Votorantim Cimentos S.A. (Consolidated and parent company) Condensed interim financial statements for the period ended at June 30, 2012 and report on review
Report on review of condensed interim financial statements
To the Board of Directors and Stockholders Votorantim Cimentos S.A.
Introduction
We have reviewed the accompanying balance sheet of Votorantim Cimentos S.A. as at June 30, 2012 and the related statements of income, comprehensive income, changes in equity and cash flows for the six- month period then ended.
We have also reviewed the accompanying consolidated balance sheet of Votorantim Cimentos S.A. and its subsidiaries ("Consolidated") as at June 30, 2012 and the related consolidated statements of income, comprehensive income, changes in equity and cash flows for the six-month period then ended.
Management is responsible for the preparation and fair presentation of these parent company condensed interim financial statements in accordance with accounting standard CPC 21 - "Interim Financial Reporting", of the Brazilian Accounting Pronouncements Committee (CPC), and for the consolidated condensed interim financial statements in accordance with CPC 21 and International Accounting Standard (IAS) 34 - "Interim Financial Reporting", of the International Accounting Standards Board (IASB). Our responsibility is to express a conclusion on these condensed interim financial statements based on our review.
Scope of review
We conducted our review in accordance with Brazilian and International Standards on Reviews of Interim Financial Information (NBC TR 2410 - "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" and ISRE 2410 - "Review of Interim Financial Information Performed by the Independent Auditor of the Entity", respectively). A review of interim financial statements consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Brazilian and international standards on auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion on the condensed interim parent company financial statements
Based on our review, nothing has come to our attention that causes us to believe that the accompanying condensed interim parent company financial statements referred to above are not prepared, in all material respects, in accordance with CPC 21. 2
PricewaterhouseCoopers, Al. Dr. Carlos de Carvalho 417, 10o, Curitiba, PR, Brasil 80410-180, Caixa Postal 699 T: (41) 3883-1600, F: (41) 3222-6514, www.pwc.com/br
Votorantim Cimentos S.A.
Conclusion on the condensed interim consolidated financial statements
Based on our review, nothing has come to our attention that causes us to believe that the accompanying condensed interim consolidated financial statements referred to above are not prepared, in all material respects, in accordance with CPC 21 and IAS 34.
Emphasis of matter
Restatement of financial statements
We draw attention to Note 2.2 of the financial statement, which describes the restatements to the financial statements of the Company and the explanatory notes of the adjustments made. This report replaces the original auditor’s report issued on July 31, 2012.
Other matters - supplementary information
Statements of value added
We have also reviewed the parent company and consolidated interim statements of value added for the six-month period ended June 30, 2012. These statements are the responsibility of the Company's management, and are presented as supplementary information. These statements have been subjected to the same review procedures described above and, based on our review, nothing has come to our attention that causes us to believe that they are not prepared, in all material respects, in a manner consistent with the condensed interim financial statements taken as a whole.
Curitiba, March 22, 2013
PricewaterhouseCoopers Auditores Independentes CRC 2SP000160/O-5
Carlos Eduardo Guaraná Mendonça Contador CRC 1SP196994/O-2
3
Contents
Consolidated and parent company condensed interim financial statements Balance sheets 2 Statementsofincome 3 Statements of comprehensive income 4 Statements of changes in equity 5 Statements of cash flows 6 Statementsofvalueadded 7
1 General considerations 8 2 Presentation of condensed Interim Financial statements 8 2.1 SummaryofSignificantAccountingPolicies 8 2.2 Restatement of condensed interim financial statements 10 3 New standards, amendments and interpretations to existing standards that are not yet effective 16 4 Financialriskmanagement 16 4.1Financialriskfactors 16 4.2Sensitivityanalysis 17 5 Derivative financial instruments used for hedging strategies 18 6 Creditqualityoffinancialassets 19 7 Cashandcashequivalents 20 8 Financial assets held for trading 20 9 Trade receivables 20 10 Inventories 21 11 Taxes recoverable 21 12 Related parties 23 13 Investments 27 14 Property, plant and equipment 30 15 Intangible assets 33 16Borrowings 36 17 Deferredincometaxandsocialcontribution 42 18Provisions 43 19Equity 47 20 Revenues 49 21 Other operating income, net 49 22Expensesbynature 49 23 Employee benefit expenses 50 24Netfinanceincome(costs) 50 25 Insurance coverage 50 26Seasonalityofoperations 51 27 Subsequent Events 51
1 de 52 Votorantim Cimentos S.A.
Interim balance sheets All amounts in thousands of reais
Parent Consolidated Parent Consolidated Restated (*) Restated (*) Other liabilities Restated (*) Restated (*) Assets Note 6/30/2012 12/31/2011 6/30/2012 12/31/2011 Liabilitiesandequity Note 6/30/2012 12/31/2011 6/30/2012 12/31/2011 Currentassets Currentliabilities Cashandcashequivalents 7 5.257 5.370 82.219 225.130 Loansandfinancing 16 303.270 268.938 490.735 413.551 Financialassets-heldfortrading 8 1.076.808 1.158.052 1.377.152 1.450.510 Tradepayables 381.100 401.872 689.109 662.532 Tradeaccountsreceivable 9 436.318 359.723 991.002 786.077 Salariesandpayrollcharges 99.836 105.745 170.270 151.373 Inventories 10 332.747 401.995 875.083 890.668 Incometaxandsocialcontribution 99.799 35.201 168.480 132.882 Current income taxand social contribution receivable 11 100.994 17.984 146.079 23.554 Othertaxespayable 70.703 118.895 177.594 181.473 Othertaxesrecoverable 11 81.997 111.558 151.628 149.316 Dividendspayable 12 342.250 263.302 355.849 274.031 Advancestosuppliers 79.281 78.588 122.120 118.425 Advancesfromcustomers 10.044 9.730 15.605 14.370 Dividendsreceivable 12 39.923 91.297 364 7.552 Payables-Trading 19 58.434 16.481 64.270 36.826 Otherassets 52.389 76.999 175.009 140.336 UseofPublicAsset 18(d) 22.578 22.005 Accountpayable 54.494 45.503 64.321 57.993 2.205.714 2.301.566 3.920.656 3.791.568 Otherliabilities 61.330 70.986 141.230 211.269
Non-currentassets 1.481.260 1.336.653 2.360.041 2.158.305 Long-term receivables Relatedparties 12 196.626 50.233 233.437 52.764 Non-currentliabilities Judicialdeposits 134.755 128.227 179.728 149.432 Deferredtaxes 17(b) 514.452 383.645 902.614 759.140 Loansandfinancing 16 9.102.746 6.748.887 9.883.419 7.643.161 Othertaxesrecoverable 11 5.386 7.045 14.923 Relatedparties 12 2.755.628 2.863.539 677.233 726.093 Otherassets 33.737 14.048 129.196 199.305 Provisions 18(a) 628.659 655.476 886.706 894.973 Deferredtaxes 17(b) 859.455 753.859 1.077.168 983.326 879.570 581.539 1.452.020 1.175.564 Useofpublicassets 18(d) 363.626 352.180 Payablestoinvestees 96.431 72.657 InvestmentsinAssociates 13 11.839.884 11.155.422 3.494.140 3.241.411 Pensionliabilities 145.103 134.538 Property,plantandequipment 14 3.956.147 3.448.816 7.591.844 6.954.265 Otherliabilities 145.690 63.558 406.702 318.204 Intangibleassets 15 308.289 233.655 3.667.916 3.466.389 13.588.609 11.157.976 13.439.957 11.052.475 16.104.320 14.837.893 14.753.900 13.662.065 15.069.869 12.494.629 15.799.998 13.210.780
Equity 19 Capital 2.746.024 2.746.024 2.746.024 2.746.024 Taxincentivereserve 465.943 360.648 465.943 360.648 Profitreserves 266.087 1.963.935 266.087 1.963.935 Retainedearnings 227.112 227.112 Cumulativeothercomprehensiveincome 414.569 155.762 414.569 155.762
TotalequityattributabletoownersoftheParent 4.119.735 5.226.369 4.119.735 5.226.369
Non-controllinginterests 206.843 192.048
Totalstockholders'equity 4.119.735 5.226.369 4.326.578 5.418.417
Totalassets 19.189.604 17.720.998 20.126.576 18.629.197 Totalliabilitiesandstockholders'equity 19.189.604 17.720.998 20.126.576 18.629.197 (*) See Note 2.2 The accompanying notes are an integral part of these condensed interim financial statements.
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Interim statements of income Six-month periods ended June 30 All amounts in thousands of reais unless otherwise stated
Parent Consolidated Restated(*) Restated(*) Note 2012 2011 2012 2011
Net revenue 20 2,696,164 2,466,398 4,429,258 3,903,821 Cost of sales and services 22 (1,613,995) (1,539,988) (2,939,679) (2,870,659) Gross profit 1,082,169 926,410 1,489,579 1,033,162
Operating income (expenses) Selling 22 (159,924) (122,270) (255,746) (205,831) General and administrative 22 (181,294) (171,555) (266,085) (260,193) Other operating income, net 21 22,123 18,122 135,667 330,214 (319,095) (275,703) (386,164) (135,810)
Operating profit before equity results and finance income (costs) 763,074 650,707 1,103,415 897,352 Results from equity investments Equity in the earnings of investees 13 304,273 333,361 97,968 156,101
Financial income 24 (363,520) 79,637 (427,677) 88,865 Financial expenses 24 89,115 (290,133) 106,930 (309,687) Net foreign exchange gains (losses) 24 (323,565) 55,829 (317,012) 63,411 Net finance income (costs) (597,970) (154,667) (637,759) (157,411)
Profit before income tax and social contribution 469,377 829,401 563,624 896,042
Income tax and social contribution 17(a) Current (90,539) (124,193) (187,728) (217,180) Deferred 37,719 (86,425) 53,815 (51,286) Profit for the six-month period 416,557 618,783 429,711 627,576
Profit attributable to ow ners of the Company 416,557 618,783 416,557 618,783 Profit attributable to non-controlling interests ############ 13,154 8,793 Profit for the six-month period 416,557 618,783 429,711 627,576
Basic and diluted earnings per thousand shares 4.00 6.00 4.00 6.00
(*) See Note 2.2 The accompanying notes are an integral part of these condensed interim financial statements.
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Interim statements of comprehensive income Six-month periods ended June 30 All amounts in thousands of reais unless otherwise stated
Parent Consolidated Restated(*) Restated(*) 2012 2011 2012 2011 Profit for the six-month period 416,557 618,783 429,711 627,576 Components of comprehensive income for the six-month period Interest in comprehensive income of associates (70,853) 75,016 (70,853) 75,016 Hedge accounting of net investment (57,359) (38,066) (57,359) (38,066) Foreign exchange gains (losses) in investees abroad 387,019 (165,271) 387,019 (165,271) Other components of comprehensive income for the six-month period 258,807 (128,321) 260,448 (128,321) Total comprehensive income for the six-month period 675,364 490,462 690,159 499,255
Attributable to Ow ners of the Company 729,179 490,462 Non-controlling interests 13,154 8,793
742,333 499,255
The components of other comprehensive income have been presented net of taxes.
(*) See Note 2.2 The accompanying notes are an integral part of these condensed interim financial statements.
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Interim statements of changes in equity All amounts in thousands of reais unless otherwise stated
Attributable to owners of the Parent Cumulative Share Tax incentive Profit reserves Retained other comprehensive Non-controlling Total Note capitalreserve Legal Profit retention earnings income Totalinterests equity
At January 1, 2011 2.327.212 220.813 227.732 2.187.350 - (88.744) 4.874.363 186.448 5.060.811 Total comprehensive income for the six-month period Profitforthesix-monthperiod 618.783 618.783 8.793 627.576 Componentsofcomprehensiveincomeforthesix-monthperiod (128.321) (128.321) (128.321) Total comprehensive income for the six-month period ---- 618.783 (128.321) 490.462 8.793 499.255
Total contributions by and distributions to stockholders Capitalincrease 20(a) 414.613 (400.000) 14.613 14.613 Appropiation of profit for the six-month period --- Taxincentivereserve 58.772 - (58.772) -- Totalcontributionsbyanddistributionstostockholders 414.613 58.772 - (400.000) (58.772) - 14.613 - 14.613 At June 30, 2011 2.741.825 279.585 227.732 1.787.350 560.011 (217.065) 5.379.438 195.241 5.574.679
At December 31, 2011 2.746.024 360.648 272.230 1.691.705 155.762 5.226.369 192.048 5.418.417
Total comprehensive income for the six-month period -- Profitforthesix-monthperiod 416.557 416.557 13.154 429.711 Componentsofcomprehensiveincomeforthesix-monthperiod 258.807 258.807 1.641 260.448 Total comprehensive income for the six-month period ---- 416.557 258.807 675.364 14.795 690.159
Total contributions by and distributions to stockholders Non-controlling interests -- Appropiation of profit for the six-month period --- Taxincentivereserve 105.295 (105.295) -- Dividends(R$16.11pershare) (1.697.848) (84.150) (1.781.998) (1.781.998) Total contributions byand distributions to stockholders - 105.295 - (1.697.848) (189.445) - (1.781.998) (1.781.998) At June 30, 2012 2.746.024 465.943 272.230 (6.143) 227.112 414.569 4.119.735 206.843 4.326.578
(*) See Note 2.2 The accompanying notes are an integral part of these condensed interim financial statements.
