1. business and industrial
2. company
3. merger and acquisition

OFFERING MEMORANDUM
US$325,000,000
Corporación Azucarera del Perú S.A.
6.375% Senior Notes due 2022
Unconditionally and Irrevocably Guaranteed by
Certain of its Operating Subsidiaries
____________________
We are offering US$325,000,000 aggregate principal amount of our 6.375% senior notes due 2022 (the “notes”). The notes will mature on
August 2, 2022. Interest on the notes will accrue at a rate of 6.375% per annum and will be payable semi-annually in arrears on each February 2 and
August 2 of each year, commencing on February 2, 2013.
We may redeem the notes, in whole or in part, subject to a minimum float condition, at any time on or after August 2, 2017 at the applicable
redemption prices set forth in this offering memorandum, plus accrued and unpaid interest and any Additional Amounts. Before August 2, 2017, we
may also redeem the notes, in whole or in part, subject to a minimum float condition, at a redemption price based on a “make-whole” premium. In
addition, at any time prior to August 2, 2015, we may redeem up to 35% of the notes at a redemption price equal to 106.375% of their outstanding
principal amount, plus accrued and unpaid interest and any Additional Amounts, using the proceeds of certain equity offerings. We may also redeem
the notes, in whole but not in part, if certain changes in applicable tax laws occur. See “Description of the Notes—Optional Tax Redemption.”
The notes will be our senior unsecured obligations. The notes will be unconditionally, irrevocably and fully guaranteed on a senior unsecured
basis by one of our wholly-owned subsidiaries and two of our partially-owned subsidiaries, and unconditionally, irrevocably and partially guaranteed
by another one of our partially-owned subsidiaries for an initial amount equal to US$162,500,000, as subsequently adjusted as provided in
“Description of the Notes—Note Guarantees” and “—Principal, Maturity and Interest.” The notes and the related guarantees: (i) will rank equally
with all of our and the subsidiary guarantors’ respective existing and future unsecured and unsubordinated indebtedness, other than with respect to
certain obligations given preferential treatment pursuant to the laws of Peru; (ii) will be effectively subordinated to all of our and the subsidiary
guarantors’ respective existing and future secured indebtedness to the extent of the assets securing such indebtedness; (iii) will be structurally
subordinated to the existing and future indebtedness and other liabilities of our subsidiaries which are not guarantors and with respect to the partial
guarantor, to the extent that any obligations under the notes exceed US$162,500,000, as subsequently adjusted as provided in “Description of the
Notes—Note Guarantees” and “—Principal, Maturity and Interest” and (iv) will not provide holders with any direct claims on the assets of any nonguarantor unless or until such entity becomes a guarantor.
Application has been made to the Irish Stock Exchange for the approval of this document as Listing Particulars. Application has been made to
the Irish Stock Exchange for the notes to be admitted to the Official List and to trading on the Global Exchange Market which is the exchange
regulated market of the Irish Stock Exchange. The Global Exchange Market is not a regulated market for the purposes of Directive 2004/39/EC.
Investing in the notes involves risks. See “Risk Factors” beginning on page 17.
______________________
Price: 99.091% plus accrued interest, if any, from August 2, 2012.
______________________
We have not and will not register the notes and the guarantees under the U.S. Securities Act of 1933, as amended (the “Securities Act”) or under
any state securities laws. Prospective purchasers that are qualified institutional buyers are hereby notified that the sellers of the notes may be relying
on an exemption from the provisions of Section 5 of the Securities Act provided by Rule 144A under the Securities Act. Outside the United States,
the offering is being made in reliance on Regulation S under the Securities Act. See “Transfer Restrictions.”
We have registered the notes and this offering memorandum with the Peruvian Superintendency of the Securities Market (Superintendencia del
Mercado de Valores, or “SMV”). In Peru, this offering will be considered a public offering directed exclusively to “institutional investors” (as such
term is defined under the Seventh Final Disposition of CONASEV Resolution No. 141-98-EF/94.10.1). In addition, we have registered the notes
with the Foreign Investment and Derivatives Instruments Registry (Registro de Instrumentos de Inversión y de Operaciones de Cobertura de Riesgo
Extranjeros) of the Peruvian Superintendency of Banks, Insurance and Private Pension Fund Administrators (Superintendencia de Banca, Seguros y
Administradoras Privadas de Fondos de Pensiones, or “SBS”) for Peruvian private pension fund investment eligibility, as required by Peruvian law.
The notes may not be offered or sold in the Republic of Peru or in any other jurisdiction except in compliance with the securities laws thereof.
We expect that delivery of the notes will be made to investors in book-entry form through the facilities of The Depository Trust Company
(“DTC”) for the accounts of its direct and indirect participants, including Euroclear Bank S.A./N.V., as operator of the Euroclear System
(“Euroclear”), and Clearstream Banking, société anonyme (“Clearstream”), Luxembourg, on or about August 2, 2012.
____________________
Joint Book-Running Managers
BofA Merrill Lynch
Citigroup
Peruvian Placement Agent
Citicorp Perú S.A. Sociedad Agente de Bolsa
____________________
The date of this offering memorandum is September 13, 2012
TABLE OF CONTENTS
Page
Available Information....................................................................................................................................................v
Enforcement of Civil Liabilities ....................................................................................................................................v
Forward-Looking Statements ......................................................................................................................................vii
Presentation of Financial and Other Information..........................................................................................................ix
Summary........................................................................................................................................................................1
Risk Factors .................................................................................................................................................................17
Use of Proceeds ...........................................................................................................................................................39
Capitalization...............................................................................................................................................................40
Exchange Rates ...........................................................................................................................................................41
Selected Financial and Other Information ...................................................................................................................42
Management’s Discussion and Analysis of Financial Condition and Results of Operations ......................................45
Peruvian Sugar Industry ..............................................................................................................................................67
Business.......................................................................................................................................................................71
Regulatory Overview...................................................................................................................................................91
Management ................................................................................................................................................................97
Shareholders ..............................................................................................................................................................100
Grupo Gloria..............................................................................................................................................................100
Related Party Transactions ........................................................................................................................................101
Description of the Notes ............................................................................................................................................103
Taxation.....................................................................................................................................................................151
Plan of Distribution ...................................................................................................................................................156
Transfer Restrictions..................................................................................................................................................160
Legal Matters.............................................................................................................................................................163
Independent Auditors ................................................................................................................................................163
Listing and General Information ...............................................................................................................................164
Index to Financial Statements.................................................................................................................................... F-1
____________________
Unless otherwise indicated or the context otherwise requires, all references in this offering memorandum to:

“Coazucar,” “issuer,” “we,” “us,” “our,” “our company,” “ourselves” and similar terms refer to
Corporación Azucarera del Perú S.A. and its consolidated subsidiaries;

“Argentina” refers to the Republic of Argentina;

“Azucarera Olmos” refers to Azucarera Olmos S.A., a wholly-owned subsidiary of our company that is a
guarantor of the notes;

“Cartavio” refers to Cartavio S.A.A., a partially-owned subsidiary of our company that is a guarantor of the
notes;

“Casa Grande” refers to Casa Grande S.A.A., a partially-owned subsidiary of our company that is a
guarantor of the notes;

“Chiquitoy” refers to Empresa Agraria Chiquitoy S.A.;

“CONASEV” refers to the Comisión Nacional Supervisora de Empresas y Valores del Perú;
i

“Ecuador” refers to the Republic of Ecuador;

“FAO” refers to the Food and Agriculture Organization of the United Nations.

“Grupo Gloria” refers to a conglomerate comprised of operating companies, including among many others,
the Guarantors, Gloria S.A. and Yura S.A., under the common control of Vito Rodríguez Rodríguez and
Jorge Rodríguez Rodríguez, with operations in seven countries in Latin America;

the “Guarantors” refer to Casa Grande, Cartavio, San Jacinto and Azucarera Olmos;

“La Troncal” refers to Grupo Azucarero EQ2 S.A., which is owned by us through Fideicomiso Mercantil
Consorcio Azucarero Ecuatoriano;

“OECD” refers to the Organisation for Economic Co-operation and Development;

“Peru” refers to the Republic of Peru;

the “Peruvian government” refers to the government of Peru;

the “Peruvian Ministry of Agriculture” refers to the Ministerio de Agricultura del Perú.

“San Isidro” refers to, collectively, Verha S.A., Prosal S.A., Emaisa S.A. and Bio San Isidro S.A., partiallyowned subsidiary of our company;

“San Jacinto” refers to Agroindustrias San Jacinto S.A.A., a partially-owned subsidiary of our company
that is a guarantor of the notes;

“Sintuco” refers to Empresa Agrícola Sintuco S.A., a partially-owned subsidiary of our company; and

the “United States” or the “U.S.” refers to the United States of America.
You should assume that the information appearing in this offering memorandum is accurate as of the date on the
front cover of this offering memorandum only. Our business, financial condition, results of operations and prospects
may have changed since that date. Neither the delivery of this offering memorandum nor any sale made hereunder
shall under any circumstances imply that the information herein is correct as of any date subsequent to the date on
the cover of this offering memorandum.
We have prepared this offering memorandum for use solely in connection with the proposed offering of the
notes described in this offering memorandum. This offering memorandum is personal to each offeree and does not
constitute an offer to any other person other than the offeree to whom it has been delivered or the public generally to
subscribe for or otherwise acquire notes (other than pursuant to CONASEV Resolution No. 079-2008-EF/94.01.1).
Distribution of this offering memorandum to any person other than a prospective investor and any person retained to
advise such prospective investor with respect to its purchase is unauthorized, and any disclosure of any of its
contents, without our prior written consent, is prohibited. Each prospective investor, by accepting delivery of this
offering memorandum, agrees to the foregoing and to make no photocopies of this offering memorandum or any
documents referred to in this offering memorandum.
The initial purchasers make no representation or warranty, expressed or implied, as to the accuracy or
completeness of the information contained in this offering memorandum. Nothing contained in this offering
memorandum is, or shall be relied upon as, a promise or representation by the initial purchasers as to the past or
future.
This offering memorandum is intended solely for the purpose of soliciting indications of interest in the notes
from qualified investors and does not purport to summarize all of the terms, conditions, covenants and other
provisions relating to the terms of the notes contained in the indenture being entered into in connection with the
issuance of the notes as described herein and other transaction documents described herein. The market information
in this offering memorandum has been obtained by us from publicly available sources deemed by us to be reliable.
ii
We accept responsibility for correctly extracting and reproducing such information. Notwithstanding any
investigation that the initial purchasers may have conducted with respect to the information contained in this
offering memorandum, the initial purchasers accept no liability in relation to the information contained in this
offering memorandum or its distribution or with regard to any other information supplied by us or on our behalf.
Neither we nor the initial purchasers are making an offer to sell the notes in any jurisdiction except where such
an offer or sale is permitted. You must comply with all applicable laws and regulations in force in any jurisdiction
in which you purchase, offer or sell the notes or possess or distribute this offering memorandum and you must
obtain any consent, approval or permission required by you for the purchase, offer or sale of the notes under the
laws and regulations in force in your jurisdiction to which you are subject or in which you make such purchases,
offers or sales, and neither we nor the initial purchasers will have any responsibility therefor.
You acknowledge that:

you have been afforded an opportunity to request from us, and to review, all additional information
considered by you to be necessary to verify the accuracy of, or to supplement, the information contained in
this offering memorandum;

you have not relied on the initial purchasers or their agents or any person affiliated with the initial
purchasers or their agents in connection with your investigation of the accuracy of such information or your
investment decision; and

no person has been authorized to give any information or to make any representation concerning us or the
notes other than those as set forth in this offering memorandum. If given or made, any such other
information or representation should not be relied upon as having been authorized by us, the initial
purchasers or their agents.
We are relying upon an exemption from registration under the Securities Act for an offer and sale of securities
which do not involve a public offering. By purchasing the notes, you will be deemed to have made certain
acknowledgments, representations and agreements as set forth under “Transfer Restrictions” in this offering
memorandum. The notes are subject to restrictions on transfer and resale and may not be transferred or resold
except as permitted under the Securities Act and applicable state securities laws. As a prospective purchaser, you
should be aware that you may be required to bear the financial risks of this investment for an indefinite period of
time. See “Plan of Distribution” and “Transfer Restrictions.”
In making an investment decision, prospective investors must rely on their own examination of our company
and the terms of the offering, including the merits and risks involved. Prospective investors should not construe
anything in this offering memorandum as legal, business or tax advice. Each prospective investor should consult its
own advisors as needed to make its investment decision and to determine whether it is legally permitted to purchase
the notes under applicable legal, investment or similar laws or regulations.
None of the United States Securities and Exchange Commission (the “SEC”), any United States state securities
commission or any United States, Peruvian or other regulatory authority has approved or disapproved of these
securities or determined if this offering memorandum is truthful or complete. Any representation to the contrary is a
criminal offense.
Application has been made to the Irish Stock Exchange for the approval of this document as Listing Particulars.
Application has been made to the Irish Stock Exchange for the notes to be admitted to the Official List and to
trading on the Global Exchange Market which is the exchange regulated market of the Irish Stock Exchange. The
Global Exchange Market is not a regulated market for the purposes of Directive 2004/39/EC. The Irish Stock
Exchange’s Global Exchange Market takes no responsibility for the contents of this offering memorandum, makes
no representations as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss
howsoever arising from or in reliance upon the whole or any part of the contents of this offering memorandum.
We and the Guarantors confirm that, after having made all reasonable inquiries, this offering memorandum
contains all information which is material to the offering and sale of the notes, that the information contained in this
offering memorandum is true and accurate in all material respects and is not misleading and that there are no
iii
omissions of any facts from this offering memorandum which, by their absence herefrom, make this offering
memorandum misleading. We and the Guarantors accept responsibility for the information contained in this
offering memorandum. The opinions and intentions expressed in this offering memorandum are honestly held and
based on reasonable assumptions.
______________
NOTICE TO NEW HAMPSHIRE RESIDENTS ONLY
NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION
FOR A LICENSE HAS BEEN FILED UNDER CHAPTER 421-B OF THE NEW
HAMPSHIRE REVISED STATUTES (“RSA”) WITH THE STATE OF NEW HAMPSHIRE
NOR THE FACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS
LICENSED IN THE STATE OF NEW HAMPSHIRE IMPLIES THAT ANY DOCUMENT
FILED UNDER RSA 421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER
ANY SUCH FACT NOR THE FACT THAT ANY EXEMPTION OR EXCEPTION IS
AVAILABLE FOR A SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY
OF STATE HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS OF,
OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY OR
TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY
PROSPECTIVE PURCHASER, CUSTOMER OR CLIENT ANY REPRESENTATION
INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH.
______________
NOTICE TO RESIDENTS OF PERU
IN PERU, THIS OFFERING WILL BE CONSIDERED A PUBLIC OFFERING DIRECTED
EXCLUSIVELY TO “INSTITUTIONAL INVESTORS” (AS SUCH TERM IS DEFINED UNDER THE
SEVENTH FINAL DISPOSITION OF CONASEV’S RESOLUTION NO. 141-98-EF/94.10, AS AMENDED).
THE NOTES AND THIS OFFERING MEMORANDUM HAVE BEEN REGISTERED WITH THE SMV IN
ACCORDANCE WITH THE PROCEDURES SET FORTH IN NUMERAL IV OF THE SECOND SECTION OF
THE MANUAL FOR COMPLIANCE WITH THE APPLICABLE REQUIREMENTS FOR INITIAL PUBLIC
OFFERINGS, AS SET FORTH UNDER SMV RESOLUTION NO. 004-2011- EF/94.01.1, PURSUANT TO
CONASEV RESOLUTION NO. 079-2008-EF/94.01.1, APPLICABLE TO U.S. OFFERINGS IN RELIANCE OF
RULE 144A UNDER THE SECURITIES ACT WITH A LOCAL PERUVIAN COMPONENT.
THE NOTES OFFERED HEREBY ARE SUBJECT TO TRANSFER AND RESALE RESTRICTIONS AND
MAY NOT BE TRANSFERRED OR RESOLD IN PERU EXCEPT AS PERMITTED UNDER CONASEV
RESOLUTION NO. 079-2008-EF/94.01.1.
THE NOTES HAVE BEEN PROVISIONALLY REGISTERED WITH THE FOREIGN INVESTMENT AND
DERIVATIVES INSTRUMENTS REGISTRY (REGISTRO DE INSTRUMENTOS DE INVERSIÓN Y DE
OPERACIONES DE COBERTURA DE RIESGO EXTRANJEROS) OF THE SBS, IN ORDER TO MAKE THE
NOTES ELIGIBLE FOR PERUVIAN PENSION FUND INVESTMENT, AS REQUIRED BY PERUVIAN
LEGISLATION. THIS REGISTRATION WAS PROVISIONALLY APPROVED, AND DEFINITIVE
REGISTRATION IS CONDITIONED ON THE DELIVERY OF THE FINAL OFFERING MEMORANDUM AND
OTHER ANCILLARY DOCUMENTS TO THE SBS.
______________
iv
NOTICE TO INVESTORS IN THE EUROPEAN ECONOMIC AREA
This offering memorandum has been prepared on the basis that any offer of notes in any Member State of the
European Economic Area which has implemented the Prospectus Directive (each, a “Relevant Member State”) will
be made pursuant to an exemption under the Prospectus Directive from the requirement to publish a prospectus for
offers of notes. Accordingly any person making or intending to make an offer in that Relevant Member State of
notes which are the subject of the offering contemplated in this offering memorandum may only do so in
circumstances in which no obligation arises for any of the Issuer, the Guarantors or the initial purchasers to publish a
prospectus pursuant to Article 3 of the Prospectus Directive or supplement a prospectus pursuant to Article 16 of the
Prospectus Directive, in each case, in relation to such offer. Neither the Issuer, the Guarantors nor the initial
purchasers have authorised, nor do they authorise, the making of any offer (other than Permitted Public Offers) of
notes in circumstances in which an obligation arises for the Issuer, the Guarantors or the initial purchasers to publish
or supplement a prospectus for such offer. The expression “Prospectus Directive” means Directive 2003/71/EC (and
amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the Relevant
Member State), and includes any relevant implementing measure in the Relevant Member State and the expression
“2010 PD Amending Directive” means Directive 2010/73/EU.
IN CONNECTION WITH THE OFFERING OF THE NOTES, THE PERSON (IF ANY) NAMED AS THE
STABILIZING MANAGER(S) (THE “STABILIZING MANAGER(S)) (OR PERSONS ACTING ON THEIR
BEHALF) MAY OVER-ALLOT NOTES OR EFFECT TRANSACTIONS WITH A VIEW TO SUPPORTING
THE MARKET PRICE OF THE NOTES AT A LEVEL HIGHER THAN THAT WHICH MIGHT OTHERWISE
PREVAIL. HOWEVER, THERE IS NO ASSURANCE THAT THE STABILIZING MANAGER(S) (OR
PERSONS ACTING ON THEIR BEHALF) WILL UNDERTAKE STABILIZATION ACTION. ANY
STABILIZATION ACTION MAY BEGIN ON OR AFTER THE DATE ON WHICH ADEQUATE PUBLIC
DISCLOSURE OF THE TERMS OF THE OFFER OF THE RELEVANT TRANCHE OF NOTES IS MADE AND,
IF BEGUN, MAY BE ENDED AT ANY TIME, BUT IT MUST END NO LATER THAN 30 DAYS AFTER THE
DATE ON WHICH THE ISSUER RECEIVED THE PROCEEDS OF THE ISSUE, OR NO LATER THAN 60
DAYS AFTER THE DATE OF ALLOTMENT OF THE RELEVANT SECURITIES, WHICHEVER IS THE
EARLIER.
______________
AVAILABLE INFORMATION
To permit compliance with Rule 144A in connection with resales of the notes, for so long as the notes are
“restricted securities” within the meaning of Rule 144(a)(3) under the Securities Act, we have agreed to furnish
upon request of a holder or beneficial owner of such restricted securities and a prospective purchaser or subscriber
of such restricted securities designated by such holder or beneficial owner upon the request of such holder,
beneficial owner or prospective purchaser or subscriber the information required to be delivered under Rule
144A(d)(4) if at the time of such request we are neither a reporting company under Section 13 or Section 15(d) of
the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”), nor exempt from reporting pursuant to
Rule 12g3-2(b) thereunder.
We will be required to file certain information in Spanish with the SMV, such as quarterly and annual reports
and notices of material events (Hechos de Importancia). All such reports and notices are available at
www.smv.gob.pe. The documents filed with the SMV are not and will not form part of this offering memorandum
and are not incorporated by reference herein.
ENFORCEMENT OF CIVIL LIABILITIES
We are, and each of the Guarantors is, an exempted limited liability company organized under the laws of Peru
and substantially all of our and the Guarantors’ assets are located outside the United States. In addition, all of our
and each of the Guarantors’ directors and officers and certain other persons named in this offering memorandum
reside outside the United States and all or a significant portion of our and their assets are located outside the United
States. As a result, it may be difficult or impossible for investors to effect service of process within the United
v
States upon such persons or to enforce against them, our company or each of the Guarantors judgments of courts of
the United States, whether or not predicated upon the civil liability provisions of the federal securities laws of the
United States or other laws of the United States or any state thereof.
We have been advised by our Peruvian counsel, Rubio Leguía Normand, that any final and conclusive judgment
for a fixed and final sum obtained against us in any foreign court having jurisdiction in respect of any suit, action or
proceeding against us for the enforcement of any of our obligations under the notes that are governed by New York
law will, upon request, be deemed valid and enforceable in Peru through an exequatur judiciary proceeding (which
does not involve the reopening of the case), provided that: (1) there is a treaty in effect between the country where
said foreign court sits and Peru regarding the recognition and enforcement of foreign judgments; or (2) in the
absence of such a treaty, the following conditions and requirements are met:
(i)
the judgment does not resolve matters under the exclusive jurisdiction of Peruvian courts (and the
matters contemplated in respect of this offering memorandum or the notes are not matters under the exclusive
jurisdiction of Peruvian courts);
(ii) such court had jurisdiction under its own private international conflicts of law rules and under general
principles of international procedural jurisdiction;
(iii) we received service of process in accordance with the laws of the place where the proceeding took
place, were granted a reasonable opportunity to appear before such foreign court and were guaranteed due
process rights;
(iv) the judgment has the status of res judicata as defined in the jurisdiction of the court rendering such
judgment;
(v) no pending litigation in Peru between the same parties for the same dispute was initiated before the
commencement of the proceeding that concluded with the foreign judgment;
(vi) the judgment is not incompatible with another judgment that fulfills the requirements of recognition
and enforceability established by Peruvian law, unless such foreign judgment was rendered first;
(vii)
the judgment is not contrary to Peruvian public policy or good morals; and
(viii) it is not proven that such foreign court denies enforcement of Peruvian judgments or engages in a
review of the merits thereof.
We have no reason to believe that any of our obligations relating to the notes and the guarantees would be
contrary to Peruvian public policy, good morals and international treaties binding upon Peru or generally accepted
principles of international law.
The United States does not currently have a treaty providing for reciprocal recognition and enforcement of
judgments in civil and commercial matters with Peru. Therefore, a final judgment for payment of money rendered
by a federal or state court in the United States based on civil liability, whether or not predicated solely upon U.S.
federal securities laws, may not be enforceable, either in whole or in part, in Peru. However, if the party in whose
favor such final judgment is rendered brings a new suit in a competent court in Peru, such party may submit to the
Peruvian court the final judgment rendered in the United States. Under such circumstances, a judgment by a federal
or state court of the United States against our company, the Guarantors or such persons could be regarded by a
Peruvian court only as evidence of the outcome of the dispute to which such judgment relates, and a Peruvian court
may choose to re-hear the dispute. In addition, awards of punitive damages in actions brought in the United States
or elsewhere are unenforceable in Peru. In the past, Peruvian courts have enforced judgments rendered in the United
States based on legal principles of reciprocity and comity.
We and the Guarantors will appoint CT Corporation System, New York, New York, as agent to receive service
of process under the indenture governing the notes, including with respect to any action brought against us or the
Guarantors in the Supreme Court of the State of New York in the County of New York or the United States District
Court for the Southern District of New York under the federal securities laws of the United States.
vi
FORWARD-LOOKING STATEMENTS
This offering memorandum contains forward-looking statements within the meaning of Section 27A of the
Securities Act and Section 21E of the Exchange Act. These statements appear throughout this offering
memorandum, principally in “Summary,” “Management’s Discussion and Analysis of Financial Condition and
Results of Operations” and “Business”. Such estimates and forward-looking statements are primarily based on
current expectations and projections about future events and financial trends that affect, or may affect, our business,
financial condition, results of operations and prospects.
There are many significant risks, uncertainties and assumptions that might cause our business, financial
condition, results of operations and prospects to differ materially from those set out in our estimates and
forward-looking statements. Statements that are predictive in nature, that depend upon or refer to future events or
conditions or that include words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “estimates” and
similar expressions are forward-looking statements. Although we believe that these forward-looking statements are
based upon reasonable assumptions, these statements are subject to several risks and uncertainties and are made in
light of information currently available to us.
Our forward-looking statements may be influenced by factors, including the following:

economic, political and business conditions in Peru, Ecuador, Argentina and in major international markets
to which we export and sell sugar and ethanol, including price and demand for such products;

climatic conditions, climate changes and natural disasters;

the cost and availability of financing and our ability to obtain financing on satisfactory terms;

our investment, acquisition, joint venture, strategic alliances or divestiture plans;

interest rate fluctuations, inflation and exchange rates between Peruvian and foreign currencies;

existing and future governmental regulations;

market price variation, client preferences and competition;

our ability to successfully implement our strategy and capital expenditure plans;

our future production capacity and the availability of sugarcane;

our ability to retain certain personnel and ability to hire additional key personnel;

changes in tax policies and legislation;

seasonality of the sugarcane growing cycle in Ecuador and Argentina;

export duties and tariffs, as well as tariff barriers;

other factors or trends that may affect our financial condition or results of operations;

the factors discussed under the section entitled “Risk Factors” in this offering memorandum; and

other statements contained in this offering memorandum regarding matters that are not historical facts.
Our forward-looking statements are not guarantees of future performance, and our actual results or other
developments may differ materially from the expectations expressed in the forward-looking statements. As for
forward-looking statements that relate to future financial results and other projections, actual results will be different
due to the inherent uncertainty of estimates, forecasts and projections. Because of these uncertainties, potential
investors should not rely on these forward-looking statements.
vii
Forward-looking statements speak only as of the date they are made, and neither we nor the initial purchasers
undertake any obligation to update them in light of new information or future developments or to release publicly
any revisions to these statements in order to reflect later events or circumstances or to reflect the occurrence of
unanticipated events.
viii
PRESENTATION OF FINANCIAL AND OTHER INFORMATION
Currencies and Exchange Rates
Unless otherwise specified herein or the context otherwise requires, in this offering memorandum references to
“US$,” “dollars” and “U.S. dollars” are to United States dollars, the official currency of the United States and
Ecuador, and references to “S/.” and “nuevos soles” are to Peruvian nuevos soles, the official currency of Peru, and
references to “Pesos” or “Argentine Pesos” are to Argentine pesos, the official currency of Argentina.
Solely for the convenience of the reader, we have translated certain amounts included in “Summary—Summary
Financial and Other Information,” “Capitalization,” “Selected Financial and Other Information” and elsewhere in
this offering memorandum from nuevos soles into U.S. dollars for figures as of December 31, 2011 using the rate as
specified by the SBS as of December 31, 2011 of S/.2.696 to US$1.00 and, for figures as of March 31, 2012, using
the rate as specified by the SBS as of March 31, 2012 of S/.2.667 to US$1.00. These translations should not be
considered representations that any such nuevos sol amounts have been, could have been or could be converted into
U.S. dollars at that or at any other exchange rate. Such translations should not be construed as representations that
the nuevo sol amounts represent or have been or could be converted into U.S. dollars as of that or any other date.
For a complete description of the exchange rates between the nuevo sol and the U.S. dollar, see “Exchange Rates.”
The Federal Reserve Bank of New York does not report a noon buying rate for nuevos soles.
Financial Statements
We maintain our books and records in nuevos soles. We have prepared our consolidated financial statements in
accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting
Standards Board (“IASB”) and are the first consolidated financial statements we have prepared in accordance with
IFRS.
This offering memorandum includes: (i) our audited consolidated statements of financial position as of
December 31, 2011, 2010 and January 1, 2010 (transition date) and our results of operations for the years ended
December 31, 2011 and 2010 and (ii) our unaudited condensed consolidated interim statements of financial position
as of March 31, 2012 and our results of operations for the three months ended March 31, 2012 and 2011.
Our financial information as of December 31, 2011, 2010 and January 1, 2010 (transition date) and for the years
ended December 31, 2011 and 2010 has been derived from our audited consolidated financial statements contained
elsewhere in this offering memorandum. Our financial information as of March 31, 2012 and for the three months
ended March 31, 2012 and 2011 has been derived from our unaudited condensed consolidated interim financial
statements. The results of operations for the three months ended March 31, 2012 are not necessarily indicative of
the results to be expected for the year ending December 31, 2012 or for any other period. The unaudited condensed
consolidated interim financial statements and the notes thereto have been condensed, but contain all adjustments,
including adjustments of a normal and recurring nature, necessary for a fair presentation of our financial position
and results of operation.
Guarantors’ Financial Statements
Each of the Guarantors (other than Azucarera Olmos) is a publicly traded company in Peru and like us
prepares annual consolidated financial statements comparable to those prepared by us. As indicated in this section,
the Guarantors (other than Azucarera Olmos) are consolidated into our audited consolidated financial statements and
unaudited condensed consolidated interim financial statements and represented at March 31, 2012 and December 31,
2011 (i) in the case of Casa Grande 41.7% and 40.5%, respectively, of our consolidated assets, 86.8% and 55.6%,
respectively, of our consolidated profit and 51.3% and 52.5%, respectively, of our consolidated EBITDA (as
defined below), (ii) in the case of Cartavio 15.9% and 15.9%, respectively, of our consolidated assets, 12.0% and
20.3%, respectively, of our consolidated profit and 17.2% and 23.3%, respectively, of our consolidated EBITDA
and (iii) in the case of San Jacinto 10.8% and 11.6%, respectively, of our consolidated assets, (7.7)% and 17.9%,
respectively, of our consolidated profit and 16.0% and 12.4%, respectively, of our consolidated EBITDA.
Furthermore, Casa Grande, Cartavio and San Jacinto at March 31, 2012 and December 31, 2011 had total liabilities
of S/.614.6 million and S/.499.4 million, S/.312.6 million and S/.227.7 million and S/.180.7 million and S/.190.7
million, respectively.
ix
We are an operating company and also operate through our subsidiaries, including Casa Grande, Cartavio and
San Jacinto. Given the (i) relative contribution of Casa Grande, Cartavio and San Jacinto to our results of operations
and financial condition, (ii) Casa Grande’s, Cartavio’s and San Jacinto’s ability under limited circumstances to incur
additional indebtedness and (iii) limited amount of Casa Grande’s guarantee, we do not believe the inclusion of
separate consolidated financial statements for each of the Guarantors would be material to a prospective purchaser’s
decision on whether to invest in and acquire the notes.
Non-GAAP Financial Measures
A body of generally accepted accounting principles is commonly referred to as “GAAP.” For this purpose, a
non-GAAP financial measure is generally defined by the SEC as one that purports to measure historical or future
financial performance, financial position or cash flows but excludes or includes amounts that would not be so
adjusted in the most comparable GAAP measure. In this offering memorandum, we disclose so-called non-GAAP
financial measures, primarily EBITDA, Fixed Charge Coverage Ratio and Consolidated Leverage Ratio. We define
EBITDA as operating income less the change in fair value of biological assets plus depreciation plus amortization.
See “Description of the Notes—Certain Definitions” for the definitions of Fixed Charge Coverage Ratio and
Consolidated Leverage Ratio. The non-GAAP financial measures described in this offering memorandum are not a
substitute for GAAP measures of earnings.
Our management believes that disclosure of EBITDA, Fixed Charge Coverage Ratio and Consolidated
Leverage Ratio provides useful information to investors and financial analysts in their review of our operating
performance and their comparison of our operating performance to the operating performance of other companies in
the same industry and other industries. EBITDA, Fixed Charge Coverage Ratio and Consolidated Leverage Ratio,
as calculated by us, may not be comparable to similarly titled measures reported by other companies, including those
in the sugar and ethanol industries.
Market Data
We obtained the market and competitive position data, including market forecasts, used throughout this offering
memorandum from internal surveys, reports issued by market research firms, publicly available information and
industry publications. We include data from reports prepared by OECD-FAO Agricultural Outlook 2011-2020, the
Peruvian Ministry of Agriculture, the Czarnikow Group, IntercontinentalExchange, the World Bank and
Indexmundi. Industry publications, including those referenced here, generally state that the information presented
therein has been obtained from sources believed to be reliable, but that the accuracy and completeness of such
information is not guaranteed. Similarly, internal surveys, industry forecasts and market research, while believed to
be reliable, have not been independently verified, and neither we nor the initial purchasers make any representation
as to the accuracy of such information.
Information derived from the industry publications above have been accurately reproduced and, to the best of
our knowledge (after taking all reasonable care to ensure that such is the case), no facts have been omitted which
would render the reproduced information inaccurate or misleading.
Assumptions made in this offering memorandum as to domestic prices were made on basis of international
prices made from the above mentioned sources and also using a conservative model based on past developments.
Climate phenomena, such as “El Niño”, that could affect our performance also were included in our model so as to
stress the model.
Technical and Other Terms
As used in this offering memorandum, the following terms have these meanings:

“Ethanol” means a clear, colorless liquid with a characteristic, agreeable odor, made by fermenting and
then distilling starch or sugar crops. It is also known as alcohol or ethyl alcohol, and can be in hydrous or
anhydrous state, depending on the percentage of water or purity. We currently produce only hydrous
ethanol, and therefore references throughout this offering memorandum to “ethanol” are only to hydrous
ethanol.
x

“Ethanol 1” refers to a mixture of 96% ethanol and 4% water.

“Ethanol 2” refers to a mixture of 94% ethanol and 6% water.

“Polarization” refers to the measurement of sucrose content in sugar, where 100 is the maximum and
means 100% sucrose.

“Sugar” means any grade or type of saccharine product derived, directly or indirectly, from sugarcane or
sugar beets and consisting of, or containing, sucrose or invert sugar, including all raw sugar, refined
crystalline sugar, liquid sugar, edible molasses, and cane syrup.
All references in this offering memorandum to “tons” shall also include “metric tons.” The term “MW” refers
to megawatt. One “hectare” is equivalent to 10,000 square meters or 2.47105381 acres. One “cubic meter” is
equivalent to 1,000 liters.
Rounding
Certain figures included in this offering memorandum and in our financial statements have been rounded for
ease of presentation. Percentage figures included in this offering memorandum have not in all cases been calculated
on the basis of such rounded figures but on the basis of such amounts prior to rounding. For this reason, percentage
amounts in this offering memorandum may vary from those obtained by performing the same calculations using the
figures in our financial statements. Certain other amounts that appear in this offering memorandum may not sum
due to rounding.
General
Our obligations under the notes will be fully and unconditionally guaranteed by Cartavio, San Jacinto and
Azucarera Olmos on a joint and several basis, and Casa Grande will partially guarantee such obligations in an initial
amount equal to US$162,500,000.
Azucarera Olmos, a wholly-owned Guarantor of the notes, does not currently have any operations or assets.
Because Azucarera Olmos was incorporated on May 9, 2012, it is not consolidated in our audited consolidated
financial statements or unaudited condensed consolidated interim financial statements contained in this offering
memorandum. Assuming the land sale for the Olmos Expansion Plan (as defined below) is completed and land
preparation occurs, we expect the Olmos Expansion Plan to result in increases to our harvested area and sugar
production. As a result, our financial results for a future period may not be directly comparable to prior periods.
xi
SUMMARY
This summary highlights information presented in greater detail elsewhere in this offering memorandum. This
summary is not complete and does not contain all of the information you should consider before investing in our
notes. You should carefully read this entire offering memorandum before deciding whether to invest in our notes,
including the “Risk Factors,” “Selected Financial and Other Information” and “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” sections and our financial statements and notes to those
statements, included elsewhere in this offering memorandum.
Overview
We cultivate, harvest, purchase and crush sugarcane, the principal raw material used to produce sugar and
ethanol. We conduct our sugar and ethanol operations through our five mills and eight distilleries, which are located
throughout Peru, and in Ecuador and Argentina. We market and sell all of the sugar and ethanol we produce, both
domestically and globally. In 2011, we cultivated sugarcane on 55,733 hectares. According to data provided by the
Peruvian Ministry of Agriculture, we were the largest sugarcane crush processor in terms of sugarcane crushed, the
largest producer of sugar and one of the two largest producers of ethanol in Peru in 2011. In addition, according to
data provided by the Peruvian Ministry of Agriculture, we accounted for approximately 46% of the sugar produced
in Peru in 2011. We believe, according to internal data, that we accounted for approximately 38% of the ethanol
produced in Peru in 2011.
Our operations are conducted in Peru through Coazucar (approximately 1% of our EBITDA for the three
months ended March 31, 2012 and 2% of our EBITDA for 2011) and our subsidiaries (i) Casa Grande
(approximately 51% of our EBITDA for the three months ended March 31, 2012 and 52% of our EBITDA for
2011), (ii) Cartavio (approximately 17% of our EBITDA for the three months ended March 31, 2012 and 23% of our
EBITDA for 2011), (iii) San Jacinto (approximately 16% of our EBITDA for the three months ended March 31,
2012 and 12% of our EBITDA for 2011) and (iv) Sintuco (approximately 2% of our EBITDA for the three months
ended March 31, 2012 and 1% of our EBITDA for 2011); in Ecuador through our subsidiary La Troncal
(approximately 13% of our EBITDA for the three months ended March 31, 2012 and 6% of our EBITDA for 2011);
and in Argentina through our subsidiary San Isidro (approximately 0% of our EBITDA for the three months ended
March 31, 2012 and 4% of our EBITDA for 2011).
Our mills have a combined installed sugarcane crushing capacity of approximately 8.4 million tons per year and
benefit from high agricultural yields, proximity to a main port and consumer markets and a more efficient structure
for sugarcane transportation, as compared to other mills. In addition, Peru’s dry, tropic climate allows us to harvest
our sugarcane throughout the entire calendar year, giving us a competitive advantage over producers in other
countries, which can only harvest once or twice a year. Most of our mills are also able to shift production between
brown, white and refined sugar in order to capitalize on unexpected price variations among the different types of
sugar.
The close proximity of our sugarcane fields and those of our suppliers to our milling facilities (average distance
of approximately 15 kilometers) and our increasing mechanization levels (approximately 13% of the sugarcane we
cultivated was harvested mechanically in 2011) positively impact our operating cost structure. Our Peruvian mills
and distilleries are located in the La Libertad and Ancash regions, an average of approximately 59 kilometers from
the nearest sea port, Salaverry, also located in the La Libertad region, through which we ship almost all of our
Peruvian exports. The La Libertad and Ancash regions are approximately 610 kilometers and 407 kilometers
respectively from Lima, our principal market.
For the three months ended March 31, 2012, we crushed 1.3 million tons of sugarcane, all of which was used to
produce sugar and ethanol in Peru because the sugarcane harvest does not begin in Ecuador and Argentina until July
and May, respectively. In the same period, we produced approximately 133 thousand tons of sugar and
approximately 14.1 million liters of ethanol. For the three months ended March 31, 2012, we reported sales of
products of S/.377.2 million (US$141.4 million) and EBITDA of S/.138.6 million (US$52.0 million). Our sales of
sugar and ethanol for the three months ended March 31, 2012 were S/.340.1 million (US$127.5 million) and S/.30.9
million (US$11.6 million), respectively. During 2011, we crushed 6.7 million tons of sugarcane (4.7 million tons of
which were crushed in Peru), all of which was used to produce sugar and ethanol. In 2011, we produced
approximately 690 thousand tons of sugar (492 thousand tons of which were produced in Peru) and approximately
1
69.2 million liters of ethanol (47.9 million liters of which were produced in Peru). For 2011, we reported sales of
products of S/.1,304.4 million (US$483.8 million) and EBITDA of S/.578.5 million (US$214.6 million). Our sales
of sugar and ethanol during 2011 were S/.1,166.2 million (US$432.6 million) and S/.93.4 million (US$34.6 million),
respectively.
As of March 31, 2012, we owned land with a total area of 89,752 hectares (approximately 224,380 acres), of
which approximately 80,862 hectares (approximately 199,814 acres) is arable land. As of December 31, 2011, we
cultivate sugarcane on 55,733 hectares (approximately 137,719 acres). We also purchase sugarcane from third party
suppliers, which represented approximately 28% of the total sugarcane that we crushed during 2011.
Key Financial and Operating Data
The following table sets forth certain of our financial information and operating data for the periods indicated.
As of and for the Three Months
Ended March 31,
2012
2012
2011
(in thousands
of US$, except
(in thousands of S/.,
as indicated)
except as indicated)
Financial data:
Sales of products .........................
Profit for the period.....................
EBITDA(1) ...................................
EBITDA margin(2) .......................
Total debt(3) .................................
Total debt / EBITDA(4) ................
Net debt(5) ....................................
Net debt / EBITDA(6) ..................
141,427
32,767
51,979
36.8%
302,049
1.46x
230,133
1.11x
(unaudited)
377,185
87,388
138,628
36.8%
805,566
1.46x
613,766
1.11x
As of and for the Years
Ended December 31,
2011
2011
2010
(in thousands
of US$, except
(in thousands of S/.,
as indicated)
except as indicated)
309,162
147,796
164,151
53.1%
As of and for the Three Months
Ended March 31,
2012
2011
483,833
207,543
214,587
44.4%
302,946
1.41x
260,558
1.21x
1,304,415
559,535
578,526
44.4%
816,744
1.41x
702,467
1.21x
937,854
427,689
416,977
44.5%
533,619
1.28x
462,637
1.11x
2011
As of and for the Years
Ended December 31,
2010
2009
Operating data:
Sugarcane crushed (tons)
Casa Grande ..........................
Cartavio .................................
San Jacinto.............................
San Isidro...............................
La Troncal .............................
Total ......................................
Sugar production (tons)...............
Ethanol production (million
liters) ........................................
Employees ..................................
648,161
449,681
207,568
—(7)
—(7)
1,305,409
133,429
664,952
455,021
171,499
—(7)
—(7)
1,291,472
135,866
2,331,436
1,688,790
696,063
488,752
1,500,886
6,705,927
689,651
2,365,120
1,696,196
605,809
547,106
1,629,216
6,843,447
470,599
2,197,378
1,690,490
546,774
515,821
1,295,569
6,246,032
451,866
14.1
13,526
13.1
9,706
69.2
12,089
67.2
8,646
59.7
9,471
_______________________________
(1) EBITDA is calculated using profit from operations for the period before financing and taxation without initial recognition and change in fair
value of biological asset, added to depreciation and amortization. See “Presentation of Financial and Other Information.”
(2) EBITDA margin is EBITDA divided by sales of products, expressed as a percentage.
(3) Total debt is the sum of total short- and long-term loans.
(4) Total debt/EBITDA is the ratio of our total debt as of the end of the applicable period divided by our EBITDA for the then most recently
concluded period of four consecutive fiscal quarters, including the four consecutive fiscal quarters ended March 31, 2012.
(5) Net debt is obtained netting total debt with cash and cash equivalents.
(6) Net debt/EBITDA is the ratio of our net debt as of the end of the applicable period divided by our EBITDA for the then most recently
concluded period of four consecutive fiscal quarters, including the four consecutive fiscal quarters ended March 31, 2012.
(7) Sugarcane harvest begins in Ecuador and Argentina in July and May, respectively, due to climate conditions in these countries that do not
permit sugarcane harvesting year-round.
2
The following tables set forth certain of the financial information and operating data of the Guarantors for the
periods indicated.
Casa
Grande
Financial data:
Sales of products ........................................... 153,270
Profit for the period.......................................
75,848
EBITDA(2) .....................................................
71,134
EBITDA margin(3) ........................................
46.4%
Total debt(4) ................................................... 106,801
(5)
Total debt / EBITDA .................................
0.39x
Net debt(6) ......................................................
70,127
Net debt / EBITDA(7) ....................................
0.26x
Operating data:
Total area for sugarcane production
capacity (hectares) .....................................
21,115
Sugarcane crushed (tons) .............................. 648,161
Daily ethanol production capacity (liters) ....
60,000
Total ethanol production (million liters).......
4.0
% of
Coazucar
40.6%
86.8%
51.3%
13.3%
11.4%
37.9%
49.7%
13.6%
28.2%
For the Three Months
Ended March 31, 2012
(in thousands of S/., except as indicated)
% of
San
% of
Cartavio Coazucar Jacinto Coazucar Others(1)
95,749
10,508
23,814
24.9%
54,040
0.45x
32,394
0.27x
25.4%
12.0%
17.2%
6,891
449,681
80,000
3.7
12.4%
34.4%
18.2%
26.4%
6.7%
5.3%
48,430
(6,764)
22,181
45.8%
103,481
1.42x
102,865
1.42x
12.8%
(7.7)%
16.0%
6,081
207,568
40,000
0.6
10.9%
15.9%
9.1%
4.1%
12.8%
16.8%
% of
Coazucar
Total
79,736
7,796
21,499
27.0%
541,244
6.25x
408,380
4.72x
21.1%
8.9%
15.5%
21,646
(8)
—
260,000
5.8
38.8%
55,733
(8)
1,305,410
—
59.1% 440,000
41.3%
14.1
67.2%
66.5%
377,185
87,388
138,628
36.8%
805,566
1.46x
613,766
1.11x
_______________________________
(1) Includes La Troncal, San Isidro, Sintuco and Coazucar distilleries with respect to financial data, and adjustment for consolidation. With
respect to operating data, only the Coazucar distilleries are included in total ethanol production and capacity figures and La Troncal, San
Isidro and Sintuco are included in the total sugarcane production and total of sugarcane crushed figures.
(2) EBITDA is calculated using profit from operations for the period before financing and taxation without initial recognition and change in fair
value of biological asset, added to depreciation and amortization. See “Presentation of Financial and Other Information.”
(3) EBITDA margin is EBITDA divided by sales of products, expressed as a percentage.
(4) Total debt is the sum of total short- and long-term loans.
(5) Total debt/EBITDA is the ratio of our total debt as of the end of the applicable period divided by our EBITDA for the then most recently
concluded period of four consecutive fiscal quarters, including the four consecutive fiscal quarters ended March 31, 2012.
(6) Net debt is obtained netting total debt with cash and cash equivalents.
(7) Net debt/EBITDA is the ratio of our net debt as of March 31, 2012 divided by our EBITDA for the then most recently concluded period of
four consecutive fiscal quarters ended March 31, 2012.
(8) Sugarcane harvest begins in Ecuador and Argentina in July and May, respectively, due to climate conditions in these countries that do not
permit sugarcane harvesting year-round.
Casa
Grande
% of
Coazucar
For the Year
Ended December 31, 2011
(in thousands of S/., except as indicated)
% of
San
% of
Cartavio Coazucar Jacinto Coazucar Others(1)
% of
Coazucar
Total
Financial data:
Sales of products ........................................... 583,390
Profit for the year .......................................... 310,859
EBITDA(2) ..................................................... 303,581
EBITDA margin(3) ........................................
52.0%
Total debt(4) ................................................... 119,141
(5)
Total debt / EBITDA .................................
0.39x
Net debt(6) ...................................................... 110,467
Net debt / EBITDA(7) ....................................
0.36x
Operating data:
Total area for sugarcane production
capacity (hectares) ..................................... 21,115
Sugarcane crushed (tons) .............................. 2,331,436
Daily ethanol production capacity (liters) .... 60,000
Total ethanol production (million liters).......
12.7
44.7%
55.6%
52.5%
401,718
113,742
134,659
33.5%
56,211
0.42x
47,889
0.36x
30.8%
20.3%
23.3%
37.9%
6,891
34.8% 1,688,790
13.6%
80,000
18.3%
15.8
12.4%
25.2%
18.2%
22.9%
14.6%
15.7%
6.9%
6.8%
164,855
99,990
71,922
43.6%
105,406
1.47x
103,410
1.44x
12.6%
17.9%
12.4%
154,452
34,944
68,364
44.3%
535,986
7.84x
440,701
6.45x
11.8% 1,304,415
6.2% 559,535
11.8% 578,526
44.4%
65.6% 816,744
1.41x
62.7% 702,467
1.21x
6,081
696,063
40,000
2.4
10.9%
21,646
10.4% 1,989,638
9.1% 260,000
3.5%
38.2
38.8%
55,733
29.7% 6,705,927
59.1% 440,000
55.3%
69.2
12.9%
14.7%
_______________________________
(1) Includes La Troncal, San Isidro, Sintuco and Coazucar distilleries with respect to financial data, and adjustment for consolidation. With
respect to operating data, only the Coazucar distilleries are included in total ethanol production and capacity figures and La Troncal, San
Isidro and Sintuco are included in the total sugarcane production and total of sugarcane crushed figures.
(2) EBITDA is calculated using profit from operations for the period before financing and taxation without initial recognition and change in fair
value of biological asset, added to depreciation and amortization. See “Presentation of Financial and Other Information.”
(3) EBITDA margin is EBITDA divided by sales of products, expressed as a percentage.
(4) Total debt is the sum of total short- and long-term loans.
(5) Total debt/EBITDA is the ratio of our total debt as of the end of the applicable period divided by our EBITDA for the then most recently
concluded year.
(6) Net debt is obtained netting total debt with cash and cash equivalents.
(7) Net debt/EBITDA is the ratio of our net debt as of December 31, 2011 divided by our EBITDA for the then most recently concluded period of
fiscal year ended December 31, 2011.
3
Our Main Products
We market and sell all the sugar and ethanol produced by our mills and distilleries, both domestically and
globally. We also produce other sugarcane by-products including molasses and bagasse. Ethanol is produced from
molasses, the principal remaining by-product of processing sugarcane into sugar. Bagasse is used as a raw material
to generate the vapor that is used to produce sugar and it is also used to cogenerate electricity.
Sugar
We are able to produce several types of sugar such as refined white, refined, brown and organic sugar. While
brown sugar has constituted the majority of our sugar sales during the last six years, most of our mills have
industrial flexibility to produce brown, white and refined sugar. We produced approximately 690 thousand tons of
sugar during 2011 (consisting 60% of brown sugar, 29% of white sugar, 8% of refined sugar and 3% of organic
sugar) and recorded sales of products from sugar of S/.1,166.2 million, or 89.4%, of our sales of products in 2011.
For 2011, we exported approximately 11.7% of our total sugar sales to customers located primarily in North
America and Europe. In Peru, we sell our sugar products to retailers, wholesale distributors and food and beverage
manufacturers. In Argentina, we produce mostly organic sugar, which we export mainly to Europe, where demand
for this specialty product is highest.
Ethanol
We produce and sell ethanol both domestically and globally. In 2011, we produced approximately 69.2 million
liters of ethanol in our eight distilleries and recorded sales of products from ethanol of S/.93.4 million, or 7.2%, of
our sales of products. In 2011, we sold 20.2% of our ethanol mainly to alcohol producers in Peru and exported
79.8% to customers located in the U.S. and Europe.
Sugarcane by-products
We also produce molasses and bagasse. Molasses is a by-product of processing sugarcane into sugar and is
used as a raw material to produce ethanol. Sugarcane bagasse is a by-product of processing both sugar and ethanol
and is a renewable energy source. We generate electricity at all of our mills through the burning of sugarcane
bagasse in boilers, which enables those mills to be self-sufficient in terms of their energy needs. In addition, we sell
excess bagasse produced at our Casa Grande, Cartavio and San Jacinto mills to Trupal S.A., an affiliate of Grupo
Gloria engaged in the production of paper and cardboard.
Peru’s Competitive Advantages in the Production of Sugarcane
According to the Food and Agricultural Policy Research Institute (“FAPRI”), Peru had one of the highest crop
yields in the world for sugarcane in 2011. Peru is located near the equator and the resulting vertical solar radiation it
receives allow for such high sugarcane crop yields. Moreover, the vast territory, mild climate and stable water
supply found in Peru, make it possible to harvest sugarcane all year long, thus further increasing productivity.
According to the Peruvian Ministry of Agriculture, approximately 8% of Peru’s coastal agricultural land,
or 127,809 million hectares, is currently used for sugarcane production, and we believe that Peru should be able to
increase its sugarcane production capacity significantly depending on market conditions and the suitability of
available land for sugarcane cultivation. Peru’s favorable growing conditions also permit sugarcane to be harvested
seven times before requiring re-planting, compared to (i) India, where, on average, sugarcane must be re-planted
every two harvests and (ii) the United States and other countries that harvest sugar beet, which has one annual crop
and must be re-planted every year, as well as requiring crop rotations that range between three and five years.
We believe that Peruvian producers of sugar, including us, enjoy competitive advantages over sugar producers
in other countries due to the following factors:
 Low-cost producer. The cost of producing sugar from sugarcane in Peru is low due to its extremely
favorable climate and soil. Peru experiences dry weather with little climate differentiation among the seasons
due to its proximity to the equator and due to the effects of the Humboldt sea current. Peru also benefits from
4
technological improvements developed in the production of sugar. These technological improvements have
resulted in longer harvesting cycles, higher sugarcane yield per hectare and increased sucrose content from
crushed sugarcane, which has improved sugar output. According to the Czarnikow Group, sugar production
costs in Peru are significantly lower than production costs in Brazil, a leading producer of sugar. For example,
during 2011, average production costs per pound of brown sugar in Brazil was approximately US$0.20, or
53.8% higher than the US$0.13 per pound cost of brown sugar produced from our own sugarcane.
 Strong domestic and global sugar demand. Peru consumed approximately 1.2 million tons of sugar
during 2011. Sugar consumption in Peru has continued to grow, principally as a result of higher consumption
of beverages and processed food products made with sugar, as well as a result of higher consumer disposable
income. Worldwide sugar consumption has more than doubled since the early 1980s, to approximately
165 million tons in 2010 from approximately 70 million tons in 1971, in each case, measured based on raw
sugar equivalent. OECD-FAO estimates the worldwide sugar consumption to increase to 207 million tons by
2020. We expect future growth opportunities to come from a gradual liberalization of trade barriers in markets
outside Peru, mainly in developed OECD countries; and we expect increased sugar consumption due to
(1) population growth concentrated in markets open to the international sugar trade, (2) increased purchasing
power in many countries and (3) higher consumption of processed foods and drinks.
 Increased opportunities to export sugar. The global sugar market has grown significantly in recent
years. However, sugar producing countries still give priority to supplying their domestic markets. Therefore,
the international trade market for sugar should have ample room for growth. Consumption growth of sugar is
not always accompanied by increased local production in many countries. This creates medium-term
opportunities for Peruvian sugar export growth. Furthermore, given Peru’s location in the western hemisphere
and proximity to the equator, Peruvian producers of sugar, such as us, are able to export the majority of their
products in a different export window than those of competitors outside of Peru. This also creates opportunities
for Peruvian sugar export growth.
Our Strengths
Undisputed leadership in Peru. We enjoy leading market positions in Peru, a country with one of the highest
sugarcane yields in the world in 2011 and we have one of the highest sugarcane yields in Peru. We are the largest
grower and processor of sugarcane in Peru, whose climate allows us to harvest sugarcane year-round. According to
the Peruvian Ministry of Agriculture, we are the largest sugarcane grower in Peru, with 55,733 hectares cultivated in
2011, compared to 10,350 hectares cultivated by our largest competitor. For 2011, the combined crushing capacity
of our three Peruvian mills is over six million tons per year, compared to a crushing capacity 1.2 million tons for our
largest competitor. We produced approximately 492 thousand tons of sugar in Peru and are also the largest seller of
sugar in Peru, with a market share of approximately 46% through our brands Casa Grande, Cartavio and San Jacinto.
We are one of the two largest producers of ethanol in Peru, having produced 47.9 million liters of ethanol in 2011,
and the largest exporter in Peru, having exported 42.2 million liters of ethanol in 2011.
Low-cost producer and strategically located assets throughout Peru. Our mills and distilleries and the land on
which we cultivate and harvest sugarcane are strategically located throughout Peru and benefit from favorable
climate and stable water supply. Peru is one of the world’s most productive countries in terms of high crop yields
for sugarcane, primarily as a result of:

its favorable climate;

a combination of climate and soil resulting in increased production of sugar per hectare of planted
sugarcane;

extensive agricultural properties and operations, with large-scale production;

availability of land for sugarcane production; and

extensive logistical infrastructure, allowing for efficient product distribution.
5
Our existing mills, distilleries and other production facilities are located in close proximity to our customers,
sugarcane fields owned by us and by other growers, port terminals and other transportation infrastructure and
warehouses. For example, our production facilities, Casa Grande, Cartavio and San Jacinto, are located throughout
Peru, approximately 63, 54 and 170 kilometers, respectively, from the port of Salaverry, in the La Libertad Region,
from which we export sugar and ethanol. Our production facilities are also located close to major roads and our
warehouses, thus decreasing delivery time, increasing operating efficiencies, reducing logistics costs and facilitating
responses to shifts in demand.
During 2011, 65% of our total sugarcane crushed was harvested from our own fields, with lower costs than the
sugarcane supplied by third-party growers. Our expansive owned lands and those of our suppliers are also
strategically located within an average of approximately 15 kilometers from our mills and distilleries. This close
proximity, coupled with our increasing level of mechanization, reduces our transportation costs.
We are also energy self-sufficient and can generate enough energy to support our milling and distilling
operations. We believe our low costs, the increasing mechanization of our agricultural processes, improvements in
industrial operations and other factors enable us to manage our operating costs efficiently.
Increasingly mechanized agro-industrial complex. We seek to implement technological innovations in our
planting, harvesting and production processes, which has greatly improved our productivity and reduced our
operating costs in recent years by, among others, reducing the number of workplace accidents and the number of
employees assigned to harvesting. For 2011, our level of mechanized harvesting contributed to reduce our costs
associated to our sugarcane harvest and loading operations. During 2011, we harvested approximately 13% of the
sugarcane we produced in Peru using mechanized harvesters, which we operate 24 hours per day, seven days per
week throughout the harvesting season. We have developed and implemented numerous technological
improvements for our mechanized harvesting equipment, such as automatic pilots and use of high precision GPS for
soil preparation (including application of fertilizers and pesticides) and harvesting, which has significantly improved
our productivity levels, and are also in the process of developing and testing mechanized planting.
Diversified sugarcane varieties. We currently cultivate 19 types of sugarcane, with no single variety
representing more than 40% of our total cultivated area. Six of the types of sugarcane we cultivate have been
developed to maximize productivity considering the soil and climate conditions in Peru and to be more resistant to
pests and disease. Our use of a wide variety of sugarcane plants coupled with our practice of replanting
approximately 11% of our sugarcane crop annually, has resulted in historical low infestation and disease rates of our
crops and mitigates our exposure to the risk of loss of our crops from pests and disease.
Long operating history and experienced management team. Many of our mills and distilleries have been in
operation for over 100 years, including Casa Grande (1860), Cartavio (1782), San Jacinto (1868) and San Isidro
(1760). As a result, we benefit from significant operating experience in both the sugar and ethanol industries. We
have successfully acquired companies and facilities and expanded our sugar and ethanol operations throughout Peru,
and more recently in Ecuador and Argentina. We believe this demonstrates our ability to grow our operations and
succeed in the industries in which we operate, reducing our fixed average costs. Our team of seven senior
executives has an average of 15 years experience and knowledge in the sugar and ethanol industries and in
production and operations. Our management team and our other professionals are highly trained, and we have a
results- oriented corporate culture that is focused on reducing operating costs and increasing revenue. We utilize
human resource management tools that focus on the integration and motivation of our management team and other
professionals to help to maximize their effectiveness.
Efficient use of water. Water is vital to the production of sugarcane, and our investments in water storage and
distribution systems allow us to increase our water efficiency and improve our sugarcane production. We are
planning to increase the area under cultivation by introducing new pressurized watering systems that will allow us to
reduce our usage of water per hectare compared to traditional watering systems. The pressurized water system also
decreases the time needed for sugarcane to achieve maturity, allowing us to harvest sugarcane earlier. In addition,
our investments in water storage will allow us to manage our supply of water. By building reservoirs to obtain water
from the Chicama River when its levels are the highest, we are able to store that water in reservoirs both for future
use on existing cultivated lands and to use the reservoirs as water sources to expand cultivation.
6
Our Strategy
We intend to focus on achieving sustainable and profitable growth, further reducing our operating costs and
building on our competitive strengths to maintain our market share in Peru and in the other countries in which we
operate.
Expand our sugarcane and industrial facilities, increasing utilization of our existing capacity. We currently
use approximately 80% of our overall crushing capacity. We have a combined sugarcane crushing capacity
of approximately 8.4 million tons per year, and in 2011 we crushed approximately 6.7 million tons of sugarcane.
We will seek to increase our sugarcane production and achieve the full utilization of our existing crushing capacity,
therefore increasing the productivity of those crops, resulting in more sugarcane volume and expansion of the
harvested area close to our mills and distilleries through new plantations. Through more efficient water use, we
intend to significantly increase our harvested area over the next five years from approximately 55,733 hectares
in 2011. We expect to significantly increase our harvested area mainly through the Olmos Expansion Plan (as
defined below), which will add approximately 14,500 hectares to our sugarcane operations, in addition to increasing
our harvested area on our existing lands by approximately 12,100 hectares in Peru, approximately 2,276 hectares in
Ecuador and approximately 3,200 hectares in Argentina. The potential areas that we have identified for such
expansion are within the 50 kilometer radius area where most of our producing land is currently located. Expanding
our harvested area and renewing our current harvesting areas will allow us to fully utilize the processing capacity of
our mills and distilleries.
Continue to reduce our operating costs and seek to increase our operating efficiencies. We intend to continue
to focus on our low-cost operations improving the efficiency of our operations through additional investments in
technology, including agricultural and industrial processes, and information technology. As part of this effort, we
intend to continue to (1) increase the level of mechanization of our harvesting, (2) test and implement mechanized
planting in our land, (3) take advantage of the competitive advantage of climate and soil conditions in Peru, by
expanding our sugarcane production to levels that would allow us to fully utilize our existing crushing capacity,
(4) invest in the modernization of our equipments and industrial facilities, (5) invest in improving the productivity of
our crop and the efficiency of our industrial process and (6) invest in water storage and distribution systems to
increase our water efficiency and improve our sugarcane production.
Expand our land portfolio. We plan to further expand our land portfolio. Through a public auction in
December 2011, Azucarera Olmos and our affiliate, Gloria S.A., won the rights to purchase 15,600 hectares (11,100
hectares by Azucarera Olmos and 4,500 hectares by Gloria S.A.) of land from Odebrecht, S.A. in Olmos,
Lambayeque, Peru (approximately 854 kilometers north of Lima) of the Proyecto Especial de Irrigación Olmos (the
“Olmos Expansion Plan”), from which sugarcane greenfield crops will be developed using pressurized water and
green harvesting for the production of sugar. According to the auction criterion, water will be available as of March
2014, when construction of the project will be finalized. See “—Recent Developments.”
Participate in the consolidation of the sugar and ethanol sectors. The sugar and ethanol sectors have been
consolidating in recent years in Latin America. In addition to acquisitions in Peru, we recently acquired sugar and
ethanol companies in Argentina and Ecuador. We closely monitor domestic and foreign acquisition and investment
opportunities in these sectors and are currently considering, and will continue to consider in the future, selective
acquisitions, partnerships and investment opportunities that offer the right strategic fit for our operations. We may
enter into acquisitions or partnerships or make certain investments that could be material to our results of operations.
Focus on environmental and social awareness. We are committed to acting as an environmentally and
socially conscious company. Cartavio, San Jacinto and Casa Grande have signed an Environmental Compliance and
Management Program (Programas de Adecuación y Manejo Ambiental or “PAMA”) with the Peruvian government
regulating mechanical harvesting, burning of sugarcane, and carbon dioxide emissions, formalizing our commitment
to reducing environmental impacts. Casa Grande’s PAMA has been approved by the Peruvian government through
the Ministry of Agriculture, and San Jacinto’s and Cartavio’s are in the process of obtaining the approval for their
respective PAMAs from the Peruvian government. We continue to invest in the mechanization of our harvests,
which is not only cost-efficient, but also reduces our emission levels and decreases the burning of sugarcane fields
for manual harvesting, and to improve and develop new training programs for our employees, as well as for the
communities where we operate in.
7
Recent Developments
Azucarera Olmos was incorporated on May 9, 2012 and it has committed to purchase 11,100 hectares and
Grupo Gloria, through Gloria S.A., has committed to purchase 4,500 hectares, for the Olmos Expansion Plan. We
have provided a US$49.8 million guarantee for the financing used to purchase the land. The sale contract was
signed on May 30, 2012, and a payment schedule is expected to be determined in the second half of August 2012,
with land preparation expected to begin in September 2012 and sugar production by 2016.
Grupo Gloria and Our History
We are part of the Grupo Gloria conglomerate, which is comprised of operating companies, including among
many others, the Guarantors, Gloria S.A. and Yura S.A., under the common control of Vito Rodríguez Rodríguez
and Jorge Rodríguez Rodríguez, with operations in various industries throughout Latin America, including dairy,
food, cement, paper, packaging, agriculture and transportation.
Grupo Gloria, through Trupal S.A. was involved in the packaging business which used paper as a raw material.
Trupal S.A. began to research the use of bagasse as a raw material used in the production of paper and as a result
decided to enter into the sugarcane business in order to produce bagasse. In October 2005, Coazucar, a company
formed to manage the agro-industrial division of Grupo Gloria, bought an ownership interest in Casa Grande S.A.A.
and in January 2006, acquired the majority of Casa Grande S.A.A.’s shares, laying the foundation for Coazucar’s
sugar business.
Since 2006, Coazucar has made a number of acquisitions of local Peruvian sugarcane producers. In 2007,
Coazucar purchased a majority ownership interest in Complejo Agroindustrial Cartavio S.A.A. from Azucagro S.A.,
along with a direct ownership interest in its subsidiary Cooperativa Agraria Sintuco Ltda. In 2009, Coazucar also
purchased a majority ownership interest in Agroindustrias San Jacinto S.A.A. from Grupo Picasso S.A.C. In 2011,
Coazucar undertook several international acquisitions beginning with the purchase of an ownership interest in
Ingenio La Troncal, an Ecuadorian sugar company. In that same year, Coazucar also purchased a majority
ownership interest in Ingenio San Isidro, Argentina’s largest sugar producer.
Corporate Information
Our executive offices are located at Av. República de Panamá 2461, La Victoria, Lima 13, Peru. Our telephone
number is +51 (1) 470-7170. Our website is http://www.coazucar.com. Any information that is included on or
linked to on our website or which may be accessed through our website is not a part of this offering memorandum
and is not included herein by reference or otherwise.
8
Our Corporate Structure
The following is a chart of our current ownership and corporate structure.
50.0%
50.0%
Vito Rodríguez
Rodríguez
Jorge Rodríguez
Rodríguez
Maningham
Holding S.A.(1)
100.0%
Clarcrest
Investments S.A.(1)
94.1%(2)
Peru
57.1%
Argentina
87.2%
Casa
Grande
Cartavio
82.6%
100.0%
San Jacinto
Azucarera
Olmos
60.0%
San Isidro
Ecuador
36.4% (3)
La
Troncal
14.6%
50.0%
Chiquitoy (4)
57.7%
Sintuco
(1) Incorporated under the laws of the Republic of Panama.
(2) Clarcrest Investments S.A. owns 270,135,573 (or 94.1%) shares of Coazucar. Vito Rodríguez Rodríguez and Jorge Rodríguez Rodríguez
each own 8,438,000 (or 2.94%) shares of Coazucar. Maningham Holding S.A. owns one share of Coazucar.
(3) Coazucar owns a 52% interest in a trust vehicle. The trust has a 70% ownership interest in La Troncal.
(4) Chiquitoy’s results of operations are not consolidated into our results of operations because we do not own a majority ownership interest in
Chiquitoy.
9
THE OFFERING
The following summary contains basic information about the notes and the guarantees and is not intended to be
complete. It does not contain all of the information that is important to you. For a more complete understanding of
the notes, please refer to the section of this offering memorandum entitled “Description of the Notes.”
Issuer .........................................................
Corporación Azucarera del Perú S.A.
Guarantors .................................................
Cartavio S.A.A., Agroindustrias San Jacinto S.A.A., Casa Grande S.A.A. and
Azucarera Olmos S.A., each, a company incorporated in Peru.
Notes Offered ............................................
US$325,000,000 aggregate principal amount of 6.375% senior notes due
2022.
Maturity.....................................................
August 2, 2022.
Interest.......................................................
The notes will bear interest at the rate of 6.375% per annum, payable semiannually in arrears on each February 2 and August 2 of each year, beginning
on February 2, 2013.
Issue Price .................................................
99.091%, plus accrued interest, if any, from August 2, 2012.
Guarantees.................................................
Cartavio, San Jacinto and Azucarera Olmos will unconditionally, irrevocably
and fully guarantee all of the Issuer’s obligations pursuant to the notes. Casa
Grande will unconditionally, irrevocably and partially guarantee all amounts
due on the notes, including principal, interest, premium, if any, and any other
amounts, in an initial amount equal to US$162,500,000, as subsequently
adjusted as provided in “Description of the Notes—Note Guarantees” and
“—Principal, Maturity and Interest.” See “Description of the Notes—Note
Guarantees.”
In the event that we acquire or redeem any notes and such notes are no longer
considered outstanding under the indenture governing the notes, the amount
of Casa Grande’s guarantee will be reduced on a proportional basis.
Ranking .....................................................
The notes and the guarantees will be senior unsecured obligations and: (i)
will rank equally with all of our and the Guarantors’ respective existing and
future unsecured and unsubordinated indebtedness, other than with respect to
certain obligations given preferential treatment pursuant to the laws of Peru;
(ii) will be effectively subordinated to all of our and the Guarantors’
respective existing and future secured indebtedness to the extent of the assets
securing such indebtedness and other liabilities; (iii) will be structurally
subordinated to the existing and future indebtedness and other liabilities of
our subsidiaries which are not guarantors and Casa Grande to the extent that
any obligations under the notes exceed the amount of its partial guarantee of
an initial amount equal to US$162,500,000 and (iv) will not provide holders
with any direct claims on the assets of any non-guarantor unless or until such
entity becomes a guarantor.
As of March 31, 2012, after excluding intercompany balances and
intercompany guarantees:
 on a consolidated basis, we and our subsidiaries had S/.805.6 million
(US$302.0 million) of indebtedness outstanding, of which S/.619.2
million (US$232.2 million) was secured indebtedness and S/.0 would
have been subordinated in right of payment to the notes; and
 on a combined basis, the Guarantors had S/.264.3 million (US$99.1
million) of indebtedness outstanding, of which S/.199.5 million
(US$74.8 million) was secured indebtedness and S/.0 would have been
10
subordinated in right of payment to the Guarantees;
 Casa Grande had S/.106.8 million (US$40.0 million) of
indebtedness outstanding, of which S/.97.8 million (US$36.7 million)
was secured indebtedness and S/.0 million would have been subordinated
in right of payment to its Guarantee; and
 on a combined basis, the restricted subsidiaries other than the
Guarantors, had total liabilities of S/.568.1 million (US$213.0 million),
including S/.306.6 million (US$115.0 million) of indebtedness, and total
assets of S/.1,425.8 million (US$534.6 million).
For the three months ended March 31, 2012, our non-guarantor subsidiaries
and Casa Grande generated 24.1% and 40.6%, respectively, of our
consolidated revenues and 14.8% and 51.3%, respectively, of our
consolidated EBITDA.
Optional Redemption ................................
On or after August 2, 2017, we may redeem the notes, in whole or in part,
provided at least US$100 million in aggregate principal amount of the notes
remains outstanding (not including notes held by us or our affiliates), at the
redemption prices set forth in “Description of the Notes—Optional
Redemption.”
Before August 2, 2017, we may also redeem the notes, in whole or in part,
provided at least US$100 million in aggregate principal amount of the notes
remains outstanding (not including notes held by us or our affiliates), at a
redemption price based on a “make-whole” premium.
In addition, at any time prior to August 2, 2015, we may redeem up to 35% of
the aggregate principal amount of the notes (including any additional notes),
with the net proceeds from certain equity offerings by us, at a price of
106.375% of the aggregate principal amount thereof, plus accrued and unpaid
interest, and any Additional Amounts.
Change of Control Offer............................
Upon the occurrence of a change of control repurchase event (including both
a change of control and a rating downgrade event), we will be required to
make an offer to repurchase all notes then outstanding at 101% of their
principal amount, plus accrued and unpaid interest to the repurchase date and
any Additional Amounts. See “Description of the Notes—Repurchase at the
Option of Holders—Change of Control.”
Additional Amounts ..................................
All payments in respect of the notes, whether of principal or interest, will be
made without withholding or deduction for or on account of any present or
future taxes, duties, levies, or other governmental charges and any interest,
penalties or other liabilities with respect thereto, except to the extent required
by applicable law. If withholding or deduction is required by applicable law,
subject to certain exceptions and limitations, we will pay additional amounts
so that the net amount received by the holders of the notes is no less than the
amount they would have received in the absence of such withholding or
deduction. See “Description of the Notes—Additional Amounts.”
Optional Tax Redemption .........................
The notes are redeemable at our option, in whole but not in part, at any time,
at the principal amount thereof plus accrued and unpaid interest and any
Additional Amounts due thereon if certain changes in applicable tax laws
occur. See “Description of the Notes—Optional Tax Redemption.”
11
Covenants ..................................................
The indenture governing the notes contains covenants that will limit our and
our restricted subsidiaries’ ability to, among other things:

incur additional debt or issue certain preferred shares;

pay dividends on or make other distributions in respect of our capital
stock or make other restricted payments;

make certain investments;

sell certain assets;

create liens on certain assets to secure debt;

consolidate, merge, sell or otherwise dispose of all or substantially
all of our assets;

enter into certain transactions with our affiliates; and

designate our subsidiaries as unrestricted subsidiaries.
These covenants are subject to a number of important limitations and
exceptions. Many of these covenants will cease to apply to the notes at all
times after the notes have investment grade ratings. See “Description of the
Notes—Certain Covenants.” In particular, although the indenture governing
the notes will contain restrictions on the incurrence of additional debt, these
restrictions are subject to a number of important qualifications and
exceptions, and the debt incurred in compliance with these restrictions could
be substantial.
Events of Default.......................................
For a discussion of certain events of default that will permit acceleration of
the principal of the notes plus accrued and unpaid interest, if any, and any
other amounts due with respect to the notes, see “Description of the Notes—
Events of Default and Remedies.”
No Registration Rights ..............................
We will not register the notes for resale under the Securities Act or the
securities laws of any other jurisdiction, other than Peru, or offer to exchange
the notes for registered notes under the Securities Act or the securities laws of
any other jurisdiction. See “Risk Factors—Risks Relating to the Notes and
the Guarantees—There are restrictions on your ability to transfer or resell the
notes without registration under applicable securities laws.”
Further Issuances ......................................
Subject to the covenants in the indenture governing the notes, we may from
time to time, without the consent of the holders of the notes, issue further
notes of the same series having the same terms and conditions as the notes in
all respects, including (i) full and unconditional guarantees of any such
additional notes by Cartavio, San Jacinto and Azucarera Olmos and (ii) a
partial and unconditional guarantee of any such additional notes by Casa
Grande in an amount equal to one half of the aggregate principal amount of
such additional notes. Any further issue will be consolidated with, and form
a single series with, the notes sold in this offering.
Book-Entry System; Delivery and Form
and Denomination of the Notes .................
The notes will be issued only in fully registered form, without coupons, in the
form of beneficial interests in respect of one or more global securities (the
“Global Notes”) in denominations of US$100,000 and integral multiples of
US$1,000 thereof. Beneficial interests in respect of the Global Notes will be
shown on, and transfers thereof will be effected only through, the book-entry
records maintained by DTC and its participants, including Euroclear and
12
Clearstream. The notes will not be issued in definitive form except under
certain limited circumstances.
Use of Proceeds .........................................
We intend to use the net proceeds from the sale of the notes, after the
deduction of certain fees and expenses in connection with this offering to (i)
repay approximately US$148 million of the outstanding indebtedness of the
Issuer, Cartavio S.A.A., Agroindustrias San Jacinto S.A.A. and Casa Grande
S.A.A., (ii) purchase land in connection with the Olmos Expansion Plan, and
(iii) use the remainder for capital expenditures and general corporate
purposes for our operations in Peru.
Governing Law..........................................
The notes, the guarantees and the indenture will be governed by the laws of
the State of New York.
Listing........................................................
Application has been made to the Irish Stock Exchange for the approval of
this document as Listing Particulars. Application has been made to the Irish
Stock Exchange for the notes to be admitted to the Official List and to trading
on the Global Exchange Market which is the exchange regulated market of
the Irish Stock Exchange. However, we cannot assure you that the listing
application will be approved.
Peruvian SBS Registration ........................
The notes have been provisionally registered with the Foreign Investment and
Derivatives Instruments Registry (Registro de Instrumentos de Inversión y de
Operaciones de Cobertura de Riesgo Extranjeros) of the SBS, in order to
make the notes eligible for Peruvian pension fund investment, as required by
Peruvian legislation. This registration was provisionally approved, and
definitive registration is conditioned on the delivery of the final offering
memorandum and other ancillary documents to the SBS.
Peruvian SMV Registration.......................
The notes and this offering memorandum have been registered with the SMV.
We will be required to file certain information in Spanish with the SMV, such
as quarterly and annual reports and notices of material events (Hechos de
Importancia). All such reports and notices are available at www.smv.gob.pe.
The documents filed with the SMV are not and will not form part of this
offering memorandum and are not incorporated by reference herein.
Trustee, Registrar, Paying Agent and
Transfer Agent .......................................
Citibank, N.A.
Irish Listing Agent.....................................
Arthur Cox Listing Services Limited
Transfer Restrictions .................................
The notes have not been registered under the Securities Act and are subject to
restrictions on transfer and resale. See “Transfer Restrictions” and “Plan of
Distribution.”
Expected Ratings.......................................
BB+ (S&P)/BB (Fitch)
Risk Factors...............................................
Investing in the notes involves substantial risks and uncertainties. See “Risk
Factors” and other information included in this offering memorandum for a
discussion of factors you should carefully consider before deciding to invest
in the notes.
13
SUMMARY FINANCIAL AND OTHER INFORMATION
The following summary financial data has been derived from (1) our unaudited condensed consolidated interim
financial statements as of March 31, 2012 and for the three months ended March 31, 2012 and 2011 and (2) our
audited consolidated financial statements as of December 31, 2011, 2010 and January 1, 2010 (transition date) and
for the years ended December 31, 2011 and 2010, in each case included elsewhere in this offering memorandum.
Our financial statements have been prepared in accordance with IFRS, as issued by the IASB. The unaudited
condensed consolidated interim financial statements and the notes thereto have been condensed, but contain all
adjustments, including adjustments of a normal and recurring nature, necessary for a fair presentation of our
financial position and results of operation. The results for the three months ended March 31, 2012 are not
necessarily indicative of the results to be expected for the entire year ending March 31, 2012.
This financial information should be read in conjunction with “Presentation of Financial and Other
Information,” “Selected Financial and Other Information,” “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” and our financial statements and the related notes thereto, which are included
elsewhere in this offering memorandum.
As of and for the Three Months
Ended March 31,
2012
2012
2011
(in thousands
of US$, except
(in thousands of S/.,
as indicated)
except as indicated)
Consolidated Statement of Comprehensive
Income:
Sales of products
Cost of products sold
Gross profit
Initial recognition and change in fair value of
biological assets(1)
Profit before operating expenses
Selling expenses
Administrative expenses
Other operating expenses, net
Profit from operation before financing and
taxation
Financial income
Financial expenses
Exchange difference, net
Income attributable to associate
Profit before income tax
Income tax expense
Profit for the period
Exchange differences on translating foreign
operations, net of deferred income tax
Fair value change in cash flow hedge, net
Total comprehensive income for the year
As of and for the Years
Ended December 31,
2011
2011
2010
(in thousands
of US$, except
(in thousands of S/.,
as indicated)
except as indicated)
(unaudited)
141,427
(85,548)
55,879
66
377,185
(228,157)
149,028
175
309,162
(145,824)
163,338
31,786
483,833
(261,583)
222,250
69,865
1,304,415
(705,229)
599,186
188,355
937,854
(498,467)
439,387
177,852
55,945
(3,227)
(9,725)
(722)
149,203
(8,606)
(25,936)
(1,924)
195,124
(4,710)
(8,762)
(1,364)
292,115
(11,220)
(24,624)
(58)
787,541
(30,248)
(66,386)
(157)
617,239
(18,563)
(42,924)
(19,623)
42,271
190
(6,484)
2,237
656
38,870
(6,103)
32,767
(1,933)
112,737
506
(17,294)
5,966
1,750
103,665
(16,277)
87,388
(5,155)
180,288
787
(7,591)
268
—
173,752
(25,956)
147,796
—
256,213
913
(17,599)
6,808
—
246,335
(38,792)
207,543
(4,947)
690,750
2,461
(47,446)
18,354
—
664,119
(104,584)
559,535
(13,336)
536,129
1,621
(45,388)
11,096
—
503,458
(75,769)
427,689
—
(82)
30,752
(219)
82,014
(1,285)
146,511
(325)
202,271
(877)
545,322
(5,141)
422,548
________________________________
(1) See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Financial Presentation and Accounting
Policies—Valuation of biological assets” for a description of how we calculate the fair value of biological assets using the criteria set out in
IAS 41, which requires that a biological asset should be measured at its fair value less the estimated point-of-sale costs.
14
As of and for the Years
As of and for the Three
As of
Ended December 31,
Months Ended March 31,
January 1,
2012
2012
2011
2011
2010
2010
(in thousands (in thousands (in thousands
of US$, except of S/., except as of US$, except
(in thousands of S/.,
as indicated)
indicated)
as indicated)
except as indicated)
Consolidated Statement of Financial
Position:
Non-current assets
Property, plant and equipment
Intangible assets
Biological assets
Investments in associates
Deferred income tax assets
Trade and other accounts receivables
Total non-current assets
Current assets
Biological assets
Inventories
Trade and other accounts receivables
Cash and cash equivalents
Total current assets
Total assets
Equity
Share capital
Cumulative translation adjustment
Legal and other reserves
Retained earnings
Equity attributable to equity holders of
the parent
Non-controlling interest
Total equity
Non-current liabilities
Borrowings
Trade and other accounts payables
Provisions and other liabilities
Deferred income tax liabilities
Derivative financial instruments
Total non-current liabilities
Current liabilities
Borrowings
Trade and other accounts payables
Provisions and other liabilities
Derivative financial instruments
Total current liabilities
Total liabilities
Total equity and liabilities
(unaudited)
1,056,169
76,166
161,256
11,834
3,151
2,612
1,311,188
2,816,804
203,135
430,069
31,560
8,405
6,966
3,496,939
1,040,651
75,195
140,570
11,058
2,378
3,050
1,272,902
2,805,594
202,727
378,978
29,811
6,410
8,224
3,431,744
2,025,253
130,743
155,721
1,303
3,470
7,982
2,324,472
1,907,566
131,477
82,726
1,306
3,650
20,446
2,147,171
93,451
100,336
45,939
71,916
311,642
1,622,830
249,234
267,595
122,520
191,800
831,149
4,328,088
103,191
111,423
43,515
42,388
300,517
1,573,419
278,204
300,395
117,317
114,277
810,193
4,241,937
222,099
80,870
102,017
70,982
475,968
2,800,440
111,105
76,385
84,938
21,367
293,795
2,440,966
287,011
—
44,674
687,375
270,136
—
21,299
425,181
107,616
(4,648)
16,457
416,478
287,011
(12,397)
43,892
1,110,748
106,458
(3,316)
16,335
390,588
287,011
(8,941)
44,039
1,053,024
535,903
1,429,254
510,065
1,375,133
1,019,060
716,616
405,884
941,787
1,082,492
2,511,746
412,026
922,091
1,110,822
2,485,955
521,008
1,540,068
408,075
1,124,691
91,188
112,451
2,529
175,655
—
381,823
243,198
299,906
6,745
468,472
—
1,018,321
96,429
109,810
3,177
174,511
—
383,927
259,973
296,047
8,566
470,481
—
1,035,067
347,284
43,153
9,086
353,854
15,074
768,451
284,201
192,187
8,197
329,574
15,183
829,342
112,503
179,510
3,418
3,789
299,220
681,043
1,622,830
300,046
478,754
9,117
10,104
798,021
1,816,342
4,328,088
108,181
152,961
2,343
3,916
267,401
651,328
1,573,419
291,657
412,384
6,316
10,558
720,915
1,755,982
4,241,937
186,335
302,425
3,161
—
491,921
1,260,372
2,800,440
159,476
326,310
1,147
—
486,933
1,316,275
2,440,966
15
As of and for the Three Months
Ended March 31,
2012
2012
2011
(in thousands
of US$, except
(in thousands of S/.,
as indicated)
except as indicated)
Other data:
EBITDA(1) .......................................................
EBITDA margin(2) ...........................................
Total debt(3) .....................................................
Total debt / EBITDA(4) ....................................
Net debt(5) ........................................................
Net debt / EBITDA(6).......................................
Fixed Charge Coverage Ratio(7) .......................
Consolidated Leverage Ratio(8) ........................
51,979
36.8%
302,049
1.46x
230,133
1.11x
9.75x
1.45x
138,628
36.8%
805,566
1.46x
613,766
1.11x
9.75x
1.45x
164,151
53.1%
As of and for the Years
Ended December 31,
2011
2011
2010
(in thousands
of US$, except
(in thousands of S/.,
as indicated)
except as indicated)
214,587
44.4%
302,946
1.41x
260,558
1.21x
12.25x
1.41x
578,526
44.4%
816,744
1.41x
702,467
1.21x
12.25x
1.41x
416,977
44.5%
533,619
1.28x
462,637
1.11x
9.22x
1.27x
________________________________
(1) EBITDA is calculated using profit from operations for the period before financing and taxation without initial recognition and change in fair
value of biological asset, added to depreciation and amortization. See “Presentation of Financial and Other Information.” We calculate
EBITDA as follows:
As of and for the Three Months
Ended March 31,
2012
2011
2012
(in thousands
of US$, except
(in thousands of S/.,
as indicated)
except as indicated)
Profit from operation before financing and
taxation ............................................................
(-) Initial recognition and change in fair
value of biological assets.................................
(+) Depreciation ..............................................
(+) Amortization..............................................
EBITDA...........................................................
As of and for the Years
Ended December 31,
2011
2011
2010
(in thousands
of US$, except
(in thousands of S/.,
as indicated)
except as indicated)
42,271
112,737
180,288
256,213
690,750
536,129
(66)
9,686
88
51,979
(175)
25,832
234
138,628
(31,786)
15,454
195
164,151
(69,865)
27,899
340
214,587
(188,355)
75,215
916
578,526
(177,852)
57,672
1,028
416,977
(2) EBITDA margin is EBITDA divided by sales of products, expressed as a percentage.
(3) Total debt is the sum of total short- and long-term loans.
(4) Total debt/EBITDA is the ratio of our total debt as of the end of the applicable period divided by our EBITDA for the then most recently
concluded period of four consecutive fiscal quarters, including the four consecutive fiscal quarters ended March 31, 2012.
(5) Net debt is obtained netting total debt with cash and cash equivalents.
(6) Net debt/EBITDA is the ratio of our net debt as of the end of the applicable period divided by our EBITDA for the then most recently
concluded period of four consecutive fiscal quarters, including the four consecutive fiscal quarters ended March 31, 2012.
(7) See “Description of the Notes—Certain Definitions” for the definition of Fixed Charge Coverage Ratio.
(8) See “Description of the Notes—Certain Definitions” for the definition of Consolidated Leverage Ratio.
16
RISK FACTORS
Prospective purchasers of notes should carefully consider the risks discussed below, as well as the other
information in this offering memorandum, before deciding to purchase any notes. Our business, results of
operations, financial condition or prospects could be negatively affected if any of these risks occurs and, as a result,
the trading price of the notes could decline and you could lose all or part of your investment. The risk factors
discussed below are not the only risks that we and the Guarantors face, but are the risks that we currently consider
to be material. There may be additional risks that we currently consider immaterial or of which we are currently
unaware, and any of these risks could have similar effects to those set forth below.
Risks Related to Our Business and the Sugar and Ethanol Industries
Fluctuations in the price of our products, as well as Peruvian and global economic, political and financial
uncertainties, may materially and adversely affect us.
The sugar and ethanol industries, both globally and in Peru, have historically been cyclical and sensitive to
domestic and international changes in supply and demand, causing fluctuations in the prices of these products, as
well as in our profit margins. In addition, sugar and ethanol are commodities and are subject to price fluctuations
that generally affect commodities. Various factors beyond our control contribute to the volatility in the prices of
sugar, ethanol and other sugarcane by-products, including:

the demand for sugar and ethanol both in Peru and abroad;

climatic conditions and natural disasters in areas where sugarcane is cultivated;

the production capacity of our competitors;

government incentives and subsidies to promote the production, domestic sale, export and consumption of
these products both in Peru and in other countries that produce sugar and ethanol;

the availability of substitutes for sugar, ethanol and other sugarcane by products such as saccharine and
high fructose syrup (“HFCS”); and

developments in trade negotiations, including through the World Trade Organization (the “WTO”).
In addition, sugar is traded on commodities and futures exchanges, and thus, is subject to speculative trading,
which may affect prices in a manner that may materially and adversely affect us.
The prices of sugar and ethanol sold by us are based on prevailing market prices, and thus, are subject to
macroeconomic factors that may affect our industry, Peru and/or the global economy. Any significant and
prolonged decline in sugar and/or ethanol prices could materially and adversely affect us. There can be no assurance
that we will be able to maintain sales at generally prevailing market prices for sugar and ethanol in Peru, nor that we
will be able to sell or export sufficient quantities of sugar and ethanol to assure an appropriate domestic and export
market balance.
In addition, we may use financial instruments to protect ourselves against the risk of fluctuations in sugar and
ethanol prices. In the event that market prices exceed the price set under future contracts we enter into, we may be
materially and adversely affected.
We may not be successful at reducing our operating costs and increasing our operating efficiencies.
We must continue to reduce our operating costs and increase our operating efficiencies to achieve further cost
savings in future periods. We cannot assure you that we will be able to achieve all of the cost savings that we expect
to realize from current initiatives. In particular, we may be unable to implement one or more of our initiatives
successfully or we may experience unexpected cost increases that offset the savings that we achieve. Our failure to
realize cost savings may adversely affect our results of operations. Any reduction in the amount of sugarcane or
sugar that we can cultivate and purchase in a given harvest could have a material and adverse effect on our business.
Our sugar production depends on the volume and sucrose content of the sugarcane that we cultivate. Any reduction
17
in the amount of sugar recovered could have a material and adverse affect on our results of operations. We may be
adversely affected by a shortage of sugarcane or by high sugarcane costs.
Sugarcane is the principal raw material used for the production of sugar and ethanol and any limitation on our
ability to obtain sugarcane may materially and adversely affect us.
During 2011, the cost of sugarcane represented 59% of the sale cost of sugar in Peru. Approximately 65% of
the sugarcane we used in our production was harvested from our own fields, and the remaining 35% was bought
from independent farmers, to whom we pay the amount equivalent to 60% of the value of the sugarcane, as
determined by sucrose levels. We do not foresee any shortage in the supply of sugarcane, however, any limitation
on our ability to obtain sugarcane may affect us.
A reduction in the productivity of our sugarcane crop and the sugarcane that we purchase may materially and
adversely affect us.
Our sugar production depends on the volume and sucrose content of the sugarcane that we cultivate or that is
supplied to us by growers located in the vicinity of our mills and distilleries. Crop yields and sucrose content
depend primarily on geographic factors, such as land composition and topography, weather conditions, such as the
amount of rainfall and average temperatures, agricultural techniques that may be employed and the variety of
sugarcane planted. Weather conditions have historically caused volatility in the ethanol and sugar industries and,
consequently, in our results of operations by causing crop failures or reduced harvests. Future weather patterns may
reduce the amount of sugar or sugarcane that we can recover in a given harvest or its sucrose content. Accordingly,
many factors beyond our control, including drought, frost and/or sugarcane pests and diseases may materially and
adversely affect the quantity and quality of sugarcane that we produce and purchase from third parties, our sugar and
ethanol production volumes and our company.
We face significant competition in the sugar and ethanol industries, which may materially and adversely affect
us.
The sugar and ethanol industries are highly competitive. Domestically, we compete with numerous small- and
medium-size sugar and ethanol producers. Currently, our main competitors in Peru are Empresa Agroindustrial
Laredo S.A.A. (Grupo Manuelita of Colombia), Empresa Agroindustrial Pomalca S.A.A. and Empresa
Agroindustrial Tuman S.A.A. (Grupo Oviedo) and Agro Industrial Paramonga S.A.A. (GrupoWong).
In the event that one or more of our competitors increase their financial and other resources, present a greater
breadth of products than we do or adopt more successful sales or pricing policies, our competitive position and our
business may be materially and adversely affected. If we are unable to remain competitive with our competitors, we
may be materially and adversely affected.
Alternative sweeteners have negatively affected demand for our sugar products in Peru and other countries,
which could have a material and adverse affect on us.
We believe that the increased use of alternative sweeteners, especially artificial alternative sweeteners such as
aspartame, saccharine and HFCS, has adversely affected the growth of the overall demand for sugar in Peru and the
rest of the world. For example, soft drink bottlers in Peru and many other countries have switched from sugar to, or
increased consumption of, alternative sweeteners. A substantial decrease in sugar consumption, or the increased use
of alternative or artificial sweeteners, would decrease demand for our sugar products and could result in lower
growth in our sales of products and overall financial performance.
We may be adversely affected by seasonality, which could negatively impact us.
Our businesses in Argentina and Ecuador are subject to seasonal trends based on the sugarcane harvesting cycle
in those countries, which begins in Ecuador and Argentina in July and May, respectively. This cycle creates
seasonal fluctuations in our inventory (which usually peaks from October to November) to cover sales between the
sugarcane harvest, our sales of products and gross profit. In addition, seasonality affects our level of outstanding
indebtedness and working capital, as we generally incur more indebtedness to meet our greater working capital
needs during the harvesting period, which increases our financial expenses during the harvest period.
18
Our results of operations, including for current periods, may be adversely affected by market conditions.
Our results of operations are dependent on a variety of factors in Peru, Argentina and Ecuador, including local
and international demand of sugar and ethanol and other factors. In recent periods in 2012, our results of operations
have been affected by, among other things, (i) the impact of integration and high level administrative costs
associated with acquisitions of La Troncal and San Isidro in the second half of 2011, (ii) lesser margins of our
acquired companies pending possible improvement through synergies and other positive effects of our consolidated
operations, (iii) the impact of valuation adjustments associated with IAS 41 (See “Management’s Discussion and
Analysis of Financial Condition and Results of Operations—Financial Presentation and Accounting Policies—
Valuation of biological assets”) and (iv) the impact of recurrent scheduled maintenance at certain of our mills during
the second quarter of each year (which necessarily lowers income during such quarter). These and other factors can
be expected to adversely affect the level of our profit for the period in future financial quarterly periods in 2012
pending our efforts to increase for 2012 our EBITDA. In the near term, it is possible we may continue to experience
a lessening of our total consolidated profit from operations compared to the comparable period of the prior year and
consistent with recent periods.
Based on the factors mentioned herein, including the factors that affected our results for the three month period
ended March 31, 2012 described in “Management’s Discussion and Analysis of Financial Condition and Results of
Operations,” we believe that our EBITDA for the six months ended June 30, 2012 will decrease when compared to
the six months ended June 30, 2011. We also believe our EBITDA for the three months ended June 30, 2012 will
decrease when compared to the three months ended March 31, 2012 for similar reasons. We expect however, that
our EBITDA for the three months ended June 30, 2012 will be substantially in line with our EBITDA for the three
months ended June 30, 2011.
Government policies and regulations affecting the agricultural sector and related industries could materially and
adversely affect us.
Our industry is subject to numerous statutes, rules, and regulations, both within Peru and internationally. To
operate our farms, mills and distilleries, we must comply with certain administrative requirements, such as acquiring
appropriate permits, licenses, concessions, authorizations, certifications and registrations, some of which are granted
for fixed terms and therefore require periodic renewal. Changes to any of the laws, regulations, rules, or policies
regarding the licensing, harvesting, production, processing, preparation, distribution, packaging, or labeling of our
products, or environmental matters, or a stricter interpretation or enforcement thereof, or a delay obtaining or
renewing administrative requirements, may increase our operating costs or impose restrictions on our operations
which, in turn, could have a material and adverse affect on us.
Agricultural production and trade flows are also significantly affected by government policies and regulations.
Governmental policies, such as taxes, tariffs, duties, subsidies and import and export restrictions on agricultural
commodities and products made from these commodities can adversely affect the agricultural industry and its
profitability, the allocation of agricultural resources, the location and size of crop production, the trading of
unprocessed or processed commodity products, and the type and volume of imports and exports, which may
materially and adversely affect us.
Future government policies in Peru and elsewhere may adversely affect the supply, and demand for, and prices
of, our products or restrict our ability to do business in our existing and target markets, which could materially and
adversely affect our financial performance. Sugar prices, like the prices of many other staple goods in Peru, were
historically subject to controls imposed by the Peruvian government. Although sugar prices in Peru have not been
subject to price controls since 1990, additional measures may be imposed in the future, such as in Ecuador and
Argentina, where sugar prices are currently subject to governmental control. Any changes affecting governmental
policies and regulations regarding ethanol, sugar or sugarcane in Peru may materially and adversely affect our
company.
19
IFRS accounting standards require us to make numerous estimates in the compilation and preparation of our
financial results and limit the comparability of our financial statements to similar issuers using Generally
Accepted Accounting Principles in United States (“U.S. GAAP”) measurements.
IFRS accounting standards for agricultural companies require that we make assumptions and estimates relating
to, among other things, future agricultural commodity yields, prices, and production costs extrapolated through a
discounted cash flow method. For example, the value of our biological assets with a production cycle lasting more
than one year generated initial recognition and changes in fair value of biological assets amounting to S/.0.2 million
(US$0.1 million) and S/.188.4 million (US$69.9 million) for the three months ended March 31, 2012 and the year
ended December 31, 2011, respectively. These assumptions and estimates, and any changes to such prior estimates,
directly affect our reported results of operations. If actual market conditions differ from our estimates and
assumptions, there could be material adjustments to our results of operations. In addition, the use of such discounted
cash flow method utilizing these future estimated metrics differs from U.S. GAAP. As a result, our financial
statements and reported earnings are not directly comparable to those of similar companies in the United States. See
“Management’s Discussion and Analysis of Financial Condition and Results of Operations—Financial Presentation
and Accounting Policies—Valuation of biological assets”.
We are subject to extensive environmental and labor regulations and may be exposed to liabilities and potential
costs for environmental and labor compliance.
We are subject to Peruvian state and local environmental protection and health and safety laws and regulations
that govern, among other things:

the generation, storage, handling, use and transportation of hazardous materials;

the emission and discharge of hazardous materials into the ground, air or water;

the use of natural resources; and

the health and safety of our employees.
We are regularly inspected by various governmental environmental protection agencies in Peru, Argentina and
Ecuador to ensure our compliance with applicable laws and regulations. We are also required to obtain permits from
governmental authorities for certain aspects of our operations. In connection with our mills and distilleries in Peru,
starting in 2011, Cartavio, San Jacinto and Casa Grande signed PAMAs with the Peruvian government regarding
mechanical harvesting, burning of sugarcane, and carbon dioxide emissions over a 33-year period. Casa Grande’s
PAMA has been approved by the Peruvian government through the Ministry of Agriculture, and San Jacinto’s and
Cartavio’s are in the process of obtaining the approval for their respective PAMAs from the Peruvian government.
Upon the expiration of the PAMAs, we will have to comply with Peruvian environmental legislation relating to
emissions and air quality in force at that time.
Non-compliance with environmental laws and regulations may require us to remedy any environmental damage,
as well as subject us to criminal and administrative penalties, such as fines and/or the suspension of our activities.
In addition, we may be strictly liable for certain environmental damages caused by third-parties on or related to
property that we acquired from such third parties. In addition, any changes in applicable environmental regulation
or changes in its interpretation may lead to an increase in compliance costs, which may materially and adversely
affect us. Environmental protection laws in Peru are becoming more strict, therefore our expenses in complying
with our environmental obligations may significantly increase in the future. See “Regulatory Overview.”
Additionally, according to the Peruvian Safety and Health at Work Law (Ley de Seguridad y Salud en el
Trabajo), Law No. 29783, we are obligated to adopt the necessary measures to guarantee the health and safety of
employees, and third parties, in our production facilities or workplaces. In order to fulfill such regulations, we
maintain (i) an Internal Regulation of Safety and Health at Work (Reglamento de Seguridad y Salud en el Trabajo)
and (ii) a special committee whose members include representatives of our employees and management, which is in
charge of monitoring the proper application of the Internal Regulation Safety and Health at Work and Peruvian law.
20
If an adverse final decision is issued in an administrative process, we could be exposed to penalties and
sanctions derived from the violation of any of these laws and regulations, including the payment of fines, and,
depending on the level of severity applied to the infraction, the closure of facilities and/or stoppage of activities and
the cancellation or suspension of the registrations, authorizations and licenses, which may also result in temporary
interruption or discontinuity of activities in our farms, mills and distilleries, and materially and adversely affect us.
Government laws and regulations governing the burning of sugarcane could materially and adversely affect our
business or financial performance.
We currently harvest approximately 100% of our sugarcane in Peru and 87% of our sugarcane in Ecuador by
burning the crop, which removes leaves and destroys insects and other pests. The PAMAs signed with the Peruvian
Ministry of Agriculture gradually reduce our ability to burn sugarcane. We do not burn sugarcane in Argentina.
We currently incur significant costs to comply with these laws and regulations, and there is a likelihood that
increasingly stringent regulations relating to the burning of sugarcane will be imposed by the governmental
authorities of Peru, Ecuador and Argentina in the near future. As a result, our costs to comply with existing or new
laws or regulations are likely to increase, which could materially and adversely affect us.
Any failure to comply with these laws and regulations may subject us to legal and administrative actions. These
actions can result in administrative, civil or criminal penalties.
Governmental price controls may materially and adversely affect us.
In order to protect domestic farmers, the Peruvian government sets every week the Range of Prices (Bandas de
Precios) that can be charged by importers for basic agricultural commodities, including sugar, and publishes the
prices in the newspaper Diario Oficial El Peruano. The price range set in the Bandas de Precios do not necessarily
reflect the global market prices of agricultural commodities. For the last three years, the Peruvian price of sugar has
fluctuated within the range of prices set in the Bandas de Precios. However, in the first week of July 2012, the
Peruvian price of sugar dropped below the low band of the Bandas de Precios. As a result, if the low band of the
Bandas de Precios is set higher than global commodities prices, foreign producers may increase their imports to
Peru in order to sell their products at above-market prices, resulting in increased competition to us. Furthermore, if
the low band of the Bandas de Precios is lowered or the Bandas de Precios is eliminated altogether, the price of the
sugar we sell in Peru may be reduced. Decisions by the Peruvian government regarding the Bandas de Precios may
materially and adversely affect us.
Suspension, cancellation or decrease in tax incentives that currently benefit us may materially and adversely
affect us.
Our mills located in Peru currently benefit from certain tax incentives granted by the Peruvian government
through the Agricultural Sector Promotion Law (Ley No. 27360 - Ley de Promoción del Sector Agrario). In
connection with the income tax owed by our Peruvian operating subsidiaries, a reduced corporate income tax rate of
15% and a special annual depreciation rate of 20% for hydraulic infrastructure and irrigation works is assessed on
our operating subsidiaries. These benefits were granted in 1997 and currently extend through 2021. The reduced
tax rates from which we benefit have definite terms and we may not be able to renew or replace such benefits in the
future.
In order to qualify for, and maintain, such tax incentives, we are required to comply with a number of
obligations (including labor, tax, social security and environmental protection obligations). Noncompliance with
such obligations may result in loss or suspension of incentives as well as the imposition of fines. We may also be
obligated to pay in full all the taxes owed and interest thereon.
We cannot assure you that we will maintain, or qualify for, such benefits in the future, until they end pursuant to
applicable law or that we will be able to renew or replace such benefits in the future.
In addition, there is a risk that modifications of tax laws or judicial decisions may prohibit, interrupt, limit or
change the use of existing tax incentives as of the date of this offering memorandum. Any suspension, early
maturity, reimbursement, limitation or impossibility to renew such tax benefits may materially and adversely affect
21
us. If we lose our tax benefits and incentives or are unable to comply with future requirements, this could have a
material adverse effect on us.
Any failure to maintain or obtain due authorizations for the generation of electricity may materially and
adversely affects us.
We believe we are in compliance in all material respects with applicable regulations with regards to the
generation of electricity. Currently, San Jacinto and Cartavio are permitted to generate electricity with renewable
energy resources, and Casa Grande is in the process of requesting authorization from the General Bureau of
Electricity of the Ministry of Energy and Mines (Dirección General de Electricidad del Ministerio de Energía y
Minas), the governmental entity responsible for granting such authorization. Notwithstanding the foregoing, if San
Jacinto and Cartavio’s authorizations expire or if Casa Grande’s authorization is not granted, our operations could be
materially and adversely affected.
Any failure to obtain sanitary permits or fuel storage authorizations may materially and adversely affects us.
We believe we are in compliance in all material aspects with applicable statutory and administrative regulations
with regards to controlled chemicals, sanitary permits and fuel storage authorizations in Peru, Ecuador and
Argentina.
However, Casa Grande, San Jacinto and Cartavio are currently adjusting their Hazard Analysis and Critical
Control Point (HACCP) Plans, which is the sanitary permit that every Peruvian company must submit to the General
Bureau of Environmental Health (Dirección General de Salud Ambiental - DIGESA) of the Health Ministry for its
official validation, in order to participate in food and/or beverages manufacture processes for the domestic or
international market.
In addition, San Jacinto is currently in the process of obtaining the authorizations to maintain fuel storage
facilities before the Supervising Body of Investment in Mining and Energy (Organismo Supervisor de la Inversión
en Energía y Minas, or “OSINERGMIN”). If the aforementioned authorizations expire or are not granted, our
operations could be materially and adversely affected.
We are insured against business interruption for our operations, but our assets are not insured against war or
sabotage. In addition, our insurance coverage may be inadequate to cover all losses and/or liabilities that may be
incurred in our operations.
We maintain insurance coverage for business interruptions of our operations, including business interruptions
caused by labor disruptions. This coverage remains in effect for a term of 12 months as of commencement of
business interruption. However, we do not insure our assets against war or sabotage (other than physical damage
deriving from acts of bad faith, which are covered by the corresponding insurance policy). Our operations in
Argentina are no insured against sabotage. Therefore, an attack or an operational incident causing an interruption of
our business could have a material and adverse effect on our financial condition or results of operations.
Our operations are also subject to risks affecting our crops which are not covered by the business interruption
insurance, including fire potentially destroying some or our entire crop. If disease, pestilence, accidents or natural or
climatic disasters were to strike our crops, it may result in destruction of a significant portion of our harvest. Crop
disease and pestilence, as well as accidents or natural or climatic disasters, can occur and have a devastating effect
on our crops and those of our suppliers, potentially rendering useless or unusable all or a substantial portion of
affected harvests. Even when only a portion of the crop is damaged, our business and financial performance could
be materially and adversely affected because we may have incurred a substantial portion of the production cost for
the related harvest. Any serious incidents of crop disease, pestilence or accidents or natural or climatic disasters,
and related costs, may materially and adversely affect our production levels and, as a result, our sales of products
and overall financial performance. We do not maintain insurance coverage against fire, disease, accidents or natural
or climatic disasters and other risks to our crops. In the event of interruption of operations at one of our production
facilities, we cannot assure you that we will be able to shift production to another location or at all.
In addition, our operations are subject to hazards associated with the manufacture of inflammable products and
transportation of feedstocks and inflammable products.
22
We maintain insurance against some risks at levels that we believe are customary in our industry to protect
against these liabilities, but we cannot assure you that we will be able to maintain compliance necessary for renewal
of such policies. Our insurance policies may not cover our losses or be cancelled in the event that we do not obtain
or renew all required licenses, permits and governmental authorizations. Furthermore, our insurance may not be
adequate to cover all losses or liabilities that might be incurred in our operations.
Funding on terms acceptable to us may not be available to meet our future capital needs.
Global market and economic conditions have been, and continue to be, disruptive and volatile. The debt capital
markets have been impacted by significant defaults in the financial services sector and the re-pricing of credit risk,
among other things. These events have negatively affected general economic conditions.
If funding is unavailable when needed, or is available only on unfavorable terms, it may become challenging for
us meeting our capital needs or otherwise taking advantage of business opportunities or responding to competitive
pressures, which could have a material and adverse effect on our revenue and results of operations.
Termination of our sugarcane supply contracts or a decrease or an interruption in the sale of sugarcane by our
suppliers may materially and adversely affect us.
Sugarcane is the main raw material we use to produce sugar and ethanol. During 2011, we crushed
approximately 6.7 million tons of sugarcane, approximately 4.3 million tons (or 65%) of which we cultivated on our
properties and approximately 2.4 million tons (or 35%) from third-party suppliers. We own the only sugar mills that
exist in the areas in which we operate and, in some cases, we have entered into long-term contracts with our
suppliers for an average term of approximately five years.
If our supply of sugarcane were to be interrupted, we may be required to pay higher prices for sugarcane and/or
the volume of sugarcane available to us may decrease significantly, each of which could materially and adversely
affect us.
Our controlling shareholder may have conflicts of interest relating to our business.
Grupo Gloria directly and indirectly owns all of our capital stock and a majority ownership interest in our
subsidiaries. As a result, Grupo Gloria has the power to determine the outcome of almost all matters that require
shareholder votes, such as the election of our board members and, subject to contractual and legal restrictions, the
distribution of dividends and payments in respect of intercompany debt. Grupo Gloria also has the power to
determine our business strategy. The interests of Grupo Gloria may in some cases differ from those of the holders of
our notes. Grupo Gloria conducts its business through us as well as through other entities in which we do not have
an equity interest. In circumstances involving a conflict of interest between Grupo Gloria and the holders of the
notes, Grupo Gloria may exercise its rights in a manner that would benefit Grupo Gloria to the detriment of the
holders of the notes. We do not have any independent members of our Board of Directors.
We have exposure to material litigation for which we have not established provisions.
We are currently involved in various legal proceedings, which could result in unfavorable decisions or financial
penalties against us, and we will continue to be subject to future legal proceedings, which if determined adverse to
us, could result in material adverse consequences for us. For more information regarding the significant legal claims
against our company, see “Business—Legal and Administrative Proceedings” and note 15 to our audited
consolidated financial statements and note 13 to our unaudited condensed consolidated interim financial statements.
Some of these claims may be resolved against us. Although we believe that we have established adequate
provisions for these legal proceedings, there are some legal proceedings with respect to which we have not
established provisions based on our assessment of the unlikely possibility of an adverse outcome in these legal
proceedings. If we are incorrect in our assessment, we may have to establish provisions that could materially and
adversely affect us.
23
We may lose corporate control over San Jacinto as a result of litigation.
On May 30, 2006, a plaintiff initiated a lawsuit against San Jacinto and a previous owner, among others, from
which we purchased 2,519,498 shares of San Jacinto (representing 55.25% of the capital stock of San Jacinto at that
time). The plaintiff, in his lawsuit, claimed that the owner from which we purchased the shares of San Jacinto did
not have valid title to the shares. On March 2, 2012, we were added by the court as a party to the lawsuit as the
purchaser of the shares in dispute. Should the court rule against the seller that the seller did not have valid title to
the shares and therefore, could not have validly transferred its ownership in San Jacinto to us, we could be required
to divest our shares and potentially result in the loss corporate control in San Jacinto, which may materially and
adversely affect us.
We are substantially dependent on our facilities, and any interruption or operational failure in any of these
facilities may result in a reduction of the volume of sugar and ethanol we produce or sell and, therefore,
materially and adversely affect us.
Most of our profit is derived from the sale of the sugar and ethanol produced in our five mills and eight
distilleries. If an accident, unanticipated repair, equipment malfunction, or natural or climatic disaster occurs in one
or more of our mills, we may be materially and adversely affected and all or part of our operations may be
interrupted, nor can we assure you that such damage will be covered under our insurance policies.
In addition, we are subject to labor strikes and other operational incidents, such as equipment failures, fires,
explosions, pipe ruptures and transportation accidents. These and other operational accidents may result in physical
injury, death, material loss and destruction of our properties and equipment, and/or, in the case of environmental
accidents, which may result in the suspension of our operations and/or the imposition of civil, labor and
administrative penalties and criminal liability. Irregularities in our mills’ environmental licensing, National Institute
of Civil Defense (Instituto Nacional de Defensa Civil, or “INDECI”) licensing, municipal licensing and our failure
to comply with regulations applicable to our business may also result in the suspension of our operations and/or the
imposition of civil, administrative and criminal penalties.
We are subject to labor risks and a dispute with one or more of our labor unions could materially and adversely
affect us.
Labor is a significant cost for our production. Changes in labor regulations and increases in labor costs would
have a significant effect on our operations. Approximately 46% of our employees are affiliated with labor unions
and are thus covered by collective bargaining agreements with such labor unions. A work slowdown, work
stoppage, strike or other labor dispute may occur prior to or upon the expiration of our other labor agreements, and
we are unable to estimate the adverse effect of any such work slowdown, stoppage or strike or other dispute on our
production and sales. A labor dispute at one of our facilities or an unfavorable judicial or administrative ruling
against us in one labor proceeding may result in labor disputes in other facilities and unfavorable rulings in other
cases, magnifying the effect on our operations and costs. Given our high concentration and dependency of labor in
specific tasks, work slowdowns, stoppages, strikes or other labor-related developments affecting us could materially
and adversely affect us.
We depend on third parties to provide our customers and us with facilities and services that are integral to our
business.
We have entered into agreements with third-party contractors to provide facilities and services required for our
operations, such as the transportation of our sugarcane from our plantations to our mills and the transportation of our
mechanical harvesters from one facility to another. Our reliance on third parties to provide these services for us also
gives us less control over the costs, efficiency, timeliness and quality of those services. Contractors’ negligence
could result in damage or loss of our sugarcane or mechanical harvesters, which may materially and adversely affect
us. We expect to be dependent on these contractors for the foreseeable future. The loss or expiration of our
agreements with third-party contractors or our inability to renew these agreements or to negotiate new agreements
with other providers at comparable rates could harm our business and financial performance.
24
Disruption of transportation and logistics services or insufficient investment in public infrastructure could
materially and adversely affect us.
A substantial portion of Peruvian sugar and production is transported by truck, which is generally significantly
more expensive than the rail transportation available to U.S. and other international producers. Efficient access to
transportation infrastructure and ports is critical to the continued growth of the Peruvian sugar and ethanol industry
generally and of our operations in particular. Improvements in transportation infrastructure are likely to be required
to make more sugar and ethanol production accessible to export terminals at competitive prices. Improvement
projects may not be undertaken and/or completed on a timely basis, if at all, which could adversely affect the
demand for our products, impede our delivery of products or increase our costs.
We depend on the continuous operation of the port facilities we use. Interruptions in port operations could
result from various events and circumstances outside of our control including, among others, catastrophic events,
environmental issues, strikes or labor issues, adverse meteorological conditions and the interruption in the supply of
our products to our facilities. Any such difficulties with port facilities could, therefore, result in delays in, or the
suspension of, the transportation of sugar and ethanol to our customers, adversely affecting our product distributions
capacity which could have a material adverse effect on us.
We may not successfully acquire or develop additional production capacity through the expansion of existing
facilities or greenfield projects.
We continually explore opportunities to increase our production capacity, including through expansion of our
existing facilities and greenfield projects. We are currently developing the greenfield Olmos Expansion Plan, where
Azucarera Olmos and our affiliate, Gloria S.A., purchased 15,600 hectares of land (14,500 hectares of which are
arable) in Olmos, Lambayeque, Peru, to cultivate sugarcane using pressurized water and green harvesting for the
production of sugar. We also have expansion plans to increase our industrial facilities and crushing capacity in
some of our existing mills and distilleries. At this time, we do not have all of the environmental or other permits,
designs or engineering, procurement and construction contracts with respect to our greenfield Olmos Expansion
Plan. As a result, we may not implement this greenfield project on a timely basis or at all, and may not realize the
related benefits from this project. In addition, we may be unable to obtain the required financing for this project on
satisfactory terms, or at all. In addition, we may not have the appropriate personnel and equipment to implement
this project.
The expansion of our existing facilities or integration of this or other greenfield projects may result in
unforeseen operating difficulties and may require significant financial and managerial resources that would
otherwise be available for conducting our existing operations. Planned or future expansion of existing facilities or
greenfield projects may not enhance our financial performance.
We may undertake additional acquisitions that may be significant in size and that may change the scale of our
business.
Although we believe that future acquisition opportunities to acquire agro-business companies in Latin America
are likely to be limited, we expect to evaluate opportunities to acquire additional processing assets and/or businesses
from time to time. If those future acquisitions were significant in size, they could change the scale of our business
and may expose us to new geographic, political, operating and financial risks. Our ability to make any such
acquisitions would depend on our ability to identify suitable acquisition candidates, acquire them on acceptable
terms and integrate their operations successfully. Any acquisitions would be accompanied by risks, including risks
related to the quality of the facilities acquired; the difficulty of assimilating the operations and personnel of any
acquired companies; the potential disruption of our ongoing business; the inability of management to maximize our
financial and strategic position through the successful integration of acquired assets and businesses; the inability of
management to maintain uniform standards, controls, procedures and policies; the impairment of relationships with
employees, customers and contractors as a result of any integration of new management personnel; and the potential
unknown liabilities associated with acquired assets and businesses. In addition, we would need additional capital to
finance an acquisition. Debt financing related to any acquisition will expose us to the risks associated with
borrowing money, while equity financing may cause existing shareholders to suffer dilution. We may not be
successful in overcoming these risks or any other problems encountered in connection with such acquisitions.
25
We may engage in hedging transactions, which involve risks that can materially and adversely affect us.
We are exposed to market risks arising from the conduct of our business activities—in particular, market risks
arising from changes in commodity prices, exchange rates or interest rates. Historically, our only hedging
transactions have been against exchange rate and interest rate volatility and we have not hedged against sugar price
fluctuations. Notwithstanding the foregoing, we can not assure you we will not enter into other type of hedging
transactions in the future. As of both March 31, 2012 and December 31, 2011, all of our sugar exports were at
market prices. However, in an attempt to minimize the effects of volatility of sugar prices and exchange rates on our
cash flows and results of operations, we may engage in hedging transactions involving commodities and exchange
rate futures, options, forwards and swaps. We also may engage in interest rate-related hedging transactions from
time to time. Hedging transactions expose us to the risk of financial loss in situations where the other party to the
hedging contract defaults on its contract or there is a change in the expected differential between the underlying
price in the hedging agreement and the actual price of commodities or exchange rate.
Our exports expose us to factors that are outside our control.
Our sales of products from exports in 2011 totaled S/.211.2 million (US$78.3 million), representing 16.2% of
our total sales of products, 64.7% of which were from sugar exports. For the three months ended March 31, 2012,
our sales of products from exports accounted for 11.9% (S/.44.7 million) of our sales of products and sugar exports
accounted for 5.4% of our sales of products. We are subject to risks that are outside our control in connection with
our export operations, including:

changes in foreign currency exchange rates;

deterioration of economic conditions in our principal export markets;

imposition of tax increases, anti-dumping tariffs and other trade and/or health barriers;

exchange controls and restrictions to exchange operations; and

strikes or other events that may affect ports and transportations.
Our future financial performance will depend significantly on economic, political and social conditions in our
principal export markets. Most countries that produce sugar or ethanol, including the United States and European
Union member countries, protect local producers from international competition by establishing government policies
that affect the production and importation of sugar and ethanol. We may therefore have limited or no access to our
main export markets or other major potential markets if new trade barriers are established, which could result in
difficulties in reallocating our products to other markets under favorable conditions, possibly resulting in a material
and adverse effect on us.
Certain of our indebtedness and the indenture for the notes contain covenants that restrict our ability to engage
in certain transactions and may impair our ability to respond to changing business and economic conditions.
Certain of our indebtedness and the indenture for the notes contain covenants that restrict our ability to engage
in certain transactions, such as the incurrence of indebtedness and the execution of corporate mergers or
reorganizations, and may impair our ability to respond to changing business and economic conditions, including,
among other things, limitations on our ability to:

incur additional indebtedness;

incur additional liens;

issue certain guarantees;

pay dividends or make certain other restricted payments;

consummate certain asset sales;
26

enter into certain transactions with affiliates; or

merge or consolidate with any other person or sell or otherwise dispose of all or substantially all of our
assets.
In addition, certain of our indebtedness require us to satisfy certain financial covenants. Future indebtedness or
other contracts could contain financial or other covenants more restrictive than those applicable to our indebtedness
and the indenture for the notes.
Our ability to comply with these provisions may be affected by general economic conditions, political
decisions, industry conditions and other events beyond our control. As a result, we cannot assure you that we will
be able to comply with these covenants. Our failure to comply with the covenants contained in certain of our
indebtedness and in the indenture for the notes, including failure as a result of events beyond our control, could
result in an event of default, which could materially and adversely affect our operating results and our financial
condition.
If there were an event of default under one of our debt instruments, the holders of the defaulted debt could cause
all amounts outstanding with respect to that debt to be due and payable immediately and may be cross-defaulted to
other debt. We cannot assure you that our assets or cash flow would be sufficient to fully repay borrowings under
our outstanding debt instruments if accelerated upon an event of default, or that we would be able to repay, refinance
or restructure the payments on those debt securities. See “Management’s Discussion and Analysis of Financial
Condition and Results of Operations—Liquidity and Capital Resources—Indebtedness.”
We may face conflicts of interest in transactions with related parties.
We engage in business and financial transactions with our controlling shareholder and other shareholders that
may create conflicts of interest between our company and these shareholders. In the ordinary course of our
business, we engage in a variety of transactions with subsidiaries, affiliates and related parties, including loan
agreements relating to the sale of our products, sale of goods, management services, processing services, storage
services and provision of labor. Commercial, administrative and financial transactions between our affiliates and us,
even if entered into on an arm’s length basis, create the potential for, or could result in, conflicts of interests.
Water shortages or any failure to maintain existing licenses for water rights may materially and adversely affect
us.
We grow our crops in an arid, desert region of northern Peru that is characterized by low levels of rainfall.
Therefore, the continued supply of water is essential for our business. We obtain the vast majority of the water used
to irrigate our crops pursuant to licenses granted to us by the Peruvian National Water Authority (Autoridad
Nacional de Agua, or the “ANA”). These rights permit us to use a system of canals that diverts water from major
rivers that are fed by melting snow in the Andes mountains. These licenses generally do not have an expiration date.
Under Peruvian law, authorities may grant temporary water rights, as well as rights for indefinite periods, such as
those licenses that have been granted to us as of the date of this offering memorandum. Our licenses are subject to
our compliance with certain customary legal conditions related to the permitted use of the water. For example,
Peruvian law requires that water rights must be used efficiently without adversely affecting water quality or the
environment, and taking into account primary uses (such as water for food preparation, human direct consumption,
agricultural activities and personal hygiene) and rights for the use of water previously granted.
Water rights, including licenses, may be terminated by government authorities or courts under certain
circumstances, including: (i) a titleholder’s resignation; (ii) the annulment of the resolution approving the
corresponding permit, authorization and/or license, (iii) the expiration of the permit, authorization and/or license,
(iv) the nullification of the resolution approving the corresponding permit, authorization and/or license, declared by
the ANA, based on certain infringements of applicable laws and regulations, such as a failure to pay an applicable
water rights fee.
Although we continue to seek alternative sources of water to minimize the risk of any disruption, the available
water supply may be adversely affected by shortages or changes in governmental regulations that may reduce the
available volumes of water to which we currently have access. We cannot assure you that water will be available in
27
sufficient quantities to meet our future needs or will prove sufficient to meet our water supply needs. In addition,
we cannot assure you that our existing licenses related to water rights will be maintained. If our water supply is
reduced, this could adversely affect our business, results of operations, financial condition and ability to repay the
notes. See “Regulatory Overview—Peru—Water Permits.”
Risks Related to the Countries in which We Operate
Our results of operations and financial condition are dependent upon economic conditions in the countries in
which we operate, and any decline in economic conditions could materially and adversely affect us.
All of our operations and development are in countries in emerging markets, and we expect to have additional
operations in these or other emerging market countries. Many of these countries have a history of political, social
and economic instability. Our revenue is derived primarily from the sale of sugar and ethanol, and the demand for
sugar and ethanol is largely driven by the economic conditions of the countries in which we operate. Therefore, our
results of operations and financial condition are to a large extent dependent upon the overall level of economic
activity and political and social stability in those emerging market countries. Should economic conditions
deteriorate in these countries or in emerging markets generally, we could be materially and adversely affected.
Governments have a high degree of influence in the economies in which we operate, which could have a material
and adverse effect on us.
Governments in many of the markets in which we operate frequently intervene in the economy and occasionally
make significant changes in monetary, credit, industry and other policies and regulations. Government actions to
control inflation and other policies and regulations have often involved, among other measures, price controls,
currency devaluations, capital controls and limits on imports. We have no control over, and cannot predict, what
measures or policies governments may take in the future. The results of operations and financial condition of our
businesses may be adversely affected by changes in governmental policy or regulations in the jurisdictions in which
they operate that impact factors such as:

subsidies and incentives;

labor laws;

economic growth;

currency fluctuations;

inflation;

capital control policies;

interest rates;

liquidity of domestic capital and lending markets;

fiscal policy;

tax laws, including the effect of tax laws on distributions from our subsidiaries;

