ORBIS

Revista Científica Electrónica de Ciencias Humanas / Scientific e-journal of Human Sciences /

PPX200502ZU1935 / ISSN 1856-1594 / By Fundación Unamuno /
Edmundo Lizarzaburu Bolaños, Kurt Burneo, Luis Noriega (2018)
CEMENTO ANDINO S.A: ANÁLISIS FINANCIERO DE UNA EMPRESA LATINOAMERICANA
[Link] / núm 40 (año 14) 17-31

CEMENTO ANDINO S.A: ANÁLISIS FINANCIERO DE UNA

EMPRESA LATINOAMERICANA
CEMENTO ANDINO S.A: FINANCIAL ANALYSIS OF A LATIN
AMERICAN COMPANY

Edmundo Lizarzaburu Bolaños1 Kurt Burneo2 Luis Noriega3

ABSTRACT
In emerging markets, it is essential to evaluate for a combination of debt and capital in determining the optimal value
of a company. Accordingly, Peruvian companies seek to adjust their capital structure to achieve sustainability and be
attractive to investors. All this is done, because an investor usually studies the capital structure of a company when
deciding whether to invest money in shares. Thus, companies expect to strengthen balance sheets and reduce risks.
The challenge for the senior management of the firm is to evaluate the company´s development prospects in the
domestic market and the issues associated with a strategic alliance with a foreign concern. Therefore, in the case we
consider the Modigliani-Miller markets value of a firm is independent theorem from 1959, taking into account the taxes
of Peru. According to Modigliani and Miller, in perfect capital markets the value of a firm is independent of its capital
structure. For those reasons, the objective of this case study is to analyze and evaluate the optimal value of the
company with the combination of debt and capital.
Keywords: Debt, Capital, WACC, GDP and Optimal Value.

RESUMEN
En los mercados emergentes, es esencial evaluar una combinación de deuda y capital para determinar el valor óptimo
de una empresa. En consecuencia, las empresas peruanas buscan ajustar su estructura de capital para lograr la
sostenibilidad y ser atractivas para los inversionistas. Todo esto se hace, porque un inversor generalmente estudia la
estructura de capital de una empresa cuando decide invertir dinero en acciones. Por lo tanto, las empresas esperan
fortalecer los balances y reducir los riesgos. El desafío para la alta dirección de la empresa es evaluar las perspectivas
de desarrollo de la empresa en el mercado interno y los problemas asociados con una alianza estratégica con una
empresa extranjera. Por lo tanto, en el caso que consideremos los mercados de Modigliani-Miller, el valor de una
empresa es un teorema independiente desde 1959, teniendo en cuenta los impuestos del Perú. Según Modigliani y
Miller, en los mercados de capital perfectos, el valor de una empresa es independiente de su estructura de capital. Por
esas razones, el objetivo de este estudio de caso es analizar y evaluar el valor óptimo de la empresa con la
combinación de deuda y capital.

Palabras clave: Deuda, Capital, WACC, PIB y Valor óptimo.

1
PhD Management, ESAN Graduate School of Business / ESAN University, elizarzaburub@[Link]
2
PhD. Pontificia Universidad Católica del Perú, Centrum
3
UCV Sede Chimbote

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Revista Científica Electrónica de Ciencias Humanas / Scientific e-journal of Human Sciences /
PPX200502ZU1935 / ISSN 1856-1594 / By Fundación Unamuno /
Edmundo Lizarzaburu Bolaños, Kurt Burneo, Luis Noriega (2018)
CEMENTO ANDINO S.A: ANÁLISIS FINANCIERO DE UNA EMPRESA LATINOAMERICANA
[Link] / núm 40 (año 14) 17-31

1. INTRODUCTION
This case study seeks to analyze and evaluate the financial situation of the Peruvian
company Cemento Andino S.A. (code ISIN: ANDINBC1), situated in an emerging
market between the period 2008 and 2012. Such an analysis will help to develop the
valuation of the company in a precise way and understand the implied risks of
expanding the business or maintaining their actual growth (considering the
prospective international investors). Included in the study is an analysis of the
national and international cement industry. Included in the study is an analysis of the
national and international cement industry to help students understand the positive
evolution of the construction industry and its growth in recent years. In addition, it
will consider the effects of the entrance of international competitors such as CEMEX,
Cementos Bio Bio and Votorantim Cimentos.

In valuating Cemento Andino it is important to consider the possible merger in the

following years with Cementos Lima that could change the real value of the business.
In this case the use of accounting methods based on multiples because it could
indicate the real value of the company. In addition, the PER method is considered,
as it allows analysis of the level of obtained earnings in reference to the stock price.
On the other hand, specific methods will be used to relate the capacity of production
and consumption to value the company.

Even in the wake of the 2008 financial crisis, Peru has been in a better situation
because of significant growths rates on the GDP allowing the country to have
financial solvency. However, according to the report of SCOTIABANK in 2011 “there
are signals that the mayor risks of the financial European systems are generating a
sort of credit crunch in a slow way that it is starting to affect the credit markets in the
world, with consequences for money and financial conditions”. According to the risk
classificatory Standard & Poor's (S&P) and Fitch the Peruvian sovereign debt has a
classification BBB (in 2011), which indicates there is lower solvency risk and
indicates the positive credit image of the country. For 2012 and 2013 the growth of
Peru was expected to depend on public and private investment. According to the
Ministry of Economics and Finances (MEF), public investment will increase about
30% in 2012. Considering the cement industry, the companies are doing projects to
increase their productive capacity. It is relevant to highlight that the growth of the
construction industry is positive and implies more demand of cement. Cementos
Lima is going to increase its production to 4.8 million TM (metric tons).

2. ABOUT THE COMPANY

Cemento Andino S.A is a Peruvian company that has more than 60 years in the
cement industry. It was founded on April 21 1952 and is part of the Corporative Rizo-
Patron that is also owner of Cementos Lima S.A. The audited financial statements,
Balance Sheet and Profit and Loss statements can be seen in Appendix 1.1 and 1.2.
The webpage of the company is: [Link] [Link]/.

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Revista Científica Electrónica de Ciencias Humanas / Scientific e-journal of Human Sciences /
PPX200502ZU1935 / ISSN 1856-1594 / By Fundación Unamuno /
Edmundo Lizarzaburu Bolaños, Kurt Burneo, Luis Noriega (2018)
CEMENTO ANDINO S.A: ANÁLISIS FINANCIERO DE UNA EMPRESA LATINOAMERICANA
[Link] / núm 40 (año 14) 17-31

The company has common stocks in the BVL with the code ANDINBC1. The social
equity or market capitalization is of S/. 313’320,000 and is represented by 1’200,000
common stocks with a nominal value of S/. 261.10. Until the 25th of May 2012 the
company had 278,386 stocks in circulation. In Appendix 2.1 it is indicated the
evolution of the close price of the stock from May 2011 to April 2012. The used prices
are the last market rate of the month and are comparing with the monthly average
that considers the different variations of the analyzed periods. The price tendency is
bear at the beginning and then it increases from January 2012 until April. The market
capitalization is S/. 247’763,540. The value in books is shown on Chart N° 01; its
value has increased in 64% from 2007 to the first trimester of 2012.

The price value in books is lower than the market price and there is an increasing
tendency of the UPA showing improvement of the company value (for more detail
see Appendix 2.2). The dividend distribution rate is 25% and is constant from 2008
to 2011. In 2011 and 2010 the company paid 24.000 billion Peruvian nuevo soles
and in 2009 it was paid 18.000 billion soles, less than in 2008 (34.200 billion soles).
Appendix 2.3 shows the net income for each analyzed period. In 2009, the first two
quarters the company obtained less net incomes than in other periods. To calculate
the beta of the company it is considered Damodaran betas for the construction
industry. Beta of building materials is 1.50 (see Appendix 2.4). We used the debt /
equity ratio of 0.75 and a tax rate of 30% and gives a result of = 0.82 * (1 + 0.75 *
(1-30%)) = 1.24 which is the beta of the company. The debt capital ratio considered
was of period 2011. Table 1 indicates the debt-equity from 2007 to 2012 first quarter
and indicates the growing trend of debt of Cemento Andino S.A.
Table 1. Financial Indexes from 2007 to 2012
Index 2007 2008 2009 2010 2011 2012-1T Variation
Debt / Equity 0.2324 0.2501 0.3575 0.7266 0.7122 0.7581
Books value % 137.35 144.49 161.84 184.85 204.21 225.60 64.25%
Source: Own elaboration

