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IMPORTANT NOTICE
THIS OFFERING IS AVAILABLE ONLY TO INVESTORS WHO ARE EITHER (1) U.S. PERSONS WHO ARE
QUALIFIED INSTITUTIONAL BUYERS (“QIBs”) (WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES
ACT of 1933, AS AMENDED (THE “SECURITIES ACT”) AND (2) NON-U.S. PERSONS (WITHIN THE MEANING OF
REGULATION S UNDER THE SECURITIES ACT) OUTSIDE THE U.S.
IMPORTANT: You must read the following before continuing. The following applies to the offering memorandum following
this page, and you are advised to read this carefully before reading, accessing or making any other use of the offering
memorandum. By accessing the offering memorandum, you agree to be bound by the following terms and conditions, including
any modifications to them any time you receive any information from us as a result of such access.
NOTHING IN THIS ELECTRONIC TRANSMISSION CONSTITUTES AN OFFER OF SECURITIES FOR SALE IN ANY
JURISDICTION WHERE IT IS UNLAWFUL TO DO SO. THE SECURITIES HAVE NOT BEEN, AND WILL NOT BE,
REGISTERED UNDER THE SECURITIES ACT OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES
OR OTHER JURISDICTION AND THE SECURITIES MAY NOT BE OFFERED OR SOLD WITHIN THE U.S. OR TO, OR
FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS (AS DEFINED IN REGULATION S UNDER THE SECURITIES
ACT), EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE LAWS OF OTHER JURISDICTIONS.
THE OFFERING MEMORANDUM AND THE OFFER OF THE ORDINARY SHARES ARE ONLY ADDRESSED TO AND
DIRECTED AT PERSONS IN MEMBER STATES OF THE EUROPEAN ECONOMIC AREA WHO ARE "QUALIFIED
INVESTORS” WITHIN THE MEANING OF ARTICLE 2(1)(E) OF THE PROSPECTUS DIRECTIVE (DIRECTIVE
2003/71/EC) AND RELATED IMPLEMENTATION MEASURES IN MEMBER STATES (“QUALIFIED INVESTORS”). IN
ADDITION, IN THE UNITED KINGDOM THE OFFERING MEMORANDUM IS ONLY BEING DISTRIBUTED TO
PERSONS WHO HAVE PROFESSIONAL EXPERIENCE IN MATTERS RELATING TO INVESTMENTS FALLING
WITHIN ARTICLE 19(5) OF THE FINANCIAL SERVICES AND MARKETS ACT 2000 (FINANCIAL PROMOTION)
ORDER 2005, AND OTHER PERSONS TO WHOM IT MAY OTHERWISE LAWFULLY BE COMMUNICATED (ALL
SUCH PERSONS TOGETHER REFERRED TO AS “RELEVANT PERSONS”). ANY INVESTMENT OR INVESTMENT
ACTIVITY TO WHICH THIS OFFERING MEMORANDUM RELATES IS AVAILABLE ONLY TO (I) IN THE UNITED
KINGDOM, RELEVANT PERSONS, AND (II) IN ANY MEMBER STATE OF THE EUROPEAN ECONOMIC AREA
OTHER THAN THE UNITED KINGDOM, QUALIFIED INVESTORS, AND WILL BE ENGAGED IN ONLY WITH SUCH
PERSONS. IN ADDITION, NO PERSON MAY COMMUNICATE OR CAUSE TO BE COMMUNICATED ANY
INVITATION OR INDUCEMENT TO ENGAGE IN INVESTMENT ACTIVITY, WITHIN THE MEANING OF SECTION 21
OF THE FINANCIAL SERVICES AND MARKETS ACT 2000 (THE “FSMA”), RECEIVED BY IT IN CONNECTION WITH
THE ISSUE OR SALE OF THE ORDINARY SHARES OTHER THAN IN CIRCUMSTANCES IN WHICH SECTION 21(1)
OF THE FSMA DOES NOT APPLY TO US.
THE FOLLOWING OFFERING MEMORANDUM MAY NOT BE FORWARDED OR DISTRIBUTED TO ANY OTHER
PERSON AND MAY NOT BE REPRODUCED IN ANY MANNER WHATSOEVER. ANY FORWARDING,
DISTRIBUTION OR REPRODUCTION OF THIS DOCUMENT IN WHOLE OR IN PART IS UNAUTHORIZED. FAILURE
TO COMPLY WITH THIS DIRECTIVE MAY RESULT IN A VIOLATION OF THE SECURITIES ACT OR THE
APPLICABLE LAWS OF OTHER JURISDICTIONS.
Confirmation of your Representation: In order to be eligible to view this offering memorandum or make an investment
decision with respect to the securities, an investor must be either (1) a U.S. Person who is a QIB or (2) a non-U.S. person (within
the meaning of Regulation S under the Securities Act) outside the United States. This offering memorandum is being sent at your
request and by accepting the e-mail and accessing this offering memorandum, you shall be deemed to have represented to us that
(1) you and any customers you represent are either (a) QIBs or (b) non-U.S. persons (within the meaning of Regulation S under
the Securities Act) and that the electronic mail address that you gave us and to which this offering memorandum has been
delivered is not located in the U.S., and (2) that you consent to delivery of such offering memorandum by electronic transmission.
You are reminded that this offering memorandum has been delivered to you on the basis that you are a person into whose
possession this offering memorandum may be lawfully delivered in accordance with the laws of the jurisdiction in which you are
located and you may not, nor are you authorized to, deliver this offering memorandum to any other person.
The materials relating to the offering do not constitute, and may not be used in connection with, an offer or solicitation in any
place where offers or solicitations are not permitted by law. If a jurisdiction requires that the offering be made by a licensed
broker or dealer and the initial purchasers or any affiliate of the initial purchasers is a licensed broker or dealer in that
jurisdiction, the offering shall be deemed to be made by the initial purchasers or such affiliate on behalf of the issuers in such
jurisdiction.
This offering memorandum has been sent to you in an electronic form. You are reminded that documents transmitted via this
medium may be altered or changed during the process of electronic transmission, and consequently neither the initial purchasers,
nor any person who controls them or any of their directors, officers or employees, nor any of their agents nor any affiliate of any
such person accept any liability or responsibility whatsoever in respect of any difference between this offering memorandum
distributed to you in electronic format and the hard copy version available to you on request from the initial purchasers.
OFFERING MEMORANDUM
CONFIDENTIAL
201,000,000 Shares
Elementia, S.A.B. de C.V.
Ordinary Shares
Pesos 17.00 per share
This is the initial offering of our shares. We are offering 201,000,000 shares of our common stock in a
global offering. Concurrently with this international offering of 38,808,695 shares, we are offering
162,191,305 shares in Mexico in a public offering approved by the Comisión Nacional Bancaria y de Valores
(Mexican National Securities and Banking Commission, or “CNBV”), conducted through certain Mexican
underwriters referred to herein, to the general public in Mexico; for these purposes, we are registering our
shares with the Registro Nacional de Valores “RNV” maintained by the CNBV and listing our shares on the
Bolsa Mexicana de Valores (the Mexican Stock Exchange, or “BMV”). The Mexican offering commenced
on the same date as this international offering and shares sold in the Mexican offering will be sold at the
same price as the price per share offered hereby. The closings of the international and Mexican offerings are
conditioned upon each other.
This offering includes a public offering to retail and institutional investors in Mexico and an
international offering to institutional investors outside of Mexico. The shares of our common stock that are
being offered may be reallocated between the Mexican offering and the international offering, depending
upon the existing demand in the different markets. See “Plan of Distribution.” We refer to the international
offering and the Mexican offering collectively as the “global offering.”
We have granted the initial purchasers an option to purchase an aggregate of up to 5,821,305
additional shares in the international offering and the Mexican underwriters an option to purchase an
aggregate of up to 24,328,695 additional shares in the Mexican offering.
There is currently no market for our shares. We have applied to have our shares listed on the BMV
under the symbol “ELEMENT.”
Investing in the shares involves risks. See the “Risk Factors” section beginning on page 27 of this offering
memorandum.
The shares have not been and will not be registered under the U.S. Securities Act of 1933, as amended
or “Securities Act.” Prospective purchasers that are qualified institutional buyers are hereby notified that
the sellers of the shares are relying on an exemption from the provisions of Section 5 of the Securities Act
provided by Rule 144A under the Securities Act. Outside the United States, the offering is being made in
reliance on Regulation S under the Securities Act.
Delivery of the shares in book-entry form will be made on or about July 15, 2015 through the
book-entry system of S.D. Indeval Institución para el Depósito de Valores, S.A. de C.V., or “Indeval”, the
central securities depositary system located in Mexico City, Mexico.
Joint Global Coordinators and Joint Bookrunners
Credit Suisse
Morgan Stanley
Citigroup
Joint Bookrunners
HSBC
Santander
July 9, 2015
BBVA
TABLE OF CONTENTS
Page
Notice to Prospective Investors in the United States ..................................................................................................... ii
Notice to New Hampshire Residents ............................................................................................................................iii
Notice to Prospective Investors in the United Kingdom ..............................................................................................iii
Service of Process and Enforcement of Civil Liabilities ..............................................................................................iii
Available Information ..................................................................................................................................................iii
Forward-Looking Statements ....................................................................................................................................... iv
Presentation of Financial and Certain Other Information ............................................................................................. vi
Glossary of Terms and Definitions ............................................................................................................................... ix
Summary ....................................................................................................................................................................... 1
The Global Offering .................................................................................................................................................... 17
Summary Consolidated Financial and Other Information ........................................................................................... 22
Risk Factors ................................................................................................................................................................. 27
Use of Proceeds ........................................................................................................................................................... 45
Capitalization .............................................................................................................................................................. 46
Dilution ....................................................................................................................................................................... 47
Dividends and Dividend Policy ................................................................................................................................... 48
Exchange Rates ........................................................................................................................................................... 49
Selected Consolidated Financial and Other Information ............................................................................................. 50
Management’s Discussion and Analysis of Our Results of Operations and Financial Condition ............................... 55
Industry ....................................................................................................................................................................... 83
Business ....................................................................................................................................................................... 96
Management .............................................................................................................................................................. 143
Principal Shareholders ............................................................................................................................................... 149
Related Party Transactions ........................................................................................................................................ 150
Description of Our Capital Stock and By-Laws ........................................................................................................ 153
The Mexican Securities Market................................................................................................................................. 160
Taxation..................................................................................................................................................................... 169
Plan of Distribution ................................................................................................................................................... 173
Transfer Restrictions ................................................................................................................................................. 180
Validity of the Shares ................................................................................................................................................ 181
Independent Auditors ................................................................................................................................................ 182
Index to Consolidated Financial Statements ............................................................................................................. F-1
All references to “we,” “us,” “our,” “our company” or the “issuer” in this offering memorandum are to
Elementia, S.A.B. de C.V., and, unless otherwise indicated or the context requires otherwise, its consolidated
subsidiaries. All references to “Mexico” in this offering memorandum are to the United Mexican States. All
references to the “United States” or “U.S.” in this offering memorandum are to the United States of America.
APPLICATION HAS BEEN MADE TO REGISTER THE SHARES IN MEXICO WITH THE RNV
MAINTAINED BY THE CNBV, WHICH IS A REQUIREMENT UNDER THE MEXICAN SECURITIES
MARKET LAW (LEY DEL MERCADO DE VALORES OR “LMV”) TO PUBLICLY OFFER SUCH
SHARES IN MEXICO. SUCH REGISTRATION IS EXPECTED TO BE OBTAINED ON OR BEFORE
THE CLOSING OF THE GLOBAL OFFERING AND DOES NOT IMPLY ANY CERTIFICATION AS TO
THE INVESTMENT QUALITY OF THE SHARES OFFERED PURSUANT TO THIS OFFERING
MEMORANDUM, OUR SOLVENCY OR THE ACCURACY OR COMPLETENESS OF THE
INFORMATION CONTAINED IN THIS OFFERING MEMORANDUM, AND SUCH REGISTRATION
DOES NOT RATIFY OR VALIDATE ACTS OR OMISSIONS, IF ANY, UNDERTAKEN IN
CONTRAVENTION OF APPLICABLE LAW. IN MAKING AN INVESTMENT DECISION, ALL
INVESTORS, INCLUDING ANY MEXICAN INVESTOR WHO MAY ACQUIRE SHARES FROM TIME
TO TIME, MUST RELY ON THEIR OWN EXAMINATION OF US.
i
This offering memorandum is confidential. We have prepared this offering memorandum solely for use in
connection with the proposed offering of the securities described in this offering memorandum. This offering
memorandum is personal to each offeree and does not constitute an offer to any other person or to the public
generally to subscribe for or otherwise acquire securities. You are authorized to use this offering memorandum
solely for the purpose of considering the purchase of our shares. Distribution of this offering memorandum to any
person other than the prospective investor and any person retained to advise such prospective investor with respect
to its purchase is unauthorized, and any disclosure of any of its contents, without our prior written consent, is
prohibited. Each prospective investor, by accepting delivery of this offering memorandum, agrees to the foregoing
and to make no photocopies of this offering memorandum or any documents referred to in this offering
memorandum.
We are relying upon an exemption from registration under the Securities Act for an offer and sale of securities
that do not involve a public offering in the United States. By purchasing the shares, you will be deemed to have
made the acknowledgements, representations and agreements described under “Transfer Restrictions” in this
offering memorandum. You should understand that you may be required to bear the financial risks of your
investment for an indefinite period of time.
In making an investment decision, prospective investors must rely on their own examination of the company,
our business and the terms of the offering, including the merits and risks involved. Prospective investors should not
construe anything in this offering memorandum as legal, business or tax advice. Each prospective investor should
consult its own advisors as needed to make its investment decision and to determine whether it is legally permitted
to purchase the securities under applicable legal investment or similar laws or regulations.
We have furnished the information in this offering memorandum. You acknowledge and agree that the initial
purchasers make no representation or warranty, express or implied, as to the accuracy or completeness of such
information, and nothing contained in this offering memorandum is, or shall be relied upon as, a promise or
representation by the initial purchasers. This offering memorandum contains summaries believed to be accurate with
respect to certain documents, but reference is made to the actual documents for complete information. All such
summaries are qualified in their entirety by such reference. Copies of documents referred to herein will be made
available to prospective investors upon request to us or the initial purchasers.
The distribution of this offering memorandum and the offering and sale of the shares in certain jurisdictions
may be restricted by law. We and the initial purchasers require persons into whose possession this offering
memorandum comes to inform themselves about and to observe any such restrictions. This offering memorandum
does not constitute an offer of, or an invitation to purchase, any of the shares in any jurisdiction in which such offer
or sale would be unlawful. No one has taken any action that would permit a public offering to occur in any
jurisdiction other than Mexico.
We reserve the right to withdraw the global offering at any time and, to the extent permitted by law, we and the
initial purchasers reserve the right to reject any commitment to subscribe for the shares in whole or in part and to
allot to any prospective investor less that the full amount of shares sought by that investor. The initial purchasers and
certain related entities may acquire for their own accounts a portion of the shares.
NOTICE TO PROSPECTIVE INVESTORS IN THE UNITED STATES
Neither the U.S. Securities and Exchange Commission, or “SEC”, nor any state securities commission has
approved or disapproved of these securities or determined if this offering memorandum is truthful or complete. Any
representation to the contrary is a criminal offense.
The shares are subject to restrictions on transferability and resale and may not be transferred or resold except as
permitted under the Securities Act and the applicable state securities laws pursuant to registration or exemption
therefrom. As a prospective purchaser, you should be aware that you may be required to bear the financial risks of
this investment for an indefinite period of time. Please refer to the sections in this offering memorandum entitled
“Plan of Distribution” and “Transfer Restrictions.”
ii
NOTICE TO NEW HAMPSHIRE RESIDENTS
NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A
LICENSE HAS BEEN FILED UNDER CHAPTER 421-B OF THE NEW HAMPSHIRE REVISED
STATUTES, OR “RSA”, WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A
SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW
HAMPSHIRE IMPLIES THAT ANY DOCUMENT FILED UNDER RSA 421-B IS TRUE, COMPLETE
AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE FACT THAT ANY EXEMPTION OR
EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION MEANS THAT THE
SECRETARY OF STATE HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS OF,
OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY OR TRANSACTION. IT
IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER,
CUSTOMER OR CLIENT ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF
THIS PARAGRAPH.
NOTICE TO PROSPECTIVE INVESTORS IN THE UNITED KINGDOM
Our shares may not be offered or sold to any person in the United Kingdom, other than to persons whose
ordinary activities involve the acquiring, holding, managing or disposing of investments (as principal or agent) for
the purposes of their businesses or who it is reasonable to expect will acquire, hold, manage or dispose of
investments (as principal or agent) for the purposes of their businesses or otherwise in circumstances which have not
resulted and will not result in an offer to the public in the United Kingdom.
SERVICE OF PROCESS AND ENFORCEMENT OF CIVIL LIABILITIES
We are a sociedad anónima bursátil de capital variable (variable capital public stock corporation) organized
under the laws of Mexico. All of our directors, officers, controlling persons and certain other persons named in this
offering memorandum reside outside the territory of the United States and all or a significant portion of the assets of
the directors and officers and certain other persons named in this offering memorandum and substantially all of our
assets are located outside the territory of the United States. As a result, it may not be possible for you to effect
service of process within the United States upon such persons or to enforce against them or against us in U.S. courts
judgments predicated upon the civil liability provisions of the federal securities laws of the United States. There is
doubt as to the enforceability in Mexico, either in original actions or in actions for enforcement of judgments of U.S.
courts, of civil liabilities predicated on the U.S. federal securities laws. See “Risk Factors—Risk Factors Relating to
the Shares and this Offering—It may be difficult to enforce civil liabilities against us or our directors, executive
officers and controlling persons.”
AVAILABLE INFORMATION
We are not subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, or the
“Exchange Act.” For so long as any of the shares remain outstanding and are “restricted securities” within the
meaning of Rule 144(a)(3) under the Securities Act, we agree to furnish upon the request of any shareholder of the
shares, to the holder or beneficial owner or to each prospective purchaser designated by any such holder of the
shares or interests therein who is a “qualified institutional buyer” within the meaning of Rule 144A(a)(1),
information required by Rule 144A(d)(4) under the Securities Act, unless we either maintain the exemption from
reporting under Rule 12g3-2(b) of the Securities Act or furnish the information to the SEC in accordance with
Section 13 or 15 of the Exchange Act. Any such request may be made to us in writing at our corporate offices
located at Poniente 134, No. 719, Col. Industrial Vallejo, C.P. 02300, Del. Azcapotzalco, México, Distrito Federal,
Attention: Mr. Juan Francisco Sánchez Kramer. For so long as the shares are registered with the RNV and listed
with the BMV, we will be required periodically to furnish certain information, including quarterly and annual
reports, to the CNBV and to the BMV, which will be available in Spanish for inspection on the BMV’s website at
www.bmv.com.mx and on the CNBV’s website at www.cnbv.gob.mx.
iii
FORWARD-LOOKING STATEMENTS
This offering memorandum contains forward-looking statements. Examples of such forward-looking statements
include, but are not limited to: (i) statements regarding our results of operations and financial position;
(ii) statements of plans, objectives or goals, including those related to our operations; and (iii) statements of
assumptions underlying such statements. Words such as “aim,” “anticipate,” “believe,” “could,” “estimate,”
“expect,” “forecast,” “guidance,” “intend,” “may,” “may have,” “plan,” “potential,” “predict,” “seek,” “should,”
“will,” “would” and similar expressions are intended to identify forward-looking statements but are not the
exclusive means of identifying such statements.
By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and
specific, and risks exist that the predictions, forecasts, projections and other forward-looking statements will not be
achieved. We caution investors that a number of important factors could cause actual results to differ materially
from the plans, objectives, expectations, estimates and intentions expressed or implied in such forward-looking
statements, including the following factors:

general economic, political and business conditions in Mexico and the other markets in which we operate;

the performance of the global financial markets and economic crises, as well as our ability to refinance our
financial obligations, as necessary;

competition in our industry and markets;

management’s expectations and estimates regarding our future financial performance and our funding plans
and programs;

limitations on our access to sources of financing on competitive terms or otherwise, and compliance with
covenants by which we are bound;

our ability to service our debt;

our capital expenditure plans;

fluctuations in exchange rates, market interest rates or rates of inflation or the conversion of currencies;

existing and future laws and governmental regulations, including environmental laws, and liabilities or
obligations arising thereunder and adverse administrative or judicial rulings relating to us;

policies and interpretations in respect of acquisitions;

increases in insurance premiums;

changes in market prices, demand and consumer preferences and competitive conditions;

cyclicality and seasonality in our results of operations;

our ability to implement our strategy;

increases in the prices of goods and/or services supplied to us and fluctuations in the prices of raw materials
in commodities markets;

the imposition of price controls on the products we sell;

trade barriers;

technological innovations;

the costs, difficulties, uncertainties and regulations related to mergers, acquisitions or joint ventures;

our ability to complete acquisitions, for regulatory or other reasons, and to successfully integrate the
operations of our acquired businesses;
iv

liability claims including claims related to health, safety and environmental matters and claims arising from
class action laws in Mexico or other jurisdictions in which we operate;

failures in our information technology systems, including our data and communications systems;

the effect of changes in accounting principles, new legislation, actions by regulatory authorities,
government bulletins and monetary or fiscal policy in Mexico and the other markets in which we operate;

declines in sales of our products by independent distributors;

our ability to retain certain key personnel and to hire additional key personnel;

our ability to realize synergies from our mergers and acquisitions activity;

delays by our suppliers or the inability to source, on terms acceptable to us or otherwise, inputs required by
us to produce the products which we sell;

investigations by governmental authorities; and

other risk factors discussed under “Risk Factors.”
Should one or more of these factors or uncertainties materialize, or should underlying assumptions prove
incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated,
expected, forecast or intended.
Prospective investors should read the sections of this offering memorandum entitled “Summary,” “Risk
Factors,” “Selected Consolidated Financial and Other Information,” “Management’s Discussion and Analysis of Our
Results of Operations and Financial Condition,” “Business” and “Management” for a more complete discussion of
the factors that could affect our future performance and the markets and industry sectors in which we operate.
In light of these risks, uncertainties and assumptions, the forward-looking statements described in this offering
memorandum may not occur. These forward-looking statements speak only as to the date of this offering
memorandum and we undertake no obligation to update or revise any forward-looking statement, whether as a result
of new information or future events or developments. Additional factors affecting our business emerge from time to
time and it is not possible for us to predict all of these factors, nor can we assess the impact of all such factors on our
business or the extent to which any factor, or the combination of factors, may cause actual results to differ materially
from those contained in any forward-looking statement. Although we believe the plans, intentions and expectations
reflected in or suggested by such forward-looking statements are reasonable, we cannot assure you that those plans,
intentions or expectations will be achieved. In addition, you should not interpret statements regarding past trends or
activities as assurances that those trends or activities will continue in the future. All written, oral and electronic
forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety
by this cautionary statement.
v
PRESENTATION OF FINANCIAL AND CERTAIN OTHER INFORMATION
Financial Statements
This offering memorandum includes our audited annual consolidated financial statements as of and for the years
ended December 31, 2014, 2013 and 2012, together with the notes thereto, and our unaudited interim condensed
consolidated financial statements as of March 31, 2015 and for the three-month periods ended March 31, 2015 and
2014, together with the notes thereto, prepared in accordance with IFRS and IAS 34, respectively. See “Selected
Consolidated Financial and Other Information” and “Management’s Discussion and Analysis of Our Results of
Operations and Financial Condition.”
The financial statements included in this offering memorandum have been prepared in accordance with IFRS, as
required commencing on January 1, 2012, for public entities in Mexico in accordance with the amendments to the
Rules for Public Companies and other Market Participants in the Mexican Securities Market, established by the
CNBV on January 27, 2009.
In May 2015, we made certain internal changes to our reporting divisions, in order to evaluate the performance
of our divisions and the allocation of resources to them, and in order to reflect a new operating strategy. As a result
of these changes, our division dedicated to the production and marketing of expandable and extruded polystyrene, as
well as the transformation of polypropylene, polyethylene, polycarbonate resins and PVC (formerly the Plastics
Division) has been absorbed by our Building Systems Division. We now have three divisions: the Cement Division,
the Building Systems Division and the Metal Products Division. We have restated our division information based on
our new structure for the three months ended March 31, 2015 and 2014 and for the years ended December 31, 2014,
2013 and 2012. We have not adjusted any division information for any period prior to January 1, 2012. Thus the
division information presented in this offering memorandum is not directly comparable with the division
information as of any date or any period prior to January 1, 2012.
Acquisitions and Comparability of Our Financial Statements
Certain of our financial information may not be comparable as a result of various acquisitions and dispositions
consummated during the periods covered in this offering memorandum that may affect any analysis of our financial
information. See “Risk Factors.”
In 2009, we acquired a majority stake in Trituradora y Procesadora de Materiales Santa Anita, S.A. de C.V., or
“Trituradora,” which built a plant for the manufacture and marketing of cement. The new cement plant commenced
operations in 2013. On January 8, 2013, Trituradora and ELC Tenedora Cementos, both of which are subsidiaries of
Elementia, and Elementia entered into an agreement, or the “Contribution Agreement,” with Lafarge and Lafarge
Cementos (entities engaged in the manufacture and marketing of cement) whereby, among other things, we agreed
to create a joint venture, through ELC Tenedora Cementos, for cement production in Mexico beginning on July 31,
2013. Pursuant to the Contribution Agreement, the share capital of each of Trituradora and Lafarge Cementos was
transferred to ELC Tenedora Cementos and we acquired a 53% ownership in ELC Tenedora Cementos, which gave
us control over ELC Tenedora Cementos and its subsidiaries, Trituradora and Lafarge Cementos, and Financière
Lafarge, S.A.S. retained a 47% shareholding in the joint venture. This transaction generated goodwill in the amount
of approximately Ps$1,150 million. For purposes of this offering memorandum, the term “Lafarge Joint Venture”
refers to ELC Tenedora Cementos, our subsidiary, in which we owned 53% and Lafarge owned 47% of the capital
stock prior to our purchase of Lafarge’s 47% non-controlling interest.
On September 19, 2014, we signed a share purchase agreement to acquire Lafarge’s 47% non-controlling
interest in the Lafarge Joint Venture for a purchase price of US$225 million. We agreed to make payments in two
installments: (i) an initial payment of US$180 million at the close of the transaction, and (ii) a second payment of
US$45 million, without interest, on the first anniversary of the closing date of the transaction. On December 16,
2014, following the receipt of approval from the Mexican Federal Economic Competition Commission (Comisión
Federal de Competencia Económica) and the initial payment of US$180 million using part of the proceeds from our
offering of the 2025 notes, we became the holder, directly or indirectly, of 100% of the shares of ELC Tenedora
Cementos. Pursuant to the terms of the share purchase agreement, Lafarge is required to indemnify us for any
breach of their representations made pursuant to such contract during a period of one year from the acquisition.
Elementia, in turn, is required to maintain the confidentiality of the information obtained from Lafarge during the
Lafarge Joint Venture until September 19, 2017.
vi
On December 19, 2013, our subsidiary Plycem USA LLC signed an acquisition agreement with Saint-Gobain to
acquire the production assets of the fiber cement business of its subsidiary, CertainTeed Corporation, a significant
manufacturer of construction materials in the United States. This acquisition was completed on January 31, 2014.
The amount paid in connection with this acquisition was US$25.2 million, equivalent to Ps$329.1 million,
generating a bargain purchase gain in the amount of Ps$434.6 million, which was recorded as other income in the
statement of comprehensive income.
The financial information for the years ended December 31, 2013 and 2012 may not be comparable to the
financial information for the year ended December 31, 2014 or prior periods as a result of our acquisition of the
Lafarge Joint Venture in July 2013 and the acquisition of the assets of the fiber cement business of CertainTeed in
January 2014.
EBITDA
References to “EBITDA” are to consolidated net income for the period, plus or minus: losses from discontinued
operations, income tax expense, equity in income of associated entities, exchange rate results, interest income,
interest expense, banking fees and depreciation and amortization. EBITDA should not be interpreted as a substitute
for net income, cash flow from operations or other measures of our liquidity or financial performance. Our
presentation of EBITDA may not be comparable to similarly titled measures provided by other companies either in
Mexico or in other jurisdictions. EBITDA is not a measure recognized under IFRS and does not have a standardized
meaning. In addition, we have not calculated EBITDA in accordance with the guidelines adopted by the SEC on
presentation of non-GAAP financial measures. See “Selected Consolidated Financial and Other Information” and
“Management’s Discussion and Analysis of Our Results of Operations and Financial Condition.”
Currency and Other Information
Unless otherwise stated, the financial information appearing in this offering memorandum is presented in
Mexican pesos. References herein to “pesos” or “Ps$” are to Mexican pesos, and references to “U.S. dollars” or
“US$” are to U.S. dollars. Solely for the convenience of the reader, certain amounts presented in Mexican pesos in
this offering memorandum as of and for the three months ended March 31, 2015 and as of and for the year ended
December 31, 2014 have been translated into U.S. dollars at specified exchange rates. Unless otherwise indicated,
the exchange rate used in translating Mexican pesos into U.S. dollars to calculate these convenience translations was
determined by reference to the exchange rate published by the Mexican Central Bank (Banco de México) as the rate
for the settlement of liabilities denominated in U.S. dollars payable in Mexico on March 31, 2015, which was
Ps$15.1542 per U.S. dollar. You should not construe these convenience translations as representations that the
Mexican peso amounts actually represent the U.S. dollar amounts presented, or that they could be converted into
U.S. dollars at the rate or at the dates indicated. See “Exchange Rates.”
In this offering memorandum, information is presented in thousands, millions or billions of pesos or thousands,
millions or billions of U.S. dollars. Amounts lower than a thousand, a million or a billion, as the case may be, have
been rounded unless specified otherwise. All percentages are rounded to the nearest percent, a tenth of one percent
or one hundredth of one percent, as appropriate. In some cases, the amounts and percentages in the tables in this
offering memorandum may not add up due to these rounding adjustments.
We own or have rights to trademarks or trade names that we use in conjunction with the operation of our
business. Solely for convenience, trademarks and trade names referred to in this offering memorandum may appear
without the ™ or ® symbols, but such references are not intended to indicate, in any way, that we will not assert, to
the fullest extent of the law, our rights or the rights of the applicable licensor to these trademarks and trade names. In
this offering memorandum, we also refer to product names, trademarks, trade names and service marks that are the
property of other companies. Each of the trademarks, trade names or service marks of other companies appearing in
this offering memorandum belongs to its owners. Our use or display of other companies’ product names,
trademarks, trade names or service marks is not intended to and does not imply a relationship with, or endorsement
or sponsorship by us of, the product, trademark, trade name or service mark owner, unless we otherwise indicate.
Industry and Market Data
The market information as well as other statistical information (other than information relative to our financial
results and performance) used throughout this offering memorandum is based on independent industry publications,
government publications, reports issued by market research firms or other published independent sources. Certain
vii
information is also based on our estimates, which are derived from our review of internal surveys and analyses, as
well as from independent sources. Although we believe these sources to be reliable, we have not independently
verified the information and cannot guarantee its accuracy or completeness. In addition, these sources may use
different definitions for relevant markets to those presented by us.
viii
GLOSSARY OF TERMS AND DEFINITIONS
Unless otherwise indicated by the context, the following terms will, for purposes of this offering memorandum,
have the meanings ascribed to them below, whether used in singular or plural form.
“2025 notes” means the US$425 million aggregate principal amount of senior unsecured notes due 2025
bearing interest of 5.500% per year that we issued in November 2014.
“ASTM” means the American Society for Testing and Materials.
“Autoclave Process” means a curing technology based on the use of high pressure and temperature in order to
accelerate the chemical reaction between cement and silica in the curing process, which allows the use of cellulose
fibers as the only reinforcing fibers and the elimination of the moisture of the matrix. A very stable matrix is
obtained in crystalline form in comparison to other technologies.
“Banco Inbursa” means Banco Inbursa, S.A., Institución de Banca Múltiple, Grupo Financiero Inbursa.
“BASC” means the Business Alliance for Secure Commerce.
“BMV” or “Mexican Stock Exchange” means the Bolsa Mexicana de Valores, S.A.B. de C.V.
“Building Systems Division” means the Elementia subsidiaries and operations related to the production and
marketing of fiber cement products, including sheets, roofing tiles, panels, boards, trims and pipes, among others,
and of expandable and extruded polystyrene used in construction, agriculture and food industries as well as the
manufacture of roofing materials and water tanks, primarily, from polypropylene, polyethylene and polycarbonate
resins.
“CAGR” means compound annual growth rate.
“Cast and roll” means the process that our Metal Products Division uses in the production of copper tubing in
order to improve the metal yield.
“Cathode” means the negative terminal in an electrolytic cell where copper is deposited during the electrolytic
refining process. Copper so deposited is referred to as the cathode and is typically 99.99% pure.
“Cement Division” means the Elementia subsidiary and operations related to the production and marketing of
cement.
“Certificados Bursátiles Program” means the revolving bond program established by the Company and
authorized by the CNBV (reference no. 153/3778/2010) on September 24, 2010, in the amount of up to
Ps$5,000 million.
“CERTIMEX” means Certificación Mexicana, S.C.
“CNBV” means Mexican National Banking and Securities Commission (Comisión Nacional Bancaria y de
Valores).
“COMECOP” means Compañía Mexicana de Concreto Pretensado Comecop, S.A. de C.V.
“COMEX” means Commodity Exchange Inc.
“CONAGUA” means the Mexican National Water Commission (Comisión Nacional del Agua).
“CONAPO” means the Mexican National Population Council (Consejo Nacional de Población).
“CONAVI” means the Mexican National Housing Commission (Comisión Nacional de Vivienda).
“Corporations Law” means the Mexican General Corporations Law (Ley General de Sociedades
Mercantiles).
ix
“CPVC” means Chlorinated Polyvinyl Chloride.
“CSTB” means the Scientific and Technical Center for Building (Centre Scientifique et Technique du
Batimênt).
“ELC Tenedora Cementos” means ELC Tenedora Cementos, S.A.P.I. de C.V.
“Elementia”, “the Company” or “the issuer” means Elementia, S.A.B. de C.V. and its subsidiaries.
“El Palmar” means the cement plant constructed in Santiago de Anaya, in the State of Hidalgo, Mexico.
“EIU” means the Economist Intelligence Unit.
“EU” means the European Union.
“Fiber cement” a composite material created through the bonding of natural and synthetic fibers and other
minerals into a cement matrix, used in the manufacture of roofing tiles, pipes, panels, boards, trims and pipes,
among others.
“Fibraforte” means Industrias Fibraforte, S.A.
“Fibraforte Acquisition” means the acquisition of Fibraforte, a company engaged in the manufacture and
marketing of marketing of polypropylene and polycarbonate roofs in accordance with the share purchase and sale
agreement dated July 22, 2010, which became effective on that date.
“Frigocel” means Frigocel, S.A. de C.V.
“Frigocel Acquisition” means the acquisition of Frigocel and Frigocel Mexicana, companies engaged in the
manufacture and sale of plastic products, in accordance with the share purchase and sale agreement dated
December 8, 2009, which became effective on that date.
“Frigocel Mexicana” means Frigocel Mexicana, S.A. de C.V.
“General Issuers’ Rules” means certain general regulations applicable to issuers and other securities market
participants (Disposiciones de carácter general aplicables a las emisoras de valores y otros participantes del
mercado de valores) issued by the CNBV.
“Group” means Elementia, S.A.B. de C.V. and its subsidiaries.
“Grupo Carso” means Grupo Carso, S.A.B. de C.V.
“Grupo Kaluz” means Kaluz, S.A. de C.V.
“Holding” means Elementia, S.A.B. de C.V. and subsidiaries that do not belong to or are grouped with one of
the three divisions described in this offering memorandum and are presented as corporate entities together with
Elementia, S.A. de C.V.
“IAS 34” means International Accounting Standard No. 34, Interim Financial Reporting, issued by the
International Accounting Standards Board.
“IFRS” means International Financial Reporting Standards as issued by the International Accounting Standards
Board.
“IMPI” means the Mexican Patent and Trademark Office (Instituto Mexicano de la Propiedad Industrial).
“Independent Auditors” means Galaz, Yamazaki, Ruiz Urquiza, S.C. (member of Deloitte Touche Tohmatsu
Limited).
“Indeval” means S.D. Indeval Institución para el Depósito de Valores, S.A. de C.V., a Mexican securities
depository institution.
x
“INEGI” means Mexico’s National Institute of Statistics and Geography (Instituto Nacional de Estadística y
Geografía).
“ISR” means Mexican Income Tax (Impuesto Sobre la Renta).
“IVA” means value-added tax in Mexico (Impuesto al Valor Agregado).
“Lafarge” means, collectively, Lafarge S.A. and Financière Lafarge, S.A.S.
“Lafarge Cementos” means Lafarge Cementos, S.A. de C.V.
“LGSM” means the Mexican General Law of Business Corporations (Ley General de Sociedades Mercantiles).
“LMV” means the Mexican Securities Market Law (Ley del Mercado de Valores).
“Metal Products Division” means the Elementia subsidiaries and companies related to the production and
marketing of copper and copper alloys used in the construction, refrigeration and air conditioning, automotive,
electric and electronics industries, white goods, ammunition and minting industries.
“Mexalit Industrial” means Mexalit Industrial, S.A. de C.V.
“México” means the United Mexican States (Estados Unidos Mexicanos).
“Nacobre” means Nacional de Cobre, S.A. de C.V.
“Nacobre Acquisition” means the acquisition of the Nacobre Subsidiaries, companies engaged in the
manufacture and sale of copper and aluminum, in accordance with the share purchase and sale agreement dated
November 7, 2008, which became effective on June 1, 2009.
“Nacobre Subsidiaries” means, jointly, Nacional de Cobre, S. A. de C. V., Aluminio Holdings, S. A. de C. V.,
Almexa Aluminio, S. A. de C. V. (these last two subsidiaries were sold in April 2012), Operadora de Inmuebles
Elementia, S. A. de C. V., Grupo Aluminio, S. A. de C. V. (until its merger into Elementia, S. A. B. de C. V. in
November 2011), Productos Nacobre, S. A. de C. V. (until its merger with Nacional de Cobre, S. A. de C. V. in
August 2011), Copper & Brass International, Industrializadora Conesa, S. A. de C. V. and Aluminio Conesa, S. A.
de C. V. (these last two subsidiaries were sold in June 2011).
“NAFTA” means the North American Free Trade Agreement (Tratado de Libre Comercio de América del
Norte).
“NCPI” means the Mexican National Consumer Price Index (Índice Nacional de Precios al Consumidor).
“OECD” means the Organization for Economic Co-Operation and Development.
“OSHA” means the U.S. Occupational Safety and Health Administration.
“ONNCCE” means the Mexican National Standardization and Certification Organization for Building and
Construction (Organización Nacional de Normalización y Certificación de la Construcción y Edificación, S.C.).
“Peso”, “Pesos”, “Ps”, “Ps$” or “$” means Mexican Pesos, the legal tender of Mexico.
“Plycem” means The Plycem Company, Inc.
“PROFEPA” means the Mexican Attorney General for Environmental Protection (Procuraduría Federal de
Protección al Ambiente).
“PVA” means polyvinyl alcohol.
“RNV” means the National Securities Registry (Registro Nacional de Valores) maintained by the CNBV.
xi
“SEMARNAT” means the Mexican Ministry of Environment and Natural Resources (Secretaría de Medio
Ambiente y Recursos Naturales).
“SHF” means the Mexican Federal Mortgage Agency (Sociedad Hipotecaria Federal).
“Tenedora” means Tenedora de Empresas de Materiales de Construcción, S.A. de C.V. (previously known as
Industrias Nacobre, S.A. de C.V.).
“TIIE” means the Mexican benchmark interbank money market rate published daily by the Bank of Mexico in
the Official Gazette or any successor or substitute rate.
“Trituradora” means Trituradora y Procesadora de Materiales Santa Anita, S.A. de C.V., engaged in the
manufacture of cement and concrete.
“Trituradora Acquisition” means the acquisition of Trituradora y Procesadora de Materiales Santa Anita, S.A.
de C.V., which is currently part of the Cement Division.
“U.S.” means the Unites States of America.
“U.S. dollars”, “Dollars” or “US$” means dollars, the legal tender of the United States of America.
xii
SUMMARY
This summary highlights selected information contained elsewhere in this offering memorandum. This offering
memorandum includes a description of our business and detailed financial information. Unless otherwise expressly
indicated, the terms “we,” “our,” the “Company” and “Elementia” each refer to Elementia, S.A.B. de C.V., and its
subsidiaries. This summary does not contain all of the information you should consider before investing in our
shares. You should read the entire offering memorandum carefully, especially the risks of investing in our shares
discussed under “Risk Factors,” our audited annual consolidated financial statements and the notes thereto and our
unaudited interim condensed consolidated financial statements and the notes thereto included elsewhere in this
offering memorandum.
Our Business
We are a manufacturer and distributor of products and solutions primarily focused on the construction materials
industry, and a leader in Latin America based on installed capacity, according to internal estimates and publicly
available information. Through our regional divisions, Mexico, the United States, Central America and South
America, we manufacture and sell a wide range of products, based primarily on cement, fiber cement, plastics and
copper, used throughout all stages of construction, from the early structural and unfinished construction stages
through the installation of interior and exterior finishes, repairs and remodeling. Through our involvement in all
stages of construction and our diversified product mix we are able to maintain close relationships with our customers
and distributors. Additionally, we are focused on end users for industrial applications, whereby we provide our
clients with highly-specialized, value-added products. The industrial sector represents approximately 24% of our
sales. Our network of independent distributors, through which we market and offer the various products and
solutions of our three divisions, consists of more than 4,300 independent distributors and customers throughout the
42 countries in which we sell that use and offer our diverse products and solutions to a broad client base. We have a
total of 26 manufacturing plants located in nine countries in the Americas: Mexico, the United States, Bolivia,
Colombia, Costa Rica, Ecuador, El Salvador, Honduras and Peru.
We offer products that are used in each step of the construction process:
Our primary markets are located in Mexico and the United States, which represent 59% and 21% of our net
sales in 2014, respectively. The Central American and South American markets represent 5% and 14% of our net
sales in 2014, respectively, although we also export our products to more than 40 countries. We serve all of our
markets through six distribution centers, twelve warehouses, a distribution center in Laredo, Texas and a sales office
located in Houston, Texas, which we intend to expand in order to meet the expected increase in demand that we will
1
satisfy with the production of our plants in North Carolina and Oregon in the United States and, if necessary, with
the reactivation of our plant in Indiana. We market our products using our own brands, which we believe have an
established track record and a high level of market recognition. Such brands include Mexalit, Eureka, Allura,
Maxitile, Plycem, Eternit, Duralit, Fibraforte, Nacobre and Fortaleza, which we introduced to the Mexican market
in 2013 and which allowed us to become the first new participant in the Mexican cement industry in 65 years. The
introduction of the Fortaleza brand allowed us to expand our range of product offerings and thereby strengthen our
presence in the market. We believe our brand positioning, along with our diverse offering of solutions, our efficient
network of independent distributors (present throughout the value chain in the construction industry) and our focus
on customer service, create significant competitive advantages that distinguish us in the construction materials
industry.
Our business strategy, focused on continued processes optimization, operations integration and organic and
inorganic growth, has allowed us to grow in a sustained and disciplined manner while maintaining strong levels of
profitability. In 2007, under Mexican Financial Reporting Standards (“MFRS”), the accounting standards under
which we reported at that time, our EBITDA was Ps$291 million. In 2014, on an IFRS basis, our EBITDA was
Ps$2,675 million, a nine-fold increase, which represented a CAGR of 37%. During the last three years, our net sales
and EBITDA grew at a compound annual rate of 7% and 19%, respectively, an increase from Ps$13,506 million and
Ps$1,877 million, respectively, in 2012 to Ps$15,331 million and Ps$2,675 million, respectively, in 2014. During the
three months ended March 31, 2015, we generated net sales of Ps$4,070 million and EBITDA of Ps$707 million,
which represents an increase of 12% and 16%, respectively, compared to net sales and EBITDA during the same
period in 2014. During 2014, we generated net sales of Ps$15,331 million and EBITDA of Ps$2,675 million,
representing an increase of 19% and 40%, respectively, compared to net sales and EBITDA in 2013.
We operate our businesses through three divisions:

Cement Division. Through our Cement Division, we produce and sell gray cement, white cement, mortar
and concrete using the Fortaleza brand. Our products are geared toward the self-construction sector. We
currently sell more than 70% of our production to a large number of customers in 50 kg bags, allowing us
to obtain better prices and greater profit margins than if we sold cement in bulk. We distribute our products
through a network of close to 120 distributors and 50 bulk customers, through more than 500 points of sale
in 15 states located primarily in the central region of Mexico. These states have a combined population of
74 million people, or 66% of the total Mexican population, and account for 66% of the total cement
consumption in Mexico, according to information published by INEGI and CONAPO, as well as our
internal estimates.
Our Cement Division commenced operations in March 2013 with the start of commercial operations of the
El Palmar cement plant in Santiago de Anaya, State of Hidalgo, Mexico, with an approximate capacity of 1
million tons per year. Subsequently, on July 31, 2013, we established the Lafarge Joint Venture, whereby
we contributed our El Palmar plant and Lafarge contributed its operations in Tula and Vito, State of
Hidalgo, Mexico. In exchange for our contribution, we received an ownership stake of 53% in such joint
venture, enabling us to expand our installed capacity from 1 million to 2 million tons. On September 19,
2014, we entered into a share purchase agreement to acquire Lafarge’s 47% non-controlling interest in the
Lafarge Joint Venture for US$225 million. On December 16, 2014, following the receipt of approval from
the Mexican Federal Economic Competition Commission (Comisión Federal de Competencia Económica)
and the initial payment of US$180 million, we closed the acquisition and acquired 100% of the shares of
ELC Tenedora Cementos (including the Fortaleza brand), consolidating our position in the cement industry
in Mexico. Currently, the Cement Division operates three plants with a production capacity of
approximately 2 million tons of cement per annum.
Notwithstanding the Cement Division’s recent commencement of operations, we estimate that in 2014 our
market share within our target region (based on the 15 states in which we operate) was approximately 7%.
Additionally, in 2014 we sold approximately 1.5 million tons of cement, which represents a utilization
capacity close to 74%, considering 12 months of operations. The use of the distribution network developed
by our Building Systems and Metal Products Divisions was key in obtaining a meaningful market share in
only our second year of operations. This is a clear example of the competitive advantage that our
distribution network represents. We currently sell all of our production to external customers, but we have
the flexibility to use a portion of our cement production as input for the production of fiber cement in our
2
Building Systems Division. Our Building Systems Division is currently able to obtain its necessary supply
of cement under favorable market conditions by being a major consumer of cement in the country.
One of our principal strategies is to grow the Cement Division. We expect to invest approximately US$250
million during through 2017 to increase the production capacity of our Tula plant, which we estimate will
increase our total production capacity from 2.0 million to 3.5 million tons of cement per annum. On May
28, 2015, through our subsidiary Trituradora, we executed an agreement with the French company, Fives
FCB, for the design, supply, construction, installation, and start up (under a turnkey scheme) of the
production of 3,300 daily tons of clinker in the Tula Plant. We expect completion of capacity expansion
and commencement of commercial operations by mid-2017. We anticipate that part of such investment will
come from the net proceeds of the Global Offering.
The Cement Division generated net sales of Ps$509 million and EBITDA of Ps$202 million during the
three months ended March 31, 2015, representing an increase of 26% and 113%, respectively, compared to
net sales and EBITDA recorded during the same time period in 2014, primarily due to the increase in
volume and the sales price, as well as the optimization of production costs. The Cement Division
represented 13% and 11% of our total net sales for the three months ended March 31, 2015 and the year
ended December 31, 2014, respectively. The Cement Division represented 28% and 21% of our
consolidated EBITDA for the three months ended March 31, 2015 and the year ended December 31, 2014,
respectively.
Based on our internal financial information, for the last twelve months ended March 31, 2015, the Cement
Division contributed 12% of our net sales and 25% of our EBITDA (excluding revenues and EBITDA
attributable to the Company as parent company and eliminations).

Building Systems Division. Through our Building Systems Division we manufacture and sell solutions
based on fiber cement and plastics for the lightweight construction materials industry, including corrugated
roofing sheets, flat boards, siding, building systems, pipes and water tanks (or cisterns), among others. The
Building Systems Division operates 20 plants across Mexico, the United States, Colombia, Peru, Bolivia,
Ecuador, Costa Rica, El Salvador and Honduras. We distribute our Building Systems Division products
using brands that, in some cases, have had a presence of more than 80 years in the markets in which we
operate. Our main brands include Mexalit, Eureka, Eternit, Duralit, Fibraforte, Maxitile, Allura and
Plycem. Our products are distributed through our network of approximately 2,480 independent distributors,
wholesalers and retailers, which allow us to reach a broad customer base in our target markets, including
the self-construction and construction sectors in Latin America and the United States.
The Building Systems Division’s products are exposed to trends that we believe favor their use, including
the change from traditional to lightweight construction systems and the replacement of horizontal
development for vertical development in urban areas. We believe that due to our broad product portfolio,
product quality, brand and distribution network, we are well positioned to continue to benefit from such
trends.
In January 2014, we acquired the production assets of the fiber cement business of a subsidiary of SaintGobain, significantly expanding our presence in the United States, the largest lightweight building
materials market worldwide. This acquisition provided us with access to a national distribution network in
the United States that we consider strategic for our future growth plans. In 2014, in connection with our
implementation of initiatives to increase the profitability of such operation, we concentrated production at
two of the three plants we acquired, and we believe that additional installed capacity we hold (mainly by
reactivating the third plant), along with the continued recovery of the housing market in the United States,
represent a high potential for production growth that will require a minimal investment.
Within the Building Systems Division, we continue to implement measures to optimize our operations and
value offerings, including: (i) the robotization of certain of our operations such as Plycem Salvador and
Costa Rica (this automation plan is intended to increase baking capacity by 10%, reduce costs by 5%,
decrease the manufacturing workforce and improve working conditions); and (ii) the development of high
value added products that we call the “wood of the future,” which we manufacture within Plycem. An
example of such products would be “Plydeck” a floor that has the same appearance as a wooden deck but
has the properties of fiber cement (resistance to humidity, low maintenance and durability, among others).
3
The Building Systems Division generated net sales of Ps$1,547 million and EBITDA of Ps$253 million
during the three months ended March 31, 2015, representing an increase of 8% and 2%, respectively,
compared with net sales and EBITDA recording during the same time period in 2014, mainly due to the
increase in sales volume in the United States, which partially offset the decrease in the sales volume in the
Central American and South American regions. The Building Systems Division represented 38% and 40%
of our total net sales for the three months ended March 31, 2015 and the year ended December 31, 2014,
respectively. The Building Systems Division represented 36% and 42% of our consolidated EBITDA for
the three months ended March 31, 2015 and year ended December 31, 2014, respectively.
Based on our internal financial information, for the last twelve months ended March 31, 2015, the Building
Systems Division contributed 40% of our net sales and 42% of our EBITDA (excluding revenues and
EBITDA attributable to the Company as parent company and eliminations).

Metal Products Division. Through our Metal Products Division, we manufacture and sell pipes, tubes, coils
and sheets, bars and rods, fittings, wires and forged and machined parts, primarily based on copper and its
alloys. Our principal value added products are fittings, forged and machined parts, connectors, plugs,
preformed and preassembled tubes, collectors, returns, accumulators, flexible hoses for water and gas,
regulators and valves, among others, mainly made of copper and its alloys, under the Nacobre and
Cobrecel brands. We sell our products primarily to customers in the construction and industrial sectors. In
2014, the construction and industrial sectors each accounted for approximately 50% of the Metal Products
Division’s net sales.
Through the Metal Products Division, we operate three vertically integrated (from casting to the finished
product) manufacturing plants in Mexico, with a total production capacity of approximately 74 thousand
tons per annum. We operate one of the few manufacturing plants in Latin America for copper products and
its alloys such as brass, brass with lead, copper and nickel, nickel silver and bronze, all with a minimum
copper content of 60% (Brass Mill), and we are the only producer of copper-nickel-alloy tubes in the
Americas, and one of the principal global producers according to internal estimates. We are also one of the
main suppliers of copper-nickel tubing used by the United States defense industry, a strategic supplier for
the Mexican currency-minting industry and the largest producer of special brass and refractory alloys and
copper and copper alloy strips in Latin America, according to information received from our clients and
certain reports prepared by independent companies such as Urunet and Penta Transaction.
Our products are sold in Mexico and exported to the United States, Latin America and Europe through
more than 1,064 distributors and through direct sales to final consumers. In 2014, 62% of the Metal
Products Division’s net sales were to customers in Mexico, 22% to customers in the United States, 12% to
customers in Latin America (excluding Mexico) and 3% to customers in Europe. The commercial strategy
(cost plus) of the Metal Products Division allows for any variations in the cost of raw materials to generally
be transferred to the final sale price of the product, thus achieving a stable target nominal margin per ton.
This reduces the risks associated with fluctuations in the price of copper and its alloys.
Within the Metal Products Division, we continue to implement measures that allow us to optimize our
operations and improve the profitability of the division, including: (i) the adoption of new production
technologies, such as the cast and roll process for the production of copper tubing and the continuous
casting of brass ingot for the production of bars, among others, and (ii) the development of high-value
added products tailored to meet our customers’ needs.
The Metal Products Division generated net sales of Ps$1,936 million and EBITDA of Ps$253 million
compared with net sales and EBITDA recorded during the same period in 2014, due to the increase in sales
volume and the change in exchange rate, as well as greater sales of value added products and improved
production costs resulting from our cost optimization initiatives and our more efficient use of metal. The
Metal Products Division represented 48% and 47% of our total net sales for the three months ended March
31, 2015 and the year ended December 31, 2014, respectively. The Metal Products Division accounted for
36% and 32% of our consolidated EBITDA for the three months ended March 31, 2015 and the year ended
December 31, 2014, respectively.
4
Based on our internal financial information, for the last twelve months ended March 31, 2015, the Metal
Products Division contributed 48% of our net sales and 33% of our EBITDA (excluding revenues and
The following tables show our net sales and EBITDA by division and as a percentage of the consolidated totals
for the periods indicated.
EBITDA in millions of pesos
Three months ended
Year ended December 31,
March 31,
Net sales in millions of pesos
Three months
ended March 31,
2015
Cement Division .....................
Building Systems
Division...................................
Metal Products Division ..........
Holdings and
eliminations (1) .................
Total .......................................
2014
2014
2013
2012
2015
2014
2014
2013
2012
$509
$405
$1,747
$1,046
$8
$202
$95
$572
$238
$(3)
$1,547
$1,438
$6,074
$4,724
$4,959
$253
$248
$1,119
$943
1,005
$1,936
$1,759
$7,218
$6,919
$8,085
$253
$219
$855
$658
716
$78
$4,070
$37
$3,639
$292
$240
$454
$74
159
$12,929
$13,506
$47
$609
$129
$15,331
$(1)
$707
$2,675
$1,913
$1,877
(1) Includes income from corporate services, recovery of expenses and rent charged to our subsidiaries, as well as intercompany
eliminations.
EBITDA as % of total
Net sales as % of total
Three months
ended March 31,
2015
2014
2014
2013
2012
Three months ended
March 31,
2015
2014
2014
2013
2012
Cement Division .....................
Building Systems
Division...................................
13%
11%
11%
8%
0%
28%
16%
21%
12%
0%
38%
40%
40%
37%
37%
36%
41%
42%
49%
54%
Holdings and
eliminations (1) ..................
Total .......................................
48%
48%
47%
54%
60%
36%
36%
32%
34%
38%
1%
1%
2%
1%
3%
100%
100%
100%
100%
100%
0%
7%
100%
100%
5%
4%
8%
100%
100%
100%
eliminations.
Our Competitive Strengths
We consistently focus on generating superior value for our shareholders, customers, suppliers, employees,
collaborators and the communities in which we are present by leveraging the following competitive strengths:
Diversified Products and Market Sectors
Through our three divisions, we have a diversified product portfolio that allows us to have a presence
throughout the value chain of the construction industry, from the early structural and unfinished construction stages
through the installation of interior and exterior finishes, repairs and renovations, offering solutions that enable us to
meet the needs of, and maintain a close relationship with, a wide range of customers and markets. In particular,
approximately 50% of the Metal Products Division’s sales, and therefore 24% of our net sales, are intended for
industrial applications, mitigating construction industry cycles. Our broad product portfolio includes cement, mortar
and concrete, as well as fiber cement and plastic-based lightweight construction materials, including corrugated
roofing sheets, flat boards, water tanks and cisterns. Additionally, we provide comprehensive solutions in copper
products and its alloys such as tubes, sheets, forged and machined parts, wires and fittings. Due to this wide range of
products and our focus on the self-construction segment, no one customer represents more than 4% of our
consolidated net sales. In 2014, approximately 64% of our net sales corresponded to the construction sector and 24%
to the industrial sector.
5
Product Portfolio of Leading and Well-Recognized Brands
We market our products using brand names that we believe have a long history and high level of recognition in
the self-construction industry in the markets where we operate. Additionally, we believe that the strength of our
brands, along with our network of independent distributors and the quality of our products, are a key to our growth
and a factor that is difficult to replicate, which differentiates us within the construction materials industry. We
believe that our brands are well positioned among consumers and distributors, some to the extent of having become
a product category in their sector (for example, Eternit, Duralit and Plycem), and are associated with features like
high quality, excellent performance, reliability and service. For example, in Colombia, lightweight roofs are
generally referred to as “Eternit.”
Fortaleza, the cement brand we introduced in 2013, is one of the newest brands in our portfolio and according
to internal estimates has achieved a high level of recognition among consumers and distributors, evidenced by its
wide distribution and presence in the Mexican cement market, and our own market share in the Mexican cement
market of approximately 4% in 2014. Such results stem from a marketing strategy that highlights product attributes
and brand message to the target market, self-construction, and in particular looking to position the Fortaleza brand
as the preferred brand among masons.
Nacobre, the flagship brand of our Metal Products Division, has a strong presence in more than 36 countries
and, according to internal estimates, a market share in Mexico of 65% in our key product categories. The Nacobre
brand has been recognized by FERREPRO (a publication specializing in the hardware industry) as the fourth most
influential brand in the Mexican hardware industry.
Among our leading brands are the following:
Brand
Cement Division
Product
Years in the
Market
Geographic Region
Market Position(1)
Cement
2
Mexico
#5 in the Mexican
market
73
Mexico
#1 in fiber cement
roofs
73
Colombia
38
Bolivia
11(3)
Central America
Building Systems Division
Fiber cement
products: roofs,
panels, tiles and
pipes
Fiber cement
products: roofs,
panels, PVC tiles,
plastic tanks, paint
and putties
Fiber cement
products: tiles and
roofs
Fiber cement
products: roofs,
panels and tiles
Flat products (siding
and fiber cement
roofs)
Polyethylene water
tanks and cisterns,
and polypropylene
corrugated sheets
1
#1 in fiber cement
products in
Colombia, Ecuador,
Bolivia and Central
America
#3 in water tanks in
Colombia
United States
#2 in fiber cement (2)
Mexico
#2 in water tanks
15
80
6
Years in the
Market
Geographic Region
Market Position(1)
Polypropylene
corrugated sheets
25
Peru
#1 in plastic roofs
Copper and copper
alloys (tubes, sheets,
bars, connections
and others)
65
Mexico
#1 in Mexico
Brand
Product
Metal Products Division
(1) From January 1, 2014 to December 31, 2014. Information provided based on internal estimates.
(2) Market share of approximately 11%, below the principal player in the market which has a market share of
approximately 80%.
(3) Plycem as a company has been in existence for 50 years.
Geographic Diversification and Presence in Countries with Favorable Macroeconomic Fundamentals and
Demographics
We have a presence across the Americas, with 26 production plants in 9 different countries, giving us exposure
to different countries and currencies and thereby allowing us to mitigate the effects of any cyclicality in the markets,
countries or regions where we operate. In addition, we are continuing to diversify geographically with clients in over
40 countries into which we export our range of products. In 2014, 59%, 21%, 5% and 14% of our net sales were
made to clients in Mexico, the United States, Central America and South America, respectively. Additionally, in
2014, 59%, 23%, 8% and 10% of our net sales were generated in Mexican pesos, U.S. dollars, Colombian pesos and
other currencies, respectively.
7
We believe that most countries in which we operate have favorable estimated future growth prospects, based on
factors such as the increase in foreign, public and private direct investment, the growth in consumer spending, a
greater proportion of an economically active population, a growing middle class and a controlled inflationary
environment. According to the Global Insight, the annual GDP growth rate expected in 2015 for Mexico, the United
States, our principal markets in Central America (Costa Rica, Honduras and El Salvador) and our principal markets
in South America (Bolivia, Colombia, Ecuador and Peru) will be 2.7%, 3.1%, 3.6% and 3.9% respectively. In
comparison, the growth rates expected for European Union and OECD member states for the same period are 1.7%
and 2.3%, respectively. Furthermore, the recent economic recovery in Europe and Japan, if sustained, may have a
positive impact on the Mexican economy (including its construction industry).
We believe that the growing middle class will continue to be an important factor for the growth in demand for
construction materials in the countries in which we operate. In Mexico, for example, the middle class expanded by
11 million people, representing 30% of the total population in 2000 and 36% of the total population in 2012,
according to statistics of INEGI. Similarly, other countries in Latin America, such as Colombia and Peru, have also
experienced growth in the size of their middle classes in the last decade.
Other factors which we believe have supported the growth of the construction sector in the countries in which
we operate are: (i) the housing deficit in Latin America, where approximately 37% of households lack adequate
housing infrastructure and conditions for construction according to the Inter-American Development Bank, (ii) the
recovery in housing construction in the United States, (iii) the move away from traditional construction systems to
lightweight construction, (iv) the replacement in urban areas of horizontal development with vertical development
and (v) favorable demographics in Mexico, including an increase in life expectancy which stimulates demand for
housing, vacation homes, retirement homes and healthcare facilities. Additionally, several countries in Latin
America, such as Mexico, Colombia, Peru and Ecuador, have announced important national infrastructure plans
which could increase demand for construction materials. For example, in 2013, Mexico released its National
Infrastructure Plan which contemplates US$596 billion of investment in 740 projects to be developed between 2014
and 2018 in areas including energy, urban development and housing, telecom and transport, water utilities, tourism
and health.
Wide Distribution Network that Covers our Three Divisions, Allowing for Cross-Selling and Marketing of
Complementary Products
We have developed an extensive distribution network linking our three divisions, comprised of over 4,300
independent distributors and customers, 6 distribution centers, 12 warehouses (located in Guadalajara, Puebla,
Ciudad Juárez, Monterrey, Mexico City, Celaya and San Luis Potosí in Mexico; in Savannah, Georgia and Oakland,
California in the United States; in Lima, Peru and in Cochabamba, Bolivia), one distribution center in Laredo,
Texas, and one sales office strategically located in Houston, Texas, which we intend to expand in order to meet the
expected increase in demand that we will satisfy with the production of our plants in North Carolina and Oregon.
Our high quality and diverse product offerings, as well as our focus on innovation and customer service, have
allowed us to build long-standing relationships with our distributors, many of which have grown together with us
and offer our products exclusively. Through our network of independent distributors, we are able to offer a wide
range of products for the construction market, which enables cross selling and marketing of complementary
products. In the three-month period ended March 31, 2015, 35% of our sales were made through distributors that sell
products from at least two of our three divisions. This percentage was 31% and 35% for the year ended December
31, 2014 and the cumulative period from 2012 to date, respectively. To expand our distribution network we
continue to improve our service and make sure that our distributors know the full range of our product offerings.
Additionally, we believe our network of independent distributors appreciates our capacity to offer a wide range of
integrated products as adequate solutions for the needs of final customers in the construction chain, unlike most of
our competitors who offer only a single type of product. Even though we continually focus on integrating and
creating synergies between our divisions, we maintain a specialized and independent sales force for each of them
with the ultimate objective of having a multi-product sales force.
8
We estimate that we have increased cross-selling to distributors from our divisions from Ps$1,220 million in
2013 to Ps$1,891 million in 2015 (on an annualized basis based on our sales in the first four months of 2015). The
following figure shows an example of the cross-selling efforts we are undertaking in order to have a multi-product
sales force:
Through our network of independent distributors, we have been able to increase our product offerings with only
a minimal incremental increase in cost, which has allowed us to maintain operating flexibility and access new
markets quickly and efficiently. For example, our Cement Division, which began operations in 2013, has already
achieved wide market penetration through the use of the existing distribution network of the Building Systems and
Metal Products Divisions.
Through our acquisition of the fiber cement business in the United States of a subsidiary of Saint-Gobain in
2014, we significantly expanded our presence there to a network of 97 independent distributors with nationwide
coverage, a strategic acquisition with a view toward future growth. Such distribution network not only allows us to
market products that are produced within the United States but also those products we produce in Mexico and Latin
America, thereby creating important opportunities to expand our product offerings in the United States.
9
We believe that our network of independent distributors also allows us to provide better customer service to
large customers with broad geographic scopes and helps us identify opportunities and respond quickly to their needs.
Likewise, many of our distributors, ranging from small materials houses, large retailers and even construction
companies, have grown with us and have become our strategic partners, given their detailed knowledge of our
products, among other reasons.
The following table shows the approximate number of independent distributors and customers for each of our
divisions:
Division
Region
Cement Division ....................................................................... Mexico
Building Systems Division ........................................................ Mexico
Building Systems Division ........................................................ Central America
Building Systems Division ........................................................ United States
Building Systems Division ........................................................ South America
Mexico and the
Metal Products Division............................................................ United States
Subtotals ..................................................................................
Total .......................................................................
Distributors
Customers
119
1,154
230
97
997
46
244
16
0
3
1,064
3,661
403
712
4,373
Successful Track Record of Organic and Inorganic Growth Supported by our Financial Discipline
Our growth during the previous decades has been focused in three stages:
First Stage: 1999-2009 (Consolidation): We started with the integration of our Building Systems Division with
the leading producers and sellers of fiber cement and plastic in the regions of Mexico and Central and South
America.
Second Stage: 2009-2014 (Diversification): We finalized the Nacobre acquisition, establishing the Metal
Products Division in order to have a presence along the value chain of the construction industry, strengthen our cash
flow generation and increase diversification by entering the industrial market. Similarly, we entered the cement
industry in 2010 by beginning the construction of our El Palmar plant in order to be a part of the Mexican cement
industry and consolidate our presence along the value chain of the construction industry.
Third Stage: 2015 (Expansion): Our main focus on growth will be on the Cement Division and expansion in the
United States market.
We have achieved this through our management team’s successful development and implementation of the
operational methodology that we now call the “Fifth Element,” which seeks to improve the operating performance
of our divisions through operational integration and process efficiency, as well as having efficient teams to integrate
operations rapidly. Some examples of the benefits we have obtained through the application of our Fifth Element
methodology to integrate acquisitions include: (i) increased profitability of Plycem, which once registered a loss of
US$3 million in 2007, the same year we acquired it, and had a profit of US$12 million in 2014; (ii) the operating
efficiencies achieved in the fiber cement business in the United States, which we acquired from a subsidiary of Saint
Gobain in 2014, resulting in an increase of US$14 million in gross income, and transitioning from incurring losses
to generating profits in only a year under our management; (iii) the substantial increase in the EBITDA margins of
our Cement Division from 29% to 40% during the first quarter of 2015, once the acquisition of the non-controlling
interest in the Lafarge Joint Venture was concluded in 2014; and (iv) steps undertaken at Eternit such as investments
in technology to improve quality, restructuring of personnel and the vertical integration of raw materials such as
silica and calcium bicarbonate, as a result of which EBITDA increased from US$1 million in 1999 to US$17 million
in 2014.
Similarly, through the implementation of the Fifth Element, we have increased our participation in the domestic
and international markets through the use of synergies (for example, we increased our market share of water tanks in
Mexico, from 12% in 2012 to 16% in 2014, as a result of the synergy with Nacobre which gave us access to the
hardware distribution channel), entry into new product categories (plastic roofs) and the development of high valueadded products, notably the strategic investments made in (i) the optimization of production processes in the
10
Building Systems and Metal Products Divisions; (ii) the innovation of products and processes such as the smelting
and pressing technology (cast and roll) in the Metal Products Division; and (iii) expansions in operational capacity.
Our focus on growth is accompanied by financial discipline and constant evaluation of our liquidity and
leverage levels. We seek to maintain adequate levels of liquidity and sources of funding to take advantage of future
investment opportunities. Our corporate policy targets a net debt to EBITDA ratio for the medium term of
approximately 2.00x. As of March 31, 2015, we had a net debt to EBITDA ratio of 2.66x after giving effect to the
issuance of the 2025 notes at the end of 2014. As of December 31, 2014, our net debt to EBITDA ratio was 2.69x
and we anticipate a return to our internal policy target by mid-2016.
Highly Experienced Management Team and Strong Shareholder Base
Our senior management team has an average of more than 20 years of experience in the building materials
industry and has been instrumental in developing and implementing the business strategies that have resulted in
improvements in our operating and financial performance as well as integrating our acquisitions (twelve successful
mergers and acquisitions transactions completed in the past fifteen years). We believe that our senior management
has also proved to be highly capable in their ability to respond promptly and effectively to the challenges posed by
the recent global economic crisis. We maintain a focus on the development of internal talent, which has enabled us
to create a strong management team through extensive internal training and develop future generations of managers.
We benefit from the longstanding support of our principal shareholders, who have a proven track record of
value creation across different industries and geographic areas. Our principal shareholders are Kaluz, S.A. de C.V.,
or “Grupo Kaluz,” and Tenedora, which is indirectly controlled by Grupo Carso, S.A.B. de C.V., or “Grupo Carso.”
Grupo Kaluz and Grupo Carso are among the most representative, experienced and respected business groups in
Mexico and Latin America. Grupo Kaluz, which is controlled by the del Valle family, operates a diversified group
of companies in the industrial and petrochemical sectors, including Mexichem, S.A.B. de C.V. Grupo Kaluz has a
global presence with businesses in the Americas, Europe, Asia and Africa. The del Valle family also participates in
the real estate (through Kaluz Inmobiliaria) and financial (including Banco Ve por Más S.A., Instituición de Banca
Múltiple, Grupo Financiero Ve por Más, Byline Bancorp Inc. and Byline Bank) sectors. The Slim family controls
Grupo Carso and controls a diversified group of companies in the telecom, finance, industrial, mining, retail and
infrastructure sectors including América Móvil S.A.B. de C.V., Grupo Financiero Inbursa S.A.B. de C.V., Minera
Frisco, S.A.B. de C.V., Grupo Sanborns S.A.B. de C.V., and Impulsora del Desarrollo y el Empleo en América
Latina, S.A.B. de C.V., among others.
Our Key Strategies
Our objective is to achieve sustained yet disciplined growth in sales, earnings and market share by developing
and offering integrated, high-quality solutions for the construction materials industry. We focus on achieving that
objective through organic and inorganic growth and the maximization of operating efficiencies, innovation and high
quality standards.
Focus on the Growth of our Cement Division
We intend to focus our expansion efforts on our Cement Division in the coming years, given that according to
our business plan the El Palmar plant will reach its maximum production capacity in the next few years.
Consequently, we are in the process of increasing the production capacity of our Tula plant by 1.5 million tons per
annum, which will require an investment of approximately US$250 million to achieve a total approximate capacity
in the Cement Division of 3.5 million tons per annum. On May 28, 2015, through our subsidiary Trituradora, we
executed an agreement with the French company, Fives FCB, for the design, supply, construction, installation, and
start up (under a turnkey scheme) of the production of 3,300 daily tons of clinker in the Tula Plant. We expect that
this expansion will be complete and we will begin commercial operations by mid-2017. We believe that this
investment will allow us to increase our market share in the Mexican cement sector.
Additionally, we are analyzing potential alternatives to foster our growth in this division, including operations,
logistics, distribution and marketing, as well as potential expansions, acquisitions and/or the construction and
development of new facilities (greenfields / brownfields).
11
Grow Organically and Inorganically through Mergers and Acquisitions
We are taking certain steps focused on expanding our production capacity in accordance with demand. In our
Cement Division, we are in the process of increasing the production capacity of our Tula plant by 1.5 million tons
per annum in order to maintain our market share given the increase in demand and achieve incremental sales of
approximately 2 to 3 points in the market. In our Building Systems Division, particularly our production assets
located in the United States, we are focusing production on two of the three plants we have acquired. We believe
that the additional installed capacity, primarily through the reactivation of the third plant, will allow us to efficiently
respond to market needs by meeting the potential growth in demand for our products. We are also investing close to
US$19 million to relocate and expand our Fibraforte plant in Peru, which we estimate will increase its production
capacity by 42%. Therefore, the Fibraforte plant could reach a production capacity of 13,613 tons per annum in the
second quarter of 2016. This project’s approach includes strengthening the local market and increasing our coverage
in the export market to Chile, Uruguay, Ecuador, Bolivia and Brazil. The new plant will be located in Chilca, Peru,
on a 45,284 m2 parcel of land. In our Metal Products Division, we expect to capitalize on the benefits of capital
investments made in recent years, including the optimization of raw material consumption and the improvement of
our indices, focusing on continued improvement, perfecting inventory levels, and increasing sales of higher valueadded products, as well as the launch of cast and roll equipment for the production of copper tubing with improved
metal yields.
Through this initiative we intend to carry out the following:

Cement Division. Increase our sales of 50 kg cement bags from 70% to 80% to further increase our
margin, continuing to focus on the self-construction market.

Building Systems Division. Strengthen our position as a leading provider of solutions in building
systems through the development of highly specialized, value-added products and solutions to
capitalize on the opportunities generated by the trend toward lightweight construction. We will focus
on the development of urban and green construction markets with new and innovative solutions and on
developing new products that add value to the consumer and avoid maintenance and adjustment costs.
In the United States, we intend to boost our market share through our fiber cement business by
consolidating the current business and adding value added products to our portfolio (Plydeck,
mezzanine slab and others). Additionally, we will continue to achieve capacity expansion to be able to
efficiently meet market needs and respond to the potential increase in demand for our products. Thus,
we are continually exploring opportunities to eliminate dependence on third parties during our
production process. Currently, we have vertically integrated various raw materials such as silica and
calcium carbonate, with mills in several of our Building Systems operations. We also use recycled
polypropylene to produce plastic roofs in Peru, in addition to having the option to use the cement that
we produce at any time. Additionally, we have been able to generate energy in our Honduras plant
through biomass fuel plants. We intend to continue increasing the efficiency of the operations in our
divisions by increasing the use of alternative fuels, as is the case in our Tula plant where 35% of fossil
fuels have been replaced with such alternative fuels.

Metal Products Division. Focus on offering innovative, value-added solutions for our clients
(currently, approximately 65% of our metal products manufacturing is produced according to customer
specifications). For example, in the Metal Products Division, we have the ability to produce new metal
alloys required by our customers through technological innovations and by adapting processing
technologies, such as new alloys to be used in several industries such as minting, nuclear submarines,
oil and gas, among others. Also, we will continue to undertake strategic investments in technologies
such as cast and roll, forge presses and new steel profiles and leverage our production capabilities
(through the increase of our production capacity of added value products, among other things) and
network of independent distributors to increase our penetration and market share in key markets.
In short, we will continue to pursue the growth of our divisions’ market share through entry into new product
categories and development of higher value-added products. We will also continue to analyze new opportunities for
mergers and acquisitions in support of our initiatives as they arise.
12
Strengthen our Competitive Position through Continuous Optimization of Processes and Innovation in
Products and Solutions
We intend to continue applying the Fifth Element with a view to further increase our profitability and further
successfully and efficiently integrate acquisitions into our platform.
The Fifth Element is an operating methodology which we have developed based on broad experience and
trajectory to standardize processes and achieve a continuous improvement in our operations, be it through the
incorporation of new business, the development of new products or the optimization of existing business. This
methodology is based, among other things, on the following elements:

implementation, standardization and optimization of processes;

integration of new operations and/or acquisitions of information and control systems;

incorporation, development and implementation of best practices;

realization of synergies;