import/export restrictions; and

other political, social and economic developments in or affecting the country where each business is based.
Uncertainty over whether governments will implement changes in policy or regulation affecting these or other
factors in the future may contribute to economic uncertainty and heightened volatility in the securities markets.
Due to populist political trends that have become more prevalent in certain countries in Latin America over
recent years, some of the administrations in countries where we operate may increase government involvement in
regulating economic activity.
28
Changes in tax laws may increase our tax burden and, as a result, have a material and adverse effect on us.
The governments of each of the countries in which we operate regularly implement changes to their tax
regulations that may increase our tax burdens. For example, the Peruvian government is currently in the process
reforming the Income Tax, Value Added Tax and the Tax Code. These changes include modifications in the
methods for tax audits and, from time to time, the enactment of temporary taxes. The effects of these proposed tax
reforms and any other changes resulting from the enactment of additional tax reforms have not been quantified.
However, if enacted, some of these reforms may result in increases in our overall tax burden, which could materially
and adversely affect us.
The climatic phenomenon El Niño and other natural phenomena such as earthquakes and floods may have a
material and adverse effect on us.
El Niño is an oceanic and atmospheric phenomenon that causes a warming of temperatures in the Pacific Ocean
to rise, resulting in heavy rains off the coast of Peru and Ecuador and various other effects in other parts of the
world. The effects of El Niño, which typically occurs every two to seven years around the end of December,
include, among other things, flooding and significant declines in fish populations and negative effects on agriculture,
and accordingly, can have a negative effect on Peru’s economy. The strongest El Niño events of the 20th and 21st
centuries occurred in 1982-1983 and in 1997-1998. Should another strong El Niño event occur, there is no
assurance that our installed river barriers and reefs will be sufficient to prevent damage to our farmlands.
In addition, Peru has experienced other natural phenomena in the past such as earthquakes and floods. Most
recently, on August 15, 2007, a strong earthquake, measuring 7.9 on the Richter scale, hit the central coast of Peru,
heavily affecting the Ica province in particular. A major earthquake could damage infrastructure necessary to our
operations. Peru has also experienced droughts caused by low rainfall. Most recently, a drought in 2004 adversely
affected our farm production yields, raised our production costs and reduced our sales. If such earthquakes, El Niño
events, droughts or other natural phenomena occur in the future, we may suffer damage to, or destruction of,
properties and equipment, as well as temporary disruptions to our production, which may materially and adversely
affect us.
Economic, political and social developments in Peru could materially and adversely affect us.
The majority of our operations and customers are located in Peru. As a result, our results of operations and
financial condition are dependent on economic, political and social developments in Peru, and are affected by the
economic and other policies of the Peruvian government, including devaluation, currency exchange controls,
inflation, economic downturns, political instability, social unrest and terrorism.
During the past several decades, Peru has experienced political instability that has included a succession of
regimes with differing economic policies. Previous governments have imposed controls on prices, exchange rates,
local and foreign investment and international trade, restricted the ability of companies to dismiss employees,
expropriated private sector assets and prohibited the remittance of profits to foreign investors.
Presidential elections were held in Peru in April 2011. On July 28, 2011, after winning a run-off election,
Ollanta Humala was sworn in as president of Peru for a five-year term through 2016. President Humala founded the
Gana Perú (Win Peru) party, an alliance of various left-leaning parties such as the Partido Comunista del Perú
(Communist Party of Peru), the Partido Socialista (Socialist Party), the Partido Socialista Revolucionario (Socialist
Revolutionary Party), the Movimiento Político Voz Socialista (Socialist Voice Political Movement), and a significant
constituency of the Movimiento Político Lima para Todos (Political Movement Lima for All). The President of Peru
has considerable power to determine governmental policies and actions that relate to the Peruvian economy and that
consequently affect the operations and financial performance of companies that operate in Peru such as us. The
uncertainties characteristic of a change in government could cause instability and volatility in Peru, including
volatility in the nuevo sol exchange rate and the performance of the Lima Stock Exchange (“BVL”). See
“Management’s Discussion and Analysis of Financial Condition and Results of Operations—Factors Affecting
Operating Results—Economic Conditions in Peru, Argentina and Ecuador.”
Although it is unclear what policies the Humala administration will enact, President Humala has publicly stated
that Peru will continue conservative economic policies, a responsible fiscal policy and autonomous monetary policy.
29
Furthermore, the appointment of independent ministers and public announcements from government officials have
partially dissipated concerns that Peru’s economic policy framework would change drastically. However, we cannot
assure you whether the current or any future Peruvian administration will maintain business-friendly and openmarket economic policies or policies that stimulate economic growth and social stability. Any changes in the
Peruvian economy or the Peruvian government’s economic policies may materially and adversely affect us.
Also, the Peruvian Congress is discussing proposed legislation that would seek to limit the amount of farm
lands to be held, directly or indirectly, by a single owner. If any of the proposed legislation is enacted into law, such
law could have a material adverse effect on the expansion plans of Coazucar in Peru.
A devaluation of the nuevo sol could have a material adverse effect on us and consequently affect our ability to
make payments on the notes.
A sudden and significant devaluation of the nuevo sol could materially and adversely affect us. A severe
devaluation of the nuevo sol may have a material and adverse effect on our financial condition, results of operations
and cash flows in future periods by, for example, increasing in nuevos soles terms the amount of our foreign
currency-denominated liabilities. Any significant devaluation of the nuevo sol against the U.S. dollar could have a
material adverse effect on us, including our ability to make payments on the notes.
The re-implementation of certain laws by the Peruvian government, most notably restrictive exchange rate
policies, could materially and adversely affect us and our and the Guarantors’ ability to make payment on the
notes and the guarantees.
Since 1991, the Peruvian economy has experienced a significant transformation from a highly protected and
regulated system to a free market economy. In 1991, President Fujimori’s administration eliminated all foreign
exchange controls and unified the exchange rate. Currently, foreign exchange rates are determined by market
conditions, with regular operations by the Peruvian Central Reserve Bank in the foreign exchange market in order to
reduce volatility in the value of Peru’s currency against the U.S. dollar. Since the early 1990s, protectionist and
interventionist laws and policies have been gradually dismantled to create a liberal economy dominated by market
forces. The Peruvian economy has generally responded positively to this transformation, GDP grew by an average
annual rate of approximately 5.0% during the period from 1995 to 2011. Exchange controls and restrictions on
remittances of profits, dividends and royalties have ceased. Prior to 1991, Peru exercised control over foreign
exchange markets by imposing restrictions to multiple exchange rates and restrictions to the possession and use of
foreign currencies.
The Peruvian government may institute restrictive exchange rate policies in the future. Any such restrictive
exchange rate policy could affect our ability to engage in foreign exchange activities, and could also materially and
adversely affect us.
In addition, if the Peruvian government were to institute restrictive exchange rate policies in the future, we and
the Guarantors might be obligated to seek an authorization from the Peruvian government to make payments on the
notes and the guarantees. We cannot assure you that such an authorization would be obtained. Any such exchange
rate restrictions or the failure to obtain such an authorization could materially and adversely affect our and the
Guarantors’ ability to make payments under the notes and the guarantees, respectively.
Peruvian inflation could adversely affect us.
In the past, Peru has suffered through periods of high and hyper inflation, which has materially undermined the
Peruvian economy and the government’s ability to create conditions that would support economic growth. A return
to a high inflation environment would undermine Peru’s foreign competitiveness, with negative effects on the level
of economic activity and employment. Additionally, in response to increased inflation, the Peruvian Central Bank
(Banco Central de Reserva del Perú), which sets the Peruvian basic interest rate, may increase or decrease the basic
interest rate in an attempt to control inflation or foster economic growth.
As a result of reforms initiated in the 1990s, Peruvian inflation has decreased significantly in recent years from
four-digit inflation during the 1980s. The Peruvian economy experienced annual inflation of 2.94% in 2009, 1.53%
30
in 2010 and 3.37% in 2011, as measured by the Peruvian Consumer Price Index (Índice de Precios al Consumidor
del Perú).
If Peru experiences substantial inflation in the future, our costs of goods could increase and its operating
margins could decrease, which could materially and adversely affect us. Inflationary pressures may also limit our
ability to access foreign financial markets and may cause government intervention in the economy, including the
introduction of government policies that may adversely affect the overall performance of the Peruvian economy.
In the past, Peru experienced significant levels of domestic terrorist activity. It is possible that a resurgence of
terrorism in Peru may occur in the future, which would have a material adverse effect on the Peruvian economy
and, ultimately, on us.
In the late 1980s and early 1990s, Peru experienced significant levels of terrorist activity targeted against,
among others, the government and private sector. These activities were attributed mainly to two local terrorist
groups, Sendero Luminoso and Movimiento Revolucionario Túpac Amaru (the “MRTA”).
Both terrorist groups suffered significant defeats in the 1990s, including the arrest of their leaders, causing
considerable limitations in their activities during the decade of 2000. Although we believe that Sendero Luminoso
and MRTA no longer pose a significant risk as they did during the 1980s and early 1990s, their members still
operate in remote mountainous and jungle areas in central and southern Peru, where military patrols have decreased
due to military spending cutbacks. Despite the suppression of terrorist activity, we cannot assure you that a
resurgence of terrorism in Peru will not occur, or that if there is a resurgence, it will not disrupt the economy of Peru
and us.
The Peruvian economy could be adversely affected by economic developments in regional or global markets.
Financial and securities markets in Peru are influenced, to varying degrees, by economic and market conditions
in regional or global markets. Although economic conditions vary from country to country, investors’ perceptions
of the events occurring in one country may substantially affect capital flows into and securities from issuers in other
countries, including Peru. The Peruvian economy was adversely affected by the political and economic events that
occurred in several emerging economies in the 1990s, including in Mexico in 1994, which impacted the market
value of securities in many markets throughout Latin America. The crisis in the Asian markets beginning in 1997
also negatively affected markets throughout Latin America. Similar adverse consequences resulted from the
economic crisis in Russia in 1998, the Brazilian devaluation in 1999 and the Argentine crisis in 2001. In addition,
Peru continues to be affected by events in the economies of its major regional partners. Furthermore, the Peruvian
economy may be affected by events in developed economies that are trading partners or that affect the global
economy.
The 2008 global economic crisis, principally driven by the sub-prime mortgage market in the United States,
significantly affected the international financial system, including Peru’s securities market and economy.
Additionally, the current economic crisis in Europe, beginning with the financial crises in Greece, Spain, Italy and
Portugal, has reduced the confidence of foreign investors, which has caused volatility in the securities markets and
affected the ability of companies to obtain financing in the global capital markets. Moreover, the fiscal problems in
the United States due to difficulties and delays in increasing the government debt ceiling, culminating in the
downgrade of the U.S. long term sovereign credit rating by Standard & Poor’s on August 6, 2011, has added to an
already high risk-avert environment. Renewed doubts about the pace of global growth have contributed to weak
international growth in 2011. An interruption to the recovery of the developed economies, the continued effects of
the current crisis in Europe, or a new economic and/or global financial crisis, could affect Peru’s economy, and,
consequently, materially adversely affect our business, economic and financial condition or results of operations.
The recent market volatility generated by distortions in the international financial markets may affect the
Peruvian capital markets.
The international financial conditions in 2008 and 2009 increased the volatility of the Lima Stock Exchange.
The general index of the Lima Stock Exchange decreased by 60% in 2008, increased by 101% in 2009, increased by
65% in 2010, and decreased by 17% in 2011. In recent years, the Lima Stock Exchange has experienced increased
participation from retail investors that react rapidly to the effects from international markets. Further volatility in
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the international markets may also adversely affect the Peruvian capital markets. The Peruvian banking system has
not experienced significant liquidity problems as a result of the international financial conditions, primarily because
the major source of funds for local banks is represented by their deposit base. Nevertheless, we have partially relied
on funding from the local capital markets and limited liquidity in those markets as a result of future market volatility
could adversely affect our ability to raise funds at the price or level we consider necessary to fund our operations.
Argentine economic and political conditions and perceptions of these conditions in the international market may
have a direct impact on our business and could materially and adversely affect us.
One of our subsidiaries, San Isidro, is located in Argentina and accounted for 4% of our EBITDA in 2011. The
Argentine economy has experienced significant volatility in recent decades, characterized by periods of low or
negative growth, high and variable levels of inflation and currency devaluation. Between 2001 and 2003 Argentina
experienced a period of severe political, economic and social crisis. More than a decade of uninterrupted
Peso/dollar parity ended in 2002, and the value of the Peso against the U.S. dollar has fluctuated significantly since
then. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Factors
Affecting Operating Results—Economic Conditions in Peru, Argentina and Ecuador.”
Although general economic conditions in Argentina have recovered significantly during the past years, there is
uncertainty as to whether this growth is sustainable. This is mainly because the economic growth was initially
dependent on a significant devaluation of the Peso, a high excess production capacity resulting from a long period of
deep recession and high commodity prices. The global economic crisis of 2008 has led to a sudden economic
decline, accompanied by political and social unrest, inflationary and Peso depreciation pressures and lack of
consumer and investor confidence. We cannot assure you that GDP will increase or remain stable in the future. The
economic crisis in Europe, beginning with the financial crisis in Greece, Spain, Italy and Portugal, the international
demand for Argentine products, the stability and competitiveness of the Peso against foreign currencies, confidence
among consumers and foreign and domestic investors, a stable and relatively low rate of inflation and the future
political uncertainties, among other factors, may affect the development of the Argentine economy.
In response to the prevailing economic conditions during 2011 and the beginning of 2012, including the rise of
inflation, the continued demand for salary increases, the growth of the fiscal deficit, the required payments to be
made on public debt in 2012, the reduction of the industrial growth and the increase of the capital flow out of
Argentina, the Argentine government has adopted different measures, including strengthening foreign exchange
controls, the elimination of subsidies to the private sector and the proposal for new taxes.
On April 16, 2012, the Argentine government announced its intention to expropriate YPF, S.A. (“YPF”), the
largest oil and gas company in Argentina, which is controlled by Repsol YPF, S.A., a Spanish integrated oil and gas
company. On May 4, 2012, the Argentine Congress approved the expropriation of 51% of YPF’s capital stock, with
26.03% held by the national government and the remaining 24.99% distributed among certain provinces. This
measure has sparked strong international condemnation and could have a significant negative impact on future
foreign direct investment in Argentina as well as potentially limit the country’s access to international capital and
debt markets. In response to the nationalization of YPF by the Argentine government, Spain has blocked loans
disbursements to Argentina it had previously agreed to fund through multilateral development institutions. On June
13, 2012, the European Union Parliament voted to suspend unilateral tariff preferences to Argentina, one year ahead
of schedule. Also in response to the Argentine government’s actions, the European Union has lodged a formal
complaint against Argentina with the World Trade Organization, denouncing the country’s protectionist trade and
investment policies. If such sanctions by international trading blocks like the European Union continue to be
imposed on Argentina or on its agricultural exports, it may have a negative impact on our Argentine subsidiaries’
financial conditions and results of operations.
Argentine economic and political conditions and resulting measures could have a material adverse impact on
our operations in Argentina.
Ecuadorian economic and political conditions may have a material and adverse impact on us.
One of our subsidiaries, La Troncal, is located in Ecuador and accounted for 6% of our EBITDA in 2011.
Between 1997 and 2006, Ecuador experienced a severe political crisis during which it elected or appointed seven
presidents. While Rafael Correa has served as president since 2007 and is eligible for reelection in 2013, there can
32
be no assurance that political instability, and consequently lower economic growth, will not return in Ecuador.
Correa’s presidency has resulted in greater direct government intervention in the economy and there can be no
guarantee that the Ecuadorian government will not intervene in the sugar and ethanol sector in the future.
The Ecuadorean economy has experienced periods of significant economic volatility, resulting in two sovereign
defaults in 1999 and in 2009 that have since limited the government’s ability to borrow money. The scheduled
presidential elections in 2013 may encourage increased government spending and pressure the government to
increase tax revenue or increase borrowings from its already limited sources of credit, and there is no guarantee that
overspending will not contribute to additional economic volatility and deterioration. While Ecuador’s economy has
been dollarized since 2002, economic instability could still occur. See “Management’s Discussion and Analysis of
Financial Condition and Results of Operations—Factors Affecting Operating Results—Economic Conditions in
Peru, Argentina and Ecuador.” In particular, a decline in current account receipts could spur the government to
make the exit of dollars from the country more difficult. For example, Ecuadorian lawmakers attempted
unsuccessfully last year to pass a tax on capital outflows and there is no guarantee that the government will not
continue pursuing policies to preserve its dollar reserves.
Decreasing productivity in Ecuador’s oil sector may adversely affect the country’s growth prospects. While
several oil producers have settled their claims against the government and accepted the government’s increased
involvement in the oil industry, there is no guarantee that the petrochemical investment climate and growth
prospects will not deteriorate. The decreased independence of the Ecuadorian central bank following the 2008
constitutional reforms and newly passed banking regulations may also deter private sector investment and adversely
affect the growth of the Ecuadorian economy.
Risks Relating to the Notes and the Guarantees
Coazucar is a holding company and most of its production assets are held by subsidiaries.
Coazucar is a holding company, and most of its production assets are held by its direct and indirect subsidiaries,
including the Guarantors. Accordingly, we depend on the results of operations of our subsidiaries, including the
Guarantors. The ability of Coazucar’s subsidiaries to make dividend or other payments to Coazucar are affected by,
among other factors, the obligations of these subsidiaries, including the Guarantors, to their creditors, requirements
of the relevant corporate and other laws in the jurisdiction in which each subsidiary, including each Guarantor,
operates, and restrictions contained in agreements entered into by or relating to these entities. In the event that we
do not receive dividend or other payments from our subsidiaries, we may not be able to make required principal and
interest payments on our indebtedness, including the notes, or honor our other obligations, and you may be forced to
make a claim against the Guarantors that guarantee the notes.
Coazucar’s non-guarantor subsidiaries do not have an obligation to pay amounts due on the notes or to make
funds available for that purpose. While the indenture governing the notes limits the ability of Coazucar’s
subsidiaries to incur consensual restrictions on their ability pay dividends or make intercompany payments to
Coazucar, these limitations are subject to certain qualifications and exceptions.
Our substantial indebtedness may make it difficult for us to service our debt, including the notes, and to operate
our businesses.
We have, and after the offering of the notes will continue to have, a significant amount of indebtedness. As of
March 31, 2012, we and our subsidiaries had S/.805.6 million (US$302.0 million) of total consolidated debt. We
anticipate that our substantial indebtedness will continue for the foreseeable future. Our substantial indebtedness
may have important negative consequences for you, including:
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making it more difficult for us and our subsidiaries to satisfy our obligations with respect to our debt,
including the notes and other liabilities;
requiring that a substantial portion of the cash flow from operations of our operating subsidiaries be
dedicated to debt service obligations, reducing the availability of cash flow to fund internal growth through
working capital and capital expenditures and for other general corporate purposes;
increasing our vulnerability to economic downturns in our industry;
exposing us to interest rate increases;
33
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placing us at a competitive disadvantage compared to our competitors that have less debt in relation to cash
flow;
limiting our flexibility in planning for or reacting to changes in our business and our industry;
restricting us from pursuing strategic acquisitions or exploiting certain business opportunities; and
limiting, among other things, our and our subsidiaries’ ability to borrow additional funds or raise equity
capital in the future and increasing the costs of such additional financings.
In the worst case, an actual or impending inability by us or our subsidiaries to pay debts as they become due and
payable could result in our insolvency.
Despite our current substantial indebtedness, we may be able to incur more debt in the future, including on a
secured basis, which could further exacerbate the risks of our indebtedness.
Despite our current substantial indebtedness, we may be able to incur more debt in the future. The indenture
governing the notes will limit our ability to incur additional debt but will not prohibit us from doing so. We may
incur additional debt in the future that could mature prior to the notes, and such debt could be secured on an equal,
ratable and pari passu basis with the notes and the guarantees. Any such additional debt could further exacerbate the
risks of our indebtedness.
Payments on the notes and the guarantees will be effectively subordinated to any secured debt obligations of
Coazucar and the Guarantors, and structurally subordinated to the liabilities of non-guarantor subsidiaries to
their own creditors and the liabilities of Casa Grande to its own creditors to the extent that the obligations under
the notes exceed its partial guarantee of an initial amount equal to US$162,500,000.
The notes will be fully guaranteed by Cartavio, San Jacinto and Azucarera Olmos, and partially guaranteed by
Casa Grande, on an unsecured basis. The notes and the guarantees will constitute senior unsecured obligations of
Coazucar and the Guarantors, and will rank equal in right of payment with all of the other existing and future
unsecured, unsubordinated indebtedness of Coazucar and the Guarantors, other than with respect to certain
obligations given preferential treatment pursuant to the laws of Peru. Holders of the notes will not have any claim
against our subsidiaries that are not guarantors of the notes. Therefore, our non-guarantor subsidiaries will pay their
debt and other obligations as required, before they make any funds available to us for making payments under the
notes. Moreover, the right of holders of the notes to receive assets of any non-guarantor subsidiaries upon
liquidation or reorganization or to participate in the distribution of, or realize the proceeds of, those assets will be
structurally subordinated to the claims of such subsidiary’s creditors.
Additionally, while Casa Grande is a Guarantor, its guarantee is limited to an initial amount equal to
US$162,500,000, which represents only a portion of the aggregate principal amount of the notes. In the event that
we are not able to make required principal and interest payments on the notes, you may be limited in the amounts
recoverable against Casa Grande pursuant to its limited guarantee.
As of March 31, 2012, Coazucar had total consolidated debt of S/.805.6 million (US$302.0 million), of which
S/.234.6 million (US$87.9 million) was debt of Coazucar, S/.264.3 million (US$99.1 million) was debt of the
Guarantors, S/.106.8 million (US$40.0 million) was debt of Casa Grande, and S/.306.6 million (US$115.0 million)
was debt of the non-guarantor subsidiaries. As of March 31, 2012, Coazucar, the Guarantors, Casa Grande and the
non-guarantor subsidiaries had secured debt in the amounts of S/.132.4 million (US$49.6 million), S/.199.5 million
(US$74.8 million), S/.97.8 million (US$36.7 million) and S/.287.3 million (US$107.7 million), respectively. As of
and for the three months ended March 31, 2012, the Guarantors represented 68.4% of our consolidated total assets
and 84.5% of our consolidated EBITDA and Casa Grande represented 41.7% of our consolidated total assets and
51.3% of our consolidated EBITDA. We intend to repurchase a portion of the indebtedness of Coazucar with a
portion of the proceeds of this offering.
Although the holders of the notes will have a direct, but unsecured, claim on the assets and property of the
Coazucar and the Guarantors, payment on the notes and guarantees will be effectively subordinated to payments on
Coazucar’s and the Guarantors’ secured debt to the extent of the assets and property securing such debt. Payments
on the notes and guarantees is also subject to the payment of certain other obligations that receive preferential
treatment under Peruvian law, such as certain labor and tax obligations.
34
The guarantee of Casa Grande is limited to an initial amount equal to US$162,500,000 and as a result, in the
case of a default in respect of our obligations under the notes, you may be limited in the amounts recoverable
from Casa Grande to satisfy our obligations under the notes.
Casa Grande’s guarantee is limited to an initial amount equal to US$162,500,000, which represents only a
portion of the aggregate principal amount of the notes. As of and for the three months ended March 31, 2012, Casa
Grande generated 51.3% of our consolidated EBITDA and had 41.7% of our consolidated total assets. Because
Casa Grande’s guarantee is limited to an initial amount equal to US$162,500,000, in the case of a default in respect
of our obligations under the notes, you may be limited in the amounts recoverable from Casa Grande to satisfy our
obligations under the notes.
Our obligations under the notes and guarantees will be subordinated to certain statutory liabilities.
Under Peruvian bankruptcy law, our obligations under the notes and guarantees are subordinated to certain
statutory preferences. In the event of our liquidation, such statutory preferences, including claims for salaries,
wages, secured obligations, social security, taxes and court fees and expenses related thereto, will have preference
over any other claims, including claims by any investor in respect of the notes and guarantees.
It is possible that the guarantees may not be enforceable in the event of insolvency or bankruptcy or may be
limited as to enforcement.
The guarantees provide a basis for a direct claim against the Guarantors. However, it is possible that the
guarantees may not be enforceable under Peruvian law or U.S. federal or state law. In particular, while the laws of
these jurisdictions do not prevent the guarantees from being granted, in the event that a Guarantor is declared
insolvent or bankrupt, the relevant guarantee could be voided, or claims in respect of a guarantee could be
subordinated to all other debts of that Guarantor if, among other things, the Guarantor, at the time it provided its
guarantee:
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issued such guarantee by means of misrepresentation;
provided the guarantee with the intent to hinder, delay or defraud creditors or was influenced by a desire to
put the beneficiary of the guarantee in a position which, in the event of the Guarantor’s insolvency, would
be better than the position the beneficiary would have been in had the guarantee not been given;
received less than reasonably equivalent value or fair consideration for the incurrence of such guarantee;
was insolvent or rendered insolvent by reason of such incurrence;
was engaged in a business or transaction for which the Guarantor’s remaining assets constituted
unreasonably small capital; or
intended to provide, or believed that it would provide, the guarantee beyond its ability to repay it upon its
maturity.
In a recent Florida bankruptcy case, subsidiary guarantees containing this kind of provision were found to be
fraudulent conveyances and thus unenforceable and the court stated that this kind of limitation is ineffective. We do
not know if that case will be followed if there is litigation on this point under the indenture governing the notes.
However, if it is followed, the risk that the guarantees will be found to be fraudulent conveyances will be
significantly increased.
Additionally, the guarantee of Cartavio, San Jacinto and Azucarera Olmos, by its terms, will be limited to such
amount as would not render each of these entities insolvent, and the guarantee of Casa Grande will be limited to an
initial amount equal to US$162,500,000. While such limitation may not prevent the guarantee from being
determined to be a fraudulent transfer, such limitation could meaningfully limit amounts recoverable pursuant to
such guarantee.
Developments in other emerging markets may adversely affect the market value of the notes.
The market price of the notes may be adversely affected by declines in the international financial markets and
world economic conditions. The market for securities of companies doing substantially all of their business in Latin
American markets, such as our company, is influenced, to varying degrees, by economic and market conditions in
other emerging market countries, especially those in Latin America. Although economic conditions are different in
35
each country, investors’ reaction to developments in one country may affect the securities markets and the securities
of issuers in other countries. We cannot assure you that the market for our securities will not be affected negatively
by events in countries in which we do not operate, particularly in emerging markets, or that such developments will
not have a negative impact on the market value of the notes.
Enforcing your rights as a holder of notes in Peru may prove difficult.
Your rights under the notes will be subject to the insolvency and administrative laws of Peru and we cannot
assure you that you will be able to effectively enforce your rights in such bankruptcy, insolvency or similar
proceedings. In addition, the bankruptcy, insolvency, administrative and other laws of Peru may be materially
different from, or in conflict with, each other, including in the areas of rights of creditors, priority of government
entities and related-party creditors and ability to obtain post bankruptcy filing loans or to pay interest. The
application of these laws, or any conflict among them, could call into question what and how Peruvian laws should
apply. The laws of Peru may not be as favorable to your interests as the laws of jurisdictions with which you are
familiar. Such issues may adversely affect your ability to enforce your rights under the notes in Peru or limit any
amounts that you may receive.
In addition, the ability of holders of notes to institute bankruptcy proceedings against us or the Guarantors in
Peru, where most of our and their respective assets and operations are located, is currently not guaranteed by
Peruvian law. Therefore, we cannot assure you that the holders of notes will have the right directly (or indirectly
through the trustee) to institute bankruptcy proceedings against us or the Guarantors in Peru if we default on the
notes.
You may be unable to enforce judgments against us, the Guarantors, or our respective directors and officers.
We and the Guarantors are organized under the laws of Peru. In addition, all of our assets are outside the
United States and all of our directors and officers live outside the United States. Our auditors are also organized
outside the United States. As a result, it may be difficult or impossible to serve process against any of these persons
in the United States. Furthermore, as all or substantially all of the assets of these persons are located outside of the
United States, it may not be possible to enforce judgments obtained in courts in the United States predicated upon
civil liability provisions of the federal securities laws of the United States against these persons. There is no
guarantee that a judgment against such persons in Peru will be enforceable, whether in original actions or in actions
to enforce judgments of U.S. courts, based solely on the U.S. federal securities laws. See “Enforcement of Civil
Liabilities.”
The notes constitute a new issue of securities for which there is no existing market, and we cannot assure you
that you will be able to sell your notes in the future.
The notes constitute new securities for which there is no existing market. Although application has been made
to the Irish Stock Exchange for the notes to be admitted to the Official List and to trading on the Global Exchange
Market, we cannot assure you that the application will be approved or that an active trading market in the notes will
develop. In addition, we cannot provide you with any assurances regarding the ability of holders of the notes to sell
their notes, or the price at which such holders may be able to sell their notes.
If such a market were to develop, the notes could trade at prices that may be higher or lower than the initial
offering price depending on many factors, including prevailing interest rates, our results of operations and financial
condition, political and economic developments in and affecting the jurisdictions where we have operations, and the
market for similar securities. The initial purchasers of this offering have advised our company that they currently
intend to make a market in the notes. However, the initial purchasers are not obligated to do so, and any marketmaking with respect to the notes may be discontinued at any time without notice.
There are restrictions on your ability to transfer or resell the notes without registration under applicable
securities laws.
The notes and the guarantees have not been, and will not be, registered under the Securities Act or any state
securities laws and may not be offered or sold within the United States or to, or for the account or benefit of, U.S.
persons except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the
36
Securities Act and applicable state securities laws. Such exemptions include offers and sales that occur outside the
United States in compliance with Regulation S under the Securities Act and in accordance with any applicable
securities laws of any other jurisdiction and sales to qualified institutional buyers as defined under Rule 144A under
the Securities Act.
The notes have been registered in Peru pursuant to SMV Resolution No. 004-2011-EF/94.01.1. In Peru, the
notes are subject to transfer and resale restrictions and shall not be transferred or resold except as permitted under
CONASEV Resolution No. 079-2008-EF/94-01.1. For a discussion of certain restrictions on resale and transfer, see
“Transfer Restrictions”. Due to these transfer restrictions, you may be required to bear the risk of your investment
for an indefinite period of time.
We may be unable to satisfy our note purchase obligations upon a change of control repurchase event.
Upon the occurrence of a change of control repurchase event, which is comprised of certain change of control
events together with a ratings decline, as described in the “Description of the Notes” and the indenture governing the
notes, each holder of the notes may require us to purchase all or a portion of such holder’s notes at a purchase price
equal to 101% of the aggregate principal amount of such holder’s notes, together with accrued and unpaid interest, if
any, to the date of purchase. In such event, we may not have the financial resources sufficient to purchase all of the
notes and our other indebtedness that might become payable upon the occurrence of a change of control repurchase
event.
We may choose to redeem the notes and you may be unable to reinvest the proceeds at the same or a higher rate
of return.
We may redeem the notes, in whole or in part, subject to a minimum float condition, at any time on or after
August 2, 2017 at the applicable redemption prices set forth in this offering memorandum, plus accrued and unpaid
interest and any Additional Amounts. Before August 2, 2017, we may also redeem the notes, in whole or in part,
subject to a minimum float condition, at a redemption price based on a “make-whole” premium. In addition, at any
time prior to August 2, 2015, we may redeem up to 35% of the notes (including any additional notes), at a
redemption price equal to 106.375% of their outstanding principal amount, plus accrued and unpaid interest and any
Additional Amounts, using the proceeds of certain equity offerings. See “Description of the Notes—Optional
Redemption”. Additionally, in the event of certain changes in applicable tax laws, we will have the right to redeem
the notes prior to their maturity at a price equal to 100% of their outstanding principal amount plus accrued and
unpaid interest and Additional Amounts, if any. See “Description of the Notes—Optional Tax Redemption”. We
may chose to redeem the notes at times when prevailing interest rates may be relatively low. Accordingly, you may
not be able to reinvest the redemption proceeds in a comparable security with an effective interest rate as high as
that of the notes.
Different disclosure and accounting principles in Peru and the United States may provide you with different or
less information about us than you expect.
Securities disclosure requirements in Peru differ from those applicable in the United States. Accordingly, the
information about us available to you may not be the same as the information available to security holders of a U.S.
company. There may be less publicly available information about us than is regularly published about companies in
the U.S. and certain other jurisdictions. We are not subject to the periodic reporting requirements of the Exchange
Act and, therefore, are not required to comply with the information disclosure requirements that it imposes.
The perception of higher risk in other countries, especially in emerging economies, may adversely affect the
Peruvian economy, our business and the market price of securities issued by Peruvian issuers, including the
notes.
Emerging markets like Peru are subject to greater risks than more developed markets, and financial turmoil in
any emerging market could disrupt business in Peru and adversely affect the price of the notes. Moreover, financial
turmoil in any emerging market country may adversely affect prices in stock markets and prices for debt securities
of issuers in other emerging market countries as investors move their money to more stable, developed markets. An
increase in the perceived risks associated with investing in emerging markets could dampen capital flows to Peru
and adversely affect the Peruvian economy in general, and the interest of investors in the notes. We cannot assure
37
you that the value of the notes will not be negatively affected by events in other emerging markets or the global
economy in general.
We cannot assure you that the credit ratings for the notes will not be lowered, suspended or withdrawn by the
rating agencies.
The credit ratings of the notes may change after issuance. Such ratings are limited in scope, and do not address
all material risks relating to an investment in the notes, but rather reflect only the views of the rating agencies at the
time the ratings are issued. An explanation of the significance of such ratings may be obtained from the rating
agencies. We cannot assure you that such credit ratings will remain in effect for any given period of time or that
such ratings will not be lowered, suspended or withdrawn entirely by the rating agencies, if, in the judgment of such
rating agencies, circumstances so warrant. Any lowering, suspension or withdrawal of such ratings may have a
material and adverse effect on the market price and marketability of the notes.
Peruvian capital gains tax may apply on transfers of the offered notes.
In the event beneficial interests in the Global Notes are exchanged for definitive notes (or the Global Notes are
transferred), the non-Peruvian holders of such Global Notes may be subject to Peruvian capital gains tax on any
transfer of such definitive notes (or transfer of notes). See “Taxation—Peruvian Tax Considerations.”
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USE OF PROCEEDS
We intend to use the net proceeds from the sale of the notes, after the deduction of certain fees and expenses in
connection with this offering to (i) repay approximately US$148 million of the outstanding indebtedness of the
Issuer, Cartavio S.A.A., Agroindustrias San Jacinto S.A.A. and Casa Grande S.A.A., (ii) purchase land in
connection with the Olmos Expansion Plan, and (iii) use the remainder for capital expenditures and general
corporate purposes for our operations in Peru.
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CAPITALIZATION
The following table sets forth our consolidated debt and capitalization as of March 31, 2012, derived from our
unaudited condensed consolidated interim financial statements as of March 31, 2012 prepared in accordance with
IFRS, as issued by the IASB:
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on an actual historical basis; and
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as adjusted for the sale of the notes in this offering, the receipt of net proceeds therefrom in the aggregate
amount of approximately US$319 million after deduction of commissions and expenses and the use of a
portion of the proceeds to repay approximately US$148 million of outstanding indebtedness.
You should read this table in conjunction with “Use of Proceeds,” “Selected Financial and Other Information,”
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial
statements and the related notes thereto, which are included in this offering memorandum.
As of March 31, 2012
Actual
As Adjusted
(in US$ millions)(1)
(in S/. millions)
(in US$ millions)(1)
(in S/. millions)
Cash and cash equivalents..............
Short-term debt
Overdraft .....................................
Promissory notes .........................
Finance lease ...............................
Payable from acquisition of
subsidiaries(2) ............................
Payable from acquisition of
associate(3) ................................
Total short-term debt..................
Long-term debt
Promissory notes .........................
6.375% Senior Notes due 2022
offered hereby ..........................
Finance lease ...............................
Payable from acquisition of
subsidiaries(2) ............................
Total long-term debt....................
Total debt .......................................
Total equity ....................................
Total capitalization......................
71.9
191.8
242.9
647.8
0.8
111.1
0.6
2.1
296.3
1.6
—
54.0
0.6
—
144.0
1.6
6.9
18.5
6.9
18.5
7.3
126.7
19.4
337.9
7.3
68.8
19.4
183.5
90.9
242.4
—
—
—
0.3
—
0.8
325.0
0.3
866.8
0.8
84.1
175.3
302.0
941.8
1,243.8
224.4
467.6
805.5
2,511.7
3,317.2
84.1
409.4
478.2
941.8
1,420.0
224.4
1,092.0
1,275.5
2,511.7
3,787.2
________________________________
(1)
(2)
(3)
Amounts stated in U.S. dollars have been translated from nuevos soles at the exchange rate of S/.2.667 per US$1.00 as of March 31, 2012.
See “Exchange Rates” for additional information on the exchange rate.
The liability incurred in connection with our acquisition of La Troncal is treated as an account payable and not as indebtedness.
Includes an account payable in connection with our acquisition of 50% of the shares of Producargo S.A., an ethanol company in Ecuador.
Since March 31, 2012, we have provided a guarantee in the amount of US$49.8 million for purchasing lands in
connection with the Olmos Expansion Plan, which we anticipate repaying with the proceeds from this offering.
40
EXCHANGE RATES
Peruvian law does not impose any restrictions on the ability of companies having operations in Peru to transfer
foreign currencies from Peru to other countries, to convert nuevos soles into any foreign currency or to convert any
foreign currency into nuevos soles. Companies may freely remit interest and principal payments abroad and
investors may repatriate capital from liquidated investments. Peruvian law in the past imposed restrictions on the
conversion of Peruvian currency and the transfer of funds abroad, however, we cannot assure you that Peruvian law
will continue to permit such payments, transfers, conversions or remittances without restrictions.
Exchange rates for the nuevo sol have been relatively stable in recent years. The following table sets forth the
low, high, period-average and period-end rates for the periods indicated, expressed in nuevos soles per U.S. dollar.
Low
High
Period
Average(1)
Period End
Year Ended December 31:
2007...........................................................................................
2008...........................................................................................
2009...........................................................................................
2010...........................................................................................
2011...........................................................................................
2.968
2.693
2.852
2.787
2.694
3.201
3.157
3.259
2.883
2.833
3.124
2.941
3.006
2.826
2.752
2.996
3.140
2.890
2.809
2.696
2012:
January ......................................................................................
February ....................................................................................
March ........................................................................................
April ..........................................................................................
May ...........................................................................................
June ...........................................................................................
July (through July 25) ...............................................................
2.690
2.677
2.667
2.640
2.636
2.641
2.620
2.689
2.691
2.676
2.668
2.709
2.708
2.654
2.693
2.684
2.671
2.657
2.670
2.671
2.636
2.690
2.677
2.667
2.640
2.709
2.671
2.638
(1) Calculated as the average of the month-end or day-end exchange rates during the relevant period, as applicable.
Source: SBS
On July 25, 2012, the exchange rate was S/.2.638 per U.S. dollar.
41
SELECTED FINANCIAL AND OTHER INFORMATION
The following selected financial data has been derived from (1) our unaudited condensed consolidated interim
financial statements as of March 31, 2012 and for the three months ended March 31, 2012 and 2011 and (2) our
audited consolidated financial statements as of December 31, 2011, 2010 and January 1, 2010 (transition date) and
for the years ended December 31, 2011 and 2010, in each case included elsewhere in this offering memorandum.
Our financial statements have been prepared in accordance with IFRS, as issued by the IASB. The unaudited
condensed consolidated interim financial statements and the notes thereto have been condensed, but contain all
adjustments, including adjustments of a normal and recurring nature, necessary for a fair presentation of our
financial position and results of operation. The results for the three months ended March 31, 2012 are not
necessarily indicative of the results to be expected for the entire year ending March 31, 2012.
This financial information should be read in conjunction with “Presentation of Financial and Other
Information,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our
financial statements and the related notes thereto, which are included elsewhere in this offering memorandum.
As of and for the Three Months
Ended March 31,
2012
2012
2011
(in thousands
of US$, except
(in thousands of S/.,
as indicated)
except as indicated)
Consolidated Statement of Comprehensive
Income:
Sales of products
Cost of products sold
Gross profit
Initial recognition and change in fair value of
biological assets(1)
Profit before operating expenses
Selling expenses
Administrative expenses
Other operating expenses, net
Profit from operation before financing and
taxation
Financial income
Financial expenses
Exchange difference, net
Income attributable to associate
Profit before income tax
Income tax expense
Profit for the period
Exchange differences on translating foreign
operations, net of deferred income tax
Fair value change in cash flow hedge, net
Total comprehensive income for the year
As of and for the Years
Ended December 31,
2011
2011
2010
(in thousands
of US$, except
(in thousands of S/.,
as indicated)
except as indicated)
(unaudited)
141,427
(85,548)
55,879
66
377,185
(228,157)
149,028
175
309,162
(145,824)
163,338
31,786
483,833
(261,583)
222,250
69,865
1,304,415
(705,229)
599,186
188,355
937,854
(498,467)
439,387
177,852
55,945
(3,227)
(9,725)
(722)
149,203
(8,606)
(25,936)
(1,924)
195,124
(4,710)
(8,762)
(1,364)
292,115
(11,220)
(24,624)
(58)
787,541
(30,248)
(66,386)
(157)
617,239
(18,563)
(42,924)
(19,623)
42,271
190
(6,484)
2,237
656
38,870
(6,103)
32,767
(1,933)
112,737
506
(17,294)
5,966
1,750
103,665
(16,277)
87,388
(5,155)
180,288
787
(7,591)
268
—
173,752
(25,956)
147,796
—
256,213
913
(17,599)
6,808
—
246,335
(38,792)
207,543
(4,947)
690,750
2,461
(47,446)
18,354
—
664,119
(104,584)
559,535
(13,336)
536,129
1,621
(45,388)
11,096
—
503,458
(75,769)
427,689
—
(82)
30,752
(219)
82,014
(1,285)
146,511
(325)
202,271
(877)
545,322
(5,141)
422,548
________________________________
(1) See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Financial Presentation and Accounting
Policies—Valuation of biological assets” for a description of how we calculate the fair value of biological assets using the criteria set out in
IAS 41, which requires that a biological asset should be measured at its fair value less the estimated point-of-sale costs.
42
As of and for the Years
As of and for the Three
As of
Ended December 31,
Months Ended March 31,
January 1,
2012
2012
2011
2011
2010
2010
(in thousands (in thousands (in thousands
of US$, except of S/., except as of US$, except
(in thousands of S/.,
as indicated)
indicated)
as indicated)
except as indicated)
Consolidated Statement of Financial
Position:
Non-current assets
Property, plant and equipment
Intangible assets
Biological assets
Investments in associates
Deferred income tax assets
Trade and other accounts receivables
Total non-current assets
Current assets
Biological assets
Inventories
Trade and other accounts receivables
Cash and cash equivalents
Total current assets
Total assets
Equity
Share capital
Cumulative translation adjustment
Legal and other reserves
Retained earnings
Equity attributable to equity holders of
the parent
Non-controlling interest
Total equity
Non-current liabilities
Borrowings
Trade and other accounts payables
Provisions and other liabilities
Deferred income tax liabilities
Derivative financial instruments
Total non-current liabilities
Current liabilities
Borrowings
Trade and other accounts payables
Provisions and other liabilities
Derivative financial instruments
Total current liabilities
Total liabilities
Total equity and liabilities
(unaudited)
1,056,169
76,166
161,256
11,834
3,151
2,612
1,311,188
2,816,804
203,135
430,069
31,560
8,405
6,966
3,496,939
1,040,651
75,195
140,570
11,058
2,378
3,050
1,272,902
2,805,594
202,727
378,978
29,811
6,410
8,224
3,431,744
2,025,253
130,743
155,721
1,303
3,470
7,982
2,324,472
1,907,566
131,477
82,726
1,306
3,650
20,446
2,147,171
93,451
100,336
45,939
71,916
311,642
1,622,830
249,234
267,595
122,520
191,800
831,149
4,328,088
103,191
111,423
43,515
42,388
300,517
1,573,419
278,204
300,395
117,317
114,277
810,193
4,241,937
222,099
80,870
102,017
70,982
475,968
2,800,440
111,105
76,385
84,938
21,367
293,795
2,440,966
287,011
—
44,674
687,375
270,136
—
21,299
425,181
107,616
(4,648)
16,457
416,478
287,011
(12,397)
43,892
1,110,748
106,458
(3,316)
16,335
390,588
287,011
(8,941)
44,039
1,053,024
535,903
1,429,254
510,065
1,375,133
1,019,060
716,616
405,884
941,787
1,082,492
2,511,746
412,026
922,091
1,110,822
2,485,955
521,008
1,540,068
408,075
1,124,691
91,188
112,451
2,529
175,655
—
381,823
243,198
299,906
6,745
468,472
—
1,018,321
96,429
109,810
3,177
174,511
—
383,927
259,973
296,047
8,566
470,481
—
1,035,067
347,284
43,153
9,086
353,854
15,074
768,451
284,201
192,187
8,197
329,574
15,183
829,342
112,503
179,510
3,418
3,789
299,220
681,043
1,622,830
300,046
478,754
9,117
10,104
798,021
1,816,342
4,328,088
108,181
152,961
2,343
3,916
267,401
651,328
1,573,419
291,657
412,384
6,316
10,558
720,915
1,755,982
4,241,937
186,335
302,425
3,161
—
491,921
1,260,372
2,800,440
159,476
326,310
1,147
—
486,933
1,316,275
2,440,966
43
As of and for the Three Months
Ended March 31,
2012
2012
2011
(in thousands
of US$, except
(in thousands of S/.,
as indicated)
except as indicated)
Other data:
EBITDA(1) .......................................................
EBITDA margin(2) ...........................................
Total debt(3) .....................................................
Total debt / EBITDA(4) ....................................
Net debt(5) ........................................................
Net debt / EBITDA(6).......................................
Fixed Charge Coverage Ratio(7) .......................
Consolidated Leverage Ratio(8) ........................
51,979
36.8%
302,049
1.46x
230,133
1.11x
9.75x
1.45x
138,628
36.8%
805,566
1.46x
613,766
1.11x
9.75x
1.45x
164,151
53.1%
As of and for the Years
Ended December 31,
2011
2011
2010
(in thousands
of US$, except
(in thousands of S/.,
as indicated)
except as indicated)
214,587
44.4%
302,946
1.41x
260,558
1.21x
12.25x
1.41x
578,526
44.4%
816,744
1.41x
702,467
1.21x
12.25x
1.41x
416,977
44.5%
533,619
1.28x
462,637
1.11x
9.22x
1.27x
________________________________
(1) EBITDA is calculated using profit from operations for the period before financing and taxation without initial recognition and change in fair
value of biological asset, added to depreciation and amortization. See “Presentation of Financial and Other Information.” We calculate
EBITDA as follows:
As of and for the Three Months
Ended March 31,
2012
2011
2012
(in thousands
of US$, except
(in thousands of S/.,
as indicated)
except as indicated)
Profit from operation before financing and
taxation ............................................................
(-) Initial recognition and change in fair
value of biological assets.................................
(+) Depreciation ..............................................
(+) Amortization..............................................
EBITDA...........................................................
As of and for the Years
Ended December 31,
2011
2011
2010
(in thousands
of US$, except
(in thousands of S/.,
as indicated)
except as indicated)
42,271
112,737
180,288
256,213
690,750
536,129
(66)
9,686
88
51,979
(175)
25,832
234
138,628
(31,786)
15,454
195
164,151
(69,865)
27,899
340
214,587
(188,355)
75,215
916
578,526
(177,852)
57,672
1,028
416,977
(2) EBITDA margin is EBITDA divided by sales of products, expressed as a percentage.
(3) Total debt is the sum of total short- and long-term loans.
(4) Total debt/EBITDA is the ratio of our total debt as of the end of the applicable period divided by our EBITDA for the then most recently
concluded period of four consecutive fiscal quarters, including the four consecutive fiscal quarters ended March 31, 2012.
(5) Net debt is obtained netting total debt with cash and cash equivalents.
(6) Net debt/EBITDA is the ratio of our net debt as of the end of the applicable period divided by our EBITDA for the then most recently
concluded period of four consecutive fiscal quarters, including the four consecutive fiscal quarters ended March 31, 2012.
(7) See “Description of the Notes—Certain Definitions” for the definition of Fixed Charge Coverage Ratio.
(8) See “Description of the Notes—Certain Definitions” for the definition of Consolidated Leverage Ratio.
44
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion of our financial condition and results of operations for the three months ended March
31, 2012 and 2011 and for the years ended December 31, 2011 and 2010 should be read in conjunction with (1) our
unaudited condensed consolidated interim financial statements as of March 31, 2012 and for the three months ended
March 31, 2012 and 2011 and (2) our audited consolidated financial statements as of December 31, 2011, 2010 and
January 1, 2010 (transition date) and for the years ended December 31, 2011 and 2010, in each case included
elsewhere in this offering memorandum, as well as the information presented under “Presentation of Financial and
Other Information” and “Selected Financial and Other Information.”
The following discussion contains forward-looking statements that involve risks and uncertainties. Our actual
results may differ materially from those discussed in the forward-looking statements as a result of various factors,
including those set forth in “Forward-Looking Statements” and “Risk Factors.”
Overview
We cultivate, harvest, purchase and crush sugarcane, the principal raw material used to produce sugar and
ethanol. According to data provided by the Peruvian Ministry of Agriculture, we were the largest producer of sugar
and the one of the two largest producers of ethanol (along with Grupo Romero’s Caña Brava) in Peru during 2011.
Over the last three years, our main sugar product has been brown sugar. Our main ethanol product is hydrous
ethanol.
During 2011, we recorded sales of products of S/.1,304 million (US$484 million), gross profit of S/.599 million
(US$222 million) and profit for the year of S/.559 million (US$207 million). During the three months ended March
31, 2012, we recorded sales of products of S/.377 million (US$141 million), gross profit of S/.149 million (US$56
million) and profit for the period of S/.87 million (US$33 million).
We currently conduct our principal sugar and ethanol operations through our production facilities, Casa Grande,
Cartavio, San Jacinto, La Troncal, San Isidro and Coazucar, which are located throughout Peru, and in Ecuador and
Argentina. We currently market and sell all of our sugar and ethanol products, both domestically and through
exports. We own and operate warehouse facilities at the port of Salaverry, in the La Libertad region, through which
we export sugar and ethanol products. In Argentina we export our products through the port of Buenos Aires.
Factors Affecting Operating Results
Our results of operations have been influenced and will continue to be influenced by the following key factors:
Global Sugar Demand and Pricing
Sugar is a commodity and is subject to price fluctuations in the international market. Sugar prices are affected
by the perceived and actual supply and demand for sugar and its substitute products. The supply of sugar is affected
by weather conditions, governmental trade policies and regulations (including import tariffs and other trade
restrictions) and the amount of sugarcane and sugar beet planted by farmers, including substitution by farmers
growing other agricultural commodities for sugarcane or sugar beet. Demand is affected by growth in domestic and
worldwide consumption of sugar and the prices of substitute sugar products. See “Peruvian Sugar Industry.” From
time to time, imbalances may occur between overall sugarcane and sugar beet processing capacity, the supply of
sugarcane and sugar beet and demand for sugar and ethanol products. Prices of sugar and ethanol products are also
affected by these imbalances, which, in turn, impact our decision regarding when to sell our sugar and ethanol
inventories, as well as our market projections regarding the recommended overall mix between sugar and ethanol.
According to OECD-FAO Agricultural Outlook 2011-2020, world raw sugar prices increased from an average
of US$0.18 per pound in March 2010 to US$0.26 per pound in March 2011 and decreased to US$0.24 per pound in
March 2012, principally due to: (1) demand for sugar that exceeded supply in part due to lower sugar production
caused by droughts in China, India, Thailand and Brazil and a resulting reduction in world sugar inventories to meet
demand; (2) the reduction in protectionist practices in the European market; and (3) the overall 11.7% appreciation
of the nuevo sol against the U.S. dollar during this two-year period. As of June 30, 2012, the price of the NY11
sugar contract was US$0.22 per pound.
45
Domestic Peruvian brown sugar prices rose similarly, increasing from an average of S/.1,622 per ton on
December 31, 2009 to S/.2,088 per ton on December 31, 2010 to S/.2,075 per ton on December 31, 2011, according
to the Peruvian Ministry of Agriculture. Due to the appreciation of the nuevo sol against the U.S. dollar, the
domestic Peruvian price of brown sugar in U.S. dollar terms increased by approximately 4.2% (compared to a 0.6%
decrease in nuevos soles) during 2011.
During the three months ended March 31, 2012, according to the Peruvian Ministry of Agriculture, the domestic
Peruvian price of brown sugar decreased by approximately 4.0%, from S/.2,075 per ton on December 31, 2011 to
S/.1,992 per ton on March 31, 2012, principally due to market expectations that production volumes in Brazil,
Australia and India would decrease, thereby also decreasing global inventories. For a chart of the evolution of sugar
prices, see “Peruvian Sugar Industry.”
We are also affected by domestic and international prices of ethanol, competition, governmental policies and
regulations and market demand for ethanol. The price for ethanol that we sell domestically is determined in
accordance with market prices. There is no established international reference price for ethanol, and prices for
exported ethanol are generally set in accordance with international market prices, dictated by the balance of supply
and demand and by opportunities to sell ethanol in Peru.
The Peruvian and the international sugar and ethanol industries are marked by periods of instability of offer and
demand, resulting in changes in sales prices and profit margins. In addition to the factors described above, the
following factors which are beyond our control contribute to the price fluctuations of sugar, ethanol and other
sugarcane byproducts, including the following:

weather conditions and natural disasters in the regions where sugarcane is cultivated;

the production capacity of our competitors;

incentive trade policies in Peru and abroad for the production, sale, export and consumption of sugar,
ethanol and other sugarcane byproducts;

governmental incentives and subsidies from other countries that also produce sugar, ethanol and other
sugarcane byproducts;

negotiation developments in international trade, including at the WTO;

the growth rate of the world economy and the corresponding sugar consumption growth;

the GDP growth rate in Peru, which has a positive effect on the consumption of sugar and ethanol products
in Peru, in particular by industries that produce or process food;

the exchange rate of the Peruvian nuevo sol against the U.S. dollar, which directly affects our sales of
products and our financing costs, and indirectly affects the international market price of sugar and our cost
of third- party supplied sugarcane;

tax policies adopted by the Peruvian federal government and by the governments of Argentina and
Ecuador, and our resulting tax obligations, as well as tax policies adopted by the markets for sugar and
ethanol; and

greater use of ethanol as a source of cleaner, renewable energy
Furthermore, both sugar and ethanol are negotiated in futures and commodities exchange and their prices may
be affected by market speculation.
Cost of Products Sold
We incur costs and expenses in producing sugar and ethanol. For accounting purposes, we classify our cost of
products sold into two major categories: (1) the cost of sugarcane; and (2) costs that we incur that are directly related
to our processing of sugarcane into sugar and ethanol, or industrial costs. On a consolidated basis, our cost of
sugarcane reflects the cost of purchasing sugarcane from related parties (including our controlling shareholders) and
46
from third parties. Our industrial costs include costs relating to our purchase of other raw materials that we use to
process sugarcane, labor costs and benefits, third-party service costs, transportation costs, maintenance and
replacement part costs, fuel and lubricant costs, taxes and administrative costs. As a percentage of our sales of
products, our cost of products sold represented 54% and 53% during 2011 and 2010, respectively.
The following table shows the evolution of our principal costs for our three Peruvian mills for the periods
presented.
Three Months Ended March 31,
Years Ended December 31,
2012
2011
2011
2010
(as a percentage of total cost of products sold for the period)
Casa Grande
Cost of sugarcane ...........................
Industrial costs ...............................
Total ...............................................
Cartavio
Cost of sugarcane ...........................
Industrial costs ...............................
Total ...............................................
San Jacinto
Cost of sugarcane ...........................
Industrial costs ...............................
Total ...............................................
71.9%
28.1%
100.0%
73.3%
26.7%
100.0%
68.1%
31.9%
100.0%
72.1%
27.9%
100.0%
91.6%
8.4%
100.0%
96.8%
3.2%
100.0%
94.7%
5.3%
100.0%
95.9%
4.1%
100.0%
85.4%
14.6%
100.0%
79.8%
20.2%
100.0%
81.3%
18.7%
100.0%
77.7%
22.3%
100.0%
As a producer of commodities, we attempt to increase our margins through efficient management of our
operations, including effective control over our cost of sugarcane and industrial costs. We believe that our
significant investments in mechanization (for both planting and harvesting) and in our logistical facilities have
assisted us in improving our gross profit.
Prices for sugarcane are set based on the quality of sugarcane harvested. The unit price (per kilogram) of
sugarcane varies in part based on the amount of sucrose equivalents in the sugar that we produce. The quality of
sugarcane is also expressed in sucrose equivalents. To determine the amount of sucrose equivalents in sugarcane
delivered to our mills, we inspect all of the sugarcane that we process upon receipt by our mills. Accordingly, the
price of sugarcane that we pay to third parties is based on the quality of the sugarcane (as measured by sucrose
equivalents), the volume of sugarcane delivered to us and the price per kilogram of sucrose equivalents.
Our Productivity
Our results of operations are materially affected by the level of our productivity, including the level of sucrose
equivalents per ton of our harvested sugarcane, which is also affected by the quality of our soil. We have increased
our agricultural productivity to 158 tons of sugarcane per hectare harvested during 2011, 25.4% higher than average
productivity of sugarcane per hectare (126 tons) harvested in Peru during 2011. During 2011, we harvested
approximately 67.0% of the total sugarcane that was planted in 2011. We operate 24 hours per day throughout the
harvesting season. We are implementing precision agriculture techniques, such as automatic pilots and use of high
precision GPS for soil preparation (including application of fertilizers and pesticides) and harvesting which will
significantly improve our productivity levels, and we are also in the process of developing and testing mechanized
planting. The use of GPS systems will allows us to steer our harvesters along predefined parallel tracks, which
reduces soil compaction and damage to the crowns, thus, improving the productivity of our sugarcane for the harvest
cycle.
We use computer simulations to model the harvesting, loading and transportation of our sugarcane under
various conditions, which has assisted us in improving our productivity. We also have improved the quality of our
soil through mechanized harvesting, as the leaves that remain after sugarcane has been harvested mechanically form
a protective cover over the crop. This protective covers contributes to the reducing of erosion and increases the
organic matter in the soil, which in turn reduces our use of chemical fertilizers and lowers our costs increasing
productivity over time. In addition, we have improved our productivity by planting new varieties of sugarcane that
are more resistant to diseases and pests and richer in sucrose concentration. We also use satellite imaging to monitor
our sugarcane crops and to plan for the future.
47
Our productivity is also determined in part by the level of sucrose equivalents per ton of our harvested
sugarcane. During 2011, the sucrose equivalents per ton of our harvested sugarcane in Peru was 13.0%. The level
of sucrose equivalents per ton of our harvested sugarcane during 2010 and 2009 was 12.9% and 12.8%, respectively.
Economic Conditions in Peru, Argentina and Ecuador
Most of our operations and a significant portion of our sales of products are derived from our sales in Peru. As
a result, our results of operations and financial condition are primarily affected by Peruvian economic conditions,
and to a lesser extent, by conditions in Argentina and Ecuador.
During the 1980s, Peru experienced a severe economic crisis and high levels of inflation. Beginning in the
1990s, however, the Peruvian government implemented a series of structural reforms, which contributed to the
stabilization of the Peruvian economy, GDP growth, low inflation, lower interest rates, stable currency and
significantly improved public finances. As a result, according to the International Monetary Fund, the Peruvian
economy has been one of the fastest growing and most stable economies in Latin America since 2000. The average
yearly rate of GDP growth between 1995 to 2011 was 5.0%.
The Peruvian economic environment has been characterized by significant variations in economic growth,
inflation and currency exchange rates. The following table sets forth Peruvian GDP growth, inflation rates and
exchange rates as of and for the three months ended March 31, 2012 and as of and for the three years ended
December 31, 2011, 2010 and 2009:
GDP growth................................................................................
Inflation rate ...............................................................................
Appreciation (devaluation) of nuevo sol against US$1.00 ........
Average exchange rate — nuevos soles against US$1.00 .........
As of and for the
Three Months
Ended March 31,
2012
6.0%
4.2%
4.6%
S/.2.67
2011
6.9%
3.4%
3.9%
S/.2.70
As of and for the Years
Ended December 31,
2010
8.8%
1.5%
2.8%
S/.2.81
2009
0.9%
2.9%
8.0%
S/.2.89
_________________________________
Sources: Economist Intelligence Unit Country Report June 2012, IMF (International Financial Statistics).
The global economy experienced a period of significant financial instability in 2008 and 2009, accompanied by
the worst global economic downturn in many decades. The Peruvian economy, while affected, was one of the few
economies in Latin America to experience growth in 2009. Peru’s real GDP grew at a rate of 0.9% in 2009,
sustained by the Peruvian government’s launching of fiscal stimulus programs. The following sectors of production
showed the greatest contribution to GDP during this period: (i) construction, (ii) agriculture and (iii) electricity and
water. Furthermore, Peru continues to be one of six countries in Latin America, along with Brazil, Chile, Colombia,
Mexico and Panama, to have its sovereign debt obtain an investment grade credit rating by Standard and Poor’s
Rating Services, Fitch Ratings Ltd. and Moody’s Investor Service.
The Peruvian economy has experienced a strong recovery during 2010 and 2011, with growth in GDP of 8.8%
and 6.9%, respectively. This increase was mostly driven by increased domestic demand and stronger public and
private investment. The 2010 and 2011 GDP growth represented one of the highest rates among Latin American
countries. The high growth of GDP was primarily a result of growth in exports and in internal demand, which was
attributable to increases in private investment and consumer spending.
San Isidro is located in Argentina and accounted for 4% of our EBITDA in 2011. The following table sets forth
Argentine GDP growth, inflation rates and exchange rates as of and for the three months ended March 31, 2012 and
as of and for the three years ended December 31, 2011, 2010 and 2009:
GDP growth................................................................................
Inflation rate ...............................................................................
Appreciation (devaluation) of Pesos against US$1.00 ..............
Average exchange rate — Pesos against US$1.00 ....................
As of and for the
Three Months
Ended March 31,
2012
4.2%
9.8%
(8.0)%
Ps.4.34
As of and for the Years
Ended December 31,
2011
2010
8.9%
9.2%
9.5%
10.9%
(5.4)%
(5.1)%
Ps.4.11
Ps.3.90
_________________________________
Sources: Economist Intelligence Unit Country Report June 2012, IMF (International Financial Statistics).
48
2009
0.9%
7.7%
(18.2)%
Ps.3.71
La Troncal is located in Ecuador and accounted for 6% of our EBITDA in 2011. The following table sets forth
Ecuadorian GDP growth and inflation rates as of and for the three months ended March 31, 2012 and as of and for
the three years ended December 31, 2011, 2010 and 2009:
As of and for the
Three Months
As of and for the Years
Ended March 31,
Ended December 31,
2012
2011
2010
GDP growth................................................................................
N/A
7.8%
3.6%
Inflation rate ...............................................................................
6.1%
5.4%
3.3%
_________________________________
Sources: Economist Intelligence Unit Country Report June 2012, IMF (International Financial Statistics).
2009
0.4%
4.3%
Operating Expenses
We incur operating expenses, including our selling and administrative expenses, which consist of salaries and
benefits paid to our employees, taxes, expenses related to third-party services, rentals (other than land) and other
expenses. As a percentage of our sales of products, our selling and administrative expenses, represented 9.2%, 7.4%
and 6.6% during the three months ended March 31, 2012 and for the years ended December 31, 2011 and 2010,
respectively.
The costs and expenses we incur in selling our products include:

Selling expenses, which include freight (both in transferring sugar and ethanol products and in delivering
final sugar products to our domestic and export customers and final ethanol products to our export
customers, as our domestic ethanol customers generally accept delivery at our mills, commissions,
professional fees, packaging, sales commissions, port and other (including inspection and certification)
costs. We include these costs on our statement of comprehensive income under the line item “Selling
expenses.”

Administrative expenses, which primarily consist of salaries and other charges payable in respect of our
administrative staff and other employees; legal and consulting fees; and administrative expenses related to
our monitoring and other activities at each of our production facilities. We include these costs on our
statement of comprehensive income under the line item “Administrative expenses.”