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Interim statements of cash flows Six-month periods ended June 30 All amounts in thousands of reais
Parent Consolidated Restated(*) Restated(*) Note 2012 2011 2012 2011 Cash flows from operating activities Profit before income tax and 469,377 829,401 563,624 896,042 social contribution
Adjustments to reconcile profit to cash from operating activities Depreciation, amortization and depletion 14 and 15 114,997 71,756 268,318 201,231 Result on disposal of property, plant and equipment (2,118) 9,832 1,266 27,317 Equity in the results of investees 14 (304,273) (333,361) (97,968) (156,101) Provision for impairment of trade receivables 407 4,323 3,769 (2,017) Provision for losses on inventories (15,823) (8,959) (20,718) (4,843) Interest, indexation and foreign exchange gains (losses) 684,267 206,303 754,536 326,258 Provision for contingencies and tax obligations 19(b) 36,468 71,430 69,418 94,361 983,302 850,725 1,542,245 1,382,248
Changes in assets and liabilities Financial assets held for trading 81,244 (567,080) 73,358 (400,748) Trade receivables (76,595) (126,729) (185,737) (190,619) Inventories 85,071 (276,348) 32,534 (317,677) Taxes recoverable (48,063) (111,258) (116,959) (152,027) Related parties (292,190) (212,551) (287,000) (28,963) Other assets 4,228 (3,067) (93,147) (35,125) Trade payables (20,772) (77,120) 26,577 (166,393) Taxes payable (48,192) 98,095 (3,879) 85,047 Salaries and payroll charges (5,909) (9,635) 18,897 11,447 Advances from customers 314 (531) 1,235 (5,323) Other obligations and liabilities 34,079 (159,561) 2,528 (236,350)
Cash generated from operations 696,517 (595,060) 1,010,652 (54,483) Interest paid 17(b) (368,085) (229,862) (391,972) (270,156) Income tax and social contribution paid (63,608) (69,316) (187,728) (139,735)
Net cash provided by (used in) operating activities 264,824 (894,238) 430,952 (464,374)
Cash flows from investing activities Capital Increase 13(b) (2,629) (35,633) (72,047) (71,458) Acquisition of investment 13(b) (12,946) (45,306) Purchases of property, plant and equipment 14 (695,640) (567,806) (846,767) (820,077) Increase in intangible assets 15 (1,378) (3,494) (10,000) (11,671) Proceeds from sale of property, plant and equipment 2,197 9,991 5,206 11,952 Dividends received 68,681 111,908 104,894 49,721
Net cash used in investing activities (641,715) (485,034) (818,714) (886,839)
Cash flows from financing activities Funding transactions 18(b) 2,048,801 2,000,484 2,142,085 2,056,416 Repayment of borrow ings 18(b) (47,187) (20,505) (269,719) (31,416) Capital increase 14,613 14,613 Related party, net 37,886 (468,575) 57,467 (472,861) Dividends paid (1,662,722) (146,478) (1,700,180) (151,856)
Net cash provided by financing activities 376,778 1,379,539 229,653 1,414,896 Exchange results on cash and cash equivalents of foreign subsidiaries 15,198 (7,399)
Increase (decrease) in cash and cash equivalents (113) 267 (158,109) 63,683 Cash and cash equivalents at the beginning of the six-month period 5,370 7,102 225,130 24,948 Cash and cash equivalents at the end of the six-month period 5,257 7,369 82,219 81,232 (*) See Note 2.2 The accompanying notes are an integral part of these condensed interim financial statements.
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Interim statements of value added Six-month periods ended June 30 All amounts in thousands of reais
Parent Consolidated Restated(*) Restated(*) Note 2012 2011 2012 2011
Revenues Sales of products and services 21 3,584,609 3,274,382 5,679,247 5,063,496 Other revenue 15,957 15,617 30,750 93,318 Change in provision for impairment of trade receivables (407) (4,323) (3,769) 2,017 3,600,159 3,285,676 5,706,228 5,158,831
Inputs acquired from third parties Cost of sales and services (1,444,084) (1,389,407) (2,723,905) (2,122,896) Materials, energy, outsourced services and others (88,259) (83,700) 155,188 (300,042) (1,532,343) (1,473,107) (2,568,717) (2,422,938)
Gross value added 2,067,816 1,812,569 3,137,511 2,735,893 Retentions Depreciation, amortization and depletion 15 and 16 (114,997) (71,756) (268,318) (201,231) Net value added generated by the entity 1,952,819 1,740,813 2,869,193 2,534,662 Value added received through transfer Equity in the earnings of investees 14 304,273 333,361 97,968 156,101 Finance income 25 89,115 135,466 106,930 152,276 393,388 468,827 204,898 308,377 Total value added to distribute 2,346,207 2,209,640 3,074,091 2,843,039
Distribution of value added Personnel and payroll charges 209,389 185,549 370,997 328,109 Direct compensation 163,031 144,454 294,204 258,680 Benefits 46,358 41,095 76,793 69,429 Taxes and contributions 1,014,695 1,075,088 1,494,279 1,528,694 Federal 463,705 468,658 708,930 713,595 State 575,124 528,596 824,318 771,366 Municipal 13,585 12,771 14,846 13,809 Deferred taxes (37,719) 65,063 (53,815) 29,924 Remuneration on third parties' capital 705,566 308,858 779,104 337,298 Finance costs 25 687,085 290,133 744,689 309,687 Rentals 18,481 18,725 34,415 27,611 Remuneration on ow n capital 416,557 640,145 429,711 648,938 Non-controlling interests 13,154 8,793 Retained earnings 416,557 640,145 416,557 640,145 Value added distributed 2,346,207 2,209,640 3,074,091 2,843,039
(*) See Note 2.2 The accompanying notes are an integral part of these condensed interim financial statements.
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Notes to the condensed interim financial statements at June 30, 2012 All amounts in thousands of reais unless otherwise stated
1 General considerations
Votorantim Cimentos S.A.("Company", "Parent Company", or "VCSA") and its subsidiaries are principally engaged in: the production and sale of cement and aggregate and supplementary products, as well as of raw materials and byproducts, similar and related products; rendering of concrete pouring services; research, mining and processing of mineral reserves in connection with its cement producing activities; transportation, distribution and importing; and holding investments in other companies. The Company is a corporation headquartered in the city and State of São Paulo. The Company and its subsidiaries operate in the South, Southeast, Central-West, North and Northeast of Brazil, as well as the United States and Canada. Through its associates, the Company also has operations in other countries in Latin America and Portugal.
The Company and its subsidiaries are members of “Votorantim”, one of Brazil´s largest private conglomerates. The Company´s direct parent company is Votorantim Industrial S.A.. and the ultimate parent company is Votorantim Participações S.A
2 Presentation of condensed Interim Financial statements
The condended interim financial statements for the period March 31, 2012 were originally authorized for issue by the Company's management on May 16, 2012. These condensed interim financial statements have been restated as described in Note 2.2 and these restated condensed interim financial statements have been authorized for issue by management of the Company on March 11, 2013.
The interim consolidated financial statements at June 30, 2012 have been prepared in accordance with accounting standard CPC 21 - Interim Financial Reporting, issued by the Brazilian Accounting Pronouncements Committee (CPC), and IAS 34 - Interim Financial Reporting, issued by the International Accounting Standards Board (IASB), and contain selected explanatory notes, in order not to duplicate information already disclosed in the financial statements at December 31, 2011 made available to the public on March 8, 2012.
Therefore, the interim consolidated financial statements at June 30, 2012 do not contain all the explanatory notes and disclosures required by the accounting standards applicable to annual financial statements, and, consequently, should be read together with the financial statements prepared in accordance with CPCs and IFRSs at December 31, 2011.
The interim consolidated financial statements have been prepared in a manner that is consistent with the information disclosed in Note 2 to the financial statements at December 31, 2011.
2.1 Summary of Significant Accounting Policies
(a) Subsidiaries
Subsidiaries are entities over which the Company has the power to determine the financial and operating policies, generally reflecting a shareholding of more than one half of the voting rights. The existence and effect of possible voting rights that are currently exercisable or convertible are considered when assessing whether the Company controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Company and unconsolidated from the date that control ceases. 8 de 52 Votorantim Cimentos S.A.
Notes to the condensed interim financial statements at June 30, 2012 All amounts in thousands of reais unless otherwise stated
Inter-company transactions, balances and unrealized gains on transactions between VCSA companies are eliminated. Unrealized losses are also eliminated, unless the transaction demonstrates evidence of impairment of the asset transferred. Accounting policies of subsidiaries are changed where necessary to ensure consistency with the policies adopted by the Company.
(b) Transactions with entities in which has non-controlling interests
The Company accounts for transactions with entities in which has non-controlling interests as transactions with equity owners of the Company. For purchases from entities in which has non- controlling interests, the difference between any consideration paid and the share acquired of the book value of net assets of the subsidiary is recorded in stockholders' equity. Gains or losses on disposals to entities which has non-controlling interests are also recorded in stockholders' equity, in "Carrying value adjustments".
When the Company ceases to have control, any retained interest in the entity is remeasured to its fair value, with the change in book value recognized in profit or loss. In addition, any amounts previously recognized in Other comprehensive income in respect of that entity are accounted for as if the Company had directly sold the related assets or liabilities, which means that amounts previously recognized in Other comprehensive income are reclassified to profit or loss.
(c) Associated companies
Associated companies are entities over which the Company has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights, with significant influence obtained through either shareholding interest, rights with respect to financial and operating decisions through shareholder agreements or representation on the board or through other factors. Investments in associated companies are accounted for using the equity method and are initially recognized at cost. The Company's investment in associated companies includes goodwill identified on acquisition, net of any accumulated impairment loss.
The Company's share of its associated companies' profits or losses is recognized in the statement of income, and its share of stockholders' equity movements is recognized in its own equity. When the Company's share of losses in an associated company equals or exceeds its interest in the associated company, including any other receivables, the Company does not recognize further losses, unless it has incurred obligations or made payments on behalf of the associated company.
Unrealized gains on transactions between the Company and its associated companies are eliminated proportionally to the Company's interest in the associated companies. Unrealized losses are also eliminated unless the transaction demonstrates evidence of an impairment of the asset transferred. Accounting policies of associated companies are changed where necessary to ensure consistency with the policies adopted by the Company.
The Company determines at each reporting date whether there is any objective evidence that the investment in the associate is impaired. One of the factors considered in assessing whether objective evidence of impairment exists is a significant reduction in the quoted market price of listed associates. If this is the case, the Company calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and recognizes the amount in the income statement. The recoverable amount is measured as the higher of the value in use and fair value less cost
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Notes to the condensed interim financial statements at June 30, 2012 All amounts in thousands of reais unless otherwise stated
of sale. Value in use is measured based on the share of the Company in the associate discounted cash flows both for listed and non-listed entities. For listed entities the quoted market price as of the date of the impairment analysis is used to determine the fair value less cost of sale as of such date.
(d) Companies included in the interim consolidated financial statements
There were no significant changes in subsidiaries and jointly-controlled subsidiaries included in the consolidation used in the preparation of these interim consolidated financial statements. The main subsidiaries included are those described in Note 2.2 (d) to the Company's annual consolidated financial statements at December 31, 2011.
(e) Critical accounting estimates and judgments
The critical accounting estimates and assumptions used in the preparation of these interim financial statements are those described in Note 4 to the Company's annual financial statements at December 31, 2011.
2.2 Restatement of condensed interim financial statements
In 2012, the Company identified certain errors related to the already issued and distributed condensed interim financial statements. The nature of the adjustments is detailed below.
Adjustments to the consolidated and parent company’s balance sheets, statements of income and comprehensive income and the statements of cash flows.
a. In the original condensed interim financial statements the total amount of judicial deposits was presented net with the provision for contingencies. In these condensed interim financial statements for those judicial deposits that have a related contingency, these are presented as a reduction of provision. The remaining judicial deposits are presented as judicial deposits in non-current assets;
b. In the original condensed interim financial statements the acquisition of the additional interest in VILA in 2010 was recorded at the predecessor basis of accounting recognizing the investment in VILA at its net book value with the difference between the consideration paid and the carrying amount was recorded directly in stockholders' equity under “Profit reserve” In these condensed interim financial statements it was concluded that such acquisition was neither a acquisition of a non-controlling interest nor a transaction between entities under e common control and therefore the additional interest acquired in these financial statements is recorded at the amount of the consideration paid in the investments in associates balance;
c. In the original condensed interim financial statements of the parent company goodwill of an incorporated subsidiary was presented in the line item “investments in associates” but should have been reclassified to the intangible assets on incorporation. In these condensed interim financial statements such amounts have been reclassified.
d. In the original condensed interim financial statements no deferred income tax was recognized in 10 de 52 Votorantim Cimentos S.A.
Notes to the condensed interim financial statements at June 30, 2012 All amounts in thousands of reais unless otherwise stated
relation to our equity investment in Cimpor. In these financial statements the deferred income tax has been recognized. e. In the original condensed interim financial statements certain equity investments with a negative balance were presented as a deduction from the “investments in associates” line item, while they should have been presented as liabilities. In these condensed interim financial statements such amounts have been presented as “payables to investees”. f. In the original condensed interim financial statements certain payments to and receipts from related parties were reflected as cash flows from operating activities in the statements of cash flows, while, due to their nature, these should be classified as cash flows financing activities. In these condensed interim financial statements such reclassification has been made.
The effects of these restatements to the consolidated and parent company’s balance sheets and statement of income, comprehensive income and statement of cash flows. The restatements did not impact the statements of added value.
11 de 52 Votorantim Cimentos S.A.
Notes to the condensed interim financial statements at June 30, 2012 All amounts in thousands of reais unless otherwise stated
Parent company Consolidated June30,2012 June30,2012 Original Adjustment Adjusted Original Adjustment Adjusted Assets Current assets Cashandcashequivalents 5,257 5,257 82,219 82,219 Financialassets-heldfortrading 1,062,319 14,489 1,076,808 1,362,343 14,809 1,377,152 Trade accounts receivable 436,318 436,318 971,795 19,207 991,002 Inventories 332,747 332,747 875,083 875,083 Current income tax and social contribution receivable 100,994 100,994 146,079 146,079 Othertaxesrecoverable 182,991 (100,994) 81,997 297,707 (146,079) 151,628 Advancestosuppliers 79,281 79,281 122,120 122,120 Dividendsreceivable 39,923 39,923 364 364 Otherassets 52,389 52,389 175,009 175,009 2,191,225 14,489 2,205,714 3,886,640 34,016 3,920,656 Non-current assets Financialassets-heldfortrading 14,489 (14,489) 14,809 (14,809) Trade accounts receivable 19,207 (19,207) Judicialdeposits 134,755(a) 134,755 179,728(a) 179,728 Relatedparties 196,626 196,626 233,437 233,437 Deferredtaxes 514,452 514,452 902,614 902,614 Othertaxesrecoverable 7,045 7,045 Otherassets 33,737 33,737 129,196 129,196 759,304 120,266 879,570 1,306,308 145,712 1,452,020
Investmentsinassociates 11,703,675 136,209 (b)/(c) 11,839,884 3,378,480 115,660 (b) 3,494,140 Property,plantandequipment 3,956,147 3,956,147 7,591,844 7,591,844 Intangibleassets 232,407 75,882(c) 308,289 3,667,916 3,667,916
15,892,229 212,091 16,104,320 14,638,240 115,660 14,753,900
Totalassets 18,842,758 346,846 19,189,604 19,831,188 295,388 20,126,576
12 de 52 Votorantim Cimentos S.A.
