6-K 1 a50971823.htm GRANA Y MONTERO GROUP 6-K a50971823.htm
FORM 6-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
 
FORM 6-K
 
REPORT OF FOREIGN ISSUER
PURSUANT TO RULE 13a-16 OR 15b-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
 
For the month of October 2014

 Commission File Number 001-35591

GRAÑA Y MONTERO S.A.A.
(Exact name of registrant as specified in its charter)
 
GRAÑA Y MONTERO GROUP
(Translation of registrant’s name into English)
 
Republic of Peru
(Jurisdiction of incorporation or organization)
 
Avenida Paseo de la República 4667, Lima 34,
Surquillo, Lima
Peru
(Address of principal executive offices)
 
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.
 
Form 20-F ___X____ Form 40-F _______
 
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): [ ]
 
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): [ ]
 
Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
 
Yes _______ No ___X____
 
If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): Not applicable.

 
 
 
 
____________________
/s/Dennis Gray Febres
Stock Market Representative
Graña y Montero S.A.A.


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


GRAÑA Y MONTERO S.A.A.

 
 

By: /s/ DENNIS GRAY FEBRES

Name: Dennis Gray Febres

Title: Stock Market Representative

October 30, 2014
 
 
 
 
 
(All amounts are expressed in thousands of S/. unless otherwise stated)

UNAUDITED


GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES


CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
AT SEPTEMBER 30, 2013 AND 2014 AND FOR THE NINE-MONTH PERIOD ENDED IN THIS DATE
 
 
 
 
 
 
(All amounts are expressed in thousands of S/. unless otherwise stated)

UNAUDITED


GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES


CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
AT SEPTEMBER 30, 2013 AND 2014 AND FOR THE NINE-MONTH PERIOD ENDED IN THIS DATE


CONTENTS




Condensed Interim Consolidated Statement of Financial Position

Condensed Interim Consolidated Income Statement

Condensed Interim Consolidated Statement of Comprehensive Income

Condensed Interim Consolidated Statement of Shareholders’ Equity                                                                                                                                

Condensed Interim Consolidated Statement of Cash Flows

Notes to the Condensed Interim Consolidated Financial Statements
 
 
 
 
 
 
S/.          =      New Peruvian Sol
US$       =      United States dollar
 
 
 
 
 
(All amounts are expressed in thousands of S/. unless otherwise stated)
  
UNAUDITED  
                                         
GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES
  
                                         
                                         
CONDENSED INTERIM CONSOLIDATED STATEMENT OF FINANCIAL POSITION
  
AT DECEMBER 31, 2013 (AUDITED) AND AT SEPTEMBER 30, 2014 (UNAUDITED)
  
                                         
ASSETS
                    
LIABILITIES AND EQUITY
  
         
At
                    
At
        
         
December 31,
    
September 30,
              
December 31,
    
September 30,
  
   
Note
    
2013
    
2014
        
Note
    
2013
    
2014
  
                                         
Current assets
                    
Current liabilities
                  
Cash and cash equivalents
           959,415       897,259    
Borrowings
   12       486,119       1,171,089  
Trade accounts receivables
           521,872       686,194    
Trade accounts payable
           991,397       1,074,677  
Outstanding work in progress
           971,743       1,244,223    
Accounts payable to related parties
   9       25,585       45,310  
Accounts receivable from related parties
   9       83,850       105,588    
Current taxes
           159,234       133,249  
Other accounts receivable
           556,696       565,652    
Other accounts payable
           745,094       754,582  
Inventories
           762,797       884,421    
Other provisions
   13       8,895       14,542  
Prepaid expenses
           25,686       42,689    
Total current liabilities
           2,416,324       3,193,449  
Non-current assets classified as held for sale
           21,474       19,445                            
Total current assets
           3,903,533       4,445,471    
Non-current liabilities
                      
                         
Borrowings
   12       309,703       361,944  
Non-current assets
                        
Long-term trade accounts payable
           2,157       5,049  
Long-term trade accounts receivable
           591,917       603,902    
Other long-term accounts payable
           205,396       193,076  
Long-term outstanding work in progress
           -       7,070    
Other provisions
   13       43,418       34,111  
Other long-term accounts receivable
           38,151       43,040    
Derivative financial instruments
           3,911       2,910  
Available-for-sale financial assets
   8       88,333       88,333    
Deferred income tax liability
           138,554       95,683  
Investments in associates and joint ventures
   10       87,967       152,088    
Total non-current liabilities
           703,139       692,773  
Investment property
           36,945       36,661    
Total liabilities
           3,119,463       3,886,222  
Property, machinery and equipment
   11       952,906       1,072,334                            
Intangible assets
   11       480,885       545,759    
Equity
   14                  
Deferred income tax asset
           135,521       152,492    
Capital
           660,054       660,054  
Total non-current assets
           2,412,625       2,701,679    
Legal reserve
           111,657       132,011  
                         
Premium for share issuance
           1,027,533       976,110  
                         
Other comprehensive income
           18,423       (6,775 )
                         
Retained earnings
           947,766       1,049,112  
                         
Equity attributable to controlling interest in the Company
       2,765,433       2,810,512  
                         
Non-controlling interest
           431,262       450,416  
                         
Total equity
           3,196,695       3,260,928  
            6,316,158       7,147,150                 6,316,158       7,147,150  
                                                 
                                                 
The accompanying notes on pages 7 to 23 are an integral part of the consolidated financial statements.
  
 
 
- 2 -
 
 
(All amounts are expressed in thousands of S/. unless otherwise stated)
  
UNAUDITED  
                   
GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES
  
                   
                   
CONDENSED INTERIM CONSOLIDATED STATEMENT OF INCOME
  
                   
                   
         
For the nine-month period
  
         
ended September 30,
  
   
Note
    
2013
    
2014
  
                   
                   
Revenues from construction activities
           2,752,996       3,403,546  
Revenues from services provided
           1,202,849       1,271,878  
Revenue from real estate and sale of goods
           289,848       223,592  
            4,245,693       4,899,016  
                       
Cost of construction activities
           (2,431,744 )     (3,034,568 )
Cost of services provided
           (924,606 )     (1,034,910 )
Cost of real estate and goods sold
           (186,018 )     (144,061 )
    15       (3,542,368 )     (4,213,539 )
Gross profit
           703,325       685,477  
                       
Administrative expenses
   15       (264,130 )     (307,515 )
Other income and expenses
           20,665       12,075  
Other gains, net
           138       491  
Operating profit
           459,998       390,528  
                       
Financial expenses
           (399,255 )     (339,300 )
Financial income
           300,416       295,804  
Dividends received
           -       6,924  
Share of the profit or loss in associates and joint
                      
ventures under the equity method of accounting
           32,603       33,308  
Profit before income tax
           393,762       387,264  
Income tax
   16       (128,183 )     (105,047 )
Profit for the period
           265,579       282,217  
                       
Profit attributable to:
                      
Owners of the Company
           203,935       235,294  
Non-controlling interest
           61,644       46,923  
            265,579       282,217  
                       
Earnings per share from continuing operations
                      
attributable to owners of the Company during
                      
the nine-month period ended
           0.351       0.356  
                       
Weighted average number of shares in issue
                      
at S/.1.00 each, at September 30,
           660,054       660,054  
                       
                       
The accompanying notes on pages 7 to 23 are an integral part of the consolidated financial statements.
  
 
 
- 3 -
 
 
(All amounts are expressed in thousands of S/. unless otherwise stated)
UNAUDITED            
             
             
GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES
            
             
             
CONDENSED INTERIM CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
  
             
             
   
For the nine-month period
  
   
ended September 30,
  
   
2013
    
2014
  
             
             
Profit for the period
     265,579       282,217  
Other comprehensive income:
                
Items that will not be reclassified to profit or loss
                
Adjustment for actuarial gains and losses, net of tax
     (4,842 )     (1,931 )
                 
Items that may be subsequently reclassified to profit or loss
          
Cash flow hedge, net of tax
     3,412       485  
Foreign currency translation adjustment, net of tax
     6,359       (32,812 )
      9,771       (32,327 )
Other comprenhensive income for the period, net of tax
     4,929       (34,258 )
Total comprehensive income for the period
     270,508       247,959  
                 
Comprehensive income attributable to:
                
Controlling interest in the Company
     207,304       208,629  
Non-controlling interest
     63,204       39,330  
      270,508       247,959  
                 
                 
                 
The accompanying notes on pages 7 to 23 are an integral part of the consolidated financial statements.
  