3. DESCRIPTION OF THE BUSINESS

Rizo-Patron Corporation is owner of 87% of the company with its subsidiary
Inversiones Andino. This company is in charge of the administration of the company
as well as to promote its investment in value titles. The rubric of the company is a
society that produces and commercializes clinker, cement and derivate at local and
international markets, also to do mining activities, industrials and energy generation.
Cemento Andino S.A is in the district of La Union Leticia in the province of Tarma in
Junín, (region of Peru). Cemento Andino S.A was created by the social
denomination Peru Central S.A. After feasibility studies and engineering studies it
was signed a financial contract with Lehman Brothers and Lazard Frères and with
suppliers of German machinery. By 1956 its social denomination (company name)
changed to Cemento Andino S.A and it is started to construct the factory and its
Hydroelectric Central Carpatata. The initial installed capacity was 85,000 TM per
year. During the military regime (seventies) the company was confiscated and in

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Revista Científica Electrónica de Ciencias Humanas / Scientific e-journal of Human Sciences /
PPX200502ZU1935 / ISSN 1856-1594 / By Fundación Unamuno /
Edmundo Lizarzaburu Bolaños, Kurt Burneo, Luis Noriega (2018)
CEMENTO ANDINO S.A: ANÁLISIS FINANCIERO DE UNA EMPRESA LATINOAMERICANA
[Link] / núm 40 (año 14) 17-31

2007 the company was privatized. In 2007 the Peruvian government sold 23.20% of
its participation with a stock price of 725 nuevos soles. After the launch of Oven 1,
the production capacity of clinker was 1’180,000 TM of clinker and 1’500,000 TM of
cement. In 2009 it was launched the amplification project of Oven 4 that will increase
the clinker capacity of production to 1’880,000 TM and cement industry to 2’100,000
TM. This project will finish in the first semester of the present year (2012). Next
Figure 1 summarizes the evolution of the installed capacity of Cemento Andino S.A.
through years.
Figure 1. Evolution of Clinker and Cement Production from 1958 to 2012
2500000

2000000
Clinker Cemento
1500000

1000000

500000

0
1958 1963 1969 1985 2000 2008 2012

Source: BCP. (2011). Cemento Andino Renta Variable Local. Reporte de Seguimiento: Servicio de Análisis:
Gerencia Central de Gestión de Activos. P. 3.

4. INDUSTRY DESCRIPTION
According to the Global Cement Report – GCR (Figure 2), which estimates a
significant increase of the global cement consumption, in 2008, the world
consumption of cement had a variation of 2.4%, in 2009 about 5.9% and for 2010
cement consumption growth was 9.9%. GCR forecasts indicate that consumption in
2012 reached a record of 3,859 TM. China is the biggest consumer of cement
worldwide with 1.851 TM, followed by India and the U.S. In 2010, Turkey was the
leading exportation country of cement and clinker (sales of 19 TM outpacing China,
17 TM). In the case of import of cement, Bangladesh is first in the ranking with a
demand of 12 TM, then Nigeria and then the USA (with 7 TM and 6 TM respectively).

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Edmundo Lizarzaburu Bolaños, Kurt Burneo, Luis Noriega (2018)
CEMENTO ANDINO S.A: ANÁLISIS FINANCIERO DE UNA EMPRESA LATINOAMERICANA
[Link] / núm 40 (año 14) 17-31

Figure 2. World cement production and consumption from 2005 to 2009

3500

3000

2500

2000

1500

1000

500

0
2005 2006 2007 2008 2009

Production Consume

Source: Inter-American Cement Federation

Table 2 shows the per capita consumption in some countries of the world from 2006
to 2009. In America, in 2009 Mexico was the country with the highest per capita
consumption of cement and in Europe it was Spain. Significantly, in 2006 Spain was
the country with the highest consumption (1278 per capita) that in 2009 was
surpassed by China (1218 per capita).
Table 2. Consumption per capita from 2006 to 2011
Continent Country 2006 2007 2008 2009 2010 2011

USA 427 381 318 230 259 232

Mexico 342 347 329 321 314 308

America Brazil 221 240 272 271 288 308

Chile 262 282 288 243 279 285

Peru 182 209 241 249 281 314

Germany 351 333 337 310 301 290

Europe Spain 1,278 1,266 936 630 536 436

France 397 399 386 325 313 296

Source: Inter-American Cement Federation

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CEMENTO ANDINO S.A: ANÁLISIS FINANCIERO DE UNA EMPRESA LATINOAMERICANA
[Link] / núm 40 (año 14) 17-31

Figure 3 shows the production and consumption of cement in Latin America for
period 2009. As seen in the graph, the largest producer and consumer of cement in
the region is Brazil, which is 5 times more of what is produced and consumed in
Argentina. It also indicates that consumption in Brazil, Chile and Peru exceeds local
cement production.
Figure 3. Cement production and consumption in Latin America
60000

50000

40000

30000

20000

10000

0
Argentina Brasil Colombia Chile Mexico Peru

Production Consume

Source: Inter-American Cement Federation

The French company Lafarge is the main cement company worldwide with a
production of 142.2 TM and a total turnover of 15.884 million Euros. Then it is
followed by Holcim (in sales 15.691 million Euros), Heidelberg Cement, CEMEX,
Italcementi and Buzzi Unicem. However, Holcim has the highest cement capacity
which is 212 TM were as Lafarge has a capacity of 201 TM.

5. TENDENCY OF THE SECTOR

In recent years, the construction sector boom has fueled the growth of consumption
and demand for cement in Peru. Significantly, the entry for 2013 of CEMEX and
Cempor (explained in the competency profile) to amend the market share of existing
firms. Moreover, in 2011 the Peruvian government reduced tariff rates of cement and
clinker from 12% to 0% as a policy to reduce the price of both commodities.

By 2010, the GDP of the construction sector grew by 17.40% which was favored by
increases in private and public construction. In Figure 4 is shown the amount in
million soles of the construction sector to the total GDP. By 2011 the demand for
cement increased by 3.90% over the previous year (from 8.406 TM to 8.826 TM).

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CEMENTO ANDINO S.A: ANÁLISIS FINANCIERO DE UNA EMPRESA LATINOAMERICANA
[Link] / núm 40 (año 14) 17-31

Figure 4. Construction industry to GDP from 2006 to 2012

18,000

16,000

14,000

12,000

10,000

8,000

6,000

4,000

2,000

0
2004 2005 2006 2007 2008 2009 2010 2011 2012

Source: BCRP

On the other hand, imports of gray cement increased from 313 to 432 thousand
metric tons per year (2010-2011). As recorded, the per capita consumption of
cement in Peru was of 296 kilos / inhabitant. Figure 5 shows the growth in cement
consumption in TM and the per capita consumption.
Figure 5. Cement Consumption from 1975 to 2012
12000 350

10000 300

250
8000
200
6000
150
4000
100
2000 50

0 0
2007 2008 2009 2010 2011 2012

National Consume Consumption per Capita

Source: Cemento Andino S.A. (2011) Annual Memory

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CEMENTO ANDINO S.A: ANÁLISIS FINANCIERO DE UNA EMPRESA LATINOAMERICANA
[Link] / núm 40 (año 14) 17-31

Appendix 2.5 indicates the volume production of cement and clinker in Peru from
2008 to 2012-1T (First quarter of 2012). In addition, it is indicated the percentage
variation of periods: 2009-2008; 2010-2009 and 2011-2010. Table 2 (Appendix
2.5.1) indicates the cement dispatches of three companies of the industry: Cemento
Andino, Cementos Lima, Cementos Pacasmayo and all the local dispatches. The
total dispatches of cement were calculated from the average indicated in the
Analysis and Discussion of the Management for the mentioned companies to the
forth trimester of 2009 and 2011. Appendix 2.5.2 indicates the same information as
percentage. To see in detail the production per company sees Figure 6. Dispatches
and production of cement is shown of the first trimester of 2012.
Figure 6. Cement Shipments from 2008 to 2012-Q1 in Annual TM

2012 1Q

2011

2010

2009

2008

0 500 1000 1500 2000 2500 3000 3500

Others Cementos Pacasmayo Cementos Lima Cemento Andino

Source: Peruvian regulator SMV4.

COMPETITION
Currently in the cement sector, there are seven manufacturing companies
nationwide. Which are Cemento Andino SA and Cementos Lima SA of Rizo-Patrón
Corporation that is concentrated in Lima and the central highlands, in the south
Cementos Yura S.A. and Cementos Sur S.A. of Rodríguez Banda Corporation, in
the north Cementos Pacasmayo SA and Cementos Selva .SA. of Hochschild
Corporation, and Caliza Cemento Inka of Choy family that has its operation in the

4
Superintendencia del Mercado de Valores

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CEMENTO ANDINO S.A: ANÁLISIS FINANCIERO DE UNA EMPRESA LATINOAMERICANA
[Link] / núm 40 (año 14) 17-31

central region. Figure 1 (Appendix 3.1) indicates the market share of the mentioned
companies. For more detail see Appendix 4.2 which specifies the market share by
geographic segmentation.

