States and elsewhere outside Brazil and the concurrent offering in Brazil as the “global offering.” We will not receive any proceeds from the sale of units, including units in the form of ADSs, by the selling shareholder. Prior to this global offering, there has been no public market for our ADSs, units, common shares or preferred shares. The estimated initial public offering price for the units will be between R$16.00 and R$19.00 per unit and between U.S.$15.59 and U.S.$18.51 per ADS, based on the selling exchange rate of R$2.0527 per U.S.$1.00 reported by the Brazilian Central Bank on May 27, 2013.

We have applied to list our ADSs on the New York Stock Exchange, or NYSE, under the symbol “VEBM”. We have applied to list our units and our underlying common shares and preferred shares on the Level 2 (Nível 2) segment of the São Paulo Stock Exchange (BM&FBOVESPA S.A. - Bolsa de Valores Mercadorias e Futuros), or BM&FBOVESPA, under the symbols “VEBM11”, “VEBM3” and “VEBM4”, respectively.

 

     Per ADS(1)      Per unit      Total  

Initial public offering price

   U.S.$                    R$                    U.S.$                

Underwriting discounts and commissions(2)

   U.S.$                    R$                    U.S.$                

Proceeds to us, before expenses

   U.S.$                    R$                    U.S.$                

Proceeds to selling shareholder, before expenses

   U.S.$                    R$                    U.S.$                

 

(1) Amounts in reais have been translated into U.S. dollars at the selling exchange rate reported by the Brazilian Central Bank as of                         , 2013, or R$             to U.S.$1.00
(2) See “Underwriting” for a description of the compensation payable to the underwriters.

We have granted Morgan Stanley & Co. LLC and Banco Morgan Stanley S.A. an over-allotment option for a period of 30 days to purchase up to an aggregate of 60,000,000 additional units, including in the form of ADSs, at the initial public offering price, less underwriting discounts and commissions. See “Underwriting—Over-allotment option.”

 

 

Investing in our units and ADSs involves a high degree of risk. See “Risk Factors” beginning on page 20.

Neither the United States Securities and Exchange Commission, or the SEC, nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The underwriters expect to deliver the ADSs to purchasers on or about             , 2013. Delivery of our units (otherwise not in the form of ADSs) is expected to be made on or about             , 2013.

 

 

 

Morgan Stanley   J.P. Morgan   Itaú BBA   Credit Suisse   BTG Pactual

 

HSBC  

Goldman,

Sachs & Co.

 

Deutsche Bank

Securities

  Bradesco BBI   BofA Merrill Lynch  

Banco do Brasil
Securities LLC

  Banco
Votorantim

 

 

The date of this prospectus is             , 2013


Table of Contents

TABLE OF CONTENTS

 

     Page  

PRESENTATION OF FINANCIAL AND OTHER INFORMATION

     ii   

PROSPECTUS SUMMARY

     1   

THE OFFERING

     11   

SUMMARY CONSOLIDATED FINANCIAL AND OTHER INFORMATION

     15   

RISK FACTORS

     20   

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

     39   

EXCHANGE RATES

     41   

USE OF PROCEEDS

     42   

DIVIDEND POLICY

     43   

CAPITALIZATION

     48   

DILUTION

     49   

SELECTED CONSOLIDATED FINANCIAL AND OTHER INFORMATION

     50   

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION

     60   

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     66   

INDUSTRY

     103   

BUSINESS

     116   

MANAGEMENT

     173   

PRINCIPAL AND SELLING SHAREHOLDERS

     181   

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

     183   

DESCRIPTION OF CAPITAL STOCK

     188   

DESCRIPTION OF AMERICAN DEPOSITARY SHARES

     201   

TAXATION

     213   

UNDERWRITING

     221   

EXPENSES OF THE OFFERING

     236   

LEGAL MATTERS

     237   

EXPERTS

     238   

ENFORCEABILITY OF CIVIL LIABILITIES

     239   

WHERE YOU CAN FIND ADDITIONAL INFORMATION

     240   

INDEX TO FINANCIAL STATEMENTS

     F-1   

 

 

This prospectus has been prepared by us solely for use in connection with the proposed offering of units, including units in the form of ADSs, in the United States and elsewhere outside Brazil. Morgan Stanley & Co. LLC, J.P. Morgan Securities LLC, Itau BBA USA Securities, Inc., Credit Suisse Securities (USA) LLC, Banco BTG Pactual S.A. – Cayman Branch, HSBC Securities (USA) Inc., Goldman, Sachs & Co., Deutsche Bank Securities Inc., Banco Bradesco BBI S.A., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Banco do Brasil Securities LLC and Banco Votorantim S.A., Nassau Branch will act as international underwriters with respect to the offering of the ADSs and as agents, on behalf of the Brazilian underwriters, with respect to the offering of units outside of Brazil (otherwise not in the form of ADSs).

We, the selling shareholder and the international underwriters have not authorized anyone to provide you with additional information or information different from that contained in this prospectus or in any free writing prospectus prepared by us or on our behalf. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. When you make a decision about whether to invest in our units and ADSs, you should not rely upon any information other than the information in this prospectus and any free writing prospectus prepared by us or on our behalf. This prospectus is not an offer to sell or solicitation of an offer to buy these units and ADSs in any circumstances under which the offer or solicitation is unlawful.

 

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PRESENTATION OF FINANCIAL AND OTHER INFORMATION

Certain Defined Terms

In this prospectus, unless otherwise indicated or the context otherwise requires:

 

   

all references to “VCSA” are to the registrant, Votorantim Cimentos S.A., a corporation organized and existing as a sociedade por ações under the laws of Brazil;

 

   

all references to “Votorantim Cimentos,” “our company,” “we,” “our” and “us,” or similar terms are to VCSA and its subsidiaries;

 

   

all references to the “selling shareholder” and “VID” are to Votorantim Industrial S.A., a corporation organized and existing as a sociedade por ações under the laws of Brazil;

 

   

all references to “Votorantim Industrial” are to VID and its subsidiaries;

 

   

all references to “VPar” are to Votorantim Participações S.A., a corporation organized and existing as a sociedade por ações under the laws of Brazil;

 

   

all references to “Brazil” are to the Federative Republic of Brazil;

 

   

all references to the “Brazilian Central Bank” are to the Central Bank of Brazil (Banco Central do Brasil);

 

   

all references to “U.S. dollars,” “dollars” or “U.S.$” are to U.S. dollars;

 

   

all references to the “real,” “reais” or “R$” are to the Brazilian real, the official currency of Brazil; and

 

   

all references to “euro”, “euros” or “€” are to the European Euro, the official currency of certain countries of the European Union.

Solely for the convenience of the reader, we have translated some amounts included in this prospectus, including in the “Prospectus Summary,” “Summary Consolidated Financial and Other Information,” “Capitalization” and “Selected Consolidated Financial and Other Information” sections from reais into U.S. dollars using the selling rate as reported by the Brazilian Central Bank as of March 31, 2013 of R$2.0138 to U.S.$1.00. These translations should not be considered representations that any such amounts have been, could have been or could be converted into U.S. dollars at that or at any other exchange rate. These translations also should not be construed as representations that the real amounts represent or have been or could be converted into U.S. dollars as of that or any other date. See “Exchange Rates” for information regarding exchange rates for the Brazilian currency since January 1, 2008.

Financial Statements

We maintain our books and records in reais, the presentation currency for our financial statements and also the functional currency of our operations in Brazil. We have prepared our annual audited consolidated financial statements included in this prospectus in accordance with International Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board, or IASB. We have prepared our unaudited consolidated interim condensed financial information included in this prospectus in accordance with International Accounting Standard 34 – “Interim Financial Information,” or IAS 34, issued by the IASB. Unless otherwise noted, our financial information presented herein as of March 31, 2013, and for the three-month periods ended March 31, 2013 and 2012, and for the years ended December 31, 2012, 2011, 2010 and 2009 is stated in reais, our reporting currency.

This prospectus includes (1) our consolidated interim condensed financial statements as of March 31, 2013 and for the three-month periods ended March 31, 2013 and 2012, together with the notes thereto, or our unaudited consolidated interim financial information, and (2) our audited consolidated financial statements as of December 31, 2012 and 2011 and for each of the years ended December 31, 2012, 2011 and 2010, together with the notes thereto, or our audited consolidated financial statements.

 

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As described in note 3.2 of our unaudited consolidated interim financial information, effective as of January 31, 2013, we have adopted IFRS 11 – Joint Arrangements, or IFRS 11. As a result of our adoption of IFRS 11, we no longer proportionally consolidate the results of operations of our joint ventures, and effective as of January 1, 2013, we account for these companies using the equity method. We have retroactively applied IFRS 11 to the comparative balance sheet as of December 31, 2012 and to the statement of income information for the three-month period ended March 31, 2012 included in our unaudited consolidated interim financial information. The joint ventures that we previously consolidated and that we currently account for using the equity method are: Sumter Cement Co LLC; Trinity Materials LLC; Suwannee American Cement LLC, or Suwannee; Superior Building Materials LLC; Cementos Especiales de Las Islas S.A., Hormigones y Aridos La Barca S.A. and Cantera do Penedo S.A.

Considering that the effects of the retroactive application of IFRS 11 to our consolidated financial statements are not material to our financial position, results of operations or cash flows as of December 31, 2012 and 2011 and for the years ended December 31, 2012, 2011 and 2010, we present in this prospectus our audited consolidated financial statements using the accounting for joint ventures that was applicable before the effectiveness of IFRS 11.

The consolidated balance sheet information as of December 31, 2012 presented in this prospectus has been derived from our consolidated balance sheet presented as comparative information in our unaudited consolidated interim financial information, while the consolidated balance sheet information as of December 31, 2011 has been derived from our audited consolidated financial statements.

Unless otherwise indicated, all references herein to “our financial statements,” and “our consolidated financial statements,” are to our audited and unaudited consolidated financial statements included elsewhere in this prospectus.

Assets and Liabilities Held for Sale and Discontinued Operations

China operations

We do not intend to continue our operations in China, which we acquired in December 2012 as part of our 2012 Cimpor asset exchange (as defined below), and we have implemented a plan to dispose of this business. As a result, these assets and liabilities are presented as separate line items in our consolidated balance sheets as of March 31, 2013 and December 31, 2012 and its related results of operations are classified as discontinued operations in our consolidated statement of income for the three-month period ended March 31, 2013. Our management expects this sale to be consummated during 2013.

VILA investment held for sale

On March 31, 2013, we classified our 12.36% equity interest in Votorantim Investimentos America Ltda., or VILA, as a non-current asset held for sale since our management had an active plan to transfer this investment to our controlling shareholder VID, which held a 21.95% equity interest in VILA. As of March 31, 2013, the book value of our investment in VILA was R$682.2 million. On May 14, 2013, we entered into a share purchase agreement with VID pursuant to which VID purchased our equity interest in VILA for an aggregate purchase price of R$682.5 million. On May 28, 2013, we offset dividends payable to VID in the amount of R$280.2 million against part of the amount due from VID as a result of this sale. The remaining balance will be settled against a debt that one of our subsidiaries owes a subsidiary of VID resulting from our acquisition of additional equity interests in Cementos Avellaneda S.A., or Avellaneda, and Cementos Artigas S.A., or Artigas.

Segment Information and Presentation of Segment Financial Data

We are organized by geographical areas and have three operating segments based on the location of our main assets, as follows: (1) Brazil (including our operations in South America); (2) North America; and (3) commencing on December 21, 2012 when we consummated the 2012 Cimpor asset exchange (as defined below), Europe, Africa and Asia.

On June 25, 2012, we entered into an exchange agreement with Camargo Corrêa Cimentos Luxembourg S.à.r.l., or Camargo Corrêa Luxembourg, and InterCement Austria Holding GmbH, or InterCement Austria, in which we agreed to exchange our 21.21% equity interest in Cimpor – Cimentos de Portugal SGPS, S.A., or Cimpor, in return for Cimpor’s subsidiaries, including its cement production assets, in Spain, Morocco, Tunisia, Turkey, India and

 

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China, and its subsidiary, including a quarry, in Peru, and 21.21% of Cimpor’s net debt. We refer to this transaction as the 2012 Cimpor asset exchange. Because the 2012 Cimpor asset exchange was consummated on December 21, 2012, our audited consolidated financial statements as of and for the years ended December 31, 2012, 2011 and 2010 include segment asset information for our three operating segments but results of operations for only two segments: (1) Brazil (including our operations in South America); and (2) North America. Commencing on January 1, 2013, our financial statements include information about the results of our three operating segments described above.

Our segment information is prepared on the same basis as the information that our senior management uses to allocate resources among our segments and evaluate their performance. The key financial performance measure of our operating segments are EBITDA before results of investees and Adjusted EBITDA, which are reported on a monthly basis to our chief operating decision maker, who in our case, is our Chief Executive Officer. For additional information on our operating segments and a reconciliation of the operating results of our operating segments to our consolidated results, see note 27 to our unaudited consolidated interim financial information included elsewhere in this prospectus and note 34 to our audited consolidated financial statements.

Audited Carve-Out Combined Financial Statements of the Cimpor Target Businesses

In connection with the 2012 Cimpor asset exchange, we have included in this prospectus the audited carve-out combined financial statements of the Cimpor Target Businesses. References to the “Cimpor Target Businesses” are collectively to the subsidiaries of Cimpor Inversiones, S.A. (a wholly-owned subsidiary of Cimpor) in Spain, Morocco, Tunisia, Turkey, India, China and Peru, which were contributed to Votorantim Cimentos EAA Inversiones, S.L., or VCEAA. For a detailed description of the 2012 Cimpor asset exchange, see the note 1 to the carve-out combined financial statements (as defined below).

The audited carve-out combined financial statements and the notes related thereto of the Cimpor Target Businesses as of and for the years ended December 31, 2012 and 2011, or the carve-out combined financial statements, have been prepared as a combination of the historical accounts of the Cimpor Target Businesses. The carve-out combined financial statements include only the assets, liabilities, income and expenses, that are specifically attributable to the Cimpor Target Businesses. They do not take into account any other business activities carried out by VCEAA. Because the Cimpor Target Businesses are legal entities that were transferred as a whole, it was not necessary to allocate any corporate assets, liabilities, income or expenses.

Unaudited Pro Forma Condensed Consolidated Financial Information

On June 25, 2012, we entered into an exchange agreement with Camargo Corrêa Luxembourg and InterCement Austria, in which we agreed to exchange our 21.21% equity interest in Cimpor in return for the Cimpor Target Businesses. On December 21, 2012, we consummated the 2012 Cimpor asset exchange, through which we obtained sole ownership and control of VCEAA and the Cimpor Target Businesses and assumed 21.21% of Cimpor’s consolidated net debt as of November 30, 2012. We accounted for the 2012 Cimpor asset exchange as a business combination in accordance with IFRS 3R “Business Combinations” (Revised 2008) with Votorantim Cimentos as the acquirer for accounting purposes.

For purposes of the unaudited pro forma condensed consolidated statement of income for the year ended December 31, 2012, we have assumed that the 2012 Cimpor asset exchange occurred on January 1, 2012. As a result, the unaudited pro forma condensed consolidated statement of income was derived from:

 

   

our audited historical consolidated statement of operations for the year ended December 31, 2012; and

 

   

the audited carve-out combined statement of profit and loss of the Cimpor Target Businesses for the year ended December 31, 2012.

Special Note Regarding Non-GAAP Financial Measures

In this prospectus, we present EBITDA before results of investees, Adjusted EBITDA and return on capital employed, or Adjusted ROCE, which are non-GAAP financial measures. We define EBITDA before results of investees as net income plus/minus net financial income (expense) plus/minus income tax and social contribution

 

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plus depreciation and amortization and depletion plus/minus equity in results of investees. We define Adjusted EBITDA as EBITDA before results of investees plus/minus certain non-cash transactions that are considered by our management as exceptional, impairment of goodwill and dividends received plus/minus EBITDA from discontinued operations. The non-cash items considered as exceptional by our management generally relate to gains/losses on acquisitions, disposals or exchange of assets. In 2010, we recorded a non-cash gain of R$1,672.4 million in connection with the exchange of assets related to our acquisition of a 17.28% equity interest in Cimpor, which did not involve cash, and which we refer to as the 2010 Cimpor asset exchange. In 2011, we recorded an impairment loss on equity of investees of R$586.5 million, and in 2012, we recorded a non-cash gain of R$266.8 million in connection with the disposal of our 21.21% equity interest in Cimpor.

We present EBITDA before results of investees and Adjusted EBITDA because we believe they provide investors with a supplemental measure of the financial performance of our operations that facilitates period-to-period comparisons on a consistent basis. Our management also uses EBITDA before results of investees and Adjusted EBITDA, among other measures, for internal planning and performance measurement purposes. EBITDA before results of investees and Adjusted EBITDA should not be construed as an alternative to profit, or operating profit, as an indicator of operating performance, as an alternative to cash flow provided by operating activities or as a measure of liquidity (in each case, as determined in accordance with IFRS). EBITDA before results of investees and Adjusted EBITDA, as we calculated them, may not be comparable to similarly titled measures reported by other companies, including our competitors in the cement industry. For a calculation of EBITDA before results of investees and Adjusted EBITDA and a reconciliation of EBITDA before results of investees and Adjusted EBITDA to the most directly comparable IFRS financial measure, see “Selected Consolidated Financial and Other Information—Non-GAAP financial measures and reconciliation.”

We present Adjusted ROCE due to the asset intensive nature of our business and our related need to efficiently employ our capital. Adjusted ROCE is a non-GAAP measure that helps to focus our management on maximizing the use and return of our existing assets and pursuing strategic growth and investment opportunities that are projected to yield sufficient returns. We calculate Adjusted ROCE by dividing the sum of our operating profit from continuing operations before equity in results of investees and net financial income (expense) minus/plus certain non-cash transactions that are considered by our management as exceptional included in operating profit and dividends received plus property, plant and equipment plus total current assets less total current liabilities, in each case, from continuing operations. For a calculation of Adjusted ROCE and a reconciliation of Adjusted ROCE to the most directly comparable IFRS financial measure, see “Selected Consolidated Financial and Other Information—Non-GAAP financial measures and reconciliation.”

Market Data and Other Information

We have obtained the market and competitive position data, including market forecasts, used throughout this prospectus from internal surveys, market research, publicly available information and industry publications. We include data from reports prepared by ourselves; the Brazilian Institute of Geography and Statistics (Instituto Brasileiro de Geografia e Estatística), or IBGE; the Brazilian National Department of Mineral Production (Departamento Nacional de Produção Mineral), or DNPM; the Office of the Brazilian National Housing Secretary (Secretaria Nacional de Habitação) of the Brazilian Ministry of Cities (Ministério das Cidades), or the Brazilian Housing Secretary; the Brazilian Ministry of Planning (Ministério de Planejamento); the Brazilian Association of Financial and Capital Markets Entities (ANBIMA – Associação Brasileira dos Mercados Financeiros e de Capitais), or ANBIMA; the Brazilian Central Bank; the Brazilian National Economic and Social Development Bank (Banco Nacional de Desenvolvimento Econômico e Social), or BNDES; and the Getulio Vargas Foundation (Fundação Getulio Vargas), or FGV.

We have used the following sources to obtain market share and other related data:

 

   

the National Cement Industry Union (Sindicato Nacional da Indústria do Cimento), or SNIC;

 

   

the Global Cement Report Ninth Edition (2011), published by the International Cement Review, or the Global Cement Report;

 

   

the Portland Cement Association, or PCA;

 

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the Brazilian Industry and Construction Board (Câmara Brasileira da Indústria da Construção), or CBIC;

 

   

the European Cement Association, or Cembureau;

 

   

the Turkish Cement Manufacturer’s Association (Türkiye Çimento Müstahsilleri Birlği) (Turkey), or TCMA;

 

   

the Moroccan Professional Cement Association (Association Professionnelle des Cimentiers du Maroc) (Morocco), or APCM;

 

   

the National Bureau of Statistics of China;

 

   

the Cement Manufacturer’s Association (India), or CMA;

 

   

the United States Geological Survey, or USGS;

 

   

the equity research report entitled “Building Materials: Significantly Undervalued but Shorter Term Uncertainties” published by Jefferies International Ltd. in August 2012, or the Building Materials Research Report;

 

   

the Spanish Cement Manufacturer’s Association (Agrupación de Fabricantes de Cemento de España), or Oficemen, (Spain);

 

   

Consulting Group LCA; and

 

   

Ipsos Loyalty (Brazil).

Any reports and internal surveys that we have prepared are based on our estimates and our analysis of publicly available information, including information from those companies we believe are our principal competitors in the markets where we operate. Industry publications generally state that the information presented therein has been obtained from sources believed to be reliable. While we believe that internal surveys and reports, industry publications or forecasts and market research referred to in this prospectus are generally reliable, neither we nor the international underwriters have independently verified this information. Estimates and forecasts included in this industry data involve uncertainties and risks and are subject to change based on various factors, including those discussed under the headings “Special Note Regarding Forward-Looking Statements” and “Risk Factors” in this prospectus.

Operational Data and Other Information

Our operational data presented in this prospectus include the operational data of our consolidated subsidiaries and our proportional share of the operational data of the companies that we proportionally consolidated during the relevant periods (based upon our equity participation in these companies) and does not include the operational data of the companies that we accounted for using the equity method during the relevant periods. For instance, our operational data as of and for the years ended December 31, 2012, 2011 and 2010, includes 100% of the operational data of our consolidated subsidiaries and the proportional annual installed production capacities of our 50/50 joint ventures in North America (based upon our equity participation in these companies), and it does not include the operational data for Avellaneda, Artigas, Cementos Bío Bío S.A., or Bío Bío, Mizu S.A., or Mizu, Sirama Participacões S.A., or Sirama, Polimix Concreto Ltda., or Polimix Concrete, and Supermix Concreto Ltda., or Supermix, companies which we accounted for using the equity method during those years. Our operational data as of and for the three-month periods ended March 31, 2013 and 2012, includes 100% of the operational data of our consolidated subsidiaries and does not include the operational data of companies which we accounted for using the equity method during those periods, including (but not limited to) Avellaneda, Bío Bío, Mizu, Sirama, Polimix Concrete, Supermix and Suwannee.

 

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References to our total annual installed production capacity in this prospectus include 100% of the annual installed production capacities of the companies that we consolidated during the relevant period, and as of March 31, 2013, it also included the annual installed production capacity of Artigas, which we commenced consolidating on April 3, 2013 upon our acquisition of a controlling interest on such date. We have separately included the annual installed production capacities of those companies that we do not consolidate but the results of which are included pursuant to the equity method in the line item “equity in results of investees” in this prospectus solely for the investor’s reference. However, we have not included the production capacities of these companies in our total annual installed production capacity.

References to “our mortar” products include all types of mortar we produce, including dry and adhesive mortars. All references in this prospectus to “tons” are to “metric tons.” References to “dmt” are to dry metric ton. References to “kg” are to “kilograms,” equivalent to 1,000 grams, and references to “kt” shall mean “kiloton,” equivalent to 1,000 tons. The term “MW” and “GW” refers to megawatt and gigawatt, respectively, and the term “GWh” refers to gigawatt hours.

References to “greenfield” projects are to projects that are newly constructed production facilities at a new location or a site with little to no infrastructure available to support the project. References to “brownfield” projects are to projects that begin from an existing production capacity at an existing location with available infrastructure and with expansion or modernization opportunities. References to “top-of-mind” are to brands that first arise in a consumer’s mind when thinking of a particular industry.

Rounding

We have made rounding adjustments to reach some of the figures included in this prospectus. As a result, numerical figures shown as totals in some tables may not be an arithmetic aggregation of the figures that preceded them.