Other operating expenses, which primarily consist of write-off of plant, property and equipment from
previous years. We include these costs on our statement of comprehensive income under the line
item “Other operating expenses, net.”
In addition to operating and administrative expenses, we incur:

financial expenses related to debt service payments in respect of our outstanding indebtedness, which we
incur primarily to finance our exports and working capital. We record our financial expenses related to the
indebtedness we incur to finance our exports and working capital, as well as financial expenses related to
indebtedness that we incur to finance our operations, on our statement of comprehensive income under the
line item “Financial expenses”;

expenses in connection with our hedging of our exposure to fluctuations in the value of the nuevo sol as
against the U.S. dollar and other foreign currencies. We record our expenses on our statement of
comprehensive income under the line item “Financial income”; and

expenses under transactions that we engage in from time to time to hedge our exposure to fluctuations in
sugar and ethanol prices. We deduct these expenses from our sales of products.
49
Financial Presentation and Accounting Policies
Our Financial Statements
We have prepared (1) our unaudited condensed consolidated interim statement of financial position as of March
31, 2012 and our unaudited condensed consolidated interim statements of comprehensive income for the three
months ended March 31, 2012 and 2011 and (2) our audited consolidated statements of financial position as of
December 31, 2011 and 2010 and at January 1, 2010 (transition date) and our audited consolidated statements of
comprehensive income for the years ended December 31, 2011 and 2010, in each case, in accordance with IFRS, as
issued by the IASB, and included elsewhere in this offering memorandum. Our annual financial statements have
been audited by Dongo-Soria Gaveglio y Asociados Sociedad Civil de Responsabilidad Limitada, a member firm of
PricewaterhouseCoopers.
Guarantors’ Financial Statements
Each of the Guarantors (other than Azucarera Olmos) is a publicly traded company in Peru and like us
prepares annual consolidated financial statements comparable to those prepared by us. As indicated in this section,
the Guarantors (other than Azucarera Olmos) are consolidated into our audited consolidated financial statements and
unaudited condensed consolidated interim financial statements and represented at March 31, 2012 and December 31,
2011 (i) in the case of Casa Grande 41.7% and 40.5%, respectively, of our consolidated assets, 86.8% and 55.6%,
respectively, of our consolidated profit and 51.3% and 52.5%, respectively, of our consolidated EBITDA, (ii) in the
case of Cartavio 15.9% and 15.9%, respectively, of our consolidated assets, 12.0% and 20.3%, respectively, of our
consolidated profit and 17.2% and 23.3%, respectively, of our consolidated EBITDA and (iii) in the case of San
Jacinto 10.8% and 11.6%, respectively, of our consolidated assets, (7.7)% and 17.9%, respectively, of our
consolidated profit and 16.0% and 12.4%, respectively, of our consolidated EBITDA. Furthermore, Casa
Grande, Cartavio and San Jacinto at March 31, 2012 and December 31, 2011 had total liabilities of S/.614.6 million
and S/.499.4 million, S/.312.6 million and S/.227.7 million and S/.180.7 million and S/.190.7 million, respectively.
We are an operating company and also operate through our subsidiaries, including Casa Grande, Cartavio and
San Jacinto. Given the (i) relative contribution of Casa Grande, Cartavio and San Jacinto to our results of operations
and financial condition, (ii) Casa Grande’s, Cartavio’s and San Jacinto’s ability under limited circumstances to incur
additional indebtedness and (iii) limited amount of Casa Grande’s guarantee, we do not believe the inclusion of
separate consolidated financial statements for each of the Guarantors would be material to a prospective purchaser’s
decision on whether to invest in and acquire the notes.
Critical Accounting Policies
The presentation of our financial condition and results of operation in conformity with IFRS requires us to make
certain judgments and estimates regarding the effects of matters that are inherently uncertain and that impact the
carrying value of our assets and liabilities. Actual results could differ from those estimates. To provide an
understanding about how we form our judgments and estimates about certain future events, including the variables
and assumptions underlying the estimates, and the sensitivity of those judgments to different variables and
conditions, we have summarized the critical accounting policies set forth below under IFRS that may be impacted
by our judgments and estimates.
Functional Currency
Management has determined the functional currency of our principal operating entities to be the nuevo sol.
These entities sell their products in international markets to customers in a number of countries, and sales are
influenced by a number of currencies. Most operating costs are incurred in Peru but many are invoiced in U.S.
dollars and the price of certain raw materials and supplies are influenced by the U.S. dollar. The borrowings and
cash balances of these entities are held in nuevos soles, Argentine Pesos and U.S. dollars. Management has used its
judgment to determine our functional currency, taking into account the secondary factors and concluded that the
currency that most faithfully represents the economic environment and conditions of these entities is the nuevo sol.
50
Valuation of biological assets
Biological assets of sugarcane are stated at their fair value less costs to sell. Land and related facilities are
accounted for under property, plant and equipment.
To assess the fair value of biological assets we take into account the criteria set out in IAS 41, which requires
that a biological asset should be measured at its fair value less the estimated point-of-sale costs. The fair value
indicated is determined by using the present value of net cash flows expected to be obtained from the assets.
Determining the fair value of an asset requires the application of judgment to decide on the way in which the
biological asset will be recovered and assumptions to be used in its determination.
For the present value method, assumptions are used to estimate the harvest volumes, cost per ton, and depletion.
Cost of delivery includes all costs associated with getting the harvested sugarcane produce to the market, being
harvesting and allocated fixed overheads. Future cash flows are discounted using the pre-tax weighted average cost
of capital. The net change in the fair value of biological assets as of the date of the consolidated statement of
financial position is recognized in the consolidated statement of comprehensive income.
Property, plant and equipment
Property, plant and equipment are recorded at cost, less accumulated depreciation and impairment losses, if any.
Historical cost comprises the purchase price and any costs directly attributable to the acquisition.
Where individual components of an item of property, plant and equipment have different useful lives, they are
accounted for as separate items, which are depreciated separately.
Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate,
only when it is probable that future economic benefits associated with the item will flow to Coazucar and the cost of
the item can be measured reliably.
The carrying amount of the replaced part is derecognized. All other repairs and maintenance are charged to the
statement of comprehensive income during the period in which they are incurred.
Assets in the construction stage are capitalized as separate components. At their completion, the cost is
transferred to the adequate category. Work in progress is not depreciated.
Land is not depreciated. Depreciation on other assets is calculated using the straight-line method, to allocate
their cost to their residual values over their estimated useful lives, as follows:
Buildings and other constructions.................................................
Machinery and equipment ............................................................
Furniture and fixtures and others ..................................................
Vehicles ........................................................................................
Years
Up to 40
Between 3 and 30
Between 3 and 10
Between 3 and 25
The assets’ residual values and useful lives are reviewed and adjusted, if appropriate, at the date of each
statement of financial position. An asset’s carrying amount is immediately written down to its recoverable amount
if it is greater than its estimated recoverable amount.
Gains and losses on disposals correspond to the difference between the proceeds and the carrying amount of the
assets, which are included in the consolidated statement of comprehensive income.
Impairment of assets
Goodwill
For the purpose of impairment testing, assets are grouped at the lowest levels for which they separately generate
identifiable cash flows. This group of assets is known as cash-generating units. If the recoverable amount of a cashgenerating unit is less than the carrying amount of the assets within the unit, an impairment loss is allocated first to
reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit on a pro-rata
51
basis based on the carrying amount of each asset in the unit. Goodwill impairment losses recognized cannot be
reversed in a subsequent periods. The recoverable amount of goodwill is the higher of its fair value less costs to sell
and its value in use. In assessing the value in use, the estimated future cash flows are discounted to their present
value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks
specific to the asset for which the estimates of future cash flows have not been adjusted (see note 4 for details).
Property, plant and equipment and finite useful live intangible assets
At each statement of financial position date, Coazucar reviews the carrying amounts of its property, plant and
equipment and finite useful live intangible assets to determine whether there is any indication that those assets have
suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order
to determine the extent, if any, of the impairment loss. Where the asset does not generate cash flows that are
independent from other assets, Coazucar estimates the recoverable amount of the cash generating unit to which the
asset belongs. If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying
amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount.
An impairment loss is recognized immediately in the statement of comprehensive income. Where an
impairment loss subsequently reverses the carrying amount of the asset or cash-generating unit is increased to the
revised estimate of its recoverable amount, which should not exceed the carrying amount that would have been
determined had no impairment loss been recognized for the asset or cash-generating unit in prior years. A reversal
of an impairment loss is recognized in the statement of comprehensive income.
Impairment of financial assets
We assess at the end of each reporting period whether there is objective evidence that a financial asset or group
of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are
incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the
initial recognition of the asset (a “loss event”) and that loss event (or events) has an impact on the estimated future
cash flows of the financial asset or group of financial assets that can be reliably estimated.
The criteria that we use to determine that there is objective evidence of an impairment loss include:

Significant financial difficulty of the issuer or obligor;

A breach of contract, such as a default or delinquency in interest or principal payments;

When we, for economic or legal reasons relating to the borrower’s financial difficulty, grant to the
borrower a concession that the lender would not otherwise consider;

It becomes probable that the borrower will enter bankruptcy or other financial reorganization;

The disappearance of an active market for that financial asset because of financial difficulties; or

Observable data indicating that there is a measurable decrease in the estimated future cash flows from a
portfolio of financial assets since the initial recognition of those assets, although the decrease cannot yet be
identified with the individual financial assets in the portfolio, including: (i) adverse changes in the payment
status of borrowers in the portfolio; and (ii) national or local economic conditions that correlate with
defaults on the assets in the portfolio.
We first assess whether objective evidence of impairment exists.
The amount of the loss is measured as the difference between the asset’s carrying amount and the present value
of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial
asset’s original effective interest rate. The asset’s carrying amount of the asset is reduced and the amount of the loss
is recognized in the consolidated statement of comprehensive income. If a loan has a variable interest rate, the
discount rate for measuring any impairment loss is the current effective interest rate determined under the contract.
As a practical expedient, we may measure impairment on the basis of an instrument’s fair value using an observable
market price.
52
A provision for impairment of trade receivables is estimated when there is objective evidence that we will not
be able to collect all amounts due according to the original terms of the invoice. The amount of the provision is
determined as explained in the paragraph above. Bad debts are written off when they are assessed as uncollectible.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related
objectively to an event occurring after the impairment was recognized (such as an improvement in the debtor’s
credit rating), the reversal of the previously recognized impairment loss is recognized in profit or loss.
Inventories
Inventories comprise raw materials, finished goods (including harvested agricultural produce) and others.
The cost of finished products comprises the fair value of the agriculture produce less cost necessary to sell at the
harvest point (an amount transferred from biological asset to productive process) plus the cost incurred in the
industrial production process, such as direct labor, other direct cost and overhead production costs.
Inventories are measured at the lower of cost and net realizable value. Cost is determined using the weighted
average method, except for in-transit inventory, which is stated by using the specific identification method. The net
realization value is the estimated sales price of the product during the ordinary course of business, based on the
current price less estimated costs to complete its production and expenses to place inventory in sales conditions.
Trade receivables
Current trade receivables are recognized initially at fair value and subsequently re-measured at amortized cost
using the effective interest method, less any provision for impairment.
A provision for impairment of trade receivables is estimated when there is objective evidence that we will not
be able to collect all amounts due according to the original terms of the invoice. The amount of the provision is the
difference between the carrying amount and the present value of the recoverable amounts and this difference is
recognized in the consolidated statement of comprehensive income. Bad debts are written off when they are
assessed as uncollectible.
Revenue recognition
Revenue comprises the fair value of the consideration received or receivable for the sale of goods in the
ordinary course of our activities. Revenue is shown net of value-added tax, returns, rebates and discounts and after
eliminating sales within our group companies.
Revenue is recognized to the extent that it is probable that the economic benefits will flow to us and the revenue
can be reliably measured. The following specific recognition criteria must also be met before revenue is recognized:
Sale of goods
Sales of goods are recognized when all risks and rewards of ownership have been transferred to the buyer,
usually on delivery of the goods. Sales of goods comprise of sales in three segments: Peru, Ecuador and Argentina,
and also some exports to other countries.
Interest income
Revenue is recognized as interest accrues using the effective interest method.
Description of the Principal Statement of Comprehensive Income Line Items
Sales of products
We primarily generate revenue from the sales of our sugar (brown, white, refined and organic) as well as
ethanol.
53
Cost of products sold
Our cost of products sold primarily include: (1) the cost of our raw materials, which include sugarcane, (2)
depreciation related to fixed assets used to produce our products, and (3) our labor costs associated with the
production. Our raw material costs are our largest costs of sales.
Selling expenses
Our selling expenses primarily include commissions, professional fees, transportation of our products from our
plants to our distribution centers (heavy freight costs) and to the port of embarkation.
Administrative expenses
Our administrative expenses primarily include labor expenses for our management, third party services such as
professional services and other items such as rent, insurance and depreciation.
Financial income (expenses)
Our financial income is comprised mainly of interest on bank deposits. Our financial expenses primarily
include the interest on borrowings and other accounts payable.
Income taxes - current and deferred
Our tax expense for the year comprises the charge for current tax payable and deferred taxation attributable to
our operating subsidiaries. Tax is recognized in the statement of comprehensive income, except to the extent that it
relates to items recognized directly in equity. In this case, the tax is also recognized in equity.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the
date of the statement of financial position in the countries where our subsidiaries operate and generate taxable
income. Management periodically evaluates positions taken in tax returns with respect to situations in which
applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of
amounts expected to be paid to the tax authorities.
Deferred income tax is recognized, using the liability method, on temporary differences arising between the tax
bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, the
deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction
other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or
loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted
by the date of the statement of financial position and are expected to apply when the related deferred income tax
asset is realized or the deferred income tax liability is settled.
Deferred income tax assets are recognized only to the extent that it is probable that future taxable profit will be
available against which the temporary differences can be utilized.
Deferred income tax is provided on temporary differences arising on investments in associates, except where
the timing of the reversal of the temporary difference is controlled by us and it is probable that the temporary
difference will not reverse in the foreseeable future.
Results of Operations
The following discussion of our results of operations for the years ended December 31, 2011 and 2010 and for
the three months ended March 31, 2012 and 2011 is based on our financial statements, together with the notes
thereto, prepared in accordance with IFRS, as issued by the IASB, and included in this offering memorandum.
54
Three Months Ended March 31, 2012 Compared to the Three Months Ended March 31, 2011
The following table provides a summary of our results of operations for the three months ended March 31, 2012
and 2011:
Sales of products.......................................................
Cost of products sold ................................................
Gross profit ...............................................................
Initial recognition and change in fair value of
biological assets .....................................................
Selling expenses........................................................
Administrative expenses ...........................................
Other operating expenses, net ...................................
Financial income.......................................................
Financial expenses ....................................................
Exchange difference, net...........................................
Income attributable to associate................................
Income tax expense...................................................
Profit for the period ..................................................
For the Three Months Ended March 31,
% of Sales of Products
2012
2011
% Change
2012
2011
(in millions of S/.)
(unaudited)
377.2
309.2
22.0%
100.0%
100.0%
(228.2)
(145.8)
56.5%
60.5%
47.2%
149.0
163.3
(8.8)%
39.5%
52.8%
0.2
(8.6)
(25.9)
(1.9)
0.5
(17.3)
6.0
1.8
(16.3)
87.4
31.8
(4.7)
(8.8)
(1.4)
0.8
(7.6)
0.3
—
(26.0)
147.8
(99.4)%
82.7%
196.0%
41.1%
(35.7)%
127.8%
2126.1%
0.0%
(37.3)%
(40.9)%
0.0%
2.3%
6.9%
0.5%
0.1%
4.6%
1.6%
0.5%
4.3%
23.2%
10.3%
1.5%
2.8%
0.4%
0.3%
2.5%
0.1%
0.0%
8.4%
47.8%
Sales of products
Our sales of products increased by 22.0% to S/.377.2 million during the three months ended March 31, 2012
from S/.309.2 million during the corresponding period in 2011, primarily as a result of: (i) a 1.1% increase in the
volume of sugarcane crushed to 1.31 million tons during the three months ended March 31, 2012 from 1.29 million
tons during the corresponding period in 2011, (ii) a 19.9% increase in sales of products from sugar to S/.340.1
million during the three months ended March 31, 2012 from S/.283.8 million during the corresponding period
in 2011 and (iii) a 60.5% increase in sales of products from ethanol to S/.30.9 million during the three months ended
March 31, 2012 from S/.19.3 million during the corresponding period in 2011.
Sugar
Our sales of products from sugar increased by 19.9% to S/.340.1 million during the three months ended March
31, 2012 from S/.283.8 million during the corresponding period in 2011, primarily as a result of a 31.5% increase in
sales of products from domestic sugar sales, which was partially offset by a 50.0% decrease in sales of products
from export sugar sales.
The 31.5% increase in sales of products from domestic sugar sales was due to a 39.9% increase in domestic
sales volumes to 163,280 tons during the three months ended March 31, 2012 from 116,705 tons during the
corresponding period in 2011, which was partially offset by a 6.0% decrease in average domestic sugar sale prices
for the period to S/.1,958 per ton during the three months ended March 31, 2012 from S/.2,083 per ton during the
corresponding period in 2011.
The 50.0% decrease in sales of products from sugar exports was due to a 48.0% decrease in export sales
volumes to 9,201 tons during the three months ended March 31, 2012 from 17,697 tons during the corresponding
period in 2011, as a result of a 19.9% decrease in our average sugar sale prices in Peru for the period to S/.1,840 per
ton during the three months ended March 31, 2012 from S/.2,298 per ton during the corresponding period in 2011.
Ethanol
Our sales of products from ethanol increased by 60.5% to S/.30.9 million during the three months ended March
31, 2012 from S/.19.3 million during the corresponding period in 2011, primarily as a result of:
55

a 24.1% increase in domestic sales volumes of ethanol to 3,034 cubic meters during the three months ended
March 31, 2012 from 2,444 cubic meters during the corresponding period in 2011, as a result of
incorporating the operations of our new subsidiaries in Argentina and Ecuador in the second half of 2011;

a 9.4% increase in average domestic sales price of ethanol in Peru to S/.1,567 per cubic meter during the
three months ended March 31, 2012 from S/.1,433 per cubic meter during the corresponding period in
2011;

a 45.7% increase in export sales volumes of ethanol to 14,164 cubic meters during the three months ended
March 31, 2012 from 9,721 cubic meters during the corresponding period in 2011, as a result of the
increase of ethanol consumption in our export countries, primarily due to the higher production of
molasses, which we used to produce ethanol; and

a 6.0% increase in average international sales price of ethanol to S/.1,720 per cubic meter during the three
months ended March 31, 2012 from S/.1,623 per cubic meter during the corresponding period in 2011.
Cost of Products Sold
Cost of products sold increased by 56.5% to S/.228.2 million during the three months ended March 31, 2012
from S/.145.8 million during the corresponding period in 2011, primarily as a result of incorporating the operations
of our new subsidiaries in Argentina and Ecuador in the second half of 2011. As a percentage of our sales of
products, cost of products sold increased to 60.5% during the three months ended March 31, 2012 from 47.2%
during the corresponding period in 2011.
Gross Profit
Gross profit decreased by 8.8% to S/.149.0 million during the three months ended March 31, 2012 from
S/.163.3 million during the corresponding period in 2011, primarily as a result of (i) higher production costs as the
result of a reduction in water levels at Casa Grande and (ii) an anomalous administrative delay on the part of the
export client at the port of Salaverry, resulting in sugar being held at the port before shipment to the United States.
Initial Recognition and Change in Fair Value of Biological Assets
Initial recognition and change in fair value of biological assets decreased by 99.4% to S/.0.2 million during the
three months ended March 31, 2012 from S/.31.8 million during the corresponding period in 2011, primarily as a
result of a decrease of approximately 11% in the estimated price of sugar by the FAO and an increase in
administrative expenses in 2012 derived from the acquisition of La Troncal, which affected our calculation of fair
value of biological assets. See “—Financial Presentation and Accounting Policies—Valuation of biological assets”
for a description of how we calculate the fair value of biological assets using the criteria set out in IAS 41, which
requires that a biological asset should be measured at its fair value less the estimated point-of-sale costs.
Selling Expenses
Selling expenses increased by 82.7% to S/.8.6 million during the three months ended March 31, 2012 from
S/.4.7 million during the corresponding period in 2011, primarily as a result of (i) a 28.3% increase in sales volumes
of sugar to 172,481 tons during the three months ended March 31, 2012 from 134,403 tons during the corresponding
period in 2011 and (ii) a 41.4% increase in sales volume of ethanol to 17,198 cubic meters during the three months
ended March 31, 2012 from 12,165 cubic meters during the corresponding period in 2011. As a percentage of our
sales of products, our selling expenses increased to 2.3% during the three months ended March 31, 2012 from 1.5%
during the corresponding period in 2011.
Administrative Expenses
Administrative expenses increased by 196.0% to S/.25.9 million during the three months ended March 31, 2012
from S/.8.8 million during the corresponding period in 2011, primarily as a result of (i) a S/.7.4 million increase in
salaries primarily as a result of incorporating the operations of our new subsidiaries in Argentina and Ecuador in the
second half of 2011 and (ii) a S/.4.7 million increase in expenses related to depreciation and amortization. As a
56
percentage of our sales of products, our administrative expenses increased to 6.9% during the three months ended
March 31, 2012 from 2.8% during the corresponding period in 2011.
Other Operating Expenses, Net
Other operating expenses, net, increased by 41.1% to S/.1.9 million during the three months ended March 31,
2012 from S/.1.4 million during the corresponding period in 2011, primarily due to the effect of adjustments for a
recording error in actual sugar inventories recorded in our mills for the three months ended March 31, 2012.
Financial Income
Financial income sold decreased by 35.7% to S/.0.5 million during the three months ended March 31, 2012
from S/.0.8 million during the corresponding period in 2011, primarily as result of the higher financial expenses
associated with the acquisition of our new subsidiaries in Argentina and Ecuador in the second half of 2011.
Financial Expenses
Financial expenses increased by 127.8% to S/.17.3 million during the three months ended March 31, 2012 from
S/.7.6 million during the corresponding period in 2011, primarily as a result of new debt and financial expenses
originated from the companies that we acquired in Argentina and Ecuador in the second half of 2011.
Exchange Difference, Net
Exchange difference, net, increased to S/.6.0 million during the three months ended March 31, 2012 from S/.0.3
million during the corresponding period in 2011, primarily as a result of (i) a 4.9% appreciation in the nuevo sol
against the U.S. dollar, to S/.2.667 per US$1.00 during the three months ended March 31, 2012, from S/.2.804 per
US$1.00 during the corresponding period of 2011, and (ii) the indebtedness of the companies that we acquired in
Argentina and Ecuador in the second half of 2011, which amounted to US$115.0 million as of March 31, 2012.
Income Attributable to Associate
Income attributable to associate increased to S/.1.8 million during the three months ended March 31, 2012 from
S/.0 during the corresponding period in 2011, primarily as a result of our acquisition of 50% of the shares of
Producargo S.A., an ethanol company, of which we own 36.4%. We do not consolidate Producargo in our financial
statements. See note 2.2(c) to our audited consolidated financial statements included in this offering memorandum.
Income Tax Expense
Our income tax expense decreased by 37.3% to an expense of S/.16.3 million during the three months ended
March 31, 2012 from an expense of S/.26.0 million during the corresponding period in 2011, primarily as a result of
minor profits before income tax.
Profit for the Period
As a result of the foregoing, during the three months ended March 31, 2012, we recorded profit for the period of
S/.87.4 million, compared to a profit for the period of S/.147.8 million during the corresponding period in 2011.
57
Year Ended December 31, 2011 Compared with Year Ended December 31, 2010
The following table provides a summary of our results of operations for the years ended December 31, 2011 and
2010:
Sales of products.................................................
Cost of products sold ..........................................
Gross profit .........................................................
Initial recognition and change in fair value of
biological assets ...............................................
Selling expenses..................................................
Administrative expenses .....................................
Other operating expenses, net .............................
Financial income.................................................
Financial expenses ..............................................
Exchange difference, net.....................................
Income tax expense.............................................
Profit for the year................................................
For the Years Ended December 31,
% of Sales of Products
2011
2010
% Change
2011
2010
(in millions of S/.)
1,304.4
937.9
39.1%
100.0%
100.0%
(705.2)
(498.5)
41.5%
54.1%
53.1%
599.2
439.4
36.4%
45.9%
46.9%
188.4
(30.2)
(66.4)
(0.2)
2.5
(47.4)
18.4
(104.6)
559.5
177.9
(18.6)
(42.9)
(19.6)
1.6
(45.4)
11.1
(75.8)
427.7
5.9%
62.9%
54.7%
(99.2)%
51.8%
4.5%
65.4%
38.0%
30.8%
14.4%
2.3%
5.1%
0.0%
0.2%
3.6%
1.4%
8.0%
42.9%
19.0%
2.0%
4.6%
2.1%
0.2%
4.8%
1.2%
8.1%
45.6%
Sales of Products
Our sales of products increased by 39.1% to S/.1,304.4 million during 2011 from S/.937.9 million during 2010,
primarily as a result of: (i) a 42.6% increase in volume of sugarcane crushed to 6.7 million tons during 2011
from 4.7 million tons during 2010, (ii) a 40.5% increase in sales of products from sugar to S/.1,166.2 million during
2011 from S/.830.1 million during 2010 and (iii) a 21.6% increase in sales of products from ethanol to S/.93.4
million during 2011 from S/.76.8 million during 2010.
Sugar
Our sales of products from sugar increased by 40.5% to S/.1,166.2 million during 2011 from S/.830.1 million
during 2010, primarily as a result of: (i) a 39.5% increase in sales of products from sugar export and (ii) a 40.6%
increase in sales of products from domestic sugar sales.
The 39.5% increase in sales of products from sugar export was due to (i) a 2.1% increase in export sales volume
to 55,450 tons during 2011 from 54,298 tons during 2010 and (ii) a 36.6% increase in the average international
sugar sale prices for the period to S/.2,464 per ton during 2011 from S/.1,804 per ton during 2010.
The 40.6% increase in sales of products from domestic sugar sales was due to (i) a 23.5% increase in domestic
sales volumes to 503,273 tons during 2011 from 407,351 tons during 2010 and (ii) a 13.8% increase in average
domestic sugar sale prices for the period to S/.2,046 per ton during 2011 from S/.1,797 during 2010.
Ethanol
Our sales of products from ethanol increased by 21.6% to S/.93.4 million during 2011 from S/.76.8 million
during 2010, primarily as a result of:

a 45.2% increase in domestic sales volume of ethanol to 10,083 cubic meters during 2011 from 6,944 cubic
meters during 2010.

a 1.7% increase in export sales volume of ethanol to 42,516 cubic meters during 2011 from 41,798 cubic
meters during 2010; and

a 9.2% increase in average sales price of ethanol in Peru to S/.1,720 per cubic meter during 2011 from
S/.1,576 per cubic meter during 2010.
58
Cost of Products Sold
Cost of products sold increased by 41.5% to S/.705.2 million during 2011 from S/.498.5 million during 2010,
primarily as a result of a 43.7% increase in sugarcane crushed to 6.7 million tons during 2011 from 4.7 million tons
during 2010. As a percentage of our sales of products, cost of products sold increased to 54.1% during 2011
from 53.1% during 2010.
Gross Profit
Gross profit increased by 36.4% to S/.599.2 million during 2011 from S/.439.4 million during 2010, as a result
of (i) a 5.5% increase in the price of sugar in Peru in 2011 and a 5.3% increase in the price of ethanol in Peru in
2011 and (ii) a 21.6% in the sales volume of sugar and (iii) a 8.2% increase in the sales volume of ethanol in 2011.
Initial Recognition and Change in Fair Value of Biological Assets
Initial recognition and change in fair value of biological assets increased by 5.9% to S/.188.4 million during
2011 from S/.177.9 million during 2010, as a result of (i) a 36.6% increase in the average international sugar sale
prices for the period to S/.2,464 per ton during 2011 from S/.1,804 per ton during 2010, (ii) a decrease in the
discount rate to 9.7% from 11.7%, and (iii) a decrease in the projected production volume of sugarcane of 8.8% in
2011, with respect to 2010.
Selling Expenses
Selling expenses increased by 62.9% to S/.30.2 million during 2011 from S/.18.6 million during 2010, primarily
as a result of a 21.0% increase in sugar sales volume to 558,723 tons during 2011 from 461,649 tons during 2010
and a 7.9% increase in ethanol sales volume to 52,599 cubic meters during 2011 from 48,742 cubic meters during
2010. As a percentage of our sales of products, our selling expenses increased to 2.3% during 2011 from 2.0%
during 2010.
Administrative Expenses
Administrative expenses increased by 54.7% to S/.66.4 million during 2011 from S/.42.9 million during 2010,
primarily as a result of an increase in (i) legal fees, (ii) depreciation and (iii) security, contractor, marketing and
utilities fees associated with the companies that we acquired in Argentina and Ecuador in the second half of 2011.
As a percentage of our sales of products, our administrative expenses increased to 5.1% during 2011 from 4.6%
during 2010.
Other Operating Expenses, Net
Other operating expenses, net, decreased by 99.2% to S/.0.2 million during 2011 from S/.19.6 million during
2010, as a result of a decrease in the write-offs of plant, property and equipment that was recorded because they
were no longer being used.
Financial Income
Financial income increased by 51.8% to S/.2.5 million during 2011 from S/.1.6 million during 2010, primarily
as a result of a 340.7% increase in interest on bank deposits to S/.1.6 million during 2011 from S/.0.4 million during
2010 associated with the companies that we acquired in Argentina and Ecuador in the second half of 2011.
Financial Expenses
Financial expenses increased by 4.5% to S/.47.4 million during 2011 from S/.45.4 million during 2010,
primarily as a result of a 38.0% increase in interest on borrowings to S/.40.1 million during 2011 from S/.29.1
million during 2010 primarily associated with the companies that we acquired in Argentina and Ecuador in the
second half of 2011.
Exchange Difference, Net
Exchange difference, net, increased by 65.4% to S/.18.4 million during 2011 from S/.11.1 million during 2010,
as a result of (i) a 4.0% appreciation of the nuevo sol against the U.S. dollar, to S/.2.696 per US$1.00 during 2011,
59
from S/.2.809 per US$1.00 during the corresponding period of 2010, and (ii) the indebtedness associated with the
companies that we acquired in Argentina and Ecuador in the second half of 2011.
Income Tax Expense
We recorded income tax expenses of S/.104.6 million during 2011 and income tax expenses of S/.75.8 million
during 2010, primarily as a result of a 31.9% increase in our profit before income taxes during 2011.
Profit for the Year
As a result of the foregoing, we recorded profit for the year of S/.559.5 million during 2011 compared to
S/.427.7 million during 2010.
The Guarantors
Casa Grande
Casa Grande was incorporated in 1860 and it is the largest sugar mill in Peru, owning 31,377 hectares, of which
28,128 hectares are arable and 21,115 hectares are used for sugarcane production. Casa Grande produces sugar,
bagasse, molasses and alcohol. We acquired a minority ownership interest in Casa Grande in October 2005 and
became majority shareholders in January 2006 with a 57.09% ownership interest.
Casa Grande is located 50 kilometers north of Trujillo, 610 kilometers north of Lima, in the province of
Ascope, region of La Libertad, where the Chicama River is its main source of irrigation, discharging more than 400
million cubic meters of water a year.
Casa Grande is Peru’s leading sugar producer, selling brown sugar in the local and international markets, and
also the third largest hydrous alcohol producer in Peru, exporting all of its alcohol production. Casa Grande has a
crushing capacity of 3.3 million tons per year and a daily ethanol production capacity of 60,000 liters.
As of March 31, 2012, Casa Grande harvested during 83 days (84 days as of March 31, 2011), crushed 648.2
thousand tons of sugarcane (665.0 thousand as of March 31, 2011), of which 90.4% of the sugarcane crushed was
produced by Casa Grande and the remaining 9.6% was acquired from third parties. In addition, Casa Grande
produced 71.2 thousand tons of sugar (73.9 thousand as of March 31, 2011), 204.7 thousand tons of bagasse (198.5
thousand as of March 31, 2011), 24.7 thousand tons of molasses (29.2 thousand as of March 31, 2011) and 3.9
million liters of alcohol (3.8 million as of March 31, 2011).
During 2011, Casa Grande harvested during 312 days (322 days in 2010), crushed 2.3 million tons of sugarcane
(2.4 million in 2010), of which 90.5% of the sugarcane crushed was produced by Casa Grande and the remaining
9.5% was acquired from third parties. In addition, Casa Grande produced 257.3 thousand tons of sugar (247.5
thousand in 2010), 714.5 thousand tons of bagasse (716.8 thousand in 2010), 90.4 thousand tons of molasses (13.5
thousand in 2010) and 12.7 million liters of alcohol (13.5 million in 2010).
As of March 31, 2012, Casa Grande recorded a sales of product of S/.153.3 million (S/.175.4 million as of
March 31, 2011), generated an EBITDA of S/.71.1 million, had a total debt of S/.106.8 million and had a net debt of
S/.70.1 million.
As of December 31, 2011, Casa Grande recorded a sales of product of S/.583.4 million (S/.490.8 million as of
December 31, 2010), generated an EBITDA of S/.303.6 million, had a total debt of S/.119.1 million and had a net
debt of S/.110.5 million.
Cartavio
Cartavio was incorporated in 1782 and is the second largest contributor to our total comprehensive income of
our sugar mills in Peru, owning 7,932 hectares, of which 7,486 hectares are arable and 6,891 hectares are used for
sugarcane production. Cartavio produces sugar, bagasse, molasses and alcohol. We acquired 52.23% of Cartavio in
May 2007 and between 2007 through 2009, we increased our ownership interest to 87.17%.
60
Cartavio is located 50 kilometers north of Trujillo, 610 kilometers north of Lima, in the province of Ascope,
region of La Libertad, near to Casa Grande.
Cartavio is Peru’s second largest producer of sugar, selling sugar in the local and international markets.
Cartavio is also the second largest hydrous alcohol producer in Peru, exporting all of its alcohol production.
Cartavio has a crushing capacity of 2.4 million tons per year and a daily ethanol production capacity of 80,000 liters.
As of March 31, 2012, Cartavio harvested during 76 days (76 days as of March 31, 2011), crushed 449.7
thousand tons of sugarcane (455.0 thousand as of March 31, 2011), of which 49.8% of the sugarcane crushed was
produced by Cartavio and the remaining 50.2% was acquired from third parties. In addition, Cartavio produced 39.3
thousand tons of sugar (41.2 thousand as of March 31, 2011), 122.9 thousand tons of bagasse (127.5 thousand as of
March 31, 2011) and 3.7 million liters of alcohol (4.1 million as of March 31, 2011).
During 2011, Cartavio harvested during 287 days (298 days in 2010), crushed 1.7 million tons of sugarcane (1.7
million in 2010), of which 45.5% of the sugarcane crushed was produced by Cartavio and the remaining 54.5% was
acquired from third parties. In addition, Cartavio produced 154.5 thousand tons of sugar (155.1 thousand in 2010),
465.2 thousand tons of bagasse (490.8 thousand in 2010), 9.7 thousand tons of molasses and 15.8 million liters of
alcohol (16.7 million in 2010).
As of March 31, 2012, Cartavio recorded a sales of product of S/.95.7 million (S/.99.4 million as of March 31,
2011), generated an EBITDA of S/.23.8 million, had a total debt of S/.54.0 million and had a net debt of S/.32.4
million.
As of December 31, 2011, Cartavio recorded a sales of product of S/.401.7 million (S/.362.1 million as of
December 31, 2010), generated an EBITDA of S/.134.7 million, had a total debt of S/.56.2 million and had a net
debt of S/.47.9 million.
San Jacinto
San Jacinto was incorporated in 1872 and owns 12,349 hectares, of which 11,035 hectares are arable and 6,081
hectares are used for sugarcane production. San Jacinto produces sugar, bagasse, molasses and alcohol. We
acquired 72.62% of San Jacinto in 2009 and through a mandatory tender offer increased our ownership interest to
82.63% in March 2010.
San Jacinto is located 45 kilometers of Chimbote, 405 kilometers north of Lima, in the province of Santa,
district of Nepeña, region of Ancash.
San Jacinto sells white and brown sugar in the local and international markets. San Jacinto has a crushing
capacity of 1.2 million tons per year and a daily ethanol production capacity of 40,000 liters.
As of March 31, 2012, San Jacinto harvested during 84 days (73 days as of March 31, 2011), crushed 207.6
thousand tons of sugarcane (171.5 thousand as of March 31, 2011), of which 76.1% of the sugarcane crushed was
produced by San Jacinto and the remaining 23.9% was acquired from third parties. In addition, San Jacinto
produced 23.0 thousand tons of sugar (20.8 thousand as of March 31, 2011), 61.5 thousand tons of bagasse (50.8
thousand as of March 31, 2011) and 0.6 million liters of alcohol (1.0 million as of March 31, 2011).
During 2011, San Jacinto harvested during 286 days (279 days in 2010), crushed 0.7 million tons of sugarcane
(0.6 million in 2010), of which 76.1% of the sugarcane crushed was produced by Cartavio and the remaining 23.9%
was acquired from third parties. In addition, San Jacinto produced 80.1 thousand tons of sugar (67.9 thousand in
2010), 198.1 thousand tons of bagasse (178.1 thousand in 2010), 27.7 thousand tons of molasses (21.8 thousand in
2010) and 2.4 million liters of alcohol (1.5 million in 2010).
As of March 31, 2012, San Jacinto recorded a sales of product of S/.48.4 million (S/.42.2 million as of March
31, 2011), generated an EBITDA of S/.22.2 million, had a total debt of S/.103.5 million and had a net debt of
S/.102.9 million.
As of December 31, 2011, San Jacinto recorded a sales of product of S/.164.9 million (S/.122.7 million as of
December 31, 2010), generated an EBITDA of S/.71.9 million, had a total debt of S/.105.4 million and had a net
debt of S/.103.4 million.
61
Azucarera Olmos
Azucarera Olmos was incorporated on May 9, 2012 to develop the Olmos Expansion Plan in Olmos,
Lambayeque, Peru. As of the date of this offering memorandum, Azucarera Olmos has no material sales of product,
EBITDA, total debt or net debt. See “Presentation of Financial and Other Information—General.”
Liquidity and Capital Resources
Our financial condition and liquidity is and will be influenced by a variety of factors, including:

our ability to generate cash flows from our operations and our ability to sell and distribute our sugar and
ethanol;

the level of our outstanding indebtedness and the interest we are obligated to pay on this indebtedness;

prevailing domestic and international interest rates, which affects our net financial expenses;

our ability to continue to borrow funds from Peruvian and international financial institutions; and

our capital expenditure requirements, which consist primarily of investments in crop planting and the
maintenance of our agricultural and industrial equipment.
Our cash requirements consist mainly of the following:

working capital requirements;

the servicing of our indebtedness;

the payment of dividends or interest attributable to equity; and

capital expenditures related to investments in our agricultural and industrial operations.
Our sources of liquidity consist mainly of the following:

cash flows from our operating activities, derived mainly from our sale and distribution of our sugar and
ethanol; and

short- and long-term borrowings.
During the three months ended March 31, 2012 and the year ended December 31, 2011, we used cash flow
generated by operations primarily for investments in our agricultural and industrial operations and for working
capital requirements. As of March 31, 2012, our cash and cash equivalents and other investments amounted to
S/.191.8 million, and we had working capital of S/.33.1 million.
Projected Sources and Uses of Cash
We anticipate that we will be required to spend approximately S/.971.1 million to meet our short-term
contractual obligations and commitments and budgeted capital expenditures in 2012. We expect that we will meet
these cash requirements through a combination of cash generated from operating activities and cash generated by
financing activities, including some of the proceeds of this offering and the refinancing of our existing short-term
indebtedness as it becomes due.
We anticipate that we will be required to spend approximately S/.722.2 million to meet our commitments and
budgeted capital expenditures through the end of 2013. We anticipate that we will meet these cash requirements
through a combination of cash generated from operating activities and cash generated by financing activities,
including additional debt financings and the refinancing of our existing indebtedness as it becomes due.
62
Indebtedness
General
As of March 31, 2012, our total outstanding indebtedness on a consolidated basis was approximately S/.805.6
million, consisting of S/.338.0 million of short-term indebtedness, including the current portion of long-term
indebtedness (or 42.0% of our total indebtedness), and S/.467.5 million of long-term indebtedness (or 58.0% of our
total indebtedness). As of March 31, 2012, 30.4%, 67.6% and 2.0% of our outstanding indebtedness was
denominated in nuevos soles, U.S. dollars and Argentine pesos.
As of March 31, 2012, 67.4% of our total indebtedness corresponded to working capital financial lines of credit
and the remaining 32.6% to others, such as government development banks. As of March 31, 2012, S/.621.3 million
(or 77.1%) of our debt was secured.
The following table sets forth selected information with respect to our principal outstanding indebtedness as of
March 31, 2012:
Lender
Borrower
Currency
Interest Rate
Maturity Date
Collateral
Outstanding Principal
Outstanding
Amount as of March
Principal Amount as 31, 2012 adjusted in
of March 31, 2012 accordance with IFRS
(in thousands)
(in thousands)
BBVA
Coazucar
S/.
7.65%
September 2015 Coazucar’s shares of
Cartavio and Casa
Grande; properties of
Sintuco
US$23,563
US$23,563
Citibank
Coazucar
S/.
7.10%
November 2012 Coazucar’s shares of
Cartavio
US$18,810
US$18,810
Corporación
Financiera
Nacional
Coazucar
US$
5.06%
March 2026
Coazucar’s shares of
Producargo
US$7,274
US$7,274
Citibank
Coazucar
US$
5.45%
May 2012
None
US$9,000(1)
US$9,000(1)
(1)
5.45%
June 2012
None
US$26,000
US$26,000(1)
6.90%
June 2017
Mortgage over certain
properties of Casa Grande
and a joint obligation of
Coazucar
US$14,764
US$14,764
US$20,000
US$20,000
None
US$11,249
US$11,249
June 2017
Properties of San Jacinto
and a joint obligation of
Gloria S.A.
US$20,247
US$20,247
7.50%
June 2016
Coazucar’s shares of San
Jacinto; properties of San
Jacinto
US$9,822
US$9,822
S/.
7.50%
June 2016
Coazucar’s shares of San
Jacinto; properties of San
Jacinto
US$8,036
US$8,036
US$
5.00%
July 2026
Coazucar’s shares of La
Troncal
US$117,085(2)
US$91,070
Citibank
Coazucar
US$
BBVA
Casa Grande S/.
CitibankScotiabank
Casa Grande US$
Banco de
Crédito del
Perú
Cartavio
S/.
7.00%
February 2015
Scotiabank
San Jacinto
S/.
7.75%
Interbank
San Jacinto
S/.
BanBif
San Jacinto
Corporación
Financiera
Nacional
La Troncal
LIBOR+5.70% December 2015 Mortgage over certain
physical properties of
Casa Grande
Other
US$36,506(2)
US$42,214
US$322,356(2)
Total
US$302,049
_________________________________
(1) As of the date of this offering memorandum, these loans have been fully repaid.
(2) Nominal amounts. Unless otherwise specified, the figures appearing in the financial statements and elsewhere in this offering memorandum
have been adjusted in accordance with IFRS.
63
Short-Term Indebtedness
Our consolidated short-term indebtedness, including the current portion of long-term debt, increased to S/.338.0
million as of March 31, 2012 from S/.329.7 million as of December 31, 2011, primarily as a result of increase in
working capital requirements during the first three months of the year.
We also maintain short-term lines of credit with a number of financial institutions in Peru. Although we have
no committed lines of credit with these financial institutions, we believe that we will continue to be able to obtain
sufficient credit to finance our working capital needs based on current market conditions. As of March 31, 2012, the
total outstanding balance under our short-term working capital lines of was S/.122.0 million.
Long-Term Indebtedness
Our consolidated long-term indebtedness decreased to S/.467.5 million as of March 31, 2012 from S/.486.9
million as of December 31, 2011, primarily as a result of the decrease in the short-term portion of our long-term
indebtedness. Our long-term indebtedness is mainly composed of bank loans.
As of March 31, 2012, some of our long-term indebtedness owed to financial institutions required that we
comply with financial covenants (on a consolidated basis), the most restrictive of which were the following:

Debt service coverage ratio shall be not less than: 1.3x for Coazucar and Casa Grande, 1.2x for Cartavio
and 1.75x for San Jacinto.

Debt to EBITDA ratio shall not exceed: 2.0x for Coazucar, 2.25x for Casa Grande, 1.9x for Cartavio, 3.0x
for San Jacinto and 4.0x for San Isidro.

Leverage shall not exceed: 1.0x for Coazucar and Cartavio, 0.75x for Casa Grande, 1.3x for San Jacinto
and 4.0x for San Isidro.

Consolidated assets to consolidated liabilities shall be not less than: 1.7x for Coazucar and 1.0x for
Cartavio.
Many of these instruments also contain other covenants that restrict, among other things, our ability to:

incur additional indebtedness;

incur additional liens;

issue certain guarantees;

pay dividends or make certain other restricted payments;

consummate certain asset sales;

enter into certain transactions with affiliates; or

merge or consolidate with any other person or sell or otherwise dispose of all or substantially all of our
assets.
In addition, the instruments governing a substantial portion of our long-term indebtedness contain cross-default
or cross- acceleration clauses, such that the occurrence of an event of default under one of these instruments could
trigger an event of default under other indebtedness or enable the creditors under certain other indebtedness to
accelerate that indebtedness.
Off-Balance Sheet Arrangements
We do not currently have any transactions involving off-balance sheet arrangements that are reasonably likely
to have a material effect on our financial condition, results of operations or liquidity.
64
Contractual Commitments and Capital Expenditures
Contractual Commitments
The following table summarizes the maturity schedule of our significant contractual obligations and
commitments as of March 31, 2012:
Payments Due by Period
Less than
1 Year
Total(1).......... 110,842
Total(2).......... 116,328
________________________
1 to 2 Years
27,411
27,189
2 to 3 Years 3 to 4 Years 4 to 5 Years
(in thousands of US$)
29,974
28,681
13,380
29,752
27,792
12,269
More than
5 Years
Total
112,068
88,720
322,356
302,049
(1) Principal amount without interest.
(2) Principal balance at present value in accordance with IFRS.
Capital Expenditures
Our capital expenditures on property, plant and equipment were S/.44.4 million during the three months ended
March 31, 2012, S/.186.5 million in 2011 and S/.193.9 million in 2010. Over the last three years, we have applied
our capital expenditures mainly to

expand our production capacity, through repowering two of our mills in Peru;

plant sugarcane to stabilize our sugarcane crops;

modernize our agricultural equipment and processing facilities;

increase the mechanization of our harvesting and production process; and

improve safety and environmental controls and compliance.
We have budgeted total capital expenditures of approximately S/.1,910 million for 2012, 2013 and 2014.
However, our actual capital expenditures for these years may exceed or fall short of these budgeted amounts. All of
the budgeted capital expenditures are expected to be used primarily for developing the Olmos Expansion Plan, replanting sugarcane, modernizing our agricultural equipment and processing facilities, increasing mechanization of
our harvesting and production process, increasing the cogeneration capacity of our mills, investing in machinery
needed to begin production of hydrous ethanol and improving our safety and environmental controls and
compliance. As water availability is vital to ensure the stability of sugarcane yields, we also expect to use capital
expenditures for water projects, including the construction of reservoirs and improving our access to water in the
Chicama Valley.
The following table sets forth our principal capital expenditures for 2012 (including those already made), 2013
and 2014.
Total Budgeted Amount
(in millions of S/.)
653 (1)
663
594
Year
2012
2013
2014
______________________
(1) Includes S/.44.4 million of capital expenditures incurred during the three months ended March 31, 2012.
We plan to obtain financing for approximately 25% of our capital expenditures, directly or indirectly, with the
proceeds from the notes and with additional bank loans. We intend to pay for the remaining 75% of our capital
expenditures through internal cash generation.
65
Quantitative and Qualitative Disclosures About Market Risk
We consider market risk to be the potential loss arising from adverse changes in market rates and prices. We
are exposed to a number of market risks arising from our normal business activities. Such market risks principally
involve the possibility that changes in commodity prices, interest rates or exchange rates will adversely affect the
value of our inventory, financial assets and liabilities or future cash flows and earnings.
General Risk Management
We periodically review our exposure to market risks and determine at the senior management level how to
manage and reduce the impact of these risks. We use derivative financial instruments solely for the purpose of
managing market risks, primarily fluctuations in interest rates and foreign exchange rates. While these hedging
instruments fluctuate in value, these fluctuations are generally offset by the value of the underlying hedged
exposures. The counterparties to these contractual arrangements are primarily major financial institutions. As a
result, we do not believe that we are subject to any material credit risk arising from these contracts, and accordingly,
we do not anticipate any material credit-related losses. We do not enter into derivative or other hedging instruments
for speculative purposes.
Commodities Risk
We are exposed to market risks arising from the activities inherent to our business, that is, operations in the
commodities market with sugar and ethanol. For risk management purposes and to evaluate our overall level of
commodity price exposure, we further reduce our exposure to commodity market risk by the sugar and ethanol
produced from sugarcane that we purchase from growers, as we pay for the sugarcane costs based on sucrose
equivalents. Unlike sugarcane harvested on our own land, the price of sugarcane supplied by growers is indexed to
the market price of sugar and ethanol, which provides a partial natural hedge to our sugar price exposure. When we
acquire sugarcane from growers, we take samples from the delivered sugarcane to measure its sugar content (or
sucrose) and pay only for the sucrose that we acquire according to a formula established by the market in Peru and
Argentina and by the government in Ecuador. Therefore, our net market risk would be approximately S/.68 million,
which is the potential loss in fair value resulting from a hypothetical 10% decrease in prices.
Interest Rate Risk
We have fixed and floating rate indebtedness, so we are exposed to market risk as a result of changes in interest
rates. As of March 31, 2012, approximately 7.24% of our loans and financings bear interest at floating rates such as
the London Interbank Offered Rate (LIBOR) and the Buenos Aires Deposits of Large Amount Rate (BADLAR).
Foreign Currency Risk
A portion of our debt is denominated in U.S. dollars, so we are exposed to market risk related to exchange
movements between the nuevo sol and the U.S. dollar. As of March 31, 2012, approximately 67.6%, or S/.544.3
million, of our debt was denominated in U.S. dollars and approximately 2.0%, or S/.16.5 million of our debt was
denominated in Argentine Pesos.
The following tables show our swap instrument as of March 31, 2012:
Derivative
Cross Currency Swap
As of March 31, 2012
Maturity
Notional Receivable
November 6, 2012
US$18,810
Notional Payable
S/.58,725
We estimate our foreign currency exchange rate risk as the potential devaluation of the nuevo sol on our dollar
denominated debt. Based on the profile of our dollar denominated debt vis-à-vis our operations as of March 31,
2012, the results from a hypothetical 10% devaluation of the nuevo sol would result in a decrease of our profit
before income tax by approximately S/.33.7 million.
66
PERUVIAN SUGAR INDUSTRY
Introduction
Sugar is a staple consumer product that is produced in over 90 countries and supplies a highly-developed
market that continues to grow largely due to population growth. Peru ranks among world’s highest crop yield
countries for various products including sugarcane. Peru’s location near the equator and the resulting vertical solar
radiation, which improves the quality of the soil, are essential to such high yields. Peru features 84 out of the 104
life zones known in the world in its 11 natural eco-regions. This broad variety of climates allows for a great variety
of food crops, some being produced and exported all year.
Peru, the third largest country in South America, has 7.6 million hectares with immediate agricultural potential,
but less than 3.6 million are used, according to the FAO. The country’s temperature is relatively constant and mild
due to the Humboldt Current, which brings cold water from the Antarctic to most of Peru’s coast and thus moderates
otherwise hot temperatures. The proximity of Peru to the equator gives the country a relatively even length of
daylight and supply of sunshine throughout the year and guarantees the absence of frost. This spring-like climate
allows crops such as sugarcane to be harvested 12 months out of the year, under the proper water-management
techniques.
Sugarcane Yields (Mt/Ha)
126
92
91
80
Peru
Guatemala
Egypt
E.U.
79
76
Brazil
Colombia
75
U.S.
70
70
68
China
World
India
Source: World Agricultural Outlook 2011, Food and Agricultural Policy Research Institute
Peru’s combination of business climate, low labor costs, and climatic conditions helped lay the foundation for
developing a competitive and successful sugar industry. Coazucar has taken advantage of these factors to grow and
consolidate its existing business, and become the leading player in the Peruvian sugar industry.
Sugarcane and Sugar
Sugarcane is the primary raw material used in the production of sugar throughout the world. Sugarcane is a tall
grass that grows best in tropical climates characterized by warm temperatures and high humidity. The climate and
topography of the northwest and northern central regions of Peru are ideal for the cultivation of sugarcane,
accounting for approximately 100% of the country’s sugarcane production.
Sugar is a essential commodity produced in various parts of the world. Sugar is primarily derived from
sugarcane and sugar beet. Sugar has agricultural and industrial applications and its production is both labor and
capital intensive.
67
History of the Sugar Production in Peru
In the 1960s, Peru’s sugar industry was among the most efficient in the world. The military government in the
1970s negatively impacted the industry by expropriating the sugar estates on the country’s north coast, turning them
into government-owned co-operatives. Having peaked at 1 million tons in 1975, output fell to 400,000 tons by the
early 1990s.
Following the negative land reforms implemented by the military government in the 1970s, the Peruvian sugar
industry has finally recovered. This ongoing process has resulted in the privatization of most mills and sugarcane
cultivated land, increased investment and productivity. The following chart shows the evolution of Peruvian
sugarcane production and sugar production between 1961 and 2011 according to FAO:
Historical Sugar Production (tons)
1,200
1,100
1,000
Thousands
900
800
700
600
500
400
2011
2009
2007
2005
2003
2001
1999
1997
1995
1993
1991
1989
1987
1985
1983
1981
1979
1977
1975
1973
1971
1969
1967
1965
1963
1961
300
Source: FAO, Peruvian Ministry of Agriculture
Over the past decade production has returned to its historic peak. The change has been gradual. The
government has sold its ownership interest in the industry in tranches; land has been purchased by Peruvian and
foreign investors, followed by the consolidation of property. The efficiency brought by economies of scale is
improving return rates, which attracts more investment, generating a beneficial cycle. This process is finally
undoing the damage to production levels done by the 1970s land reform that expropriated land to give to workers in
socialist type cooperatives.
Production and Consumption
Peru’s sugar production has more than doubled since the early 1990s, from approximately 521 thousand tons in
1990 to approximately 1,076 thousand tons (of raw sugar equivalent) in the 2011 harvest. The consumption of sugar
has also increased steadily to approximately 1,269 thousand tons during 2011 from 929 thousand tons during 2004.
The Peruvian consumption of sugar is expected to continue to grow due to overall population growth, increasing
purchasing power of consumers in the country and increasing consumption of processed foods as a result of
widespread migration from rural to urban areas and the future growth in per capita income.
Peru is a net importer of sugar with imports around 190 thousand tons and exports around 56 thousand tons.
Demand is expected to continue growing at a faster pace than supply due to the strong macroeconomic fundamentals
of the country. The following chart illustrates the evolution of Peruvian production and imports of sugar (in
thousands of tons) in the last 8 years.
68
Sugar Consumption (Thousand Tons)
929
947
181
252
748
695
2004
2005
1,050
244
1,215
1,211
1,251
247
208
146
213
190
911
805
2006
1,269
1,158
2007
Production
1,007
1,065
1,038
1,079
2008
2009
2010
2011
Imports
Source: Peruvian Ministry of Agriculture Peruvian Ministry of Agriculture
Sugar can be categorized into two main product categories in the Peruvian market, raw sugar and white sugar.
Raw sugar represents approximately 90% of the total sugar consumption in the country:

Raw Sugar: Raw sugar is a tan to brown colored, coarsely grained solid obtained through the evaporation
of clarified sugarcane or sugar beet juice. It is a partially purified sugar, characterized by sucrose crystals
covered with a film of molasses. Raw sugar is processed from the sugarcane or the sugar beet at a sugar
mill and usually further refined to produce white sugar for consumption. Raw sugar is traded in US$ per
pound at the New York’s Intercontinental Exchange (ICE) under contract no. 11. The Sugar No. 11 (NY
11) contract is the world benchmark contract for raw sugar trading. The contract prices the physical
delivery of raw cane sugar, free-on-board (FOB), the receiver’s vessel to a port within the country of origin
of the sugar.