 
 
- 4 -
 
 
(All amounts are expressed in thousands of S/. unless otherwise stated)
  
UNAUDITED  
                                                       
GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES
  
                                                       
                                                       
CONDENSED INTERIM CONSOLIDATED STATEMENT OF CHANGES IN NET SHAREHOLDERS' EQUITY
  
FOR THE PERIODO ENDED SEPTEMBER 30, 2013 AND SEPTEMBER 30, 2014
  
                                                       
                                                       
         
Attributable to the controlling interests of the Company
              
   
Number
                
Premium
    
Other
                          
   
of shares
          
Legal
    
for issuance
    
comprehensive
    
Retained
          
Non-controlling
  
   
In thousands
    
Capital
    
reserve
    
of shares
    
income
    
earnings
    
Total
    
interest
    
Total
  
                                                       
                                                       
Balances as of January 1, 2013
     558,284       558,284       107,011       6,656       (3,716 )     723,972       1,392,207       391,035       1,783,242  
Profit for the period
     -       -       -       -       -       203,935       203,935       61,644       265,579  
Cash flow hedge
     -       -       -       -       3,241       -       3,241       171       3,412  
Adjustment for actuarial gains and losses
     -       -       -       -       -       (3,632 )     (3,632 )     (1,210 )     (4,842 )
Foreign currency translation adjustment
     -       -       -       -       3,760       -       3,760       2,599       6,359  
Comprehensive income of the period
     -       -       -       -       7,001       200,303       207,304       63,204       270,508  
Transactions with shareholders:
                                                                        
- Transfer to legal reserve
     -       -       4,646       -       -       (4,646 )     -       -       -  
- Dividend distribution
     -       -       -       -       -       (86,986 )     (86,986 )     (27,054 )     (114,040 )
- Issuance of shares
     101,770       101,770       -       1,060,865       -       -       1,162,635       -       1,162,635  
- Contributions of non-controlling shareholders
     -       -       -       -       -       -       -       15,550       15,550  
- Additional acquisition of non-controlling
     -       -       -       (2,787 )     -       (1,215 )     (4,002 )     (8,754 )     (12,756 )
- Deconsolidation of subsidiaries
     -       -       -       -       -       -       -       (6,842 )     (6,842 )
- Purchase of subsidiaries
     -       -       -       -       -       -       -       15,985       15,985  
Total transactions with shareholders
     101,770       101,770       4,646       1,058,078       -       (92,847 )     1,071,647       (11,115 )     1,060,532  
Balances as of September 30, 2013
     660,054       660,054       111,657       1,064,734       3,285       831,428       2,671,158       443,124       3,114,282  
                                                                         
                                                                         
Balances as of January 1, 2014
     660,054       660,054       111,657       1,027,533       18,423       947,766       2,765,433       431,262       3,196,695  
Profit for the period
     -       -       -       -       -       235,294       235,294       46,923       282,217  
Cash flow hedge
     -       -       -       -       461       -       461       24       485  
Adjustment for actuarial gains and losses
     -       -       -       -       -       (1,467 )     (1,467 )     (464 )     (1,931 )
Foreign currency translation adjustment
     -       -       -       -       (25,659 )     -       (25,659 )     (7,153 )     (32,812 )
Comprehensive income of the period
     -       -       -       -       (25,198 )     233,827       208,629       39,330       247,959  
Transactions with shareholders:
                                                                        
- Transfer to legal reserve
     -       -       20,354       -       -       (20,354 )     -       -       -  
- Dividend distribution
     -       -       -       -       -       (112,127 )     (112,127 )     (50,705 )     (162,832 )
- Contributions of non-controlling shareholders
     -       -       -       -       -       -       -       49,979       49,979  
- Additional acquisition of non-controlling
     -       -       -       (51,423 )     -       -       (51,423 )     (15,209 )     (66,632 )
- Returns additional capital from non-controlling interests
     -       -       -       -       -       -       -       (4,241 )     (4,241 )
Total transactions with shareholders
     -       -       20,354       (51,423 )     -       (132,481 )     (163,550 )     (20,176 )     (183,726 )
Balances as of September 30, 2014
     660,054       660,054       132,011       976,110       (6,775 )     1,049,112       2,810,512       450,416       3,260,928  
                                                                         
                                                                         
                                                                         
The accompanying notes on pages 7 to 23 are an integral part of the consolidated financial statements.
                                  
 
 
- 5 -
 
 
(All amounts are expressed in thousands of S/. unless otherwise stated)
  
UNAUDITED  
                   
GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES
  
                   
                   
CONDENSED INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS
  
                   
                   
         
For the nine-month period
  
         
ended September 30,
  
   
Note
    
2013
    
2014
  
                   
OPERATING ACTIVITIES
                  
Profit before income tax
           393,762       387,264  
Adjustments to  profit not affecting cash flows from
                      
operating activities:
                      
Depreciation
   15       141,498       135,735  
Amortization of other assets
   15       58,094       60,891  
Impairment of inventory
           1,516          
Other provisions
           516       8,655  
Share of the profit and loss in associates
                      
under the equity method of accounting
           (32,604 )     (33,308 )
Reversal of provisions
           (6,932 )     (7,748 )
Profit on sale of property, plant and equipment
           (496 )     (5,693 )
Foreign exchange gains on investing activities
           -       (23,685 )
Foreign exchange gains on operating activities
           6,031       (11,370 )
Net variations in assets and liabilities:
                      
Decrease trade accounts receivable
           (484,438 )     (450,356 )
Decrease in other accounts receivable
           (265,384 )     (14,932 )
Decrease in other accounts receivable from related parties
           (16,059 )     (21,659 )
Decrease in inventories
           (44,174 )     (121,134 )
Decrease in pre-paid expenses and other assets
           (1,048 )     (15,897 )
Decrease (increase) in trade accounts payable
           12,114       82,122  
Increase in other accounts payable
           (125,022 )     12,319  
Increase in other accounts payable to related parties
           8,920       18,826  
Decrease in other provisions
           (1,068 )     (5,607 )
Payments for intangible purchase - Concessions
           (1,721 )     (41,873 )
Payment of income tax
           (176,533 )     (185,242 )
Net cash applied to operating activities
           (533,028 )     (232,692 )
                       
INVESTING ACTIVITIES
                      
Sale of property, machinery and equipment
           15,773       34,226  
Dividends received
           4,420       18,822  
Payment for Investment in associates
           -       (54,868 )
Payment for purchase of property investments
           (2,398 )     (1,326 )
Payments for intangible purchase
           (17,747 )     (54,085 )
Direct cash inflow (outflow) from acquisition of subsidiaries
           (88,343 )     (6,594 )
Payments for fixed asset purchase
           (152,123 )     (188,254 )
Net cash applied to investing activities
           (240,418 )     (252,079 )
                       
FINANCING ACTIVITIES
                      
Loans received
           1,202,848       1,522,923  
Amortization of loans received
           (1,121,396 )     (900,377 )
Interest payment
           (54,627 )     (27,205 )
Dividends paid to owners of the parent
           (86,986 )     (112,127 )
Dividends paid to non-controlling interest
           (27,054 )     (50,706 )
Cash received (contribution return) to non-controlling shareholders
       15,550       43,454  
Acquisition or sale of interest in a subsidiary of non-controlling shareholders
       (12,756 )     (66,632 )
Capital contribution
           1,148,424       -  
Net cash provided by financing activities
           1,064,003       409,330  
Net decrease in cash
           290,557       (75,441 )
Cash decrease in deconsolidation
           (5,816 )     1,915  
Exchange gains on cash and cash equivalents
           (6,031 )     11,370  
Cash and cash equivalents at the beginning of the year
           780,114       959,415  
Cash and cash equivalents at the end of the period
           1,058,824       897,259  
                       
NON-CASH TRANSACTIONS:
                      
Acquisition of assets through finance leases
           36,490       141,836  
Adjustment for deconsolidation LQS SA and SEC
           17,183       -  
                       
                       
The accompanying notes on pages 7 to 23 are an integral part of the consolidated financial statements.
  