  
  

 

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PROSPECTUS SUMMARY

This summary highlights selected information contained elsewhere in this prospectus. This summary does not contain all the information that you should consider before deciding to invest in our units or ADSs. You should read the entire prospectus carefully, including the information presented under “Risk Factors” and our financial statements and notes to our financial statements, before making an investment decision. Unless otherwise indicated, operational information as of and for the year ended December 31, 2012 reflects the 2012 Cimpor asset exchange as if it had been consummated on January 1, 2012. See “Presentation of Financial and Other Information.”

Overview

We are a global vertically-integrated heavy building materials company, with operations in North and South America, Europe, Africa and Asia. We believe we are the largest and most profitable heavy building materials company in Brazil, the fourth-largest cement market in the world according to the Building Materials Research Report. We produce and sell a complete portfolio of building materials—which includes cement, aggregates, ready-mix concrete, mortar and other building materials—and we serve a very diversified and fragmented client base. We are the eighth-largest global cement producer in terms of annual installed cement production capacity, according to the Global Cement Report, with 52.3 million tons as of the date of this prospectus. In 2012, we had revenues of R$9,481.7 million, net income of R$1,640.5 million, Adjusted EBITDA of R$3,070.7 million, net margin (calculated as net income divided by revenue) of 17.3%, Adjusted EBITDA margin of 32.4% and Adjusted ROCE of 21.6%. We believe our Adjusted ROCE (which was 23.4% during the 12-month period ended March 31, 2013) is one of the highest among publicly traded global cement producers, and our revenues grew at a compound annual growth rate, or CAGR, of 9.4% from 2009 through 2012.

We believe we are uniquely positioned to maintain high returns on capital and generate significant value for our shareholders. We have operations in various important high-growth markets and we are present in regions with significant opportunities for value creation with a total of 33 cement plants, 23 grinding mills, 331 ready-mix plants, 84 aggregates facilities, two clinker plants, two lime units and 13 mortar plants. In addition, we have a total of 61 limestone quarries with an expected average reserve life in excess of 60 years assuming we were to operate at our maximum production capacity as of December 31, 2012.

Our Markets

The map below sets forth our installed cement production capacity by country in which we operate and our respective market share:

 

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(1) Our assets related to our business in China are classified as “held for sale” in our unaudited consolidated interim condensed financial information and in our audited consolidated financial statements.

 

 

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(2) Includes 100% of the annual installed capacity of Suwannee, which was not consolidated as of March 31, 2013.
(3) Not available.
(4) Annual installed cement production capacity is presented as of March 31, 2013 and includes our consolidated companies, including Artigas. The annual installed cement production capacities represent full capacities.
(5) Market share data is based on data from the SNIC (Brazil), USGS, The Canada Cement Association in Ontario (North America), Oficemen (Spain), TCMA (Turkey), CMA (India), China Economic Information Network (China), the Argentine Portland Cement Manufacturers’ Association (Asociación de Fabricantes de Cemento Portland) (Argentina), APCM (Morocco), CNPC (Tunisia), the Bolivian Cement and Concrete Institute (IBCH - Instituto Boliviano del Cemento y el Hormigón) (Bolivia), the Chilean Cement and Concrete Institute (ICH - Instituto del Cemento y del Hormigón de Chile) (Chile) and is presented as of the most recent dates for which information is available, which is March 31, 2013 for Europe, Asia and Africa, North America, Brazil and Argentina and as of December 31, 2012 for Bolivia and Chile.

Brazil. In Brazil, we own 16 cement plants, 11 grinding mills, 110 ready-mix concrete plants, 28 aggregates facilities, eight mortar plants and one lime unit, as well as 27 limestone quarries. Our total annual installed cement production capacity was 30.1 million tons as of March 31, 2013, and, according to information available from the SNIC, we had a market share of 36.4%, 35.2% and 36.7% in 2011, 2012 and in the three-month period ended March 31, 2013, respectively, in terms of Portland cement volume sold in Brazil, positioning us as the market leader in the country. We deliver our products to approximately 30,000 clients per month through our broad distribution network that includes 52 distribution centers strategically located close to the principal markets in Brazil, and that enable us to distribute our products throughout the country. In addition to our 30.1 million tons of total annual installed cement production capacity in Brazil, we also have equity interests in Mizu and Sirama, Brazilian cement companies with three cement plants, two grinding mills and one cement mixing plant, and a combined total annual installed cement production capacity of 5.2 million tons.

We believe that increasing personal income levels, lower interest rates, the housing deficit and the implementation of significant infrastructure projects by the Brazilian federal government will drive opportunities for growth in the construction sector and, consequently, substantial additional demand for cement, ready-mix concrete, aggregates, mortar and other building materials. Annual cement consumption per capita in Brazil grew at an annual average rate of 8.5% between 2007 and 2011, according to the SNIC, which is equivalent to 2.3 times the gross domestic product, or GDP, real growth over the same period, according to the IBGE. The Brazilian federal government has announced plans to substantially increase public and private infrastructure spending, particularly through its Growth Acceleration Program (Programa de Aceleração de Crescimento), or PAC, with an estimated investment of R$955 billion by 2014, of which approximately 12.3% has yet to be disbursed for highways, ports and airports, among other projects as of September 2012. The Brazilian federal government also expects to invest approximately R$390 billion in home construction in Brazil from 2012 to 2015 to address the estimated housing deficit of 5.6 million homes, according to IBGE’s Brazilian Household Sample Survey 2008 (Pesquisa Nacional de Amostra por Domicílios – 2008). In addition to expected investments in infrastructure and housing, we believe the Brazilian cement market will also experience additional demand due to construction projects related to the 2014 International Federation of Association Football (Fédération Internationale de Football Association), or FIFA, World Cup and the 2016 Olympic Games.

North America. Our North American business includes four cement plants, two grinding mills, 140 ready-mix concrete plants, 33 aggregates facilities and four limestone quarries, with a total annual installed cement production capacity of 5.2 million tons in the Great Lakes region. We also have operations in the States of Florida and Michigan through 50/50 joint ventures with a total annual installed cement production capacity of 0.8 million tons, through which we are involved in the operation of one cement plant and one aggregates facility. Cement in these regions (unlike the Brazilian market) is usually sold in bulk to ready-mix concrete companies. In 2012 and during the three-month period ended March 31, 2013, we sold approximately 95% and 96%, respectively, of our cement in the Great Lakes region in bulk. In addition, we sell cement to manufacturers of pre-cast concrete, as well as to construction companies. We believe we are well positioned to benefit from the expected economic and construction sector recovery in these regions. The PCA expects cement consumption in North America to increase by 8.1% in 2013, by 8.3% in 2014 and by 9.2% in 2015 as a result of the expected economic recovery in the United States, particularly in the construction industry.

 

 

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South America (excluding Brazil). Our South American business, excluding our Brazilian operations, includes controlling and minority stakes in leading heavy building materials companies. We own:

 

   

a 66.71% equity interest in Itacamba Cementos S.A., or Itacamba, in Bolivia, which owns one grinding mill with an annual installed cement production capacity of 0.2 million tons;

 

   

a 51.0% equity interest in Artigas, a Uruguayan cement company with a current annual installed cement production capacity of 0.5 million tons;

 

   

a 49.0% equity interest in Avellaneda, an Argentinean cement company with a current annual installed cement production capacity of 2.8 million tons; and

 

   

a 16.70% equity interest in Bío Bío, a Chilean cement company with a current annual installed cement production capacity of 2.2 million tons.

Through our controlling and minority interests, we are involved in the operation of five cement plants, three grinding mills, one clinker plant, 65 ready-mix concrete plants, 18 aggregates facilities, one mortar unit and three lime plants in South America (excluding Brazil). In addition, we own a limestone quarry in Peru as a result of the 2012 Cimpor asset exchange described below. We believe our operations in South America provide us with a platform for potential consolidation and expansion of our presence in the region’s attractive markets.

Europe, Africa and Asia. On June 25, 2012, we entered into an exchange agreement with Camargo Corrêa Luxembourg and InterCement Austria, in which we agreed to exchange our 21.21% equity interest in Cimpor in return for Cimpor’s subsidiaries, including its cement production assets, in Spain, Morocco, Tunisia, Turkey, India and China, and its subsidiary, including a quarry, in Peru, and 21.21% of Cimpor’s net debt (which we refer to as the 2012 Cimpor asset exchange). On December 21, 2012, we concluded this transaction, resulting in an increase in our total global annual installed cement production capacity of 16.3 million tons. As a result of certain post-closing adjustments, we paid €57.0 million to InterCement Austria on January 21, 2013.

As a result of the 2012 Cimpor asset exchange, we have 13 cement plants, one clinker production facility, eight grinding mills, 78 ready-mix concrete plants, 22 aggregates plants, five mortar mills, one lime unit and 29 limestone quarries in Europe, Africa and Asia, with total annual installed cement capacity of 16.3 million tons. Since we recently acquired these operations, we believe we can capture value through potential synergies, cost-efficiency improvements and streamlining of headcount among these operations in addition to further increasing our presence in certain high-growth markets. We do not intend to continue our operations in China, and we have implemented a plan to dispose of this business in 2013.

Expansion of Capacity in Brazil

During the past five years, we have developed, upgraded and expanded our cement plants in Brazil, increasing our installed cement production capacity from 21.4 million tons in 2007 to 30.1 million tons as of March 31, 2013. We have also focused on upgrading our aggregates and ready-mix concrete capabilities. We expect to invest a total of approximately R$3,562.5 million (U.S.$1,769.0 million) during 2013, 2014 and 2015 in expansion projects to increase our capacity to meet expected additional demand for our products. We also expect to incur approximately R$1,425.9 million (U.S.$708.1 million) over the same period in capital expenditures (excluding expansion projects) during this period. Through our projected investments in expansion, we expect to increase our current Brazilian annual installed cement production capacity from 30.1 million tons as of March 31, 2013 to 40.4 million tons by the end of 2015, in order to meet expected demand growth.

Votorantim Industrial

We are part of Votorantim Industrial, a privately held conglomerate in Latin America that is a strong player in each of its main business segments: cement; non-ferrous metals, such as zinc, aluminum, nickel and copper; and pulp (through a company that Votorantim Industrial jointly controls), as well as significant steel and power generation operations. Votorantim Industrial had consolidated net revenues and Adjusted EBITDA in 2012 of R$24,792 million (U.S.$12,311 million) and R$5,101 million (U.S.$2,533 million), respectively. As of the date of this prospectus, VID directly owns 100.0% of our capital stock. VID is a wholly owned subsidiary of VPar, which is controlled by the Ermirio de Moraes family. See “Principal and Selling Shareholders.” Upon consummation of this global offering, VID will beneficially own approximately 92.72% of our outstanding common shares (assuming no exercise of the over-allotment option) and therefore will continue to be our controlling shareholder. See “Risk

 

 

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Factors—Risks relating to our units and ADSs—Our controlling shareholder will continue to have significant influence over us after this global offering, and its interests may conflict with the interests of our minority shareholders.”

Competitive Strengths

We believe the following competitive strengths consistently differentiate us from our competitors and contribute to our continued success:

Leading market position in Brazil based on top-of-mind brands and unmatched operational network

We are the cement market leader in Brazil, with 16 cement plants and 11 grinding mills, making us the only cement supplier producing in all five Brazilian regions, according to the SNIC. In 2012 and in the three-month period ended March 31, 2013, we had a market share of 35.2% and 36.7%, respectively, in terms of Portland cement sales volume in Brazil, according to the SNIC, and we have maintained this leadership position for several decades. We believe our market position is also supported by brand recognition and customer loyalty based on the high quality of our products and our extensive distribution network. Our participation in the retail and bagged cement markets with over 25 different products and five brands creates substantial brand awareness. According to market research from Ipsos Loyalty (Brazil), approximately 72% of our retail customers in Brazil strongly recommend our brands. We have 52 distribution centers, strategically positioned to offer superior service to approximately 30,000 clients per month in approximately 3,350 cities in Brazil. Given the stability, scale and national reach of our production facilities, we benefit from efficient distribution logistics, which enables significant cost savings and optimal time to market.

We believe that we are the only company in Brazil able to supply a full portfolio of heavy building materials to our customers, selling materials ranging from aggregates and cement to ready-mix concrete and mortars We also supply specialized cement products to meet our clients’ needs, including for large infrastructure projects, such as the Belo Monte hydroelectric plant, an infrastructure project in the State of Pará with a total publicly announced project cost of R$28.9 billion, and the Santo Antônio and Jirau hydroelectric plants, infrastructure projects with total publicly announced project costs of R$15.1 billion and R$9.5 billion, respectively, in the State of Rondônia.

Global platform and strategic positions in high-growth markets

We operate in some of the most promising cement markets, which are characterized by strong demand drivers. We have a diversified international asset base in several important markets, which provides us with a unique footprint spanning South America, North America, Turkey, Morocco, Tunisia, Spain and India. We believe most of our markets have favorable demographic profiles and we expect our markets to experience economic growth or recover to previous growth and demand levels, which we believe will lead to increased per capita cement consumption.

Industry-leading technical expertise enabling low-cost production in the markets in which we operate

In our 80-year history in the cement sector we have developed unique know-how and industry-leading technical expertise that we apply throughout our operations. Our consistent operating cost reduction measures, ability to respond in a timely manner to market changes and high operating standards have driven our ability to increase our profitability even in highly challenging market conditions. These efforts have continually allowed us to improve our key performance indicators, such as kiln efficiency, to reduce our clinker ratio and to increase our use of alternative fuels. This, in addition to our in-house clinker production, provides us with better ability to control operating costs. During 2012, we produced virtually all of the clinker we grind in our mills to produce cement.

We have invested in and secured mining rights for access to our limestone quarries. In addition, we have secure and efficient access to other raw materials, such as gypsum, slag, fly ash and pozzolan. Our long-standing track record and our sustained access to raw materials provide us with a competitive advantage. In Brazil, we mine limestone from quarries that have, on average, a reserve life in excess of 60 years, assuming we were to operate at our maximum production capacity of 30.1 million tons as of December 31, 2012. In addition, we believe that the average distance from our Brazilian cement plants to our quarries is one of the lowest in the Brazilian cement industry and minimizes our raw materials logistics costs, increasing our efficiency and profitability.

 

 

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As of December 31, 2012, we met approximately 27.5% of our energy consumption needs in Brazil through hydroelectric power plants that we own, which allows us to significantly reduce our energy costs. In addition, all of our cement plants use a modern dry production process which reduces energy consumption. We meet the remainder of our energy needs in Brazil through long-term, competitively priced, large-scale supply contracts. We believe that we are pioneers in the use of alternative and environmentally friendly fuels in Brazil, such as tire-derived fuel, or TDF, and other industrial waste materials.

Demonstrated ability to manage high growth with financial discipline and a track record of robust EBITDA generation

We believe we are uniquely positioned to maintain high returns and generate significant value for our shareholders. We have focused on value creation and high returns by expanding organically in Brazil, acquiring companies outside Brazil and entering into strategic partnerships or joint ventures. In 2012, we recorded net income of R$1,640.5 million (U.S.$814.6 million), Adjusted EBITDA of R$3,070.7 million (U.S.$1,524.8 million), net margin of 17.3%, Adjusted EBITDA margin of 32.4% and an Adjusted ROCE of 21.6%. During the 12-month period ended March 31, 2013, our Adjusted ROCE reached 23.4%, which we believe is among the highest in the global cement industry, based on our analysis of publicly available information from those companies that we believe are the principal global cement producers. We made capital expenditures of R$4,187.5 million (U.S.$2,079.4 million) from January 1, 2010, to December 31, 2012, mainly in connection with our organic expansion, and we paid aggregate dividends and interest on stockholders’ equity of R$5,736.4 million (U.S.$2,848.5 million) and maintained a strong capital structure during the period. We believe this shows our potential for continued strong cash flow generation.

Well-defined, proven and replicable management model supporting operational excellence, stability and high returns

We believe we have an operating model that allows us to achieve margins that are above our peers in Brazil and North America, and we believe our profitability levels are above the industry average. Moreover, we have consistently delivered Adjusted ROCE that exceeds the average of the publicly traded companies in our industry. We believe our replicable management model has helped us to create positive results and will allow us to improve performance of companies or assets that we may invest in or acquire, including our operations in North America and the companies and related assets we acquired in connection with the 2012 Cimpor asset exchange.

The key elements of our management model are: (1) delivering superior returns by actively managing our cost structure to adapt to changing market conditions; (2) increasing efficiencies in the use of raw materials and other large-scale supply contracts in order to benefit from our economies of scale; and (3) employing qualified and experienced professionals. Our management is guided by value creation, based on cash value added. In order to completely align our guidance with our management, part of our management’s compensation is based on this performance metric.

Experienced senior management team with strong sponsorship of Votorantim Industrial

Our senior management team has many years of experience with a strong focus on financial performance, operating efficiencies and shareholder returns. In addition, our senior management is committed to sustainability and attaining solid financial results in a socially and environmentally responsible way. Our senior management team has successfully transformed our company into a global vertically-integrated heavy building materials company with a focus on further diversifying our product offerings and geographic presence. Over the past 80 years we have made strategic acquisitions and divestments, and implemented brownfield and greenfield projects that increased our annual installed capacity, while also focusing on cost reductions and improved financial performance.

We also have a committed controlling shareholder, Votorantim Industrial, which has a profound knowledge of the cement industry resulting from its leading industrial position over its 80-year history. We believe that Votorantim Industrial’s sponsorship gives us a competitive advantage, due to its continuing support and long-term vision for global growth. In addition, Votorantim Industrial’s proven track record in implementing strong corporate governance practices has contributed to our sustainable growth.

 

 

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Business Strategy

We are focused on expanding organically in Brazil and coupling this growth with international expansion primarily through acquisitions. We seek to continue to grow with financial discipline and maintenance of an adequate capital structure, positioning ourselves as a leading company in terms of profitability.

Continue to grow organically in Brazil

We intend to continue our organic growth in Brazil by maintaining and improving our cost efficiency relative to our competitors, further increasing our product offerings and geographic reach and reducing delivery times for our customers. We will continue to create brand awareness, deliver high-quality products and maintain our high penetration rate in the retail segment, which will allow us to continue to earn a premium for our products. In addition, we intend to increase our participation in the technical market (a segment composed mainly of mid- to large-scale construction companies), which, according to Consulting Group LCA, is a growing segment that demands an ample portfolio of quality products and services similar to what we provide.

We believe that we have not yet fully achieved the benefits of our recently increased installed capacity in terms of our sales volume and our operating results due to the ramp-up period required for a new cement plant to reach its full capacity. During 2012, we invested R$1,171.3 million in our new plants, which we expect to produce at their full capacity within one year from their operating commencement date.

Further expand our international presence through acquisitions and investments

We intend to continue to further expand our operations internationally through a vertically integrated platform and footprint in high-growth markets. When considering acquisition or investment opportunities in North America, we will select companies or assets with potential to improve their operating and financial performances and generate synergies with our existing clusters. In South America, we will continue to invest in premium assets, generally in cement and often in partnership with strong domestic established businesses. We will continue to identify entry platforms that have well-located quality operations and good regional market positions and which have the potential to develop further into integrated building materials businesses as construction markets become more sophisticated over time. We intend to maintain the same growth discipline that has proven successful throughout our corporate history.

Continue to enhance profitability and improve the financial performance of our existing assets

In Brazil, we have invested, and intend to continue to invest, to improve our profitability and cost efficiencies by utilizing advanced production technologies. We expect to continue using alternative fuels to further reduce our energy costs by investing in energy co-processing. We believe that we will further maintain our track record of achieving cost efficiency through disciplined cost management policies and by leveraging our know-how and industry-leading technical expertise.

In North America, we will focus our efforts on maximizing the benefits from the expected market recovery, and we expect to further improve the utilization rates of our plants as higher sales volume reduce our fixed costs per ton sold. In South America, we will continue to work closely with our partners to share our sector expertise and replicate our successful management model.

With respect to the Cimpor assets that we recently acquired through the 2012 Cimpor asset exchange, we will apply our management model and cement know-how (as we previously did and continue to do in North America) to the assets we own and operate. We seek to bring these new assets to operating and profitability standards similar to the most efficient companies and plants in our portfolio. Our turn-around operational plans to improve the profitability of these companies involve, among other things, enhancing our operating efficiency to levels comparable to those in our most efficient cement plants. We believe our investments will be successful given our lean organizational structure and our vast commercial expertise in many different markets.

 

 

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Further leverage our market positions and distribution networks to expand our value-added product and services offerings

In providing our customers with the best products and services, we plan to focus on further diversifying our product base by increasing the production and sale of aggregates, ready-mix concrete, mortar and other building materials. We will continue to manage our product offerings as a vertically integrated business, which allows us to capture a greater portion of the cement value chain and to offer our customers integrated solutions to meet their needs. We will also continue to benefit from our vast commercial expertise in a wide range of products and markets. We are positioned to capture an increase in demand in ready-mix concrete, aggregates and mortar in Brazil, and in ready-mix concrete and aggregates in North America and South America (excluding Brazil). We also believe there is a substantial demand in Brazil for ready-mix concrete-based products over other materials, particularly in infrastructure such as ports, airports, dams, sanitation projects and the government-subsidized housing segments, which will result in higher cement bulk sales.

Continue to focus on sustainability and social responsibility

We are committed to sustainable development. Sustainability means ensuring business continuity and long-term growth, while focusing on environmental and social responsibility and results that are consistent with value creation. Three principles determine our actions in all markets in which we operate: constant economic growth, protection of the environment and respect for our communities. By following these principles, we will continue to develop as a world-class company and operate our business in accordance with the values of sustainability.

We are a founding partner in the Cement Sustainability Initiative, or the CSI, and a strong supporter of the responsible use of energy and climate protection. We believe that we are pioneers in the use of alternative fuels in Brazil, and we believe that we are one of the lowest carbon dioxide, or CO2, emitting cement companies in the world, based on our estimates. We intend to continue to explore the use of environmentally friendly techniques in order to lower our CO2 emissions. The Votorantim Institute (Instituto Votorantim) supports our company and other companies within Votorantim Industrial in developing and implementing a social action strategy that contributes to the development of the communities in which we operate.

Risk Factors

Investing in our units and ADSs involves risks. You should carefully consider the risks described in “Risk Factors” before making a decision to invest in our ADSs. If any of these risks actually were to occur, our business, financial condition and results of operations would likely be materially adversely affected, the trading price of our ADSs would likely decline and you may lose all or part of your investment. The following is a summary of some of the principal risks we face:

 

   

general economic and/or political conditions in Brazil and the other countries where we operate may materially adversely affect our business, financial condition and results of operations;

 

   

we are dependent on the development of the Brazilian construction industry and are exposed to the risk of adverse market movements;

 

   

the construction industry has a cyclical nature, and variations in supply and demand, including reductions from a decrease in activities, or an increase of capacities, might lead to overcapacity and therefore to a reduced utilization of our cement plants;

 

   

we are subject to certain investigations in Brazil in connection with alleged antitrust violations, as well as other pending litigation that may materially adversely affect our financial performance and financial condition;

 

   

we are dependent on adequate supplies of raw materials and electrical energy for our operations;

 

   

we may be unable to complete or integrate our past or prospective acquisitions and strategic alliances successfully;

 

 

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our level of indebtedness could materially adversely affect our ability to react to changes in our business, and could make us more vulnerable to downturns in our business;

 

   

our business strategies require substantial investments, which we may be unable to fund competitively;

 

   

compliance with environmental, health and safety regulation could result in significant additional costs, and non-compliance with environmental legislation may result in punishment for environmental damages, as well as criminal and administrative sanctions, which could adversely affect us;

 

   

mineral exploration activities depend on authorizations, concessions and licenses from public authorities, which are subject to expiration, limitation on renewal, changes in the relevant laws and regulations, and to various other risks and uncertainties that may affect the heavy building materials industry and our activities;

 

   

our status as a foreign private issuer will allow us to follow alternative standards to the corporate governance standards of the NYSE, including not having a board of directors composed of a majority of independent directors, which may limit the protections afforded to investors; and

 

   

the Brazilian federal government has exercised, and continues to exercise, significant influence over the Brazilian economy. Brazilian economic and political conditions have a direct impact on our business.