establishment of strategic management; and

introduction of the Fifth Element in the businesses acquired or created.
By implementing the Fifth Element, we have achieved (i) a continuous optimization of processes, consumption,
costs, margins and inventory throughout our divisions; (ii) the reduction in production resources, cost and time (lean
manufacturing); (iii) the automation of processes in certain of our plants; (iv) the increase in use of recycled
materials; (v) the modernization of technologies and teams through investments; and (vi) the integration of
Information Technology (IT) and control systems, primarily through the SAP system.
We intend to continue applying the Fifth Element with the aim of improving our profitability and to keep
expanding our platform in an organic manner and through the incorporation of new businesses. The initiatives which
we are implementing include the development of new solutions that match the requirements of our clients and of the
market, such as products based on special “made to measure” metal alloys, by relying on the support of our product
development and engineering departments and of our technological partners such as Centro de Investigación y
Desarrollo Carso (the Carso Research and Development Center); the optimization of our energy costs through the
use of alternative fuels, such as tires and industrial waste from our operations in the three divisions or using coke
with a higher sulfur content than what is widely available in Mexico in the Cement Division; and leveraging our
scale and that of our shareholders to obtain better input prices, like we did with the electric energy supply contract
that we signed with Iberdrola in 2015 and that we estimate will lead to savings of between 5% and 15% compared to
the rate obtainable from the Federal Electricity Commission (Comisión Federal de Electricidad).
Use our Distribution Network to Maximize Synergies Between Divisions and Commercialize Complementary
Products under our own Brands
We believe that our wide network of independent distributors with coverage throughout the countries in which
we operate is difficult to replicate and constitutes one of our main competitive advantages. The combination of this
distribution network with our wide portfolio of products creates important opportunities to broaden our offering of
solutions to the construction industry and maximize the synergies between our divisions.
We intend to use our distribution network to increase our market share through the marketing of our products in
markets in which we are not currently present, such as for example the sale of plastics-based products like tanks and
cisterns in the United States; the introduction of new products which meet market demands; and the sale of
complementary products manufactured by third parties, potentially under our brand names, which could result in our
possible integration into the manufacturing of these products. Our entry into the Mexican cement industry, in which
we achieved, according to internal estimates, a market share of approximately 4% in 2014 just two years after
launching our Fortaleza brand, is a clear example of the benefits which we can obtain through the use of our
distribution network to broaden our product offering.
13
We continue to seek synergies among our divisions, similar to those we have already identified and adopted, in
order to achieve a better cost structure and more efficient operations. Such efforts include the use of our databases
and information technology to facilitate cross selling and the centralized management of areas such as treasury,
credit line analysis and billing.
Using our network of independent distributors, we intend to significantly increase the marketing of
complementary third party products, possibly under our brands, which has the potential to create additional product
integrations. We currently sell products which we buy from third parties, making the most of the strength of our
network of independent distributors, such as chromed products (e.g. keys and bath accessories), valves for the
control of gas supply, roofing sheets made from recycled materials and flexible hoses.
We centralize key processes to allow communication and coordination among our three divisions’ sales efforts
throughout our distribution networks. These processes include cash management and evaluation of credit limits.
Through these processes and our centralized database, we continue to optimize the collection process to support our
working capital.
Our Corporate Structure
Prior to the global offering, Grupo Kaluz and members of the del Valle family owned 51% of our share capital
and Tenedora, which is indirectly controlled by Grupo Carso, owned 46%, with the remaining shares (3%) held by
two minority investors. Grupo Kaluz, which is controlled by the del Valle family and led by Daniel Martínez-Valle
(who has more than twenty years of experience in the industry and over five years at Grupo Kaluz), is a Mexican
conglomerate with significant investments in the petrochemical and industrial sectors. Grupo Carso, which is
controlled by the Slim family, belongs to one of the world’s largest conglomerates. In addition, the Slim family
participates in the retail, industrial, telecommunications and manufacturing, and infrastructure and construction
sectors.
We are a holding company and conduct our business through our subsidiaries. The following chart shows our
current corporate structure and our principal operating subsidiaries.
14
Metal Products
Division
Nacional de
Cobre
Nacobre USA,
LLC
Building Systems
Division
Mexico
United States
Central America
Cement Division
South America
ELC Tenedora
Cementos
Mexalit
Industrial
Maxitile LLC
Plycem
Construsistemas
Honduras
Eternit
Colombiana
Trituradora
Frigocel
Plycem USA
LLC
Plycem
Construsistemas
El Salvador
Eternit
Atlántico1
Concretos TPMFortaleza
Plycem
Construsistemas
Costa Rica
Eternit Pacífico1
Industrias
Duralit
Eternit
Ecuatoriana
Industrias
Fibraforte
1
In the process of merging.
Our History
We were incorporated on April 28, 1952 in Mexico City, with a duration of 99 years under the name “Productos
Mexalit, S.A.,” in accordance with Mexican law. Our name was changed to “Mexalit, S.A.” in 1979 and then to
“Elementia, S.A.” in February 2009, as a result of branding changes aimed at reflecting recent acquisitions. On
June 13, 2011, we became a variable capital corporation, and since then we have operated under the name of
“Elementia, S.A. de C.V.”
Since 1952, when we commenced our business as a fiber cement roofing products manufacturer, we have grown
by building up our manufacturing capacity and acquiring other fiber cement and other products manufacturers
throughout North, Central and South America.
Through several acquisitions between 2001 and 2009, we expanded our product offerings in what is now our
Building Systems Division. Between 2000 and 2008 we acquired Eternit Colombiana, Eternit Pacífico, Eternit
Atlántico, Eureka Servicios Industriales, Eternit Ecuatoriana, Industrias Duralit and Plycem, all industry leaders in
the production and manufacture of fiber cement roofing and water tanks in the South American and Central
American regions. Continuing our expansion, in 2006 we built the Nuevo Laredo plant where we develop products
that are mainly marketed in the United States using the Allura brand. Through these acquisitions and capital
investments we have greatly diversified our fiber cement product offerings for the Building Systems Division.
15
In 2009, we commenced the construction project for the El Palmar cement plant, resulting in the creation of our
Cement Division. Beginning on the same year, we have further expanded our product portfolio and geographic reach
through several strategic acquisitions. On June 1, 2009, we purchased the Nacobre Subsidiaries, which
manufactured and distributed copper and aluminum products, providing the basis for what is now our Metal
Products Division. As a result of the acquisition, Grupo Carso, the ultimate parent of the Nacobre Subsidiaries,
indirectly acquired 49% of our share capital, which has been reduced to 46% as of the date of this offering
memorandum. During the course of 2011 and 2012, we sold our interests in the Nacobre Subsidiaries that produced
aluminum products , and now the Nacobre Subsidiaries produce and distribute only copper, copper alloys and steel
products. On December 8, 2009, we acquired Frigocel, S.A. de C.V., or “Frigocel,” and Frigocel Mexicana, S.A. de
C.V, or “Frigocel Mexicana,” in Mexico, both of which manufacture plastic products, and on July 22, 2010, we
acquired Fibraforte, a Peruvian company dedicated to the manufacture of polypropylene and polycarbonate roofing.
Through these acquisitions, we developed and strengthened our Building Systems Division.
In 2012, we decided to discontinue our fiber cement A.C. piping line from our Mexalit Industrial plant in
Chihuahua, Mexico. Today, it only produces water tanks and cisterns. In the second half of 2013, our subsidiary
Trituradora opened our new El Palmar cement plant. On January 8, 2013, we entered into the Lafarge Joint Venture
for the production of cement in Mexico which became effective on July 31, 2013. During the existence of the
Lafarge Joint Venture, we held an interest of 53%, while Lafarge held the remaining 47% interest through
ownership of the capital stock of ELC Tenedora Cementos. On September 19, 2014, we entered into a share
purchase agreement to acquire the remaining 47% stake in the Lafarge Joint Venture. On December 16, 2014,
following the receipt of approval from the Mexican Federal Economic Competition Commission (Comisión Federal
de Competencia Económica) and the initial payment of US$180 million, we became the holder, directly or
indirectly, of 100% of the shares of ELC Tenedora Cementos. During 2013, we commenced operations at a second
autoclave in Colombia, increasing our annual production of fiber cement sheet products by 1,200 tons. We also
transferred our copper operations at our former plant in Toluca, State of Mexico, Mexico to our plant at Celaya,
Guanajuato, Mexico, as part of a process of integration. On January 31, 2014, our subsidiary Plycem USA acquired
the assets of the fiber cement business of CertainTeed Corporation, an affiliate of Saint-Gobain and one of the
principal manufacturers of construction materials in the United States. Through this transaction we acquired various
assets related to the fiber cement business and strengthened our coverage and United States presence.
Today, we are a diversified company with over 6,000 employees, offering integrated solutions in metals, fiber
cement, cement and plastics products manufactured at our 26 plants located in Mexico, the United States, Bolivia,
By promoting participation in sustainable projects in our communities through our Elementia Foundation
(Fundación Elementia), we consider ourselves to be a socially responsible company. Such projects include housing
support, community centers (schools, clinics and others), as well as support in the context of natural disasters.
Additionally, we follow national and international environmental and social responsibility standards in order to rate
our performance in such matters, such as the Global Reporting Initiative (GRI) in sustainability matters.
General Information
The marketing name for our company is “Elementia” and our principal executive offices are located at Poniente
134, No. 719, Col. Industrial Vallejo, C.P. 02300, Del. Azcapotzalco, México, Distrito Federal, and our phone
number is +52 (55) 5728-5300.
16
THE GLOBAL OFFERING
This summary highlights information presented in greater detail elsewhere in this offering memorandum. This
summary is not complete and does not contain all the information you should consider before investing in our
shares. You should carefully read this entire offering memorandum before investing in our shares, including the
section entitled “Risk Factors” and our consolidated financial statements. For more information on our shares, see
“Description of Our Capital Stock and By-Laws.”
Issuer .............................................................................
Offering price per share .................................................
Ps$17.00 per share (US$1.07 per share, at the
exchange rate published by the Bank of Mexico for
July 9, 2015 of Ps$15.8281 per U.S. dollar).
Shares offered in the global offering .............................
201,000,000 shares of our common stock, no par
value, or the “shares.” See “Plan of Distribution.”
The international offering ..............................................
We are offering 38,808,695 shares through the initial
purchasers, in the United States to qualified
institutional buyers as defined in Rule 144A under the
Securities Act, in transactions exempt from registration
thereunder, and in other countries outside Mexico and
the United States, to non-U.S. persons in reliance on
Regulation S under the Securities Act.
The Mexican offering ....................................................
Concurrently with the international offering, we are
offering 162,191,305 shares in Mexico, all of which
are registered with the RNV, in a public offering
approved by the CNBV, conducted through the
Mexican underwriters to the general public in Mexico.
Initial purchasers ...........................................................
Credit Suisse Securities (USA) LLC, Morgan Stanley
& Co. LLC, Citigroup Global Markets Inc., HSBC
Securities (USA) Inc., Santander Investment Securities
Inc. and BBVA S.A.
Mexican underwriters ....................................................
Casa de Bolsa Credit Suisse (Mexico), S.A. de C.V.,
Grupo Financiero Credit Suisse (México), Morgan
Stanley México, Casa de Bolsa, S.A. de C.V.,
Acciones y Valores Banamex, S.A. de C.V., Casa de
Bolsa, integrante del Grupo Financiero Banamex, Casa
de Bolsa Ve por Más, S.A. de C.V., Grupo Financiero
Ve por Más, Inversora Bursátil, S.A. de C.V., Casa de
Bolsa, Grupo Financiero Inbursa, Casa de Bolsa
Santander, S.A. de C.V., Grupo Financiero Santander
México, HSBC Casa de Bolsa, S.A. de C.V., Grupo
Financiero HSBC, and Casa de Bolsa BBVA
Bancomer, S.A. de C.V., Grupo Financiero BBVA
Bancomer.
17
Reallocations .................................................................
The number of shares being offered in the global
offering (including any shares placed pursuant to the
overallotment options) may be reallocated between the
international offering and the Mexican offering,
depending upon demand and other factors applicable
in the Mexican market and the international markets
where our shares are being offered and, as a result, the
number of shares placed in the Mexican offering and
the international offering may vary.
Overallotment options ...................................................
Independent options have been granted to the initial
purchasers and to the Mexican underwriters,
exercisable within 30 days counted from the date of
this offering memorandum, to purchase up to an
aggregate of 15% of the shares offered in both the
international offering and the Mexican offering from
us at the initial offering price thereof, to cover overallotments on the offering date, if any. See “Plan of
Distribution.” The overallotment options may be
exercised only once, in whole or in part, on a
coordinated basis, but may be exercised independently
by the Mexican underwriters and the initial purchasers,
depending upon circumstances affecting each market
and stabilization conducted in respect of each such
market.
Shares outstanding after the global offering ..................
Immediately following the global offering, we will
have an aggregate of 843,593,820 shares outstanding,
assuming no exercise of the overallotment options
granted by us, and 873,743,820 shares if the
overallotment options are exercised in full by both the
initial purchasers and the Mexican underwriters.
Use of proceeds .............................................................
We estimate that the net proceeds to us from the sale
of the shares being offered by us in the global offering
will be approximately Ps$3,276 million, or
approximately US$207 million (at the July 9, 2015
exchange rate of Ps$15.8281 per US$1.00), after
deducting all estimated underwriting discounts and
commissions and other expenses we must pay in
connection with the global offering, assuming no
exercise of the overallotment options.
We intend to use (i) approximately Ps$2,594 million
(approximately US$164 million), or 79.18% of the net
proceeds of the global offering (assuming no exercise
of the overallotment options), for capital expenditures
principally within the next 24 months to increase
production capacity in the Cement Division; and (ii)
approximately Ps$682 million (approximately US$43
million), or 20.82% of the net proceeds of the global
offering (assuming no exercise of the overallotment
options), for the final payment relating to the purchase
of Lafarge’s non-controlling interest in the Lafarge
Joint Venture.
18
Listing ...........................................................................
BMV symbol .................................................................
An application has been filed to register the shares
with the RNV maintained by the CNBV, and to list the
shares for quotation on the BMV under the symbol
“ELEMENT.” We expect that simultaneously with the
consummation of the global offering, such registration
and listing will have been effected. Prior to the global
offering, there has been no trading market for the
shares in Mexico, the United States or elsewhere. We
cannot assure you that a trading market will develop or
will continue if developed.
“ELEMENT”
Offering date .................................................................
July 9, 2015.
Settlement date ..............................................................
July 15, 2015.
Payment, settlement and delivery ..................................
Settlement of the shares will be made on July 15, 2015
through the book-entry settlement and custody system
of Indeval. The initial purchasers will deliver the
shares in book-entry form only through the facilities of
Indeval, in Mexico City, Mexico, on or about July 15,
2015. Investors must settle their purchase of shares in
Pesos.
Depository .....................................................................
S.D. Indeval Institución para el Depósito de Valores,
S.A. de C.V., the Mexican licensed central securities
depositary.
Dividends ......................................................................
See “Dividends and Dividend Policy.”
Voting rights ..................................................................
All of our issued and outstanding shares have full
voting rights. See “Description of Our Capital Stock
and By-Laws—Share Capital and Voting Rights.”
Principal shareholders ...................................................
After giving effect to the global offering, and assuming
no exercise of the over-allotment options, our principal
shareholders will own approximately 77.8% of our
outstanding shares. See “Principal Shareholders.”
Change of control and shareholders’ agreements ..........
Provisions of our by-laws and the LMV may make it
difficult and costly for a third-party to pursue a tender
offer or takeover attempt resulting in a change of
control. Our by-laws contain provisions which, among
other things, require approval of our board of directors
prior to any person or group of persons acquiring,
directly or indirectly, 8% or more of our shares. In
accordance with the LMV and our by-laws, if a person
or group of persons intends to acquire 30% or more of
our shares, such persons are required to conduct a
tender offer to purchase the corresponding shares and,
if their intention is to obtain control of the Company a
tender offer for 100% of our shares must be conducted.
Our board of directors is required to opine over the
price to be offered in any tender offer, which opinion
may be based upon the advice of a financial advisor.
These provisions could substantially impede the ability
of a third party to control us, and could be detrimental
19
to shareholders willing to benefit from any change of
control premium paid on the sale of the Company in
connection with a tender offer. See “Description of
Our Capital Stock and By-Laws—Change of Control
Provisions.”
If any person or group of persons acquires shares
representing 8% of more our total share capital without
the prior approval of our board of directors, the
Company will not recognize such acquisition nor will
it register the acquirer as a shareholder for the
purposes of the exercise of voting rights and other
corporate rights attaching to the acquired shares.
As a result of the global offering, a shareholders’
agreement among the current principal shareholders
of the Company (Grupo Kaluz, members of the del
Valle family and Tenedora) shall come into force.
Such agreement includes provisions relative to: (i)
preferential subscription rights; (ii) possible transfers
of rights to subscribe for shares between affiliates and
third parties; (iii) a reciprocal option to purchase
shares as among the current principal shareholders, in
the case of transfers of shares in equal or greater than
5% blocks; and (iv) voting in common to (a) appoint
the number of directors corresponding to each of the
blocks of controlling shareholders and (b) for certain
other matters, including increases or reductions in
capital, amendments to bylaws, mergers, dividend
payments and material investments and divestitures.
Transfer restrictions .......................................................
The international offering is being made in accordance
with Rule 144A and Regulation S under the Securities
Act. The shares have not been and are not expected to
be registered under the Securities Act or with any
securities regulatory authority of any U.S. state or
other jurisdiction and, accordingly, may not be offered,
sold, pledged or otherwise transferred or delivered
within the United States or to, or for the account or
benefit of, U.S. persons (as defined in Regulation S)
except as set forth in “Transfer Restrictions.” As a
result of these restrictions, investors are advised to
consult legal counsel prior to making any reoffering,
resale, pledge or transfer of the shares.
Lock-up period ..............................................................
We and our current shareholders have agreed, subject
to certain exceptions, for a period of 180 days from the
date of this offering memorandum, without the prior
written consent of the representatives of the initial
purchasers and Mexican underwriters, not to issue, sell
or transfer, the shares of our capital stock or any
securities convertible into or exchangeable for, or that
represent the right to receive shares of our capital
stock. See “Plan of Distribution.”
20
Taxation.........................................................................
Under Mexican law, dividends paid by us to holders of
our shares who are not residents of Mexico for tax
purposes, will be subject to a 10% Mexican
withholding tax imposed on the relevant dividend
payment. Sales of our shares effected through the
BMV or through any other securities market
recognized by the Mexican Tax Administration
Service (Servicio de Administración Tributaria) by
holders who are not residents of Mexico for tax
purposes are generally subject to a 10% Mexican
withholding tax, withheld by the applicable Mexican
custodian through which the sale is conducted. See
“Taxation” for a discussion of certain U.S. federal and
Mexican federal tax consequences of purchasing,
holding and disposing of our shares.
Approval of the global offering by our shareholders .....
The registration of the shares with the RNV and the
listing for quotation of such shares with the BMV, the
increase in the variable portion of our capital stock
relating to the issuance of the shares to be offered in
the global offering and the amendment of our by-laws
(estatutos sociales) in order to give effect to the
requirements of the LMV necessary to conduct a
public offering in Mexico, including the adoption of
the form of a listed corporation (sociedad anónima
bursátil), were approved by ordinary and extraordinary
general meeting of our shareholders held on June 26,
2015.
Risk factors ....................................................................
Investing in our shares involves risks. See “Risk
Factors” beginning on page 27 and the other
information in this offering memorandum for a
discussion of factors you should carefully consider
before deciding to invest in the shares.
21
SUMMARY CONSOLIDATED FINANCIAL AND OTHER INFORMATION
The following tables set forth our summary consolidated financial and other information, which has been
derived from our consolidated financial statements prepared in accordance with IFRS. The financial information as
of March 31, 2015 and for the three months ended March 31, 2015 and 2014 was obtained from the interim
unaudited condensed consolidated financial statements included elsewhere in this offering memorandum. The
financial information as of and for the years ended December 31, 2014, 2013 and 2012 was obtained from our
audited consolidated financial statements included elsewhere in this offering memorandum.
The U.S. dollar amounts provided below are translations from the Mexican peso amounts, solely for the
convenience of the reader, at the exchange rate of Ps$15.1542 per U.S. dollar, which is the exchange rate published
by the Mexican Central Bank (Banco de México) as the rate for the settlement of liabilities denominated in U.S.
dollars payable in Mexico on March 31, 2015. You should not construe these convenience translations as
representations that the Mexican peso amounts actually represent the United States dollar amounts presented, or that
they could be converted into U.S. dollars at the rate or at the dates indicated. See “Exchange Rates.”
January 2014.
The consolidated financial information contained herein must be read in conjunction with our audited annual
consolidated financial statements and the notes thereto and our unaudited interim condensed consolidated financial
statements and the notes thereto included elsewhere in this offering memorandum. Furthermore, this summary
information should be read in conjunction with the explanations provided in “Management’s Discussion and
Analysis of Our Results of Operations and Financial Condition.”
For the year ended December 31,
For the three months ended March 31,
2015
2015
(in millions
of U.S.
dollars)
Profit or Loss Data:
Continuing operations:
Net sales ....................................................
Cost of sales ..............................................
Gross profit ..............................................
Operating expenses ...................................
Other income, net(1) .................................
Exchange loss (income) ............................
Interest income ..........................................
Interest expense .........................................
Banking fees .............................................
Equity in income of associated entity........
Income before income taxes and
discontinued operations ......................
Income tax expense (benefit) ....................
Income from continued operations ........
Discontinued operations(2):
Loss from discontinued operations, net .....
Consolidated net income .........................
Non-controlling interest ............................
Consolidated net income attributable
to the owners of the Company............
2014
(in millions of pesos)
2014
2014
(in millions
of U.S.
dollars)
2013
2012
269
203
66
38
(0)
11
(2)
12
1
—
4,070
3,073
997
569
(6)
169
(33)
184
17
—
3,639
2,809
830
628
(162)
(9)
(18)
112
16
—
1,012
771
241
147
(12)
13
(5)
33
8
—
15,331
11,683
3,648
2,228
(184)
192
(80)
506
117
—
12,929
9,908
13,506
10,273
3,021
2,125
(301)
49
(46)
421
48
(4)
3,233
1,888
(21)
345
(31)
289
20
(35)
6
2
4
97
30
67
263
75
188
57
16
41
869
246
623
729
177
552
778
(38)
816
—
4
(0)
8
59
(1)
9
179
11
6
35
3
93
530
50
60
492
4
501
315
(10)
4
60
168
32
480
488
325
(1) See note 22 to our consolidated financial statements for more details.
22
2015(2)
(in millions
of U.S.
dollars,
except per
share
amounts)
Basic income per share (in
thousands of pesos):
From continuing operations ......................
From discontinued operations ...................
Basic income per share ...........................
Weighted average shares outstanding
(in thousands)........................................
EBITDA(1) ...............................................
0.01
(0)
0.01
642,594
46
2015(2)
2014(2)
(in millions of pesos, except
per share amounts)
0.11
(0.01)
0.09
642,594
707
0.27
(0.01)
0.26
642,594
609
2014(2)
(in millions
of U.S.
dollars,
except per
share
amounts)
0.06
(0)
0.05
642,594
177
2014(2)
2013(2)
2012(2)
(in millions of pesos, except per share
amounts)
0.89
(0.14)
0.75
642,594
0.85
(0.09)
0.76
642,594
1.41
(0.85)
0.55
586,850
2,675
1,913
1,877
(1) EBITDA is not a financial measure recognized by IFRS. EBITDA is included in this offering memorandum because we
believe that it is useful to certain investors as a supplemental measure of our financial performance and our ability to service
our debt and fund capital expenditures. EBITDA should not be considered as a substitute for net income, cash flow provided
by operations or other measures of financial performance or liquidity under IFRS. The presentation of EBITDA may not be
comparable to similarly entitled measures used by other companies.
(2) These figures have been restated to take into account the stock split that was approved by our ordinary and extraordinary
general meeting of shareholders on June 26, 2015. The stock split was applied retroactively to all periods presented.
Weighted average shares outstanding and earnings per share as shown in this table do not coincide with our annual or
interim financial statements included elsewhere this offering memorandum, as the stock split took place after the issuance of
such financial statements.
23
As of December 31,
As of March 31,
Statement of Financial Position:
Current assets:
Cash and cash equivalents ....................................
Derivative financial instruments ...........................
Accounts receivable – Net ....................................
Due from related parties .......................................
Inventories – Net ..................................................
Prepaid expenses...................................................
Total current assets.............................................
Non-current assets:
Property, machinery and equipment – Net ............
Investment in shares of associated companies
and others .........................................................
Net plan assets for employee benefits at
retirement .........................................................
Intangibles and other assets – Net .........................
Long-term receivables due from related
parties and other long-term accounts
receivable .........................................................
Total non-current assets .....................................
Total assets ..........................................................
Current liabilities:
Notes payable to financial institutions and
current portion of long-term debt .....................
Trade accounts payable.........................................
Financière Lafarge, S.A.S. ....................................
Direct employee benefits ......................................
Provisions .............................................................
Accrued expenses and taxes .................................
Due to related parties ............................................
Current portion of income tax liabilities from
consolidation ....................................................
Advances from customers .....................................
Total current liabilities .......................................
Long-term liabilities:
long-term debt ..................................................
Long-term due to related parties ...........................
Deferred income taxes ..........................................
Income taxes liabilities from consolidation ..........
Other long-term liabilities.....................................
Total long-term liabilities ...................................
Total liabilities ....................................................
Total stockholders’ equity ..................................
Total liabilities and stockholders’ equity ..........
2015
2015
2014
(in millions of
U.S. dollars)
(in millions of
pesos)
(in millions of
U.S. dollars)
209
—
231
—
162
18
620
3,169
—
3,504
1
2,439
279
9,392
211
—
208
—
163
11
593
3,193
—
3,150
2
2,471
176
8,992
1,973
10
3,506
41
2,250
307
8,087
1,762
9
2,926
—
2,471
592
7,760
1,032
15,646
1,037
15,711
14,608
11,823
1
10
1
10
11
813
22
208
337
3,161
22
209
328
3,184
289
3,174
239
1,108
4
1,267
1,887
54
19,208
28,600
2014
4
1,273
1,866
2013
2012
54
19,287
28,279
54
18,136
26,223
265
14,248
22,008
204
170
45
1
37
13
11
3,098
2,581
682
14
568
192
161
205
164
44
1
41
18
10
3,102
2,482
662
17
619
274
156
193
2,663
—
31
421
166
173
456
2,330
—
19
204
255
206
0
4
13
498
1
56
202
7,555
0
6
10
499
1
96
146
7,555
171
158
—
3,976
5
45
—
3,520
492
—
71
54
0
617
1,115
7,454
—
1,078
814
1
9,347
16,902
480
—
76
45
0
601
1,100
7,282
—
1,155
679
1
9,117
16,672
6,185
18
1,080
513
14
7,810
11,786
5,926
40
1,490
18
25
7,499
11,019
772
1,887
11,698
28,600
766
1,866
11,607
28,279
14,437
26,223
10,989
22,008
24
For the three months ended
March 31,
2015
2015
2014
(in millions of
U.S. dollars,
except
turnover days
and sales
volume)
(in millions of
pesos, except
turnover days
and sales
volume)
(in millions of
U.S. dollars,
except
turnover days
and sales
volume)
(8)
(128)
(40)
(613)
18
49
76
67
273
49
76
67
71
46
78
74
1,071
46
78
74
715
61
98
87
511
45
83
83
638
638
2,422
2,422
1,507
753
Other Data:
Purchase of property and equipment .................
Depreciation and amortization for the
period ............................................................
Accounts receivable turnover (in days) .............
Accounts payable turnover (in days) .................
Inventory turnover (in days)..............................
Consolidated sales volume (in thousands
of tons) ..........................................................
2014
2013
2012
(in millions of pesos, except turnover days and
sales volume)
(2,059)
(2,113)
EBITDA is not a financial measure recognized by IFRS. EBITDA is included in this offering memorandum
because we believe that it is useful to certain investors as a supplemental measure of our financial performance and
our ability to service our debt and fund capital expenditures. EBITDA should not be considered as a substitute for
net income, cash flow provided by operations or other measures of financial performance or liquidity under IFRS.
The presentation of EBITDA may not be comparable to similarly entitled measures used by other companies. The
following tables reconcile consolidated net income to EBITDA:
Consolidated EBITDA Reconciliation
2015
2015
(in millions of
U.S. dollars)
Consolidated net income
(loss) ..................................... $
Plus (Less):
Loss from discontinued
operations, Net ......................
Income tax expense (benefit) ....
Equity in income of
associated entity ....................
Financing result, net(1) .............
Depreciation and
amortization for the period ....
EBITDA ................................... $
4
2014
2014
(in millions of
U.S. dollars)
$
59
$
2014
179
$
35
2013
$
530
0
2
8
30
9
75
6
16
93
246
0
22
0
337
0
101
0
49
0
735
18
273
245
71
1,071
46 $
707 $
609 $
177 $
2,675
$
$
(1) Includes the net amount of interest income, interest expense, banking fees and exchange loss (income).
25
2012
492
$
315
60
501
177
(4)
(38)
(35)
473
623
715
511
1,913
$
1,877
For the year ended December 31,(2)
2007
2007
(in millions of U.S. dollars)
Consolidated net income (loss)
Plus (Less):
Loss from discontinued operations,
Net ....................................................
Equity in income of associated entity....
Financing result, net(1) .........................
Depreciation and amortization for
the period ..........................................
EBITDA ...............................................
$
6
$
(4)
4
$
(61)
56
—
—
5
70
9
137
19
$
(2) Based on MFRS, which were the financial reporting standards applicable and effective in Mexico in 2007.
26
89
291
RISK FACTORS
An investment in our shares involves risks. Before deciding to purchase our shares, you should carefully
consider the risks described below, as well as the additional information contained in this offering memorandum.
Any of the risks described below may materially affect our operations, business plans, financial condition or results
of operations. In such cases, the price or liquidity of our shares could decrease and you may lose part or all of your
investment. The risks described below are those which we currently believe could adversely affect us. Additional
risks not currently known or not considered material on the date hereof could also adversely affect our business
results of operations and financial condition.
Risk Factors Related to Our Business
The industries in which we operate are highly competitive and any increased competition could adversely affect
our financial condition.
A high degree of competition exists in the markets in which we participate. We compete with several large and
small manufacturers of construction materials, many of which are larger than us in terms of production and sales
capacity and have greater financial resources. We usually compete on quality, price, product performance, sales,
service and marketing support. In addition, we compete with a large number of distributors of construction
materials.
We also face competition in our various production divisions from Mexican and non-Mexican producers of
alternative materials, such is the case with respect to producers of galvanized steel roofs, plastic, cardboard or
fibrobitumen, cement and gypsum panels in our Building Systems Division and producers of products similar to
plastics that are manufactured with different resins and products such as chlorinated polyvinyl chloride, or
“CPVC”, polypropylene plastic pipes and other plastics in the Metal Products Division. In Mexico, increased
competition between national and transnational manufacturers and with alternative construction materials could
adversely affect our business, results of operations and financial condition.
We may be unable to complete or integrate our completed or prospective acquisitions successfully, which could
adversely affect our results of operations and financial condition.
We have acquired and, as part of our strategy, intend to continue acquiring in the future, businesses in Mexico
and in other countries. See “Summary—Our Key Strategies” and “Summary—Our History.” We are unable to
predict whether or when additional acquisitions will occur, or the likelihood of a material transaction being
completed on terms and conditions favorable to us. Our ability to continue to expand successfully through
acquisitions depends on many factors, including the availability of potential targets, and our ability to identify
acquisitions and negotiate, finance and close transactions. Even if we complete future acquisitions, these
transactions involve risks, including the following:

the acquired businesses failing to achieve expected results;

inability to successfully integrate the operations, services and products of any acquired company, or the
inability to achieve expected synergies and/or economies of scale;

unanticipated liabilities;

failure to effectively plan or manage acquisitions;

antitrust considerations and other regulatory requirements;

diversion of attention of our management; and

possible inability to retain or hire key personnel for the acquired businesses.
27
If we are unable to integrate or manage our acquired businesses successfully, we may not realize anticipated
cost savings, revenue growth, synergies and levels of integration, or be able to operate efficiently acquired
businesses, which may have an adverse effect on our business, results of operations and financial condition.
Further, approval by the Mexican Economic Competition Commission (Comisión Federal de Competencia
Económica) or other antitrust regulators in the different countries where we may pursue any other acquisition, is
required for us to acquire or sell significant businesses and to enter into significant joint ventures. We cannot assure
you that the Mexican Economic Competition Commission or such other agencies or equivalent authorities in other
jurisdictions, will authorize our proposed joint ventures or acquisitions in the future, or that it will authorize
transactions without imposing conditions or requiring that we divest portions of our business, which may adversely
affect our business, results of operations and financial condition.
Our business is subject to the risks generally associated with international business operations.
We engage in manufacturing and other business activities throughout the United States, Mexico, Central
America and South America. Our principal manufacturing facilities are located in Latin America and the United
States. As a result, our business is and will continue to be subject to the risks generally associated with international
manufacturing and other business operations, including:

governmental regulations applicable to manufacturing operations, including environmental regulations;

changes in social, political and economic conditions;

transportation delays;

power and other utility shutdowns or shortages;

disparity in currency conversion and volatility of foreign exchange markets;

limits on the supply of skilled labor and changes in local labor conditions;

changes in administrations and their policies;

guidelines and policies in respect of foreign investment and competition;

changes in tax and other laws and regulations; and

natural disasters.
Some of the countries in which we operate have been subject to social and political instability, and interruptions
in operations in our foreign manufacturing facilities could occur in the future. Our sales could be adversely affected
by many of the foregoing factors, as well as by government regulations applicable to the import, export or sale of
our products and trade protection measures or to governmental taking or expropriations.
Our operations depend on the building materials and infrastructure sectors. A reduction in the activities of
these sectors could adversely affect our operations.
In 2014, our net sales were derived primarily from our sales to the building materials and infrastructure sectors,
respectively, in Mexico, the United States and Latin America. A decline in the building materials industry in the
countries in which we operate or a negative change in economic and demographic factors influencing the building
materials industry, all of which have occurred in the past, may have a material adverse effect on our results of
operations, cash flows and financial condition.
Similarly, our historical performance has been partially tied to public sector spending on infrastructure and
housing projects and our ability to bid successfully for such contracts. Sales to the public sector represented 14% of
total sales for the Building Systems division in 2014. Public sector spending, in turn, generally has been dependent
on the relative health of the economies of the countries in which we operate. A decrease in public sector spending
or a negative change in the economic and demographic factor influencing this industry could have a material adverse
effect on our business, results of operations and financial condition.
28
The lack of development of new products and production technologies and the inability to operate efficiently
may damage our competitive position.
Our customers require ongoing advances in quality and performance, and we need to develop and market
products that meet market needs in a timely manner in order to remain competitive. If new technologies were to
emerge to which we did not have access or we are not able to produce or provide products that meet market needs in
a timely manner and at competitive prices, our results of operations could be significantly and adversely affected.
Furthermore, if our products are no longer purchased (for example, in the event that new technologies or valueadded products are developed), the costs of research and development or capital expenditures related to specific
products would not be recovered, which could adversely affect our business, results of operations and financial
condition. Although we spend a portion of our resources in research and development, no assurances may be given
that the monies and resources devoted would be sufficient for us to maintain state-of-the art technologies.
Increases in the price and decreases in the availability of raw materials may adversely affect our financial
condition.
Our results of operations are significantly affected by the cost and availability of our raw materials, including
copper (and recycled copper), pulp and plastics resins. Prices for copper are subject to market conditions, demand by
other Mexican and international manufacturers of construction materials, freight costs and prices in the international
market. All of these factors are beyond our control. Although we are currently able to pass on the cost of these raw
materials to our customers, we may not be able to pass on higher copper costs to our customers, or other costs of raw
materials that are significant and change suddenly, and there is no guarantee that we will be able to continue passing
on these costs to our customers in the future. In addition, we enter into derivative financial instruments (such as
forward and futures contracts) to hedge financial risks associated with our exposure to metals prices. However, our
hedging strategy may be insufficient or not successful.
Although we have strong business relationships with suppliers of plastics resins, the price of these resins is
denominated in U.S. dollars and depends on two hydrocarbons derived from petroleum, benzene, ethylene and other
natural gas derivatives. Therefore, the price of these resins depends on the price of oil, natural gas and exchange
rate fluctuations. Although we are generally able to pass on increases in the prices of these resins to our end
customers, there are no assurances that we will be able to pass on higher costs to our customers in the future.
Reliable access to, and consistent quality in the supply of, pulp from the United States, Canada and Chile are
critical to our production of fiber cement building materials. The main suppliers of cellulose fiber are located in
Chile and Canada. We manage our supply by means of negotiations based on annual forecasts, with quarterly
reviews, monitoring our inventories according to logistical cycles. Availability of this raw material, because it is of a
particular specification, is subject to production volumes in the factories. Even though its availability in the market
is limited, there are few industries that consume pulp with this specification. Although this raw material is readily
available at prices prevailing in the global market, there is no guarantee that these materials will be readily available
in the future.
Any increase in the price of raw materials which cannot be passed on to our customers, or cannot be passed on
quickly, or mitigated through derivative financial instruments, or a reduction in the availability of such raw materials
due to market shortages or conflicts with suppliers, could adversely affect our business, results of operations and
financial condition. In addition, no assurance can be given that cost increases will not have a larger adverse impact
on our financial condition and profitability than currently anticipated.
Maintenance, upgrading and improvements related to our production capacity require significant investment,
without being able to ensure that we can achieve the expected return on these investments.
We are currently considering expanding and improving our existing facilities. See “Summary—Our Key
Strategies.” We may not obtain our expected return on our investments, particularly if certain adverse events were to
occur, including changes in the markets for our products, inaccurate projections, including projections regarding
future market demands, on which decisions were made regarding the timing or manner of these investments or an
inability to obtain sufficient resources to make necessary capital expenditures. This could have a material adverse
effect on our results of operations, including asset impairment charges. Furthermore, there is a possibility that
existing projects will not be completed in a timely manner or at all, due to factors such as the inability to obtain
financing, regulatory changes, failure to perform or the lack of availability of contractors and subcontractors and
29
logistical problems, which could hinder or prevent us from implementing our business strategy, which in turn could
Our inability to effectively manage our growth could adversely affect our business and results of operations.
We have experienced rapid growth in our operations and employee headcount, which has required and will
continue to require a major effort by management with respect to our administrative, operational and financial
infrastructure. We anticipate requiring additional growth to continue expanding the scope of our operations and the
size of our customer base. Our continued success will depend in part on the ability of our key executives to
effectively manage this growth, including causing employees to continue to perform in accordance with our
standards and specifications.
In order to effectively manage our business and growth, we must continue to improve our internal controls,
information technology systems, operational, financial and management procedures and generally map and improve
our various processes. Furthermore, new employee hires will increase our spending, which could, in the short term,
offset increases in net sales. In the event that we fail to efficiently manage our planned growth, our costs could
increase more than expected, net sales may decrease or increase at a slower rate than anticipated and we may not be
able to implement our business strategy, which could adversely impact our business, results of operations and
financial condition.
The inability to obtain adequate capital to fund acquisitions or expansions could delay or prevent the
implementation of our business strategy.
It is expected that the expansion and continuous development of our operations will require significant capital
expenditures and operating expenses, including working capital requirements, which may not be obtainable on
acceptable terms or at all. It is possible that we will not generate sufficient cash flow from operations to meet cash
requirements. In addition, capital requirements could vary significantly as compared to our current estimates, if, for
example, revenue does not reach expected levels, or we have to incur unforeseen capital expenditures and
investments to maintain our competitive position. If this is the case, we may require additional financing sooner
than expected, certain development and expansion plans may need to be delayed or we could miss market
opportunities. We may not be able to obtain financing or debt capital in the future and even if obtained, it may not
be on favorable terms or on terms that are competitive to those that may be obtained by our competitors. It is likely
that future lending instruments, such as lines of credit, will contain various affirmative and negative covenants, and
may require us to provide assets as collateral. This could limit our ability to obtain additional financing to conduct
acquisitions and use funds on capital expenditures and to fund our strategy. The inability to raise additional capital
on satisfactory terms may delay or prevent the expansion of our operations and the taking of advantage of available
opportunities, which could adversely affect our business, results of operations and financial condition.
The lack of capacity to meet customer orders may adversely affect our competitive position and could have a
negative effect on our results of operations.
The lack of capacity to meet customer orders may adversely affect our competitive position and have a negative
effect on our results of operations. If for any reason we cannot continue with our expansion and growth plans, our
ability to market and sell our products will be limited by the production capacity of our 26 existing operating plants.
If we are continuously unable to meet customer demands, this fact will have an impact on our franchise and is likely
to adversely affect our business and results of operations.
We rely on our network of independent distributors to sell and distribute our products. If the sales of those
distributors are low or if they give preference to products of our competitors, our results of operations and
financial condition could be adversely affected.
Most of the sales of our products are made through independent distributors who sell these products to the
commercial, industrial and retail markets. Any substantial decrease in the sales of our independent distributors could
adversely affect the sales of our products sold through such distributors. Independent distributors also often carry
products that directly compete with our products. Our independent distributors may give higher priority to products
of, and/or form alliances with our competitors. If a substantial portion of our independent distributors fail to
purchase our products, or fail to provide our products with promotional support, our results of operations and
financial condition are likely to be adversely affected. Developing our own distribution network is costly and may
not happen rapidly as a means to substitute current distributors.
30
Price increases or shortages in the supply of electricity and fuel could adversely affect our results of
operations.
We consume significant amounts of electricity, gas and fuel in our operations, the cost of which has
significantly fluctuated in recent years. Energy and gas costs are affected by several factors, including weather,
product mix and price increases during peak-demand hours. In 2014, energy and gas costs collectively represented
approximately 7% of our production costs. Our financial condition or results of operations could be materially
affected by future increases in energy and fuel costs or shortages in the supply of electricity and fuel.
We depend on a limited number of suppliers.
We depend on a limited number of key suppliers to meet our raw material requirements. For example, we obtain
our raw materials, such as chrysotile fiber used in the production of certain of our Building Systems Division
products, from suppliers in Colombia, Brazil, Russia, China and Kazakhstan, among others. If any of our key
suppliers fails to deliver or to deliver timely, we could face limited access to raw materials, higher costs and delays
resulting from the need to obtain our raw material requirements from other suppliers. Any such situation could
adversely affect our production, net sales, business, results of operations and financial condition.
Labor disruptions could affect our results of operations.
We have entered into 26 collective bargaining agreements with various unions. Almost all of these collective
bargaining agreements are renegotiated yearly, except for the collective bargaining agreement in Colombia, which is
renegotiated every three years. Approximately 63% of our total employees are represented by labor unions. An
inability to successfully negotiate renewals may adversely affect our business and results of operations. Also, in the
event we encounter adverse financial conditions, we may have difficulty meeting the terms of such agreements,
which could have a negative impact on our business and results.
We occasionally experience pressure from unions to increase the benefits paid to our employees, which could
affect our results of operations. Similarly, there is no guarantee that relations with unionized workers will be free
from individual or collective disputes. A collective dispute accompanied by a temporary interruption or prolonged
strike by our employees could have a negative impact on our business and results of operations and may expand
throughout the different facilities in which we operate.
Our success depends on our ability to retain certain key personnel and our ability to hire additional key
personnel.
We depend on the performance of our senior management and key employees. In particular, our senior officers
have considerable experience in our business, and the loss of any of them or in our ability to attract and retain
sufficient replacements or additional qualified officers, could adversely affect our ability to continue to operate
efficiently, implement our business strategy or obtain results of operations that are consistent with prior returns.
Our future success also depends on our continued ability to identify, hire, train and retain qualified sales,
marketing, operations and administration personnel. Competition for such qualified personnel is intense. If we are
unable to attract, integrate or retain such qualified personnel, our business, financial condition and results of
operations are likely to be adversely affected.
We may be unable to protect the reputation of our brands and our intellectual property rights.
Our net sales are derived from sales of products under brands owned by us. These brand names are key business
assets. Maintaining the reputation of these brands is essential to our future success and loss of reputation could have
a material adverse effect on our business, results of operations and financial condition. We have also obtained
patents and submitted patent applications on our products, including Maxi-Therm fiber cement roofing, multiconnectors for water tanks and mineral fiber manufacturing process, which we believe distinguishes our products
from those of our competitors. We cannot assure you that we will be able to maintain the value of our brands or that
our patent applications will be successful or will not be challenged.
Our principal trademarks and patents are registered in Mexico and in the relevant countries where these
trademarks and patents are used. Even if we enforce our rights against third-party offenders, we cannot assure that
our actions to establish and protect our intellectual property rights are adequate to prevent imitation of our products
31
or use of our production systems and processes by others or to prevent others from seeking to block sales of our
products on grounds that they violate their trademarks and proprietary rights. If a competitor were to infringe our
trademarks, enforcement by us of our rights would likely be costly and would divert resources that would otherwise
be used to operate and develop the business. Although we intend to actively defend the trademark and patents in our
portfolio, we cannot assure you that we will be successful in enforcing these intellectual property rights. See
“Business—Intellectual Property.”
Unexpected equipment failures may lead to production curtailments or shutdowns.
Interruptions in our production capabilities could increase our production costs and reduce our sales and
earnings for the affected period. Our plants are subject to the risk of catastrophic loss due to unanticipated events.
Our manufacturing processes are dependent upon critical pieces of equipment, which could reduce our production
capacity or incur downtime as a result of unanticipated failures. In the future we could experience inoperability or
reduced production capabilities in our plants due to equipment failure. Unexpected interruptions in our production
capabilities would adversely affect our business, productivity and financial condition. Moreover, any interruption in
our production capability may require significant capital expenditures to remedy the problem, which would reduce
the amount of cash available for our operations. Our insurance may not cover such losses. In addition, a long-term
disruption could harm our reputation and result in a loss of customers, which could adversely affect our business,
results of operations and financial condition.
Natural disasters, production hazards and other events could adversely affect our business.
Natural disasters, such as torrential rains, hurricanes and earthquakes, could impede operations, damage our
infrastructure or adversely affect our production facilities. We could also be subject to acts of vandalism or civil
disturbances, which could affect our infrastructure and/or our distribution network. Any of these events could
increase our capital expenditures for repairs.
Our operations are subject to hazards, such as fires, explosions and other accidents, associated with the use of
chemicals and the storage and transportation of our products. These hazards can cause personal injury and loss of
life, severe damage to or destruction of property and equipment, and environmental damage. A significant accident
at one of our plants or storage facilities could force us to suspend our operations temporarily and result in significant
remediation costs, governmental penalties or fines and lost sales.
Notwithstanding that we have insured our plants against damages caused by natural disasters, accidents or other
similar events and resulting consequential damages, if losses occur we cannot assure you that losses caused by
damage to our plants will not exceed policy limits or will be covered by our policies. Damages significantly in
excess of our insurance policy limits or that were not foreseeable and covered by our policies could have a material
adverse effect on our business, results of operations, financial condition and prospects. In addition, even if we
receive insurance proceeds as a result of a natural disaster, facilities could suffer interruptions in production as we
complete repairs, which could materially and adversely affect our business, results of operations, financial condition
and prospects.
We are subject to stringent environmental laws and regulations which may impose significant costs on us.
We are subject to various environmental protection, health and safety laws and regulations governing, among
other things, the production, storage, handling, use, remediation, disposal and transportation of hazardous materials,
the emission and discharge of hazardous materials into the ground, air or water, and the health and safety of our
employees. We are required to obtain permits from governmental authorities for certain operations and have
voluntarily obtained certifications from national and international organizations for certain of our production plants.
We cannot assure you that we have been or will be at all times in compliance with such laws, regulations, permits
and certifications. If we violate or fail to comply with these laws, regulations or permits, we could be fined, be
subject to administrative and criminal procedures, have our facilities be shut down or otherwise be sanctioned by
regulators. Under certain environmental laws, we could be held responsible for all of the costs relating to any
contamination at our or our predecessors’ past or present facilities and at third party waste disposal sites. We may
also be held liable for any and all consequences arising from human exposure to hazardous substances or other
environmental damage.
32
Environmental laws are complex, change frequently and have become more stringent over time. Furthermore,
certain governments interpret the applicable laws more strictly than others. While we have budgeted resources for
future capital requirements and operating expenditures to comply with environmental laws, we cannot assure you
that environmental laws will not change, become subject to stricter interpretations by authorities or become more
stringent in the future. Changes or additions to existing laws or regulations, or stricter enforcement or application of
such laws or regulations, could force us to make significant additional capital expenditures or to operate differently,
which could affect our profitability, financial condition and results of operations, and even compel us to reformulate
our processes. We cannot assure that our costs of complying with current and future environmental and health and
safety laws, and our liabilities arising from past or future releases of, or exposure to hazardous substances will not
adversely affect our business, results of operations and financial condition. See “Business—Regulation—
Environmental Matters and Regulation.”
Certain of our fiber cement products contain chrysotile fiber.
Certain of our fiber cement products manufactured in our Building Systems Division in Mexico and South
America contain chrysotile fiber, which is a form of asbestos. Asbestos (including chrysotile asbestos) is one of the
113 substances that are included on the International Agency for Research on Cancer’s list of carcinogenic
substances. As a result, our use of chrysotile fiber is subject to various health and safety standards in the countries in
which we operate. National and international health and safety standards could become stricter in the future, which
would require us to make substantial additional capital expenditures to be able to substitute the use of chrysotile
fiber for other synthetic fibers, as well as increase our operating costs. Our use of chrysotile fiber may also limit the
marketability of, or demand for, our fiber cement products and therefore adversely affect our growth prospects.
Certain of our customers, including some customers in Mexico, Colombia, Bolivia and Ecuador, avoid purchasing
products that contain chrysotile fibers. In the United States, it is not forbidden to sell products that contain
chrysotile fibers. Nevertheless, the products we manufacture and/or sell in that country do not contain such fibers
and neither do any of the products that we manufacture in South America. We are able to substitute other fibers such
as cellulose fiber, polypropylene or PVA (polyvinyl alcohol fiber) for chrysotile fiber, but our use of chrysotile fiber
overall remains significant. Such substitution would result in our inability to continue manufacturing some of our
products, such as fiber cement tubing in Mexico. This use of chrysotile fiber also subjects us to the risk of litigation
in the future, where an adverse ruling or judgment could have a material adverse effect on our financial condition or
results of operations. See “Risk Factors—Risk Factors Related to Our Business—We may be subject to claims and
potential liabilities related to the products we manufacture or distribute, or to our operations” and “Business—Legal
Proceedings.”
We may be subject to claims and potential liabilities related to the products we manufacture or distribute, or to
our operations.
We have been subject, and may be exposed in the future, to product liability claims in the event that the use of
our products is alleged to have caused injury or had other adverse effects. Currently, we maintain product liability
insurance coverage, but we may not be able to obtain such insurance on acceptable terms in the future, or such
insurance may not provide adequate coverage against potential claims. Product liability claims can be expensive to
defend and can divert management and employee resources for months or years, regardless of the ultimate outcome.
Similarly, such claims may adversely affect our reputation, which could result in a loss of customers. An
unsuccessful product liability defense could have a material adverse effect on our business, results of operations and
financial condition and may subject us to class actions that are expensive and difficult to defend. See “Business—
Legal Proceedings.”
Our insurance coverage may be insufficient to cover damages that we may incur.
Our insurance coverage may be insufficient to cover damages that we may incur if the amount of damages
surpasses the amount of coverage of our insurance policy or policies or if the damage is not covered by such policy
or policies. In addition, we cannot assure you that we will maintain our current insurance coverage or that we will be
able to contract insurance at our current cost. Uninsured losses could cause us to suffer significant unanticipated
expenses resulting in an adverse effect on our business, results of operations and financial condition.
33
We engage in hedging activity from time to time, which may not be successful and may result in losses to us.
We use derivative financial instruments to mitigate the volatility of prices for certain raw materials used in our
production processes, such as nickel, copper and zinc, and financial transactions we enter into from time to time.
Our materials hedging activity could cause us to lose the benefit of a decrease in raw materials prices if such prices
drop below the level of our hedge positions and the cash flows from the materials hedges can be affected by the
market price of the raw materials, which are not under our control. Similarly, our financial hedging activity could
cause us to lose the benefit of a decrease in interest rates. In addition, we cannot assure you that we will be
adequately protected by our hedging activities or that such hedging activities will not result in significant losses that
affect our business, financial condition and results of operations.
We hold debt that could significantly impact our strategic development.
As of March 31, 2015, our total indebtedness was Ps$10,552 million and our shareholders’ equity was
Ps$11,698 million. The level of our indebtedness and the terms and conditions of such indebtedness, may have
significant consequences, including:

limit our ability to use our cash flow or obtain additional financing in the future to fund working capital,
capital expenditures, acquisitions and future general corporate requirements;

restrict our ability to pay dividends;

restrict our ability to make certain payments;

restrict our ability to incur additional indebtedness;

restrict our ability to use the proceeds from the sale of assets as we see fit;

require a substantial portion of cash flow from operations to service debt payments, particularly in the event
of a default under one of our other debt instruments;

require that we use cash flows as a means to make prepayments instead of using such cash flow for our
capital expenditures and operations;

increase our vulnerability to adverse economic and industry conditions, including increases in interest rates,
foreign currency exchange rate fluctuations and market volatility;

limit our flexibility in planning for, or reacting to, changes in our business and industry conditions;

limit our ability to carry out additional acquisitions; and

place us at a competitive disadvantage compared to other less-leveraged competitors.
There is no guarantee that we will continue to generate sufficient cash flows to cover our debt, meet our
working capital requirements and capital expenditures or carry out our expansion plans. To the extent that we are not
able to generate sufficient operating cash flow, or in the event of our inability to apply for loans or additional
funding, we will likely be required to sell assets, reduce capital expenditures, refinance all or a portion of our
existing debt or obtain additional funding through the issuance of equity or debt, which may impact our growth and
our results of operations and financial condition. In such cases, we cannot assure you that we will be able to
refinance our debt, sell assets or obtain additional financing on terms acceptable to us. Additionally, our ability to
incur additional debt will be limited as stipulated in our credit agreements and the indenture governing our 2025
notes. See “Management’s Discussion and Analysis of Our Results of Operations and Financial Condition—
Liquidity and Capital Resources.”
If changes in our financial debt cause us to breach the terms of our credit agreement terms, the indenture
governing our 2025 notes or other debt instruments, this could lead to, among other things, restrictions in our ability
to make future acquisitions or enter into other operations (including future financing operations or refinancing of our
debt), or accelerate the repayment of our indebtedness, which could have a negative impact on our operations,
results of operations and prospects.
34
We are parties to several credit agreements and have issued debt in the Mexican and international securities
markets, for which we have committed to comply with restrictive covenants and maintain certain financial ratios. If
we fail to satisfy the covenants or maintain the financial ratios set forth in these agreements, our outstanding
indebtedness could be accelerated and become immediately due and payable, thus potentially requiring us and our
subsidiaries to restructure such indebtedness, which is likely to impact our flexibility and to have an adverse impact
in our financial condition and results of operations. We cannot provide any assurance that we will remain in
compliance with said covenants and financial ratios.
We are a holding company and hold no significant assets other than shares of our subsidiaries.
We are a holding company and conduct our operations through a series of operating subsidiaries and controlling
operating companies. Accordingly, we depend on the results of operations of our subsidiary companies. Our ability
to pay dividends and service our debt and other obligations depends on the generation of cash flow by our
subsidiaries and their ability to make such cash available to us in the form of interest payments, debt repayment,
dividends and capital reimbursements, among others. All assets used to provide technical and administrative
services and the various concessions are held by our subsidiaries. As a result, we have no significant assets other
than the shares of our subsidiaries. Any dividends or payments that we decide to issue will be subject to the
availability of cash provided by our subsidiaries. Cash transfers from subsidiaries to us may be further limited by
corporate and legal requirements, including having absorbed losses from previous financial years, by the terms of
subordinated indebtedness or by adverse tax consequences, among others. As a result, if our subsidiaries do not pay
dividends or other distributions, we may not have sufficient funds to meet our obligations or pay dividends, which
could affect our financial condition and the market price of the shares.
As a holding company, our ability to meet our creditors’ claims depends on the payments we receive from our
subsidiaries and our capacity to participate in the distribution of their income. In some cases, our right, and
therefore the right of our creditors, to participate in the income distribution of our subsidiaries, may be subordinated
to the claims of certain creditors of our subsidiaries pursuant to applicable financial agreements and applicable law.
As of March 31, 2015, our subsidiaries Trituradora and ELC Tenedora Cementos collectively hold approximately
13% of the debt of our consolidated company.
Our presentation of EBITDA may not be comparable to similarly titled measures used by other companies.
Our presentation of EBITDA may not be comparable to similarly entitled measures used by other companies.
Our completed acquisitions and divestitures may affect the comparability of our financial information.
The financial information for the three months ended March 31, 2015 and fiscal years 2014, 2013 and 2012
included in this offering memorandum may not be comparable due to the acquisitions and divestitures we have
completed during those periods. See “Management’s Discussion and Analysis of Our Results of Operations and
Financial Condition.”
Risk Factors Relating to Mexico and Other Countries Where We Operate
Downturns in the Mexican economy, which has historically been volatile, may adversely affect us.
The majority of our customers are Mexican companies or individuals and as of March 31, 2015, 71% of our
assets and 61% of our operations were located in Mexico. For these reasons, our operations, business, results of
operations and financial condition are dependent on the level of economic activity in Mexico. Our net sales are
highly affected by the level of economic activity in Mexico and the general purchasing power of Mexican
individuals and companies. Accordingly, declines in the spending of our Mexican customers could have negative
effects on our net sales, financial condition and results of operations. Economic slowdowns in Mexico may have,
and in the case of the current slowdown, have had, additional consequences that impact our business. We also face
risks associated with the impact of economic downturns on third parties such as suppliers, financial institutions and
other parties with whom we do business. If these parties experience negative effects on their businesses due to an
economic downturn, this could adversely affect our business, our results of operations and financial condition.
35
Historically, Mexican inflation rates have been extremely high, although they have decreased in recent years. In
2014, 2013 and 2012, Mexico’s annual inflation, as measured in terms of the changes in the Mexican National
Consumer Price Index, or “NCPI”, was 4.1%, 3.8% and 4.1%, respectively. In addition, although Mexican GDP has
increased at the rates of 2.1%, 1.4% and 4.0% in 2014, 2013 and 2012, respectively, Mexico’s economy has
historically been volatile and GDP growth in the future may be slow or flat. The Mexican consumer confidence
index reached an eight-year low in October 2009, when it registered 77.0 points, subsequently closing the year at
80.1 points. In 2011 to 2014, there was a steady improvement in the index, and consumer confidence at the end of
that period was at 93.55 points. The global recessionary environment has an impact on consumption. Consequently,
consumer purchasing power may continue to decrease and demand for our products may therefore decrease. A
decrease in demand could affect our operations to the extent that we are not able to reduce our costs and expenses in
response to falling demand. These factors could result in a decrease in our net sales and could adversely affect our
business, results of operations and financial condition.
Mexico may continue to suffer a period of violence and criminal activity which could affect our operations.
Mexico has recently experienced periods of violence and crime due to the activities of organized crime. In
response, the Mexican government has implemented various security measures and has strengthened its police and
military forces. Despite these efforts, organized crime (especially drug-related crime) continues to exist in Mexico.
These activities, their possible escalation and the violence associated with them may have a negative impact on the
Mexican economy or on our operations in the future. The social and political situation in Mexico could adversely
affect the Mexican economy, which in turn could have a material adverse effect on our business, financial condition,
results of operations and prospects.
Political and economic events in Latin American countries where we operate could adversely affect us.
Our business strategies, results of operations and financial condition could be adversely affected by changes in
government policies in Mexico or other Latin American countries in which we have a presence and other political
events that affect those countries, as well as changes in laws or administrative practices which are beyond our
control. These may include, but are not limited to:

government regulation applicable to the manufacture or distribution of our products or supplies;

existence and interpretation of environmental laws and regulations and liabilities and obligations arising
thereunder;

policies relating to foreign investment;

complications in transportation or roads;

shortages or outages of power and other services or on the availability of raw materials, including oil and
gas;

restrictions on currency conversion or devaluation of currencies;

the nationalization or expropriation of assets;

restrictions on the repatriation of funds; and

limitations on the supply of qualified personnel.
Similarly, recent GDP growth in some of these countries may not continue, and future events that affect their
economies could impair our ability to execute our business plan, or could adversely affect our business, results of
operations or financial condition.
The countries in which we operate have been exposed to political and social instability in the past. Social and
political uncertainty and instability as well as other adverse social or political developments that affect those
countries could adversely affect our business, results of operations and financial condition, as well as the market
price of our shares.
36
In the past, some Latin American countries in which we operate have experienced high inflation rates. A return
to higher rates of inflation could adversely affect our business, results of operations and financial condition. In
addition, the countries in which we operate have devalued their currency several times in the past and could do so in
the future. These measures and others that these countries could adopt may adversely and significantly affect our
business, results of operations and financial condition.
Mexican federal governmental policies could adversely affect our results of operations and our financial
condition.
We are incorporated in Mexico and a significant portion of our assets and operations are located in Mexico. As
a result, we are subject to political, legal and regulatory risks specific to Mexico. The Mexican federal government
has exercised, and continues to exercise, significant influence over the Mexican economy. Accordingly, Mexican
federal governmental actions and policies concerning the economy and the federal public administration entities
influence the activity of financial institutions. This could have a significant impact on private sector entities in
general and us in particular, as well as on market conditions, prices and returns on Mexican securities. In addition,
government housing and infrastructure expenditures affect our results as we are dependent on these sectors.
We cannot provide any assurance that future policy developments in Mexico over which we exercise no control
will not have an unfavorable impact on our business, results of operations or financial condition. Social and
political uncertainty and instability in Mexico and other adverse social or political events that influence Mexico
could affect our business, results of operations and financial condition, as well as the market price of our shares.
Political developments in Mexico could significantly affect the Mexican economy, and consequently, our
operations. Significant changes in laws, policies and regulations, which could affect Mexico’s economic and
political situation, could adversely affect our business.
A depreciation of the peso relative to the U.S. dollar and other currencies could negatively affect our business
and results of operations.
The value of the peso and other Latin American currencies relative to the U.S. dollar and other currencies has
been and may be subject to significant fluctuations resulting from crises in international markets, crises in Mexico,
speculation and other circumstances.
In order to consolidate the financial statements of foreign subsidiaries, their financial statements are translated
from the local currency to the currency of presentation, pursuant to the following methodology: (i) the closing
exchange rate in effect at the balance sheet date for all assets and liabilities; and (ii) historical exchange rates for
stockholders’ equity, as well as net sales, cost and expenses. Translation effects are recorded under other
comprehensive income (loss) within stockholders’ equity. Translation effects are reclassified from equity to profit
or loss upon the partial or complete sale of the investment.
The adjustments to goodwill and fair value generated in the acquisition of a foreign operation are treated as
assets and liabilities of the operation and translated at the exchange rate prevailing at the end of the transaction.
Foreign currency transactions are recorded at the applicable exchange rate in effect at the transaction date.
Monetary assets and liabilities denominated in foreign currency are translated into Mexican pesos at the applicable
exchange rate in effect at the balance sheet date. Exchange fluctuations are recorded as a component of net
financing result in the statements of income, except for exchange rate differences from foreign currency
denominated loans relating to assets under construction qualifying for capitalization of interest, which are included
in the cost of such assets considering them as an adjustment to interest cost on those foreign currency denominated
loans. Non-monetary items carried at fair value denominated in foreign currencies are retranslated at the exchange
rates prevailing at the date on which the fair value was determined. The recording of non-monetary items calculated
in terms of historical cost in foreign currency are not translated.
As of March 31, 2015 and December 31, 2014, we had liabilities denominated in U.S. dollars or other
currencies amounting to US$583 million and US$558 million, respectively. Therefore, any significant depreciation
of the peso versus the U.S. dollar or other currencies could affect our liquidity, results of operations and financial
condition. Also, if a significant depreciation of the peso versus the U.S. dollar or other currencies were to occur, this
depreciation could cause interest rates to rise, which could in turn affect our results of operations and financial
condition. For example, a 10% devaluation of the peso against the U.S. dollar, based on the exchange rate and our
outstanding dollar-denominated indebtedness at December 31, 2014, would result in a liability position of US$687
37
million compared to the liability of US$558 million that we had as of December 31, 2014. See note 9.e to our
consolidated financial statements for more details.
An increase in inflation may increase our operating costs.
High levels of inflation may cause our operating costs to increase while the prices charged for our products, due
to the competitive environment, may not. Most of our operating expenses are based on short-term contracts which
may be subject to inflationary pressures. During most of the 1980s and during 1995, Mexico experienced periods of
very high levels of inflation. Inflation has led to high interest rates, devaluations of the peso and, during the 1980s,
substantial government controls over exchange rates and prices. A return to higher levels of inflation could
Political events in Mexico could adversely affect our operations.
The Mexican government’s actions and policies concerning the economy, the regulatory environment or social
or political context, state-owned enterprises and state controlled, funded or influenced financial institutions could
have a significant impact on private sector entities in general and on us in particular, as well as on market
conditions, prices and returns on Mexican securities. Such actions have involved, among other measures, increases
in interest rates, changes in tax policies, price controls, currency devaluations, capital controls, limits on imports and
other actions. Our business, results of operations, financial condition and dividend payments may be adversely
affected by changes in governmental policies or regulations involving or affecting our management, our operations
and our tax regime.
Beginning in 2013, the Mexican Congress has approved various reforms relating to labor, education,
telecommunications, local government indebtedness, transparency, financial, tax and energy matters. We cannot
predict whether these or potential changes in Mexican governmental and economic policy will adversely affect
economic conditions in Mexico or the sector in which we operate and therefore have an adverse effect on us.
We cannot assure you that future changes in Mexican governmental and economic policies, will not adversely
affect our business, results of operations and financial condition. There can be no assurance as to whether the
government will make changes to any existing political, social, economic or other policies, whose changes may have
a material adverse effect on our business, results of operations, financial condition or prospects or adversely affect
the market price of our shares.
High interest rates in Mexico could increase our operating and financial costs.
Mexico historically has had high real and nominal interest rates. The interest rate on the 28-day Mexican
interbank rate (Tasa de Interés Interbancaria de Equilibrio, or “TIIE”) averaged 3.51%, 4.28% and 4.79% for 2014,
2013 and 2012, respectively, according to the Mexican Central Bank (Banco de México). We cannot assure you that
interest rates will remain at current levels. Thus, if we contract peso-denominated or variable interest rate debt in the
future, it may be at interest rates higher than current rates. See note 9.d to our consolidated financial statements for
more details. An increase in the interest rate we pay on our indebtedness would adversely affect our financial
condition and results of operations.
We obtain financing under different conditions. If the rate of interest is variable, we enter into interest rate
swaps to reduce our exposure to rate volatility risk, thus converting the interest payment profile from variable to
fixed. See “—Risk Factors Related to Our Business—We engage in hedging activity from time to time, which may
not be successful and may result in losses to us.” As of December 31, 2014 we had entered into financing
instruments with interest rates based on LIBOR and TIIE in the amount of Ps$4,477 million. As an example, if
LIBOR (London InterBank Offered Rate) and TIIE interest rates during 2014 registered an increase of 100 basis
points, and all other variables remained constant, the payment of interest expense in 2014 would have increased
from Ps$506 million to Ps$610 million.
Changes in Mexican tax laws may adversely affect us or our shareholders.
The Mexican Congress approved several tax reforms with the objective of increasing public sector revenues. On
December 11, 2013, certain reforms to Mexican tax laws were published in the Mexican Federal Official Gazette
(Diario Oficial de la Federacíon), which became effective as of January 1, 2014. While the corporate income tax
rate remained at 30%, the tax reforms (i) resulted in several amendments to corporate tax deductions, among others,
38
by eliminating deductions that were previously allowed for related-party payments to certain foreign entities and
narrowing tax deductions for fringe benefits paid to employees, (ii) added a 10% withholding income tax on
dividends paid by corporations, including our company, to shareholders who are Mexican resident individuals or
foreign residents, (iii) repealed the possibility of paying taxes on a consolidated basis, (iv) increased the value-added
tax from 11% to 16% in the border Mexican region, (v) introduced the requirement to use electronic invoices and
new monthly tax reports to be provided to governmental tax authorities and (vi) established a 10% income tax
payable by Mexican resident individuals and foreign residents on the sale of stock listed on the BMV (such as our
shares). Although we cannot currently predict the impact of these reforms or calculate their effects on our tax
obligations in future years, these changes and future changes in Mexican tax laws may increase our tax obligations
and tax payments which may affect our results of operations and financial condition.
Antitrust laws in Mexico and other countries where we operate may limit our ability to expand our operations.
In Mexico, the Federal Economic Competition Law and related provisions could adversely affect our ability to
buy and sell companies or assets, as well as perform operations or joint ventures. Approval by the Mexican Federal
Economic Competition Commission may be required to carry out significant acquisitions, divestments or
associations. Failure to obtain approval from the antitrust authority could restrict our ability to complete a
transaction, condition any such transaction or result in the requirement that we divest our assets. There is no
guarantee that Mexico’s antitrust authorities or those of any country in which we are to carry out future acquisitions,
will approve any or all acquisitions under review or that arise in the future or that will do so on satisfactory terms or
on terms that would not result in our obligation to divest assets. Any unfavorable or conditional decision of any
authority with regards to antitrust issues may have an adverse and significant impact on our growth opportunities,
including on acquisitions to integrate our businesses.
A violation of laws by us or the issuance of more stringent government regulations could negatively affect us.
We are subject to various federal, state and municipal laws and regulations in the countries where we operate,
including those relating to the manufacture, use and handling of hazardous materials, environmental protection,
health protection, labor, taxes, workplace safety and consumer protection. In order to implement projects, we are
required to obtain, maintain and regularly renew licenses, permits and approvals from various government
authorities. We seek to comply with these laws and regulations at all times. Failure to comply with such laws would
subject us to fines, penalties, plant closings, cancellation of licenses, revocation of licenses or concessions or other
restrictions on the ability to operate, which could have an adverse impact on our results of operations or financial
situation.
We cannot assure you that new, stricter and even prohibitive standards will not be adopted or become
applicable, or that more stringent interpretations will not be given to existing laws and regulations. Any of these
events may require us to incur additional costs to comply to the extent possible with these new requirements, which
would increase our operating costs and could adversely and significantly affect our operations.
Developments in other countries could adversely affect the Mexican economy, the market price of the shares
and of other securities, as well as our results of operations.
The Mexican economy and the market price of securities of Mexican companies are affected by economic and
market conditions in developed countries and other emerging market countries. Although economic conditions in
those countries may differ significantly from economic conditions in Mexico, adverse economic conditions may
expand regionally, or investors’ reactions to developments in any of these other countries may have an adverse
effect on the market values of Mexican issuers. In recent years, for example, the prices of Mexican debt and equity
have sometimes suffered substantial declines as a result of events occurring in other countries.
Moreover, the correlation between economic conditions in Mexico and the U.S. has sharpened in recent years as
a result of NAFTA and an increase in economic activity between the two countries. As a result, a slowing in the U.S.
economy, the termination of NAFTA and other related events could have a material adverse effect on the Mexican
economy, which in turn could affect our financial condition and results of operations. These events could have an
adverse effect on our operations and revenues, which could in turn affect the liquidity and the market price of our
shares.
39
Risk Factors Relating to the Shares and this Offering
Our shares have never traded on any stock market. An active market for the shares may not develop, and the
market price of the shares could decline after this offering.
Prior to this offering, there has not been a public market for our shares. Although we have applied for the listing
of our shares for trading on the BMV, an active market in our shares may not develop on the BMV or on other
markets, or if developed, it may not be maintained. The Mexican stock market, consisting of the BMV, is
substantially smaller, less liquid, more volatile, has a smaller base of institutional investors and is more concentrated
than main international stock markets such as those of the United States. These market characteristics may
substantially limit your ability to sell our shares, or sell at a desired price and time, and this may adversely affect the
market price and liquidity of our shares, as well as opportunities for shareholders to recoup the amount invested in
our shares.
The market price of the shares may fluctuate significantly after this offering.
The price per share indicated in this offering memorandum may not be indicative of the price for our shares that
will prevail in the market after the conclusion of the global offering. Future share prices may be volatile and may be
subject to significant fluctuations in response to various factors, including the following:

changes in market valuations of companies offering similar products;

economic, regulatory, political and market conditions in Mexico, the United States and other countries;

industry conditions or trends;

emergence of technological innovations that could make our products and services less attractive or
obsolete, or not economically viable;

the introduction of new products and services by us or our competitors;

the quarterly, annual historical and estimated results of operations;

variations between actual and estimated results as well as analyst and investor expectations;

issuer or third party announcements and events affecting operations;

investor perceptions of us or our services;

changes in financial or economic estimates by securities analysts;

environmental events, consumer perceptions regarding environmental matters and compliance with, or
liabilities under, environmental laws;

regulatory provisions or prohibitions, such as those relating to the manufacturing, use and handling of
dangerous materials, environmental protection, health protection, labor, fiscal, civil protection and
consumer protection matters, as well as the interpretation of the aforementioned provisions, the existence of
litigation, including class action lawsuits in connection with such provisions, or fines, suspensions or other
sanctions relating to such provisions;

regulations affecting Mexico or the Mexican securities market;

regulations and interpretations thereof affecting our ability to complete acquisitions or engage in joint
ventures, including regulations regarding competition, or our activities in the ordinary course;

the announcement of significant operations or capital commitments made by us;

currency devaluations and the imposition of capital controls;

additions or departures of key management personnel; or

future sales of shares.
40
Many of these factors are beyond our control. In addition, the stock market and the securities markets of
Mexican and Latin American companies, in particular, have experienced extreme fluctuations in prices and volumes,
which have often been unrelated or disproportionate to the issuers’ operating performance. Many market and
industry factors may materially and adversely affect the price of our shares, regardless of actual operating
performance.
If additional shares are issued in the future, investors could be diluted, and the price of the shares could
decline.
As part of our business strategy, future acquisitions or corporate needs and other expenses may be financed by
issuing additional equity. The issuance of equity could result in the dilution of our investors. In addition, future
offerings or sales of shares by controlling shareholders, or an announcement of the intent to make such an offering
or sale, could result in a decrease in the market price of our shares.
Substantial sales of our shares after this offering could cause the price of such shares to decrease.
We and our current shareholders have agreed, subject to certain exceptions described under “Plan of
Distribution,” for a period of 180 days after the date of this offering memorandum, not to issue, sell or transfer, any
shares of our capital stock or any securities convertible into or exchangeable for, or that represent the right to
receive, shares of our capital stock. After this lock-up period expires, the shares subject to such lock-up period will
be eligible for sale in the market. The market price of our shares could drop significantly, and have an impact on the
liquidity of our shares, if a substantial number of our shares are sold or if the market expects such sales to occur.
Future offerings of securities ranking senior to our shares may limit our operating and financial flexibility and
may adversely affect the market price of, and dilute the value of, our shares.
If in the future we decide to issue debt securities ranking senior to our shares or otherwise incur additional
indebtedness, it is possible that such debt securities or indebtedness will be governed by an indenture or other
instrument containing covenants restricting our operating flexibility, limiting our ability to make distributions to
holders of our shares or limiting our ability to incur debt, undertake acquisitions or incur capital expenditures,
including with regards to any payments of dividends. Additionally, any convertible or exchangeable securities that
we issue in the future may have rights, preferences or privileges, including with respect to distributions, more
favorable than those of our shares and may result in dilution to holders of our shares. Because our decision to issue
securities in any future offering or otherwise incur indebtedness will depend on market conditions and other factors
beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings or financings,
any of which could reduce the market price of our shares and dilute the value of your shares.
Our principal shareholders and their related parties, who will continue to control us upon the conclusion of the
global offering, may have interests that differ from those of the minority shareholders.
After completion of the global offering, our principal shareholders will continue to be Grupo Kaluz, members of
the del Valle family and Tenedora (indirectly controlled by Grupo Carso), and, having participated in the Mexican
offering as described in this offering memorandum, they will collectively own 77.80% of our share capital and
voting rights, assuming no exercise of the over-allotment options. These shareholders have entered into a
shareholders’ agreement (see “Description of Our Capital Stock and By-Laws”) which includes provisions relative
to: (i) preferential subscription rights; (ii) possible transfers of rights to subscribe for shares between affiliates and
third parties; (iii) a reciprocal option to purchase shares as among the current principal shareholders, in the case of
transfers of shares in equal or greater than 5% blocks; and (iv) voting in common to (a) appoint the number of
directors corresponding to each of the blocks of controlling shareholders and (b) for certain other matters,
including increases or reductions in capital, amendments to bylaws, mergers, dividend payments and material
investments and divestitures.
If these shareholders were to vote in the same manner, as contemplated in the shareholders’ agreement, they
would have the capacity to determine the outcome of substantially all actions requiring shareholder approval,
including the election of the majority of our directors. The interests of these shareholders may not be consistent with
the interests of minority shareholders, including the interests of any investors participating in the global offering.
41
Preemptive rights may be unavailable to non-Mexican shareholders.
Under current Mexican law, whenever we issue new shares for cash, subject to certain exceptions (including
exceptions related to public offerings, mergers or conversions of convertible debt securities), we may grant
preemptive rights to our shareholders, giving them the right to purchase a sufficient number of shares to maintain
their existing ownership percentage. If we decide to grant preemptive rights, we may not be able to offer shares to
non-Mexican shareholders pursuant to preemptive rights granted to our shareholders in connection with any future
issuance of shares, unless a registration statement under the Securities Act or a similar registration document under
other applicable laws is effective or a similar procedure is followed with respect to such rights and shares or an
exemption from the registration requirements of the Securities Act or a similar exemption is available.
At the time we decide to conduct a preemptive rights offering, we intend to evaluate the costs and potential
liabilities associated with a registration statement to enable United States shareholders to exercise their preemptive
rights, the indirect benefits of enabling United States shareholders to exercise preemptive rights and any other
factors that we consider appropriate at the time. We will then decide whether to file such a registration statement.
Such a registration statement may not be filed. As a result, United States shareholders may not be able to
exercise their preemptive rights in connection with future issuances of our shares, while Mexican shareholders may
exercise such rights. In this event, the economic and voting interest of United States shareholders in our total equity
would decrease in proportion to the size of the issuance. Depending on the price at which shares are offered, such
an issuance could result in dilution to United States shareholders.
The protections afforded to minority shareholders in Mexico are not as comprehensive or as developed as those
in the United States.
Under Mexican law, the protections afforded to minority shareholders and the fiduciary duties of officers and
directors are, in certain respects, not as comprehensive or as developed by court decisions as those in other
jurisdictions. Although Mexican law permits any shareholder owning 5% or more of our outstanding shares to file a
stockholder derivative suit, for our benefit and not the benefit of our stockholders, and provides specific duties of
care and loyalty applicable to our directors and to our principal officers, the Mexican legal regime concerning
fiduciary duties of directors and officers is not as comprehensive as in other jurisdictions and has not been subject to
extensive judicial interpretation. Further, although Mexico recently enacted procedures for class actions, these
procedures have not been extensively used to date, and there are uncertainties in respect of how they may be
interpreted or implemented by Mexican courts. As a result, in practice it may be more difficult or less predictable for
our minority shareholders to enforce their rights against us or our directors or officers than it would be for
shareholders of a U.S. company. Under Mexican law, shareholders’ actions are derivative as opposed to direct,
meaning that suits are brought for the benefit of the corporation rather than particular shareholders.
We are subject to different disclosure and accounting standards than companies in other countries.
A principal objective of the securities laws in the United States, Mexico, and other countries is to promote full
and fair disclosure of all material corporate information, including accounting information. However, there may be
less or different publicly available information about foreign issuers of securities than is regularly published by or
about issuers in other markets. We will be subject to reporting obligations in respect of the shares to be listed on the
Mexican Stock Exchange. The disclosure standards imposed by the Mexican Stock Exchange may be different than
those imposed by securities exchanges in other countries, including the United States. As a result, the level of
information that is available may not correspond to what non-Mexican holders of our shares receive in other
jurisdictions. In addition, accounting standards and disclosure requirements in Mexico differ from those of the
United States. We have made no attempt to quantify the impact of those differences by a reconciliation of our
financial statements or other financial information in this offering memorandum to U.S. GAAP. We cannot be
certain that a reconciliation would not identify material quantitative or qualitative differences between our financial
statements or other financial information as prepared on the basis of IFRS if such information were to be prepared
on the basis of U.S. GAAP.
Provisions of our by-laws make a takeover more difficult, which may impede the ability of holders of our
shares to benefit from a change in control or to change our management and board of directors.
Provisions of our by-laws and the LMV may make it difficult and costly for a third party to pursue a tender
offer or takeover attempt. Holders of our shares may desire to participate in one of these transactions, but may not
42
be able to do so. For example, our by-laws contain provisions which, among other things, require board approval
prior to any person or group of persons acquiring, directly or indirectly, 8% or more of our shares. In accordance
with the LMV and our by-laws, if a person or group of persons intends to acquire 30% or more of our shares, such
person or group of persons would be required to conduct a tender offer to purchase the corresponding shares, and, if
their intention is to obtain control of the Company, a tender offer for 100% of our shares is required to be conducted.
The board of directors is required to opine over the price to be offered in any tender offer, which opinion may be
based upon the advice of a financial advisor.
If any person or group of persons acquires shares that represent 8% or more of our capital stock without the
prior authorization of our Board of Directors, we will not recognize such acquisition nor will the acquirer be
registered as a shareholder for the purpose of the exercise of the rights corresponding to such shares.
These provisions could substantially impede the ability of a third party to control us, and be detrimental to
shareholders desiring to benefit from any change of control premium paid on the sale of the company in connection
with a tender offer. See “Description of Capital Stock—Change of Control Provisions.”
It may be difficult to enforce civil liabilities against us or our directors, executive officers and controlling
persons.
We are a sociedad anónima bursátil de capital variable (variable capital public stock corporation) organized
under the laws of Mexico. Substantially all of our directors, executive officers, controlling persons and experts
named in this offering memorandum are non-residents of the United States, and substantially all of the assets of such
non-resident persons and substantially all of our assets are located outside the United States. As a result, it may not
be possible for investors to effect service of process within the United States or in any other jurisdiction outside of
Mexico upon such persons or us or to enforce against them or us in courts of any jurisdiction outside of Mexico
judgments predicated upon the laws of any such jurisdiction, including any judgment predicated upon the civil
liability provisions of United States federal and state securities laws. There is doubt as to the enforceability in
Mexican courts, in original actions or in actions for enforcement of judgments obtained in courts of jurisdictions
outside Mexico, of civil liabilities arising under the laws of any jurisdiction outside Mexico, including any judgment
predicated solely upon United States federal or state securities laws.
Mexican law may restrict our ability to pay dividends.
As required by Mexican law and our by-laws, we and our subsidiaries can only declare and pay dividends based
on financial statements approved at our general shareholders’ meeting, provided that our legal and statutory reserves
are covered, losses for prior fiscal years have been paid, and if our shareholders have also approved the payment of
such dividends. The amount of such dividends must be approved at our general shareholders’ meeting and all losses
from previous years must be fully paid or absorbed and all reserves must be properly constituted and registered. We
will not be able to distribute dividends until we have covered our accumulated losses. The ability of our subsidiaries
to make payments to us corresponding to dividends and for other reasons is limited by Mexican law and applicable
restrictions included in certain contracts, including agreements evidencing indebtedness. In the event that these
financial constraints are not met, a waiver is not received or the modification of said financial limitations is not
effected, we will not be able to issue dividends in respect of our shares, including shares sold as part of the global
offering. See “Dividends and Dividend Policy.”
Dividend distributions to holders of our shares will be made in Mexican pesos.
We will make dividend distributions to holders of our shares in Mexican pesos. Any significant fluctuations in
the exchange rates between Mexican pesos to U.S. dollars or other currencies could have an adverse impact on the
U.S. dollar or other currency equivalent amounts holders of our shares receive from the conversion. In addition, the
amount paid by us in Mexican pesos may not be readily convertible into U.S. dollars or other currencies. While the
Mexican government does not currently restrict the ability of Mexican or foreign persons or entities to convert pesos
into U.S. dollars or other currencies, the government could institute restrictive exchange control policies in the
future. Future fluctuations in exchange rates and the effect of any exchange control measures adopted by the
government on the Mexican economy cannot be predicted.
43
The requirements of being a public company may strain our resources, divert management’s attention and
affect our ability to attract and retain qualified board members.
As a public company in Mexico, we will incur significant legal, accounting and other expenses that we have not
incurred as a private company, including costs associated with public company reporting requirements. The
expenses incurred by public companies generally for reporting and corporate governance purposes have been
increasing. We expect these rules and regulations to increase our legal and financial compliance costs and to make
some activities more time consuming and costly, although we are currently unable to estimate these costs with any
degree of certainty. These laws and regulations could also make it more difficult or costly for us to obtain certain
types of insurance, including director and officer liability insurance, and we may be forced to accept reduced policy
limits and coverage or incur substantially higher costs to obtain the same or similar coverage. These laws and
regulations could also make it more difficult for us to attract and retain qualified persons to serve on our board of
directors, our board committees or as our executive officers and may divert management’s attention. Furthermore, if
we are unable to satisfy our obligations as a public company, we could be subject to delisting of our shares from the
Mexican Stock Exchange, fines, sanctions and other regulatory action and potentially civil litigation.
We may prove unable to remain compliant with the registration and listing requirements imposed by the RNV
and the BMV.
As a company whose shares will be listed on the BMV, we will be subject to certain listing requirements,
including periodic reporting and maintaining a certain minimum capitalization, in order to maintain our shares listed
on such exchange. However, if we prove unable to comply with such requirements for any reason, the listing and
registration of our shares with the BMV and RNV, respectively, could be cancelled, and we may also be subject to
fines, sanctions and/or administrative or regulatory actions.
44
USE OF PROCEEDS
We estimate that the net proceeds to us from the sale of the shares being offered by us in the global offering will
be approximately Ps$3,276 million, or approximately US$207 million (at the July 9, 2015 exchange rate of
Ps$15.8281 per US$1.00), after deducting all estimated underwriting discounts and commissions and other expenses
we must pay in connection with the global offering, assuming no exercise of the overallotment options.
We intend to use (i) approximately Ps$2,594 million (approximately US$164 million at an exchange rate of
Ps$15.8281 per US$1.00), or 79.18% of the net proceeds of the global offering (assuming no exercise of the
overallotment options), for capital expenditures in the next 24 months to increase production capacity in the Cement
Division; and (ii) approximately Ps$682 million (approximately US$43 million at an exchange rate of Ps$15.8281
per US$1.00), or 20.82% of the net proceeds of the global offering (assuming no exercise of the overallotment
options), for the final payment relating to the purchase of Lafarge’s non-controlling interest in the Lafarge Joint
Venture.
45
CAPITALIZATION
The following table sets forth our capitalization (i) as of March 31, 2015, (ii) as adjusted to reflect the receipt of
the net proceeds of the global offering, assuming no exercise of the over-allotment options and (iii) as further
adjusted to reflect the receipt of the net proceeds from the global offering, assuming full exercise of the overallotment options and a price per share equal to Ps$17.00. You should read this table together with the information
under the section entitled “Use of Proceeds,” “Management’s Discussion and Analysis of Our Results of Operations
and Financial Condition” and our financial statements included elsewhere in this offering memorandum.
As of March 31, 2015
As Adjusted
(1)
Actual
As Further
Adjusted (2)
Cash and cash equivalents ..........
Current portion of long-term
debt .........................................
Long-term debt:
Notes payable to financial
institutions and longterm debt(4).........................
Long-term debt due to
related parties ......................
Other long-term liabilities.......
Total debt....................................
Total stockholders’ equity(5) .....
Total capitalization .....................
Actual
As Adjusted
(1)
As Further
Adjusted (2)
(in millions of U.S. dollars)(3)
3,169
6,445
6,943
209
425
458
3,098
3,098
3,098
204
204
204
7,454
7,454
7,454
492
492
492
1
10,553
11,698
22,251
1
10,553
15,026
25,579
1
10,553
15,529
26,082
0
696
772
1,468
0
696
992
1,688
0
696
1,025
1,721
(1) The adjusted columns included in the table above are merely illustrative and have been calculated using the
offering price of Ps$17.00 per share and a global offering of 201,000,000 shares, assuming no exercise of the
over-allotment options (net of offering expenses).
(2) The as further adjusted columns included in the table above are merely illustrative and have been calculated
using the offering price of Ps$17.00 per share and a global offering of 231,150,000 shares, assuming full
exercise of the over-allotment options (net of offering expenses).
(3) Converted, for convenience purposes only, using the exchange rate for pesos into U.S. dollars of Ps$15.1542 to
US$1.00 reported by the Mexican Central Bank for March 31, 2015.
(4) Includes the current issuance of the Certificados Bursátiles ELEM 10 (currently, ELEMENT 10) for Ps$3,000
million and the 2025 notes, with the remainder in bank debt.
(5) Total stockholders’ equity in the as adjusted and as further adjusted columns included in the table above take
into account the expected tax benefits from the global offering.
46
DILUTION
Existing shareholders prior to the global offering will suffer a dilution of their investment. Dilution is the
difference between the book value prior to the global offering and the book value after the global offering, with
reference to the financial statements at March 31, 2015, as adjusted to reflect the global offering.
As of March 31, 2015, our net book value was Ps$400.50 per share, or Ps$18.20 per share after giving effect to
the stock split approved at the ordinary and extraordinary general shareholders’ meeting held on June 26, 2015. The
net book value per share represents the book value of our total assets less our total liabilities, divided by the number
of our shares subscribed and outstanding. Our pro forma net book value per share at March 31, 2015 would decrease
by Ps$0.39 per share (or Ps$0.43 if the initial purchasers and Mexican underwriters were to exercise the overallotment options in full):

after giving effect to the subscription of 201,000,000 shares (or 231,150,000 shares if the initial purchasers
and Mexican underwriters were to exercise the over-allotment options in full) at the offering price of
Ps$17.00 per share,

after deducting underwriting commissions and other expenses related to the global offering, and

after adjusting the amount of total assets to take into account the expected tax benefits from the global
offering.
This amount represents to our new investors who acquired shares at the initial offering price of Ps$17.00 per
share an immediate gain of Ps$0.81 in net book value per share (or Ps$0.77 in net book value per share if the initial
purchasers exercise their over-allotment option in full).
The following table sets forth the dilution in the net book value excluding the over-allotment option:
Per share
Initial offering price............................................................................................................................... Ps$
Net book value before the global offering .........................................................................................
Decrease in net book value attributable to the sale of the shares .......................................................
Net book value after the global offering ................................................................................................
Gain in net book value to new investors................................................................................................
17.00
18.20
(0.39)
17.81
0.81
As of March 31, 2015, after giving effect to the stock split approved at the ordinary and extraordinary general
shareholders’ meeting on June 26, 2015, our net income per share over the immediately preceding twelve months,
assuming an offering of 231,150,000 shares (if the initial purchasers and the Mexican underwriters exercise their
over-allotment option in full), would be Ps$0.47.
Prior to the global offering, our shares had not been offered to any person other than our current shareholders.
47
DIVIDENDS AND DIVIDEND POLICY
Under Mexican law, subject to the satisfaction of quorum requirements, the favorable vote by the majority of
our shareholders present at an ordinary general shareholders’ meeting determines the declaration, amount and
payment of dividends. Dividends may only be paid (i) from retained earnings included in financial statements that
have been approved by our shareholders’ meeting, (ii) if losses for prior fiscal years have been fully paid or
absorbed, and (iii) after allocation of at least 5% of net income for legal reserves, up to an amount equal to 20% of
our paid-in capital stock. Payment of dividends could be limited by covenants in debt instruments we enter into in
the future and by our subsidiaries, which may adversely affect our ability to make dividend payments. Since 2006,
we have not paid any dividends as we have decided to reinvest the profits of the Company to increase our business.
The dividend policy is proposed by the board of directors and any payment of dividends must then be approved
in an ordinary general shareholders’ meeting. As a result, in some years the Company may not pay dividends, while
in others dividends are paid per shareholder approval. The nature of the dividend policy proposed by the board of
directors depends on a variety of factors, including results of operations, financial condition, cash requirements,
business perspectives, taxes and financial covenants of any indebtedness we may have limiting the payment of
dividends and other factors.
Our principal shareholders currently have and after the consummation of the global offering will continue to
have the power to determine matters related to the payment of dividends.
Our capacity to make dividend payments, or payments of any other nature, is limited by certain restrictive
covenants to which we are subject. See “Management’s Discussion and Analysis of Our Results of Operations and
Financial Condition—Liquidity and Capital Resources—Indebtedness.”
48
EXCHANGE RATES
The following table sets forth, for the periods indicated, the period-end, average, high and low exchange rates
published by the Mexican Central Bank (Banco de México) expressed in pesos per U.S. dollar. The average annual
rates presented in the following table were calculated by using the average of the exchange rates on the last day of
each month during the relevant period. The rates shown below are in nominal pesos that have not been restated in
constant currency units. No representation is made that the peso amounts referred to in this offering memorandum
could have been or could be converted into U.S. dollars at any particular rate or at all.
We cannot assure you that the Mexican government will maintain its current policies with respect to the peso or
that the peso will not appreciate or depreciate significantly in the future. On July 9, 2015 the Mexican Central Bank
(Banco de México) exchange rate expressed in pesos per U.S. dollar was Ps$15.8281 to US$1.00.
Banco de México Exchange Rate(1)
Period-End
Average
High
Low
(pesos per U.S. dollar)
2014 ..................................................................................
2013 ..................................................................................
2012 ..................................................................................
2011 ..................................................................................
2010 ..................................................................................
Month Ended
July 31, 2015 (through July 9, 2015) ................................
June 30, 2015....................................................................
May 31, 2015....................................................................
April 30, 2015 ..................................................................
March 31, 2015 ................................................................
February 28, 2015.............................................................
January 31, 2015 ..............................................................
December 31, 2014...........................................................
Source: Banco de México.
49
14.7180
13.0765
13.0101
13.9787
12.3571
13.3580
12.8210
13.1661
12.5511
12.6409
14.7853
13.4394
14.3949
14.2443
13.1819
12.8462
11.9807
12.6299
11.5023
12.1575
15.8281
15.5676
15.3737
15.2225
15.1542
14.9624
14.8414
14.7180
15.7164
15.4506
15.2536
15.2275
15.2100
14.9044
14.6740
14.4530
15.8281
15.6958
15.4940
15.4518
15.5837
15.1099
14.9469
14.7853
15.6599
15.2828
15.0225
14.8003
14.9347
14.7548
14.5559
13.7667
SELECTED CONSOLIDATED FINANCIAL AND OTHER INFORMATION
The following tables set forth our selected consolidated financial and other information, which has been derived
from our consolidated financial statements prepared in accordance with IFRS. The financial information as of March
31, 2015 and for the three months ended March 31, 2015 and 2014 was obtained from the interim unaudited
condensed consolidated financial statements included elsewhere in this offering memorandum. The financial
information as of and for the years ended December 31, 2014, 2013 and 2012 was obtained from our audited
consolidated financial statements included elsewhere in this offering memorandum.
The U.S. dollar amounts provided below are translations from the Mexican peso amounts, solely for the
convenience of the reader, at the exchange rate of Ps$15.1542 per U.S. dollar, which is the exchange rate published
by the Mexican Central Bank (Banco de México) as the rate for the settlement of liabilities denominated in U.S.
dollars payable in Mexico on March 31, 2015. You should not construe these convenience translations as
representations that the Mexican peso amounts actually represent the United States dollar amounts presented, or that
they could be converted into U.S. dollars at the rate or at the dates indicated. See “Exchange Rates.”
January 2014.
The consolidated financial information contained herein must be read in conjunction with our audited annual
consolidated financial statements and the notes thereto and our unaudited interim condensed consolidated financial
statements and the notes thereto included elsewhere in this offering memorandum. Furthermore, this selected
information should be read in conjunction with the explanations provided in “Management’s Discussion and
Analysis of Our Results of Operations and Financial Condition.”
2015
2015
(in millions
of U.S.
dollars)
Profit or Loss Data:
Net sales ....................................................
Cost of sales ..............................................
Gross profit ..............................................
Operating expenses ...................................
Other income, net(1) .................................
Exchange loss (income) ............................
Interest income ..........................................
Interest expense .........................................
Banking fees .............................................
Equity in income of associated entity........
Income before income taxes and
discontinued operations ......................
Income tax expense (benefit) ....................
Income from continued operations ........
Discontinued operations(2):
Loss from discontinued operations, net .....
Consolidated net income .........................
Non-controlling interest ............................
Consolidated net income attributable
to the owners of the Company............
2014
2014
2014
(in millions
of U.S.
dollars)
2013
2012
269
203
66
38
(0)
11
(2)
12
1
—
4,070
3,073
997
569
(6)
169
(33)
184
17
—
3,639
2,809
830
628
(162)
(9)
(18)
112
16
—
1,012
771
241
147
(12)
13
(5)
33
8
—
15,331
11,683
3,648
2,228
(184)
192
(80)
506
117
—
12,929
9,908
13,506
10,273
3,021
2,125
(301)
49
(46)
421
48
(4)
3,233
1,888
(21)
345
(31)
289
20
(35)
6
2
4
97
30
67
263
75
188
57
16
41
869
246
623
729
177
552
778
(38)
816
—
4
(0)
8
59
(1)
9
179
11
6
35
3
93
530
50
60
492
4
501
315
(10)
4
60
168
32
480
488
325
50
2015(2)
(in millions
of U.S.
dollars,
except per
share
amounts)
Basic income per share (in
thousands of pesos):
From continuing operations ......................
From discontinued operations ...................
Basic income per share ...........................
(in thousands)........................................
EBITDA(1) ...............................................
0.01
(0)
0.01
642,594
46
2015(2)
2014(2)
(in millions of pesos, except
per share amounts)
0.11
(0.01)
0.09
642,594
707
0.27
(0.01)
0.26
642,594
609
2014(2)
(in millions
of U.S.
dollars,
except per
share
amounts)
0.06
(0)
0.05
642,594
177
2014(2)
2013(2)
2012(2)
(in millions of pesos, except per share
amounts)
0.89
(0.14)
0.75
642,594
0.85
(0.09)
0.76
642,594
1.41
(0.85)
0.55
586,850
2,675
1,913
1,877
(1) EBITDA is not a financial measure recognized by IFRS. EBITDA is included in this offering memorandum because we
believe that it is useful to certain investors as a supplemental measure of our financial performance and our ability to service
our debt and fund capital expenditures. EBITDA should not be considered as a substitute for net income, cash flow provided
by operations or other measures of financial performance or liquidity under IFRS. The presentation of EBITDA may not be
comparable to similarly entitled measures used by other companies.
(2) These figures have been restated to take into account the stock split that was approved by our ordinary and extraordinary
general meeting of shareholders on June 26, 2015. The stock split was applied retroactively to all periods presented.
Weighted average shares outstanding and earnings per share as shown in this table do not coincide with our annual or
interim financial statements included elsewhere this offering memorandum, as the stock split took place after the issuance of
such financial statements.
51
As of December 31,
As of March 31,
Statement of Financial Position:
Current assets:
Cash and cash equivalents ....................................
Accounts receivable – Net ....................................
Due from related parties .......................................
Inventories – Net ..................................................
Prepaid expenses...................................................
Total current assets.............................................
Non-current assets:
Property, machinery and equipment – Net ............
Investment in shares of associated companies
and others .........................................................
Net plan assets for employee benefits at
retirement .........................................................
Intangibles and other assets – Net .........................
Long-term receivables due from related
parties and other long-term accounts
receivable .........................................................
Total non-current assets .....................................
Total assets ..........................................................
current portion of long-term debt .....................
Trade accounts payable.........................................
Financière Lafarge, S.A.S. ....................................
Direct employee benefits ......................................
Provisions .............................................................
Accrued expenses and taxes .................................
Due to related parties ............................................
consolidation ....................................................
Advances from customers .....................................
Total current liabilities .......................................
long-term debt ..................................................
Long-term due to related parties ...........................
Deferred income taxes ..........................................
Income taxes liabilities from consolidation ..........
Other long-term liabilities.....................................
Total long-term liabilities ...................................
Total liabilities ....................................................
Total stockholders’ equity ..................................
Total liabilities and stockholders’ equity ..........
2015
2015
2014
(in millions of
U.S. dollars)
(in millions of
pesos)
(in millions of
U.S. dollars)
209
—
231
—
162
18
620
3,169
—
3,504
1
2,439
279
9,392
211
—
208
—
163
11
593
3,193
—
3,150
2
2,471
176
8,992
1,973
10
3,506
41
2,250
307
8,087
1,762
9
2,926
—
2,471
592
7,760
1,032
15,646
1,037
15,711
14,608
11,823
1
10
1
10
11
813
22
208
337
3,161
22
209
328
3,184
289
3,174
239
1,108
4
1,267
1,887
54
19,208
28,600
4
1,273
1,866
54
19,287
28,279
54
18,136
26,223
265
14,248
22,008
204
170
45
1
37
13
11
3,098
2,581
682
14
568
192
161
205
164
44
1
41
18
10
3,102
2,482
662
17
619
274
156
193
2,663
—
31
421
166
173
456
2,330
—
19
204
255
206
0
4
13
498
1
56
202
7,555
0
6
10
499
1
96
146
7,555
171
158
—
3,976
5
45
—
3,520
492
—
71
54
0
617
1,115
7,454
—
1,078
814
1
9,347
16,902
480
—
76
45
0
601
1,100
7,282
—
1,155
679
1
9,117
16,672
6,185
18
1,080
513
14
7,810
11,786
5,926
40
1,490
18
25
7,499
11,019
772
1,887
11,698
28,600
766
1,866
11,607
28,279
14,437
26,223
10,989
22,008
52
2014
2013
2012
For the three months ended
March 31,
2015
2015
2014
(in millions of
U.S. dollars,
except
turnover days
and sales
volume)
(in millions of
pesos, except
turnover days
and sales
volume)
(in millions of
U.S. dollars,
except
turnover days
and sales
volume)
(8)
(128)
(40)
(613)
18
49
76
67
273
49
76
67
71
46
78
74
1,071
46
78
74
715
61
98
87
511
45
83
83
638
638
2,422
2,422
1,507
753
Other Data:
Purchase of property and equipment ................
Depreciation and amortization for the
period ...........................................................
Accounts receivable turnover (in days) ............
Accounts payable turnover (in days) ................
Inventory turnover (in days).............................
Consolidated sales volume (in thousands
of tons) .........................................................
2014
2013
2012
(in millions of pesos, except turnover days and
sales volume)
(2,059)
(2,113)
The presentation of EBITDA may not be comparable to similarly entitled measures used by other companies. The
following tables reconcile consolidated net income to EBITDA:
2015
2015
(in millions of
U.S. dollars)
(loss) ..................................... $
Plus (Less):
operations, Net ......................
Equity in income of
associated entity ....................
Financing result, net(1) .............
Depreciation and
amortization for the period ....
EBITDA ................................... $
4
2014
2014
—
2
59
$
179
8
30
2013
(in millions of
U.S. dollars)
$
2014
$
9
75
35
$
6
16
530
—
—
—
—
—
337
101
49
735
18
273
245
71
1,071
46 $
707 $
609 $
177 $
$
93
246
22
2,675
492
$
315
60
501
177
(38)
(4)
473
(35)
623
715
$
53
2012
1,913
511
$
1,877
For the year ended December 31,(2)
2007
2007
(in millions of U.S. dollars)
Plus (Less):
Loss from discontinued operations,
Net ....................................................
Equity in income of associated entity....
Financing result, net(1) .........................
Depreciation and amortization for
the period ..........................................
EBITDA ...............................................
$
6
$
(4)
4
$
(61)
56
—
—
5
70
9
137
19
$
(2) Based on MFRS, which were the financial reporting standards applicable and effective in Mexico in 2007.
54
89
291
MANAGEMENT’S DISCUSSION AND ANALYSIS OF OUR RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
Overview
and distributors. Additionally, we are focused on end users for industrial applications, whereby we provide our clients
with highly-specialized, value-added products. The industrial sector represents approximately 24% of our sales. Our
network of independent distributors, through which we market and offer the various products and solutions of our
three divisions, consists of more than 4,300 independent distributors and customers throughout the 42 countries in
which we sell that use and offer our diverse products and solutions to a broad client base. We have a total of 26
manufacturing plants located in nine countries in the Americas: Mexico, the United States, Bolivia, Colombia, Costa
Rica, Ecuador, El Salvador, Honduras and Peru.
Our primary markets are located in Mexico and the United States, which represent 59% and 21% of our net sales
in 2014, respectively. The Central American and South American markets represent 5% and 14% of our net sales in
2014, respectively, although we also export our products to more than 40 countries. We serve all of our markets
through six distribution centers, twelve warehouses, a distribution center in Laredo, Texas and a sales office located
in Houston, Texas, which we intend to expand in order to meet the expected increase in demand that we will satisfy
with the production of our plants in North Carolina and Oregon in the United States and, if necessary, with the
reactivation of our plant in Indiana. We market our products using our own brands, which we believe have an
Maxitile, Plycem, Eternit, Duralit, Fibraforte, Nacobre and Fortaleza, which we introduced to the Mexican market in
2013 and which allowed us to become the first new participant in the Mexican cement industry in 65 years. The
network of independent distributors (present throughout the value chain in the construction industry) and our focus on
customer service, create significant competitive advantages that distinguish us in the construction materials industry.
profitability. In 2007, under MFRS, our EBITDA was Ps$291 million. In 2014, on an IFRS basis, our EBITDA was
Significant Events and Factors Affecting Comparability of Our Results for Each Reporting Period
Acquisitions and Dispositions
On April 20, 2012, we sold 100% of the shares of Almexa Aluminio, S.A. de C.V. to Industria Mexicana del
Aluminio, S.A. de C.V., a subsidiary of Grupo Vasconia, S.A. de C.V.
In 2012, we decided to discontinue certain operations because we determined that the projects of certain entities
were not viable in accordance with our business plans. The following entities were dedicated to the manufacture and
marketing of reinforced and pre-stressed concrete pipes: Compañía Mexicana de Concreto Pretensado Comecop, S.A.
de C.V., Construsistemas Servicios Administrativos, S.A. de C.V. and Operadora de Aguas, S.A. de C.V. Similarly,
55
we decided to discontinue the operations of our Mexalit Industrial, S.A. de C.V. plant located in the State of
Chihuahua, Mexico.
On January 8, 2013, Trituradora and ELC Tenedora Cementos, both of which are subsidiaries of Elementia,
signed the Contribution Agreement with Lafarge and Lafarge Cementos (engaged in the manufacturing and
marketing of cement) whereby, among other things, it was agreed to create the Lafarge Joint Venture for cement
production in Mexico. Pursuant to the Contribution Agreement, the share capital of each of Trituradora and Lafarge
Cementos was transferred to ELC Tenedora Cementos and we acquired a 53% ownership in ELC Tenedora
Cementos, which gave us control over the Lafarge Joint Venture, and Financière Lafarge, S.A.S. retained a 47%
shareholding. This transaction generated goodwill in the amount of approximately Ps$1,150 million. This
transaction was subject to the fulfillment of several conditions set forth in the Contribution Agreement, which were
met on July 31, 2013. On that date, several annexes to the Contribution Agreement were finalized and a
shareholders’ meeting of ELC Tenedora Cementos was held which gave rise to the Lafarge Joint Venture. Beginning
on August 1, 2013, we commenced operations and the results of the Lafarge Joint Venture were included in our
consolidated financial statements. Subsequently, on September 19, 2014, we entered into a share purchase agreement
to acquire the remaining 47% stake in the Lafarge Joint Venture, which was consummated on December 16, 2014,
following the receipt of approval from the Mexican Federal Economic Competition Commission (Comisión Federal
de Competencia Económica) and the initial payment of US$180 million out of a total consideration of US$225
million.
On December 17, 2013, we sold our 42.5 million shares in Grupo Cuprum, S.A.P.I. de C.V. for Ps$584 million,
representing 20% of Cuprum’s share capital. The sale was made in equal proportions (50% and 50%) to Tenedora
and Controladora GEK, S.A.P.I. de C.V.
On December 19, 2013, we signed an acquisition agreement with the external products division of Saint-Gobain
to acquire the assets of the fiber cement business of its affiliate, CertainTeed Corporation, a significant manufacturer
of construction materials in North America. On January 31, 2014, we completed the acquisition of the assets of the
fiber cement business of CertainTeed Corporation. We subsequently rebranded this business under our new Allura
brand. We expect that this acquisition will strengthen our presence in the United States upon the integration of the
operations of three production plants to increase our coverage and growth in that country.
Principal Factors Affecting Our Financial Condition and Results of Operations
Optimization of Operations
In recent years, we have made investments to increase our capacity and to modernize and streamline our
production processes, which has resulted in significant savings for us.
In 2013, we completed the construction and launch of our El Palmar cement plant, which began operations in
2013 and gave rise to the creation of our Cement Division. We strengthened this division by adding the synergies of
the three plants that currently comprise it. The investments made in this division in 2014 totaled Ps$115 million.
Similarly, we have invested in the Building Systems Division, acquiring businesses in Latin America and
acquiring the assets of the fiber cement business of CertainTeed Corporation, a subsidiary of Saint-Gobain, in
January 2014. This acquisition significantly expanded our presence in the U.S. market, which has permitted us to
strengthen our presence through CertainTeed Corporation’s brands and the quality of their products. We have also
strengthened the Building Systems Division through the acquisition in the last five years of the operations of Frigocel
and Frigocel Mexicana in Mexico and Fibraforte in Peru. Furthermore, we have continued to make investments in the
production facilities in order to modernize and expand its production lines, and to make profits once such investments
are complete. The Building Systems Division made investments totaling Ps$187 million in 2014.
In 2012, the Company divested its aluminum operations to focus on its copper business where it believes it has a
significant competitive advantage. We have made significant investments in machinery and equipment in the Metal
Products Division in recent years. These investments have improved and modernized the production processes of our
plants, for example by means of the continuous casting process, which implies having constant metal smelting 24
hours per day, 365 days per year. This division made investments in 2014 totaling Ps$310 million.
56
Process Improvements
We distinguish ourselves by our continuous improvements in our processes, not only on the production side, but
also in areas such as sales, logistics, purchasing and administration. For example, we have made investments since
2011 to adopt SAP as an ERP system, with which we have been able to integrate the operations, marketing and
distribution of our products, as well as the administration and reporting thereof, thereby having reliable and timely
information for decision-making.
Global Macroeconomic Conditions
Our business is affected by general economic conditions of several industries, including the building materials,
manufacturing, infrastructure, automotive and refrigeration industries. We have manufacturing and distribution
operations in a number of countries throughout the Americas, including Mexico, Colombia, Bolivia, Costa Rica,
Ecuador, El Salvador, Honduras and the United States. As a result, our activities, business, financial condition and
results of operations are largely dependent upon the general economic and financial environment in each of the
countries in which we operate.
The countries that contribute most significantly to our results of operations are Mexico, the United States and
Colombia. In 2014, our sales derived from these countries represented 59%, 21% and 8%, respectively, of our
consolidated sales. In the past, the economies of these countries have been affected by a number of factors, including:

Each country’s economic cycles in the commercial, building materials, automotive and agricultural industries,
among others. The following table shows real GDP growth for these countries since 2011.
2014
Colombia ..............................................................
United States ........................................................
Mexico..................................................................
4.6%
2.4%
2.1%
GDP Growth
2013
2012
4.9%
2.2%
1.4%
4.0%
2.3%
4.0%
2011
6.6%
1.6%
4.0%
Source: World Bank

Uncertainty with respect to future political, social and economic conditions, particularly during the years
immediately preceding presidential and legislative elections;

Volatility and uncertainty in the global credit and capital markets;

The potential devaluation of local currencies with respect to the United States dollar or the euro, and the potential
imposition of foreign exchange restrictions; and

Significant increases in inflation and interest rates in these countries.
In addition, in recent years, countries such as Colombia, Ecuador and Bolivia have experienced significant
growth in the housing industry, similar to that experienced by Mexico.
Pricing Strategy
We sell metal products on a cost-plus mark-up basis. Our pricing strategy consists of maintaining strong margins
throughout the various stages of the relevant production cycles and adjusting our product prices periodically to
compensate for short-term disparities between the price of our principal raw materials and the price of our finished
products.
With respect to our Metal Products Division exports, we enter into financial derivatives (such as forward and
futures contracts) to hedge financial risks associated with the prices of certain metal products, such as copper, zinc
and nickel. These transactions are not speculative in nature and are based on the actual requirements of our
customers. The hedging instruments that we enter into relating to copper are quoted primarily on COMEX, and those
relating to zinc and nickel are quoted primarily on the London Metal Exchange.
57
For example, when a customer submits a purchase order for products affected by the prices of relevant metals,
we request a COMEX quote for such metals’ prices and provide the customer with a price based on the COMEX
quote plus a margin. If the customer agrees to the price, we then execute the COMEX contract. We conduct daily
reviews of our contracts against the price of each metal daily and make adjustments to our accounts as necessary.
Foreign Sales
Our reporting currency is the Mexican peso. However, our net sales are generated and denominated in various
currencies. Our transactions denominated in U.S. dollars include net sales derived from our operations in the United
States, Ecuador and El Salvador, which accounted for 24% and 22% of our consolidated net sales in the three months
ended March 31, 2015 and 2014, respectively. Net sales denominated in Mexican pesos accounted for 59% and 59%
of our consolidated net sales in the three months ended March 31, 2015 and 2014, respectively. In addition, 7% and
9% of our net sales were denominated in Colombian pesos in the three months ended March 31, 2015 and 2014,
respectively, 3% and 3% of our net sales were denominated in Costa Rican colones in the three months ended March
31, 2015 and 2014, respectively. Net sales denominated in other currencies represented 7% and 7% of our net sales
in the three months ended March 31, 2015 and in 2014, respectively.
Nevertheless, taking into account the sales made in different currencies, but which are referenced to U.S. dollars
and therefore do not reflect or have an impact linked to variations in exchange rates against the U.S. dollar, 63% of
net sales during the three months ended March 31, 2015 were in U.S. dollars or were linked to prices in U.S. dollars,
24% of net sales were in Mexican pesos, 7% were in Colombian pesos and 6% were in other currencies.
Impact of Foreign Currency Fluctuations
Fluctuations in currency exchange rates relative to the Mexican peso expose us to foreign currency translation
risk. As of December 31, 2014 and March 31, 2015, 79% and 80%, respectively, of our total indebtedness was
denominated in U.S. dollars while 21% and 20%, respectively, was denominated in Mexican pesos. Interest expense
on our U.S. dollar-denominated indebtedness, as expressed in Mexican pesos in our financial statements, varies with
currency exchange fluctuations. Given that the Mexican peso is our functional currency, we are exposed to the risk of
foreign currency translation, the depreciation of our results and increases in our interest expense on a Mexican peso
basis. We record currency exchange gains or losses with respect to the U.S. dollar-denominated net monetary position
of assets and liabilities when the peso appreciates or depreciates in relation to the U.S. dollar. Our foreign exchange
results were a loss of Ps$169 million in the three months ended March 31, 2015 and losses of Ps$192 million, Ps$49
million and Ps$345 million in 2014, 2013 and 2012, respectively.
Competition
Some of the markets in which we and our subsidiaries operate are highly competitive. For example, we compete
with manufacturers in the Mexican cement market, where we are the newest market participant. We usually compete
on price, product performance, sales, service and marketing support. In our Building Systems Division, we compete
with many large and small manufacturers.
We also face competition in our various business divisions from alternative materials: (i) in the Building Systems
Division, from products such as natural wood and its derivatives, vinyl, stucco, masonry, plaster, plates, cups and
cardboard packaging, and (ii) in the Metal Products Division, from products such as polystyrene and polypropylene
plastic pipes. We also face competition in Mexico from foreign manufacturers, however, we estimate that high
importation and transportation costs increase the costs of foreign manufacturers’ products, thereby giving us a
competitive advantage.
Some of our most important competitors, among others, are: Cemex, Cementos Moctezuma, Cementos Cruz
Azul, James Hardie, Etex, Rotoplas, Mueller Industries, Inc., KME, IUSA and Olin Brass.
Critical Accounting Policies
We have identified the policies below as critical to our business operations and to understanding our results of
operations. Preparation of our consolidated financial statements requires us to make estimates and assumptions that
affect the reported amount of assets and liabilities, the disclosure of contingent assets and liabilities at the date of our
financial statements and the reported amounts of revenue and expenses during the period. Actual results may differ
58
from those estimated. We believe the following accounting policies used in the preparation of our consolidated
financial statements involve significant judgments and estimates.
Inventory and Accounts Receivables
We use estimates to determine inventory and accounts receivables. The factors that we consider for purposes of
determining inventory reserves are production and sales volumes, as well as changes in demand for certain products.
The factors that we consider in estimating uncollectible accounts receivable are principally the risk relating to the
client’s financial situation, unsecured accounts and significant delays in collection according to the established credit
limits.
Property, Machinery and Equipment
We review the estimated useful life of property, machinery and equipment at the end of each annual period. The
level of uncertainty related to the estimates of useful lives is related to the changes in the market and the use of assets
according to production volumes, as well as technological developments.
Fair value of property, plant and equipment
Certain classes of fixed assets of the Company are measured at fair value in the consolidated financial statements
of the Company. In measuring the fair value of an asset, the Company uses available market data. The Company also
appoints a qualified independent appraiser to conduct the valuation, with whom the Company works to establish the
valuation methods and appropriate data inputs for the model.
Impairment of Long-lived Assets
The carrying value of long-lived assets is reviewed for impairment if there are situations or changes in
circumstances indicating that the carrying value is not recoverable. If there is evidence of impairment, we perform a
review to determine if the carrying value of the asset exceeds its recoverable value and is impaired. To perform
impairment testing of assets, we estimate the value-in-use assigned to our property, machinery and equipment, and
cash generating units in the case of certain assets. The value-in-use calculations require us to determine the
future cash flows that are expected to arise from the cash generating units and the appropriate discount rate to
calculate the present value. We use revenue cash flow projections using estimates of market conditions, pricing, and
production and sales volumes.
Valuation of Derivative Financial Instruments
We use valuation techniques for our derivative financial instruments, which include information that is not always
based on observable market data, in order to estimate the fair value of certain financial instruments. Note 10 to our
audited financial statements includes detailed information about the key assumptions we consider in determining fair
value of our financial instruments, as well as a detailed sensitivity analysis relating to these assumptions. Our
management considers that the valuation techniques and the assumptions used are appropriate for determining the fair
value of our financial instruments.
Contingencies
Due to the nature of our operations, we are subject to transactions and contingent events with respect to which
we must utilize our professional judgment in developing estimates of the probability of occurrence. The factors that
we consider in making such estimates are the actual legal situation at the date of estimate and the opinion of our legal
advisors.
Employee Benefit Retirement Assets
We use assumptions to determine employee retirement benefits and to calculate the best estimate of these
benefits on an annual basis. These estimates, as well as the assumptions, are established in conjunction with
independent actuaries. These assumptions include demographic assumptions, discount rates and the expected
increases in salaries and future service, among others. Although we estimate that the assumptions we have used are
appropriate, a change in them could affect the value of the assets (liabilities) for these employee benefits and the
statement of comprehensive income in the period in which they occur.
59
Net Tax Losses
The Company reviews the carrying amounts of deferred tax assets and liabilities, which are determined based on
the tax rates that are expected to apply at the time the liabilities are paid or the assets are realized (as applicable). The
expected rates are based on the rates (and tax laws) that have been enacted or substantially enacted as of the end of
the reporting period to which the financial statements relate. In addition, the Company evaluates the probability of
recovery of deferred income tax assets at the end of each reporting period.
Financial Information by Division, Region, Destination and Sector
The following tables set forth our sales volumes and net sales by division, region and destination for the periods
presented below. The information by division presented below differs from that presented in note 27 to our audited
financial statements included elsewhere in this offering memorandum as a consequence of the criteria used for
eliminating intercompany transactions.
Sales by Division
Three months ended March 31,
2014
2015
Net Sales
Volume
Volume
% Change
Net Sales
Volume
Net Sales
(in thousands of tons and millions of pesos)
Cement ..................................................
Building Systems ...................................
Metal Products.......................................
Holding and eliminations ......................
Total ......................................................
439 Ps$ 509
194
1,547
17
1,936
—
78
650 Ps$ 4,070
368 Ps$ 405
188
1,438
16
1,759
—
37
572 Ps$ 3,639
19%
3%
6%
—
14%
26%
8%
10%
111%
12%
2013
2014
Volume
Net Sales
Volume
2012
Net Sales
Volume
Net Sales
Cement ........................................
Building Systems .........................
Metal Products.............................
Holding and eliminations ............
Total ............................................
1,548
810
64
—
2,422
Ps$
1,747
6,074
7,218
292
Ps$ 15,331
818
629
60
—
1,507
Ps$
1,046
4,724
6,919
240
Ps$ 12,929
Three months ended
March 31,
Ps$
8
4,959
8,085
454
Ps$ 13,506
2014
2015
—
689
64
—
753
2014
2013
2012
(as a percentage of net sales)
Cement .........................................................
Building Systems ..........................................
Metal Products..............................................
Holding and eliminations .............................
Total .............................................................
13%
38%
48%
1%
100%
11%
40%
48%
1%
100%
11%
40%
47%
2%
100%
8%
37%
54%
1%
100%
0%
37%
60%
3%
100%
Sales by Region
The following tables set forth our net sales by region both in value and as a percentage for the periods indicated
below.
60
2014
2015
2014
2013
2012
Mexico(1)................................................ Ps$ 2,392
United States(2) ......................................
901
Central America(3) .................................
195
504
South America(4) ....................................
78
Ps$
4,070
Total ......................................................
Ps$ 2,155
725
193
529
37
Ps$ 3,639
Ps$
9,014
3,253
698
2,074
292
Ps$ 15,331
7,527
2,355
683
2,124
240
Ps$ 12,929
Ps$
7,276
2,499
816
2,461
454
Ps$ 13,506
2015
Ps$
2014
2014
2013
2012
(as a percentage of total net sales)
Mexico(1) ................................................
United States(2) .......................................
Central America(3)..................................
South America(4) ....................................
Total ......................................................
59%
22%
5%
12%
2%
100%
59%
20%
5%
15%
1%
100%
59%
21%
5%
14%
1%
100%
58%
18%
5%
16%
3%
100%
54%
19%
6%
18%
3%
100%
(1) Includes the results of our Cement Division, Building Systems Division and our Metal Products Division in Mexico.
(2) Includes the results of our Building Systems Division and our Metal Products Division in the United States.
(3) Includes the results of the Central American region of our Building Systems Division, which covers Costa Rica, El Salvador
and Honduras.
(4) Includes the results of the South American region of our Building Systems Division, which covers Bolivia, Colombia and
Ecuador.
Sales by Destination
The following tables set forth our domestic and export sales (excluding sales among our subsidiaries) on a
consolidated basis in terms of volume and net sales, and as a percentage of our total net sales:
2014
2015
Volume(2)
Domestic(1) ...................................................
Exports .........................................................
Holding and eliminations .............................
Total ............................................................
633
17
—
650
Net Sales(3)
% of Total
Net Sales
Ps$ 3,569
423
78
Ps$ 4,070
Volume(2)
88%
10%
2%
100%
553
19
—
572
Net Sales(3)
Ps$ 3,121
481
37
Ps$ 3,639
% of Total
Net Sales
86%
13%
1%
100%
2013
2014
Volume(2)
Domestic(1) ..............
Exports ....................
Holding and
eliminations.........
Total .....................
Net
Sales(3)
% of Total
Net Sales
Volume(2)
Net
Sales(3)
2012
% of Total
Net Sales
Volume(2)
Net
Sales(3)
% of Total
Net Sales
2,352 Ps$ 13,103
70
1,936
85%
13%
1,429 Ps$ 10,979
78
1,710
83%
15%
663 Ps$ 11,175
90
1,877
83%
14%
—
292
2,422 Ps$15,331
2%
100%
—
240
1,507 Ps$12,929
2%
100%
—
454
753 Ps$13,506
3%
100%
(1) Includes products sold domestically within each country where they are manufactured or produced.
(2) In thousands of tons.
(3) In millions of pesos.
61
For the three months ended March 31, 2015, during which net sales were Ps$4,070 million, 53% of the net sales
were in Mexico, 22% in the United States, 18% in South America, 6% in Central America and 2% in other regions of
the world, principally in Europe.
Sales by Sector
For the three months ended March 31, 2015, 63% of the net sales were generated within the construction sector,
28% within the industrial sector, 7% within the infrastructure sector and 2% within the homebuilding sector.
Results of Operations
Three Months Ended March 31, 2015 Compared to Three Months Ended March 31, 2014
The following table sets forth certain financial information with respect to our results of operations for the
periods indicated.
2015
2014
% Change
Net sales ......................................................................................................... Ps$
Cost of sales ...................................................................................................
Gross profit ...................................................................................................
Operating expenses.........................................................................................
Other income, net(1).......................................................................................
Exchange income (loss), net ...........................................................................
Interest income ...............................................................................................
Interest expense ..............................................................................................
Banking fees ...................................................................................................
Income before income taxes and discontinued operations........................
Income taxes ...................................................................................................
Income from continued operations .............................................................
Loss from discontinued operations, Net ........................................................
Consolidated net income .............................................................................. Ps$
EBITDA(2) .................................................................................................... Ps$
4,070
3,073
997
569
(6)
169
(33)
184
17
97
30
67
8
59
707
Ps$
Ps$
Ps$
3,639
2,809
830
628
(162)
(9)
(18)
112
16
263
75
188
9
179
609
12%
9%
20%
(9)%
(96)%
(1,978)%
83%
64%
6%
(63)%
(60)%
(64)%
(11)%
(67)%
16%
(2) EBITDA is not a financial measure recognized by IFRS. EBITDA should not be considered as a substitute for net income,
cash flow provided by operations or other measures of financial performance or liquidity under IFRS. Our presentation of
EBITDA may not be comparable to similarly titled measures provided by other companies.
Net Sales
Net sales in the three months ended March 31, 2015 amounted to Ps$4,070 million, an increase of 12%
compared to net sales of Ps$3,639 million during the same period in 2014. This increase was due to consistent
growth in sales across all divisions.
Consolidated sales volumes in the three months ended March 31, 2015 were 650 thousand tons, representing an
increase of 14% over the same period in 2014. By business division, volumes performed as follows: in the Cement
Division, 439 thousand tons, an increase of 19%, due to the commencement of operations at the El Palmar cement
plant and the positioning of the Fortaleza brand; in the Building Systems Division, 194 thousand tons, an increase of
3%, mainly as a result of an increase in sales volume in the United States due to the inclusion of the Allura brand; and
in the Metal Products Division, 17 thousand tons, an increase of 6% due to greater sales of copper tubing and alloys,
as well as the sale of steel, which was initiated in 2015. As a percentage of net sales, in the three months ended
March 31, 2015, the Cement Division represented 13%, the Building Systems Division 38%, and the Metal Products
Division represented 48%, while in the three months ended March 31, 2014, the Cement Division represented 11%,
the Building Systems Division 40%, and the Metal Products Division 48%. We expect to continue experiencing
constant growth across all of our divisions through organic growth or potential future acquisitions.
62
Net sales by business division in the three months ended March 31, 2015 were for the Cement Division Ps$509
million, Ps$1,547 million for the Building Systems Division, and Ps$1,936 million for the Metal Products Division,
an increase compared with the following amounts for the same period in 2014: Ps$405 million for Cement, Ps$1,438
million for the Building Systems Division, and Ps1,759 million for the Metal Products Division. In the Cement
Division, the increase in net sales was primarily due to an increase in volume of 19% in line with the increase in the
utilization of installed capacity, as well as the higher sales price. Net sales in the Building Systems Division increased
due to an increase in volume primarily in the United States, which offset a decrease in sales volume in the South
America region. The increase in net sales in the Metal Products Division in the three months ended March 31, 2015
was due to an increase in the sales volume of 6% compared to the same period in 2014, which offset the decrease in
the value of the price of the metals, primarily copper, which decreased by 18% between the two periods.
Cost of Sales
Cost of sales in the three months ended March 31, 2015 was Ps$3,073 million, an increase of 9% or Ps$264
million as compared with Ps$2,809 million in the three months ended March 31, 2014. The increase in cost of sales
was mainly due to an increase in the volume sold due to the operation of the Cement Division in the three months
ended March 31, 2015, whose variable costs increase or decrease relative to the volume in terms of raw materials,
labor, fuel, energy and manufacturing costs. The cost of sales as a percentage of net sales improved by one
percentage point to 76% in the three months ended March 31, 2015 as compared to 77% in the three months ended
March 31, 2014, due to the better margin of the products in the Cement Division. Additionally, we can experience
significant changes in our cost of sales due to the peso-U.S. dollar exchange rate or fluctuations in the price of metals,
which are generally passed through proportionally in net sales.
Gross Profit
The increase in the utilization of installed capacity in the Cement Division led to an increase in volume and net
sales as compared to our other divisions, which drove gross profit in the three months ended March 31, 2015 to
Ps$997 million, an increase of 20% compared to gross profit of Ps$830 million in the same period in 2014. The
margin with respect to net sales improved in the three months ended March 31, 2015, reaching 24% as compared to
23% in the three months ended March 31, 2014. Our higher gross margins are attributable primarily to the Cement
Division.
Operating Expenses
Operating expenses (including selling expenses, and distribution, marketing and administrative costs) in the three
months ended March 31, 2015 were Ps$569 million, a decrease of 9% or Ps$59 million as compared to operating
expenses of Ps$628 million in the same period in 2014. This decrease in operating expenses was mainly due to the
reduction in marketing costs in the operations of the Cement Division, as well as the decreases in expenses of the
Metal Products Division.
Other Income, Net
In the three months ended March 31, 2015, we recorded other income, net of Ps$6 million, a decrease compared
to Ps$162 million recorded in the same period in 2014. This decrease in other income, net was primarily due to the
bargain purchase gain from the acquisition of the assets of the fiber cement business of CertainTeed Corporation
recognized in the three months ended March 31, 2014.
Financing Result, Net
The financing result, net for the three months ended March 31, 2015 was Ps$337 million, an increase of
Ps$236 million compared to Ps$101 million for the same period in 2014. The increase in net financing expense was
due to: (i) the exchange loss, net of Ps$169 million in the three months ended March 31, 2015, resulting primarily
from the depreciation of the peso against the U.S. dollar, which affected the Company due to the net liability position
as of the close of that period, compared to an exchange gain, net of Ps$9 million in the three months ended March 31,
2014, and (ii) an increase in interest expenses of Ps$72 million resulting from the effect of exchange rate changes on
the U.S. dollar interest payments relating to the 2025 notes.
63
The following table shows a breakdown of the net financing result for the periods indicated:
2014
2013
% Change
Interest income ......................................................................
Interest expense .....................................................................
Banking fees ..........................................................................
Exchange loss (gain), net .......................................................
Total financing result, net ...................................................
(33)
184
17
169
337
(18)
112
16
(9)
101
83%
64%
6%
(1,978)%
234%
Income Taxes
Current and deferred income taxes amounted to Ps$30 million in the three months ended March 31, 2015, a
decrease of Ps$45 million compared to current and deferred income taxes of Ps$75 million for the same period in
2014. This decrease was a consequence of the increase in financing expenses in the 2015 period.
Consolidated Net Income
Consolidated net income in the three months ended March 31, 2015 was Ps$59 million, a decrease of Ps$120
million compared to consolidated net income in the three months ended March 31, 2014, which amounted to Ps$179
million. This decrease in consolidated net income was primarily due to the effect of changes in the exchange rate on
our debt position.
EBITDA
EBITDA in the three months ended March 31, 2015 was Ps$707 million, an increase of 16% compared to
Ps$609 million for the same period in 2014. The EBITDA margin to net sales was 17.4% in the three months ended
March 31, 2015 as compared to a margin of 16.7% in the three months ended March 31, 2014. This increase was
generated by the greater sales volume and the better EBITDA margin in the Cement Division.
Division Information for Three Months Ended March 31, 2015 Compared to Three Months Ended March 31,
2014
Building Systems
Cement
Three months ended
March 31,
2015
2014
2015
(millions of pesos, except for
EBITDA margin)
Net sales ...............
Operating
income .............
Add:
Depreciation
and
amortization .....
EBITDA(1) ..........
EBITDA margin ...
(1)
Metal Products
Three months ended March
31,
(% change)
Three months ended
March 31,
2014
(millions of pesos, except
for EBITDA margin)
2015
(% change)
2014
for EBITDA margin)
(% change)
509
405
26%
1,547
1,438
8%
1,936
1,759
10%
128
25
412%
175
189
(7)%
136
109
25%
74
202
40%
70
95
23%
113%
78
253
16%
59
248
17%
2%
117
253
13%
110
219
12%
16%
EBITDA is not a financial measure recognized by IFRS. EBITDA should not be considered as a substitute for net income, cash flow
provided by operations or other measures of financial performance or liquidity under IFRS. Our presentation of EBITDA may not be
comparable to similarly titled measures provided by other companies.
64
Cement Division
The volume of sales for the three months ended March 31, 2015 of the Cement Division was 439 thousand tons,
an increase of 19% compared to 368 thousand tons in the same period in 2014. The increase in volume as compared
to the same period in 2014 was due to the increase in the utilization of installed capacity. Sales in the three months
ended March 31, 2015 amounted to Ps$509 million, compared to Ps$405 million in the same period in 2014. The
price of cement per ton increased by 5%.
The Cement Division in the three months ended March 31, 2015 recorded operating income of Ps$128 million,
an increase of 412% or Ps$103 million compared to the operating income generated in the three months ended March
31, 2014 of Ps$25 million. This was a result of the growth in net sales in the Cement Division and the optimization
of the costs of production (reduction in the consumption and cost of electric energy), as well as a reduction in
marketing costs. EBITDA in the three months ended March 31, 2015 was Ps$202 million, an increase of Ps$107
million or 113% compared to the same period in 2014. The EBITDA margin to net sales amounted to 40% for the
three months ended March 31, 2015 compared to 23% for the three months ended March 31, 2014.
Net sales in the three months ended March 31, 2015 were Ps$1,547 million, an 8% increase compared to
Ps$1,438 million in the same period in 2014, mainly due to the growth in sales volume in the United States, which
partially offset the decrease in sales volume in the Central American and South American regions. In addition, we
achieved an improved mix of volume and sales price for our products, with growth primarily in cisterns and tanks in
the Mexico and South American regions.
The Building Systems Division in the three months ended March 31, 2015 recorded operating income of Ps$175
million, compared to operating income recorded in the three months ended March 31, 2014 of Ps$189 million, which
represents a 7% decrease, as a result of the increase in production costs mainly due to an increase in the depreciation
expenses of our operations in the United States. The margin of operating income to net sales was 11% in the three
months ended March 31, 2015 compared to a margin of 13% for the same period in 2014. EBITDA for the three
months ended March 31, 2015 amounted to Ps$253 million, an increase of Ps$5 million or 2% compared to the same
period in 2014, a result of higher sales volume due to the penetration of the U.S. market. The EBITDA margin to net
sales was 16% in the three months ended March 31, 2015, compared to a margin of 17% for the three months ended
March 31, 2014.
For the three months ended March 31, 2015, the Metal Products Division reported a sales volume of 17
thousand tons, an increase of 6% compared to the volume in the three months ended March 31, 2014, mainly due to
the increased sales volume in sheets and piping. Net sales amounted to Ps$1,936 million, an increase of 10% as
compared to the amount in the same period in 2014. The increase in the sales volume achieved in this division, as
well as the effect of the exchange rate, offset the decrease in the value of the metals, primarily copper, the average
international price of which in the three months ended March 31, 2015 was US$2.66 per pound, compared to
US$3.24 per pound during the same period in 2014, which represents a decrease of 18%.
Operating income in the three months ended March 31, 2015 of the Metal Products Division was Ps$136 million
compared to Ps$109 million for the same period in 2014. This increase was mainly due to the increase in sales
volume, as well as the greater efficiency in the production process and better use of the metal. EBITDA in the three
months ended March 31, 2015 amounted to Ps$253 million, compared to Ps$219 million in the three months ended
March 31, 2014, representing an increase of 16%. This increase in EBITDA is mainly due to the increase in sales
volumes of higher value added products, a lower production cost derived from cost optimization initiatives and an
improvement in the performance of the use of metal. In addition, the EBITDA margin increased by one percentage
point to 13% in March 2015.
65
Year Ended December 31, 2014 Compared to Year Ended December 31, 2013
periods indicated.
2014
2013
% Change
Net sales ................................................................................. Ps$
Cost of sales ...........................................................................
Gross profit ...........................................................................
Operating expenses.................................................................
Other income, net(1)...............................................................
Exchange loss, net ..................................................................
Interest income .......................................................................
Interest expense ......................................................................
Banking fees ...........................................................................
Participation in the results of associated entities ...................
Income before income taxes and discontinued
operations ..........................................................................
Income taxes ...........................................................................
Income from continued operations .....................................
Discontinued operations:
Loss from discontinued operations, Net .................................
Consolidated net income for the year ................................. Ps$
EBITDA(2) ............................................................................. Ps$
15,331
11,683
3,648
2,228
(184)
192
(80)
506
117
—
Ps$
12,929
9,908
3,021
2,125
(301)
49
(46)
421
48
(4)
19%
18%
21%
5%
(39)%
292%
74%
20%
144%
(100)%
869
246
623
729
177
552
19%
39%
13%
93
530
2,675
60
492
1,913
55%
8%
40%
Ps$
Ps$
Net Sales
Net sales in 2014 were Ps$15,331 million, an increase of 19% compared to net sales of Ps$12,929 million in
2013. Net sales increased primarily due to increase in sales in the Cement Division, as well as the increases in
volume in the Building Systems Division and the Metal Products Division, which partly offset the fall in the
international price of copper by 6.6% during 2014.
Consolidated sales volumes in 2014 were 2,422 thousand tons, representing an increase of 61% over the same
period in 2013. By business division, volumes performed as follows: in Cement, 1,548 thousand tons, an increase of
89%, due to the commencement of operations at the El Palmar cement plant and the consolidation of the Lafarge
Joint Venture, which commenced in August 2013; in Building Systems, 810 thousand tons, an increase of 29%,
mainly as a result of an increase in sales volume in the United States due to the inclusion of the Allura brand; and in
Metals, 64 thousand tons, an increase of 7%. As a percentage of net sales, in 2014, the Cement Division represented
11%, the Building Systems Division 40%, and the Metal Products Division represented 47%, while in 2013, the
Cement Division represented 8%, the Building Systems Division 37%, and the Metal Products Division 54%.
Net sales by business division in 2014 were for Cement Ps$1,747 million, Ps$6,074 million for Building
Systems, and Ps$7,218 million for Metals, compared with the following amounts in 2013: Ps$1,046 million for
Cement, Ps$4,724 million for Building Systems, and Ps$6,919 million for Metals. In the Cement Division, the
increase in net sales in 2014 was primarily due to the commencement of operations at the El Palmar plant and the
consolidation of the Lafarge Acquisition. Net sales in the Building Systems Division increased due to a 29% increase
in volume, while the average price of the products remained constant. The increase in net sales in the Metal Products
Division was due to an increase in the sales volume of 7% compared to 2013.
66
Cost of Sales
The cost of sales in 2014 was Ps$11,683 million, an increase of 18% or Ps$1,775 million compared to Ps$9,908
million in 2013. Cost of sales increased mainly due to: (i) the increase in the sales volume due to the operations of
the Cement Division in 2014, the variable costs of which increase or decrease relative to volume in terms of raw
materials, workforce, fuel, energy and manufacturing costs, and (ii) the expansion of our operations in the United
States, primarily of our Allura brand. The cost of sales in relation to net sales improved slightly, representing 76% in
2014 and 77% in 2013, due to the better income margin of the products in the Cement Division. In addition, we may
experience significant changes in our cost of sales due to the peso-U.S. dollar exchange rate and/or fluctuations in the
price of metals, which would be reflected proportionally in net sales.
Gross Profit
The incorporation of the Cement Division, along with its better margins and the consequent increase in volume
and net sales as compared to our other divisions drove gross profit in 2014 to Ps$3,648 million, an increase of 21%
compared to gross profit of Ps$3,021 million in 2013. The margin with respect to net sales improved in 2014,
reaching 24% as compared to 23% in 2013. Our higher gross margins are driven primarily by volume growth in the
Cement Division. However, the increase experienced in the prior period will be difficult to replicate unless we
engage in additional business acquisitions or invest in capacity expansion.
Operating Expenses
Operating expenses (including selling expenses, and distribution, marketing and administrative costs) in
2014 were Ps$2,228 million, an increase of 5% or Ps$103 million as compared to operating expenses of
Ps$2,125 million in 2013. The increase in operating expenses was mainly due to the fact that the Cement Division
operated for a full 12 months in 2014 compared to approximately six months in 2013, as well as the increase in
expenses of the Building Systems Division due to the incorporation of the operations in the United States. This
increase is partially offset by a reduction in operating expenses in the Metals Division.
Other Income, Net
In 2014, we recorded other income, net of Ps$184 million, primarily due to a one-time bargain purchase gain of
Ps$435 million from the acquisition of the assets of the fiber cement business of CertainTeed Corporation, offset by
litigation expenses, asset retirement costs and others. In 2013, other income corresponded primarily to the gain from
the sale of property, plant and equipment and the recovery of taxes in our favor.
The financing result, net in 2014 was Ps$735 million, an increase of Ps$263 million compared to Ps$472 million
in 2013. The increase in net financing expense was primarily due to: (i) the increase in interest expense by Ps$85
million, primarily due to the issuance of the 2025 notes, and the capitalizing of interest in 2013 relating to the
construction of the El Palmar plant, which were included as part of the asset (this capitalization concluded on
June 30, 2013); (ii) the exchange loss, net of Ps$192 million, primarily due to the depreciation of the peso in relation
to the U.S. dollar in 2014, corresponding to the net position in dollars that we had as of the close of 2014, compared
to the exchange loss, net of Ps$49 million in 2013; and (iii) banking fees of Ps$117 million deriving from the
majority of the debt that was prepaid and which had to be amortized in its totality in December 2014, compared to
banking fees of Ps$48 million in 2013.
67
2014
2013
% Change
Interest income ......................................................................
Banking fees ..........................................................................
Exchange loss, net .................................................................
(80)
506
117
192
735
(46)
421
48
49
472
74%
20%
144%
292%
56%
Income Taxes
Current and deferred income taxes amounted to Ps$246 million in 2014, an increase of Ps$69 million compared
to current and deferred income taxes of Ps$177 million in 2013. This increase was a consequence of the increase in
income before income taxes in 2014 period, due to the better results of the divisions.
Consolidated net income in 2014 was Ps$530 million, an increase of 8% or Ps$38 million compared to
consolidated net income in 2013, which amounted to Ps$492 million. The increase in consolidated net income was
due to a full year of operations as described above.
EBITDA
EBITDA in 2014 was Ps$2,675 million, an increase of Ps$762 million or 40% compared to 2013. The EBITDA
margin to net sales was 17% in 2014 as compared to a margin of 15% in 2013. This increase was generated by the
greater EBITDA margin in all three of our divisions. In 2014, there were certain events that affected EBITDA both
positively and negatively.
Division Information for Year Ended December 31, 2014 Compared to Year Ended December 31, 2013
Cement
Building Systems
Year ended
December 31,
Year ended
December 31,
2013
2014
2014
(millions of pesos, except for
EBITDA margin)
(1)
Metal Products
(% change)
Year ended
December 31,
2013
2014
for EBITDA margin)
(% change)
2013
for EBITDA margin)
(% change)
Net sales ...............
Operating
income .............
Add:
Depreciation
and
amortization .....
1,747
1,046
67%
6,074
4,724
29%
7,218
6,919
4%
291
101
188%
817
714
14%
393
332
18%
281
137
303
229
462
326
EBITDA(1) ..........
572
238
1,119
943
855
658
EBITDA margin ...
33%
23%
18%
20%
12%
10%
140%
19%
30%
EBITDA is not a financial measure recognized by IFRS. EBITDA should not be considered as a substitute for net income, cash flow provided by
operations or other measures of financial performance or liquidity under IFRS. Our presentation of EBITDA may not be comparable to similarly
titled measures provided by other companies.
68
Cement Division
Net sales in the Cement Division in 2014 amounted to Ps$1,747 million, compared to Ps$1,046 million in 2013,
representing an increase of 67%. This increase was derived from the increase in the sales volume by 89% compared
to 2013. Pre-mixed concrete operations commenced in October 2014.
Operating income in 2014 in the Cement Division amounted to Ps$291 million, an increase of 188% or Ps$190
million compared to Ps$101 million in 2013. This increase was a result of the growth in volume reflected in net sales
due to the consolidation of the Lafarge Joint Venture within the operations of the Cement Division.
EBITDA in 2014 was Ps$572 million, an increase of Ps$334 million or 140% compared to 2013. This increase
was due to the increase in the sales volume mentioned previously.
In 2014, the operating income margin to net sales was 17%, an increase of 7 percentage points compared to
2013. In addition, the EBITDA margin, increased by 10 percentage points to 33%, for the reasons previously
described.
Net sales in 2014 amounted to Ps$6,074 million, an increase of 29% or Ps$1,350 million compared to Ps$4,724
million in 2013, as a result of the greater sales volume. The sales volume in 2014 in the Building Systems Division
was 29% greater than the volume in 2013, mainly due to greater volume sold in the United States due to the inclusion
of the Allura brand, the increase in the distribution network and the sales contract with the government of Mexico, as
well as the increase in the volume of sales of tanks and roofing products in Mexico and South America.
In 2014, the Building Systems division had operating income of Ps$817 million, an increase of 14% or Ps$103
million compared to operating income of Ps$714 million in 2013 as a result of the growth in volume reflected in net
sales and improved margins relative to cost. The operating income margin to net sales was 13% in 2014 compared to
15% in 2013. This was a result of a lower operating income margin in the United States where the operating margin
is lower than in other regions of this division.
EBITDA in 2014 amounted to Ps$1,119 million, an increase of Ps$176 million or 19% compared to 2013, as a
consequence of the greater volume of sales, which was derived from the incorporation of the operations of the Allura
brand in the United States. The EBITDA margin to net sales was 18% in 2014, compared to 20% in 2013.
This division reported net sales of Ps$7,218 million in 2014, an increase of 4% compared to Ps$6,919 million in
2013. This increase was the result of the mix of the increase in volume and the increase in the exchange rate, partially
offset by the decrease in the price of metals, primarily copper, whose average international price in 2014 was
US$3.12 per pound, compared to US$3.34 per pound in 2013, representing a decrease of 6.6% in the price of that
metal and causing a decrease in the average sales price of our products by 2%.
Operating income in 2014 for the Metal Products Division increased by 18% or Ps$61 million compared to
Ps$332 million in 2013 due to the reduction in the cost of sales resulting from greater efficiency in the use of metal,
an improvement in the production process from having implemented continuous casting (24 hours per day, 365 days
per year), and synergies from the closing of the plant in Toluca, in the State of Mexico and the transfer of such plant’s
operations to the Celaya plant in Guanajuato, Mexico. We had a significant decrease in operating expenses in this
division.
EBITDA in 2014 amounted to Ps$855 million compared to Ps$658 million in 2013, representing an increase of
30% or Ps$197 million. This increase in EBITDA was primarily due to the increase in volume, the efficiencies in
production costs and the synergies in costs and expenses between the Toluca and Celaya plans, as mentioned
previously.
In 2014, the operating income margin to net sales was maintained at 5% and the EBITDA margin increased by
two percentage points to 12%, for the reasons previously described.
69
Year Ended December 31, 2013 Compared to Year Ended December 31, 2012
periods indicated.
2013
2012
% Change
Continued operations:
Net sales ................................................................................. Ps$
Cost of sales ...........................................................................
Gross profit ...........................................................................
Operating expenses.................................................................
Other income, net(1)...............................................................
Exchange loss .........................................................................
Interest income .......................................................................
Interest expense ......................................................................
Banking fees ...........................................................................
Participation in the results of associated entities ...................
Income before income taxes and discontinued
operations ..........................................................................
Income taxes ...........................................................................
Income from continued operations .....................................
Loss from discontinued operations, Net .................................
Consolidated net income for the year ................................. Ps$
EBITDA(2) ............................................................................. Ps$
12,929
9,908
3,021
2,125
(301)
49
(46)
421
48
(4)
Ps$
13,506
10,273
3,233
1,888
(21)
345
(31)
289
20
(35)
(4)%
(4)%
(7)%
13%
1,333%
(86)%
48%
46%
140%
(89)%
729
177
552
778
(38)
816
(6)%
566%
(32)%
60
492
1,913
501
315
1,877
(88)%
56%
2%
Ps$
Ps$
Net Sales
Net sales in 2013 were Ps$12,929 million, a decrease of 4% compared to 2012. Net sales decreased primarily
due to a fall in the prices of metals. The average price of copper decreased 7.5% in 2013 as compared to 2012, which
directly impacted the sales prices of our Metal Products Division products. In addition, the volume of sales decreased
6% in the Metal Products Division, where we experienced a consistent decrease in sales, both domestically and in
exports, mainly with regard to sheets.
The decrease in net sales was also due the governments of Mexico and Colombia continuing to delay their
infrastructure and construction projects, which negatively affected sales volume and in turn caused a proportionate
decrease in net sales and cost of sales in the Building Systems Division. Also in this division, the selling prices of
our products increased 4% in 2013 relative to 2012. The decrease in net sales in the two aforementioned divisions
was offset in part by the incorporation of the results of the new Cement Division.
Cost of Sales
The cost of products sold on a consolidated basis in 2013 was Ps$9,908 million, a decrease of 4% compared to
2012. Cost of sales decreased in the same proportion as sales, such that we were able to maintain gross margins.
Gross Profit
Gross profit decreased by Ps$212 million mainly due to the decrease in net sales. Gross profit represented 23%
of sales in 2013, a margin which is almost unchanged from 24% in 2012.
70
Operating Expenses
In 2013, operating expenses amounted to Ps$2,125 million, an increase of 13% compared to Ps$1,888 million in
2012, due to the expenses for the commencement of operations of the new Cement Division, for which we incurred
significant marketing expenses, including with respect to a significant marketing campaign to position the Fortaleza
brand in a competitive market, as well as the development of more than 700 distributors. For the same reason, wages
and salary expenses also increased as well as depreciation and amortization charged to expenses.
Other Income, Net
Other income increased by Ps$280 million in 2013 compared to 2012, primarily due to the sale of property, plant
and equipment (see note 22 to our consolidated financial statements for more details) and similarly due to income
from recovery of the Tax on Assets (Impuesto al Activo) and other income from cancellation of balance sheet
accounts from reconciliation thereof.
The composition of other income, net in 2013 and 2012 was as follows:
2012
2013
Sale of property, plant and equipment ......................................................
Recovery of the Tax on Assets .................................................................
Discharge of debt......................................................................................
Deterioration of long-term assets .............................................................
Cancellation of balance sheet accounts ....................................................
Provision for contingencies ......................................................................
Total .........................................................................................................
(215)
(26)
–
–
(60)
–
(301)
(118)
–
(22)
40
29
50
(21)
The financing result, net in 2013 was Ps$472 million, a decrease of Ps$151 million compared to Ps$623 million
in 2012. The net financing expense decreased primarily due to a decrease in the exchange loss in the amount of
Ps$296 million, from the effect of conversion of the functional currency of the Metal Products Division, and an
increase of Ps$132 million in the expense for payment of interest, which was due to the capitalizing of interest and
commissions paid to financial institutions for the construction of the El Palmar plant during 2012 and up to the first
half of 2013. During the second half of 2013, after the commencement of operations at El Palmar, these interest
payments were recognized within results as interest expense.
2013
2012
% Change
Interest income ......................................................................
Banking fees ..........................................................................
Exchange loss, net .................................................................
(46)
48
421
49
472
(31)
20
289
345
623
48%
140%
46%
(86)%
(24)%
Income Taxes
Income taxes increased mainly due to the current income tax in 2013 in the amount of Ps$616 million, compared
to the tax of Ps$229 million in 2012, due to the effect of tax deconsolidation which was recognized and should be
paid in the five fiscal years beginning in fiscal year 2014. This effect was offset by the increase in the recording of a
deferred tax benefit of Ps$394 million, due to the benefit from amortization of the loss from the sale of shares that
was obtained in 2012, as a result of which this tax asset benefit was recognized.
71
Consolidated net income in 2013 amounted to Ps$492 million, an increase of 56% compared to Ps$315 million
in 2012. Consolidated net income increased due to the decrease in losses from discontinued operations from a loss of
Ps$501 million in 2012 to a loss of Ps$60 million in 2013 (see note 25 to our consolidated financial statements for
more details), as well as an increase in net income in the Cement Division. The net income margin in 2013 was 4%
compared to 2% in 2012.
EBITDA
EBITDA in 2013 was Ps$1,913 million, an increase of 2% compared to Ps$1,877 million in 2012 and with a
margin to sales of 15% and 14%, respectively. This was due to the commencement of operations of the Cement
Division in 2013. In 2013, there were certain events which affected EBITDA both positively and negatively.
Division Information for Year Ended December 31, 2013 Compared to Year Ended December 31, 2012
Cement
Building Systems
2012
2013
Metal Products
Year ended
December 31,
Year ended
December 31,
2013
(millions of pesos, other than
EBITDA margin)
(% change)
Year ended
December 31,
2012
2013
(millions of pesos, other
than EBITDA margin)
(% change)
2012
(millions of pesos, other
than EBITDA margin)
(% change)
Net sales ...............
Operating
income .............
Add:
Depreciation
and
amortization .....
1,046
8
12,975%
4,724
4,959
(5)%
6,919
8,085
(14)%
101
(3)
(3,467)%
714
800
(11)%
332
423
(22)%
137
0
229
205
326
293
EBITDA(1) ..........
238
(3)
943
1,005
658
716
EBITDA margin ...
23%
(38)%
20%
20%
10%
9%
(1)
8,033%
(6)%
(8)%
EBITDA is not a financial measure recognized by IFRS. EBITDA should not be considered as a substitute for net income, cash flow
provided by operations or other measures of financial performance or liquidity under IFRS. Our presentation of EBITDA may not be
comparable to similarly titled measures provided by other companies.
Cement Division
The Cement Division commenced operations in 2013 upon the conclusion of the construction of the El Palmar
cement plant. Similarly, the Lafarge Joint Venture was consolidated, which commenced in August 2013. The sales
volume in this division amounted to 818 thousand tons, translating into net sales of Ps$1,046 million.
Operating income in the first year of operations amounted to Ps$101 million, representing a margin to net sales
of 10%. Operations in 2013 of the Cement Division resulted in EBITDA of Ps$238 million with a margin to net sales
of 23%.
The sales volume in 2013 in the Building Systems Division amounted to 629 thousand tons compared to 689
thousand tons in 2012. The decrease in sales volume was mainly due to the fact the governments of Mexico and
Colombia postponed certain infrastructure and construction projects, which affected net sales in the Building Systems
Division, which were Ps$4,724 million and Ps$4,959 million in 2013 and 2012, respectively.
In 2013, the Building Systems division had operating income of Ps$714 million compared to operating income in
2012 of Ps$800 million as a result of the decrease in the sales volumes, primarily in Mexico and Colombia, and the
increase in operating expenses due to annual inflation and the change in the sales structure. EBITDA was Ps$943
million with a margin of 20% and Ps$1,005 million with a margin of 20% in 2013 and 2012, respectively, decreasing
primarily due to the lower sales in this division.
72
This division reported net sales of Ps$6,919 million in 2013, a decrease of 14% compared to Ps$8,085 million in
2012. In general, the Metal Products Division decreased its volume of sales, from 64 thousand tons in 2012 to 60
thousand tons in 2013, or a decrease of 6%. In addition, the sales prices decreased significantly by 9% on average, a
reflection of the international prices of metals during 2013. The greater participation in plastic tubing in the building
materials sector and the price of copper compared to the price of plastic generated the main decrease in volume of
this division. On the other hand, we were able to offset this effect in part by increasing our participation in different
sectors of the market, including the building materials and automotive sectors.
Operating income in 2013 for the Metal Products Division was Ps$332 million compared to Ps$423 million in
2012. EBITDA in 2013 amounted to Ps$658 million compared to Ps$716 million in 2012, due principally to the
decreased volume in this division.
Liquidity and Capital Resources
Our financial condition and liquidity is and will continue to be influenced by a variety of factors, including:

our ability to generate cash flow from our operations;

the level of our outstanding indebtedness and the interest we are obliged to pay on this indebtedness;

changes in exchange rates which will impact our generation of cash flows from operations when
measured in U.S. dollars; and

our capital expenditure requirements.
Our main sources of financing consist of bank facilities and capital contributions carried out by our shareholders.
We have generated cash flows from operations in the normal course of our business, and have made use of credit
facilities and issued debt securities traded and listed on the BMV, as well as received capital contributions from our
shareholders.
In addition to the Ps$3,000 million five-year term notes raised through issuance of ELEMENT 10 Certificados
Bursátiles, we have access to long-term capital markets financing of up to Ps$2,000 million through our Certificados
Bursátiles Program.
As of March 31, 2015, our financial liabilities consisted of Ps$3,140 million of short-term liabilities and
Ps$7,724 million of long-term liabilities. As of December 31, 2014, our financial liabilities consisted of Ps$3,138
million of short-term liabilities and Ps$7,564 million of long-term liabilities.
In November 2014, we issued US$425 million aggregate principal amount of the 2025 notes. In accordance with
the terms of the indenture relating to the 2025 notes, we may, from time to time, issue additional notes of the same
series as the 2025 notes offered at a future date. We intend to enter into foreign exchange hedging arrangements with
regards to the 2025 notes.
The table below sets forth our liquidity ratios as of the dates indicated.
As of December 31,
As of March 31,
Liquidity Ratios
2015
2014
2014
2013
2012
Current assets / current liabilities ......................................
Current assets – inventories / current liabilities .................
Current assets / total liabilities ..........................................
Liquid assets(1) / current liabilities ...................................
1.24
0.93
0.56
0.42
1.95
1.44
0.71
0.34
1.19
0.86
0.54
0.42
2.03
1.47
0.69
0.50
2.20
1.50
0.70
0.50
(1) Liquid assets include cash and cash equivalents.
73
Indebtedness
The following table presents our indebtedness as of March 31, 2015 and December 31, 2014 in Mexican pesos,
unless otherwise noted. For the column showing indebtedness as of December 31, 2014, we have used the exchange
rate published by the Mexican Central Bank (Banco de México) as the rate for the settlement of liabilities
denominated in U.S. dollars payable in Mexico on such date, which was Ps$14.7180 per U.S. Dollar.
March 31,
2015
December 31,
2014
(in thousands of pesos)
2025 notes in the amount of US$425 million. The 2025 notes mature on
January 15, 2025, unless previously redeemed. The interest is payable
semiannually on January 15 and July 15 of each year, beginning on July 15,
2015. .........................................................................................................................
Certificados Bursátiles (CEBUR) in the amount of Ps$3 billion, accruing
monthly interest at a rate of TIIE plus 2.75 basis points, maturing on October
22, 2015 .....................................................................................................................
Banco HSBC (ELC Tenedora Cementos) promissory notes accruing quarterly
interest at a rate of TIIE plus 1.5 basis points and maturing in 2018. Elementia,
S.A. de C.V., Trituradora y Procesadora de Materiales Santa Anita, S.A. de
C.V. and Lafarge Cementos, S.A. de C.V. are guarantors .........................................
Banco HSBC PLC Sucursal España HSBC (Trituradora y Procesadora de
Materiales Santa Anita, S.A. de C.V.) promissory notes in U.S. dollars accruing
interest on a biannual basis at a fixed rate of 3.05% (tranche A) and 6-month
LIBOR plus 1.3 basis points (tranche B), payable in a maximum term of 10
years after the date of launch of the project. Elementia, S.A. de C.V. and
subsidiaries are guarantors .........................................................................................
Banco BX+ (Elementia, S.A. de C.V.) Revolving credit facility through
promissory notes accruing monthly interest at a rate of TIIE plus 1.5 basis
points and maturing in 2015, renewable annually. Mexalit Industrial, S.A. de
C.V. is a guarantor .....................................................................................................
Total debt ..................................................................................................................
Less – Short-term bank loans and current portion of debt......................................
Expenses for placement of short-term debt ............................................................
Short-term debt, excluding expenses for placement ...............................................
Long-term debt.......................................................................................................
Less – Expenses for placement of long-term debt ..................................................
Long-term debt, excluding current portion and expenses for placement............
Ps$
Ps$
6,440,535
Ps$
6,255,150
3,000,000
3,000,000
650,000
650,000
723,426
746,514
50,000
Ps$
10,863,961
3,140,428
(42,849)
3,097,579
7,723,533
(269,186)
7,454,347
50,000
Ps$
Ps$
10,701,664
3,137,826
(35,643)
3,102,183
7,563,838
(281,635)
7,282,203
We are up to date in all scheduled principal and interest payments for our loans and liabilities.
2025 Notes
In November 2014, we issued US$425 million aggregate principal amount of the 2025 notes. The 2025 notes
mature on January 15, 2025, unless previously redeemed. Interest will be paid semi-annually in arrears on January 15
and July 15 of each year, beginning on July 15, 2015. The terms and conditions of the 2025 notes, subject to certain
exceptions, limit our ability and the ability of our restricted subsidiaries to, among other things:

incur additional indebtedness;

pay dividends on capital stock or redeem, repurchase or retire capital stock or subordinated
indebtedness;

make investments;

create liens;

create any consensual limitation on the ability of restricted subsidiaries to pay dividends, make loans or
transfer property;
74

engage in transactions with affiliates;

sell assets; and

consolidate, merge or transfer assets.
All of these covenants, limitations and restrictions are subject to a number of significant qualifications and
exceptions, as set forth in the indenture relating to the 2025 notes.
At our option, on or after January 15, 2020, we may redeem the 2025 notes, in whole or in part, at the applicable
redemption prices set forth in the indenture, plus accrued and unpaid interest, if any, plus additional amounts payable
to the date of redemption. Prior to January 15, 2020, we may redeem the 2025 notes, in whole or in part, by paying
the principal amount of the notes, plus the applicable “make-whole” premium and accrued and unpaid interest. Prior
to January 15, 2018, we may also redeem up to 35% of the 2025 notes with the proceeds of certain equity offerings. If
a change of control triggering event occurs, we may be required to offer to purchase the 2025 notes from the holders.
In addition, we may only redeem the 2025 notes in whole, at a price equal to 100% of their outstanding principal
amount, plus any additional amounts then payable, and accrued and unpaid interest, in the event of certain changes in
Mexican tax laws applicable to the 2025 notes.
In accordance with the terms of the indenture relating to the 2025 notes, we may, from time to time, issue
additional notes of the same series as the 2025 notes offered at a future date.
Refinancing Transactions
On March 21, 2013, we announced the repayment of our syndicated loan in the amount of Ps$2,593 million,
through the refinancing with a new syndicated loan in the amount of approximately Ps$3,730 million. The new loan
has a more favorable interest rate and maturity profile, resulting in greater financial flexibility.
As of December 20, 2013, we had prepaid Ps$1,700 million of the loans under the syndicated loan.
On December 22, 2014, we fully prepaid the remaining outstanding balance of the syndicated loan in the amount
of Ps$2,150 million using a portion of the net proceeds from the 2025 notes.
Restrictions Relating to Indebtedness
Certain of our debt instruments contain restrictive covenants, that if violated could result in the acceleration of
repayment of our respective indebtedness. Among these restrictions are limitations on the payment of dividends,
limitation on the incurrence of additional indebtedness, limitation on restricted payments, limitation on liens,
limitation on transactions with affiliates, compliance with certain financial ratios, insurance of secured assets,
limitations on merger, consolidation and sale and disposal of assets and limitations on the acquisition of contingent
liabilities or other contractual liabilities.
The table below shows our financial ratios as of March 31, 2015 and December 31, 2014:
Financial Ratios of Loans
March 31, 2015
Leverage Ratio ...............................................................
Interest Coverage Ratio ..................................................
Consolidated Equity (millions of pesos) ........................
2.66
4.80
Ps$11,698
December 31, 2014
2.69
5.28
Ps$11,607
Certificados Bursátiles ELEMENT 10. The Certificados Bursátiles ELEMENT 10 impose the following terms on
us, in accordance with their terms as well as the modifications approved by the general meetings of holders that took
place on July 21, 2011, December 4, 2012 and September 3, 2013:
Unless the holders of a majority of the Certificados Bursátiles ELEMENT 10 consent to in writing:

The proceeds from the issuance must be used exclusively for the specified use of proceeds.

We must deliver to the CNBV, the BMV and the other applicable governmental authorities and
institutions, the information and documentation required by applicable law and regulations.
75

We must comply with the following financial ratios, as applicable:
Period
Maximum leverage ratio (1)
From and including January 1, 2012 until March 31, 2014..................................
From and including April 1, 2014 until March 31, 2015......................................
From and including April 1, 2015 until the maturity date ....................................
3.50x to 1.0
3.30x to 1.0
2.75x to 1.0
(1) Modified in accordance with the meeting of holders held on September 3, 2013. Ratio is equivalent to: (a) the total
consolidated net debt of the Company and its subsidiaries as of the relevant date; and (b) consolidated EBITDA (income from
operations plus depreciation and amortization) of the Company and its subsidiaries corresponding to the four prior calendar
quarters.
Applicable Quarter
Minimum interest coverage ratio(1)
From the issuance date until the second quarter of 2011......................................
From July 1, 2011 until and including June 30, 2012 ..........................................
From July 1, 2012 to maturity ..............................................................................
3.0 to 1.0
3.0 to 1.0
3.5 to 1.0
(1) Modified in accordance with the meeting of holders held on July 21, 2011. Ratio is equivalent to: (a) the consolidated
EBITDA (operating income plus depreciation and amortization) of the Company and its subsidiaries for such period; and
(b) the consolidated financing expense of the Company and its subsidiaries for such period.
In 2012, due to our corporate restructuring, including mergers of several subsidiaries with our Company, and the
sale of several other subsidiaries, the holders of the Certificados Bursátiles ELEMENT 10 approved that the
Certificados Bursátiles ELEMENT 10 be guaranteed by Nacional de Cobre, S.A. de C.V., Mexalit Industrial, S.A. de
C.V., The Plycem Company Inc., Compañía Mexicana de Concreto Pretensado Comecop, S.A. de C.V. and Frigocel.
Syndicated loan. We are required to maintain the following consolidated financial ratios:

Interest Coverage Ratio, on a consolidated basis, greater than 3.0:1.0.

Net Debt to Consolidated EBITDA Ratio (a) less than 3.5:1.0 from the closing date to and including
March 31, 2014; (b) less than 3.3:1.0 from and including April 1, 2014 to and including March 31,
2015; and (c) less than 2.75:1.0 from and including April 1, 2015 to and including the maturity date.

Consolidated Equity not less than Ps$10,695 million; such sum may be adjusted to reflect the net effect
from a sale or permitted disposition in accordance with the Crédito Sindicado 2013.
The syndicated loan also includes several affirmative and negative covenants that restrict some of our activities.
As of the date of this offering memorandum, we are in compliance with the financial ratios and covenants.
As of December 20, 2013, we had prepaid Ps$1,700 million of the loans under the syndicated loan and on
December 22, 2014, we fully prepaid its remaining balance.
ELC Tenedora Loan. ELC Tenedora Cementos has a loan agreement with Banco HSBC, which at December 31,
2013, had an outstanding balance of Ps$650 million and a 10 year maturity from the date of launch of the new cement
plant project, “El Palmar.” The loan is guaranteed by us, Trituradora and Lafarge Cementos, S.A. de C.V. Under the
loan contract, we and our subsidiaries must comply with affirmative and negative covenants, including maintaining
the following financial ratios:

Interest Coverage Ratio greater than 3.0:1.0;

Net Debt to Consolidated EBITDA Ratio (a) less than 4.75:1.0 from the closing date to and including
March 31, 2014; (b) less than 4.50:1.0 from and including April 1, 2014 to and including June 30, 2014;
(c) less than 3.50:1.0 from and including July 1, 2014 to and including September 30, 2014; (d) less
than 3.30:1.0 from and including October 1, 2014 to and including March 31, 2015; and (e) less than
2.75:1.0 from and including April 1, 2015 to and including the maturity date; and

Consolidated Equity of ELC Tenedora Cementos not less than Ps$3,900 million.
76
The loan to ELC Tenedora Cementos also includes various affirmative and negative covenants applicable to ELC
Tenedora Cementos and its co-guarantors, among them Elementia (applying on a consolidated basis), including
restrictions on (i) the transfer or sale of assets, (ii) mergers, splits or transformations of their line of business, (iii) the
creation of mortgages, liens or other security interests (other than permitted liens), (iv) entering into derivative
financial instruments for speculative purposes, (v) payment of dividends or other distributions, and (vi) transactions
with related parties.
As of the date of this offering memorandum, we are in compliance with the financial ratios and covenants.
Cash Flows
Sources and Uses of Cash
The following table sets forth our cash flows for the periods indicated:
For the Three Months Ended
March 31,
2015
For the Years Ended
December 31,
2014
2014
2013
2012
Net cash flow provided by (used in) operating activities ..........
Net cash flow provided by (used in) investing activities ...........
Net cash provided by (used in) financing activities...................
298
(96)
(226)
134
(399)
(26)
1,788
(944)
415
1,592
(278)
(1,272)
(1,974)
(943)
867
Net cash flow provided by (used in) operating activities
The increase in net cash flow provided by operating activities in the three months ended March 31, 2015 to
Ps$298 million from Ps$134 million provided by operating activities in the comparable period of 2014 was primarily
the result of improved EBITDA which reached Ps$707 million, a decrease in inventory of Ps$31 million and an
increase in suppliers of Ps$99 million.
The increase in net cash flow provided by operating activities in 2014 compared to 2013 was net cash flow
provided by operating activities of Ps$1,788 million in 2014 compared to net cash flow provided by operating
activities of Ps$1,592 million in 2013, primarily resulting from a 40% increase in EBITDA and a decrease in the
client portfolio of Ps$358 million.
The increase in net cash flow provided by operating activities in 2013 compared to 2012 was net cash flow
provided by operating activities of Ps$1,592 million in 2013 compared to net cash flow used in operating activities of
Ps$1,974 million in 2012, primarily resulting from an increase in EBITDA to Ps$1,913 million, a decrease in
inventory of Ps$300 million and an increase in suppliers of Ps$220 million.
At December 31, 2012, net cash flow used in operating activities in 2012 was Ps$(1,974) million, mainly due to
certain events and transactions that occurred in 2012, principally the payment of certain liabilities of Almexa
Aluminio for Ps$341 million, payments to suppliers of Ps$994 million for the renegotiation of a suppliers factoring
contract with Banco Santander, a payment of Ps$423 million for payments in advance for the construction of the El
Palmar plant and the acquisition of an ERP, SAP, and Ps$215 million paid upon the execution of a purchase
commitment for a piece of land.
Net cash flow used in investing activities
Net cash flow used in investing activities in the three months ended March 31, 2015 and 2014 was Ps$96 million
and Ps$399 million, respectively, representing in both periods investments in property, plant and equipment, as well
as divestments in those same items. In the three months ended March 31, 2014, net cash flow used in investing
activities was also used for the acquisition of the assets of the fiber cement business of CertainTeed Corporation in
the United States in January 2014.
The capital expenditures represented in net cash flow used in investing activities in 2014, 2013 and 2012
amounted to Ps$944 million, Ps$278 million and Ps$943 million, respectively. In 2014, these represented mainly
investments in property, plant and equipment and the acquisition of the assets of the fiber cement business of
CertainTeed Corporation in the United States in 2014. In 2013, these represented mainly investments in property,
77
plant and equipment in the divisions, primarily for the construction of the El Palmar cement plant, as well as
divestments in property. With respect to 2012, these represented investments in property, plant and equipment,
primarily the construction of the El Palmar cement plant and sales of property, plant and equipment.
Net cash (used in) provided by financing activities
Net cash used in financing activities in the three months ended March 31, 2015 amounted to Ps$226 million and
mainly represented interest payments and the disposition and payment of bank loans. Net cash flow used in financing
activities in the three months ended March 31, 2014 amounted to Ps$26 million, mainly from the disposition and
payment of loans and interest corresponding to the service of debt.
Net cash provided by financing activities was Ps$415 million in 2014, net cash used in financing activities was
Ps$1,272 million in 2013, and net cash provided by financing activities of Ps$867 million in 2012. In 2014, these
represent primarily the incurrence of net bank loans, the placement of the 2025 notes and the payment of certain loans
in the amount of Ps$2,030 million, the payment for the acquisition of the 47% non-controlling interest of Lafarge
and interest paid. With respect to 2013, it primarily represents the restructuring of the syndicated loan, which was
substituted with another loan in a greater amount with a better term and interest rate, as well as the payment of loans
with related parties. With respect to 2012, it represents the disposition and payment of loans and interest for
servicing debt, net of a capital increase of Ps$1,159 million from our shareholders in 2012.
Contractual Obligations and Capital Expenditures
Contractual Obligations
Our contractual obligations mainly consist of our outstanding debt. We also have commitments under certain
related party agreements; see “Related Party Transactions”.
The maturities of the long-term portion of our debt as of March 31, 2015 are as set forth in the following table.
Debt Maturities
To be paid from:
April 2016 to March 2017 .............................................................................................................. Ps$
April 2017 to March 2018 ..............................................................................................................
April 2018 and later........................................................................................................................
Total ...............................................................................................................................................
Ps$
46
46
7,362
7,454
The following table sets forth the breakdown of our debt obligations by term of maturity as of March 31, 2015:
As of
Short-term
Long-term
Total
March 31, 2015 ........................................................................... Ps$
3,097
Ps$
7,454
Ps$
10,551
Capital Expenditures
Estimated Capital
Expenditures
Year:
2016 ................................................................................................................................................
2017 ................................................................................................................................................
2018 ................................................................................................................................................
2019 ................................................................................................................................................
Ps$
2,810
1,111
714
617
Our principal capital expenditures include investments in new technologies and upgrades to our manufacturing
plants, as well as the expansion of our existing production capacity.
78
In the three months ended March 31, 2015, we made capital expenditures totaling Ps$128 million primarily for
the improvement and efficiency of machines and equipment.
In 2014, we made capital expenditures totaling Ps$613 million primarily for the acquisition of property, plant
and equipment in the divisions.
In 2013, we made capital expenditures totaling Ps$2,059 million for the acquisition of fixed assets, primarily
relating to new technologies, equipment upgrades and efficiency improvements.
In 2012, we made capital expenditures totaling Ps$2,113 million, primarily related to the construction of the El
Palmar cement plant, which commenced operations in 2013, investments in property, plant and equipment in the
divisions.
We have authorized the investment of Ps$2,590 million in 2015, which will be applied mainly to expand the
installed capacity of the Tula plant in our Cement Division.
Off-Balance Sheet Arrangements
As of March 31, 2015, no transactions have been effected by us or our subsidiaries that have not been adequately
recorded in our accounting records, which serve as a basis to prepare our individual and consolidated financial
statements. Furthermore, no events have occurred after the date of our financial statements and through the date of
this offering memorandum that could require adjustments or disclosures in the individual and consolidated financial
statements.
Research and Development
We continually strive to develop new and advanced production processes to improve our operating efficiency
and so that our products satisfy the changing needs of our clients. The planning and budget for research and
development is prepared in accordance with the strategy determined by our Board of Directors. The plans and budget
are prepared and approved in three-year cycles and the budget for the following year is approved during the third
quarter of the year, prepared through the combined effort of the officers of the various business areas. Our technical
management department centralizes our research and development activities and sets our budget and priorities.
During the three months ended March 31, 2015, we invested Ps$3 million in research and development. We invested
Ps$18 million and Ps$13 million in research and development in 2014 and 2013, respectively. We did not make
significant investments in research and development during 2012.
Risk Management
Our risk management policy is aimed at maintaining healthy finances with sufficient liquidity to ensure the
necessary investments to enable us to have the most efficient and modern technology focused on lower cost and
higher quality production. Due to the nature of our operations, we maintain bank and investment accounts in local
currencies and in U.S. dollars, according to the countries in which we operate.
Some of our internal control policies and procedures include:

procedures aimed at obtaining financial resources, including loans, sales collection, shipments, transfers
and international trade, among others;

procedures for monitoring accounts receivable, including origin, collection management and
registration;

procedures for cash flow and accounts payable management; and

guidelines for making investments, wire transfers and check writing, defining authorization levels and
requisite supporting documentation.
In relation to derivative financial instruments, we use valuation techniques, which include information that is not
always based on observable market data, in order to estimate the fair value of certain financial instruments. Note 11
to our audited financial statements includes detailed information about the key assumptions we consider in
79
determining fair value of our financial instruments, as well as a detailed sensitivity analysis relating to these
assumptions. Our management considers that the valuation techniques and the assumptions used are appropriate for
determining the fair value of our financial instruments.
Our internal policies dictate that we limit the use of derivative financial instruments for hedging purposes only.
We use derivative financial instruments to hedge certain price exposures arising from movements in metal prices that
could affect the value of our assets or liabilities or our future cash flows. Specifically, we use hedges for changes in
the prices of copper, zinc and nickel.
Copper is the main raw material for the production of products in our Metal Products Division. The price of
copper may experience price volatility. Given its importance to our production costs, we entered into fixed price
contracts to hedge our cash flows with certain clients. Our goal for the use of hedging instruments is to obtain a price
level of such metals that allows us to maintain a predictable cost of production and achieve the profitability level
established in our strategic plan. We use futures and swaps for the purchase of certain metals. See “—Principal
Factors Affecting Our Financial Condition and Results of Operations—Pricing Strategy.”
On September 20, 2013, an interest rate swap derivative contract was entered into to manage the risk of longterm bank debt. For this hedging instrument, our objective is to manage interest rates in order to reach the level of
profitability established in our strategic plan.
Until October 2013, the Cement Division used forward currency contracts to partially cover the financial risks of
currency fluctuations related to the sales of petroleum derivatives, though they were contracted to hedge from an
economic perspective, as these were already contracted for with its previous holding entity. At the moment, due to
the diversification of our business it has not been necessary to contract for forwards as our diversification serves as a
natural hedge.
Our finance department determines for what amounts and for which primary positions it believes prudent to
contract for a derivative hedging instrument, with the aim of mitigating the possible risks generated by transactions
associated with the primary positions, taking into account market conditions.
Negotiation with derivatives is carried out only with institutions which are considered solvent and principally
with those with which there is an existing business relationship. It should be mentioned that the derivatives we use
are for common use in the markets and thus can be listed with two or more financial institutions in order to ensure the
best procurement conditions. The hedging instruments relating to copper are principally listed on COMEX and those
relating to zinc and nickel are principally listed on the London Metal Exchange.
To obtain the calculation or valuation of the derivatives, we have a policy of obtaining the valuation of the
counterparty with whom we have entered into the derivatives agreement as well as, in some cases, obtaining an
independent third party valuation, using prestigious and well-known institutions in the market. Our risk management
staff also analyzes the valuations and revises them as necessary.
The contracting of, and use of, derivatives, is carried out in accordance with established internal policies. Prior to
the execution of a contract of this type, our finance department and the client determine the amount and targets on the
primary positions for which it is believed suitable to contract for a derivative hedging instrument. The evaluation and
definition are presented to the client for their final review and approval. At the end of the prescribed period the client
is responsible for the decision on said contract and for the subsequent delivery of their order.
In accordance with applicable regulations, we are required to have an independent external auditor opine on our
annual financial statements.
General description of valuation techniques
We have a department which continuously calculates and evaluates the current position of the aforementioned
hedges. Due to the simplicity of those instruments and the aim of having a fixed or maximum input price, valuation
of the instruments generally represents the intrinsic value of the related instrument.
The fair value is determined using acceptable market practices. Hedging instruments valuation is performed by
the counterparty and validated by our risk management department.
80
The effectiveness of hedging is measured by changes in fair value or cash flow of the hedging instruments within
a certain range. To comply with financial practices, we measure the efficiency of the derivative financial instruments
on a monthly basis.
For accounting purposes, the Company applies the provisions of IAS 39 “Financial Instruments.” IAS 39
establishes the characteristics financial instruments must meet in order to be considered derivatives and hedging
instruments, as well as defines the concept of effectiveness and designates the valuation rules and accounting
treatment for changes in their value.
We recognize all assets and liabilities that result from transactions with derivative financial instruments in the
balance sheet at fair value. Since derivatives are contracted for the purpose of hedging risks and satisfy all of the
hedging requirements, they are designated as such at the beginning of the hedging transaction, and we document their
objective, characteristics, accounting treatment and how the measurement of effectiveness will be carried out.
Liquidity sources
Ultimate responsibility for liquidity risk management rests with our Board of Directors, which has established
appropriate policies for the control of such risk through the monitoring of working capital, allowing management of
our short, medium, and long-term funding requirements. We maintain cash reserves and available lines of credit lines,
continuously monitoring projected and actual cash flows, reconciling the profiles of maturity of financial assets and
financial liabilities.
Exposure, risks and contingencies
The identified risks are related to the variations in the pricing of the commodities market. Given the direct
relationship that exists between the primary positions and the hedging instruments, and that the latter do not have
contractual optionality elements which could affect the effectiveness of the hedge, we are not, to date, exposed to any
risk with which these hedges differ from the purpose for which they were entered into.
Risk emanates from the agreed price of the hedge. We would be negatively impacted in a scenario where the
market price is less than the one agreed to in the hedging contract. Another risk we face is related to the demand for
the underlying commodity in the contract. The effectiveness of the hedge would be negatively impacted if the
demand is less than the amounts agreed to in our hedging contract.
In our hedging transactions, we limit our risk to the maximum payment of the price agreed upon.
Quantitative information
The amount represented by our derivative financial instruments is not significant. On March 31, 2015, the fair
value of the derivative financial instruments, which are in a liability position, is approximately Ps$202 million, a sum
that is less than 0.71% of our total assets, 1.20% of our total liabilities, 1.73% of our total capital and 4.96% of our
quarterly sales (for the quarter ending on March 31, 2015).
On December 31, 2014, the fair value of the derivative financial instruments, which are in a liability position, is
approximately Ps$146 million, a sum that is less than 0.52% of our total assets, 0.88% of our total liabilities, 1.26%
of our total capital and 0.95% of our annual sales (for the year ending on December 31, 2014). On December 31,
2013, the fair value of the derivative financial instruments, which are in an asset position, is approximately Ps$10
million, a sum that is less than 0.04% of our total assets, 0.08% of our total liabilities, 0.07% of our total capital and
0.08% of our annual sales (for the year ending on December 31, 2013). On December 31, 2012, the fair value of the
derivative financial instruments, which are in an asset positon, is approximately Ps$8.5 million, a sum that is less than
0.04% of our total assets, 0.08% of our total liabilities, 0.08% of our total capital and 0.06% of our annual sales (for
the year ending on December 31, 2012).
We have not had margin calls on March 31, 2015 for the contracted financial instruments and have not defaulted
under those instruments.
81
The following tables summarize our derivative financial instruments as of March 31, 2015:
Notional
Instrument
Designated as
Copper future ........
Copper future ........
Zinc future.............
Nickel future .........
Hedging
Hedging
Hedging
Hedging
Amount
(thousands)
Units
3,867
261
425
42
Tons
Tons
Tons
Tons
Value at March 31, 2015
Other
comprehensive
income
Liability
Maturity
Feb to Dec 2015
Feb to Oct 2016
Jan to Oct 2015
Jan to Apr 2015
Total at March 31, 2015
Ps$
(5,197) Ps$
7
452
(1,028)
(3,638)
5
316
(720)
Ps$
(5,766)
(4,037)
Notional
Instrument
Currency swap (for which the
Entity exchanges pesos for dollars)
and obtains a preferential interest
rate of 4.05%..........................................
Ps$
Value at March 31, 2015
Designated as
Amount
(thousands of
U.S. dollars)
Unit
Maturity
Liability
Other
comprehensive
income
Hedging
US$1,500,000
U.S. dollar
Oct-15
Ps$ (196,185)
Ps$ (120,163)
Sensitivity analysis
For derivatives whose only purpose is hedging, sensitivity analysis is not applied.
For additional information about our risk management, including our use of derivative financial instruments and
our treasury policy, see notes 9, 10, and 11 to our consolidated financial statements.
82
INDUSTRY
Sector Overview
Our operations are primarily focused on manufacturing products used in the building materials, housing
infrastructure and industrial sectors. Our production processes are oriented toward different segments of the industry
and are classified according to product type.
Building Materials Sector
The building materials sector represents a very important market for our products, particularly for the Building
Systems Division. In 2014, approximately 76% of our net sales were derived from the building materials sector. We
believe there are significant opportunities to continue to grow our business through our lightweight building systems
products for the building materials sector. Continued government support for reducing the housing deficit in Mexico
and other key target markets, lower interest rates, and supportive frameworks to promote mortgage financing
contribute to what we believe are promising growth opportunities.
Mexican Housing Market
The housing market in Mexico is determined by various social, economic, political and industry factors,
including housing supply, demographics, government policies and the availability of mortgage financing.
Ongoing Housing Deficit. According to information published by the Consejo Nacional de Población (National
Population Council, or “CONAPO”), existing housing in Mexico totaled 28.6 million households as of the
2010 census. Nevertheless, in 2012 the Inter-American Development Bank estimated that Mexico had a housing
deficit of approximately 34% of total households, which represents approximately 11 million homes.
Favorable and Sustainable Demographic Trends. Demographic trends in Mexico also contribute to increased
demand for housing. Mexico’s population as of December 31, 2014 was estimated at approximately 120 million,
according to INEGI information. According to CONAPO and INEGI information, the total population of Mexico
increased 1.1% between 2012 and 2014. Moreover, according to the same institutions, Mexico’s population in the
25 to 50 age range is forecasted to grow from 42.2 million in 2014 to 47.9 million in 2030, which is expected to
contribute to an increased demand for housing in Mexico. By 2030 more than 70% of Mexico’s population will be
below 50 years of age. In addition, this is accompanied by an increase in life expectancy which stimulates demand for
housing, vacation homes, retirement homes and other healthcare facilities.
Mexico’s Population Pyramid
(Age ranges on vertical axis and population in millions on horizontal axis)
Source: CONAPO.
Based on estimates by the World Bank and the population growth rate trend in the countries in which we operate,
it is estimated that approximately 69 million people will enter the Economically Active Population (“EAP”) in the
next 34 years. The combination of increased purchasing power and the need for housing, infrastructure and services
83
for these 69 million people will result in increased demand for the products we manufacture and sell. Elementia is
ready to capture this additional demand.
Favorable Demographic Trends
(Millions of persons estimated to be added to the Economically Active Population (1) in the period from 2010 to 2050)
69 million people are expected to join the EAP(1) in our markets by 2050, representing an increase of 24% from 2015E
22.9
21.6
19.4
4.9
USA
Elementia South America
Average(2)
Mexico
Elementia Central America
Average(3)
Source: World Bank.
(1)
People within the ages of 20 and 59 years.
(2)
Includes Bolivia, Colombia, Ecuador and Peru.
(3)
Includes Costa Rica, Honduras and El Salvador.
Supportive Government Policies. In order to address the housing deficit in Mexico, the Mexican federal
government has implemented certain policies designed to increase affordable housing supply. In Mexico, mortgage
financing for affordable and middle-income housing has been made available primarily through government social
housing programs or government-sponsored institutions, such as the Instituto del Fondo Nacional de la Vivienda
para los Trabajadores (National Fund for Workers’ Housing, or “INFONAVIT”), the SHF and the Fondo de la
Vivienda del Instituto de Seguridad y Servicios Sociales de los Trabajadores del Estado (Housing Fund of the State’s
Employees’ Social Security and Social Services Institute, or “FOVISSSTE”), and to a lesser extent by commercial
and mortgage banks and loan providers, including limited-purpose and multi-purpose finance companies. According
to CONAVI, the target of the various housing programs for 2014 is 1 million home loans. Furthermore, INFONAVIT
and other mortgage providers have launched several mortgage securitization programs in order to increase liquidity in
the mortgage industry through the capital markets.
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U.S. Housing Market
Home Construction Recovery in the U.S.
(New housing units completed in thousands of units)
Source: US Census Bureau
The U.S. economy has shown slow but steady grow in the last couple of years, after emerging from one of the
worse recessions in its history. According to the World Bank, the U.S. economy grew 2.8% in 2012, 1.9% in 2013
and 2.4% in 2014, while the Bureau of Labor Statistics indicates that the primary unemployment rate stands at 5.5%
as of March 2015, the lowest in the last five years. Housing starts rose 0.9% year-over-year through December 2014
to an annual rate of approximately 1.1 million units. Fannie Mae’s Economic & Strategic Research forecasts that total
housing starts will recover to a “normal” level of approximately 1.6 million units per year in 2016.
The Housing Market in Other Countries in Which We are Present
Considerable housing deficits are an issue present in most of the countries in Latin America and represent a
future growth opportunity for our company. According to the Inter-American Development Bank, the housing deficit
in the Central American countries in which we are present affects 44.3% of homes, and in the South American
countries in which we are present it affects 58.5% of homes. Such markets represent an attractive prospect for future
growth for our Building Systems Division.
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Housing Deficit in Latin America
(% of homes that suffer from a lack of infrastructure and adequate conditions)
More than 28 million homes lack adequate conditions in Elementia’s markets.
15.6
68.8
2.3
10.8
58.5%
45.1%
44.3%
34.0%
Elementia Avg. South
America
Elementia Avg. Latin
America
Elementia Avg. Central
America
Mexico
Estimate of millions of families without homes or living in inadequate housing conditions.(3)
Source: Inter-American Development Bank (Room for Development: Housing Markets in Latin America and the Caribbean 2012),
World Bank and national censuses.
(1)
(2)
(3)
Assuming four persons per home for Bolivia, Ecuador, El Salvador and Honduras, 3.82 for Colombia, 3.38 for Costa Rica,
3.85 for Mexico and 3.92 for Peru.
Colombian Housing Market
The Colombian economy has experienced among the lightest levels of homes economic growth in the South
American region. According to the World Bank, the Colombian economy expanded 4.0% in 2012, 4.7% in 2013 and
4.7% in 2014. Colombia’s strengthening economy has led to a growing demand for new housing and an increase in
investment in social housing programs. This momentum led to an 8.2% year-over-year growth in the construction
industry, including an 11.5% growth for homebuilders, in 2014. Despite these tailwinds, according to the
Departamento Administrativo Nacional de Estadística (DANE) and current population estimates, there is a housing
deficit of approximately 4.5 million houses in the country.
Industrial Growth
We operate in a broad range of industries that we consider part of the building materials sector, including the oil
and gas, HVAC (heating, ventilation and air conditioning), equipment, defense, minting and transportation industries,
among others. Industrial demand for our products is highly correlated with the macroeconomic environment in the
countries in which we operate. The World Bank estimates that Latin America will experience moderate growth in
coming years, particularly in markets targeted by our company. Given these conditions, we believe that industrial
demand for our products will continue to increase.
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The following chart shows estimates of real GDP growth estimated for 2015.
GDP Growth Above Average
3.9%
3.6%
3.1%
2.7%
2.3%
1.7%
Elementia South
America Average (1)
Elementia Central
America Average (2)
USA
Mexico
OECD
EU
Source: Global Insight.
(1)
(2)
Includes Costa Rica, Honduras and El Salvador
Mexico’s industries accounted for over approximately 33% of its GDP in 2014. EIU estimates that Mexico will
experience a 3.6% real GDP CAGR through 2017. Depending on the rate of growth of the U.S. economy, Mexico’s
proximity to, and strong correlation with the, U.S. economy could cause Mexico’s growth to be slightly lower than
the rates of other emerging economies in the region, such as Colombia, Chile and Peru. However, acceleration in the
U.S. economy could have a significant positive impact on Mexico, as the Mexican economy is dependent on exports,
and the United States is the destination for approximately 70% of its exports. Furthermore, the recent economic
recovery in Europe and Japan, if sustained, may have a positive knock-on effect on the Mexican economy (including
its construction industry).
The Mexican political outlook for 2015 is promising after the presidential administration was able to pass a slate
of critical reforms through congress – energy, education, telecom, banking, fiscal, among others – leading to a
sovereign credit rating upgrade both from Moody’s and Standard and Poor’s, making Mexico the second country in
Latin America with an “A” rating.
In Colombia and Peru, domestic demand and consumption coupled with increasing public and private spending
are the main drivers of the economies’ continued growth. Consumer confidence remains strong and unemployment is
showing a clear downward trend, according to EIU, thus supporting the expectation that consumption will grow in
coming years. The growth of the industrial and business sectors has been driven by economic stability; however,
there are strong appreciation pressures on the local currency, due primarily to an increase in foreign direct investment
and the weakness of the U.S. dollar.
The size of the markets in which we participate is 1.14 times the size of the construction market in China.
Construction GDP in China is $694 billion and the sum of the GDP of the countries in which we operate is US$791
billion, i.e., 1.14 times the size of China.
The following chart shows the construction GDP of China and the various countries in which we operate,
comparing the relative size of the sum of the countries in which we operate to China.
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Large Scale Markets
(2014 GDP; US$Bn)
1.89
2.19x
22,67
1,296
812
19,52
3,145
17,41
10,33
USA
Mexico
Other
Elementia
Countries
All
Elementia
Countries
Rest of
S. America
Elementia
Countries +
S. America
China
Source: Global Insight
The amount of debt (calculated as gross debt divided by 2014 GDP) of the countries in which we operate is
currently at very healthy levels, providing economic stability, thus promoting economic growth and consequently,
consumption. We believe these markets will continue to grow at rates similar to the current rates.
The following chart shows the rate of indebtedness of the countries in which we operate compared to other
economies such as the EU and the OECD according to the following 2014 calculation:
Economic Stability Caused by Financial Prudence
(Gross Debt in % of GDP; 2014)
104.8%
82.1%
72.7%
50.1%
39.9%
USA
OECD
EU
MEX
Source: World Bank
(1)
(2)
88
38.0%
Elementia Central Elementia South
(1)
America average(2) America average
Infrastructure Sector
In order to continue their economic development and increase their competitiveness, Latin American countries
will need to make a substantial investment in infrastructure, and to that end, several Latin American governments
have implemented public investment initiatives in recent years and have established tax incentives and favorable
financing structures for investment in infrastructure projects. Currently, the governments of Brazil, Colombia,
Mexico, Panama and Peru, among others, have devoted significant resources to modernizing their infrastructure in
order to keep pace with other emerging regions. These policies represent opportunities for sales of our products.
The following chart provides information on infrastructure levels in Latin America as compared to the rest of the
world.
Quality of Infrastructure
(Index of quality and quantity of infrastructure; 7 = extensive and efficient)
6.6
6.0
5.8
4.2
World
4.2
3.9
3.5
Switzerland
Germany
USA
Mexico
Central America South America
Average
Average
Elementia(1)
Elementia(2)
Source: WEF Global Competitiveness Report 2014-2015
(1) Includes Costa Rica, Honduras and El Salvador
(2) Includes Bolivia, Colombia, Ecuador and Peru
The governments of Mexico and other Latin American countries are actively promoting policies to grant
concessions to private enterprises for the construction, operation and maintenance of infrastructure projects. The
granting of these concessions allow governments to promote infrastructure development without committing public
sector resources, while stimulating private investment in their economies.
In 2013, President Enrique Peña Nieto announced a national six-year National Infrastructure Plan which included
an investment of US$102 billion in thousands of miles of new roads, railways, telecom infrastructure and ports and
airports in an aim to boost competitiveness for exporters and stimulate growth. The stated goal of this plan is to
deploy the telecom and transportation infrastructure by 2018. The plan calls for significant public and private
investment, both domestic and foreign, and could add up to 1.9% of GDP growth between 2014 and 2018.
89
Mexico’s National Infrastructure Plan
(US$ in billions)
Source: Plan Nacional de Infraestructura.
Along with the Telecom and Transportation Investment plan, the government announced a US$300 billion
Energy Investment plan backed up by an extensive Energy Reform. This reform is considered the most significant
overhaul of the country’s energy industry since 1938. These changes became law in December 2013. In
May 2014, the administration introduced into congress the proposed secondary laws that would implement the
reforms, which were approved in August 2014.
According to World Bank estimates, in the 2014 to 2050 period, approximately 19 million people will be
integrated into urban areas in the markets in which we operate.
Continuous Shift Towards Vertical Construction
(% of population living in urban areas)
2014-2050E = in the regions in which Elementia operates, approximately 19 million people
are moving to urban areas
81.4%
87.4%
73.7%
79.0%
86.4%
81.1%
71.5%
66.3%
79.2%
65.4%
54.8%
40.7%
USA
MEX
USA
1980
Elementia South America
average(1)
MEX
2014
2050E
Source: World Bank
(1)
(2)
90
Elementia Central America
average(2)
Market Overview
In general, our operations focus on industries that use cement, fiber cement, plastic and copper. The following is
a brief description of the markets for the various types of products we manufacture.
Cement Products
Cement is the key ingredient in concrete. Modern cement is made from mixtures of naturally occurring minerals
that contain calcium oxide (usually from limestone) and silicon dioxide (usually from clay). The minerals are heated
to extremely high temperatures (1450°C), which chemically transforms them into hard marble-like nodules called
clinker. The clinker is then ground into an extremely fine powder; between 4,500 and 6,500 cm2/kg of cement.
When cement is mixed with water, it forms very strong bonds with sand and other aggregates. Cement is a binding
agent, which, when mixed with sand, stone or other aggregates and water, produces either ready-mix concrete or
mortar. The raw materials used for cement are limestone, clay, gypsum, granulated slag, pyrinite cinder and coal.
Cement Industry Outlook
The construction industry, and specially the cement industry, is closely tied to the general economic activity of
the country and in particular the development of construction GDP. All of our sales occur in Mexico, therefore there
is a high correlation between our revenues and the Mexican economy.
The combination of Mexican construction GDP and increasing private and foreign investments, as well as the
flow of remittances, are expected to support cement consumption growth in Mexico during the next few years. The
following table shows projected cement consumption in Mexico is lower than in other emerging markets and the
world.
Per Capita Consumption of Cement in Emerging Countries
(Cement Consumption per Capita in 2013; kg)
1,763
798
World
567
485
348
318
195
China
Turkey
Brazil
Russia
Source: Morgan Stanley Global Cement Markets Report
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Mexico
India
Fiber Cement Products
The Building Systems Division’s main fiber cement products include flat and ondulated panels used for roofing,
walls, façades, tiles, floors and other applications, and pipes, among other products, and this division represented
47.3% of our net sales for 2014.
Fiber Cement in the Construction Industry
Fiber cement products are used in the residential and commercial construction industries, in applications such as
exterior siding, interior walls, roofing, ceilings, floors and soffits, among other products. The commercial and
residential construction industries represent the principal market for fiber cement products and the demand for fiber
cement products is affected by many factors such as the level of new home construction, renovation activity and
government expenditures.
Fiber cement products provide increased performance, consistency and cost advantages as compared to its
substitutes. The primary attribute of fiber cement is its durability in outdoor applications, especially in comparison to
galvanized metal, plastic, wood and wood-based alternatives. Fiber cement creates a similar aesthetic to wood or
wood-based products, but with greater resistance to the damaging effects of moisture, heat, wear and tear and
termites. Although vinyl coated products generally have better durability than wood products, they usually are less
aesthetically appealing than wood or fiber cement products.
We believe that fiber cement has good potential for long-term growth due to the benefits of
lightweight construction products and framing construction as compared to traditional (brick and mortar)
construction. We also believe that the option of replacing wood, vinyl and metal products with fiber cement products
will appeal to consumers aesthetically and economically.
Fiber Cement Industry in the United States
In the United States, the largest demand for fiber cement products is found in the exterior siding industry. Siding
usually occupies more square footage than any other construction component. The selection of siding materials is
based on several factors, including the cost of installation, durability, aesthetics, strength, weather resistance,
maintenance requirements and cost, and insulating properties. Different regions in the United States show marked
preferences for certain siding materials according to economic conditions, climate, availability of materials and local
preferences. The primary siding materials are vinyl, stucco, fiber cement, brick and solid wood. Vinyl has the largest
share of the U.S. siding market according to The Freedonia Group in their Siding to 2018 report. In recent years,
fiber cement has been gaining market share as compared to vinyl for several reasons, including its aesthetic appeal
and durability.
Plastics Products
Plastics Industry Outlook
Plastics are used in a variety of products, but have become crucial in the home construction industry. With the
evolution of technology, plastics have gained ground against other natural components such as wood and steel. The
U.S. Department of Energy estimates that the use of plastic foam insulation in homes and building each year could
save over 60 million of barrels of oil over other kinds of insulation.
Sales of our plastics products in our Building Systems Division are highly correlated to economic activity; most
of our sales in the plastic industry are derived from the construction of houses. Economic growth results in higher
housing construction spending, which may cause an increase in sales of our plastics products. The housing deficits
remain a focal issue for local governments in our markets and housing starts are expected to grow significantly in the
coming years, as governments implement housing programs in order to increase the construction of houses.
Copper Products
In the Metal Products Division, we produce copper and copper alloy, strips and sheets, rods, tubes, pipe fittings,
forged and machined parts used in the construction, remodeling, refrigeration, HVAC, automotive, electrical,
electronics, minting, ammunition, white goods and personal products industries. In 2014, copper and copper alloy
products represented approximately 47% of our net sales. To manufacture these products, we acquire newly refined
92
copper and scrap copper from a variety of suppliers in Mexico and other parts of the world. As we sell the majority
of our products at a cost-plus markup basis, our customers bear the risk of volatility in copper prices.
The copper industry can be affected by different variables, many of which are beyond our control. These
variables include general trends in economies, population, construction and infrastructure sector activity and the
automotive industry, among others. Copper is used in residential and commercial building projects, which in turn are
affected by interest rates, consumer confidence and general business cycles. Copper consumption also depends on
growth in energy consumption and the production of manufactured products, such as industrial machinery and
electronics. The use of alternative materials, such as bimetallics, aluminum, iron and plastics, also affects copper
demand.
The retail and general merchandise sectors are a key factor driving the current demand for copper, and one of the
leading causes is the increased global production of air conditioners. It is estimated that the copper used in air
conditioners covers about half of the copper tubing market.
Copper consumption can be divided into three main segments: wire, copper products and copper alloy products.
Wire represents approximately 55% of the global consumption of copper. Due to its high electrical conductivity,
copper is often used for cabling and wiring. Wire is used in construction, electrical and electronic products, industrial
machinery and transportation equipment among others. Of these, construction is the largest segment, accounting for
31% of total copper consumption.
The following table shows the primary uses of copper in 2014 by end use region and sector.
Primary Uses for Copper: Use by End Use Region and Sector, 2014
Base: Copper content, thousands of metric tons
Thousands
of Tons
China ......................................
Japan.......................................
South Korea ............................
India .......................................
Taiwan ....................................
North America ........................
LatAm & Caribbean ...............
Mexico ...................................
Europe ....................................
Russia .....................................
Africa .....................................
Global Total ..........................
12,315
1,524
1,152
806
695
2,682
1,159
353
4,941
770
287
28,126
Construction
32.9%
Infrastructure
14.8%
Plumbing
6.0%
Industrial
Construction
0.6%
Electric Supply
11.5%
Telecommunications
Other Commercial
/ Residential
1.5%
Communications
0.9%
1.2%
Other
2.0%
Equipment
Manufacturing
52.3%
Industrial
12.4%
Automotive
7.2%
Other
Transportation
4.4%
General and
Consumer
Products
8.2%
Electric generation
& transmission
23.9%
Refrigeration
6.0%
Other
0.04%
Electronics
1.2%
Other
12.9%
Source: Wood Mackenzie.
Note: Breakdown by final use based on 2010 International Copper Study Group report.
93
According to Brook Hunt, the consumption of copper in the United States and the European Union is expected to
increase over the next 15 years. Global consumption grew by 5.0% during 2014, greater than the rate of 3.4% in
2013. In Latin America, the consumption of copper is expected to grow at an annual average rate of 3.1% from
2015 to 2025, which would represent an increase in consumption from approximately 1,159 thousand tons in 2015 to
approximately 1,641 thousand tons in 2025. In the case of Mexico, consumption is expected to increase at an annual
rate above 3.2% during the same period, from approximately 364 thousand tons in 2015 to approximately 498
thousand tons in 2025.
2014
Copper Consumption
(thousands of tons)
Brazil..........................................................
549
Chile...........................................................
97
Mexico .......................................................
353
160
Other ..........................................................
Total Latin America ................................. 1,159
Year-over-year change ...............................
3.8%
% of global consumption............................
4.1%
2015E
2016E
2017E
2018E
2019E
2020E
2025E
578
101
364
165
1,207
4.2%
4.2%
605
103
376
170
1,254
3.9%
4.2%
628
106
388
175
1,297
3.4%
4.2%
651
109
400
181
1,340
3.3%
4.3%
673
112
412
185
1,383
3.2%
4.3%
695
115
426
190
1,426
3.1%
4.3%
801
129
498
213
1,641
2.7%
4.6%
20142025 CAG
R
3.5%
2.6%
3.2%
2.6%
3.2%
Source: Wood Mackenzie
Trends in the Consumption of Secondary (Recycled) Copper
Definition of Recycled Copper
Recycled copper is classified into two main categories, new and old recycled copper. New recycled copper is
generated during the manufacture of copper products and returned to production lines to be reused or sold, but is not
considered a new supply source. A copper-producing plant can generate up to 60% recycled copper in its various
processes. If the new recycled copper is generated internally and reused, it is not included in statistics regarding
acquisition of recycled copper. Old recycled copper is derived from obsolete or deteriorated products and is
considered a new source of supply.
The supply of old recycled copper is linked to the volume of copper and the life cycle of products destined for
recycling. The overall average lifespan of copper is 15 to 20 years, but it varies depending on its specific use. For
example, the average lifespan of copper is 30 to 35 years in electronic equipment and machinery, 15 years in nonelectronic equipment, 35 to 37 years in residential construction and 10 years in transportation. The value of old
recycled copper and its availability depends not only on the life cycles of copper products, but is also affected by the
sensitivity of recycled prices in relation to market prices. Over the past 20 years, the volume of new recycled copper
has not kept pace with industrial demand because the sector has become much more efficient and the generation of
new recycled copper has fallen by 50% during this period.
Use of Recycled Copper
The majority of old recycled copper must be processed again through smelting, refining, and, where appropriate,
electronic extraction in order to achieve a purified copper product. Certain products, such as brass rods may contain a
high amount of recycled copper compared to other products, although they can still maintain the basic quality of the
product. Others, like wire, must contain fewer impurities (usually 5%) because impurities could compromise their
structure and cause them to warp. New recycled copper is usually ready for use in producing copper and brass pipes.
Because recycled copper requires very little maintenance for reuse, it is also known as “direct smelt” or “recycled 1.”
In general, recycled 1 is present in recycled copper products and copper alloys, but not in wiring. The purchase of
recycled copper is based on the production levels of the target regions and on the price differential between cathode
and recycled 1, and not on the actual price of copper. In positive economic cycles, the supply of recycled copper
increases, since industrial production levels also increase, and during negative economic cycles, recycled copper
supply decreases, and producers are forced to purchase more cathodes given the restricted supply.
Low copper prices from 1997 to 2003 led to a reduction in the availability of high quality recycled copper and a
significant decrease in demand, especially in the United States and Europe. In China, however, the use of high
quality recycled copper has been increasing. Environmental factors have also played an important role, with the cost
94
of environmental compliance often resulting in the closure of plants, especially in the United States, even though the
cost of retrieving a ton of recycled copper is approximately half that of traditional copper processing.
Duties on Foreign Trade
NAFTA became effective on January 1, 1994. NAFTA provided for the progressive elimination over a period of
ten years of duties formerly in effect on raw materials imported into Mexico from the United States and Canada, and
on the finished goods exported to those markets. There is currently no duty applicable to the imports of our raw
materials from the United States or Canada, nor to the imports of our finished products to such countries, particularly
of our metal products.
The Mexico-European Union Free Trade Agreement, or “MEFTA”, became effective on July 1, 2000. MEFTA
provides for the progressive elimination of Mexican duties for steel producers that are members of the European
Union over a period of 6.5 years. Although we do not have imports from this region, this agreement provided an
opportunity to increase our exports to European countries that are parties to MEFTA, following elimination of their
duties on the imports of our finished products, particularly of our metal products.
Mexico has also signed several free trade agreements with certain Latin American countries under which imports
of our fiber cement products into those countries are exempt from import duties.
Certain of our markets, however, are not under free trade agreements, and various duties and tariffs apply.
95
BUSINESS
Our Business
and distributors. Additionally, we are focused on end users for industrial applications, whereby we provide our clients
with highly-specialized, value-added products. The industrial sector represents approximately 24% of our sales. Our
network of independent distributors, through which we market and offer the various products and solutions of our
three divisions, consists of more than 4,300 independent distributors and customers throughout the 42 countries in
which we sell that use and offer our diverse products and solutions to a broad client base. We have a total of 26
manufacturing plants located in nine countries in the Americas: Mexico, the United States, Bolivia, Colombia, Costa
Rica, Ecuador, El Salvador, Honduras and Peru.
We offer products that are used in each step of the construction process:
Our primary markets are located in Mexico and the United States, which represent 59% and 21% of our net sales
in 2014, respectively. The Central American and South American markets represent 5% and 14% of our net sales in
2014, respectively, although we also export our products to more than 40 countries. We serve all of our markets
through six distribution centers, twelve warehouses, a distribution center in Laredo, Texas and a sales office located
in Houston, Texas, which we intend to expand in order to meet the expected increase in demand that we will satisfy
with the production of our plants in North Carolina and Oregon in the United States and, if necessary, with the
reactivation of our plant in Indiana. We market our products using our own brands, which we believe have an
Maxitile, Plycem, Eternit, Duralit, Fibraforte, Nacobre and Fortaleza, which we introduced to the Mexican market in
2013 and which allowed us to become the first new participant in the Mexican cement industry in 65 years. The
network of independent distributors (present throughout the value chain in the construction industry) and our focus on
customer service, create significant competitive advantages that distinguish us in the construction materials industry.
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profitability. In 2007, under MFRS, our EBITDA was Ps$291 million. In 2014, on an IFRS basis, our EBITDA was
We operate our businesses through three divisions:

Cement Division. Through our Cement Division, we produce and sell gray cement, white cement, mortar
and concrete using the Fortaleza brand. Our products are geared toward the self-construction sector. We
currently sell more than 70% of our production to a large number of customers in 50 kg bags, allowing us to
obtain better prices and greater profit margins than if we sold cement in bulk. We distribute our products
through a network of close to 120 distributors and 50 bulk customers, through more than 500 points of sale
in 15 states located primarily in the central region of Mexico. These states have a combined population of
74 million people, or 66% of the total Mexican population, and account for 66% of the total cement
consumption in Mexico, according to information published by INEGI and CONAPO, as well as our internal
estimates.
Our Cement Division commenced operations in March 2013 with the start of commercial operations of the
El Palmar cement plant in Santiago de Anaya, State of Hidalgo, Mexico, with an approximate capacity of 1
million tons per year. Subsequently, on July 31, 2013, we established the Lafarge Joint Venture, whereby we
contributed our El Palmar plant and Lafarge contributed its operations in Tula and Vito, State of Hidalgo,
Mexico. In exchange for our contribution, we received an ownership stake of 53% in such joint venture,
enabling us to expand our installed capacity from 1 million to 2 million tons. On September 19, 2014, we
entered into a share purchase agreement to acquire Lafarge’s 47% non-controlling interest in the Lafarge
Joint Venture for US$225 million. On December 16, 2014, following the receipt of approval from the
Mexican Federal Economic Competition Commission (Comisión Federal de Competencia Económica) and
the initial payment of US$180 million, we closed the acquisition and acquired 100% of the shares of ELC
Tenedora Cementos (including the Fortaleza brand), consolidating our position in the cement industry in
Mexico. Currently, the Cement Division operates three plants with a production capacity of approximately 2
million tons of cement per annum.
Notwithstanding the Cement Division’s recent commencement of operations, we estimate that in 2014 our
market share within our target region (based on the 15 states in which we operate) was approximately 7%.
Additionally, in 2014 we sold approximately 1.5 million tons of cement, which represents a utilization
capacity close to 74%, considering 12 months of operations. The use of the distribution network developed
by our Building Systems and Metal Products Divisions was key in obtaining a meaningful market share in
only our second year of operations. This is a clear example of the competitive advantage that our distribution
network represents. We currently sell all of our production to external customers, but we have the flexibility
to use a portion of our cement production as input for the production of fiber cement in our Building
Systems Division. Our Building Systems Division is currently able to obtain its necessary supply of cement
under favorable market conditions by being a major consumer of cement in the country.
One of our principal strategies is to grow the Cement Division. We expect to invest approximately US$250
million during through 2017 to increase the production capacity of our Tula plant, which we estimate will
increase our total production capacity from 2.0 million to 3.5 million tons of cement per annum. On May 28,
2015, through our subsidiary Trituradora, we executed an agreement with the French company, Fives FCB,
for the design, supply, construction, installation, and start up (under a turnkey scheme) of the production of
3,300 daily tons of clinker in the Tula Plant. We expect completion of capacity expansion and
commencement of commercial operations by mid-2017. We anticipate that part of such investment will
come from the net proceeds of the Global Offering.
97
The Cement Division generated net sales of Ps$509 million and EBITDA of Ps$202 million during the three
months ended March 31, 2015, representing an increase of 26% and 113%, respectively, compared to net
sales and EBITDA recorded during the same time period in 2014, primarily due to the increase in volume
and the sales price, as well as the optimization of production costs. The Cement Division represented 13%
and 11% of our total net sales for the three months ended March 31, 2015 and the year ended December 31,
2014, respectively. The Cement Division represented 28% and 21% of our consolidated EBITDA for the
three months ended March 31, 2015 and the year ended December 31, 2014, respectively.
Based on our internal financial information, for the last twelve months ended March 31, 2015, the Cement
Division contributed 12% of our net sales and 25% of our EBITDA (excluding revenues and EBITDA
attributable to the Company as parent company and eliminations).

Building Systems Division. Through our Building Systems Division we manufacture and sell solutions
based on fiber cement and plastics for the lightweight construction materials industry, including corrugated
roofing sheets, flat boards, siding, building systems, pipes and water tanks (or cisterns), among others. The
Building Systems Division operates 20 plants across Mexico, the United States, Colombia, Peru, Bolivia,
Ecuador, Costa Rica, El Salvador and Honduras. We distribute our Building Systems Division products
using brands that, in some cases, have had a presence of more than 80 years in the markets in which we
operate. Our main brands include Mexalit, Eureka, Eternit, Duralit, Fibraforte, Maxitile, Allura and Plycem.
Our products are distributed through our network of approximately 2,480 independent distributors,
wholesalers and retailers, which allow us to reach a broad customer base in our target markets, including the
self-construction and construction sectors in Latin America and the United States.
The Building Systems Division’s products are exposed to trends that we believe favor their use, including
the change from traditional to lightweight construction systems and the replacement of horizontal
development for vertical development in urban areas. We believe that due to our broad product portfolio,
product quality, brand and distribution network, we are well positioned to continue to benefit from such
trends.
In January 2014, we acquired the production assets of the fiber cement business of a subsidiary of SaintGobain, significantly expanding our presence in the United States, the largest lightweight building materials
market worldwide. This acquisition provided us with access to a national distribution network in the United
States that we consider strategic for our future growth plans. In 2014, in connection with our implementation
of initiatives to increase the profitability of such operation, we concentrated production at two of the three
plants we acquired, and we believe that additional installed capacity we hold (mainly by reactivating the
third plant), along with the continued recovery of the housing market in the United States, represent a high
potential for production growth that will require a minimal investment.
Within the Building Systems Division, we continue to implement measures to optimize our operations and
value offerings, including: (i) the robotization of certain of our operations such as Plycem Salvador and
Costa Rica (this automation plan is intended to increase baking capacity by 10%, reduce costs by 5%,
decrease the manufacturing workforce and improve working conditions); and (ii) the development of high
value added products that we call the “wood of the future,” which we manufacture within Plycem. An
example of such products would be “Plydeck” a floor that has the same appearance as a wooden deck but
has the properties of fiber cement (resistance to humidity, low maintenance and durability, among others).
The Building Systems Division generated net sales of Ps$1,547 million and EBITDA of Ps$253 million
compared with net sales and EBITDA recording during the same time period in 2014, mainly due to the
increase in sales volume in the United States, which partially offset the decrease in the sales volume in the
Central American and South American regions. The Building Systems Division represented 38% and 40%
of our total net sales for the three months ended March 31, 2015 and the year ended December 31, 2014,
respectively. The Building Systems Division represented 36% and 42% of our consolidated EBITDA for the
three months ended March 31, 2015 and year ended December 31, 2014, respectively.
Based on our internal financial information, for the last twelve months ended March 31, 2015, the Building
Systems Division contributed 40% of our net sales and 42% of our EBITDA (excluding revenues and
98

Metal Products Division. Through our Metal Products Division, we manufacture and sell pipes, tubes, coils
and sheets, bars and rods, fittings, wires and forged and machined parts, primarily based on copper and its
alloys. Our principal value added products are fittings, forged and machined parts, connectors, plugs,
preformed and preassembled tubes, collectors, returns, accumulators, flexible hoses for water and gas,
regulators and valves, among others, mainly made of copper and its alloys, under the Nacobre and Cobrecel
brands. We sell our products primarily to customers in the construction and industrial sectors. In 2014, the
construction and industrial sectors each accounted for approximately 50% of the Metal Products Division’s
net sales.
Through the Metal Products Division, we operate three vertically integrated (from casting to the finished
product) manufacturing plants in Mexico, with a total production capacity of approximately 74 thousand
tons per annum. We operate one of the few manufacturing plants in Latin America for copper products and
its alloys such as brass, brass with lead, copper and nickel, nickel silver and bronze, all with a minimum
copper content of 60% (Brass Mill), and we are the only producer of copper-nickel-alloy tubes in the
Americas, and one of the principal global producers according to internal estimates. We are also one of the
main suppliers of copper-nickel tubing used by the United States defense industry, a strategic supplier for
the Mexican currency-minting industry and the largest producer of special brass and refractory alloys and
copper and copper alloy strips in Latin America, according to information received from our clients and
certain reports prepared by independent companies such as Urunet and Penta Transaction.
Our products are sold in Mexico and exported to the United States, Latin America and Europe through more
than 1,064 distributors and through direct sales to final consumers. In 2014, 62% of the Metal Products
Division’s net sales were to customers in Mexico, 22% to customers in the United States, 12% to customers
in Latin America (excluding Mexico) and 3% to customers in Europe. The commercial strategy (cost plus)
of the Metal Products Division allows for any variations in the cost of raw materials to generally be
transferred to the final sale price of the product, thus achieving a stable target nominal margin per ton. This
reduces the risks associated with fluctuations in the price of copper and its alloys.
Within the Metal Products Division, we continue to implement measures that allow us to optimize our
operations and improve the profitability of the division, including: (i) the adoption of new production
technologies, such as the cast and roll process for the production of copper tubing and the continuous casting
of brass ingot for the production of bars, among others, and (ii) the development of high-value added
products tailored to meet our customers’ needs.
The Metal Products Division generated net sales of Ps$1,936 million and EBITDA of Ps$253 million during
the three months ended March 31, 2015, representing an increase of 10% and 16%, respectively, compared
with net sales and EBITDA recorded during the same period in 2014, due to the increase in sales volume
and the change in exchange rate, as well as greater sales of value added products and improved production
costs resulting from our cost optimization initiatives and our more efficient use of metal. The Metal Products
Division represented 48% and 47% of our total net sales for the three months ended March 31, 2015 and the
year ended December 31, 2014, respectively. The Metal Products Division accounted for 36% and 32% of
our consolidated EBITDA for the three months ended March 31, 2015 and the year ended December 31,
2014, respectively.
Based on our internal financial information, for the last twelve months ended March 31, 2015, the Metal
Products Division contributed 48% of our net sales and 33% of our EBITDA (excluding revenues and
The following tables show our net sales and EBITDA by division and as a percentage of the consolidated totals
for the periods indicated.
99
EBITDA in millions of pesos
Three months ended
March 31,
Net sales in millions of pesos
Three months
ended March 31,
2015
Cement Division .....................
2014
2014
2013
2012
2015
2014
2014
2013
2012
$509
$405
$1,747
$1,046
$8
$202
$95
$572
$238
$(3)
Building Systems Division ......
$1,547
$1,438
$6,074
$4,724
$4,959
$253
$248
$1,119
$943
1,005
Holdings and
eliminations (1) .................
Total .......................................
$1,936
$1,759
$7,218
$6,919
$8,085
$253
$219
$855
$658
716
$78
$4,070
$37
$3,639
$292
$240
$454
159
$13,506
$47
$609
$74
$12,929
$(1)
$707
$129
$15,331
$2,675
$1,913
$1,877
eliminations.
EBITDA as % of total
Net sales as % of total
Three months
ended March 31,
2015
2014
2014
2013
2012
Three months ended
March 31,
2015
2014
2014
2013
2012
Cement Division .....................
13%
11%
11%
8%
0%
28%
16%
21%
12%
0%
Building Systems Division ......
38%
40%
40%
37%
37%
36%
41%
42%
49%
54%
Holdings and
eliminations (1) ..................
Total .......................................
48%
48%
47%
54%
60%
36%
36%
32%
34%
38%
1%
1%
2%
1%
3%
0%
7%
5%
4%
8%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
eliminations.
Our Competitive Strengths
We consistently focus on generating superior value for our shareholders, customers, suppliers, employees,
collaborators and the communities in which we are present by leveraging the following competitive strengths:
Diversified Products and Market Sectors
Through our three divisions, we have a diversified product portfolio that allows us to have a presence throughout
the value chain of the construction industry, from the early structural and unfinished construction stages through the
installation of interior and exterior finishes, repairs and renovations, offering solutions that enable us to meet the
needs of, and maintain a close relationship with, a wide range of customers and markets. In particular, approximately
50% of the Metal Products Division’s sales, and therefore 24% of our net sales, are intended for industrial
applications, mitigating construction industry cycles. Our broad product portfolio includes cement, mortar and
concrete, as well as fiber cement and plastic-based lightweight construction materials, including corrugated roofing
sheets, flat boards, water tanks and cisterns. Additionally, we provide comprehensive solutions in copper products
and its alloys such as tubes, sheets, forged and machined parts, wires and fittings. Due to this wide range of products
and our focus on the self-construction segment, no one customer represents more than 4% of our consolidated net
sales. In 2014, approximately 64% of our net sales corresponded to the construction sector and 24% to the industrial
sector.
Product Portfolio of Leading and Well-Recognized Brands
We market our products using brand names that we believe have a long history and high level of recognition in
the self-construction industry in the markets where we operate. Additionally, we believe that the strength of our
brands, along with our network of independent distributors and the quality of our products, are a key to our growth
and a factor that is difficult to replicate, which differentiates us within the construction materials industry. We believe
that our brands are well positioned among consumers and distributors, some to the extent of having become a product
category in their sector (for example, Eternit, Duralit and Plycem), and are associated with features like high quality,
excellent performance, reliability and service. For example, in Colombia, lightweight roofs are generally referred to
as “Eternit.”
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Fortaleza, the cement brand we introduced in 2013, is one of the newest brands in our portfolio and according to
internal estimates has achieved a high level of recognition among consumers and distributors, evidenced by its wide
distribution and presence in the Mexican cement market, and our own market share in the Mexican cement market of
approximately 4% in 2014. Such results stem from a marketing strategy that highlights product attributes and brand
message to the target market, self-construction, and in particular looking to position the Fortaleza brand as the
preferred brand among masons.
Nacobre, the flagship brand of our Metal Products Division, has a strong presence in more than 36 countries and,
according to internal estimates, a market share in Mexico of 65% in our key product categories. The Nacobre brand
has been recognized by FERREPRO (a publication specializing in the hardware industry) as the fourth most
influential brand in the Mexican hardware industry.
Among our leading brands are the following:
Brand
Cement Division
Product
Years in the
Market
Geographic Region
Market Position(1)
Cement
2
Mexico
#5 in the Mexican
market
73
Mexico
#1 in fiber cement
roofs
73
Colombia
38
Bolivia
11(3)
Central America
Fiber cement
products: roofs,
panels, tiles and
pipes
Fiber cement
products: roofs,
panels, PVC tiles,
plastic tanks, paint
and putties
Fiber cement
products: tiles and
roofs
Fiber cement
products: roofs,
panels and tiles
Flat products (siding
and fiber cement
roofs)
1
#1 in fiber cement
products in
Colombia, Ecuador,
Bolivia and Central
America
#3 in water tanks in
Colombia
United States
#2 in fiber cement (2)
15
Polyethylene water
tanks and cisterns,
and polypropylene
corrugated sheets
80
Mexico
#2 in water tanks
Polypropylene
corrugated sheets
25
Peru
#1 in plastic roofs
Copper and copper
alloys (tubes, sheets,
bars, connections
and others)
65
Mexico
#1 in Mexico
(1) From January 1, 2014 to December 31, 2014. Information provided based on internal estimates.
(2) Market share of approximately 11%, below the principal player in the market which has a market share of approximately
80%.
(3) Plycem as a company has been in existence for 50 years.
101
Geographic Diversification and Presence in Countries with Favorable Macroeconomic Fundamentals and
Demographics
We have a presence across the Americas, with 26 production plants in 9 different countries, giving us exposure
to different countries and currencies and thereby allowing us to mitigate the effects of any cyclicality in the markets,
countries or regions where we operate. In addition, we are continuing to diversify geographically with clients in over
40 countries into which we export our range of products. In 2014, 59%, 21%, 5% and 14% of our net sales were
made to clients in Mexico, the United States, Central America and South America, respectively. Additionally, in
2014, 59%, 23%, 8% and 10% of our net sales were generated in Mexican pesos, U.S. dollars, Colombian pesos and
other currencies, respectively.
We believe that most countries in which we operate have favorable estimated future growth prospects, based on
factors such as the increase in foreign, public and private direct investment, the growth in consumer spending, a
greater proportion of an economically active population, a growing middle class and a controlled inflationary
environment. According to the Global Insight, the annual GDP growth rate expected in 2015 for Mexico, the United
States, our principal markets in Central America (Costa Rica, Honduras and El Salvador) and our principal markets in
South America (Bolivia, Colombia, Ecuador and Peru) will be 2.7%, 3.1%, 3.6% and 3.9% respectively. In
comparison, the growth rates expected for European Union and OECD member states for the same period are 1.7%
and 2.3%, respectively. Furthermore, the recent economic recovery in Europe and Japan, if sustained, may have a
positive impact on the Mexican economy (including its construction industry).
We believe that the growing middle class will continue to be an important factor for the growth in demand for
construction materials in the countries in which we operate. In Mexico, for example, the middle class expanded by
11 million people, representing 30% of the total population in 2000 and 36% of the total population in 2012,
according to statistics of INEGI. Similarly, other countries in Latin America, such as Colombia and Peru, have also
experienced growth in the size of their middle classes in the last decade.
Other factors which we believe have supported the growth of the construction sector in the countries in which we
operate are: (i) the housing deficit in Latin America, where approximately 37% of households lack adequate housing
infrastructure and conditions for construction according to the Inter-American Development Bank, (ii) the recovery in
housing construction in the United States, (iii) the move away from traditional construction systems to lightweight
102
construction, (iv) the replacement in urban areas of horizontal development with vertical development and (v)
favorable demographics in Mexico, including an increase in life expectancy which stimulates demand for housing,
vacation homes, retirement homes and healthcare facilities. Additionally, several countries in Latin America, such as
Mexico, Colombia, Peru and Ecuador, have announced important national infrastructure plans which could increase
demand for construction materials. For example, in 2013, Mexico released its National Infrastructure Plan which
contemplates US$596 billion of investment in 740 projects to be developed between 2014 and 2018 in areas
including energy, urban development and housing, telecom and transport, water utilities, tourism and health.
Wide Distribution Network that Covers our Three Divisions, Allowing for Cross-Selling and Marketing of
Complementary Products
We have developed an extensive distribution network linking our three divisions, comprised of over 4,300
independent distributors and customers, 6 distribution centers, 12 warehouses (located in Guadalajara, Puebla, Ciudad
Juárez, Monterrey, Mexico City, Celaya and San Luis Potosí in Mexico; in Savannah, Georgia and Oakland,
California in the United States; in Lima, Peru and in Cochabamba, Bolivia), one distribution center in Laredo, Texas,
and one sales office strategically located in Houston, Texas, which we intend to expand in order to meet the expected
increase in demand that we will satisfy with the production of our plants in North Carolina and Oregon. Our high
quality and diverse product offerings, as well as our focus on innovation and customer service, have allowed us to
build long-standing relationships with our distributors, many of which have grown together with us and offer our
products exclusively. Through our network of independent distributors, we are able to offer a wide range of products
for the construction market, which enables cross selling and marketing of complementary products. In the threemonth period ended March 31, 2015, 35% of our sales were made through distributors that sell products from at least
two of our three divisions. This percentage was 31% and 35% for the year ended December 31, 2014 and the
cumulative period from 2012 to date, respectively. To expand our distribution network we continue to improve our
service and make sure that our distributors know the full range of our product offerings. Additionally, we believe our
network of independent distributors appreciates our capacity to offer a wide range of integrated products as adequate
solutions for the needs of final customers in the construction chain, unlike most of our competitors who offer only a
single type of product. Even though we continually focus on integrating and creating synergies between our divisions,
we maintain a specialized and independent sales force for each of them with the ultimate objective of having a multiproduct sales force.
We estimate that we have increased cross-selling to distributors from our divisions from Ps$1,220 million in
2013 to Ps$1,891 million in 2015 (on an annualized basis based on our sales in the first four months of 2015). The
following figure shows an example of the cross-selling efforts we are undertaking in order to have a multi-product
sales force:
103
Through our network of independent distributors, we have been able to increase our product offerings with only
a minimal incremental increase in cost, which has allowed us to maintain operating flexibility and access new
markets quickly and efficiently. For example, our Cement Division, which began operations in 2013, has already
achieved wide market penetration through the use of the existing distribution network of the Building Systems and
Metal Products Divisions.
Through our acquisition of the fiber cement business in the United States of a subsidiary of Saint-Gobain in
2014, we significantly expanded our presence there to a network of 97 independent distributors with nationwide
coverage, a strategic acquisition with a view toward future growth. Such distribution network not only allows us to
market products that are produced within the United States but also those products we produce in Mexico and Latin
America, thereby creating important opportunities to expand our product offerings in the United States.
We believe that our network of independent distributors also allows us to provide better customer service to large
customers with broad geographic scopes and helps us identify opportunities and respond quickly to their needs.
Likewise, many of our distributors, ranging from small materials houses, large retailers and even construction
companies, have grown with us and have become our strategic partners, given their detailed knowledge of our
products, among other reasons.
The following table shows the approximate number of independent distributors and customers for each of our
divisions:
Division
Region
Cement Division ........................................................................ Mexico
Building Systems Division ......................................................... Mexico
Building Systems Division ......................................................... Central America
Building Systems Division ......................................................... United States
Building Systems Division ......................................................... South America
Mexico and the
Metal Products Division............................................................. United States
Subtotals ...................................................................................
Total .......................................................................
Distributors
Customers
119
1,154
230
97
997
46
244
16
0
3
1,064
3,661
403
712
4,373
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Successful Track Record of Organic and Inorganic Growth Supported by our Financial Discipline
Our growth during the previous decades has been focused in three stages:
First Stage: 1999-2009 (Consolidation): We started with the integration of our Building Systems Division with
the leading producers and sellers of fiber cement and plastic in the regions of Mexico and Central and South America.
Second Stage: 2009-2014 (Diversification): We finalized the Nacobre acquisition, establishing the Metal
Products Division in order to have a presence along the value chain of the construction industry, strengthen our cash
flow generation and increase diversification by entering the industrial market. Similarly, we entered the cement
industry in 2010 by beginning the construction of our El Palmar plant in order to be a part of the Mexican cement
industry and consolidate our presence along the value chain of the construction industry.
Third Stage: 2015 (Expansion): Our main focus on growth will be on the Cement Division and expansion in the
United States market.
We have achieved this through our management team’s successful development and implementation of the
operational methodology that we now call the “Fifth Element,” which seeks to improve the operating performance of
our divisions through operational integration and process efficiency, as well as having efficient teams to integrate
operations rapidly. Some examples of the benefits we have obtained through the application of our Fifth Element
methodology to integrate acquisitions include: (i) increased profitability of Plycem, which once registered a loss of
US$3 million in 2007, the same year we acquired it, and had a profit of US$12 million in 2014; (ii) the operating
efficiencies achieved in the fiber cement business in the United States, which we acquired from a subsidiary of Saint
Gobain in 2014, resulting in an increase of US$14 million in gross income, and transitioning from incurring losses to
generating profits in only a year under our management; (iii) the substantial increase in the EBITDA margins of our
Cement Division from 29% to 40% during the first quarter of 2015, once the acquisition of the non-controlling
interest in the Lafarge Joint Venture was concluded in 2014; and (iv) steps undertaken at Eternit such as investments
in technology to improve quality, restructuring of personnel and the vertical integration of raw materials such as silica
and calcium bicarbonate, as a result of which EBITDA increased from US$1 million in 1999 to US$17 million in
2014.
Similarly, through the implementation of the Fifth Element, we have increased our participation in the domestic
and international markets through the use of synergies (for example, we increased our market share of water tanks in
Mexico, from 12% in 2012 to 16% in 2014, as a result of the synergy with Nacobre which gave us access to the
hardware distribution channel), entry into new product categories (plastic roofs) and the development of high valueadded products, notably the strategic investments made in (i) the optimization of production processes in the Building
Systems and Metal Products Divisions; (ii) the innovation of products and processes such as the smelting and
pressing technology (cast and roll) in the Metal Products Division; and (iii) expansions in operational capacity.
Our focus on growth is accompanied by financial discipline and constant evaluation of our liquidity and leverage
levels. We seek to maintain adequate levels of liquidity and sources of funding to take advantage of future investment
opportunities. Our corporate policy targets a net debt to EBITDA ratio for the medium term of approximately 2.00x.
As of March 31, 2015, we had a net debt to EBITDA ratio of 2.66x after giving effect to the issuance of the 2025
notes at the end of 2014. As of December 31, 2014, our net debt to EBITDA ratio was 2.69x and we anticipate a
return to our internal policy target by mid-2016.
Highly Experienced Management Team and Strong Shareholder Base
Our senior management team has an average of more than 20 years of experience in the building materials
industry and has been instrumental in developing and implementing the business strategies that have resulted in
improvements in our operating and financial performance as well as integrating our acquisitions (twelve successful
mergers and acquisitions transactions completed in the past fifteen years). We believe that our senior management
has also proved to be highly capable in their ability to respond promptly and effectively to the challenges posed by
the recent global economic crisis. We maintain a focus on the development of internal talent, which has enabled us to
create a strong management team through extensive internal training and develop future generations of managers.
We benefit from the longstanding support of our principal shareholders, who have a proven track record of value
creation across different industries and geographic areas. Our principal shareholders are Kaluz, S.A. de C.V., or
“Grupo Kaluz,” and Tenedora, which is indirectly controlled by Grupo Carso, S.A.B. de C.V., or “Grupo Carso.”
105
Grupo Kaluz and Grupo Carso are among the most representative, experienced and respected business groups in
Mexico and Latin America. Grupo Kaluz, which is controlled by the del Valle family, operates a diversified group of
companies in the industrial and petrochemical sectors, including Mexichem, S.A.B. de C.V. Grupo Kaluz has a global
presence with businesses in the Americas, Europe, Asia and Africa. The del Valle family also participates in the real
estate (through Kaluz Inmobiliaria) and financial (including Banco Ve por Más S.A., Instituición de Banca Múltiple,
Grupo Financiero Ve por Más, Byline Bancorp Inc. and Byline Bank) sectors. The Slim family controls Grupo Carso
and controls a diversified group of companies in the telecom, finance, industrial, mining, retail and infrastructure
sectors including América Móvil S.A.B. de C.V., Grupo Financiero Inbursa S.A.B. de C.V., Minera Frisco, S.A.B. de
C.V., Grupo Sanborns S.A.B. de C.V., and Impulsora del Desarrollo y el Empleo en América Latina, S.A.B. de C.V.,
among others.
Our Key Strategies
Our objective is to achieve sustained yet disciplined growth in sales, earnings and market share by developing
and offering integrated, high-quality solutions for the construction materials industry. We focus on achieving that
objective through organic and inorganic growth and the maximization of operating efficiencies, innovation and high
quality standards.
Focus on the Growth of our Cement Division
We intend to focus our expansion efforts on our Cement Division in the coming years, given that according to
our business plan the El Palmar plant will reach its maximum production capacity in the next few years.
Consequently, we are in the process of increasing the production capacity of our Tula plant by 1.5 million tons per
annum, which will require an investment of approximately US$250 million to achieve a total approximate capacity in
the Cement Division of 3.5 million tons per annum. On May 28, 2015, through our subsidiary Trituradora, we
executed an agreement with the French company, Fives FCB, for the design, supply, construction, installation, and
start up (under a turnkey scheme) of the production of 3,300 daily tons of clinker in the Tula Plant. We expect that
this expansion will be complete and we will begin commercial operations by mid-2017. We believe that this
investment will allow us to increase our market share in the Mexican cement sector.
Additionally, we are analyzing potential alternatives to foster our growth in this division, including operations,
logistics, distribution and marketing, as well as potential expansions, acquisitions and/or the construction and
development of new facilities (greenfields / brownfields).
Grow Organically and Inorganically through Mergers and Acquisitions
We are taking certain steps focused on expanding our production capacity in accordance with demand. In our
Cement Division, we are in the process of increasing the production capacity of our Tula plant by 1.5 million tons per
annum in order to maintain our market share given the increase in demand and achieve incremental sales of
approximately 2 to 3 points in the market. In our Building Systems Division, particularly our production assets
located in the United States, we are focusing production on two of the three plants we have acquired. We believe that
the additional installed capacity, primarily through the reactivation of the third plant, will allow us to efficiently
respond to market needs by meeting the potential growth in demand for our products. We are also investing close to
US$19 million to relocate and expand our Fibraforte plant in Peru, which we estimate will increase its production
capacity by 42%. Therefore, the Fibraforte plant could reach a production capacity of 13,613 tons per annum in the
second quarter of 2016. This project’s approach includes strengthening the local market and increasing our coverage
in the export market to Chile, Uruguay, Ecuador, Bolivia and Brazil. The new plant will be located in Chilca, Peru,
on a 45,284 m2 parcel of land. In our Metal Products Division, we expect to capitalize on the benefits of capital
investments made in recent years, including the optimization of raw material consumption and the improvement of
our indices, focusing on continued improvement, perfecting inventory levels, and increasing sales of higher valueadded products, as well as the launch of cast and roll equipment for the production of copper tubing with improved
metal yields.
Through this initiative we intend to carry out the following:

Cement Division. Increase our sales of 50 kg cement bags from 70% to 80% to further increase our
margin, continuing to focus on the self-construction market.

Building Systems Division. Strengthen our position as a leading provider of solutions in building
systems through the development of highly specialized, value-added products and solutions to capitalize
106
on the opportunities generated by the trend toward lightweight construction. We will focus on the
development of urban and green construction markets with new and innovative solutions and on
developing new products that add value to the consumer and avoid maintenance and adjustment costs.
In the United States, we intend to boost our market share through our fiber cement business by
consolidating the current business and adding value added products to our portfolio (Plydeck,
mezzanine slab and others). Additionally, we will continue to achieve capacity expansion to be able to
efficiently meet market needs and respond to the potential increase in demand for our products. Thus,
we are continually exploring opportunities to eliminate dependence on third parties during our
production process. Currently, we have vertically integrated various raw materials such as silica and
calcium carbonate, with mills in several of our Building Systems operations. We also use recycled
polypropylene to produce plastic roofs in Peru, in addition to having the option to use the cement that
we produce at any time. Additionally, we have been able to generate energy in our Honduras plant
through biomass fuel plants. We intend to continue increasing the efficiency of the operations in our
divisions by increasing the use of alternative fuels, as is the case in our Tula plant where 35% of fossil
fuels have been replaced with such alternative fuels.

Metal Products Division. Focus on offering innovative, value-added solutions for our clients (currently,
approximately 65% of our metal products manufacturing is produced according to customer
specifications). For example, in the Metal Products Division, we have the ability to produce new metal
alloys required by our customers through technological innovations and by adapting processing
technologies, such as new alloys to be used in several industries such as minting, nuclear submarines,
oil and gas, among others. Also, we will continue to undertake strategic investments in technologies
such as cast and roll, forge presses and new steel profiles and leverage our production capabilities
(through the increase of our production capacity of added value products, among other things) and
network of independent distributors to increase our penetration and market share in key markets.
In short, we will continue to pursue the growth of our divisions’ market share through entry into new product
categories and development of higher value-added products. We will also continue to analyze new opportunities for
mergers and acquisitions in support of our initiatives as they arise.
Strengthen our Competitive Position through Continuous Optimization of Processes and Innovation in Products
and Solutions
We intend to continue applying the Fifth Element with a view to further increase our profitability and further
successfully and efficiently integrate acquisitions into our platform.
The Fifth Element is an operating methodology which we have developed based on broad experience and
trajectory to standardize processes and achieve a continuous improvement in our operations, be it through the
incorporation of new business, the development of new products or the optimization of existing business. This
methodology is based, among other things, on the following elements:

implementation, standardization and optimization of processes;

integration of new operations and/or acquisitions of information and control systems;

incorporation, development and implementation of best practices;

realization of synergies;

establishment of strategic management; and

introduction of the Fifth Element in the businesses acquired or created.
By implementing the Fifth Element, we have achieved (i) a continuous optimization of processes, consumption,
costs, margins and inventory throughout our divisions; (ii) the reduction in production resources, cost and time (lean
manufacturing); (iii) the automation of processes in certain of our plants; (iv) the increase in use of recycled
materials; (v) the modernization of technologies and teams through investments; and (vi) the integration of
Information Technology (IT) and control systems, primarily through the SAP system.
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We intend to continue applying the Fifth Element with the aim of improving our profitability and to keep
expanding our platform in an organic manner and through the incorporation of new businesses. The initiatives which
we are implementing include the development of new solutions that match the requirements of our clients and of the
market, such as products based on special “made to measure” metal alloys, by relying on the support of our product
development and engineering departments and of our technological partners such as Centro de Investigación y
Desarrollo Carso (the Carso Research and Development Center); the optimization of our energy costs through the
use of alternative fuels, such as tires and industrial waste from our operations in the three divisions or using coke
with a higher sulfur content than what is widely available in Mexico in the Cement Division; and leveraging our scale
and that of our shareholders to obtain better input prices, like we did with the electric energy supply contract that we
signed with Iberdrola in 2015 and that we estimate will lead to savings of between 5% and 15% compared to the rate
obtainable from the Federal Electricity Commission (Comisión Federal de Electricidad).
Use our Distribution Network to Maximize Synergies Between Divisions and Commercialize Complementary
Products under our own Brands
We believe that our wide network of independent distributors with coverage throughout the countries in which
we operate is difficult to replicate and constitutes one of our main competitive advantages. The combination of this
distribution network with our wide portfolio of products creates important opportunities to broaden our offering of
solutions to the construction industry and maximize the synergies between our divisions.
We intend to use our distribution network to increase our market share through the marketing of our products in
markets in which we are not currently present, such as for example the sale of plastics-based products like tanks and
cisterns in the United States; the introduction of new products which meet market demands; and the sale of
complementary products manufactured by third parties, potentially under our brand names, which could result in our
possible integration into the manufacturing of these products. Our entry into the Mexican cement industry, in which
we achieved, according to internal estimates, a market share of approximately 4% in 2014 just two years after
launching our Fortaleza brand, is a clear example of the benefits which we can obtain through the use of our
distribution network to broaden our product offering.
We continue to seek synergies among our divisions, similar to those we have already identified and adopted, in
order to achieve a better cost structure and more efficient operations. Such efforts include the use of our databases
and information technology to facilitate cross selling and the centralized management of areas such as treasury, credit
line analysis and billing.
Using our network of independent distributors, we intend to significantly increase the marketing of
complementary third party products, possibly under our brands, which has the potential to create additional product
integrations. We currently sell products which we buy from third parties, making the most of the strength of our
network of independent distributors, such as chromed products (e.g. keys and bath accessories), valves for the control
of gas supply, roofing sheets made from recycled materials and flexible hoses.
We centralize key processes to allow communication and coordination among our three divisions’ sales efforts
throughout our distribution networks. These processes include cash management and evaluation of credit limits.
Through these processes and our centralized database, we continue to optimize the collection process to support our
working capital.
Our Corporate Structure
Prior to the global offering, Grupo Kaluz and members of the del Valle family owned 51% of our share capital
and Tenedora, which is indirectly controlled by Grupo Carso, owned 46%, with the remaining shares (3%) held by
two minority investors. Grupo Kaluz, which is controlled by the del Valle family and led by Daniel Martínez-Valle
(who has more than twenty years of experience in the industry and over five years at Grupo Kaluz), is a Mexican
conglomerate with significant investments in the petrochemical and industrial sectors. Grupo Carso, which is
controlled by the Slim family, belongs to one of the world’s largest conglomerates. In addition, the Slim family
participates in the retail, industrial, telecommunications and manufacturing, and infrastructure and construction
sectors.
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We are a holding company and conduct our business through our subsidiaries. The following chart shows our
current corporate structure and our principal operating subsidiaries.
Metal Products
Division
Nacional de
Cobre
Nacobre USA,
LLC
Building Systems
Division
Mexico
United States
Central America
Cement Division
South America
ELC Tenedora
Cementos
Mexalit
Industrial
Maxitile LLC
Plycem
Construsistemas
Honduras
Eternit
Colombiana
Trituradora
Frigocel
Plycem USA
LLC
Plycem
Construsistemas
El Salvador
Eternit
Atlántico1
Concretos TPMFortaleza
Plycem
Construsistemas
Costa Rica
Eternit Pacífico1
Industrias
Duralit
Eternit
Ecuatoriana
Industrias
Fibraforte
1
In the process of merging.
Our History
We were incorporated on April 28, 1952 in Mexico City, with a duration of 99 years under the name “Productos
Mexalit, S.A.,” in accordance with Mexican law. Our name was changed to “Mexalit, S.A.” in 1979 and then to
“Elementia, S.A.” in February 2009, as a result of branding changes aimed at reflecting recent acquisitions. On
June 13, 2011, we became a variable capital corporation, and since then we have operated under the name of
“Elementia, S.A. de C.V.”
Since 1952, when we commenced our business as a fiber cement roofing products manufacturer, we have grown
by building up our manufacturing capacity and acquiring other fiber cement and other products manufacturers
throughout North, Central and South America.
Through several acquisitions between 2001 and 2009, we expanded our product offerings in what is now our
Building Systems Division. Between 2000 and 2008 we acquired Eternit Colombiana, Eternit Pacífico, Eternit
Atlántico, Eureka Servicios Industriales, Eternit Ecuatoriana, Industrias Duralit and Plycem, all industry leaders in
the production and manufacture of fiber cement roofing and water tanks in the South American and Central American
regions. Continuing our expansion, in 2006 we built the Nuevo Laredo plant where we develop products that are
mainly marketed in the United States using the Allura brand. Through these acquisitions and capital investments we
have greatly diversified our fiber cement product offerings for the Building Systems Division.
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In 2009, we commenced the construction project for the El Palmar cement plant, resulting in the creation of our
Cement Division. Beginning on the same year, we have further expanded our product portfolio and geographic reach
through several strategic acquisitions. On June 1, 2009, we purchased the Nacobre Subsidiaries, which manufactured
and distributed copper and aluminum products, providing the basis for what is now our Metal Products Division. As a
result of the acquisition, Grupo Carso, the ultimate parent of the Nacobre Subsidiaries, indirectly acquired 49% of our
share capital, which has been reduced to 46% as of the date of this offering memorandum. During the course of 2011
and 2012, we sold our interests in the Nacobre Subsidiaries that produced aluminum products , and now the Nacobre
Subsidiaries produce and distribute only copper, copper alloys and steel products. On December 8, 2009, we acquired
Frigocel, S.A. de C.V., or “Frigocel,” and Frigocel Mexicana, S.A. de C.V, or “Frigocel Mexicana,” in Mexico, both
of which manufacture plastic products, and on July 22, 2010, we acquired Fibraforte, a Peruvian company dedicated
to the manufacture of polypropylene and polycarbonate roofing. Through these acquisitions, we developed and
strengthened our Building Systems Division.
In 2012, we decided to discontinue our fiber cement A.C. piping line from our Mexalit Industrial plant in
Chihuahua, Mexico. Today, it only produces water tanks and cisterns. In the second half of 2013, our subsidiary
Trituradora opened our new El Palmar cement plant. On January 8, 2013, we entered into the Lafarge Joint Venture
for the production of cement in Mexico which became effective on July 31, 2013. During the existence of the Lafarge
Joint Venture, we held an interest of 53%, while Lafarge held the remaining 47% interest through ownership of the
capital stock of ELC Tenedora Cementos. On September 19, 2014, we entered into a share purchase agreement to
acquire the remaining 47% stake in the Lafarge Joint Venture. On December 16, 2014, following the receipt of
approval from the Mexican Federal Economic Competition Commission (Comisión Federal de Competencia
Económica) and the initial payment of US$180 million, we became the holder, directly or indirectly, of 100% of the
shares of ELC Tenedora Cementos. During 2013, we commenced operations at a second autoclave in Colombia,
increasing our annual production of fiber cement sheet products by 1,200 tons. We also transferred our copper
operations at our former plant in Toluca, State of Mexico, Mexico to our plant at Celaya, Guanajuato, Mexico, as part
of a process of integration. On January 31, 2014, our subsidiary Plycem USA acquired the assets of the fiber cement
business of CertainTeed Corporation, an affiliate of Saint-Gobain and one of the principal manufacturers of
construction materials in the United States. Through this transaction we acquired various assets related to the fiber
cement business and strengthened our coverage and United States presence.
Today, we are a diversified company with over 6,000 employees, offering integrated solutions in metals, fiber
cement, cement and plastics products manufactured at our 26 plants located in Mexico, the United States, Bolivia,
By promoting participation in sustainable projects in our communities through our Elementia Foundation
(Fundación Elementia), we consider ourselves to be a socially responsible company. Such projects include housing
support, community centers (schools, clinics and others), as well as support in the context of natural disasters.
Additionally, we follow national and international environmental and social responsibility standards in order to rate
our performance in such matters, such as the Global Reporting Initiative (GRI) in sustainability matters.
Cement Division
General
During 2013, our new El Palmar cement plant began operations. Its cost of construction was US$315 million.
We began distribution of the cement product in the Mexican market under the trade name Fortaleza, with the goal of
meeting demand in the self-construction sector of the central Mexican region. This plant has a production capacity of
approximately one million tons per year. With the startup of a new cement plant, capacity utilization is expected to
ramp up over a period of time, and during 2014 and the three months ended March 31, 2015, the El Palmar plant
continued to increase production. We estimate that the plant will operate at or close to full capacity in 2015.
In 2013, we and Financière Lafarge S.A.S. entered into Contribution Agreement for the production of cement in
México. In accordance with the Contribution Agreement, all of the shares of capital stock of Trituradora and Lafarge
Cementos were transferred to ELC Tenedora Cementos, and Elementia assumed control of 53% of the shares, with
Financière Lafarge, S.A.S., retaining 47%. We anticipate the Lafarge Joint Venture will service between 4% and 5%
of the national market, reinforced by the launching of the new Fortaleza brand and marketing campaign. The
combination of cement assets from the Lafarge Joint Venture parties allows them to have a production capacity of
approximately two million tons of cement per year. On September 19, 2014, we entered into a share purchase
110
agreement in which we agreed to purchase Lafarge’s remaining 47% of the shares in the Lafarge Joint Venture for a
price of US$225 million. On December 16, 2014, following the receipt of approval from the Mexican Federal
Economic Competition Commission (Comisión Federal de Competencia Económica), and our initial payment of
US$180 million, we became the holder, directly or indirectly, of 100% of the shares of ELC Tenedora Cementos,
through which its Fortaleza brand consolidates our position in the Mexican cement industry.
In 2014, this division had net sales of Ps$1,747 million and EBITDA of Ps$572 million, representing 11% and
21%, respectively, of our consolidated totals for the period. In the three months ended March 31, 2015, this division
had net sales of Ps$509 million and EBITDA of Ps$202 million, representing 13% and 28%, respectively, of our
consolidated totals for the period.
Products
The Cement Division produces a portfolio of products including:

Portland compound cement CPC30R, a rapid resistance class 30 cement, suitable for the construction of
structural elements, in situations where there are no special requirements, demonstrating a good performance
with respect to setting, resistance and yield. It meets the Mexican cement quality standards set forth in NMX-C414-ONNCCE.

Portland compound cement CPC40, a resistant class 40 cement, suitable for the construction of concrete
elements and structures, demonstrating good performance with respect to setting and yield, highlighted by its
initial and final resistance. It meets the Mexican cement quality standards set forth in NMX-C-414-ONNCCE.

Portland ordinary white cement CPO30R, a resistant class 30 cement, suitable for the manufacture of (i) white or
clear cement, (ii) ceramic adhesives and (iii) sinks, tiles and mosaics. It meets the Mexican cement quality
standards set forth in NMX-C-414-ONNCCE.

Mortar or masonry cement, suitable for masonry work related to the construction industry. It meets the Mexican
cement quality standards set forth in NMX-C-021-ONNCCE.

Premixed concrete focused on the production and marketing of structural concrete for the housing, commercial
and urban infrastructure construction markets. It meets the concrete quality standards set forth in NMX-C-155ONNCCE.
Our Cement Division reported net sales of Ps$1,747 million for white, gray and mortar cement in its second year
of operations in 2014.
The following table sets forth our sales volumes and net sales from our principal cement products for the periods
indicated.
2014
2015
Volume
Net Sales
Volume
2014
Net Sales
Volume
Net Sales
Gray Cement .................................................
White Cement ................................................
Mortar ............................................................
Others ............................................................
Total ..............................................................
381 $
45
—
13
439 $
454
40
—
15
509
329 $
39
—
—
368 $
313
32
60
—
405
1,278 $
105
165
—
1,548 $
1,400
202
138
7
1,747
Raw Materials and Suppliers
The principal raw material used in the cement production process is limestone, which represents approximately
80% of the volume. Iron ore, clay, gypsum, plaster and pozzolana are also used in the production of cement.
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The majority of the raw materials that we used in our Cement Division are sourced through mines and fields
owned by Elementia. These mines and fields are fully integrated with our cement production facilities. We estimate
that we have enough resources to last for more than 50 years at current production capacity.
The principal energy sources utilized to transform raw materials into clinker and clinker into cement are electric
energy and petroleum coke.
In addition to the limestone which we obtain from our own quarries, our major suppliers of raw materials are the
Comisión Federal de Electricidad (Federal Electric Commission), TPC Petcoke Corporation and Mondi México, S.
de R.L. de C.V.
Facilities
Our Cement Division uses three facilities: El Palmar, Tula and Vito, all of which are located in Hidalgo, Mexico.
El Palmar was completed and inaugurated in 2013 by Elementia, while Tula (completed in 2006) and Vito
(completed in 1946, with renovations in the 1980s) were contributed by Lafarge.
Product Quality
Our Cement Division products comply with the technical and quality standard requirements of the Mexican
national market. Our cement production facilities have obtained the following certifications:
Cement Division Facilities
Certifications
El Palmar ................................................................. N/A
Tula ......................................................................... Clean Audit Industry (PROFEPA)
Vito .......................................................................... Clean Audit Industry (PROFEPA)
Efficient Industrial Processes
Our production process allows us to achieve high levels of quality and efficiency, achieving among other
benefits, a quicker resistance generation process due to the use of our cement in concrete and mortar. In addition to
emphasizing environmental safety by investing in dust collection and water treatment systems since commencing
operations, we have implemented the following processes:

Exploitation of raw materials: our quarries have rehabilitation plans, including reforestation and species
relocation efforts undertaken since we began operations.

Grinding and homogenization of raw powders: effectively using the heat from the clinkerization process to dry
raw materials.

Clinker production: optimization of electric and heat energy to maximize equipment performance.

Container: our customers have several different container size delivery options (50 kg bags, 25 kg bags, “big
bags” and bulk).
Cement Plant Specifications
El Palmar

Total capacity: 1 million tons per annum, or “TPA.”

Process: Uses a dry process, featuring a short rotary kiln and five-story preheat tower, with a capacity of
2,400 tons per day, or “TPD,” capacity.

Inputs: Inputs include oil (195 tons per hour or “TPH”), solid fuels (11 TPH) and rawmix (130 TPH).

Packing: The process consists in a packing machine for white cement with 50 TPH capacity, a mortar
packaging machine with 30 TPH capacity, a white cement silo with a total capacity of 2,500 tons, a bulk
loader, two mortar cement silos each with a capacity of 200 tons and a bulk loader.

Cement products: The plant produces three types of gray cement: CPC30R, CPC40 and mortar.
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Tula

Total capacity: 720 thousand TPA. The planned investments (approximately US$250 million) will permit us
to increase capacity by 1.5 million additional tons per year by mid-2017.

Process: Uses a dry process, featuring a short rotary kiln and five-story preheat tower, with a 1,800 TPD
capacity.

Inputs: Inputs include oil (140 TPH), solid fuels (11 TPH) and rawmix (84 TPH). 35% of energy
consumption comes from the coprocessing of tires.

Packing: Has a cement packing process capable of 2,300 TPD. The process features two packing machines,
each with a 120 TPH; one palletizer; one bulk loader; and two cement silos, each with a 4,000 ton capacity.

Cement products: The plant produces CPC30R, CPC30RRS, CPC40 and CPC40RS gray cements.

Total capacity: 288 thousand TPA (156 thousand TPA of mortar cement and 132 thousand TPA of white
cement).

Process: Uses a dry process, featuring a long rotary kiln and one-story preheat tower, with a 435 TPD
capacity.

Inputs: oil (60 TPH); white rawmix (26 TPH) or mortar rawmix (22 TPH)

Packing: The process features one packing machine for white cement with 50 TPH capacity; one packing
machine for mortar cement with 30 TPH capacity (without bag applicator); one silo for white cement with
2,500 ton total capacity and a bulk loader; two silos for mortar cement with 200 ton capacity each and a bulk
loader.

Cement products: The plant produces mortar cement and CPO30RB white cement.
Vito
General
Our Building Systems Division manufactures and markets solutions based on fiber cement and plastic for the
lightweight building materials industry including corrugated roofing products, panels, sidings, construction systems
and pipes, among other products, and transforms polystyrene (GPPS, HIPS and EPS) utilizing thermoforming
extrusion, expansion and molding processes, polyethylene (rotomolding and injected), polypropylene and vinyl
polychloride products in a wide variety of measures, colors, dimensions, densities and capacities. This division’s
products are sold to customers in the building materials and infrastructure industries. The Building Systems Division
is divided into four regions: United States, Mexico, Central America and South America.
We manufacture and market our Building Systems products through the following subsidiaries:


Mexico Region:

Mexalit Industrial, S.A. de C.V. (Mexico)

Frigocel, S.A. de C.V. (Mexico)
United States Region:

Maxitile LLC

Plycem USA LLC
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

Central American Region:

Plycem Construsistemas Honduras, S.A. de C.V. (Honduras)

Plycem Construsistemas El Salvador, S.A. de C.V. (El Salvador)

Plycem Construsistemas Costa Rica, S.A. (Costa Rica)
South American Region:

Eternit Colombiana, S.A. (Colombia)

Eternit Atlántico, S.A. (Colombia)

Eternit Pacífico, S.A. (Colombia)

Eternit Ecuatoriana, S.A. (Ecuador)

Industrias Duralit, S.A. (Bolivia)

Industrias Fibraforte, S.A. (Peru)
This division has 20 manufacturing plants across 9 countries: Peru, Mexico, Colombia, Ecuador, Costa Rica,
Honduras, El Salvador, Bolivia and the United States. Our Building Systems products are sold through approximately
2,741 distributors and customers. This division had net sales of Ps$6,074 million and EBITDA of Ps$1,119 million in
2014, representing 40% and 42%, respectively, of our consolidated totals for the year. In the three months ended
March 31, 2015, this division had net sales of Ps$1,547 million and EBITDA of Ps$253 million, representing 38%
and 36%, respectively, of our consolidated totals for the period.
Our revenue from the sale of building systems has usually followed the trends of the construction industry.
Historically, our Building Systems Division has had higher sales during the summer and lower sales during the
winter, reflecting the seasonality of construction activity.
On December 19, 2013, we signed an acquisition agreement with the external products division of Saint-Gobain
to acquire the assets of the fiber cement business of its affiliate, CertainTeed Corporation, one of the principal
manufacturers of construction materials in the United States. On January 31, 2014, we completed the acquisition of
the assets of the fiber cement business of CertainTeed Corporation. We subsequently rebranded this business under
our new Allura brand. We expect that this acquisition will strengthen our presence in the United States. These plants
will geographically complement the operations of our Nuevo Laredo plant, which is focused on the U.S. market.
Pursuant to the acquisition agreement relating to the assets of the fiber cement business of CertainTeed
Corporation, we will not be liable for, among other things, (i) any liabilities arising from, or relating to, claims made
by any person due to, or attributable to, the actual or alleged exposure to asbestos that occurred prior the purchase or
(ii) any environmental liabilities relating to, or arising from, events or circumstances occurring or existing prior to the
consummation of the agreement, including all liabilities relating to environmental, health and safety laws.
We are in the process of relocating and expanding our fiber cement plant in Peru, which will permit us to
increase our production capacity by approximately 42%, to approximately 13,613 tons per year. We estimate that the
works will be concluded during the first half of 2016. The focus of the project is to consolidate the local market and
increase our coverage in the export market (Chile, Uruguay, Ecuador, Bolivia and Brazil). The new plant will be
located in the area of Chilca, on a 45,284 m2 site, with a total investment of approximately US$19 million.
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Products
The primary Building Systems products that we manufacture are the following:

Corrugated roofing sheets from fiber cement, which are used primarily in residential construction and which can
also be used as decorative ornaments. These roofing sheets are cost-effective, versatile and an architectural
solution. We manufacture different sizes and profiles of corrugated sheets for different applications. We produce
the most common profiles used in the market (P3, P4, P7, P10 and Channel C90) in various lengths ranging from
1.22 to 3.66 meters with widths ranging from 0.91 to 1.1 meters and thicknesses ranging from 4 to 6 millimeters.
We manufacture corrugated sheets for the local construction business and the export market, and our
management system has been certified based on the requirements specified in ISO 9001:2008.

Roofs or suspended ceilings from fiber cement flat sheets, which are used primarily in residential and commercial
construction. We manufacture flat sheets in lengths of 0.61 meters, 1.22 meters and 2.44 meters, with widths of
1.22 meters and thicknesses from 4 to 20 millimeters. We manufacture flat sheets to different local and/or ASTM
mechanical specifications, such as ISO 8336 and ASTM-C-1186.

Siding fiber cement boards, which are used primarily in the housing and construction industries to weatherproof
and enhance the aesthetic quality of facades and for modern architectural designs. These products have a high
level of dimensional stability, resistance and durability. The boards come in a variety of shapes and sizes, may
be used for interiors and exteriors.

Trims, which are used primarily in the residential and commercial construction industries. Trims come in a
variety of shapes and sizes and may be used for corners, fascia, windows, doors, column wraps, rakes, friezes,
decorative trim and other non-structural architectural elements to add decorative elements to homes and
buildings. We manufacture trims to different local and/or ASTM mechanical specifications, such as ISO 8336
and ASTM-C-1186.

Fiber cement panels for internal and external walls, and floors, which are used primarily in residential and
commercial construction. We produce panels in lengths of 2.44 meters, with widths of 1.22 meters and
thicknesses ranging from 6.0 to 20.0 millimeters. The panels are versatile and can be used in a broad spectrum of
buildings and construction types. Our panels offer resistance to moisture, are immune to wood-boring insects, are
load-bearing, are non-combustible and are available in different finishes. We manufacture panels to different
local and/or ASTM mechanical specifications, such as ISO 8336 and ASTM-C-1186.

Fiber cement pipes, which are used primarily in the infrastructure industry for water and sewage systems. We
manufacture pipes in “A” and “B” classes in lengths of 5 meters, widths of 1.07 meters and thicknesses ranging
from 2.4 to 27.4 centimeters for class “A” pipes, and from 2.8 to 16.7 centimeters for class “B” pipes. F.C. pipes
are manufactured to different local/ASTM mechanical specifications, such as NMX-C-012-ONNCCE-2007 and
NMX-C-039-ONNCCE-2004.

Polystyrene rolls, which are primarily used in the food industry. We sell polystyrene in rolls and the customer
produces its own thermoformed containers or pots, injecting the product into the interior of the formed container
and subsequently sealing it. We produce these rolls to different local and mechanical specifications according to
custom specifications. These products are manufactured using extrusion.

Polystyrene plastic sheet, which is mainly used in advertising stands. We produce the sheeting according to
custom specifications. These products are manufactured using the extrusion process.

Disposable polystyrene products, such as cups and plates, which are used primarily for bulk consumption and are
sold under the Festy brand. These products are manufactured using extrusion and are thermoformed.

Coffers, slabs, plates, panel strips, medium rods and expandible polystyrene moldings, which are mainly used in
the construction industry. We manufacture these products in different densities and to different specifications
according to the requirements of the product and its end use, depending on whether it is used for filler, thermal
insulation, sound insulation, packing or decorative use. These products are manufactured using expansion,
molding and cutting processes.
115

Refrigerated storage room panels, which are used primarily in the industrial sector. We produce panels for
industrial refrigeration chambers for thermal insulation. These panels are manufactured to different
specifications according to the characteristics of the client’s refrigerated storage chambers. These products are
manufactured using expansion, molding, cutting and foil incorporation processes.

Trays or seed trays, which are used primarily in the agricultural industry, mainly in greenhouses. We produce
trays and seed trays to different custom specifications. These products are manufactured using expansion and
molding processes.

Polypropylene sheeting, which is used in the construction industry. In Mexico, in the fourth quarter of 2013, we
invested in modern extrusion and thermoforming equipment to commence the production of polypropylene
corrugated sheets. We also invested in injection equipment in order to produce water tank covers.

Polyethylene water tanks and cisterns, which are primarily used in the housing industry for the storage of water.
We produce water tanks and cisterns in a variety of sizes, ranging from a capacity of 450 liters to 10,000 liters.
We manufacture tanks to different local and/or ASTM mechanical specifications, such as NMX-C-374ONNCCE-2000.
We also manufacture a range of fiber cement products based on customer specifications, such as light building
systems and remodeling accessories, as well as a range of energy saving products, such as Maxi-Therm fiber cement
sheets.
Below are images of some of the products in our Building Systems Division:
116
The following tables set forth our sales volumes and sales from our principal Building Systems products for the
periods indicated.
2014
2015
Sales
Volume
Volume
Sales
(in thousands of tons and millions of Ps$)
Mexico
Sheets, tiles and moldings ..............................................................
Panels .............................................................................................
Trims/Sidings .................................................................................
Water tanks ....................................................................................
Others .............................................................................................
Mexico Subtotal............................................................................
Foreign
Sheets, tiles and moldings ..............................................................
Panels .............................................................................................
Trims/Sidings .................................................................................
Water tanks ....................................................................................
Others .............................................................................................
Foreign Subtotal ...........................................................................
Total .....................................................
97 $
35
43
2
3
180 $
636
249
359
85
108
1,437
106 $
29
33
1
2
171 $
736
190
242
58
100
1,326
4 $
8
2
—
—
14 $
194 $
24
57
26
—
3
110
1,547
6 $
9
2
—
—
17 $
188 $
35
60
12
—
5
112
1,438
2013
2014
Sales
Volume
Volume
2012
Sales
Volume
Sales
Mexico
Sheets, tiles and moldings ............................
Panels ...........................................................
Trims/Sidings ...............................................
Water tanks ...................................................
Others ...........................................................
Mexico Subtotal ......................................
422 $
129
179
23
1
754 $
117
2,619
841
1,345
848
53
5,706
363 $
105
66
20
5
559 $
2,230
717
477
743
156
4,323
416 $
108
60
21
3
608 $
2,313
734
414
788
218
4,467
2013
2014
Sales
Volume
Volume
2012
Sales
Volume
Sales
Foreign
Sheets, tiles and moldings ............................
Panels ...........................................................
Trims/Sidings ...............................................
Water tanks ...................................................
Others ...........................................................
Foreign Subtotal .....................................
Total .....................................................
22 $
34
—
—
—
56 $
810 $
135
213
—
1
19
368
6,074
33
37
—
—
—
70 $
629 $
177
205
—
—
19
401
4,724
34
46
—
1
—
81 $
689 $
194
251
—
24
23
492
4,959
The principal raw materials used in the manufacture of products in the Building Systems Division are cement,
demineralized water, calcium carbonate, silica, chrysotile, other natural/synthetic fibers, aluminum, mineral
pigments, polystyrene crystal resin, high-impact polystyrene resin, expandable polystyrene resin, polypropylene resin
and polyethylene resin, depending on the type of product. These raw materials represented approximately 60% of this
division’s production costs in 2014.
We obtain the raw materials used in our Building Systems Division from a large number of suppliers, and we are
not dependent on any individual source for the raw materials that we purchase.
Our principal suppliers (i) for chrysotile fiber are Sama-Mineração de Amianto, Ltda., JSC Ural Asbest and
Minera Las Brisas, S.A.; (ii) for cement are Cemex, S.A.B. de C.V., Holcim México, S.A. de C.V. and Cementos
Argos, S.A. in Mexico, Central America and South America, and Giant Cement Company in the United States; and
(iii) for cellulose fiber are Arauco and Constitución, S.A., Canfor Pulp and Paper S.A., Domtar Paper Company LLC
and GP Cellulose International Marketing S.R.L.; (iv) for polystyrene crystal resin and high-impact polystyrene resin
are Styrolution Mexicana SA de CV, Resirene S.A. de C.V. and Polímeros Nacionales S.A. de C.V.; (v) for
polystyrene expandable resin is Poliestireno y Derivados, S.A. de C.V.; (vi) for polyethylene resin, are Polímeros
Mexicanos S.A. de C.V. and Polímeros Nacionales S.A. de C.V.; (vii) for polypropylene resin, are Polímeros
Nacionales S.A. de C.V., Polipetrosur, S. de R.L de C.V. and Arpema Plásticos S.A. de C.V.; and (viii) fiber from
PVA Kinoshita Fishing Net MFG. CO., LTD.
Cement. Currently, we do not have long-term supply agreements for cement, but we set prices on a yearly basis
and obtain discounts and special prices for specific government export and infrastructure projects. This raw material
is readily accessible in global markets, showing low volatility in recent years.
Chrysotile Fiber. In Mexico and South America, chrysotile fiber is used to manufacture certain fiber cement
products that are marketed locally. Products that are exported to the United States are manufactured using other
fibers such as cellulose fiber and PVA and we have never exported products manufactured using chrysotile into the
United States. Chrysotile fiber is acquired from suppliers located in Colombia, Brazil and Russia. Our use of
chrysotile fiber is compliant with the local health and safety regulations in the countries in which we operate as well
as international standards such as the Responsible Use of Chrysotile Asbestos. This raw material is difficult to access
in the market and prices have increased approximately 36% during the past three years, derived from the deficit in the
production of the fiber. We have entered into a supply contract with JSC Uralbest that assures the required volume.
Cellulose Fiber. The market availability of this product, the competitive prices that we can obtain due to the
volume that our division consumes, in addition to quality assurance, are important factors that allow us to have access
to providers in Chile, the United States and Canada. We do not have supply agreements with our cellulose fiber
suppliers. However, our orders are based on the needs of our production plants and are usually placed two months in
advance. This raw material is readily available at prices prevailing in the global market.
PVA Fiber. We acquire PVA fiber from suppliers located in Asia. PVA fiber is used in the manufacture of fiber
cement products. Although the current price of this raw material is higher than that of the mineral fiber, there are
various suppliers worldwide.
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Silica. We obtain silica from local suppliers and from the different regions where silica is used. We have
traditionally negotiated and set prices on an annual basis, and we currently have vertically integrated in Mexico a
silica mine located in Nuevo Laredo, Tamaulipas. Silica is a readily available material with a number of suppliers
available to us. In some of our plants, we have invested in silica mills in order to decrease the cost of the material.
Polystyrene and polyethylene resins. We have access to raw resins without restrictions as we have strong
business relationships with polystyrene and polyethylene suppliers, they have a surplus of installed capacity and we
have access to this material as a preferred customer. The price is denominated in U.S. dollars and depends on two
hydrocarbons derived from petroleum, benzene and ethylene. Therefore, the price of these resins depends on the
price of oil, natural gas and exchange rate fluctuations. However, we are generally able to pass on increases in the
cost of raw materials to our end customers.
Polypropylene resin. Polypropylene resin is the thermoplastic polymer, partially crystalline, obtained from the
polymerization of propylene (or propane). It belongs to the group of polyolefins and is used in a broad range of
applications including food packaging, textiles, laboratory equipment, automotive components and transparent films.
Polypropylene has strong resistance to several chemical solvents as well as alkalis and acids. Principal suppliers
include Polipropileno del Caribe (Cartagena Colombia); Muehlstein (United States, Asia); and Petroquim (Chile). In
recent years, there has been an over-supply in the market, although its price has been affected by the market price of
oil. Virgin polypropylene is widely available, but there is limited supply for recycled polypropylene due to the
specifications that are required.
Manufacturing Plants
The manufacturing operations of the Building Systems Division are located in several countries, including the
United States of America, Mexico, Peru, El Salvador, Costa Rica, Honduras, Colombia, Ecuador and Bolivia, which
makes us an integrated producer with a truly regional platform.
Product Quality
Each of our manufacturing plants in the Building Systems Division has a quality assurance department
responsible for ensuring the compliance with our raw material and finished product specifications, and for overseeing
the production process, allowing us to develop products with significant brand value. Additionally, these departments
supervise the manufacturing processes. All of our testing methods are based on international norms, such as the
ASTM and Mexican NMX.
Our manufacturing plants in this division have, or operate pursuant to, certifications under national and
international norms, including certifications from the ISO for quality management (ISO-9001) and environmental
quality and safety (ISO-14001), and from the Occupational Safety and Health Administration, or “OSHA”, for
occupational health and safety management (OSHAS-18000). Moreover, many of our manufacturing plants are
certified by the Organización Nacional de Normalización y Certificación de la Construcción y Edificación (National
Organization of Standardization and Certification of Building and Construction, or “ONNCCE”), Comisión Nacional
del Agua (National Water Commission, or “CONAGUA”), Certificación Mexicana, S.C., or “CERTIMEX”, Centre
Scientifique et Technique du Bâtiment (International Code Council, or “CSTB”) and Business Alliance for Secure
Commerce, or “BASC.” In addition, PROFEPA has granted many of our manufacturing plants in Mexico the
Industria Limpia certification, which certifies full compliance with Mexican environmental laws.
Manufacturing Plants in the Building Systems Division
Certifications
Santa Clara ........................................................... ISO 9001:2008, ISO 14001:2004, Clean Industry, NMX-C-012,
NMX-C-039, NMX-C-374, NOM-006-CONAGUA, ICC, CSTB,
Pacto Global
Guadalajara........................................................... ISO 9001:2008, ISO 14001:2004, OSHAS 18001:2007, Clean
Industry, NMX-C-374, NOM-006-CONAGUA, ICC, Pacto Global
Nuevo Laredo ....................................................... ISO 9001:2008, ICC
Villahermosa ........................................................ ISO 9001:2008, Pacto Global
119
Manufacturing Plants in the Building Systems Division
Certifications
North Carolina ...................................................... ISO 14001 (expired)
Oregon .................................................................. ISO 14001
Indiana .................................................................. N/A
Cartago ................................................................. ISO 9001, ISO 14001, OSHAS 18001
San Pedro Sula ..................................................... ISO 9001, ISO 14001, OSHAS 18001
El Salvador ........................................................... ISO 9001, ISO 14001, OSHAS 18001
Eternit Colombiana............................................... ISO 9001:2008, ISO 14001:2004, OSHAS 18001:2007, BASC
Version 3-2008
Eternit Pacífico ..................................................... ISO 9001:2008, ISO 14001:2004, OSHAS 18001:2007 (Bureau
Veritas), BASC V4-2012 (WBO), BASC V3-2008
Eternit Atlántico ................................................... Bureau Veritas, ISO 9001, ISO 14001, OSHAS 18000, BASC V42012
Eternit Ecuatoriana ............................................... INEN 1320 Tipo III, INEN 1320 Tipo IV, ISO 9001, ISO 14001,
OSHAS:18001
Duralit Bolivia ...................................................... ISO 9001:2000, IBNORCA (Instituto Boliviano de Normalización y
Calidad, Certificado de Sello de Producto NB 673:2010, Certificado
de Aprobación. Renewed on 02/07/2011)
Expansion La Luz ................................................. NOM-018, Pacto Global
Extrusion Cuamalta .............................................. Pacto Global
Industrias Fibraforte ............................................. ISO 9001:2000 ICONTEC
Chihuahua............................................................. Pacto Global
Monterrey ............................................................. Pacto Global
Manufacturing Processes
Our Building Systems Division currently offers the broadest portfolio of solutions for lightweight building
systems in fiber cement. The manufacturing plants in the Building Systems Division have production lines for
manufacturing roofing sheets, sidings, pipes and panels.
The manufacturing process begins with the mixing of raw materials. The production lines then stretch the
mixture using rollers, in order to form slabs that will subsequently be shaped into the desired product. These plates
are then subjected to various processes:

Autoclaving, which cures the cement at an accelerated pace under high pressure and temperature.

Carbonation, which accelerates the curing of cement, but which does not result in the final baking.

Natural, whereby the cement sets by itself in the shade.

Painting, whereby the product is brought to a painting line.
120
In addition, our Building Systems Division also manufactures plastics products. For this purpose, the Building
Systems Division acquires a diversity of raw materials and through the processes of rotomolding transformation,
extrusion, thermoforming, expansion and injection, obtains and markets, among its principal products, deposits
(water tanks, cisterns, tanks), laminate (sheets and rolls), disposable (cups and plates), lightening and isolation (block,
coffer, plate, slab, cooling panel for cameras) and packaging (seedling and forest nurseries) products which are
primarily used in the construction, food, publicity, agricultural, decorative and refrigeration industries. These
products are manufactured and distributed through ten plants located in Mexico (five), Colombia (three), Bolivia
(one) and Peru (one).

Extrusion process. We use polystyrene resin (GPPS and HIPS) as a raw material for the manufacture of plastic
laminates (rolls and sheets). The polystyrene resin is fed into an extruding machine that applies mechanical heat
and friction. As a result of this process, a soft material is obtained that passes through a die and rollers which
give the product the desired thickness and physical characteristics. In the case of sheet plastic, this sheet is cut
into the desired dimensions and colors to produce the final product and, in the case of roll, it is coiled and packed
for delivery.

Expansion process. We use polystyrene beads (EPS) as a raw material to manufacture expandable polyethylene
block. The expandable polystyrene bead is inserted into a pre-expansion machine, which adds friction, pressure
and temperature. The product obtained is cooled in silos to later be fed into a model which through steam and
pressure forms the material into a solid molded block. This block undergoes a cutting process to produce various
products made to measure for our customers, such as coffers, slabs, plates, moldings, panel strips and slabs,
among others.

Polypropylene or PVC plastic tiles extrusion process. The manufacturing process for corrugated polypropylene
and PVC roofing consists of: (1) feeding into the extruder the raw material; (2) extruding and obtaining the
laminate, controlling the thickness with the rollers; (3) thermoforming the laminate to obtain the required
corrugation; and (4) cutting the sheet automatically, according to standard lengths.
General
Our Metal Products Division manufactures a variety of copper and copper alloys, flats, laminates in rolls and
sheets, bars and rods, wires, tubes, fittings, forged and machined parts used in the construction, air conditioning,
refrigeration, automotive, electrical, electronics, minting, ammunition, white goods, crafts, petrochemicals, heat
exchangers and textile industries, among other industries. We established the Metal Products Division in June 2009
following the Nacobre Acquisition. We manufacture our products in three plants located in Mexico and distribute
them through eight warehouses in Mexico and one distribution center in Laredo, Texas. We have one sales office in
Houston, Texas in the United States to serve to the United States and Canadian markets. From our central office in
Mexico City, we market our products throughout more than 36 countries in the world. The Metal Products Division
had net sales of Ps$7,218 million and EBITDA of Ps$855 million in 2014, representing 47% and 32%, respectively,
of our consolidated totals for the year. In the three months ended March 31, 2015, the Metal Products Division
generated net sales of Ps$1,936 million and EBITDA of Ps$253 million, representing 48% and 36%, respectively, of
our consolidated totals for the period.
Revenues from the sale of metal products are generally not affected by seasonality, although they do tend to
track the activity levels of the building materials sector. In addition, because our metals products are sold on a costplus mark-up basis, we are generally able to adjust pricing to maintain our margins independent of the volatility of
international copper prices.
121
Products
Our Metal Products Division manufactures a variety of copper and copper alloy products, which are used by our
customers in the manufacturing processes of their finished products. We believe we have a competitive advantage
over our competitors due to our rigorous quality standards and strong technical know-how, which allow us to develop
higher value-added, higher margin products. We believe we also have a leading market position in copper and copper
alloy products: we are one of the primary global manufacturers in the world of copper-nickel tubes, which are highly
specialized products sold to the petrochemical, energy and naval sectors, among others, primarily in the United States
as well as Europe.
Copper
We currently produce various specifications of copper and copper alloys, flats in rolls and sheets, bars and rods,
wires, tubes, connections and fittings, forged and machined parts used in the building materials, air conditioning,
refrigeration, automotive, electrical, electronics, minting, ammunition, white goods, crafts, petrochemicals, heat
exchangers and textile industries, among others, varying in length, thickness and size. Our copper products are used
primarily in the construction and industrial sectors. Our principal copper products include:

Tubes, which are used primarily in construction, refrigeration and air conditioning, in the electrical,
petrochemical, and water and gas transportation (in various pressures and temperatures) sectors. We produce
various sizes of copper tubes ranging from 0.072” to 10” in diameter. We manufacture copper tubes according to
different local and/or international standards, including the American Society for Testing and Materials, or
“ASTM”, mechanical specifications, including NOM, EN, DIN, JIS and MIL-T.

Flats in rolls and sheets. We produce a large selection of flat rolled products using copper-based alloys, which
are used primarily in the electronics, automotive, decorative, electricity, key blanks and minting industries. We
produce these products in various gauges with widths of up to 36 inches, all in compliance with ASTM
standards.
122

Solid copper products, such as bars and rods, which are used primarily in the industrial manufacturing and
automotive industries. We manufacture solid copper products in round, square, hexagonal and special shapes, to
different local and/or ASTM mechanical specifications, including ASTM B-455, ASTM B-152 and ASTM B187.

Wires, which are used primarily in the electronics, telecommunications, electricity, apparel, musical instruments
and personal products industries. We produce various types of wires, including square, half-round, flat, round
and electro-erosion wires. We manufacture wires to different local and/or ASTM mechanical specifications,
including ASTM B-134, ASTM B-206 and ASTM B-187.