 
 
- 6 -
 
 
 
(All amounts are expressed in thousands of S/. unless otherwise stated)
UNAUDITED
 
GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES
 
 
 
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
 
AT SEPTEMBER 30, 2013 AND 2014 (UNAUDITED), AND AT DECEMBER 31, 2013 (AUDITED)


1
GENERAL INFORMATION

 
The Company is the parent company of the Graña y Montero Group (hereinafter the Group) and its principal activity is the holding of investments in the different companies of the Group. Additionally, the Company provides services of general management, financial management, commercial management, legal advisory and human resources management to Group companies; it is also engaged in the leasing of offices to Group companies and third parties.

 
The Group is a conglomerate of companies with operations including different business activities, of which the most significant are engineering and construction, infrastructure (public concession operation), real estate businesses and technology services.

 
These condensed interim consolidated financial statements as of September 30, 2014 have been prepared and authorized for issuance by the Chief Financial Officer on on October 30, 2014.

2
BASIS OF PREPARATION

 
These condensed interim consolidated financial statements for the nine-month period ended September 30, 2014 have been prepared in accordance with (IAS 34) “Interim financial reporting”.  The condensed interim consolidated financial statements should be read in conjunction with the annual consolidated financial statements for the year ended December 31, 2013, which have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).

3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 
The accounting policies used in the preparation of these interim condensed consolidated financial statements are consistent with those applied in the preparation of the year-end financial statements at December 31, 2013

4
FINANCIAL RISK MANAGEMENT

 
4.1 
Financial risk factors

 
The Group’s activities expose it to a variety of financial risks: market risk (including currency risk, price risk, fair value interest rate risk and cash flow interest rate risk), credit risk and liquidity risk.

 
The condensed interim consolidated financial statements do not include all financial risk management information and disclosures required in the annual financial statements; these should be read in conjunction with the Group’s annual financial statements as of December 31, 2013.  There have been no changes since year-end in the risk management department of the Group or in any risk management policies.
 
 
- 7 -
 
 
 
(All amounts are expressed in thousands of S/. unless otherwise stated)
UNAUDITED
 
 
4.1.1     Market risk –

 
Compared to year end, no new material market risk hedging arrangements have occurred.

 
4.1.2     Credit risk –

 
Compared to year end, the Group has no exposure to any new relevant credit risk.

 
4.1.3     Liquidity risk -

 
Compared to year end, no major changes in undiscounted contractual cash flows have occurred, except for changes in the structure of the Group’s liabilities, resulting from an increase in the short-term debt, mainly for working capital.

 
The following table categorizes the Group’s financial liabilities into relevant maturity groupings based on the remaining period from the date of the statement of financial position to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows:
 
   
Less than 1
    
From 1 to 2
    
From 2 to 5
    
Over
        
   
year
    
years
    
years
    
5 years
    
Total
  
                               
As of December 31, 2013
                              
Borrowing (except for
                              
finance leases)
     371,302       118,347       64,698       -       554,347  
Finance leases liabilities
     115,698       82,492       87,829       22,912       308,931  
Trade accounts payable
     991,397       2,157       -       -       993,554  
Accounts payable to related parties
     25,585       -       -       -       25,585  
Other accounts payable
     215,413       28,745       5,197       2,354       251,709  
Trading and net settled derivative
                                        
financial instruments
                                        
(interest rate swaps)
     1,773       2,138       -       -       3,911  
      1,721,168       233,879       157,724       25,266       2,138,037  
                                         
As of September 30, 2014
                                        
Borrowing (except for
                                        
finance leases)
     1,076,847       118,928       44,437       -       1,240,212  
Finance leases liabilities
     133,989       84,593       137,054       14,514       370,150  
Trade accounts payable
     1,074,677       5,049       -       -       1,079,726  
Accounts payable to related parties
     45,310       -       -       -       45,310  
Other accounts payable
     479,293       50,085       10,697       3,819       544,371  
Trading and net settled derivative
                                        
financial instruments
                                        
(interest rate swaps)
     772       2,138               -       2,910  
      2,810,888       260,793       192,188       18,810       3,282,679  
 
 
4.2        Capital management -

 
The Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings (including current and non-current borrowings), less cash and cash equivalents. Total capital is calculated as total ‘equity’ as shown in the consolidated statement of financial position plus net debt.
 
 
- 8 -
 
 
 
(All amounts are expressed in thousands of S/. unless otherwise stated)
UNAUDITED
 
 
As of December 31, 2013, no gearing ratio was part of the analysis because cash surpluses were higher than financial obligations and equity had not been used to secure compliance with financial obligations as it is shown in the table below. As of September 30, 2014, due to the fact that the Company has acquired significant borrowings, the Company’s strategy was to maintain a gearing ratio between 0.03 and 1.00.
 
   
December 31,
    
September 30,
  
   
2013
    
2014
  
             
Total borrowing
     795,822       1,533,033  
Less: Cash and cash equivalents
     (959,415 )     (897,259 )
Net debt
     (163,593 )     635,774  
Total equity
     3,196,695       3,260,928  
Total capital
     3,033,102       3,896,702  
                 
Gearing ratio
     0.00       0.16  
 
 
4.3        Fair value estimation -

 
For the classification of the type of valuation used by the Group for its financial instruments at fair value, the following levels of measurement have been established:

 
-
Level 1: Measurement based on quoted prices in active markets for identical assets or liabilities.
 
-
Level 2: Measurement based on inputs other than quoted prices included within Level 1 that are observable for the asset or liability (level 1), either directly (that is, as prices) or indirectly (that is, derived from prices).
 
-
Level 3: Measurement based on inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs, generally based on internal estimates and assumptions of the Group).

 
The only financial instruments measured at fair value by the Group are interest rate swaps (variable to fixed), forward foreign exchange contracts (mostly euros and U.S. dollars) and available-for-sale investments. The measurement at fair value of these instruments corresponds to the characteristics of Level 2 and has been determined based on the present value of discounted future cash flows.  During the nine-month period ended September 30, 2014 there were no changes in the levels of measurement of financial instruments at fair value.

 
The carrying amount of cash and cash equivalents corresponds to its fair value. The Group considers that the carrying amount of short-term accounts receivable and payable approximates fair value. The fair value of financial liabilities has been estimated by discounting the future contractual cash flows at the interest rate currently prevailing in the market and which is available to the Group for similar financial instruments.

 
Fair value hierarchy -

 
The following table presents the Group’s financial assets and liabilities that are measured at fair value as of September 30, 2014.
 
   
Level 1
    
Level 2
    
Level 3
    
Total
  
                         
Liabilities:
                        
Derivative financial instruments - Cash
                        
flow hedging
     -       2,910       -       2,910  
Total liabilities
     -       2,910       -       2,910  
 
 
There were no transfers between Levels 1, 2 and 3 during the period.
 
 
- 9 -
 
 
 
(All amounts are expressed in thousands of S/. unless otherwise stated)
UNAUDITED
 
5
CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS

 
Preparation of the condensed interim consolidated financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

 
In preparing these condensed interim consolidated financial statements, the significant judgements made by management in applying the Group’s accounting policies and the key sources of uncertainty were the same as those that applied to the consolidated financial statements for the year ended  December 31, 2013.

6
SEASONALITY OF OPERATIONS

 
The Group shows no material seasonality in the operations of any of its subsidiaries; operations are carried out regularly during the course of the period.

7
SEGMENT REPORTING

 
Operating segments are reported consistent with the internal reports that are reviewed by the Corporate General Manager, who is the chief operating decision maker, responsible for allocating resources and evaluating the performance of each operating segment.

 
The Group's operating segments are assessed by the activity of the following business units: (i) engineering and construction, (ii) infrastructure, (iii) real estate, (iv) technical services and (v) the operation of the Parent Company (Holding).

 
As set forth under IFRS 8, reportable segments by significance of income are: ‘engineering and construction’ and ‘technical services’. However, the Group has voluntarily decided to report on all its operating segments as detailed in this Note.

 
Inter-segmental sales transactions are entered into at prices that are similar to those that would have been agreed to with unrelated third parties. Revenues from external customers reported to the Corporate General Manager are measured in a manner consistent with the basis of preparation of the financial statements.

 
Group sales and receivables are not concentrated on a few customers.
 