CEMEX enter Peru in 2007 importing gray and white cement. CEMEX in 2013
through the company Blue Rock Cement Holdings SA started the project of a cement
plant with an initial production of 1 million TM per annum with an investment of 230
million dollars. Also, the Brazilian company Votorantim Cimentos in participation with
Cementos Bio Bio (Chile) invested 122.2 million dollars in the company Cempor
(representing 59% of the shares). The construction of the plant is expected to
culminate in 2013 with a production capacity of 750 thousand tons. The project has
a cost of 150 million dollars. Table 3 emphasizes that the Peruvian company
Cementos Pacasmayo S. A. A. has the highest ROE; it indicates the good
performance for its shareholders in respect of the net income. According to
Bloomberg data, Cementos Pacasmayo has the highest market capitalization of the
listed Peruvian cement companies of the bourse.
Table 3. Company valuation and ROE
Company Country Shares outstanding (in Market capitalization (in ROE
millions) millions)

Cementos Pacasmayo S.A.A Peru 519.98 3,625.82 17.58%

Cementos Lima S.A. A Peru 1,185.70 3,343.68 11.26%
Cemento Andino S. A Peru 0.28 1,188.00 8.23%
Cementos BioBio S. A Chile 264.22 171,743.66 N. A
Source: Blomberg and Stock Exchanges – BVL and BVS (2012).

6. INVESTMENT SUMMARY
According to information of Peruvian Central Bank (BCRP), the company has its
main projects for the amplification of its cement plant in Junín. The project will be
finish by 2012 and it will increase the cement production up to 2.1 million tons per
annum. The investment is about 162 million dollars. Moreover “Cemento Andino will
do complementary investments: installation of a cement mill, increase the power of
its hydroelectrically in Condorcocha, amplification of the capacity of dispatches and
in parallel putting into work its central hydroelectric in Carpatata (BCRP. 2012,
p.14)”, for periods 2010 to 2011, with an investment of 16.7 million dollars. Table 4
indicates the variation of the construction, machinery and net team account.

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CEMENTO ANDINO S.A: ANÁLISIS FINANCIERO DE UNA EMPRESA LATINOAMERICANA
[Link] / núm 40 (año 14) 17-31

Table 4. Variation of the construction, machinery and net team account between 2010 and
2011
Cost Opening Additions Transfers Deductions Ending Annual
balances balances variation

Sites 29,534 44 0 0 29,578 0.15%

Industrial constructions 116,827 1,456 1,272 -805 118,750 1.65%
Machinery and equipment 687,093 4,448 6,730 0 698,271 1.63%
Transportation units 7,568 0 0 -53 7,515 -0.70%
Furniture and fixtures 2,659 225 0 0 2,884 8.46%
Replacement units 15,290 0 -3,023 0 12,267 -19.77%
Utilities receives 0 6,548 0 0 6,548 100.00%
Works in process 336,551 167,258 -4,979 0 498,830 48.22%
1,195,522 179,979 - -858 1,374,643 14.98%

Source: Cemento Andino. (2011). Auditing report. Página 27. Retrieved from:
[Link]

By the end of 2005, the investment of the first part of the project the Platanal (central
hydroelectric located in the river source of river Cañete) was approved. The new
company “Compañía Eléctrica El Platanal S.A.” (CELEPSA) which 60% belongs to
Cementos Lima S.A, 30% to Cemento Andino S.A and 10% to Corporación Aceros
Arequipa S.A., was formed. For incidental expenses not designed to project
Cemento Andino, in December 2010 contributed with an additional investment of
189.5 million dollars (155.4 million soles already invested by December 2009). The
company also handed CELEPSA a bail equivalent to 151.7 million soles to ensure
obtaining additional financing. As indicated by Apoyo & Asociados “in 2010,
CELEPSA paid S /.0.99 million as royalties to Cemento Andino.”

OTHER INFORMATION OF THE COMPANY

The company issues bonds that were approved by the General Board on 26 March
2009. It was launched the first corporate bond program of the company for U.S. $
40,000 or its equivalent in soles. On January 21, 2010 bonuses were awarded for $
35 million in the form of Dutch auction. See Appendix indicating the first and third
issues. The funds were used to finance CELEPSA (U.S. $ 15 million) and the rest to
replace short-term liabilities. Table 5 details the first corporate bond program.
Table 5. First Corporate Bond program
First Third
Bonds Issued $7,000,000.00 $28,000,000.00
Rate 3.75% 6.25%
Maturity 22/01/2013 22/01/2018
Source: Own elaboration

Note: The first issue had a maturity of three years and the interest rate is semiannual. The bond
matures on January 22, 2013. The third issue is with semi-annual interest rate and the repayment of

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[Link] / núm 40 (año 14) 17-31

principal will be made in ten semi-annual installments from the seventh straight quarter. The bond
matures on January 21, 2018.

7. LEARNING OUTCOMES
Through the use of the case, the students will be able to:

1. Recognize the challenges of evaluating a listed company in emerging markets

and understand the effects of changing market conditions on the policy and
operations of a company.

2. Explore the company’s options for expansion including the use of cost of
capital strategies.

3. Be able to calculate the growth term in the cost of common stock valuation
formula.

4. Identify the strengths and weaknesses of a company, its key priorities and the
strategy to attain them.

8. QUESTIONS TO SOLVE
1. Realize a financial analysis with the information in Appendix 1.1 and 1.2.
Consider not only ratios, but horizontal and vertical analysis (part of the
fundamental analysis) in order to complement the analysis of the stock in the
following question.

2. Show close and average Stock Price Evolution for ANDINBC1, this is an
aspect of the technical analysis require to evaluate the tendency of a
company.

3. Establish market ratios for the periods 2008 to 2012-1Q

4. Show Cemento Andino EBITDA in a graphic.

5. Show Stock Price Evolution from Bolsa de Valores de Lima (BVL) of the
companies

9. CONCLUSIONS AND RECOMMENDATIONS

The financial analysis of the company shows increasing and decreasing trends in
operating and net margins, indicating some seasonal year to year. In periods 2008
to 2010, the trend is growing, except for 2009 and 2011 whose growth were lower.
In the case of the ROE, the result is different considering the effects of two factors:
the growing capital debt and the increase in fixed assets that makes the ROE to have
a lower result in 2010 and 2011 and even for 2012.

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[Link] / núm 40 (año 14) 17-31

On the other hand, it may indicate a positive correlation (from: Equilibrium

Clasificadora de riesgo S.A. 2012. Informa de Clasificación “CEMENTO ANDINO
S.A.”. retrieving: [Link]/[Link] el 26 de Febrero del 2014) on
between sales, cement production and cement consumption in the country, which is
explained by the positive relationship between the construction industry and the
cement industry. According to the investor financial indicators Cemento Andino S.A
should maintain its stocks.

It is necessary to assess the evolution of the share price of ANDINBC1 that indicate
random patterns: increasing and decreasing in different periods. This pattern is
similar to the operating and net margins. Furthermore, the ratios of expected returns
on investment and equity will be low in the early years of investment in fixed assets
(industrial buildings, equipment and machinery net) and hence they will have less
impact on the profitability of the company.

For valuing the company, it was considered to evaluate the PER (referential), free
cash flows and a specific multiple which indicates the relationship between sales,
consumption and cement production (Damodaran 2012). The EVA was calculated
but was not considered because it destroyed value for the company and decreases
from 2008 to 2012. It explains why the exponential increase of fixed assets will
decrease the ROI. Market capitalization was considered as referential because they
were a point of start to evaluate the company during the considered period. Over
time the trend favors a higher business valuation and indicates the stability of the
company for the long term.

REFERENCES
Apoyo & Asociados: Clasificadora de riesgos. (2011). Informe Anual: Cemento Andino S.A.

Apoyo & Asociados: Clasificadora de riesgos. (2011). Informe Anual: Cementos Pacasmayo S.A.A.

Apoyo & Asociados: Clasificadora de riesgos. (2011). Informe Anual: Cementos Lima S.A.A.

Badillo C., Gutiérrez J., Ramos C. & Silva C. (2012). Reporte Financiero CENTRUM Bunkenroad
Latinoamérica (Perú). Extraído de
[Link]/adjunto/upload/publicacion/archivo/[Link] el 2 de febrero del
2014

Barrezueta, M. M. (2012). Análisis dinámico de la estructura de capital de las empresas.

Undergraduate thesis in Economics, Universidad de Piura, Piura.

BCP. (2011). Cemento Andino Renta Variable Local. Reporte de Seguimiento: Servicio de Análisis:
Gerencia Central de Gestión de Activos.