Our Corporate Structure

The following chart sets forth our corporate structure as of the date of this prospectus:

 

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(1) As of March 31, 2013, Votorantim Andina S.A., a subsidiary of VID, also had a 38.39% equity interest. On April 3, 2013, we acquired VID’s indirect equity interest in Avellaneda and as a result, as of the date of this prospectus, we own a 49.0% equity interest in Avellaneda.

 

 

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(2) As of March 31, 2013, Votorantim Andina S.A., a subsidiary of VID, also had a 38.39% equity interest. On April 3, 2013, we acquired VID’s indirect equity interest in Artigas and as a result, as of the date of this prospectus, we own a 51.0% equity interest in Artigas.
(3) Includes a 16.7% interest owned directly by VCEAA.
(4) Considers 100% participation in a quarry recently acquired through the 2012 Cimpor asset exchange.
(5) We hold our assets in Spain mainly through (1) Cementos Cosmos, S.A., (2) Cementos Teíde, S.L.U. (formerly known as Cimpor Canarias, S.L.), or Cementos Teíde, and (3) Sociedad de Cementos y Materiales de Construcción de Andalucia, S.A.
(6) We hold our assets in Turkey mainly through Votorantim Çimento Sanayi ve Ticaret A.Ş. (formerly known as Cimpor Yibitas Çimento Sanayi ve Ticaret A.Ş.), or Çimento Sanayi.
(7) We hold our assets in Morocco mainly through Cementos Asment EAA.
(8) We hold our assets in Tunisia mainly through two principal indirect subsidiaries: (1) Societe des Ciments de Jbel Oust – CJO; and (2) Terminal Cementier Gabes - TCG.
(9) We hold our assets in India mainly through Shree Digvijay Cement Company Limited.
(10) Our assets related to our business in China are classified as “held for sale” in our unaudited consolidated interim financial information and in our audited consolidated financial statements. See “Presentation of Financial and Other Information—Financial Statements—China operations held for sale.” As of the date of this prospectus, we hold an 80.0% equity interest in Cimpor Macau Investment Company S.A., or Cimpor Macau, in China. See “Business—The 2012 Cimpor Asset Exchange.”
(11) Although we own 51.0% of the outstanding capital stock of Mizu, we do not exercise control over this company as a result of our limited rights to influence its strategic, operating and finance decisions, and therefore, we account for our interest using the equity method.
(12) We also have equity interests in Polimix Cimento Ltda., or Polimix Cement, and Verona Participações Ltda., or Verona, two cement companies. Although we own 51.0% of the outstanding capital stock of Polimix Cement, we do not exercise control over this company as a result of our limited rights to influence its strategic, operating and finance decisions, and therefore, we account for our interest using the equity method.
(13) Refers to Suwannee, which we hold through our 100% equity interest in Suwannee Holdings LLC.
(14) As of March 31, 2013, we held a 15.15% equity interest in Bío Bío. On April 18, 2013 we acquired an additional 1.549% equity participation in Bío Bío in a transaction on the Santiago Stock Exchange, and as a result, as of the date of this prospectus, we hold a 16.70% equity interest in Bío Bío.

Our Ownership Structure

The following charts set forth our ownership structure prior to and following this global offering (assuming no exercise of the over-allotment option):

 

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(1) As of the date of this prospectus, VID directly owns 5,437,499,999 of our outstanding shares (including 5,437,499,899 common shares and 100 preferred shares), and VPar owns one common share. VID is a wholly-owned subsidiary of VPar, which is controlled by the Ermirio de Moraes family.
(2) Immediately after this global offering, we will have 6,294,642,858 total shares issued and outstanding, consisting of 5,494,642,858 common shares and 800,000,000 preferred shares, assuming no exercise of the underwriters’ overallotment option. Upon the completion of the offering, VID will beneficially own approximately 5,094,642,857 of our outstanding shares, all of which will be common shares, representing 92.72% of our outstanding common shares, and VPar will own one common share.
(3) Includes units purchased by our employees, directors and officers in Brazil at the public offering price for the Brazilian offering.

Recent Developments

On April 16, 2013, we acquired an aggregate 30% equity interest in Cimpor Macau in China. This acquisition was part of our strategy to facilitate the proposed sale of our operations in China. As of the date of this prospectus, we hold an 80% equity interest in Cimpor Macau.

On April 3, 2013, our subsidiary Votorantim Europe, S.L.U. entered into a share purchase agreement with Votorantim Andina S.A., a subsidiary of VID, pursuant to which we purchased 374,090,472 shares of Artigas, representing 38.39% of the capital stock of this company and 25,306,594 class B shares of Avellaneda, representing 38.39% of the capital stock of this company, for an aggregate purchase price of €154.6 million (equivalent to R$402.0 million using the exchange rate applicable as of April 3, 2013 of R$2.6001 per €1.00), which corresponds to the fair value of the equity interest in Avellaneda and the book-value of the equity interest in Artigas. As a result, we currently own a 51.0% equity interest in Artigas and a 49.0% equity interest in Avellaneda.

On April 18, 2013, we acquired an additional 1.549% equity interest in Bío Bío in a transaction on the Santiago Stock Exchange for a purchase price of 2,742.7 million Chilean pesos (equivalent to R$11.6 million using the exchange rate applicable as of April 18, 2013 of R$0.0042 per 1.00 Chilean peso).

On April 30, 2013, our shareholders approved a 49-to-1 stock split by which 5,310,496,224 additional common shares were issued to holders of our existing 110,635,338 common shares. On May 27, 2013, our shareholders approved an additional 1.00301935819354-to-1 stock split of our common shares, by which 16,368,338 additional common shares were issued to holders of our existing 5,421,131,562 common shares. The quantity of our shares outstanding at December 31, 2012 and March 31, 2013 after retrospective adjustment for these stock splits was 5,437,499,900 common shares and 100 preferred shares.

On May 14, 2013, we entered into a share purchase agreement with VID, pursuant to which VID purchased our 12.36% equity interest in VILA, for an aggregate purchase price of R$682.5 million. On May 28, 2013, we offset dividends payable to VID in the amount of R$280.2 million against part of the amount due from VID as a result of this sale. The remaining balance will be settled against a debt that one of our subsidiaries owes a subsidiary of VID resulting from our acquisition of additional equity interests in Avellaneda and Artigas.

Corporate Information

We were incorporated initially as a limited liability company (sociedade limitada) under the laws of Brazil on January 9, 1997, with unlimited duration and on June 1, 2009 became a corporation (sociedade por ações). Our principal executive offices are located at Praça Professor José Lannes, 40, 9º andar, 04571-100, São Paulo, SP, Brazil. We are currently registered as Company No. 35300370554 by the Board of Trade of the State of São Paulo (Junta Comercial do Estado de São Paulo – JUCESP). Our telephone number is +55 (11) 2162-0600. Our website address is www.vcimentos.com.br. None of the information contained therein or connected thereto shall be deemed to be incorporated into this prospectus or the registration statement of which it forms a part.

 

 

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Throughout this prospectus, we refer to various trademarks, service marks and trade names that we use in our business, including—Votoran, Itaú Cimentos, Poty, Tocantins, Aratu, Votomassa, Matrix, Engemix, Prairie, Prestige, Cosmos, Kamal, Jbel Oust and Temara, which are our major brand names. We also have several other registered trademarks, service marks and pending applications relating to our products. Other trademarks and service marks appearing in this prospectus are the property of their respective holders.

 

 

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THE OFFERING

The following is a brief summary of the terms of this global offering and should be read together with more detailed information included elsewhere in this prospectus. For a more complete description of our common and preferred shares and our ADSs, see “Description of Capital Stock” and “Description of American Depositary Shares” in this prospectus.

 

Issuer    Votorantim Cimentos S.A.
Selling Shareholder    Votorantim Industrial S.A.
International Underwriters    Morgan Stanley & Co. LLC, J.P. Morgan Securities LLC, Itau BBA USA Securities, Inc., Credit Suisse Securities (USA) LLC, Banco BTG Pactual S.A. –Cayman Branch, HSBC Securities (USA) Inc., Goldman, Sachs & Co., Deutsche Bank Securities Inc., Banco Bradesco BBI S.A., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Banco do Brasil Securities LLC and Banco Votorantim S.A., Nassau Branch.
Brazilian Underwriters   

Banco Morgan Stanley S.A., Banco J.P. Morgan S.A., Banco Itaú BBA S.A., Banco de Investimentos Credit Suisse (Brasil) S.A., Banco BTG Pactual S.A., HSBC Bank Brasil S.A. – Banco Múltiplo, Goldman Sachs do Brasil Banco Múltiplo S.A., Deutsche Bank S.A. – Banco Alemão, Banco Bradesco BBI S.A., Bank of America Merrill Lynch Banco Múltiplo S.A., BB-Banco de Investimento S.A. and Banco Votorantim S.A.

Global Offering   

This global offering consists of an international offering and a concurrent Brazilian offering.

 

We intend to use our reasonable efforts to seek to generate demand from retail investors aiming at an allotment to retail investors of 10% or more of the units, including in the form of ADSs, offered in this global offering.

International Offering    We and the selling shareholder are offering              units, directly or in the form of ADSs, through the international underwriters in the United States and elsewhere outside Brazil. The international underwriters also will act as placement agents on behalf of the Brazilian underwriters with respect to the offering of units (otherwise not in the form of ADSs) sold to investors located outside Brazil that are authorized to invest in Brazilian securities under the requirements established by the Brazilian National Monetary Council (Conselho Monetário Nacional), or the CMN, and Brazilian Securities Commission (Comissão de Valores Mobiliários), or the CVM.
Brazilian Offering    Concurrently with the international offering, we and the selling shareholder are offering              units, through the Brazilian underwriters in a public offering in Brazil by means of a separate Portuguese-language prospectus, including a Formulário de Referência. The Brazilian underwriters will sell units to investors located in Brazil pursuant to the requirements established by the CVM.
Employee, director and officer offering in Brazil    We will reserve up to 2.0% of the retail portion of the Brazilian offering for our employees, directors and officers in Brazil at the public offering price for the Brazilian offering. See “Underwriting—Brazilian offering and placement of units.”
Units    Each unit represents one of our common shares and two of our preferred shares.
American Depositary Shares    Each ADS represents two units and may be represented by American depository receipts, or ADRs. The ADSs will be issued under an ADS deposit agreement among us, Deutsche Bank Trust Company Americas, or the ADS Depositary, and the holders and beneficial owners from time to time of ADSs issued thereunder.

 

 

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Offering Price    We expect that the offering price will be between R$16.00 and R$19.00 per unit and between U.S.$15.59 and U.S.$18.51 per ADS, based on the selling exchange rate of R$2.0527 per U.S.$1.00 reported by the Brazilian Central Bank on May 27, 2013.
Over-Allotment Options    We are granting Morgan Stanley & Co. LLC an option, exercisable in its sole discretion upon prior written notice to our company, with a copy to the other international underwriters, at any time for a period of 30 days from, and including, the first day of trading of the units on the BM&FBOVESPA, to purchase up to 60,000,000 additional units, in the form of ADSs, minus the number of units sold by us pursuant to the Brazilian underwriters’ over-allotment option referred to below, at the initial public offering price, less the underwriting discounts and commissions, to cover over-allotments, if any, provided that the decision to allocate the additional units (including in the form of ADSs) is made jointly by the international underwriters and the Brazilian underwriters at the time the price per unit and ADS is determined. If any additional ADSs are purchased with this over-allotment option, the international underwriters will offer the additional ADSs on the same terms as those ADSs are being offered pursuant to the international offering.
   We have also granted Banco Morgan Stanley S.A. an option, exercisable in its sole discretion upon prior written notice to our company, with a copy to the other Brazilian underwriters, at any time for a period of 30 days from, and including, the first day of trading of the units on the BM&FBOVESPA, to place up to an additional 60,000,000 units, minus the number of units in the form of ADSs sold pursuant to the international underwriters’ over-allotment option, to cover over-allotments, if any, provided that the decision to allocate the additional units (including in the form of ADSs) is made jointly by the Brazilian underwriters at the time the price per unit and ADS is determined. See “Underwriting—Over-allotment option.”
Use of proceeds    We intend to use the net proceeds from this global offering primarily to continue our organic cement expansion strategy and diversification of our portfolio of products in Brazil, for potential acquisitions of heavy building materials companies or assets outside Brazil, for strategic investments to further improve the efficiency of our operations and for our general corporate purposes. See “Use of Proceeds.”
Share Capital Before and After Global Offering    Our issued and outstanding share capital consists of 5,437,499,900 common shares and 100 preferred shares as of the date of this prospectus. Immediately after the offering, we will have 5,494,642,858 common shares and 800,000,000 preferred shares issued and outstanding, assuming no exercise of the underwriters’ over-allotment option. If the underwriters exercise their over-allotment option in full, we will have 5,554,642,858 common shares and 920,000,000 preferred shares issued and outstanding.

 

 

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Dividends    Brazilian corporate law and our bylaws require us to distribute at least 25.0% of our annual adjusted net profits, as calculated under Brazilian GAAP and Brazilian corporate law, unless the payment of dividends is suspended by our board of directors after having concluded that such distribution would be incompatible with our financial condition. See “Description of Capital Stock”.
   Direct holders of our units will be entitled to the same dividends and any interest on stockholders’ equity as holders of the underlying common shares and preferred shares. See “Description of Capital Stock––Description of Our Units”.
   Holders of our ADSs will be entitled to receive the same dividends and any interest on stockholders’ equity as the owners of the underlying units (and, consequently, the underlying common shares and preferred shares of such units), subject to the deduction of the fees of the ADS Depositary and any applicable withholding taxes and the costs of foreign exchange conversions. See “Description of the American Depositary Shares.”
Controlling Shareholder    As of the date of this prospectus, VID directly owns 100.0% of our capital stock. Upon the consummation of this global offering, our controlling shareholder will beneficially own approximately 92.72% of our outstanding common shares (including in the form of units) (assuming no exercise of the over-allotment option). As long as our controlling shareholder beneficially owns a majority of our outstanding capital stock, it will be able to elect a majority of our directors and to determine the outcome of the voting on substantially all actions that require shareholder approval. For a discussion on the limitations and risks to investors related to our controlling shareholder’s influence over us, see “Risk Factors—Risks relating to our units and ADSs—Our controlling shareholder will continue to have significant influence over us after this global offering, and its interests may conflict with the interests of our minority shareholders.”
Conflicts of Interest    Banco Votorantim Securities, Inc., a FINRA member participating in the offering to effect sales in the U.S. on behalf of Banco Votorantim S.A., Nassau Branch (see “Underwriting—International offering”), is under common control with VCSA, as defined in FINRA Rule 5121(f)(6)(B). Consequently, Banco Votorantim Securities, Inc. is deemed to have a “conflict of interest” within the meaning of FINRA Rule 5121(f)(5)(B). Accordingly, this offering is being made in compliance with the requirements of FINRA Rule 5121. Since Banco Votorantim Securities, Inc. is not primarily responsible for managing this offering, pursuant to FINRA Rule 5121(a)(1)(A), the appointment of a qualified independent underwriter is not necessary. Banco Votorantim Securities, Inc. will not confirm sales to discretionary accounts without the prior written approval of the customer.
Voting Rights   

Each common share entitles its holder to one vote at any annual or extraordinary shareholders’ meeting. In accordance with the rules set forth under the Level 2 segment of the BM&FBOVESPA, each preferred share entitles the holder, in addition to the voting rights granted under the Brazilian corporate law, to one vote on the following matters: (1) approval of our conversion into another corporate form, merger, spinoff or consolidation; (2) approval in any shareholders’ meeting of agreements between us and our controlling shareholders, directly or through third parties, as well as other companies in which the controlling shareholders have an interest, to the extent required by law or by our bylaws; (3) valuation of assets used to pay for any capital increase; (4) the selection of an investment bank, auditing firm or another qualified company to deliver a valuation report in the event of our delisting from the Level 2 segment of the BM&FBOVESPA or a going private transaction; and (5) amendment or revocation of bylaws provisions that would modify our compliance with requirements in the Level 2 segment of the BM&FBOVESPA, so long as the Level 2 participation agreement remains in effect. See “Description of Capital Stock—Rights of Preferred Shares.”

 

Direct holders of our units will be entitled to the same voting rights as holders of the underlying common shares and preferred shares. See “Description of Capital Stock––Description of Our Units.”

 

 

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   Holders of our ADSs do not have voting rights, but may instruct the ADS Depositary how to vote the underlying units with respect to the underlying common shares and preferred shares of such units. See “Description of American Depositary Shares.”
Tag Along Right    In the event of a sale of a controlling stake in our company, the acquiring person must extend a public tender offer to purchase all our common shares and preferred shares not already held by the acquiring person, at a minimum price per share equal to 100% of the price per share paid for the controlling stake. See “Description of Capital Stock—Rights of Common Shares” and “—Rights of Preferred Shares.”
Listings    We have applied to have the ADSs approved for listing/quotation on the NYSE under the symbol “VEBM”. We have also applied to list our units and the underlying common shares and preferred shares on the Level 2 (Nível 2) segment of the BM&FBOVESPA, under the symbols “VEBM11”, “VEBM3” and “VEBM4”, respectively.
Lock-up agreements   

We, the selling shareholder and our directors and officers have agreed that, within 180 days following date of this prospectus, subject to certain exceptions, we and they will not issue, offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, or file with the SEC or the CVM a registration statement relating to, any of the ADSs, the units or the underlying shares, or securities convertible into or exchangeable or exercisable for any of such ADSs, units or underlying shares, or publicly disclose our intention to make any offer, sale, pledge, disposition or filing, without the prior written consent of the international underwriters.

 

Additionally, pursuant to the regulations of the Level 2 segment of the BM&FBOVESPA, we, VID and our directors and executive officers may not sell and/or offer to sell any ADSs, units and the underlying shares (or derivatives of such securities) they own immediately after this global offering, as well as any securities or other derivatives linked to securities issued by us, for six months after the publication in Brazil of the announcement of commencement of the offering. After the expiration of this six-month period, we, VID and our directors and executive officers may not, for an additional six-month period, sell and/or offer to sell more than 40.0% of such securities. See “Underwriting—No sale of similar securities.”

ADS Depositary    Deutsche Bank Trust Company Americas
Taxation    For certain Brazilian and U.S. federal income tax consequences with respect to the acquisition, ownership and disposition of the ADSs and the units, see “Taxation.”
Risk Factors    See “Risk Factors” and other information in this prospectus before investing in our units or ADSs.

Unless otherwise indicated, all information contained in this prospectus assumes no exercise of the over-allotment options of the international underwriters and the Brazilian underwriters.

 

 

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SUMMARY CONSOLIDATED FINANCIAL AND OTHER INFORMATION

The following tables set forth our summary consolidated financial information as of March 31, 2013 and for the three-month periods ended March 31, 2013 and 2012 and as of and for the years ended December 31, 2012, 2011 and 2010. The financial information as of March 31, 2013 and December 31, 2012, and for the three-month periods ended March 31, 2013 and 2012 has been derived from our unaudited consolidated interim financial information, included elsewhere in this prospectus. The financial information as of December 31, 2011 and for the years ended December 31, 2012, 2011 and 2010 has been derived from our audited consolidated financial statements, included elsewhere in this prospectus. The financial information as of December 31, 2010 has been derived from our audited consolidated financial statements not included in this prospectus. Our consolidated financial statements have been prepared in accordance with IFRS as issued by the IASB. You should read the following summary consolidated financial and other information in conjunction with “Presentation of Financial and Other Information,” “Selected Consolidated Financial and Other Information,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes included elsewhere in this prospectus.

 

 

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     For the Three-Month Period Ended
March 31,
    For the Year Ended December 31,  
     2013     2013     2012(2)     2012     2012(3)     2011(3)     2010(3)  
(amounts expressed in
millions, except for per share
amounts and number of
shares)
   (in U.S.$)(1)     (in reais)     (in U.S.$)(1)     (in reais)  

Statement of income data:

              

Continuing operations

              

Revenues

     1,231.9        2,480.8        2,057.8        4,708.4        9,481.7        8,698.4        8,047.1   

Cost of sales and services

     (873.8     (1,759.6     (1,418.6     (3,067.4     (6,177.1     (5,684.5     (4,986.9
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     358.1        721.2        639.2        1,641.0        3,304.6        3,013.9        3,060.2   

Selling expenses

     (92.5     (186.2     (112.8     (302.9     (610.0     (595.4     (500.7

General and administrative expenses

     (89.9     (181.1     (127.9     (331.7     (668.0     (530.0     (413.1

Gain on transfer of assets – 2010 Cimpor asset exchange

     —          —          —            —          —          1,672.4   

Gain on the disposal of our 21.21% equity interest in Cimpor

     —          —          —          132.5        266.8        —          —     

Other operating income (expenses), net

     45.6        91.9        47.1        141.4        284.8        (295.9     187.2   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating profit before equity results and net financial income (expense)

     221.3        445.7        445.7        1,280.2        2,578.1        1,592.6        4,006.0   

Recognition of other comprehensive loss upon disposal of our 21.21% equity interest in Cimpor

     —          —          —          (84.5     (170.1     —          —     

Equity in results of investees

     0.2        0.4        18.6        12.7        25.5        311.8        192.0   

Financial income (expenses), net

     (56.3     (113.4     (106.4     (464.4     (935.3     (772.4     (390.8
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Profit before income tax

     165.2        332.7        357.9        744.0        1,498.2        1,131.9        3,807.2   

Income tax and social contribution

     (62.2     (125.2     (107.6     70.6        142.3        (277.1     (1,126.8
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income from continuing operations

     103.1        207.5        250.3        814.6        1,640.5        854.8        2,680.4   

Discontinued operations

              

Loss from discontinued operations

     (5.6     (11.4     —          —          —          —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income for the period

     97.4        196.2        250.3        814.6        1,640.5        854.8        2,680.4   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to controlling interests

     96.5        194.3        244.4        802.9        1,616.8        835.5        2,648.4   

Net income attributable to non-controlling interests

     1.0        1.9        5.9        11.8        23.7        19.3        32.0   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income for the period

     97.4        196.2        250.3        814.6        1,640.5        854.8        2,680.4   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income per share – basic and diluted– R$(4)

     0.018        0.036        0.045        0.148        0.297        0.154        0.502   

Net income per share – continuing operations – basic and diluted – R$(4)

     0.018        0.037        0.045        0.148        0.297        0.154        0.502   

Net income per share – discontinued operations – basic and diluted – R$(4)

     —          (0.001     —          —          —          —          —     

Weighted average number of total shares outstanding (in thousands)(4)

     5,437,500        5,437,500        5,437,500        5,437,500        5,437,500        5,426,425        5,280,161   

 

(1) Solely for the convenience of the reader, real amounts for the three-month period ended March 31, 2013 and the year ended December 31, 2012 have been translated into U.S. dollars at the exchange rate as of March 31, 2013 of R$2.0138 to U.S.$1.00. See “Exchange Rates” for further information on recent fluctuations in exchange rates.
(2) Recast on the basis of accounting principles introduced as from January 1, 2013.
(3) Derived from our audited consolidated financial statements.
(4) Retrospectively adjusted for the 49-to-1 stock split approved by our shareholders on April 30, 2013 by which 5,310,496,224 additional common shares were issued to holders of our existing 110,635,338 common shares, and the additional 1.00301935819354-to-1 stock split of our common shares approved by our shareholders on May 27, 2013 by which 16,368,338 additional common shares were issued to holders of our existing 5,421,131,562 common shares.