 
- 10 -
 
 
 
(All amounts are expressed in thousands of S/. unless otherwise stated)
UNAUDITED
 
Operating segments financial position
  
                                                             
Segment reporting
  
                                                             
   
Engineering
    
Infrastructure
                
Parent
              
   
and
construction
    
Energy
    
Toll roads
    
Mass transit
    
Water
treatment
    
Real estate
    
Technical
services
    
Company
Operations
    
Eliminations
    
Consolidated
  
As of December 31, 2013
                                                            
Assets.-
                                                            
Cash and cash equivalents
     265,788       17,764       80,785       23,318       445       43,026       46,469       481,820       -       959,415  
Trade Accounts receivable
     265,544       29,527       12,347       4,090       -       17,938       192,382       44       -       521,872  
Outstanding work in progress
     734,976       6,966       2,433       31,187       37,489       -       158,692       -       -       971,743  
Accounts receivable from related parties
     107,732       4,083       18,660       163       -       561       53,845       733,645       (834,839 )     83,850  
Other accounts receivable
     364,414       26,840       11,180       34,263       4,557       17,939       65,794       33,469       (1,760 )     556,696  
Inventories
     90,671       7,741       -       11,927       -       590,567       63,912       487       (2,508 )     762,797  
Prepaid expenses
     7,440       1,318       5,442       4,394       3       2,596       4,130       363       -       25,686  
Non-current assets classified as held for sale
     21,474       -       -       -       -       -       -       -       -       21,474  
Total Current assets
     1,858,039       94,239       130,847       109,342       42,494       672,627       585,224       1,249,828       (839,107 )     3,903,533  
                                                                                 
Long-term trade accounts receivable
     -       -       -       591,917       -       -       -       -       -       591,917  
Long-term trade accounts receivable
from related parties
     -       -       -       -       -       -       -       57,501       (57,501 )     -  
Other long-term accounts receivable
     -       -       10,081       -       1,858       11,811       12,301       2,100       -       38,151  
Available-for-sale financial asset
     -       1,058       -       -       -       -       2       88,333       (1,060 )     88,333  
Investments in associates and joint ventures
     153,556       7,287       -       -       -       16,297       10,454       837,889       (937,516 )     87,967  
Investment property
     -       -       -       -       -       36,945       -       -       -       36,945  
Property, plant and equipment
     534,067       190,844       3,919       6,724       -       5,636       114,081       103,840       (6,205 )     952,906  
Intangible assets
     174,771       101,978       145,711       6,450       1,151       957       18,883       15,282       15,702       480,885  
Deferred income tax asset
     68,699       644       4,258       8,765       -       4,860       42,119       1,264       4,912       135,521  
Total non-current assets
     931,093       301,811       163,969       613,856       3,009       76,506       197,840       1,106,209       (981,668 )     2,412,625  
Total assets
     2,789,132       396,050       294,816       723,198       45,503       749,133       783,064       2,356,037       (1,820,775 )     6,316,158  
                                                                                 
                                                                                 
Liabilities.-
                                                                                
Borrowings
     195,083       33,847       46,007       -       5,869       77,854       126,872       587       -       486,119  
Trade accounts payable
     751,097       19,950       3,353       9,912       280       42,484       160,104       4,217       -       991,397  
Accounts payable to related parties
     43,373       877       25,572       642,510       24,058       21,493       77,613       24,928       (834,839 )     25,585  
Current taxes
     117,087       3,477       2,515       81       366       3,161       30,498       2,049       -       159,234  
Other accounts payable
     526,994       10,882       42,891       879       -       72,617       79,050       11,781       -       745,094  
Other provisions
     -       4,207       3,846       -       -       -       842       -       -       8,895  
Total current liabilities
     1,633,634       73,240       124,184       653,382       30,573       217,609       474,979       43,562       (834,839 )     2,416,324  
                                                                                 
Borrowings
     127,067       86,334       9,780       -       -       52,318       31,367       2,837       -       309,703  
Long-term trade accounts payable
     -       -       -       2,157       -       -       -       -       -       2,157  
Accounts payables to related parties
     -       -       -       -       -       28,500       29,001       -       (57,501 )     -  
Other long-term accounts payable
     124,344       -       462       -       -       9,723       69,957       910       -       205,396  
Other provisions
     14,832       4,668       -       -       -       -       23,918       -       -       43,418  
Derivative financial instruments
     -       3,563       -       201       -       147       -       -       -       3,911  
Deferred income tax liability
     119,367       453       166       -       340       7,074       5,864       3,599       1,691       138,554  
Total non-current liabilities
     385,610       95,018       10,408       2,358       340       97,762       160,107       7,346       (55,810 )     703,139  
Total liabilities
     2,019,244       168,258       134,592       655,740       30,913       315,371       635,086       50,908       (890,649 )     3,119,463  
Equity
     622,900       211,431       120,407       50,594       14,590       152,713       125,736       2,295,245       (828,183 )     2,765,433  
Non-controlling interest
     146,988       16,361       39,817       16,864       -       281,049       22,242       9,884       (101,943 )     431,262  
Total liabilities and equity
     2,789,132       396,050       294,816       723,198       45,503       749,133       783,064       2,356,037       (1,820,775 )     6,316,158  
 
 
- 11 -
 
 
 
(All amounts are expressed in thousands of S/. unless otherwise stated)
UNAUDITED
 
Operating segments financial position
  
                                                             
Segment reporting
  
                                                             
   
Engineering
    
Infrastructure
                
Parent
              
   
and
construction
    
Energy
    
Toll roads
    
Mass transit
    
Water
treatment
    
Real estate
    
Technical
services
    
Company
Operations
    
Eliminations
    
Consolidated
  
As of September 30, 2014
                                                            
Assets.-
  
 
                                                        
Cash and cash equivalents
     188,280       31,512       65,749       51,682       6,806       51,829       36,073       465,328       -       897,259  
Trade Accounts receivable
     384,173       54,932       42,566       57,848       -       30,501       116,174       -       -       686,194  
Outstanding work in progress
     1,036,610       3,751       -       -       22,694       -       181,168       -       -       1,244,223  
Accounts receivable from related parties
     119,327       8,970       327       168       -       3,710       55,605       554,093       (636,612 )     105,588  
Other accounts receivable
     335,894       25,118       10,948       35,381       3,393       12,438       74,384       67,037       1,059       565,652  
Inventories
     140,357       7,684       -       12,230       -       656,543       69,018       486       (1,897 )     884,421  
Prepaid expenses
     9,144       1,716       4,338       15,773       428       1,901       7,714       1,675       -       42,689  
Non-current assets classified as held for sale
     19,445       -       -       -       -       -       -       -       -       19,445  
Total Current assets
     2,233,230       133,683       123,928       173,082       33,321       756,922       540,136       1,088,619       (637,450 )     4,445,471  
                                                                                 
Long-term trade accounts receivable
     -       13,079       -       590,823       -       -       -       -       -       603,902  
Long-term outstanding work in progress
     -       -       7,070       -       -       -       -       -       -       7,070  
Long-term trade accounts receivable from
related parties
     -       -       -       -       -       -       -       143,727       (143,727 )     -  
Other long-term accounts receivable
     -       -       11,842       2,548       1,587       12,487       12,398       2,178       -       43,040  
Available-for-sale financial asset
     -       1,058       -       -       -       -       2       88,333       (1,060 )     88,333  
Investments in associates and joint ventures
     159,331       7,188       -       -       -       60,071       10,302       934,721       (1,019,525 )     152,088  
Investment property
     -       -       -       -       -       36,661       -       -       -       36,661  
Property, plant and equipment
     571,425       209,343       2,098       12,683       -       6,307       165,562       111,581       (6,665 )     1,072,334  
Intangible assets
     153,383       121,079       196,265       6,280       1,113       1,161       35,033       16,531       14,914       545,759  
Deferred income tax asset
     87,336       1,340       2,639       1,962       -       624       53,929       1,397       3,265       152,492  
Total non-current assets
     971,475       353,087       219,914       614,296       2,700       117,311       277,226       1,298,468       (1,152,798 )     2,701,679  
Total assets
     3,204,705       486,770       343,842       787,378       36,021       874,233       817,362       2,387,087       (1,790,248 )     7,147,150  
                                                                                 