Bolsa de Valores de Lima (BVL). Información financiera y Memoriales anuales de los periodos 2008
al 2012. Cemento Andino. Extraído del 10 de febrero del 2014

BVL. (2012). Empresas con valores listados. Cemento Andino S.A. Recuperado el 24 de marzo de
2012 de [Link] 6. Cemento Andino S.A.
Página web: [Link]

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Revista Científica Electrónica de Ciencias Humanas / Scientific e-journal of Human Sciences /
PPX200502ZU1935 / ISSN 1856-1594 / By Fundación Unamuno /
Edmundo Lizarzaburu Bolaños, Kurt Burneo, Luis Noriega (2018)
CEMENTO ANDINO S.A: ANÁLISIS FINANCIERO DE UNA EMPRESA LATINOAMERICANA
[Link] / núm 40 (año 14) 17-31

CEMEX. (2010). CEMEX anuncia participación en proyecto de planta de cemento en Perú. Sala de
prensa. Revisado el 4 de abril del 2012 de:
[Link]

Damodaran, A. (2012). Investment valuation: tools and techniques for determining the value of any
asset (3rd ed). Hoboken, New Jersey, United States: John Wiley & Sons Inc.

Equilibrium Clasificadora de riesgo S.A. (2012). Informa de Clasificación “CEMENTO ANDINO S.A.”.
Extraído de [Link]/[Link] el 26 de febrero del 2014

Equilibrium Clasificadora de Riesgo. (2011). Informe de Clasificación: Cemento Andino S.A.

Ernst & Young (2012). Estados financieros al 31 de diciembre del 2011 y de 2010 junto con el
dictamen de los auditores independientes: Cementos Lima S.A.A. Lima, Perú

Fabozzi, F. J., Drake, P. P., & Polimeni, R. S. (2008). The complete CFO handbook: From accounting
to accountability. John Wiley & Sons.

Kuchhal, R., Verma, A., & Mandawat, A. (2016). Empirical and Financial Analysis for Prediction of
Corporate Bankruptcy: A Holistic Review of Indian Aviation Sector. International Journal of
Innovative Research and Development|| ISSN 2278–0211, 5(7).

Lizarzaburu, E., & Berggrun, L. (2013). Gestión del riesgo cambiario: aplicación a una empresa
exportadora peruana. Estudios Gerenciales, 29(128), 379-384.

Pacasmayo. (Marzo, 2012). Corporate Presentation.

SMV. (2012). Cemento Andino S.A. Recuperado el 28 de marzo de 2012 de

[Link]

SMV. (2012). Cemento Andino S.A. Recuperado el 28 de marzo de 2012 de

[Link]

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Revista Científica Electrónica de Ciencias Humanas / Scientific e-journal of Human Sciences /
PPX200502ZU1935 / ISSN 1856-1594 / By Fundación Unamuno /
Edmundo Lizarzaburu Bolaños, Kurt Burneo, Luis Noriega (2018)
CEMENTO ANDINO S.A: ANÁLISIS FINANCIERO DE UNA EMPRESA LATINOAMERICANA
[Link] / núm 40 (año 14) 17-31

ANNEX

APPENDIX 1.1. – BALANCE SHEET TO 31ST DECEMBER (Non-audited)

2008 2009 2010 2011 2012*
CURRENT ASSETS
Cash and cash equivalents 15,406 24,127 46,371 33,155 86,271
Financial investments 5,554 853 601 170 133
Accounts receivable 15,540 17,228 20,267 32,296 29,597
Inventories 92,765 92,925 124,878 127,621 117,779
Prepaid expenses 1,210 1,153 1,253 4,100 7,123
Total current assets 130,475 136,286 193,370 197,342 240,903
FIXED ASSETS
Financial investments 104,267 176,206 210,241 280,814 280,814
Industrial construction
machinery and equipment, net 296,821 341,303 1,152,214 1,295,360 1,336,239
Other net assets 34,373 34,564 38,335 39,393 39,400
Total Fixed assets 435,461 552,073 1,400,790 1,615,567 1,656,453
TOTAL ASSETS 565,936 688,359 1,594,160 1,812,909 1,897,356
2008 2009 2010 2011 2012*
CURRENT LIABILITIES
ST banks 56,121 80,215 74,976 106,948 139,926
Accounts payable 16,418 14,268 16,210 21,147 14,946
Income taxes and working participation
Payable 12,240 9,957 22,259 12,266 22,120
Diverse accounts payable 11,594 9,657 14,997 13,459 770
Total current liabilities 96,373 114,097 128,442 153,820 177,762|
LONG TERM DEBT
FINANCIAL OBLIGATIONS
Financial leasing 279,504 415,169 456,035
Guarantee fund leasing -89,866 -139,499 184,700
Total financial obligations 189,638 275,670 640,735
Bonds 98,315 94,395 -
Long term banking loans - 46,436 -
15,874 64,514 287,953 416,501 640,735
DEFERRED INCOME TAXES 982 2,668 182,082 183,789 -
Total long-term debt 16,856 67,182 470,035 600,290 640,735
TOTAL LIABILITIES 113,229 181,279 598,477 754,110 818,497
EQUITY
Capital stock 313,320 313,320 313,320 313,320 313,320
Legal reserve 62,664 62,664 62,664 62,664 62,664
Retained earnings 76,723 131,096 619,699 682,815 702,875
TOTAL EQUITY 452,707 507,080 995,683 1,058,799 1,078,859
TOTAL LIABILITIES AND EQUITY 565,936 688,359 1,594,160 1,812,909 1,897,356

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Revista Científica Electrónica de Ciencias Humanas / Scientific e-journal of Human Sciences /
PPX200502ZU1935 / ISSN 1856-1594 / By Fundación Unamuno /
Edmundo Lizarzaburu Bolaños, Kurt Burneo, Luis Noriega (2018)
CEMENTO ANDINO S.A: ANÁLISIS FINANCIERO DE UNA EMPRESA LATINOAMERICANA
[Link] / núm 40 (año 14) 17-31

APPENDIX 1.2 – INCOME STATEMENTS

Cemento Andino S.A.

FOR THE FINISH YEARS UNTIL 31st DECEMBER

(In thousands of Nuevos Soles, except amounts of earnings per share)

2008 2009 2010 2011 2012*

Net revenues 378,928 378,783 434,017 445,039 115,407
Costs of sales -185,616 -196,602 -231,447 -261,734 -79,523
Depreciation and amortization -40,918 -42,230 -37,963 -36,225
Gross profit 152,394 139,951 164,607 147,080 35,884
Sales expenses -2,512 -2,268 -2,641 -2,773 -769
Administrative expenses -21,777 -20,415 -26,880 -25,982 -6,981
Operating income 128,105 117,268 135,086 118,325 29,146
Income (expenses), net:
Financial incomes 945 131 1,017 293 1,186
Financial expenses -5,161 -4,200 -9,711 -11,769 -3,787
Exchange rate difference -913 472 169 5,247 1,589
Diverse, net 1,334 2,595 2,192 11,235
-3,795 -1,002 -6,333 5,006 -1,012
Earnings before income taxes 124,310 116,266 128,753 123,331 28,134
Income taxes -47,608 -43,893 -39,266 -36,215 -8,074
Net income 76,702 72,373 89,487 87,116 20,060
Other results - - - - -
Total comprehensive income 76,702 72,373 89,487 87,116 20,060
* Non-audited financial information

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ORBIS
Revista Científica Electrónica de Ciencias Humanas / Scientific e-journal of Human Sciences /
PPX200502ZU1935 / ISSN 1856-1594 / By Fundación Unamuno /
Edmundo Lizarzaburu Bolaños, Kurt Burneo, Luis Noriega (2018)
CEMENTO ANDINO S.A: ANÁLISIS FINANCIERO DE UNA EMPRESA LATINOAMERICANA
[Link] / núm 40 (año 14) 17-31

APPENDIX 2.1. – EVOLUTION OF ANDINBC1 FROM MAY 2011 TO APR 2012

1,200

1,000

800

600

400

200

Close price of the stock Average Price

Source: Own elaboration

APPENDIX 2.2 – MARKET ORIENTED RATIOS FROM 2008 TO 2012

MARKET ORIENTED RATIOS 2008 2009 2010 2011 2012-1T

UPA 0.153 0.195 0.235 0.227 0.2445
P/UPA 5,322.77 2,952.43 3,344.62 3,800.32 3,415.35
PAYOUT RATIO 25% 25% 25% 25% 25%
BOOK VALUE PER SHARE 1.13 1.13 1.13 1.13 1.13
PRICE TO BOOK VALUE 722.04 512.36 699.06 765.55 742.07
MARKET PRICE 812.64 576.65 786.78 861.61 835.19
Source: Own elaboration

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ORBIS
Revista Científica Electrónica de Ciencias Humanas / Scientific e-journal of Human Sciences /
PPX200502ZU1935 / ISSN 1856-1594 / By Fundación Unamuno /
Edmundo Lizarzaburu Bolaños, Kurt Burneo, Luis Noriega (2018)
CEMENTO ANDINO S.A: ANÁLISIS FINANCIERO DE UNA EMPRESA LATINOAMERICANA
[Link] / núm 40 (año 14) 17-31

APPENDIX 2.3 – NET INCOME PER QUARTERS FROM 2008 TO THE FIRST
QUARTER OF 2012

PERIOD 2008 2009 2010 2011 2012-1T

FIRST QUARTER 19,813 13,946 20,243 21,192 20,060
SECOND QUARTER 18,527 15,078 25,640 19,736
THIRD QUARTER 21,872 22,211 26,614 21,642
FOURTH QUARTER 16,489 21,137 23,588 51,459
Source: Bolsa de Valores de Lima. Cemento Andino S.A.