Notes to the condensed interim financial statements at June 30, 2012 All amounts in thousands of reais unless otherwise stated
Parent company Consolidated June30,2012 June30,2012
Liabilities and stockholders' equity Original Adjustment Adjusted Original Adjustment Adjusted Current liabilities Loansandfinancing 303.270 303.270 490.735 490.735 Tradepayables 381.100 381.100 689.109 689.109 Salariesandpayrollcharges 99.836 99.836 170.270 170.270 Incometaxandsocialcontributionpayable 99.799 99.799 168.480 168.480 Othertaxespayable 70.703 70.703 177.594 177.594 Dividendspayable 342.250 342.250 355.849 355.849 Advancesfromcustomers 10.044 10.044 15.605 15.605 Payables-Trading 58.434 58.434 64.270 64.270 UseofPublicAsset 22.578 22.578 Accountpayable 54.494 54.494 64.321 64.321 Otherliabilities 115.824 (54.494) 61.330 205.551 (64.321) 141.230
1.481.260 1.481.260 2.337.463 22.578 2.360.041
Non-current liabilities Loansandfinancing 9.102.746 9.102.746 9.883.419 9.883.419 Relatedparties 2.755.628 2.755.628 677.233 677.233 Provisions 436.707 191.952(a) 628.659 644.150 242.556(a) 886.706 Deferredtaxes 783.064 76.391 859.455 1.000.777 76.391 1.077.168 UseofPublicAsset 386.204 (22.578) 363.626 Payablestoinvestees 96.431(e) 96.431 Pensionliabilities 145.103 145.103 Otherliabilities 202.887 (57.197) 145.690 614.633 (207.931) 406.702
13.281.032 307.577 13.588.609 13.206.416 233.541 13.439.957
Totalliabilities 14.762.292 307.577 15.069.869 15.543.879 256.119 15.799.998
Stockholders' equity Capital 2.746.024 2.746.024 2.746.024 2.746.024 Taxincentivereserve 465.943 465.943 465.943 465.943 Revenuereserves 272.230 (6.143) 266.087 272.230 (6.143) 266.087 Retainedearnings 238.925 (11.813)(d) 227.112 238.925 (11.813)(d) 227.112 Cumulativeothercomprehensiveincome 357.344 57.225 (b)/(d) 414.569 357.344 57.225 (b)/(d) 414.569
Totalequityattributabletoownersoftheparent 4.080.466 39.269 4.119.735 4.080.466 39.269 4.119.735
Non-controllinginterests 206.843 206.843
Totalstockholders'equity 4.080.466 39.269 4.119.735 4.287.309 39.269 4.326.578
Totalliabilitiesandstockholders'equity 18.842.758 346.846 19.189.604 19.831.188 295.388 20.126.576
13 de 52 Votorantim Cimentos S.A.
Notes to the condensed interim financial statements at June 30, 2012 All amounts in thousands of reais unless otherwise stated
Statement of income Parent company Consolidated June30,2012 June30,2012
Original Adjustment Adjusted Original Adjustment Adjusted Revenues 2,696,164 2,696,164 4,429,258 4,429,258 Costofsalesandservices (1,613,995) (1,613,995) (2,939,679) (2,939,679)
Grossprofit 1,082,169 1,082,169 1,489,579 1,489,579
Operating income (expenses) Selling (159,924) (159,924) (255,746) (255,746) Generalandadministrative (181,294) (181,294) (266,085) (266,085) Otheroperatingincome(expenses),net 22,123 22,123 135,667 135,667 (319,095) (319,095) (386,164) (386,164) Operating profit before results from investments andfinancialresults 763,074 763,074 1,103,415 1,103,415
Results from investments Equityintheresultsofinvestees 304,273 304,273 97,968 97,968
Netfinancialresults (597,970) (597,970) (637,759) (637,759)
Profitbeforetaxation 469,377 469,377 563,624 563,624
Income taxand social contribution Current (90,539) (90,539) (187,728) (187,728) Deferred 49,532 (11,813)(d) 37,719 65,628 (11,813)(d) 53,815
Netincomeforthequarter 428,370 (11,813) 416,557 441,524 (11,813) 429,711
Statement of comprehensive income
Interestinothercomprehensiveincomeofassociatedcompanies (28,851) (42,002) (d) (70,853) (28,851) (42,002) (d) (70,853) Hedgeofanetinvestment/cashflowhedge (57,359) (57,359) (57,359) (57,359) Exchangegains(losses)oncurrencytranslationeffect 387,019 387,019 387,019 387,019
Total statement of comprehensive income 729,179 (42,002) 675,364 742,333 (42,002) 688,518
Parent company Consolidated Statements of cash flows June30,2012 June30,2012
Original Adjustment Adjusted Original Adjustment Adjusted Cash flows from operating activities 303,258 (38,434)(f) 264,824 460,318 (29,366)(f) 430,952 Cash flows from investing activities (642,263) 548 (641,715) (775,415) (43,299) (818,714) Cash flows from financing activities 338,892 37,886 (f) 376,778 172,186 57,467 (f) 229,653 14 de 52 Votorantim Cimentos S.A.
Notes to the condensed interim financial statements at June 30, 2012 All amounts in thousands of reais unless otherwise stated
Statement of income Parent company Consolidated June30,2011 June30,2011
Original Adjustment Adjusted Original Adjustment Adjusted
Revenues 2,466,398 2,466,398 3,903,821 3,903,821 Costofsalesandservices (1,539,988) (1,539,988) (2,870,659) (2,870,659)
Grossprofit 926,410 926,410 574,269 458,893 1,033,162
Operating income (expenses) Selling (122,270) (122,270) (205,831) (205,831) General and administrative (171,555) (171,555) (260,193) (260,193) Otheroperatingincome(expenses),net 18,122 18,122 330,214 330,214 (275,703) (275,703) (135,810) (135,810) Operating profit before results from investments andfinancialresults 650,707 650,707 897,352 897,352
Results from investments Equityintheresultsofinvestees 333,361 333,361 156,101 156,101
Netfinancialresults (154,667) (154,667) (157,411) (157,411)
Profitbeforetaxation 829,401 829,401 896,042 896,042
Income taxand social contribution Current (124,193) (124,193) (217,180) (217,180) Deferred (65,063) (21,362) (d) (86,425) (29,924) (21,362) (d) (51,286)
Netincomeforthequarter 640,145 (21,362) 618,783 280,056 347,520 627,576
Statement of comprehensive income
Interestinothercomprehensiveincomeofassociatedcompanies 25,688 49,328 (d) 75,016 25,688 49,328 (d) 75,016 Hedgeofanetinvestment/cashflowhedge (38,066) (38,066) (38,066) (38,066) Exchangegains(losses)oncurrencytranslationeffect (165,271) (165,271) (165,271) (165,271) 462,496 49,328 490,462 102,407 49,328 499,255
Parent company Consolidated Statements of cash flows June30,2011 June30,2011
Original Adjustment Adjusted Original Adjustment Adjusted Cash flows from operating activities (1,362,813) 468,575 (f) (894,238) (944,634) 480,260 (f) (464,374) Cash flows from investing activities (485,034) (485,034) (886,839) (886,839) Cash flows from financing activities 1,848,114 (468,575) (f) 1,379,539 1,887,757 (472,861) (f) 1,414,896 15 de 52 Votorantim Cimentos S.A.
Notes to the condensed interim financial statements at June 30, 2012 All amounts in thousands of reais unless otherwise stated
3 New standards, amendments and interpretations to existing standards that are not yet effective
The new standards, amendments and interpretations to existing standards that are not yet effective are those described in Note 3 to the Company's annual consolidated financial statements at December 31, 2011.
4 Financial risk management
4.1 Financial risk factors
There have been no changes in financial risks and risk management policies since December 31, 2011.
The table below analyzes the Company’s non-derivative financial liabilities to be settled by the Company classified by maturity (the remaining period in the balance sheet up to the contractual maturity date). The amounts reflect the future cash flows, which include interest to be incurred, and, accordingly, may not reconcile to the amounts disclosed in the balance sheet for borrowings.
Parent Between Betw een Between five Up to one one and tw o two and five and ten Over ten year years years years years At June 30, 2012 Loans and financing 858,819 912,614 4,667,319 6,156,669 6,010,199 Trade payables 381,100 Payables - Trading 58,434 Dividends payable 342,250 Related parties 34,839 2,385,348 104,614 526,341 Account payable 54,494 1,729,936 3,297,962 4,771,933 6,683,010 6,010,199
At December 31, 2011 Loans and financing 706,502 741,825 2,260,408 6,776,613 3,400,213 Trade payables 401,872 Dividends payable 263,302 Related parties 32,420 2,229,461 97,083 504,575 Payables - Trading 16,481 Account payable 45,503 1,466,080 2,971,286 2,357,491 7,281,188 3,400,213
16 de 52 Votorantim Cimentos S.A.
Notes to the condensed interim financial statements at June 30, 2012 All amounts in thousands of reais unless otherwise stated
Consolidated Between Betw een Between five Up to one one and tw o two and five and ten Over ten year years years years years At June 30, 2012 Loans and financing 1,076,817 1,079,073 5,329,229 6,182,584 6,017,292 Trade payables 689,109 Dividends payable 355,849 Use of Public Asset 22,571 24,343 82,413 174,926 966,602 Related parties 34,839 306,953 104,614 526,341 Payables - Trading 64,270 Account payable 15,605 2,259,060 1,410,369 5,516,256 6,883,851 6,983,894
At December 31, 2011 Loans and financing 883,182 885,979 3,080,131 6,805,127 3,400,213 Trade payables 662,532 Dividends payable 274,031 Use of Public Asset 22,005 23,511 80,123 134,920 1,023,165 Related parties 32,420 92,015 97,083 504,575 Accounts payable - Trading 36,826 Account payable 57,993 1,968,989 1,001,505 3,257,337 7,444,622 4,423,378
4.2 Sensitivity analysis
Presented below is the sensitivity analysis for outstanding positions in financial instruments. The scenarios are described below:
. Scenario I: based on market yield curves and quotations at June 30, 2012 that reflect in management's opinion the most likely scenario at June 30, 2012.
. Scenario II: considers a stress factor of + or -25% applied to the market yield curves and quotations at June 30, 2012.
. Scenario III: considers a stress factor of + or -50% applied to the market yield curves and quotations at June 30, 2012.
The table below presents a sensitivity analysis of the financial instruments.
17 de 52 Votorantim Cimentos S.A.
Notes to the condensed interim financial statements at June 30, 2012 All amounts in thousands of reais unless otherwise stated
Impact on profit (loss) Impact on equity Scenario I Scenarios II & III Scenario I Scenarios II & III Market yield Results of Results of Risk factors curves at -25% -50% 25% 50% -25% -50% 25% 50% scenario I scenario I 6/30/2012 Exchange rate USD -4.00% 114,000 781,000 1,562,000 (781,000) (1,562,000) (2,000) (14,000) (27,000) 14,000 27,000 EUR -5.00% 5,000 23,000 46,000 (23,000) (46,000) 89,000 438,000 876,000 (438,000) (876,000)
Interest rate BRL - CDI 23 bps (9,000) 55,000 106,000 (54,000) (106,000)
5 Derivative financial instruments used for hedging strategies
(a) Cash flow hedge
Interest rate swaps
During 2010, the Company’s subsidiary VCNA entered into various swap agreements, with an initial principal amount of US $ 200 million, for which VCNA contracted to receives three- months LIBOR on a quarterly basis and pays a fixed interest rate quarterly up to through October 31, 2014 (the "interest rate swap"). The fair value of the interest rate swap at June 30, 2012 was US $ 1.9 million negative (December 31, 2011: 1.3 million (negative)*, and the cumulative fair value movement of the interest rate swap was recognized through other comprehensive income. This hedge was found determined to be fully effective over the reporting periods.
The notional amount of the outstanding interest rate swaps at June 30, 2012 was US$ 186.25 million (2011: US$ 192.5 million).
Basis swaps
During 2011, the Company’s subsidiary VCNA entered into various basis swap contracts, with an initial principal amount of US $ 309,9 million, for which VCNA receives one month LIBOR + approximately 13 basis points on a monthly basis and pays three months LIBOR quarterly through December 31, 2013 (the "Basis swaps"). The Basis swaps are used together with the interest rate swaps described above as hedging instruments to hedge the variability of the cash flows attributable to interest rate changes of the hedged instrument object (i.e. US $ loan). The fair value of the basic swap at June 30, 2012 was US $ 120 thousand negative (December 31, 2011: US $ 201 thousand negative) to VCNA and was recognized stockholders equity through "other comprehensive income".
The notional amounts of the outstanding basic interest rate swap at June 30, 2012 is US $ 290.0 million (December, 31 2011: US $ 309.9 million)
(b) Net investment hedge in a foreign entity
The Company designated a portion of its indebtedness denominated in Euros. A proportion of the group’s EUR-denominated borrowing amounting join an aggregate amount equal to R$ 1,937,801 (2011: R$ 1,890,100) relating to its equity investment in Portuguese domiciled Company CIMPOR, which is domiciled in Portugal and has the euro as its functional currency is the euro, is designated as a hedge of the net investment in the its equity investment in CIMPOR (Net investment hedge). The foreign exchange loss of R$ 94,800 (2011: loss of R$ 29,025) on translation of the borrowing to currency at the end of the reporting period is recognized in other comprehensive income.