Liabilities.-
                                                                                
Borrowings
     442,220       23,959       78,979       404,546       -       103,063       117,718       604       -       1,171,089  
Trade accounts payable
     826,438       32,918       661       14,855       65       42,958       150,594       6,188       -       1,074,677  
Accounts payable to related parties
     197,224       22,054       36,396       283,856       19,582       23,351       95,070       4,389       (636,612 )     45,310  
Current taxes
     102,876       8,746       47       108       222       1,359       18,389       1,502       -       133,249  
Other accounts payable
     501,558       17,276       41,844       955       124       79,590       97,134       16,101       -       754,582  
Other provisions
     -       7,098       578       -       -       -       6,866       -       -       14,542  
Total current liabilities
     2,070,316       112,051       158,505       704,320       19,993       250,321       485,771       28,784       (636,612 )     3,193,449  
                                                                                 
Borrowings
     137,377       99,580       3,888       -       -       45,921       72,784       2,394       -       361,944  
Long-term trade accounts payable
     -       -       2,892       2,157       -       -       -       -       -       5,049  
Accounts payables to related parties
     -       -       -       -       -       109,126       34,261       -       (143,387 )     -  
Other long-term accounts payable
     121,095       -       477       4,047       -       7,196       59,427       834       -       193,076  
Other provisions
     9,695       5,927       -       -       -       -       18,489       -       -       34,111  
Derivative financial instruments
     -       2,910       -       -       -       -       -       -       -       2,910  
Deferred income tax liability
     68,847       588       5       -       304       5,465       6,990       13,484       -       95,683  
Total non-current liabilities
     337,014       109,005       7,262       6,204       304       167,708       191,951       16,712       (143,387 )     692,773  
Total liabilities
     2,407,330       221,056       165,767       710,524       20,297       418,029       677,722       45,496       (779,999 )     3,886,222  
Equity
     656,910       247,100       137,766       57,641       15,724       152,687       114,072       2,331,882       (903,270 )     2,810,512  
Non-controlling interest
     140,465       18,614       40,309       19,213       -       303,517       25,568       9,709       (106,979 )     450,416  
Total liabilities and equity
     3,204,705       486,770       343,842       787,378       36,021       874,233       817,362       2,387,087       (1,790,248 )     7,147,150  
 
 
- 12 -
 
 
 
(All amounts are expressed in thousands of S/. unless otherwise stated)
UNAUDITED
 
Operating segment performance
  
                                                             
Segment Reporting
  
                                                             
   
Engineering
    
Infrastructure
          
Parent
  
   
and
construction
    
Energy
    
Toll roads
    
Mass
transit
    
Water
treatment
    
Real
estate
    
Technical
services
    
Company
operations
    
Eliminations
    
Consolidated
  
For the nine-month period
  
ended Sep 30, 2013
        
                                                             
Revenue
     2,930,313       198,867       128,031       78,830       42,366       230,199       811,448       38,769       (213,130 )     4,245,693  
Gross profit
     378,975       67,679       46,722       10,397       2,943       85,592       141,409       (3,988 )     (26,404 )     703,325  
Administrative expenses
     (154,986 )     (12,191 )     (4,642 )     (5,776 )     (291 )     (15,683 )     (104,388 )     (5,908 )     39,735       (264,130 )
Other income and expenses
     8,188       (427 )     208       (100 )     (3 )     (610 )     15,411       (1,175 )     (827 )     20,665  
Other gains (losses) , net
     -       244       -       -       -       (106 )     -       -       -       138  
Profit before interests
          
and taxes
     232,177       55,305       42,288       4,521       2,649       69,193       52,432       (11,071 )     12,504       459,998  
Financial expenses
     (177,691 )     (21,775 )     (17,399 )     (54,698 )     (61 )     (13,620 )     (31,633 )     (85,173 )     2,795       (399,255 )
Financial income
     159,692       10,547       14,402       30,707       33       1,430       17,753       85,062       (19,210 )     300,416  
Dividends received
     -       -       -       -       -       -       -       79,528       (79,528 )     -  
Share of the profit or loss
  
in associates under the equity
  
method of accounting
     39,281       627       -       -       -       71       636       685       (8,697 )     32,603  
Profit before income tax
     253,459       44,704       39,291       (19,470 )     2,621       57,074       39,188       69,031       (92,136 )     393,762  
Income tax
     (81,125 )     (13,589 )     (11,170 )     5,749       (788 )     (15,413 )     (11,602 )     (1,194 )     949       (128,183 )
Net profit for the period
     172,334       31,115       28,121       (13,721 )     1,833       41,661       27,586       67,837       (91,187 )     265,579  
                                                                                 
Profit attributable to:
                  
                                                                                 
Controlling interest in the Group
     142,954       28,699       17,788       (10,291 )     916       14,211       23,997       67,997       (82,336 )     203,935  
Non-controlling interest
     29,380       2,416       10,333       (3,430 )     917       27,450       3,589       (160 )     (8,851 )     61,644  
Net profit for the period
     172,334       31,115       28,121       (13,721 )     1,833       41,661       27,586       67,837       (91,187 )     265,579  
 
 
- 13 -
 
 
 
(All amounts are expressed in thousands of S/. unless otherwise stated)
UNAUDITED
 
Operating segment performance
  
                                                             
Segment Reporting
  
                                                             
   
Engineering
    
Infrastructure
          
Parent
  
   
and
construction
    
Energy
    
Toll roads
    
Mass
transit
    
Water
treatment
    
Real
estate
    
Technical
services
    
Company
operations
    
Eliminations
    
Consolidated
  
For the nine-month period
  
ended Sep 30, 2014
              
                                                             
Revenue
     3,552,475       255,007       206,868       115,806       24,156       138,323       841,286       39,971       (274,876 )     4,899,016  
Gross profit
     401,210       96,259       52,108       27,387       1,917       37,547       96,683       (6,697 )     (20,937 )     685,477  
Administrative expenses
     (192,597 )     (11,625 )     (6,605 )     (7,955 )     (260 )     (15,154 )     (92,909 )     (23,120 )     42,710       (307,515 )
Other income and expenses
     521       (2,913 )     63       23       -       (428 )     7,940       7,691       (822 )     12,075  
Other gains (losses) , net
     -       374       31       -       -       (6 )     92       -       -       491  
Profit before interests
                  
and taxes
     209,134       82,095       45,597       19,455       1,657       21,959       11,806       (22,126 )     20,951       390,528  
Financial expenses
     (177,314 )     (18,716 )     (15,531 )     (37,629 )     (44 )     (19,556 )     (28,295 )     (52,621 )     10,406       (339,300 )
Financial income
     152,578       11,924       7,021       34,373       13       11,896       10,374       95,743       (28,118 )     295,804  
Dividends received
     -       -       -       -       -       -       -       137,549       (130,625 )     6,924  
Share of the profit or loss
          
in associates under the equity
  
method of accounting
     32,639       (100 )     -       -       -       4,811       873       -       (4,915 )     33,308  
Profit before income tax
     217,037       75,203       37,087       16,199       1,626       19,110       (5,242 )     158,545       (132,301 )     387,264  
Income tax
     (45,340 )     (23,717 )     (10,416 )     (6,803 )     (491 )     (5,669 )     (2,883 )     (10,009 )     281       (105,047 )
Net profit for the period
     171,697       51,486       26,671       9,396       1,135       13,441       (8,125 )     148,536       (132,020 )     282,217  
                                                                                 
Profit attributable to:
                          
                                                                                 
Controlling interest in the Group
     138,762       48,555       19,907       7,047       1,135       4,938       (5,795 )     148,712       (127,967 )     235,294  
Non-controlling interest
     32,935       2,931       6,764       2,349       -       8,503       (2,330 )     (176 )     (4,053 )     46,923  
Net profit for the period
     171,697       51,486       26,671       9,396       1,135       13,441       (8,125 )     148,536       (132,020 )     282,217  
 
 
- 14 -
 
 
 
(All amounts are expressed in thousands of S/. unless otherwise stated)
UNAUDITED
 
 
No major changes occurred in total assets as compared to the amount stated in the year-end financial statements.

 
There are no differences as compared to the year-end financial statements based on segmentation or measurement of financial performance by segment.

8
FINANCIAL ASSETS AVAILABLE FOR SALE

 
This account comprises the investment maintained by the Company directly and indirectly in Transportadora de Gas del Perú S.A. (TGP), a local entity that operates gas transportation systems.  At December 31, 2012 the investment corresponded to shares representing the 0.6% of interest in the TGP’s capital.