Fittings, which are used primarily in the building materials and manufacturing industries. We produce various
types of copper and brass fittings, including threaded and wrought fittings for water, gas and industrial uses. Our
line of products also includes valves for use in the building materials sector. We manufacture fittings to different
local and/or ASTM mechanical specifications.
123
The following table sets forth sales volumes and net sales from our principal copper products for the periods
presented.
2015
Volume
Net Sales
2014
Volume
2014
Net Sales
Volume
Net Sales
2013
Volume
Net Sales
2012
Volume
Net Sales
Mexico and USA
Tubes ...............................................
Sheets ...............................................
Solid copper .....................................
Wires ................................................
Fittings .............................................
Others...............................................
Subtotal.......................................
Exports
Tubes ...............................................
Sheets ...............................................
Solid copper .....................................
Wires ................................................
Fittings .............................................
Other ................................................
Subtotal.......................................
Total .......................................
6 $ 705
4
441
2
150
1
102
1
211
14
14 $ 1,623
5 $ 426
4
435
3
272
1
89
1
158
10
14 $ 1,390
19 $ 2,379
17
1,750
7
574
3
381
3
493
1
73
50 $ 5,650
21 $ 2,472
15
1,481
8
813
3
364
4
390
1
90
52 $ 5,610
22 $
18
8
4
3
55 $
2,818
1,974
875
413
463
157
6,700
2 $ 247
1
55
3
6
2
3 $ 313
17 $ 1,936
2 $ 223
100
12
33
1
2 $ 369
16 $ 1,759
9 $ 1,032
4
364
43
25
1
103
1
14 $ 1,568
64 $ 7,218
6
$742
2
375
39
146
4
3
8 $ 1,309
60 $ 6,919
6
$925
2
363
36
46
1
15
9 $
1,385
64
$ 8,085
The primary raw materials used in the manufacture of our metal products are copper, nickel, zinc and lead, which
together accounted for approximately 85% of this division’s production costs in 2014. We have two sources of raw
materials for our metal products: newly refined virgin metal and recycled metal, both of which are sourced from
Mexican suppliers.
No single metal supplier accounted for more than 15% of the total amount of metal raw materials purchased by
us in 2014 and we are not dependent on any individual supplier for our metal raw materials. Our primary recycled
metal suppliers are Grupo de Metales Tultepec, S.A. de C.V., Recuperaciones Industriales Internacionales, S.A. de
C.V., Victor Systems, S.A. de C.V., Texsisa and Válvulas y Aceros del Norte; however, we obtain recycled metal
from a large number of suppliers. Our primary suppliers of newly refined virgin metal (cathode) are Recuperaciones
Industriales Internacionales, S.A. de C.V., Industrial Minera Mexico, S.A. de C.V., Cobre de México, S.A. de C.V.,
Operadora de Minas e Instalaciones, Vale Americas Inc. and Gerald Metals Mexico, S. de R.L. de C.V.
Our Metal Products Division products are sold on a metal cost-plus mark-up basis, which means that customers
absorb the risk of price volatility of raw materials.
We manufacture our copper products at our Vallejo, San Luis Potosí and Celaya plants, all of which are located
in Mexico. During 2013, we concluded our transition from the Toluca plant to Celaya, consolidating our operations
in the three manufacturing plants mentioned above.
Product Quality
Our Metal Products Division’s manufacturing plants have quality control departments responsible for ensuring
compliance with our raw material and finished product specifications and for overseeing the production process. All
of our testing methods are based on international standards, such as the ASTM, as well as Mexican standards
developed by technical committees under the direction of Mexican federal agencies, or “NMX.”
Our Metal Products Division products comply with the technical standards and quality required by domestic and
foreign markets. Applicable standards and specifications vary according to product type and are established by
124
various international institutions and associations. Our manufacturing plants in this division have certifications from
the ISO for quality management (ISO-9001). In addition, PROFEPA has granted some of our manufacturing plants
the Industria Limpia (Clean Industry) certification, which certifies full compliance with Mexican environmental laws.
Our manufacturing plants in our Metal Products Division have the following certifications:
Manufacturing Plants in the Metal Products Division
Certifications
Vallejo .................................................................................. Clean Industry, ISO 9001:2008, ISO 14401:2004
Celaya ................................................................................... ISO 9001:2008; UL certification for Pigtail MH1956-1
and Regulators: Environmental Management System ISO
14001:2004
San Luis Potosí ..................................................................... ISO 9001:2000, Clean Industry
Manufacturing Processes
We utilize several manufacturing processes, ranging from metal casting, to lamination or extrusion, to reach the
final product which can be flat rolled, tube or a custom shape according to customer specifications.
Smelting Process: In this part of the process, the raw material, whether in pure or recycled form, is melted in
order to produce blocks or 8-inch thick cakes made of copper or copper alloys (which can be copper-nickel, brass,
zinc or nickel-silver). These blocks are melted into a sheet or coil. There are two types of casting:

Caster or continuous smelting, from which rolls and mother tube are made, or

Semi-continuous casting, from which a cake/ingot is produced.
Lamination Process: In this part of the process, the block or billet obtained by smelting the raw material is
subjected to high temperatures and passed through rollers, which fashion it into a sheet or coil. The sheet or coil is
immersed in chemicals to remove rust, and then cold force and pressure are applied to it to reach a specified
thickness.
Extrusion Process: In this part of the process, the block obtained by smelting the raw material is subjected to
high temperatures and placed in an extrusion press, where pressure is applied to generate a tube. The outside and
inside diameters of this tube are then adjusted through an extrusion process.
The manufacturing process for copper piping and its alloys includes smelting and extruding the metal in order to
produce water pipes, tubes for air conditioning and refrigeration, capillary tubes and fittings, among other products.
The manufacturing process for copper, coil and sheeting and its alloys includes smelting and sheeting, after
which the customer processes it to mint coins and produce cartridges for the military industry, electrical terminals,
keys and automotive parts, transformers, appliances and other products.
Subsidiaries
The following table lists our primary direct and indirect subsidiaries as of March 31, 2015, indicating the
percentage of our direct or indirect holding in each:
Name of Subsidiary
Country
Year of
Incorporation
Percentage
Owned
Nacional de Cobre, S.A.
de C.V.
Mexico
1979
100.00%
Manufacture of copper products for the
construction industry
Operadora de Inmuebles
Elementia, S.A. de C.V.
(formerly Almexa, S.A.
de C.V.)
Mexico
1944
100.00%
Asset leasing
125
Products/Services
Country
Year of
Incorporation
Percentage
Owned
U.S.
1988
100.00%
Distribution and sale of copper and
aluminum products for the construction
industry in the United States of
America
Mexalit Industrial, S.A.
de C.V.
Mexico
1943
100.00%
Manufacture and distribution of fiber
cement construction products
Mexalit Servicios
Administrativos, S.A. de
C.V. (formerly Eureka
Servicios Industriales,
S.A. de C.V.)
Mexico
2000
100.00%
Administrative services
Distribuidora Promex, S.A.
de C.V. and subsidiaries
Mexico
1965
100.00%
Investments in shares of fiber cement
construction products and pipes.
Eternit Atlántico, S.A.
Colombia
1945
96.52%
Eternit Colombiana, S.A.
Colombia
1942
93.41%
Eternit Pacífico, S.A.
Colombia
1945
98.20%
cement and construction products
Eternit Ecuatoriana, S.A.
Ecuador
1956
100.00%
cement and construction products
Maxitile LLC (previously
Maxitile Inc.)
U.S.
1985
100.00%
Nacobre Servicios
C.V. (formerly Maxitile
Servicios Industriales,
S.A. de C.V.)
Mexico
2005
100.00%
Compañía Mexicana de
Concreto Pretensado
Comecop, S.A. de C.V.
Mexico
1974
99.96%
Manufacture and sale of pre-stressed
concrete pipes.
The Plycem Company Inc.
Costa Rica and
Central America
2004
100.00%
Holding Entity of Central America
entities and production of light
construction systems (construsistemas)
in Latin America.
Plycem USA LLC
(previously Plycem USA
Inc.)
U.S.
2008
100.00%
Commercialization of fiber cement
products
Frigocel, S.A. de C.V.
Mexico
1959
100.00%
Distribution and sale of plastic products
ELC Tenedora Cementos,
S.A.P.I. de C.V.
Mexico
2012
100.00%
Holding company
Name of Subsidiary
Nacobre USA LLC
(previously Copper &
Brass International Corp.)
126
Products/Services
Country
Year of
Incorporation
Percentage
Owned
Panama
2003
100.00%
Holding company
Elementia USA Inc.
U.S.
2014
100.00%
Holding company
Industrias Fibraforte, S.A.
Peru
1993
100.00%
Elementia USA LLC
U.S.
2014
100.00%
Manufacture of light polypropylene and
polycarbonate covers
Name of Subsidiary
General de Bebidas y
Alimentos, S.A. and
subsidiaries
Products/Services
We provide financing to certain of our subsidiaries for their investment or working capital needs. These loan
documents are drafted on similar terms and conditions to those used by us for financing or on market terms and
conditions. Similarly, through certain of our subsidiaries, we provide technical assistance, financial and treasury,
legal, accounting and tax services, economic studies, human resources and corporate planning to other subsidiaries.
Distribution Channels
We sell our products through an extensive distribution network of over 4,300 independent distributors and end
users who comprise a large network of points of sale for our products, supported by six company-operated
distribution facilities in Mexico. The following table shows a breakdown of our independent distributors in our
divisions and the markets in which we operate:
Our distributors are not only an important part of our distribution strategy, but are also considered one of our
most important customer groups. In addition to enhancing our ability to penetrate the markets in which we operate,
our distributors allow us to understand the evolving needs of the end consumers for our products.
Independent distributors form the industry’s primary distribution channel for our products. Our distribution
partners are carefully selected based on their ability to drive sales of our products, deliver high-quality customer
service and meet other performance criteria. While we do not enter into distribution agreements with our
independent distributors, we have a strict credit policy and require that our independent distributors document their
creditworthiness and provide guarantees in the form of promissory notes. We use our own transportation, as well as
third-party trucking companies to transport all of our products from our manufacturing plants to distribution centers,
independent distributors and customers.
We believe that our use of independent distributors provides us with a high level of operational flexibility,
because it allows us to penetrate key markets and expand our geographic reach without incurring the expense of a
company-operated distribution network. This reach also allows us to service larger customers with a broader
geographic scope, as these independent distributors have their own formal and structured distribution network and
their own distribution centers. In addition, this allows us to reach the greatest number of clients, some of which prefer
to visit the distribution facility directly to purchase their products. We support our network of independent
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distributors with marketing and promotional programs that include product sample cases, sales literature, product
videos and other sales and promotional materials.
We believe that distributing our products through our six distribution centers, twelve warehouses, a distribution
center in Laredo, Texas, and a sales office located in Houston, Texas, and through the Plycem distribution network
throughout the United States, enables us to build long-standing customer relationships; monitor developments in local
customer preferences; ensure product availability through integrated logistics between our manufacturing and
distribution facilities; offer “one-stop” shopping to our customers; and target our marketing efforts.
Cement Division
Our Cement Division distributes its products through an extensive network covering approximately 500
kilometers across 15 Mexican states inhabited by approximately 74 million people. Our network of independent
distributors for the Cement Division reaches the market through over 500 points of sale through approximately 120
distributors.
We market our Building Systems Division non-plastics products through over 2,400 distributors, who in turn
manage their own distribution networks, and more than 260 customers. We have sales offices in our manufacturing
plants throughout Mexico and Latin America, six distribution centers and a sales office in the United States.
Location
Houston, Texas ........................................................
Medellin, Colombia .................................................
Arequipa, Peru .........................................................
Chiclayo, Peru .........................................................
Guayaquil, Ecuador .................................................
Cuenca, Ecuador......................................................
Format
Sales Office
Distribution Center
Distribution Center
Distribution Center
Distribution Center
Distribution Center
We market our copper and copper alloy products through an extensive distribution network comprised of more
than 1,000 distributors and approximately 400 clients. We have a sales office located in the United States.
Products in the Metal Products Division are marketed through six warehouses. Our warehouses are strategically
located within Mexico in the following territories:
Location
Monterrey ................................................................
Guadalajara..............................................................
Puebla ......................................................................
Juarez.......................................................................
Tijuana.....................................................................
Houston, Texas ........................................................
Laredo, Texas ..........................................................
Mexico City .............................................................
Format
Warehouse
Warehouse
Warehouse
Warehouse
Warehouse
Sales Office
Distribution Center
Warehouse
We also market our copper products in the United States and Canadian markets through our office in the United
States, located in Houston, Texas.
Major Customers
We believe that our distributors are not only an important part of our distribution strategy, but are also
considered one of our most important customer groups as, in addition to enhancing our ability to penetrate the
markets in which we operate, they provide us with valuable insight on the needs of our end consumers.
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In 2014, our ten largest customers for the Cement, Building Systems and Metal Products Divisions accounted for
approximately 1%, 39% and 4%, respectively, of our net sales and none individually accounted for more than 4% of
our net sales.
Our products are exported to over 40 countries in the Americas, Europe and Asia. In the three months ended
March 31, 2015, sales by the Cement, Building Systems and Metal Products Divisions in the national markets
represented 13%, 35% and 40% of our net domestic sales and exports represented 0%, 3% and 8%, respectively, of
such division’s net sales. In 2014, sales in the national markets by the Cement, Building Systems and Metal Products
Divisions in Mexico represented 11%, 37% and 37% of our net sales and exports represented 0%, 2% and 10%,
respectively, of such division’s net sales.
The following table sets forth our sales volumes and net sales by product division in the three months ended
March 31, 2015 and 2014 and in 2014, 2013 and 2012.
Volume
204
2015
Net Sales
Volume
2014
Net Sales
Volume
2013
Net Sales
Volume
2012
Net Sales
Volume
Net Sales
Cement...................
Building Systems ...
Metal Products .......
Holding and
Eliminations ......
Total ......................
439 $
194
17
509
1,547
1,936
368 $
188
16
78
650 $
4,070
1,548 $
810
64
405
1,438
1,759
-
37
572 $
-
3,639
2,422 $
1,747
6,074
7,218
292
15,331
818 $
629
60
1,507
1,046
4,724
6,919
240
12,929
$
689
64
753
$
8
4,959
8,085
454
$ 13,506
The following table sets forth our exports by product division (excluding the Cement Division, which currently
does not export any of its products) in the three months ended March 31, 2015 and 2014 and in 2014, 2013 and 2012.
Volume
2014
2015
Net Sales
Volume
2014
Net Sales
Volume
2013
Net Sales
Volume
2012
Net Sales
Volume
Net Sales
Cement ................
Building Systems ...
Metal Products ....
Total ...................
- $
14
3
17 $
110
313
423
- $
17
2
19 $
112
369
481
- $
56
14
70 $
368
1,568
1,936
- $
70
8
78 $
401
1,309
1,710
- $
81
9
90 $
492
1,385
1,877
We provide trade finance to our customers. Prior to extending financing, such customers must submit a credit
application and evidence of the respective customer’s incorporation and authorization, and must provide certain
guarantees to support the credit granted in merchandise. We request credit studies through Dun & Bradstreet for all
new customers and for material transactions with pre-existing customers. The credit limit is set on an individual basis
depending on the characteristics of each potential customer. In the case of the Metal Products Division, 30% of
accounts receivable are insured against default by distributors and customers through a credit insurance policy with
Euler Hermes Seguros de Crédito S.A. de C.V. Customers are generally granted a repayment period of 30 to 60 days.
Cement Division
Our Cement Division began operations in 2013 and markets its products through distributors in central Mexico
and primarily focuses on the self-construction market. Most of our sales in the Cement Division are made through
independent distributors in a position to market them in local markets.
Most of our sales are made through independent distributors, who then resell the products to customers in the
commercial, industrial and retail sectors. Some of these sales are made directly to industrial customers. Additionally,
we sell lining, remodeling and covering products to companies working on large construction projects for the
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government, hotels and shopping centers. Our plastics products are manufactured in Mexico, Colombia, Bolivia and
Peru, primarily marketing in the respective markets. The sales of our plastics products are made directly to industrial
customers and other end consumers, as well as to independent distributors who then resell the products in the
commercial, building materials and retail sectors.
Mexico Region: In the three months ended March 31, 2015, 26% of our Building Systems products were sold in
Mexico. In 2014, 29% of our Building Systems products were sold in Mexico, while in 2013 and 2012, Building
Systems products sold in Mexico represented 28% and 23% of division sales, respectively.
Most of our sales in Mexico are made through independent distributors who then resell the products in the
commercial, industrial and retail sectors. Additionally, we sell made-to-order piping and fittings to companies
working on infrastructure projects for delivery of potable water and drainage. Some sales are made directly to
industrial customers.
United States Region: In the three months ended March 31, 2015, 29% of our Building Systems products were
sold in the United States. In 2014, 25% of our Building Systems products were sold in the United States, while in
2013 and 2012, Building Systems products sold in the United States represented 13% and 11% of division sales,
respectively.
Most of our sales in the United States are made through independent distributors who then resell the products in
the commercial, industrial and retail sectors.
Central American Region: In the three months ended March 31, 2015, 13% of our Building Systems products
were sold in Central America. In 2014, 11% of our Building Systems products were sold in Central America, while
in 2013 and 2012, Building Systems products sold in Central America represented 14% and 16% of division sales,
respectively.
Most of our sales in Central America are made through independent distributors who then resell the products in
the commercial, industrial and retail sectors. Additionally, we sell remodeling products to companies working on
extensive construction projects for the government, hotels and shopping centers. Some sales are made directly to
industrial customers.
South American Region: In the three months ended March 31, 2015, 33% of our Building Systems products were
sold in South America. In 2014, 34% of our Building Systems products were sold in the South American region,
while in 2013 and 2012, Building Systems products sold in the South American region represented 45% and 50% of
division sales, respectively.
Most of our sales in this region are made through independent distributors who then resell the products in the
commercial, industrial, housing and retail sectors.
In the three months ended March 31, 2015, 61% of our metal products were sold in Mexico and 23% in the
United States, while 16% were sold in other countries. In 2014, 62% of our metal products were sold in Mexico,
22% in the United States, 12% in Latin America (excluding Mexico) and 3% in Europe.
In this division, we generally do not negotiate long-term contracts with any customers and our sales are primarily
made through purchase orders from independent distributors or customers, which allows us to respond to changes in
metal prices and mitigate the risks of price volatility. A significant portion of our local sales are also made through
independent distributors who then resell the products in the commercial, industrial and retail sectors. The remainder
of sales are made directly to end users. This mix is also applicable to our export markets.
Competition
Our operations focus on the manufacturing of products used in the building materials, housing and infrastructure
sectors. Our product groups are focused on different industrial sectors and are classified according to product type. In
general, our operations focus on industries that use cement, fiber cement, plastic and copper, and we manufacture
products used by the building materials, housing and infrastructure sectors. Across our various markets and products,
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we compete with domestic, regional and foreign companies that manufacture products similar to ours, as well as
products that serve as alternatives to ours. We compete on the basis of quality, reliability, price and service.
Cement Division
Our main competitors in the Cement Division are Cemex México, S.A. de C.V., Cooperativa La Cruz Azul, S.A.
de C.V., Cementos Moctezuma, S.A. de C.V., Cementos de Chihuahua, S.A. de C.V. and Holcim México, S.A. de
C.V.
We compete with other Mexican and foreign fiber cement and plastics producers. During 2014, according to
internal estimates, we led the Mexican fiber cement market, as we are the only fiber cement producer in Mexico, but
certain competitors offer alternative products that can be substituted for ours. In Mexico, we compete against
products made of cement, steel, gypsum, concrete, carton, polycarbonate and clay.
Mexico Region: There are no existing competitors in the fiber cement market in Mexico; however, our
competitors manufacture using alternative materials, such as galvanized steel, plastic roofing, cement and gypsum
panels. These competitors include Ternium México S.A. de C.V., Galvasid S.A. de C.V., Grupo Villacero S.A. de
C.V. and Onduline Materiales de Construcción S. de R.L. de C.V. in light ceilings; Ladrillera Mecanizada S.A. de
C.V. in handcrafted clay tile in tiles, Stabilit S.A. de C.V. in plastic roofs; and USG México S.A. de C.V., Panel Rey
S.A. and Comex Lafarge S.A. de C.V. (Plaka Comex) in gypsum board. Our primary competitors with respect to
plastics products are Coexpan, S.A., CEDAP, S.A., Grupo Industrial de Poliestireno, S.A., Formacel de México, S.A.
de C.V., Grupo Gama (CEMPOSA), Rotoplas, S.A. de C.V., Ajover S.A., Quality Panel Covintec S.A. de C.V.,
Lamidos Extruidos Plásticos, S.A. de C.V., Laplex S.A. de C.V., Cemix, S.A. de C.V., Plastinak, S.A. de C.V., KP
Extrusiones de México, Spartech and Espumado de Estireno, S.A.
United States Region: Our main fiber cement competitors in the United States are James Hardie Building
Products Inc. and Nichiha Inc.
Central American Region: Our main fiber cement competitors in the Central American region are Duralita, S.A.
and Metpapan, S.A. Other competitors, such as Panel Rey Mexicana, S.A., USG, S.A., Grupo Panel, S.A., Toptec,
S.A., and Colombit, S.A., import their products from other countries and market them in the countries where we are
located. We face competition from products sold under the following competing brands: Gypsum, Durock,
Densglass and Metapan.
South American Region: In the South American region, our principal building systems competitors are Skinco –
Colombit (Etex Group), S.A., Toptec, S.A., Tubasec S.A., FAPESA S.A. (Etex Group), Ecofibra SRL, Ajover, S.A.,
Gerfor, Colempaques S.A., Rotoplas, S.A., Tamicorp S.A., Plastindustria SAC, Corp Misayago SAC, Gyplac S.A.,
Gyptec S.A., Paneltec S.A., Volcan S.A. (Saint Gobain) and PanelRey S.A. We face competition from products under
the following brands: Colombit, Manilit, Superboard, Dryboard, Acuaviva, Rotoplast, Techito and Fortecho, among
others.
Our main competitors in the copper industry in Mexico are Golden Dragon, Grupo IUSA, S.A. de C.V., Mueller
Comercial de Mexico S. de R.L. de C.V. and Luvata Monterrey, S. de R.L. de C.V.
Our main competitors in countries other than Mexico are Olin Brass (flat rolled), Golden Dragon (tube), Mueller
Industries (tubes and fittings), Kobe Wieland (tubes and sheets), Chase Brass (bars), Cerro Cooper (tubes and
fittings), Elkhart, KME and Nibco (fittings).
Research and Development
We continually strive to develop new and advanced production processes to increase operational efficiency and
develop products that meet customers’ changing needs. Plans and budgets for research and development are prepared
according to the strategy set by our Board of Directors. Plans and budgets are prepared and approved for three-year
cycles and the following year’s budget during the third quarter of the year, prepared through the joint effort of
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directors of the various business divisions. The technical direction department centralizes our research and
development activities and sets the budget and our main priorities.
During the three months ended March 31, 2015, we invested Ps$3.1 million in research and development. We
invested Ps$18 million and Ps$13 million in research and development in 2014 and 2013, respectively. We did not
make significant investments in research and development in 2012.
Intellectual Property
Patents
We have obtained 28 registered patents, 2 in Mexico and 26 in foreign countries, and have 3 patent applications
pending with the Instituto Mexicano de la Propiedad Industrial (Mexican Patent and Trademark Office, or “IMPI”).
We have also submitted patent applications in the jurisdictions where such patents are used. These patents are related
to several diverse systems and processes, which we believe distinguishes our products from those of our competitors.
Trademarks
The strong name-brand recognition of our brands is crucial to the development of our business. We have
registered approximately 1,046 trademarks in Mexico and abroad, of which 371 are registered with IMPI and 675 are
registered in the various foreign jurisdictions in which we operate. Our Mexican trademarks have ten-year,
renewable terms. As of the date of this offering memorandum, all of our trademarks are valid and none is close to
expiring.
The following table highlights our primary trademarks and their underlying products.
Trademark
Products
Elementia .............................................................................. Corporate name
Cement Division
Fortaleza ............................................................................... Cement
Mexalit ................................................................................. Fiber cement products: sheets, tiles and tubing
Eternit ................................................................................... Fiber cement tiles and accessories
Duralit .................................................................................. Fiber cement products
Plycem .................................................................................. Fiber cement products
Allura.................................................................................... Sheets for fiber cement walls and ceilings
Water tanks, polyethylene and polypropylene corrugated
Eureka .................................................................................. sheets
Fibraforte .............................................................................. Corrugated polypropylene sheets
Polystyrene, disposable plastic cups and plates, and
Frigocel......................................................................................... polystyrene sheets
Cobrecel ............................................................................... Copper products and connections
Nacobre ................................................................................ Copper and copper alloy products
We believe that given the significant association of our brands with our corporate image, they are important for
the development of our business.
Regulation
In Mexico, the Ministry of Economy regulates our products and we are subject to continuous audits of our
processes and practices, including our facilities.
As a corporation whose shares are registered with the RNV and listed on the BMV, we will become subject to
the Mexican Securities Market Law (Ley del Mercado de Valores) and the rules and regulations issued thereunder.
For more information regarding the regulation of corporations whose shares are registered with the RNV, please see
“The Mexican Securities Market.”
In Mexico, some of the principal laws that apply to us relate to business, corporate governance and
environmental regulation, such as the Commercial Code (Código de Comercio), the General Business Corporations
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Law (Ley General de Sociedades Mercantiles), the LMV, the General Law for Ecological Balance and
Environmental Protection (Ley General del Equilibrio Ecológico y Protección del Ambiente), the National Waters
Law (Ley de Aguas Nacionales) and the General Law for the Prevention and Management of Waste (Ley General
para la Prevención y Gestión Integral de los Residuos). We are also subject to the Federal Consumer Protection Law
(Ley Federal de Protección al Consumidor), the Federal Labor Law (Ley Federal del Trabajo), the Social Security
Law (Ley del Seguro Social), the Federal Appropriations Law (Ley Federal de Derechos), the Customs Law (Ley
Aduanera), the Mining Law (Ley Minera), the General Health Law (Ley General de Salud) and the Industrial
Property Law (Ley de la Propiedad Industrial).
In Colombia, Bolivia, Ecuador and Peru, some of the principal laws that apply to us and our operations are those
relating to the performance of commercial activities, capital and corporate structure of companies, labor laws,
accounting, currency exchange, compliance with local and national tax obligations, and environmental regulations.
These laws and regulations are of various kinds and are from many different sources, including, among others: the
Constitution of Colombia (Constitución Política de Colombia), the Constitution of Bolivia (Constitución Política del
Estado Plurinacional de Bolivia), the Constitution of Peru (Constitución Política del Perú), the Constitution of
Ecuador (Constitución Política del Ecuador), civil codes, commercial codes, foreign exchange and foreign
investment regimens in each country, the local and national tax code, customs, the accounting rules in each country,
IFRS, labor laws, consumer laws, environmental regulations and mining regulations. In addition, international norms
from conventions, agreements and treaties entered into by those countries are applicable.
In Colombia, some of the principal laws applicable to us are Law 99, which created the Environmental
Protection Ministry; Resolution 941, which created the Renewable Resource Usage Information Subsystem; Decree
2811, which laid out the National Code of Renewable Resources and Environmental Protection; and Law 373, which
established the program for the efficient use of water.
In Costa Rica, some of the principal laws applicable to us are the Waters Law (Ley de Aguas), General Health
Law (Ley General de Salud), Organic Environmental Law (Ley Orgánica del Ambiente), Waste Management Law
(Ley para la Gestión Integral de Residuos), Forest Law (Ley Forestal) and Soil Use, Management and Conservation
Law (Ley de Uso, Manejo y Conservación de Suelos).
We consider, in general terms, that we are in compliance with the legislation to which we are subject.
Tax Regulation
We are subject to the payment of ISR on our profits, calculated as revenues less official deductions. We make
monthly ISR payments into our annual tax account. The applicable ISR rate for the fiscal year 2015 is 30%.
Dividends and other dispositions to our shareholders who are natural persons and to foreign residents are subject
to the payment of 10% of the ISR, other than those declared which are charged against the net fiscal income account
(CUFIN) existing in respect of results for periods occurring prior to December 31, 2013.
We are also subject to the IVA. The IVA is an indirect tax that we pass on to our clients. The actual IVA rate is
16% of the value of the services and products we sell.
In addition to Mexican tax regulations discussed above, we are also subject to the tax regulations of the other
countries in which we operate. See “Taxation—Certain Mexican Tax Considerations.”
Antitrust Regulation
We are subject to antitrust and competition laws and regulations governing our business and acquisitions. As of
the date of this offering memorandum, we believe that we are in compliance with such laws and regulations and none
of our recent acquisitions is under review by the Mexican Federal Economic Competition Commission or other
regulatory or economic authorities of the other jurisdictions in which we operate. Approval of the Mexican Federal
Economic Competition Commission or other regulatory or economic authorities of other jurisdictions may be
required for us to enter into significant acquisitions, dispositions or joint ventures in the future. Failure to obtain the
approval of the Mexican Federal Economic Competition Commission or other economic authorities in the other
jurisdictions in which we operate may result in the imposition of fines on us or the divestiture or sale of assets. As the
opportunities to expand our operations continue, it is possible that we will face greater scrutiny from antitrust
regulators in the countries in which we operate. See “Risk Factors—Risk Factors Relating to Mexico and Other
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Countries Where We Operate—Antitrust laws in Mexico and other countries where we operate may limit our ability
to expand our operations.” In addition, our operations could be subject to investigations in the case of third party
claims, or if the authorities believe that we are operating in violation of competition laws.
Environmental Matters and Regulation
We are subject to various environmental laws and regulations related to, among other things, the production,
storage, handling, use, remediation, disposal, treatment and transportation of hazardous materials and wastes, the
emission and discharge of hazardous materials into the ground, air or water, and the health and safety of our
employees.
These environmental laws also require us to obtain permits for some of our operations from governmental
authorities. These authorities can modify or revoke our permits and can enforce compliance through fines and
injunctions. We cannot assure you that we have been or will be at all times in complete compliance with such laws,
regulations and permit requirements. If we violate or fail to comply with these laws, regulations and permit
requirements, we could be fined or otherwise sanctioned by regulators. Environmental authorities may inspect any
facility and, either as part of such inspection or in response to inspection findings, may bring administrative and
criminal proceedings against companies that violate environmental laws. They have the authority to close facilities,
revoke required environmental permits and impose sanctions and fines. These standards expose us to the risk of
substantial environmental costs and liabilities.
We could also be held liable for any and all consequences arising out of human exposure to hazardous materials
or other environmental damage. Mexico permits class actions to be initiated in connection with environmental
liabilities. Certain environmental laws assess liability on current or previous owners or operators of real property for
the cost of removal or remediation of hazardous materials. Environmental laws often impose liability even if the
owner or operator did not know of, or was not responsible for, the release of hazardous substances. Persons who
arrange for the disposal or treatment of hazardous substances also may be responsible for the cost of removal or
remediation of these substances, even if such persons never owned or operated any disposal or treatment facility. We
cannot assure you that our costs of complying with current and future environmental and health and safety laws, and
our liabilities arising from past or future releases of, or exposure to, hazardous materials will not adversely affect our
business, results of operations or financial condition. See “Risk Factors—Risk Factors Related to Our Business—We
are subject to stringent environmental laws and regulations which may impose significant costs on us.”
We endeavor to have our management systems in place at our production facilities comply with national and
international standards, including ISO-9001 for quality management, ISO 14001 for environmental management and
OHSAS 18001 for workplace safety and occupational health management. Further, many of our manufacturing
plants are certified by ONNCCE, CONAGUA, CERTIMEX, International Code Council, CSTB and BASC. In
addition, PROFEPA has granted many of our manufacturing plants in Mexico the Clean Industry Certification, which
certifies compliance with Mexican environmental laws.
Our manufacturing processes incorporate certain hazardous materials, which can be toxic to employees if
allowed to become airborne in high concentrations. We have incorporated safety controls and procedures into our
manufacturing processes designed to maximize the safety of our employees and the area surrounding our
manufacturing plants. We have a comprehensive program to train our employees in the proper handling of these
materials, as well as in pollution prevention and control, natural resource management and waste management. Each
of our plants has an Environmental, Safety and Health Manager that is responsible for the implementation of, and
compliance with, our safety controls and procedures.
For example, certain of our fiber cement products are manufactured using chrysotile fiber, which is a form of
asbestos. Asbestos (including chrysotile asbestos) is one of the substances considered by the International Agency for
Research on Cancer to be carcinogenic. Our use of chrysotile fiber is subject to various health and safety standards in
the countries in which we operate or sell our products. We currently operate below permissible exposure levels in
each country in which we manufacture products containing asbestos, and we do not manufacture in or export to the
United States any products containing asbestos. We implement extensive measures to minimize the risk from
asbestos in our manufacturing process: we only use asbestos to manufacture certain products and each facility where
asbestos is used features advanced designs and engineering controls to minimize the exposure to asbestos. As a result,
the systems and procedures at each facility are certified by national and international organizations as being
optimized to limit health and safety risks. Due to these systems and procedures, we do not believe our manufacturing
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process poses an unacceptable health or safety risk to our employees. However, our employees who work with
chrysotile fibers are entitled to workers’ compensation from the Instituto Mexicano del Seguro Social (Mexican
Social Security Institute) in case of injury or illness sustained in the course of their employment. Such employees
would also be entitled to initiate a class action against us. Our finished products that are manufactured using
chrysotile fiber do not pose an unacceptable risk to our customers because they contain very low percentages of
chrysotile fibers and such fibers are contained within the products rather than released into the air due to the density
of the finished products.
In Mexico, the use of chrysotile asbestos is regulated by various standards and regulations, such as NOM 125SSA1, which are enforced by various institutions and government authorities, such as the Ministry of Health and the
Federal Commission for Sanitary Risks and Protection. In Colombia, the Ministry of Health and Social Protection
regulates the use, management, utilization, manipulation and risk control mechanisms of asbestos.
In addition, we generate certain by-product residues that are classified as non-hazardous, but must be properly
controlled and disposed of under applicable environmental laws. Among the laws to which we are subject are the Ley
General del Equilibrio Ecológico y la Protección al Ambiente (Mexican General Law of Ecological Balance and
Environmental Protection), the Ley de Aguas Nacionales (National Water Law), the Ley General para la Prevención
y Gestión Integral de los Residuos (General Law for the Prevention and Integral Management of Waste), and their
related regulations. The Ministry of Environment and Natural Resources (SEMARNAT), the Mexican Attorney
General for Environmental Protection (PROFEPA) and the National Water Commission (CONAGUA) are the
principal governmental agencies responsible for supervising, monitoring and enforcing Mexican environmental
regulations. We are also subject to local and municipal regulations related to non-hazardous waste, land use and
wastewater discharges into sewers and/or drainage.
Newly acquired businesses are integrated into our environmental management plans, including training,
corporate policy compliance and ensuring compliance with all applicable environmental regulations.
Every year, all of our facilities carry out environmental improvement projects. Among the most noteworthy
projects completed during 2014 were the following:

The Santa Clara Plan obtained level 1 GEI recognition from SEMARNAT relating to the measurement of
greenhouse gases.

Eternit Colombiana, S.A. achieved a reduction of 23% in the consumption of water in the production process.
We eliminated the contamination of electric transformers. According to the results obtained by a certified
laboratory under the applicable ASTM norms, there was no presence of carcinogen PBCs (biphenyls,
polychlorinate, benzene): oils used as dieletric fluids in the refrigeration of electric transformers and condensers
and which have carcinogenic contents and electric insulators.

Eternit Pacífico S.A. carried out energy and technical optimization with electric vehicles as part of the process,
which also reduces our impact in terms of carbon dioxide emissions. Similarly, we strengthened the dust
collector at the carbonate plant so that the collector obtains a greater amount of material, which is eventually
reused in the process. There was also a 5% reduction in the monthly average use of energy compared with the
goal for the plates machine.

Eternit Atlántico S.A. reduced the final disposal of waste from operations by 58% and reduced by 10% the
consumption of underground water throughout the company. The environmental authority in charge of the
district of Barranquilla, DAMAB, audited our management of all of our waste and certified that our company is
in compliance with all of the current legislation.

Eternit Ecuatoriana S.A. obtained a fiber cement waste environmental management license, the only certification
in the country for this activity. It achieved a reduction in daytime and nighttime environmental sound pollution to
the limits permitted by law. It has reduced the consumption of well water by 50% thanks to the water
recirculation system that it implemented. Similarly, it worked on reducing consumption of fuels by 25% after
having changed the mold lubrication system to use biodegradable chemicals. Energy was reduced in the general
factory from 90 to 75 kwh per ton.
135

Duralit worked on the reduction of the consumption of water by 8% thanks to the addition of a water collector
that is in the new molding area, which permits a better use of this non-renewable natural resource, reusing it in
our processes.

The Industrias Fibraforte plant reused plastics that other industries in the sector had discarded in a recycling
process, creating value by transforming them into a raw material for our products.

In El Salvador, we achieved the following:

Reuse of tires for conversion into pots and bases for plants within the company, which decreased the
transportation of waste; and

Construction of a water treatment plant, where the water is treated with sulfuric acid and ammonia to
achieve the ph balance necessary for the production and distribution through the channels in the
different areas for non-potable uses

In Honduras, we achieved treatment of water left over from the painting process through the building of
canals which collect the water left over from the painting process to transport it to the treatment plant.

In Costa Rica, we achieved the following:

Implementation of a system to reprocess sludge generated from production, to be reused in the process
as a raw material, and incorporation of residual sludge into our process with the goal of reducing the
cost of raw material consumption and the cost of disposal of such waste; and

Substituting potable water for waste water to clean primary machines and reduction of the consumption
of potable water by approximately 40% compared to that consumed in the primary production zone.

In our plant in Celaya, Guanajuato, Mexico, we implemented the reuse of waste water for the preparation of
chemicals. With this initiative, we were able to obtain an annual savings of 1,809 m3 of water during 2014.
Similarly, we reused hydraulic old through a re-additive process obtaining a savings of Ps$1.2 million.

In our plant in Vallejo in the Federal District of Mexico, we implemented a program to save potable water.
Consumption decreased from 0.31 m3 per ton produced in 2013 to 0.22 m3 per ton produced in 2014,
obtaining an improvement of 71%, equivalent to 6,420 m3 of water. We also achieved a reduction in the
consumption of natural gas from 392 m3 per ton produced in 2013 to 343 m3 per ton produced in 2014,
obtaining savings of Ps$1.6 million.

In our plant in San Luis Potosí, Mexico, we implemented a plan to use treated water, exchanged regular
urinals for ecological ones, and used treated water to feed our cooling towers rather than water from deep
wells. This resulted in a decrease of 32% in the consumption of well water compared to 2013.
Employees and Labor Relations
As of March 31, 2015, we had 6,327 employees, all of whom were full-time employees. Approximately 63%
were union employees and 37% were non-union employees. We have entered into 26 collective bargaining
agreements with various unions and confederations. Collective bargaining agreements are usually renegotiated every
year, except for the Colombian collective bargaining agreement that has a three-year term. We believe that we are
proactive in establishing and fostering a climate of positive relations and we have historically enjoyed good relations
with unions and our employees. We have not had any strikes in our plants that have materially affected our
operations. See “Risk Factors—Risk Factors Related to Our Business—Labor disruptions could affect our results of
operations.”
In addition to full-time employees, we have contracts with companies that secure the services of temporary
employees. As of March 31, 2015 we had approximately 282 temporary production employees. As of December 31,
2014, we had 275 temporary production employees.
136
The following table shows the breakdown of our employees (excluding temporary employees) by division, as of
March 31, 2015.
Division
Cement ............................................................................................................
Building Systems .............................................................................................
Metal Products.................................................................................................
Corporate .........................................................................................................
Total ............................................................................................................
Unionized
NonUnionized
152
1,515
2,140
0
3,807
237
1,364
523
114
2,238
Total
389
2,879
2,663
114
6,045
The following table shows the breakdown of our employees, including temporary production employees, by
country.
As of
March 31,
Employees(1)
Bolivia .......................................................................................
Colombia ...................................................................................
Costa Rica .................................................................................
Ecuador .....................................................................................
El Salvador ................................................................................
Honduras ...................................................................................
Mexico .......................................................................................
Peru ...........................................................................................
United States .............................................................................
Total ......................................................................................
As of December 31,
2015
2014
2013
2012
209
658
265
123
238
155
4,260
157
262
6,327
207
644
225
122
259
156
4,295
157
232
6,297
204
611
215
162
229
176
4,221
148
18
5,984
207
620
197
140
193
168
4,185
156
17
5,883
(1) Includes temporary production employees.
In all jurisdictions in which we operate, we provide the standard employee benefits required under local laws.
Property, Plant and Equipment
We own all of our plants, warehouses and offices. The total installed capacity of our plants in our Cement,
Building Systems and Metal Products Divisions amounted to 2.2 million tons, 1.6 thousand tons and 71 thousand
tons, per year, respectively. In 2014, our utilization rate for our plants was 74% for the Cement Division, 57% for the
Building Systems Division and 92% for the Metal Products Division.
Our principal assets include the following manufacturing plants:
Division and Plant
Country
Commencement Estimated Maximum
of Operations
Installed Capacity(1)
Utilization
Rate in 2014
(%)
Products
Cement:
El Palmar................................................. Mexico
Tula ......................................................... Mexico
2013
2006
1,008,000
720,000
60
74
Gray cement
Gray cement
Vito ......................................................... Mexico
1944
156,000
132,000
62
44
White cement
Gray Cement
137
Certifications
N/A
Clean Industry Audit
(PROFEPA)
Clean Industry Audit
(PROFEPA)
Division and Plant
Country
of Operations
Utilization
Rate in 2014
(%)
Products
Building Systems:
Santa Clara .............................................. Mexico
1954
173,400
78
Fiber cement
sheets, tiles,
panels and
pipes, and
polyethylene
tanks and
cisterns
Guadalajara ............................................ Mexico
1960
96,000
59
Nuevo Laredo.......................................... Mexico
2006
72,000
59
Villahermosa ........................................... Mexico
1977
45,000
53
Monterrey................................................ Mexico
2013
780
17
Chihuahua ............................................... Mexico
1962
648
30
Expansión La Luz ................................... Mexico
1983
4,080
40
Extrusión Cuamatla ................................. Mexico
1980
9,240
49
North Carolina(2) ..................................... USA
1997
119,000
89
Oregon ................................................. USA
1999
135,300
34
Indiana(2) ................................................. USA
Cartago .................................................... Costa
Rica
2008
1964
258,500
63,000
0
74
Polyethylene
tanks and
cisterns, fiber
cement
corrugated
sheets and
tiles.
Exterior fiber
cement walls
Fiber cement
sheets and
tiles and
polyethylene
tanks, cisterns
and septic
tanks
Polyethylene
tanks
Polyethylene
tanks
Construction
products,
expanded
polystyrene,
shoring
partitions,
plates, fillings,
panel strips,
moldings,
panels for
refrigeration
chambers and
seedbeds
Industrial
polystyrene
plant for
laminated and
thermoformed
products, rolls,
sheets, glasses,
plates and
industrial
containers
Fiber cement
external walls
Fiber cement
external walls
N/A
Fiber cement
boards for tile
floors, walls,
ceilings, Fiber
cement boards
for facades and
fiber cement
exterior walls,
panels, and
soffits.
(2)
138
Certifications
ISO9001:2008,
ISO14001:2004,
Industria Limpia,
NMX-C-012, NMXC-039, NMX-C-374,
NOM-006CONAGUA, ICC,
CSTB, Pacto Global
ISO 9001:2008, ISO
14001:2004, OHSAS
18001:2007, Industria
Limpia, NMX-C-374,
NOM-006CONAGUA, ICC,
Pacto Global
ISO 9001-2008, ICC
ISO 9001-2008;
Pacto Global
Pacto Global
Pacto Global
NOM-018, Pacto
Global
Pacto Global
ISO 14001 (expired)
ISO 14001 (expired)
N/A
ISO 9001, ISO
14001, OSHAS
18001
Division and Plant
Country
of Operations
Utilization
Rate in 2014
(%)
San Pedro Sula ........................................ Honduras 1980
52,000
63
El Salvador .............................................. El
Salvador
1986
63,000
100
Eternit Colombiana ................................. Colombia 1942
144,600
68
Eternit Pacífico........................................ Colombia 1945
79,000
69
Eternit Atlántico ...................................... Colombia 1944
80,000
81
Eternit Ecuatoriana .................................. Ecuador
1978
73,000
46
Duralit Bolivia ........................................ Bolivia
1977
84,000
77
Industrias Fibraforte ................................ Peru
1993
9,613
99
139
Products
Panels for
interior and
exterior
flooring,
suspended
ceilings,
ceiling and
trim basis.
Fiber cement
sheeting for
roofs and
walls, corners,
shapes and
accessories for
ceilings.
Tiles for fiber
cement
roofing,
suspended
ceiling panels,
flooring,
autoclaved
fiber cement,
fiber cement
sheets, paint,
plastic water
tanks,
translucent
PVC tile
Tiles for fiber
cement
roofing, sheets
and panels for
ceiling panels
and paintings
Tiles for fiber
cement
roofing, sheets
and panels for
ceiling panels,
paints and
plastic water
tanks
Fiber cement
flat and
corrugated
sheeting, tiles,
fixtures, and
gutters,
drainage pipes,
skylights and
paints.
Flat and
corrugated
fiber cement
sheets, tiles,
plastic water
tanks, septic
tanks and
paints.
Polypropylene
and
polycarbonate
sheets
Certifications
ISO 9001, ISO
14001, OSHAS
18001
ISO 9001, ISO
14001, OSHAS
18001
ISO 9001:2008, ISO
14001:2004, OHSAS
18001:2007, BASC
Version 4-2012
ISO 9001:2008, ISO
14001:2004, OHSAS
18001:2007 (Bureau
Veritas) and BASC
V4-2012 (WBO)
Bureau Veritas, ISO
9001, ISO 14001,
OSHAS 18000,
BASC V4 del 2012
INEN 1320 Type III,
INEN
1320 Type IV, ISO
9001, ISO14001,
OSHAS:18001
ISO 9001:2000,
IBNORCA (Instituto
Boliviano de
Normalización y
Calidad) Certificado
de Sello de Producto
NB 673:2010,
Certificado de
Aprobacion.
Renewed on
02/07/2011
ISO 9001-2000
ICONTEC
Division and Plant
Country
of Operations
Utilization
Rate in 2014
(%)
Products
Certifications
Copper sheets
and strips,
copper foil
Copper wire;
Copper bars;
copper
profiles; round
wires.
Connectors
and valves for
water and gas,
regulators,
pigtail,
industrial
connectors,
original
equipment
machined
parts, forged
parts
Copper and
copper alloys,
pipe and tube,
and fittings
Industria Limpia, ISO
9001:2008, ISO
14401:2004
ISO9001:2008; UL
pigtail certification;
Environmental
Management System
ISO 14001:2004
Metal Products:
Vallejo..................................................... Mexico
1950
21,600
93
Celaya ..................................................... Mexico
1982
18,000
92
San Luis Potosí ....................................... Mexico
1980
31,000
91
(1)
In tons per year.
(2)
The utilization rate for these plants has been calculated on usage between January and December of 2014.
ISO 9001:2000,
Industria Limpia
Depreciation of property, plant and equipment is calculated using the straight-line method based on
management’s estimates of the useful lives of these assets. The average useful lives of our main group of assets are
listed below:
Asset
Average useful life
Buildings ..............................................................................
Machinery and equipment ....................................................
Transportation equipment ....................................................
Furniture and office equipment ............................................
Computing equipment .........................................................
40 and 60 years
20-30 years
4 and 5 years
10 years
3 years
Distribution Centers, Stores and Sales Offices
We market our products through an extensive distribution network composed of distribution centers, warehouses
and sales offices.
Location
Guadalajara, Mexico ..........
Puebla, Mexico ...................
Ciudad Juárez, Mexico .......
Tijuana, Mexico .................
Houston, Texas ..................
Laredo, Texas ....................
Monterrey, Mexico .............
Mexico City, Mexico ..........
Celaya, Mexico ...................
San Luis Potosí, Mexico .....
Savannah, Georgia .............
Format
Warehouse
Warehouse
Warehouse
Warehouse
Sales Office
Distribution Center
Warehouse
Warehouse
Warehouse
Warehouse
Warehouse
Products/Division
Metal Products
Metal Products
Metal Products
Metal Products
Metal Products /Building Systems
Metal Products
Metal Products
Metal Products
Metal Products
Metal Products
Building Systems
140
Leased/Owned
Leased
Leased
Leased
Leased
Owned
Leased
Leased
Owned
Owned
Owned
Leased
Location
Oakland, California ...........
Chiclayo, Peru ...................
Arequipa, Peru ...................
Medellin, Colombia ............
Guayaquil, Ecuador ............
Cuenca, Ecuador.................
Lima, Peru ..........................
Cochabamba, Bolivia .........
Format
Warehouse
Distribution Center
Distribution Center
Distribution Center
Distribution Center
Distribution Center
Warehouse
Warehouse
Products/Division
Building Systems
Building Systems
Building Systems
Building Systems
Building Systems
Building Systems
Building Systems
Building Systems
Leased/Owned
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Insurance
Currently, we hold various insurance policies that protect our plants and distribution centers against different
types of risk. We consider these policies to be appropriate for the type of industries in which we operate and typical
for companies in the industries in which we operate.
Guarantees
As of the date of this offering memorandum, Elementia does not secure any of its credit agreements.
Notwithstanding, the following subsidiaries issue, directly or indirectly, our Certificados Bursátiles ELEMENT
10: Nacional de Cobre, S.A. de C.V., Mexalit Industrial, S.A. de C.V., The Plycem Company Inc., Compañía
Mexicana de Concreto Pretensado Comecop, S.A. de C.V. and Frigocel. See “Management’s Discussion and
Analysis of Our Results of Operations and Financial Condition—Liquidity and Capital Resources.”
Similarly, the 2025 notes are guaranteed, directly or indirectly, by the following subsidiaries: Nacional de Cobre,
S.A. de C.V., Mexalit Industrial, S.A. de C.V., Frigocel and ELC Tenedora Cementos. See “Management’s
Discussion and Analysis of Our Results of Operations and Financial Condition” and “Management.”
Investments
As of March 31, 2015, we had made investments in an amount of Ps$128 million for fixed assets.
Legal Proceedings
We are party to several administrative and judicial proceedings in civil, labor, and tax matters that are incidental
to the normal course of our business. Some of the pending proceedings, complaints or investigations may have an
adverse effect on our results of operations or our operating or financial condition.
Nacobre, one of our subsidiaries, was involved in an anti-dumping investigation initiated by the U.S. Department
of Commerce, or “DOC”, with respect to certain copper products from China and Mexico. As a result of this
investigation, an anti-dumping duty was established at a rate of 27.16% on the declared value of our exports to the
United States. We believe that we have complied with the DOC’s ruling, but we cannot assure you that further
proceedings will not be initiated in the future. On December 31, 2011, in its first revision, the DOC formally began
reviewing all of Nacobre’s sales made during the period from November 22, 2010 to October 31, 2011. After the
first revision, the DOC concluded that during the reviewed period there was no evidence of the contemplated
weighted-average dumping margin with respect to Nacobre’s sales that were the subject of the review. On
December 30, 2012, in its second revision, the DOC formally began reviewing all of Nacobre’s sales made during the
period from November 1, 2011 to October 31, 2012. On June 30, 2014, as a result of the second revision, the DOC
determined a dumping margin of 0.58%. A new anti-dumping duty is expected to be established in June 2015 based
on the DOC’s third revision.
On May 22, 2013, the Canada Border Services Agency, or “CBSA”, initiated an anti-dumping investigation into
the importing of copper tubing originating from Brazil, Greece, China, Korea and Mexico during the period from
May 1, 2012 to April 30, 2013. On August 20, 2013, the CBSA issued a preliminary resolution whereby it
determined an estimated dumping margin of 17.6% by Nacobre. On November 18, 2013, the CBSA issued a final
resolution whereby it determined a dumping margin of 23.5% by Nacobre and it fixed market prices for all future
exports, which shall remain in force until the CBSA initiates a reinvestigation. A reinvestigation is normally
141
conducted upon annualized export quantity and price change information, making it difficult to predict when a
reinvestigation will take place.
On September 13, 2014, our subsidiaries Eternit Colombiana and Eternit Pacífico, along with other third parties,
were joined to a class action lawsuit initiated nine years before brought forth in the 39th administrative court of
Colombia by parties allegedly affected by chrysotile against a mine that supplies us with chrysotile (Minera Bricolsa
SAS, formerly known as Minera Las Brisas) and against two Colombian officials. The lawsuit alleges that the mine’s
exploitation and commercialization of asbestos has caused damage to the environment and ecological balance. On
January 15, 2015, the companies filed their response to the complaint. On April 24, 2015, Eternit Atlántico was
joined to the same proceeding and its response was filed on May 15, 2015. In the cases of Eternit Colombiana, Eternit
Pacifico and Eternit Atlántico, the claims aim for responsibility for damage to collective interests and rights. In the
case of a decision favorable to the claimants, our legal advisors in charge of this case have advised us that such
claims could have a variety of consequences, including an order to suspend the use of chrysotile and to pay
compensation for any damages caused to the community. The proceedings will remain in the first instance until all
evidence is presented. After the court ruling, there will be the possibility of a second hearing before the
Administrative Court, which is the body responsible for issuing the decision. However, this decision may be subject
to review by the State Council, which is the highest administrative court in Colombia and which will decide the
matter definitively. In the opinion of the legal counsel in charge of the defense in this matter, the process will be long
and the results difficult to predict.
In addition, a proceeding has commenced before the Administrative Court of Cundinamarca, Colombia, First
Section, Subsection A, consisting of a lawsuit against various public and private entities in Colombia, including,
among others, Eternit Colombiana, S.A., seeking a declaration of their responsibility in the damages to health and life
allegedly suffered by a class of persons and requesting payment of damages by such entities. In this process, of which
we were recently notified, an appeal has been filed against the notification, alleging expiration of the term during
which a class action may be brought, and opposing the imposition of temporary injunctive relief sought by the
petitioners. The appeal has suspended the term for answering the complaint and the court has decided in favor of
Eternit Colombiana, S.A. in relation to the injunctive relief, without the case having been resolved. Currently, the
amount of compensation claimed is about approximately US$1 million. However, in litigation of this nature it is
difficult to forecast possible increases in the contingent liability (which may be significant) as well as the time for
resolution of the proceeding. The Company has made the necessary reserves to cover the costs which may arise from
these proceedings.
There is also an application for a writ of protection commenced by an individual against the Ministry of Health
of the Municipality of Sibaté, Government of Cundinamarca, Colombia in the Administrative Court of
Cundinamarca, Fourth Section, Subsection B. The plaintiff is requesting that the local environmental authority takes
appropriate measures to eliminate asbestos particles on the site. On May 8, 2015, an appeal was filed by the Ministry
of Health, Municipality of Sibaté, Department of Cundinamarca (Ministerio de Salud, Municipio de Sibaté,
Gobernación de Cundinamarca). This complaint may cause the local authority to commence administrative actions
against Eternit Colombiana, S.A. as the alleged producer of dangerous waste in the event that the plaintiff’s
complaint is successful, which could lead to the imposition of fines or sanctions against Eternit Colombiana, S.A.
Currently, Eternit Colombiana S.A. is not involved in these proceedings, but nevertheless, in the opinion of the legal
counsel in this matter, it is highly possible that Eternit Colombiana will be joined to these proceedings in the future,
in which case the appropriate defense will be raised. The Company has made the necessary reserves to cover the costs
which may arise from these proceedings.
To our knowledge, none of our shareholders, directors or senior management is party to any judicial proceeding
which could adversely affect our results of operations or our financial position. Moreover, neither we nor our
subsidiaries are party to any tax proceeding which could adversely affect our results of operations or our financial
position.
142
MANAGEMENT
Our Board of Directors
Our board of directors is composed of 11 directors and alternates, which were appointed at a general
shareholders’ meeting. More than 25% of the board members are independent directors. The members of our current
board of directors were appointed at our general ordinary shareholders’ meeting on April 30, 2015, for a one-year
term and they may be reelected for subsequent one-year terms.
According to our by-laws (estatutos sociales), the board of directors is granted the broadest authority to perform
all matters inherent to our corporate purpose, except for those expressly reserved for shareholders. In particular, our
board of directors designs and approves all Company policies.
Set forth below are the names of the persons who will be appointed as directors, their principal occupation and
their business experience.
Name
Position
Francisco Javier del Valle Perochena .......... Chairman and Director
Antonio del Valle Perochena ...................... Director
Eduardo Domit Bardawil ............................ Director
Jaime Ruiz Sacristán ................................... Director
Eugenio Clariond Rangel(1) ......................... Director
Divo Milán Haddad(1) .................................. Director
José Kuri Harfush(1)..................................... Director
Gerardo Kuri Kaufmann ............................. Director
Alfonso Salem Slim .................................... Director
Antonio Gómez García .............................. Director
Juan Rodríguez Torres(1)(3) .......................... Director
Juan Pablo del Río Benítez ........................ Secretary(2)
Santiago Bernard Covelo ............................ Deputy Secretary(2)
Age
Member Since
45
46
50
65
46
58
65
30
52
53
75
46
40
2000
2000
2012
2007
2014
2014
2009
2009
2009
2009
2014
2009
2014
(1) Independent director
(2) Not a member of the Board of Directors
(3) Financial expert
Francisco Javier del Valle Perochena is the Chairman of our Board of Directors and has been a member of the
Board of Directors since 2000 and has over 25 years of experience in the industry. Mr. Francisco Javier del Valle
Perochena graduated with a degree in Business Administration from Universidad Anáhuac, has a master's degree in
economics and business from the same university and an AD-2 in Senior Management from IPADE (Instituto
Panamericano de Alta Dirección de Empresas). He is currently the general manager of Controladora GEK, S.A.P.I.
de C.V. and a member of the board of directors of Mexichem, S.A.B. de C.V., Grupo Kaluz, Banco Ve por Más, S.A.
Institución de Banca Múltiple, Grupo Financiero Ve por Más and Grupo Pochteca, S.A.B. de C.V. Mr. Francisco
Javier del Valle Perochena is the brother of Mr. Antonio del Valle Perochena and nephew of Mr. Jaime Ruíz
Sacristán.
Antonio del Valle Perochena has been a member of our Board of Directors since 2000. He graduated with a
degree in Business Administration from Universidad Anáhuac in 1992 and he holds a A-D-2 in Senior Management
from the Instituto Panamericano de Alta Dirección de Empresa, or “IPADE.” He is currently the Chairman of the
Board of Grupo Kaluz and of Grupo Financiero Ve por Más, S.A. de C.V., as well as a member of the boards of
Mexichem, S.A.B. de C.V., Casa de Bolsa Ve por Más, S.A. de C.V., Grupo Financiero Ve por Más y Arrendadora
Ve por Más, S.A. de C.V., Sociedad Financiera de Objeto Múltiple, Entidad Regulada, Grupo Financiero Ve por
Más, Grupo Pochteca, S.A.B. de C.V., Byline Bancorp Inc. and Byline Bank. Mr. Antonio del Valle Perochena is the
son of Mr. Antonio del Valle Ruiz; brother of Mr. Francisco Javier del Valle Perochena and nephew of Mr. Jaime
Ruíz Sacristán.
143
Eduardo Domit Bardawil has been a member of our Board of Directors since 2012. He graduated with a degree
in Civil Engineering from Universidad Anáhuac and has a Master’s in Business Administration from the Instituto
Tecnológico Autónomo de México. Mr. Eduardo Domit Bardawil is the brother-in-law of Messrs. Francisco Javier
and Antonio del Valle Perochena.
Jaime Ruiz Sacristán has been a member of our Board of Directors since 2007. He graduated with a degree in
Business Administration from Universidad Anahuac in 1972, and has a Masters in Finance from Northwestern
University (1974). Since January 1, 2015, Mr. Ruiz has been the Chairman of the Board of Directors of the Mexican
Stock Exchange, Mexder, Mercado Mexicano de Derivados, S.A. de C.V., Indeval and other companies that are part
of the Grupo Bolsa Mexicana de Valores. Mr. Ruiz is a former President of the Bankers Association of Mexico and is
also Chairman of the Board of Banco Ve por Más, S.A., Institución de Banca Múltiple, Grupo Financiero Ve por
Más, Grupo Financiero Ve por Más, S.A. de C.V., Casa de Bolsa Ve por Más, S.A. de C.V., Grupo Financiero Ve por
Más, Arrendadora Ve por Más, S.A. de C.V., SOFOM, E.R., Grupo Financiero Ve por Más, Mexichem, S.A.B. de
C.V., Grupo Kaluz, Byline Bancorp Inc. and Byline Bank. Mr. Jaime Ruíz Sacristán is the uncle of Messrs. Antonio
and Francisco Javier del Valle Perochena.
Eugenio Clariond Rangel is a member of our Board of Directors. Eugenio Clariond Rangel holds a degree in
Chemical Engineering and Systems from the Instituto Tecnológico y de Estudios Superiores de Monterrey, a Master’s
of Business Administration from the University of Texas at Austin and has participated in the International Program
for Administration at IPADE, in Florida. He has held various positions in industrial companies, among them: General
Manager at Stahl; Chief of Planning and Projects at IMSALUM; Chief Operating Officer at Grupo Cuprum, S.A.P.I.
de C.V.; and currently the Chief Executive Officer of Grupo Cuprum. He has held multiple positions in businesses,
institutions and academic and social associations, among them: Chairman of the Chamber of Commerce for the
Transformation of Nuevo León (CAINTRA); Vice Chairman of the Confederation of Chambers of Commerce
(CONCAMIN); Chairman of the Mexican Institute of Aluminum A.C. (IMEDAL); Member of the Executive
Committee and Board of “The Aluminum Association”; Vice Chairman and Director of the Mexican Council on
Foreign Trade, Northeast (COMCE); Member of the Council of COPARMEX Nuevo León; Member and Director of
the Credit Committee of Banco Ve por Más; Member of the Board of Directors of Mexichem S.A.B. de C.V.;
Chairman of the Commission on Finances, Fundraising and Institutional Relations for the Nuevo León State Council
of Wild Flora and Fauna; Member of the Board of XIGNUX, S.A. de C.V.; Member of the Board of the University of
Monterrey (UDEM); and Member of the Boards of PROITESM and Supera A.C.
Divo Milán Haddad is a member of our Board of Directors. Divo Milán Haddad has a degree in Law and a
Masters in Administration from the Universidad Iberoamericana. He has a diploma in Securities Regulation and
Transnational Business Problems Negotiation from Harvard University. He has also completed studies in senior
business management from the IPADE. He is currently the General Director of Grupo C.N.I., Investigación
Estratégica, Pro-Invest, Promotora Eco, S.A. de C.V., Servicios de Comercio Electrónico, S.A. de C.V., Dab-Invest
and Dimmag, S.A. de C.V. (a Panamanian company). He also serves as president of the Board of Directors of
Inmobiliaria del Norte, Grupo C.N.I. and Plu Mil and as a director for New Dawn Mining, Pro-Invest, Mexichem,
S.A.B. de C.V., Banco Ve por Más, S.A., Institución de Banca Múltiple, Grupo Financiero Ve por Más, Círculo de
Crédito, Grupo Financiero Ve por Más, S.A. de C.V. and Grupo Kaluz.
José Kuri Harfush has been a member of our Board of Directors since 2009. Mr. José Kuri Harfush has a degree
in Business Administration and a Master’s in Business Administration from the Universidad Anáhuac. He is
currently Director General of Janel, S.A. de C.V. and is a director at Grupo Carso, Teléfonos de Mexico, S.A.B. de
C.V., Grupo Financiero Inbursa, S.A.B. de C.V.; Banco Inbursa, S.A., Institución de Banca Múltiple, Grupo
Financiero Inbursa; Banco Inbursa; Seguros Inbursa, S.A., Grupo Financiero Inbursa; and Impulsora del Desarrollo y
el Empleo en América Latina, S.A.B. de C.V. (IDEAL). Mr. José Kuri Harfush is the father of Mr. Gerardo Kuri
Kaufmann.
Gerardo Kuri Kaufmann has been a member of our Board of Directors since 2009. Mr. Gerardo Kuri Kaufmann
has a degree in Industrial Engineering from Universidad Anáhuac. He is 31 years old. From 2008 to 2010, he served
as the Director for Purchases of Carso Infraestrutura y Construcción, S.A. de C.V. He has been the Chief Executive
Officer of Inmuebles Carso S.A.B. de C.V. since the company’s inception. In addition, he is also a member of the
boards of directors of Minera Frisco, S.A. de C.V., Fomento de Construcciones y Contratas, S.A., Cementos Portland
Valderrivas, S.A. and Operadora de Sites Mexicanos, S.A. de C.V.
144
Alfonso Salem Slim has been a member of our Board of Directors since 2009. Mr. Alfonso Salem Slim is a Civil
Engineer from the Universidad Anahuac, graduate from the class of 1984. Throughout his career, Mr. Salem Slim
has served as: Expansion Director of Sanborns Hermanos S.A. de C.V., Chief Executive Officer of Carso’s Shopping
Center, Real Estate Director of Inbursa, Chief Executive Officer of Hoteles Calinda, Chief Executive Officer of
Grupo PC Constructores, Chief Executive Officer of IDEAL and, now, Vice President of the Board of Directors of
IDEAL and President of Inmuebles Incarso, S.A.B. de C.V. He also participates as a member of the Boards of
Directors of the following companies: Grupo Carso, IDEAL, Carso Infraestructura y Construcción, S.A.B. de C.V.,
Inmuebles Carso, S.A.B. de C.V., SEARS Operadora México, S.A. de C.V., Grupo Gigante S.A.B. de C.V., Gas
Natural and Fundación del Centro Histórico de la Ciudad de México, A.C.
Antonio Gómez García has been a member of our Board of Directors since 2009. Mr. Gómez García has a
degree in Industrial Engineering from Universidad Iberoamericana. He is currently Chief Executive Officer of Grupo
Carso, Carso Infraestructura y Construcción, S.A.B. de C.V. and Grupo Condumex, and a board member of Grupo
Carso, Grupo Idesa S.A. de C.V. and Grupo Frisco S.A.B. de C.V.
Juan Rodríguez Torres is a member of our Board of Directors. Mr. Rodríguez Torres is a Civil Engineer and has
completed Master’s studies in planning and operations research at the Universidad Nacional Autónoma de México
(UNAM). He has also completed management studies form IPADE and has a diploma in prestressed concrete from
Paris, France. He is currently a member of several boards of directors such as Fomento de Construcciones y
Contratas, S.A. (including certain of its committees), Minera Frisco S.A.B. de C.V., Grupo Sanborns S.A.B. de C.V.,
Procorp, Inmobiliaria Baita S.A. de C.V. and an advisory director of Banamex-Citi.
Juan Pablo del Río Benítez, is our Secretary since 2009. Mr. Juan Pablo del Rio Benítez holds a law degree from
Universidad Anáhuac and is currently a partner of DRB Consultores Legales, S.C. He has been a member of the
Mexican Bar Association since 2002.
Senior Management
Set forth below are the names of our current senior management members, their main occupation, their business
experience, including other directorships, and their years of service in their current position. Our senior managers are
appointed by the Board of Directors for indefinite terms.
Name
Position
Fernando Benjamín Ruiz Jacques .................. Chief Executive Officer
Rafael Lira Oaxaca ......................................... Chief Administration and Financial Officer
Juan Francisco Sánchez Kramer ..................... Director of Investor Relations
Santiago Bernard Covelo................................ Legal Director
Luis Antonio García Lima .............................. Director of Internal Audit
Jaime Emilio Rocha Font ............................... Director, Cement Division
Gustavo Arce del Pozo ................................... Director, Metal Products Division
Age
Years with the
Company
42
51
45
41
44
43
53
7
0
1
2
1
0
27
Fernando Benjamín Ruiz Jacques is our Chief Executive Officer. Prior to becoming our Chief Executive
Officer, he served as General Director for the Building Systems Division until February 2015. He has a degree in
Civil Engineering from Universidad Iberoamericana and a Master’s in Business Administration from University of
California Berkeley, as well as a Masters in Finance from Universidad Anáhuac. He has seven years of experience at
our Company and 19 years of experience in the construction and retail industries.
Rafael Lira Oaxaca is our Chief Administration and Financial Officer. He has a degree in Business
Administration from the Universidad Nacional Autónoma de México and a master’s degree in Business Management
from IPADE . He has 25 years of experience and has been Finance Director of global companies such as Techint S.A.
de C.V., Cablemas S.A. de C.V., Salesko (a subsidiary of Coca-Cola) and Panamco Coca Cola in Costa Rica, among
other senior management positions in Mexico and the United States. Previously, he was the Finance Vice-President
of Nextel México.
Juan Francisco Sánchez Kramer is our Director of Investor Relations. He has over 21 years of experience in the
industry, including three years with Mexichem and more than six years with Grupo Kaluz. His background also
includes heading areas such as sales, strategic planning, financial planning, business development, supply chain and
investor relations. Mr. Sánchez Kramer has a degree in Industrial Engineering from Universidad del Valle de México
145
and postgraduate degrees in General Marketing and Administration from Instituto Tecnológico y de Estudios
Superiores de Monterrey.
Santiago Bernard Covelo is our Legal Director. He has a degree in Law with a Master’s degree in Civil Law,
both from the Universidad La Salle. He also has a Diploma in International Arbitration from the Escuela Libre de
Derecho and the International Chamber of Commerce, a Diploma from the Business School at Yale University for
the Administration for Lawyers Program, and a Diploma from the Business School at Yale University for the
Corporate Governance Program. His professional career spans over 20 years, primarily with companies in the
pharmaceutical, retail and telecommunications sectors.
Luis Antonio García is our Director of Internal Audit. With a degree in accounting from the Universidad La
Salle, he has 25 years of experience in finance, primarily in Internal Audit but also in Finance, Administration,
Auditing and Internal Control in various companies in the service, consulting, electronics, lighting, medical
equipment, personal care, retail, manufacturing, consumer products and pharmaceutical sectors, at both the national
and international levels. The companies he has worked for are Ernst & Young, Productos de Maíz - Unilever, Philips
Mexicana, Avon Cosmetics and Carnot Laboratorios, among others.
Jaime Emilio Rocha Font has been our General Director for the Cement Division since March 1, 2015. Mr.
Rocha Font has a decrease in Civil Engineering from the Universidad Católica de Chile and has post-graduate
degrees in Administration and Business from entities such as IMD, IPADE and ULB. He has 23 years of experience
in the cement industry, and previously held various positions in upper management at Holcim. He is also a member
of associations such as Canacem and ANTP.
Gustavo Arce del Pozo is our General Director for the Metal Products Division. He has a degree in
Administration and over 27 years of experience with us. He has worked in various positions in the commercial area
serving the national and international markets for aluminum, copper and copper alloys.
Committees
Pursuant to our by-laws and the LMV, oversight of our management and operations, as well as the entities
controlled by us, is headed by our Board of Directors, with the assistance of our Audit and Corporate Practices
Committee, as outlined by the LMV.
Audit and Corporate Practices Committee
The Audit and Corporate Practices Committee must be composed of at least three independent members of the
board of directors. Our Audit and Corporate Practices Committee is composed of Juan Rodríguez Torres, Eugenio
Clariond Rangel and Divo Milán Haddad. Our Chief Executive Officer, Chief Financial Officer, the Audit Director
and the partner or partners of our external audit firm are permanent invitees to meetings of this Committee.
The duties of the Audit and Corporate Practices Committee, as established in our by-laws and derived from the
LMV, are the following:

with respect to corporate practices:

issue opinions to the Board of Directors on matters under its authority in accordance with the LMV and
our by-laws;

express an opinion in respect of related party transactions;

request the opinion of independent experts in cases where it deems convenient, including in connection
with related party transactions, for the appropriate performance of its functions or when required by the
LMV or when deemed appropriate;

convene a general shareholders’ meeting and include the matters that it deems relevant in the agenda;

support the Board of Directors in the preparation of its yearly reports, as well as the report of the Board
of Directors issued in respect of the report of our Chief Executive Officer in connection with our
financial statements;
146


opine on and approve the remuneration packages or total remuneration of our principal employees;

consider approval for third parties, employees or related parties to take advantage of corporate
opportunities otherwise available to the Company or to the entities which it controls or over which it has
significant influence;

other matters established by the LMV or provided by our by-laws, in accordance with the duties
assigned to it by the LMV; and
with respect to audit matters:

issue opinions to the Board of Directors regarding matters of its authority pursuant to the LMV and our
by-laws;

discuss our financial statements with parties responsible for their preparation and review, and
recommend or not their approval to the Board of Directors;

inform the Board of Directors of the condition of our internal control and internal audit systems or those
corresponding to the entities controlled by us, including, as appropriate, irregularities that it detects;

draft the opinion referenced in article 28, section IV, subparagraph (c) of the LMV and submit it to the
Board of Directors for their consideration, for its subsequent submission to the general shareholders’
meeting, using the external audit report as a backup. This opinion must state: (i) whether the accounting
and information policies and criteria we follow are adequate and sufficient, considering our specific
circumstances; (ii) whether such policies and criteria have been consistently applied to the information
submitted by our Chief Executive Officer; and (iii) whether, as a result of the above, the information
submitted by our Chief Executive Officer reasonably reflects our financial position and results of
operation;

support the Board of Directors in the preparation of its yearly reports, as well as the report of the Board
of Directors issued in respect of the report of our Chief Executive Officer in connection with our
financial statements;

supervise that transactions of the kind referenced in article 28, section III and article 47 of the LMV are
carried out in accordance with the standards therein established, as well as their corresponding policies
(including those related to the use of assets, our financial statements and our accounting policies);

express an opinion to the Board of Directors in respect of the appointment of the external auditor;

assess the performance of our external auditor, and analyze the report, opinions or judgments prepared
by the external auditor. The committee may meet with the external auditor whenever it deems
appropriate;

express an opinion for the benefit of the Board of Directors, with respect to transactions involving an
amount exceeding 5% of our consolidated assets;

request an opinion from independent experts in the cases it deems appropriate, for the adequate
performance of its duties or as required by the LMV;

require reports regarding the preparation of financial information and any other information it deems
necessary in the exercise of its duties from the relevant directors and other employees or entities
controlled by us;

investigate possible non-compliance of operations, guidelines and operational policies, internal control
systems, internal audits and accounting records, either from us or entities controlled by us;
147

receive comments submitted by shareholders, directors, relevant officers, employees and, generally, any
third party, regarding matters referenced by the preceding subparagraph, and act as it deems appropriate
with respect to such comments;

request periodic meetings with pertinent executive officers, and submit any type of information related
to internal controls and our internal audit or entities controlled by us;

inform the Board of Directors with regard to significant irregularities detected as a result of the
performance of its duties, and, where appropriate, the corrective actions adopted or proposed;

convene general shareholders’ meetings and request the inclusion in the agenda of the matters it deems
relevant;

monitor compliance by the Chief Executive Officers with the resolutions of the general shareholders
meetings and the Board of Directors; and

supervise the implementation of mechanisms and internal controls to ensure that our actions and
transactions and those of our controlled entities adhere to applicable norms, and implement
methodologies that enable monitoring of the above-referenced compliance.
Since May 2012 we have had a Policies and Proceedings Manual that addresses our Ethical Principles and Code
of Conduct. The purpose of the manual is to inform all employees of the Company, its subsidiaries and affiliated
businesses of the proper conduct to achieve the Company’s goals of improving the quality of our service,
guaranteeing compliance with laws and regulations and establishing appropriate behavioral standards within the
organization. The policies described in the manual include the universal values of faith, discretion, efficacy,
efficiency, honesty, impartiality, integrity, transparency, service, prudence and simplicity.
Benefits and Compensation of Directors and Senior Management
The total compensation paid to our senior management during 2014 was Ps$51 million. Each member of our
Board of Directors received Ps$35 thousand for attending each meeting of the Board of Directors, except for the
Chairman, who received Ps$70 thousand for attending each meeting.
We have a pension plan that benefits all employees. Compensation under the pension plan is based on years of
service and the respective employee’s salary. We make annual contributions to the pension plan for the benefit of our
employees. The total anticipated or accrued amount for pension plans for relevant directors is Ps$17 million as of
December 31,2014.
The employee incentive plan is based on a system of variable compensation linked to the achievement of sales
targets, EBITDA and cash flow generation, measured and paid quarterly to reward the achievement of such
objectives and may equal up to 20 days of salary per quarter.
We also intend to implement a share purchase plan for directors and managers of the Company and/or its
subsidiaries to purchase shares of the Company. Under this plan, beneficiaries will have the option to acquire shares
of Elementia at fair market value, through zero interest rate loans to corresponding eligible employees, to be paid
pack via payroll deductions. Beneficiaries may purchase shares in an amount up to the equivalent of three months of
salary for managers, and six months of salary for directors. We intend to allocate up to a maximum of 1% of the
shares included in the global offering to such incentive plan, which will be transferred to an irrevocable
administration trust agreement through which the corresponding shares will be appointed to eligible employees.
Under such plan, up to a third part of the allocated shares may be released to beneficiaries, once such shares have
been paid, on an annual basis. Our shareholders have authorized the Board of Directors to design and implement such
incentive plan, subject to the approval of the Audit and Corporate Practices Committee.
148
PRINCIPAL SHAREHOLDERS
The table below sets forth certain information regarding the ownership of our capital structure as of the date of
this offering memorandum and after giving effect to this global offering.
Shares owned
after the global offering
Shares owned
prior to the global offering
Name of shareholder
Number
Tenedora(1)(3) .................................... 295,593,892
Grupo Kaluz(2)(3)............................... 327,722,098
Others.................................................. 19,277,830
Total............................................... 642,593,820
%
46.00%
51.00%
3.00%
100.00%
Non-exercise of
over-allotment option
Number
311,245,792
345,070,198
187,277,830
843,593,820
%
Exercise of
over-allotment option
Number
36.90%
40.90%
22.20%
100.00%
311,245,792
345,070,198
217,427,830
873,743,820
%
35.62%
39.49%
24.88%
100.00%
(1)
Tenedora is an indirect subsidiary of Grupo Carso which, in turn, is directly or indirectly controlled by Mr. Carlos Slim Helú and the Slim
Domit brothers.
(2)
Grupo Kaluz is a corporation controlled, directly or indirectly, by the members of the del Valle Perochena family, which, prior to the global
offering, held 15.7% of our shareholdings and after the global offering hold 11.57% of our shares (assuming the over-allotment options are
exercised in full), but none of the members of the del Valle Perochena family individually holds a controlling interest in us. Francisco Javier
del Valle Perochena and Antonio del Valle Perochena are members of our Board of Directors and together directly hold shares that represent
4.63% of our shareholdings after the global offering (assuming the the over-allotment options are exercised in full).
(3)
Grupo Kaluz and, indirectly, Grupo Carso purchased 16.42% of the shares in the global offering (assuming no exercise of the overallotment
options), or 14.28% of the shares in the global offering (assuming full exercise of the overallotment options), on equal terms with all other
participants.
As a result of the global offering, a shareholders’ agreement among the current principal shareholders of the
Company (Grupo Kaluz, members of the del Valle family and Tenedora) shall come into force. Such agreement
includes provisions relative to: (i) preferential subscription rights; (ii) possible transfers of rights to subscribe for
shares between affiliates and third parties; (iii) a reciprocal option to purchase shares as among the current principal
shareholders, in the case of transfers of shares in equal or greater than 5% blocks; and (iv) voting in common to (a)
appoint the number of directors corresponding to each of the blocks of controlling shareholders and (b) for certain
other matters, including increases or reductions in capital, amendments to bylaws, mergers, dividend payments and
material investments and divestitures.
149
RELATED PARTY TRANSACTIONS
In the ordinary course of business, we enter into transactions with certain affiliates and related parties. The table
below sets forth related party transactions entered into in the normal course of business during 2014, 2013 and 2012
and the three months ended March 31, 2015:
Years ended December 31,
Three months
ended
March 31, 2015
2014
2013
2012
Revenues from:
Sales ................................................................. $
Sales of shares .................................................
Sales of fixed assets .........................................
Interest received ...............................................
Leases ..............................................................
Corporate tax ...................................................
Contractual penalties .......................................
Services............................................................
Total ................................................................ $
Expenses:
Technical assistance received .......................... $
Purchase of materials .......................................
Shipping and handling .....................................
Interest paid .....................................................
SAP implementation ........................................
Donations .........................................................
Leases ..............................................................
Payroll services ................................................
Fixed asset purchases .......................................
Factory construction ........................................
Insurance..........................................................
Paid services ....................................................
Total ................................................................ $
5,992
—
—
—
685
—
—
—
6,677
39,472
34,596
—
600
3,715
—
480
—
—
—
1,649
6,785
87,297
$
$
$
$
5,674
—
—
—
238
66,278
—
67
72,257
187,072
202,392
—
4,230
13,728
9,630
747
—
—
—
15,038
36,033
468,870
$
$
$
$
6,668
582,818
156,533
—
1,490
74,351
18,664
80
840,604
130,267
60,594
79
54
22,991
—
6,333
7,763
—
79,941
8,592
37,714
354,327
$
$
$
$
15,866
—
37,562
733
145
—
—
5,312
59,618
162,802
3,422
—
25,322
21,519
—
—
—
37,867
27,573
8,537
7,121
294,163
Our related parties are Kaluz, S.A. de C.V., Fundación Kaluz, A.C., Inmobiliaria Patriotismo, S.A., Grupo Carso,
Mexichem Servicios Administrativos, S.A. de C.V., Logtec, S.A. de C.V., Pochteca Materias Primas, S.A.de C.V.,
PAM PAM, S.A. de C.V., Mexichem Soluciones Integrales, S.A. de C.V., Nacional de Conductores Eléctricos, S.A.
de C.V., Mexichem Compuestos, S.A. de C.V., Mexichem Colombia, S.A.S., Mexichem Honduras, S.A., Mexichem
El Salvador, S.A., Mexichem Costa Rica, S.A., Mexichem Ecuador, S.A., Mexichem Flour Comercial, S.A.,
Mexichem Resinas Colombia, S.A., Mexichem, S.A.B de C.V., Teléfonos de México, S.A.B. de C.V., Teléfonos del
Noreste, S.A. de C.V., Mexichem Comercial, S.A. de C.V., Grupo Financiero Inbursa, S.A. de C.V., Acatunel, S.A.
de C.V., Administración Integral de Alimento, S.A. de C.V., Arneses Eléctricos Automotrices, S.A. de C.V., Carso
Eficentrum, S.A. de C.V., Construcciones Urvitec, S.A. de C.V., Conticon, S.A. de C.V., Controladora GEK, S.A.P.I.
de C.V., Cordaflex, S.A. de C.V., Lafarge, S.A., Lafarge Francia SAU, and Banco Ve por Más, S.A., Instituición de
Banca Múltiple, Grupo Financiero Ve por Más.
We have carried out certain transactions, primarily (i) factoring transactions, with Banco Ve por Más, S.A.,
Institución de Banca Múltiple, Grupo Financiero Ve por Más and Casa de Bolsa Ve por Más, S.A. de C.V., Grupo
Financiero Ve por Más; and (ii) leasing transactions with Arrendadora Ve por Más, S.A. de C.V., Sociedad
Financiera de Objeto Múltiple, Sociedad Regulada. These transactions have been entered into pursuant to market
conditions and at market values.
150
We conduct business with related companies under various contractual agreements. The following table sets
forth amounts due to and from our related parties:
As of December 31,
As of
March 31, 2015
2013
2014
2012
Due from related parties:
Inmuebles General, S.A. de C.V. ........................... $
Urvitec, S.A. de C.V. .............................................
Other ......................................................................
Total short term ................................................... $
Long-term account receivable
Grupo Carso(1) ................................................
Due to related parties:
Grupo Kaluz ..........................................................
Fundación Kaluz, A.C. ..........................................
Inmobiliaria Patriotismo, S.A. ...............................
Grupo Carso(2) ......................................................
Cobre de México, S.A. de C.V. .............................
Radiomovil Dipsa, S.A. de C.V. ............................
PAM PAM, S.A. de C.V. ......................................
Conductores Mexicanos Eléctricos de
Telecomunicación, S.A. de C.V. ........................
Precitubo, S.A. de C.V...........................................
Pochteca Materias Primas, S.A. de C.V.................
Conticon, S.A. de C.V. ..........................................
Telgua, El Salvador, Honduras y Nicaragua ..........
Nacional de Conductores Eléctricos, S.A. de
C.V. ....................................................................
Mexichem Soluciones Integrales ...........................
Mexichem Compuestos, S.A. de C.V. ...................
Mexichem Colombia, S.A.S. .................................
Mexichem Servicios Administrativos, S.A. de
C.V.(3) ...............................................................
Mexichem Honduras, S.A. ....................................
Mexichem Costa Rica, S.A. ...................................
Mexichem, S.A.B. de C.V. ....................................
Cordaflex, S.A. de C.V. .........................................
Logtec, S.A. de C.V. ..............................................
Other Kaluz ...........................................................
Total short-term: .................................................
Long-term account payable Mexichem
Servicios Administrativos, S.A. de C.V.(3) ........
—
613
133
746
$
$
$
$
$
—
—
2,120
2,120
53,703
$
10,373
—
—
127,098
—
—
—
$
$
$
40,000
—
944
40,944
$
—
—
—
—
53,703
$
53,851
$
50,553
6,852
—
—
125,965
—
—
577
$
6,926 $
—
460
125,980
394
—
—
6,543
1,000
693
150,266
558
5,034
273
—
—
1,771
—
—
—
—
6
—
—
—
—
624
—
24
9,083
7,730
30
41
769
—
207
—
—
—
15
529
—
50
—
—
147
48
43
288
18
21,602
—
70
—
—
—
651
156,267
$
20,598
46
74
1,455
2,580
99
13,901
173,358
$
19,895
—
—
1,392
—
—
2,214
205,918
—
$
18,075
$
40,462
21,703
—
93
—
—
—
—
161,245 $
$
$
—
$
(1)
Corresponds to the corporate tax paid by Productos Nacobre, S.A. de C.V., Grupo Aluminio, S.A. de C.V. and Almexa Aluminio, S.A. de
C.V. to Grupo Carso as majority shareholders under the fiscal consolidation through 2009, which they had the right to recover upon
deconsolidation.
(2)
The account payable to Grupo Carso includes corporate tax of Ps$120,129 as of March 31, 2015 and Ps$120,129, Ps$120,129 and
Ps$145,687 as of December 31, 2014, 2013 and 2012, respectively.
(3)
The account payable to Mexichem Servicios Administrativos, S.A. de C.V. corresponds to the indefinite use of SAP licenses inventoried in
February 2013 and will be paid in trimester installments over a five year period.
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In the past we have engaged in, and expect that in the future we will continue to engage in, transactions with our
directors, officers, principal shareholders and their respective affiliates or subsidiaries, including, without limitation,
the transactions described below. The terms of these transactions are typically negotiated by one or more of our
employees who are not related parties, taking into account the same business considerations that would apply to
transactions with unrelated third parties, and are subject to meeting the relevant market price for the transaction. We
believe that these arrangements are generally on terms at least as favorable as those that we could obtain from an
unaffiliated third party, to the extent there are third parties which could provide comparable services.
We have an ongoing contract for the provision of business development services with Grupo Kaluz and Grupo
Carso, whereby they have performed consulting services regarding economic, financial, commercial and negotiation
matters and business strategy. Under such contract, we have paid to Grupo Kaluz and Grupo Carso a monthly fee of
0.54% and 0.46% of our consolidated monthly net sales, plus the value-added tax. As of the date of this offering
memorandum, the payment of the monthly fee to Grupo Kaluz and Grupo Carso under this contract will be
discontinued. This decision by the principal shareholders and the Company was made in order to strengthen corporate
governance best practices and realize savings for the Company. All contracts for services that the Company may
enter into with its related parties in the future shall be entered into on an arms-length basis and with the favorable
opinion of the Audit and Corporate Practices Committee.
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DESCRIPTION OF OUR CAPITAL STOCK AND BY-LAWS
Set forth below is a description of our capital stock and a brief summary of material provisions of our by-laws
and Mexican law after giving effect to the global offering. This description is qualified in its entirety by reference to
our by-laws and Mexican law that are available on the internet page of the Mexican Stock Exchange.
General
We are a variable capital listed stock corporation (sociedad anónima bursátil de capital variable) organized
under the laws of Mexico. We were incorporated in Mexico on April 28, 1952, and were originally named Productos
Mexalit, S.A. In 1979, we changed our name to Mexalit, S.A. and in February 2009 we changed our name to
Elementia S.A. as a result of a rebranding effort to reflect our recent acquisitions. On June 13, 2011, we adopted the
form of a variable capital stock corporation and changed our name to Elementia, S.A. de C.V. Before the
consummation of the global offering, we held an ordinary and extraordinary general shareholders’ meeting,
through which shareholders (i) approved the amendment to our by-laws (estatutos sociales) in order to adopt the
regime corresponding to a publicly traded stock corporation as well as to include certain provisions of the LMV
applicable to a company with shares registered with the RNV and (ii) changed the name of the company to
Elementia, S.A.B. de C.V. Our corporate headquarters are located in Mexico City. We submitted copies of our bylaws to the CNBV and the BMV, and they are currently available for review at the offices of the BMV or through its
web site, http://www.bmv.com.mx. Our headquarters are located at Poniente 134, No. 719, Col. Industrial Vallejo,
C.P. 02300, Del. Azcapotzalco, México, Distrito Federal.
We maintain a stock ledger and, in accordance with Mexican law, only recognize those shareholders that are
registered in our stock ledger as our shareholders. Our shareholders may hold their shares in the form of physical
certificates or through book-entries with institutions that have accounts with Indeval as depositors. Accounts may
be maintained at Indeval by brokers, banks and other entities approved by the CNBV. Ownership is reflected
through Indeval certifications, supplemented by certifications emitted by each Indeval participant.
Term
Our by-laws will provide for an indefinite term.
Corporate Purpose
In accordance with our by-laws, our corporate purpose comprises, among other matters, to hold equity in all
kinds of companies and entities, both domestic and foreign, and participate in their management, restructuring or
liquidation. We are a holding company with no independent operations, which operates through its subsidiaries.
Share Capital and Voting Rights
We are a variable capital listed stock corporation (sociedad anónima bursátil de capital variable). Any increase
or decrease in the minimum fixed portion of our share capital must be approved by an extraordinary general
shareholders’ meeting and, consequently, our by-laws must be amended to reflect any such modification. Any
increase or decrease in the variable portion of our share capital must be approved by an ordinary general
shareholders’ meeting without a need to amend our by-laws.
Our minimum fixed capital stock is Ps$229,112,173.84, represented by 281,954,244 shares of a single series
with no par value, that are fully subscribed and paid. Our variable capital stock is unlimited and is represented by
shares with no par value.
All our shares are shares pertaining to a single series, and grant holders identical corporate and economic rights.
In the last three years, our capital stock has increased as follows (not including the split of the shares that was
approved in the ordinary and extraordinary shareholders’ meeting held on June 26, 2015):
Date
Initial Capital Stock
Final Capital Stock
07/13/2012 ..................................... Ps$ 458,224,454.94 Ps$ 1,040,769,492.64
12/20/2012 ..................................... Ps$ 1,040,769,492.64 Ps$ 1,623,314,530.34
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Initial Shares
25,632,210
27,420,510
Final Shares
27,420,510 Ps$
29,208,810 Ps$
Price per Share
325.75353
325.75353
Both capital stock increases were fully subscribed and paid for by all our shareholders, proportionally per their
interest and according to preferential rights. In both cases, the subscription price per share was Ps$325.75353, with no
discounts or special conditions.
Except as indicated in the tables above, in the last three years, we have not issued any new shares representing
our capital stock other than the shares included in the global offering and the shares in treasury, except with regards
to the stock split decided upon at the ordinary and extraordinary general shareholders’ meeting that was held on June
26, 2015, at which it was resolved, among other things, to issue 22 new shares for each share previously issued in
preparation for the Global Offering.
Immediately after the consummation of the global offering, considering the exercise in full of the overallotment
options, there will be a total of 873,743,820 shares in circulation.
Changes to Capital Stock and Preemptive Rights for Capital Increases
Except for the acquisition of our own shares pursuant to rules issued under the LMV, any increase or decrease in
the fixed or variable portion of our capital stock must be approved by a majority of the shareholders present at an
extraordinary general shareholders’ meeting or an ordinary general shareholders’ meeting, respectively. Per the most
recent modifications to the LGSM, we have amended our bylaws such that when our shareholders approve a capital
stock increase they will also determine whether shareholders will have a preemptive right to purchase the new shares
and if that right should be broadened or modified. No new shares may be issued until the previously issued shares
have been fully subscribed and paid. Only fully-paid shares may be amortized or canceled, unless otherwise agreed to
by an extraordinary shareholders’ meeting. Any amortization or cancellation of shares will be effected among the
shareholders in proportion to their percentage shareholdings.
Shareholders’ Meetings and Quorum
In accordance with our by-laws, general shareholders’ meetings may be ordinary, extraordinary and special.
Ordinary general shareholders’ meetings are those held to address any matter that is not expressly reserved for an
extraordinary general shareholders’ meeting and for the approval of any type of transaction to be entered into by us or
by any entity controlled by us, within the same fiscal year, that exceeds 20% of our consolidated assets as per the
most recent published quarterly financial statements. Ordinary general shareholders’ meetings shall be held at least
once per year, within four months following the end of each fiscal year and shall be held to approve, among other
matters, the Chief Executive Officer’s annual report with respect to our financial statements and the report of our
Board of Directors with respect thereto, discuss and approve the audit and the report of the Audit and Corporate
Practices Committee, the appointment or ratification and compensation of members of the Board of Directors, the
declaration of dividends, the maximum amount of money that may be assigned and used for share repurchases, and
the election of the president of the Audit and Corporate Practices Committee.
Extraordinary general shareholders’ meetings are those held to consider any of the matters referenced in
Article 182 of the Mexican Corporations Law (Ley General de Sociedades Mercantiles, or “LGSM”) and Articles 53
and 18 of the Mexican Securities Market Law, such as changing our corporate purpose, a merger, spin-off or
conversion into a different type of corporate entity, approving our dissolution or liquidation, authorizing amendments
to our by-laws, approving the deregistration of our shares with RNV, modifying provisions included in our by-laws in
connection with a change of control, and any other matter that, in accordance with our by-laws, must be approved by
an extraordinary general shareholders’ meeting, as more fully specified below.
Special shareholders’ meetings are convened for shareholders owning shares of a particular series to consider
any matter affecting said shareholders.
In accordance with our by-laws, quorum in respect of an ordinary general shareholders’ meeting will exist
pursuant to a first call if it is attended by shareholders representing more than 50% of the shares entitled to vote at
said meeting, and resolutions shall be valid if adopted by the affirmative vote of a majority of the shares present or
represented at the meeting. Ordinary general shareholders’ meetings held pursuant to a second or subsequent call will
be validly held regardless of the number of shares represented at the meeting and resolutions shall be validly adopted
by a majority vote of the shares present.
According to the LGSM and our by-laws, the following matters, among others, must be resolved by an
extraordinary general shareholders’ meeting:
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
extension of term of the Company;

early dissolution and liquidation;

increase or decrease of the fixed capital of the Company;

change of nationality;

any change in our corporate purpose;

issuance of shares of the Company;

any issuance of preferred shares;

the redemption of shares with retained earnings;

the issuance of debentures that are convertible into Company shares;

any merger, transformation, or spin-off;

any other amendment to our by-laws;

cancellation of the registration of the shares of the Company in the RNV and other national securities
exchanges or foreign markets in which they are registered;

redemption of shares of the Company;

any decision by the Company to sue any of its directors or members of the Committees for responsibility;

any amendment to our by-laws; and

any other matters for which applicable law or the by-laws require a special quorum.
The minimum quorum required for an extraordinary general shareholders’ meeting on first call is 75% of the
shares entitled to vote and resolutions shall be valid if they are adopted by the affirmative vote of more than 50% of
our capital stock. Extraordinary general shareholders’ meetings held under a second or subsequent call will be validly
held with shares representing more than 50% of our capital stock and their resolutions will be valid when adopted by
the affirmative vote of shares representing more than 50% of our capital stock. Decisions will be adopted and will be
valid at special general shareholders’ meetings if approved by the vote of shareholders representing more than 50% of
the respective series of shares.
Notices for shareholders’ meetings shall be published in the electronic system established by the Ministry of
Economy (Secretaría de Economía) for that purpose. Until such electronic system is established, notices for
shareholders’ meetings shall be published in the Official Gazette and/or in a newspaper of general circulation in
Mexico City. Such notice shall be published at least 15 calendar days prior to the date set for the meeting. In
compliance with Mexican law, our by-laws require that all information regarding matters to be submitted for
determination at a shareholders’ meeting must be made available as from the date of publication of the notice calling
the meeting.
Minority Shareholder Rights
Pursuant to the Mexican Securities Market Law and the Mexican General Corporations Law, our by-laws
include a number of minority shareholder protections. These minority protections include provisions that allow:

holders of at least 5% of our outstanding capital stock:
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(i) to bring claims for breach of the duty of loyalty or the duty of care by one or more members of our
board of directors or committees, our secretary or our principal officers (as a derivative suit), pursuant
to the Mexican Securities Market Law for the benefit of the Company, in an amount equal to damages
or losses caused to us (as opposed to any shareholder directly). Actions initiated on these grounds have
a five year statute of limitations. As a safe harbor, persons liable will not be considered to have
breached his or her duty of care or duty of loyalty if such person acted in good faith and (i) complied
with applicable law and our by-laws, (ii) acted upon information provided by executive officers,
external auditors or third-party experts whose capacity and credibility are not subject to reasonable
doubt, (iii) to the best of his or her knowledge and based on the information available at the time
the decision was made, the director chose the most adequate alternative, or the negative effects of
his or her decision would not have been foreseeable, and (iv) his or her actions were taken in
compliance with resolutions adopted at a shareholders’ meeting, if applicable.

