ANNUAL REPORT 2015 Table of Contents

ANNUAL REPORT 2015 Table of Contents 1. Letter from the President 2. Structure of Ferreycorp 3. Commercial and Operations Management 4. Organization and Human Resources 5. Financial Management & Management Discussion and Analysis of the Audited Financial Statements 6. Appendices . General information on the business . Information on the market for securities registered in the Public Registry of the Securities Market . Corporate Sustainability Report 2 Statement of responsibility This document contains true and sufficient information on the operations of Ferreycorp S.A.A. during the year 2015. Notwithstanding the responsibility of the issuer, the undersigned assume responsibility for its content pursuant to applicable legislation. Mariela García Figari de Fabbri Patricia Gastelumendi Lukis Chief Executive Officer Chief Financial Officer Miguel Espinosa Rivas Budget and Accounting Manager Lima, March 30, 2016 3 1. Letter from the President In the year 2015, Ferreycorp further improved its outstanding position as a leading corporation in the capital goods, supplies and complementary services business, offering a vast portfolio of products and services in Peru and eight other countries in Latin America, through 17 subsidiary companies. Its primary mission is for its companies to offer increasing value to its customers, providing top-quality machinery, equipment, parts and services, as well as solutions that complement and enhance each other, in order to serve nearly every sector of the economy. In this effort, the role of representing Caterpillar, a leading brand with which we have had close ties for over 70 years, in Peru, Guatemala, El Salvador and Belize stands out. Over the years, other brands of recognized international prestige have been added. The successful relationship with many of these brands has, in turn, been an important supporting factor in the corporation’s expansion, by making it possible to serve them in different countries. This expansion is the result of the application of the strategy determined some years ago to guide the growth of the corporation, which is supported by three pillars: i) continuous identification of products and brands that have synergies with the current portfolio and whose inclusion makes it possible to serve customers better with a more complete range; ii) increased presence in the Latin American region, taking the representation of the brands with which it has been working to other countries, thereby strengthening its relationship with prestigious manufacturers; and iii) becoming involved in business that has strong synergies with capital goods and services, such as logistics and energy provision, among others, without losing sight of its main lines of business. Taking the foregoing into account, the year 2015 was very positive, not only in terms of the results achieved, but also in the consolidation of the corporate structure, despite complex economic and political scenes in the different countries in which the corporation’s companies operate. In the case of Peru, the economy was generally weak. Production indicators reveal an economic cycle with lower than expected GDP growth rates. The low level of private consumption and investment as a consequence of lower business and consumer expectations, the reduction in international prices of our main export products, particularly in relation to the reduced growth of the Chinese economy, and fluctuations in the value of the United States dollar created a complicated environment for business in general. In addition, uncertainty resulting from domestic politics and social conflicts, particularly those related to mining, exacerbated the unfavorable behavior of private and public activity. 4 However, despite the factors mentioned, the corporation continued growing in Peru, as well as in the other countries where it operates, developing its companies’ commercial capacity and identifying important business opportunities in the countries where it operates. In this context, in the year 2015 the corporation’s consolidated sales, including direct orders, amounted to S/. 5,333 million, 9% higher than in 2014, achieving growth in each of the different groups of companies. The 17 Ferreycorp companies are now grouped in three units for better coordination and supervision. The first group of companies, dedicated to the distribution of Caterpillar machinery, equipment and parts in Peru, is made up of Ferreyros, Orvisa, Unimaq and Ferrenergy. Its sales totaled S/. 4,168 million, 9% higher than in the same period during the preceding year, mainly due to a greater volume of deliveries of heavy machinery from Ferreyros to mining companies in an expansion phase, which represent 17% of that company’s sales. Along with this growth, it also maintained high levels of sales of Caterpillar machines and engines to other economic sectors, especially construction, which accounts for 20% of the principal subsidiary’s total sales. Although the different models of Caterpillar machines have always maintained absolute leadership, the level of sales in 2015 gave rise to a 60% market share, one of the highest in its history, based on import statistics. The high market shares obtained stand out, especially that of mining and heavy construction equipment at 73%. At the same time, in Central America, subsidiary companies also obtained high market shares. Achieving these positions brings legitimate satisfaction to our organization, which has represented Caterpillar since 1942. In 2015, Caterpillar recognized Ferreyros as one of its best dealers in the world. The growth in sales of machinery and equipment of this first group of companies has been accompanied by a noteworthy 13% increase in sales of parts and services, in relation to the preceding year, driven in part by many important customers’ decision to postpone investment in new equipment and extend the operation of their existing machines, using services offered by the corporation’s companies to have them repaired. In this regard, the larger share of post-sales revenue as a percentage of this group’s total sales reflects our companies’ policy to serve the customer throughout the useful life of the products they sell, thereby contributing to the efficiency and productivity of their operation. The second group of companies, which does business in Central America, showed an increase of 9% in sales, which totaled S/. 520 million by the end of the year, including those made by the recently acquired Transportes Pesados S.A., a leader in the commercialization of parts for heavy transport equipment in El Salvador. This dynamic group of subsidiaries is made up of Gentrac, in Guatemala and Belize, and Cogesa, in El Salvador, representatives of Caterpillar and Mobil in these countries; Mercalsa, a wholesale Mobil distributor for Nicaragua; and the company mentioned previously, Transpesa. 5 The remainder of the companies (Mega Representaciones, Motored, Cresko, Fiansa, Fargoline, Forbis Logistics, Soluciones Sitech Perú and Trex), make up a third group, which is dedicated to types of business that have great synergy with the capital goods business. This group achieved sales of S/. 645 million during the year, which was an increase of 10%. Standing out in these results is the revenue generated by Trex, which deals in the Terex brand of cranes, lift platforms and a wide range of port equipment in Chile. Acquired by the corporation in June 2014, it is in the process of integrating the operation in Peru (previously within Ferreyros), as well as expanding its current operations in Colombia and Ecuador soon. It should be noted that, as a result of the diversification and internationalization process begun in 2010, Ferreycorp’s operations outside of Peru amounted to 12% of total consolidated sales for the year 2015. The corporation’s presence in these countries, representing different prestigious brands, adds value to its operations and makes it possible to replicate good management practices that increasingly contribute to improvement in what we are able to offer customers. The importance of the diversification of the company through businesses that complement the distribution of products of the main company we represent, Caterpillar, in Peru and abroad should also be noted, since they represent 12% of the corporation’s sales. This development has been possible thanks to the long-term relations we maintain with leading brands such as Mobil, Good Year, Metso, Terex, Massey Ferguson, Kenworth, Iveco and 3M, among others, which are represented by Ferreycorp companies in Peru and abroad. In line with the positive trend in sales, the corporation’s gross profit totaled S/. 1,292 million, 16% higher than in 2014. In addition, Ferreycorp’s EBITDA— which reflects the business’ approximate profitability and cash generation— grew 28%, totaling S/. 667 million. The EBITDA margin was 12.5% for the year, a 10.7% improvement over 2014, as a result of achieving an adequate volume of revenue and a high gross margin of 24%. The corporation’s net profits increased 75%, reaching S/. 161.8 million as of December, 2015. These figures respond firstly to the composition of the corporation’s sales, among which, as mentioned previously, the sale of parts and services accounted for the majority, as is typical of companies dedicated to the sale of machinery. On the other hand, as in the case of nearly every company, exchange losses were recorded during the preceding year, but recovery of that loss resulted in a better gross margin. Lastly, the operating margin showed

Load more