APPENDIX 2.4 – CALCULATION OF THE COMPANY BETA

1.50
UNLEVERED BETA = = 0.82
1.84

RE − LEVERAGED BETA = 0.82 × 1.53 = 1.25

Source: Own elaboration

APPENDIX 2.5 - CLINKER AND CEMENT PRODUCTION FOR PERIODS 2008-2012

FIRST QUARTER

YEAR PRODUCTION % VARIATION OF THE PRODUCTION

CLINKER CEMENT CLINKER CEMENT
2008 1,163 1,253
2009 1,170 1,278 0.55% 2.06%
2010 1,176 1,440 0.52% 12.64%
2011 1,169 1,484 -0.59% 3.08%
2012-1T 271 388
Source: Own elaboration

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ORBIS
Revista Científica Electrónica de Ciencias Humanas / Scientific e-journal of Human Sciences /
PPX200502ZU1935 / ISSN 1856-1594 / By Fundación Unamuno /
Edmundo Lizarzaburu Bolaños, Kurt Burneo, Luis Noriega (2018)
CEMENTO ANDINO S.A: ANÁLISIS FINANCIERO DE UNA EMPRESA LATINOAMERICANA
[Link] / núm 40 (año 14) 17-31

APPENDIX 2.5.1 – CEMENT SHIPMENTS IN MT PER YEAR

YEAR ANNUAL CEMENT SHIPMENTS IN METRIC TONES

CEMENTO CEMENTOS CEMENTOS OTHER CEMENT PERU
ANDINO LIMA PACASMAYO COMPANIES

2008 1,251 2,875 1,320 1,396 6,842

2009 1,274 2,935 1,388 1,540 7,137
2010 1,431 3,278 1,616 1,943 8,268
2011 1,477 3,225 1,746 2,078 8,526
2012-1T 384 853 482 667 2,386
Source: Own elaboration

APPENDIX 2.5.2 – PERCENTAGE OF CEMENT SHIPMENTS IN PERU

YEAR PERCENTAGE OF CEMENT COMPANIES CEMENT SHIPMENTS

CEMENTO CEMENTOS CEMENTOS OTHER CEMENT PERU
ANDINO LIMA PACASMAYO COMPANIES

2008 18% 42% 19% 20% 100%

2009 18% 41% 19% 22% 100%
2010 17% 40% 20% 23% 100%
2011 17% 38% 20% 24% 100%
2012-1T 16% 36% 20% 28% 100%
Source: Own elaboration

APPENDIX 3.1. – MARKET SHARE OF PERUVIAN CEMENT COMPANIES IN 2011

Cementos Cementos Cemento

Sur, 5% Selva, 2% Inka, 2%

Cementos Cementos
Yura, 14% Lima, 39%

Cemento
Andino, 17%

Cementos
Pacasmayo,
21%

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Revista Científica Electrónica de Ciencias Humanas / Scientific e-journal of Human Sciences /
PPX200502ZU1935 / ISSN 1856-1594 / By Fundación Unamuno /
Edmundo Lizarzaburu Bolaños, Kurt Burneo, Luis Noriega (2018)
CEMENTO ANDINO S.A: ANÁLISIS FINANCIERO DE UNA EMPRESA LATINOAMERICANA
[Link] / núm 40 (año 14) 17-31

Source: Own elaboration

APPENDIX 3.2 – MILLION TONNES OF CEMENT CONSUMPTION AND MARKET

SHARE IN NORTHERN, CENTRAL AND SOUTHER REGION

NORTHERN REGION
PLANT 2008 2009 2010 2011 MKT. SHARE
C. PACAS 1,322 1,397 1,616 1,748 20%
C. SELVA 157 160 195 196 2%
IMPORTS 47 39 39 44 0.50%
TOTAL 1,526 1,596 1,850 1,988 23%
Source: ASOCEM, INEI, ADUANET (SUNAT)

CENTRAL REGION
PLANT 2008 2009 2010 2011 MKT. SHARE
C. LIMA 2,937 2,935 3,278 3,225 37%
C. ANDINO 1,251 1,275 1,434 1,483 17%
CALIZA INCA 60 63 97 110 1%
IMPORTS 172 101 275 388 4%
TOTAL 4,420 4,374 5,084 5,206 59%
Source: ASOCEM, INEI, ADUANET (SUNAT)

SOUTHERN REGION
PLANT 2008 2009 2010 2011 MKT. SHARE
C. YURA 927 1,008 1,159 1,265 14%
C. SUR 123 246 433 450 4%
TOTAL 1,050 1,254 1,592 1,715 18%
Source: ASOCEM, INEI, ADUANET (SUNAT)

APPENDIX 4 – GROWTH IN FIXED ASSET ACCOUNT CEMENT COMPANIES FROM

2008 TO 2011

PERIOD 2008 2009 2010 2011

NET PROPERTY, PLANT VAR VAR VAR
AND EQUIPMENT 2008-
2011
CEMENTOS LIMA 672,45 764,50 13.69 1,834,43 139.95 2,030,36 201.93
9 8 % 8 % 8 %
CEMENTOS 393,80 432,49 9.82% 686,893 58.82% 867,966 120.40
PACASMAYO 8 5 %
CEMENTO ANDINO 296,82 341,30 14.99 1,152,21 237.59 1,295,36 336.41
1 3 % 4 % 0 %
Source: Own elaboration

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ORBIS
Revista Científica Electrónica de Ciencias Humanas / Scientific e-journal of Human Sciences /
PPX200502ZU1935 / ISSN 1856-1594 / By Fundación Unamuno /
Edmundo Lizarzaburu Bolaños, Kurt Burneo, Luis Noriega (2018)
CEMENTO ANDINO S.A: ANÁLISIS FINANCIERO DE UNA EMPRESA LATINOAMERICANA
[Link] / núm 40 (año 14) 17-31

APPENDIX 5 – GENERAL AND CONSTRUCTION GDP EVOLUTION FROM 2006 TO

2011

20.00%

15.00% 16.60% 16.50% 17.40%

14.80%
10.00%
9.80%
8.90% 8.80%
5.00% 7.70% 6.90%
6.10%
0.90% 3.40%
0.00%
2006 2007 2008 2009 2010 2011

GDP Construction GDP General

Source: Own elaboration

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ORBIS
Revista Científica Electrónica de Ciencias Humanas / Scientific e-journal of Human Sciences /
PPX200502ZU1935 / ISSN 1856-1594 / By Fundación Unamuno /
Edmundo Lizarzaburu Bolaños, Kurt Burneo, Luis Noriega (2018)
CEMENTO ANDINO S.A: ANÁLISIS FINANCIERO DE UNA EMPRESA LATINOAMERICANA
[Link] / núm 40 (año 14) 17-31

TEACHING NOTES5

CEMENTO ANDINO S.A: FINANCIAL ANALYSIS OF A LATIN AMERICAN COMPANY

CASE STUDY SUMMARY

In emerging markets is essential to evaluate for a combination of debt and capital in the optimal value
of the company. In this case, Peruvian company seeks to adjust its capital structure to achieve
sustainability and become attractive to investors. All this in terms of financial needs because an
investor, usually studies the capital structure of a company when evaluating invest their money in
shares. Thus, the companies expect to strengthen balance sheets and reduce risks.

LEARNING OUTCOMES

1. Recognize the challenges of evaluating a listed company in emerging markets and

understand the effects of changing market conditions on the policy and operations of a
company.
2. Explore the company’s options for expansion including the use of cost of capital strategies.
3. Be able to calculate the growth term in the cost of common stock valuation formula.
4. Identify the strengths and weaknesses of a company, its key priorities and the strategy to
attain them.

SUGGESTED TEACHING STRATEGIES

There are various ways to teach this case study. One strategy is to review the financial information
of the company, considering the financial statements of each period and using ratio analysis,
supplemented by the vertical and horizontal analysis to determine composition and trends of
accounting accounts. This will identify the most relevant accounts. Another strategy is to start by
analyzing the evolution of the share price, as well as the behavior of framerate market or stock market
index and the risk-free rate in the Peruvian market, which it can be obtained from the website of
Superintendencia de Banca y Seguros ([Link]).