 
In December 2013, the Group acquired from one of the TGP’s shareholders, Pluspetrol Resources Corporation (hereinafter Pluspetrol), an additional 1.04% interest in TGP paying a consideration of US$20 million (equivalent to S/.56.1 million). At December 31, 2013, the fair value of the Group´s interest in TGP equals S/.88.3 million. The change in fair value from 2012 to 2013 of S/.19.1 million, net of the income tax of S/.8.2 million is recorded within other comprehensive income.

 
Together with the acquisition of the 1.04% interest, the Company acquired from Pluspetrol on behalf of the Canada Pension Plan Investment Board (CPPIB) an additional indirect interest of 11.34% in TGP. The investment for US$217 million was funded entirely by CPPIB. The risk and rewards of the entire investment are assumed by CPPIB.

 
Given the features of the transaction, it has been treated as an off-balance transaction because, in substance, the Company is acting as an agent for CPPIB. Therefore, the Company has not recognized neither the investment in TGP nor any obligation to CPPIB.

 
On February 27, 2014 the Company transferred 10.43% to CPPIB and 0.91% to CFI, retaining the 1.04% interest.

9
TRANSACTIONS WITH RELATED PARTIES

 
a)      Transactions with related parties-

 
Major transactions between the Company and its related parties are summarized as follows:
 
   
From the nine-month
  
   
period ended September30,
  
   
2013
    
2014
  
             
Revenue from sale of goods and services:                       
            
- Associates
     1,983       8,272  
- Joint operations
     44,101       31,701  
      46,084       39,973  
 
 
Inter-company services were agreed upon under market terms as if they had been agreed to with third parties.
 
 
- 15 -
 
 
 
(All amounts are expressed in thousands of S/. unless otherwise stated)
UNAUDITED
 
 
b) 
Balances of transactions with related parties

   
At December 31,
    
At September 30,
  
    2013           2014        
    Receivable     Payable     Receivable    
Payable
  
Consorcio Peruano de Conservación
     15,080       -       18,804       -  
Consorcio Rio Mantaro
     3,822       -       5,807       8,273  
Consorcio Brocal Pasco
     1,913       41       -       -  
Consorcio La Gloria
     3,696       3,398       3,715       3,385  
Consorcio GyM Conciviles
     33,405       -       52,523       -  
Consorcio Toromocho
     62       34       201       -  
Consorcio Rio Urubamba
     2,798       -       4,416       -  
Consorcio Tren Electrico
     2,499       -       2,276       -  
Consorcio Atocongo
     712       -       -       897  
Consorcio Constructor Alto Cayma
     566       4,881       1,405       -  
Consorcio Lima
     312       -       -       -  
Consorcio Rio Pallca
     3,903       -       260       203  
Consorcio Norte Pachacutec
     556       952       531       850  
Consorcio Vial Ipacal
     283       -       -       -  
Consorcio Terminales
     4,294       -       47       4,858  
Consorcio Vial Quinua
     37       1,315       158       740  
Consorcio Vial Sullana
     470       -       -       -  
Consorcio Ancon Pativilca
     -       -       -       260  
Consorcio La Chira
             51       71       -  
Consorcio Alto Cayma
     5,557       666       122       1,076  
Comerciales Sur
     206       -       294       -  
Consorcio Proyecto Chiquintirca
     134       -       134       -  
Consorcio Ingenieria y Construcción Bechtel
     -       3,924       -       -  
Consorcio Vial Sur
     737       -       -       -  
Consorcio JV PAnamá
     1,323       -       1,015       -  
Consorcio Construcciones y Montajes
     -       -       112       1,607  
Inversiones y Construcciones
     -       -       -       -  
Consorcio Sistemas SEC
     -       -       1,629       -  
Stracon Motta Engil JV
     -       -       -       -  
Consorcio Pasco
     -       -       514       -  
Consorcio Huacho Pativilca
                     664       1,657  
Consorcio HV GyM
                     427       -  
Terminales del Perú
                     8,971       711  
Consorcio Constructora Incolur-DSD Limitada
                     -       707  
Other minor
     1,485       965       1,492       1,723  
      83,850       16,227       105,588       26,947  
                                 
Other related parties:
                                
Ferrovias Argentina SA
             8,771       -       14,871  
Besco
     -       587       -       3,255  
El Condor Combustibles
     -       -       -       237  
      -       9,358       -       18,363  
      83,850       25,585       105,588       45,310  
 
 
Accounts receivable and payable are of current maturity and have no specific guarantees.

 
Accounts receivable from related parties mainly arise from sales transactions for goods and services with a maturity period of 60 days. These balances are non-interest-bearing because they have short-term maturities and do not require a provision for impairment.

 
Accounts payable to related parties mainly arise from transactions to provide services of engineering, construction, maintenance and others and have a maturity period of 60 days. Such accounts are not interest bearing because they are short-term.

10
INVESTMENTS IN ASSOCIATES AND JOINT VENTURES
 
 
As of September 30, 2014, associates in which the Group has significant influence are substantially the same as those existing as of December 31, 2013.
 
 
- 16 -
 
 
 
(All amounts are expressed in thousands of S/. unless otherwise stated)
UNAUDITED
 
 
The movement of our investments in associates for the nine-month period ended September 30, 2013 and September 30, 2014 is as follows:
 
   
At September
    
At September
  
    30, 2013     30, 2014  
                 
Beginning balance
     37,446       87,967  
Acquisition and/or contributions received
     2,609       54,868  
Share of the profit and loss in associates
                
under the equity method of accounting
     32,603       33,308  
Dividends received
     (4,420 )     (18,822 )
Adjustment LQS
     7,408       -  
Adjustment SEC
     9,775       -  
Other
     2,301       (5,232 )
Ending balances
     87,722       152,089  
 
 
On December 2013, the Company was awarded the concession for the operation of Chavimochic Irrigation Project. The project consists of the following activities: i) design and construction work of the third phase of the Chavimochic Irrigation Project, in La Libertad; ii) operation and work maintenance; and iii) water supply to the project users. Construction works will begin in 2015, concession has a 25-year period and total investment amounts to US$647 million.

 
For the operation of the concession the Company, Constructora Norberto Odebrecht S.A. and Odebrecht Partipacoes e Investimentos S.A. have formed Concesionaria Chavimochic S.A.C. in which the Company has 26.5% interest. As of March 14, 2014 the Company has issued S/.13.3 million equity.

 
Additionally, the Company acquired Panorama Plaza’s Business with a contribution of S/.28 million, it corresponds to a participation as 35%. The main active is a land located in the district of Santiago de Surco, which is developing the real estate project consisting of a commercial area and two office towers of 17 floors.

11
PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS

 
For the nine-month period ended September 30,2013 and 2014, the movement in property, plant and equipment and intangible assets accounts was as follows:
 
   
Property,
        
   
plant and
    
Intangible
  
   
equipment
    
assets
  
             
At January 1, 2013
     953,531       480,398  
Additions
     188,613       19,468  
Acquisition of subsidiary - net
     52,922       13,719  
Transfers, disposals and adjustments
     (62,666 )     42,872  
Deductions for sale of assets
     (15,277 )     -  
Depreciation, amortization and impairment charges
     (140,318 )     (58,094 )
Net cost at September 30, 2013
     976,805       498,363  
                 
At January 1, 2014
     952,906       480,885  
Additions
     330,089       95,960  
Acquisition of subsidiary - net
     567       9,069  
Transfers, disposals and adjustments
     (48,616 )     (20,782 )
Deductions for sale of assets
     (28,487 )     (46 )
Depreciation, amortization and impairment charges
     (134,125 )     (60,891 )
Net cost at September 30, 2014
     1,072,334       545,759  
 
 
Additions to property, plant and equipment comprise of acquisition of plant and equipment intended for the Group’s operations.
 
 
- 17 -
 
 
 
(All amounts are expressed in thousands of S/. unless otherwise stated)
UNAUDITED
 
 
The amounts registered in Property, plant and equipment and intangible assets were obtained through the acquisition of Coasin Instalaciones Limitada (Note 19), direct control acquired by CAM Chile S.A. and Inversiones y Construcciones Ltda.