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Notes to the condensed interim financial statements at June 30, 2012 All amounts in thousands of reais unless otherwise stated
Due to the fact that the carrying value of CIMPOR, as a consequence of the impairment recognized at December 31, 2011, dropped below the amount of the EUR-denominated borrowing the Company re- designated the amount included in the hedge of a net investment to the lower carrying amount of CIMPOR as of January 1, 2012. As a result of this the Company recognized a foreign exchange loss directly in the income statement of R$ 388 during the period.
(c) Derivatives for which hedge accounting is not applied
Instruments to hedge real-denominated fixed rate debts
During the period derivative financial instruments were contracted to transform the fixed rates of real-denominated debts into CDI floating rates. Risk mitigation is carried out by means of swaps. Changes in fair value are recognized in the statement of income.
At June 29, 2012, the fair value of the financial instruments asset was R$ (2,337) (December 31, 2011: nil)
The notional value of these contracts is R$ 500,000.
6 Credit quality of financial assets
The following table reflects the credit quality of issuers and counterparties in transactions involving the Company’s financial assets. The local ratings relate to ratings specifically received from local credit rating agencies, while “Rating Global” refers to assets rated by global rating agencies.
Parent Consolidated 6/30/2012 12/31/2011 6/30/2012 12/31/2011 Localrating Globalrating Localrating Globalrating Localrating Globalrating Localrating Global rating Cash and cash equivalents AAA 5,257 5,370 28,055 174 10,572 220 AA- 3 2,676 868 A+ 229 10,373 923 98,248 A 10,917 55,187 BBB 3,247 BBB+ 7 42,569 BBB- 833 9,046 B+ 11,393 B 16,543 Without rating 5,266 5,257 5,370 - 34,393 47,826 11,495 213,635
Financial assets held for trading AAA 548,800 436,823 811,059 726,018 AA+ 461,357 648,184 480,845 650,287 AA 44,690 58,840 52,838 58,840 A 13,728 13,824 13,728 14,653 A- 87 381 195 712 BBB+ 4 Without rating 8,146 18,483 1,076,808 1,158,052 - 1,377,152 1,450,510
1,082,065 1,163,422 - 1,411,545 47,826 1,462,005 213,635
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Notes to the condensed interim financial statements at June 30, 2012 All amounts in thousands of reais unless otherwise stated
7 Cash and cash equivalents ConsolidatedParent Restated Restated 6/31/2012 12/31/2011 6/31/2012 12/31/2011 Cashandbanks 3,030 4,288 78,321 222,592 BankDepositCertificates(CDBs) 1,560 442 2,667 925 Others 667 640 1,231 1,613 5,257 5,370 82,219 225,130
8 Financial assets held for trading Parent Consolidated Restated Restated 6/31/2012 12/31/2011 6/31/2012 12/31/2011 Held for trading DIFund(InterbankDeposits) 1,062,401 1,144,228 1,338,494 1,435,857 BankDepositCertificate(CDB) 14,407 13,824 38,051 14,653 Other 607
1,076,808 1,158,052 1,377,152 1,450,510
The investments in Investment Funds yield on average 101% of the CDI rate.
The DI Exclusive Fund is controlled by Votorantim Participações S.A. and, accordingly, is not consolidated into these financial statements. The Fund is consolidated in the financial statements of the controlling shareholder.
9 Trade receivables Parent Consolidated Restated Restated Note 6/31/2012 12/31/2011 6/31/2012 12/31/2011 Domesticcustomers 383,191 301,952 555,295 453,182 Foreigncustomers 67 109 410,506 290,701 Relatedparties 12 60,562 64,757 64,264 77,488 Provisionforimpairmentoftradereceivables (7,502) (7,095) (39,063) (35,294) 436,318 359,723 991,002 786,077
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Notes to the condensed interim financial statements at June 30, 2012 All amounts in thousands of reais unless otherwise stated
10 Inventories
Parent Consolidated Restated Restated 6/31/2012 12/31/2011 6/31/2012 12/31/2011 Finishedproducts 26,412 28,774 73,028 63,967 Semifinishedproducts 124,547 144,292 282,716 319,837 Rawmaterials 111,832 149,934 223,105 276,812 Auxiliarymaterialsandconsumables 112,229 106,729 235,155 219,744 Advancestosuppliers 783 1,899 49,814 13,420 Importsintransit 10,693 46,526 62,647 95,550 Provisionforlosses (64,696) (80,519) (111,381) (132,099) Other 10,947 4,360 59,999 33,437 332,747 401,995 875,083 890,668
At the end of the reporting period, the Company had no inventories pledged as collateral for liabilities.
The provision for losses refers mainly to the obsolescence of materials in inventory.
For the amount of inventories included in cost of goods sold we refer to Note 22.
11 Taxes recoverable
Parent Consolidated Restated (*) Restated (*) 6/31/2012 12/31/2011 6/31/2012 12/31/2011
IncomeTax(IR)andSocialContributiononNetIncome(CSLL) 100,994 17,984 146,079 23,554
100,994 17,984 146,079 23,554
State value-added Taxon Sales and Service (ICMS) on property,plantandequipment 27,277 33,275 42,253 50,005 Statevalue-addedTaxonSalesandServices(ICMS) 8,186 43,683 48,817 58,707 ExciseTax(IPI) 13,411 13,870 22,471 20,723 SocialIntegrationProgram(PIS) 3,238 8,459 3,793 9,010 SocialContributiononRevenues(COFINS) 14,949 17,087 18,221 20,301 WithholdingIncomeTax(IRRF) 14,288 16,740 Other 648 570 6,378 5,493 Othertaxesreceivable 81,997 116,944 158,673 164,239
Taxes recoverable 182,991 134,928 304,752 187,793 Current (182,991) (129,542) (297,707) (172,870) Non-current 5,386 7,045 14,923
21 de 52 Votorantim Cimentos S.A.
Notes to the condensed interim financial statements at June 30, 2012 All amounts in thousands of reais unless otherwise stated
The credit related to State Value-added Tax on Sales and Services (ICMS) credits arise from the purchase of property, plant and equipment items (recoverable in 48 monthly installments) and raw materials, to be realized in the course of the Company’s operations.
The Company estimates that it will use a substantial part of taxes recoverable to offset taxes payable by July 31, 2013.
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Notes to the condensed interim financial statements at June 30, 2012 All amounts in thousands of reais unless otherwise stated
12 Related parties
(a) Parent Results of operations
Tradereceivables Dividendsreceivable Loansreceivable Tradepayables Loanspayable Dividendspayable Purchases Sales
6/30/2012 12/31/2011 6/30/2012 12/31/2011 6/30/2012 12/31/2011 6/30/2012 12/31/2011 6/30/2012 12/31/2011 6/30/2012 12/31/2011 6/30/2012 6/30/2011 6/30/2012 6/30/2011 Shareholders Votorantim Industrial S.A. 37 37 124,720 409 10,504 9,844 88,907 188,368 181,221 3,169 2,024 Votorantim Participações S.A. 13 13 892 2,919 16,003 Inecap Investimentos S.A. 62,346 8,890
Related companies Anfreixo S.A. 1,162 9,395 Citrovita Agroindustrial S.A. 26,666 Citrovita Agropecuária S.A. 203 15 CJ Mineração Ltda. 15,700 2,000 69 52 2,167 Companhia Brasileira de Alumínio (iii) 573 359 24 3 14,211 844 836 1,646 Companhia Cimento Ribeirão Grande (iii) 2,046 1,168 14,037 14,038 6,367 5,313 5 5 20,492 79,452 15,349 18,107 Companhia de Cimento Itambé 7,561 4,209 14,505 21,024 Companhia Luz e Força Santa Cruz Companhia Nitro Química Brasileira -
Empresa de Mineração Acariúba Ltda. 18,196 4,790 Empresa de Transportes CPT Ltda. Hailstone Limited 10,313 9,570 Hejoassu Administração S.A. Ibar Administração e Participações Ltda. Interavia Transportes Ltda. (iii) 13,185 50 11,708 50 36,436 69,866 24,883 Itacamba Cemento S.A. 1,131348 32 32 5,4904,687 MAESA - Machadinho Energética 143 8 Maré Cimento Ltda. Metalúrgica Atlas S.A. 7 207 8,022 1 Metalex Ltda. 2 2 Mizu S.A. 4,064 5,941 80 230 29,645 23,302 Pedreira Pedra Negra Ltda. 27 27 21,246 296 360 37 Polimix Cimento S.A. Polimix Concreto S.A. 16,897 18,703 208 221 69,005 95,780 Rhamo Ind. E Com. Serviços Ltda. Somix Concreto Ltda. 913 1,301 4,331 5,749 Supermix Concreto S.A. 23,378 23,796 127,876 119,867 Verona Participações Ltda. Votener-Votorantim C.Energia 1,298 6 307 91,589 112,347 Voto III 405,119 375,691 Voto V Voto VI Votorantim Cimentos América S.A. (iii) 599,618 599,633 Votorantim Cimentos N/NES.A. (ii) 102 403 25,886 56,886 859 345 1,695,181 1,693,186 12,457 6,494 215 11,287 Votorantim Cement North America Votorantim Energia Ltda. 5 Votorantim GmbH (iii) 2,216 25,374 17,617 17,859 40,856 97,647 Votorantim Investimentos Latino-Americano S.A. 7,188 Votorantim Metais Ltda. Votorantim Metais S.A. 1,635 7,241 14 10,946 228 1,513 136 14,156 Votorantim Metais Zinco S.A. (iii) 304 70 12 12 63 Votorantim Siderurgia S.A. 819 801 269 131 2,279 4,588 17 Other 1,062 331 5,258 2,475 (75) 348 1,640 1,533 91,536 73,191 5,722 9,174 2,982 1,662
60,562 64,757 39,923 91,297 196,626 50,233 32,741 71,050 2,755,628 2,863,539 342,250 263,302 184,702 348,353 269,740 317,399 Current (60,562) (64,757) (39,923) (91,297) (32,741) (71,050) (342,250) (263,302)
Non-current 196,626 50,233 2,755,628 2,863,539
23 de 52 Votorantim Cimentos S.A.
Notes to the condensed interim financial statements at June 30, 2012 All amounts in thousands of reais unless otherwise stated
(b) Consolidated Results of operations Tradereceivables Dividendsreceivable Loansreceivable Tradepayables Loanspayable Dividendspayable Purchases Sales 6/30/2012 12/31/2011 6/30/2012 12/31/2011 6/30/2012 12/31/2011 6/30/2012 12/31/2011 6/30/2012 12/31/2011 6/30/2012 12/31/2011 6/30/2012 6/30/2011 6/30/2012 6/30/2011
Shareholders Votorantim Industrial S.A. 37 37 212,435 407 11,147 10,230 229,126 293,253 188,706 181,712 3,169 2,024 Votorantim Participações S.A. 15 15 2,476 6,754 663 16,666 Inecap Investimentos S.A. 62,346 8,890
Related companies Anfreixo S.A. 17 1,423 12,012
Calmit Industrial Ltda. Cal Itaú Participações S.A. Campos Novos Energia S.A. Citrovita Agroindustrial S.A. 26,666 1 2 CJ Mineração Ltda. Companhia Brasileira de Alumínio (iii) 576 363 24 3 14,211 844 846 836 1,646 Companhia Cimento Ribeirão Grande Companhia de Cimento Itambé 7,565 4,213 14,505 21,024 Companhia Nitro Química Brasileira CRB Operações Portuárias S.A. Empresa de Mineração Acariúba Ltda. Empresa de Transportes CPT Ltda. Hailstone Limited (iii) 10,313 9,570 23,047 19,957 Hejoassu Administração S.A. Ibar Administração e Participações Ltda. (iii) 5,075 5,075 Interavia Transportes Ltda. Itacamba Cemento S.A. Maré Cimento Ltda. 1,933 8,351 101 22,144 36,452 Metalúrgica Atlas S.A. 7 8,565 1,524 1 1 Mizu S.A. 4,176 6,000 90 90 1 1 80 230 29,769 25,418 Pedreira Pedra Negra Ltda. Polimix Cimento S.A. 312 122 Polimix Concreto S.A. (iii) 17,029 19,258 52 52 8 8 207 219 69,491 97,768 Rhamo Ind. E Com. Serviços Ltda. (iii) 2,043 3,165 Somix Concreto Ltda. 911 1,299 4,331 5,749 Supermix Concreto S.A. 28,465 29,415 153,432 150,457 Verona Participações Ltda. 222 222 Votener-Votorantim C.Energia 6 307 91,595 112,347 3,556 9,028 Voto IV (i) 405,119 375,691 Voto V Voto VI Votorantim Cimentos América S.A. Votorantim Cimentos S.A. Votorantim Cimentos N/NE S.A. Votorantim Cement North America Votorantim Energia Ltda. 5 Votorantim GmbH (iii) 19,192 25,374 17,617 17,859 117,064 168,695 Votorantim Investimentos Latino-Americano S.A. 7,188 Votorantim Metais Ltda. Votorantim Metais S.A. (iii) 1,635 7,241 2 14 10,946 1 228 1,513 136 14,156 Votorantim Metais Zinco S.A. (iii) 30470 1212 8 63 Votorantim Siderurgia S.A. (iii) 810 791 270 131 2,279 6,511 17 Other 496 428 814 1,094 (1,337) 570 1,649 1,811 104,796 82,572 1,250 1,410 199 1,988 64,264 77,488 364 7,552 233,437 52,764 29,566 65,789 677,233 726,093 355,849 274,031 221,871 306,872 297,686 363,767 Current (64,264) (77,488) (364) (7,552) (29,566) (65,789) (355,849) (274,031) Non-current ---- 233,437 52,764 -- 677,233 726,093 --
24 de 52 Votorantim Cimentos S.A.