 

 

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     As of March 31,      As of December 31,  
(amounts expressed in millions)    2013      2013      2012      2012(2)      2011(3)      2010(3)  
   (in U.S.$)(1)      (in reais)      (in U.S.$)(1)      (in reais)                

Balance sheet data:

                 

Cash and cash equivalents

     136.7         275.2         464.9         936.3         225.1         24.9   

Financial investments

     922.1         1,856.8         1,009.2         2,032.4         1,450.5         1,184.0   

Total current assets

     2,427.3         4,888.0         2,744.6         5,527.1         3,791.6         3,015.8   

Assets related to business classified as held for sale (4)

     686.6         1,382.7         348.2         701.2         —           —     

Investments in associated companies

     643.1         1,295.1         1,018.3         2,050.6         3,241.4         3,521.5   

Property, plant and equipment

     4,612.9         9,289.5         4,628.5         9,320.8         6,954.3         5,581.3   

Intangible assets

     2,333.5         4,699.2         2,382.8         4,798.4         3,466.4         3,259.4   

Total assets

     11,448.7         23,055.4         11,876.4         23,916.6         18,629.2         16,372.3   

Current debt (5)

     612.3         1,233.0         301.4         606.9         413.6         220.7   

Total current liabilities

     1,696.4         3,416.3         1,602.1         3,226.3         2,158.3         1,968.5   

Liabilities related to business classified as held for sale (4)

     144.7         291.5         136.1         274.1         —           —     

Non-current debt (6)

     5,492.5         11,060.7         6,046.9         12,177.2         7,643.2         5,027.6   

Total non-current liabilities

     7,126.3         14,351.0         7,701.1         15,508.4         11,052.5         9,343.0   

Capital stock

     1,363.6         2,746.0         1,363.6         2,746.0         2,746.0         2,327.2   

Profit reserves

     392.2         789.8         392.2         789.8         1,963.9         2,415.1   

Non-controlling interest

     123.9         249.6         124.1         249.9         192.0         186.4   

Total stockholders’ equity

     2,481.2         4,996.6         2,437.1         4,907.8         5,418.4         5,060.8   

Total liabilities and stockholders’ equity

     11,448.7         23,055.4         11,876.4         23,916.6         18,629.2         16,372.3   

 

(1) Solely for the convenience of the reader, real amounts as of March 31, 2013 and December 31, 2012 have been translated into U.S. dollars at the exchange rate as of March 31, 2013 of R$2.0138 to U.S.$1.00. See “Exchange Rates” for further information on recent fluctuations in exchange rates.
(2) Recast on the basis of accounting principles introduced as from January 1, 2013.
(3) Derived from our audited consolidated financial statements.
(4) Includes the assets and liabilities related to our operations in China and our interest in VILA.
(5) Includes current portion of long-term debt.
(6) Excludes current portion of long-term debt.

 

 

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     As of and for the Three-Month
Period Ended March 31,
    As of and for the Year Ended December 31,  
     2013     2013     2012(2)     2012     2012(2)(3)     2011(3)     2010(3)  
(amounts expressed in millions, except for
ratios and operating data)
   (in U.S.$)(1)     (in reais)     (in U.S.$)(1)     (in reais)  

Other financial data:

              

Working capital (4)

     670.5        1,350.3        —          614.1        1,236.6        1,014.3        837.9   

Capital expenditures (5)

     183.5        369.5        419.0        744.9        1,500.1        1,723.1        964.4   

Depreciation, amortization and depletion

     86.1        173.4        125.6        277.2        558.3        441.1        420.3   

EBITDA before results of investees (6)

     301.6        607.4        571.3        1,557.5        3,136.4        2,033.7        4,426.3   

Adjusted EBITDA (6)

     313.6        631.6        583.9        1,524.8        3,070.7        2,776.8        2,805.8   

Adjusted EBITDA margin (7)

     25.5     25.5     28.4     32.4     32.4     31.9     34.9

Net debt (8) /Adjusted EBITDA (9)

     3.3        3.3        n.a.  (11)      3.2        3.2        2.3        1.4   

Adjusted ROCE (10)

     23.4     23.4     n.a.  (11)      21.6     21.6     27.2     36.0

Operating segment and product information:

              

Revenues by operating segment:

              

Brazil operations (12)

     946.2        1,905.4        1,847.6        3,826.1        7,705.1        7,250.4        6,538.1   

North America operations

     121.1        243.9        210.2        882.2        1,776.6        1,448.0        1,509.0   

Europe, Africa and Asia operations

     164.6        331.5        —          —          —          —          —     

Revenues by product:

              

Cement

     870.1        1,752.2        1,413.0        3,127.1        6,297.4        5,890.9        5,472.4   

Ready-mix concrete

     235.6        474.5        391.1        1,042.4        2,099.1        1,880.7        1,789.3   

Aggregates

     37.3        75.2        78.0        188.2        379.0        371.9        303.6   

Other building materials

     88.9        179.0        177.6        350.7        706.2        554.9        481.8   

Adjusted EBITDA by operating segment (13):

              

Brazil operations (12)

     301.3        606.8        627.9        1,378.0        2,775.1        2,574.8        2,542.4   

North America operations

     (17.4     (35.1     (44.1     146.8        295.6        201.9        263.4   

Europe, Africa and Asia operations

     29.7        59.9        —          —          —          —          —     

Operating data:

              

Installed cement capacity (in thousand tons per year) (14)

     52,302        52,302        31,620        52,205        52,205        32,039        29,035   

Cement production (in thousand tons)

     8,495        8,495        6,073        28,347        28,347        27,185        25,246   

Number of employees

     15,697        15,697        11,498        15,666        15,666        11,353        11,587   

 

(1) Solely for the convenience of the reader, real amounts as of and for the three-month period ended March 31, 2013 and the year ended December 31, 2012 have been translated into U.S. dollars at the exchange rate as of March 31, 2013 of R$2.0138 to U.S.$1.00. See “Exchange Rates” for further information on recent fluctuations in exchange rates.
(2) Balance sheet information as of March 31, 2012 and December 31, 2012 has been recast on the basis of accounting principles introduced as from January 1, 2013.
(3) Statement of income information for the years ended December 31, 2012, 2011 and 2010 derived from our audited consolidated financial statements.
(4) Working capital is defined as trade receivables plus inventories less trade payables.
(5) Represents cash disbursements for purchase of property, plant and equipment as presented in our statement of cash flows.
(6) We define EBITDA before results of investees as net income plus/minus net financial income (expense) plus/minus income tax and social contribution plus depreciation, amortization and depletion plus/minus equity in results of investees. We define Adjusted EBITDA as EBITDA before results of investees minus/plus certain non-cash transactions that are considered by our management as exceptional, impairment of goodwill and dividends received minus/plus EBITDA from discontinued operations. The non-cash items considered as exceptional by our management generally relate to gains/losses on acquisitions, disposals or exchange of assets. For a calculation of EBITDA before results of investees and Adjusted EBITDA and a reconciliation of EBITDA before results of investees and Adjusted EBITDA to the most directly comparable IFRS financial measure, see “Selected Consolidated Financial and Other Information—Non-GAAP financial measures and reconciliation.”
(7) Adjusted EBITDA margin is defined as Adjusted EBITDA divided by revenues.
(8) Net debt is the sum of total short- and long-term debt minus cash and cash equivalents, financial investments and derivatives.
(9) Net debt/Adjusted EBITDA ratio is the ratio of our net debt as of the end of the applicable period divided by our Adjusted EBITDA most recently concluded period of four consecutive fiscal quarters.
(10) We calculate Adjusted ROCE by dividing the sum of our operating profit from continuing operations before equity in results of investees and net financial income (expense) minus/plus certain non-cash transactions that are considered by our management as exceptional included in operating profit and dividends received, by the sum of property, plant and equipment plus total current assets less total current liabilities, in each case, from continuing operations. For March 31, 2013 and 2012, Adjusted ROCE is presented for the 12-month periods ended March 31, 2013 and 2012.
(11) Not available.
(12) Includes South America.
(13)

We calculate EBITDA before results of investees for each of our operating segments as net income plus/minus net financial income (expense) plus/minus income tax and social contribution plus depreciation, amortization and depletion plus/minus equity in results of investees. We define Adjusted EBITDA as EBITDA before results of investees minus/plus certain non-cash transactions that are considered

 

 

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  by our management as exceptional, impairment of goodwill and dividends received minus/plus from discontinued operations. For a calculation of EBITDA before results of investees and Adjusted EBITDA and a reconciliation of EBITDA before results of investees and Adjusted EBITDA to the most directly comparable IFRS financial measure, see “Selected Consolidated Financial and Other Information—Non-GAAP financial measures and reconciliation.”
(14) As of March 31, 2013, includes total installed cement production capacity of Artigas. As of March 31, 2013 and December 31, 2012, installed cement production capacity includes assets from Europe, Africa and Asia.

 

 

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RISK FACTORS

This initial public offering and an investment in our units or ADSs involve a significant degree of risk. You should consider carefully the risks described below and all other information contained in this prospectus, before you decide to invest in our units or ADSs. If any of the following risks were to occur, our business, financial condition and results of operations we would likely be materially adversely affected. In that event, the trading price of our units or ADSs would likely decline and you might lose all or part of your investment.

For purposes of this section, the indication that a risk, uncertainty or problem may or will have a “material adverse effect on us” or that we may experience a “material adverse effect” means that the risk, uncertainty or problem could have a material adverse effect on our business, financial condition or results of operations and/or the market price of our units or ADSs, except as otherwise indicated or as the context may otherwise require. You should view similar expressions in this section as having a similar meaning

Risks relating to our business and industry

General economic conditions in Brazil and in other countries where we operate may materially adversely affect our business, financial condition and results of operations.

General economic conditions in the countries where we operate may have a material adverse impact on our business, financial condition and results of operations.

We are highly dependent on the results of our operations in Brazil. In 2012 and in the three-month period ended March 31, 2013, sales of our Brazilian operations segment (including our operations in South America) represented 81.3% and 76.8%, respectively, of our consolidated net revenue. Real Brazilian GDP growth for 2012, the most recently available data, was 0.9%, according to the IBGE. This recent economic slowdown, coupled with the ongoing effects of the global economic crisis may result in greater economic and financial volatility and continued stagnation in terms of GDP growth, all of which could negatively impact the demand for and pricing of our products and, consequently, our business and results of operations. Actions taken by the Brazilian federal government and the Brazilian Central Bank may not prevent further slowdown of the Brazilian economy. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Principal Factors Affecting Our Revenue and Results of Operations—Macroeconomic Conditions in Brazil.”

In addition, we depend on the results of our operating subsidiaries in North America, our 50/50 joint ventures in the States of Florida and Michigan, our controlling interests in Bolivia and Uruguay and our results from equity participations in Argentina and Chile. The broad impact of the global economic crisis, including the lingering effects of the European debt crisis, has caused economic slowdown in certain of these countries, which, in some cases, has been compounded by volatile domestic economic and financial conditions. See “—Risks relating to Brazil, North America and other emerging markets in which we operate—Economic conditions in North America and other markets where we operate may adversely affect our business, financial condition and results of operations.” There is still a significant risk that the measures taken by governments and central banks in certain of these countries to combat the effects of the global economic crisis may not prevent further economic declines in several of these countries. The downturn in the construction industry, which is highly correlated to economic conditions, has been particularly severe in certain countries that experienced greater expansion in the housing market during years of high levels of availability of credit (such as the United States and Spain). Any further contraction in the availability of credit could materially adversely affect the demand for our products in Brazil, North America and other markets in which we operate, as well as the cost and availability of our needed raw materials, thereby causing a material adverse effect on us.

We are dependent on the development of the Brazilian construction industry and are exposed to the risk of adverse market movements.

Cement consumption is highly correlated to construction levels. Given the extent of our Brazilian operations, our business is dependent to a high degree on the development of the Brazilian construction industry, which is closely linked to the general economic situation and the priorities and financial resources of Brazilian federal governmental authorities.

 

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Throughout Brazil, the construction industry is cyclical and dependent upon the residential and commercial construction markets. Specifically, the demand for our cement and other products depends, in large part, on residential construction in Brazil, an important component of which includes housing construction and home improvement for the low-income segment. In 2012, approximately 48.7% of total cement sales in Brazil were made to the retail market, according to the SNIC. A decline in Brazilian economic conditions may decrease the availability of favorable financing to individuals seeking to build or improve their homes and may also generally reduce household disposable income, which could cause a significant reduction in residential construction and, accordingly, demand for our products. Government policies related to housing and housing credit, such as the My House, My Life (Minha Casa Minha Vida), or MCMV Program, also impact cement demand.

Government policies relating to investments in infrastructure projects (e.g., highways, ports and railroads) and public sector construction also have a significant effect on demand for our products. In Brazil, we expect significant government-funded investments in infrastructure over the next years, due to the PAC, the 2014 FIFA World Cup and the 2016 Olympic Games, among others. If these investments are not made due to macroeconomic factors or otherwise, are delayed or generate a demand for products that is below our expectations, we may not be able to successfully achieve the results expected in our strategic plan.

Negative trends in the construction industry or in key regional markets where we operate could have a material adverse effect on our financial condition and results of operations.

The construction industry has a cyclical nature, and variations in supply and demand, including reductions from a decrease in activities, or an increase of capacities, might lead to overcapacity and therefore to a reduced utilization of our cement plants.

We are affected by the cyclical nature of the construction industry, which is characterized by periods of growth and decline caused by variations in supply and demand. Delays in the capacity adjustment process following a significant decrease in demand, or conversely a greater than expected increase of competitors’ investments in additional capacity, might lead to overcapacity and a reduction in our utilization of our cement plants. This may cause reduced sales volumes and/or a decrease in prices, which could have a negative impact on our overall financial condition and results of operation.

If we do not succeed in reducing overcapacity (for example by plant closures) at reasonable costs, thereby lowering our cost base and helping to minimize the excess supply that contributes to a potential decrease in prices, or if strategically we continue to operate plants because we expect a recovery in demand, we may face a further decline in cash flow. Even if we successfully reduce our capacity, such reduction may lead to significant costs in particular for closures of plants or other restructuring measures. In addition, the pricing and production policies of competitors could, in some markets, frustrate our commercial efforts.

We are also subject to the risk that we could build up excess capacity, for example as a result of our incorrect evaluation of market developments, which cannot then be fully utilized. Any failure to adequately use our production capacity could lead to extraordinary depreciation on production equipment and significant impairment charges on goodwill and have negative consequences due to the relatively high level of fixed costs.

The realization of one or more of the aforementioned risks could have a material adverse effect on our business, financial condition and results of operations.

We are subject to substantial competition in our markets, which could decrease our market share and profitability in the regions in which we operate.

The cement, aggregates, ready-mix concrete, mortar and other building materials markets in Brazil, North America and the other markets in which we operate are highly competitive. We face consolidated markets with substantial competition from domestic and international competitors. In addition, we may face competition from imports of foreign competitors. See “Business—Our Operations in Brazil—Competition.”

Our competitive position is impacted by price, logistics and production costs. In Brazil our major competitors are InterCement Brasil S.A. and Cimento Nassau (João Santos), and globally we compete with local and international players, including Lafarge S.A., CEMEX S.A.B. de C.V., HeidelbergCement AG and Holcim Ltd.

 

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Some of our global competitors have greater financial and marketing resources, larger customer bases and a greater breadth of product offerings than we do. In addition, some of these competitors may be able to obtain financing on terms more favorable than we are. If we are unable to remain competitive, or our competitors are more aggressive in competing with us, this may have a material adverse effect on us in Brazil and the other markets in which we operate.

We are subject to certain investigations in Brazil in connection with alleged antitrust violations, as well as other pending litigation that may materially adversely affect our financial performance and financial condition.

We, together with other cement producers, are subject to ongoing investigations by Brazilian antitrust authorities, particularly given the overall size and significance of our cement operations and our Brazilian market leadership. For example, in 2003 the Secretary of Economic Law of the Brazilian Ministry of Justice (Secretaria de Direito Econômico), or SDE, initiated an administrative proceeding against the largest concrete producing Brazilian cement companies, including us. This proceeding relates to allegations by certain ready-mix concrete producers that the large cement companies may have breached Brazilian antitrust law by allegedly not selling certain types of cement to ready-mix concrete companies. Moreover, in 2006, the SDE initiated another administrative proceeding against the largest Brazilian cement companies, including us. This proceeding relates to allegations of anti-competitive practices that include price fixing and the formation of a cartel. See “Business—Legal Proceedings.”

These investigations could result in criminal penalties for certain individuals, as well as administrative fines for us that could range from 1.0% to up to 30.0% of our annual gross revenues relating to the fiscal year immediately prior to the year in which the administrative proceeding was initiated, or, if the new Brazilian antitrust law is applied, range from 0.1% to up to 20.0% of the annual gross revenues relating to the fiscal year immediately prior to the year in which the administrative proceeding was initiated and deriving from the cement and concrete business activities of VID and its subsidiaries, and also the following non-monetary penalties (pursuant to Brazilian law): (1) publication of the summary decision in a widely-circulated newspaper, which may have a negative reputational impact on the company; (2) ineligibility to obtain financing from governmental financial institutions or participate in competitive government bidding processes conducted by federal, state or municipal governmental entities or with governmental agencies; (3) inclusion in the Brazilian Consumer Protection List for wrongdoing; (4) recommendations to the competent public agencies to require that compulsory licenses for intellectual property rights owned by the culpable party are granted in applicable cases; (5) recommendations to the competent public agencies to deny the benefit of paying any overdue federal taxes in installments; (6) recommendations to the competent public agencies for the total or partial cancellation of tax incentives or public subsidies; and (7) mandatory spin-off, transfer of corporate control, sale of assets or partial cessation of our activities, and any other measure deemed necessary by the Administrative Council for Economic Defense (Conselho Administrativo de Defesa Econômica), or CADE, to eliminate the detrimental effects to competition caused by the anticompetitive conduct. Any such adverse decision and/or fine could have a material adverse effect on our financial condition and results of operations.

As a related matter, in 2012, the Office of the Public Prosecutor of Rio Grande do Norte filed a civil class action against us, in addition to eight other defendants, including several of Brazil’s largest cement manufacturers, alleging breach of Brazilian antitrust law as a result of alleged cartel formation and demanding, among other things, that: (1) defendants pay an indemnity, on joint basis, in the amount of R$5,600 million in favor of the class action plaintiffs for moral and collective damages; (2) defendants pay 10.0% of the total amount paid for cement or concrete acquired by the consumers of the brands negotiated by the defendants, between the years 2002 and 2006, as compensation for damages to individual consumers; and (3) defendants suffer the following penalties under Articles 23, Item I and 24 of the Law No. 8.884/94: (i) in addition to the fine referred to in item (1) above, a fine ranging from 1.0% to 30.0% of the annual gross revenues relating to the fiscal year immediately prior to the year in which the administrative proceeding was initiated, which may never be in an amount less than the monetary advantage gained; and (ii) ineligibility, for a period of at least five years, to obtain financing from governmental financial institutions or to participate in competitive government bidding processes conducted by federal, state or municipal governmental entities or with governmental agencies. Because the total amount of the claims for moral and collective damages in this civil class action amounts to R$5,600 million and the claims allege joint liability, we have estimated that, based on our market share, our share of the liability would be approximately R$2,400 million. However, there can be no assurance that this apportionment would prevail and that we will not be held liable for a different portion, which may be larger, or for the entire amount of these claims. Furthermore, there can be no assurance that we will not be required to pay other amounts as compensation for damages caused to consumers in connection with item (2) above. This action is based on the same fact allegations of the SDE administrative proceedings especially the 2006 proceeding. For a description of our administrative and judicial proceedings, see “Business—Regulatory Matters—Antitrust regulations” and “Business—Legal Proceedings.”

 

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We are also involved in a substantial number of tax, civil and labor disputes, some of which involve significant monetary claims. As of March 31, 2013, we had an estimated R$6,279.5 million (U.S.$3,118.2 million) in litigation contingencies for which the risk of loss was deemed probable and possible, and we had established provisions of R$1,249.9 million (U.S.$620.7 million) for those deemed probable. As of the same date, we had also made judicial deposits in the amount of R$553.7 million (U.S.$275.0 million) and R$207.2 million (U.S.$102.9 million) related to our litigation contingencies for probable and possible claims, respectively. If unfavorable decisions are rendered in one or more of these lawsuits, we could be required to pay substantial amounts, which could materially adversely affect us. For some of these lawsuits, we have not established any provision, or we have established a provision for a portion of the amount in controversy, based on the judgment of our counsel involved in these disputes. An unfavorable outcome in our pending disputes may have a material adverse effect on us. See “Business—Legal Proceedings.”

We depend on adequate supplies of raw materials and electrical energy for our operations.

Our business requires raw materials, including clinker, gypsum, slag, fly ash and other materials for the production of clinker and cement. For example, we plan to negotiate the purchase of a substantial amount of fly ash from one of our Brazilian suppliers and we purchase a substantial portion of the sacks we use for our bagged cement from another Brazilian supplier. Raw material supply conditions generally involve multiple risks, including the possibility of higher raw material costs and reduced control over delivery schedules, any or all of which may materially adversely affect us. We may not be able to obtain adequate supplies of raw materials in a timely and cost-effective manner, which may have a material adverse effect on us.

We use substantial amounts of petcoke in our cement production processes and are dependent on a limited number of suppliers who set the price of petcoke in U.S. dollars, which may adversely affect our operating results. For example, a 30.0% decrease in average petcoke prices from 2011 to 2012 was the primary driver of a 0.5% decrease in our variable costs, while increases in average petcoke prices of 15.1% from 2010 to 2011 increased such costs. We do not engage in hedging transactions in connection with the price of petcoke. In addition, any shortage or interruption in the supply of petcoke could also disrupt our operations.

We consume substantial quantities of electrical energy in our cement production processes and currently rely on third-party suppliers for a significant portion of our total energy needs. In 2011, 2012 and the three-month period ended March 31, 2013, electricity costs represented 8.6%, 7.8% and 9.1%, respectively, of our total costs and expenses. As of December 31, 2012, we have sourced approximately 28.4% of our power purchase agreements from third parties through short-term, one-year contracts that permit tariffs to be adjusted on a semi-annual basis. Our results of operations may be materially adversely affected by higher costs of electricity or unavailability or shortages of electricity, or an interruption in energy supplies. For example, an increase in our electricity expenses in 2011 was primarily the result of a 20.6% increase in electricity costs in Brazil, contributing substantially to a 14.0%, or R$697.5 million, increase in our consolidated cost of sales and services. Electricity shortages have occurred from time to time in Brazil and certain other countries in which we operate and could occur again in the future, and there can be no assurance that power generation capacity will grow sufficiently to meet our demand. Shortages may materially adversely impact the cost and supply of electricity for our operations.

We may be unable to complete or integrate our past or prospective acquisitions and strategic alliances successfully.

We have recently acquired operating subsidiaries in Spain, Turkey, Morocco, India, Tunisia and China. If we were to encounter unexpected difficulties integrating the operations of our recently acquired subsidiaries, or if their businesses do not develop as we expect, we may incur impairment charges in the future that could be significant and that could have a material adverse effect on our results of operations and financial condition. In addition, we have acquired equity interests in other companies and cement plants in the past, and may in the future acquire additional businesses or enter into new strategic alliances and/or joint ventures as part of our strategy to expand our presence outside Brazil and diversify our product base. We are unable to predict whether or when we may pursue any additional acquisitions or alliances, or the likelihood of a material transaction or acquisition being completed on terms favorable to us. Our ability to continue to expand successfully through acquisitions and strategic alliances depends on many factors, including the general availability of suitable targets, as well as our ability to identify such targets, negotiate favorable terms, obtain financing and close transactions. Even if we are able to complete acquisitions or strategic alliances, these transactions may involve significant risks, including the following:

 

   

failure of the acquired businesses to achieve projected results;

 

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inability to successfully integrate the operations, systems, services and products of any acquired company, or to achieve expected synergies and/or economies of scale;

 

   

unanticipated liabilities or contingencies;

 

   

failure to effectively plan or manage any acquisition or strategic alliance;

 

   

antitrust considerations and other regulatory requirements;

 

   

diversion of attention of our management; and

 

   

inability to retain or hire key personnel for the acquired businesses.