Besides, this case study seeks to analyze and evaluate the financial situation of the Peruvian
company Cemento Andino S.A. (code ISIN: ANDINBC1), situated in an emerging market between
the period 2008 and 2012. Such an analysis will help to develop the valuation of the company in a
precise way and understand the implied risks (considering the prospective international investors).
Include in the study is an analysis of the national and international cement industry. It will be also
important to understand the positive evolution of the construction industry and its growth in recent
years. In addition, it will be considered the effects of the entrance of international competitors such
as CEMEX, Cementos Bio Bio and Votorantim Cimentos.

5
Assistant: Celeste Gaspar and Miguel Alegre from Esan University

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ORBIS
Revista Científica Electrónica de Ciencias Humanas / Scientific e-journal of Human Sciences /
PPX200502ZU1935 / ISSN 1856-1594 / By Fundación Unamuno /
Edmundo Lizarzaburu Bolaños, Kurt Burneo, Luis Noriega (2018)
CEMENTO ANDINO S.A: ANÁLISIS FINANCIERO DE UNA EMPRESA LATINOAMERICANA
[Link] / núm 40 (año 14) 17-31

In valuating Cemento Andino it is important to consider the possible merger in the following years
with Cementos Lima that could change the real value of the business. In this case the use of
accounting methods based on multiples because it could indicate the real value of the company. In
addition, the PER method is considered, as it allows analysis of the level of obtained earnings in
reference to the stock price. On the other hand, specific methods will be used to relate de capacity of
production and consumption to value the company.

Even in the wake of the 2008 financial crisis, Peru has been in a better situation because of significant
growths rates on the GDP allowing the country to have financial solvency. However, according to the
report of SCOTIABANK in 2011 “there are signals that the mayor risks of the financial European
systems are generating a sort of credit crunch in a slow way that it is starting to affect the credit
markets in the world, with consequences for money and financial conditions”. According to the risk
classificatory Standard & Poor's (S&P) and Fitch the Peruvian sovereign debt has a classification
BBB (in 2011), which indicates there is lower solvency risk and indicates the positive credit image of
the country. For 2012 and 2013 the growth of Peru was expected to depend on public and private
investment. According to the Ministry of Economics and Finances (MEF), public investment will
increase about 30% in 2012.

Considering the cement industry, the companies are doing projects to increase their productive
capacity. It is relevant to highlight that the growth of the construction industry is positive and implies
more demand of cement. Cementos Lima is going to increase its production to 4.8 million TM (metric
tons).

ANSWER THE FOLLOWING QUESTIONS:

1. Realize a financial analysis with the information in Appendix 1.1 and 1.2. Consider not only
ratios, but horizontal and vertical analysis (part of the fundamental analysis) in order to
complement the analysis of the stock in the following question
2. Show close and average Stock Price Evolution for ANDINBC1, this is an aspect of the
technical analysis require to evaluate the tendency of a company.
3. Establish market ratios for the periods 2008 to 2012-1Q
4. Show Cemento Andino EBITDA in a graphic.
5. Show Stock Price Evolution from Bolsa de Valores de Lima (BVL) of the companies
([Link]).

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ORBIS
Revista Científica Electrónica de Ciencias Humanas / Scientific e-journal of Human Sciences /
PPX200502ZU1935 / ISSN 1856-1594 / By Fundación Unamuno /
Edmundo Lizarzaburu Bolaños, Kurt Burneo, Luis Noriega (2018)
CEMENTO ANDINO S.A: ANÁLISIS FINANCIERO DE UNA EMPRESA LATINOAMERICANA
[Link] / núm 40 (año 14) 17-31

APPENDIXES AND SOLUTION

APPENDIX 1.1. – HORIZONTAL ANALYSIS OF CEMENTO ANDINO S.A. BALANCE

SHEET FROM 2009 TO 2012

09/08 10/09 11/10 12*/11

CURRENT ASSETS
Cash and cash equivalents 56.61% 92.20% -28.50% 160.21%
Financial investments -84.64% -29.54% -71.71% -21.76%
Accounts receivable 10.86% 17.64% 59.35% -8.36%
Inventories 0.17% 34.39% 2.20% -7.71%
Prepaid expenses -4.71% 8.67% 227.21% 73.73%
Total current assets 4.45% 41.89% 2.05% 22.07%
FIXED ASSETS
Financial investments 68.99% 19.32% 33.57% 0.00%
Industrial construction
machinery and equipment, net 14.99% 237.59% 12.42% 3.16%
Other net assets 0.56% 10.91% 2.76% 0.02%
Total Fixed assets 26.78% 153.73% 15.33% 2.53%
TOTAL ASSETS 21.63% 131.59% 13.72% 4.66%
CURRENT LIABILITIES
ST banks 42.93% -6.53% 42.64% 30.84%
Accounts payable -13.10% 13.61% 30.46% -29.32%
Income taxes and working participation
Payable -18.65% 123.55% -44.89% 80.34%
Diverse accounts payable -16.71% 55.30% -10.26% -94.28%
Total current liabilities 18.39% 12.57% 19.76% 15.56%
LONG TERM DEBT
FINANCIAL OBLIGATIONS
Financial leasing 48.54% 9.84%
Guarantee fund leasing 55.23% -232.40%
Total financial obligations 45.37% 132.43%
Bonds -3.99% -
Long term banking loans 0.00% -
306.41% 346.34% 44.64% 53.84%
DEFERRED INCOME TAXES 171.69% 6724.66% 0.94% -
Total long-term debt 298.56% 599.64% 27.71% 6.74%
TOTAL LIABILITIES 60.10% 230.14% 26.00% 8.54%
EQUITY
Capital stock 0.00% 0.00% 0.00% 0.00%
Legal reserve 0.00% 0.00% 0.00% 0.00%
Retained earnings 70.87% 372.71% 10.18% 2.94%
TOTAL EQUITY 12.01% 96.36% 6.34% 1.89%
TOTAL LIABILITIES AND EQUITY 21.63% 131.59% 13.72% 4.66%
2012* Note: is none-audited financial information until the 31st March (first quarter)

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Revista Científica Electrónica de Ciencias Humanas / Scientific e-journal of Human Sciences /
PPX200502ZU1935 / ISSN 1856-1594 / By Fundación Unamuno /
Edmundo Lizarzaburu Bolaños, Kurt Burneo, Luis Noriega (2018)
CEMENTO ANDINO S.A: ANÁLISIS FINANCIERO DE UNA EMPRESA LATINOAMERICANA
[Link] / núm 40 (año 14) 17-31

Source: Own elaboration

APPENDIX 1.2. – VERTICAL ANALYSIS OF CEMENTO ANDINO S.A. BALANCE

SHEET FROM 2008 TO 2012

2008 2009 2010 2011 2012*

CURRENT ASSETS
Cash and cash equivalents 2.72% 3.51% 2.91% 1.83% 4.55%
Financial investments 0.98% 0.12% 0.04% 0.01% 0.01%
Accounts receivable 2.75% 2.50% 1.27% 1.78% 1.56%
Inventories 16.39% 13.50% 7.83% 7.04% 6.21%
Prepaid expenses 0.21% 0.17% 0.08% 0.23% 0.38%
Total current assets 23.05% 19.80% 12.13% 10.89% 12.70%
FIXED ASSETS
Financial investments 18.42% 25.60% 13.19% 15.49% 14.80%
Industrial construction
machinery and equipment, net 52.45% 49.58% 72.28% 71.45% 70.43%
Other net assets 6.07% 5.02% 2.40% 2.17% 2.08%
Total Fixed assets 76.95% 80.20% 87.87% 89.11% 87.30%
TOTAL ASSETS 100.00% 100.00% 100.00% 100.00% 100.00%
CURRENT LIABILITIES
ST banks 9.92% 11.65% 4.70% 5.90% 7.37%
Accounts payable 2.90% 2.07% 1.02% 1.17% 0.79%
Income taxes and working participation
Payable 2.16% 1.45% 1.40% 0.68% 1.17%
Diverse accounts payable 2.05% 1.40% 0.94% 0.74% 0.04%
Total current liabilities 17.03% 16.58% 8.06% 8.48% 9.37%
LONG TERM DEBT
FINANCIAL OBLIGATIONS
Financial leasing 17.53% 22.90% 24.04%
Guarantee fund leasing -5.64% -7.69% 9.73%
Total financial obligations 11.90% 15.21% 33.77%
Bonds 6.17% 5.21% 0.00%
Long term banking loans 0.00% 2.56% 0.00%
2.80% 9.37% 18.06% 22.97% 33.77%
DEFERRED INCOME TAXES 0.17% 0.39% 11.42% 10.14% 0.00%
Total long-term debt 2.98% 9.76% 29.48% 33.11% 33.77%
TOTAL LIABILITIES 20.01% 26.33% 37.54% 41.60% 43.14%
EQUITY
Capital stock 55.36% 45.52% 19.65% 17.28% 16.51%
Legal reserve 11.07% 9.10% 3.93% 3.46% 3.30%
Retained earnings 13.56% 19.04% 38.87% 37.66% 37.04%
TOTAL EQUITY 79.99% 73.67% 62.46% 58.40% 56.86%
TOTAL LIABILITIES AND EQUITY 100.00% 100.00% 100.00% 100.00% 100.00%
2012* Note: is none-audited financial information until the 31st March (first quarter)