(i) to request the issuance of a call for a shareholders’ meeting;
(ii) to request that the voting of shareholders’ resolutions, with respect to any matter on which they were
not sufficiently informed, be postponed; and
(iii) to appoint or revoke the appointment of a member of our board of directors and his/her corresponding
alternate member;

(i) to oppose any resolution adopted at a general shareholders’ meeting and file a petition for a court
order to suspend the resolution if the claim is filed within 15 calendar days following the
adjournment of the meeting at which the action was taken, provided that:
(a)
the challenged resolution violates Mexican law or our by-laws;
(b)
the opposing shareholders neither attended the meeting nor voted in favor of the challenged
resolution; and
(c)
the opposing shareholders deliver a bond to the court to secure payment of any damages that
we may suffer as a result of suspending the resolution, in the event that the court ultimately
rules against the opposing shareholder.
Information to Shareholders
The Board of Directors is responsible for submitting the following information to the ordinary general
shareholders’ meeting: (i) the financial statements prepared by our Chief Executive Officer, (ii) the Audit and
Corporate Practices Committee report, previously submitted to, and approved by, the Board of Directors, (iii) the
main results of its review of our financial statements, (iv) the opinion of the external auditors, (v) the opinion of the
Board of Directors regarding the Chief Executive Officer’s report in connection with our financial statements, (vi) a
report explaining the main policies and accounting criteria used in the preparation of our financial statements,
and (vii) a report regarding the transactions and activities in which we have participated pursuant to the LMV.
Our annual audited financial statements and unaudited quarterly financial statements are required to be
disclosed in accordance with the general provisions of the LMV and the general rules issued by the CNBV, and
must be publicly available on the BMV’s website. We are also required to submit an annual report to the BMV,
which should also be available on its website.
Appointment of Directors
The LMV provides that boards of directors of Mexican public corporations must be comprised by a maximum of
21 members, of whom at least 25% must qualify as “independent.” The general shareholders’ meeting is responsible
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for appointing directors and their alternates, who, in the case of independent directors, must also qualify as
independent, with the CNBV having the ability to question the independence of any director.
Our Board of Directors will be comprised of 11 directors, appointed at the general shareholders’ meeting
dated April 30, 2015. At least 25% of the members of our Board of Directors will comply with the definition of
independence pursuant to the LMV.
Under Mexican law and our by-laws, any shareholder or group of shareholders holding 10% of our capital
stock is entitled to appoint one director. The election of a director by minority shareholders may only be
revoked upon the revocation of the appointment of the remaining members of the Board of Directors.
Pursuant to Article 24 of the LMV, directors shall remain in office for a one-year period and shall continue
to perform their functions even when the term of their respective appointments has concluded or upon
resignation, for a term of up to 30 calendar days, in the absence of an appointment of a replacement or when
said replacement does not take office, without being subject to the provisions of Article 154 of the Corporations
Law.
The Board of Directors may directly appoint interim directors, directors, or alternates, without the
intervention of the general shareholders’ meeting, when any of the cases mentioned in the previous paragraph
occurs, when a director has abandoned its position for any reason or in the case of Article 155 of the Corporations
Law. The general shareholders’ meeting shall ratify this appointment or appoint alternate directors at the next
shareholders’ meeting.
The Board of Directors shall meet at least four times per fiscal year and at any time it is convened by its
Chairman, the Chairman of the Audit and Corporate Practices Committee, or by 25% or more of the directors.
The required quorum to validly hold a meeting of the Board of Directors is at least a majority of its
members. Resolutions issued by the Board of Directors require an affirmative vote by the majority of its
members present at the meeting. The Chairman of the Board of Directors has a casting vote in the event of a tie.
Powers of the Board of Directors
Our by-laws specify that the Board of Directors has, among others, the ability to determine our business
strategies and the function of managing our management and that of our subsidiaries. This broad power includes
the appointment and dismissal of the Chief Executive Officer and the determination of compensation policies
for the Chief Executive Officer and other officers. The Board of Directors has the authority to establish
compensation plans for executive officers and directors, as well as make decisions with respect to any other
matter in which they may have personal interests.
Acquisition of Our Own Shares
Share repurchases by the Company must be charged to either our net worth, if the repurchased shares
remain in our possession, or to our capital stock, if the repurchased shares are converted into treasury shares.
The ordinary general shareholders’ meeting must approve, each year, the aggregate amount of money allocated
to share repurchases, with the sole limitation being that the sum of the resources which may be used for this
purpose shall in no case exceed the total amount of our net profits, including retained earnings. Repurchased
shares cannot be represented at any shareholders’ meeting and the economic and voting rights corresponding to
repurchased common shares will not be exercised during the period the shares are owned by us.
In accordance with the LMV and our by-laws, we are permitted to repurchase the shares of our own capital
stock through the BMV at market prices.
If we intend to repurchase shares representing more than 1% of our outstanding capital stock at a single trading
session, we will be required to inform the public of such intention at least ten minutes before submitting our bid in
the BMV. If we intend to repurchase common shares representing 3% or more of our capital stock during any
rolling period of 20 trading days, we will be required to conduct a public tender offer for such common shares.
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Change of Control Provisions
The prior written consent of our Board of Directors will be required for the acquisition or series of acquisitions
by any person or group of persons intending to acquire, directly or indirectly, 8% or more of our capital stock (with
the understanding that for the approval of an acquisition on the part of direct or indirect competitors of the
Company or its subsidiaries or affiliates, approval by at least 85% of the directors will be required).
The prior written consent of our Board of Directors will also be required to enter into agreements, contracts
and any other legal acts of any kind, oral or written, through which voting mechanisms or agreements are adopted,
for their exercise at one or more of our shareholders’ meetings, when the number of cumulative votes involved is
equal to or greater than 8% of our capital stock. Nevertheless, agreements entered into by our shareholders
(whether individually or collectively) for the following purposes shall not require the prior written consent of our
Board of Directors: (i) the appointment of the minority directors or the exercise of other minority rights pursuant to
the LMV; (ii) demanding that the Chairman of the Board of Directors or of the audit committee or the corporate
governance committee call a shareholder meeting; and (iii) demanding that voting regarding any issue in relation to
which the shareholders do not feel sufficiently informed be postponed once, for three days, and without need for a
new meeting to be called. Such agreements will be subject to the LMV and shall not be enforced on the Company
to the detriment of the remaining shareholders or the assets or business interests of the Company.
In addition, any person or group of persons intending to acquire or achieve by any means, directly or
indirectly, ownership of 30% percent or more of our ordinary shares, through a stock exchange transaction or
through a direct transaction, by one or more transactions of any nature, simultaneous or successive, will have to
carry out the acquisition via a public offering in accordance with the requirements set forth in Article 98 of the
LMV.
Any acquisition of our shares or the entering into voting agreements in contravention of the procedures
described above will result in the purchaser, or the parties to the voting agreements, not having any voting or
corporate rights (including the right to assist shareholders meetings) in respect to the purchased securities or
securities involved in such voting agreements. Any transfer in breach of these provisions will not be registered in,
or will be cancelled from, our stock registry.
Dividends
Our board of directors must submit our financial statements for the previous fiscal year, proposed and prepared
by our Chief Executive Officer and supplemented by a report of our Board of Directors, at our ordinary general
shareholders’ meeting for approval. Once our shareholders approve our financial statements, they are required to
allocate net profits for the previous fiscal year. Under Mexican law and our by-laws, prior to any distribution of
dividends, 5% of our net earnings must be allocated to a legal reserve fund, until such legal reserve fund is equal to at
least 20% of our paid-in capital stock. Additional amounts may be allocated to other reserve funds as the shareholders
may determine, including the amount allocated to the reserve fund for the repurchase of shares. The remaining
balance, if any, may be distributed as dividends.
Redemption
In accordance with our by-laws, shares representing our capital stock are subject to redemption in connection
with either (i) a reduction of capital stock, or (ii) a redemption with retained earnings, which in either case must be
approved by our shareholders. In connection with a capital reduction, the redemption of shares will be made pro rata
among the shareholders but in no case will the redemption price be less than the book value of such shares as
determined pursuant to our latest statements of financial position approved at an ordinary general shareholders’
meeting or by means of a tender offer conducted on the Mexican Stock Exchange at prevailing market prices, in
accordance with the Mexican Corporations Law, the LMV and our by-laws.
Purchases of Shares by our Subsidiaries
Our subsidiaries or other entities controlled by us may not purchase, directly or indirectly, shares representing
our capital stock.
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Conflicts of Interest
Under Mexican law, any shareholder that has an opposing interest to ours, must abstain from discussing and
voting on the relevant matter. Any such shareholder that votes in a transaction in which its interests conflict with our
interest may be liable for damages and losses, but only if the transaction would not have been approved without such
shareholder’s vote.
A member of the Board of Directors that has an opposing interest to ours must disclose such opposing interest
and abstain from any deliberation or vote in connection therewith. A breach by any member of the Board of Directors
of any such obligations may result in the director being liable for damages and losses.
Exclusive Jurisdiction
Our by-laws provide that, in connection with any controversy between our shareholders and us, or between our
shareholders, in connection with any matter related to us, both we and our shareholders must submit to the
jurisdiction of the courts of Mexico City, Federal District, Mexico.
Appraisal Rights
Whenever our shareholders approve a change in our corporate purpose, jurisdiction of organization or
transformation from one corporate form to another, any shareholder entitled to vote that voted against the matters
approved has the right to withdraw and receive the book value of its shares as set forth in the financial statements last
approved by our shareholders, provided that the shareholder exercises this appraisal right within 15 days after the
meeting at which the relevant matter was approved.
Cancellation of Registration in the RNV
In the event of cancellation of the registration of our shares before the RNV, be it as a result of a request from
the Company or of a resolution adopted by the CNBV, we are required comply with the requirements of the
LMV, including the requirement to conduct a tender offer and to establish the respective trust for a minimum period
of six months. If the cancellation is requested by the Company, pursuant to the LMV and to our By-laws, the
cancellation request must be approved by 95% of our shareholders at an extraordinary general shareholders’
meeting.
Dissolution and Liquidation
We will dissolve upon the occurrence of any of the events listed in the Corporations Law. Upon our
dissolution we will be liquidated and our shareholders will appoint one or more liquidators at an extraordinary
general shareholders’ meeting to wind up our affairs. All fully paid and outstanding shares or capital stock will be
entitled to participate equally in any liquidating distributions.
Shareholders’ Agreement
As a result of the global offering, a shareholders’ agreement among the current principal shareholders of the
Company (Grupo Kaluz, members of the del Valle family and Tenedora) shall come into force. Such agreement
includes provisions relative to: (i) preferential subscription rights; (ii) possible transfers of rights to subscribe for
shares between affiliates and third parties; (iii) a reciprocal option to purchase shares as among the current principal
shareholders, in the case of transfers of shares in equal or greater than 5% blocks; and (iv) voting in common to (a)
appoint the number of directors corresponding to each of the blocks of controlling shareholders and (b) for certain
other matters, including increases or reductions in capital, amendments to bylaws, mergers, dividend payments and
material investments and divestitures.
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THE MEXICAN SECURITIES MARKET
The information concerning the Mexican securities market set forth below has been prepared based on
materials obtained from public sources, including the CNBV, the BMV, the Mexican Central Bank and information
made public by market participants, as well as the applicable laws and regulations. This information has not been
independently verified by us or the initial purchasers in connection with the offering. The complete text of the
Mexican Securities Market Law, as amended (Ley del Mercado de Valores or “LMV”), and other relevant
regulations may be found at http://www.cnbv.gob.mx. The following summary does not purport to be a
comprehensive description of all of the material aspects related to the Mexican securities market.
Prior to this global offering, there has been no public market for any of our outstanding capital stock in Mexico,
the United States or elsewhere. Upon the completion of the global offering, our shares will be registered on the RNV
maintained by the CNBV and listed on the Mexican Stock Exchange, under the symbol “ELEMENT.”
We cannot predict the extent to which a trading market in Mexico, the United States or elsewhere will develop
with respect to our shares. We also cannot predict the liquidity of any trading market for our shares, should any
develop. If the trading volume and/or float of our shares on the Mexican Stock Exchange falls below certain levels,
our shares may be de-listed or deregistered in that market.
Trading on the BMV
The BMV, located in Mexico City, is the only stock exchange currently operating in Mexico. Operating
continuously since 1907, the BMV is organized as a variable capital public stock corporation, or sociedad anónima
bursátil de capital variable, the shares of which are publicly traded. Securities trading on the BMV occurs each
business day from 8:30 a.m. to 3:00 p.m., Mexico City time, subject to adjustments to operate uniformly with certain
United States markets.
Since January 1999, all trading on the BMV has been effected electronic electronically. The BMV may impose a
number of measures to promote an orderly and transparent trading price of securities, including the operation of a
system of automatic suspension of trading in shares of a particular issuer, when price fluctuations exceed certain
limits.
Settlement of transactions with equity securities on the BMV is effected three business days after a share
transaction is agreed upon. Deferred settlement is not permitted without the approval of the BMV even when
mutually agreed upon. Securities traded on the BMV, are on deposit in book-entry form through the facilities of
Indeval, a securities depositary that acts as a clearinghouse, depositary and custodian, as well as a settlement, transfer
and registration agent for BMV transactions, eliminating the need for the physical transfer of securities.
Transactions must be settled in pesos except under limited circumstances and in respect of limited transactions in
which a settlement in foreign currencies may be permitted. Although the LMV acknowledges the possible existence
of an over-the-counter market, no such market for securities in Mexico has developed.
The LMV provides that foreign-issued securities may be traded by brokerage firms and lending institutions
through the International Trading System (Sistema Internacional de Cotizaciones, or “SIC”). These securities may be
listed through the SIC if (i) the securities are not already registered on the RNV, (ii) the market of origin or the
company issuing the shares has received, based on their characteristics, recognition from the CNBV and (iii) the
securities comply with the applicable stock exchange listing requirements.
In addition, the BMV operates a system which suspends trading of shares of a particular issuer upon price or
volume volatility or changes in the offer or demand for such shares that are not consistent with the historic
performance of the shares and cannot be explained solely through information made publicly available, pursuant to
the CNBV’s general regulations.
The LMV includes appropriate placement exemptions pursuant to which securities may be offered to institutional
and accredited investors without registration with the RNV.
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Market Regulation and Registration Standards
In 1925, the Mexican Banking Commission (Comisión Nacional Bancaria) was established to regulate banking
activity, and in 1946, the Mexican Securities Commission (Comisión Nacional de Valores) was established to
regulate stock market activity. In 1995, these two entities merged to form the CNBV.
Among other things, the CNBV regulates the public offering and trading of securities public companies and
participants in the Mexican securities market (including brokerage houses and the BMV) and imposes sanctions for
the illegal use of insider information and other violations of the LMV. The CNBV regulates the Mexican securities
market, the BMV, and brokerage firms through its staff and a board of governors composed of thirteen members.
Mexican Securities Market Law
On December 30, 2005, the current LMV was enacted and published in the Official Gazette (Diario Oficial de la
Federación) and became effective on June 28, 2006. The LMV modified the Mexican securities’ regulation in
various material respects. The reforms introduced by this law were intended to update the Mexican regulatory
framework applicable to the securities market and publicly traded companies, as compared to securities and corporate
governance standard laws of jurisdictions that maintained more developed securities markets. Publicly traded
companies are regulated by the LMV and, secondarily, by the Corporations Law (Ley General de Sociedades
Mercantiles).
The LMV (i) established that public entities and the entities controlled by them are considered a single economic
unit (e.g., holding companies and wholly owned subsidiaries), (ii) clarified the rules for public offerings and tender
offers, dividing tender offers into voluntary and mandatory categories, (iii) clarified standards for disclosure,
including disclosure of holdings of shareholders of public companies, (iv) clarified, expanded and strengthened the
role of the board of directors (and each of its members), (v) defined the standards applicable to the board of directors
and the duties of the board, each director, its Secretary, the chief executive officer and other executive officers
(introducing concepts such as the duty of care, duty of loyalty and safe harbors), (vi) replaces the statutory auditor
(comisario) and its duties with an audit committee, a corporate practices committee and external auditors, (vii)
defined the roles and responsibilities of executive officers, (viii) improves the rights of minority shareholders relating
to legal remedies, the exercise of shareholder derivative actions and access to company information, (ix) introduced
concepts such as consortiums, groups of related persons or entities, control, related parties and decision-making
power, (x) expanded the definition of applicable sanctions for violations of the LMV, including punitive damages and
criminal penalties, (xi) clarified rules relating to types of equity securities that may be offered by public companies
and the availability of limited voting or non-voting shares, (xii) sets forth rules for share repurchases, and (xiii)
specified requirements for implementing anti-takeover measures.
Under the LMV, public companies must have a board of directors comprised of no more than 21 members, of
which at least 25% must be independent. Independent members must be selected at the issuer’s ordinary general
shareholders’ meeting based on their experience, ability and reputation, among other factors. The conclusion as to
whether a director is independent must be determined by the issuer’s shareholders, and such determination may be
challenged by the CNBV. Departing from legislative precedents, the LMV permits then-acting members of the board
of directors, under certain circumstances, to appoint, on a temporary basis, new members of the board of directors.
The Board of Directors of a public company is required to meet at least four times during each calendar year. Its
principal duties are (a) the determination of the issuer’s general business strategies, (b) the approval of guidelines for
the use of corporate assets, (c) the approval, on an individual basis, of transactions with related parties, subject to
certain limited exceptions, (d) the approval of unusual or nonrecurring transactions and any transaction related to the
acquisition or sale of assets with a value equal to or exceeding 5% of the issuer’s consolidated assets, or the granting
of collateral or guarantees, or the assumption of liabilities, equal to or exceeding 5% of the issuer’s consolidated
assets, (e) the appointment or removal of the chief executive officer, (f) the approval of accounting and internal
control policies, and (g) the approval of policies for disclosure of information. Directors are required to seek the best
interests of the issuer, and may not favor any shareholder or group of shareholders.
The LMV requires the creation of one or more committees in charge of the audit and corporate practices
functions of the company. These committees must consist of at least three members appointed by the board of
directors (except for the Chairman who is appointed by the shareholders), and each member must be independent
(except for corporations controlled by a person or group holding 50% or more of the outstanding capital stock, in
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which case the majority of the members of the committee in charge of the corporate practice functions must be
independent).
The committee in charge of the corporate practice functions is required to, among other things, provide opinions
to the board of directors, request and obtain opinions from independent third-party experts (primarily in respect of
transactions with related parties and securities transactions), supervise related party transactions, review and opine on
the performance and compensation of the chief executive officer and other relevant executives, call shareholders’
meetings, provide assistance to the board in the preparation of annual reports and provide a report, on an annual basis,
to the board of directors.
The committee entrusted with the audit function is responsible, among other things, for obtaining and providing
opinions to the Board of Directors with respect to internal control guidelines, accounting policies, financial
statements and the engagement of outside auditors; evaluating outside auditors and analyzing their reports; analyzing
and supervising the preparation of financial statements; informing the board regarding internal controls and their
adequacy; assisting the board in the preparation of annual reports and other reporting obligations; investigating noncompliance with operating and accounting guidelines and policies or with the internal control system; informing the
board of any irregularities that it may encounter; calling shareholders’ meetings; supervising compliance by the chief
executive officer with shareholders’ and Board of Directors’ resolutions; and verifying the implementation of internal
control mechanisms
Duty of Care and Loyalty of Directors
The Mexican Securities Market Law also imposes duties of care and loyalty on directors (and members of
committees and principal officers).
The duty of care generally requires that directors obtain sufficient information and be sufficiently prepared to
support their decisions, and to act in the best interests of the issuer. The duty of care is principally discharged by a
director by requesting and obtaining from the issuer and its officers all the information required to participate in
discussions requesting and obtaining information from third-party experts, attending board meetings and by
disclosing material information in possession of the relevant director. Failure to act with care by one or more
directors makes the relevant directors jointly and severally liable for damages and losses caused to the issuer and its
subsidiaries, which may be limited by the company’s by-laws or by resolution of a shareholders’ meeting, except in
the case of bad faith, willful misconduct or illegal acts. Liability for breach of the duty of care may also be covered
by indemnification provisions and directors’ and officers’ insurance policies.
The duty of loyalty primarily consists of maintaining the confidentiality of information received in connection
with the performance of the director’s duties and abstaining from discussing or voting on matters, where the director
has a conflict of interest. In addition, the duty of loyalty is breached if a shareholder or group of shareholders is
knowingly favored or if, without the express approval of the board of directors, a director takes advantage of a
corporate opportunity.
The duty of loyalty is also breached if the director or committee member uses corporate assets or approves the
use of corporate assets in violation of the issuer’s policies, discloses false or misleading information, orders not to or
causes the failure to register any transaction in the issuer’s records that could affect its financial statements or causes
material information not to be disclosed or to be modified. The violation of the duty of loyalty makes the relevant
directors jointly and severally liable for damages and losses caused to the issuer and its subsidiaries. This liability
also arises if damages and losses are sustained as a result of benefits wrongfully obtained by the director or directors
or third parties as a result of activities carried out by the breaching directors. Liability for breach of the duty of
loyalty may not be limited by the company’s by-laws, by resolution of a shareholders’ meeting or otherwise.
Liability for breach of the duty of care or the duty of loyalty may be claimed solely for the benefit of the issuer
(as a derivative suit) as opposed to the benefit of the claimant, or other entities controlled by the issuer that suffer
from the breach of the respective duty, and may only be exercised by the issuer or by shareholders holding shares of
any class representing at least 5% of any outstanding shares in the aggregate.
As a safe-harbor for the benefit of directors, committee members and officers, the Mexican Securities Market
Law provides that liabilities arising from a breach of the duty of care or the duty of loyalty will not arise if the
director or committee member acted in good faith and (i) complied with applicable law and the by-laws of the issuer,
(ii) the decision was made based upon information provided by officers, external auditors or third-party experts,
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whose capacity and credibility may not be subject of reasonable doubt, (iii) selected the most appropriate alternative
in good faith and any negative effects of such decision were not reasonably foreseeable, and (iv) actions were taken
in compliance with resolutions adopted at a shareholders’ meeting, provided that such resolutions did not contravene
applicable law. Mexican courts have not yet interpreted the meaning of this provision and, as a result, the extent and
enforceability of this safe harbor remains uncertain.
The issuer’s principal executives are also required, under the LMV, to act for the benefit of the issuer and not for
the benefit of any shareholder or group of shareholders. These executives are required to submit the major business
strategies to the board of directors for approval, to submit proposals for internal controls to the audit committee, to
disclose all material information to the public, and to maintain adequate accounting and registration systems and
mechanisms for internal control.
Limited or Non-Voting Shares
The LMV does not permit issuers to implement mechanisms for common shares and limited or non-voting shares
to be bundled or jointly traded or offered to public investors, unless the limited or non-voting shares are convertible
into common shares within a term of up to five years, or when, as a result of the nationality of the holder, the shares
or the securities representing the shares limit the right to vote to comply with foreign investment laws. Except when
issued to comply with foreign investment limitations, the aggregate amount of the shares with limited or non-voting
rights that are not convertible may not exceed 25% of the aggregate amount of publicly held shares. The CNBV may
increase this 25% limit, provided that the limited or non-voting shares exceeding 25% of the aggregate amount of
publicly held shares are convertible into common shares within five years of their issuance.
As of the date of the offering memorandum, our only outstanding equity securities are our shares of common
stock.
Disclosure of Shareholders’ Agreements
Any shareholders’ agreements containing non-compete clauses, any agreements related to the sale, transfer or
exercise of preemptive rights, and any agreements which allow for the sale and purchase of shares, voting rights, and
sale of shares in a public offering must be notified to the issuer within five business days following their execution to
allow the issuer to disclose such agreements to the investors through the stock exchanges on which its securities are
being traded and to be made public in an annual report prepared by the issuer. These agreements (i) will be available
for the public to review at the issuer’s offices, (ii) will not be enforceable against the issuer and a breach of such
agreements will not affect the validity of the vote at a shareholders’ meetings, and (iii) will only be effective between
the parties once they have been disclosed to the public.
Regulations Applicable to Issuers, Brokerage Firms and Other Market Participants
In March 2003, the CNBV issued certain general regulations applicable to issuers and other securities market
participants (Disposiciones de carácter general aplicables a las emisoras de valores y otros participantes del
mercado de valores) or “General Issuers’ Rules”, which have been amended from time to time since their issuance.
The General Issuers’ Rules, which repealed several previously enacted CNBV regulations (circulares), now provide a
single set of rules governing issuers and issuer activity, among other things.
Minority Shareholders’ Protections
5% Threshold. Shareholders holding at least 5% of outstanding capital stock of the company have an individual
right to take legal action for breach of the director’s duty of care or the duty of loyalty. The action may be exercised
solely for the benefit of the company.
10% Threshold. Shareholders who jointly or individually hold at least 10% of a company’s capital stock, even if
their voting rights are limited or restricted, are entitled to appoint and remove a member of the board of directors (for
each 10% interest), require the chairman of the board or the audit and/or corporate practices committee to call a
general shareholders’ meeting and request, on a one-time basis, the postponement for three calendar days and without
the need for another call, voting on any matter on the agenda being discussed at the shareholders’ meeting if there is
insufficient information available to enable voting on such matter.
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20% Threshold. Shareholders who jointly or individually hold at least 20% of a company’s capital stock, even if
their voting rights are limited or restricted, may judicially challenge resolutions adopted at a shareholders’ meeting
that contravene Mexican law or the company’s by-laws, provided that they were entitled to vote on such resolutions.
Conflicts of Interest
Shareholders. Shareholders, directors and members of any committees must refrain from participating in
discussions at the relevant shareholders’, board of directors or committee meeting and from voting on matters as to
which they may have a conflict of interest. A shareholder that votes on a transaction in which its interest conflicts
with the company’s may be liable for damages in the event the relevant transaction would not have been approved
without such shareholder’s vote.
Board of Directors. Members of the board and, if applicable, the secretary of the board with a conflict of interest
must abstain from participating and being present during the deliberation and voting of the matter at the relevant
board or committee meeting, without this affecting the necessary quorum for that particular meeting.
Members of the board of directors and the secretary of the board of a SAB, will breach their duty of loyalty to
the company and be liable for damages to the corporation and, if applicable, its subsidiaries if they have a conflict of
interest and they vote or make a decision with respect to the company or its subsidiary’s assets or if they fail to
disclose any conflict of interest they may have unless confidentiality duties prevent them from disclosing such
conflict.
Senior Management. The chief executive officer and members of senior management (directivos relevantes) of a
SAB are required to focus their activities on creating value for the company. The chief executive officer and senior
management will be liable for damages to the corporation and, if applicable, its subsidiaries among others, for: (i)
lack of timely and diligent attention to information requests from board members; (ii) favoring a single shareholder or
a group of shareholders, (iii) approving transactions between the company (or its subsidiaries) with “related persons”
without complying with legal requirements, (iv) taking advantage of business opportunities that correspond to the
company or its subsidiaries for him/herself or for the benefit of a third party, without the approval of the board of
directors, (v) making inappropriate use of company’s (or its subsidiaries) non-public information, and (vi) knowingly
disclosing or revealing false or misleading information.
Registration and Listing Standards
In order to offer securities to the public in Mexico, an issuer must meet specific qualitative and quantitative
requirements. In addition, only securities that have been registered with the RNV pursuant to the CNBV’s approval
may be listed on the BMV, other than unregistered securities listed on the SIC (Sistema Internacional de
Cotizaciones) which may be also traded on the BMV.
The CNBV’s approval for registration does not imply any kind of certification or assurance related to the
investment quality of the securities, the solvency of the issuer, or the accuracy or completeness of any information
delivered to the CNBV, nor does such registration ratify or validate acts or omissions, if any, undertaken in
contravention of applicable law. The General Issuers’ Rules require that the BMV must adopt minimum requirements
for issuers to list their securities in Mexico. These requirements relate to matters such as operating history, financial
and capital structure, and minimum public floats, among others. The General Issuers’ Rules also state that the BMV
must implement minimum requirements for issuers to maintain their listing in Mexico. The CNBV may waive some
of these requirements in certain circumstances. In addition, some of the requirements are applicable to each series of
shares of the relevant issuer.
The BMV will review compliance with the foregoing requirements and other requirements at any time but will
normally do so on an annual, semi-annual and quarterly basis, provided that it may also review compliance at any
other time.
The BMV must inform the CNBV of the results of its review and this information must, in turn, be disclosed to
investors. If an issuer fails to comply with any of these minimum requirements, the BMV will request that the issuer
propose a plan to cure the violation. If the issuer fails to propose a plan, if the plan is not satisfactory to the BMV or if
an issuer does not make substantial progress with respect to the implementation of corrective measures, trading of the
relevant series of shares on the BMV may be temporarily suspended. In addition, if an issuer fails to implement the
plan proposed, the CNBV may cancel the registration of the shares, in which case the majority shareholder or any
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controlling group shall be required to carry out a tender offer to acquire all of the outstanding shares of the issuer in
accordance with the tender offer provisions set forth in the Mexican Securities Market Law (under which all holders
must be treated in the same manner).
Reporting Obligations
Issuers of listed securities are required to file unaudited quarterly financial statements and audited annual
financial statements, (along with an explanation thereof), and periodic reports in particular reports dealing with
material events with the CNBV and the BMV. Mexican issuers must file the following reports with the CNBV:

a comprehensive annual report prepared in accordance with the CNBV’s General Issuers’ Rules by no later
than April 30 of each year, which must include (i) audited annual financial statements and (ii) reports on the
activities carried out by the audit committee and the corporate governance committee;

quarterly reports, within 20 business days following the end of each of the first three quarters and within 40
business days following the end of the fourth quarter;

reports disclosing material events promptly upon their occurrence;

reports and disclosure memoranda revealing corporate restructurings such as mergers, acquisitions, splits or
asset sales approved at shareholders’ meetings or by the board of directors;

reports regarding the policies and guidelines with respect to the use of the company’s (or its subsidiaries)
assets by related persons; and

details dealing with agreements among shareholders.
Pursuant to the CNBV’s General Issuers’ Rules, the internal rules of the BMV were amended to implement an
automated electronic information transfer system (Sistema Electrónico de Envío y Difusión de Información, or
“SEDI”), for information required to be filed with the BMV. Issuers of listed securities must prepare and disclose
their financial information and any other required information via a BMV approved electronic financial information
system (Sistema Electrónico de Comunicación con Emisoras de Valores, or “EMISNET”). Immediately upon its
receipt, the BMV makes the financial information or other required information submitted via EMISNET by the
issuer available to the public.
The General Issuers’ Rules and the rules of the BMV require issuers of listed securities to file information
(including any disclosure of material events (eventos relevantes)) through EMISNET that relates to any act, event or
circumstance that could influence an issuer’s share price. If listed securities experience unusual price volatility or if
there is any third party information available to the public with respect to such issuer that may affect the price of its
securities, the BMV will immediately request that the issuer inform the public of the causes of the volatility or, if the
issuer is unaware of the causes, that the issuer make a statement to that effect and/or the accuracy of the third party
information publicly available. In addition, the BMV may immediately request that the issuer disclose any
information relating to material events, when it deems the information currently disclosed to be insufficient, as well
as instruct the issuer to clarify the information when necessary. The BMV may request that issuers confirm or deny
any material events that have been disclosed to the public by third parties when it deems that the material event may
affect or influence the securities being traded. The BMV must immediately inform the CNBV of any such requests.
In addition, the CNBV may also make any of these requests directly to issuers. An issuer may opt to defer the
disclosure of material events, as long as:

the issuer maintains adequate confidentiality measures (including maintaining records of persons or entities
in possession of material non-public information);

the information is related to actions or events that have not been consummated;

there is no misleading public information relating to the material event; and

no unusual price or volume fluctuation occurs.
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Similarly, if an issuer’s securities are traded on both the BMV and a foreign securities exchange, the issuer must
simultaneously file the information that it is required file pursuant to the laws and regulations of the foreign
jurisdiction with the CNBV and the BMV.
Suspension of Trading
Under its internal regulations, the BMV may suspend trading in the shares of a particular issuer as a result of:

the disclosure of material events;

unusual price or volume fluctuations;

failure by the issuer to timely or adequately comply with its reporting obligations, including the obligation to
disclose material events; or

significant exceptions or comments contained in the auditors’ opinion of the issuer’s financial statements, or
determinations that such financial statements were not prepared in accordance with the applicable
accounting procedures and policies.
In addition to the authority of the BMV under its internal regulations as described above, pursuant to the rules of
the CNBV, the CNBV and the BMV may suspend trading of an issuer’s shares:

if the issuer does not disclose a material event; or

upon price or volume volatility or changes in the offer or demand for such shares that are not consistent with
their historic performance and cannot be explained solely through information made publicly available
pursuant to the CNBV’s general regulations.
The BMV must immediately inform the CNBV and the general public of any such suspension. An issuer may
request that the CNBV or the BMV resume trading, provided that the issuer demonstrates that the causes triggering
the suspension have been resolved and, if applicable, that it is in full compliance with the periodic reporting
requirements under applicable law. The BMV may reinstate trading in suspended shares when (i) it deems that the
material events have been adequately disclosed to investors, (ii) it deems that the issuer has adequately explained the
reasons for the changes in offer and demand, volume traded, or prevailing share price, or (iii) the events affecting the
unusual share price volatility or performance have ceased to exist. If an issuer’s request has been granted, the BMV
will determine the appropriate mechanism to resume trading. If trading of an issuer’s securities is suspended for more
than 20 business days and the issuer is authorized to resume trading without conducting a public offering, the issuer
must disclose via SEDI before trading may resume, a description of the causes that resulted in the suspension and
reasons why it is now authorized to resume trading, before trading may resume.
Under current regulations, the BMV may consider the measures adopted by other non-Mexican stock exchanges
to suspend and/or resume trading of an issuer’s shares in cases where the relevant securities are simultaneously traded
on stock exchanges located outside of Mexico.
Insider Trading, Trading Restrictions and Disclosure Requirements
The LMV contains specific regulations regarding insider trading, including the requirement that persons in
possession of information deemed privileged, abstain: (i) from trading, directly or indirectly, in any relevant issuer’s
securities or derivatives with respect to such securities whose trading price could be affected by such information; (ii)
from making recommendations or providing advice to third parties to trade in such securities, (iii) from disclosing or
communicating such privileged information to third parties (except for those entitled to such information due to their
role or employment position, such as employees of governmental authorities), and (iv) from trading in options and
derivatives of the underlying security issued by such issuer.
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Pursuant to the LMV, the following persons must notify the CNBV any of transactions undertaken as they relate
to a listed issuer’s stock:

members of a listed issuer’s board of directors;

shareholders controlling, 10% or more of a listed issuer’s outstanding share capital;

advisors;

groups controlling 25% or more of a listed issuers’ outstanding share capital; and

other insiders, including, but not limited to, relevant officers and agents with authority to act for the issuers.
In addition, under the LMV insiders must abstain from purchasing or selling securities of the issuer within 90
days from the last sale or purchase, respectively.
Subject to certain exceptions, any acquisition of a public company’s shares that results in the acquirer owning
10% or more, but less than 30%, of an issuer’s outstanding share capital must be publicly disclosed to the CNBV and
the BMV, by no later than one business day following the acquisition.
Any acquisition by an insider that results in the insider its holding by an additional 5% or more of a public
company’s outstanding share capital must also be publicly disclosed to the CNBV and the BMV no later than one
business day following the acquisition. Some insiders must also notify the CNBV of share purchases or sales that
occur within any three-month or five-day period and that exceed certain value thresholds. The LMV requires that
convertible securities, warrants and derivatives to be settled in kind, be taken into account in the calculation of share
ownership percentages.
Tender Offers
The LMV contains provisions relating to public tender offers in Mexico. According to the LMV, tender offers
may be voluntary or mandatory. Both are subject to the prior approval of the CNBV and must comply with general
legal and regulatory requirements. Any intended acquisition of a public company’s shares that results in the buyer
owning 30% or more, but less than a percentage that would result in the buyer acquiring control of a company’s
voting shares, requires the buyer to make a mandatory tender offer for the greater of (a) the percentage of the share
capital intended to be acquired or (b) 10% of the company’s outstanding capital stock. Finally, any acquisition of a
public company’s shares that is intended to obtain voting control, requires the potential buyer to make a mandatory
tender offer for 100% of the company’s outstanding capital stock (however, under certain circumstances the CNBV
may permit an offer for less than 100%). Any tender offer must be made at the same price to all shareholders and
classes of shares. The board of directors, with the advice of the audit committee, must issue its opinion regarding the
tender offer price offered in connection with of any tender offer resulting in a change of control, which opinion must
take minority shareholder rights into account and which may be accompanied by an independent fairness opinion.
Furthermore, members of the board of directors and officers must disclose whether or not they will tender the shares
they hold.
Under the LMV, all tender offers must be open for at least 20 business days and purchases thereunder are
required to be made pro rata to all tendering shareholders. The LMV also permits the payment of certain amounts to
controlling shareholders over and above the offering price, if these amounts are fully disclosed, approved by the
board of directors and paid in connection with non-compete or similar obligations of such controlling shareholders.
The LMV also provides exceptions to the mandatory tender offer requirements and specifically sets forth remedies
for non-compliance with tender offer rules (e.g., suspension of voting rights, possible annulment of purchases, among
others) and other rights available to former shareholders of the issuer.
The LMV also requires that convertible securities, warrants and derivatives that can be settled in kind
representing underlying securities be taken into account in the calculation of the individual or group of individuals
that, directly or indirectly, intends to acquire shares of an issuer.
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Anti-Takeover Protections
The LMV provides that public companies may include anti-takeover provisions in their by-laws if such
provisions (i) are approved by a majority of the shareholders present at an extraordinary general shareholders’
meeting, provided that no shareholder or group of shareholders representing 5% or more of the capital stock present
at the relevant meeting vote against such provision, (ii) do not exclude any shareholders or group of shareholders, (iii)
do not restrict, in an absolute manner, a change of control, and (iv) do not contravene legal provisions related to
tender offers or have the effect of not taking into account the economic rights related to the shares held by the
acquiring party.
Miscellaneous
The LMV also requires that any transaction or series of transactions that represent 20% or more of the
consolidated assets of a public issuer during any fiscal year be approved at a shareholders’ meeting. In addition to the
rights granted to minority shareholders representing 5% or more of the outstanding shares of a public company, to
initiate a shareholder derivative suit for the benefit of the issuer in an amount equal to the damages or losses incurred
by the issuer against directors for a breach of the duties of care or loyalty, the LMV sets forth the right of
shareholders representing 10% of the outstanding voting shares to appoint a director (for each 10% of the outstanding
voting shares), call a shareholders’ meeting, and request that the vote on resolutions in respect of which they were not
sufficiently informed be postponed. Also, holders of 20% of our outstanding voting shares may judicially oppose
resolutions that were passed by a shareholders’ meeting and file a petition for a court order to suspend the resolution,
if the claim is filed within 15 days following the adjournment of the meeting at which the action was taken, provided
that (i) the challenged resolution violates Mexican law or the company’s by-laws, (ii) the opposing shareholders
either did not attend the meeting or voted against the challenged resolution, and (iii) the opposing shareholders
deliver a bond to the court to secure payment of any damages that we may suffer as a result of suspending the
resolution in the event that the court ultimately rules against the opposing shareholder these provisions have seldom
been invoked in Mexico and, as a result, any action that may be taken by a competent court is uncertain.
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TAXATION
Certain Mexican Tax Considerations
General
The following summary contains a description of certain Mexican federal tax consequences, under the Mexican
Income Tax Law (Ley del Impuesto Sobre la Renta), of the acquisition, ownership and disposition of our shares by a
holder of such shares that is a non-Mexican holder (as described below) and that does not hold our shares through a
permanent establishment in Mexico for tax purposes, and it does not purport to be a comprehensive description of all
of the tax considerations that may be relevant to a decision to purchase, hold or dispose our shares. This summary
does not address any United States’ or other countries or Mexican state or municipal tax considerations that may be
relevant to any non-Mexican holder of our shares.
This summary is intended to be for information purposes only, and is based upon the Mexican Income Tax Law
as in effect on the date of this offering memorandum, which are subject to change, possibly with retroactive effects.
Prospective investors in our shares should consult their own tax advisors as to the United States, Mexican or
other tax consequences of the purchase, ownership and disposition of our shares including, in particular, the effect of
any foreign, state, municipal or local tax laws, and their entitlement to the benefits, if any, afforded by the Tax Treaty
and other tax treaties to which Mexico may be a party and which are in effect.
For purposes of this summary, the term “non-Mexican holder” shall mean a holder that is not a resident of
Mexico for tax purposes, and that will not hold the Shares, or a beneficial interest therein, in connection with the
conduct of a trade or business, through a permanent establishment for tax purposes in Mexico.
For purposes of Mexican taxation:

individuals are residents of Mexico for tax purposes, if they have established their principal place of
residence in Mexico or, if they have established their principal place of residence outside Mexico, if their
core of vital interests (centro de intereses vitales) is located within Mexican territory. This will be deemed to
occur if (i) at least 50% of their aggregate annual income derives from Mexican sources, or (ii) the main
center of their professional activities is located in Mexico. Mexican nationals who filed a change of tax
residence to a country or jurisdiction that does not have a comprehensive exchange of information
agreement with Mexico, in which their income is subject to a preferred tax regime pursuant to the provisions
of the Mexican Income Tax Law, will be considered Mexican residents for tax purposes during the year of
filing of the notice of such residence change and during the following three years;

unless proven differently, a Mexican national individual shall be deemed a Mexican resident for tax
purposes. An individual will also be considered a resident in Mexico for tax purposes if such individual is a
government employee, regardless of the location of the individual’s core of vital interests; and

a legal entity is a resident of Mexico for tax purposes if it maintains the principal administration of its
business or the place of its effective management, in Mexico.
Non-residents of Mexico who are deemed to have a permanent establishment in Mexico for tax purposes, shall
be subject to Mexican tax laws, and all income attributable to such permanent establishment will be subject to
Mexican taxes in accordance with the Mexican Income Tax Law.
Taxation on Dividends
Pursuant to the Mexican Income Tax Law, dividends paid to non-Mexican holders, either in cash or in kind, with
respect to our shares, are currently subject to a 10% Mexican withholding tax. Pursuant to a provision of the Mexican
Income Tax Law having temporary effect, dividends paid to non-Mexican holders from profits generated by us prior
to 2014 and derived from our net after-tax profit account existing on December 31, 2013, will not be subject to the
10% withholding tax.
In addition to the aforementioned withholding taxes, dividends paid from distributable earnings that have not
been subject to Mexican corporate income tax pursuant to the Mexican Income Tax Law, are subject to taxation at the
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corporate level, payable by us. This corporate tax paid by us on any such distribution of earnings is not final, and may
be credited by us against income taxes payable by us during the fiscal year in which the tax was paid and for the
following two years.
Taxation on Dispositions
Gains on the sale of our shares by a non-Mexican holder are subject to a 10% withholding tax, to be withheld by
the financial intermediary through which the sale was effected. The Mexican Income Tax Law provides that no
withholding would be applicable, if the holder is a resident of a country with which Mexico has in force a treaty for
the avoidance of double taxation. For that purpose, the non-Mexican holder must provide a statement under oath to
that effect, to the financial intermediary, which needs to include the non-Mexican tax identification number of the
non-Mexican holder. Additionally, to be eligible for the 10% Mexican withholding tax or the exemption, the holder
(i) must have purchased and sold our shares in a recognized market (such as the BMV), (ii) must not hold 10% or
more of our shares nor transfer 10% or more of our shares in one or several transactions within a 24-month period,
(iii) must not transfer control over us by transferring the shares, and (iv) must not transfer the shares in a transaction
that restricts the seller from accepting a more competitive offer.
If the non-Mexican holder would not be eligible for the 10% Mexican withholding tax on the gain or the treaty
exemption set forth in the Mexican Income Tax Law referred to in the prior paragraph (for instance, because the
transaction is not carried out through a recognized market such as the BMV), then any gain of the sale of our shares
would be subject to the general 25% withholding tax rate on the gross income or, alternatively, a 35% rate applicable
to the gain arising from the sale of such shares, if certain requirements are met (including appointing an agent in
Mexico for tax purposes and filing an ad-hoc tax return).
Under the Mexico-United States tax treaty, a holder that is eligible to claim the benefits under such treaty, may
be exempt from Mexican taxes on gains realized from a sale or other disposition of our shares, to the extent such
holder is a resident of the United States for tax purposes, did not own, directly or indirectly, 25% or more of our
outstanding shares during the twelve-month period preceding the date of the sale or disposition, and provided that
certain formal requirements set forth by the Mexican Income Tax Law are also complied with.
Other Mexican Taxes
There is currently no Mexican estate, gift, inheritance or value-added tax applicable to the purchase, ownership
or disposition of our shares by a non-Mexican holder, provided, however, that gratuitous transfers of our shares may,
in certain circumstances, result in the imposition of Mexican federal income tax on the recipient.
There is currently no Mexican stamp, issue, registration or similar tax or duty payable by a non-resident holder
with respect to the purchase, ownership or disposition of our shares.
Certain U.S. Federal Income Tax Considerations
This disclosure is limited to the U.S. federal tax issues discussed below. Additional issues that are not discussed
below could affect the U.S. federal tax treatment of your ownership and disposition of shares. You should,
therefore, seek advice based on your particular circumstances from an independent tax advisor.
The following is a description of certain U.S. federal income tax consequences to U.S. Holders (as defined
herein) of owning and disposing of shares held as capital assets. It does not describe all of the tax consequences that
may be relevant in light of your particular circumstances, including alternative minimum tax consequences and the
Medicare contribution tax on net investment income, as well as tax consequences that may apply if you are an
investor subject to special rules, such as a regulated investment company, a dealer in securities, a trader in securities
who has elected a mark-to-market method of tax accounting, a person holding shares as part of a straddle, wash sale,
or conversion transaction or entering into a constructive sale with respect to shares, a U.S. Holder whose functional
currency for U.S. federal income tax purposes is not the U.S. dollar, a tax-exempt entity (including an “individual
retirement account” or a “Roth IRA”), persons that own or are deemed to own ten percent or more of our voting stock
or an entity or arrangement classified as a partnership for U.S. federal income tax purposes.
This discussion is based on the Internal Revenue Code of 1986, as amended (the “Code”), administrative
pronouncements, judicial decisions, final, temporary and proposed Treasury regulations, and the income tax treaty
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between Mexico and the United States, all as of the date hereof, any of which is subject to change, possibly with
retroactive effect.
A “U.S. Holder” is a beneficial owner of shares that is, for U.S. federal income tax purposes:

an individual citizen or resident of the United States;

a corporation, or other entity taxable as a corporation, created or organized in or under the laws of the United
States, any state therein or the District of Columbia; or

an estate or trust the income of which is subject to U.S. federal income taxation regardless of its source.
If you are a prospective U.S. shareholder, you should consult your tax advisor concerning the U.S. federal, state,
local and foreign tax consequences of owning and disposing of shares in your particular circumstances.
The discussion below assumes that we are not, and will not become, a “passive foreign investment company”
(“PFIC”) for U.S. federal income tax purposes.
Taxation of Distributions
Distributions paid on shares, other than certain pro rata distributions of shares, will generally be treated as
dividends to the extent paid out of our current or accumulated earnings and profits (as determined under U.S. federal
income tax principles). Because we do not maintain calculations of our earnings and profits under U.S. federal
income tax principles, it is expected that distributions you receive generally will be reported as dividends. Subject to
applicable limitations, dividends paid to certain non-corporate U.S. Holders may be taxable at favorable rates. You
should consult your tax advisor regarding the availability of the reduced tax rate on dividends in your particular
circumstances.
The amount of a dividend will include any amounts withheld in respect of Mexican taxes. A dividend will be
included in your income on the date you receive it, will be treated as foreign-source income, and will not be eligible
for the dividends-received deduction generally available to U.S. corporations under the Code. The amount of any
dividend income paid in pesos will be the U.S. dollar amount calculated by reference to the exchange rate in effect on
that date, regardless of whether the payment is in fact converted into U.S. dollars. If the pesos are converted into U.S.
dollars on the date of receipt, you should not be required to recognize foreign currency gain or loss in respect of the
dividend income. You may have foreign currency gain or loss if the pesos are converted into U.S. dollars after the
date of receipt.
Subject to certain conditions and limitations concerning credits for non-U.S. taxes, Mexican taxes, if any,
withheld from distributions on shares may be creditable against your U.S. federal income tax liability. Alternatively,
you may be able to deduct Mexican taxes withheld with respect to distributions on shares against your taxable
income, assuming you do not take a credit for any foreign income taxes paid or accrued during the taxable year and
certain other conditions are met. The rules governing foreign tax credits and deductions are complex, and you should
consult your tax advisor regarding the creditability or deductibility of foreign taxes in your particular circumstances.
Sale or Other Disposition of Shares
Gain or loss realized on the sale or other disposition of shares will be capital gain or loss, and will be long-term
capital gain or loss if you held the shares for more than one year. The amount of the gain or loss will equal the
difference between the amount realized on the disposition and your tax basis in the shares disposed of, in each case as
determined in U.S. dollars. This gain or loss generally will be U.S.-source gain or loss for foreign tax credit
purposes. Long-term capital gain of non-corporate U.S. Holders is eligible for reduced rates of taxation. The
deductibility of capital losses is subject to limitations.
Passive Foreign Investment Company Rules
We believe that we are not a PFIC for U.S. federal income tax purposes for our current taxable year and were not
a PFIC for our 2014 taxable year. However, since PFIC status depends upon the composition of a company’s income
and assets and the market value of its assets from time to time, there can be no assurance that we will not be
considered a PFIC for any taxable year. If we were treated as a PFIC for any taxable year during which you held
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shares, certain adverse consequences could apply to you. For instance, any gain you recognized on a sale or other
disposition of shares would be allocated ratably over your holding period for the shares. The amounts allocated to the
taxable year of the disposition and to any year before we became a PFIC would be taxed as ordinary income. The
amount allocated to each other taxable year would be subject to tax at the highest rate in effect for individuals or
corporations, as appropriate, for that taxable year, and an interest charge would be imposed on the resulting tax
liability. Similar rules would apply to any “excess distribution” with respect to your shares. If we were a PFIC for
any taxable year during which you held shares, you might be required to file a report with the Internal Revenue
Service (“IRS”) containing such information as the U.S. Treasury may require.
Information Reporting and Backup Withholding
Payments of dividends and sales proceeds that are made within the United States or through certain U.S.-related
financial intermediaries generally are subject to information reporting, and may be subject to backup withholding,
unless (i) you are a corporation or other exempt recipient or (ii) in the case of backup withholding, you provide a
correct taxpayer identification number and certify that you are not subject to backup withholding. The amount of any
backup withholding will be allowed as a credit against your U.S. federal income tax liability and may entitle you to a
refund, provided that the required information is timely furnished to the IRS.
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PLAN OF DISTRIBUTION
Credit Suisse Securities (USA) LLC, Morgan Stanley & Co. LLC and Citigroup Global Markets Inc. are acting
as joint global coordinators and joint bookrunners and representatives of the several initial purchasers, and HSBC
Securities (USA) Inc., Santander Investment Securities Inc. an BBVA S.A. are acting as joint bookrunners of the
offering. Subject to the terms and conditions stated in the purchase agreement dated the date of this offering
memorandum, each initial purchaser named below has severally agreed to purchase, and we have agreed to sell to
that initial purchaser, the number of shares set forth opposite the initial purchaser’s name.
Number
of Shares
Initial Purchaser
Credit Suisse Securities (USA) LLC ..........................................................................................................
Morgan Stanley & Co. LLC .......................................................................................................................
Citigroup Global Markets Inc. ....................................................................................................................
HSBC Securities (USA) Inc. ......................................................................................................................
Santander Investment Securities Inc...........................................................................................................
BBVA S.A. .................................................................................................................................................
Total ........................................................................................................................................................
9,702,174
7,276,630
7,276,630
4,851,087
4,851,087
4,851,087
38,808,695
A prospectus in Spanish prepared pursuant to Mexican law and practice will be used in connection with the
Mexican offering in accordance with applicable law.
The international purchase agreement and the Mexican underwriting agreement provide that the obligations of
the initial purchasers and the Mexican underwriters to purchase the shares are subject to approval of legal matters by
counsel and to other conditions. The offering of shares by the initial purchasers is subject to receipt and acceptance
and subject to the initial purchasers’ right to reject any order in whole or in part.
The initial purchasers and the Mexican underwriters propose to resell the shares at the offering price set forth on
the cover page of this offering memorandum within the United States to qualified institutional buyers (as defined in
Rule 144A) in reliance on Rule 144A and outside the United States in reliance on Regulation S. See “Transfer
Restrictions.” The price at which the shares are offered may be changed at any time without notice.
The shares have not been and will not be registered under the Securities Act or any state securities laws and may
not be offered or sold within the United States except in transactions exempt from, or not subject to, the registration
requirements of the Securities Act. See “Transfer Restrictions.” In addition, until 40 days after the commencement of
the international offering, an offer or sale of shares within the United States by a dealer that is not participating in the
international offering may violate the registration requirements of the Securities Act if that offer or sale is made
otherwise than in accordance with Rule 144A and Regulation S.
We have granted the initial purchasers an option to purchase up to an additional 5,821,305 shares and the
Mexican underwriters an option to place up to an additional 24,328,695 shares, in each case exercisable for a period
of 30 days from the date of this offering memorandum, at the offering price, less the underwriting discount, to cover
overallotments, if any. The over-allotment options granted to the initial purchasers and the Mexican underwriters
may be exercised independently of each other, but are expected to be exercised on a coordinated basis, and may be
reallocated between the international offering and the Mexican offering. Any shares issued or sold under the option
will be issued and sold on the same terms and conditions as the other shares that are the subject of the global offering.
We and our current shareholders have agreed that, for a period of 180 days from the date of this offering
memorandum, subject to certain limited exceptions, we and they will not, without the prior consent of the Mexican
underwriters and the representation of initial purchasers, directly or indirectly, offer, sell, contract to sell, pledge,
otherwise dispose of or hedge any shares or any securities convertible into, or exercisable or exchangeable for,
shares. The Mexican underwriters and the representation of initial purchasers in their sole discretion may release any
of the securities subject to these lock- up agreements at any time without notice.
Our principal shareholders, Grupo Kaluz and Grupo Carso, have purchased 16.42% of the shares in the global
offering (assuming no exercise of the overallotment options), or 14.28% of the shares in the global offering
(assuming full exercise of the overallotment options), on equal terms with all other participants. Neither we nor the
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Mexican underwriters can ensure that persons participating in the Mexican offering received their requested
allocation, or that such allocation did not have an impact on the share price in the Mexican offering.
Prior to this offering, there has been no public market for our shares. Consequently, the offering price for the
shares was determined by negotiations among us, the initial purchasers and the Mexican underwriters. Among the
factors considered in determining the offering price were our results of operations, our current financial condition,
our future prospects, our markets, the economic conditions in and future prospects for the industry in which we
compete, our management, and currently prevailing general conditions in the equity securities markets, including
current market valuations of publicly traded companies considered comparable to our company.
The shares will constitute a new class of securities with no established trading market. We have applied to have
our shares listed on the BMV under the symbol “ELEMENT.” However, we cannot assure you that the prices at
which the shares will sell in the market after this offering will not be lower than the initial offering price or that an
active trading market for the shares will develop and continue after this offering. The initial purchasers have advised
us that they currently intend to make a market in the shares. However, they are not obligated to do so and they may
discontinue any market-making activities with respect to the shares at any time without notice. Accordingly, we
cannot assure you as to the liquidity of, or the trading market for, the shares.
In connection with the offering, the initial purchasers may purchase and sell shares in the open market. Purchases
and sales in the open market may include short sales, purchases to cover short positions, which may include
purchases pursuant to the initial purchasers’ option to purchase additional shares, and stabilizing purchases. These
transactions may also include the option to purchase additional shares and stabilizing in the Mexican market in
accordance with Mexican law and regulations.

Short sales involve secondary market sales by the initial purchasers of a greater number of shares than the
initial purchasers are required to purchase in the offering.

“Covered” short sales are sales of shares in an amount up to the number of shares represented by the initial
purchasers’ option to purchase additional shares.

“Naked” short sales are sales of shares in an amount in excess of the number of shares represented by the
initial purchasers’ option to purchase additional shares.

Covering transactions involve purchases of shares either pursuant to the initial purchasers’ option to
purchase additional shares or in the open market after the distribution has been completed in order to cover
short positions.

To close a naked short position, the initial purchasers must purchase shares in the open market after the
distribution has been completed. A naked short position is more likely to be created if the initial purchasers
are concerned that there may be downward pressure on the price of the shares in the open market after
pricing that could adversely affect investors who purchase in the offering.

To close a covered short position, the initial purchasers must purchase shares in the open market after the
distribution has been completed or must exercise their option to purchase additional shares. In determining
the source of shares to close the covered short position, the initial purchasers will consider, among other
things, the price of shares available for purchase in the open market as compared to the price at which they
may purchase shares by exercising their option to purchase additional shares.

Stabilizing transactions involve bids to purchase shares so long as the stabilizing bids do not exceed a
specified maximum.
Purchases to cover short positions and stabilizing purchases, as well as other purchases by the initial purchasers
for their own accounts, may have the effect of preventing or retarding a decline in the market price of the shares.
They may also cause the price of the shares to be higher than the price that would otherwise exist in the open market
in the absence of these transactions. The initial purchasers may conduct these transactions in the over-the-counter
market or otherwise. If the initial purchasers commence any of these transactions, they may discontinue them at any
time.
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The initial purchasers and/or their affiliates may enter into derivative transactions in connection with the shares,
acting at the order and for the account of their clients. The initial purchasers and/or their affiliates may also purchase
some of the securities in this offering as a hedge for such transactions. Such transactions may have an effect on
demand, price or other terms of the offering.
The initial purchasers are full service financial institutions engaged in various activities, which may include
securities trading, commercial and investment banking, financial advisory, investment management, principal
investment, hedging, financing and brokerage activities. Certain of the initial purchasers and their affiliates have in
the past performed commercial banking, investment banking and advisory services for us from time to time for which
they have received customary fees and reimbursement of expenses and may, from time to time, engage in transactions
with and perform services for us in the ordinary course of their businesses for which they may receive customary fees
and reimbursement of expenses. In the ordinary course of their various business activities, the initial purchasers and
their respective affiliates may make or hold a broad array of investments and actively trade debt and equity securities
(or related derivative securities) and financial instruments (which may include bank loans and/or credit default swaps)
for their own account and for the accounts of their customers and may at any time hold long and short positions in
such securities and instruments. Such investment and securities activities may involve our securities and instruments
(directly, as collateral securing other obligations or otherwise). The initial purchasers and their affiliates may also
make investment recommendations and/or publish or express independent research views in respect of such securities
or instruments and may at any time hold, or recommend to clients that they acquire, long and/or short positions in
such securities and instruments. In addition, affiliates of some of the initial purchasers are lenders, and in some cases
agents or managers for the lenders, under our credit facility, and as such affiliates of certain of the initial purchasers
may receive proceeds from the offering if we use any of such proceeds to repay indebtedness.
BBVA, S.A., one of the initial purchasers, is only participating in the offering of shares outside of the United
States under Regulation S. BBVA, S.A. is not a broker-dealer registered with the SEC and will not be offering or
selling securities in the United States or to U.S. nationals or residents.
We have agreed to indemnify the initial purchasers against certain liabilities, including liabilities under the
Securities Act, or to contribute to payments that the initial purchasers may be required to make because of any of
those liabilities.
Notice to Prospective Investors in the European Economic Area
In relation to each member state of the European Economic Area that has implemented the Prospectus Directive
(each, a “relevant member state”), with effect from and including the date on which the Prospectus Directive is
implemented in that relevant member state (the “relevant implementation date”), an offer of shares described in this
offering memorandum may not be made to the public in that relevant member state other than:

to any legal entity which is a qualified investor as defined in the Prospectus Directive;

to fewer than 100 or, if the relevant member state has implemented the relevant provision of the 2010 PD
Amending Directive, 150 natural or legal persons (other than qualified investors as defined in the Prospectus
Directive), as permitted under the Prospectus Directive, subject to obtaining the prior consent of the relevant
Dealer or Dealers nominated by us for any such offer; or

in any other circumstances falling within Article 3(2) of the Prospectus Directive,
provided that no such offer of securities shall require us or the initial purchasers to publish a prospectus pursuant to
Article 3 of the Prospectus Directive.
For purposes of this provision, the expression an “offer of securities to the public” in any relevant member state
means the communication in any form and by any means of sufficient information on the terms of the offer and the
securities to be offered so as to enable an investor to decide to purchase or subscribe for the securities, as the
expression may be varied in that member state by any measure implementing the Prospectus Directive in that member
state, and the expression “Prospectus Directive” means Directive 2003/71/EC (and amendments thereto, including the
2010 PD Amending Directive, to the extent implemented in the relevant member state) and includes any relevant
implementing measure in each relevant member state. The expression 2010 PD Amending Directive means Directive
2010/73/EU.
175
The sellers of the shares have not authorized and do not authorize the making of any offer of shares through any
financial intermediary on their behalf, other than offers made by the initial purchasers with a view to the final
placement of the shares as contemplated in this offering memorandum. Accordingly, no purchaser of the shares, other
than the initial purchasers, is authorized to make any further offer of the shares on behalf of the sellers or the initial
purchasers.
Notice to Prospective Investors in the United Kingdom
This offering memorandum is only being distributed to, and is only directed at, persons in the United Kingdom
that are qualified investors within the meaning of Article 2(1)(e) of the Prospectus Directive that are also (i)
investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial
Promotion) Order 2005 (the “Order”) or (ii) high net worth entities, and other persons to whom it may lawfully be
communicated, falling within Article 49(2)(a) to (d) of the Order (each such person being referred to as a “relevant
person”). This offering memorandum and its contents are confidential and should not be distributed, published or
reproduced (in whole or in part) or disclosed by recipients to any other persons in the United Kingdom. Any person
in the United Kingdom that is not a relevant person should not act or rely on this document or any of its contents.
Notice to Prospective Investors in France
Neither this offering memorandum nor any other offering material relating to the shares described in this offering
memorandum has been submitted to the clearance procedures of the Autorité des Marchés Financiers or of the
competent authority of another member state of the European Economic Area and notified to the Autorité des Marchés
Financiers. The shares have not been offered or sold and will not be offered or sold, directly or indirectly, to the
public in France. Neither this offering memorandum nor any other offering material relating to the shares has been or
will be:

released, issued, distributed or caused to be released, issued or distributed to the public in France; or

used in connection with any offer for subscription or sale of the shares to the public in France. Such offers,
sales and distributions will be made in France only:

to qualified investors (investisseurs qualifiés) and/or to a restricted circle of investors (cercle restreint
d’investisseurs), in each case investing for their own account, all as defined in, and in accordance with,
articles L.411-2, D.411-1, D.411-2, D.734-1, D.744-1, D.754-1 and D.764-1 of the French Code monétaire
et financier;

to Advisors authorized to engage in portfolio management on behalf of third parties; or

in a transaction that, in accordance with article L.411-2-II-1°-or-2°-or 3° of the French Code monétaire et
financier and article 211-2 of the General Regulations (Règlement Général) of the Autorité des Marchés
Financiers, does not constitute a public offer (appel public à l’épargne).
The shares may be resold directly or indirectly, only in compliance with articles L.411-1, L.411-2, L.412-1 and
L.621-8 through L.621-8-3 of the French Code monétaire et financier.
Notice to Prospective Investors in Switzerland
This document does not constitute a prospectus within the meaning of Article 652a of the Swiss Code of
Obligations. The shares may not be sold directly or indirectly in or into Switzerland except in a manner which will
not result in a public offering within the meaning of the Swiss Code of Obligations. Neither this document nor any
other offering materials relating to the shares may be distributed, published or otherwise made available in
Switzerland except in a manner which will not constitute a public offering of the shares in Switzerland.
Notice to Prospective Investors in Hong Kong
The shares may not be offered or sold in Hong Kong by means of any document other than (i) in circumstances
which do not constitute an offer to the public within the meaning of the Companies Ordinance (Cap. 32, Laws of
Hong Kong), or (ii) to “professional investors” within the meaning of the Securities and Futures Ordinance (Cap.
176
571, Laws of Hong Kong) and any rules made thereunder, or (iii) in other circumstances which do not result in the
document being a “prospectus” within the meaning of the Companies Ordinance (Cap. 32, Laws of Hong Kong) and
no advertisement, invitation or document relating to the shares may be issued or may be in the possession of any
person for the purpose of issue (in each case whether in Hong Kong or elsewhere), which is directed at, or the
contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under
the laws of Hong Kong) other than with respect to shares which are or are intended to be disposed of only to persons
outside Hong Kong or only to “professional investors” within the meaning of the Securities and Futures Ordinance
(Cap. 571, Laws of Hong Kong) and any rules made thereunder.
Notice to Prospective Investors in Japan
The shares offered in this offering memorandum have not been registered under the Securities and Exchange
Law of Japan. The shares have not been offered or sold and will not be offered or sold, directly or indirectly, in Japan
or to or for the account of any resident of Japan, except (i) pursuant to an exemption from the registration
requirements of the Securities and Exchange Law and (ii) in compliance with any other applicable requirements of
Japanese law.
Notice to Prospective Investors in Singapore
This offering memorandum has not been registered as a prospectus with the Monetary Authority of Singapore.
Accordingly, this offering memorandum and any other document or material in connection with the offer or sale, or
invitation for subscription or purchase, of the shares may not be circulated or distributed, nor may the shares be
offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to
persons in Singapore other than (i) to an institutional investor under Section 274 of the Securities and Futures Act,
Chapter 289 of Singapore (the “SFA”), (ii) to a relevant person pursuant to Section 275(1), or any person pursuant to
Section 275(1A), and in accordance with the conditions specified in Section 275 of the SFA or (i)otherwise pursuant to,
and in accordance with the conditions of, any other applicable provision of the SFA, in each case subject to
compliance with conditions set forth in the SFA.
Where the shares are subscribed or purchased under Section 275 of the SFA by a relevant person which is:

a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of
which is to hold investments and the entire share capital of which is owned by one or more individuals, each
of whom is an accredited investor; or

a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each
beneficiary of the trust is an individual who is an accredited investor,
shares, debentures and units of shares and debentures of that corporation or the beneficiaries’ rights and interest
(howsoever described) in that trust shall not be transferred within six months after that corporation or that trust has
acquired the shares pursuant to an offer made under Section 275 of the SFA except:

to an institutional investor (for corporations, under Section 274 of the SFA) or to a relevant person defined
in Section 275(2) of the SFA, or to any person pursuant to an offer that is made on terms that such shares,
debentures and units of shares and debentures of that corporation or such rights and interest in that trust are
acquired at a consideration of not less than S$200,000 (or its equivalent in a foreign currency) for each
transaction, whether such amount is to be paid for in cash or by exchange of securities or other assets, and
further for corporations, in accordance with the conditions specified in Section 275 of the SFA;