If we are unable to integrate or manage acquired businesses or strategic alliances successfully, we may not realize anticipated cost savings, revenue growth and levels of integration, which may have a material adverse effect on us.

Our level of indebtedness could materially adversely affect our ability to react to changes in our business, and could make us more vulnerable to downturns in our business.

As of March 31, 2013, we had outstanding consolidated indebtedness of R$12,293.7 million (U.S.$6,104.7 million), of which 10.0% was short-term indebtedness and 90.0% was long-term indebtedness. Assuming that we were to make all amortization payments and payments on our loans, financings and debentures outstanding as of March 31, 2013 on their scheduled payment dates and with interest rates and foreign exchange rates in effect as of March 31, 2013, our estimated total debt service obligations would be R$1,734.6 million (of which R$931.0 million corresponds to principal payments and R$803.7 million to interest expense) within one year, R$1,213.4 million (of which R$411.2 million corresponds to principal payments and R$802.1 million to interest expense) between April 1, 2014 and March 31, 2015, and R$1,216.3 million (of which R$405.2 million corresponds to principal payments and R$811.1 million to interest expense) between April 1, 2015 and March 31, 2016. For additional information on our estimated future debt service obligations see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Contractual Commitments.”

The level of our indebtedness and our repayment profile could have important consequences, certain of which could have a material adverse effect on us. Specifically, our level of indebtedness could:

 

   

limit our flexibility to plan for, or react to, competition and/or changes in our business or our industry;

 

   

require us to dedicate a substantial portion of our cash flow to service our debt, reducing our ability to use our cash flow to fund working capital, capital expenditures and other general corporate purposes;

 

   

limit our ability to obtain financing on terms favorable to us or increase our funding costs;

 

   

place us at a competitive disadvantage relative to some of our competitors that are less leveraged than us;

 

   

increase our vulnerability to downturns in our business; and

 

   

impact our credit rating and the condition under which additional financing is available to us.

Our ability to service our level of indebtedness may have a material adverse effect on our liquidity, financial condition and results of operations.

Our business strategies require substantial investments, which we may be unable to fund competitively.

Our business strategies to continue to expand our cement production capacity and distribution network and to acquire additional assets will require substantial investments, including capital expenditures in greenfield and

 

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brownfield projects, which we may finance through additional debt and/or equity financing. However, adequate financing may not be available or, if available, may not be available on satisfactory terms, including as a result of adverse macroeconomic conditions. We may be unable to obtain sufficient additional capital in the future to fund our capital requirements and our business strategy at acceptable costs. If we are unable to access additional capital on terms that are acceptable to us, we may not be able to fully implement our business strategy, which may limit the future growth and development of our business. If our need for capital were to arise due to operating losses, these losses may make it more difficult for us to raise additional capital to fund our expansion projects.

Our implementation of our growth strategies depends on certain factors that are beyond our control, including changes in the conditions of the markets in which we operate, actions taken by our competitors and laws and regulations in force in Brazil and the other jurisdictions in which we operate. Our failure to successfully implement any part of our strategy may have a material adverse effect on us.

Delays in the construction of new cement facilities and the expansion of our existing facilities may materially adversely affect us.

The construction or expansion of a cement production facility involves various risks, including engineering, construction, governmental, environmental, regulatory and other significant challenges that may delay or prevent the successful operation of a project or significantly increase its cost. For example, the delay in the start-up of a greenfield project can be the result of engineering challenges related to mining limestone in difficult topographies. In addition, we may be unable to identify attractive locations for construction of new facilities. Our ability to successfully complete any construction or expansion project on schedule also may be subject to financing and other risks. Therefore, we may incur additional costs if we are unable to complete any construction or expansion project on time or within budget or if our new or expanded facilities do not operate at their designed capacity or cost more to construct, expand or operate than we anticipated. We cannot assure you that any of these additional costs will not have a material adverse effect on us.

Compliance with environmental, health and safety regulation could result in significant additional costs, and non-compliance with environmental legislation may result in punishment for environmental damages, as well as criminal and administrative sanctions, which could adversely affect us.

Our operations often involve the use, handling, disposal and discharge of hazardous materials into the environment and the use of natural resources. Most of our operations are subject to extensive environmental, health and safety regulations.

The enactment of stricter laws and regulations, or stricter interpretation of existing laws or regulations, may impose new risks or costs on us or result in the need for additional investments in pollution control equipment, which could result in a material decline in our profitability. Efforts to address climate change through national, state and regional laws and regulations, as well as through international agreements, to reduce the emissions of greenhouse gases, or GHGs, can create risks and uncertainties for our business. This is because the cement manufacturing process requires the combustion of large amounts of fuel and creates CO2 as a by-product of the calcination process. Such risks could include costs to purchase allowances or credits to meet GHG emission caps, costs required to provide equipment to reduce emissions to comply with these limits, or decreased profits arising from higher production costs resulting directly or indirectly from the imposition of legislative or regulatory controls. We also may be required to modify or retrofit our facilities at substantial cost in order to comply with waste disposal and emissions regulations.

As a result of possible changes to environmental regulations, the amount and timing of our future environmental compliance expenditures may vary substantially from those we currently anticipate. Certain environmental laws impose liability on us for any and all consequences arising out of exposure to hazardous substances or other environmental damage. In addition, we may be required to invest significant additional resources in occupational health and safety measures in order to reduce severe injuries or fatalities.

We cannot assure you that the costs we incur to comply with existing and future environmental, health and safety laws, and liabilities that we may incur from past or future releases of, or exposure to, hazardous substances, or severe accidents, will not materially and adversely affect our results of operations or financial condition.

 

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Under Brazilian law, the construction, installation, expansion and operation of any establishment or activity that uses environmental resources or is deemed actually or potentially polluting, as well as those capable of causing any kind of environmental degradation, depend on a prior licensing process. Failure to secure licenses or authorizations from the necessary environmental agencies for the construction, modification, implementation, expansion and operation of potentially pollutant activities and/or enterprises may subject us to criminal and administrative sanctions that may result in fines ranging from R$500 to R$10,000,000. In addition to the fines, we may also be subject to penalties such as suspension of activities, deactivation and demolition, among others. This means that if we develop any potentially pollutant activity without authorization from the necessary environmental agency, we may be subject to such penalties, among others (such as shutdowns and embargoes). These penalties are also applicable if we fail to comply with the conditions of our environmental licenses. Thus we seek to obtain all environmental licenses required for the regular exercise of our activities.

In North America, we are subject to federal, state and local environmental laws and regulations in the United States and federal and provincial laws and regulations in Canada concerning, among other matters, air emissions, waste disposal and water discharge. In the United States, the Environmental Protection Agency, or EPA, has finalized new environmental standards for Portland cement, the National Emission Standards for Hazardous Air Pollutants, which introduced stricter controls for substances emitted in cement production such as mercury, total hydrocarbons, hydrochloric acid and particulate matter. These standards come into effect in 2015. See “Business—Regulatory Matters—Environmental Regulations—Environmental Laws and Regulations in North America.”

In addition, failure to comply with environmental laws and regulations as well as health and safety regulations may make us liable for the repair of any damage that has been or may be caused, and may damage our reputation or require us and our managers to pay criminal, civil, labor and social security or administrative penalties. These penalties could include fines, restriction of rights, community service, and restitution. Moreover, administrative penalties can range from the imposition of fines and warnings to the partial or total suspension of activities, which can include the loss of tax incentives, the obligation to restore the affected areas, the cancellation or suspension of lines of credit from governmental credit institutions and a prohibition from entering into government contracts. The imposition of any such penalty or obligation of redress for a violation of environmental legislation may adversely affect us.

We are party to certain environmental judicial and administrative proceedings. Any losses that may arise from these proceedings may materially and adversely affect our results of operations or financial condition. See “Business—Legal Proceedings.”

Mineral exploration activities depend on authorizations, concessions and licenses from public authorities, which are subject to expiration, limitation on renewal, changes in the relevant laws and regulations, and to various other risks and uncertainties that may affect the heavy building materials industry and our activities.

We require authorizations, concessions and licenses from governmental and other regulatory bodies (including environmental and mining agencies) to conduct our mining operations, processing, transportation, storage and production facilities. We have obtained, or are in the process of obtaining, all material authorizations, concessions and licenses required to conduct our mining and mining-related operations. However, we may need to renew such authorizations, concessions and licenses or require additional authorizations, concessions and licenses in the future.

These authorizations, concessions and licenses are subject to our compliance with conditions imposed and regulations promulgated by the relevant governmental authorities. While we anticipate that all required authorizations, concessions and licenses or their renewals will be given as and when sought, there is no assurance that these authorizations, concessions, licenses or renewals will be granted as a matter of course, and there can be no assurance that new conditions will not be imposed in connection with such renewals.

Our mining concessions and exploration licenses require us to make certain payments to the Brazilian federal government and certain state governments, including royalties known as Financial Compensation for the Exploitation of Mineral Resources (Compensação Financeira pela Exploração de Recursos Minerais), or CFEM, and applicable duties related to the exploration, production, exploitation and use of mineral resources. Royalties, taxes and fees related to our exploration licenses and mining concessions may change or increase substantially as a result of unfavorable judicial decisions in litigation with the governmental entities collecting such royalties, taxes and fees due to change of law, or simply because these duties (which are different at each phase of the mineral right

 

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development) tend to accrue higher amounts at the mining concession stage than at the exploration license stage (e.g., royalties are charged only at mining concession stage). If the mining royalties, taxes and fees to which we are subject increase substantially, our business objectives may be impeded by the costs of holding our exploration licenses and mining concessions. Accordingly, we must continually assess the mineral potential of each mining concession to determine if the costs of maintaining the exploration licenses and mining concessions are justified by the results of operations to date. If such cost is not justified and we stop paying the applicable royalties, taxes and fees, abandoning the mine or suspending the mining activities without the formal consent of the DNPM, for a period in excess of six months, we may lose our mining concessions. Alternatively, we may elect to assign some of our exploration licenses or mining concessions. There can be no assurance that the required mining concessions will be obtained and maintained on terms favorable to us, or at all, for our current and future intended mining or exploration targets.

If we fail to demonstrate the existence of technical and economically viable mineral deposits in an area covered by our exploration licenses, we may be required to return it to the federal government. This retrocession requirement can lead to a substantial loss of part of the mineral deposit originally identified in our prospection, exploration or feasibility studies.

In addition, these concessions, authorizations and licenses may not be granted, or may be revoked due to changes in laws and regulations governing mineral rights. Accordingly, the loss of mining royalties and/or inability to renew our concessions, authorizations and licenses may materially adversely affect us.

If we were to violate any of the foregoing laws and regulations or the conditions of our concessions, authorizations and licenses, we may be subjected to substantial fines or criminal sanctions, revocations of operating permits or licenses and possible closings of certain of our facilities.

Brazil may replace its current Mining Code with a new regulatory framework, which could substantially change the ways in which authorizations, licenses and concessions are granted, modify the terms and conditions for such authorizations, licenses and concessions, increase CFEM rates, establish a new agency to replace the DNPM, and create minimum investment targets, each of which may increase our expenses and potentially materially adversely affect our mining authorizations, concessions and licenses.

Our current mining operations are regulated primarily by the Mining Code, the Mining Code Regulations enacted by Decree No. 62,934 of July 2, 1968, and certain rulings issued by the DNPM (collectively, the “Mining Framework”).

In 2009, the Brazilian Ministry of Mines and Energy (Ministério de Minas e Energia), or MME, announced that a new mining regulatory framework would soon be issued to replace the existing Mining Framework. Certain legislative proposals have been submitted to the Brazilian National Congress, which would, in addition to increasing the CFEM rate, calculate the CFEM rate based on gross revenues instead of net revenues. It is not likely that the previously proposed laws will be approved in their entirety or at all, since the executive branch is currently drafting a new proposed law. However, this new proposed law is expected to be based on the previously proposed laws and new mining regulatory directives that MME also prepared in 2009.

In order for the existing Mining Code to be replaced, the new law would have to be approved by the Brazilian Congress and signed by the Brazilian President. In addition, it is likely that the new law will include a transition period for existing mining concessions and exploration licenses to shift to the new legal framework. Accordingly, neither the content of any new law nor the terms of any transitional provision can be determined at this stage.

Pursuant to press reports, materials made available by the government and the previously proposed laws, it is expected that the new mining regulatory framework will create a new agency to replace the DNPM, a new formula for applying the CFEM and a potential increase in CFEM rates, a bidding system for granting exploration licenses and mining concessions depending on the mineral type and the strategic and economical relevance of the mine, and new terms and conditions for exploration licenses and mining concessions, including the potential creation of minimum investment targets for each stage of exploration.

A new mining regulatory framework may result in limitations in the duration of our existing mining concessions, an increase in our expenses, particularly mining royalties, taxes and fees, and a re-tender of our mining concessions

 

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if they are deemed to have strategic and economic importance. In addition, we currently have a mining concession request pending approval by the DNPM, and we have not been able to determine whether the issuance of these concessions will be approved under the existing Mining Framework, the new mining regulatory framework under consideration, or if it will be approved at all, given that the DNPM has still not reviewed our request. A failure to approve any of our mining concessions may reduce our anticipated capacity to produce the limestone we need to make cement, requiring us to purchase additional raw materials from third-party suppliers and pay for their transport to our plants. This scenario would substantially increase our operating costs and potentially lead us to raise our cement prices.

Accordingly, any of these changes or a failure to approve our mining concession application may adversely impact our business, financial condition and results of operations.

Our mining operations are subject to risks and hazards inherent to the mining industry.

The exploration for and the development of mineral deposits involves significant risks that even a combination of risk management, careful evaluation, experience and knowledge cannot eliminate. Our exploration, extraction and production activities may be hampered by industrial accidents, equipment failure, unusual or unexpected geological and geotechnical conditions, environmental hazards, labor disputes, changes in the regulatory environment, weather conditions and other natural phenomena.

Our production activities may be impaired by accidents associated with the operating of our crushing and mining equipment, which could result in prolonged short-term downtime or longer-term shutdowns of our production facilities. These hazards could result in material damage to mineral properties, human exposure to pollution, personal injury or death, environmental and natural resource damage, delays in shipment, monetary losses and possible legal liability if we are unable to satisfy our contractual obligations under various supply contracts.

We currently extract the majority of our mineral resources in our mines. Hazards associated with mining include accidents involving the operation of drilling, blasting, rock transportation, crushing, and flooding of the pit. Additionally, our operations require the removal of groundwater during mining operations. Future efforts to remove groundwater may not be adequate and may not meet future operational demands or expectations.

The occurrence of these hazards and/or any prolonged short-term downtime or longer-term shutdown at any of our mining and production facilities could materially and adversely affect our ability to produce and consequently impair our ability to satisfy our contractual obligations under various supply contracts.

Failure to resolve any unexpected problems as described above at a commercially reasonable cost could have a material adverse effect on our business, financial condition and results of operations, and could result in our inability to pay dividends on our units and/or ADSs.

We may be materially adversely affected if our transportation, storage and distribution operations are interrupted or are more costly than anticipated.

Our operations are dependent upon the uninterrupted operation of transportation, storage and distribution of our products. Infrastructure in Brazil and certain other countries in which we operate may be significantly less developed compared to other regions. Transportation, storage or distribution of our cement and other products could be partially or completely shut down, temporarily or permanently, as the result of any number of circumstances that are not within our control, such as:

 

   

catastrophic events,

 

   

strikes or other labor difficulties, and

 

   

other disruptions in means of transportation.

In addition, we rely on third-party services providers for the transportation of our products to our customers. Our ability to service our customers at reasonable costs depends, in many cases, upon our ability to negotiate reasonable terms with carriers, including trucking companies. To the extent that third-party carriers were to increase their rates, we may be forced to pay these higher rates before we are able to pass such increases onto our customers, if at all.

 

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Any significant interruption at these facilities, an inability to transport our products to or from these facilities or to or from our customers or an increase in transportation costs for any reason would materially adversely affect us.

Our insurance coverage may be insufficient to cover losses to which we may be subject.

Our businesses are generally subject to multiple risks and hazards, which could result in damage to, or destruction of, our properties, plants and equipment. The occurrence of losses or other liabilities that are not covered by insurance or that exceed the limits in our policies may result in significant unexpected additional costs to us and materially adversely affect us.

We may be subject to labor disputes from time to time that may materially adversely affect us.

Most of our employees are represented by unions or equivalent bodies and are covered by collective bargaining or similar agreements which are subject to periodic renegotiation. We are subject to possible work slowdowns in certain of our facilities. For example, in 2011, our Rio Branco cement plant experienced a threat of a labor strike that resulted in our negotiation of a new collective bargaining agreement for this plant. In addition, we may not successfully conclude future labor negotiations on satisfactory terms, which may result in a material increase in the cost of labor or may result in work stoppages or labor disturbances that disrupt our operations. These cost increases, work stoppages or labor disturbances could materially and adversely affect us.

We are subject to periodic and regular investigations by labor officials and government bodies, including the Ministry of Labor and the Labor Public Prosecutor’s Office, regarding our compliance with our labor-related legal obligations, including occupational health and safety. These investigations can result in fines and lawsuits that could materially and adversely affect us.

The introduction of substitutes for cement in the markets in which we operate and the development of new construction techniques could have a material adverse effect on us.

Materials such as plastic, aluminum, ceramics, glass, wood and steel can be used in construction to substitute cement. In addition, other construction techniques, such as the use of dry wall, could decrease the demand for cement, ready-mix concrete and mortars. In addition, new construction techniques and modern materials may be introduced in the future. The use of substitutes for cement could cause a significant reduction in the demand and prices for our cement products and have a material adverse effect on us.

Our estimates of the volume and grade of our limestone deposits could be overstated, and we may not be able to replenish our reserves.

Our limestone reserves described in this prospectus constitute our estimates based on evaluation methods generally used in our industry and on assumptions as to our production, as well as market prices for limestone. There are numerous uncertainties inherent in estimating quantities of reserves and in projecting potential future rates of mineral production, including many factors beyond our control. Reserve engineering involves estimating deposits of minerals that cannot be measured precisely, and the accuracy of any reserve estimate is a function of the quality of available data, as well as engineering and geological interpretation and judgment. As a result, we cannot assure investors that our limestone reserves will be recovered or that they will be recovered at the rates we anticipate. We may be required to revise our reserve and mine life estimates based on our actual production and other factors. For example, fluctuations in the market prices of limestone, reduced recovery rates, higher output or increased operating and capital costs due to inflation, exchange rates or other factors may make it expensive to mine certain of our reserves and may result in a restatement of our reserves. If our limestone reserves are lower than our estimates, this may have a material adverse effect on us, particularly if as a result we are required to purchase limestone from third-party suppliers or to develop mines at greater distance from our facilities.

 

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We do not control the business strategy of the investments in which we are not the controlling shareholder and are limited by the rights given to minority shareholders in such jurisdictions.

We have operations in Brazil, Argentina, Chile and North America through minority interests or joint ventures which we do not fully control. In 2012, these companies together represented 8.6% of our total assets and 1.6% of our total net profit. The other shareholders in these operations might have different business interests than us. There may be decisions taken that are unfavorable to our business interests or decisions in our business interest that are only taken after a significant delay. Therefore, the interests of these controlling shareholders may not always be aligned with our interests. Furthermore, if any of the companies in which we hold a minority interest were to violate local environmental, antitrust, taxation or any other regulation, causes material environmental damage or become a party to a material contingency, it may negatively impact our reputation with our customers, which could have a material adverse effect on our operations and financial results. In addition, there may be legal restrictions in these jurisdictions that severely impact our ability to implement our operating and financial strategies in the companies in which we have a non-controlling interest. This could have a material adverse effect on our business, financial condition and results of operations.

The construction industry is affected by weather conditions.

Lower demand for building materials occurs in periods of cold weather and heavy rain. Results for a single financial quarter might therefore not present a reliable basis for the expectations of a full fiscal year. Furthermore, according to the Intergovernmental Panel on Climate Change, climate change may contribute to changes and variability in precipitation and in the intensity and frequency of extreme weather events. Such adverse weather conditions can materially and adversely affect our business, financial condition and results of operations if they occur with unusual intensity, during abnormal periods, or last longer than usual in our major markets, including Brazil, especially during peak construction periods.

We are dependent on management, qualified personnel and employees having special technical knowledge.

Qualified and motivated personnel are a key factor in the development of our business, in particular our further technological development and geographic expansion. Competition for talent has increased in recent years, and in certain cases in the past, we faced challenges in obtaining or retaining the desired personnel. Personnel shortages or the loss of key employees could negatively influence our further business development, including by preventing us from replicating our management structure in companies we acquire. In addition, we are subject to risks related to our dependence on individual persons in key positions, particularly at the level of the senior management as well as in the areas of development, distribution, service, production, finance and marketing and sales. The loss of management personnel or employees in key positions would lead to a loss of know-how, or under certain circumstances to the passing on of know-how to our competitors. If one of these risks were to occur, this could materially adversely affect us.

Risks relating to Brazil, North America and other emerging markets in which we operate

The Brazilian federal government has exercised, and continues to exercise, significant influence over the Brazilian economy. Brazilian economic and political conditions have a direct impact on our business.

The Brazilian economy has been characterized by frequent, and occasionally material, intervention by the Brazilian federal government, which has often modified monetary, credit and other policies intended to influence Brazil’s economy. The Brazilian government’s actions to control inflation and effect other policy changes have involved wage and price controls, changes in existing, or the implementation of new taxes, and fluctuations of base interest rates. Actions taken by the Brazilian federal government concerning the economy may have important effects on Brazilian companies, including us, and on market conditions and prices of Brazilian securities. In addition, actions taken by Brazilian state and local governments with respect to labor and other laws affecting our operations may have an effect on us. Our financial condition and results of operations may also be materially and adversely affected by any of the following and the Brazilian federal government’s actions in response to them:

 

   

depreciations and other exchange rate movements;

 

   

monetary policies;

 

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inflation rates;

 

   

economic and social instability;

 

   

energy shortages, or other changes in energy prices;

 

   

interest rates;

 

   

exchange controls and restrictions on remittances abroad;

 

   

liquidity of the domestic capital and lending markets;

 

   

tax policy, including international tax treaties; and

 

   

other political, diplomatic, social and economic policies or developments in or affecting Brazil.

Uncertainty over whether the Brazilian federal government will implement changes in policy or regulation affecting these or other factors in the future may contribute to economic uncertainty in Brazil and to heightened volatility in the market value of securities issued by Brazilian companies. Historically, the political scenario in Brazil has influenced the performance of the Brazilian economy; in particular, political crises have adversely affected investors’ confidence and public sentiment, which has adversely affected economic development in Brazil.

These and other future developments in the Brazilian economy and governmental policies may materially adversely affect us.

Economic and market conditions, including the perception of risks, in other countries, especially in the United States, in developing countries and in other countries in which we operate, may materially and adversely affect the Brazilian economy and, therefore, the market value of our units and ADSs.