Source: Own elaboration

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ORBIS
Revista Científica Electrónica de Ciencias Humanas / Scientific e-journal of Human Sciences /
PPX200502ZU1935 / ISSN 1856-1594 / By Fundación Unamuno /
Edmundo Lizarzaburu Bolaños, Kurt Burneo, Luis Noriega (2018)
CEMENTO ANDINO S.A: ANÁLISIS FINANCIERO DE UNA EMPRESA LATINOAMERICANA
[Link] / núm 40 (año 14) 17-31

APPENDIX 1.3. – HORIZONTAL ANALYSIS OF CEMENTO ANDINO S.A. INCOME

STATEMENT FROM 2009 TO 2012

09/08 10/09 11/10 12*/11

Net revenues -0.04% 14.58% 2.54% -74.07%
Costs of sales 5.92% 17.72% 13.09% -69.62%
Depreciation and amortization 3.21% -10.10% -4.58% -100.00%
Gross profit -8.17% 17.62% -10.65% -75.60%
Sales expenses -9.71% 16.45% 5.00% -72.27%
Administrative expenses -6.25% 31.67% -3.34% -73.13%
Operating income -8.46% 15.19% -12.41% -75.37%
Income (expenses), net: 0.00% 0.00% 0.00% 0.00%
Financial incomes -86.14% 676.34% -71.19% 304.78%
Financial expenses -18.62% 131.21% 21.19% -67.82%
Exchange rate difference -151.70% -64.19% 3004.73% -69.72%
Diverse, net 94.53% -15.53% 412.55% -100.00%
-73.60% 532.04% -179.05% -120.22%
Earnings before income taxes -6.47% 10.74% -4.21% -77.19%
Income taxes -7.80% -10.54% -7.77% -77.71%
Net income -5.64% 23.65% -2.65% -76.97%
Other results 0.00% 0.00% 0.00% 0.00%
Total comprehensive income -5.64% 23.65% -2.65% -76.97%
2012* Note: is none-audited financial information until the 31st March (first quarter)

Source: Own elaboration

41 / 52
ORBIS
Revista Científica Electrónica de Ciencias Humanas / Scientific e-journal of Human Sciences /
PPX200502ZU1935 / ISSN 1856-1594 / By Fundación Unamuno /
Edmundo Lizarzaburu Bolaños, Kurt Burneo, Luis Noriega (2018)
CEMENTO ANDINO S.A: ANÁLISIS FINANCIERO DE UNA EMPRESA LATINOAMERICANA
[Link] / núm 40 (año 14) 17-31

APPENDIX 1.3. – VERTICAL ANALYSIS OF CEMENTO ANDINO S.A. INCOME

STATEMENT FROM 2008 TO 2012

2008 2009 2010 2011 2012*

Net revenues 100.00% 100.00% 100.00% 100.00% 100.00%
Costs of sales -48.98% -51.90% -53.33% -58.81% -68.91%
Depreciation and amortization -10.80% -11.15% -8.75% -8.14% 0.00%
Gross profit 40.22% 36.95% 37.93% 33.05% 31.09%
Sales expenses -0.66% -0.60% -0.61% -0.62% -0.67%
Administrative expenses -5.75% -5.39% -6.19% -5.84% -6.05%
Operating income 33.81% 30.96% 31.12% 26.59% 25.25%
Income (expenses), net: 0.00% 0.00% 0.00% 0.00% 0.00%
Financial incomes 0.25% 0.03% 0.23% 0.07% 1.03%
Financial expenses -1.36% -1.11% -2.24% -2.64% -3.28%
Exchange rate difference -0.24% 0.12% 0.04% 1.18% 1.38%
Diverse, net 0.35% 0.69% 0.51% 2.52% 0.00%
-1.00% -0.26% -1.46% 1.12% -0.88%
Earnings before income taxes 32.81% 30.69% 29.67% 27.71% 24.38%
Income taxes -12.56% -11.59% -9.05% -8.14% -7.00%
Net income 20.24% 19.11% 20.62% 19.57% 17.38%
Other results 0.00% 0.00% 0.00% 0.00% 0.00%
Total comprehensive income 20.24% 19.11% 20.62% 19.57% 17.38%
2012* Note: is none-audited financial information until the 31st March (first quarter)

Source: Own elaboration

42 / 52
ORBIS
Revista Científica Electrónica de Ciencias Humanas / Scientific e-journal of Human Sciences /
PPX200502ZU1935 / ISSN 1856-1594 / By Fundación Unamuno /
Edmundo Lizarzaburu Bolaños, Kurt Burneo, Luis Noriega (2018)
CEMENTO ANDINO S.A: ANÁLISIS FINANCIERO DE UNA EMPRESA LATINOAMERICANA
[Link] / núm 40 (año 14) 17-31

APPENDIX 2.1. – EVOLUTION OF ANDINBC1 FROM MAY 2011 TO APR 2012

1,200

1,000

800

600

400

200

Close price of the stock Average Price

Source: Own elaboration

43 / 52
ORBIS
Revista Científica Electrónica de Ciencias Humanas / Scientific e-journal of Human Sciences /
PPX200502ZU1935 / ISSN 1856-1594 / By Fundación Unamuno /
Edmundo Lizarzaburu Bolaños, Kurt Burneo, Luis Noriega (2018)
CEMENTO ANDINO S.A: ANÁLISIS FINANCIERO DE UNA EMPRESA LATINOAMERICANA
[Link] / núm 40 (año 14) 17-31

APPENDIX 2.2 – MARKET ORIENTED RATIOS FROM 2008 TO 2012

Market oriented ratios 2008 2009 2010 2011 2012-1T

UPA 0.153 0.195 0.235 0.227 0.2445
P/UPA 5,322.77 2,952.43 3,344.62 3,800.32 3,415.35
Payout ratio 25% 25% 25% 25% 25%
Book value per share 1.13 1.13 1.13 1.13 1.13
Price to book value 722.04 512.36 699.06 765.55 742.07
Market price 812.64 576.65 786.78 861.61 835.19
2012* Note: is none-audited financial information until the 31st March (first quarter)

Source: Own elaboration

44 / 52
ORBIS
Revista Científica Electrónica de Ciencias Humanas / Scientific e-journal of Human Sciences /
PPX200502ZU1935 / ISSN 1856-1594 / By Fundación Unamuno /
Edmundo Lizarzaburu Bolaños, Kurt Burneo, Luis Noriega (2018)
CEMENTO ANDINO S.A: ANÁLISIS FINANCIERO DE UNA EMPRESA LATINOAMERICANA
[Link] / núm 40 (año 14) 17-31

APPENDIX 2.3 – NET INCOME PER QUARTERS FROM 2008 TO THE FIRST QUARTER OF
2012

Period 2008 2009 2010 2011 2012-1T

First Quarter 19,813 13,946 20,243 21,192 20,060
Second Quarter 18,527 15,078 25,640 19,736
Third Quarter 21,872 22,211 26,614 21,642
Fourth Quarter 16,489 21,137 23,588 51,459
2012* Note: is none-audited financial information until the 31st March (first quarter)

Source: Own elaboration

45 / 52
ORBIS
Revista Científica Electrónica de Ciencias Humanas / Scientific e-journal of Human Sciences /
PPX200502ZU1935 / ISSN 1856-1594 / By Fundación Unamuno /
Edmundo Lizarzaburu Bolaños, Kurt Burneo, Luis Noriega (2018)
CEMENTO ANDINO S.A: ANÁLISIS FINANCIERO DE UNA EMPRESA LATINOAMERICANA
[Link] / núm 40 (año 14) 17-31

APPENDIX 2.4 – CALCULATION OF THE COMPANY BETA

1.50
UNLEVERED BETA = = 0.82
1.84

RE − LEVERAGED BETA = 0.82 × 1.53 = 1.25

Source: Own elaboration

46 / 52
ORBIS
Revista Científica Electrónica de Ciencias Humanas / Scientific e-journal of Human Sciences /
PPX200502ZU1935 / ISSN 1856-1594 / By Fundación Unamuno /
Edmundo Lizarzaburu Bolaños, Kurt Burneo, Luis Noriega (2018)
CEMENTO ANDINO S.A: ANÁLISIS FINANCIERO DE UNA EMPRESA LATINOAMERICANA
[Link] / núm 40 (año 14) 17-31