Notes to the condensed interim financial statements at June 30, 2012 All amounts in thousands of reais unless otherwise stated
The main transactions with related parties were carried out under the following terms and conditions:
Products are sold between related parties based on the companies' internal price lists which in the case of purchases made by the Company from Votorantim GmBH (consisting substantially of petcoke bought Votorantim GmBH from suppliers and resold to the Company) include a margin with respect to the purchase price charged by the suppliers which has been between 14% and 15¨% in the periods presented.
Services purchased include those provided by the Shared Solutions Center (Centro de Soluções Compartilhadas), or CSC, of VID related to administrative activities, human resources, back office, accounting, taxes, technical assistance, training, and those provided by the Center of Competency in Information Technology (Centro de Competência em Tecnologia da Informação). Those services are provided to all the companies of the Votorantim Group and we reimburse the expenses related to these services to VID based upon the services actually provided to us by the CSC and the CCTI.
The Fund DI is controlled by Votorantim Industrial S.A. and the balances outstanding are disclosed in Note 7.
(i) Refers to loan from VOTO-Votorantim Overseas Trading Operations IV Limited ("VOTO IV"), payable semiannually and with final maturity in 2020, bearing fixed interest of 8.5% denominated in U.S. dollars.
(ii) Refers to intercompany loan agreements, indexed monthly for inflation and carrying interest at the rate of 12% per year.
Guarantees of indebtedness of the Company and its subsidiaries granted to related parties
Percentage Amount guaranteed by Debt as June 30, guaranteed Instrument Debtor Guarantor the Company 2012 June 30, 2012 VOTO III Voto III VPAR, Fibria, VCSA, VMZ, VMN 45% 435,696 196,063 VOTO IV Voto IV VPAR, Fibria, VCSA 50% 809,564 404,782 VotoV CBA VPAR,VCSA 50% 2,056,638 1,028,319 VotoVI CBA VPAR,VCSA 50% 1,540,136 770,068 TOTAL 4,842,034 2,399,232
Amount Percentage guaranteed guaranteed by Debt as December December 31, Instrument Debtor Guarantor the Company 31, 2011 2011 VOTO III Voto III VPAR, Fibria, VCSA, VMZ, VMN 45% 427,105 192,197 VOTO IV Voto IV VPAR, Fibria, VCSA 50% 376,046 188,023 VotoV CBA VPAR,VCSA 50% 1,910,665 955,333 VotoVI CBA VPAR,VCSA 50% 1,429,272 714,636
TOTAL 4,143,088 2,050,189
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Notes to the condensed interim financial statements at June 30, 2012 All amounts in thousands of reais unless otherwise stated
Guarantees of indebtedness or related parties granted by related parties on behalf of the Company and its subsidiaries
Instrument Guarantor 6/30/2012 12/31/2011 BNDES Hejoassu 1,371,146 1,237,232 1stemissionofdebentures VPAR 1,006,403 1,008,703 2ndemissionofdebentures VID 1,022,163 1,028,924 3rdemissionofdebentures VID 622,454 628,895 4themissionofdebentures VID(*) 1,044,333 - ECAFrameworkAgreement VID(*) 98,359 94,485 Voto VII VPAR(100%) / CBA(50%) 1,937,801 1,890,100 Voto VIII VID (*) 2,569,876 1,431,217
TOTAL 9,672,535 7,319,556
(*) In 2012, after the fulfillment of certain contractual conditions, Votorantim Industrial has assumed the obligations as guarantor for certain loans and financing, previously guaranteed by its parent company, Votorantim Participações S.A.
26 de 52 Votorantim Cimentos S.A.
Notes to the condensed interim financial statements at June 30, 2012 All amounts in thousands of reais unless otherwise stated
13 Investments
(a) Analysis
(i) Parent
Equity in Restated Information on the investees at June 30, 2012 results (losses) Investment balance Profit(loss)Ownership percentage Restated(*) Equity for the six-month period Voting Total Restated (*) 6/30/2011 6/30/2012 12/31/2011 Investments accounted for on the equitymethod A21MineraçãoLtda. 11,733 4,290 85.00 85.00 3,646 46 9,973 6,327 AcariubaMineraçãoeParticipaçãoLtda. 110,537 (1,694) 100.00 100.00 (1,694) 564 110,537 112,231 CementosPortlandS.A. 206,113 (655) 29.50 29.50 (193) 60,803 56,231 Cimpor-CimentosdePortugalS.A. 5,197,503 163,444 21.21 21.21 34,667 62,742 1,908,571 1,751,017 CompanhiaCimentoRibeirãoGrande 302,965 12,306 100.00 100.00 12,306 28,029 302,965 302,736 EromarS.A. 994 (59) 100.00 100.00 (59) (66) 994 1,015 InteraviaTransportesLtda. 49,572 (2,270) - 11,922 ItacambaCementoS.A. 23,916 1,899 50.00 50.00 949 329 11,960 10,297 Maesa-MachadinhoEnergéticaS.A. 444,916 27,701 6.76 6.76 1,703 1,987 30,091 23,447 PedreiraPedraNegraLtda. 131,413 371 100.00 100.00 371 2,193 131,413 115,569 SeacrowndoBrasil,Com.Import.ePart.S.A. 11,901 290 40.45 40.45 117 128 4,814 4,692 Silcar-Empreend.ComParticip.Ltda. 448,985 60,320 100.00 100.00 60,320 60,463 448,985 428,981 VotorantimCementNorthAmericaInc 3,174,374 (39,730) 100.00 100.00 (39,730) (28,940) 3,174,374 2,984,185 VotorantimCimentosAméricasS.A. 598,924 (709) 94.55 94.55 (671) 566,256 566,926 VotorantimCimentosN/NES.A. 3,374,205 257,975 95.25 95.25 245,803 165,0313,214,158 2,968,336 VotorantimInvestimentosLatinoAmericanoS.A. 4,242,197 7,843 14.27 14.27 1,119 22,728 721,064 687,705 YguazúCementoS.A. 101,907 8,136 35.00 35.00 2,848 1,889 35,667 31,135 Otherinvestments (3) 14 6,015 3,348 Totalinvestments 321,499 329,05910,738,64010,054,178 Goodwill A21MineraçãoLtda. 807 807 CompanhiaCimentoRibeirãoGrande 205,939 205,939 PedreiraPedraNegraLtda. 11,700 11,700 St.MarysCementInc. 108,938 108,938 VotorantimCementNorthAmericaInc. 773,860 773,860 1,101,244 1,101,244 Total Investments in associates 11,839,884 11,155,422 Payables to investees LuxCemInternationalS.A. (15,850) (501) 99.99 99.99 (501) (324) (15,848) (13,666) VotorantimCementosChileLtda. (80,583) (16,725) 100.00 100.00 (16,725) 4,626 (80,583) (58,991)
Totalinvestmentsandgoodwill 304,273 333,361 11,743,453 11,082,765
27 de 52 Votorantim Cimentos S.A.
Notes to the condensed interim financial statements at June 30, 2012 All amounts in thousands of reais unless otherwise stated
(ii) Consolidated
Equity in Restated Information on the investees at June 30, 2012results (losses) Investment balance Profit (loss)Ownership percentage Restated (*) Restated (*) Restated (*) Restated (*) Equity for the six-month period Voting Total 6/30/2012 12/31/2011 6/30/2012 12/31/2011 Investments accounted for on the equitymethod CementoBioBioS.A.(b) 847,179 (36,340) 15.15 15.15 (5,505) 3,609 128,348 117,403 CementosPortlandS.A. 206,113 (655) 29.50 29.50 (193) 60,803 56,231 Cimpor-CimentosdePortugalS.A. 5,197,503 163,444 21.21 21.21 34,667 62,742 1,908,571 1,751,017 Maesa-MachadinhoEnergéticaS.A.(b) 444,916 27,701 5.62 5.62 1,703 1,987 30,091 23,447 MaréCimentoLtda.(a)(c) 143,148 25,509 51.00 51.00 13,010 12,529 73,006 115,966 MizuS.A.(a)(c) 67,932 9,175 51.00 51.00 4,679 4,496 34,645 39,475 PolimixCimentoLtda.(a)(c) 30,345 51.00 51.00 15,476 15,476 PolimixConcretoLtda.(a) 349,681 5,591 27.57 27.57 1,541 1,250 96,413 45,186 SiramaParticipaçõesLtda. 657,156 81,995 38.25 38.25 31,364 35,840 251,367 225,583 SupermixConcretoS.A. 175,409 18,142 25.00 25.00 4,535 3,801 43,852 48,284 VeronaParticipaçõesLtda.(a) 105,167 31,637 25.00 25.00 7,909 5,215 26,292 28,359 VotorantimInvestimentosLatinoAmericanoS.A. 4,242,197 31,637 14.27 14.27 1,119 22,728 721,064 687,705 YguazúCementoS.A. 101,907 8,136 35.00 35.00 2,848 1,890 35,667 31,135 Otherinvestments 291 14 68,545 56,144 97,968 156,101 3,494,140 3,241,411
(a) Relates to investees of the Company’s subsidiary Silcar - Empreendimentos Comércio e Participações Ltda. Silcar's participation relates only to certain product segments of the investee and, accordingly, it does not have control or shared control and receives dividends in amounts disproportional to its percentage of ownership. However the Company has significant influence over these entities.
(b) Relates to investees for which the Company has an equity participation below 20% of voting interest but we excerpt significant influence over their activities through shareholders agreements to which the Company is party.
(c) Relates to companies in which we have a participation above 50%, however we do not have control of these entities due to limited rights as to make strategic, operating and finance decisions.
28 de 52 Votorantim Cimentos S.A.
Notes to the condensed interim financial statements at June 30, 2012 All amounts in thousands of reais unless otherwise stated
(b) Change in investments
Parent Consolidated Restated Restated Restated Restated 2012 2011 2012 2011 Balance at the beginning of the six-month period 11,082,765 10,990,914 3,241,411 3,521,492 Equity in the earnings of investees 304,273 333,361 97,968 156,101 Foreign exchange gains (losses) 387,019 (165,271) 188,124 13,358 Other comprehensive income (28,851) 25,688 (6,724) (60,995) Dividends received and receivable (17,307) (77,879) (97,706) (77,879) Capital Increase 2,629 45,306 Acquisitions of investments 12,946 35,633 72,047 71,458 Disposal of investments and capital reduction (21) (19,702) (980) (19,365) Balance at the end of the six-month period 11,743,453 11,122,744 3,494,140 3,649,476
29 de 52 Votorantim Cimentos S.A.
Notes to the condensed interim financial statements at June 30, 2012 All amounts in thousands of reais unless otherwise stated
14 Property, plant and equipment
(a) Changes and analysis
(i) Parent
Restated 2012 2011 Land and Equipment and Leasehold Furniture and Construction buildings facilities improvements Vehicles fittings in progress Total PP&E Total PP&E
Balance at the beginning of the period Cost 994,650 3,754,600 22,312 278,491 49,263 901,602 6,000,918 4,873,926 AcummulatedDepreciation (431,614) (1,875,534) (9,158) (195,697) (40,099) - (2,552,102) (2,445,819) Net balance at the beginning of the period 563,036 1,879,066 13,154 82,794 9,164 901,602 3,448,816 2,428,107
Balanceatthebeginningoftheperiod 563,036 1,879,066 13,154 82,794 9,164 901,602 3,448,816 2,428,107 Purchases 36 12,178 4 400 13 683,009 695,640 567,806 Disposals (56) (56)(121) Depreciation (13,522) (70,656) (1,539) (17,265) (807) (103,789) (59,387) Transfers 36,623 154,094 3,249 5,803 1,766 (285,999) (84,464) Net balance 586,173 1,974,682 14,868 71,676 10,136 1,298,612 3,956,147 2,936,405
Cost 1,031,309 3,920,872 25,565 284,638 51,042 1,298,612 6,612,038 5,443,268 Acummulated Depreciation (445,136) (1,946,190) (10,697) (212,962) (40,906) - (2,655,891) (2,506,863)
Net balance 586,173 1,974,682 14,868 71,676 10,136 1,298,612 3,956,147 2,936,405
Averageannualdepreciationrates-% 2 9 8 23 10
30 de 52 Votorantim Cimentos S.A.
Notes to the condensed interim financial statements at June 30, 2012 All amounts in thousands of reais unless otherwise stated
(ii) Consolidated
2012 2011 Land and Equipment and Leasehold Furniture and Construction buildings facilities improvements Vehicles fittings in progress Other Total PP&E Total PP&E Balance at the beginning of the period Cost 2,230,215 7,191,878 296,501 697,263 65,577 1,302,588 23,997 11,808,019 9,942,155 AcummulatedDepreciation (734,318) (3,460,568) (126,629) (470,381) (53,514) (8,344) (4,853,754) (4,360,857) Net balance at the beginning of the period 1,495,897 3,731,310 169,872 226,882 12,063 1,302,588 15,653 6,954,265 5,581,298
Balanceatthebeginningoftheperiod 1,495,897 3,731,310 169,872 226,882 12,063 1,302,588 15,653 6,954,265 5,581,298
Purchases 1,862 19,015 10 4,574 121 821,185 846,767 820,077 Disposals (2,243) (1,049) (5) (643) (3,940) 71,982 Depreciation (24,947) (158,182) (7,102) (35,929) (1,201) (1,632) (228,993) (178,680) Foreignexchangegains(losses) 36,400 36,380 12,551 16,360 3,001 10,341 115,033 (91,886) Effects of subsidiaries includedinconsolidation 24,519 Transfers 66,684 224,526 6,988 6,596 3,252 (399,334) (91,288) (37,717)
Balance at the end of the period 1,575,896 3,850,806 182,319 217,434 17,231 1,734,137 14,021 7,591,844 6,189,593
Cost 2,335,161 7,469,556 316,050 723,744 71,946 1,734,137 23,997 12,674,591 10,779,672 Acummulated Depreciation (759,265) (3,618,750) (133,731) (506,310) (54,715) - (9,976) (5,082,747) (4,590,079)
Net Balance 1,575,896 3,850,806 182,319 217,434 17,231 1,734,137 14,021 7,591,844 6,189,593
Averageannualdepreciationrates-% 2 8 8 23 10 4 4
In relation the Company has no contractual commitments for the purchase of new fixed assets
31 de 52 Votorantim Cimentos S.A.