The market for securities issued by Brazilian companies is influenced by economic and market conditions in Brazil, and, to varying degrees, market conditions in the United States and developing countries, especially other Latin American countries. Although economic conditions vary by country, the reaction of investors to developments in one country may cause fluctuations in the capital markets in other countries. Developments or adverse economic conditions in other countries, including developing countries, have at times significantly affected the availability of credit in the Brazilian economy and resulted in considerable outflows of funds and reduced foreign investment in Brazil, as well as limited access to international capital markets, all of which may materially and adversely affect our ability to borrow at acceptable interest rates or to raise equity capital when and if we need to do so.

Brazilian securities have experienced increase volatility from time to time, and share prices on the BM&FBOVESPA, for example, have historically been sensitive to fluctuations in United States interest rates as well as movements of major United States stock indexes. Furthermore, investors’ perception of greater risk due to crises or adverse economic conditions in other countries, including Latin American and other developing countries, may also result in reductions in the market price of our units and ADSs.

Inflation, and the Brazilian federal government’s measures to combat inflation, may contribute significantly to economic uncertainty in Brazil, our operating results and the market value of our units and ADSs.

Brazil has historically experienced high rates of inflation. Inflation, as well as government efforts to combat inflation, had significant negative effects on the Brazilian economy, particularly prior to 1995. Inflation rates were 7.8% in 2007 and 9.8% in 2008, compared to deflation of 1.7% in 2009, and inflation of 11.3% in 2010, inflation of 5.1% in 2011 and inflation of 7.8% in 2012, as measured by the General Market Price Index (Índice Geral de Preços—Mercado), or IGP-M, compiled by the FGV. The Brazilian federal government’s measures to control inflation have often included maintaining a tight monetary policy with high interest rates, restricting thereby the availability of credit and reducing economic growth. Inflation, actions that may be implemented to combat inflation and public speculation about any possible additional actions also may contribute materially to economic uncertainty in Brazil and accordingly weaken investor confidence in Brazil, thus adversely impacting our ability to access the international capital markets.

 

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Brazil may experience high levels of inflation in the future, which may impact domestic demand for our products. Inflationary pressures may also curtail our ability to access international financial markets and may lead to further government intervention in the economy, including the introduction of government policies that may materially and adversely affect the overall performance of the Brazilian economy, which in turn may materially and adversely affect us.

Because an important portion of our total debt is denominated in U.S. dollars, fluctuations in the value of the real against the value of the U.S. dollar may adversely affect our financial income (expenses), net and our results of operations.

The Brazilian currency has depreciated periodically in relation to the U.S. dollar and other foreign currencies during the last four decades. Throughout this period, the Brazilian federal government has implemented various economic plans and utilized a number of exchange rate policies, including sudden devaluations, periodic mini-devaluations during which the frequency of adjustments has ranged from daily to monthly, floating exchange rate systems, exchange controls and dual exchange rate markets. From time to time, there have been significant fluctuations in the exchange rate between the Brazilian currency and the U.S. dollar and other currencies. For example, according to the Brazilian Central Bank, the real depreciated by 31.9% against the U.S. dollar in 2008, appreciated by 25.5% and 4.3% in 2009 and 2010, respectively, and depreciated 12.6% in 2011 and 8.9% in 2012. There can be no assurance that the real will not depreciate further against the U.S. dollar, and that we would not be materially adversely affected as a result of these fluctuations.

Because an important portion of our total debt is denominated in U.S. dollars, fluctuations in the value of the real against the U.S. dollar may adversely affect our financial income (expenses), net and our results of operations. As of March 31, 2013, our debt denominated in U.S. dollars represented 30.3% of our total debt. A devaluation or depreciation in the value of the real compared to the U.S. dollar may result in foreign exchange losses that we must record in our financial income (expenses), net. For example, in 2010, we recorded foreign exchange gains, net of R$97.2 million as a result of the 4.3% appreciation of the real against the U.S. dollar in 2010. Conversely, we recorded foreign exchange losses, net of R$253.6 million in 2011 as a major consequence of the 12.6% devaluation of the real against the U.S. dollar throughout 2011. In 2012, we recorded foreign exchange losses, net of R$381.8 million (U.S$189.6 million) as a result of the 8.9% devaluation of the real against the U.S. dollar throughout 2012.

Changes in Brazilian tax laws or conflicts in the interpretation of these laws may have a material adverse impact on us by increasing the taxes that we are required to pay.

The Brazilian federal government has frequently implemented multiple changes to tax regimes that may affect us and our clients, including as a result of the execution or amendment of tax treaties. These changes include changes in prevailing tax rates and enactment of taxes, which may be temporary, the proceeds of which are earmarked for designated governmental purposes.

Some of these changes may result in increases in our tax burden, which could materially adversely affect our profitability and increase the prices of our services, restrict our ability to do business in our existing and target markets and cause our financial results to suffer. There can be no assurance that we will be able to maintain our projected cash flow and profitability following any increases in Brazilian taxes that may apply to us and our operations.

Moreover, some tax laws may be subject to controversial interpretation by tax authorities, including but not limited to the regulation applicable to corporate restructurings. In the event an interpretation different than the one on which we based our transactions prevails, we may be adversely affected.

We may also be materially adversely affected if any of the tax benefits granted to us are revoked or if we are unsuccessful in renewing or extending such tax benefits.

In order to promote industrial development, certain Brazilian states grant tax and financial benefits to attract investment. We benefit from certain tax benefits granted by the States of Ceará, Rondônia, Paraná, Sergipe, Tocantins, Mato Grosso, Pará, as well as the Distrito Federal, among others. These benefits include the deferral of a value-added tax (Imposto sobre Circulação de Bens e Serviços), or ICMS, imposed on our importation of fixed assets and raw materials, the deferral of ICMS imposed on our importation of intermediate and packing materials, ICMS tax credits, and the reduction of applicable taxes.

 

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Tax benefits related to ICMS may be declared unconstitutional if they were granted without authorization from the Brazilian National Council of Fiscal Policy (Conselho Nacional de Política Fazendária). Claims have already been filed before the Brazilian Federal Supreme Court challenging the constitutionality of certain tax benefits granted to us, such as the Industrial Development Fund of Ceará and the Industrial Development Program of Sergipe. In addition, Brazilian state tax authorities may revoke tax benefits if we do not comply with the conditions established in the law that granted us the tax benefit. If any tax benefits were to be declared unconstitutional or were revoked, we may be requested to pay to the applicable Brazilian state the aggregate amount of any ICMS that we did not pay over the prior five-year period, plus interest and penalties. In addition, tax benefits have a fixed term, and we may not be successful in renewing or extending our tax benefits. The foregoing may have a material adverse effect on us.

In addition to the benefits mentioned above, we also benefit from certain tax benefits related to reduced federal income tax and additional freight for the renewing of the merchant marine (Adicional ao Frete para Renovação da Marinha Mercante), or AFRMM, and municipal service taxes (Imposto Sobre Serviços), or ISS. If we fail to comply with legal requirements or if any tax benefits were to be declared unconstitutional, we may lose these tax benefits and we may be required to pay an amount equivalent to our benefits plus interest and penalties which could result in a material adverse effect on us.

Fluctuations in interest rates could increase the cost of servicing our debt and negatively affect our overall financial performance.

Certain of our indebtedness bears interest based on variable interest rates, including the Interbank Deposit Certificate (Certificado de Depósito Interbancário), or CDI, and the London Interbank Offered Rate, or LIBOR. The CDI rate has fluctuated significantly in the past due to the impact of changes in Brazilian economic growth, inflation, Brazilian federal government policies and other factors. For example, the CDI rate increased from 13.6% as of December 31, 2008, decreased to 8.6% as of December 31, 2009, increased to 10.6% as of December 31, 2010, increased to 10.9% as of December 31, 2011 and decreased to 6.9% as of December 31, 2012. LIBOR rates have also fluctuated in response to changes in economic growth, monetary policy and governmental regulation. A significant increase in underlying interest rates, particularly the CDI and LIBOR, could have a material adverse effect on our financial expenses and materially adversely affect our overall financial performance. On the other hand, a significant reduction in the CDI rate or LIBOR could materially adversely impact the financial revenues that we derive from our investing activities, given that certain of our financial investments bear interest based on these interest rates. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Principal Factors Affecting Our Revenue and Results of Operations—Macroeconomic Conditions in Brazil.”

In addition, the Brazilian Central Bank periodically establishes the special overnight clearance and custodial rate for the Central Bank’s Special System for Settlement and Custody (Sistema Especial de Liquidação e Custódia), or the SELIC rate, which is the base interest rate for the Brazilian banking system and an important policy instrument for the achievement of Brazilian inflation targets. In recent years, the SELIC rate has fluctuated and the Brazilian Central Bank has frequently adjusted the SELIC rate in response to economic uncertainties. On December 31, 2008, 2009, 2010, and 2011, the SELIC rate was 13.75%, 8.75%, 10.75% and 11.00%, respectively. During 2012, the Brazilian Monetary Policy Committee decreased the SELIC rate several times from 11.00% as of January 1, 2012, to 7.25% as of December 31, 2012. The Brazilian Monetary Policy Committee increased the SELIC rate to 7.50% on April 18, 2013 and to 8.00% on May 29, 2013. Future reductions in the SELIC rate could adversely affect us by decreasing the income we earn on our interest-earning assets.

Economic conditions in North America and other markets where we operate may adversely affect our business, financial condition and results of operations.

In the United States, the 2008-2009 recession was longer and deeper than the prior recessions during the 1990s and early 2000s, and economic uncertainty continues to affect the housing market, the primary driver for cement demand. The timing of a housing recovery remains uncertain given the current market environment, tight credit conditions and housing oversupply. Spending under the American Recovery and Reinvestment Act of 2009 has not been effective to offset the decline in cement and ready-mix concrete demand as a result of current economic conditions.

 

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Argentina, Uruguay, Bolivia and Chile are exposed to the risk of a decrease in overall economic activity. The current and any new financial downturn, lower exports to the United States and Europe, lower remittances and lower commodity prices could represent an important risk for these regions in the short-term. In addition, these countries are characterized by occasional interventions by their respective governments, which has often modified monetary, credit and other policies intended to influence their respective economies. This may translate into greater economic and financial volatility and lower growth rates, which could have a material adverse effect on consumption and/or prices for our products, thereby adversely affecting our business and results of operations.

Many Western European countries, including Spain, have faced difficult economic environments due to the financial crisis and its impact on their economies, including the construction sectors. If this situation were to deteriorate further, our financial condition and results of operations could be adversely affected. In the construction sector, the residential adjustment could last longer than anticipated, while non-residential construction could experience a sharper decline than expected. Furthermore, the austerity measures implemented by some European countries could result in further declines in construction activity and demand for our products. In addition, concerns regarding the European debt crisis, market perceptions concerning the instability of the Euro and the risk of further contagion could have a negative impact on other countries in which we operate, which could adversely affect demand for our products and, as a consequence, adversely affect our business and results of operations. For example, the important trade links with Western Europe pose a significant vulnerability in Turkey, Morocco and Tunisia. Large financing needs in these countries and moderate economic growth may also adversely affect construction investments in these countries, which could materially and adversely affect our financial condition and results of operations.

The Asia-Pacific region will likely be affected if the economic landscape further deteriorates. Decelerated economic growth in India may negatively impact the development of the construction industry in this country, which could negatively impact demand for our products. An additional increase in country risk and/or decreased confidence among global investors would also limit capital flows and investments in the Asian region, particularly India.

The economic volatility in these countries may have an impact on prices and demand for our products, which could adversely affect our business and results of operations.

Our presence and plans for expansion in emerging markets exposes us to economic and political risks which we do not face in more mature markets.

Emerging markets face economic and political risks and risks associated with legal systems being less certain than those in more mature economies. As of March 31, 2013, approximately 84.0% of our global installed cement production capacity is located in emerging markets. Emerging markets are even more exposed to volatility in GDP, inflation, exchange rates and interest rates than developed markets, which may negatively affect the level of construction activity and our results of operations in the emerging markets in which we operate or will operate.

Other potential risks presented by emerging markets include:

 

   

disruption of our operations due to terrorism, civil disturbances, and other actual and threatened conflicts;

 

   

nationalization and expropriation of private assets;

 

   

price controls;

 

   

unexpected changes in regulatory environments, including environmental, health and safety, local planning, zoning and labor laws, rules and regulations;

 

   

varying tax regimes, including with respect to the imposition of withholding taxes on remittances and other payments by subsidiaries and joint ventures;

 

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fluctuations in currency exchange rates and restrictions on the repatriation of capital; and

 

   

difficulties in attracting and retaining qualified management and employees.

We are subject to various laws and regulations throughout the many jurisdictions in which we operate and are exposed to changes in those laws and regulations, and to the outcome of any investigations conducted by governmental, international and other regulatory authorities, which may result in the imposition of fines and/or sanctions for non-compliance.

We are subject to various statutes, regulations and laws applicable to businesses generally in the countries and markets in which we operate. These include statutes, regulations and laws affecting land usage, zoning, employment practices, competition, financial reporting, taxation, anti-bribery, anti-corruption, governance and other matters. We cannot guarantee that our operating units will at all times be successful in complying with all demands of regulatory agencies in a manner which will not materially adversely affect its business, financial condition or results of operations.

Risks relating to our units and ADSs

Our controlling shareholder will continue to have significant influence over us after this global offering, and its interests may conflict with the interests of our minority shareholders.

As of the date of this prospectus, VID (our controlling shareholder) directly owns 100.0% of our capital stock. Upon the consummation of this global offering, VID will beneficially own approximately 92.72% of our outstanding common shares (assuming no exercise of the over-allotment option). As such, our controlling shareholder has the ability to determine the outcome of substantially all matters submitted for a vote to our shareholders and thus exercise control over our business policies and affairs, including, among others, the following:

 

   

the composition of our board of directors and, consequently, any determinations of our board of directors with respect to our business direction and policy, including the appointment and removal of our executive officers;

 

   

determinations with respect to mergers, spin-offs, other business combinations and other transactions, including those that may result in a change of control;

 

   

acquisition of equity interests in other companies; and

 

   

whether dividends are paid in addition to the mandatory dividend under our bylaws or other distributions are made and the amount of any such dividends or distributions.

Our controlling shareholder may direct us to take actions that could be contrary to the interests of our minority shareholders and may be able to prevent other shareholders from blocking these actions or from causing different actions to be taken. Also, our controlling shareholder may prevent change of control transactions that might otherwise provide our minority shareholders with an opportunity to dispose of or realize a premium on their investment in our units or ADSs. We cannot assure our investors that our controlling shareholder will act in a manner consistent with the best interests of our minority shareholders.

Substantial sales of our units or ADSs after the offering may lead to a decrease in the price of units or ADSs.

We, our controlling shareholder and certain of the members of our board of directors and our executive officers who hold any shares or units issued by us, including in the form of ADSs, are obligated, during a period from the date of each lock-up agreement through 180 days following the date of this prospectus, except if the international underwriters’ consent to a prior sale, and subject to certain exceptions, not to issue, offer, sell, contract for sale, give in guarantee, loan or grant a call option on any share or unit, including in the forms of ADSs, issued by us, or other securities convertible into or exchangeable for such securities, and to refrain from entering into any swap, hedge, selling-short or other transaction, which may transfer, fully or in part, any of the economic benefits derived from holding such securities.

 

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Additionally, except for the units and ADSs subject to this global offering, according to the corporate governance rules under regulations of the Level 2 segment of the BM&FBOVESPA, during the six months following this global offering our controlling shareholder, members of our board of directors and our executive officers may not sell or offer to sell any units, ADSs or the underlying shares (or derivatives of such securities) they own immediately after this global offering. After this initial six-month period, our controlling shareholder, members of our board of directors and our executive officers may not, for an additional six-month period, sell or offer to sell more than 40% of the units, ADSs or the underlying shares issued by us or derivatives of such securities. Following the expiration of the periods described above, the units, ADSs and underlying shares that were subject to restrictions will be available for issue or sale. The occurrence of sales or the perception of possible sales, of a substantial number of our units, ADSs or underlying shares may materially adversely affect the market value of our units or ADSs.

The holders of our units and ADSs might not receive dividends.

Pursuant to our bylaws, we must pay our shareholders a minimum of 25.0% of our annual net income, calculated and adjusted according to the terms of Brazilian corporate law, which may be in the form of dividends or interest on equity. Our net income may be used to cover losses or withheld pursuant to Brazilian corporate law and may not be available for the payment of dividends or interest on our capital. In addition, Brazilian corporate law allows public companies to suspend the mandatory distribution of dividends if the board of directors advises its shareholders at its annual shareholders’ meeting that the distribution of dividends would be inadvisable in light of such company’s financial condition. As a consequence, there is no assurance we will be able to distribute dividends or interest on stockholders’ equity in the future, nor that any such distribution will be consistent with our track record.

If we do not file or maintain a registration statement and no exemption from the Securities Act of 1933, or the Securities Act, registration is available, U.S. holders of ADSs may be unable to exercise preemptive rights granted to our unit holders.

U.S. Persons (as defined in Regulation S under the Securities Act) holding our ADSs may be unable to exercise preemptive rights granted to our unit holders in connection with any future issuance of our units unless a registration statement under the Securities Act is effective with respect to both the preemptive rights and the new units, or an exemption from the registration requirements of the Securities Act is available. We are not obligated to file or maintain a registration statement relating to any preemptive rights offerings with respect to our units, and we cannot assure you that we will file or maintain any such registration statement. As a result, ADS holders could be substantially diluted following future equity or equity-linked offerings.

You may face difficulties in serving process on or enforcing judgments against us, our affiliates and our directors and officers.

We are incorporated under the laws of Brazil, certain members of our senior management reside in Brazil and we expect that a majority of the future members of our board of directors will reside in Brazil or elsewhere outside the United States. The majority of our assets are located outside the United States. As a result, it may be difficult for investors to effect service of process upon us or these persons within the United States or other jurisdictions outside Brazil or to enforce against us or these other persons judgments obtained in the United States or other jurisdictions outside Brazil. In addition, because substantially all of our assets and all of our directors and officers reside outside the United States, any judgment obtained in the United States against us or any of our directors or officers may not be collectible within the United States. Because judgments of U.S. courts for civil liabilities based upon the U.S. federal securities laws may only be enforced in Brazil if certain conditions are met, holders may face greater difficulties in protecting their interests in the case of actions by us or our board of directors or executive officers than would shareholders of a U.S. corporation. See “Enforceability of Civil Liabilities.”

Judgments of Brazilian courts with respect to our units and ADSs will be payable only in reais.

If proceedings are brought in the courts of Brazil seeking to enforce our obligations in respect of the units or the ADSs, we will not be required to discharge its obligations in a currency other than reais. Under Brazilian exchange control limitations, an obligation in Brazil to pay amounts denominated in a currency other than reais may only be satisfied in Brazilian currency at the exchange rate, as determined by the Brazilian Central Bank, in effect on the

 

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date the judgment is obtained, and such amounts are then adjusted to reflect exchange rate variations through the effective payment date. The then prevailing exchange rate may not afford non-Brazilian investors with full compensation for any claim arising out of, or related to, our obligations under the units or the ADSs

If an ADS holder surrenders its ADSs and withdraws the underlying units, it may lose the ability to remit foreign currency abroad and certain Brazilian tax advantages.

An ADS holder benefits from the electronic certificate of foreign capital registration obtained by the custodian for our units underlying the ADSs in Brazil, which permits the custodian to convert dividends and other distributions with respect to the units into non-Brazilian currency and remit the proceeds abroad. If an ADS holder surrenders its ADSs and withdraws units, it may be required, after a certain period, to obtain an electronic certificate of foreign capital registration, except under certain limited circumstances, in order to purchase and sell our units on the BM&FBOVESPA and to receive distributions on our units. In addition, without the required registration, a foreign investor may be subject to less favorable tax treatment in respect of dividends and distributions on, and the proceeds from any sale of, our units.

If an ADS holder were to apply to obtain its own electronic certificate of foreign capital registration, it may incur expenses or suffer delays in the process. The ADS Depositary’s electronic certificate of foreign capital registration may also be adversely affected by future legislative changes.

Our ADSs and units have not previously been traded on stock exchanges, and therefore an active and liquid market for the trading of our ADSs and the units underlying the ADSs may not develop and the price of our ADSs and units may be adversely affected after this global offering.

Before this global offering, neither our shares nor units, including in the form of ADSs, were ever traded on any stock exchange. In connection with this global offering, we will apply to list ADSs representing our units on the NYSE and our units on the BM&FBOVESPA. An active and liquid market for trading may not develop or, if developed, may not be able to maintain itself. The investment in marketable securities traded in emerging countries, such as Brazil, usually represents higher levels of risk as compared to investments in securities issued in countries whose political and economic situations are more stable, and in general, such investments are considered speculative in nature. Furthermore, if an active public market for our ADSs and units does not develop on the NYSE and the BM&FBOVESPA following the completion of this global offering, the market price and liquidity of our units, including in the form of ADSs, may be materially and adversely affected. As of March 31, 2013, BM&FBOVESPA had a total market capitalization of R$2.5 trillion, with an average daily volume of R$6.9 billion during the 12-month period ended March 31, 2013. As of the same date, the NYSE, had a total market capitalization of U.S.$15.2 trillion, with an average daily volume of U.S.$52.9 billion during the 12-month period ended March 31, 2013.

The initial public offering price for our units and ADSs will be determined by negotiation between us and the underwriters based upon several factors, and the trading price of our units and ADSs after this global offering may decline below the initial public offering price. As a result, investors may experience a significant decrease in the market price of our units, including in the form of ADSs.

The preferred shares underlying our units and ADSs have limited voting rights.

Only our common shares have full voting rights. Except under certain situations, our preferred shares do not have voting rights. Due to this restriction on voting rights, and because our controlling shareholders will own more than half of our common shares after the completion of this global offering, the preferred shares that underlie our units and ADSs generally do not confer upon their holders the ability to influence the majority of corporate decisions that depend on our shareholders’ meeting, including the distribution of dividends. See “Description of Capital Stock.”

You may face difficulties in exercising your voting rights or other rights relating to the ADSs.

ADS holders may only exercise certain of their rights relating to the shares underlying our units by providing voting instructions to the ADS Depositary in accordance with the ADS deposit agreement and custody agreement. Therefore, ADS holders may face difficulties in exercising their rights with respect to the underlying securities that would otherwise not exist if the held such securities directly.

 

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For example, an ADS holder may not have sufficient or reasonable time to provide voting instructions to the ADS Depositary in accordance with the mechanisms set forth in the deposit agreement and custody agreement, and the ADS Depositary will not be held responsible for failure to deliver such instruction. The ability of ADS holders to hold us responsible for such failure may be limited. In addition, investors may need to be an owner of record to have standing to pursue certain actions against us. Any of these factors could substantially limit the ability of ADS holders to fully exercise their rights as shareholders.

The exercise of options under our stock option plan may result in the dilution of your equity interest in our capital stock.

On May 20, 2013, our shareholders approved a stock option plan in accordance with Brazilian corporate law, under which we expect to grant options to purchase our common shares, preferred shares and units to our senior management and certain of our employees in the future. The maximum number of shares that may be issued under our stock option plan may not exceed 2% of our total issued and outstanding capital stock, subject to the authorized share capital limit set forth in our bylaws. The granting of options under our stock option plan and the issuance of common shares, preferred shares and units as a result of the exercise of such options may result in the dilution of our shareholders’ and investors’ interests in our capital stock.

Our status as a foreign private issuer allows us to follow alternate standards to the corporate governance standards of the NYSE, which may limit the protections afforded to investors.

We are a “foreign private issuer” within the meaning of the NYSE corporate governance standards. Under NYSE rules, a foreign private issuer may elect to comply with the practices of its home country and not comply with certain corporate governance requirements applicable to U.S. companies with securities listed on the exchange. We currently follow certain Brazilian practices concerning corporate governance and intend to continue to do so.