 
Goodwill -

 
Management reviews the results of its business operations based on the type of economic activity carried out. The economic activities that have given rise to goodwill for the Group were engineering and construction, electro-mechanical works, mining services, IT services and telecommunications services.

 
Goodwill by cash-generating units is broken down as follows:
 
   
At December
    
At September
  
    31, 2013     30, 2014  
                 
Construction - Engineering
     36,812       31,752  
Construction - Mining services
     13,366       13,366  
Construction - Electromechanical
     20,737       20,737  
IT services
     4,172       4,172  
Telecommunications Services
     -       7,648  
      75,087       77,675  
 
 
Goodwill from the telecommunications services corresponds to the acquisition of the subsidiary Coasin Instalaciones Limitada, which is subsidiary of CAM Chile S.A. (Note 19).

 
As a result of the impairment testing on goodwill performed by Management on an annual basis the recoverable amount of the related cash-generating unit (CGU) is determined based on its value in use. Value in use is determined based on the future cash flows expected to be generated by the assessed CGU. As a result of these assessments no provisions for impairment were required. As of September 30, 2014 same criteria were applied as those in test impairment at December 31, 2013.

12
BORROWINGS

 
This item comprises:
 
   
Total
    
Current
    
Non-current
  
   
At
    
At
    
At
    
At
    
At
    
At
  
   
December
    
September
    
December
    
September
    
December
    
September
  
    31, 2013     30, 2014     31, 2013     30, 2014     31, 2013     30, 2014  
                                                 
                                                 
Bank loans
     514,228       1,198,271       381,005       1,050,764       133,223       147,507  
Leases
     281,594       334,762       105,114       120,325       176,480       214,437  
      795,822       1,533,033       486,119       1,171,089       309,703       361,944  
 
 
Bank loans -

 
As of December 31, 2013 and September 30, 2014, this item comprises bank loans in local and foreign currencies for working capital purposes. These obligations bear interest at fixed rates which fluctuated between 2% and 9% in 2013, and 1% and 9% in September 30,2014.

 
In April 2005, the subsidiary Norvial S.A.signed Loan Agreements with IFC and IDB to finance the construction of the first stage of the road Ancón – Huacho – Pativilca (Red Vial 5) for the amount of US$36 million (S/.123.5 millions).  The remaining of this loan (S/.42.6 millions) was prepaid at the end of 2013. On January 15, 2014 the subsidiary Norvial S.A. signed a short term bridge loan with Banco de Crédito del Perú for the amount of S/. 50 million at an interest rate of 6.32%; further in June 2014 and August 2014, it acquired two loan for S/.10 million each, with the same conditions. This loan will be canceled with the Bond Program to be issue in the local capital market that will finance the construction of the second stage of this road.
 
 
- 18 -
 
 
 
(All amounts are expressed in thousands of S/. unless otherwise stated)
UNAUDITED
 
 
In June 2014, the subsidiary GyM Ferrovías signed a short term loan with BBVA Continental by S/.200 million at an interest rate of 5.75%, which will due in December 2014. Additionally, in August 2014, signed another short term loan with Banco de Crédito del Perú-BCP by S/.200 million at an interest rate of 5.90%,  which will due in January 2015.

 
As of September 30, 2014, the Company maintained unused credit limits for S/.2,911  million, which expire within one year (S/.2,626 million as of December 31, 2013).

 
b)      Fair value of borrowings -

 
The carrying amount and fair value of borrowings are broken down as follows:
 
   
Carrying amounts
    
Fair value
  
   
At December
    
At September
    
At December
    
At September
  
    31, 2013     30, 2014     31, 2013     30, 2014  
                                 
                                 
Other loans
     753,223       1,533,033       642,842       1,489,735  
Loans from multilateral organizations
     42,599       -       44,384       -  
      795,822       1,533,033       687,226       1,489,735  
 
 
The fair value is based on cash flows discounted using a rate based on the borrowing rate of 3.0% and 7.6% (4.1% and 8.05% in 2013). It should be noted that the interest rate used are those applicable and negotiated by each Company.
 
13
PROVISIONS

 
This item is broken down based on the expectation of liquidation as follows:
 
   
At December
    
At September
  
    31, 2013     30, 2014  
                 
                 
Current portion
     8,895       14,542  
Non-current portion
     43,418       34,311  
      52,313       48,653  
 
 
The movement of this item for the nine-month period ended September 30, 2013 and 2014 is as follows:
 
         
Contingent
    
Provisions for the
    
Provision
    
Provision
        
   
Legal
    
liabilities from
    
for the acquisition
    
for well
    
for periodic
        
 
  
claims
    
acquisitions
    
of CAM
    
closure
    
maintenance
    
Total
  
                                     
At January 1, 2013
     11,380       11,130       35,220       4,897       -       62,627  
Additions
     802               -       -       -       802  
Additions from business combinations
     -       815       -       -       -       815  
Reversals
     (869 )     (2,093 )     (6,932 )     (199 )             (10,093 )
At September 30, 2013
     11,313       9,852       28,288       4,698       -       54,151  
                                                 
                                                 
                                                 
At January 1, 2014
     12,217       9,852       21,546       4,852       3,846       52,313  
Additions
     5,819       -               1,759       2,487       10,065  
Additions from business combinations
     -       5,159       -       -       -       5,159  
Reversals
     (588 )     (4,119 )     (7,160 )     -       -       (11,867 )
Payments
     (346 )     -       -       (338 )     (6,333 )     (7,017 )
At September 30, 2014
     17,102       10,892       14,386       6,273       -       48,653  
 
 
Reversals for the nine-month period ended September 30, 2014 mainly consists of write-offs of provisions recognized in conjunction with the purchase price allocation related to acquisition of CAM Chile in S/.7.1 million. (S/.6.9 million as of September 30, 2013).
 
 
- 19 -
 
 
 
(All amounts are expressed in thousands of S/. unless otherwise stated)
UNAUDITED
 
14
CAPITAL

 
As of September 30, 2014 and December 31, 2013, the authorized, subscribed and paid-in capital, according to the Company’s bylaws as amended, is represented by 660,053,790 common shares at S/.1.00 par value each.

 
Subsequently, a resolution of the General Meeting on March 26, 2013, as well as agreements adopted at meetings of the Board on May 30, July 23 and August 22 of 2013, mandated the issuance of common stock through a public offering of "American Depositary Shares" (ADS´s) registered in the Securities and Exchange Commission (SEC) and NYSE, increasing the capital sum from S/.558,284 to S/.660,054.

 
This capital increase was carried out in two tranches as follows:

(i)  
The first tranche in the amount of S/.97,674 (representing the issuance of 97,674,420 common shares issued and 19,534,884 ADS’s, therefore, at 5 shares per ADS), and,

(ii)  
A second tranche in the amount of S/.4,095 (representing the issuance of 4,095,180 common shares and ADS’s 819,036, issued at 5 shares per ADS rate).

 
As of September 30, 2014, the amount of 257,162,175 common shares is representing en ADSs (equivalents at 51,432,435 ADS’s therefore, at 5 shares per ADS).

15
EXPENSES BY NATURE

 
For the nine-month period ended September 30, 2013 and 2014, this item comprises:
 
   
Cost of
services
and goods
    
Adminis-
trative-
expenses
    
Total
  
                   
2013
                  
Purchase of goods
     766,309       -       766,309  
Personnel charges
     1,001,536       148,978       1,150,514  
Services provided by third-parties
     972,575       65,739       1,038,314  
Taxes
     13,808       892       14,700  
Other management charges
     480,949       34,677       515,626  
Depreciation
     133,078       8,420       141,498  
Amortization
     52,889       5,205       58,094  
Variation of inventories
     121,224       219       121,443  
      3,542,368       264,130       3,806,498  
2014
                        
Purchase of goods
     703,999       -       703,999  
Personnel charges
     1,244,725       161,117       1,405,842  
Services provided by third-parties
     1,444,041       87,256       1,531,297  
Taxes
     8,629       1,229       9,858  
Other management charges
     614,070       40,920       654,990  
Depreciation
     124,701       11,034       135,735  
Amortization
     54,932       5,959       60,891  
Variation of inventories
     18,442       -       18,442  
      4,213,539       307,515       4,521,054  
 
 
- 20 -
 
 
 
(All amounts are expressed in thousands of S/. unless otherwise stated)
UNAUDITED
 
16
INCOME TAX

 
Income tax expense is recognised based on management’s estimate of the weighted average annual income tax rate expected for the full financial year. The estimated average annual tax rate used for the year to 31 december 2014 is 27.13% (32.55% for the nine-month period ended September 30, 2013).