Notes to the condensed interim financial statements at June 30, 2012 All amounts in thousands of reais unless otherwise stated
(b) Main construction in progress, consolidated
The balance of construction in progress is comprised mainly of projects for expansion and optimization of the industrial units, as presented below: Consolidated 6/30/2012 12/31/2011 Acquisitionofcementmixertrucks-Engemix 41,197 NewproductionlineinRioBranco/PR 330,426 162,975 NewunitinCuiabá/MT 312,298 133,083 NewunitinEdealina/GO 99,691 40,781 NewproductionlineinSaltodePirapora 39,198 39,458 NewplantinVidalRamos/SC 22,071 31,393 NewunitinPrimavera/PA 31,076 22,732 Acquisitionsofland 31,492 21,375 CrushinginSãoLuis/MA 20,169 NewunitinPortoVelho/RO 18,916 ConstructionandpavinginVicenteMatheus 12,856 12,856 NewunitinXambioá 12,415 PozzolanacrushinginPotyPaulista 11,787 NewunitinItuaçú/BA 11,695 10,299 CementcrushinginImbituba 7,080 CementcrushingZ3inCimesa 29,608
The Company has bank loans collateralized by assets and property amounting to R$ 63,228 at June 30, 2012.
32 de 52 Votorantim Cimentos S.A.
Notes to the interim financial statements at June 30, 2012 All amounts in thousands of reais unless otherwise stated
15 Intangible assets
(a) Analysis and changes
(i) Parent
Restated 2012 2011 Rights over natural Total intangible Total intangible resources Software Goodwill Other assets assets Balance at the beginning of the period Cost 143,929 90,498 75,882 44,650 354,959 388,476 Accumulatedamortization (28,281) (73,475) (19,548) (121,304) (118,169) Net balance at the beginning of the period 115,648 17,023 75,882 25,102 233,655 270,307
Balance at the beginning of the period 115,648 17,023 75,882 25,102 233,655 270,307 Purchases 1,378 1,378 3,494 Amortization (4,773) (4,754) (1,681) (11,208) (12,369) Transfers 81,079 3,385 84,464 9,950
Balance atthe end of the period 193,332 15,654 75,882 23,421 308,289 271,382
Cost 226,386 93,883 75,882 44,650 440,801 401,920 Accumulated depreciation (33,054) (78,229) (21,229) (132,512) (130,538)
Net balance 193,332 15,654 75,882 23,421 308,289 271,382
Average annual amortization rates - % 10 20
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Notes to the interim financial statements at June 30, 2012 All amounts in thousands of reais unless otherwise stated
(ii) Consolidated
Restated 2012 2011 Contractual customer relationships Rights over and non- natural Use of public competition Total intangible Total intangible Goodwill resources Software assets agreements Other assets assets Balance at the beginning of the period Cost 2,009,307 1,134,195 132,938 197,342 265,735 122,612 3,862,129 3,570,228 Accumulatedamortization (76,137) (110,895) (43,910) (87,877) (77,158) (395,977) (310,789) Netbalanceatthebeginningoftheperiod 2,009,307 1,058,058 22,043 153,432 177,858 45,454 3,466,152 3,259,439
Balance at the beginning of the period 2,009,307 1,058,058 22,043 153,432 177,858 45,454 3,466,152 3,259,439 Purchases 8,634 1,235 131 10,000 11,671 Amortization (13,746) (6,278) (3,028) (14,560) (1,713) (39,325) (22,551) Foreign exchange gains (losses) 56,741 70,395 364 12,301 139,801 (91,433) Transfers 88,093 3,195 91,288 63,987
Balance atthe end of the period 2,066,048 1,211,434 20,559 150,404 163,298 56,173 3,667,916 3,221,113
Balance at the end of the period Cost 2,066,048 1,301,317 137,732 197,342 265,735 135,044 4,103,218 3,554,453 Accumulateddepreciation (89,883) (117,173) (46,938) (102,437) (78,871) (435,302) (333,340)
Net balance 2,066,048 1,211,434 20,559 150,404 163,298 56,173 3,667,916 3,221,113 Averageannualamortizationrates-% 10 20 3 15-5
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Notes to the interim financial statements at June 30, 2012 All amounts in thousands of reais unless otherwise stated
(b) Goodwill arising on acquisitions
We allocate goodwill to cash generating units (CGU) or groups of CGUs with each CGU or group of CGUs being the lowest level at which goodwill is monitored for internal management purposes and not being larger than an operating segment. We allocated goodwill related to our operations in North America to our operating segment North America and we allocated goodwill related to business acquired in Brazil to CGUs which are the specific business acquired as detailed below:
Consolidated Restated 3/31/2012 12/31/2011 OperatingsegmentNorthAmerica"VCNA" 1,655,258 1,598,517 Goodwill related to bussines acquired in Brazil CompanhiaCimentoRibeirãoGrande 205,939 205,939 Engemix S.A. 75,882 75,882 CJMineraçãoLtda. 15,641 15,641 Pedreira Pedra Negra Ltda. 11,700 11,700 MineraçãoPotiliderLtda 71,401 71,401 Petrolina Zeta Mineração Ltda 13,455 13,455 Other 16,772 16,772
2,066,048 2,009,307
35 de 52 Votorantim Cimentos S.A.
Notes to the interim financial statements at June 30, 2012 All amounts in thousands of reais unless otherwise stated
16 Borrowings
(a) Analysis
(i) Parent Type Averageannual Current Non-current Total charges (%) 6/30/2012 12/31/2011 6/30/2012 12/31/2011 6/30/2012 12/31/2011 In local currency BNDES TJLP + 2.87% 93,005 48,369 711,736 498,184 804,741 546,553 BNDES 5.11% 14,872 124,855 139,727 Debentures 112.66% CDI / 1.09% 95,353 66,523 3,600,000 2,600,000 3,695,353 2,666,523 FINAME TJLP + 2.39% / 5.86% 18,142 22,278 67,264 41,252 85,406 63,530 PADES (Tax incentive) 10,372 26,761 37,133 Other 12,576 902 37,885 2,664 50,461 3,566 Subtotal 219,076 163,316 4,416,885 3,293,716 4,635,961 3,457,032
In foreign currency Development promotion agency LIBOR + 1.39% 8,306 7,473 90,053 87,012 98,359 94,485 BNDES UMBNDES + 2.46% 15,273 9,351 148,745 135,640 164,018 144,991 Eurobonds - EUR 5.25% 17,364 64,431 1,920,437 1,825,669 1,937,801 1,890,100 Eurobonds - USD 7.32% 43,251 24,367 2,526,626 1,406,850 2,569,877 1,431,217 Subtotal 84,194 105,622 4,685,861 3,455,171 4,770,055 3,560,793 Total 303,270 268,938 9,102,746 6,748,887 9,406,016 7,017,825
Interest on borrow ings 165,041 163,555 Current portion of long-term borrow ings (principal) 138,229 105,383 Total borrowings 303,270 268,938
EUR - Euro USD- US dollar BRL - Local currency “Reais” BNDES - National Bank for Economic and Social Development FINAME- Government Agency for Machinery and Equipment Financing UMBNDES - Monetary unit of the BNDES URTJLP - Long-term Interest Rate set by the National Monetary Council. The TJLP is the basic cost of financing of BNDES. CDI - Interbank Deposit Certificate PADES - Federal District Economic and Social Development Support Program Development promotion agency - HSBC Bank
36 de 52 Votorantim Cimentos S.A.
Notes to the interim financial statements at June 30, 2012 All amounts in thousands of reais unless otherwise stated
At June 30, 2012, borrowings fall due as follows:
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 onward Total
In local currency BNDES 39,468 118,418 156,999 156,272 153,021 100,886 45,511 34,167 804,742 FINAME 10,574 15,045 13,507 13,775 13,700 9,168 3,574 2,591 1,746 1,244 483 85,407 Debentures 95,353 1,320,000 1,400,000 640,000 240,000 3,695,353 Other 7,906 14,288 14,621 9,505 4,023 116 50,459 Subtotal 153,301 147,751 185,127 179,552 166,721 110,054 1,369,085 1,440,781 641,862 241,244 483 4,635,961
% 3.31 3.19 3.99 3.87 3.60 2.37 29.53 31.08 13.85 5.20
In foreign currency BNDES 6,793 19,606 30,414 30,695 30,486 23,298 12,470 9,824 431 164,017 Development promotion agency 4,598 8,953 10,489 10,489 10,489 10,489 10,489 10,489 10,489 6,780 4,607 98,361 Eurobonds - USD 43,251 2,526,625 2,569,876 Eurobonds - EUR 17,364 1,920,437 1,937,801 Subtotal 72,006 28,559 40,903 41,184 40,975 1,954,224 22,959 20,313 10,920 6,780 2,531,232 4,770,055
% 1.51 0.60 0.86 0.86 0.86 40.97 0.48 0.43 0.23 0.14 53.07
Total 225,307 176,310 226,030 220,736 207,696 2,064,278 1,392,044 1,461,094 652,782 248,024 2,531,715 9,406,016
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Notes to the interim financial statements at June 30, 2012 All amounts in thousands of reais unless otherwise stated
(ii) Consolidated
Type Average annual Current Non-current Total charges (%) 6/30/2012 12/31/2011 6/30/2012 12/31/2011 6/30/2012 12/31/2011 In local currency BNDES TJLP + 2,79% / 5,06% 178,170 142,243 969,445 896,181 1,147,615 1,038,424 Debentures 112,66 CDI / 1,09 95,353 66,523 3,600,000 2,600,000 3,695,353 2,666,523 FINAME TJLP + 2,39 / 5,82 18,763 22,887 69,745 44,047 88,508 66,934 Working capital 10.00% 902 3,120 2,664 3,120 3,566 Other 24,996 20,377 54,404 42,177 79,400 62,554 Subtotal 317,282 252,932 4,696,714 3,585,069 5,013,996 3,838,001
In foreign currency Development promotion agency LIBOR + 1.39% 8,306 7,473 90,053 87,012 98,359 94,485 BNDES UMBNDES + 2.39% 26,585 18,527 196,946 180,281 223,531 198,808 Eurobonds - EUR 5.25% 17,364 64,431 1,920,436 1,825,669 1,937,800 1,890,100 Eurobonds - USD 7.32% 43,252 24,366 2,526,625 1,406,850 2,569,877 1,431,216 Syndicated loans LIBOR + 1.75% 23,711 36,673 437,850 543,841 461,561 580,514 Working capital LIBOR + 3.00% 7,061 9,149 7,061 9,149 Other 47,174 14,795 14,439 61,969 14,439 Subtotal 173,453 160,619 5,186,705 4,058,092 5,360,158 4,218,711 Total 490,735 413,551 9,883,419 7,643,161 10,374,154 8,056,712
Interest on borrow ings 171,966 168,452 Current portion of long-term borrow ings (principal) 264,533 235,950 Short-term borrow ings 54,236 9,149 Total borrowings 490,735 413,551
EUR - Euro USD- US dollar BRL - Local currency “Reais” BNDES - National Bank for Economic and Social Development FINAME- Government Agency for Machinery and Equipment Financing UMBNDES- Monetary unit of the BNDES URTJLP - Long-term Interest Rate set by the National Monetary Council. The TJLP is the basic cost of financing of BNDES. CDI - Interbank Deposit Certificate PADES - Federal District Economic and Social Development Support Program
38 de 52 Votorantim Cimentos S.A.
Notes to the interim financial statements at June 30, 2012 All amounts in thousands of reais unless otherwise stated
At June 30, 2012, borrowings fall due as follows:
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 onward Total
In local currency BNDES 81,749 198,008 230,571 229,844 201,853 117,729 52,295 35,565 --- 1,147,615 FINAME 10,882 15,673 14,050 14,311 14,235 9,676 3,617 2,591 1,746 1,244 482 88,508 Debentures 95,353 ----- 1,320,000 1,400,000 640,000 240,000 - 3,695,353 Working capital 456 888 888 888 ------3,120 Other 16,169 21,955 20,993 12,674 1,468 1,468 533 4,023 116 -- 79,400 Subtotal 204,609 236,524 266,503 257,717 217,557 128,874 1,376,445 1,442,178 641,862 241,244 482 5,013,996
% 4.08 4.72 5.32 5.14 4.34 2.57 27.45 28.76 12.80 4.81 0.01
In foreign currency BNDES 12,244 31,745 42,767 43,048 40,134 28,212 14,489 10,462 431 -- 223,531 Development promotion agency 4,598 8,953 10,489 10,489 10,489 10,489 10,489 10,489 10,489 6,780 4,608 98,359 Eurobonds - USD 43,252 ------2,526,625 2,569,877 Eurobonds - EUR 17,363 ---- 1,920,437 ----- 1,937,800 Syndicated loans 14,661 29,556 34,000 50,976 332,368 ------461,561 Working capital 7,061 ------7,061 Other 49,319 174 392 445 503 565 632 704 781 864 7,591 61,969 Subtotal 148,497 70,428 87,648 104,957 383,493 1,959,703 25,609 21,654 11,701 7,644 2,538,824 5,360,158
% 2.77 1.31 1.64 1.96 7.15 36.56 0.48 0.40 0.22 0.14 47.36
Total 353,106 306,952 354,151 362,674 601,050 2,088,577 1,402,054 1,463,832 653,563 248,888 2,539,306 10,374,154
(b) Changes
Parent Consolidated 6/30/2012 6/30/2011 6/30/2012 6/30/2011 Balance at the beginning of the six-month period 7,017,825 4,310,493 8,056,712 5,248,323 Funding transactions 2,048,801 2,309,518 2,142,085 2,434,303 Repayments (47,187) (46,676) (269,719) (143,958) Foreign exchange gains (losses) 390,919 383,451 442,311 457,928 Accrued interest 363,743 539,113 394,736 610,345 Interest paid (368,085) (478,074) (391,972) (550,229) Balance at the end of the six-month period 9,406,016 7,017,825 10,374,154 8,056,712
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Notes to the interim financial statements at June 30, 2012 All amounts in thousands of reais unless otherwise stated
(c) Analysis by currency
Parent Consolidated 6/30/2012 12/31/2011 6/30/2012 12/31/2011
Real 4,635,961 3,457,032 5,013,996 3,838,001 Dollar 2,668,235 1,525,701 3,186,570 2,118,796 Euro 1,937,801 1,890,100 1,937,800 1,890,100 Basket of currencies 164,019 144,992 220,993 195,375 Other 14,795 14,438
Total 9,406,016 7,017,825 10,374,154 8,056,712
(d) Analysis by index
ConsolidatedParent 6/30/2012 12/31/2011 6/30/2012 12/31/2011
In local currency CDI 3,695,977 2,666,523 3,695,353 2,666,523 TJLP 707,979 569,322 1,039,787 905,860 Fixed rate 232,005 219,899 265,192 255,670 Other 1,288 13,664 9,948
4,635,961 3,457,032 5,013,996 3,838,001
In foreign currency LIBOR 98,359 94,485 566,981 684,148 UMBNDES 164,642 144,990 221,617 198,808 Fixed rate 4,507,054 3,321,318 4,570,126 3,333,235 Other 1,434 2,520
4,770,055 3,560,793 5,360,158 4,218,711
Total 9,406,016 7,017,825 10,374,154 8,056,712
(e) Funding transactions
(i) In January 2012, the Company concluded its fourth public issuance of simple, non-convertible, unsecured debentures in two series of R$ 500 each. The debentures were distributed with restricted placement efforts and are exempt from registration with the Brazilian Securities Commission ("CVM"), pursuant to article 6 of CVM Instruction 476, of January 16, 2009. The first series, in the amount of R$ 500, yields CDI + 1.09% p.a., and the second series, also in the amount of R$ 500, yields 111% of the CDI variation. Both series mature in May 2018.