We intend to rely on certain exemptions as a foreign private issuer listed on the NYSE. For example, a majority of our board of directors will not be independent, and we do not plan to hold at least one executive session of solely independent members of our board of directors each year. Due to certain restrictions imposed by Brazilian corporate law, our audit committee, unlike the audit committee of a U.S. issuer, will only have an “advisory” role and may only make recommendations for adoption by our board of directors, which will be responsible for the ultimate vote and final decision.

In addition, we do not intend to have a nominating or corporate governance committee as required under the NYSE rules and although we intend to have a human resources and compensation committee, we are not required to comply with the NYSE standards applicable to compensation committees of listed companies.

Accordingly, holders of our ADSs will not have the same protections afforded to shareholders of companies that are subject to all of the NYSE corporate governance requirements.

 

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

We make forward-looking statements in this prospectus that are subject to risks and uncertainties. These forward-looking statements include information about possible or assumed future results of our business, financial condition, results of operations, liquidity, plans and objectives. In some cases, you can identify forward-looking statements by terminology such as “believe,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “expect,” “predict,” “potential,” or the negative of these terms or other similar expressions. The statements we make regarding the following subject matters are forward-looking by their nature:

 

   

our direction and future operations;

 

   

the implementation of our principal operating strategies;

 

   

our acquisitions, joint ventures, strategic alliances or divestiture plans, and our ability to successfully integrate the operations of businesses or assets that we acquire;

 

   

the implementation of our financing strategy and capital expenditure plans;

 

   

general economic, political and business conditions, both in Brazil and in our principal markets abroad;

 

   

industry trends and the general level of demand for, and change in the market prices of, our products and services;

 

   

the performance of the Brazilian and global economies, including the impact of a longer than anticipated continuation of the ongoing global economic downturn or further deterioration in global economic conditions;

 

   

construction activity levels, particularly in the regions and markets in which we operate;

 

   

private investment and public spending in construction projects;

 

   

existing and future governmental regulations, and our compliance therewith, including tax, labor, antitrust, pension and environmental laws and regulations in Brazil and in other markets in which we operate;

 

   

shortages of electricity and government responses to them;

 

   

the competitive nature of the industry in which we operate;

 

   

our level of capitalization, including the level of our indebtedness and overall leverage;

 

   

the cost and availability of financing;

 

   

inflation and fluctuations in currency exchange rates, including the real and the U.S. dollar;

 

   

legal and administrative proceedings to which we are or become party;

 

   

the volatility of the prices of the raw materials we sell or purchase to use in our business;

 

   

the exploration and related depletion of our mines and mineral reserves;

 

   

other statements included in this prospectus that are not historical; and

 

   

other factors or trends affecting our financial condition or results of operations, including those factors identified or discussed under “Risk Factors.”

 

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The preceding list is not intended to be an exhaustive list of all of our forward-looking statements. Any forward-looking statements are based on our beliefs, assumptions and expectations of future performance, taking into account information currently available to us. These statements are only predictions based upon our current expectations and projections about future events. There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward-looking statements. In particular, you should consider the numerous risks provided under “Risk Factors” in this prospectus.

You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that future results, levels of activity, performance and events and circumstances reflected in the forward-looking statements will be achieved or will occur. Except as required by law, we undertake no obligation to update publicly any forward-looking statements for any reason after the date of this prospectus to conform these statements to actual results or to changes in our expectations.

 

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EXCHANGE RATES

The Brazilian foreign exchange system allows the purchase and sale of foreign currency by any person or legal entity, regardless of the amount, subject to certain regulatory procedures.

Since 1999, the Brazilian Central Bank has allowed the real/U.S. dollar exchange rate to float freely and during this period, the real/U.S. dollar exchange rate has experienced frequent and substantial variations in relation to the U.S. dollar and other foreign currencies. Between 2000 and 2002, the real depreciated significantly against the U.S. dollar, reaching an exchange rate of R$3.533 per U.S.$1.00 at the end of 2002. Between 2003 and mid-2008, the real appreciated significantly against the U.S. dollar due to the stabilization of the Brazilian macroeconomic environment and a substantial increase in foreign investment in Brazil, with the real appreciating to R$1.559 per U.S.$1.00 in August 2008. Particularly as a result of the crisis in the global financial markets from mid-2008, the real depreciated by 31.9% against the U.S. dollar during 2008 and closed the year at R$2.337 per U.S.$1.00. As of December 31, 2012, 2011, 2010 and 2009, the exchange rate was R$2.044 per U.S.$1.00, R$1.876 per U.S.$1.00, R$1.666 per U.S.$1.00 and R$1.741 per U.S.$1.00, respectively. As of March 31, 2013 the exchange rate was R$2.014 per U.S.$1.00.

The Brazilian Central Bank has intervened occasionally to attempt to control instability in foreign exchange rates. We cannot predict whether the Brazilian Central Bank or the Brazilian federal government will continue to allow the real to float freely or will intervene in the exchange rate market by re-implementing a currency band system or otherwise. The real may depreciate or appreciate substantially against the U.S. dollar in the future.

The following tables set forth the selling rate, expressed in reais per U.S. dollar (R$/U.S.$), for the periods indicated, as reported by the Brazilian Central Bank:

 

     Exchange Rates of R$ per U.S.$1.00  
     Period-End      Average(1)      High      Low  

Year ended December 31,

           

2008

     2.3370         1.8346         2.5004         1.5593   

2009

     1.7412         1.9905         2.4218         1.7024   

2010

     1.6662         1.7589         1.8811         1.6554   

2011

     1.8758         1.6709         1.9016         1.5345   

2012

     2.0435         1.9588         2.1121         1.7024   

Month

           

November 2012

     2.1074         2.0678         2.1074         2.0312   

December 2012

     2.0435         2.0778         2.1121         2.0435   

January 2013

     1.9883         2.0311         2.0471         1.9883   

February 2013

     1.9754         1.9733         1.9893         1.9570   

March 2013

     2.0138         1.9828         2.0185         1.9528   

April 2013

     2.0017         2.0022         2.0244         1.9736   

May 2013 (through May 29, 2013)

     2.0894         2.0300         2.0894         2.0030   

 

Source: Brazilian Central Bank.

 

(1) Annually, represents the average of the exchange rates on the last day of each month during the periods presented; monthly, represents the average of the end-of-day exchange rates during the periods presented.

 

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USE OF PROCEEDS

We estimate that the net proceeds to us from this global offering, after deducting underwriting discounts and commissions and estimated offering expenses, will be approximately U.S.$2,364.7 million (or approximately U.S.$2,863.3 million if the underwriters exercise their over-allotment option in full), assuming the units are offered at R$17.50 per unit and the ADSs at US$17.05 per ADS (based on the selling exchange rate of R$2.0527 per U.S.$1.00 reported by the Brazilian Central Bank on May 27, 2013), which correspond to the mid-point of the estimated offering price range set forth on the cover page of this prospectus.

We intend to use (1) approximately U.S.$1,064.1 million (or approximately 45%) of the net proceeds from this global offering primarily to continue our organic cement expansion strategy and diversification of our portfolio of products in Brazil, as well as for potential acquisitions of heavy building materials companies or assets outside Brazil, (2) approximately U.S.$945.9 million (or approximately 40%) of the net proceeds from this global offering to enhance our working capital position and (3) approximately U.S.$354.7 million (or approximately 15%) of the net proceeds from this global offering for strategic investments to further improve the efficiency of our operations. Our intended use of the net proceeds from this global offering is based on our analysis, current expectations and projections regarding future events. These estimates are subject to change at any time in our discretion, as we intend to use the net proceeds from this global offering to satisfy our funding requirements as they arise. Our management will retain broad discretion over the use of the net proceeds from this global offering, and may ultimately use the net proceeds for different purposes than we currently intend. Pending any specific application, we may invest the net proceeds of this global offering in cash, cash equivalents or marketable securities.

A U.S.$1.00 increase (decrease) in the assumed initial public offering price of R$17.50 per unit and U.S.$17.05 per ADS (based on the selling exchange rate of R$2.0527 per U.S.$1.00 reported by the Brazilian Central Bank on May 27, 2013) would increase (decrease) the net proceeds to us from this global offering by approximately U.S.$278.8 million (R$572.3 million), assuming the number of units, including units in the form of ADSs, offered by us as set forth on the cover page of this prospectus remains the same and after deducting underwriting discounts and commissions and estimated offering expenses.

We will not receive any of the net proceeds from the sale of units, including in the form of ADSs, by the selling shareholder.

 

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DIVIDEND POLICY

Dividend Policy

We intend to declare and pay dividends and/or interest on stockholders’ equity in each year in amounts equivalent to a minimum of 25.0% of our adjusted net income, in accordance with Brazilian corporate law and our bylaws. Our future dividend policy and the amount of future dividends and/or interest on stockholders’ equity our board of directors decides to recommend to our shareholders for approval in each fiscal year will depend on a number of factors, including, but not limited to, our adjusted net income available for distribution, our cash flow, financial condition (including capital position), investment plans, prospects, economic environment, as well as legal requirements and other factors we may deem relevant at the time. The amount of any future dividends or interest on stockholders’ equity we may pay is subject to the provisions of Brazilian corporate law and our bylaws and will be determined by our shareholders at annual general shareholders’ meetings as described below. There is no assurance that we will be able to distribute dividends or interest on stockholders’ equity in the future, nor that any such distribution will be consistent with our history of distributions.

Amounts Available for Distribution

At each annual general shareholders’ meeting, our board of directors is required to recommend how to allocate our net income for the preceding fiscal year. The allocation and declaration of annual dividends, including any dividend in excess of the mandatory dividend and dividends in the form of interest on stockholders’ equity, require the approval of a majority of the holders of our common shares. Pursuant to Brazilian corporate law, we define “adjusted net income” for any fiscal year as the net income in a given year after deducting the provisions for income and social contribution taxes for that year, any accumulated losses from prior years and any amounts allocated to profit-sharing payments to our employees and management.

Our bylaws provide that an amount equal to at least 25.0% of our annual adjusted net income, after deducting any allocations to our legal and, if applicable, contingency reserves, should be made available for distribution as dividends or interest on stockholders’ equity, which amount represents the mandatory dividend. We calculate our net income and allocations to reserves, as well as the amount available for distribution, on the basis of our unconsolidated financial statements prepared in accordance with IFRS.

Brazilian corporate law allows our shareholders to suspend dividends distributions if our board of directors reports to our annual shareholders’ meeting that the distribution would not be advisable given our applicable financial condition. Our fiscal council, if constituted, also would review and make a recommendation in connection with any suspension of the mandatory dividend. In addition, our management is required to submit a report to the CVM setting out the reasons for the suspension. Net income that we do not distribute by virtue of a suspension is allocated to a separate reserve and, if not netted against any subsequent losses, must be distributed as a dividend once our financial condition permits such payment.

Reserve Accounts

Brazilian corporations generally maintain two main reserve accounts: profit reserve accounts and capital reserve accounts.

Profit reserves

Reserve accounts comprise the legal reserve, bylaws reserve, unrealized earnings reserve, retained earnings reserve, contingency reserve and tax incentive reserve.

 

   

Legal Reserve. We are required to maintain a legal reserve to which we must allocate 5.0% of our net income for each fiscal year until the aggregate amount of the reserve equals 20.0% of our capital stock. However, we are not required to make any allocations to our legal reserve in a year in which the legal reserve, when added to our other established capital reserves, exceeds 30.0% of our capital stock. The amounts we allocate to this reserve may be used only to increase our capital stock or to offset net losses, rather than to pay dividends. As of March 31, 2013, the balance of our legal reserve was R$353.1 million.

 

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Bylaws Reserves. Pursuant to Brazilian corporate law, we are permitted to provide for the allocation of a portion of our net income to discretionary reserve accounts that may be established in accordance with our bylaws, which must also indicate the purpose, allotment criteria and maximum amount of the reserve. We may not make an allocation of our net income to discretionary reserve accounts if as a result we cannot distribute the mandatory dividend of 25.0% of our adjusted net income. We do not currently have bylaws reserves.

 

   

Unrealized Earnings Reserve. Pursuant to Brazilian corporate law, we may allocate the amount by which the mandatory dividend exceeds the “realized” net income in a given year to an unrealized earnings reserve account. Brazilian corporate law defines “realized” net income as the amount by which our net income exceeds the sum of (1) our net positive results, if any, from the equity method of accounting; and (2) the earnings, gains or income in transactions or recording of assets and liabilities by the market value, the term of financial realization of which occurs after the end of the next fiscal year. Earnings recorded in the unrealized earnings reserve, if realized and not netted against any losses in subsequent years, must be added to the next mandatory dividend distributed after the recognition. We do not currently have an unrealized earnings reserve.

 

   

Retained Earnings Reserve. Pursuant to Brazilian corporate law, we may reserve a portion of our net income for investment projects in an aggregate amount based on a capital expenditure budget approved by our shareholders. If this budget relates to more than one fiscal year, it must be reviewed annually at the shareholders’ general meeting. The allocation of this reserve cannot impact our payment of the mandatory dividend of 25.0% of our adjusted net income.

 

   

Contingency Reserve. Under Brazilian corporate law, we may allocate a percentage of our net income to a contingency reserve for anticipated losses that we deem probable in future years. Our management must indicate the cause of the anticipated losses and justify any allocation to the contingency reserve. Any amount that we allocated in a prior year either must be reversed in the year in which the loss had been anticipated, if the loss does not occur as projected, or charged off in the event that the anticipated loss occurs. Any allocations to the contingency reserve are subject to the approval of our common shareholders at a shareholders’ general meeting. We do not currently have a contingency reserve.

 

   

Tax Incentive Reserve. Our management may propose that our shareholders approve the allocation to the tax incentive reserve of part of our net profits resulting from donations or government grants for investments, which may be excluded from the calculation basis of the mandatory dividend. As of March 31, 2013, the balance of our tax incentive reserve was R$596.1 million.

The balance of our profit reserve accounts, except for any contingency reserve, the tax incentive reserve and any unrealized earnings reserve, may not exceed our share capital. If this were to occur, our common shareholders would vote at a shareholders’ general meeting on whether to use the excess to pay in subscribed and unpaid capital, to increase the share capital or to distribute dividends.

Capital Reserves

Pursuant to Brazilian corporate law, we may maintain capital reserves which may comprise part of the price paid in the subscription of shares and subscription bonds. We may use the capital reserve only to: (1) amortize losses greater than accumulated income and profit reserves; (2) call, reimburse or redeem our own shares; or (3) increase our capital stock. We do not currently have a capital reserve.

Payment of Dividends

Dividends

We are required by Brazilian corporate law and our bylaws to hold an annual general shareholders’ meeting by no later than the fourth month after the end of each fiscal year, at which time, among other proposals, the allocation of the net income in any fiscal year and the distribution of an annual dividend are considered. The payment of annual dividends is based on our unconsolidated financial statements prepared for the immediately preceding fiscal year.

 

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Any holder of record of our shares at the time a dividend is declared is entitled to receive dividends. Under Brazilian corporate law, dividends are generally required to be paid within 60 days following the date on which the dividend is declared, unless the shareholders’ resolution establishes another payment date, which, in any event, must occur prior to the end of the fiscal year in which such dividend was declared. Based on Brazilian corporate law, unclaimed dividends do not bear interest, are not monetarily adjusted and may revert to us three years after dividends were declared.

Our board of directors may declare interim dividends or interest on stockholders’ equity based on income verified in semi-annual financial statements. Our board of directors may also declare dividends based on financial statements prepared for shorter periods, provided that the total dividends paid in each six-month period do not exceed the capital reserves amount required by Brazilian corporate law. Our board of directors may also pay interim dividends or interest on stockholders’ equity out of retained earnings or profit reserves recorded in the last annual balance sheet other than reserves created by our shareholders for specific purposes. Any payment of interim dividends or interest on stockholders’ equity may be set off against the amount of mandatory dividends relating to the net income earned in the year in which the interim dividends were paid.

In general, shareholders who are not residents of Brazil must register their equity investment with the Brazilian Central Bank to receive dividends, sales proceeds or other amounts with respect to their shares eligible to be remitted outside Brazil. The units underlying the ADSs are held in Brazil by Itaú Unibanco S.A., acting as the custodian as agent for the ADS Depositary. Deutsche Bank Trust Company Americas is the registered owner on the records of the registrar of our units and acts as the registrar of our ADSs. The ADS Depositary registers the units underlying the ADSs with the Brazilian Central Bank and, therefore, is able to receive dividends, sales proceeds or other amounts with respect to registered units remitted outside Brazil.

Payments of cash dividends and distributions, if any, are made in reais to the custodian on behalf of the depositary, which then converts such proceeds into U.S. dollars and causes such U.S. dollars to be delivered to the depositary for distribution to holders of ADSs. In the event that the custodian is unable to convert immediately the Brazilian currency received as dividends into U.S. dollars, the amount of U.S. dollars payable to holders of ADSs may be adversely affected by depreciation of the Brazilian currency. Under current Brazilian law, dividends paid to shareholders who are not Brazilian residents, including holders of ADSs, will not be subject to Brazilian withholding tax, except for dividends declared based on profits generated prior to December 31, 1995, which will be subject to Brazilian withholding income tax at varying tax rates. See “Taxation—Material Brazilian Tax Considerations for Holders of Units or ADRs.”

Holders of ADSs have the benefit of the electronic registration obtained from the Brazilian Central Bank, which permits the depositary and the custodian to convert dividends and other distributions or sales proceeds with respect to the units represented by ADSs into foreign currency and remit the proceeds outside Brazil. In the event the holder exchanges the ADSs for units, the holder will be entitled to sell the units in Brazil and continue to rely on the depositary’s electronic registration for five business days after the exchange. Thereafter, in order to convert foreign currency and remit outside Brazil the sales proceeds, dividends or other distributions with respect to the units, the holder must obtain a new electronic registration as a direct investment in its own name or qualify under the foreign investment in portfolio regulations that will also be reflected in a specific electronic registration. Each of such registrations will permit the conversion and remittance abroad of sales proceeds, dividends or other distributions with respect to the units.

If the holder does not qualify under the foreign investment in portfolio regulations, the foreign direct investment will generally be subject to less favorable tax treatment from any sale or return of the investment under the units. If the ADSs holder attempts to obtain its new own registration of foreign direct investment may result expenses or suffer delays in the application process, which could delay the ability to receive dividends or distributions relating to the units or the return of the investment in a timely manner. Moreover, should the ADSs holder exchange the ADSs for units, applicable regulations require the execution of the corresponding foreign exchange transactions and payment of taxes on such foreign exchange transactions.

Under current Brazilian legislation, the Brazilian federal government may impose temporary restrictions of foreign capital abroad in the event of a serious imbalance or an anticipated serious imbalance of Brazil’s balance of payments.

 

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Interest on Stockholders’ Equity

Under existing Brazilian tax law, Brazilian companies may pay “interest” to holders of equity securities and account for these payments as an expense for Brazilian income tax purposes and for social contribution purposes. The decision to pay interest on stockholders’ equity may be adopted at the discretion of our board of directors, subject to the approval of our common shareholders at a shareholders’ general meeting. The amount of any such notional “interest” payment to holders of equity securities is generally limited in respect of any particular year to the greater of:

 

   

50.0% of our net income (after the deduction of any allowances for social contribution taxes on net profits but before taking into account allowances for income tax and interest on stockholders’ equity) for the period in respect of which the payment is made; and

 

   

50.0% of our retained earnings and profit reserves as of the date of the beginning of the period in respect of which the payment is made.

The rate applied in calculating interest on stockholders’ equity cannot exceed the pro rata die variation of the Long-Term Interest Rate (Taxa de Juros de Longo Prazo), or the TJLP.

Payments of interest on stockholders’ equity, net of withholding income tax, may be considered as part of the mandatory dividend distribution. Under applicable law, we are required to pay to our shareholders an amount sufficient to ensure that the net amount they receive in respect of interest on stockholders’ equity, after payment of any applicable withholding tax, plus the amount of distributed dividends, is at least equivalent to the mandatory dividend amount.

Any payment to the shareholders of interest on stockholders’ equity, whether or not they are Brazilian residents, is subject to Brazilian withholding tax at the rate of 15.0%, with a 25.0% withholding tax rate applicable if the Non-Resident Holder is domiciled in a country or other jurisdiction (i) that does not impose income tax; (ii) where the maximum income tax rate is lower than 20.0%; or (iii) where the applicable laws impose restrictions on the disclosure of shareholding composition or the ownership of the investment. See “Taxation— Material Brazilian Tax Considerations for Holders of Units or ADRs.”

Restrictions on the Payment of Dividends

Pursuant to the terms of the indentures governing our outstanding debentures, on the occurrence and continuance of an event of default, we may not distribute dividends in excess of the mandatory dividend of 25.0% of our adjusted net income. For a description of the principal terms of our outstanding debentures see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Indebtedness and Financing Strategy—Long-Term Indebtedness—Debentures.”

 

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History of Payment of Dividends and Interest on Stockholders’ Equity

With respect to our result for 2012, we paid interim dividends of R$1,995.5 million to our shareholders corresponding to our distribution of a portion of our profit reserves, as well as interest on stockholders’ equity of R$178.7 million.

On April 30, 2013, our annual shareholders meeting declared the payment of dividends in an aggregate amount of R$2,428.5 million, of which R$333.0 million corresponded to the minimum mandatory dividend with respect to our results for the year ended December 31, 2012 and R$2,095.5 million corresponded to the R$1,995.5 million in dividends (in excess of the minimum mandatory dividend) that we paid as interim dividends during 2012 and the R$100.0 million of interim dividends that we paid during the three-month period ended March 31, 2013. On May 28, 2013, we paid in cash R$86.1 million that as of December 31, 2012 was recorded on our consolidated balance sheet as “Dividends payable.” We offset the remaining R$280.2 million in dividends payable against an amount owed by VID to us from our sale to VID of our 12.36% equity interest in VILA. See “Presentation of Financial and Other Information—Financial Statements—Assets and Liabilities Held for Sale and Discontinued Operations—VILA investment held for sale” and “Summary—Recent Developments.”

The table below shows the amounts distributed to our shareholders for the periods indicated below:

 

     For the Year Ended December 31,  
     2012     2011     2010  
     (in millions of reais, except amounts per share)  

Net income attributable to controlling interest used for the calculation of dividends

     1,616.8        888.1        2,670.4   

Legal reserve

     (80.8     (44.4     (133.5

Interest on stockholders’ equity

     (178.7     —          —     

Tax incentives reserve

     (25.2     (2.8     —     
  

 

 

   

 

 

   

 

 

 

Adjusted net income

     1,332.1        840.9        2,536.9   

Mandatory dividends

     333.0        210.2        634.2   

Additional dividends

     2,095.5        536.5        2,187.4   
  

 

 

   

 

 

   

 

 

 

Total dividends declared

     2,428.5        746.8        2,821.6   

Total distribution to shareholders

     2,428.5        746.8        2,821.6   
  

 

 

   

 

 

   

 

 

 

Dividend per share (in reais) (1)

     0.45        0.14        0.53   

 

(1) Retrospectively adjusted for the 49-to-1 stock split approved by our shareholders on April 30, 2013 by which 5,310,496,224 additional common shares were issued to holders of our existing 110,635,338 common shares, and the additional 1.00301935819354-to-1 stock split of our common shares approved by our shareholders on May 27, 2013 by which 16,368,338 additional common shares were issued to holders of our existing 5,421,131,562 common shares.

There is no assurance that we will be able to distribute dividends or interest on stockholders’ equity in the future, or that any such distribution will be consistent with our history of distributions.