17
CONTINGENCIES, COMMITTMENTS AND GUARANTEES

 
As of September 30, 2014, total contingencies amounted S/.29 million. In addition the Group had guarantee commitments with different financial institutions securing transactions in the amount of US$49.5 million and S/.87.5 million.

18
DIVIDENDS

 
For the period ended September 30, 2014, the Group paid dividends on its subsidiaries to its non-controlling entities for S/.51 million (S/.27 million for the same period of 2013).

 
Dividends from the year ended December 31, 2013, of S/.0.169 per share totaling S/.112,126,908 were approved at the General Shareholders’ meeting held on March 28, 2014, and was paid on April 28, 2014.

19
BUSINESS COMBINATIONS

 
a)  
Acquisition of Coasin Instalaciones Limitada.

 
In March 2014, through the subsidiaries CAM Chile S.A. and Inversiones y Construcciones Ltda., the Group acquired control of Coasin Instalaciones Limitada with the purchase of 100.00% of its equity shares. Coasin is an entity domiciled in Chile, whose main economic activity is the provision of maintenance and installation services and telecommunications equipment..

 
This acquisition is part of the Group’s plan to increase its presence in markets that present high growth potential as in Chile, and in attractive industries, such as public services.

 
The Price paid by CAM Chile S.A. for the acquisition of Coasin amounted to US$2.3 million (equivalent to S/.6.6 million) and resulted in the recognition of goodwill for S/.7.6 million at the acquisition date.

 
The following tables summarize the consideration paid for Coasin and the preliminary determination of fair value of assets acquired, liabilities assumed at the acquisition date:
 
      S/.000    
US$000
  
                 
Cash and cash equivalents
     24       9  
Trade accounts receivable
     4,639       1,651  
Inventories
     355       126  
Property, plant and equipment
     567       202  
Intangibles (“Order backlog”)
     1,421       506  
Deferred income tax
     899       320  
Trade accounts payable                                                                      
     (3,776 )      (1,344 )
Contingent liabilities                                                                      
     (5,159 )      (1,836 )
Fair value of net assets                                                                      
     (1,030 )      (366 )
                 
Goodwill
     7,648       2,723  
Total paid for acquisition
     6,618       2,357  
                 
Cash payment for acquisition                                                                      
     6,618       2,357 )
Cash and cash equivalent of the acquired subsidiary
     (24 )      (9 )
Direct cash outflow from acquisition
     6,594       2,348  
 
 
- 21 -
 
 
 
(All amounts are expressed in thousands of S/. unless otherwise stated)
UNAUDITED
 
 
The income and the profit generated for the period from the acquisition date to September 30, 2014 amounted to S/.46.6 million and S/.1.8 million, respectively.

 
The Group has a measurement period not exceeding one year from the acquisition of Coasin date on the additional assets and liabilities arising from new information could be obtained regarding the information that there are recognized in the date of acquisition and which is neither new events occurring after the acquisition date, in this case the Group adjusts the initial amounts recognized in the business combination date.

 
b)  
Acquisition of DSD Construcciones y Montajes S.A. (DSD)

 
In August 2013, through the subsidiaries GyM Minería S.A., Ingeniería y Construcción Vial y Vives S.A. and GyM Chile S.p.A., the Group acquired control of DSD with the purchase of 85.95% of its equity shares. DSD is an entity domiciled in Chile whose main economic activity is the execution of electromechanical works and assemblies in construction projects of oil refineries, pulp and paper, power plants and mining plants.

 
During the period of twelve months after the acquisition date the Group reassessed the purchase price allocation from the acquisition of DSD Construcciones y Montajes S.A. which was made in August, 2013 and reallocated the amount of S/.1.7 million from goodwill (net of tax impact of S/.0.5 million and non-controlling interest of S/.0.3 million) to fixed assets, intangible, trade accounts receivable, other accounts receivable and contingent liabilities in the amounts of S/.0.4 million, S/.1.9 million, S/.0.2 million, S/.3.5 million and S/.3 million respectively. This effect corresponds to the measurement period adjustment of the preliminary fair value assigned to the assets and liabilities acquired.

 
The price paid by GyM for the acquisition of DSD Construcciones y Montajes S.A. amounted to US$37.2 million (equivalent to S/.103.9 million) and resulted in the recognition of goodwill for S/.6.1 million, at the acquisition date, which is detailed as follows:
 
   
Previous reported
  
Revised
   
S/.000
  
US$000
  
S/.000
  
US$000
                                 
Cash and cash equivalents
     15,530       5,562       15,530       5,562  
Trade accounts receivable
     74,502       26,684       74,317       26,618  
Accounts receivable from related parties
     6,605       2,366       10,083       3,611  
Prepaid expenses
     1,032       369       1,032       369  
Investments
     2,608       935       2,608       935  
Property, plant and equipment
     52,504       18,805       52,922       18,955  
Intangibles
     5,741       2,056       7,591       2,719  
Deferred income tax
     2,192       785       2,192       785  
Trade accounts payable                                                           
     (5,328 )     (1,908 )     (5,328 )     (1,908 )
Other accounts payable                                                           
     (38,679 )     (13,854 )     (38,679 )     (13,854 )
Contingent liabilities                                                           
     (815 )     (292 )     (3,846 )     (1,378 )
Deferred income tax liability                                                          
     (4,187 )     (1,500 )     (4,692 )     (1,681 )
Fair value of net assets
     111,705       40,008       113,730       40,733  
                                 
Non-controlling interest (14.05%)                                                           
     (15,701 )     (5,624 )     (15,986 )     (5,725 )
Goodwill
     7,868       2,802       6,128       2,178 )
Total paid for acquisition
     103,872       37,186       103,872       37,186  
                                 
Cash payment for the acquisition
     103,872       37,186       103,872       37,186  
Cash and cash equivalent of the acquired subsidiary
     (15,530 )     (5,562 )     (15,530 )     (5,562 )
Direct cash outflow from acquisition
     88,342       31,624       88,342       31,624  

 
The income and the profit generated for the period from the acquisition date to December 31, 2013 amounted to S/.82.97 million and S/.8.3 million, respectively.
 
 
- 22 -
 
 
 
(All amounts are expressed in thousands of S/. unless otherwise stated)
UNAUDITED
 
 
If DSD Construcciones y Montajes S.A. had been consolidated from January 1, 2013, the income and the profit generated would have been S/.182.68 million and S/.10.15 million, respectively

20
EVENTS AFTER THE DATE OF THE STATEMENT OF FINANCIAL POSITION

 
a)  
On March 24, 2014 we reached an agreement with CPPIB for the purchase of a 51% equity interest in Compañía Operadora de Gas del Amazonas (“COGA”), the operator of TGP, for a total amount of US$25.5 million. CPPIB will also sell 30% of COGA to Enagás, and will retain the remaining19%. This purchase is in process and is subject to certain conditions in order to complete the transaction.

 
b)  
On October 15, 2014 the Company and Alcogroup S.A. from Belgium, sent a binding offer for the share purchase of The Maple Companies Limited consisting on: (i) US$ 4 million for the acquisition of 40.0% of shares of The Maple Companies Limited and, (ii) a commitment for an increase of capital in The Maple Companies Limited of US$13 million. This operation has been approved by Maple Energy PLC Board of Directors, and will be elevated to its Shareholders’ meeting. As a result of this offer, the stakes hold by la Compañía and Alcogroup S.A. in The Maple Companies Limited will be of 30.43% and 43.48%, respectively.
 
  
Certain purchase conditions include the sale of 100% of shares of The Maple Gas Corporation del Perú S.R.L. in favor of the subsidiary Graña y Montero Petrolera S.A. (GMP) within a period of thirty days, for US$31 million; as well as to assign the funds from the capital increase, and from the share sale of The Maple Gas Corporation del Perú S.R.L., to Maple Etanol SRL and Maple Biocombustibles SRL. Once the sale is concluded, GMP will own 100% of The Maple Gas Corporation del Perú and the Company will be a minority shareholder (30.43%) of The Maple Companies Limited.

- 23 -