(ii) In February 2012, the Company issued US$ 500 million in the international market through the reopening of a bonds issue maturing in April 2041.With the amount raised the principal of the transaction increased to US$ 1,250 million and the other conditions were maintained, including the payment of a half-yearly coupon of 7.25% per year. The issuance was rated “BBB” by Standard & Poor’s”, “Baa3” by Moody’s and “BBB-“ by Fitch. The funds raised from the issuance will be used for the early repayment of borrowings, thereby extending the debt maturity profile.
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Notes to the interim financial statements at June 30, 2012 All amounts in thousands of reais unless otherwise stated
(iii) In November 2011, the subsidiary Votorantim Cement North America (VCNA) renegotiated a US$ 325 million syndicated loan raised in October 2010, extending its maturity to 2016 and reducing the interest rate. The other contractual conditions remained unaltered.
(iv) On April 4, 2011, the Company issued bonds in the international capital market of US$750 million, maturing in 30 years and due in April 2041. The bonds are rated "BBB" by Standard & Poor's, "Baa3" by Moody's and "BBB-" by Fitch Ratings. This transaction is guaranteed by Votorantim Participações S.A. and Votorantim Industrial S.A..; the latter will cease to be one of the guarantors after the fulfillment of certain requirements. The bonds accrue interest of 7.25% p. a., payable semiannually. The proceeds from the issuance will be used for the early repayment of borrowings, thus extending the debt profile.
(v) In March 2011, the Company incurred US$ 36 million of indebtedness with the guaranty of the Danish Agency for long-term financing "EKF" for imported equipment with a term of 10 years, bearing interest of LIBOR + 1.385% a year.
(vi) In February 2011, the Company completed its third public issuance of simple, non-convertible, non- privileged, unsecured debentures in a single series. The debentures were distributed with restricted placement efforts and are exempt from registration with the CVM, pursuant to article 6 of CVM Instruction 476, of January 16, 2009. The issuance of R$ 600, with maturity in February 2021, pays 113.90% of the CDI.
(f) Fair value of borrowings
Parent Consolidated 6/30/2012 6/30/2012 Book value Fair value Book value Fair value In local currency
BNDES 804,741 796,802 1,147,615 1,138,457 FINAME 85,406 85,372 88,508 88,364 Debentures 3,695,353 3,920,240 3,695,353 3,920,240 Other 50,462 45,245 82,520 77,303
Subtotal 4,635,962 4,847,659 5,013,996 5,224,364
In foreign currency
BNDES 164,018 183,953 223,531 249,303 Development promotion agency 98,359 93,808 98,359 93,808 Eurobonds - USD 2,569,876 2,590,473 2,569,877 2,590,473 Eurobonds - EUR 1,937,801 2,046,184 1,937,801 2,046,184 Syndicated loans 461,560 458,040 Working capital 7,061 7,061 Other 61,969 61,969 Subtotal 4,770,054 4,914,418 5,360,158 5,506,838
Total 9,406,016 9,762,077 10,374,154 10,731,202
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Notes to the interim financial statements at June 30, 2012 All amounts in thousands of reais unless otherwise stated
17 Deferred income tax and social contribution
(a) Reconciliation of the income tax and social contribution expense
The income tax and social contribution amounts presented in the statement of income for the periods ended June 30 are reconciled from their Brazilian statutory rates as follows:
Parent Consolidated 2012 2011 2012 2011 Profit before income tax, social contribution and non-controlling interests 469,377 829,401 563,624 896,042 Statutoryrates 34% 34% 34% 34% IRPJandCSLLatstatutoryrates (159,588) (281,996) (191,632) (304,654)
Adjustments to calculate IRPJ and CSLL at statutoryrates Equityintheearningsofinvestees 91,666 92,010 21,522 31,742 Donationsandgrantsforinvestments 3,124 298 35,800 19,982 Amountnotsubjecttotheincometaxsurcharge 3,864 4,170 4,185 4,183 Otherpermanentadditions(deductions),net 8,114 (25,100) (3,788) (19,719) IRPJandCSLLcalculated (52,820) (210,618) (133,913) (268,466) Current (90,539) (124,193) (187,728) (217,180) Deferred 37,719 (86,425) 53,815 (51,286) IRPJandCSLLexpense (52,820) (210,618) (133,913) (268,466)
(b) Analysis of deferred tax balances
Deferred income tax and social contribution balances are as follows:
42 de 52 Votorantim Cimentos S.A.
Notes to the interim financial statements at June 30, 2012 All amounts in thousands of reais unless otherwise stated
Parent Consolidated 6/30/2012 12/31/2011 6/30/2012 12/31/2011 Assets
Tax losses 154,444 101,377 Temporary differences Provision for participation on results - PPR 11,934 15,011 13,941 17,464 Tax contingencies 171,169 199,793 245,718 273,795 Allowance for doubtful accounts 2,550 2,412 5,559 3,612 Provision for inventories losses 14,758 19,029 30,631 36,566 Provision for investments losses 16,245 16,245 22,707 45,113 Provision for taxes under litigation with judicial deposits 41,245 38,593 69,893 63,343 Foreign exchange taxed on cash basis 206,966 72,311 206,966 73,702 Use of Public Asset 80,172 75,056 Other 49,585 20,251 72,583 69,112 514,452 383,645 902,614 759,140
Liabilities
Depreciation of property, plant and equipament 155,816 140,472 374,596 311,203 Amortization of goodwill 157,357 183,668 157,357 Difference in basis on investment in Cimpor 391,018 391,018 391,018 Deffered taxon step up of asset acquired 31,278 33,502 Other 128,953 65,012 96,608 90,246 859,455 753,859 1,077,168 983,326
18 Provisions
Parent Consolidated Restated Restated 3/31/2012 12/31/2011 3/31/2012 12/31/2011 Asset retirement obligation (57,197) (54,380) (62,828) (59,859) Legal Claims (571,462) (601,096) (823,878) (835,114)
(628,659) (655,476) (886,706) (894,973)
The Company is a party to tax, labor, civil and other ongoing lawsuits in progress and is contesting matters both at the administrative and judicial levels, which are backed by judicial deposits, where applicable.
The provision and the corresponding judicial deposits are as follows:
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Notes to the interim financial statements at June 30, 2012 All amounts in thousands of reais unless otherwise stated
(a) Analysis of balances
Parent Restated 03/31/2012 12/31/2011 Provision for Judicial Provision for Judicial deposits contingencies Total, net deposits contingencies Total, net
Tax 231,630 (696,777) (465,147) 224,971 (720,705) (495,734) Labor 2,322 (45,414) (43,092) 2,143 (47,741) (45,598) Civil and other 8,245 (71,468) (63,223) 6,616 (66,380) (59,764) 242,197 (813,659) (571,462) 233,730 (834,826) (601,096)
Consolidated Restated 03/31/2012 12/31/2011 Provision for Judicial Provision for Judicial deposits contingencies Total, net deposits contingencies Total, net
Tax 308,776 (983,098) (674,322) 313,333 (994,582) (681,249) Labor 4,637 (71,071) (66,434) 5,517 (69,732) (64,215) Civil 25,785 (108,907) (83,122) 13,877 (103,527) (89,650) 339,198 (1,163,076) (823,878) 332,727 (1,167,841) (835,114)
(b) Changes in provisions for legal claims
Parent Consolidated 2012 2011 2012 2011
Balance at the beginning of the six-month period 601,096 458,897 835,114 691,376 Additions (net of reversals) 36,468 71,430 69,418 94,361 Judicial deposits (net of write-offs) (8,467) (134,194) (6,470) (156,014) Payments (74,148) (12,310) (93,779) (18,937) Indexations and reversals 16,513 12,116 19,595 8,730 Balance at the end of the six-month period 571,462 395,939 823,878 619,516
The main lawsuits in which the Company is involved at June 30, 2012 are as follows:
(c) Nature of provisions for legal claims
The main lawsuits in which the Company is involved at June 30, 2012 are as follows:
(i) Tax lawsuits
These refer mainly to disputes concerning federal, state and municipal taxes.The main tax lawsuits refer to collection of ICMS (State Value-added Tax on Sales and Services), PIS (Social Integration Program), COFINS (Social Contribution on Revenues), IRPJ (Corporate Income Tax) and CSLL (Social Contribution on Net Income).
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Notes to the interim financial statements at June 30, 2012 All amounts in thousands of reais unless otherwise stated
(ii) Labor lawsuits
Refer mainly to lawsuits filed by former employees and outsourced employees claiming payment of indemnity upon termination, health and safety hazard bonuses, risk premiums, overtime, commuting hours, as well as civil lawsuits referring to indemnity claims by former employees or employees from outsourced companies based on alleged occupational illnesses, work accidents, property and personal damages.
(iii) Civil lawsuits
The main lawsuits relate to claims for environmental and property damages and pain and suffering.
(iv) Lawsuits regarded as possible losses
The Company and its subsidiaries are parties to other tax, labor and civil lawsuits involving possible loss risks, as detailed below:
Consolidated Restated(*) 12/31/2011 Tax 1,281,422 779,682 Civil 1,107,888 521,979 Other 23,395 20,954 2,412,705 1,322,615
Description of the main probable and possible legal proceedings
Tax Liabilities and Contingencies
In December, 2011, eight tax assessments in the total amount of R$448.2 million were issued by the Brazilian Federal Revenue Service (Receita Federal Brasileira), or RFB, against us alleging failure to pay IRPJ and CSLL in respect of the 2006 and 2007 tax years. The tax assessments issued in relation to the 2006 tax year allege that we engaged in tax planning using the presumed profits regime after we assumed certain operations that were previously performed by other entities of the same economic group that were taxed under the real profits regime. According to the tax authorities, our failure to present certain documents during the course of the tax audit and the nature of the tax planning that we engaged in lead us to have taxable profits during the 2006 tax year.
The tax assessments issued in connection with the 2007 tax year are based on the argument of tax authorities that, due to the restructuring we performed in 2006, we lost the right to benefit from the tax losses that were carried forward over the years, which reduced the taxable profit we earned in 2007. We consider the expectation of loss under these claims was considered 9% possible and the remainder as remote. As of December 31, 2011 the total amount in controversy was R$485.0 million, and we had not recorded any provision in connection with these tax assessments.
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Notes to the interim financial statements at June 30, 2012 All amounts in thousands of reais unless otherwise stated
The DNPM issued several tax assessments against us, alleging that we owed CFEM related to the period from 1991 until 2011. As of December 31, 2011, the amount in controversy was R$366.1 million, of which we consider approximately R$279.3 million as a possible loss and approximately R$86.8 million as a probable loss. We have established a provision of R$86.8 million with respect to these tax assessments.
Civil, Administrative and Environmental Liabilities and Contingencies
Transklein Litigation
In August 2010, Transklein Transporte e Carga Ltda. filed a claim against VCNNE seeking compensation for damages in the amount of R$123.7 million, alleging that VCNNE failed to comply with the minimum volume of transportation established in the cement transportation agreement entered into by the parties. VCNNE was notified of this claim in March 2011 and presented its response, which was replied by Transklein, which also made a plea of lack of jurisdiction. In June 2012, the court determined that Transklein should present a response regarding its request for an exemption from its obligation to pay for legal fees in connection with this matter. We presented a formal objection against the court’s decision, and the proceeding was suspended until the court issues its ruling on this matter. On January 22, 2013, the court published its decision accepting our plea and transferring the case to the civil court in the city of Recife. Based on the advice of its external legal counsel, VCNNE believes the probability of loss under this claim is possible and, consequently, did not record any provision with respect to this claim.
Tabernaculo Litigation
In September 2005, Tabernaculo Comercial e Transportadora Ltda., or Tabernaculo, filed a claim against VCB (which was merged into us) seeking compensation for material damages in the amount of R$84.2 million and moral damages in an unspecified value. Tabernaculo argues that those breaches caused the discontinuance of the activities of the sales department and huge losses to its transportation area.
In August 2011, the court had denied the argument of the expiration of the statute of limitations alleged by us and determined the implementation of the expert examination requested by Tabernaculo, which has not yet been completed. The expectation of loss under this claim is considered possible (R$151.2 million).