where no consideration is or will be given for the transfer; or

where the transfer is by operation of law.
Notice to Prospective Investors in Brazil
For purposes of Brazilian law, this offer of securities is addressed to you personally, upon your request and for
your sole benefit, and is not to be transmitted to anyone else, to be relied upon elsewhere or for any other purpose
177
either quoted or referred to in any other public or private document or to be filed with anyone without our prior,
express and written consent.
Therefore, as this offering memorandum does not constitute or form part of any public offering to sell or
solicitation of a public offering to buy any shares or assets, the offering and THE SHARES OFFERED HEREBY
HAVE NOT BEEN, AND WILL NOT BE, AND MAY NOT BE OFFERED FOR SALE OR SOLD IN BRAZIL
EXCEPT IN CIRCUMSTANCES WHICH DO NOT CONSTITUTE A PUBLIC OFFERING OR DISTRIBUTION
UNDER BRAZILIAN LAWS AND REGULATIONS. DOCUMENTS RELATING TO THE SHARES, AS WELL
AS THE INFORMATION CONTAINED THEREIN, MAY NOT BE SUPPLIED TO THE PUBLIC, AS A PUBLIC
OFFERING IN BRAZIL OR BE USED IN CONNECTION WITH ANY OFFER FOR SUBSCRIPTION OR SALE
OF THE SHARES TO THE PUBLIC IN BRAZIL.
Notice to Prospective Investors in Peru
The shares and the information contained in this offering memorandum are not being publicly marketed
or offered in Peru and will not be distributed or caused to be distributed to the general public in Peru.
Peruvian securities laws and regulations on public offerings will not be applicable to the offering of the shares
and therefore, the disclosure obligations set forth therein will not be applicable to us or the sellers of the shares
before or after their acquisition by prospective investors. The shares and the information contained in this
offering memorandum have not been and will not be reviewed, confirmed, approved or in any way submitted
to the SMV nor have they been registered under the Securities Market Law (Ley del Mercado de Valores) or
any other Peruvian regulations. Accordingly, the shares cannot be offered or sold within Peruvian territory
except to the extent any such offering or sale qualifies as a private offering under Peruvian regulations and
complies with the provisions on private offerings set forth therein.
The shares may not be offered or sold in Peru except in compliance with the securities law thereof.
Notice to Prospective Investors in Chile
Pursuant to Law No. 18,045 of Chile (the securities market law of Chile) and Rule (Norma de Carácter General)
No. 336, dated June 27, 2012, issued by the SVS, the shares may be privately offered in Chile to certain 12, 2008, of
the SVS).
Rule 336 requires the following information to be provided to prospective investors in Chile:
1. Date of commencement of the offer: July 9, 2015. The offer of the shares is subject Rule (Norma de Carácter
General) No. 336, dated June 27, 2012, issued by the Superintendency of Securities and Insurance of Chile
(Superintendencia de Valores y Seguros de Chile or “SVS”);
2. the subject matter of this offer are securities not registered with the Securities Registry (Registro de Valores)
of the SVS, nor with the foreign securities registry (Registro de Valores Extranjeros) of the SVS, due to the shares
not being subject to the oversight of the SVS;
3. since the shares are not registered in Chile there is no obligation by us to make publicly available information
about the shares in Chile; and
4. the shares shall not be subject to public offering in Chile unless registered with the relevant Securities Registry
of the SVS.
Información a los Inversionistas Chilenos
De conformidad con la ley N° 18.045, de mercado de valores y la Norma de Carácter General N° 336 (la
“NCG 336”), de 27 de junio de 2012, de la Superintendencia de Valores y Seguros de Chile (la “SVS”), los acciones
pueden ser ofrecidos privadamente a ciertos “inversionistas calificados”, a los que se refiere la NCG 336 y que se
definen como tales en la Norma de Carácter General N° 216, de 12 de junio de 2008, de la SVS.
La siguiente información se proporciona a potenciales inversionistas de conformidad con la NCG 336:
178
1. La oferta de los acciones comienza el 9 de julio de 2015, y se encuentra acogida a la Norma de Carácter
General N° 336, de fecha 27 de junio de 2012, de la SVS;
2. La oferta versa sobre valores no inscritos en el Registro de Valores o en el Registro de Valores Extranjeros
que lleva la SVS, por lo que tales valores no están sujetos a la fiscalización de esa Superintendencia;
3. Por tratarse de valores no inscritos en Chile no existe la obligación por parte del emisor de entregar en Chile
información pública sobre los mismos; y
4. Estos valores no podrán ser objeto de oferta pública en Chile mientras no sean inscritos en el Registro de
Valores correspondiente.
179
TRANSFER RESTRICTIONS
The international offering is being made in accordance with Rule 144A and Regulation S under the Securities
Act. The shares have not been and will not be registered under the Securities Act or with any securities regulatory
authority of any state or other jurisdiction except Mexico and, accordingly, may not be offered, sold, pledged or
otherwise transferred or delivered (i) within the United States or to, or for the account or benefit of, U.S. persons (as
defined in Regulations S) except to qualified institutional buyers (“QIBs”) in reliance on the exemption from the
registration requirements of the Securities Act provided by Rule 144A, or (ii) outside the United States to non-U.S.
persons in accordance with Regulation S.
Rule 144A
Each purchaser of shares offered to U.S. persons, and therefore in reliance on Rule 144A, will be deemed to have
represented and agreed that it understands that:
(1) such shares have not been and will not be registered under the Securities Act or with any securities regulatory
authority of any state or other jurisdiction except Mexico; and
(2) such shares may not be offered, sold, pledged or otherwise transferred except (a) to a person whom the seller
and any person acting on its behalf reasonably believes is a QIB in a transaction meeting the requirements of Rule
144A, (b) in accordance with Regulation S under the Securities Act, or (c) in accordance with Rule 144 under the
Securities Act (if available), in each case in accordance with any applicable securities laws of any state of the United
States.
Regulation S
Each purchaser of shares offered to non-U.S. persons outside the United States, and therefore in reliance on
Regulation S, will be deemed to have represented and agreed that it understands that:
(1) such shares have not been and will not be registered under the Securities Act or with any securities regulatory
authority of any state or other jurisdiction except Mexico; and
(2) such securities may not be offered, sold, pledged or otherwise transferred prior to the expiration of 40 days
after the date of this offering memorandum, except (a) in accordance with Regulation S under the Securities Act or
(b) to a person whom the seller and any person acting on its behalf reasonably believes is a QIB in a transaction
meeting the requirements of Rule 144A, in either case in accordance with any applicable securities laws of any state
of the United States.
180
VALIDITY OF THE SHARES
The validity of the shares will be passed upon for us by DRB Consultores Legales, S.C., our Mexican counsel.
Certain legal matters in connection with the global offering are being passed upon for us by Davis Polk & Wardwell
LLP, our U.S. counsel, and Chévez, Ruiz, Zamarripa y Cía, S.C., our Mexican tax counsel, and for the initial
purchasers by Shearman & Sterling LLP, U.S. counsel to the initial purchasers, and Ritch Mueller, Heather y
Nicolau, S.C., Mexican counsel to the initial purchasers.
181
INDEPENDENT AUDITORS
Our audited consolidated financial statements of Elementia, S.A. de C.V. and subsidiaries, as of December 31,
2014, 2013 and 2012 and for the years then ended, included elsewhere in this offering memorandum, have been
audited by Galaz, Yamazaki, Ruiz Urquiza, S.C. (member of Deloitte Touche Tohmatsu Limited), independent
auditors, as stated in their report appearing herein.
182
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Unaudited Condensed Consolidated Interim Financial Statements for the Three-Month Periods Ended
March 31, 2015 and 2014:
Unaudited Condensed Consolidated Interim Statements of Financial Position as of March 31, 2015
(unaudited) and December 31, 2014 ........................................................................................................
Unaudited Condensed Consolidated Interim Statements of Profit or Loss and Other Comprehensive
Income for the three-month periods ended March 31, 2015 and 2014 ....................................................
Unaudited Condensed Consolidated Interim Statements of Changes in Stockholders’ Equity for the
three-month periods ended March 31, 2015 and 2014 .............................................................................
Unaudited Condensed Consolidated Interim Statements of Cash Flows for the three-month periods
ended March 31, 2015 and 2014 ..............................................................................................................
Notes to the Unaudited Condensed Consolidated Interim Financial Statements for the three-month
periods ended March 31, 2015 and 2014 .................................................................................................
Audited Consolidated Financial Statements for the years ended December 31, 2014, 2013 and 2012:
Independent Auditors’ Report ....................................................................................................................
Consolidated Statements of Financial Position as of December 31, 2014, 2013 and 2012 .........................
Consolidated Statements of Profit of Loss and Other Comprehensive Income for the years ended
December 31, 2014, 2013 and 2012 ........................................................................................................
Consolidated Statements of Changes in Stockholders’ Equity For the years ended December 31,
2014, 2013 and 2012 ................................................................................................................................
Consolidated Statements of Cash Flows for the years ended December 31, 2014, 2013 and 2012 .............
Notes to the Consolidated Financial Statements as of December 31, 2014, 2013 and 2012 .......................
F-1
F-4
F-5
F-7
F-8
F-10
F-20
F-22
F-23
F-25
F-26
F-28
Elementia, S. A. de C. V. y
Subsidiaries
(Subsidiary of Kaluz, S. A. de C. V.)
Unaudited Interim Condensed
Consolidated Financial Statements for
the Three-Month Periods Ended March
31, 2015 and 2014
F-2
Elementia, S. A. de C. V. and Subsidiaries
Unaudited Interim Condensed Consolidated Financial
Statements for the Three-Month Periods Ended March
31, 2015 and 2014
Table of contents
Page
Unaudited Interim Condensed Consolidated Statements of Financial Position as of March 31,
2015
F-4
Unaudited Interim Condensed Consolidated Statements of Profit or Loss and Other
Comprehensive Income for the Three-Month Periods Ended March 31,
2015 and 2014
F-5
Unaudited Interim Condensed Consolidated Statements of Changes in Stockholders’
Equity for the Three-Month Periods Ended March 31, 2015 and 2014
F-7
Unaudited Interim Condensed Consolidated Statements of Cash Flows for the ThreeMonth Periods Ended March 31, 2015 and 2014
F-8
Notes to Unaudited Interim Condensed Consolidated Financial Statements
F-3
F-10
Unaudited Interim Condensed Consolidated
Statements of Financial Position
As of March 31, 2015
(In thousands of Mexican pesos)
Assets
Current assets:
Cash and cash equivalents
Accounts receivable – Net
Due from related parties – Net
Inventories – Net
Prepaid expenses
Total current assets
Non-current assets:
Property, machinery and equipment – Net
March 31, 2015
December 31,
(unaudited)
2014
Note
5
Ps$
15
6
3,168,573
3,503,961
746
2,439,516
278,994
9,391,790
Ps$
15,646,424
8
Investment in shares of associated companies and others
Net plan assets for employee benefits at retirement
Liabilities and stockholders’ equity
current portion of long-term debt
Trade accounts payable
Financière Lafarge, S.A.S.
Direct employee benefits
Provisions
Accrued expenses and taxes, other than income taxes
Due to related parties
Current portion of income tax liabilities from consolidation
benefits
Advances from customers
Derivative financial instrument
Total current liabilities
3,193,247
3,149,647
2,120
2,470,768
176,408
8,992,190
15,710,642
9,963
10,323
336,580
328,025
Notes payable to financial institutions and long-term debt
Deferred income taxes
Income tax liabilities from tax consolidation benefits
Other long-term liabilities
Total long-term liabilities
Total liabilities
Intangibles and other assets – Net
9
3,160,729
3,184,010
Due from related parties – long-term
Total non-current assets
17
53,703
19,207,399
53,703
19,286,703
Commitments and contingencies (Note 17)
Stockholders’ equity:
Capital stock
Additional paid-in capital
Retained earnings
Exchange differences on translating foreign operations
Net fair value effect on hedging instruments
Gain on revaluation of property, machinery and equipment
Actuarial loss
Equity attributable to owners of the Entity
Non-controlling interest
Total stockholders’ equity
28,278,893
Total stockholders’ equity and liabilities
Total assets
Ps$
28,599,189
Ps$
See accompanying notes to the unaudited condensed consolidated financial statements.
F-4
March 31, 2015
December 31,
(unaudited)
2014
Note
11
10
Ps$
15
7
11,12
Ps$
3,097,579
2,581,438
681,939
14,320
567,726
191,774
161,245
Ps$
3,102,183
2,482,003
662,310
17,106
619,269
273,049
156,267
839
56,363
201,951
7,555,174
839
96,233
146,147
7,555,406
7,454,347
1,077,960
813,437
628
9,346,372
16,901,546
7,282,203
1,154,799
679,119
607
9,116,728
16,672,134
2,012,905
4,598,877
4,048,540
969,386
(124,200)
360,257
(217,672)
11,648,093
49,550
11,697,643
2,012,905
4,598,877
3,988,986
915,227
(102,303)
360,232
(217,672)
11,556,252
50,507
11,606,759
28,599,189
Ps$
28,278,893
Unaudited Interim Condensed Consolidated Statements
of Profit or Loss and Other Comprehensive Income
(Loss)
For the three-month periods ended March 31, 2015 and 2014
(In thousands of Mexican pesos, except earnings (loss) per share)
Three-month period
Three-month period
ended
ended
March 31, 2015
March 31, 2014
Note
Net sales
Cost of sales
Gross profit
16
16
Ps$
4,070,296
3,072,810
997,486
Ps$
3,639,320
2,809,363
829,957
Operating expenses
Other income – Net
Exchange loss (gain) - Net
Interest income
Interest expense
Banking fees
Income before income taxes
16
14
569,705
(6,297)
169,337
(33,300)
183,840
17,110
97,091
628,418
(162,540)
(9,291)
(18,383)
112,304
16,426
263,023
Income tax expense
13
30,222
75,336
Income from continuing operations
66,869
187,687
Loss for the period from discontinued operations, Net
Net income
8,272
58,597
9,332
178,355
Other comprehensive income, net of income taxes:
Items that will not be reclassified subsequently to profit or
loss
Actuarial loss
Gain on revaluation of property, machinery and equipment
Items that may be reclassified subsequently to profit or loss
Net fair value effect on hedging instruments
-
Total other comprehensive income (loss) for the
year, net of income taxes
Total comprehensive income for the period
25
Ps$
18,964
(21,897)
54,159
(11,299)
(144,078)
32,287
(136,413)
90,884
Ps$
41,942
(Continues)
F-5
Three-month period
Three-month period
ended
ended
March 31, 2015
March 31, 2014
Note
Net income attributable to:
Owners of the Entity
Ps$
59,554
(957)
Ps$
166,918
11,437
Ps$
58,597
Ps$
178,355
Ps$
91,841
(957)
Ps$
30,505
11,437
Ps$
90,884
Ps$
41,942
Ps$
2.3221
Ps$
6.0341
From discontinued operations
Ps$
(.2832)
Ps$
(.3195)
From continuing and discontinued operations
Ps$
2.0389
Ps$
5.7146
Total comprehensive income for the year attributable to:
Earnings per share:
From continuing operations
29,208,810
29,208,810
(Concluded)
F-6
Statements of Changes in Stockholders’ Equity
Other comprehensive income
Net fair value effect
on hedging
Balances as of January 1, 2014
Ps$
Net income
Other comprehensive loss
Exchange differences
instruments entered
Total
Capital
Additional paid-in
Retained
on translating
into for cash flow
Gain on revaluation
Actuarial
Attributable to
Non-controlling
stockholders’
stock
capital
earnings
foreign operations
hedges
of property
loss
owners of the Entity
interest
equity
(209,247)
Ps$ 11,235,386
2,012,905
Ps$
-
4,598,877
Ps$
-
3,608,669
Ps$
166,918
-
1,132,766
Ps$
(144,078)
6,867
Ps$
(11,299)
84,549
Ps$
18,964
-
Ps$
166,918
(136,413)
3,200,480
11,437
-
Ps$ 14,435,866
178,355
(136,413)
Balances as of March 31, 2014
Ps$
2,012,905
Ps$
4,598,877
Ps$
3,775,587
Ps$
988,688
Ps$
(4,432)
Ps$
103,513
Ps$
(209,247)
Ps$ 11,265,891
Ps$
3,211,917
Ps$ 14,477,808
Ps$
2,012,905
Ps$
4,598,877
Ps$
3,988,986
Ps$
915,227
Ps$
(102,303)
Ps$
360,232
Ps$
(217,672)
Ps$ 11,556,252
Ps$
50,507
Ps$ 11,606,759
Net income
Balances as of March 31, 2015
Ps$
2,012,905
Ps$
4,598,877
59,554
Ps$
4,048,540
54,159
Ps$
969,386
(21,897)
Ps$
(124,200)
F-7
-
-
25
Ps$
360,257
Ps$
(217,672)
59,554
32,287
Ps$ 11,648,093
(957)
Ps$
49,550
58,597
32,287
Ps$ 11,697,643
Statements of Cash Flows
Three-month period
Items related to operating activities:
Net income
Income tax expense
Three-month period
ended
ended
March 31, 2015
March 31, 2014
Ps$
58,597
30,222
Ps$
178,355
75,336
Depreciation and amortization
Interest income
Loss (gain) on disposal of fixed assets
Bargain purchase gain on business acquisition
272,607
(33,300)
(166)
-
245,126
(18,383)
(434,605)
Interest expense
Unrealized exchange loss on debt issuance
183,840
232,383
744,183
112,304
158,133
(354,314)
1,374
31,252
(102,586)
(11,341)
-
(215,688)
39,998
196,097
(670,233)
(16,854)
(4,764)
99,435
4,978
(51,543)
(39,870)
76,711
(99,640)
298,639
390,637
6,655
(420,815)
(55,121)
794,120
(67,461)
134,704
(127,609)
4,050
(6,144)
33,300
(96,403)
(77,742)
(329,067)
(10,460)
18,383
(398,886)
Items related to operating activities:
(Increase) decrease in:
Due from related parties
Inventories – Net
Prepaid expenses
Direct employee benefits – Net
Accounts receivable, long-term
Increase (decrease) in:
Provisions
Accrued expenses and taxes
Income taxes paid
Net cash flow provided by operating activities
Items related to investing activities:
Purchase of property, machinery and equipment
Disposal of property, machinery and equipment
Net cash paid on business acquisition
Acquisition of other assets
Interest received
(Continues)
F-8
Three-month period
Three-month period
ended
ended
March 31, 2015
March 31, 2014
Cash flows from financing activities:
Proceeds from bank loans
Payment of borrowings
Interest paid
Net cash used in financing activities
-
Effects of exchange rates on cash and cash equivalents
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the period
(45,214)
(180,940)
(226,154)
120,000
(42,317)
(103,604)
(25,921)
(756)
(143,651)
(24,674)
(433,753)
3,193,247
Cash and cash equivalents at the end of the period
Ps$
3,168,573
1,972,934
Ps$
1,539,181
(Concluded)
See accompanying notes to the consolidated financial statements.
F-9
Notes to Unaudited Condensed Consolidated Interim
Financial Statements
(In thousands of Mexican pesos, unless otherwise stated)
1.
Actividades
Elementia, S. A. de C.V. and Subsidiaries (the “Entity or “Elementia”) is subsidiary of Kaluz, S.A. de C.V.
(“Holding Entity”) with a duration of 99 years beginning in January 1979, and its main address is Poniente
134 No 719, Industrial Vallejo, 02300, Mexico, D.F. The Entity is engaged in the manufacture and sale of
fiber-cement products, copper, cement and plastic products for the construction industry.
2.
Significant events
The Entity announced that it will invest US$250 million to expand the production capacity of the Tula cement
plant in its cement segment, located in the town of Atotonilco de Tula, Hidalgo. The investment will allow
Cementos Fortaleza facilities reach a production capacity of 3.5 million tons per year from 2017, representing
an increase of 1.5 million tons of cement from the current capacity.
3.
Basis of presentation
The unaudited condensed interim financial statements of the Entity for the three month periods ended March
31, 2015 and 2014 have been prepared in accordance with International Accounting Standard 34, Interim
Financial Information (IAS 34), issued by the International Accounting Standards Board (IASB).
The unaudited condensed interim financial statements have not been audited. It is the Entity’s management’s
opinion that all adjustments (ordinary and recurring) required for a fair presentation of the unaudited
condensed interim financial statements have been included. The profit or loss for the periods in question is not
necessarily indicative of the profit or loss for the full year.
These unaudited condensed interim financial statements should be read together with the Entity’s audited
consolidated financial statements and the respective notes for the year ended December 31, 2014.
The unaudited condensed interim financial statements were prepared on a historical cost basis, except for the
valuation of derivative financial instruments and property, machinery and equipment, which were recognized
at fair value.
Preparation of these unaudited condensed interim financial statements in accordance with IAS 34 requires the
use of certain critical accounting estimates. It also requires that management exercise its judgment in the
process of applying the Entity’s accounting policies. There have been no significant changes to
Management’s critical accounting estimates or judgments compared to those applied on the Entity’s audited
consolidated financial statements as of December 31, 2014.
a.
Basis of consolidation
The unaudited condensed consolidated interim financial statements include the financial statements of
Elementia, S. A. de C. V. and its subsidiaries. The Entity has control over an entity when it is exposed,
or has rights, to variable returns from its involvement with such entity and it has the ability to affect
those returns through its power over the entity.
As of March 31, 2015 Elementia’s shareholding percentage in the capital stock of its significant
subsidiaries is the same as the presented in the financial statements as of December 31, 2014.
F-10
b.
Accounting policies
The accounting policies and methods of computation applied by the Entity to these unaudited
condensed interim financial statements are the same as those applied by the Entity in its financial
statements at December 31, 2014 and for the year ended on that date.
c.
Business segment
During 2015, the Entity changed the manner of reporting segments internally for the purpose of
making decisions on the performance and resource allocation as well as to reflect its revised
operational strategy. As a result of these changes, the segment dedicated to the manufacture and sale of
expandable and extruded polystyrene, as well as the transformation of polypropylene resins,
polyethylene and polycarbonate (Plastics) has been absorbed by the Building systems segment, such
that the Entity only has three segments: Cement, Building systems and Metals . The Entity restructured
their information retrospectively by division for the three months ended March 31, 2014.
4.
New and amended International Financial Reporting Standards (IFRS)
The following amendments, in effect as of January 1, 2014, were taken into consideration when preparing the
unaudited condensed consolidated interim financial statements and application thereof had no effects on the
Entity’s financial position or its results.
Financial Instruments3
Revenue from Contracts with Customers2
Accounting for Acquisitions of Interests in Joint Operations1
Clarification of Acceptable Methods of Depreciation and
Amortization1
1
Effective for annual periods beginning on or after January 1, 2016, with earlier application permitted.
2
3
Effective for annual periods beginning on or after January 1, 2018, with earlier application
permitted.
IFRS 9
IFRS 15
Amendments to IFRS 11
Amendments to IAS 16 and IAS 38
5.
March 31, 2015
(unaudited)
Cash
Cash equivalents Money market funds
Ps$
Ps$
1,492,373
1,542,740
Ps$
6.
1,625,833
December 31,
2014
3,168,573
1,700,874
Ps $
3,193,247
Inventories
March 31, 2015
(unaudited)
Raw and auxiliary materials
Work in progress
Finished goods
Goods in transit
Spare parts and other inventories
Ps$
721,052
497,203
958,360
41,764
392,084
2,610,463
(170,947)
Ps$
709,458
544,765
919,674
74,273
393,798
2,641,968
(171,200)
Ps$
2,439,516
Ps$
2,470,768
Less- allowance for obsolete and slow movement items
F-11
December 31,
2014
The main decrease corresponds to two situations: the first stems from a trade executed during 2014 in which
a subsidiary of the Entity, through a tender, signed a contract for the purchase and distribution of fibro-cement
sheet for roofing with the Secretary of Social Development (Secretaria de Gobierno Federal), which
generated an increase inventories to meet deadlines agreed within the tender. The second stems from the
metals division, which showed a decrease as a result in the decrease in the tons sold from a reduction of
inventory turnover and a drop in the international price of copper.
7.
Fair value of financial instruments
The fair value of financial instruments information presented below has been determined by the Entity using
information available in the markets or other valuation techniques consistent with those used in the financial
statements as of December 31, 2014. The assumptions used are based on market conditions existing at each
reporting date, and require Management to use judgment with respect to the inputs and other requirements of
such valuation techniques. As a result, the estimated amounts presented below are not necessarily indicative
of the amounts that the Entity could obtain in a current market exchange. The use of different assumptions
and/or estimation methods could have a material effect on the estimated amounts of fair value.
Except as discussed below, the Entity considers that the carrying amount of cash and cash equivalents,
accounts receivable and accounts payable from third parties and related parties and the current portion of
bank loans approximate their fair values because they have short-term maturities. The Entity’s long-term debt
is recorded at amortized cost and incurs interest at fixed and variable rates that are related to market
indicators. Fair value of the Entity’s long-term debt at amortized cost, more specifically the Securitization
Certificates (Certificados Bursátiles) and International Notes (Senior Unsecured Notes), was Ps$10,250,899
as of December 31, 2014 and did not fluctuate significantly as of March 31, 2015. This fair value was
determined based on Level 3 inputs. During the period there were no transfers between Level 1, 2 and 3.
As of March 31, 2015 (unaudited) and as of December 31, 2014, fair value of financial assets, mainly
derivative financial instruments as shown in the statement of financial position, were determined using Level
2 inputs.
8.
Property, machinery and equipment
During the three months ended March 31, 2015, the Entity acquired assets for Ps$127,609 (unaudited).
Depreciation expense was Ps$243,841 (unaudited) and Ps$218,613 (unaudited), for the three months ended
March 31, 2015 and 2014, respectively.
During 2015, the Entity did not identify indicators of impairment.
As of March 31, 2015 there have been no changes in the valuation techniques utilized to calculate the fair
value of property, plant and equipment.
9.
Intangible assets and other assets
During the three-month period ended March 31, 2015, the Entity acquired intangible assets for Ps$6,144
(unaudited) related to the implementation of SAP. The amortization of finite live intangible assets recognized
for the three-month periods ended March 31, 2015 and 2014, was Ps$28,766 (unaudited) and Ps$26,513
(unaudited), respectively
F-12
10.
Confirming bank payments to vendors
The Entity has entered into financial confirming facilities with several banking institutions. As of March 31,
2015 and December 31, 2014, vendors have used these facilities for an amount of Ps$1,533,142 (unaudited)
and Ps$1,571,444, respectively. The amounts due under these facilities are classified in trade accounts
payable in the accompanying statements of financial position.
11.
Long-term debt
During the periods from January 1 to March 31, 2015 and 2014, payments to principal were Ps$45,214
(unaudited) and Ps$42,317 (unaudited), respectively.
During 2014, the Entity entered into a credit with HSBC bank consisting of promissory notes, accruing
interest at the 28-day Equilibrium Interbank Interest Rate (TIIE, for its acronym in Spanish) plus 1.5
percentage points, which matures in 2015 for an amount of Ps$120,000 (unaudited).
Interest expense for the three-month periods ended March 31, 2015 and 2014, were Ps$141,491 (unaudited),
and Ps$66,547 (unaudited), respectively
Some of the loan contracts contain restrictive covenants for the Entity, which could require prepayment of
such contracts: the most significant of these requirements refer to a restriction on the payment of dividends,
compliance with certain financial ratios, securing of the assets pledged, no sale or disposal of assets,
prohibition on assuming contingent liabilities or any other contractual liability, as well as affirmative and
negative covenants. As of March 31, 2015, the Entity has complied with these financial obligations.
12.
Securitization Certificates (Certificados Bursatiles)
Interest recognized as expense and paid solely for these instruments for the three-month periods ended March
31, 2015 and 2014 were Ps$42,349 (unaudited), and Ps$45,757 (unaudited), respectively.
The securitization certificates contain negative and affirmative covenants, with which the Entity was in
compliance as of March 31, 2015.
13.
Income taxes
a.
Income taxes are as follows:
Current ISR
Deferred ISR
Three-month period
ended
March 31, 2015
(unaudited)
Three-month period
ended
March 31, 2014
(unaudited)
Ps$
99,640
(69,418)
Ps$
67,461
7,875
Ps$
30,222
Ps$
75,336
The Entity determines at the end of the reporting period the deferred income tax based on the
temporary differences between the carrying amount and the corresponding tax bases used in the
computation of taxable profit. Current income tax is recognized based on the estimated effective tax
rate. The effective tax rate applied to taxable income for the three-month period ended March 31, 2015
and 2014 was 31%, and 29%, respectively.
F-13
14.
Other expenses and income
Other income was as follows:
IMPAC unrecoverable
Litigation expenses
Decommissioning expenses
Loss (gain) on sale of property, machinery and equipment
Insurance proceeds received
Debt forgiveness
Others
Three-month period
ended
March 31, 2015
(unaudited)
Three-month period
ended
March 31, 2014
(unaudited)
Ps$
Ps$
(434,605)
60,140
71,596
41,992
98,337
Ps$
(162,540)
(166)
(331)
(2,739)
(3,061)
Ps$
15.
(6,297)
Transactions and balances with related parties
a.
Transactions with related parties, carried out in the ordinary course of business, were as follows:
Income:
Sales
Leasing
Expenses:
Technical assistance
Purchase of materials
SAP implementation
Leasing
Insurances
Donations
Interest
Three-month period
ended
March 31, 2015
(unaudited)
Three-month period
ended
March 31, 2014
(unaudited)
Ps$
5,992
685
Ps$
1,362
645
Ps$
6,677
Ps$
2,007
Three-month period
ended
March 31, 2015
(unaudited)
Three-month period
ended
March 31, 2014
(unaudited)
Ps$
Ps$
39,472
34,596
3,715
480
1,649
6,785
36,701
51,476
3,396
153
1,915
5,994
2,000
600
Ps$
F-14
87,297
-
Ps$
101,635
Related parties are comprised of Kaluz, S.A. de C.V., Fundación Kaluz, A.C., Inmobiliaria
Patriotismo, S.A., Grupo Carso, S.A.B. de C.V., Mexichem Servicios Administrativos, S.A. de C.V.,
Logtec, S.A. de C.V., Pochteca Materias Primas, S.A. de C.V., PAM PAM, S.A. de C.V., Mexichem
Soluciones Integrales, S.A. de C.V., Nacional de Conductores Eléctricos, S.A. de C.V., Mexichem
Compuestos, S.A. de C.V., Mexichem Colombia, S.A.S, Mexichem Honduras, S.A., Mexichem El
Salvador, S.A., Mexichem Costa Rica, S.A., Mexichem Ecuador, S.A., Mexichem Flour Comercial,
S.A., Mexichem Resinas Colombia, S.A., Mexichem, S.A.B. de C.V., Teléfonos de México, S.A.B. de
C.V., Teléfonos del Noreste, S.A. de C.V., Mexichem Comercial, S.A. de C.V., Grupo Financiero
Inbursa, S.A. de C.V., Acatunel, S.A. de C.V., Administración Integral de Alimento, S.A. de C.V.,
Arneses Eléctricos Automotrices, S.A. de C.V., Carso Eficentrum, S.A. de C.V., Construcciones
Urvitec, S.A. de C.V., Conticon, S.A. de C.V., Controladora GEK, S.A.P.I. de C.V., Cordaflex, S.A.
de C.V., Lafarge, S.A., Lafarge Francia, SAU, and Banco Ve por Más, S.A.
b.
Balances with related parties are as follows:
March 31, 2015
(unaudited)
Urvitec, S.A. de C.V.
Others
Ps$
Total
Ps$
December 31,
2014
613
133
Ps$
746
Ps$
2,120
2,120
Long-term accounts receivable – Long-term accounts receivable represent amounts owed from Grupo
Carso, S.A.B. de C.V. for Ps$53,703 (unaudited) and Ps$53,703, as of March 31, 2015 and December
31, 2014, respectively.
March 31, 2015
(unaudited)
Kaluz, S.A. de C.V.
Grupo Carso, S.A.B. de C.V.(1)
PAM PAM, S.A. de C.V.
Pochteca Materias Primas, S.A. de C.V.
Mexichem Flour, S.A. de C.V.
Mexichem Flour Comercial, S.A. de C.V.
Mexichem Soluciones Integrales, S.A. de C.V.
Mexichem Perú, S.A.
Mexichem Servicios Administrativos, S.A. de
C.V.
Mexichem Costa Rica, S.A.
Total
(1)
Ps$
10,373
127,098
1,771
207
December 31,
2014
Ps$
21,703
93
Ps$
161,245
6,852
125,965
577
535
25
625
15
1
21,602
70
Ps$
156,267
The account payable to Grupo Carso, S.A.B. de C.V. include an asset tax for Ps$120,129, as of
March 31, 2015 and December 31, 2014.
F-15
16.
Business segment information
Segment information is presented according to the productive sectors, which are grouped according to the
vertical integration of raw materials. Based on this segmentation, operating decisions are made for the purpose
of allocating resources and assessing performance of each segment.
The following are the segments of the Entity: Building systems, Metals, and Cement. Building systems sector
includes the production of Fibro-cement, and the production of plastic; the Metals segment includes the
production of copper; and the Cement segment includes mining, milling and calcination of nonmetallic
minerals for the production of clinker. The products of the four segments are mainly used in the construction
industry.
Below is a summary of the most significant line items in each segment included in the consolidated financial
statements for the three months ended March 31, 2015 and 2014:
Three-months ended March 31, 2015 (unaudited)
Metals
Cement
Eliminations
Building systems
Net sales
Cost of sales
Operating expenses
Other expenses(income) – Net
Ps$
1,546,281
(1,040,233)
(341,714)
11,413
175,747
Ps$
1,935,852
(1,700,920)
(99,524)
498
135,906
Financing result – Net
34,790
210,537
(60,698)
75,208
Income tax expense
Loss for the period from discontinued operations, Net
(66,417)
(6,875)
(32,606)
(1,397)
Current assets
Investment in shares of associated entity
Employee benefits asset
Goodwill and intangibles and other assets - Net
Long-term due from related parties
Total assets
Total liabilities
Ps$
137,245
Ps$
78,869
20,572
(98,498)
(6,818)
(5,875)
Ps$
Ps$
(336,987)
97,091
94,689
(30,222)
(8,272)
62,161
4,070,296
(3,072,810)
(569,705)
6,297
434,078
(270,828)
(276,703)
(25,888)
-
41,205
Ps$
(182,014)
Ps$
58,597
Ps$
7,771,377
5,250,368
9,963
(116,367)
419,291
13,334,632
Ps$
4,123,037
4,461,993
480,055
226,474
9,291,559
Ps$
1,508,119
6,027,004
1
(6,918)
2,186,062
9,714,268
Ps$
(4,010,743)
(92,941)
(1)
(20,190)
328,902
53,703
(3,741,270)
Ps$
9,391,790
15,646,424
9,963
336,580
3,160,729
53,703
28,599,189
Ps$
6,072,189
Ps$
5,992,765
Ps$
2,880,520
Ps$
1,956,072
Ps$
16,901,546
Three-months ended March 31, 2014 (unaudited)
Metals
Cement
Eliminations
Ps$
1,438,355
(966,613)
(314,068)
31,411
189,085
Ps$
1,759,239
(1,613,352)
(74,670)
38,052
109,269
Financing result – Net
1,320
190,405
(59,778)
49,491
Income tax expense
Loss for the period from discontinued operations
(74,698)
(6,640)
(94,256)
(2,692)
509,294
(352,229)
(29,969)
1,204
128,300
(40,251)
88,049
Ps$
Building systems
Net sales
Cost of sales
Operating expenses
Other (income) expenses – Net
Ps$
Total
Ps$
109,067
Ps$
F-16
(47,457)
Ps$
405,286
(313,557)
(66,638)
(303)
24,788
Ps$
36,440
84,159
(173,042)
93,380
40,937
(15,685)
9,103
14,096
Ps$
Total
Ps$
(26,913)
14,024
(101,056)
263,023
79,522
(75,336)
(9,332)
23,199
Ps$
3,639,320
(2,809,363)
(628,418)
162,540
364,079
93,546
Ps$
178,355
17.
Litigation and other contingencies
The Entity is party to various legal proceedings. The Entity is not involved in any litigation or arbitration
proceeding for which the Entity believes it is not adequately insured or indemnified, or which, if determined
adversely, would have a material adverse effect on the Entity or its financial position, results of operations.
They have not changed substantially since the financial statements for the year ended December 31, 2014.
18.
Unaudited condensed consolidated interim financial statements issuance authorization
On May 26, 2015, the issuance of the accompanying consolidated financial statements was authorized by C.P.
Victor Hugo Ibarra Alcázar, Corporate Controller and Administrative Director; consequently, they do not
reflect events which occurred after that date. These consolidated financial statements are subject to the
approval of the Entity’s ordinary shareholders’ meeting, where they may be modified, based on provisions set
forth in the Mexican General Corporate Law.
******
F-17
Elementia, S. A. de C. V. and
Subsidiaries
Consolidated Financial Statements for
the Years Ended December 31, 2014,
2013, and 2012, and Independent
Auditors’ Report Dated May 26, 2015
F-18
Independent Auditors’ Report and Consolidated
Financial Statements for 2014, 2013 and 2012
Table of contents
Page
Independent Auditors’ Report
F-20
Consolidated Statements of Financial Position
F-22
Consolidated Statements of Profit or Loss and Other Comprehensive Income
F-23
Consolidated Statements of Changes in Stockholders’ Equity
F-25
Consolidated Statements of Cash Flows
F-26
Notes to Consolidated Financial Statements
F-28
Deloitte
Galaz, Yamazaki,
S.C.
de Ia Reforma 489
Ruiz Urquiza,
Paseo
Piso 6
Colonia Cuauhtemoc
06500 Mexico,
D. F.
Mexico
Independent Auditors' Report to the Board
Tel:
+52 (55) 5080 6000
Fax: 'i--52 (55) 5080 6001
www.deloitte.com/mx
of Directors and Stockholders' of
Elementia, S. A. de C. V.
We have audited the accompanying consolidated financial statements ofElementia, S. A. de
C. V.
and Subsidiaries
(the "Entity"), which comprise tbe consolidated statements of financial position as ofDecember 31, 2014, 2013 and
2012, and the consolidated statements of profit or loss and other comprehensive income, consolidated statements of
changes in stockholders' equity and consolidated statements of cash flows for tbe years endedDecember 31, 2014,
2013 and 2012, and a summary of significant accounting policies and otber explanatory information.
Management's responsibilityfor the consolidatedfinancial statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in
accordance with International Financial Reporting Standards, as issued by the International Accounting Standards
Board, and for such internal control as management determines is necessary to enable the preparation of consolidated
financial statements that are free from material misstatement, whether due to fraud or error.
Auditor's responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We
conducted our audits in accordance with International Standards on Auditing. Those standards require that we
comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on the auditor's judgment, including the
assessment of the risk of material misstatement of the financial statements, whether due to fraud or error. In making
those· risk assessments, the auditor considers internal control relevant to the Entity's preparation and fair presentation
of the consolidated financiaL statements in order to design audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also
includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates
made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinion.
F-20
Deloitle se refiere a Deloitte Touche Tohrnatsu L1m1trd, soc1edad privada de rrsponsab1l1dad l1m1tada en el Reino Ur1ido, y a su red
de firmas miembro, Gda una de elias como una entidad legal Lin1ca e 1ndepenctient<'. Cono?Ca �n 'NW deloilte_com/rnx/conozcanos
Ia descripc16n detall�da de :a estruclura legal de Delo;tle Touche Tohmatsu L1miced y sus f1rma.1 miembro
Opinion
I
In our opinion, the consolidated-financial statements present fairly, in all material respects, the financial position of
Elementia, S. A. de C. V. and Subsidiaries as of December 31, 2014, 2013, and 2012, and their financial
performance and their cash flows for the years then ended in accordance with International Financial Reporting
Standards, as issued by the International Accounting Standards Board.
\
\\
Emphasis ofmatter
As
mentioned in Note 3b, the Entity restated its consolidated statement of cash flows for the year ended December
31, 2014, originally issued on April 14, 2015.
Other Matters
\
\ The accompanying consolidated financial statements have been translated into English for the convenience of
�ders.
'
.,
Galaz, Yllljlazaki, Ruiz Urquiza, S. C.
Member oiDelQitte Touche Tohrnatsu Lintited
�
\ '·
�
\._
C. P. C. Jose A. R geJ
Mexico City, Mexi .f
J
/
· chez
\
.
.,
,
April 14, 2015
May 26, 2015 with respect to Notes 3.b and 27
·
F-21
Consolidated Statements of Financial Position
As of December 31, 2014, 2013, and 2012
Assets
Current assets:
Derivative financial instruments
Inventories – Net
Prepaid expenses
Total current assets
Non-current assets:
Investment in shares of associated companies and others
Note
6
11
7
23
8
12
14
2014
Ps$
3,193,247
3,149,647
2,120
2,470,768
176,408
8,992,190
15,710,642
10,323
2013
Ps$
1,972,934
9,810
3,506,269
40,944
2,250,371
307,098
8,087,426
14,608,087
11,118
Liabilities and stockholders’ equity
2012
Ps$
current portion of long–term debt
Direct employee benefits
Provisions
Accrued expenses and taxes, other than income taxes
consolidation
Total current liabilities
1,761,935
8,549
2,926,398
2,471,265
592,029
7,760,176
Notes payable to financial institutions and long–term
debt
Due to related parties – long-term
Deferred income taxes
Income taxes liabilities from consolidation
Total long-term liabilities
11,822,531
813,415
Note
18
16
2
17
23
19
11
18
23
19
19
Total liabilities
20
328,025
289,261
Intangibles and other assets - Net
13
3,184,010
3,174,174
1,107,855
Due from related parties, long-term
23
53,703
53,851
50,553
19,286,703
18,136,491
214,774
14,248,196
Ps$ 28,278,893
Ps$ 26,223,917
Ps$ 22,008,372
Accounts receivable, long–term
Total non–current assets
Commitments and contingencies (Note 26)
Stockholders’ equity:
Capital stock
Unpaid subscribed capital stock
Additional paid-in capital
Retained earnings
Net fair value effect on cash flow hedging instruments
Gain on revaluation of property, machinery and
equipment
Actuarial loss
Equity attributable to owners of the Entity
Total stockholders’ equity
239,068
Total stockholders’ equity and liabilities
Total
F-22
21
2014
Ps$
3,102,183
2,482,003
662,310
17,106
619,269
273,049
156,267
2013
Ps$
192,533
2,663,274
30,742
420,815
168,792
173,358
2012
Ps$
456,267
2,330,471
19,163
204,371
254,015
205,918
839
96,233
146,147
7,555,406
170,948
157,863
3,978,325
5,057
45,023
3,520,285
7,282,203
1,154,799
679,119
607
9,116,728
6,185,182
18,075
1,079,537
512,845
14,087
7,809,726
5,926,129
40,462
1,490,324
17,530
24,725
7,499,170
16,672,134
11,788,051
11,019,455
2,012,905
4,598,877
3,988,986
915,227
(102,303)
2,012,905
4,598,877
3,608,669
1,132,766
6,867
2,012,905
(5,825)
4,598,877
3,338,951
900,345
5,984
360,232
(217,672)
11,556,252
50,507
11,606,759
84,549
(209,247)
11,235,386
3,200,480
14,435,866
260,535
(144,650)
10,967,122
21,795
10,988,917
Ps$ 28,278,893
Ps$ 26,223,917
Ps$ 22,008,372
Consolidated Statements of Profit or Loss and Other
Comprehensive Income (Loss)
For the Years Ended December, 31 2014, 2013, and 2012
(In thousands of Mexican pesos, except earnings (loss) per share)
Net sales
Cost of sales
Notes
2014
2013
2012
27
24
Ps$ 15,330,819
11,682,516
Ps$ 12,929,454
9,908,158
Ps$ 13,505,892
10,273,432
3,648,303
3,021,296
3,232,460
2,228,092
(183,542)
191,650
(80,107)
505,906
117,540
868,764
2,124,788
(301,347)
48,583
(45,455)
420,585
49,282
(4,220)
729,080
1,887,734
(21,054)
345,400
(31,019)
288,745
19,478
(34,760)
777,936
245,863
177,443
(38,621)
622,901
551,637
816,557
92,977
529,924
60,134
491,503
501,152
315,405
(64,202)
(79,260)
(175,730)
(8,907)
Gross profit
Operating expenses
Other income – Net
Exchange loss - Net
Interest income
Interest expense
Banking fees
Equity in income of associated entity
24
22
Income tax expense (benefit)
19
14
Income from continuing
operations
Loss from discontinued operations
Net income–
25
Other comprehensive income, net of income
taxes:
Items that will not be reclassified
subsequently to profit or loss:
Actuarial loss
Adjustment for revaluation of property,
machinery and equipment
Items that may be reclassified subsequently
to profit or loss:
Net fair value effect on cash flow
hedging instruments
Exchange differences on translating
foreign operations
(8,425)
275,683
Total other comprehensive (loss)
income for the year, net of
income taxes
Total comprehensive income for
the year
(109,170)
883
6,732
(217,539)
232,421
315,757
(59,451)
Ps$
470,473
(6,628)
Ps$
484,875
234,322
Ps$
549,727
(Continues)
F-23
Notes
Net income (loss) attributable to:
Total comprehensive income (loss) for the
year attributable to:
Earnings per share:
From continuing operations
2014
2013
2012
Ps$
479,487
50,437
Ps$
488,018
3,485
Ps$
325,256
(9,851)
Ps$
529,924
Ps$
491,503
Ps$
315,405
Ps$
420,036
50,437
Ps$
480,739
4,136
Ps$
558,777
(9,050)
Ps$
470,473
Ps$
484,875
Ps$
549,727
Ps$
19.5990
Ps$
18.7667
Ps$
30.9802
From discontinued operations
Ps$
(3.1832)
Ps$
(2.0588)
Ps$
(18.7871)
From continuing and discontinued
operations
Ps$
16.4158
Ps$
16.7079
Ps$
12.1931
29,208,810
29,208,810
26,675,385
(Concluded)
F-24
(Subsidiary of Kaluz, S. A. de C.V.)
Consolidated Statements of Changes in Stockholders’ Equity
For the years ended December 31, 2014, 2013, and 2012
Capital
stock
Ps$
847,815
Installment issuance
Ps$
-
Ps$
Additional capital contribution
Net income
Comprehensive income
1,165,090
-
(5,825)
-
Balances as of December 31, 2012
2,012,905
(5,825)
Loss on sale of shares in associated
Net income
Comprehensive income
Acquisition of Non-controlling
interest
5,825
-
-
-
-
-
4,598,877
Ps$
Ps$
315,757
3,338,951
900,345
3,988,986
883
-
Ps$
915,227
F-25
(109,170)
Ps$
Ps$
(102,303)
Ps$
(64,446)
Attributable to
owners of the Entity
Ps$
9,249,080
Non-controlling
interest
Ps$
30,845
Total
stockholders’
equity
Ps$
9,279,925
(80,204)
1,159,265
325,256
233,521
(9,851)
801
1,159,265
315,405
234,322
260,535
(144,650)
10,967,122
21,795
10,988,917
(175,986)
(64,597)
6,867
(217,539)
-
269,299
Actuarial
loss
(8,764)
5,984
1,132,766
-
Ps$
6,732
-
(99,170)
479,487
(748)
-
232,421
3,608,669
Ps$
584,588
325,256
-
-
Ps$
3,013,695
Exchange differences
on translating
foreign operations
(218,300)
488,018
-
4,598,877
Ps$
Ps$
4,598,877
-
2,012,905
Retained
earnings
-
-
Ps$
4,598,877
-
2,012,905
Loss on purchase of non-controlling
interest
Net income
Comprehensive loss
Purchase of non-controlling
Additional paid-in
capital
Net fair value effect
on hedging
Gain (loss) on
instruments entered
revaluation of
into for cash flow
property, machinery
hedges
and equipment
-
84,549
(209,247)
275,683
-
(8,425)
-
360,232
Ps$
(217,672)
5,825
(218,300)
488,018
(7,279)
3,485
651
11,235,386
(99,170)
479,487
(59,451)
Ps$ 11,556,252
3,174,549
3,174,549
3,200,480
14,435,866
50,437
(3,200,410)
Ps$
5,825
(218,300)
491,503
(6,628)
50,507
(99,170)
529,924
(59,451)
(3,200,410)
Ps$ 11,606,759
Consolidated Statements of Cash Flows
For the years ended December 31, 2014, 2013, and 2012
(In thousands of Mexican pesos
2014
(Note 3.b)
Cash flows from operating activities
Net income (loss)
Income tax expense
Labor obligations
Ps$
Interest income
Gain on sale of fixed assets
Impairment of long-lived assets
Loss on disposal of subsidiaries
Interest expense
Unrealized exchange loss on debt issuance
(Increase) decrease in:
Accounts receivable - Net
Inventories - Net
Prepaid expenses
Long-term accounts receivable
Increase (decrease) in:
Provisions
Accrued expenses and taxes
Income taxes paid
Net cash flow provided by (used in) operating
activities
Cash flows from investing activities
Purchase of property, machinery and equipment
Disposal of property, machinery and equipment
Net cash flows from business acquisition
Disposal of subsidiaries
Acquisition of other investment
Acquisition of other assets
Disposal of other assets
Interest received
529,924
245,863
(18,685)
2013
Ps$
491,503
177,443
(46,430)
2012
Ps$
315,405
(38,621)
(10,393)
1,071,167
(80,107)
(1,813)
(434,605)
505,906
448,242
2,265,892
715,748
(45,455)
(4,220)
(215,092)
420,585
1,494,082
510,782
(31,019)
(34,760)
40,010
456,496
288,745
1,496,645
358,219
38,824
(92,425)
130,690
(42,140)
148
849
(517,484)
(44,242)
299,824
290,562
(58,561)
214,774
(2,885)
341,145
54,979
(285,179)
(395,306)
(94,825)
(214,774)
(181,271)
(35,166)
198,454
(61,630)
(438,064)
(353,504)
219,751
(54,947)
216,444
109,356
(127,195)
(451,662)
(890,251)
19,221
46,660
21,424
(1,723,428)
(347,566)
1,788,027
(613,324)
32,389
(329,067)
(113,696)
80,107
(943,591)
1,591,551
(1,974,140)
(2,059,324)
882,000
260,026
582,818
10,712
45,455
(278,313)
(2,112,575)
1,132,694
340,966
(1,367)
(334,128)
31,019
(943,391)
(Continues)
F-26
2014
Cash flows from financing activities
Proceeds from bank loans
Payment of borrowings
Net cash used for the purchase of non-controlling
interest
Borrowings from related parties
Interest paid
Net cash (used in) provided by financing activities
2013
5,804,284
(2,243,461)
5,196,369
(5,201,050)
176,405
(180,390)
(2,639,664)
(505,906)
415,253
(852,934)
(420,585)
5,825
(1,272,375)
(288,745)
1,159,265
866,535
Effects of exchange rates on cash and cash
equivalents
(39,376)
170,136
Net increase (decrease) in cash and cash equivalents
1,220,313
210,999
Cash and cash equivalents at the beginning of the
year
1,972,934
1,761,935
Cash and cash equivalents at the end of the year
Ps$
2012
3,193,247
Ps$
1,972,934
273,394
(1,777,602)
3,539,537
Ps$
1,761,935
(Concluded)
F-27
Notes to Consolidated Financial Statements
As of December 31, 2014, 2013, and 2012
(In thousands of Mexican pesos, unless otherwise stated)
1.
Activities
Elementia, S. A. de C.V. and Subsidiaries (the “Entity or “Elementia”) is subsidiary of Kaluz, S.A. de C.V.
(“Holding Entity”) with a duration of 99 years beginning in January 1979, and its main address is Poniente
134 No 719, Industrial Vallejo, 02300, Mexico, D.F. The Entity is engaged in the manufacture and sale of
fiber-cement products, copper, cement products and plastic for the construction industry.
2.
Significant events
a.
On December 19, 2014, the Entity paid in advance the full amount of its loan issued with different
banks under the “Club Deal”, at its subsidiaries Nacional de Cobre, S.A. de C.V. (Nacobre) and
Mexalit Industrial, S.A. de C.V. (Mexalit), for the amount of Ps$2,030,180. Also, on December 22,
2014, ELC Tenedora Cementos, S.A.P.I. de C.V. (ELC) settled the loan issued with HSBC México,
S.A. (“HSBC”) for the amount of Ps$120,000, with the resources obtained by Elementia from the
Senior Unsecured Notes discussed in subsection c below.
b.
On December 16, 2014, Elementia acquired 47% of the common stock of its subsidiary ELC, which
were owned by Financière Lafarge, S.A.S. (Lafarge), subsequent to which it obtained a 100% direct
and indirect participation in ELC. The payment for the acquisition was agreed to be made in two
installments: 80% at the transaction date and the remaining 20% no later than within one year of the
transaction date. The total amount of the transaction was USD$225 million, generating a loss of
Ps$99,170 which was recorded in retained earnings as it is a transaction between entities under
common control. The acquisition of the non-controlling interest was approved by the Federal
Competition Commission on October 23, 2014.
c.
On November 20, 2014, Elementia issued its first international Senior Unsecured Notes, for USD$425
million, equivalent to Ps$5,809,302 (using the exchange rate of Ps$13.6738 per US$1.00) which
accrue interest at a fixed interest rate of 5.5% with coupons payable semiannually beginning in July
2015; such resources were used for the acquisition of the non-controlling interest of Lafarge, and for
the early settlement of certain liabilities as discussed in notes a and b above.
d.
On January 31, 2014, the Entity acquired the fibro-cement business of Certain Teed Corporation
(Certain Teed), one of the largest manufacturers of construction materials in North America. The
amount of the consideration was USD$25,151 thousand, equivalent to Ps$329,067, generating a
bargain purchase gain of Ps$434,605, which was recorded under other income in the statement of
profit or loss and other comprehensive income (see Notes 15 and 22).
e.
On December 17, 2013, the Entity sold 100% of its shares related to its participation in Grupo
Cuprum, S.A.P.I. (“Cuprum”, an associated entity), equivalent to 20% of the shares of such entity, to
Tenedora de Empresas de Materiales de Construcción, S. A. de C. V. and Controladora GEK, S.A.P.I.
de C.V. (both, related parties of the Entity), for the amount of USD$45 million (equivalent to Ps$584
million at that date), generating a loss of Ps$218 million, which was recorded directly in the
stockholders’ equity of the Entity, since it was a transaction among parties under common control.
The loss on the sale of shares was due to the difference between the carrying amount of the investment
and the selling price.
F-28
f.
On March 20, 2013, the Entity prepaid the syndicated loans with several banks for Ps$2,593,050. On
the same date it was replaced by a new Syndicated loan, with five other banks, obtaining better interest
rates, better maturity profile and greater financial flexibility for an approximate amount of
Ps$3,730,170.
g.
On January 8, 2013, the Entity, Trituradora y Procesadora de Materiales Santa Anita, S.A. de C.V.
(TPM) and ELC Tenedora Cementos, S.A.P.I. de C.V. (ELC), both subsidiaries of the Entity, entered
into a contribution agreement (the “Contribution Agreement”) with Lafarge, S.A., Financière Lafarge,
S.A.S. and Lafarge Cementos, S.A. de C.V. (together referred to as “Lafarge”, entities engaged in the
manufacturing and marketing of cement) whereby, among other things, they agreed to create a
business venture to produce cement in Mexico. As a result, the Entity maintained 53% of the
shareholding of ELC, thereby maintaining control of ELC, and Financière Lafarge, S.A.S. acquired the
remaining 47%. This business venture will allow the Entity to reach between 4% and 5 % of the
Mexican market, backed by the launching of an advertising campaign of Cementos Fortaleza (brand of
the Entity). The combination of the industrial assets to produce cement of the two parties will allow
them to produce approximately two million tons of cement per year. This transaction generated
goodwill of Ps$1,150 million of pesos (see Note 15).
The business venture was subject to the fulfillment of several conditions specified in the Contribution
Agreement, which were met on July 31, 2013 (the “Closing date of the Joint Venture”), date on which
several contracts were signed, annexes to the Contribution Agreement and related stockholders
meetings of the parties involved were held. Accordingly, as of such date, all shares of Lafarge
Cementos, S.A. de C.V. were transferred to ELC.
h.
3.
On April 20, 2012, the Entity sold 100% of its shares on Almexa Aluminio, S.A. de C.V., which
activities were to industrially process aluminum in its various blends, with outputs consisting of sheet,
plate, paste, powder and foil, mainly for the food industry, to Industria Mexicana the Aluminio, S.A.
de C.V., a subsidiary of Grupo Vasconia, S.A.B. de C.V. (Vasconia), a third party. The sale price was
Ps$340,966, generating a loss of Ps$456,496 which was recorded net of the operations of the
discontinued business within the discontinued operations line item. The loss on the sale of shares was
due primarily to the difference between the carrying value of net assets and the sale price.
Basis of presentation
a.
Explanation for translation into English
The accompanying consolidated financial statements have been translated from Spanish into English
for use outside of Mexico. These financial statements are presented on the basis of International
Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board
(“IASB”). Certain accounting practices applied by the Entity that conform with IFRS may not conform
with accounting principles generally accepted in the country of use.
b.
Restatement of the consolidated statement of cash flows
The Entity restated its consolidated statement of cash flows for the year ended December 31, 2014
issued on April 14, 2015, as required by International Accounting Standard (IAS) 8 “Accounting
Policies, Changes in Accounting Estimates and Errors”. Amounts previously reported were: i) net
cash flows provided by operating activities were Ps$2,447,943; ii) net cash flows used in investing
activities were Ps$(3,583,255), and iii) net cash used in financing activities Ps$2,395,001.
c.
Application of new and revised International Financing Reporting Standards (IFRS or IAS) and
interpretations that are mandatorily effective for the current year
In the current year, the Entity has applied a number of amendments to IFRSs and new Interpretations
issued by the IASB that are mandatorily effective for an accounting period that begins on or after
January 1, 2014.
F-29
Amendments to IFRS 10, IFRS 12 and IAS 27 Investment Entities
The Entity has applied the amendments to IFRS 10, IFRS 12 and IAS 27 Investment Entities for the
first time in the current year. The amendments to IFRS 10 define an investment entity and require a
reporting entity that meets the definitions of an investment entity not to consolidate its subsidiaries but
instead to measure its subsidiaries at fair value through profit or loss in its consolidated and separate
financial statements.
To qualify as an investment entity, a reporting entity is required to:
•
•
•
Obtain funds from one or more investors for the purpose of providing them with investment
management services.
Commit to its investor(s) that its business purpose is to invest funds solely for returns from
capital appreciation, investment income, or both; and
Measure and evaluate performance of substantially all of its investments on a fair value basis.
Consequential amendments have been made to IFRS 12 and IAS 27 to introduce new disclosure
requirements for investment entities
As the Entity is not an investment entity (assessed based on the criteria set out in IFRS 10 as of
January 1, 2014), the application of the amendments has had no impact on the disclosure or the
amounts recognized in the Entity consolidated financial statements
Amendments to IAS 32 Offsetting Financial Assets and Financial Liabilities
The Entity has applied the amendments to IAS 32 Offsetting Financial Assets and Financial Liabilities
for the first time in the current year. The amendments to IAS 32 clarify the requirements relating to the
offset of financial assets and financial liabilities. Specifically, the amendments clarify the meaning of
‘currently has a legally enforceable right of set-off’ and ‘simultaneous realization and settlement’.
The amendments have been applied retrospectively. As the Entity does not have any financial assets
and financial liabilities that qualify for offset, the application of the amendments has had no impact on
the disclosures or on the amounts recognized in the Entity’s consolidated financial statements. /The
Entity has assessed whether certain of its financial assets and financial liabilities qualify for offset
based on the criteria set out in the amendments and concluded that the application of the amendments
has had no impact on the amounts recognized in the Entity’s consolidated financial statements.
Amendments to IAS 36 Recoverable Amount Disclosures for Non-Financial Assets
The Entity has applied the amendments to IAS 36 Recoverable Amount Disclosures for Non-Financial
Assets for the first time in the current year. The amendments to IAS 36 remove the requirement to
disclose the recoverable amount of a cash-generating unit (CGU) to which goodwill or other intangible
assets with indefinite useful lives had been allocated when there has been no impairment or reversal of
impairment of the related CGU. Furthermore, the amendments introduce additional disclosure
requirements applicable to when the recoverable amount of an asset or a CGU is measured at fair value
less costs of disposal. These new disclosures include the fair value hierarchy, key assumptions and
valuation techniques used which are in line with the disclosure required by IFRS 13 Fair Value
Measurements.
The application of these amendments has had no material impact on the disclosures in the Entity’s
consolidated financial statements.
F-30
Amendments to IAS 19 Defined Benefit Plans: Employee Contributions
The amendments to IAS 19 clarify how an entity should account for contributions made by employees
or third parties to defined benefit plans, based on whether those contributions are dependent on the
number of years of service provided by the employee.
For contributions that are independent of the number of years of service, the entity may either
recognize the contributions as a reduction in the service cost in the period in which the related service
is rendered, or to attribute them to the employees’ periods of service using the projected unit credit
method; whereas for contributions that are dependent on the number of years of service, the entity is
required to attribute them to the employees’ periods of service.
The application of these amendments has had no material impact on the disclosures in the Entity’s
consolidated financial statements.
Amendments to IAS 39 Novation of Derivatives and Continuation of Hedge Accounting
The Entity has applied the amendments to IAS 39 Novation of Derivatives and Continuation of Hedge
Accounting for the first time in the current year. The amendments to IAS 39 provide relief from the
requirement to discontinue hedge accounting when a derivative designated as a hedging instrument is
novated under certain circumstances. The amendments also clarify that any change to the fair value of
the derivative designated as a hedging instrument arising from the novation should be included in the
assessment and measurement of hedge effectiveness.
The amendments have been applied retrospectively. As the Entity does not have any derivatives that
are subject to novation, the application of these amendments has had no impact on the disclosures or
on the amounts recognized in the Entity’s consolidated financial statements.
d.
New and revised IFRSs in issue but not yet effective
The Entity has not applied the following new and revised IFRSs that have been issued but are not yet
effective:
IFRS 9
IFRS 14
IFRS 15
Amendments to IFRS 11
Financial Instruments3
Regulatory Deferral Accounts1
Revenue from Contracts with Customers2
Accounting for Acquisitions of Interests in Joint Operations1
Clarification of Acceptable Methods of Depreciation and
Amortization1
Agriculture: Bearer Plants1
1
3
2
4.
Significant accounting policies
a.
Statement of compliance
The consolidated financial statements have been prepared in accordance with International Financial
Reporting Standards issued by the IASB.
F-31
b.
Basis of measurement
The consolidated financial statements have been prepared on the historical cost basis except for certain
long-lived assets and financial instruments that are measured at revalued amounts or fair values at the
end of each reporting period, as explained in the accounting policies below. The financial statements
are prepared in Mexican pesos, legal currency of Mexico and are presented in thousands, except when
indicated otherwise.
i.
Historical cost
Historical cost is generally based on the fair value of the consideration given in exchange for
goods and services.
ii.
Fair value
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date, regardless of whether
that price is directly observable or estimated using another valuation technique. In estimating
the fair value of an asset or a liability, the Entity takes into account the characteristics of the
asset or liability if market participants would take those characteristics into account when
pricing the asset or liability at the measurement date. Fair value for measurement and/or
disclosure purposes in these consolidated financial statements is determined on such a basis,
except for share-based payment transactions that are within the scope of IFRS 2, leasing
transactions that are within the scope of IAS 17, and measurements that have some similarities
to fair value but are not fair value, such as net realizable value in IAS 2 or value in use in IAS
36.
In addition, for financial reporting purposes, fair value measurements are categorized into Level
1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable
and the significance of the inputs to the fair value measurement in its entirety, which are
described as follows:
•
•
•
c.
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or
liabilities that the entity can access at the measurement date;
Level 2 inputs are inputs, other than quoted prices included within Level 1, that are
observable for the asset or liability, either directly or indirectly; and
Level 3 inputs are unobservable inputs for the asset or liability.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Elementia, S. A. de
C.V. and the entities controlled by it. Control is achieved when the Entity:
•
•
•
Has power over the investee;
Is exposed, or has rights, to variable returns from its involvement with the investee; and
Has the ability to use its power to affect its returns.
The Entity reassesses whether or not it controls an investee if facts and circumstances indicate that
there are changes to one or more of the three elements of control listed above.
F-32
When Elementia, S. A. de C. V. has less than a majority of the voting rights of an investee, it has
power over the investee when the voting rights are sufficient to give it the practical ability to direct the
relevant activities of the investee unilaterally.
The Entity considers all relevant facts and circumstances in assessing whether or not the Entity’s
voting rights in an investee are sufficient to give it power, including:
•
•
•
•
The size of the Entity’s holding of voting rights relative to the size and dispersion of holdings of
the other vote holders;
Potential voting rights held by the Entity other vote holders or other parties;
Rights arising from other contractual arrangements; and
Any additional facts and circumstances that indicate that the Entity has, or does not have, the
current ability to direct the relevant activities at the time that decisions need to be made,
including voting patterns at previous shareholders’ meetings.
Consolidation of a subsidiary begins when the Entity obtains control over the subsidiary and ceases
when the Entity loses control of the subsidiary. Specifically, income and expenses of a subsidiary
acquired or disposed of during the year are included in the consolidated statement of profit or loss and
other comprehensive income from the date the Entity gains control until the date when the Entity
ceases to control the subsidiary.
Net income and each component of other comprehensive income are attributed to the owners of the
Entity and to the non-controlling interests. Total comprehensive income of subsidiaries is attributed to
the owners of the Entity and to the non-controlling interests even if this results in the non-controlling
interests having a deficit balance.
When necessary, adjustments are made to the financial statements of subsidiaries to bring their
accounting policies into line with the Entity accounting policies.
All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions
between members of the Entity are eliminated in full on consolidation.
1.
Changes in the Entity’s ownership interests in existing subsidiaries
Changes in the Entity’s ownership interests in subsidiaries that do not result in the Entity losing
control over the subsidiaries are accounted for as equity transactions. The carrying amounts of
the Entity’s interests and the non-controlling interests are adjusted to reflect the changes in their
relative interests in the subsidiaries. Any difference between the amount by which the noncontrolling interests are adjusted and the fair value of the consideration paid or received is
recognized directly in equity and attributed to owners of the Entity.
When the Entity loses control of a subsidiary, a gain or loss is recognized in profit or loss and is
calculated as the difference between (i) the aggregate of the fair value of the consideration
received and the fair value of any retained interest and (ii) the previous carrying amount of the
assets (including goodwill), and liabilities of the subsidiary and any non-controlling interests.
All amounts previously recognized in other comprehensive income in relation to that subsidiary
are accounted for as if the Entity had directly disposed of the related assets or liabilities of the
subsidiary (i.e. reclassified to profit or loss or transferred to another category of equity as
specified/permitted by applicable IFRSs). The fair value of any investment retained in the
former subsidiary at the date when control is lost is regarded as the fair value on initial
recognition for subsequent accounting under IAS 39, when applicable, the cost on initial
recognition of an investment in an associate or a joint venture.
As of December 31, 2014, 2013 and 2012, and for the years then ended. Elementia’s shareholding
percentage in the capital stock of its significant subsidiaries and their activities are set forth below.
F-33
Country and entity
2014
2013
2012
Activity
Mexico:
Mexalit Industrial, S.A de C. V. (Mexalit Industrial) (1)
100%
100%
100%
Manufacture and distribution of fiber-cement construction products.
Distribuidora Promex, S. A. de C. V. y Subsidiarias (Promex)
100%
100%
100%
Investments in shares and distribution of fiber-cement construction
products and pipes.
Mexalit Servicios Administrativos, S.A. de C.V. (Mexalit
Servicios)
100%
100%
100%
Administrative services.
Nacobre Servicios, S.A. de C.V.) (Nacobre Servicios)
100%
100%
100%
Administrative services.
99.96%
99.96%
99.96%
100%
100%
100%
99.99%
99.99%
99.99%
Frigocel, S. A. de C. V. and Subsidiary (Frigocel)
100%
100%
100%
ELC Tenedora de Cementos,
S. A. P. I. de C. V. y Subsidiarias (ELC) (2)
100%
53.00%
-
Manufacture and sale of cement.
Maxitile Industries, S.A. de C.V. (Maxitile) (1)
-
-
-
Manufacture and sale of fibro-cement construction products.
100%
100%
100%
Colombia:
Eternit Colombiana, S.A (Colombiana)
93.41%
93.41%
93.41%
Eternit Pacífico, S.A. (Pacífico)
98.20%
98.20%
98.20%
Eternit Atlántico, S.A. (Atlántico)
96.52%
96.52%
96.52%
United States of America:
Maxitile Inc. (Maxitile Inc.)
-
100%
100%
Copper & Brass Int. Corp. (Copper)
-
100%
100%
Distribution and sale of copper and aluminum products for the
construction industry
Elementia USA, Inc. (3)
100%
-
-
Costa Rica and Central America:
The Plycem Company, Inc. and Subsidiaries (“Plycem and
Subsidiaries”)
100%
100%
100%
Holding entity of Central America entities and production of light
construction systems (constru-sistemas) Latin-American.
Peru:
Industrias Fibraforte, S.A. (“Fibraforte”)
100%
100%
100%
Manufacture of slight covers of polypropylene and polycarbonate.
Ecuador:
Eternit Ecuatoriana, S.A. (“Ecuatoriana”)
100%
100%
100%
Compañía Mexicana de Concreto Pretensado Comecop, S.A.
de C.V. (Comecop)
Nacional de Cobre, S.A. de C.V. (Nacobre)
Operadora de Inmuebles Elementia, S.A. de C.V. (Operadora)
General de Bebidas y Alimentos, S.A. de C.V. y Subsidiarias
(General de Bebidas)
(1)
Maxitile Industries, S.A. de C.V. merged with Mexalit Industrial, S.A. de C.V. on January 2, 2012
the latter prevailing as the merging entity.
(2)
As discussed in Note 2b, on December 16, 2014, Elementia acquired 47% of the common stock of
its subsidiary ELC, which were owned by Financière Lafarge, S.A.S. (Lafarge), to obtain a 100%
direct and indirect participation in ELC.
(3)
On November 30, 2014, all the shares of Copper & Brass International Corp., and Maxititle Inc.
were contributed to Elementia USA, Inc.
F-34
Manufacture and sale of pre-stressed concrete pipes.
Manufacture of copper products for the construction industry.
Assets leasing.
Manufacture and distribution and sale of plastic products.
Distribution of construction products.
d.
Financial instruments
Financial assets and financial liabilities are recognized when a group entity becomes a party to the
contractual provisions of the instruments.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are
directly attributable to the acquisition or issue of financial assets and financial liabilities (other than
financial assets and financial liabilities at fair value through profit or loss) are added to or deducted
from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition.
Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair
value through profit or loss are recognized immediately in profit or loss.
e.
Financial assets
Financial assets are classified into the following specified categories: financial assets ‘at fair value
through profit or loss’ (FVTPL), ‘held-to-maturity’ investments, ‘available-for-sale’ (AFS) financial
assets and ‘loans and receivables’. The classification depends on the nature and purpose of the
financial assets and is determined at the time of initial recognition. All regular way purchases or sales
of financial assets are recognized and derecognized on a trade date basis. Regular way purchases or
sales are purchases or sales of financial assets that require delivery of assets within the time frame
established by regulation or convention in the marketplace.
1.
Effective interest method
The effective interest method is a method of calculating the amortized cost of a debt instrument
and of allocating interest income over the relevant period. The effective interest rate is the rate
that exactly discounts estimated future cash receipts (including all fees and points paid or
received that form an integral part of the effective interest rate, transaction costs and other
premiums or discounts) through the expected life of the debt instrument, or, where appropriate,
a shorter period, to the net carrying amount on initial recognition.
Income is recognized on an effective interest basis for debt instruments other than those
financial assets classified as of FVTPL.
2.
Financial assets at FVTPL
Financial assets are classified as of FVTPL when the financial asset is either held for trading or
it is designated as of FVTPL.
A financial asset is classified as held for trading if:
•
•
•
It has been acquired principally for the purpose of selling it in the near term; or
On initial recognition it is part of a portfolio of identified financial instruments that the
Entity manages together and has a recent actual pattern of short-term profit-taking; or
It is a derivative that is not designated and effective as a hedging instrument.
A financial asset other than a financial asset held for trading may be designated as a financial
asset at fair value through profit or loss upon initial recognition if:
•
•
•
Such designation eliminates or significantly reduces a measurement or recognition
inconsistency that would otherwise arise; or
The financial asset forms part of a group of financial assets or financial liabilities or
both, which is managed and its performance is evaluated on a fair value basis, in
accordance with the Entity’s documented risk management or investment strategy, and
information about the grouping is provided internally on that basis; or
It forms part of a contract containing one or more embedded derivatives, and IAS 39
permits the entire combined contract to be designated as of FVTPL.
F-35
Financial assets at FVTPL are stated at fair value, with any gains or losses arising on
remeasurement recognized in profit or loss. The net gain or loss recognized in profit or loss
incorporates any dividend or interest earned on the financial asset and is included in the ‘other
income (expenses) - Net’ line item. Fair value is determined in the manner described in Note
10.
3.
Held-to-maturity investments
Held-to-maturity investments are non-derivative financial assets with fixed or determinable
payments and fixed maturity dates that the Entity has the positive intent and ability to hold to
maturity. Subsequent to initial recognition, held-to maturity investments are measured at
amortized cost using the effective interest method less any impairment.
4.
Financial assets classified as available-for-sale (AFS financial assets)
AFS financial assets are non-derivatives that are either designated as AFS or are not classified
as (a) loans and receivables, (b) held-to-maturity investments or (c) financial assets at fair value
through profit or loss.
Changes in the carrying amount of AFS monetary financial assets relating to changes in foreign
currency rates (see below), interest income calculated using the effective interest method and
dividends on AFS equity investments are recognized in profit or loss. Other changes in the
carrying amount of assets classified as held for sale are recognized in other comprehensive
income and accumulated under the heading of investments revaluation reserve. When the
investment is disposed of or is determined to be impaired, the cumulative gain or loss
previously accumulated in the investments revaluation reserve is reclassified to profit or
loss.Dividends on AFS equity instruments are recognized in profit or loss when the Entity’s
right to receive the dividends is established.
The fair value of AFS monetary financial assets denominated in a foreign currency is
determined in that foreign currency and translated at the spot rate prevailing at the end of the
reporting period. The foreign exchange gains and losses that are recognized in profit or loss are
determined based on the amortized cost of the monetary asset. Other foreign exchange gains
and losses are recognized in other comprehensive income.
AFS equity investments that do not have a quoted market price in an active market and whose
fair value cannot be reliably measured and derivatives that are linked to and must be settled by
delivery of such unquoted equity investments are measured at cost less any identified
impairment losses at the end of each reporting period.
5.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments
that are not quoted in an active market. Loans and receivables are measured at amortized cost
using the effective interest method, less any impairment.
Interest income is recognized by applying the effective interest rate, except for short-term
receivables when the effect of discounting is immaterial.
F-36
6.
Impairment of financial assets
Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end
of each reporting period. Financial assets are considered to be impaired when there is objective
evidence that, as a result of one or more events that occurred after the initial recognition of the
financial asset, the estimated future cash flows of the investment have been affected.
For AFS equity investments, a significant or prolonged decline in the fair value of the security
below its cost is considered to be objective evidence of impairment.
For all other financial assets, objective evidence of impairment could include:
•
•
•
•
Significant financial difficulty of the issuer or counterparty; or
Breach of contract, such as a default or delinquency in interest or principal payments; or
It becoming probable that the borrower will enter bankruptcy or financial reorganization; or
The disappearance of an active market for that financial asset because of financial
difficulties.
For certain categories of financial assets, such as trade receivables, assets are assessed for
impairment on a collective basis even if they were assessed not to be impaired individually.
Objective evidence of impairment for a portfolio of receivables could include the Entity’s past
experience of collecting payments, an increase in the number of delayed payments in the
portfolio past the average credit period of 60 days, as well as observable changes in national or
local economic conditions that correlate with default on receivables.
For financial assets carried at amortized cost, the amount of the impairment loss recognized is
the difference between the asset’s carrying amount and the present value of estimated future
cash flows, discounted at the financial asset’s original effective interest rate.
For financial assets that are carried at cost, the amount of the impairment loss is measured as
the difference between the asset’s carrying amount and the present value of the estimated future
cash flows discounted at the current market rate of return for a similar financial asset. Such
impairment loss will not be reversed in subsequent periods.
The carrying amount of the financial asset is reduced by the impairment loss directly for all
financial assets with the exception of trade receivables, where the carrying amount is reduced
through the use of an allowance account. When a trade receivable is considered uncollectible, it
is written off against the allowance account. Subsequent recoveries of amounts previously
written off are credited against the allowance account. Changes in the carrying amount of the
allowance account are recognized in profit or loss.
When an AFS financial asset is considered to be impaired, cumulative gains or losses
previously recognized in other comprehensive income are reclassified to profit or loss in the
period.
For financial assets measured at amortized cost, if, in a subsequent period, the amount of the
impairment loss decreases and the decrease can be related objectively to an event occurring
after the impairment was recognized, the previously recognized impairment loss is reversed
through profit or loss to the extent that the carrying amount of the investment at the date the
impairment is reversed does not exceed what the amortized cost would have been had the
impairment not been recognized.
In respect of AFS equity securities, impairment losses previously recognized in profit or loss
are not reversed through profit or loss. Any increase in fair value subsequent to an impairment
loss is recognized in other comprehensive income and accumulated under the heading of
investments revaluation reserve. In respect of AFS debt securities, impairment losses are
subsequently reversed through profit or loss if an increase in the fair value of the investment
can be objectively related to an event occurring after the recognition of the impairment loss.
F-37
7.
Derecognition of financial assets
The Entity derecognizes a financial asset when the contractual rights to the cash flows from the
asset expire, or when it transfers the financial asset and substantially all the risks and rewards of
ownership of the asset to another party. If the Entity neither transfers nor retains substantially
all the risks and rewards of ownership and continues to control the transferred asset, the Entity
recognizes its retained interest in the asset and an associated liability for amounts it may have to
pay. If the Entity retains substantially all the risks and rewards of ownership of a transferred
financial asset, the Entity continues to recognize the financial asset and also recognizes a
collateralize borrowing for the proceeds received.
On derecognition of a financial asset in its entirety, the difference between the asset’s carrying
amount and the sum of the consideration received and receivable and the cumulative gain or
loss that had been recognized in other comprehensive income and accumulated in equity is
recognized in profit or loss.
On derecognition of a financial asset other than in its entirety (e.g. when the Entity retains an
option to repurchase part of a transferred asset), the Entity allocates the previous carrying
amount of the financial asset between the part it continues to recognize under continuing
involvement, and the part it no longer recognizes on the basis of the relative fair values of those
parts on the date of the transfer. The difference between the carrying amount allocated to the
part that is no longer recognized and the sum of the consideration received for the part no
longer recognized and any cumulative gain or loss allocated to it that had been recognized in
other comprehensive income is recognized in profit or loss. A cumulative gain or loss that had
been recognized in other comprehensive income is allocated between the part that continues to
be recognized and the part that is no longer recognized on the basis of the relative fair values of
those parts.
f.
Cash and cash equivalents consist mainly of bank deposits in checking accounts and short-term
investments that a) are highly liquid and easily convertible into cash, b) mature within three months
from their acquisition date and c) are subject to low risk of material changes in value. Cash is stated at
nominal value and cash equivalents are valued at fair value; any fluctuations in value are recognized in
profit or loss and other comprehensive income. Cash equivalents are comprised mainly of investments
in investment funds.
g.
Inventories and cost of sales
Inventories are stated at the lower of cost and net realizable value. Costs of inventories are determined
on sing a weighted average basis including the cost of materials, direct costs and an appropriate portion
of fixed and variable overhead costs that are incurred in the transformation process. Reductions in
value of inventories are included in of reserves that represent the impairment of inventories.
When an impairment indicator suggests that the carrying amounts of inventories might not be
recoverable, the Entity reviews such carrying amounts, estimates the net realizable value, based on the
most reliable evidence available at that time. Impairment is recorded if the net realizable value is less
than the carrying value. Impairment indicators considered for these purposes are, among others,
obsolescence, a decrease in market prices, damage, and a firm commitment to sell.
h.
Property, machinery land buildings and equipment held for use in the production or supply of goods or
services, or for administrative purposes, are stated in the consolidated statement of financial position at
their revalued amounts, being the fair value at the date of revaluation, less any subsequent accumulated
depreciation and subsequent accumulated impairment losses. Revaluations are performed with
sufficient regularity such that the carrying amounts do not differ materially from those that would be
determined using fair values at the end of each reporting period.
F-38
Any revaluation increase arising on the revaluation of such land and buildings is recognized in other
comprehensive income and accumulated in equity, except to the extent that it reverses a revaluation
decrease for the same asset previously recognized in profit or loss, in which case the increase is
credited to profit or loss to the extent of the decrease previously expensed. A decrease in the carrying
amount arising on the revaluation of such land and buildings is recognized in profit or loss to the
extent that it exceeds the balance, if any, held in the properties revaluation reserve relating to a
previous revaluation of that asset.
Properties in construction for production, supply or administrative purposes are carried at cost, less any
recognized impairment loss. Cost includes professional fees and, for qualifying assets, borrowing costs
capitalized in accordance with the Group’s accounting policy. Such properties are classified to the
appropriate categories of property, plant and equipment when completed and ready for intended use.
Depreciation of these assets, on the same basis as other property assets, commences when the assets
are ready for their intended use.
Depreciation on revalued property and machinery is recognized in the statement to profit or loss and
other comprehensive income. In case of subsequent sale or disposal of revalued property, the
attributable revaluation surplus remaining in the properties revaluation reserve is transferred directly to
retained earnings.
Land is not depreciated.
Furniture and equipment are stated at cost less accumulated depreciation and any accumulated
impairment losses.
Depreciation is recognized to write off the cost or valuation of assets (other than properties under
construction) less their residual values over their useful lives using the straight line method. The
estimated useful lives, residual values and depreciation methods are reviewed at the end of each year,
and the effect of any changes in the estimate recorded is recognized on a prospective basis.
Depreciation is calculated under the straight-line method based on the useful lives of the assets, as
follows:
%
Residual value
Buildings
Industrial machinery and
equipment
Vehicles
Computers
Office furniture and
equipment
Average years of useful life
December 31, 2014 December 31, 2013 December 31, 2012
-
40 and 60
40 and 60
40 and 60
5
-
20 to 30
4 and 5
3
20 to 30
4 and 5
3
20 to 30
4 and 5
3
-
10
10
10
Any gain or loss arising on the disposal or retirement of an item of property, machinery and equipment
is determined as the difference between the sales proceeds and the carrying amount of the asset and is
recognized in profit or loss.
i.
1.
Intangible assets acquired separately
Intangible assets with finite useful lives that are acquired separately are carried at cost less
accumulated amortization and accumulated impairment losses. Amortization is recognized on a
straight-line basis over their estimated useful lives. The estimated useful life and amortization
method are reviewed at the end of each reporting period, with the effect of any changes in
estimate being accounted for on a prospective basis. Intangible assets with indefinite useful
lives that are acquired separately are carried at cost less accumulated impairment losses.
F-39
2.
Internally-generated intangible assets - research and development expenditure
Expenditure on research activities is recognized as an expense in the period in which it is
incurred.
An internally-generated intangible asset arising from development (or from the development
phase of an internal project) is recognized if, and only if, all of the following have been
demonstrated:
•
•
•
•
•
•
The technical feasibility of completing the intangible asset so that it will be available for
use or sale.
The intention to complete the intangible asset and use or sell it.
The ability to use or sell the intangible asset.
How the intangible asset will generate probable future economic benefits.
The availability of adequate technical, financial and other resources to complete the
development and to use or sell the intangible asset.
The ability to measure reliably the expenditure attributable to the intangible asset during
its development.
The amount initially recognized for internally-generated intangible assets is the sum of the
expenditure incurred from the date when the intangible asset first meets the recognition criteria
listed above. Where no internally-generated intangible asset can be recognized, development
expenditure is recognized in profit or loss in the period in which it is incurred.
3.
Intangible assets acquired in a business combination
Intangible assets acquired in a business combination and recognized separately from goodwill
are initially recognized at their fair value at the acquisition date (which is regarded as their
cost).
Subsequent to initial recognition, intangible assets acquired in a business combination are
reported at cost less accumulated amortization and accumulated impairment losses, on the same
basis as intangible assets that are acquired separately.
4.
Derecognition of intangible assets
An intangible asset is derecognized on disposal, or when no future economic benefits are
expected from use or disposal. Gains or losses arising from derecognition of an intangible asset,
measured as the difference between the net disposal proceeds and the carrying amount of the
asset, are recognized in profit or loss when the asset is derecognized.
j.
Impairment of tangible and intangible assets other than goodwill
At the end of each reporting period, the Entity reviews the carrying amounts of its tangible and
intangible assets to determine whether there is any indication that those assets have suffered an
impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order
to determine the extent of the impairment loss (if any). When it is not possible to estimate the
recoverable amount of an individual asset, the Entity estimates the recoverable amount of the cashgenerating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be
identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are
allocated to the smallest group of cash-generating units for which a reasonable and consistent
allocation basis can be identified.
Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested
for impairment at least annually, and whenever there is an indication that the asset may be impaired.
F-40
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in
use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate
that reflects current market assessments of the time value of money and the risks specific to the asset
for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying
amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable
amount. An impairment loss is recognized immediately in profit or loss, unless the relevant asset is
carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
When an impairment loss subsequently reverses, the carrying amount of the asset (or a cash-generating
unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying
amount does not exceed the carrying amount that would have been determined had no impairment loss
been recognized for the asset (or cash generating unit) in prior years. A reversal of an impairment loss
is recognized immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in
which case the reversal of the impairment loss is treated as a revaluation increase.
k.
Goodwill
Goodwill arising from a business combination or acquisition of associate is recognized as an asset at
the date that control is acquired (the acquisition date) less impairment losses recognized, if any.
Goodwill is the excess of the consideration transferred, the amount of any non-controlling interest in
the acquiree over the fair value of the acquirer’s interest in the equity of the acquiree and the net value
at the date of acquisition of the identifiable assets acquired and liabilities assumed.
For the purposes of impairment testing, goodwill is allocated to each of the Group’s cash-generating
units (or groups of cash-generating units) that is expected to benefit from the synergies of the
combination.
A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more
frequently when there is an indication that the unit may be impaired. If the recoverable amount of the
cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the
carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata
based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognized
directly in profit or loss. An impairment loss recognized for goodwill is not reversed in subsequent
periods.
On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the
determination of the profit or loss on disposal
When the fair value of the identifiable net assets acquired exceeds the sum of the consideration
transferred, the amount of such excess is recognized in the statement of profit or loss and other
comprehensive income as a gain on purchase.
Goodwill is not amortized and is subject to annual impairment testing. For purposes of impairment
testing, goodwill is allocated to each cash-generating unit for which the entity expects to obtain benefits.
If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the
impairment loss is allocated first to reduce the carrying amount of goodwill allocated to the unit and
then to the other assets of unit, proportionately, based on the carrying amount of each asset in the unit.
The impairment loss recognized for goodwill purposes cannot be reversed in a subsequent period.
Upon the sale of a subsidiary, the amount attributable to goodwill is included in determining the gain
or loss on disposal.
l.
Investments in associates
An associate is an entity over which the Entity has significant influence. Significant influence is the
power to participate in the financial and operating policy decisions of the investee but is not control or
joint control over those policies.
F-41
The results and assets and liabilities of associates are incorporated in these consolidated financial
statements using the equity method of accounting, except when the investment, or a portion thereof, is
classified as held for sale, in which case it is accounted for in accordance with IFRS 5. Under the
equity method, an investment in an associate is initially recognized in the consolidated statement of
financial position at cost and adjusted thereafter to recognize the Entity’s share of the profit or loss and
other comprehensive income of the associate. When the Entity’s share of losses of an associate
exceeds the Entity’s interest in that associate (which includes any long-term interests that, in
substance, form part of the Entity’s net investment in the associate), the Entity discontinues
recognizing its share of further losses. Additional losses are recognized only to the extent that the
Entity has incurred legal or constructive obligations or made payments on behalf of the associate.
An investment in an associate is accounted for using the equity method from the date on which the
investee becomes an associate. On acquisition of the investment in an associate, any excess of the cost
of the investment over the Entity’s share of the net fair value of the identifiable assets and liabilities of
the investee is recognized as goodwill, which is included within the carrying amount of the investment.
Any excess of the Entity’s share of the net fair value of the identifiable assets and liabilities over the
cost of the investment, after reassessment, is recognized immediately in profit or loss in the period in
which the investment is acquired.
The requirements of IAS 39 are applied to determine whether it is necessary to recognize any
impairment loss with respect to the Entity’s investment in an associate. When necessary, the entire
carrying amount of the investment (including goodwill) is tested for impairment in accordance with
IAS 36 Impairment of Assets as a single asset by comparing its recoverable amount (higher of value in
use and fair value less costs to sell) with its carrying amount. Any impairment loss recognized forms
part of the carrying amount of the investment. Any reversal of that impairment loss is recognized in
accordance with IAS 36 to the extent that the recoverable amount of the investment subsequently
increases.
The Entity discontinues the use of the equity method from the date when the investment ceases to be
an associate, or when the investment is classified as held for sale. When the Entity retains an interest in
the former associate and the retained interest is a financial asset, the Entity measures the retained
interest at fair value at that date and the fair value is regarded as its fair value on initial recognition in
accordance with IAS 39. The difference between the carrying amount of the associate at the date the
equity method was discontinued, and the fair value of any retained interest and any proceeds from
disposing of a part interest in the associate is included in the determination of the gain or loss on
disposal of the associate. In addition, the Group accounts for all amounts previously recognized in
other comprehensive income in relation to that associate on the same basis as would be required if that
associate had directly disposed of the related assets or liabilities. Therefore, if a gain or loss previously
recognized in other comprehensive income by that associate would be reclassified to profit or loss on
the disposal of the related assets or liabilities, the Entity reclassifies the gain or loss from equity to
profit or loss (as a reclassification adjustment) when the equity method is discontinued.
When the Entity reduces its ownership interest in an associate continues to use the equity method, the
Entity reclassifies to profit or loss the proportion of the gain or loss that had previously been
recognized in other comprehensive income relating to that reduction in ownership interest if that gain
or loss would be reclassified to profit or loss on the disposal of the related assets or liabilities.
When the Entity transacts with an associate, profits and losses resulting from the transactions with the
associate are recognized in consolidated financial statements only to the extent of interests in the
associate or joint venture that are not related to the Entity.
m.
Business combinations
Acquisitions of businesses are accounted for using the acquisition method. The consideration
transferred in a business combination is measured at fair value, which is calculated as the sum of the
acquisition-date fair values of the assets transferred by the Entity, liabilities incurred by the Entity to
the former owners of the acquiree and the equity interests issued by the Entity in exchange for control
of the acquiree. Acquisition-related costs are generally recognized in profit or loss as incurred.
F-42
At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognized at
their fair value, except that:
i.
ii.
iii.
Deferred tax assets or liabilities, and assets or liabilities related to employee benefit
arrangements are recognized and measured in accordance with IAS 12 Income Taxes and IAS
19 respectively;
Liabilities or equity instruments related to share-based payment arrangements of the acquiree or
share-based payment arrangements of the Entity entered into to replace share-based payment
arrangements of the acquiree are measured in accordance with IFRS 2 at the acquisition date;
and
Assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 Noncurrent Assets Held for Sale and Discontinued Operations are measured in accordance with that
Standard.
Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any noncontrolling interests in the acquiree, and the fair value of the acquirer’s previously held equity interest
in the acquire (if any) over the net of the acquisition-date amounts of the identifiable assets acquired
and the liabilities assumed. If, after reassessment, the net of the acquisition-date amounts of the
identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred,
the amount of any non-controlling interests in the acquiree and the fair value of the acquirer’s
previously held interest in the acquiree (if any), the excess is recognized immediately in profit or loss
as a bargain purchase gain.
Non-controlling interests that are present ownership interests and entitle their holders to a
proportionate share of the entity’s net assets in the event of liquidation may be initially measured either
at fair value or at the non-controlling interests’ proportionate share of the recognized amounts of the
acquiree’s identifiable net assets. The choice of measurement basis is made on a transaction-bytransaction basis. Other types of non-controlling interests are measured at fair value or, when
applicable, on the basis specified in another IFRS.
When the consideration transferred by the Entity in a business combination includes assets or liabilities
resulting from a contingent consideration arrangement, the contingent consideration is measured at its
acquisition-date fair value and included as part of the consideration transferred in a business
combination. Changes in the fair value of the contingent consideration that qualify as measurement
period adjustments are adjusted retrospectively, with corresponding adjustments against goodwill.
Measurement period adjustments are adjustments that arise from additional information obtained
during the ‘measurement period’ (which cannot exceed one year from the acquisition date) about facts
and circumstances that existed at the acquisition date.
The subsequent accounting for changes in the fair value of the contingent consideration that do not
qualify as measurement period adjustments depends on how the contingent consideration is classified.
Contingent consideration that is classified as equity is not remeasured at subsequent reporting dates
and its subsequent settlement is accounted for within equity. Contingent consideration that is classified
as an asset or a liability is remeasured at subsequent reporting dates in accordance with IAS 39, or IAS
37 Provisions, Contingent Liabilities and Contingent Assets, as appropriate, with the corresponding
gain or loss being recognized in profit or loss.
When a business combination is achieved in stages, the Entity’s previously held equity interest in the
acquiree is remeasured to its acquisition-date fair value and the resulting gain or loss, if any, is
recognized in profit or loss. Amounts arising from interests in the acquiree prior to the acquisition date
that have previously been recognized in other comprehensive income are reclassified to profit or loss
where such treatment would be appropriate if that interest were disposed of.
F-43
If the initial accounting for a business combination is incomplete by the end of the reporting period in
which the combination occurs, the Entity reports provisional amounts for the items for which the
accounting is incomplete. Those provisional amounts are adjusted during the measurement period (see
above), or additional assets or liabilities are recognized, to reflect new information obtained about facts
and circumstances that existed at the acquisition date that, if known, would have affected the amounts
recognized at that date.
n.
Leasing
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the
risks and rewards of ownership to the lessee. All other leases are classified as operating leases.
Assets held under finance leases are initially recognized as assets of the Entity at their fair value at the
inception of the lease or, if lower, at the present value of the minimum lease payments. The
corresponding liability to the lessor is included in the consolidated statement of financial position as a
finance lease obligation within other long-term liabilities.
Finance lease payments are apportioned between finance expenses and a reduction of the lease liability
so as to achieve an effective interest rate. Finance expenses are recognized immediately in profit or
loss, unless they are directly attributable to qualifying assets, in which case they are capitalized in
accordance with the Entity’s general policy on borrowing costs. Contingent rentals are recognized as
expenses in the periods in which they are incurred.
Operating lease payments are recognized as an expense on a straight-line basis over the lease term,
except where another systematic basis is more representative of the time pattern in which economic
benefits from the leased asset are consumed. Contingent rentals arising under operating leases are
recognized as an expense in the period in which they are incurred.
o.
Transactions in foreign currency
In preparing the financial statements of each individual group entity, transactions in currencies other
than the entity’s functional currency (foreign currencies) are recognized at the rates of exchange
prevailing at the dates of the transactions. At the end of each reporting period, monetary items
denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary
items carried at fair value that are denominated in foreign currencies are retranslated at the rates
prevailing at the date when the fair value was determined. Non-monetary items that are measured in
terms of historical cost in a foreign currency are not retranslated.
The exchange differences are recognized in income for the period, except for: exchange rate
differences from foreign currency denominated loans relating to assets under construction qualifying
for capitalization of interest, which are included in the cost of such assets when considered as an
adjustment to interest cost on those foreign currency denominated loans.
For the purposes of presenting these consolidated financial statements, the assets and liabilities of the
Entity’s foreign operations are translated into Mexican pesos using exchange rates prevailing at the
end of each reporting period. Income and expense items are translated at the average exchange rates
for the period, unless exchange rates fluctuate significantly during that period, in which case the
exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are
recognized in other comprehensive income and accumulated in equity (and attributed to noncontrolling interests as appropriate).
On the disposal of a foreign operation (i.e. a disposal of the Entity entire interest in a foreign operation,
or a disposal involving loss of control over a subsidiary that includes a foreign operation, or a partial
disposal of an interest in a joint arrangement or an associate that includes a foreign operation of which
the retained interest becomes a financial asset), all of the exchange differences accumulated in equity
in respect of that operation attributable to the owners of the Entity are reclassified to profit or loss.
F-44
In addition, in relation to a partial disposal of a subsidiary that includes a foreign operation, the
proportionate share of accumulated exchange differences are re-attributed to non-controlling interests
and are not recognized in profit or loss. For all other partial disposals (i.e. partial disposals of
associates or joint arrangements that do not result in the Group losing significant influence or joint
control), the proportionate share of the accumulated exchange differences is reclassified to profit or
loss.
The adjustments to goodwill and fair value generated in the acquisition of a foreign operation are
treated as assets and liabilities of the operation and translated at the exchange rate prevailing at the end
of each reporting period.
The functional currency and the recording currency of the entity and all of its subsidiaries is the
Mexican peso, except for the subsidiary whose functional and recording currencies are different as
follows:
(1)
Subsidiary
Recording currency
Functional currency
Reporting currency
Pacifico
Colombian peso
Colombian peso
Mexican peso
Atlántico
Colombian peso
Colombian peso
Mexican peso
Colombiana
Colombian peso
Colombian peso
Mexican peso
Maxitile
USD$
USD$
Mexican peso
Copper
USD$
USD$
Mexican peso
Plycem and Subsidiaries
USD$
USD$
Mexican peso
Fibraforte
Soles
Soles
Mexican peso
Ecuatoriana
USD$
USD$
Mexican peso
Nacobre (1)
Mexican peso
Mexican peso
Mexican peso
The Entity determined that a change occurred in the relevant facts and circumstances for
Nacional de Cobre, S.A. de C.V. (Nacobre), a subsidiary of the Entity, which justifies a change
in its functional currency based on the following factors:
i.
The currency which fundamentally influences the selling prices of the goods and
services.
ii.
The currency of the country whose competitive forces and regulations fundamentally
determine the selling prices of its goods and services.
iii.
The currency which fundamentally influences the costs of labor, materials and others.