APPENDIX 3.1 – EVOLUTION OF ANDINBC1 (CEMENTO ANDINO)

1,500.00

1,000.00

500.00

0.00

Source: BVL

47 / 52
ORBIS
Revista Científica Electrónica de Ciencias Humanas / Scientific e-journal of Human Sciences /
PPX200502ZU1935 / ISSN 1856-1594 / By Fundación Unamuno /
Edmundo Lizarzaburu Bolaños, Kurt Burneo, Luis Noriega (2018)
CEMENTO ANDINO S.A: ANÁLISIS FINANCIERO DE UNA EMPRESA LATINOAMERICANA
[Link] / núm 40 (año 14) 17-31

APPENDIX 3.2 – EVOLUTION OF CPACASC1 (CEMENTOS PACASMAYO)

4.00

3.00

2.00

1.00

0.00
May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12

Source: BVL

48 / 52
ORBIS
Revista Científica Electrónica de Ciencias Humanas / Scientific e-journal of Human Sciences /
PPX200502ZU1935 / ISSN 1856-1594 / By Fundación Unamuno /
Edmundo Lizarzaburu Bolaños, Kurt Burneo, Luis Noriega (2018)
CEMENTO ANDINO S.A: ANÁLISIS FINANCIERO DE UNA EMPRESA LATINOAMERICANA
[Link] / núm 40 (año 14) 17-31

APPENDIX 3.3 – EVOLUTION OF CEMLIMC1 (CEMENTOS LIMA)

8.00

6.00

4.00

2.00

0.00
May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12

Source: BVL

49 / 52
ORBIS
Revista Científica Electrónica de Ciencias Humanas / Scientific e-journal of Human Sciences /
PPX200502ZU1935 / ISSN 1856-1594 / By Fundación Unamuno /
Edmundo Lizarzaburu Bolaños, Kurt Burneo, Luis Noriega (2018)
CEMENTO ANDINO S.A: ANÁLISIS FINANCIERO DE UNA EMPRESA LATINOAMERICANA
[Link] / núm 40 (año 14) 17-31

GLOSSARY

Balance Sheet: A financial statement that summarizes a company's assets, liabilities and
shareholders' equity at a specific point in time. These three balance sheet segments give investors
an idea as to what the company owns and owes, as well as the amount invested by the shareholders.

BCRP: Banco Central de Reserva del Perú, Central Reserve Bank of Perú.

Bloomberg: A major global provider of 24-hour financial news and information including real-time and
historic price data, financials data, trading news and analyst coverage, as well as general news and
sports. Its services, which span their own platform, television, radio and magazines, offer
professionals analytic tools.

Bond: A bond is a debt investment in which an investor loans money to an entity (typically corporate
or governmental) which borrows the funds for a defined period of time at a variable or fixed interest
rate. Bonds are used by companies, municipalities, states and sovereign governments to raise money
and finance a variety of projects and activities. Owners of bonds are debt holders, or creditors, of the
issuer.

Book value per share: A financial measure that represents a per share assessment of the minimum
value of a company's equity. More specifically, this value is determined by relating the original value
of a firm's common stock adjusted for any outflow (dividends and stock buybacks) and inflow (retained
earnings) modifiers to the amount of shares outstanding.

BVL: Bolsa de Valores de Lima, Lima Stock Exchange.

Capital Structure: A mix of a company's long-term debt, specific short-term debt, common equity
and preferred equity. The capital structure is how a firm finances its overall operations and growth by
using different sources of funds. Debt comes in the form of bond issues or long-term notes payable,
while equity is classified as common stock, preferred stock or retained earnings. Short-term debt such
as working capital requirements is also considered to be part of the capital structure

Clinker: Portland cement clinker is ground to a fine powder and used as the binder in many cement
products. A little gypsum is sometimes added. It may also be combined with other active ingredients
or chemical admixtures to produce other types of cement

Close Price: The final price at which a security is traded on a given trading day. The closing price
represents the most up-to-date valuation of a security until trading commences again on the next
trading day.

Code ISIN (International Securities Identification Number): Its structure is defined in ISO 6166.
Securities for which ISINs are issued include bonds, commercial paper, stocks and warrants. The
ISIN code is a 12-character alpha-numerical code that does not contain information characterizing
financial instruments but serves for uniform identification of a security at trading and settlement.

Common stocks: A security that represents ownership in a corporation. Holders of common stock
exercise control by electing a board of directors and voting on corporate policy.

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ORBIS
Revista Científica Electrónica de Ciencias Humanas / Scientific e-journal of Human Sciences /
PPX200502ZU1935 / ISSN 1856-1594 / By Fundación Unamuno /
Edmundo Lizarzaburu Bolaños, Kurt Burneo, Luis Noriega (2018)
CEMENTO ANDINO S.A: ANÁLISIS FINANCIERO DE UNA EMPRESA LATINOAMERICANA
[Link] / núm 40 (año 14) 17-31

Dividend: A dividend is a distribution of a portion of a company's earnings, decided by the board of

directors, to a class of its shareholders. Dividends can be issued as cash payments, as shares of
stock, or other property.

EBITDA: Is essentially net income with interest, taxes, depreciation, and amortization added back to
it, and can be used to analyze and compare profitability between companies and industries because
it eliminates the effects of financing and accounting decisions.

Emerging markets: A nation's economy that is progressing toward becoming advanced, as shown
by some liquidity in local debt and equity markets and the existence of some form of market exchange
and regulatory body.

EPS (Earing per Share): The portion of a company's profit allocated to each outstanding share of
common stock. Earnings per share serve as an indicator of a company's profitability.

EVA (Economic Value Added): A measure of a company's financial performance based on the
residual wealth calculated by deducting cost of capital from its operating profit (adjusted for taxes on
a cash basis).

GDP (Gross Domestic Product): The monetary value of all the finished goods and services
produced within a country's borders in a specific time period. Though GDP is usually calculated on
an annual basis, it can be calculated on a quarterly basis as well. GDP includes all of private and
public consumption, government outlays, investments and exports minus imports that occur within a
defined territory. Put simply, GDP is a broad measurement of a nation’s overall economic activity.

Junín: is a region in the central highlands and westernmost Amazonia of Perú. Its capital
is Huancayo.

Market Price: The current price at which an asset or service can be bought or sold. Economic theory
contends that the market price converges at a point where the forces of supply and demand meet.
Shocks to either the supply side and/or demand side can cause the market price for a good or service
to be re-evaluated.

MEF: Ministerio de Economía y Finanzas, Ministry of Economics and Finances

Net Income: A company's total earnings (or profit). Net income is calculated by taking revenues and
adjusting for the cost of doing business, depreciation, interest, taxes and other expenses. This
number is found on a company's income statement and is an important measure of how profitable
the company is over a period of time. The measure is also used to calculate earnings per share.

Nominal Value: The nominal value of a security, such as a stock or bond, remains fixed for the
duration of its life. What fluctuates is the security's market value, which may be markedly different
from its nominal value.

PER: The Price-to-Earnings Ratio or P/E ratio is a ratio for valuing a company that measures its
current share price relative to its per-share earnings.

ROE: The amount of net income returned as a percentage of shareholders equity. Return on equity
measures a corporation's profitability by revealing how much profit a company generates with the
money shareholders have invested.

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ORBIS
Revista Científica Electrónica de Ciencias Humanas / Scientific e-journal of Human Sciences /
PPX200502ZU1935 / ISSN 1856-1594 / By Fundación Unamuno /
Edmundo Lizarzaburu Bolaños, Kurt Burneo, Luis Noriega (2018)
CEMENTO ANDINO S.A: ANÁLISIS FINANCIERO DE UNA EMPRESA LATINOAMERICANA
[Link] / núm 40 (año 14) 17-31

ROI: A performance measure used to evaluate the efficiency of an investment or to compare the
efficiency of a number of different investments. ROI measures the amount of return on an investment
relative to the investment’s cost. To calculate ROI, the benefit (or return) of an investment is divided
by the cost of the investment, and the result is expressed as a percentage or a ratio.

Stocks: A type of security that signifies ownership in a corporation and represents a claim on part of
the corporation's assets and earnings.

TM: Tonelada métrica, Metric Ton.

WACC: The weighted average cost of capital (WACC) is calculation of a firm's cost of capital in which
each category of capital is proportionately weighted. All sources of capital, including common stock,
preferred stock, bonds and any other long-term debt, are included in a WACC calculation. A firm’s
WACC increases as the beta and rate of return on equity increase, as an increase in WACC denotes
a decrease in valuation and an increase in risk.

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