Anti-Trust Matters
In 2006, the SDE initiated administrative investigations of several of the largest Brazilian cement companies, which investigations relate to allegations of anti-competitive practices that include the formation of cartels. If our cement companies are found to have violated these antitrust laws, we could be subject to administrative and criminal penalties, including an administrative fine that could range from 1.0% to 30.0% of the cement companies’ annual after-tax revenues, or range from 0.1% to 20% of their annual after-tax revenues based on the latest Brazilian antitrust law. The SDE issued a non- binding recommendation to CADE on November 10, 2011 to impose fines on the cement companies under investigation, including our Brazilian cement companies, for breach of Brazilian antitrust laws. This opinion was sent to CADE for its analysis, but is not binding on CADE. There is no formal deadline for CADE to complete its review of this matter and issue its decision, so it may issue its decision at any time.
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Notes to the interim financial statements at June 30, 2012 All amounts in thousands of reais unless otherwise stated
(v) Expected timing of settling provisions
In general the Company´s litigation provisions are long term liabilities considering the time required to conclude legal cases through the court system in Brazil. Due to this fact, we note that it is difficult to make accurate estimates regarding the specific year that a legal case will be concluded, particularly in the earlier stages of a case. For this reason, the Company has not included estimates regarding future settlement date for the most significant provisions resulting from litigation.
(d) Use of Public Assets (UBP)
The subsidiary VCNNE has been granted the right to use (UBP) the hydroeletrical potential for generation of electric energy. The UBP agreements require annual cash payments to be made which are adjusted based on the IGPM inflation index in exchange for such right of use.
The contracts have an average duration of 35 years, and the amounts to be paid annually are as follows:
6/30/2012 12/31/2011 Percentage Concession Concession Payment Plants Investor ownershipstartdate enddate startdate LiabilitiesLiabilities Pedra do Cavalo Votorantim Cimentos N/NE S.A. 100% mar/02 abr/37 abr/06 386,204 374,185 CurrentLiabilities (22,578) (22,005) Non-currentLiabilities 363,626 352,180
19 Equity
(a) Share capital
At December 31, 2010, fully subscribed and paid-up capital was represented by 110,183,998, common shares without par value.
On January 20, 2011, the Extraordinary General Stockholders Meeting approved a capital increase of R$400,000 through the use of part of the revenue reserves, from R$ 2,327,212 to R$2,727,212, comprising 110,635,438 shares.
In the first half of 2011, the Extraordinary General Stockholders Meeting approved a capital increase of R$ 14,613 through the issue of 355,388 new common shares without par value, from R$ 2,727,212 to R$ 2,741,825.
On December 31, 2011, the Company made a capital increase of R$ 4,199 through the issue of 96,052 new common shares without par value, from R$ 2,741,825 to R$ 2,746,024. The shares issued were fully subscribed an paid up by the parent company Votorantim Industrial S.A., with express consent of the Company’s other shareholders and waiver of their preemptive rights to the subscription of the shares issued.
At June 30, 2012, the fully subscribed and paid-up capital comprises110, 635,438 common shares amounting to R$ 2,746,024.
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Notes to the interim financial statements at June 30, 2012 All amounts in thousands of reais unless otherwise stated
(b) Legal reserve and profit retention reserve
The legal reserve is credited annually with 5% of the profit for the year and cannot exceed 20% of share capital. The purpose of the legal reserve is to ensure the integrity of capital. The reserve can only be used to increase capital and offset accumulated losses.
The profit retention reserve was formed to record the retention of the remaining balance of retained earnings, in order to shield funds for projected business growth pursuant to the Company's investment plan.
(c) Tax incentive reserve
The tax incentive reserve is constituted in accordance with article 195-A of the Brazilian Corporation Law (as amended by Law No. 11638 of 2007); this reserve is credited with the benefits of tax incentives, which are recognized in the statement of income for the year and allocated from retained earnings to this reserve. These incentives are not included in the calculation of the minimum mandatory dividend.
(d) Cumulative other comprehensive income
The Company recognizes under this caption the effects of exchange rate changes on investments in direct or indirect subsidiaries abroad. This accumulated effect will be reversed to income as a gain or loss in the event of disposal or write-off of the investment.
For purchases of non-controlling interests, the difference between any consideration paid and the share acquired of the carrying value of the net assets of the subsidiary is recorded in stockholders' equity. Gains or losses on disposals of non-controlling interests are also recorded directly in stockholders' equity.
Also included under this caption are foreign exchange gains/losses on loan and financing agreements in foreign currency designated as hedge of part of the investments abroad (net investment hedge) and cash flow at January 1, 2011.
Exchange gains (losses) Actuarial gains and losses Hedge of a Interest in comprehensive on investment abroad on retirement benefits net investment income of associated companies TOTAL AtJanuary1,2011 (193.407) (73.404) 92.492 85.575 (88.744) Exchangegains(losses)oninvestmentabroad (165.271) (165.271) Hedgeofanetinvestment/cashflowhedge (57.676) (57.676) Interestincomprehensiveincomeofassociatedcompanies 75.016 75.016 Deferredincometax - 19.610 19.610
AtJune30,2011 (358.678) (73.404) 54.426 160.591 (217.065)
AtDecember31,2011 232.647 (98.669) (62.954) 84.738 155.762 Exchangegains(losses)oninvestmentabroad 387.019 387.019 Hedgeofanetinvestment/cashflowhedge (86.908) (86.908) Fairvalueofassetsheldforsale - Interestincomprehensiveincomeofassociatedcompanies (70.853) (70.853) Deferredincometax - 29.549 29.549 AtJune30,2012 619.666 (98.669) (120.313) 13.885 414.569
48 de 52 Votorantim Cimentos S.A.
Notes to the interim financial statements at June 30, 2012 All amounts in thousands of reais unless otherwise stated
20 Revenues
Parent Consolidated 2012 2011 2012 2011 Revenues Salesofproducts 3,578,796 3,269,256 5,640,479 5,063,055 Services 5,813 5,126 38,768 441 3,584,609 3,274,382 5,679,247 5,063,496 Taxes on sales and services andotherdeductions (888,445) (807,984) (1,249,989) (1,159,675) 2,696,164 2,466,398 4,429,258 3,903,821
21 Other operating income, net
Parent Consolidated 2012 2011 2012 2011 Governmentgrants 9,187 877 105,295 58,772 Revenuefromco-processing 7,005 7,649 7,581 8,496 Revenuefromsaleofscrap 4,953 3,054 6,418 3,849 GainonsaleofPP&E 2,197 9,991 5,045 10,786 Non-recurringexpenses (120) (397) Otherincome(expenses),net (1,099) (3,449) 11,725 248,311 22,123 18,122 135,667 330,214
22 Expenses by nature
Parent Consolidated 6/30/2012 6/30/2011 6/30/2012 6/30/2011 Raw materials, inputs and consumables used 1,080,115 1,084,920 1,924,005 1,693,305 Employeebenefitexpenses 300,685 265,725 499,716 441,626 Depreciation,amortizationanddepletion 114,997 71,756 268,318 201,231 Outsourcedservices 166,292 161,791 230,648 217,201 Rentalsandleases 19,991 18,725 35,925 27,611 Electricpower-consumption 22,719 21,006 38,959 37,677 Transportationexpenses 93,216 60,411 153,938 108,805 Otherexpenses 157,198 149,479 310,001 609,227 Total cost of sales, distribution costs and administrative expenses 1,955,213 1,833,813 3,461,510 3,336,683
Reconciliation Costofsalesandservices 1,613,995 1,539,988 2,939,679 2,870,659 Selling 159,924 122,270 255,746 205,831 Generalandadministrative 181,294 171,555 266,085 260,193 Total cost of sales, distribution costs and administrative expenses 1,955,213 1,833,813 3,461,510 3,336,683
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Notes to the interim financial statements at June 30, 2012 All amounts in thousands of reais unless otherwise stated
23 Employee benefit expenses
Parent Consolidated 2012 2011 2012 2011 Salariesandbonuses 163,031 144,454 294,204 258,680 Payrollcharges 91,296 80,176 128,719 113,517 Social benefits 46,358 41,095 76,793 69,429 300,685 265,725 499,716 441,626
24 Net finance income (costs)
Parent Consolidated 6/30/2012 6/30/2011 6/30/2012 6/30/2011
Finance income Income from financial investments 82,609 74,098 96,607 82,294 Interest receivable on financial assets 6,506 5,540 9,563 5,892 Other finance income 760 679
89,115 79,638 106,930 88,865
Finance costs Interest on borrow ings and others (324,259) (250,555) (348,776) (184,671) Interest payable on loans from related parties (1,702) (52,276) (28,572) Discounts granted (3,300) (2,288) (3,471) (2,603) Contract of use of public use (22,887) (22,922) Other finance costs (34,259) 16,232 (51,233) (68,401) Loss on derivatives (1,246) (1,310) (2,518) (363,520) (290,133) (427,677) (309,687) Foreign exchange and indexation gains (losses), net (323,565) 55,828 (317,012) 63,411
(597,970) income (154,667) (costs), net (637,759) (157,411)Finance
25 Insurance coverage
Pursuant to the Corporate Insurance Management Corporate of the Company, different types of insurance policies are contracted, such as operational risk and civil liability insurance, protecting them against potential losses from production stoppage, property damage and damage to third parties.
The Company and its subsidiaries have civil liability insurance for their operations in Brazil, Canada and the United States, with coverage and terms and conditions deemed adequate by management to cover the inherent risks.
For the main plants in Brazil and operations in North America, an All Risks policy is contracted for all assets, including coverage against potential losses resulting from production stoppage.
The operational insurance coverage as at June 30, 2012 is as follows:
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Notes to the interim financial statements at June 30, 2012 All amounts in thousands of reais unless otherwise stated
Assets Type of coverage Coverage amount
Property damage 9,013,237 Facilites and equipment Loss of profits 1,347,440 10,360,677
Operational and civil liability risk insurance of the Pedra do Cavalo hydroelectric power plant - VCNNE
An All Risks insurance policy for operational risks is contracted annually for the Hydroelectric Power Plant, with a total insured amount of R$ 199,050. The Company has a civil liability policy for this operation, for which the coverage and conditions are considered by management as adequate for the risks involved.
26 Seasonality of operations
The majority of the operations of the Company are not impacted by specific seasons and are therefore distributed relatively equal over the calendar year.
27 Subsequent Events
27.1 Issuances of debt
In January 2012, the Company issued its fourth public issue of non-convertible and single debentures, with a fiduciary guarantee, in two series of R$ 500,000 each. Debentures were placed with restricted placement efforts and with a CVM waiver for. The 1st series in the aggregate principal amount of R$ 500,000 is subject to CDI + 1.09% p.a. and the 2nd series, also in the aggregate principal amount of R$ 500,000, pays interest at 111% of the CDI. Both series mature in May 2018.
In February, 2012, the Company issued US$ 500 million in the international market through the reopening of an issuance of bonds with maturity in April 2041. Taking into account this additional issuance , this bond has a principal amount of US$ 1,250 million bearing interest payable semi-annually at 7.25% per year. Thise issuanc was rated "BBB" by Standard & Poor's", "Baa3" from Moody's and "BBB-" from Fitch. The proceeds from this additional issuance were used for the early repayment of indebtedness, thus extending the debt profile.
On December 5, 2012, the Company issued non-convertible debentures in the total aggregate amount of R$1,200,000, unconditionally and irrevocably guaranteed by Votorantim Industrial. The debentures bear interest at a rate of 109.2% of the CDI per annum payable in 12 semi-annual installments, the first of which is due on June 5, 2013. These debentures mature on December 5, 2018. The indenture governing the issuance of such debentures requires us to comply with a series of covenants.
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Notes to the interim financial statements at June 30, 2012 All amounts in thousands of reais unless otherwise stated
27.2 Cimpor asset exchange
On December 21, 2012, the Company concluded a transaction through which it exchanged its 21.21% equity interest in Cimpor for the controlling interest in the businesses in Spain, Morocco, Tunisia, Turkey, India and China, plus a quarry in Peru, which were previously held by Intercement, part of the Camargo Correa Group.
In this transaction, the Company’s 21.21% of the shares of Cimpor were transferred for an amount of R$ 2,077,447, which is based on the value of the Company’s 142,492,130 shares of Cimpor at a price of Eur 5.33 per share, as determined in the exchange agreement date 25 June, 2012.
The fair value of the acquired business according to the exchange agreement and supported by the valuations of two investment banks resulted in an additional payment of R$ 155,946 which was settled in cash at January 21, 2013. There is no contingent payment.
This transaction resulted in a gain of R$ 266,774 related to the difference between the book value of our investment in Cimpor and the fair value of the acquired businesses and a preliminary goodwill of R$ 1,143, 790. Additionally the Company reversed the previously recognized deferred tax liability of R$ 391,018.
27.3 Acquisition of interests in Argentina and Uruguay
On December 27, 2012, we acquired from Cementos Molins S.A. a 10.61% equity interest in Cementos Avellaneda S.A. in Argentina. Total purchase price amounts to USD 60 million and will be paid in cash on January 18, 2013. There is no contingent consideration.
On the same date we acquired from Cementos Molins S.A a 12.61% equity interest in Cementos Artigas S.A., or Artigas, in Uruguay. The purchase price amounts to USD 25 million and will be paid in cash on January 18, 2013. There is no contingent consideration.
27.4 Brazilian Economic Law Secretariat case
During the third quarter of 2012, the Office of the Public Prosecutor of Rio Grande do Norte filed a civil class action against VCSA plus eight defendants, including several of Brazil’s largest cement manufacturers alleging breach of Brazilian antitrust laws as a result of alleged cartel formation, demanding that: (1) defendants pay an indemnity, on joint basis, in the amount of R$5,600 million in favor of the class action plaintiffs for moral and collective damages; (2) defendants pay 10% of the total amount paid for cement or concrete acquired by the consumers of the brands negotiated by the defendants, between the years 2002 and 2006; and (3) penalties under Articles 23, I and 24 of Law No. 8.884/94, the Brazilian antitrust laws. During the last quarter of 2012 we have concluded a reliable estimate and probability, based on the total amount of the claims in this civil class action of R$5,600 million and the fact that the claim is for joint liability. We have estimated that, based on our market share, our share of the liability would be R$2,400 million. The expectation of loss is considered possible and as such we have established no provision.
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