Up to December 31, 2013, the functional currency of Nacobre was the US dollar (USD$) and is
currently the Mexican peso (Ps$).
Therefore such subsidiaries are considered a foreign operation under IFRS.
p.
Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets,
which are assets that necessarily take a substantial period of time to get ready for their intended use or
sale, are added to the cost of those assets, until such time as the assets are substantially ready for their
intended use or sale.
Investment income earned on the temporary investment of specific borrowings pending their
expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization.
F-45
All other borrowing costs are recognized in profit or loss in the period in which they are incurred.
q.
Employee benefits from termination and retirement and Statutory employee profit sharing (PTU)
Costs for direct employee benefits upon retirement are recognized as an expense when employees have
rendered service entitling them to the contributions.
Liabilities from seniority premiums, pension plans and severance payments are recognized as they
accrue and are calculated by independent actuaries based on the projected unit credit method using
nominal interest rates. Actuarial gains and losses are recognized immediately in other comprehensive
income items net of deferred income taxes, according to the net asset or liability recognized in the
statement of financial position to reflect the surplus (or deficit) of the employee benefit plan, while the
past service costs are recognized profit or loss when performing the modification of the plan or when
restructuring the costs recognized. Defined benefit costs are categorized as follows:
•
•
•
Service cost (including current service cost, past service cost, as well as gains and losses on
curtailments and settlements).
Net interest expense or income.
Remeasurement.
The Entity presents the first two components of defined benefit costs in profit or loss in the line item.
Gains and losses for reduction of service are accounted for as past service costs.
The retirement benefit obligation recognized in the consolidated statement of financial position
represents the actual deficit or surplus in the Entity’s defined benefit plans. Any surplus resulting from
this calculation is limited to the present value of any economic benefits available in the form of refunds
from the plans or reductions in future contributions to the plans.
A liability for a termination benefit is recognized at the earlier of when the entity can no longer
withdraw the offer of the termination benefit and when the entity recognizes any related restructuring
costs.
PTU
PTU is recorded in the results of the year in which it is incurred.
r.
Income taxes
Income tax expense represents the sum of the tax currently payable and deferred tax.
-
Current tax
Current income tax (ISR) is recognized in the results of the year in which is incurred. Until
December 31, 2013, current income tax was calculated as the higher of the ISR and the
Business Flat Tax (“IETU”).
-
Deferred Income taxes
Deferred tax is recognized on temporary differences between the carrying amounts of assets and
liabilities in the consolidated financial statements and the corresponding tax bases used in the
computation of taxable profit. Deferred tax liabilities are generally recognized for all taxable
temporary differences. Deferred tax assets are generally recognized for all deductible temporary
differences to the extent that it is probable that taxable profits will be available against which
those deductible temporary differences can be utilized. Such deferred tax assets and liabilities
are not recognized if the temporary difference arises from the initial recognition (other than in a
business combination) of assets and liabilities in a transaction that affects neither the taxable
profit nor the accounting profit. In addition, deferred tax liabilities are not recognized if the
temporary difference arises from the initial recognition of goodwill.
F-46
As a consequence of the 2014 Tax Reform, as of December 31, 2013 deferred IETU is no
longer recognized.
Deferred tax liabilities are recognized for taxable temporary differences associated with
investments in subsidiaries and associates, and interests in joint ventures, except where the
Entity is able to control the reversal of the temporary difference and it is probable that the
temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from
deductible temporary differences associated with such investments and interests are only
recognized to the extent that it is probable that there will be sufficient taxable profits against
which to utilize the benefits of the temporary differences and they are expected to reverse in the
foreseeable future.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and
reduced to the extent that it is no longer probable that sufficient taxable profits will be available
to allow all or part of the asset to be recovered.
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the
period in which the liability is settled or the asset realized, based on tax rates (and tax laws) that
have been enacted or substantively enacted by the end of the reporting period.
The measurement of deferred tax liabilities and assets reflects the tax consequences that would
follow from the manner in which the Entity expects, at the end of the reporting period, to
recover or settle the carrying amount of its assets and liabilities.
-
Current and deferred tax for the year
Current and deferred tax are recognized in profit or loss, except when they relate to items that
are recognized in other comprehensive income or directly in equity, in which case, the current
and deferred tax are also recognized in other comprehensive income or directly in equity
respectively. Where current tax or deferred tax arises from the initial accounting for a business
combination, the tax effect is included in the accounting for the business combination.
-
Tax on assets
The tax on assets (IMPAC) expected to be recovered in the form of a cash refund is recorded as
a tax receivable.
s.
Provisions
Provisions are recognized when the Group has a present obligation (legal or constructive) as a result of
a past event, it is probable that the Group will be required to settle the obligation, and a reliable
estimate can be made of the amount of the obligation.
The amount recognized as a provision is the best estimate of the consideration required to settle the
present obligation at the end of the reporting period, taking into account the risks and uncertainties
surrounding the obligation. When a provision is measured using the cash flows estimated to settle the
present obligation, its carrying amount is the present value of those cash flows (when the effect of the
time value of money is material).
When some or all of the economic benefits required to settle a provision are expected to be recovered
from a third party, a receivable is recognized as an asset if it is virtually certain that reimbursement
will be received and the amount of the receivable can be measured reliably.
1.
Warranties
Provisions for the expected cost of warranty obligations under local sale of goods legislation are
recognized at the date of sale of the relevant products, at the Entity’s management best estimate
of the expenditure required to settle the Entity’s obligation.
F-47
2.
Contingent liabilities acquired in a business combination
Contingent liabilities acquired in a business combination are initially measured at fair value at
the acquisition date. At the end of subsequent reporting periods, such contingent liabilities are
measured at the higher of the amount that would be recognized in accordance with IAS 37 and
the amount initially recognized less cumulative amortization recognized in accordance with IAS
18 Revenue.
t.
Financial liabilities and equity instruments
1.
Classification as debt or equity
Debt and equity instruments issued by a group entity are classified as either financial liabilities
or as equity in accordance with the substance of the contractual arrangements and the
definitions of a financial liability and an equity instrument.
2.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity
after deducting all of its liabilities. Equity instruments issued by a group entity are recognized at
the proceeds received, net of direct issue costs.
Repurchase of the Entity’s own equity instruments is recognized and deducted directly in
equity. No gain or loss is recognized in profit or loss on the purchase, sale, issue or cancellation
of the Entity’s own equity instruments
3.
Financial liabilities
Financial liabilities are classified as either financial liabilities ‘at FVTPL’ or ‘other financial
liabilities.
4.
Financial liabilities at FVTPL
Financial liabilities are classified as of FVTPL when the financial liability is either held for
trading or it is designated as of FVTPL.
A financial liability is classified as held for trading if:
•
•
•
It has been incurred principally for the purpose of repurchasing it in the near term; or
On initial recognition it is part of a portfolio of identified financial instruments that the
Entity manages together and has a recent actual pattern of short-term profit-taking; or
It is a derivative that is not designated and effective as a hedging instrument.
A financial asset other than a financial asset held for trading may be designated as of FVTPL
upon initial recognition if:
•
•
•
Such designation eliminates or significantly reduces a measurement or recognition
inconsistency that would otherwise arise; or
The financial asset forms part of a group of financial assets or financial liabilities or
both, which is managed and its performance is evaluated on a fair value basis, in
accordance with the Entity’s documented risk management or investment strategy, and
information about the Entity is provided internally on that basis; or
It forms part of a contract containing one or more embedded derivatives, and IAS 39
permits the entire combined contract to be designated as of FVTPL.
F-48
Financial liabilities at FVTPL are stated at fair value, with any gains or losses arising on
remeasurement recognized in profit or loss. The net gain or loss recognized in other income
(expense) profit or loss incorporates any interest paid on the financial liability and is included in
the statement of profit or loss and other comprehensive income. Fair value is determined in the
manner described in Note 10.
5.
Other financial liabilities
Other financial liabilities (including borrowings and trade and other payables) are subsequently
measured at amortized cost using the effective interest method.
The effective interest method is a method of calculating the amortized cost of a financial
liability and of allocating interest expense over the relevant period. The effective interest rate is
the rate that exactly discounts estimated future cash payments (including all fees and points
paid or received that form an integral part of the effective interest rate, transaction costs and
other premiums or discounts) through the expected life of the financial liability, or (where
appropriate) a shorter period, to the net carrying amount on initial recognition.
6.
Derecognition of financial liabilities
The Entity derecognizes financial liabilities when, and only when, the Entity’s obligations are
discharged, cancelled or they expire. The difference between the carrying amount of the
financial liability derecognized and the consideration paid and payable is recognized in profit or
loss.
u.
Financial derivative instruments
In order to hedge the financial risks derived from fluctuation in prices of natural gases and some metals
such as copper, aluminum, zinc, and nickel, the Entity selectively uses derivative financial instruments
such as swaps and futures (future contracts) on those underlying instruments. Note 11 includes further
detail about derivative financial instruments.
Derivatives are initially recognized at fair value at the date of the derivative contract and subsequently
measured at fair value at the end of the reporting period. The gain or loss is recognized in income
unless the derivative is designated and is effective as a hedging instrument, in which event the timing
of the recognition in the results depend on the nature of the hedge relationship. The Entity designates
certain derivatives as either fair value hedges of recognized assets or liabilities or firm commitments
(fair value hedges), hedges of highly probable forecast transactions or hedges of foreign currency risk
of firm commitments (hedging cash flows).
A derivative with a positive fair value is recognized as a financial asset whereas a derivative with a
negative fair value is recognized as a financial liability. A derivative is presented as an asset or a
liability in the long term if the maturity date of the instrument is 12 months or more and not expected
to make or cancel within those 12 months. Other derivatives are presented as current assets and current
liabilities.
−
Hedge accounting
The Entity designates certain hedging instruments, which include derivatives, embedded
derivatives and non-derivatives in respect of foreign currency risk, as either fair value hedges,
cash flow hedges, or hedges of net investments in foreign operations. Hedges of foreign
exchange risk on firm commitments are accounted for as cash flow hedges.
F-49
At the inception of the hedge relationship, the entity documents the relationship between the
hedging instrument and the hedged item, along with its risk management objectives and its
strategy for undertaking various hedge transactions. Furthermore, at the inception of the hedge
and on an ongoing basis, the Entity documents whether the hedging instrument is highly
effective in offsetting changes in fair values or cash flows of the hedged item attributable to the
hedged risk.
Note 11 sets out details of the fair values of the derivative instruments used for hedging
purposes.
−
Cash flow hedges
The effective portion of changes in the fair value of derivatives that are designated and qualify
as cash flow hedges is recognized in other comprehensive income and accumulated under the
heading of cash flow hedging reserve. The gain or loss relating to the ineffective portion is
recognized immediately in profit or loss, and is included in the ‘other income (expenses) - Net’
line item.
Amounts previously recognized in other comprehensive income and accumulated in equity are
reclassified to profit or loss in the periods when the hedged item affects profit or loss, in the
same line as the recognized hedged item. However, when the hedged forecast transaction results
in the recognition of a non-financial asset or a non-financial liability, the gains and losses
previously recognized in other comprehensive income and accumulated in equity are transferred
from equity and included in the initial measurement of the cost of the non-financial asset or
non-financial liability.
Hedge accounting is discontinued when the Entity revokes the hedging relationship, when the
hedging instrument expires or is sold, terminated, or exercised, or when it no longer qualifies
for hedge accounting. Any gain or loss recognized in other comprehensive income and
accumulated in equity at that time remains in equity and is recognized when the forecast
transaction is ultimately recognized in profit or loss. When a forecast transaction is no longer
expected to occur, the gain or loss accumulated in equity is recognized immediately in profit or
loss.
−
Fair value hedges
Changes in the fair value of derivatives that are designated and qualify as fair value hedges are
recognized in profit or loss immediately, together with any changes in the fair value of the
hedged asset or liability that are attributable to the hedged risk. The change in the fair value of
the hedging instrument and the change in the hedged item attributable to the hedged risk are
recognized in profit or loss in the line item relating to the hedged item.
Hedge accounting is discontinued when the Entity revokes the hedging relationship, when the
hedging instrument expires or is sold, terminated, or exercised, or when it no longer qualifies
for hedge accounting. The fair value adjustment to the carrying amount of the hedged item
arising from the hedged risk is amortized to profit or loss from that date.
−
Embedded derivatives
The Entity carries out the review of contracts held to identify embedded derivatives to be
separated from the host contract for purposes of valuation and accounting records.
The Entity has no fair value hedges, hedges of net investment in a foreign operation or
embedded derivatives in the reporting period.
F-50
v.
Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced
for estimated customer returns, rebates and other similar allowances.
-
Sale of goods
Revenue from the sale of goods is recognized when the goods are delivered and title has passed,
at the time when all of the following conditions are satisfied:
•
•
•
•
•
-
The Entity has transferred to the buyer the significant risks and rewards of ownership of
the goods;
The Entity retains neither continuing managerial involvement to the degree usually
associated with ownership nor effective control over the goods sold;
The amount of revenue can be measured reliably;
It is probable that the economic benefits associated with the transaction will flow to the
Entity; and
The costs incurred or to be incurred in respect of the transaction can be measured
reliably.
Dividend and interest income
Dividend income from investments is recognized when the Entity has the right to receive
payment (provided that it is probable that the economic benefits will flow to the Entity and the
amount of income can be reliably measured).
Interest income is recognized when it is probable that the economic benefits will flow to the
Entity and the amount of income can be measured reliably. Interest income is recorded on a
periodic basis, with reference to capital and the effective interest rate applicable.
-
Services
Revenue from a contract to provide services is recognized by reference to the stage of
completion of the contract. The stage of completion of the contract is determined as follows:
•
Installation fees are recognized by reference to the stage of completion of the
installation, determined as the proportion of the total time expected to install that has
elapsed at the end of the reporting period.
•
Servicing fees included in the price of products sold are recognized by reference to the
proportion of the total cost of providing the servicing for the product sold.
Revenue from time and material contracts is recognized at the contractual rates as labour hours
and direct expenses are incurred.
-
Rentals
Rentals are recognized monthly as leasing services are provided and maintenance charges are
recognized in the period of the length of the lease agreement from which they come.
w.
Earnings per share
(i) Basic earnings per common share are calculated by dividing consolidated net income of controlling
interests by the weighted average number of common shares outstanding during the year, (ii) Basic
earnings per common share from discontinued operations are calculated by dividing net income of
discontinued operations by the weighted average number of common shares outstanding during the
year.
F-51
5.
Critical accounting judgments and key sources of estimation uncertainty
In the application of the Entity’s accounting policies, which are described in Note 4, the Entity’s management
is required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities
that are not readily apparent from other sources. The estimates and associated assumptions are based on
historical experience and other factors that are considered to be relevant. Actual results may differ from these
estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognized in the period in which the estimate is revised if the revision affects only that period,
or in the period of the revision and future periods if the revision affects both current and future periods.
Critical accounting judgments and key sources of uncertainty applying the estimates made at the date of the
consolidated financial statements, which have a significant risk deriving of an adjustment to the carrying
amounts of assets and liabilities during the next financial period are as follow:
a.
Allowances of inventories and accounts receivable - The Entity uses estimates to determine
allowances of inventories and accounts receivable. Factors considered when calculating the allowance
for obsolete and slow moment items are the production and sales volumes as well as movements on the
demand for some products. The factors considered when calculating the allowance for doubtful
accounts are mainly the credit risk of the customer’s financial situation, unsecured accounts and
significant delays in the collection according to the established credit conditions.
b.
Property, machinery and equipment - The Entity reviews the estimated useful lives of property,
machinery and equipment at the end of each annual period. During 2013, based on a detailed analysis
the management of the Entity changed the estimated useful lives of certain components of property,
machinery and equipment. The degree of uncertainty associated with estimates of useful lives is related
to changes in the market and asset utilization for production volumes and technological development.
c.
Fair value of property, machinery and equipment - Some of the asset classes of the Entity are
measured at fair value in the consolidated financial statements.
In estimating the fair value of an asset, the Entity uses observable market data, as they become
available. The Entity hired an independent qualified to perform the valuation. The Entity works closely
with the independent appraiser qualified to establish the valuation techniques and appropriate input
data for the valuation mode.
d.
Impairment of long-lived assets - The carrying value of non-current assets are reviewed for
impairment if there are situations or changes in circumstances indicating that the carrying value will is
not be recovered. If there is evidence of impairment, the Entity carries out a review to determine if the
carrying value exceeds its recoverable amount. When performing impairment testing of assets, the
Entity has to make estimates on the value in use of its property, machinery and equipment, and to its
cash generating units, in the case of certain assets. To determine the value in use the calculation
requires the Entity to determine future cash flows projections of revenue using estimates of market
conditions, pricing, and production and sales volumes from the cash-generating units using an
appropriate discount rate to calculate the present value.
e.
Valuation of financial instruments - The Entity uses valuation techniques for its derivative financial
instruments, which includes information that is not always based on observable market data to estimate
its fair value. Note 10 shows detailed information about the key assumptions considered in determining
the fair value of financial instruments, as well as detailed sensitivity analysis on these assumptions.
The management of the Entity believes that the valuation techniques and assumptions used are
appropriate to determine the fair value of its financial instruments.
f.
Contingencies - Due to the nature of its operations, the Entity is subject to transactions or events
contingent on which uses professional judgment in developing estimates of probability of occurrence.
The factors considered in these estimates are the current legal status at the date of the estimate and
opinion of the Entity’s legal counsel.
F-52
6.
g.
Employee retirement benefits asset - Assumptions are used to determine retirement benefits of
employees and the underlying assumptions annually. These estimates, as well as the related
assumptions, are established in conjunction with independent actuaries. These assumptions include
demographic assumptions, discount rates and expected increases in salaries and future service, among
others. The Entity believes these estimates to be appropriate. However, a change in any of the
assumptions could affect the value of assets or liabilities for these benefits and the statement of
comprehensive income in the period in which the changes occur.
h.
Tax losses - The Entity reviews the deferred tax assets and liabilities which are valued by using the tax
rates expected to be applied in the period in which the liability is paid or the asset is realized, based on
the rates (and tax laws) that were approved or substantially enacted at the end of the reporting period.
For the purposes of the statements of cash flows, cash and cash equivalents include cash on hand and in banks
and investment funds, net of outstanding bank overdrafts. Cash and cash equivalents at the end of the
reporting period as shown in the statements of cash flows, can be reconciled to the related items in the
statement of financial position as follows:
December 31, 2014
Cash
Cash equivalents Investment funds
Ps$
Ps$
1,700,874
Ps$
7.
1,492,373
December 31, 2013
3,193,247
1,496,814
December 31, 2012
Ps$
476,120
Ps$
1,972,934
859,840
902,095
Ps$
1,761,935
Accounts receivable
December 31, 2014
Trade accounts receivable
Allowance for doubtful accounts
Ps$
2,349,623
(205,358)
2,144,265
Recoverable taxes, mainly value-added
Tax (“VAT”)
Other receivables
Ps$
929,279
76,103
Ps$
a.
December 31, 2013
3,149,647
2,620,355
(238,758)
2,381,597
December 31, 2012
Ps$
1,019,615
105,057
Ps$
3,506,269
2,002,616
(176,853)
1,825,763
941,716
158,919
Ps$
2,926,398
Trade accounts receivable
The average credit period on sales of goods is between 30 and 60 days and the Entity expects to collect
trade accounts receivable within such timeframe. No interest is charged on trade receivables.
Allowances for doubtful accounts are recognized against trade receivables for 100% of all trade
accounts receivable with high probabilities of uncollectibility based on the estimated unrecoverable
amounts.
To accept any new customer, the Entity requests financial information for the last two years and
subsequently supports it with an external credit rating system to evaluate the potential client’s financial
condition. and defines credit limits by customer. The limits and qualifications attributed to customers
are reviewed every two months through the Credit Committee established by the Entity. No single
customer represents more than 5% of the total balance of the accounts receivable.
F-53
The Entity tracks the payment performance of clients without any guarantees and for which the only
document supporting payment are promissory notes, and in some cases, support of the client’s owner.
In the case of delay of payment, in accordance with its policies, the Entity suspends the use of line of
credit for future purchases. Further delays lead to judicial and extrajudicial (legal) actions aimed to
recover the balance. If the collection is still not accomplished, the Entity cancels the credit line and the
account receivable.
b.
Allowance for doubtful accounts is as follows:
December 31, 2014
Domestic trade receivables
Export trade receivables
c.
December 31, 2013
December 31, 2012
Ps$
188,850
16,508
Ps$
223,621
15,137
Ps$
168,482
8,371
Ps$
205,358
Ps$
238,758
Ps$
176,853
Change in the allowance for doubtful accounts:
December 31, 2014
Balance at the beginning of the
year
Allowance for the period
Write – offs
Balance at the end of the year
December 31, 2013
December 31, 2012
Ps$
238,758
56,771
(90,171)
Ps$
176,853
257,222
(195,317)
Ps$
158,064
90,652
(71,863)
Ps$
205,358
Ps$
238,758
Ps$
176,853
In determining the recoverability of a trade receivable, the Entity considers any change in the credit
quality of the trade receivable from the date the credit was initially granted up to the end of the
reporting period. Concentration of credit risk is limited due to the fact that the customer base is large
and independent.
8.
Inventories
December 31, 2014
Raw materials and auxiliary materials
Work in progress
Finished goods
Goods in transit
Spare parts and other inventories
Ps$
709,458
544,765
919,674
74,273
393,798
2,641,968
Less- allowance for obsolete and slow
movement items
December 31, 2013
Ps$
(171,200)
Ps$
2,470,768
613,152
464,274
938,276
65,562
302,564
2,383,828
December 31, 2012
Ps$
(133,457)
Ps$
2,250,371
668,795
649,947
985,109
84,965
245,468
2,634,284
(163,019)
Ps$
2,471,265
The allowance for obsolete and slow movement is determined based on the experience from previous years,
considering the movement of goods in the market. An increase to the reserve is recorded when an item shows
a lack of movement, until it is fully impaired if necessary.
The allowance for obsolete inventories is determined based on the experience of the physical inventory counts
which are performed periodically, adjusted by variable percentages in the different plants.
Inventory consumption can be seen in Note 24 under the “materials” concept.
F-54
Movements in the allowance for obsolete, slow moving inventories are presented below:
December 31, 2014
9.
December 31, 2013
December 31, 2012
Balance at the beginning of the year
Allowances of the period
Write - offs
Ps$
133,457
84,258
(46,515)
Ps$
163,019
287,990
(317,552)
Ps$
99,436
177,496
(113,913)
Balance at the end of the year
Ps$
171,200
Ps$
133,457
Ps$
163,019
Risk management
The Entity’s operations expose it to market risks such as interest rate, exchange rate, price, credit and liquidity
risk, which are administered centrally by Corporate Treasury. The Entity seeks to minimize its exposure to
these risks through the use of hedging with derivative financial instruments. The use of financial derivatives is
regulated by the policies of the Entity, approved by the Board of Directors, which establish the principles
related to the acquisition of derivative financial instruments. The internal audit area annually reviews the
compliance with these policies and exposure limits. The Board of Directors establishes and monitors policies
and procedures to measure other risks, which are described below:
a.
Capital risk management
The Entity manages its capital to ensure that it will continue as a going concern while maximizing the
return to shareholders through the optimization of debt and equity balances. Elementia’s capital
structure is made up of net debt (mainly bank loans, Notes and amounts owed to related parties, as
seen in Notes 18 and 23) and stockholders’ equity of the Entity (issued capital, capital reserves,
retained earnings and non-controlling interest, as detailed in Note 21). The capital structure of the
Entity is not subject to any capital requirements. The overall strategy of the Entity has not been
modified in comparison to 2013 or 2012.
The Entity is not subject to any externally imposed requirements for managing capital.
Management of the Entity reviews, on a monthly basis, net debt and borrowing costs and their relation
to EBITDA (net income, plus or minus discontinued operations, equity in income of associated entity,
foreign exchange (gain) loss, interest income, interest expense, banking fees, and depreciation and
amortization). This is performed at the same time that the Entity prepares its financial projections as
part of the business plan to the Board of Directors and shareholders of the Entity. The Entity has a
practice of borrowing no more than 3.50 times EBITDA determined as the ratio of net debt to
EBITDA.
The net debt ratio over the period reported is as follows:
December 31, 2014
Debt with financial institutions
International Notes (Senior
Unsecured Notes)
Securitization certificates
Net debt with financial
institutions
EBITDA
Ps$
1,129,236
December 31, 2013
Ps$
3,377,715
December 31, 2012
Ps$
3,382,396
6,255,150
3,000,000
(3,193,247)
3,000,000
(1,972,934)
3,000,000
(1,761,935)
7,191,139
2,674,920
4,404,781
1,913,603
4,620,461
1,876,562
2.69
2.30
2.46
Debt ratio
F-55
b.
Categories of financial instruments
December 31, 2014
Financial assets
in hedge accounting
relationships
Accounts receivable from related
parties
Accounts receivable (including
long-term)
Investments held to maturity
Financial liabilities
At amortized cost:
Loans to financial institutions
International Notes (Senior
Unsecured Notes)
Financière Lafarge S.A.S.
Due to related parties - long term
At fair value:
Derivative financial
instruments in hedge
accounting relationships
c.
P$
3,193,247
December 31, 2013
P$
1,972,934
-
Ps$
December 31, 2012
Ps$
1,761,935
9,810
8,549
55,823
94,795
50,553
2,425,726
10,323
2,725,412
11,118
2,376,309
12,297
1,129,236
6,255,150
3,000,000
2,482,003
662,310
156,267
Ps$
3,377,715
3,382,396
3,000,000
2,663,274
173,358
3,000,000
2,330,471
205,918
18,075
14,087
40,462
24,725
607
146,147
Ps$
-
-
Objectives of financial risk management
The treasury function coordinates access to domestic and international financial markets, monitors and
manages the financial risks relating to the operations of the Entity through internal risk reports, which
analyze the exposures by degree and magnitude of risks. These risks include market risk (including
currency risk, interest rate risk, exchange rate risk and price risk), credit risk and liquidity risk.
The Entity seeks to minimize the effects of these risks by using derivative financial instruments to
hedge exposures to risk. The use of financial derivatives is governed by the policies of the Entity
approved by the Board of Directors, which provide written principles on currency risk, interest rate
risk, credit risk, use of derivative financial instruments and non-derivatives and investment of excess
liquidity. Internal auditors regularly review compliance with policies and exposure limits. The Entity
does not subscribe or trade financial instruments, among which includes derivative financial
instruments, for speculative purposes.
At the end of the reporting period, there are no concentrations of risk with respect to loans to related
parties and accounts receivable.
d.
Interest rate risk management
The Entity is mainly exposed to interest rate risks because it has entered into debt at variable rates.
This risk is managed by maintaining an appropriate combination between fixed and variable rate loans.
Hedging activities are evaluated regularly so that they align with interest rates and defined risk,
ensuring that more profitable hedging strategies are applied.
F-56
The Entity’s exposures to interest-rate risk are mainly related to changes in the TIIE and LIBOR with
respect to the Entity’s financial liabilities.
-
Sensitivity analyses for interest rates:
The following sensitivity analysis have been determined based on the exposure to interest rates
on the Entity’s total unhedged financial indebtedness that accrues interest at variable rates. The
analysis is prepared assuming that the amount of the liability outstanding at the end of the
reporting period has been the outstanding liability for the whole year. The Entity reports
internally to the Board of Management about the risk in interest rates. If the interest rates are
between 100 and 200 basis points (BPS) higher/lower and all the other variables remained
constant, interest expense for 2014 would have increased from Ps$505,906 to Ps$609,750 for a
100 BPS change and to Ps$713,594 for a 200 BPS change; for the year ended December 31,
2013, interest expense would have changed from Ps$420,585 to Ps$482,437 for a 100 BPS
change and to Ps$544,289 for a 200 BPS change; for the year ended December 31, 2012,
interest expense would have changed from Ps$288,745 to Ps$486,945 for a 100 BPS change
and to Ps$550,769 for a 200 BPS change.
28-day TIIE
91-day TIIE
6 month LIBOR
28-day TIIE
91-day TIIE
6 month LIBOR
28-day TIIE
91-day TIIE
6 month LIBOR
e.
Maximum
2014
Minimum
Average
3.8171%
3.8297%
0.3628%
3.2741%
3.2819%
0.3194%
3.5092%
3.5192%
0.3295%
Maximum
2013
Minimum
Average
4.8475%
4.8700%
0.5063%
3.7765%
3.7722%
0.3420%
4.2745%
4.2767%
0.4087%
Maximum
2012
Minimum
Average
4.8562%
4.8700%
0.8120%
4.7175%
4.7250%
0.5080%
4.7901%
4.8069%
0.6870%
Exchange rate risk management
The functional currency of the Entity is the Mexican peso. Since the Entity has investments in foreign
operations, it is exposed to the risk of foreign currency translation. The coverage of this risk is
primarily mitigated by each subsidiary by carrying monetary assets which are equal or greater
monetary liabilities. Certain subsidiaries generate income in USD$ and in turn it hold assets that
exceed liabilities denominated in USD$. The Entity performs an analysis of variation in the exchange
rates which serves to identify sales opportunities in the market for corporate treasury dollars.
The following table details the Entity’s sensitivity analysis to an increase and decrease of 10% in the
Mexican pesos exchange rate against U.S. dollars. 10% is the sensitivity rate used when reporting
foreign exchange risk internally to key management personnel and represents management’s
assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis
includes only outstanding monetary items denominated in foreign currency and adjusts their translation
at the period end for a 10% change in exchange rates. The sensitivity analysis includes external loans
as well as loans to foreign operations within the entity where the denomination of the loan is in a
currency other than the currency of the lender or the borrower. A positive amount (as shown in the
table below) indicates an increase in the results and other items of equity capital where the peso is
strengthened by 10% against the U.S. dollar. If there is a weakening of 10% in the peso with respect to
the reference currency, there would be a comparable impact on the results and other comprehensive
income, and the balances below would be negative.
F-57
2014
Asset (liability) position
(thousands of USD$)
Projected exchange rate +(-)10%
Projected asset (liability) position
(thousands of USD$)
Increasing effect
exchange rate USD$
2013
(466,437)
Ps$
16.1898
(686,501)
2012
(6,412)
Ps$
14.3842
2014
69,054
Ps$
(8,385)
Decreasing effect
exchange rate USD$
2013
14.3111
89,839
(466,437)
Ps$
13.3800
(624,091)
2012
(6,412)
Ps$
11.8877
(7,622)
69,054
Ps$
11.8273
(81,677)
As of December 31, 2014, the foreign currency position by country is as follows:
Mexico
USD$:
Monetary assets
Monetary liabilities
Net asset (liability) position
Colombia
Thousands of USD$
Costa Rica
Bolivia
Peru
75,028
(550,058)
7,575
(4,302)
5,186
(1,220)
3,612
(928)
40
(1,380)
(475,030)
3,273
3,976
2,684
(1,340)
As of December 31, 2013, foreign currency position by country is as follows:
Mexico
USD$:
Monetary assets
Colombia
Thousands of USD$
Costa Rica
Bolivia
Peru
45,511
(73,806)
12,779
(3,462)
6,843
(1,220)
4,140
(987)
(28,295)
9,317
5,623
3,153
115
(1,044)
(929)
As of December 31, 2012, foreign currency position by country is as follows:
Mexico
USD$:
Monetary assets
f.
Colombia
Thousands of USD$
Costa Rica
56,676
(25,221)
25,924
(4,648)
19,322
(13,718)
31,455
21,276
5,604
Credit risk management
Credit risk refers to the risk that one party fails to meet its contractual obligations resulting in financial
loss to the Entity, and arises principally on accounts receivables and liquid funds. The credit risk on
cash and cash equivalents and derivative financial instruments is limited because the counterparties are
banks with high credit ratings assigned by credit rating agencies. The maximum exposure to credit risk
is represented by its carrying amount. The Entity provides credit primarily to customers in Mexico,
after assessing their creditworthiness, which are constantly monitored accordingly to credit policies as
explained in Note 7.
Accounts receivable consist of a large number of customers spread across diverse geographical areas.
Continuous assessment of credit is made on the financial condition of accounts receivable and there are
no concentrations of credit risk in the Entity’s customer base, since the balances of these accounts
receivable are represented by approximately 2,980 customers in 2014, 3,310 in 2013 and 3,200 in 2012,
which do not represent a concentration of risk individually.
F-58
Bolivia
Peru
4,265
(3,788)
477
334
(2,266)
(1,932)
The Entity has credit guarantees to cover its credit risk associated with accounts receivable. Such
guarantees are represented by an insurance policy covering 90% of the portfolio of export customers and
are effective from June 1, 2013. The estimated insurable turnover is USD$78,744,097, subject to annual
premium of 0.095%, in several countries (total estimated annual premium of USD$74,807 and minimum
premium from USD$59,845).
g.
Liquidity risk management
Ultimate responsibility for liquidity risk management rests with the Board of Directors of the Entity,
which has established appropriate policies for the control of such risk through the monitoring of working
capital, allowing management of the Entity’s short, medium, and long-term funding requirements. The
Entity maintains cash reserves and available lines of credit lines, continuously monitoring projected and
actual cash flows, reconciling the profiles of maturity of financial assets and financial liabilities.
The table below details the remaining contractual maturities of the Entity’s financial liabilities, based on
contractual repayment periods. This table has been formulated based on un-discounted projected cash
flows of financial liabilities based on the date on which the Entity will make payments. The table
includes both projected cash flows related to interest and principal on financial debt in the consolidated
statements of financial position. Where the contractual interest payments are based on variable rates, the
amounts are derived from interest rate curves at the end of the period. The contractual maturity is based
on the earliest date in which the Entity is required to make the payments.
Debt with financial institutions includes both, fixed and variable interest rate instruments as is detailed in
Note 18. Financial liabilities at variable rates are subject to change if changes in variable interest rates
differ to those estimates of interest rates determined at the end of the reporting period.
The Entity expects to meet its obligations with cash flows from continuing operations. Additionally, the
Entity could easily obtain revolving credit lines with several banking institutions, and has access to longterm capital market financing for to Ps$3,730,170 through long-term securitization certificates
(Certificados bursátiles) which expire in October 2015.
As of December 31, 2014
International Notes (Senior Unsecured Notes)
Average weighted
interest
rate
6.3103%
5.5000%
6.3150%
Total
Total
3 months
Ps$
Ps$
Average weighted
interest
rate
6.3395%
7.4064%
6 months
53,949
43,507
2,482,003
156,267
-
Ps$
2,735,726
Ps$
Ps$
Ps$
Ps$
33,876
172,290
3,078,026
-
Ps$
1,308,689
9,538,605
662,310
607
Ps$
1,446,514
9,710,895
3,165,040
2,482,003
662,310
156,267
607
93,507
Ps$
3,284,192
Ps$
11,510,211
Ps$
17,623,636
6 months
43,565
44,178
2,663,274
173,358
-
Ps$
2,924,375
Ps$
Total
50,000
43,507
-
3 months
More than
1 year
1 year
More than
1 year
1 year
Total
49,558
50,471
Ps$
743,281
101,908
-
Ps$
3,160,384
3,176,207
18,075
14,087
Ps$
3,996,788
3,372,764
2,663,274
191,433
14,087
100,029
Ps$
845,189
Ps$
6,368,753
Ps$
10,238,346
-
F-59
Rate weighted
Average effective
Interest
3 months
6.3069%
7.5383%
Ps$
Total
10.
Ps$
6 months
76,274
58,107
2,330,471
205,918
-
Ps$
2,670,770
Ps$
More than
1 year
1 year
89,750
58,106
Ps$
367,299
116,214
-
Ps$
3,892,074
3,417,450
40,462
24,725
Ps$
4,425,397
3,649,877
2,330,471
246,380
24,725
147,856
Ps$
483,513
Ps$
7,374,711
Ps$
10,676,850
-
Fair value of financial instruments
The fair value of financial instruments presented below has been determined by the Entity using information
available in the markets or other valuation techniques that use assumptions that are based on market conditions
existing at each reporting date, but require judgment with respect to their development and interpretation. As a
result, the estimated amounts presented below are not necessarily indicative of the amounts that the Entity could
obtain in a current market exchange. The use of different assumptions and/or estimation methods could have a
material effect on the estimated amounts of fair value.
Following is a discussion of the hierarchy of fair values, grouped into Levels 1 to 3 based on the degree to
which the fair value is observable:
•
•
•
Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for
identical assets or liabilities;
Level 2 fair value measurements are those derived from inputs other than quoted prices included within
level 1, that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e.
derived from prices);
Level 3 fair value measurements are those derived from valuation techniques that include inputs for the
asset or liability that are not based on observable market data (unobservable inputs).
As of December 31, 2014, financial liabilities at fair value are as follows:
Level 1
Financial liabilities at fair value
Hedging derivative financial instruments
Total
Level 2
Level 3
Total
Ps$
-
Ps$
(146,147)
Ps$
-
Ps$
(146,147)
Ps$
-
Ps$
(146,147)
Ps$
-
Ps$
(146,147)
As of December 31, 2013, financial assets at fair value are as follows:
Level 1
Financial assets at fair value
Total
Level 2
Level 3
Total
Ps$
-
Ps$
9,810
Ps$
-
Ps$
9,810
Ps$
-
Ps$
9,810
Ps$
-
Ps$
9,810
As of December 31, 2012, financial assets at fair value as follows:
Level 1
Financial assets at fair value
Total
Total
Level 2
Level 3
Total
Ps$
-
Ps$
8,549
Ps$
-
Ps$
8,549
Ps$
-
Ps$
8,549
Ps$
-
Ps$
8,549
F-60
Except for the fair value disclosed in the table below, the Entity considers that the carrying amount of cash and
cash equivalents, accounts receivable and accounts payable from third parties and related parties and the
current portion of bank loans approximate their fair values because they have short-term maturities. The
Entity’s long-term debt is recorded at amortized cost and incurs interest at fixed and variable rates that are
related to market indicators.
The Entity uses quoted market prices or quotations for similar instrument operators to obtain the fair value of
long-term debt. To determine the fair value of other financial instruments, the Entity uses other techniques
such as estimated discounted cash flows, considering the dates of flow in the market inter-temporal curves, the
discount rates used reflect the risk of the counterparty, as well as the Entity’s risk for the reference period.
The carrying amount financial instruments and fair value estimates as of December 2014, 2013 and 2012 are as
follows:
December 31, 2014
Carrying amount
Fair value
Bank loans including current portion of long-term debt
International Notes (Senior Unsecured Notes)
December 31, 2013
Carrying amount
Fair value
December 31, 2012
Carrying amount
Fair value
Ps$
1,129,236
6,255,150
3,000,000
Ps$
1,129,236
6,079,022
3,042,641
Ps$
3,377,715
3,000,000
Ps$
4,717,800
3,044,280
Ps$
3,382,396
3,000,000
Ps$
3,024,695
3,062,280
Ps$
10,384,386
Ps$
10,250,899
Ps$
6,377,715
Ps$
7,762,080
Ps$
6,382,396
Ps$
6,086,975
Fair value hierarchy of the inputs used to determine the aforementioned fair values was Level 3. During the
period there were no transfers between Level 1, 2 and 3.
Valuation techniques for financial liabilities are discounted cash flows. The future cash flows are estimated
based on the forward interest rates (based on the yield curves observable at the end of the reporting period) and
contractual interest rates, discounted at a rate that reflects the credit risk of the counterparties. For derivative
financial instruments quoted prices in an active market are used when available.
11.
The purpose of entering into derivative financial instruments is to partially hedge the financial risk exposures
to prices of some metals such as copper, zinc and nickel. The decision to hedge is in response to existing and
expected market conditions, as well as the national and international context of underlying economic
indicators. Copper hedge instruments are mainly traded in the Commercial Metal Exchange, and those related
to zinc and nickel are mainly traded on the London Metal Exchange.
As of December 31, 2014, futures and hedging are summarized below:
Notional
Instrument
Copper futures
Zinc futures
Nickel futures
Designated as
Hedging
Hedging
Hedging
Amount (‘000)
2,211
193
1
Unit
Maturity
Tons
Tons
Tons
Feb to Dec 2015
Jan to Sep 2015
Jan to Apr 2015
Total as of December 31, 2014
F-61
Valuation as of December 31, 2014
Net fair value effect on
hedging instruments
Asset
entered into for cash
(Liability)
flow hedges
Gain (loss) on
settlement
Cost of sales
Financial cost
(income)
Ps$
(12,612)
(366)
(417)
Ps$
(8,828)
(256)
(292)
Ps$
(9,167)
(266)
(303)
Ps$
(4,800)
(139)
(159)
Ps$
(13,395)
Ps$
(9,376)
Ps$
(9,736)
Ps$
(5,098)
As of December 31, 2014, cross currency swap and hedging are summarized below:
Notional
Comprehensive
Instrument
Designated as
Cross currency swap (for which the
Entity exchanges pesos for dollars)
and preferential fixed interest rate of
4.05% (CCS)
Hedging
Amount (‘000)
1,500,000
Unit
Maturity
USD
October 2015
Liability
income
Ps$
(132,752)
Ps$
(92,927)
Ps$
(132,752)
Ps$
(92,927)
Notional
Gain (loss) on
hedging instruments
Instrument
Designated as
Copper futures
Zinc futures
Nickel futures
Hedging
Hedging
Hedging
Amount (‘000)
1,678
283
31
Unit
Maturity
Tons
Tons
Tons
Feb to Dec 2014
Jan to Dec 2014
Jan to Feb 2014
Asset
settlement
Financial cost
(Liability)
flow hedges
Cost of sales
(income)
Ps$
9,188
603
19
Ps$
6,432
422
13
Ps$
32,480
2,132
67
$
(2,141)
(141)
(4)
Ps$
9,810
Ps$
6,867
Ps$
34,679
Ps$
(2,286)
Notional
hedging instruments
Instrument
Designated as
Copper futures
Copper futures
Zinc futures
Nickel futures
Hedging
Hedging
Hedging
Hedging
Amount (‘000)
1,678
23
283
31
Unit
Maturity
Tons
Tons
Tons
Tons
Feb to Dec 2013
Jan 2014
Jan to Dec 2013
Jan to Feb 2013
Asset
Gain (loss) on settlement
Financial cost
(Liability)
flow hedges
Cost of sales
(income)
Ps$
Ps$
F-62
7,779
106
646
18
Ps$
8,549
Ps$
5,445
74
452
13
Ps$
5,984
Ps$
(11,462)
239
1,783
Ps$
(9,440)
Ps$
(2,447)
(200)
(5)
(2,652)
12.
a.
For the years ended December 31, 2014, 2013, and 2012, detail of property, machinery and equipment is as follows:
Balance as of
Balance as of
December 31, 2013
Investment:
Land
Buildings and constructions
Machinery and equipment
Vehicles
Office furniture
Computers
Construction in process
Total investment
Ps$
Accumulated depreciation:
Vehicles
Office furniture
Computers
Total accumulated depreciation
Net investment
2,291,849
4,518,763
14,666,176
148,493
63,437
184,359
1,328,998
23,202,075
Revaluations
Ps$
(1,409,040)
(6,982,687)
(70,235)
(38,488)
(93,538)
(8,593,988)
Ps$
14,608,087
108,339
73,428
132,310
(12,999)
301,078
Business Combination
Ps$
(72,269)
22,850
14,441
(1,318)
(3,904)
(40,200)
Ps$
260,878
47,101
545,237
456,530
1,048,868
Additions
Ps$
10,629
13,067
55,042
3,467
3,089
1,681
526,349
613,324
Ps$
1,048,868
Allocations
Ps$
(134,467)
(781,271)
(13,637)
(7,059)
(28,001)
(964,435)
Ps$
(351,111)
66,626
473,340
509,967
18,019
4,310
2,331
(1,074,593)
-
Impairment
Ps$
Ps$
-
-
Disposals
Ps$
Ps$
-
(5,478)
(609)
(52,243)
(6,402)
(4,479)
(38)
(6,501)
(75,750)
Translation effect
Ps$
576
35,837
4,299
4,424
38
45,174
Ps$
(30,576)
12,928
(26,539)
298,618
(4,431)
4,632
6,919
8,012
300,136
December 31, 2014
Ps$
(231,288)
137,534
(9,341)
(4,708)
(17,837)
(125,640)
Ps$
174,496
(1,846,488)
(7,567,737)
(74,473)
(47,149)
(143,242)
(9,679,089)
Ps$
Ps$
Vehicles
Office furniture
Computers
Net investment
2,545,425
3,835,241
10,015,270
268,155
81,649
92,126
3,703,332
20,541,198
Revaluations
Ps$
(2,001,879)
(6,537,692)
(46,581)
(56,906)
(75,609)
(8,718,667)
Ps$
11,822,531
15,710,642
Balance as of
Balance as of
December 31, 2012
Investment:
Land
Vehicles
Office furniture
Computers
Total investment
2,531,994
5,596,687
16,066,400
146,147
70,989
195,249
782,265
25,389,731
161,786
102,407
(260,701)
(126,565)
(123,073)
Ps$
(177,488)
169,405
(22,319)
(30,402)
Ps$
(153,475)
181,957
512,008
1,390,032
4,636
2,984
2,773
17,199
2,111,589
Additions
Ps$
Ps$
2,111,589
31,178
58,157
421,528
10,234
2,610
27,115
1,508,502
2,059,324
Allocations
Ps$
(39,227)
(568,933)
(6,432)
(1,609)
(16,031)
(632,232)
Ps$
F-63
1,427,092
80,975
736,916
3,090,301
3,287
5,955
56,623
(3,974,057)
-
Impairment
Ps$
Ps$
-
-
Disposals
Ps$
Ps$
-
(592,008)
(540,326)
(25,593)
(6,479)
(1,195)
(4,195)
(1,169,796)
Translation effect
Ps$
462,259
30,799
5,107
1,153
3,570
502,888
Ps$
(666,908)
(117,464)
(185,640)
35,339
(4,775)
(28,566)
9,917
74,022
(217,167)
December 31, 2013
Ps$
347,295
(76,266)
(10)
18,874
(5,468)
284,425
Ps$
67,258
2,291,849
4,518,763
14,666,176
148,493
63,437
184,359
1,328,998
23,202,075
(1,409,040)
(6,982,687)
(70,235)
(38,488)
(93,538)
(8,593,988)
Ps$
14,608,087
Balance as of
Balance as of
December 31, 2011
Land
Vehicles
Office furniture
Computers
Total investment
Land
Ps$
Vehicles
Office furniture
Computers
Net investment
2,470,503
3,986,712
12,836,377
262,234
91,334
119,672
2,191,852
21,958,684
Revaluations
Ps$
(2,104,660)
(8,428,721)
(68,189)
(73,637)
(96,585)
(10,771,792)
Ps$
11,186,892
129,814
225,269
(82,448)
185
272,820
Ps$
-
(177,406)
(127,700)
19,458
(285,648)
Ps$
(12,828)
Additions
Ps$
15,939
32,236
287,304
10,766
8,229
3,303
1,754,798
2,112,575
Ps$
-
Allocations
Ps$
1,671,701
Ps$
Vehicles
Office furniture
Computers
Total investment
-
-
Disposals
Ps$
(40,010)
(40,010)
-
Balance as of
Ps$
(63,834)
(406,510)
(3,306,217)
(9,015)
(17,464)
(30,814)
(38,120)
(3,871,974)
Translation effect
Ps$
(6,997)
(10,737)
136,256
(441)
(688)
(63)
(8,227)
109,103
332,684
2,348,826
12,795
18,149
26,826
2,739,280
(40,010)
Ps$
(1,132,694)
December 31, 2012
Ps$
8,294
31,143
372
507
51
40,367
Ps$
149,470
Increase to
Reversal of
2012
impairment
impairment
Ps$
11,822,531
Balance as of
December 31,
Increase to
Reversal of
2013
impairment
impairment
Disposals
2,545,425
3,835,241
10,015,270
268,155
81,649
92,126
3,703,332
20,541,198
(2,001,879)
(6,537,692)
(46,581)
(56,906)
(75,609)
(8,718,667)
Balance as of
December 31,
Accumulated impairment
Ps$
8,271
184,008
4,426
238
28
(196,971)
-
(60,791)
(361,240)
(11,017)
(1,925)
(5,901)
(440,874)
Ps$
-
Impairment
December 31,
Disposals
2014
Ps$
148,552
133,582
829
579
155
8,251
Ps$
-
Ps$
-
Ps$
-
Ps$
148,552
133,582
829
579
155
8,251
Ps$
-
Ps$
-
Ps$
-
Ps$
148,552
133,582
829
579
155
8,251
Ps$
291,948
Ps$
-
Ps$
-
Ps$
-
Ps$
291,948
Ps$
-
Ps$
-
Ps$
-
Ps$
291,948
Depreciation recorded in profit or loss amounted to Ps$964,435, Ps$632,232 and Ps$440,874 for the
years ended December 31, 2014, 2013, and 2012, respectively, and in inventories amounted to
Ps$53,131, Ps$40,021, and Ps$22,044 in 2014, 2013, and 2012 respectively.
During 2014, the Entity did not identify impairment indicators.
F-64
13.
Intangible assets are as follow:
Years of
amortization
Indefinite-lived intangible:
Goodwill (1)
Mining assets (2)
Client Portfolio (3)
Assets with finite useful lives:
Exclusive distribution rights
Trademarks and other rights (4)
Prepayment of advertising
services (5)
SAP implementation
Non-compete contract
(Fibraforte)
Software licenses
Installation costs
Accumulated amortization
Indefinite
Indefinite
Indefinite
December 31, 2014
December 31, 2013
December 31, 2012
Ps$
Ps$
Ps$
1,658,382
813,300
179,252
2,650,934
1,658,382
813,300
179,252
2,650,934
507,507
507,507
2 years
Various
164,517
88,204
164,517
80,438
164,517
79,125
10 years
5 years
14,628
405,173
13,099
339,735
12,065
283,700
10 years
2 years
5 years
46,986
96,036
66,573
(472,074)
410,043
46,986
79,092
52,026
(353,464)
422,429
46,986
51,856
44,239
(269,240)
413,247
96,774
13,370
7,440
5,449
123,033
81,938
8,021
7,790
3,062
100,811
177,107
9,625
369
187,101
Long-term prepaid expenses
Foreclosed assets
Guarantee deposits
Others
Net investment
Ps$
3,184,010
Ps$
3,174,174
Ps$
1,107,855
(1)
Includes goodwill generated in the acquisition of Fibraforte, S.A., Trituradora y Procesadora de Metales
Santa Anita, S.A. de C.V., Frigocel, S.A. de C.V., Frigocel Mexicana, S.A. de C.V., Nacional de Cobre,
S.A. de C.V., and Lafarge Cementos, S.A. de C.V.
(2)
Cement plants “Tula” and “Vito” located in the State of Hidalgo, acquired through the business
combination described in Note 15.
(3)
Customer relationships, acquired through the business combination described in Note 15.
(4)
Mainly includes the indefinite-live trademark of Nacobre and Fibraforte, both arising from business
acquisitions.
(5)
On February 27, 2012, one of the Entity’ subsidiaries signed a services, sponsorship and advertising
contract with Club Pachuca, a soccer team in Mexico, to promote the logo and name of “Cementos
Fortaleza” in the uniform of soccer teams “Tuzos del Pachuca” and “Leon”. Club Pachuca has to deliver to
the Entity fortnightly reports with specific details of the promotional activities performed. The parties
agreed that the subsidiary will pay to Club Pachuca a total consideration of Ps$ 101,000 to be paid as
follows: Ps$ 11,000 at the execution of the contract and several installments of from June 30, 2013 to June
30, 2016.
F-65
Exclusive distribution
rights
Trademarks and other
rights
Others (exchange differences on translating foreign
operations)
Additions
Disposals
Ps$
Ps$
Ps$
Assets with finite useful lives - cost
77,459
Ps$
-
operations)
Additions
Acquisitions through business combinations
-
164,517
Ps$
Ps$
operations)
Additions
79,125
80,438
Ps$
Exclusive distribution
rights
Ps$
operations)
Amortization expense
Ps$
88,204
Ps$
Ps$
(14,274)
Ps$
(25)
(164,517)
Ps$
(14,299)
Ps$
Ps$
(19,303)
283,700
339,735
14,628
Ps$
405,173
SAP
implementation
-
Ps$
(59,158)
Ps$
Ps$
-
(123,797)
Ps$
(201,017)
Ps$
79,092
Ps$
(11,346)
Ps$
Ps$
-
(19,346)
Ps$
(45)
Ps$
(48,307)
2014
Ownership percentage
2013
2012
Activity
-
-
20.00
Manufacture and sale of aluminum products
2014
2013
2012
Activity
Various, less than
1%
Various, less than
1%
Various, less than
1%
Various services
As of December 31, 2014, 2013, and 2012, the balance of investment in shares is comprised as
follows:
Associated
Group Cuprum, S. A. P. I. de C. V. and Subsidiaries
Shares held to maturity
Others investment in shares from entities in Colombia
and South America
F-66
Ps$
52,026
Ps$
66,573
Ps$
(11,374)
Ps$
(15,459)
Ps$
(18,140)
(269,240)
(708)
(83,516)
Ps$
(96)
(2,585)
Ps$
882,117
Total
(165)
(3,920)
Ps$
775,893
14,750
91,474
Installation
costs
Ps$
682,488
427
16,694
76,284
12,175
2,372
(7,571)
(21,390)
(4,699)
Investment in shares of associated companies and other permanent investments
a.
Ps$
(240)
(10,535)
(4,700)
(20,745)
(8,571)
44,239
(24)
52
7,759
Software
Licenses
(16,046)
96,036
Amortization recorded in profit or loss was Ps$ 106,732, Ps$ 83,516, and Ps$ 69,908 for the years ended
December 31, 2014, 2013, and 2012, respectively.
14.
Ps$
1,352
15,592
Non-compete
contract
Ps$
51,856
404,507
2,941
275,317
(277)
-
27,414
Ps$
Ps$
15,515
(178)
46,986
Ps$
28,724
Total
-
-
-
Ps$
Ps$
45,237
46,986
Ps$
6,619
Installation
costs
-
46,986
Ps$
(3,921)
(73,299)
(45)
Ps$
-
(278)
(64,361)
-
46,986
Software
Licenses
-
580
64,858
-
(290)
(4,714)
(164,517)
Ps$
Advertising
agreement
-
Ps$
13,099
627
902
Trademarks and other
rights
-
operations)
Amortization expense
(164,517)
Ps$
Ps$
(226)
16,642
39,619
154
16
7,750
164,517
Ps$
880
Ps$
68,137
Non-compete
contract
2,941
212,899
(277)
1,338
Ps$
Ps$
12,065
(25)
-
12,065
Ps$
-
164,517
SAP
implementation
-
1,666
-
Accumulated amortization:
164,517
Advertising
Agreement
(353,464)
(11,878)
(106,732)
Ps$
(472,074)
b.
The investment in shares in the associate and other investments and the participation in the equity of the associate was as follows:
2014
and South America
Stockholders’
equity
Comprehensive
income
Ownership
percentage
Various, less than
1%
Various, less than
1%
Various, less than
1%
Total
Stockholders’
equity
Group Cuprum, S. A. P. I. de C. V. and Subsidiaries (1)
and South America
Ps$
2,520,000
Various, less than
1%
Comprehensive
income
Ps$
21,100
Various, less than
1%
Ps$
10,323
20
Investment
in shares
Ps$
Various, less than
1%
-
Equity in
income
Ps$
11,118
11,118
4,220
Ps$
4,220
As is mentioned in Note 2e, on December 17, 2013, the Entity sold its entire participation in the shares of Cuprum, equivalent to 20% of the shares of such entity, to
Tenedora de Empresas de Materiales de Construcción, S.A. de C.V. and Controladora GEK, S.A.P.I. de C.V., for the amount of USD$ 45 million (equivalent to Ps$ 582
million at such date), generating a loss of Ps$ 218 million, which was recorded directly in stockholders’ equity of the Entity, since it was a transaction among parties
under common control.
Cuprum, S. A. P. I. de C. V. and Subsidiaries (2)
and South America
Ps$
2,520,000
Various, less than
1%
Comprehensive
Income
Ps$
174,000
Various, less than
1%
2012
Ownership
percentage
20
Investment
in shares
Ps$
Various, less than
1%
Total
15.
10,323
Ps$
Stockholders’
equity
(2)
Ps$
2013
Ownership
percentage
Total
(1)
Investment
in shares
801,118
Equity in
income
Ps$
12,297
Ps$
813,415
34,760
Ps$
34,760
The fair value of the investments in share is approximately Ps$308,000.
Business combinations
1.
Certain Teed Corporation
a.
Business acquired
As mentioned in Note 2d, the Entity acquired the fibro-cement business of CertainTeed, an entity operating in the United States of America. Given that the operation
was considered a business acquisition, the related acquisition accounting was applied as of the acquisition date. The acquisition price did not include any contingent
consideration.
The following steps are required in acquisition accounting:
i.
ii.
Recognize and measure the respective assets acquired and liabilities assumed
Determine the respective intangible assets or goodwill, if any.
F-67
b.
Consideration transferred
The consideration paid in cash was USD$25,151 equivalent to Ps$329,067. The assets acquired
did not include cash or cash equivalents.
c.
Acquired assets and assumed liabilities at acquisition date
Following is an analysis of the assignment of acquisition cost to the fair values of acquired net
assets.
2014
Current assets
Properties, machinery and equipment - Net
Client portfolio
Total liabilities
Fair value of net assets
d.
Ps$
127,632
1,048,868
1,597
(414,425)
Ps$
763,762
2014
e.
Consideration paid
Ps$
(329,067)
763,762
Ps$
434,605
Effect of the acquisitions in the Entity’s results
The result for the year ended December 31, 2014 includes income from operations of
Ps$191,066, attributable to the operations of Certain Teed. The revenues for the year ended
December 31, 2014, include Ps$834,772, attributable to the operations of Certain Teed.
2.
Lafarge Cementos, S.A. de C.V.
a.
Business acquired
As mentioned in Note 2g, on January 8, 2013, the Entity acquired Lafarge Cementos, S.A. de
C.V. Given that the operation was considered a business acquisition, the related acquisition
accounting was applied as of the acquisition date July 31, 2013. The acquisition price did not
include any contingent consideration.
The following steps are required in acquisition accounting:
i.ii.-
Recognize and measure the respective assets acquired and liabilities assumed
Determine the respective intangible assets or goodwill, if any.
F-68
b.
Acquired assets and assumed liabilities at acquisition date
Following is an analysis of the assignment of acquisition cost to the fair values of acquired net
assets:
July 2013
c.
Current assets
Properties, machinery and equipment - Net
Mining assets - Net
Client Portfolio
Other non-current assets
Current liabilities
Other current and long-term liabilities
Ps$
408,200
2,111,589
813,300
179,252
35,454
(1,051,915)
(237,755)
Ps$
2,258,125
Goodwill determined on acquisition
July 2013
Consideration paid in shares
Ps$
3,409,000
2,258,125
Goodwill
Ps$
1,150,875
Goodwill arising from the acquisition of Lafarge Cementos, S.A. de C.V. derives from the price
paid, which included the benefit of capturing between 4% and 5 % of the Mexican market,
backed by the launching of an advertising campaign of the brand “Cementos Fortaleza”. Those
benefits are recognized within goodwill because they fail to meet the recognition criteria for
separately identifiable intangible assets.
d.
Net cash flows from the acquisition
July 2013
Consideration paid in cash
Less: Balances of cash and cash equivalents acquired
e.
Ps$
260,026
Ps$
(260,026)
Effect of the acquisitions in the Entity’s results
The result for the year ended December 31, 2013 includes a net profit of Ps$43,151 attributable
to the additional business generated by Lafarge. Revenues for the period corresponding to the
year ended December 31, 2013, include Ps$319,488 related with Lafarge.
F-69
16.
Confirming bank payments to vendors
On May 17, 2010, the Entity entered into financial confirming contracts with vendors with several banking
institutions for up to $2,035,000 and USD $80,000. As of December 31, 2014, vendors have used this instrument
in the amount of Ps$1,137,042 and USD $29,515, which are classified in trade accounts payable in the
accompanying statement of financial position.
The integration of each bank as of December 31, 2014 is shown below.
2014
Santander
HSBC
Total
Santander
HSBC
Total
(MXN)
(MXN)
(MXN)
(USD)
(USD)
(USD)
Threshold
Ps$
1,450,000
Ps$
585,000
Ps$
2,035,000
Ps$
Balance used
Ps$
1,020,230
Ps$
116,812
Ps$
1,137,042
Ps$
Balance available
Ps$
429,770
Ps$
468,188
Ps$
897,958
Ps$
40,000
40,000
USD$
40,000
USD$
80,000
USD$
29,515
USD$
29,515
USD$
10,485
USD$
50,485
The integration of each bank as of December 31, 2013 is shown below.
2013
Threshold
Ps$
Balance used
Ps$
Balance available
Ps$
Banamex
Santander
HSBC
Total
HSBC
Total
(MXN)
(MXN)
(MXN)
(MXN)
(USD$)
(USD$)
1,087,000
1,087,000
Ps$
1,200,000
Ps$
1,000,000
Ps$
3,287,000
USD$
650,000
USD$
650,000
Ps$
979,664
Ps$
183,374
Ps$
1,163,038
USD$
35,035
USD$
35,035
Ps$
220,336
Ps$
816,626
Ps$
2,123,962
USD$
614,965
USD$
614,965
The integration of each bank as of December 31, 2012 is shown
below:
2012
Banamex
Santander
HSBC
Total
HSBC
Total
(MXN)
(MXN)
(MXN)
(MXN)
(USD$)
(USD$)
Threshold
Ps$
1,087,000
Ps$
1,200,000
Ps$
1,000,000
Ps$
3,287,000
USD$
650,000
USD$
650,000
Balance used
Ps$
1,010,000
Ps$
31,000
Ps$
228,000
Ps$
1,269,000
USD$
32,000
USD$
32,000
Balance available
Ps$
77,000
Ps$
1,169,000
Ps$
772,000
Ps$
2,018,000
USD$
618,000
USD$
618,000
F-70
17.
Provisions
The provisions presented below represent charges incurred during 2014, 2013, and 2012, or amount to services
contracted services attributable to the year, which are expected to be settled within a period not exceeding one
year. Final amounts to be paid, as well as, the schedule of outflow of economic resources involve uncertainty
and could therefore change, which the Entity includes within the accrued expenses and taxes other than income
taxes line in the accompanying statement of financial position.
2014
Beginning
Ending
balance
Services
For supplies or consumables and energetic
Others
Additions
Applications
Balance
Ps$
150,325
38,369
40,982
191,139
Ps$
1,621,795
692,907
787,220
3,053,257
Ps$
(1,653,768)
(718,494)
(785,203)
(2,799,260)
Ps$
118,352
12,782
42,999
445,136
Ps$
420,815
Ps$
6,155,179
Ps$
(5,956,725)
Ps$
619,269
2013
Beginning
Ending
balance
Services
For supplies or consumables and energetic
Others
Additions
Applications
Balance
Ps$
109,126
51,733
19,493
24,019
Ps$
1,087,865
515,481
998,763
1,000,992
Ps$
(1,046,666)
(528,845)
(977,274)
(833,872)
Ps$
150,325
38,369
40,982
191,139
Ps$
204,371
Ps$
3,603,101
Ps$
(3,386,657)
Ps$
420,815
2012
Beginning
Ending
balance
Services
For supplies or consumables and energy
Others
Additions
Applications
Balance
Ps$
84,095
54,347
1,854
17,415
Ps$
631,331
733,960
17,905
1,573,449
Ps$
(606,300)
(736,574)
(265)
(1,566,845)
Ps$
109,126
51,733
19,493
24,019
Ps$
157,711
Ps$
2,956,645
Ps$
(2,909,984)
Ps$
204,371
F-71
18.
Long-term debt
At the dates indicated, bank loans are comprised as is shown below:
December 31, 2014
Certificados bursátiles (CEBUR) in the
amount of Ps$3 billion, accruing
monthly interest at a rate of TIIE plus
2.75 percentage points, maturing on
October 22, 2015.
Ps$
3,000,000
Senior Unsecured Notes for US
$425,000 thousands, accruing interest
at a fixed rate of 5.50% semiannually
as of January 2015, with maturity of
principal on January 15, 2025;
Nacobre, Mexalit, Frigocel and ELC
are acting as third party guarantors.
6,255,150
Banco HSBC PLC Brach España HSBC
(Trituradora y Procesadora de
Materiales Santa Anita, S.A. de C.V.)
promissory notes in U.S. dollars
accruing interest on a biannual a rate
of 3.05% (section A) basis at a rate of
6-month LIBOR plus 1.3 percentage
points (section B), payable in a
maximum term of 10 years after the
date of launch of the project.
Elementia, S.A. de C.V. and
subsidiaries are guarantors.
746,514
December 31, 2013
Ps$
3,000,000
-
December 31, 2012
Ps$
3,000,000
-
761,414
795,307
Banco Santander (Nacional de Cobre,
S.A. de C.V. and Mexalit Industrial,
S.A. de C.V.) promissory notes
accruing monthly interest at a rate of
TIIE plus 1.5 percentage points,
principal payable beginning in June
2015 and interest in monthly
installments beginning in April 2013,
maturing in April 2018. Elementia,
S.A. de C.V. and Frigocel, S.A. de
C.V. subsidiaries are guarantors under
the mortgage
-
406,034
-
Banco Inbursa (Nacional de Cobre, S.A.
de C.V. and Mexalit Industrial, S.A.
de C.V.) promissory notes accruing
1.5 percentage points, principal
payable beginning in June 2015 and
interest in monthly installments
beginning in April 2013, maturing in
April 2018. Elementia, S.A. de C.V.
and Frigocel, S.A. de C.V. subsidiaries
are guarantors.
-
406,034
-
F-72
December 31, 2014
December 31, 2013
December 31, 2012
Banco HSBC (Nacional de Cobre, S.A.
de C.V. and Mexalit Industrial, S.A. de
C.V.) promissory notes accruing
1.5 percentage points, principal payable
beginning in June 2015 and interest in
monthly installments beginning in
April 2013, maturing in April 2018.
Elementia, S.A. de C.V. and Frigocel,
S.A. de C.V. subsidiaries are
guarantors.
-
406,034
-
BBVA Bancomer (Nacional de Cobre,
S.A. de C.V. and Mexalit Industrial,
S.A. de C.V.) promissory notes
accruing monthly interest at a rate of
TIIE plus 1.5 percentage points,
principal payable beginning in June
2015 and interest in monthly
installments beginning in April 2013,
maturing in April 2018. Elementia,
S.A. de C.V. and Frigocel, S.A. de
C.V. subsidiaries are guarantors.
-
406,034
-
Banamex (Nacional de Cobre, S.A. de
C.V. and Mexalit Industrial, S.A. de
C.V.) promissory notes accruing
1.5 percentage points, principal payable
beginning in June 2015 and interest in
monthly installments beginning in
April 2013, with maturity in 2018.
Elementia, S.A. de C.V. and Frigocel,
S.A. de C.V. subsidiaries are
guarantors.
-
406,034
-
Banco HSBC (ELC Tenedora de
Cementos, S.A.P.I. de C.V.)
promissory notes accruing quarterly
interest at a rate of TIIE plus 1.5
percentage points and maturing in
2018. Elementia, S.A. de C.V.,
Trituradora y Procesadora de
Materiales Santa Anita, S.A. de C.V.
and Lafarge Cementos, S.A. de C.V.
are guarantors.
650,000
650,000
-
Banco BX+ (Elementia, S.A. de C.V.).
Current account credit through
promissory notes accruing monthly
interest at a rate of TIIE plus 1.5
percentage points and maturing in
2014. Mexalit Industrial, S.A. de C.V.
is a guarantor.
50,000
90,000
-
F-73
December 31, 2014
December 31, 2013
December 31, 2012
3,281
10,489
Loan corresponding to Industrias
Duralit, S. A. (foreign subsidiary)
granted by Banco Bisa for US$1.9
million, maturing in 2014, at an
average rate of TRE (index rate
calculated by Banco Central de
Bolivia) plus 5.50% with quarterly
payments.
-
Promissory notes with HSBC Bank
(Nacional de Cobre, S. A. de C. V. and
Mexalit Industrial, S. A. de C. V.),
bearing interest at the 28-day TIIE rate
applicable to each interest period
(three months) plus 1.5 percentage
points, with principal payable
beginning in September 2013 and
quarterly interest repayments
beginning in September 2012,
maturing in 2016. The Entity’s
subsidiaries Maxitile Industries, S. A
de C. V. and Frigocel, S. A de C. V.
subsidiary entities, which have
provided guarantees as collateral.
-
-
1,300,550
Promissory notes with BBVA Bancomer
Mexalit Industrial, S. A. de C. V.)
bearing interest at the 28-day TIIE rate
applicable to each interest period
subsidiaries Maxitile Industries, S. A
de C. V. and Frigocel, S. A de C. V.,
-
-
840,750
Promissory notes with Banamex
Mexalit Industrial, S.A. de C.V.)
bearing interest at the 28 days TIIE
rate applicable to each interest period
subsidiaries Maxitile Industries, S. A.
de C. V. and Frigocel, S. A. de C. V.
10,701,664
F-74
6,534,865
451,250
6,398,346
December 31, 2014
December 31, 2013
December 31, 2012
Less - Notes payable to financial
institutions and current portion of
long-term debt
Less-placement expenses – current
3,137,826
(35,643)
192,533
-
456,267
-
Short-term debt, net of placement
expenses
Long-term debt
3,102,183
7,563,838
192,533
6,342,332
456,267
5,942,079
Less-placement expenses – long-term
Long-term debt, net of placement
expenses
(1)
(281,635)
Ps$
7,282,203
(157,150)
Ps$
6,185,182
(15,950)
Ps$
5,926,129
As of December 31, 2014 maturities of long-term debt are as follows:
2016
2017
2018 and thereafter
Ps$
56,533
56,533
7,169,137
Ps$
7,282,203
Some of the loan contracts contain restrictive covenants for the Entity, which could require prepayment of
such contracts: the most significant restrictions refer to a restriction on the payment of dividends, compliance
with certain financial ratios, securing of the assets pledged, no sale or disposal of assets, prohibition on
assuming contingent liabilities or any other contractual liability, as well as affirmative and negative
covenants. As of December 31, 2014, the Entity has complied with these financial obligations.
As of December 31, 2014 and 2013 and 2012, the Entity and some of its subsidiaries act as borrowers, cosignatories, third-party guarantees and/or guarantors for the credits; the subsidiaries are comprised as follows:
December 31
2014
Elementia
Nacobre
Mexalit Industrial
Frigocel
ELC
Trituradora
Plycem Company
Comecop
December 31
2013
Elementia
Nacobre
Mexalit Industrial
Trituradora
Frigocel
Duralit
December 31
2012
Elementia
Nacobre
Mexalit Industrial
Comecop
Frigocel
Duralit
Plycem Company
Trituradora
On December 19, 2014, the Entity informed small investors that it settled in advance the total debt it had
contracted with different banks under the “Club Deal” scheme in its subsidiaries Nacional de Cobre, S.A. de
C.V. and Mexalit Industrial, S.A. de C.V., for the amount of $2,030,180. Also, on December 22, 2014, ELC
Tenedora Cementos, S.A.P.I. de C.V. settled the loan it had contracted with HSBC for the amount of
$120,000, using the resources obtained by Elementia derived from the international Notes offering.
On March 21, 2013, the Entity informed small investors that it settled in advance the syndicated loans it had
contracted with different banks, for the amount of Ps$2,593,050, which were replaced by a new credit under a
“Syndicated Loan” scheme, with five different banks, better interest rate conditions, a better maturity profile
and greater financial flexibility, for an approximate amount of Ps$3,730,170.
F-75
19.
Income taxes
ISR is based on taxable income, which differs from the profit reported in the statement of comprehensive
income due to taxable or deductible items in other years and items that are not taxable or deductible. The
current tax liability of the Entity is calculated using tax rates enacted or substantially approved at the end of
the reporting period for the respective countries applicable to the Entity and its subsidiaries.
The Entity is subject to ISR and through December 31, 2013, to ISR and IETU. Therefore, the income tax
payable was the higher between ISR and IETU through 2013.
ISR -The rate was 30% in 2014 and 2013 and as a result of the new 2014 ISR law (“2014 Tax Law”), the rate
will continue at 30% thereafter. The Entity incurred ISR on a consolidated basis until 2013 with its Mexican
subsidiaries. As a result of the 2014 Tax Law, the tax consolidation regime was eliminated, and the Entity and its
subsidiaries have the obligation to pay the deferred income tax benefit calculated as of that date over a 10 year
period beginning in 2014, as illustrated below.
While the 2014 Tax Law repealed the tax consolidation regime, an option was established, which allows
groups of companies to determine a joint calculation of ISR (tax integration regime). The new regime allows
groups of consolidated companies that share common direct or indirect ownership of more than 80%, certain
benefits in the tax payment (when the group of companies include both profit and loss entities in the same
period), which can be deferred over three years and reported, as updated, at the filing date of the tax return
corresponding to the tax year following the completion of the aforementioned three-year period.
The Entity and its subsidiaries opted to join the new scheme, and thus determined income tax for the year
2014 together.
Pursuant to Transitory Article 9, section XVIII, of the 2014 Tax Law, given that as of December 31, 2013, the
Entity was considered to be a holding company and was subject to the payment scheme contained in Article 4,
Section VI of the transitory provisions of the ISR law published in the Federal Official Gazette on December
7, 2009, or article 70-A of the ISR law of 2013 which was repealed, it must continue to pay the tax that it
deferred under the tax consolidation scheme in 2007 and previous years based on the aforementioned
provisions, until such payment is concluded.
IETU - IETU was eliminated as of 2014; therefore, up to December 31, 2013, this tax was incurred both on
revenues and deductions and certain tax credits based on cash flows from each year. The respective rate was
17.5%. Due to the abolishment of the IETU law, the Entity cancelled deferred IETU previously recorded in
2013.
a.
Income taxes are as follows:
December 31, 2014
Current ISR
Current IETU
Deferred ISR
b.
December 31, 2012
Ps$
353,504
(107,641)
Ps$
844,669
(667,226)
Ps$
229,002
4,931
(272,554)
Ps$
245,863
Ps$
177,443
Ps$
(38,621)
The income tax rates in foreign companies were as follows:
December 31, 2014
Costa Rica
El Salvador
Colombia
Ecuador
United States of America
Bolivia
Peru
c.
December 31, 2013
December 31, 2013
30%
30%
34%
23%
35%
25%
30%
December 31, 2012
30%
30%
34%
23%
35%
25%
30%
30%
30%
33%
24%
35%
25%
30%
The balances of the deferred tax liability is as follows :
December 31, 2014
Deferred income tax
Ps$
1,154,799
F-76
December 31, 2013
Ps$
1,079,537
December 31, 2012
Ps$
1,490,324
d.
The reconciliation of the statutory and effective tax rate on amounts expressed as a percentage of
income before income taxes is as follows:
2014
Add (deduct) effect of permanent differences:
Non-deductible expenses
Non-taxable income
Effects of inflation
Withholding tax in Central and South America (1)
Effect of tax loss carryforwards and others
Income on the sale of shares of subsidiaries -Net
IETU effect
Tax effect due to tax rate changes
Ps$
868,764
28
199,986
(13,253)
247,156
29,530
(512,639)
-
(1)
e.
Ps$
2013
Ps$
88,724
(26,260)
127,413
(4,220)
(48,053)
-
4
(1)
5
(2)
-
108,963
186,254
(34,760)
102,106
(1,292,367)
4,931
18,201
4
7
(1)
4
(50)
1
(49,220)
(2)
(137,604)
(6)
(906,672)
(35)
819,544
30
591,476
30
(128,736)
30
Ps$
Ps$
1,419,386
Other comprehensive
income
Ps$
1,419,386
-
61,607
316,578
28,870
2,378
51,360
43,222
1,923,401
-
51,360
43,222
1,923,401
(2,433,051)
(60,576)
(145,444)
(276,804)
93,288
-
(1,015,127)
(2,709,855)
(60,576)
(52,156)
43,844
(52,922)
(193,797)
(52,738)
Ps$
Ps$
61,607
316,578
28,870
2,378
43,844
(52,922)
(193,797)
(52,738)
-
(2,938,528)
Net deferred income tax
(liability) asset
-
December 31
2014
(139,672)
Ps$
(139,672)
(3,078,200)
Ps$
F-77
(1,154,799)
Ps$
Ps$
777,936
%
7
9
1
(18)
-
The main items that give rise to a deferred ISR asset (liability) as of December 31, 2014, 2013 and 2012
are:
Deferred ISR asset:
Effect of tax loss carry
forwards
Allowance for doubtful
accounts
Provisions
PTU liability
Allowance for obsolete
inventories
Other assets
Deferred ISR asset
Deferred ISR (liability):
Property, machinery and
equipment, net
Inventories, net
Employee benefits
instruments
Prepaid expenses
Intangibles and other assets
Others
2012
24
This amount corresponds to income tax withheld abroad on service revenues billed to related
parties in Central and South America. Mexican law allows, provided certain requirements are
fulfilled, that such withholding to be credited against income tax of the Entity of the year.
However, as of December 31 2014, the Entity did not fulfill such requirements in order to be
able to credit such amounts and was thus included as expense in the current year.
Recognized
in income
%
729,080
Total effect permanent differences
Taxable income
%
(5)
Recognized
in income
Deferred ISR asset:
Effect of tax loss carryforwards
accounts
Provisions
Tax advances
PTU liability
inventories
Other assets
Deferred ISR asset
Ps$
Deferred ISR (liability):
equipment, net
Inventories, net
Employee benefits
instruments
Prepaid expenses
Intangibles and other assets
Others
Net deferred income tax
(liability) asset
941,267
-
35,204
1,438
1,307,416
-
35,204
1,438
1,307,416
(2,066,070)
(54,635)
(95,608)
-
84,962
140,058
(38,788)
43,231
Ps$
43,231
Other comprehensive
income
Ps$
-
Ps$
Ps$
31,577
40,864
8,504
285,716
(112,433)
61,242
(141,873)
(1,313,068)
(81,495)
(168,710)
-
-
(141,873)
(2,565)
(61,084)
(7,245)
(1,722,284)
(2,565)
(61,084)
(7,245)
(1,776,040)
(53,756)
Ps$
140,058
52,562
1,170
11,440
(459)
-
(1,200,635)
(81,495)
(229,952)
(1,079,537)
December 31, 2012
-
31,577
40,864
8,504
285,716
(1,436,568)
(2,943)
(27,115)
(165,994)
(20,762)
(2,386,953)
-
52,562
1,170
11,440
(459)
F-78
(1,981,108)
(54,635)
(134,396)
(2,943)
(1,122,768)
Ps$
Ps$
941,267
58,033
160,449
47,358
60,258
3,409
(27,115)
(165,994)
(20,762)
(2,430,184)
Ps$
Ps$
-
-
Deferred ISR (liability)
equipment
Inventories
Employee benefits
Excess of the book value of the
subsidiaries
instruments
Prepaid expenses
Others
Net deferred income tax liability
Ps$
December 31, 2013
58,033
160,449
47,358
60,258
3,409
Recognized
in income
Deferred ISR asset:
Effect of tax loss carryforwards
accounts
Provisions
PTU liability
inventories
Intangible assets
Other assets
Deferred ISR asset
Other comprehensive
income
(53,756)
Ps$
(1,490,324)
f.
Deferred income taxes and benefit in tax consolidation are as follows:
December 31, 2014
Liability from consolidated tax
loss
Less historical partial payments
Liability from consolidated tax
loss
Ps$
Ps$
Less - Current portion of tax
liabilities
Income taxes liabilities from
consolidation
December 31, 2013
692,383
(12,425)
Ps$
679,958
Ps$
(839)
Ps$
679,119
December 31, 2012
693,472
(9,769)
Ps$
683,793
Ps$
22,587
-
(170,948)
Ps$
512,845
Ps$
839
955
1,461
122,819
553,884
$
679,958
22,587
(5,057)
Ps$
17,530
Income taxes liabilities from consolidation paid as follows:
Year
2015
2016
2017
2018
2019 and thereafter
g.
The benefits of restated tax loss carryforwards, and those for which the deferred ISR asset has already
been partially recognized in conformity with IAS 12, may be recovered subject to certain
requirements. The years of maturity of the tax losses of the individual entities and their restated
amounts as of December 31, 2014, are as follows:
Year of maturity
20.
Tax loss carryforwards
2016
2017
2018
2019
2020 and thereafter
Ps$
40
3,046
22,013
8,119
4,514,369
Total (1)(2)
Ps$
4,547,587
(1)
Excludes benefits of restated tax loss carryforwards for sales of purchase or sales shares.
(2)
Excludes benefits of restated tax loss carryforwards for those non-consolidated subsidiaries for
tax purposes in the amount of approximately Ps$183,700.
Retirement employee benefits
a.
Defined contribution plans
In the Mexican subsidiaries the Entity makes payments to the defined contribution system for
retirement savings based on the integrated workers plan and its salary.
In certain subsidiaries of the Entity there are defined contribution plans for all qualifying employees.
The assets of the plans are held separately from the assets of the Entity in funds under the control of
trustees. If the employee leaves the plan before fully acquiring contributions, the amount payable by
the Entity will be reduced by the amount of the forfeited contributions.
Contributions to these plans are paid in a monthly basis.
F-79
b.
Defined benefit plans
In certain subsidiaries of the Entity there are funded defined benefit plans for qualifying employees.
The defined benefit plans are managed by a legally separate fund of the Entity. The board of the
pension fund is responsible for the investment policy regarding the assets of the fund.
In the Mexican entities there is a plan that also covers seniority premiums, which consist of a lump
sum payment of 12 days per year worked based on latest salary of each employee, not to exceed twice
the minimum wage established by law. The related liability and annual cost of benefits is calculated by
an independent actuary on the basis of formulas defined in the plans using the method of projected unit
credit.
The Entity manages defined benefit plans for eligible employees in its Mexican subsidiaries. Under
these plans, employees are entitled to retirement benefits paid upon the normal retirement age of 65
years; with 10 or more years of service. There is also the option of early retirement when the sum of
worked years, plus the workers’ age, equals 55 years; with 10 years or more of service. Other
postretirement benefits are not granted.
The plans typically expose the Entity to actuarial risks such as: Investment risk, interest rate, longevity
and salary.
Investment risk
The present value of the defined benefit plan liability is calculated
using a discount rate determined by reference to high quality
corporate bond yields, which do not differ significantly from
government bonds; if the return on plan asset is below this rate, it
will create a plan deficit. Currently the plan has a relatively balanced
investment in equity securities, debt instruments and real estate. Due
to the long-term nature of the plan liabilities, the board of the pension
fund considers it appropriate that a reasonable portion of the plan
assets should be invested in equity securities and in real estate to
leverage the return generated by the fund.
Interest risk
A decrease in the bond interest rate will decrease the plan liability;
however, this will be partially offset by an increase in the return on
the plan’s debt investments.
Longevity risk
The present value of the defined benefit plan liability is calculated by
reference to the best estimate of the mortality of plan participants
both during and after their employment. An increase in the life
expectancy of the plan participants will increase the plan’s liability.
Salary risk
The present value of the defined benefit plan liability is calculated by
reference to the future salaries of plan participants. As such, an
increase in the salary of the plan participants will increase the plan’s
liability.
The most recent actuarial valuation of the plan assets and the present value of the defined benefit
obligation were carried out as of December 31, 2014, by independent actuaries. The present value of
the defined benefit obligation, and the related current service cost and past service cost, were measured
using the projected unit credit method.
F-80
The principal assumptions used for the purposes of the actuarial valuations were as follows:
2014
%
2013
%
2012
%
Discount of the projected benefit
obligation at present value
8.00
8.00
6.75
Salary increase
4.50
4.50
4.50
Expected yield on plan assets
8.00
8.00
7.75
In the Colombian entities, the liability corresponds mainly to the legal obligations for those entities
have with their personnel which are adjusted at the end of the year in accordance with the legal
requirements in effect.
In accordance with the local law of the countries where the Entity operates, necessary provisions have
been recorded for the corresponding amounts taking into consideration the related obligations.
Net cost for the period includes the following items:
December 31, 2014
December 31, 2013
December 31, 2012
Service (income) cost
Interest cost
Return on plan assets
Ps$
11,288
25,051
(55,024)
Ps$
(25,586)
30,829
(51,673)
Ps$
14,721
32,542
(57,656)
Net cost (income) for the period
Ps$
(18,685)
Ps$
(46,430)
Ps$
(10,393)
The current service cost and the net interest expense for the year are included in the employee benefits
expense in profit or loss, as cost of sales and the remainder has been included in administration expenses.
The remeasurement of the net defined benefit liability is included in other comprehensive income.
The amount included in the consolidated statement of financial position arising from the Entity’s obligation in
respect of its defined benefit plans is as follows:
December 31, 2014
December 31, 2013
December 31, 2012
Defined benefit obligation
Plan assets at fair value
Ps$
(385,268)
713,293
Ps$
(408,038)
697,299
Ps$
(510,815)
749,883
Projected net asset
Ps$
328,025
Ps$
289,261
Ps$
239,068
Changes in the present value of the defined benefit obligation:
December 31, 2014
Present value of defined benefit
obligation at beginning of period
Service cost
Interest cost
Benefits paid
Acquisition / disposal or demerger of
business
Actuarial losses
Present value of defined benefit
obligation at end of period
Ps$
408,038
11,288
25,051
(47,219)
December 31, 2013
Ps$
-
F-81
385,268
Ps$
(5,000)
(56,449)
(11,890)
Ps$
510,815
(25,586)
30,829
(46,571)
December 31, 2012
Ps$
408,038
452,505
14,721
32,542
(60,163)
(22,818)
94,028
Ps$
510,815
Changes in the present value of plan assets in the current period:
December 31, 2014
December 31, 2013
December 31, 2012
Opening fair value of plan assets
Return on plan assets
Benefits paid
Ps$
697,299
55,024
(39,030)
Ps$
749,883
(22,300)
(30,284)
Ps$
771,879
24,051
(46,047)
Closing fair value of plan assets
Ps$
713,293
Ps$
697,299
Ps$
749,883
Major categories of assets plan, and the expected rate of return at the end of the reporting period is reported for
each category:
Equity instruments
Debt instruments
Weighted average expected
2014
%
Expected return
2013
%
2012
%
10.70
3.8
11.50
4.71
7.96
7.54
Ps$
237,009
476,285
Ps$
226,496
470,803
Ps$
261,393
488,490
7.3
8.10
7.75
Ps$
713,293
Ps$
697,299
Ps$
749,883
The overall expected rate of return is a weighted average of the expected returns of the various categories of
plan assets. The evaluation of the directors on the expected returns based on historical return trends and
analysts’ predictions on the market for assets over the life of the related obligation.
The current yield on plan assets amounted to Ps$55,024, Ps$51,673 and Ps$57,656, as of December 31, 2014,
2013, and 2012, respectively.
The Entity has not quantified the amount of contributions that it will make to defined benefit plans during
2015.
Significant actuarial assumptions for the determination of the defined obligation are discount rate, expected
salary increase and mortality. The sensitivity analyses below have been determined based on reasonably
possible changes of the respective assumptions occurring at the end of the reporting period, while holding all
other assumptions constant.
If the discount rate were 1% higher, the defined benefit obligation would decrease by Ps$20,448.If the
discount rate were 1% lower, the defined benefit obligation would increase by Ps$23,467.
The sensitivity analysis presented above may not be representative of the actual change in the defined benefit
obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of
the assumptions may be correlated.
There was no change in the methods and assumptions used in preparing the sensitivity analysis from prior
years.
Employee benefits granted to key management personnel (and / or directors of the Entity) were as follows:
2014
Postretirement benefits
Termination benefits
Short and long term benefits
2013
2012
Ps$
15,166
79
Ps$
41,696
390
Ps$
68,035
705
Ps$
15,245
Ps$
42,086
Ps$
68,740
Employee benefits granted to key management personnel and directors of the Entity were comprised of
concepts of salaries and fees, for Ps$ 50,577 and Ps$ 43,401 in 2014 and 2013, respectively.
F-82
2014
Fair value of plan assets
2013
2012
21.
Stockholders’ equity
a.
Common stock at par value (historical pesos) as of December 31, 2014, 2013, and 2012, is as
follows:
Number of shares
Series “A”
Series “A” sub-series “L”
Series “B”
Series “B” and sub-series “L”
Total capital stock
(historical pesos)
4,855,533
10,917,191
Amount
Ps$
4,136,221
9,299,865
229,875
516,851
29,208,810
1,623,315
Effects of restatement for
inflation through 1998
Total
269,853
606,736
389,590
Ps$
2,012,905
b.
At the General Shareholders’ Meeting held on December 20, 2012, it was agreed to increase the capital
stock in its variable portion for Ps$582,545, by issuing 1,788,300 common shares, nominative, without
par value, Class II, representing the variable portion capital of the Entity at a subscription price of
Ps$325.75 pesos each. The subscribed capital not paid as of December 31, 2012 for Ps$5,825, it was
paid on January 17, 2013.
c.
At the General Shareholders’ Meeting held on July 13, 2012, it was agreed to increase the capital stock
in its variable portion for Ps$582,545, by issuing 1,788,300 common shares, nominative, without par
value Class II, representing the variable portion capital of the Entity at a subscription price of Ps$
325.75 pesos each.
d.
Retained earnings include the statutory legal reserve. The Mexican General Corporate Law requires that
at least 5% of net income of the year be transferred to the legal reserve until the reserve equals 20% of
capital stock at par value (historical pesos). The legal reserve may be capitalized but may not be
distributed unless the entity is dissolved. The legal reserve must be replenished if it is reduced for any
reason. As of December 31, 2014 and 2013, the legal reserve, in historical pesos, was Ps$18,568.
e.
Stockholders’ equity, except for restated paid-in capital and tax, retained earnings will be subject to ISR
payable by the Entity at the rate in effect upon distribution. Any tax paid on such distribution may be
credited against annual and estimated ISR of the year in which the tax on dividends is paid and the
following two fiscal years.
f.
The balances of the consolidated stockholders’ equity tax accounts are as follow:
December 31, 2014
Contributed capital account
Net tax income account
December 31, 2013
December 31, 2012
Ps$
7,955,117
886,626
Ps$
7,642,879
851,870
Ps$
7,350,815
499,587
Ps$
8,841,743
Ps$
8,494,749
Ps$
7,850,402
F-83
22.
Other income
Other income is comprised of the following:
December 31, 2014
Bargain purchase gain on business
acquisition (see Note 15)
IMPAC
Litigation expenses
Decommissioning expenses
Sale of property, machinery and
equipment
Debt forgiveness
Impairment of long-lived assets
Others, mainly balances written off
Ps$
Ps$
(1,813)
79,148
(183,542)
-
December 31, 2012
Ps$
-
-
(215,092)
(59,995)
(117,697)
(22,216)
40,010
78,849
(26,260)
-
Ps$
23.
(434,605)
60,140
71,596
41,992
December 31, 2013
Ps$
(301,347)
Ps$
(21,054)
Transactions and balances with related parties
a.
Transactions with related parties carried out in the ordinary course of business, were as follows:
December 31, 2014
Income:
Sales
Sale of shares
Sale of fixed assets
Interests received
Leasing
IMPAC
Contractual penalties
Services
Ps$
5,674
Ps$
-
6,668
582,818
156,533
December 31, 2012
Ps$
15,866
37,562
733
145
238
66,278
1,490
74,351
18,664
80
67
Ps$
72,257
December 31, 2014
Expenses:
Technical assistance
Purchase of materials
Freight
Interests paid
SAP implementation
Donations
Leasing
Purchase of fixed assets
Plant construction
Insurances
Services
December 31, 2013
Ps$
840,604
December 31, 2013
5,312
Ps$
59,618
December 31, 2012
Ps$
187,072
202,392
4,230
13,728
9,630
747
15,038
36,033
Ps$
130,267
60,594
79
54
22,991
6,333
7,763
79,941
8,592
37,714
Ps$
162,802
3,422
25,322
21,519
37,867
27,573
8,537
7,121
Ps$
468,870
Ps$
354,327
Ps$
294,163
F-84
Related parties are comprised of Kaluz, S.A. de C.V., Fundación Kaluz, A.C., Inmobiliaria
Patriotismo, S.A., Grupo Carso, S.A.B. de C.V., Mexichem Servicios Administrativos, S.A. de C.V.,
Logtec, S.A. de C.V., Pochteca Materias Primas, S.A. de C.V., PAM PAM, S.A. de C.V., Mexichem
Soluciones Integrales, S.A. de C.V., Nacional de Conductores Eléctricos, S.A. de C.V., Mexichem
Compuestos, S.A. de C.V., Mexichem Colombia, S.A.S, Mexichem Honduras, S.A., Mexichem El
Salvador, S.A., Mexichem Costa Rica, S.A., Mexichem Ecuador, S.A., Mexichem Flour Comercial,
S.A., Mexichem Resinas Colombia, S.A., Mexichem, S.A.B. de C.V., Teléfonos de Mexico, S.A.B. de
C.V., Teléfonos del Noreste, S.A. de C.V., Mexichem Comercial, S.A. de C.V., Grupo Financiero
Inbursa, S.A. de C.V., Acatunel, S.A. de C.V., Administración Integral de Alimento, S.A. de C.V.,
Arneses Eléctricos Automotrices, S.A. de C.V., Carso Eficentrum, S.A. de C.V., Construcciones
Urvitec, S.A. de C.V., Conticon, S.A. de C.V., Controladora GEK, S.A.P.I. de C.V., Cordaflex, S.A.
de C.V., Lafarge, S.A., Lafarge Francia, SAU, y Banco Ve por Más, S.A.
b.
Balances with related parties are as follows:
December 31, 2014
Inmuebles General, S.A. de C.V. Ps$
Kaluz, S.A. de C.V.
Others
-
December 31, 2013
Ps$
40,000
Ps$
-
Ps$
-
2,120
Ps$
December 31, 2012
2,120
944
Ps$
40,944
Long-term accounts receivable - Long-term accounts receivable represent amounts due from Grupo
Carso, S.A.B. de C.V. for Ps$53,703, Ps$53,851 and Ps$50,553 as of December 31, 2014, 2013, and
2012, respectively, which correspond to asset tax that Productos Nacobre, S. A. de C. V., Grupo
Aluminio, S. A. de C. V. and Almexa Aluminio, S. A. de C. V. paid to Grupo Carso for the majority
participation in tax consolidation through 2009. The Entity has the right to recover it in the future,
when the minority tax asset is recovered, as result of changes in the consolidation for tax purposes.
December 31, 2014
Kaluz, S.A. de C.V.
Fundación Kaluz, A.C.
Inmobiliaria Patriotismo, S.A.
Grupo Carso, S.A.B. de C.V.(2)
Ps$
Cobre de Mexico, S.A. de C.V.
Radiomovil Dipsa, S.A. de C.V.
PAM PAM, S.A. de C.V.
Conductores Mexicanos
Eléctricos y de
Telecomunicación, S.A.
de C.V.
Precitubo, S.A. de C.V.
Pochteca Materias Primas, S.A.
de C.V.
Conticon , S.A. de C.V.
Telgua, El Salvador, Honduras
y Nicaragua
Nacional de Conductores
Eléctricos, S.A. de C.V.
6,852
125,965
-
December 31, 2013
Ps$
6,926
460
125,980
394
577
-
Ps$
6,543
1,000
693
150,266
-
558
5,034
273
-
9,083
7,730
535
624
30
41
-
24
769
-
50
48
-
F-85
December 31, 2012
-
December 31, 2014
Mexichem Flour, S.A. de C.V.
Mexichem Flour Comercial,
S.A. de C.V.
Mexichem Soluciones
Integrales, S.A. de C.V.
Mexichem Compuestos, S.A. de
C.V.
Mexichem Perú, S.A.
Mexichem Colombia, S.A.S.
Mexichem Servicios
Administrativos, S.A. de C.V.
(1)
Mexichem Honduras, S.A.
Mexichem Costa Rica, S.A.
Mexichem, S.A.B. de C.V.
Cordaflex, S.A. de C.V.
Logtec, S.A. de C.V.
Others Kaluz
24.
December 31, 2012
25
-
-
625
-
-
15
-
1
-
-
21,602
70
Accounts payable-long term Mexichem Servicios
C.V.(1)
Ps$
Ps$
288
-
156,267
18
20,598
46
74
1,455
2,580
99
13,901
Ps$
43
147
-
Total short-term
Total long-term
December 31, 2013
19,895
1,392
2,214
Ps$
173,358
Ps$
205,918
-
Ps$
18,075
Ps$
40,462
-
Ps$
18,075
Ps$
40,462
(1)
The account payable to Mexichem Servicios Administrativos, S.A. de C.V. corresponds to the
indefinite use of SAP licenses which was fully invoiced in February 2014 and it will be paid
over a five-year period in quarterly installments.
(2)
The account payable to Grupo Carso, S.A.B. de C.V. for asset tax include sPs$120,129, as of
December 31, 2014 and 2013, and Ps$145,687 as of December 31, 2012.
Main operating cost and expenses
2014
Concept
Cost of sales
Wages and salaries
Raw materials
Other expenses output
Repair and maintenance
Selling and administrative salaries
Others
Leasing
Taxes and contributions, other than income taxes
PTU liability
Advertising
Insurances
External services
F-86
Operating expenses
Ps$
968,165
8,968,558
187,553
338,422
33,723
277,817
908,278
Ps$
653,630
734,680
44,249
32,154
17,259
116,294
54,234
412,703
162,889
Ps$
11,682,516
Ps$
2,228,092
2013
Concept
Cost of sales
Wages and salaries
Raw materials
Others
Leasing
PTU liability
Advertising
Insurances
External services
Operating expenses
Ps$
816,971
7,792,030
271,939
355,350
27,870
148,590
495,408
Ps$
559,385
678,102
33,595
29,343
21,982
76,644
50,946
454,451
220,340
Ps$
9,908,158
Ps$
2,124,788
2012
Concept
25.
Cost of sales
Operating expenses
Wages and salaries
Raw materials
Others
Leasing
PTU liability
Advertising
Insurances
External services
Ps$
773,949
8,193,423
260,864
352,625
27,076
250,767
414,728
Ps$
467,261
729,259
39,187
45,793
63,079
8,430
31,349
407,322
96,054
Total
Ps$
10,273,432
Ps$
1,887,734
Discontinued operations
The Entity decided to discontinue certain operations as it determined that they are not viable operations given
the Entity’s new business prospects. The operations of the following legal entities, engaged in manufacturing
and marketing concrete pipe within the Fibre-Cement segment were discontinued: Compañía Mexicana de
Concreto Pretensado Comecop, S.A. de C.V., and Gypsopanel Industries, S.A. de C.V., plant of Allura
located in the state of Terra Haute. Additionally, the Entity decided to discontinue the operations of Nacional
de Cobre, S.A. de C.V. plant located in the state of México (Toluca)
As mentioned in Note 2, on March 24, 2012, the Entity sold 100% of its shares on Almexa Aluminio, S. A. de
C. V. to a subsidiary of Vasconia. This transaction was completed on April 20, 2012, after the approval of the
stockholders’ meeting of Vasconia.
Due to the above, these discontinued operations are classified the statement of profit or loss and other
comprehensive income under the heading of discontinued operations.
F-87
Combined condensed financial information for the aforementioned discontinued operations is as follows:
Statements of comprehensive income:
Net sales
Cost of sales
Operating expenses
Other expenses - Net
Comprehensive financing cost - Net
Income taxes
Loss on discontinued operations
December 31
December 31
December 31
2014
2013
2012
Ps$
Loss on sale of shares
Loss from other discontinued operations
operations - Net
26.
113,421
(149,957)
(60,982)
(9,032)
(2,675)
16,248
(92,977)
Ps$
-
Ps$
(92,977)
115,974
(100,464)
(48,213)
(28,893)
(3,077)
4,539
(60,134)
Ps$
-
Ps$
(60,134)
233,921
(228,993)
(27,893)
(552)
(12,661)
(6,873)
(43,051)
(456,496)
(1,605)
Ps$
(501,152)
Contingencies and commitments
a.
As of December 31, 2014, 2013 and 2012, the Entity is involved in an antidumping investigation filed
by the US government against Mexico and China, to determine whether there is reasonable doubt that
the copper pipe industry in such country has been materially harmed as a result of the imports made by
Mexico and China. On November 15, 2010 the US government decided to apply a tariff of 27.16%.
Subsequently, in June 2013 the US government decided to apply a rate of 0%; however, this ruling was
challenged by the plaintiff manufacturers of that country. Currently the Entity is applying the rate of
0.58% as a result of the second review, which covers the period from November 1, 2011 to October
31, 2012. In 2015, the review process began for the period from November 2013 through October
2014; however, the requesting party withdrew its application, so the US authorities suspended the
process until the ITC (United States International Trade Comission) issues a ruling in this regard.
b.
On December 17, 2013, one of the subsidiaries of the Entity (the “Seller”), signed a promissory sale
agreement for a property with Inmuebles de General, S.A. de C.V. (the “Buyer”) in which they agreed
to execute a definitive purchase/sale agreement for the property no later than January 31, 2014. The
agreed price was Ps$240,000 plus value-added tax (“VAT”) corresponding to construction in progress.
The Buyer paid an advance of Ps$200,000, of which the amount of Ps$166,000 corresponded to the
price the land and Ps$34,000 corresponded to the proportion of the price of the buildings, generating
VAT over the price of construction of Ps$5,440, the Seller delivering the invoice duly filed based on
the terms of the law. On March 14, 2014 this operation was completed and closed.
c.
On August 1, 2013, one of the subsidiaries of the Entity signed a contract for the provision of a
commercial services for fiber cement sheet with Administradora Central de Materiales, S. de R.L de
C.V.. The amount, the expenditure for this item in 2013 amounted to approximately Ps$88,833.
F-88
27.
d.
On February 27, 2012, one of the Entity’ subsidiaries signed a service agreement with Mexichem
Servicios Administrativos, S. A. de C.V. a related party, in which the latter undertakes among other things
the implementation of SAP system including licensing, use of infrastructure and other software and
generally any other kind of technology services subsidiary information required for the operation thereof.
As of December 31, 2014, the implementation has not concluded.
e.
The Entity is involved in various trials and claims arising in the normal course of its operations, which are
not expected to have a material effect on its financial condition and future operating results.
f.
According to the Income Tax Law, companies carrying out transactions with related parties are subject to
certain limitations and requirements in terms of the determination of prices as they must be equivalent to
the ones used with or among independent parties in comparable transactions.
Business segment information
Segment information is presented according to the productive sectors, which are grouped according to the
vertical integration of raw materials. Based on this segmentation, operating decisions are made for the purpose
of allocating resources and assessing the performance of each segment.
During 2015, the Entity changed the manner of reporting segments internally for the purpose of making
decisions on the performance and resource allocation as well as to reflect its revised operational strategy. As a
result of these changes, the segment dedicated to the manufacture and sale of expandable and extruded
polystyrene, as well as the transformation of polypropylene resins, polyethylene and polycarbonate (Plastics) has
been absorbed by the Building systems segment, such that the Entity only has three segments: Cement, Building
systems and Metals . The Entity restructured their information retrospectively by division for the years ended
December 31, 2013 and 2013.
Below is a summary of the most significant line items in each segment included in the consolidated financial
statements:
December 31, 2014
Building systems
Net sales
Cost of sales
Operating expenses
Other (expenses) income - Net
Ps$
6,073,392
(4,145,992)
(1,123,552)
12,417
816,265
Metals
Ps$
7,217,596
(6,525,852)
(400,115)
101,223
392,852
Holding and
eliminations
Cement
Ps$
1,747,169
(1,235,939)
(200,276)
(20,415)
290,539
Ps$
292,662
225,267
(504,149)
90,317
104,097
Total
Ps$
15,330,819
(11,682,516)
(2,228,092)
183,542
1,603,753
Comprehensive financing result - Net
Equity in income (loss) of associated entity - Net
Income (loss) before income taxes
(1,937)
814,328
(192,117)
200,735
(143,241)
147,298
(397,694)
(293,597)
(734,989)
868,764
Income taxes
Consolidated net (loss) income
(266,786)
(82,319)
465,223
(83,745)
(10,658)
106,332
(29,929)
117,369
134,597
(159,000)
(245,863)
(92,977)
529,924
906,224
6,061,304
1
(6,760)
2,185,781
9,146,550
(3,222,134)
(88,609)
(1)
(18,924)
416,221
53,703
(2,859,744)
Current assets
Property, machinery and equipment - Net
Total assets
Total liabilities
5,705,778
5,226,533
10,323
(119,256)
332,078
11,155,456
Ps$
5,549,867
5,602,322
4,511,414
472,965
249,930
10,836,631
Ps$
7,550,470
F-89
Ps$
2,380,100
Ps$
1,191,697
8,992,190
15,710,642
10,323
328,025
3,184,010
53,703
28,278,893
Ps$
16,672,134
December 31, 2013
Building systems
Net sales
Cost of sales
Operating expenses
Other (expenses) income – Net
Ps$
4,724,318
(3,126,261)
(951,363)
66,796
713,490
Metals
Ps$
6,918,911
(6,227,411)
(507,934)
148,275
331,841
Equity in income (loss) of associated entity - Net
(19,099)
694,391
(334,955)
(3,114)
Income taxes
Consolidated net (loss) income
(166,639)
(33,396)
494,356
46,194
(26,738)
16,342
Current assets
Total assets
Total liabilities
6,320,641
3,449,952
11,118
(164,874)
277,340
9,894,177
Ps$
5,228,517
Ps$
6,747,006
1,045,812
(594,536)
(350,235)
101,041
Ps$
240,413
40,050
(315,256)
86,276
51,483
(66,985)
50
34,106
(63,572)
-
Ps$
2,393,958
(472,995)
4,220
729,080
6,574
(177,443)
(60,134)
491,503
(5,372,476)
387,743
(23,630)
323,470
53,851
(4,631,042)
Ps$
12,929,454
(9,908,158)
(2,124,788)
301,347
1,197,855
(51,956)
4,170
3,697
10,271
724,543
6,221,895
(5,169)
2,181,559
9,122,828
Ps$
Total
(29,466)
6,414,718
4,548,497
482,934
391,805
11,837,954
Ps$
Holding and
eliminations
Cement
(2,581,430)
8,087,426
14,608,087
11,118
289,261
3,174,174
53,851
26,223,917
Ps$
11,788,051
December 31, 2012
Building systems
Net sales
Cost of sales
Operating expenses
Other (expenses) income - Net
Ps$
Equity in income (loss) of associated entity
Income taxes
Current assets
Accounts receivable, long-term
Total assets
Total liabilities
4,958,754
(3,237,750)
(947,912)
26,771
799,863
Metals
Ps$
Ps$
8,176
(1,665)
(8,663)
(501)
(2,653)
Ps$
454,325
31,539
(260,516)
(80,152)
145,196
Total
Ps$
13,505,892
(10,273,432)
(1,887,734)
21,054
1,365,780
(58,570)
3,372
744,665
(571,067)
(147,693)
(30,320)
(53,531)
(86,504)
37,353
84,919
267,468
(622,604)
34,760
777,936
(242,672)
(5,216)
496,777
5,900
(2,944)
(144,737)
(20,368)
(106,872)
295,761
(492,992)
70,237
38,621
(501,152)
315,405
285,595
3,206,586
(6,441)
(2,435)
146,234
3,629,539
(3,936,417)
430,847
798,329
414,824
50,553
(2,241,864)
5,190,802
3,137,838
21,527
(187,705)
230,658
8,393,120
Ps$
8,084,637
(7,065,556)
(670,643)
74,936
423,374
Holding and
eliminations
Cement
3,871,567
6,220,196
5,047,260
429,208
316,139
214,774
12,227,577
Ps$
6,967,390
Other segment information is not available.
F-90
Ps$
3,647,114
Ps$
(3,466,616)
7,760,176
11,822,531
813,415
239,068
1,107,855
50,553
214,774
22,008,372
Ps$
11,019,455
28.
Financial statement issuance authorization
On April 14, 2015, the issuance of the accompanying consolidated financial statements were authorized by
C.P. Victor Hugo Ibarra Alcázar, Corporate Controller and Administrative Director; subsequently, they were
approved at the General Stockholders’ Meeting. Subsequent to that date, as mentioned in Note 27, the Entity
changed the presentation of its segments as a result of the change in its internal segment reporting;
accordingly, Note 27 to was modified from that included in the originally issued financial statements.
Additionally as mentioned in Note 3.b, the Entity restated the cash flow statement from that included in the
originally issued financial statements.
These changes occurred on May 26, 2015. These changes have not been approved by the shareholders and
therefore may be modified, based on provisions set forth in the Mexican General Corporate Law.
******
F-91
HEAD OFFICE OF THE COMPANY
Poniente 134, No. 719
Col. Industrial Vallejo
02300, Del. Azcapotzalco, México, Distrito Federal
LEGAL ADVISORS TO THE COMPANY
As to U.S. law
As to Mexican law
As to Mexican tax law
Davis Polk & Wardwell LLP
450 Lexington Avenue
New York, New York 10017
DRB Consultores Legales, S.C.
Bosques de Alisos No. 45A Piso 3
Bosque de las Lomas
05120 México, Distrito Federal
Chévez, Ruiz, Zamarripa y Cía, S.C.
Vasco de Quiroga 2121, 4º Piso
Peña Blanca Santa Fe
LEGAL ADVISORS TO THE INITIAL PURCHASERS
As to U.S. law
As to Mexican law
Shearman & Sterling LLP
599 Lexington Avenue
New York, New York 10022
Ritch, Mueller, Heather y Nicolau, S.C.
Blvd. Manuel Ávila Camacho 24
Piso 20
Col. Lomas de Chapultepec
AUDITORS
Galaz, Yamazaki, Ruiz Urquiza, S.C.
member of Deloitte Touche Tohmatsu Limited
Av. Paseo de La Reforma 489
Col. Cuauhtémoc
06500, México, Distrito Federal
201,000,000 Shares
Ordinary Shares
OFFERING MEMORANDUM
July 9, 2015
Credit Suisse
Morgan Stanley
Citigroup
HSBC
Santander
BBVA

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