 

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CAPITALIZATION

The following table sets forth our total capitalization as of March 31, 2013, as follows:

 

   

on an actual basis;

 

   

on an as adjusted basis to give effect to our repayment on May 2, 2013 of U.S.$15.0 million (equivalent to R$30.1 million using the exchange rate applicable as of May 2, 2013 of R$2.0095 per U.S.$1.00) of the outstanding principal amount under our Votorantim Backstop Facility;

and

 

   

on an as further adjusted basis the sale of our units, including in the form of ADSs, in this global offering at an assumed initial public offering price of R$17.50 per unit and U.S.$17.05 per ADS (based on the selling exchange rate of R$2.0527 per U.S.$1.00 reported by the Brazilian Central Bank on May 27, 2013), which correspond to the mid-point of the price range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and offering expenses payable by us.

You should read this information in conjunction with our consolidated financial statements and the related notes included elsewhere in this prospectus, the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section, the “Presentation of Financial and Other Information” section and other financial information contained in this prospectus.

 

 

     As of March 31, 2013  
     Actual      As Adjusted      As Further Adjusted  
     (in millions
of U.S.)(1)
     (in millions
of
reais)
     (in millions
of U.S.)(1)
     (in millions
of
reais)
     (in millions
of U.S.)(1)
     (in millions
of
reais)
 

Indebtedness:

                 

Current debt

     612.3         1,233.0         597.3         1,202.9         597.3         1,202.9   

Non-current debt

     5,492.5         11,060.7         5,492.5         11,060.7         5,492.5         11,060.7   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total debt

     6,104.7         12,293.7         6,089.8         12,263.6         6,089.8         12,263.6   

Stockholders’ equity:

                 

Capital stock, no par value

     1,363.6         2,746.0         1,363.6         2,746.0         1,735.2         3,494.3   

Share premium reserve

                                     2,038.8         4,105.8   

Profit reserves

     216.9         436.7         216.9         436.7         216.9         436.7   

Legal reserves

     175.3         353.1         175.3         353.1         175.3         353.1   

Tax incentive reserve

     296.0         596.1         296.0         596.1         296.0         596.1   

Retained earnings

     52.0         104.6         52.0         104.6         52.0         104.6   

Cumulative other comprehensive income

     253.5         510.5         253.5         510.5         253.5         510.5   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total equity attributable to owners of the parent

     2,357.3         4,747.1         2,357.3         4,747.1         4,767.7         9,601.2   

Non-controlling interest

     123.9         249.6         123.9         249.6         123.9         249.6   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total stockholders’ equity

     2,481.2         4,996.6         2,481.2         4,996.6         4,891.6         9,850.7   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total capitalization

     8,585.9         17,290.3         8,571.0         17,260.2         10,981.4         22,114.3   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
(1) Solely for the convenience of the reader, real amounts as of March 31, 2013 have been translated into U.S. dollars at the exchange rate as of March 31, 2013 of R$2.0138 to U.S.$1.00. See “Exchange Rates” for further information on recent fluctuations in exchange rates.

Except as set forth in the table above, there has been no material change in our total capitalization since March 31, 2013.

 

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DILUTION

If you invest in our units and ADSs in this global offering, your ownership interest will be immediately diluted to the extent of the difference between the initial public offering price per unit and per ADS and the net tangible book value per unit and per ADS after this global offering. Our net tangible book value as of March 31, 2013 was R$297.4 million, corresponding to a net tangible book value of R$0.16 per unit and U.S.$0.16 per ADS. Net tangible book value per unit and per ADS represents our total assets excluding our intangible assets less the amount of our total liabilities divided by 5,437,500,000, the total number of our common and preferred shares outstanding as of March 31, 2013, adjusted (1) in the case of the units, to reflect the ratio of one common and two preferred shares per unit and (2) in the case of the ADSs, to reflect the ratio of two units per ADS.

After giving effect to the sale of the units and ADSs that we are offering at an assumed initial public offering price of R$17.50 per unit and U.S.$17.05 per ADS (based on the selling exchange rate of R$2.0527 per U.S.$1.00 reported by the Brazilian Central Bank on May 27, 2013), which correspond to the midpoint of the initial public offering price range set forth on the cover page of this prospectus, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, our as adjusted net tangible book value as of March 31, 2013, would have been approximately R$2.46 per unit and U.S.$2.39 per ADS. This amount represents an immediate increase in net tangible book value of R$2.29 per unit and U.S.$2.23 per ADS to our existing shareholders and an immediate dilution in net tangible book value of R$15.04 per unit and U.S.$14.66 per ADS to new investors purchasing units or ADSs in this global offering. We determine dilution by subtracting the as adjusted net tangible book value per unit and per ADS after this global offering from the amount of cash that a new investor paid for a unit or an ADS.

The following table illustrates this dilution:

 

     Per ADS(1)      Per unit  

Assumed initial public offering price

   U.S.$ 17.05       R$ 17.50   

Net tangible book value as of March 31, 2013(2)

   U.S.$ 0.16       R$ 0.16   

Increase attributable to this global offering

   U.S.$ 2.23       R$ 2.29   

As adjusted net tangible book value after this global offering(3)

   U.S.$ 2.39       R$ 2.46   

Dilution to new investors

   U.S.$ 14.66       R$ 15.04   

 

  (1) Amounts in reais have been translated into U.S. dollars at the selling exchange rate reported by the Brazilian Central Bank as of May 27, 2013, or R$2.0527 to U.S.$1.00.
  (2) Net tangible book value per unit and per ADS represents our total assets excluding our intangible assets less the amount of our total liabilities divided by 5,437,500,000, the total number of our common and preferred shares outstanding as of March 31, 2013, adjusted (i) in the case of the units, to reflect the ratio of one common and two preferred shares per unit and (ii) in the case of the ADSs, to reflect the ratio of two units per ADS.
  (3) As adjusted net tangible book value after this global offering corresponds to net tangible book value as of March 31, 2013, plus increase in net tangible book value attributable to this global offering.

A $1.00 increase (decrease) in the assumed initial public offering price of R$17.50 per unit and U.S.$17.05 per ADS (based on the selling exchange rate of R$2.0527 per U.S.$1.00 reported by the Brazilian Central Bank on May 27, 2013), which correspond to the midpoint of the range set forth on the cover page of this prospectus, would increase (decrease) our consolidated net tangible book value after this global offering by U.S.$278.8 million (R$572.3 million) and the dilution per unit and per ADS to new investors by R$1.78 and U.S.$1.73, respectively, in each case assuming the number of units, including in the form of ADSs, offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

If the underwriters exercise their over-allotment option in full in this global offering, the as adjusted net tangible book value after this global offering would increase by U.S.$2,863.3 million (R$5,877.5 million), the increase in net tangible book value to existing shareholders would be R$2.70 per unit and U.S.$2.63 per ADS, and the dilution to new investors would be R$14.64 per unit and U.S.$14.26 per ADS, in each case assuming an initial public offering price of R$17.50 per unit and U.S.$17.05 per ADS, which is the midpoint of the initial public offering price range set forth on the cover page of this prospectus.

 

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SELECTED CONSOLIDATED FINANCIAL AND OTHER INFORMATION

The following tables set forth our selected consolidated financial information as of March 31, 2013 and for the three-month periods ended March 31, 2013 and 2012 and as of and for the years ended December 31, 2012, 2011 and 2010. The financial information as of March 31, 2013 and December 31, 2012, and for the three-month periods ended March 31, 2013 and 2012 has been derived from our unaudited consolidated interim financial information, included elsewhere in this prospectus. The financial information as of December 31, 2011 and for the years ended December 31, 2012, 2011 and 2010 has been derived from our audited consolidated financial statements, included elsewhere in this prospectus. The financial information as of December 31, 2010 and 2009 and for the year ended December 31, 2009 has been derived from our audited consolidated financial statements not included in this prospectus. Our consolidated financial statements have been prepared in accordance with IFRS as issued by the IASB. Our consolidated financial statements as of and for the year ended December 31, 2010, which included comparative information for 2009, are our first financial statements prepared under IFRS as issued by the IASB. The selected consolidated financial information presented below corresponds to the years for which our financial statements prepared in accordance with IFRS are available. You should read the following selected consolidated financial and other information in conjunction with “Presentation of Financial and Other Information,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes included elsewhere in this prospectus.

 

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     For the Three-Month Period Ended
March 31,
    For the Year Ended December 31,  
     2013     2013     2012(2)     2012     2012(3)     2011(3)     2010(3)     2009  

(amounts expressed in millions,

except for per share amounts and
number of shares)

   (in U.S.$)(1)     (in reais)     (in U.S.$)(1)     (in reais)  

Statement of income data:

                

Continuing operations

                

Revenues

     1,231.9        2,480.8        2,057.8        4,708.4        9,481.7        8,698.4        8,047.1        7,247.4   

Cost of sales and services

     (873.8     (1,759.6     (1,418.6     (3,067.4     (6,177.1     (5,684.5     (4,986.9     (4,611.6
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     358.1        721.2        639.2        1,641.0        3,304.6        3,013.9        3,060.2        2,635.8   

Selling expenses

     (92.5     (186.2     (112.8     (302.9     (610.0     (595.4     (500.7     (321.0

General and administrative expenses

     (89.9     (181.1     (127.9     (331.7     (668.0     (530.0     (413.1     (450.3

Gain on transfer of assets – 2010 Cimpor asset exchange

     —          —          —            —          —          1,672.4        —     

Gain on the disposal of our 21.21% equity interest in Cimpor

     —          —          —          132.5        266.8        —          —          —     

Other operating income (expenses), net

     45.6        91.9        47.1        141.4        284.8        (295.9     187.2        145.0   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating profit before equity results and net financial income (expense)

     221.3        445.7        445.7        1,280.2        2,578.1        1,592.6        4,006.0        2,009.5   

Recognition of other comprehensive loss upon disposal of our 21.21% equity interest in Cimpor

     —          —          —          (84.5     (170.1     —          —          —     

Equity in results of investees

     0.2        0.4        18.6        12.7        25.5        311.8        192.0        67.8   

Financial income (expenses), net

     (56.3     (113.4     (106.4     (464.4     (935.3     (772.4     (390.8     416.1   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Profit before income tax

     165.2        332.7        357.9        744.0        1,498.2        1,131.9        3,807.2        2,493.4   

Income tax and social contribution

     (62.2     (125.2     (107.6     70.6        142.3        (277.1     (1,126.8     (735.7
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income from continuing operations

     103.1        207.5        250.3        814.6        1,640.5        854.8        2,680.4        1,757.7   

Discontinued operations

                

Loss from discontinued operations

     (5.6     (11.4     —          —          —          —          —       
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income for the period

     97.4        196.2        250.3        814.6        1,640.5        854.8        2,680.4        1,757.7   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to controlling interests

     96.5        194.3        244.4        802.9        1,616.8        835.5        2,648.4        1,719.1   

Net income attributable to non-controlling interests

     1.0        1.9        5.9        11.8        23.7        19.3        32.0        38.6   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income for the period

     97.4        196.2        250.3        814.6        1,640.5        854.8        2,680.4        1,757.7   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income per share – basic and diluted – R$(4)

     0.018        0.036        0.045        0.148        0.297        0.154        0.502        0.33   

Net income per share – continuing operations – basic and diluted – R$(4)

     0.018        0.037        0.045        0.148        0.297        0.154        0.502        0.33   

Net income per share – discontinued operations – basic and diluted – R$(4)

     —          (0.001     —          —          —          —          —          —     

Weighted average number of total shares outstanding (in thousands)(4)

     5,437,500        5,437,500        5,437,500        5,437,500        5,437,500        5,426,425        5,280,161        5,145,004   

 

(1) Solely for the convenience of the reader, real amounts for the three-month period ended March 31, 2013 and the year ended December 31, 2012 have been translated into U.S. dollars at the exchange rate as of March 31, 2013 of R$2.0138 to U.S.$1.00. See “Exchange Rates” for further information on recent fluctuations in exchange rates.
(2) Recast on the basis of accounting principles introduced as from January 1, 2013.
(3) Derived from our audited consolidated financial statements
(4) Retrospectively adjusted for the 49-to-1 stock split approved by our shareholders on April 30, 2013 by which 5,310,496,224 additional common shares were issued to holders of our existing 110,635,338 common shares, and the additional 1.00301935819354-to-1 stock split of our common shares approved by our shareholders on May 27, 2013, by which 16,368,338 additional common shares were issued to holders of our existing 5,421,131,562 common shares.

 

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     As of March 31,      As of December 31,  
     2013      2013      2012      2012(2)      2011(3)      2010     2009  
(amounts expressed in millions)    (in U.S.$)(1)      (in reais)      (in U.S.$)(1)      (in reais)  

Balance sheet data:

                   

Cash and cash equivalents

     136.7         275.2         464.9         936.3         225.1         24.9        14.0   

Financial investments

     922.1         1,856.8         1,009.2         2,032.4         1,450.5         1,184.0        2,542.5   

Trade receivables

     467.0         940.5         452.2         910.7         786.1         679.6        666.9   

Inventories

     584.3         1,176.7         587.0         1,182.1         890.7         796.8        702.7   

Other current assets

     317.2         638.8         231.2         465.6         439.2         330.5        471.0   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total current assets

     2,427.3         4,888.0         2,744.6         5,527.1         3,791.6         3,015.8        4,397.1   

Assets related to business classified as held for sale (4)

     686.6         1,382.7         348.2         701.2         —           —          —     

Related parties

     57.4         115.6         8.1         16.4         52.8         257.1        3,569.4   

Judicial deposits

     102.9         207.2         122.4         246.5         149.4         103.8        97.3   

Deferred taxes

     366.5         738.1         482.7         972.0         759.1         514.0        553.0   

Other non-current assets

     218.5         440.0         140.8         283.5         214.2         119.4        143.8   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total non-current assets

     745.3         1,500.9         754.0         1,518.4         1,175.5         994.3        4,363.5   

Investments in associated companies

     643.1         1,295.1         1,018.3         2,050.6         3,241.4         3,521.5        572.1   

Property, plant and equipment

     4,612.9         9,289.5         4,628.5         9,320.8         6,954.3         5,581.3        5,129.3   

Intangible assets

     2,333.5         4,699.2         2,382.8         4,798.4         3,466.4         3,259.4        3,185.4   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total assets

     11,448.7         23, 055.4         11,876.4         23,916.6         18,629.2         16,372.3        17,647.4   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Current debt (5)

     612.3         1,233.0         301.4         606.9         413.6         220.7        329.5   

Trade payables

     380.9         767.0         425.2         856.2         662.5         638.5        456.2   

Income tax and social contribution

     35.2         70.9         25.4         51.2         132.9         186.4        286.8   

Dividend payables

     192.7         388.1         218.0         439.1         274.0         211.1        —     

Other current liabilities

     475.4         957.3         632.1         1,272.9         675.3         711.8        458.4   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total current liabilities

     1,696.4         3,416.3         1,602.1         3,226.3         2,158.3         1,968.5        1,530.9   

Liabilities related to business classified as held for sale (4)

     144.7         291.5         136.1         274.1         —           —          —     

Non-current debt (6)

     5,492.5         11,060.7         6,046.9         12,177.2         7,643.2         5,027.6        2,632.9   

Related parties

     239.3         482.0         241.6         486.6         726.1         1,748.0        6,301.1   

Provision

     475.4         957.4         531.7         1,070.8         935.0         805.0        787.9   

Deferred taxes

     429.2         864.4         418.5         842.7         983.3         990.6        478.5   

Use of public assets

     190.3         383.2         189.5         381.6         352.2         335.3        288.3   

Other liabilities

     299.6         603.3         272.9         549.5         412.7         436.5        385.0   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total non-current liabilities

     7,126.3         14,351.0         7,701.1         15,508.4         11,052.5         9,343.0        10,873.7   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total liabilities

     8,967.5         18,058.8         9,439.3         19,008.8         13,210.8         11,311.5        12,404.6   

Capital stock

     1,363.6         2,746.0         1,363.6         2,746.0         2,746.0         2,327.2        1,889.7   

Tax incentive reserve

     296.0         596.1         270.3         544.4         360.6         220.8        139.8   

Profit reserves

     392.2         789.8         392.2         789.8         1,963.9         2,415.1        2,878.2   

Retained earnings

     51.9         104.6         —           —           —           —          —     

Cumulative other comprehensive income

     253.5         510.5         286.9         577.8         155.9         (88.7     163.0   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total equity attributable to controlling interest

     2,357.3         4,747.1         2,313.0         4,658.0         5,226.4         4,874.4        5,070.7   

Non-controlling interest

     123.9         249.6         124.1         249.9         192.0         186.4        172.2   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total stockholders’ equity

     2,481.2         4,996.6         2,437.1         4,907.8         5,418.4         5,060.8        5,242.9   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total liabilities and stockholders’ equity

     11,448.7         23,055.4         11,876.4         23,916.6         18,629.2         16,372.3        17,647.4   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

 

(1) Solely for the convenience of the reader, real amounts as of March 31, 2013 and December 31, 2012 have been translated into U.S. dollars at the exchange rate as of March 31, 2013 of R$2.0138 to U.S.$1.00. See “Exchange Rates” for further information on recent fluctuations in exchange rates.
(2) Recast on the basis of accounting principles introduced as from January 1, 2013.
(3) Derived from our audited consolidated financial statements.
(4) Includes the assets and liabilities related to our operations in China and our interest in VILA.
(5) Includes current portion of long-term debt.
(6) Excludes current portion of long-term debt.

 

52


Table of Contents
     As of and for the Three-Month
Period Ended March 31,
    As of and for the Year Ended December 31,  

(amounts expressed in millions, except for

ratios)

   2013     2013     2012(2)     2012     2012(2)(3)     2011(3)     2010(3)  
   (in U.S.$) (1)     (in reais)     (in U.S.$) (1)     (in reais)  

Other financial data:

              

Working capital (4)

     670.5        1,350.3        —          614.1        1,236.6        1,014.3        837.9   

Capital expenditures (5)

     183.5        369.5        419.0        744.9        1,500.1        1,723.1        964.4   

Depreciation, amortization and depletion

     86.1        173.4        125.6        277.2        558.3        441.1        420.3   

Net cash flow provided by (used in) operating activities

     340.4        685.6        (24.3     706.2        1,422.1        806.7        3,649.6   

Net cash flow provided by (used in) investing activities

     (399.6     (804.7     (405.9     (599.5     (1,207.3     (1,553.9     (1,947.8

Net cash flow provided by (used in) financing activities

     (252.1     (507.7     364.6        254.3        512.1        932.7        (1,688.1

EBITDA before results of investees (6)

     301.6        607.4        571.3        1,557.5        3,136.4        2,033.7        4,426.3   

Adjusted EBITDA (6)

     313.6        631.6        583.9        1,524.8        3,070.7        2,776.8        2,805.8   

Adjusted EBITDA margin (7)

     25.5     25.5     28.4     32.4     32.4     31.9     34.9

Net debt (8) /Adjusted EBITDA (9)

     3.3        3.3        n.a.  (11)      3.2        3.2        2.3        1.4   

Adjusted ROCE (10)

     23.4     23.4     n.a.  (11)      21.6     21.6     27.2     36.0

Operating segment and product information:

              

Revenues by operating segment:

              

Brazil operations (12)

     946.2        1,905.4        1,847.6        3,826.1        7,705.1        7,250.4        6,538.1   

North America operations

     121.1        243.9        210.2        882.2        1,776.6        1,448.0        1,509.0   

Europe, Africa and Asia operations

     164.6        331.5        —          —          —          —          —     

Revenues by product:

              

Cement

     870.1        1,752.2        1,413.0        3,127.1        6,297.4        5,890.9        5,472.4   

Ready-mix concrete

     235.6        474.5        391.1        1,042.4        2,099.1        1,880.7        1,789.3   

Aggregates

     37.3        75.2        78.0        188.2        379.0        371.9        303.6   

Other building materials

     88.9        179.0        175.6        350.7        706.2        554.9        481.8   

Adjusted EBITDA by operating segment (13):

              

Brazil operations (12)

     301.3        606.8        627.9        1,378.0        2,775.1        2,574.8        2,542.4   

North America operations

     (17.4     (35.1     (44.1     146.8        295.6        201.9        263.4   

Europe, Africa and Asia operations

     29.7        59.9        —          —          —          —          —     

 

(1) Solely for the convenience of the reader, real amounts as of and for the three-month period ended March 31, 2013 and the year ended December 31, 2012 have been translated into U.S. dollars at the exchange rate as of March 31, 2013 of R$2.0138 to U.S.$1.00. See “Exchange Rates” for further information on recent fluctuations in exchange rates.
(2) Balance sheet information as of December 31, 2012 has been recast on the basis of accounting principles introduced as from January 1, 2013.
(3) Statement of income information for the years ended December 31, 2012, 2011 and 2010 derived from our audited consolidated financial statements.
(4) Working capital is defined as trade receivables plus inventories less trade payables.
(5) Represents cash disbursements for purchase of property, plant and equipment as presented in our statement of cash flows.
(6) We define EBITDA before results of investees as net income plus/minus net financial income (expense) plus/minus income tax and social contribution plus depreciation, amortization and depletion plus/minus equity in results of investees. We define Adjusted EBITDA as EBITDA before results of investees minus/plus certain non-cash transactions that are considered by our management as exceptional, impairment of goodwill and dividends received minus/plus EBITDA from discontinued operations. The non-cash items considered as exceptional by our management generally relate to gains/losses on acquisitions, disposals or exchange of assets. For a calculation of EBITDA before results of investees and Adjusted EBITDA and a reconciliation of EBITDA before results of investees and Adjusted EBITDA to the most directly comparable IFRS financial measure, see “—Non-GAAP financial measures and reconciliation.”
(7) Adjusted EBITDA margin is defined as Adjusted EBITDA divided by revenues.
(8) Net debt is the sum of total short- and long-term debt minus cash and cash equivalents, financial investments and derivatives.
(9) Net debt/Adjusted EBITDA ratio is the ratio of our net debt as of the end of the applicable period divided by our Adjusted EBITDA most recently concluded period of four consecutive fiscal quarters.
(10) We calculate Adjusted ROCE by dividing the sum of our operating profit from continuing operations before equity in results of investees and net financial income (expense) minus/plus certain non-cash transactions that are considered by our management as exceptional included in operating profit and dividends received, by the sum of property, plant and equipment plus total current assets less total current liabilities, in each case, from continuing operations. For March 31, 2013 and 2012, Adjusted ROCE is presented for the 12-month periods ended March 31, 2013 and 2012.
(11) Not available.
(12) Includes South America.
(13) We calculate EBITDA before results of investees for each of our operating segments as net income plus/minus net financial income (expense) plus/minus income tax and social contribution plus depreciation, amortization and depletion plus/minus equity in results of investees. We define Adjusted EBITDA as EBITDA before results of investees minus/plus certain non-cash transactions that are considered by our management as exceptional, impairment of goodwill and dividends received minus/plus EBITDA from discontinued operations. For a calculation of EBITDA before results of investees and Adjusted EBITDA and a reconciliation of EBITDA before results of investees and Adjusted EBITDA to the most directly comparable IFRS financial measure, see “—Non-GAAP financial measures and reconciliation.”

 

53


Table of Contents
     As of and for the
Three-Month Period
Ended March 31,
     As of and for the Year Ended December 31,  
     2013      2012      2012      2011      2010      2009  

Operating data:

                 

Installed capacity:

                 

Cement (in thousand tons per year)

                 

Brazil plants

     30,063         26,246         30,063         26,246         23,241         23,241   

North America plants (1)

     5,174         5,174         5,593         5,593         5,593         5,593   

South America (excluding Brazil) (2)

     717         200         200         200         200         200   

Europe, Africa and Asia

     16,348         —           16,348         —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     52,302         31,620         52,205         32,039         29,035         29,035   

Sales volume:

                 

Cement (in thousand tons)

                 

Brazil

     5,993         5,812         24,379         23,551         22,657         20,749   

North America (1)

     425         466         4,009         3,621         3,581         3,459   

South America (excluding Brazil) (3)