White sugar is a purified sugar, produced directly from either sugarcane or beet; the only difference in the
final product produced is in its appearance. Due to the higher purity of the beet concentrate, white sugar
from beet tends to be produced in slightly smaller and more uniform crystals than that from sugarcane;
there is no difference in taste between the two. White sugar can also be produced indirectly from raw sugar
under a refining process. Refined granulated sugar is traded in US$ per metric ton at London’s Euronext
LIFFE, under contract no. 5 (Lon 5).
The following chart shows 2011 sugar production across the year in Peru.
2011 Sugar Production Distribution (%)
9%
8%
7%
Jan
9%
Feb
Mar
7%
7%
Apr
May
7%
7%
Jun
Jul
Source: Peruvian Ministry of Agriculture
69
Aug
8%
Sep
10%
10%
Oct
Nov
10%
Dec
Pricing
Most sugar producing countries, including the United States and E.U. countries, protect their domestic sugar
markets from foreign competition through policies, regulations and other measures, including import and export
restrictions, quotas, duty taxes and subsidies. As a result of these regulatory measures, domestic sugar prices
fluctuate from one country to another. The unregulated international prices of raw sugar follow the rates established
by the NY 11 agreement. The Lon 5 rate is based on the price of crystal sugar traded on LIFFE.
In Peru, domestic sugar prices are established according to free market principles. Prices are established every
morning in a negotiation between producers and wholesalers/distributors in Lima’s Wholesaler Market (known as
“Santa Anita Market”), the most important wholesaler market in the country and pricing source of different
agriculture products.
In Peru, domestic sugar prices generally follow international sugar prices trend, with a significant premium due
to additional costs (transportation, nationalization, etc), benefiting local producers’ margins. The following chart
shows the price evolution of raw sugar on the NY 11 and the Peruvian Market.
Sugar Price Evolution (US$/Ton)
800
600
400
200
Jan-09
May-09 Sep-09
Jan-10
May-10 Sep-10
NY 11
Jan-11
May-11 Sep-11
Jan-12
Peruvian Raw
Source: Peruvian Ministry of Agriculture
Major Sugar Companies in Peru
As a result of the privatization process of the sugar mills in Peru, the industry faced a consolidation process,
reducing the number of sugar companies to eleven. We are not only the largest sugar producer in Peru, but also is
the biggest company in terms of land ownership for sugar production.
Market Share (% Volume)
Other
4.2%
Pomalca
7.9%
Pucala
9.1%
Land Ownership (Thousand Hectares)
Pomalca
8
Pucala
8
Paramonga
8
Casagrande
23.9%
Coazucar
45.7%
Cartavio
14.4%
Tuman
Tuman
9.7%
Paramonga
11.2%
San Jacinto
7.4%
Laredo
10
14
Laredo
12.3%
Coazucar
51
Source: Companies’ Filings and SMV. Coazucar land ownership includes land recently acquired in the Olmos Expansion Plan.
70
BUSINESS
Overview
We cultivate, harvest, purchase and crush sugarcane, the principal raw material used to produce sugar and
ethanol. We conduct our sugar and ethanol operations through our five mills and eight distilleries, which are located
throughout Peru, and in Ecuador and Argentina. We market and sell all of the sugar and ethanol we produce, both
domestically and globally. In 2011, we cultivated sugarcane on 55,733 hectares. According to data provided by the
Peruvian Ministry of Agriculture, we were the largest sugarcane crush processor in terms of sugarcane crushed, the
largest producer of sugar and one of the two largest producers of ethanol in Peru in 2011. In addition, according to
data provided by the Peruvian Ministry of Agriculture, we accounted for approximately 46% of the sugar produced
in Peru in 2011. We believe, according to internal data, that we accounted for approximately 38% of the ethanol
produced in Peru in 2011.
Our operations are conducted in Peru through Coazucar (approximately 1% of our EBITDA for the three
months ended March 31, 2012 and 2% of our EBITDA for 2011) and our subsidiaries (i) Casa Grande
(approximately 51% of our EBITDA for the three months ended March 31, 2012 and 52% of our EBITDA for
2011), (ii) Cartavio (approximately 17% of our EBITDA for the three months ended March 31, 2012 and 23% of our
EBITDA for 2011), (iii) San Jacinto (approximately 16% of our EBITDA for the three months ended March 31,
2012 and 12% of our EBITDA for 2011) and (iv) Sintuco (approximately 2% of our EBITDA for the three months
ended March 31, 2012 and 1% of our EBITDA for 2011); in Ecuador through our subsidiary La Troncal
(approximately 13% of our EBITDA for the three months ended March 31, 2012 and 6% of our EBITDA for 2011);
and in Argentina through our subsidiary San Isidro (approximately 0% of our EBITDA for the three months ended
March 31, 2012 and 4% of our EBITDA for 2011).
Our mills have a combined installed sugarcane crushing capacity of approximately 8.4 million tons per year and
benefit from high agricultural yields, proximity to a main port and consumer markets and a more efficient structure
for sugarcane transportation, as compared to other mills. In addition, Peru’s dry, tropic climate allows us to harvest
our sugarcane throughout the entire calendar year, giving us a competitive advantage over producers in other
countries, which can only harvest once or twice a year. Most of our mills are also able to shift production between
brown, white and refined sugar in order to capitalize on unexpected price variations among the different types of
sugar.
The close proximity of our sugarcane fields and those of our suppliers to our milling facilities (average distance
of approximately 15 kilometers) and our increasing mechanization levels (approximately 13% of the sugarcane we
cultivated was harvested mechanically in 2011) positively impact our operating cost structure. Our Peruvian mills
and distilleries are located in the La Libertad and Ancash regions, an average of approximately 59 kilometers from
the nearest sea port, Salaverry, also located in the La Libertad region, through which we ship almost all of our
Peruvian exports. The La Libertad and Ancash regions are approximately 610 kilometers and 407 kilometers
respectively from Lima, our principal market.
For the three months ended March 31, 2012, we crushed 1.3 million tons of sugarcane, all of which was used to
produce sugar and ethanol in Peru because the sugarcane harvest does not begin in Ecuador and Argentina until July
and May, respectively. In the same period, we produced approximately 133 thousand tons of sugar and
approximately 14.1 million liters of ethanol. For the three months ended March 31, 2012, we reported sales of
products of S/.377.2 million (US$141.4 million) and EBITDA of S/.138.6 million (US$52.0 million). Our sales of
sugar and ethanol for the three months ended March 31, 2012 were S/.340.1 million (US$127.5 million) and S/.30.9
million (US$11.6 million), respectively. During 2011, we crushed 6.7 million tons of sugarcane (4.7 million tons of
which were crushed in Peru), all of which was used to produce sugar and ethanol. In 2011, we produced
approximately 690 thousand tons of sugar (492 thousand tons of which were produced in Peru) and approximately
69.2 million liters of ethanol (47.9 million liters of which were produced in Peru). For 2011, we reported sales of
products of S/.1,304.4 million (US$483.8 million) and EBITDA of S/.578.5 million (US$214.6 million). Our sales
of sugar and ethanol during 2011 were S/.1,166.2 million (US$432.6 million) and S/.93.4 million (US$34.6 million),
respectively.
As of March 31, 2012, we owned land with a total area of 89,752 hectares (approximately 224,380 acres), of
which approximately 80,862 hectares (approximately 199,814 acres) is arable land. As of December 31, 2011, we
71
cultivate sugarcane on 55,733 hectares (approximately 137,719 acres). We also purchase sugarcane from third party
suppliers, which represented approximately 28% of the total sugarcane that we crushed during 2011.
Key Financial and Operating Data
The following table sets forth certain of our financial information and operating data for the periods indicated.
As of and for the Three Months
Ended March 31,
2012
2012
2011
(in thousands
of US$, except
(in thousands of S/.,
as indicated)
except as indicated)
Financial data:
Sales of products .........................
Profit for the period.....................
EBITDA(1) ...................................
EBITDA margin(2) .......................
Total debt(3) .................................
Total debt / EBITDA(4) ................
Net debt(5) ....................................
Net debt / EBITDA(6) ..................
141,427
32,767
51,979
36.8%
302,049
1.46x
230,133
1.11x
(unaudited)
377,185
87,388
138,628
36.8%
805,566
1.46x
613,766
1.11x
As of and for the Three Months
Ended March 31,
2012
2011
As of and for the Years
Ended December 31,
2011
2011
2010
(in thousands
of US$, except
(in thousands of S/.,
as indicated)
except as indicated)
309,162
147,796
164,151
53.1%
483,833
207,543
214,587
44.4%
302,946
1.41x
260,558
1.21x
1,304,415
559,535
578,526
44.4%
816,744
1.41x
702,467
1.21x
937,854
427,689
416,977
44.5%
533,619
1.28x
462,637
1.11x
2011
As of and for the Years
Ended December 31,
2010
2009
Operating data:
Sugarcane crushed (tons)
Casa Grande ..........................
Cartavio .................................
San Jacinto.............................
San Isidro...............................
La Troncal .............................
Total ......................................
Sugar production (tons)...............
Ethanol production (million
liters) ........................................
Employees ..................................
648,161
449,681
207,568
—(7)
—(7)
1,305,409
133,429
664,952
455,021
171,499
—(7)
—(7)
1,291,472
135,866
2,331,436
1,688,790
696,063
488,752
1,500,886
6,705,927
689,651
2,365,120
1,696,196
605,809
547,106
1,629,216
6,843,447
470,599
2,197,378
1,690,490
546,774
515,821
1,295,569
6,246,032
451,866
14.1
13,526
13.1
9,706
69.2
12,089
67.2
8,646
59.7
9,471
_______________________________
(1) EBITDA is calculated using profit from operations for the period before financing and taxation without initial recognition and change in fair
value of biological asset, added to depreciation and amortization. See “Presentation of Financial and Other Information.”
(2) EBITDA margin is EBITDA divided by sales of products, expressed as a percentage.
(3) Total debt is the sum of total short- and long-term loans.
(4) Total debt/EBITDA is the ratio of our total debt as of the end of the applicable period divided by our EBITDA for the then most recently
concluded period of four consecutive fiscal quarters, including the four consecutive fiscal quarters ended March 31, 2012.
(5) Net debt is obtained netting total debt with cash and cash equivalents.
(6) Net debt/EBITDA is the ratio of our net debt as of the end of the applicable period divided by our EBITDA for the then most recently
concluded period of four consecutive fiscal quarters, including the four consecutive fiscal quarters ended March 31, 2012.
(7) Sugarcane harvest begins in Ecuador and Argentina in July and May, respectively, due to climate conditions in these countries that do not
permit sugarcane harvesting year-round.
72
The following tables set forth certain of the financial information and operating data of the Guarantors for the
periods indicated.
Casa
Grande
Financial data:
Sales of products ........................................... 153,270
Profit for the period.......................................
75,848
EBITDA(2) .....................................................
71,134
EBITDA margin(3) ........................................
46.4%
Total debt(4) ................................................... 106,801
(5)
Total debt / EBITDA .................................
0.39x
Net debt(6) ......................................................
70,127
Net debt / EBITDA(7) ....................................
0.26x
Operating data:
Total area for sugarcane production
capacity (hectares) .....................................
21,115
Sugarcane crushed (tons) .............................. 648,161
Daily ethanol production capacity (liters) ....
60,000
Total ethanol production (million liters).......
4.0
% of
Coazucar
40.6%
86.8%
51.3%
13.3%
11.4%
37.9%
49.7%
13.6%
28.2%
For the Three Months
Ended March 31, 2012
(in thousands of S/., except as indicated)
% of
San
% of
Cartavio Coazucar Jacinto Coazucar Others(1)
95,749
10,508
23,814
24.9%
54,040
0.45x
32,394
0.27x
25.4%
12.0%
17.2%
6,891
449,681
80,000
3.7
12.4%
34.4%
18.2%
26.4%
6.7%
5.3%
48,430
(6,764)
22,181
45.8%
103,481
1.42x
102,865
1.42x
12.8%
(7.7)%
16.0%
6,081
207,568
40,000
0.6
10.9%
15.9%
9.1%
4.1%
12.8%
16.8%
% of
Coazucar
Total
79,736
7,796
21,499
27.0%
541,244
6.25x
408,380
4.72x
21.1%
8.9%
15.5%
21,646
(8)
—
260,000
5.8
38.8%
55,733
(8)
1,305,410
—
59.1% 440,000
41.3%
14.1
67.2%
66.5%
377,185
87,388
138,628
36.8%
805,566
1.46x
613,766
1.11x
_______________________________
(1) Includes La Troncal, San Isidro, Sintuco and Coazucar distilleries with respect to financial data, and adjustment for consolidation. With
respect to operating data, only the Coazucar distilleries are included in total ethanol production and capacity figures and La Troncal, San
Isidro and Sintuco are included in the total sugarcane production and total of sugarcane crushed figures.
(2) EBITDA is calculated using profit from operations for the period before financing and taxation without initial recognition and change in fair
value of biological asset, added to depreciation and amortization. See “Presentation of Financial and Other Information.”
(3) EBITDA margin is EBITDA divided by sales of products, expressed as a percentage.
(4) Total debt is the sum of total short- and long-term loans.
(5) Total debt/EBITDA is the ratio of our total debt as of the end of the applicable period divided by our EBITDA for the then most recently
concluded period of four consecutive fiscal quarters, including the four consecutive fiscal quarters ended March 31, 2012.
(6) Net debt is obtained netting total debt with cash and cash equivalents.
(7) Net debt/EBITDA is the ratio of our net debt as of March 31, 2012 divided by our EBITDA for the then most recently concluded period of
four consecutive fiscal quarters ended March 31, 2012.
(8) Sugarcane harvest begins in Ecuador and Argentina in July and May, respectively, due to climate conditions in these countries that do not
permit sugarcane harvesting year-round.
Casa
Grande
% of
Coazucar
For the Year
Ended December 31, 2011
(in thousands of S/., except as indicated)
% of
San
% of
Cartavio Coazucar Jacinto Coazucar Others(1)
% of
Coazucar
Total
Financial data:
Sales of products ........................................... 583,390
Profit for the year .......................................... 310,859
EBITDA(2) ..................................................... 303,581
EBITDA margin(3) ........................................
52.0%
Total debt(4) ................................................... 119,141
(5)
Total debt / EBITDA .................................
0.39x
Net debt(6) ...................................................... 110,467
Net debt / EBITDA(7) ....................................
0.36x
Operating data:
Total area for sugarcane production
capacity (hectares) ..................................... 21,115
Sugarcane crushed (tons) .............................. 2,331,436
Daily ethanol production capacity (liters) .... 60,000
Total ethanol production (million liters).......
12.7
44.7%
55.6%
52.5%
401,718
113,742
134,659
33.5%
56,211
0.42x
47,889
0.36x
30.8%
20.3%
23.3%
37.9%
6,891
34.8% 1,688,790
13.6%
80,000
18.3%
15.8
12.4%
25.2%
18.2%
22.9%
14.6%
15.7%
6.9%
6.8%
164,855
99,990
71,922
43.6%
105,406
1.47x
103,410
1.44x
12.6%
17.9%
12.4%
154,452
34,944
68,364
44.3%
535,986
7.84x
440,701
6.45x
11.8% 1,304,415
6.2% 559,535
11.8% 578,526
44.4%
65.6% 816,744
1.41x
62.7% 702,467
1.21x
6,081
696,063
40,000
2.4
10.9%
21,646
10.4% 1,989,638
9.1% 260,000
3.5%
38.2
38.8%
55,733
29.7% 6,705,927
59.1% 440,000
55.3%
69.2
12.9%
14.7%
_______________________________
(1) Includes La Troncal, San Isidro, Sintuco and Coazucar distilleries with respect to financial data, and adjustment for consolidation. With
respect to operating data, only the Coazucar distilleries are included in total ethanol production and capacity figures and La Troncal, San
Isidro and Sintuco are included in the total sugarcane production and total of sugarcane crushed figures.
(2) EBITDA is calculated using profit from operations for the period before financing and taxation without initial recognition and change in fair
value of biological asset, added to depreciation and amortization. See “Presentation of Financial and Other Information.”
(3) EBITDA margin is EBITDA divided by sales of products, expressed as a percentage.
(4) Total debt is the sum of total short- and long-term loans.
(5) Total debt/EBITDA is the ratio of our total debt as of the end of the applicable period divided by our EBITDA for the then most recently
concluded year.
(6) Net debt is obtained netting total debt with cash and cash equivalents.
(7) Net debt/EBITDA is the ratio of our net debt as of December 31, 2011 divided by our EBITDA for the then most recently concluded period of
fiscal year ended December 31, 2011.
73
Our Main Products
We market and sell all the sugar and ethanol produced by our mills and distilleries, both domestically and
globally. We also produce other sugarcane by-products including molasses and bagasse. Ethanol is produced from
molasses, the principal remaining by-product of processing sugarcane into sugar. Bagasse is used as a raw material
to generate the vapor that is used to produce sugar and it is also used to cogenerate electricity.
Sugar
We are able to produce several types of sugar such as refined white, refined, brown and organic sugar. While
brown sugar has constituted the majority of our sugar sales during the last six years, most of our mills have
industrial flexibility to produce brown, white and refined sugar. We produced approximately 690 thousand tons of
sugar during 2011 (consisting 60% of brown sugar, 29% of white sugar, 8% of refined sugar and 3% of organic
sugar) and recorded sales of products from sugar of S/.1,166.2 million, or 89.4%, of our sales of products in 2011.
For 2011, we exported approximately 11.7% of our total sugar sales to customers located primarily in North
America and Europe. In Peru, we sell our sugar products to retailers, wholesale distributors and food and beverage
manufacturers. In Argentina, we produce mostly organic sugar, which we export mainly to Europe, where demand
for this specialty product is highest.
Ethanol
We produce and sell ethanol both domestically and globally. In 2011, we produced approximately 69.2 million
liters of ethanol in our eight distilleries and recorded sales of products from ethanol of S/.93.4 million, or 7.2%, of
our sales of products. In 2011, we sold 20.2% of our ethanol mainly to alcohol producers in Peru and exported
79.8% to customers located in the U.S. and Europe.
Sugarcane by-products
We also produce molasses and bagasse. Molasses is a by-product of processing sugarcane into sugar and is
used as a raw material to produce ethanol. Sugarcane bagasse is a by-product of processing both sugar and ethanol
and is a renewable energy source. We generate electricity at all of our mills through the burning of sugarcane
bagasse in boilers, which enables those mills to be self-sufficient in terms of their energy needs. In addition, we sell
excess bagasse produced at our Casa Grande, Cartavio and San Jacinto mills to Trupal S.A., an affiliate of Grupo
Gloria engaged in the production of paper and cardboard.
Peru’s Competitive Advantages in the Production of Sugarcane
According to FAPRI, Peru had one of the highest crop yields in the world for sugarcane in 2011. Peru is
located near the equator and the resulting vertical solar radiation it receives allow for such high sugarcane crop
yields. Moreover, the vast territory, mild climate and stable water supply found in Peru, make it possible to harvest
sugarcane all year long, thus further increasing productivity.
According to the Peruvian Ministry of Agriculture, approximately 8% of Peru’s coastal agricultural land,
or 127,809 million hectares, is currently used for sugarcane production, and we believe that Peru should be able to
increase its sugarcane production capacity significantly depending on market conditions and the suitability of
available land for sugarcane cultivation. Peru’s favorable growing conditions also permit sugarcane to be harvested
seven times before requiring re-planting, compared to (i) India, where, on average, sugarcane must be re-planted
every two harvests and (ii) the United States and other countries that harvest sugar beet, which has one annual crop
and must be re-planted every year, as well as requiring crop rotations that range between three and five years.
We believe that Peruvian producers of sugar, including us, enjoy competitive advantages over sugar producers
in other countries due to the following factors:
 Low-cost producer. The cost of producing sugar from sugarcane in Peru is low due to its extremely
favorable climate and soil. Peru experiences dry weather with little climate differentiation among the seasons
due to its proximity to the equator and due to the effects of the Humboldt sea current. Peru also benefits from
technological improvements developed in the production of sugar. These technological improvements have
74
resulted in longer harvesting cycles, higher sugarcane yield per hectare and increased sucrose content from
crushed sugarcane, which has improved sugar output. According to the Czarnikow Group, sugar production
costs in Peru are significantly lower than production costs in Brazil, a leading producer of sugar. For example,
during 2011, average production costs per pound of brown sugar in Brazil was approximately US$0.20, or
53.8% higher than the US$0.13 per pound cost of brown sugar produced from our own sugarcane.
 Strong domestic and global sugar demand. Peru consumed approximately 1.2 million tons of sugar
during 2011. Sugar consumption in Peru has continued to grow, principally as a result of higher consumption
of beverages and processed food products made with sugar, as well as a result of higher consumer disposable
income. Worldwide sugar consumption has more than doubled since the early 1980s, to approximately
165 million tons in 2010 from approximately 70 million tons in 1971, in each case, measured based on raw
sugar equivalent. OECD-FAO estimates the worldwide sugar consumption to increase to 207 million tons by
2020. We expect future growth opportunities to come from a gradual liberalization of trade barriers in markets
outside Peru, mainly in developed OECD countries; and we expect increased sugar consumption due to
(1) population growth concentrated in markets open to the international sugar trade, (2) increased purchasing
power in many countries and (3) higher consumption of processed foods and drinks.
 Increased opportunities to export sugar. The global sugar market has grown significantly in recent
years. However, sugar producing countries still give priority to supplying their domestic markets. Therefore,
the international trade market for sugar should have ample room for growth. Consumption growth of sugar is
not always accompanied by increased local production in many countries. This creates medium-term
opportunities for Peruvian sugar export growth. Furthermore, given Peru’s location in the western hemisphere
and proximity to the equator, Peruvian producers of sugar, such as us, are able to export the majority of their
products in a different export window than those of competitors outside of Peru. This also creates opportunities
for Peruvian sugar export growth.
Our Strengths
Undisputed leadership in Peru. We enjoy leading market positions in Peru, a country with one of the highest
sugarcane yields in the world in 2011 and we have one of the highest sugarcane yields in Peru. We are the largest
grower and processor of sugarcane in Peru, whose climate allows us to harvest sugarcane year-round. According to
the Peruvian Ministry of Agriculture, we are the largest sugarcane grower in Peru, with 55,733 hectares cultivated in
2011, compared to 10,350 hectares cultivated by our largest competitor. For 2011, the combined crushing capacity
of our three Peruvian mills is over six million tons per year, compared to a crushing capacity 1.2 million tons for our
largest competitor. We produced approximately 492 thousand tons of sugar in Peru and are also the largest seller of
sugar in Peru, with a market share of approximately 46% through our brands Casa Grande, Cartavio and San Jacinto.
We are one of the two largest producers of ethanol in Peru, having produced 47.9 million liters of ethanol in 2011,
and the largest exporter in Peru, having exported 42.2 million liters of ethanol in 2011.
Low-cost producer and strategically located assets throughout Peru. Our mills and distilleries and the land on
which we cultivate and harvest sugarcane are strategically located throughout Peru and benefit from favorable
climate and stable water supply. Peru is one of the world’s most productive countries in terms of high crop yields
for sugarcane, primarily as a result of:

its favorable climate;

a combination of climate and soil resulting in increased production of sugar per hectare of planted
sugarcane;

extensive agricultural properties and operations, with large-scale production;

availability of land for sugarcane production; and

extensive logistical infrastructure, allowing for efficient product distribution.
Our existing mills, distilleries and other production facilities are located in close proximity to our customers,
sugarcane fields owned by us and by other growers, port terminals and other transportation infrastructure and
75
warehouses. For example, our production facilities, Casa Grande, Cartavio and San Jacinto, are located throughout
Peru, approximately 63, 54 and 170 kilometers, respectively, from the port of Salaverry, in the La Libertad Region,
from which we export sugar and ethanol. Our production facilities are also located close to major roads and our
warehouses, thus decreasing delivery time, increasing operating efficiencies, reducing logistics costs and facilitating
responses to shifts in demand.
During 2011, 65% of our total sugarcane crushed was harvested from our own fields, with lower costs than the
sugarcane supplied by third-party growers. Our expansive owned lands and those of our suppliers are also
strategically located within an average of approximately 15 kilometers from our mills and distilleries. This close
proximity, coupled with our increasing level of mechanization, reduces our transportation costs.
We are also energy self-sufficient and can generate enough energy to support our milling and distilling
operations. We believe our low costs, the increasing mechanization of our agricultural processes, improvements in
industrial operations and other factors enable us to manage our operating costs efficiently.
Increasingly mechanized agro-industrial complex. We seek to implement technological innovations in our
planting, harvesting and production processes, which has greatly improved our productivity and reduced our
operating costs in recent years by, among others, reducing the number of workplace accidents and the number of
employees assigned to harvesting. For 2011, our level of mechanized harvesting contributed to reduce our costs
associated to our sugarcane harvest and loading operations. During 2011, we harvested approximately 13% of the
sugarcane we produced in Peru using mechanized harvesters, which we operate 24 hours per day, seven days per
week throughout the harvesting season. We have developed and implemented numerous technological
improvements for our mechanized harvesting equipment, such as automatic pilots and use of high precision GPS for
soil preparation (including application of fertilizers and pesticides) and harvesting, which has significantly improved
our productivity levels, and are also in the process of developing and testing mechanized planting.
Diversified sugarcane varieties. We currently cultivate 19 types of sugarcane, with no single variety
representing more than 40% of our total cultivated area. Six of the types of sugarcane we cultivate have been
developed to maximize productivity considering the soil and climate conditions in Peru and to be more resistant to
pests and disease. Our use of a wide variety of sugarcane plants coupled with our practice of replanting
approximately 11% of our sugarcane crop annually, has resulted in historical low infestation and disease rates of our
crops and mitigates our exposure to the risk of loss of our crops from pests and disease.
Long operating history and experienced management team. Many of our mills and distilleries have been in
operation for over 100 years, including Casa Grande (1860), Cartavio (1782), San Jacinto (1868) and San Isidro
(1760). As a result, we benefit from significant operating experience in both the sugar and ethanol industries. We
have successfully acquired companies and facilities and expanded our sugar and ethanol operations throughout Peru,
and more recently in Ecuador and Argentina. We believe this demonstrates our ability to grow our operations and
succeed in the industries in which we operate, reducing our fixed average costs. Our team of seven senior
executives has an average of 15 years experience and knowledge in the sugar and ethanol industries and in
production and operations. Our management team and our other professionals are highly trained, and we have a
results- oriented corporate culture that is focused on reducing operating costs and increasing revenue. We utilize
human resource management tools that focus on the integration and motivation of our management team and other
professionals to help to maximize their effectiveness.
Efficient use of water. Water is vital to the production of sugarcane, and our investments in water storage and
distribution systems allow us to increase our water efficiency and improve our sugarcane production. We are
planning to increase the area under cultivation by introducing new pressurized watering systems that will allow us to
reduce our usage of water per hectare compared to traditional watering systems. The pressurized water system also
decreases the time needed for sugarcane to achieve maturity, allowing us to harvest sugarcane earlier. In addition,
our investments in water storage will allow us to manage our supply of water. By building reservoirs to obtain water
from the Chicama River when its levels are the highest, we are able to store that water in reservoirs both for future
use on existing cultivated lands and to use the reservoirs as water sources to expand cultivation.
76
Our Strategy
We intend to focus on achieving sustainable and profitable growth, further reducing our operating costs and
building on our competitive strengths to maintain our market share in Peru and in the other countries in which we
operate.
Expand our sugarcane and industrial facilities, increasing utilization of our existing capacity. We currently
use approximately 80% of our overall crushing capacity. We have a combined sugarcane crushing capacity
of approximately 8.4 million tons per year, and in 2011 we crushed approximately 6.7 million tons of sugarcane.
We will seek to increase our sugarcane production and achieve the full utilization of our existing crushing capacity,
therefore increasing the productivity of those crops, resulting in more sugarcane volume and expansion of the
harvested area close to our mills and distilleries through new plantations. Through more efficient water use, we
intend to significantly increase our harvested area over the next five years from approximately 55,733 hectares
in 2011. We expect to significantly increase our harvested area mainly through the Olmos Expansion Plan (as
defined below), which will add approximately 14,500 hectares to our sugarcane operations, in addition to increasing
our harvested area on our existing lands by approximately 12,100 hectares in Peru, approximately 2,276 hectares in
Ecuador and approximately 3,200 hectares in Argentina. The potential areas that we have identified for such
expansion are within the 50 kilometer radius area where most of our producing land is currently located. Expanding
our harvested area and renewing our current harvesting areas will allow us to fully utilize the processing capacity of
our mills and distilleries.
Continue to reduce our operating costs and seek to increase our operating efficiencies. We intend to continue
to focus on our low-cost operations improving the efficiency of our operations through additional investments in
technology, including agricultural and industrial processes, and information technology. As part of this effort, we
intend to continue to (1) increase the level of mechanization of our harvesting, (2) test and implement mechanized
planting in our land, (3) take advantage of the competitive advantage of climate and soil conditions in Peru, by
expanding our sugarcane production to levels that would allow us to fully utilize our existing crushing capacity,
(4) invest in the modernization of our equipments and industrial facilities, (5) invest in improving the productivity of
our crop and the efficiency of our industrial process and (6) invest in water storage and distribution systems to
increase our water efficiency and improve our sugarcane production.
Expand our land portfolio. We plan to further expand our land portfolio. Through a public auction in
December 2011, Azucarera Olmos and our affiliate, Gloria S.A., won the rights to purchase 15,600 hectares (11,100
hectares by Azucarera Olmos and 4,500 hectares by Gloria S.A.) of land from Odebrecht, S.A. in Olmos,
Lambayeque, Peru (approximately 854 kilometers north of Lima) of the Olmos Expansion Plan, from which
sugarcane greenfield crops will be developed using pressurized water and green harvesting for the production of
sugar. According to the auction criterion, water will be available as of March 2014, when construction of the project
will be finalized. See “Summary—Recent Developments.”
Participate in the consolidation of the sugar and ethanol sectors. The sugar and ethanol sectors have been
consolidating in recent years in Latin America. In addition to acquisitions in Peru, we recently acquired sugar and
ethanol companies in Argentina and Ecuador. We closely monitor domestic and foreign acquisition and investment
opportunities in these sectors and are currently considering, and will continue to consider in the future, selective
acquisitions, partnerships and investment opportunities that offer the right strategic fit for our operations. We may
enter into acquisitions or partnerships or make certain investments that could be material to our results of operations.
Focus on environmental and social awareness. We are committed to acting as an environmentally and
socially conscious company. Cartavio, San Jacinto and Casa Grande have signed a PAMA with the Peruvian
government regulating mechanical harvesting, burning of sugarcane, and carbon dioxide emissions, formalizing our
commitment to reducing environmental impacts. Casa Grande’s PAMA has been approved by the Peruvian
government through the Ministry of Agriculture, and San Jacinto’s and Cartavio’s are in the process of obtaining the
approval for their respective PAMAs from the Peruvian government. We continue to invest in the mechanization of
our harvests, which is not only cost-efficient, but also reduces our emission levels and decreases the burning of
sugarcane fields for manual harvesting, and to improve and develop new training programs for our employees, as
well as for the communities where we operate in.
77
Operations
Sugarcane is the main raw material used in the production of sugar and ethanol. Sugarcane is a tropical grass
that grows best in locations with stable warm temperatures and humidity. The climate and topography of Peru is
ideal for the cultivation of sugarcane.
During 2011, we cultivated sugarcane in an area equal to 55,733 hectares (137,719 acres), of which we own
52,382 hectares (or approximately 94.0%), distributed as follows:
Casa
Grande
Owned land.......................
Related company land.......
Total..................................
_______________________
21,115
—
21,115
San
Jacinto
Cartavio
6,891
—
6,891
Sintuco
Chiquitoy(1)
(in hectares)
6,081
—
6,081
1,271
—
1,271
—
3,351
3,351
San
Isidro
La
Troncal
3,300
—
3,300
Total
13,724
—
13,724
52,382
3,351
55,733
(1) We do not include Chiquitoy in our calculations of sugarcane crushed because it is not a consolidated subsidiary.
During 2011, we produced 690 thousand tons of sugar, distributed per our five mills as follows:
Casa Grande
Sugar.................................
257,276
Cartavio
San Jacinto
San Isidro
(in tons)
154,507
80,112
La Troncal
47,288
150,468
Total
689,651
During 2011, we produced 69.2 million liters of ethanol, distributed per our distilleries as follows:
Casa Grande
Ethanol.............................. 12,670,020
_______________________
Cartavio
San Jacinto
15,844,568
2,447,929
San Isidro
(in liters)
La Troncal
Coazucar(1)
Total
7,583,143
13,746,460
16,917,467
69,209,587
(1) Comprised of three distilleries.
We also purchase sugarcane directly from independent sugarcane growers, some under agreements with an
approximate five-year term. We transport the sugarcane purchased from third-party suppliers to our mills. The
price that we pay our suppliers is based on the total amount of sugar content, in the delivered sugarcane. On
delivery of the purchased sugarcane to our mills, we test the sugarcane to determine its sucrose content, which is
used to determine the price of the sugarcane. After the price for the sugarcane is determined, we pay 100% of the
total amount due on delivery of the sugarcane. Prices are based on the monthly price indicators published by the
Peruvian Ministry of Agriculture.
During 2011, we harvested approximately 65%, or 4.3 million tons, of sugarcane that we crushed from our own
land, and we purchased approximately 35%, or 2.4 million tons, of the total amount of sugarcane that we crushed
from third-party growers.
The following table compares the total amount of sugarcane grown on land we owned with the amount we
purchased from third parties during the relevant period.
For the Three
Months Ended
March 31, 2012(1)
Sugarcane harvested from owned land ..............
Sugarcane purchased from third parties.............
Total...................................................................
_______________________
967,603
337,807
1,305,409
Sugarcane Processed
For the Years Ended December 31,
2011
2010
(in thousands of tons)
4,352,710
2,353,217
6,705,927
3,309,632
1,357,493
4,667,125
2009
3,133,046
1,301,596
4,434,642
(1) Includes only sugarcane harvested in Peru, as the sugarcane harvest begins in Ecuador and Argentina in July and May, respectively, due to
climate conditions in these countries that do not permit sugarcane harvesting year-round.
78
Sugarcane Harvest Cycle
The annual sugarcane harvesting cycle in Peru occurs during the entire year because of Peru’s stable, warm and
humid climate. Sugarcane is ready for harvest when the crop’s sucrose content is at its greatest level. In Peru, the
highest sucrose levels are reached every 16 months on average, and in Ecuador and Argentina, the highest levels are
reached once a year starting in July and May, respectively.
We have developed and implemented numerous technological improvements for our mechanized planting and
harvesting equipment. Mechanized harvesting does not require burning prior to harvesting, significantly reducing
potential environmental damage and labor accidents, compared to manual harvesting. In addition, the leaves that
remain after sugarcane has been harvested mechanically form a protective cover over the crop, reducing evaporation
and aiding in pest and disease control. This protective cover of leaves decomposes into organic material over time,
which acts to increase the fertility of the soil. Mechanical harvesting is time efficient and has lower overall
production costs, when compared to manual harvesting. During 2011, we harvested mechanically approximately
13%, 25% and 100% of the sugarcane that we cultivated in Peru, Ecuador and Argentina, respectively. Under
PAMAs signed with the Peruvian government in 2011, we are allowed 33 years to achieve full mechanical harvest.
See “Risk Factors—Risks Related to Our Business and the Sugar and Ethanol Industries—We are subject to
extensive environmental and labor regulations and may be exposed to liabilities and potential costs for
environmental and labor compliance.”
The following table compares the percentage of sugarcane mechanically harvested over the last two years,
including sugarcane cultivated by us on our owned land and sugarcane we purchased from third-parties.
Mechanically
Casa Grande........................................
Cartavio ..............................................
San Jacinto..........................................
La Troncal...........................................
San Isidro............................................
2011
14.58%
4.17%
2.94%
26.00%
100.00%
2010
5.43%
0.01%
—
N/A
N/A
Sugarcane yield is an important productivity measure for our harvesting operations. Geographical factors, such
as soil composition, topography and climate, as well as some agricultural techniques that we implement and the
sugarcane varieties we plant, directly affect our high sugarcane yield. During 2011, our Peruvian mills averaged
158 tons of sugarcane per hectare, while the average sugarcane yield in Peru was 126 tons per hectare.
The following table shows our agricultural productivity measured in tons of sugarcane per hectare and sucrose
content during the last three years in Peru.
Tons of sugarcane per hectare.............
Sucrose content...................................
2010
164
12.9%
2011
158
13.0%
2009
160
12.8%
After the sugarcane is harvested, it is loaded onto trucks we own and transported to one of our five mills for
weighing, analysis and processing.
In the current harvest, the average distance from the fields on which our sugarcane is harvested in Peru to our
mills and distilleries in Peru is approximately 15 kilometers (9.3 miles). The proximity of our milling facilities to
the land on which we cultivate sugarcane reduces our transportation costs, thereby enabling us to maximize sucrose
recovery, as the sucrose content of cut sugarcane decreases over time.
In Argentina, we mechanically harvest all of our sugarcane. The average distance from the fields on which our
sugarcane is harvested to our San Isidro facility is 12 kilometers (7.5 miles).
In Ecuador, the average distance from the fields on which our sugarcane is harvested to our La Troncal facility
is 35 kilometers (21.7 miles).
79
Our Mills and Distilleries
We conduct our sugar operations through our five mills: (i) Cartavio and Casa Grande, which are located in the
La Libertad Region of Peru, 610 kilometers north of Lima; (ii) San Jacinto, which is located in the Ancash Region
of Peru, 407 kilometers north of Lima; (iii) San Isidro, which is located in the Province of Salta in Argentina; and
(iv) La Troncal, which is located in the Province of Guayas in Ecuador. We conduct our ethanol operations through
our eight distilleries: Casa Grande, Cartavio, San Jacinto, La Troncal, San Isidro and Coazucar’s three distilleries
located in La Libertad.
The following map sets forth the location of our mills and distilleries.
Quito
Guayas
La Troncal
La Libertad
Cartavio
Casa Grande
Ancash
San Jacinto
Lima
Salta
San Isidro
Buenos Aires
We have a total sugarcane crushing capacity of approximately 8.4 million tons of sugarcane per year (3.0
million tons at Casa Grande, 2.1 million tons at Cartavio, 1.0 million tons at San Jacinto, 0.6 million tons at San
Isidro and 1.8 million tons at La Troncal). We seek to minimize the excess crushing capacity of our mills and
compete with other sugarcane producers in acquiring land to cultivate sugarcane and in acquiring sugarcane
produced by third-party growers and by expanding our areas under cultivation on our existing lands.
80
Our production facilities are able to produce both sugar and ethanol. During the three months ended March 31,
2012, we produced a total of approximately 133 thousand tons of sugar and 14.1 million liters of ethanol. During
2011, we produced a total of approximately 690 thousand tons of sugar and 69.2 million liters of ethanol. While all
of our mills except for Casa Grande are currently able to shift production between brown, white and refined sugar in
order to capitalize on unexpected price variations among the different types of sugar, we expect that all mills will
soon have industrial flexibility as a result of capital expenditures we plan on making at Casa Grande during 2012.
The following table sets forth the quantity of sugar that we produce at each of our five mills, the production capacity
of each of our mills and our production volumes for the periods indicated.
Mill
Casa Grande
(Peru)
Cartavio
(Peru)
San Jacinto
(Peru)
San Isidro
(Argentina)
La Troncal
(Ecuador)
Operational data
(in tons, except days)
Sugarcane crushed
Products
Sugar
Number of days in harvest
Sugarcane crushed
Products
Sugar
Number of days in harvest
Sugarcane crushed
Products
Sugar
Number of days in harvest
Sugarcane crushed
Products
Sugar
Number of days in harvest
Sugarcane crushed
Products
Sugar
Number of days in harvest
Daily Average
Crushing
Capacity
For the Years Ended December 31,
For the Three
Months Ended
March 31, 2012
2011
2010
2009
10,000
648,161
2,331,436
2,365,120
2,197,378
7,000
71,151
83
449,681
257,276
312
1,688,790
247,526
322
1,696,196
233,446
320
1,690,490
3,200
39,319
76
207,568
154,507
287
696,063
155,145
298
605,809
159,286
287
546,774
3,800
22,959
84
—(1)
80,112
286
488,752
67,928
279
547,106
59,134
247
515,821
11,000
—(1)
—(1)
—(1)
47,288
151
1,500,886
48,614
137
1,629,216
43,467
137
1,295,569
—(1)
—(1)
150,468
145
159,778
152
135,445
137
_______________________
(1) Sugarcane harvest begins in Ecuador and Argentina in July and May, respectively, due to climate conditions in these countries that do not
permit sugarcane harvesting year-round.
The following table sets forth the types of ethanol products that we produce at each of our eight distilleries, the
production capacity of ethanol of each of our distilleries and our production volumes for the periods indicated.
Distillery
Coazucar(1) (Peru)
Casa Grande (Peru)
Cartavio (Peru)
San Jacinto (Peru)
San Isidro (Argentina)
La Troncal (Ecuador)
Daily Average
Production
Capacity
120,000
60,000
80,000
40,000
50,000
90,000
For the Three
Months Ended
March 31, 2012
5,821,273
3,966,712
3,720,944
577,087
—(2)
—(2)
For the Years Ended December 31,
2011
16,917,467
12,670,020
15,844,568
2,447,929
7,583,143
13,746,460
2010
15,743,020
13,451,469
16,687,865
1,523,939
6,593,775
11,957,735
2009
8,747,579
14,753,220
17,072,020
2,106,363
6,380,808
10,637,700
_______________________
(1) Composed of three distilleries.
(2) Sugarcane harvest begins in Ecuador and Argentina in July and May, respectively, due to climate conditions in these countries that do not
permit sugarcane harvesting year-round.
The ratio of our effective production time to effective availability of our production facilities during 2011
was 80%. Our Peruvian mills, Casa Grande, Cartavio and San Jacinto, currently have spare crushing capacity and
are located close to each other (25 kilometers between Cartavio and Casa Grande and 250 kilometers between
Cartavio/Casa Grande and San Jacinto), providing us with the ability to transport sugarcane to another mill for
crushing should one mill require mechanical repairs.
81
The following table sets forth the storage capacity of each of our five mills as of March 31, 2012.
Casa Grande
Cartavio
San Jacinto
San Isidro
La Troncal
Sugar
Bags
250,000
120,000
60,000
578,000
1,270,000
The following table sets forth the storage capacity of each of our eight distilleries as of March 31, 2012.
Casa Grande
Ethanol (in liters)
Tank 1
Tank 2
Tank 3
Tank 4
Tank 5
Tank 6
Tank 7
Total
250,000
250,000
50,000
45,000
45,000
50,000
—
690,000
Cartavio
San Jacinto
500,000
500,000
60,000
—
—
—
—
1,060,000
200,000
14,000
—
—
—
—
—
214,000
San Isidro
La Troncal
Coazucar(1)
1,048,497
1,076,025
1,520,440
1,613,103
1,142,672
69,283
421,462
6,891,482
5,000,000
1,000,000
1,000,000
500,000
—
—
—
7,500,000
750,000
750,000
1,500,000
1,500,000
3,000,000
—
—
7,500,000
_______________________
(1) Composed of three distilleries.
The following table sets forth the polarization of each of our five mills as of March 31, 2012.
Casa Grande
Cartavio
San Jacinto
San Isidro
La Troncal
Sugar
Brown
White
Refined
Organic
97.0
—
99.2
—
98.5
99.0
99.2
—
98.5
99.0
—
—
—
—
—
98.5
98.5
99.0
—
—
Our Main Products
The following table sets forth a breakdown of our sales volume and sales of products by type and market for
each the three most recent years ended.
Volume Sold(1)
Domestic sales
Sugar...................................................
Ethanol................................................
Molasses .............................................
Others .................................................
Total domestic sales of products........
Export sales
Sugar...................................................
Ethanol................................................
Total export sales of products ............
Total sales of products .....................
Years ended December 31,
2011
Sales of Products
Volume Sold(1)
(millions of S/.)
(%)
2010
Sales of Products
(millions of S/.)
(%)
503,273
10,082,806
1,029.6
18.9
33.0
11.8
1,093.3
78.9%
1.4%
2.5%
0.9%
83.8%
407,351
6,943,716
732.2
9.2
18.7
12.2
772.3
78.1%
1.0%
2.0%
1.3%
82.3%
55,450
42,515,985
136.6
74.5
211.2
1,304.4
10.5%
5.7%
16.2%
100.0%
54,298
41,797,932
97.9
67.6
165.6
937.9
10.4%
7.2%
17.7%
100.0%
_______________________
(1)
Sugar volumes are measured in tons and ethanol volumes are measured in liters.
Sugar
We produce several types of granulated sugar such as white, refined, brown and organic sugar. Brown sugar
has been the most significant contributor to our sales of products during the last six years, representing
approximately 60% of our sugar produced and 56.6% of our sales of product in 2011. We produced approximately
690 thousand tons of sugar during 2011 and recorded sales of products from sugar of S/.1,166.2 million, or 89.4%,
of our sales of products in 2011.
82
Ethanol
We produce and sell two types of ethanol: ethanol 1, a mixture of 96% ethanol and 4% water, and ethanol 2, a
mixture of 94% ethanol and 6% water. The majority of the ethanol we produce is exported for industrial use. In
2011, we produced 69.2 million liters of ethanol and recorded sales of products from ethanol of S/.93.4 million,
or 7.2%, of our sales of products.
Sugar
Sales and Distribution
During the three months ended March 31, 2012, we sold domestically approximately 163.3 thousand tons of
sugar or 94.7% of the total quantity of sugar we sold, and exported approximately 9.2 thousand tons of sugar.
During 2011, we sold domestically approximately 503.3 thousand tons of sugar, or 90.1% of the total quantity of
sugar we sold, and exported approximately 55.5 thousand tons of sugar.
In most domestic sales, the end-customer is responsible for arranging for shipment of the sugar products from
our mills. Payment is due in cash for wholesale customers on delivery, which represents 97.0% of our customer
base, and for the remaining sectors, due approximately 30 to 60 days after billing.
We export our sugar products—brown sugar (our main sugar export), white sugar, refined sugar and organic
sugar—free-on-board (“FOB”), operating throughout our supply chain, from the mill to the end-user, including road
and railroad transportation, loading terminal operation at the port of Salaverry, located in the La Libertad region of
Peru, and shipping services (through cost insurance freight (“CIF”) sales). During 2011, we exported approximately
9.9% of the total volume of sugar sold. We enter into short-term and long-term export contracts, and payment of the
sales price is generally on a cash against documents basis.
During the three months ended March 31, 2012, approximately 5.4% of our sales of products was derived from
exports (S/.20.4 million). During the year ended December 31, 2011, approximately 10.5% of our sales of products
was derived from exports (S/.136.6 million). The sugar exported during the year ended December 31, 2011 was
sold to customers in the United States, Haiti, Colombia and Chile, among other countries.
In Peru, our sales and distribution channels include: (1) sales to the industrial sector, such as food and beverage
manufacturers, where we deliver sugar directly to their factories; (2) sales to the wholesale sector, where the sugar
sold is delivered to the wholesalers or picked up from our warehouses and (3) sales to retailers, where we sell 1
kilogram and 5 kilogram bags of sugar directly to supermarkets and grocery stores. In Ecuador, our sales and
distribution channels include: (1) sales to the industrial sector, such as food and beverage manufacturers which pick
up the sugar from our warehouses; (2) sales to the wholesale and commercial sectors, where the sugar sold is picked
up from our warehouses; and (3) sales to retailers, where we sell bags of sugar directly to supermarkets and grocery
stores. In Argentina, our sales and distribution channels include: (1) sales of non-organic sugar, where customers
pick up the sugar from our warehouses and (2) sales of organic sugar, where we deliver the sugar to the customs
facilities in Buenos Aires for export.
Prices
Prices for our sugar products for export are set in accordance with international market prices. Prices for raw
sugar are established in accordance with NY 11 futures contracts and prices for refined sugar are established in
accordance with the Lon 5 futures contracts, traded on the London International Financial Futures and Options
Exchange. Prices for sugar we sell in Peru are set in accordance with domestic market prices, using a reference
published by the Peruvian Ministry of Agriculture, and NY 11 futures contracts. In Ecuador and Argentina,
domestic prices of sugar and the prices paid to farmers for sugarcane are set by the government and follow
international market prices. Spot market prices are fixed daily based on international NY 11 futures contracts and
London 5 futures contracts, plus brokerage premiums, freights, import and banking costs and also the stocks
availability.
All export sales are made with payment due on delivery, with prices based on NY 11 futures contracts.
83
For further information on average sales prices and sales revenue from the sale of our sugar in the domestic and
international markets for the three years ended December 31, 2011 and the three months ended March 31, 2012 and
2011, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Customers
In Peru, we operate exclusively in the wholesale and industrial sectors, with an estimated 46% market share of
the domestic market, according to data published by the Peruvian Ministry of Agriculture. Approximately 70% of
our sugar sales are to the wholesale sectors. Most of our domestic sugar customers are manufacturers of soft drinks,
candy and chocolate, dairy products, cookies, powdered chocolate, jellies, juices and teas. We also sell sugar for
refining and packaging. Producers of food and candy represents the largest segment of our industrial sector. As of
the date of this offering memorandum, we have approximately 1,100 active customers in our domestic portfolio.
As most of our domestic sugar sales are made in the wholesale market, our losses resulting from payment
defaults have been very low.
In the export market, our end-user customers are primarily major sugar refineries, which purchase a significant
amount of our sugar products. We export sugar primarily to customers in United States, Haiti, Colombia and Chile.
Ethanol
Sales and Distribution
During the three months ended March 31, 2012, our sales of products from ethanol operations were S/.30.9
million (US$11.6 million), or 8.2% of our sales of products for the three months ended March 31, 2012, compared
to sales of products from ethanol operations of S/.19.3 million (US$6.9) for the three months ended March 31,
2011. We sold approximately 17.2 million liters of ethanol, of which we sold 17.6% (3.0 million liters)
domestically and exported approximately 82.4% (14.2 million liters). During the three months ended March 31,
2012, 78.7% of our sales of products from ethanol sales was derived from exports (S/.24.4 million),
representing 6.5% of our sales of products.
During 2011, our sales of products from ethanol operations were S/.93.4 million (US$34.6 million), or 7.2% of
our sales of products in 2011, compared to sales of products from ethanol operations of S/.76.8 million (US$27.3
million) in 2010. We sold approximately 52.6 million liters of ethanol, of which we sold 19.2% (10.1 million liters)
domestically and exported approximately 80.8% (42.5 million liters). During 2011, 79.8% of our sales of products
from ethanol sales (representing 5.7% of our sales of products) was derived from exports (S/.74.5 million).
Most of our domestic ethanol sales are made pursuant to annual supply contracts or in the spot market, with
payment due in cash in 30 to 60 days.
In the international market, we sell through trading houses. We transport ethanol from our distilleries by truck
to the port, where the ethanol is loaded onto ships for export. Sales are made FOB (where we pay for transportation
of the goods to the port of shipment, plus loading costs, and the buyer pays freight, insurance, unloading costs and
transportation from the port of destination to its facilities) or CIF (where the selling price includes the cost of the
goods, the freight or transport costs and also the cost of marine insurance).
Prices
The price of ethanol in Peru is determined by the market. Daily prices are used as a reference for pricing spot
transactions. Most export sales are made with payment due on delivery, with prices based on daily prices. We enter
into short-term and long-term sales contracts, and payment of the sales price is generally due on delivery.
The ethanol export market is currently not material, and ethanol export prices are determined in accordance
with international market prices.
Customers
Most of our domestic ethanol customers are industrial customers in Peru. As of March 31, 2012, we had
approximately 10 active customers in our domestic portfolio.
84
In Peru, the main market for our ethanol exports is Europe, where we sell ethanol to traders that resell the
ethanol to industrial consumers for the production of alcoholic beverages in addition to a variety of industrial uses.
Other Products and Activities
Sugarcane byproducts are biodegradable and not harmful to the environment. They are an important alternative
energy source. For example, bagasse is used to produced vapor and cogenerate electricity. In addition, residues
from sugar and ethanol production processes, including cachaza and vinaze, are also used as organic fertilizers in
our fields.
Bagasse and Co-Generation of Electricity
Sugarcane is composed of water, fibers, sucrose and other sugars and minerals. When the sugarcane undergoes
the milling process, we separate water, sugar and minerals from the fibers and what remains is sugarcane bagasse.
Sugarcane bagasse is an important sugarcane byproduct and used as fuel for the boilers in our mills. Sugarcane
bagasse is burned and heats the water in the boilers to high temperatures, and the resulting vapor is used to produce
sugar and ethanol. Part of the vapor is also used by a turbo-generator that produces electricity to power our mills.
Currently, our five mills are self-sufficient during the harvest, generating all of the electric energy they
consume. We sell excess bagasse to producers of paper, cartons and packages. During 2011, we sold 193 thousand
tons of bagasse, or 0.8% our sales of products.
Our total installed electricity generation capacity is 68 MW at Casa Grande, 10 MW at Cartavio, 3 MW at San
Jacinto, 25 MW at La Troncal and 7 MW at San Isidro, all of which we use in our industrial facilities.
The main advantages of electricity generated by burning sugarcane bagasse include:

it is clean and renewable energy;

it complements hydraulic energy, and it is generated during the harvest when water reservoirs levels are
lower; and

there is a short period of time required to start up the electricity generator.
As our installed electricity generation expands, excess electricity we do not use can be sold to the market.
According to the Agencia de Promoción de la Inversión Privada - Perú, the Peruvian government’s investment
promotion agency, projected economic growth rates for Peru suggest that investments in electricity generation will
be required as demand for electricity increases further. The Peruvian government has enacted certain laws
(Legislative Decree No. 1002 and its Regulation approved by Supreme Decree No. 012-2011-EM) with the aim of
promoting investment in the generation of electric energy with renewable resources, including the incentives to
encourage the generation of electric energy from sugarcane bagasse.
Molasses
Molasses is a by-product of processing sugarcane into sugar and is used as a raw material for the production of
ethanol. The remaining molasses is sold to the animal feeding industry. During 2011, we sold 41,762 tons of
molasses, all of which were sold to the domestic market. During 2011, our sales of products from molasses was
S/.33.0 million (2.5% of our sales of products), all of which were sold to the domestic market.
In Peru, approximately 438,000 tons of molasses is produced annually, of which approximately 360,000 tons
are used by distilleries for alcohol production. A decrease in the use of molasses for ethanol production would
increase the supply of ethanol available for other uses and result in a drop in the price of molasses.
Customer Concentration
We have a wide variety of customers in Peru, Ecuador, Argentina and other countries. In Peru, we have more
than 1,100 customers, with the largest customer constituting 9% of our sales in Peru. In Ecuador, we have more
than 600 customers, with the largest customer constituting 11% of our sales in Ecuador. In Argentina, we have 18
customers, with the largest customer constituting 30% of our sales in Argentina.
85
The following table sets forth the 10 largest customers of Casa Grande during 2011:
Customer
SUCDEN AMERICAS CORPORATION
DEPRODECA S.A.C.
INVERSIONES SAN ROQUE EIRL
INVERSIONES DOWER WARTHON S.A.C.
CORPORACION VEGA S.A.C.
NEONAZARENO E.I.R.L.
COMERCIALIZADORA Y DISTRIBUCION
EMC TRADING
ED & F MAN SUGAR INC.
INVERSIONES PUCARA S.A.C.
The following table sets forth the 10 largest customers of Cartavio during 2011:
Customer
GLORIA S.A.
CORPORACION AZUCARERA DEL PERU S.A.
EMC TRADING
ED & F MAN PERU S.A.C.
ALICORP S.A.A.
INVERSIONES SAN ROQUE E.I.R.L.
MOLITALIA S.A.
DEPRODECA S.A.C.
CASA GRANDE S.A.A.
AJEPER S.A.
The following table sets forth the 10 largest customers of San Jacinto during 2011:
Customer
DEPRODECA S.A.C.
AJINOMOTO DEL PERU S.A.
CALSA PERU S.A.C.
CORPORACION AZUCARERA DEL PERU S.A.
INVERSIONES SAN ROQUE E.I.R.L.
COMERCIAL ALVARADO S.R.L.
TRANSPORTE PHI & GIL S.A.C.
ALCOHOLES DEL PERU S.C.R.L
NEONAZARENO E.I.R.L.
TABLEROS PERUANOS S.A.
The following table sets forth the 10 largest customers of San Isidro during 2011:
Customer
ED & F MAN SUGAR
DELLA NATURA
CANDICO
SUNPROJUICE
PRONATEC
NATURKOST
AVAFINA
SUCRE EXP.
WORLEE
CARE
86
The following table sets forth the 10 largest customers of La Troncal during 2011:
Customer
ARCA ECUADOR, S.A.
AJECUADOR S.A.
DISTRIBUIDORA IMPORTADORA DIPOR S.A.
PATIAM S.A.
MULTICOMERCIO ALDEAN S.C.C.
QUIJIJE TOALA ANGEL ROBERTO
DISTRIMEDIOS S.A.
CONFITECA COMPAÑIA ANONIMA
TIENDAS INDUSTRIALES ASOCIADAS TIA S.A.
ORTIZ BENAVIDES MARCOS GIOVANNY
Competition
The sugar and ethanol industry in Peru has undergone great changes. The Peruvian military coup led by
General Juan Velasco Alvarado in 1968 resulted in the expropriation of sugar plantations and their conversion into
cooperatives. Since the return to a democratic government in 1980, most sugar plantations have become privatized.
The sugar and ethanol industry in Peru has experienced increased consolidation through mergers and acquisitions
and the implementation of new greenfield projects over the last several years.
Despite the increased consolidation over the last several years, this industry remains highly fragmented with
approximately eleven mills in operation during 2011, of which only one competitor, Laredo, is located in the La
Libertad Region, according to the Peruvian Ministry of Agriculture. Due to distance and high logistical costs, we
face little competition from sugarcane, sugar and ethanol producers located in Peru. The closest competing mills are
Tuman and Pomalca, both of which are located in the Chiclayo region.
The following table sets forth the number of mills, the amount of sugarcane crushed and the quantities of sugar
and ethanol produced by us and our main Peruvian competitors during 2011.
Group
Crushed Sugarcane (tons)
Casa Grande........................................
2,331,436
Cartavio ..............................................
1,688,790
San Jacinto..........................................
696,063
Laredo.................................................
1,255,632
Paramonga ..........................................
1,125,246
Tuman.................................................
995,925
Pucala .................................................
932,997
Pomalca ..............................................
809,668
Andahuasi ...........................................
345,467
Azucarera del Norte ............................
38,024
Chucarapi............................................
36,187
Total....................................................
10,255,436
_______________________
Source: Peruvian Ministry of Agriculture
Market share
22.7%
16.5%
6.8%
12.2%
11.0%
9.7%
9.1%
7.9%
3.4%
0.4%
0.4%
100.0%
In Ecuador, there are six sugar mills, of which La Troncal represents 28% of the Ecuadorian sugar production.
In Argentina, there are 23 mills, of which San Isidro is the only producer of organic sugar, substantially all of which
is exported.
We also face competition from international sugar producers. In addition, we face strong competition in highly
regulated and protected markets, such as the United States and the European Union.
Intellectual Property
The nature of our business requires brand differentiation and our products are registered under trademarks. Our
corporate names and logos, as well as our products’ names and logos are registered before the Peruvian National
Institute for the Defense of Competition and Intellectual Property (Instituto Nacional de Defensa de la Competencia
y de la Propiedad Intelectual, or “INDECOPI”). Coazucar has seven trademark certificates with its corporate names
87
“Coazucar del Peru S.A.” and “Coazucar”, which expire in 2021. Cartavio has eight trademark certificates with its
corporate and product names, and logo “Cartavio”, which expire in 2013. Casa Grande has 33 trademark certificates
with its corporate and product names, and logos “Casa Grande”, “Hacienda Casa Grande”, “Justo y Cabal”, among
others, which expire in 2016. San Jacinto has three trademark certificates with its corporate and product names, and
logos “San Jacinto” and “Un sol de azucar de Agroindustrias San Jacinto S.A.A.”, which expire in 2014. Our
trademarks can be renewed prior to their expiration. The brand names of our mills in Argentina and Ecuador are
also registered with the applicable governmental authorities in each country.
Research and Development
We have an agricultural research and development department, which promotes independent studies for the
most efficient allocation of sugarcane varieties in specific planting areas to obtain maximum productivity.
Our independent research and development activities are aimed at the continuous improvement of our
agricultural process. For our industrial operations, we have a quality control department, which analyzes variables
that affect the efficiency of our production process and maintain a record of corrective measures to address failures
detected. These corrective measures undergo a thorough testing process to assess their effectiveness.
Plant, Property and Equipment
Our principal executive offices are located in the cities of Trujillo and Lima. Our properties consist primarily of
sugarcane, sugar and ethanol production facilities and land on which we cultivate sugarcane. We own substantially
all of the land on which we cultivate sugarcane.
The charts in “—Overview – Our Mills and Distilleries” show the primary products, daily production capacity
and production capacity at each of our mills and distilleries for the three months ended March 31, 2012 and for the
years ended December 31, 2011, 2010, and 2009. We believe that all of our production facilities are in good
operating condition. As of March 31, 2012, our consolidated net book value of our property, plant and equipment
was S/.2,816.8 million, S/.1,769.3 million of which consisted of land. As of March 31, 2012, S/.276.7 million of our
total outstanding indebtedness was secured by certain of our land and agricultural and industrial equipment and
machinery.
The following chart shows the breakdown of the net book value of our property, plant and equipment by
subsidiary as of March 31, 2012.
Entity
Coazucar ..........................................................................
Casa Grande.....................................................................
Cartavio ...........................................................................
San Jacinto.......................................................................
Sintuco.............................................................................
San Juan(1) ........................................................................
San Isidro.........................................................................
La Troncal........................................................................
Total ................................................................................
_______________________
Property, Plant and Equipment
(in millions of S/.)
131,501
1,214,502
418,061
334,841
55,240
2,384
200,609
459,666
2,816,804
Land
75,995
784,010
288,170
209,075
51,845
179
174,134
185,886
1,769,294
(1) Refers to Agroindustrias San Juan S.A.C., a subsidiary of Coazucar with a parcel of land but no operations.
Employees
As of March 31, 2012, we had 10,658 permanent employees and 2,868 temporary employees (who were
contracted for harvesting operations). We hire new employees throughout the year, and offer our employees
training to allow them to develop two skills: one for use during the harvest and the other for use between harvests.
88
The following chart shows the breakdown of our employees by subsidiary as of March 31, 2012.
Entity
Coazucar ..........................................................................
Casa Grande.....................................................................
Cartavio ...........................................................................
San Jacinto.......................................................................
Sintuco.............................................................................
Chiquitoy .........................................................................
San Isidro.........................................................................
La Troncal........................................................................
Total ................................................................................
Permanent
17
3,780
1,542
1,470
103
495
599
2,652
10,658
Temporary
—
1,420
989
254
51
—
30
124
2,868
Total
17
5,200
2,531
1,724
154
495
629
2,776
13,526
We negotiate annual collective bargaining agreements with the various unions with which our employees are
affiliated. As of March 31, 2012, we were party to nine collective bargaining agreements. We have experienced
two recent labor stoppages. We experienced a labor stoppage at Cartavio for 15 days in February 2010 and at San
Jacinto for 9 days in March 2011, both of which were due disagreements over wages. Both labor stoppages were
resolved. Approximately 46% of our employees are unionized as of March 31, 2012.
Benefits
We offer our employees (depending on their job description) a benefit package, including: (1) recreation and
entertainment programs; (2) loans for health and educational needs; (3) annual trainings; (4) housing for employees;
(5) profit sharing plans; and (6) transportation service from the city of Trujillo to our production facilities.
Social Programs
We participate in a number of social projects with local communities, mainly where our industrial facilities are
located. As the principal employer in our community, we support constant dialog with local authorities and
institutions, and contribute millions of nuevos soles annually for road improvements and cleaning. We also provide
potable water to over than 65,000 habitants in the community and donate the construction of wells for neighboring
rural settlements. We also provide sports and recreation venues such as soccer athletic fields and swimming pools to
the community.
Other social programs that we offer to the community include: (1) an educational program for local students,
offering them four libraries with books and Internet-connected computers to assist them in their schoolwork; (2) an
athletic program partnering with municipalities to provide children with volleyball, soccer, basketball and
swimming; (3) a women’s program that provides workshops on skills such as handicrafts, sewing and cooking to
allow local women to generate income; (4) a nutritional program that provides free milk daily to children in lowincome families and provide medical checkups to children to detect and treat malnutrition.
We also provide donations to the community, including fuel to local police, donations for construction of health
centers and infrastructure improvement, donations to retirement homes and churches and food donations, among
others.
Insurance
As of the date of this offering memorandum, we had insurance covering the vehicles we own that are used in
our business, with all risks coverage including related civil liabilities, collision coverage and third party coverage.
We also have insurance covering our facilities and their contents, such as equipment, machinery and inventory
stored therein. We do not have insurance that covers our planted sugarcane prior to harvesting.
We do not anticipate having any difficulties in renewing any of our insurance policies, which are provided by
leading insurance companies such as Pacifico Vida, Pacifico Seguros, Rimac Seguros and Mapfre Seguros, and
believe that our insurance coverage is reasonable in amount and consistent with industry standards applicable to
similarly situated sugar and ethanol companies operating in Peru.
89
Legal and Administrative Proceedings
As of March 31, 2012, we are party to approximately 2,013 legal and administrative proceedings, involving tax,
social security, civil, environmental and other matters, brought against us for a total amount of approximately
S/.232.6 million. Under Peruvian Law and IFRS we are required to make a provision for those legal and
administrative proceedings that, in our judgment or in the judgment of our legal advisors, are likely to have a result
that is adverse to us. As of March 31, 2012, we have recorded provisions for an amount of S/.15.9 million in
connection with these legal and administrative proceedings compared to a total of S/.14.9 million as of December
31, 2011, as reflected in our audited consolidated financial statements. As of March 31, 2012, our subsidiaries have
made judicially-mandated payments in an aggregate amount of approximately S/.17.0 million. In addition, there are
currently certain legal proceedings pending in which we are involved for which we have not established provisions
or made judicially-mandated payments. If any of these proceedings is decided adversely against us, our results of
operations or financial condition could be materially adversely affected.
With respect solely to Coazucar, there is one legal proceeding and there are no governmental or arbitration
proceedings (and we are not aware of any such proceedings which are pending or threatened) during the
past 12 months, which may have significant effects on Coazucar or our financial position or profitability.
Although we are not a party to any government or arbitration proceedings, we may be adversely affected by the
negative outcome of proceedings in which other companies of Grupo Gloria are involved.
Tax and Social Security Contribution Proceedings
As of March 31, 2012, we were involved in 14 administrative tax proceedings, all of which we initiated in
response to disagreements over income and VAT taxes with the Peruvian National Superintendency of Tax
Administration (Superintendencia Nacional de Administración Tributaria), primarily relating to the deductibility of
expenses. These tax proceedings are currently before the tax tribunal (tribunal fiscal), the decisions of which can be
appealed to the judiciary (poder judicial). We have assessed our estimated exposure in respect of these proceedings
as approximately S/.8.7 million (based on lawsuits for which we classify our risk of loss as probable or possible) and
have deposited S/.0.2 million with the court pursuant to judicial judgments. We calculated our total exposure based
on our experience in similar lawsuits in the past.
Labor Proceedings
As of March 31, 2012, we were party to 1,749 judicial and administrative labor proceedings involving a total
amount of approximately S/.98.7 million. As of March 31, 2012, we have established provisions in an aggregate
amount of S/.12.3 million. We calculated our exposure based on our experience in similar lawsuits in the past.
Civil Proceedings
As of March 31, 2012, we were a party in 188 civil proceedings in the courts, 157 of them as defendants.
Our total estimated exposure in these proceedings was S/.13.2 million (based on lawsuits for which we classify
our risk of loss as probable or possible). As of March 31, 2012, we have established provisions in an aggregate
amount of S/.3.5 million. Claims against us in these suits include (1) compensatory and punitive damages for workrelated accidents; (2) orders to refrain from using right-of-way; (3) reimbursement of amounts not paid under
agreements for the transportation of our employees and for sugarcane harvesting and other contracts; (4) a civil class
action for application of amounts in welfare plan; and (5) annulment of contracts.
Environmental Proceedings
We are party to one administrative proceedings regarding our burning of sugarcane, which is part of the
sugarcane harvesting process and the legal forestry reserve.
Restructuring Proceedings
We purchased Chiquitoy while it was in judicially approved restructuring proceedings. Chiquitoy is currently
still in an ordinary restructuring proceeding (procedimiento concursal ordinario) with the Peruvian consumer
protection agency INDECOPI. We and our partner Agroholding S.A. each own 50% of the outstanding shares of
Chiquitoy and we each own 50% of the 86.63% of the debt of Chiquitoy.
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REGULATORY OVERVIEW
We are subject to governmental regulation and supervision generally applicable to companies engaged in
business in Peru, including labor laws, social security laws, environmental laws, consumer protection and antitrust
laws, among others. These include applicable regulations for the construction, operation and maintenance of our
administrative offices, warehouses, factories, mills and distilleries, among others.
Despite certain issues related to the delay in the processing or renewal of certain permits, we believe to be in
compliance in all material aspects with applicable statutory and administrative regulations with regard to our
business.
Peru
Promotion of the Agricultural Sector
Law N° 27360, Law for the Promotion of the Agricultural Sector, and its regulations approved by Supreme
Decree No. 049-2002-AG, provide the main legal framework governing agricultural and related activities in Peru.
The legal benefits contemplated by this Law allow our Peruvian subsidiaries to pay a reduced income tax rate of
15% per annum instead of the general rate of 30% per annum, as well as a more flexible labor and social regime.
Certain other regulations of the special Peruvian regime that promote the development of the sugar industry
which are applicable to our Peruvian subsidiaries, include those regulations governed by Legislative Decree N° 802,
Law N° 28027 and Law N° 29678, under which we have been able to (i) capitalize our tax debt, (ii) adhere to the
special regime of payment with respect to contributions to the private pension system (we settled our debts and are
currently paying within the normal procedure), and (iii) access to the asset protection regime, which entails that any
injunction, mortgage, guaranty or others cannot be enforced (only Casa Grande qualified for this last benefit, under
which approximately S/.2 million of its preexisting debt was protected from creditors, but is required to make
payments according to a schedule approved by INDECOPI).
Water Permits
The Peruvian Ministry of Agriculture is the Peruvian authority responsible for setting guidelines and policies
regarding sugarcane harvesting and processing. As is required for sugarcane harvesters and processors, we are in
compliance with Law Nº 29338 – the Water Resources Law, and its regulations approved by Supreme Decree Nº
001-2010-AG, with the purpose of maintaining and obtaining the necessary water permits before the ANA, yet some
of them are in renewal or regularization processes.
We must also obtain from the ANA the necessary authorizations to reuse domestic or industrial wastewaters in
our sugarcane fields. However, such permits require proper environmental licenses to be in place, which are
currently in process.
Controlled Chemicals
The industrial production of sugar and ethanol requires the use of certain controlled chemicals and substances,
the commercialization, transportation and use of which is controlled by the National Agricultural Health Service
(Servicio Nacional de Sanidad Agraria, or “SENASA”) due to their potentially being used to produce illegal drugs.
We comply with Law Nº 28305 and its regulations which requires us to obtain a User Certificate from the National
Police Drug Division (Unidad Antidrogas de la Policia Nacional del Perú, or “DIRANDRO”) and to register
ourselves before the Peruvian Ministry of Production. Furthermore, our activities (purchase and use of
controlled chemicals) are registered in the special registries in the Peruvian Ministry of Production.
Fuel Storage
Any company that purchases fuel for its own activities and has facilities to receive and store fuel is required to
(i) obtain an authorization from the Supervising Body of Investment in Mining and Energy (Organismo Supervisor
de la Inversión en Energía y Minas) prior to installing or expanding such facilities, and (ii) be registered in the
Registry of Direct Fuel Consumers. Casa Grande and Cartavio meet the above mentioned requirements; however
San Jacinto is currently in the process of obtaining the relevant authorizations.
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Sanitary Regulation
Our products for human consumption, such as white and brown sugar, have Sanitary Registries with the General
Bureau of Environmental Health (Dirección General de Salud Ambiental, or “DIGESA”) of the Peruvian Ministry
of Health, which allows their commercialization in the local market. Likewise, companies that participate in food
and/or beverages manufacturing processes for the domestic or international market must meet the Standards for the
implementation of Hazard Analysis and Critical Control Point (HACCP) System, approved by Ministerial
Resolution No. 449-2006/MINSA. Under such standards, companies must apply for the approval of their “HACCP
Plan” before DIGESA. Currently, our companies are adjusting their plans.
In order to export our product, we are currently applying for Phytosanitary Certificates from SENASA,
including the compliance of regulations to ensure sanitary and safe conditions in facilities for the sale and
distribution of food products. Likewise, certain of our companies have the U.S. Food and Drug Administration –
FDA Certificate and others are applying for it. The aforementioned permits meet the terms of the Food Safety Law,
approved by Legislative Decree N° 1062, and the Regulation for Food and Agricultural Health and Safety, approved
by Supreme Decree N° 004-2011-AG.
Environmental Permits
According to article 18 of Law N° 27446, Law of the National System of Environmental Impact Evaluation, the
competent environmental authority for granting environmental permits is the entity that corresponds to the activity
of the company which generates the highest gross annual income. Therefore, the environmental authority that
monitors our operations is the Peruvian Ministry of Agriculture.
Our companies are required to file an Environmental Adequacy and Management Program (Programa de
Adecuación y Manejo Ambiental, or “PAMA”). Currently, Casa Grande has obtained such environmental permit
approved by the competent authority, while the permits of Cartavio and San Jacinto are in process and are expected
to be received in the coming months.
Electricity Generation Authorizations
The process of burning sugarcane bagasse qualifies as “electric cogeneration”, which is defined by article 1.5 of
Law N° 28832, Law to Ensure Efficient Development of Electricity Generation, as the process of the combined
production of electricity and thermal energy, which is an integral part of a productive activity, where electricity is
destined for consumption by oneself or by third parties. See “Business—Other Products and Activities—Bagasse
and Co-Generation of Electricity.”
The process of burning sugarcane bagasse was considered as thermoelectric generation until May 2, 2008.
Subsequent to May 2, 2008, it is considered as a renewable energy resource, according to the Law for the Promotion
of Investments in Electricity Generation based on Renewable Energy Sources (Ley de promoción de la inversión
para la generación de electricidad con el uso de energías renovables) approved by Legislative Decree N° 1002
(“DLRER”). Prior to the entry into force of DLRER, an authorization was required to generated electricity with
biomass, as was specified in article 4° of Law Decree N° 25844, Electricity Concessions Law.
Furthermore, from the date of effectiveness of DLRER, which modified article 3° d) of the Electricity
Concessions Law, a definitive concession is required in order to generate electricity with renewable energy
resources with installed capacities larger than 500 kW. Currently, San Jacinto is in the process of transferring the
authorization of an acquired company to its own name and Cartavio has the corresponding authorization in order to
generate electric power and Casa Grande is in process of requesting such authorization from the competent
authority.
Argentina
The production and commercialization of sugar in Argentina is subject to a wide range of both national and
provincial regulations, including mainly companies, environmental, foreign exchange control, tax, sale and
ownership of real estate, price controls and export quotas, among others. Please find below a brief description of the
material regulations affecting the sugar business in Argentina:
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Companies
The incorporation, organization, existence, and liquidation of companies in Argentina is governed by the
Companies Law (No. 19,550). The Public Registry of Commerce is the agency that oversees companies in
Argentina and it is represented by a different body in each province and in the city of Buenos Aires. These bodies
only have jurisdiction over the companies incorporated in each specific jurisdiction. In the city of Buenos Aires, the
Public Registry of Commerce is entrusted to the Inspección General de Justicia.
Environmental
The production and commercialization of sugar in Argentina is subject to several both national and provincial
environmental regulations, which are briefly described below:
National Law No. 24,051, which sets forth the regime applicable to the generation, use, transport, treatment,
and final disposition of hazardous waste materials, establishes that all persons that generate or process hazardous
waste materials must be enrolled in the respective registers. The application authority of said regime is the
Secretariat of Environment and Sustainable Development of Argentina. Accordingly, pursuant to local Resolution
No. 224/2006, the Province of Salta requires the enrollment in the local Hazardous Waste Registry.
Law No. 7,070 of the Province of Salta provides that all activities that could generate adverse effects to the
environment must obtain a certificate that assesses and approves the environmental effects of said activity.
According to local Executive Decree No. 3097/2000, the sugar industry is considered to be an environmental
hazardous activity.
Under Resolutions Nos. 568/2009 and 182/2010 of the Secretariat of Environment and Sustainable
Development of the Province of Salta, sugar manufacturers must register with the environmental hazardous local
registry.
The Water Code of the Province of Salta and Law No. 7,070 of the Province of Salta, establish that companies
that pour waste liquids into water courses and emit toxic gases that cause bad odors, which can potentially pollute
the environment, must obtain the respective permits.
Section 78 of the Water Code of the Province of Salta establishes the need to obtain a concession for the
industrial use of water courses.
The Argentine Food Code (Law No. 18,284) provides that all products that are manufactured, commercialized,
imported or exported destined to human consumption must be registered and approved by the National
Administration on Medicines, Food and Technology (ANMAT).
Foreign Exchange controls
Since the abandonment of the Peso-U.S. dollar parity in 2002, the Argentine government adopted a number of
monetary and currency exchange control measures, among which it created the Single Free Foreign Exchange
Market (“Mercado Único y Libre de Cambios” or “FX Market”) through which all purchases and sales of foreign
currency must be made. The agency in charge of enforcing the foreign exchange controls in Argentina is the Central
Bank of the Republic of Argentina (Banco Central de la República Argentina). Please find below a list of the main
foreign exchange restrictions in force that could affect companies with activities in Argentina:
(1) Argentine entities are required to transfer into Argentina and convert into Pesos, through the FX Market,
funds disbursed under financial indebtedness granted by non-residents. Unless expressly exempted, these
funds are subject to a 365-day non-interest bearing and non-transferrable bank deposit, in U.S. dollars, with
an Argentine financial entity, for an amount equal to 30% of the amount of the transaction (the “Mandatory
Deposit”). The principal under the foreign financial debt cannot be repaid prior to the expiration of a 365day term counted as from the date on which the financing proceeds were converted into Pesos and provided
certain conditions set forth by the Central Bank are complied with.
(2) Argentine entities are required to transfer into Argentina and convert into Pesos, in the FX Market, funds
disbursed under pre-export loans granted by non-residents (the “Pre-Export Financings”); and
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(3) Argentine entities are required to transfer into Argentina and convert into Pesos in the FX Market, all
foreign currency proceeds from exports of goods (except for those that are applied to the repayment of PreExport Financings) and services within certain periods established by the Central Bank.
Taxes
The main federal taxes in force in Argentina are the income tax, minimum presumptive income tax, value added
tax, tax on debits and credits in bank accounts, personal assets tax, equalization tax on dividends, and export taxes.
The main provincial taxes are the gross turnover tax and stamp tax. The agency in charge of collecting federal taxes
in Argentina is the Federal Administration of Public Revenue (Administración Federal de Ingresos Públicos –
AFIP), whereas each province has a local agency in charge of collecting provincial taxes. Please find below a brief
summary with the main characteristics and applicable rate of each of the above mentioned taxes:
Income Tax. The Income Tax Law (No. 20,628) establishes a federal tax on the worldwide income of
Argentine resident individuals and legal entities, and on the Argentine sourced income of non-resident individuals
and legal entities. The general income tax rate for companies is currently 35% on taxable net income obtained in
Argentina or abroad (gross income minus deductible expenses). Non-residents are taxed in Argentina by means of a
fixed withholding made by the local payer of Argentine sourced income.
Minimum Presumptive Income Tax. This tax applies to worldwide assets of Argentine companies. The tax is
only applicable if the total value of the assets exceeds AR$200,000 at the end of the company’s fiscal year, and is
levied at a yearly rate of 1% on the total value of such assets. Minimum Presumptive Income Tax can be credited
against Income Tax.
Value Added Tax. The Value Added Tax (“VAT”) applies to the domestic sale of goods, the domestic
rendering of services, and the import of goods and services. The current VAT general rate is 21%, however, certain
sales of goods (such as raw meats, cereals and oilseeds) are subject to a lower tax rate of 10.5%. The VAT rate for
the commercialization of sugar is 21%. VAT resulting from sales can be credited against VAT paid to suppliers,
and the balance must be monthly paid to the AFIP.
Tax on debits and credits in bank accounts. This tax applies to debits and credits in bank accounts opened in
Argentina and to other transactions that, due to their special nature and characteristics, are similar or could be used
in lieu of a bank account. The general tax rate is 0.6% on each credit and each debit. 20% of the resulting tax can be
credited against Income Tax.
Personal Assets Tax. Argentine companies have to pay the personal assets tax corresponding to Argentine
resident individuals, foreign individuals, and foreign entities for the holding of shares and other participations in
such company as of December 31 of each year. The applicable tax rate is 0.5% and is levied on the equity value
stated in the latest financial statements.
Equalization Tax on dividends. Although in principle there is no dividends tax in Argentina, equalization tax is
applicable at a 35% rate on dividends distributed in excess of the accumulated taxable income of the entity. Under
certain double tax treaties, equalization tax may be reduced.
Export Taxes. At present, pursuant to Decree No. 509/07 of the Ministry of Economy and Public Finance,
exports of sugar are subject to a 5% export duty. Sugar exporters are entitled to a reimbursement of local export
duties up to 4.05% of the export price.
Gross Turnover Tax. The Gross Turnover tax is a provincial tax levied on gross income derived from lucrative
activity. Each of the provinces and the City of Buenos Aires apply different tax rates; however, most of the
provinces apply rates ranging between 3% and 5% on the commercialization of sugar. The tax is levied on the
amount of gross income resulting from business activities carried on within the respective jurisdictions. A federal
treaty has been agreed between provinces to avoid double taxation in cases of inter-jurisdictional activities.
Stamp Tax. The Stamp tax is a provincial tax, which is levied on the formal execution of public or private
instruments, such as all type of contracts, notary deeds and promissory notes, among others. In general, stamp tax
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rates vary from 0.6% to 4% depending on the jurisdiction, and it is applied based on the economic value of the
instrument.
Sale and Ownership of Real Estate
The acquisition and transfer of real estate is governed by the provisions of the Argentine Civil Code as well as
municipal zoning ordinances.
On December 28, 2011, the Congress of Argentina passed Law No. 26,737 (regulated by Decree No. 274/2012)
that lays down the regime for the protection of national land (“National Land Protection Law”), which restricts the
ownership of land by foreigners.
For purposes of the National Land Protection Law, foreigners are deemed:
(i) Foreign individuals whether domiciled in Argentina or abroad, unless they have resided in Argentina
interruptedly during ten years, have Argentinean children (who have resided uninterruptedly in Argentina
during five years) or are married to an Argentine citizen to the extent the marriage took place no less than
five years before the acquisition of the land and have resided for at least five years in Argentina;
(ii) Legal entities where foreigners own or control 51% of its equity or a lower percentage if it is sufficient to
control the entity; and
(iii) Foreign governments or public entities controlled by foreign governments.
The following transactions must be notified to the Government of Argentina in order to control that the
provisions of the National Land Protection Law are met:
(i) Any variation in the equity composition of a legal entity that is controlled by foreigners or where foreigners
own more than 25% of its equity.
(ii) The transfer of land ownership (whether directly or indirectly) to a trust whose beneficiaries are foreigners.
(iii) Any joint venture or association in which foreigners own 25% or a larger participation.
Foreigners cannot own more than 15% of the rural land of Argentina. The same cap is applicable in each
province and municipality. Each foreign individual or legal entity cannot individually own more than 30% of said
15% cap.
Furthermore, foreigners are not allowed to purchase land that is adjacent to relevant rivers or lakes. The
purchase of land located in the so-called security zone (close to the borders) must be approved by the Ministry of
Interior.
As from the issuance of the National Land Protection Law, foreigners are not allowed to purchase more than
1,000 hectares of the best quality land or its equivalent depending on where the land is located. The Government
will determine said parameter based on the location of the land and its productive potential, so it is possible that in
certain regions the surface that foreigners will be allowed to buy will be higher. Prior to the acquisition of the land,
the Government will issue a certificate in order to validate that the purchaser meets the parameters set forth by the
National Land Protection Law. Essentially, this certificate will indicate the land that the buyer owns in Argentina, if
any.
Price Controls and Export Quotas
As of year 2010, the Secretariat of Domestic Trade of the Ministry of Economy and Public Finance, unofficially
and threatening with the application of the Supply Law (No. 20,680), has obliged sugar manufacturers to sell certain
quantities of sugar at a preferred price for its subsequent sale to the public. In a similar fashion, in 2010, the
Secretariat of Domestic Trade of the Ministry of Economy and Public Finance temporarily reduced the sugar export
quota to oblige local sugar producers to sell the product at a lower price in the domestic market.
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Ecuador
The governmental authorities in Ecuador in charge of regulating the environment in the areas where La Troncal
include: (a) the Ministry of Environment (Ministerio del Ambiente), (b) the National Council of Electricity (Consejo
Nacional de Electricidad), (c) the National Water Secretariat (Secretaría Nacional del Agua) and (d) the
Autonomous Provincial Government of La Troncal (Gobierno Provincial y Autónomo de la Troncal).
The environmental laws and regulations applicable to La Troncal include: (a) the Cultural Heritage Act (Ley de
Patrimonio Cultural), (b) the Bylaws of the Electricity Sector Regime (Reglamento a la Ley de Regimen del Sector
Eléctrico), (c) the Codification of the Environmental Management Act (Codificación de la Ley de Gestión
Ambiental), (d) the Regulations to the Environmental Management Act (Reglamento a la ley de Gestión Ambiental),
(e) the Codification of the Forestry Law (Codificación de la Ley Forestal), (f) the Unified Text to the Secondary
Environmental Legislation (Texto Unificado de la Legislación Ambiental Secundaria), and (g) Technical
environment standards (Normas técnicas ambientales).
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MANAGEMENT
We are managed by a board of directors and by our executive officers.
Board of Directors
The Board of Directors is the body responsible for the administration of Coazucar. The members of our Board
of Directors are appointed by our shareholders at the general shareholders meeting for a three-year term and are
eligible for re-election. The Board of Directors is currently comprised of three members. The quorum for the Board
of Directors meetings is the next whole number greater than half of members of the Board of Directors.
In order for resolutions to be adopted by the Board of Directors, approval by the majority of all the Directors
present at the meeting is required and, in the case of a deadlock, the chairman’s vote determines the result. The
Board of Directors has all the powers for legal representation and management necessary to conduct the business of
Coazucar, except for those powers granted exclusively to the general shareholders by our bylaws and by applicable
law.
The following table sets forth certain information with respect to the current members of our Board of
Directors.
Name
Date of Appointment
Jorge Columbo Rodríguez Rodríguez (President) ............
Vito Modesto Rodríguez Rodríguez (Vice President) ......
Claudio José Rodríguez Huaco.........................................
2005
2007
2007
Age
Expiration of Appointment
66
73
31
2014
2014
2014
We summarize below certain biographical information regarding our current directors.
Jorge Columbo Rodríguez Rodríguez. Mr. Rodríguez has served as a member of our Board of Directors since
2005. He currently serves as either the President or Vice President of all Grupo Gloria companies. He serves as a
member of the board of directors of Cartavio, Casa Grande, San Jacinto, Azucarera Olmos, Sintuco, Gloria S.A.,
Yura S.A., as well as other Grupo Gloria companies. He holds a bachelor’s degree in industrial engineering from
the Universidad Nacional de Ingeniería del Perú and graduate degrees in business administration from the University
of Leeds and the University of Reading.
Vito Modesto Rodríguez Rodríguez. Mr. Rodríguez has served as a member of our Board of Directors since
2007. He currently serves as either the President or Vice President of all Grupo Gloria companies. He serves as a
member of the board of directors of Cartavio, Casa Grande, San Jacinto, Azucarera Olmos, Sintuco, Gloria S.A.,
Yura S.A., as well as other Grupo Gloria companies. He holds a bachelor’s degree in civil engineering from the
Universidad Nacional de Ingeniería del Perú.
Claudio José Rodríguez Huaco. Mr. Rodríguez has served as a member of our Board of Directors since 2007.
Mr. Rodríguez worked in the Capital Markets and Banking department of PricewaterhouseCoopers in London and
as an investment banker with JPMorgan Chase in New York, focusing on Latin American markets. He serves as a
member of the board of directors of Cartavio, Casa Grande, San Jacinto, Azucarera Olmos, Gloria S.A. and Yura
S.A. He holds a bachelor’s degree in business administration, finance and accounting from Oxford Brookes
University and a master’s degree in financial administration from the Lancaster University in England.
The business address of the members of our Board of Directors is Corporación Azucarera del Perú S.A., Av.
República de Panamá 2461, La Victoria, Lima 13, Peru.
Executive Officers
Our chief executive officers of Coazucar, La Troncal and San Isidro are our legal representatives and our chief
executive officers and our executive officers are responsible for our internal organization and day-to-day operations
and the implementation of the general policies and guidelines established from time to time by our Board of
Directors.
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The following table sets forth certain information with respect to our executive officers and the chief executive
officers of our principal subsidiaries.
Name
John Carty Chirinos ..................
Hugo Dávila Trinidad...............
Fabio Bouroncle Zegarra ..........
Elizabeth Mardini Eliot ............
Carlo Bertini Hurtado ...............
Stanley Simons Chirinos ..........
César Loli Berríos.....................
Marco Ricasca Zvietcovich ......
Roberto Foulkes........................
Edgardo García .........................
Position
Date of
Appointment
Years of Experience
in Sugar and Ethanol
Age
Chief Executive Officer
Production Manager
Agricultural Services Manager
Commercial Manager
Administrative Manager
Human Resources Manager
Field Manager
Field Superintendent
Chief Executive Officer of La Troncal
Chief Executive Officer of San Isidro
2007
2007
2007
2007
2012
2011
2007
2009
2007
2011
13
25
9
10
3
9
12
11
14
26
42
74
48
53
48
52
37
38
45
56
Summarized below is certain biographical information regarding our executive officers and the chief executive
officers of our principal subsidiaries.
John Carty Chirinos. Mr. Carty has served as our Chief Executive Officer since 2007. Previously, he served as
Chief Executive Officer of Casa Grande and has served as Operations Supervisor, Commercial Manager and
Assistant Manager of Cartavio. Before joining Grupo Gloria, Mr. Carty worked in different companies of the
manufacturer, beverage, cattle and transport industries. He holds a bachelor’s degree in business administration
from the Universidad Católica de Santa María. Mr. Carty also completed graduate studies in business
administration at Centrum Pontificia Universidad Católica del Perú.
Hugo Dávila Trinidad. Mr. Dávila has served as our Production Manager since 2007. Previously, he served as
Production Manager of Casa Grande, Cartavio and San Jacinto and as Ethanol Business Manager of Coazucar.
Before joining Grupo Gloria, Mr. Dávila served as CEO of Sociedad Paramonga Ltda. S.A., Assistant Manager of
Empresa Agricola Paramonga, S.A. and as Manager of Papelera Peruana S.A. He holds a bachelor’s degree in
mechanical and electrical engineering from the Universidad Nacional de Ingeniería. Mr. Dávila also completed
graduate studies in management at the Universidad de Piura, in accounting and finance at Universidad ESAN, and at
North Carolina State University.
Fabio Bouroncle Zegarra. Mr. Bouroncle has served as our Agricultural Services Manager since 2007.
Previously, he served as Agricultural Services Manager of Cartavio and Casa Grande and as Agricultural Machinery
Manager of Cartavio. Before joining Grupo Gloria, he served as head of the North and Barranca offices of
Transaltisa S.A. Mr. Bouroncle completed graduate studies in strategic planning at the Universidad César Vallejo.
Elizabeth Mardini Eliot. Ms. Mardini has served as our Commercial Manager since 2007. Previously, she
served as Director of Sales and Commercial Superintendent of Casa Grande. Before joining Grupo Gloria, Ms.
Mardini served as National Sales Manager of Deprodeca, S.A.C., Chief Executive Officer of Ocho Rios
Distribuidora S.A.C., Enrique W. Gibson Ltda., Andina de Valores Sociedad Agente de Bolsa, Radio TV
Continental in Arequipa, and as General Services Director of Enafer Peru. She holds a bachelor’s degree in business
administration from the Universidad Nacional de San Agustín.
Carlo Bertini Hurtado. Mr. Bertini has served as our Administrative Manager since February 2012. Before
joining Grupo Gloria, Mr. Bertini served as Planning Manager of Grupo Caña Brava, as General Manager of the
Gobierno Regional Piura, President of Proyecto Especial Chira – Piura, and as Manager of Finance and
Administration of DSM Anti-Infectives Peru. Mr. Bertini holds a bachelor’s degree in economics and a master’s
degree in finance and banking, both from the Universidad de Lima. Mr. Bertini also completed graduate studies in
business administration at the Universidad ESAN.
Stanley Simons Chirinos. Mr. Simons has served as our Human Resources Manager since 2011. Previously, he
served as Human Resources Manager of Grupo Gloria, Casa Grande and Cartavio. Before joining Grupo Gloria,
Mr. Simons served as Director of Human Resources of Corporación Andina de Distribución S.A., Compañía Minera
Milpo S.A.A. and Consorcio Textil del Pacifico S.A. He holds a bachelor’s degree in law from the Universidad
Católica de Santa María.
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César Loli Berríos. Mr. Loli Berríos has served as our Field Manager since 2007. Previously, he served as
Field Manager of Cartavio, Sintuco and Casa Grande. Before joining Grupo Gloria, Mr. Loli served as a field
engineer for Empresa Agroindustrial Laredo, S.A.A. He holds a bachelor’s degree in agricultural engineering from
the Universidad Privada Antenor Orrego and a master’s degree in business administration from the Pontificia
Universidad Católica del Perú.
Marco Ricasca Zvietcovich. Mr. Ricasca has served as Field Superintendent since 2009. He previously served
as Field Manager and Projects and Water Director of San Jacinto. Before joining Grupo Gloria, Mr. Ricasca served
as a Technical Irrigation Specialist of Instituto Nacional de Investigación Agraria. He holds a bachelor’s degree in
agricultural engineering from the Universidad Nacional de San Antonio Abad del Cusco. Mr. Ricasca also
completed graduate studies in agribusiness administration at Universidad ESAN.
Roberto Foulkes. Mr. Foulkes has served as our Chief Executive Officer of La Troncal since 2007. Before
joining Grupo Gloria, Mr. Foulkes worked as a tax advisor for Banco Latino. He holds a bachelor’s degree in law
from the Universidad Católica de Santa María and a master’s degree in business administration from the Pontificia
Universidad Católica del Perú.
Edgardo García. Mr. García has served as our Chief Executive Officer of San Isidro since 2011. Before
joining Grupo Gloria, Mr. García served as a partner of the tax and accounting firm Estudio Bona, Garcia y Asoc.,
as General Manager of Prosal, S.A., and as a partner at Editorial Kapelusz, S.A. He holds a bachelor’s degree in
accounting from the Universidad de Buenos Aires.
Committees
Our Board of Directors does not have any specialized committees as of the date of this offering memorandum.
The Board of Directors is assisted in its audit functions by our internal audit department, by internal auditors from
KPMG and by the comptroller of Grupo Gloria.
Compensation
Our bylaws provide that the remuneration of the Board of Directors shall from time to time be determined by
Coazucar’s shareholders in an annual mandatory general shareholders meeting. All members of our Board of
Directors serve without compensation.
Key personnel compensation include management services and personnel, which services amounted for S/.2.7
million during 2011. In addition to salaries and bonuses, our executive officers generally receive an automobile
allowance, life insurance and medical insurance. In addition, our executive officers that are expatriates serving in
Ecuador receive housing allowances and annual paid home leave.
Share Ownership
Two members of our Board of Directors, Vito Rodríguez Rodríguez and Jorge Rodríguez Rodríguez, each
directly owns 2.94% of our shares. They indirectly own all of our outstanding shares.
Stock Option Plan
We do not have any stock option plans for our employees as of the date of this offering memorandum.
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SHAREHOLDERS
Clarcrest Investments S.A., a sociedad anónima incorporated under the laws of the Republic of Panama, owns
94.12% of our outstanding shares. Vito Rodríguez Rodríguez and Jorge Rodríguez Rodríguez each own 2.94% of
our outstanding shares. Maningham Holding S.A., the sole shareholder of Clarcrest Investments S.A., owns one of
our outstanding shares.
The rights of Clarcrest Investments S.A., Vito Rodríguez Rodríguez, Jorge Rodríguez Rodríguez and
Maningham Holding S.A., as shareholders of Coazucar are contained in our bylaws. Our company operates in
accordance with those bylaws and with the provisions of Peruvian law.
GRUPO GLORIA
The shareholders of Grupo Gloria directly and indirectly own all of our shares. Grupo Gloria is a conglomerate
comprised of operating companies, including among many others, the Guarantors, Gloria S.A. and Yura S.A., under
the common control of Vito Rodríguez Rodríguez and Jorge Rodríguez Rodríguez, with operations in various
industries throughout Latin America, including dairy, food, cement, paper, agriculture and transportation. Grupo
Gloria had assets of approximately S/.3,568.5 million (US$1,323.6 million) and S/.3,647.1 million (US$1,367.5
million) as of December 31, 2011 and March 31, 2012, respectively. For the year ended December 31, 2011 and the
three months ended March 31, 2012, Grupo Gloria generated net income of S/.362.8 million (US$134.6 million) and
S/.93.9 million (US$35.2 million), respectively, and revenues of S/.2,512.4 million (US$931.9 million) and S/.677.3
million (US$253.9 million), respectively. As of March 31, 2012, Grupo Gloria had approximately 26,000
employees on a consolidated basis.
The principal executive offices of Grupo Gloria are located at Av. República de Panamá 2461, La Victoria,
Lima 13, Peru. Its main telephone number is +51 (1) 470-7170.
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RELATED PARTY TRANSACTIONS
In the ordinary course of our business we engage in a variety of transactions with certain of our affiliates.
These transactions are entered into on an arm’s length basis. As of December 31, 2011, the material transactions
that we had entered into with our related parties are described below, and as of March 31, 2012, there have been no
additional material transactions with related parties. See note 28 to the audited consolidated financial statements and
note 15 to the unaudited condensed consolidated interim financial statements included in this offering memorandum.
The following is a description of related party transactions that our management believes are material to us.
Chiquitoy
In 2005, Cartavio granted a US$2.9 million loan to Chiquitoy, one of our subsidiaries. This loan has a senior
tranche, which bears interest at a rate of 4.0% per annum, and a subordinated tranche, which bears interest at a rate
per annum of 1.0% .
In order to secure Chiquitoy’s payments obligations in favor of Cartavio, Chiquitoy granted a first and
preferential lien in favor of Cartavio over 280,000 tons of its sugarcane.
San Jacinto
In 2009, we entered into a management, consulting and other services agreement with San Jacinto, one of our
subsidiaries, to provide management, consulting and other services related to the operation and business of San
Jacinto. Under this agreement, we paid S/.233,333 plus value added tax, on a monthly basis during a period of three
years, beginning on January 2010, for such services. We will have paid the full amount due under this agreement in
January 2013.
Gloria S.A.
We enter into sugar purchase and sale transactions on a regular basis with Gloria S.A., a related party. During
2011, we sold approximately S/.59.5 million worth of sugar to Gloria S.A., of which S/.2.3 million is outstanding.
Deprodeca S.A.C.
We enter into sugar purchase and sale transactions on a regular basis with Deprodeca S.A.C., a related party.
During 2011, we sold approximately S/.228.1 million worth of sugar to Deprodeca S.A.C., of which S/.13.1 million
is outstanding. In 2007 and 2008, we granted a S/.6.7 million unsecured loan to Deprodeca S.A.C. This loan bears
interest at a rate per annum of 6%.
In addition, during 2011, we entered into an operating lease of premises with Deprodeca S.A.C. as lessor. We
also enter into freight services transactions on a regular basis with Deprodeca S.A.C. We are required to pay S/.2.1
million as rent for the above mentioned operating lease and for all services rendered.
Trupal S.A.
We enter into bagasse purchase and sale transactions on a regular basis with Trupal S.A., a related party.
During 2011, we sold approximately S/.13.8 million worth of bagasse to Trupal S.A., of which S/.1.0 million is
outstanding.
Lakebar Holding S.A.
In 2006, Lakebar Holding S.A., a related party, granted us a S/.25.5 million unsecured loan to finance the
acquisition of shares of Casa Grande. This agreement does not bear interest and does not have a definite due date.
Before the closing of this notes offering, we intend to enter into an amended and restated loan agreement with
Lakebar Holding S.A. to subordinate the loan to the notes offered herein. The amended and restated loan agreement
will require us to pay interest on the loan at a rate per annum of LIBOR + 0.25% and the loan will mature in June
2023.
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Racionalizacion Empresarial S.A.
We enter into freight services transactions on a regular basis with Racionalizacion Empresarial S.A., a related
party. We are required to pay S/.3.0 million for the freight services rendered to us during 2011.
Clarcrest Investments S.A.
Between 2009 and 2010, Clarcrest Investments S.A., our majority shareholder, granted us a S/.44.4 million
unsecured loan to finance the acquisition of certain shares of Cartavio and San Jacinto and for working capital. This
loan does not bear any interest and does not have a definite due date. Before the closing of this notes offering, we
intend to enter into an amended and restated loan agreement with Clarcrest Investments S.A. to subordinate the loan
to the notes offered herein. The amended and restated loan agreement will require us to pay interest on the loan at a
rate per annum of LIBOR + 0.25% and the loan will mature in June 2023.
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DESCRIPTION OF THE NOTES
In this “Description of the Notes,” the word “Company” refers only to Corporación Azucarera del Perú S.A. and
not to any of its Subsidiaries, as defined herein. The definitions of certain other terms used in this description are set
forth throughout the text or under “―Certain Definitions.”
The Company will issue, and the Initial Guarantors will guarantee, the notes offered hereby (the “Notes”) under
an indenture (the “Indenture”) among the Company, the Initial Guarantors and Citibank, N.A., as trustee (the
“Trustee”). The terms of the Notes include those set forth in the Indenture. The Notes will not be registered under
the Securities Act and will be subject to certain transfer restrictions. See “Transfer Restrictions”.
The following description is a summary of the material terms of the Indenture. It does not, however, restate the
Indenture in its entirety. You should read the Indenture because it contains additional information and because it
and not this description defines your rights as a holder of the Notes. After the Notes have been issued, a copy of the
Indenture may be obtained by requesting it from the Company.
Brief Description of the Structure and Ranking of the Notes and the Note Guarantees
The Notes
The Notes will:

be the Company’s general unsecured unsubordinated obligations;

mature on August 2, 2022;

be effectively subordinated to all existing and future secured Indebtedness of the Company to the extent of
the assets securing such Indebtedness;

be structurally subordinated to all existing and future Indebtedness and other liabilities of Subsidiaries of
the Company that do not provide Note Guarantees and with respect to Casa Grande, to the extent that any
obligations under the Notes exceed the amount of its partial Guarantee of amounts due on the Notes in an
initial amount equal to US$162,500,000;

rank equally in right of payment with any and all of the Company’s existing and future Indebtedness that is
not subordinated in right of payment to the Notes, other than with respect to certain obligations given
preferential treatment pursuant to the laws of Peru;

rank senior in right of payment to any and all of the Company’s existing and future Indebtedness that is
subordinated in right of payment to the Notes; and

be guaranteed on an unsubordinated basis by the Guarantors.
The Note Guarantees
Each Note Guarantee of a Guarantor will:

cover all amounts due on or with respect to the Notes, including amounts due in respect of principal,
interest or otherwise;

be a general unsecured unsubordinated obligation of the Guarantor unlimited in amount, except in the case
of Casa Grande whose Note Guarantee in respect of amounts due under the Notes is limited to an initial
amount equal to US$162,500,000;

provide that each Guarantor will be jointly and severally liable for the Notes, subject to the limited amount
applicable to Casa Grande;
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
to the extent not otherwise secured by assets of such Guarantor, be effectively subordinated to all existing
and future secured Indebtedness of such Guarantor to the extent of the assets securing such Indebtedness;

rank equally in right of payment with any and all of such Guarantor’s existing and future Indebtedness that
is not subordinated in right of payment to its Note Guarantee, other than with respect to certain obligations
given preferential treatment pursuant to the laws of Peru; and

rank senior in right of payment to any and all of such Guarantor’s existing and future Indebtedness that is
subordinated in right of payment to its Note Guarantee.
General
As of March 31, 2012, after excluding intercompany balances and intercompany guarantees:

on a consolidated basis, the Company and its Subsidiaries had S/.805.6 million (US$302.0 million) of
Indebtedness outstanding, of which S/.619.2 million (US$232.2 million) was secured Indebtedness and S/.0
would have been subordinated in right of payment to the Notes;

on a combined basis, the Guarantors had S/.264.3 million (US$99.1 million) of Indebtedness outstanding,
of which S/.199.5 million (US$74.8 million) was secured Indebtedness and S/.0 would have been
subordinated in right of payment to the Note Guarantees;

Casa Grande had S/.106.8 million (US$40.0 million) of Indebtedness outstanding, of which S/.97.8 million
(US$36.7 million) was secured Indebtedness and S/.0 million would have been subordinated in right of
payment to its Note Guarantee; and

on a combined basis, the Restricted Subsidiaries other than the Guarantors, had total liabilities of S/.568.1
million (US$213.0 million), including S/.306.6 million (US$115.0 million) of Indebtedness, and total assets
of S/.1,425.8 million (US$534.6 million).
Not all of the Company’s Subsidiaries will Guarantee the Notes. In the event of a bankruptcy, liquidation or
reorganization of any of these non-guarantor Subsidiaries, subject to applicable bankruptcy law, the non-guarantor
Subsidiaries will likely be required to repay financial and trade creditors before distributing any assets to the
Company or a Guarantor. For the three months ended March 31, 2012, the non-guarantor Subsidiaries and Casa
Grande generated 24.1% and 40.6%, respectively, of the Company’s consolidated revenues and 14.8% and 51.3%,
respectively, of the Company’s consolidated EBITDA.
As of the Issue Date, all of the Company’s Subsidiaries will be “Restricted Subsidiaries.” However, under the
circumstances described below under the caption “—Certain Covenants—Designation of Restricted and
Unrestricted Subsidiaries,” the Company will be permitted to designate certain of its Subsidiaries as “Unrestricted
Subsidiaries.” Unrestricted Subsidiaries will not be subject to any of the restrictive covenants in the Indenture.
Further, Unrestricted Subsidiaries will not Guarantee the Notes.
Application has been made to the Irish Stock Exchange for the Notes to be admitted to the Official List and to
trading on the Global Exchange Market which is the exchange regulated market of the Irish Stock Exchange.
Although the Indenture will contain limitations on the amount of additional Indebtedness that the Company, the
Guarantors and the Restricted Subsidiaries may incur, the amount of such additional Indebtedness could be
substantial.
Principal, Maturity and Interest
The Notes will mature on August 2, 2022. The Company will issue the Notes in the aggregate principal amount
of US$325.0 million in this offering. Subject to the covenant described under “—Certain Covenants—Limitation on
Indebtedness,” the Company is permitted to issue additional Notes of the same series under the Indenture
(“Additional Notes”), having the same terms and conditions as the Notes in all respects, including (i) full and
unconditional Note Guarantees of any such Additional Notes by Cartavio, San Jacinto and Azucarera Olmos and (ii)
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a partial and unconditional Note Guarantee of any such Additional Notes by Casa Grande in an amount equal to one
half of the aggregate principal amount of such Additional Notes. The Notes and any Additional Notes that are
issued will be treated as a single class for all purposes under the Indenture, including with respect to waivers,
amendments, redemptions and Offers to Purchase. However, in order for any Additional Notes to have the same
ISIN, CUSIP or common code, as applicable, as the Notes, such Additional Notes must be fungible with the Notes
for U.S. federal income tax purposes. Unless the context otherwise requires, references to the “Notes” for all
purposes under the Indenture and in this “Description of the Notes” include any Additional Notes that are issued.
Interest on the Notes will accrue from the most recent date to which interest has been paid or, if no interest has
been paid, from and including the Issue Date, at a rate per annum of 6.375%, and will be payable semi-annually in
arrears on February 2 and August 2 of each year, commencing on February 2, 2013. Interest will be payable to
Holders of record on each Note in respect of the principal amount thereof outstanding as of the immediately
preceding January 16 or July 16, as the case may be.
Interest will be computed on the basis of a 360-day year comprising twelve 30-day months. In no event will the
rate of interest on the Notes be higher than the maximum rate permitted by applicable law.
Under New York’s statute of limitations, any legal action for breach of the Indenture, including non-payment of
interest or principal, must be commenced within six years after any such breach.
Form of Notes
The Notes will be issued on the Issue Date only in fully registered form without coupons and only in
denominations of US$100,000 and integral multiples of US$1,000 in excess thereof.
The Notes sold in reliance upon Rule 144A under the Securities Act will be represented by one or more
permanent global notes (the “Rule 144A Global Notes”). The Notes sold in offshore transactions in reliance upon
Regulation S under the Securities Act will be represented by one or more permanent global notes (the “Regulation S
Global Notes,” together with the Rule 144A Global Notes, the “Global Notes”). The Global Notes will be deposited
with the Trustee as custodian for the Depository Trust Company (“DTC”). Ownership of interests in the Global
Notes, referred to in this description as “book-entry interests,” will be limited to persons that have accounts with
DTC or their respective participants. The terms of the Indenture will provide for the issuance of definitive registered
Notes in certain circumstances. Please see the section entitled “―Book-Entry; Delivery and Form.”
The registered Holder of a Note will be treated as the owner of it for all purposes.
Transfer and Exchange
A Holder may transfer or exchange Notes in accordance with the Indenture and the procedures described in
“Transfer Restrictions.” The Registrar and the Trustee may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents. No service charge will be made for any registration of transfer,
exchange or redemption of the Notes, but the Company may require payment of a sum sufficient to cover any
transfer tax or similar governmental charge payable in connection with any such registration of transfer or exchange.
The Company is not required to transfer or exchange any Note selected for redemption. Also, the Company is
not required to transfer or exchange any Note for a period of 15 days before a selection of Notes to be redeemed.
Payments on the Notes; Paying Agent and Registrar
If a Holder holds at least US$10.0 million in aggregate principal amount of Notes and has given wire transfer
instructions to the Company and the Paying Agent at least 10 Business Days prior to the applicable payment date,
the Company, or the Paying Agent on its behalf, will pay all principal, interest and premium, if any, on that Holder’s
Notes in accordance with those instructions. All other payments on Notes will be made at the office or agency of
the Paying Agent and Registrar within the City and State of New York unless the Company elects to make interest
payments by check mailed to the Holders at their addresses set forth in the register of Holders; provided that all
payments of principal, premium, if any, and interest, with respect to the Global Notes registered in the name of or
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held by DTC or its nominee will be made by wire transfer of immediately available funds to the account specified
by DTC.
The principal of and interest on the Notes will be payable in U.S. dollars or in such other coin or currency of the
United States as at the time of payment is legal tender for the payment of public and private debts.
The Trustee will initially act as Paying Agent and Registrar. The Company may change the Paying Agent or
Registrar without prior notice to the Holders, and the Company or any of its Subsidiaries may act as Paying Agent or
Registrar. However, for so long as any Notes are listed on the Irish Stock Exchange and its rules so require, we will
deliver notice of any such change to the Companies Announcement Office in Dublin.
Note Guarantees
General
Under the Indenture, the Initial Guarantors will jointly and severally agree to guarantee the due and punctual
payment of all amounts payable under the Notes and the Indenture, including principal, premium, if any, and
interest; provided that the Note Guarantee of Casa Grande with respect to amounts due on the Notes, including
principal, interest, premium, if any, and any other amounts, will be limited to an initial amount equal to
US$162,500,000. The Indenture will require any Restricted Subsidiary that Guarantees Indebtedness of the
Company or any Guarantor to provide a Note Guarantee. Please see the section entitled “―Future Note
Guarantees” below.
In the event that the Company acquires or redeems any Notes and such Notes are no longer considered
outstanding under the Indenture, the amount of Casa Grande’s Note Guarantee will be reduced on a proportional
basis.
Each Guarantor that makes a payment or distribution under its Note Guarantee will be entitled to contribution
from any other Guarantor.
In addition to Casa Grande’s partial guarantee, the Indenture will limit the obligations of each Guarantor under
its Note Guarantee to an amount not to exceed the maximum amount that can be guaranteed by such Guarantor by
law or without resulting in its obligations under its Note Guarantee being voidable or unenforceable under
applicable laws relating to fraudulent transfer, or under similar laws affecting the rights of creditors generally. By
virtue of these limitations, a Guarantor’s obligation under its Note Guarantee could be significantly less than
amounts payable with respect to the Notes and the Indenture, or a Guarantor may have effectively no obligation
under its Note Guarantee.
We cannot assure you that the above limitation will protect the Note Guarantees from fraudulent transfer
challenges or, if it does, that the remaining amount due and collectible under the Note Guarantees would suffice, if
necessary, to pay the Notes in full when due. In a recent Florida bankruptcy case, this kind of provision was found
to be unenforceable and, as a result, the subsidiary guarantees in that case were found to be fraudulent conveyances.
We do not know if that case will be followed if there is litigation on this point under the Indenture. However, if it is
followed, the risk that the Note Guarantees will be found to be fraudulent conveyances will be significantly
increased.
Future Note Guarantees
If the Company or any Restricted Subsidiary acquires or creates any Significant Subsidiary on or after the Issue
Date, then that newly acquired or created Significant Subsidiary must become a Guarantor and execute a
supplemental indenture and deliver an Opinion of Counsel to the Trustee; provided that (i) such Significant
Subsidiary’s Note Guarantee of the Company’s obligations under the Notes and the Indenture will be limited to the
maximum amount that would not result in a breach or violation by such Significant Subsidiary of any provision of
any agreement to which it is party existing at the time of such acquisition or creation; provided, further, that such
provision was not adopted in connection with, or in contemplation of, such acquisition or creation or to avoid
guaranteeing the Notes, and (ii) such Significant Subsidiary shall not be required to execute any such supplemental
indenture if the execution or enforcement of such supplemental indenture and the resultant Note Guarantee
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thereunder is prohibited by, or in violation of, any applicable law to which such Significant Subsidiary is subject and
the Company has delivered to the Trustee an Opinion of Counsel to that effect. Notwithstanding the foregoing, if at
the time of such acquisition or creation, such Significant Subsidiary has no Indebtedness, such Significant
Subsidiary shall not be required to become a Guarantor or execute any such supplemental indenture; provided that if
at any time after such acquisition or creation, such Significant Subsidiary Incurs any Indebtedness, at the time of
such Incurrence such Significant Subsidiary must become a Guarantor and execute a supplemental indenture and
deliver an Opinion of Counsel to the Trustee in accordance with the preceding sentence.
The Company will not permit any Restricted Subsidiary, directly or indirectly, to Guarantee any Indebtedness
of the Company or any Guarantor unless such Restricted Subsidiary (a) is a Guarantor or (b) within 10 days executes
and delivers to the Trustee an Opinion of Counsel and a supplemental indenture providing for the Guarantee of the
payment of the Notes by such Restricted Subsidiary, which Guarantee will rank senior in right of payment to or
equally in right of payment with such Subsidiary’s Guarantee of such other Indebtedness.
Release of the Note Guarantees
A Note Guarantee of a Guarantor will be automatically and unconditionally released (and thereupon shall
terminate and be discharged and be of no further force and effect):
(1) in connection with any sale or other disposition (including by merger or otherwise) of Capital Stock of the
Guarantor after which such Guarantor is no longer a Subsidiary of the Company, if the sale of all such
Capital Stock of that Guarantor complies with the applicable provisions of the Indenture;
(2) if the Company properly designates the Guarantor as an Unrestricted Subsidiary under the Indenture;
(3) solely in the case of a Note Guarantee created pursuant to the second paragraph of the covenant described
under “—Future Note Guarantees,” upon the release or discharge of the Guarantee that resulted in the
creation of such Note Guarantee pursuant to that covenant, except a discharge or release by or as a result of
payment under such Guarantee;
(4) upon a Legal Defeasance or satisfaction and discharge of the Indenture that complies with the provisions
under “—Legal Defeasance and Covenant Defeasance” or “—Satisfaction and Discharge;”
(5) upon payment in full of the aggregate principal amount of all Notes then outstanding and all other
obligations under the Indenture and the Notes then due and owing; or
(6) upon the final liquidation or dissolution of such Guarantor; provided that no Event of Default occurs as a
result thereof or has occurred or is continuing.
In addition, the Holders of at least seventy-five percent (75.0%) in principal amount of the Notes then
outstanding (including, without limitation, consents obtained in connection with a purchase of, or tender offer or
exchange offer for, Notes) may release any Guarantor from any of its obligations under its Note Guarantee or the
Indenture.
Upon any occurrence giving rise to a release of a Note Guarantee as specified above, the Trustee, upon receipt
of an Officers’ Certificate from the Company and an Opinion of Counsel each stating that all conditions precedent to
such release have been satisfied, will execute any documents reasonably required in order to evidence or effect such
release, discharge and termination in respect of such Note Guarantee. Neither the Company nor any Guarantor will
be required to make a notation on the Notes to reflect any Note Guarantee or any such release, termination or
discharge. For so long as any Notes are listed on the Irish Stock Exchange and its rules so require, we will deliver
notice of any such release, termination or discharge of a Note Guarantee to the Companies Announcement Office in
Dublin.
Optional Redemption
At any time prior to August 2, 2015, the Company may redeem up to 35% of the aggregate principal amount of
Notes issued under the Indenture (including any Additional Notes) at a redemption price of 106.375% of the
principal amount thereof, plus accrued and unpaid interest thereon to the redemption date, subject to the rights of
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Holders of Notes on the relevant record date to receive interest due on the relevant interest payment date, with the
net cash proceeds of one or more Equity Offerings; provided that:
(1) at least 65% of the aggregate principal amount of Notes issued under the Indenture (including any
Additional Notes) remains outstanding immediately after the occurrence of such redemption (excluding
Notes held by the Company or its Affiliates); and
(2) the redemption must occur within 90 days of the date of the closing of such Equity Offering.
Subject to the minimum float condition (as defined below), at any time prior to August 2, 2017, the Company
may redeem all or part of the Notes at a redemption price equal to the sum of (i) 100% of the principal amount
thereof, plus (ii) the Applicable Premium as of the date of redemption, plus (iii) accrued and unpaid interest to the
date of redemption, subject to the rights of Holders of Notes on the relevant record date to receive interest due on the
relevant interest payment date.
Subject to the minimum float condition, on or after August 2, 2017, the Company may redeem all or a part of
the Notes, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and
unpaid interest thereon, to the applicable redemption date, subject to the rights of Holders of Notes on the relevant
record date to receive interest due on the relevant interest payment date, if redeemed during the twelve-month period
beginning on August 2 of the years indicated below:
Year
Percentage
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103.188%
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102.125%
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101.063%
2020 and thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.000%
If less than all of the Notes are to be redeemed at any time, the Trustee will select Notes for redemption as
follows:
(1) in compliance with the requirements of the principal national securities exchange, if any, on which the
Notes are listed; or
(2) if the Notes are not so listed, on a pro rata basis, by lot or by such other method as the Trustee deems fair
and appropriate.
No Notes of US$100,000 or less will be redeemed in part. Notices of redemption will be mailed by first class
mail, at least 30 but not more than 60 days before the redemption date, to each Holder of Notes to be redeemed at its
registered address (with a copy to the Trustee). For so long as any Notes are listed on the Irish Stock Exchange, we
will inform the Irish Stock Exchange of the principal amount of the Notes that have not been redeemed in
connection with any redemption. Notices of redemption may not be conditional.
If any Note is to be redeemed in part only, the notice of redemption that relates to that Note will state the
portion of the principal amount thereof to be redeemed. At least US$100,000,000 in aggregate principal amount of
the Notes issued under the Indenture (not including any Notes held by the Company or any of its Affiliates) must
remain outstanding after any redemption of the Notes in part but not in whole (the “minimum float condition”),
except with respect to any redemption pursuant to the first paragraph of this “Optional Redemption” section. A new
Note in principal amount equal to the unredeemed portion of the original Note will be issued in the name of the
Holder thereof upon cancellation of the original Note. Notes called for redemption become due on the date fixed for
redemption. On and after the redemption date, interest will cease to accrue on Notes or portions thereof called for
redemption.
Optional Tax Redemption
The Notes will be redeemable at the Company’s option, in whole but not in part, at 100% of their outstanding
principal amount plus accrued and unpaid interest to the date of redemption and any Additional Amounts (as defined
under “—Additional Amounts”) payable with respect thereto, only if:
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(1) on the next interest payment date the Company would, for reasons outside of its control, be obligated to pay
Additional Amounts in excess of the Additional Amounts that it would pay if payments in respect of the
Notes were subject to deduction or withholding at a rate of 4.99% generally (excluding any value added
taxes) determined without regard to any interest, fees, penalties or other additions to tax, as a result of any
change in, or amendment to, the laws or regulations of any Taxing Jurisdiction (as defined under “—
Additional Amounts”) or any authority or agency thereof or therein having power to tax, or any change in,
or a pronouncement by competent authorities of the relevant Taxing Jurisdiction with respect to, the official
application or official interpretation of such laws or regulations, which change, amendment or
pronouncement occurs after the date of the Indenture (or, in the case of any withholding taxes imposed by
the jurisdiction of the paying agent, after the date of appointment of such paying agent, and, in the case of
any successor to the Company pursuant to the covenant described under the caption “Certain Covenants—
Merger, Consolidation or Sale of Assets”, after the date of such succession); and
(2) such obligation cannot be avoided by the Company taking reasonable measures available to it; provided
that for this purpose reasonable measures shall not include any change in its jurisdiction of organization or
location of its principal executive office. For the avoidance of doubt, reasonable measures may include a
change in the jurisdiction of the paying agent, provided that such change shall not require the Company to
incur material additional costs or legal or regulatory burdens.
No such notice of redemption will be given earlier than 30 days prior to the earliest date on which the Company
would be obligated to pay such Additional Amounts if a payment in respect of the Notes were then due.
Prior to the giving of any notice of redemption of the Notes as described under “—Optional Redemption”, the
Company must deliver to the Trustee an Officers’ Certificate confirming that it is entitled to exercise such right of
redemption. The Company will also deliver an Opinion of Counsel of recognized standing stating that it would be
obligated to pay such Additional Amounts due to the changes in tax laws or regulations or changes in, or
pronouncements with respect to, the official application or official interpretation of such laws or regulations. The
Trustee will accept this certificate and opinion as sufficient evidence of the satisfaction of the conditions precedent
set forth in clauses (1) and (2) above, in which event it will be conclusive and binding on the Holders.
Mandatory Redemption; Offers to Purchase; Open Market Purchases
The Company is not required to make any mandatory redemption or sinking fund payments with respect to the
Notes. However, under certain circumstances, the Company may be required to offer to purchase the Notes as
described under the captions “―Repurchase at the Option of Holders―Change of Control” and “―Repurchase at
the Option of Holders―Asset Sales.” The Company and its Restricted Subsidiaries may at any time and from time
to time purchase Notes in the open market or otherwise.
Repurchase at the Option of Holders
Change of Control
Unless the Company has previously or concurrently mailed a redemption notice with respect to all the
outstanding Notes as described under “―Optional Redemption,” the Company must commence, within 30 days of
the occurrence of a Change of Control Repurchase Event, and consummate an Offer to Purchase for all Notes then
outstanding, at a purchase price in cash equal to 101% of the aggregate principal amount of the Notes repurchased
plus accrued and unpaid interest thereon, to the date of repurchase, subject to the rights of Holders of Notes on the
relevant record date to receive interest due on the relevant interest payment date.
Any future agreements to which the Company becomes a party may prohibit or limit, the Company from
purchasing any Notes as a result of a Change of Control Repurchase Event. In the event a Change of Control
Repurchase Event occurs at a time when the Company is prohibited from purchasing the Notes, the Company could
seek the consent of its lenders to permit the purchase of the Notes or could attempt to refinance the borrowings that
contain such prohibition. If the Company does not obtain such consent or repay such borrowings, the Company will
remain prohibited from purchasing the Notes. In such case, the Company’s failure to purchase tendered Notes
would constitute an Event of Default under the Indenture.
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The Company’s ability to pay cash to the Holders of the Notes following the occurrence of a Change of Control
Repurchase Event may be limited by the Company’s then-existing financial resources. Sufficient funds may not be
available when necessary to make any required repurchases.
The Change of Control Repurchase Event purchase feature of the Notes may in certain circumstances make
more difficult or discourage a sale or takeover of the Company and, thus, the removal of incumbent management.
The Change of Control Repurchase Event purchase feature is a result of negotiations between the Initial Purchasers
and the Company. As of the Issue Date, the Company has no present intention to engage in a transaction involving a
Change of Control, although it is possible that the Company could decide to do so in the future. Subject to the
limitations discussed below, the Company could, in the future, enter into certain transactions, including acquisitions,
refinancings or other recapitalizations, that would not constitute a Change of Control under the Indenture, but that
could increase the amount of Indebtedness outstanding at such time or otherwise affect the Company’s capital
structure or credit ratings. Restrictions on the Company’s and its Restricted Subsidiaries’ ability to Incur additional
Indebtedness are contained in the covenants described under “Certain Covenants—Limitation on Indebtedness” and
“Certain Covenants—Limitation on Liens.” Except for the limitations contained in such covenants, however, the
Indenture will not contain any covenants or provisions that may afford Holders of the Notes protection in the event
of a highly leveraged transaction.
The Company will not be required to make an Offer to Purchase upon a Change of Control Repurchase Event if
a third party makes the Offer to Purchase in the manner, at the times and otherwise in compliance with the
requirements set forth in the Indenture applicable to an Offer to Purchase made by the Company and purchases all
Notes validly tendered and not withdrawn under such Offer to Purchase.
The definition of Change of Control includes a phrase relating to the direct or indirect sale, transfer, conveyance
or other disposition of “all or substantially all” of the properties or assets of the Company and the Restricted
Subsidiaries taken as a whole. Although there is a limited body of case law interpreting the phrase “substantially
all,” there is no precise established definition of the phrase under applicable law. Accordingly, the ability of a
Holder of Notes to require the Company to repurchase such Notes as a result of a sale, transfer, conveyance or other
disposition of less than all of the assets of the Company and the Restricted Subsidiaries taken as a whole to another
Person or group may be uncertain.
The Company will comply with Rule 14e-1 under the Exchange Act and any other securities laws and
regulations thereunder, to the extent such laws and regulations are applicable, in the event that the Company is
required to repurchase Notes pursuant to an Offer to Purchase. To the extent that the provisions of any securities
laws or regulations conflict with the provisions of the Indenture relating to an Offer to Purchase, the Company will
comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations
under such provisions of the Indenture by virtue of such conflict.
Asset Sales
The Company will not, and will not permit any Restricted Subsidiary to, consummate an Asset Sale unless:
(1) the Company (or the Restricted Subsidiary, as the case may be) receives consideration at the time of such
Asset Sale at least equal to the Fair Market Value of the assets or Equity Interests issued or sold or
otherwise disposed of; and
(2) at least 75% of the consideration therefor received by the Company or such Restricted Subsidiary is in the
form of:
(a) Cash Equivalents (including any Cash Equivalents received from the conversion within 60 days of
such Asset Sale of any securities, notes or other obligations received in consideration of such Asset
Sale);
(b) Replacement Assets;
(c) any liabilities of the Company or any Restricted Subsidiary as shown on the Company’s or such
Restricted Subsidiary’s most recent balance sheet (other than contingent liabilities, Indebtedness that is
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by its terms subordinated in right of payment to the Notes or any Note Guarantee and liabilities to the
extent owed to the Company or any Affiliate of the Company) that are assumed by the transferee of
any such assets or Equity Interests and for which the Company and all of the Restricted Subsidiaries
have been validly released by all creditors in writing; or
(d) any combination of the consideration specified in clauses (a) to (c).
Within 365 days after the receipt of any Net Available Cash from an Asset Sale, the Company or a Restricted
Subsidiary, as the case may be, may apply an amount equal to such Net Available Cash at its option:
(1) to repay (a) Indebtedness secured by such assets, (b) Indebtedness of a Restricted Subsidiary that is not a
Guarantor (other than Indebtedness owed to the Company or another Restricted Subsidiary) or (c) the Notes
or Indebtedness constituting Pari Passu Debt where (i) such Indebtedness has a final maturity date earlier
than the Stated Maturity of the Notes or (ii) the rate of interest per annum payable with respect to such
Indebtedness, as in effect (pursuant to the agreement governing such Indebtedness) on the date of such
repayment, is greater than the rate of interest per annum payable with respect to the Notes; provided that all
reductions of or offers to reduce Obligations under the Notes shall be made as provided under “—Optional
Redemption” or by making an offer (in accordance with the provisions set forth below for an Offer to
Purchase) to all Holders of Notes to purchase their Notes at 100% of the principal amount thereof plus
accrued and unpaid interest to the date of purchase; provided, further, that if the Indebtedness repaid
pursuant to this clause (1) is revolving credit Indebtedness, to correspondingly reduce commitments with
respect thereto;
(2) to purchase Replacement Assets (or enter into a binding agreement to purchase such Replacement Assets;
provided that (x) such purchase is consummated no later than the later of (i) the 360th day after such Asset
Sale or (ii) 90 days after the date of such binding agreement and (y) if such purchase is not consummated
within the period set forth in subclause (x), the Net Available Cash not so applied will be deemed to be
Excess Proceeds (as defined below)); or
(3) to make an Offer to Purchase as described below.
The amount of such Net Available Cash required to be applied (or to be committed to be applied) during such
365 day period as set forth in the preceding paragraph and not applied (or committed to be applied) as so required by
the end of such period shall constitute “Excess Proceeds.” If, as of the first day of any calendar month, the
aggregate amount of Excess Proceeds totals at least US$20.0 million, the Company must commence, not later than
the fifteenth business day of such month, and consummate an Offer to Purchase, from the Holders and all holders of
other Pari Passu Debt containing provisions similar to those set forth in the Indenture with respect to offers to
purchase with the proceeds of sales of assets, the maximum principal amount of Notes and such other Pari Passu
Debt that may be purchased out of the Excess Proceeds. The offer price in any such Offer to Purchase will be equal
to 100% of the principal amount (or accreted value, if applicable) of the Notes and such other Pari Passu Debt plus
accrued and unpaid interest to the date of purchase, subject to the rights of Holders of Notes on the relevant record
date to receive interest on the relevant interest payment date, and will be payable in cash. To the extent that any
Excess Proceeds remain after consummation of an Offer to Purchase pursuant to this “Asset Sales” covenant, the
Company may use those Excess Proceeds for any purpose not otherwise prohibited by the Indenture, and those
Excess Proceeds shall no longer constitute “Excess Proceeds”.
The Company will comply with Rule 14e-1 under the Exchange Act and any other securities laws and
regulations thereunder, to the extent such laws and regulations are applicable, in the event that the Company is
required to repurchase Notes pursuant to an Offer to Purchase. To the extent that the provisions of any securities
laws or regulations conflict with the provisions of the Indenture relating to an Offer to Purchase, the Company will
comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations
under such provisions of the Indenture by virtue of such conflict.
Any future agreement to which the Company becomes a party may prohibit the Company from purchasing any
Notes and also provide that certain asset sale events with respect to the Company would constitute a default under
such agreement. In the event an Asset Sale occurs at a time when the Company is prohibited from purchasing
Notes, the Company could seek the consent of its lenders to the purchase of Notes or could attempt to refinance the
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borrowings that contain such prohibition. If the Company does not obtain such a consent or repay such borrowings,
the Company will remain prohibited from purchasing Notes. In such case, the Company’s failure to purchase
tendered Notes would constitute an Event of Default under the Indenture, which would, in turn, constitute a default
under such other agreements.
Additional Amounts
All payments made under or with respect to the Notes or the Note Guarantees will be made without withholding
or deduction for or on account of any present or future taxes, duties, levies, or other governmental charges and any
interest, penalties or other liabilities with respect thereto (collectively, “Taxes”) imposed or assessed by or on behalf
of any jurisdiction in which the Company or any Guarantor is organized, engaged in business or resident for tax
purposes, or from or through which payment under or with respect to the Notes or the Note Guarantees is made or,
in each case, any political subdivision thereof (each, a “Taxing Jurisdiction”) or any authority or agency therein or
thereof having the power to tax, unless the withholding or deduction is required by applicable law. If the Company
or any Guarantor is required to make any withholding or deduction of this nature, it will pay Holders the additional
amounts (“Additional Amounts”) necessary to ensure that they receive the same amount as they would have received
without this withholding or deduction.
The Company or the relevant Guarantor will not, however, pay any Additional Amounts with respect to any
Note in connection with any Tax that is imposed:
(1) because the Holder has some present or former connection with the Taxing Jurisdiction other than merely
holding or owning the Note, the receipt of payments on the Note or enforcing rights under the Notes;
(2) because the Holder has failed to present the Note for payment (where presentation is required by the terms
of the Notes) within 30 days from when Holders receive notice in accordance with the Indenture that the
payment is available (except to the extent that the Holder would have been entitled to Additional Amounts
had the Note been presented on the last day of such 30-day period);
(3) because the Holder presents the Note for payment in a member state of the European Union (where
presentation is required by the terms of the Notes) and such tax could have been avoided had the Holder
presented the Note for payment in another member state of the European Union;
(4) in respect of any estate, inheritance, gift, sales, transfer, personal property tax or similar Tax;
(5) in respect of Taxes payable otherwise than by withholding from payment of principal of or interest or
premium, if any, on the Notes;
(6) because of the Holder’s failure to comply with a written request of the Company or Guarantor, provided to
the Holder at least 60 calendar days prior to the first payment date with respect to which the Company or
Guarantor shall apply this clause (6), to provide information concerning such Holder’s nationality,
residence, identity, connection with any Taxing Jurisdiction or other similar information, if and to the
extent that compliance would have reduced or eliminated any withholding or deduction as to which
Additional Amounts would otherwise apply; provided, however, that in no event shall such Holder’s
requirement to provide such information require the Holder to provide any materially more onerous
information, documents or other evidence than would be required to be provided had such Holder been
required to file U.S. Internal Revenue Service Forms W-8BEN, W-8ECI, W-8EXP and/or W-8IMY; or
(7) due to any combination of the preceding clauses (1) through (6).
In addition, we will pay and indemnify the Holders against any Peruvian value added tax that is imposed on a
payment of interest on the Notes, except to the extent that such Peruvian value added tax is described in items
(1) through (7) above.
All references in this offering memorandum to principal of or interest or premium, if any, on the Notes will
include any Additional Amounts payable by the Company or the relevant Guarantor in respect of such principal,
interest or premium.
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Certain Covenants
The Indenture contains, among others, the following covenants.
Changes in Covenants When Notes Rated Investment Grade
If on any date following the Issue Date (such date, a “Suspension Date”):
(1) the Notes are rated Investment Grade by two out of the three Rating Agencies; and
(2) no Default or Event of Default shall have occurred and be continuing (other than with respect to the
covenants specifically listed under the following captions),
then, beginning on that day and subject to the provisions of the following paragraph, the covenants specifically
listed under the following captions in this “Description of the Notes” will be suspended:
(1) “Repurchase at the Option of Holders—Asset Sales”;
(2) “—Limitation on Restricted Payments”;
(3) “—Limitation on Indebtedness”;
(4) “—Limitation on Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries”;
(5) “—Limitation on Transactions with Affiliates”;
(6) “—Designation of Restricted and Unrestricted Subsidiaries”; and
(7) clauses (1) (to the extent that a Default or an Event of Default exists by reason of one or more of the
covenants specifically listed in this paragraph) and (3) of the covenant described below under the caption
“—Merger, Consolidation or Sale of Assets”.
During any period that the foregoing covenants have been suspended, the Company’s Board of Directors may
not designate any of its Subsidiaries as Unrestricted Subsidiaries pursuant to the covenant described below under the
caption “— Designation of Restricted and Unrestricted Subsidiaries” or the definition of “Unrestricted Subsidiary”.
The Company will provide written notice to the Trustee of the occurrence of any Suspension Date.
Notwithstanding the foregoing, if the rating assigned by two out of the three Rating Agencies should
subsequently decline to below Investment Grade, the Company shall provide written notice to the Trustee and the
foregoing covenants will be reinstated as of and from the date of such rating decline and any actions taken, or
omitted to be taken, before such rating decline that would have been prohibited had the foregoing covenants been in
effect shall not form the basis for a Default or an Event of Default.
Calculations under the reinstated “Limitation on Restricted Payments” covenant will be made as if the
“Limitation on Restricted Payments” covenant had been in effect since the Issue Date except that no Default or
Event of Default will be deemed to have occurred solely by reason of a Restricted Payment made while that
covenant was suspended. There can be no assurance that the Notes will ever achieve an Investment Grade rating or
that any such rating will be maintained.
Limitation on Restricted Payments
(A) The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, take any of
the following actions (each, a “Restricted Payment”):
(1) declare or pay any dividend or make any other payment or distribution with respect to any of the
Company’s or any Restricted Subsidiary’s Equity Interests (including, without limitation, any payment
in connection with any merger or consolidation involving the Company or any Restricted Subsidiary)
or to the direct or indirect holders of the Company’s or any Restricted Subsidiary’s Equity Interests in
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their capacity as such (other than dividends, payments or distributions (x) payable in Equity Interests
(other than Disqualified Stock) of the Company or (y) to the Company or a Restricted Subsidiary);
(2) purchase, redeem or otherwise acquire or retire for value (including, without limitation, in connection
with any merger or consolidation involving the Company or any Restricted Subsidiary) any Equity
Interests of the Company held by any Person (other than by a Restricted Subsidiary) or any Preferred
Stock of a Restricted Subsidiary;
(3) call for redemption or make any payment on or with respect to, or purchase, redeem, defease or
otherwise acquire or retire for value, prior to the Stated Maturity thereof, any Indebtedness that is
subordinated in right of payment to the Notes or any Note Guarantee except (a) in anticipation of
satisfying a sinking fund obligation, principal installment or final maturity, in each case due within one
year of the date of such payment, purchase or other acquisition or (b) intercompany Indebtedness
permitted to be incurred pursuant to clause (5) of the second paragraph of the covenant described
below under the caption “—Limitation on Indebtedness;” or
(4) make any Investment (other than a Permitted Investment) in any Person,
unless, at the time of and after giving pro forma effect to such Restricted Payment:
(1) no Default or Event of Default will have occurred and be continuing or would occur as a consequence
thereof; and
(2) the Company could Incur at least US$1.00 of additional Indebtedness pursuant to the Fixed Charge
Coverage Ratio test and the Consolidated Leverage Ratio test set forth in the first paragraph of the
covenant described below under the caption “—Limitation on Indebtedness;” and
(3) such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by
the Company and the Restricted Subsidiaries after the Issue Date (excluding Restricted Payments
permitted by clauses (2), (3), (4), (5), (6) and (10) of the next succeeding paragraph (B)), is less than
the sum, without duplication, of:
(a) 50% of the Consolidated Net Income on a cumulative basis during the period (taken as one
accounting period) beginning on April 1, 2012 and ending on the last day of the Company’s last
fiscal quarter ending prior to the date of such proposed Restricted Payment for which internal
financial statements are available (or, if such Consolidated Net Income for such period is a deficit,
less 100% of such deficit), plus
(b) the aggregate net cash proceeds received by the Company since the Issue Date as a contribution to
its common equity capital or from the issue or sale of Equity Interests (other than Disqualified
Stock) of the Company and the amount of reduction of Indebtedness of the Company or its
Restricted Subsidiaries that has been converted into or exchanged for such Equity Interests (other
than Equity Interests sold to, or Indebtedness held by, a Subsidiary of the Company), plus
(c) with respect to Investments (other than Permitted Investments) made by the Company and the
Restricted Subsidiaries after the Issue Date, an amount equal to the net reduction in such
Investments in any Person (except, in each case, to the extent any such amount is included in the
calculation of Consolidated Net Income), resulting from repayment to the Company or any
Restricted Subsidiary of loans or advances or from the receipt of net cash proceeds from the sale
of any such Investment, from the release of any Guarantee (except to the extent any amounts are
paid under such Guarantee) or from redesignations of Unrestricted Subsidiaries as Restricted
Subsidiaries, not to exceed, in each case, the amount of such Investments previously made by the
Company or any Restricted Subsidiary in such Person.
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(B) The preceding provisions will not prohibit:
(1) the payment of any dividend within 60 days after the date of declaration thereof, if at said date of
declaration such payment would have complied with the provisions of the Indenture, and the
redemption of any Indebtedness that is subordinated in right of payment to the Notes or any Note
Guarantees within 60 days after the date on which notice of such redemption was given, if at said date
of the giving of such notice, such redemption would have complied with the provisions of the
Indenture;
(2) the payment of any dividend by a Restricted Subsidiary to all the holders of its Common Stock on a
pro rata basis;
(3) any Restricted Payment in exchange for, or out of the net cash proceeds of a substantially concurrent
contribution to the common equity of the Company or a substantially concurrent sale (other than to a
Subsidiary of the Company) of, Equity Interests (other than Disqualified Stock) of the Company;
provided that the amount of any such net cash proceeds that are utilized for such Restricted Payment
will be excluded from clause (3)(b) of the preceding paragraph (A);
(4) the redemption, repurchase, defeasance or other acquisition or retirement for value of Indebtedness
that is subordinated in right of payment to the Notes or the Note Guarantees in exchange for, or with
the net cash proceeds from a substantially concurrent Incurrence (other than to a Subsidiary of the
Company) of, Permitted Refinancing Indebtedness for such Indebtedness;
(5) the repurchase of Capital Stock deemed to occur upon the exercise of options or warrants to the extent
that such Capital Stock represents all or a portion of the exercise price thereof and applicable
withholding taxes, if any;
(6) the payment of cash in lieu of fractional Equity Interests pursuant to the exchange or conversion of
any exchangeable or convertible securities; provided, that such payment shall not be for the purpose
of evading the limitations of this covenant (as determined by the Board of Directors of the Company
in good faith);
(7) the repurchase, redemption or other acquisition or retirement for value of any Equity Interests of the
Company held by any current or former employee or director of the Company (or any Subsidiaries)
pursuant to the terms of any employee equity subscription agreement, stock option agreement or
similar agreement entered into in the ordinary course of business; provided that the aggregate price
paid for all such repurchased, redeemed, acquired or retired Equity Interests in any calendar year will
not exceed US$5.0 million (with unused amounts in any calendar year being carried over to
succeeding years subject to a maximum of US$10.0 million in any calendar year);
(8) the declaration and payment of dividends to holders of any class or series of Disqualified Stock of the
Company or any Restricted Subsidiary issued in accordance with the covenant described under
“Limitation on Indebtedness”, and provided that (i) such dividends constitute “Fixed Charges” and (ii)
with respect to Disqualified Stock that is not convertible or exchangeable into Pari Passu Debt, no
Event of Default has occurred and is continuing or would be caused thereby;
(9) in connection with a Change of Control Repurchase Event or an Offer to Purchase required by the
covenant described above under the caption “—Repurchase at the Option of Holders—Asset Sales,”
repurchases of Subordinated Indebtedness at a purchase price not greater than (a) 101% of the
principal amount or accreted value, as applicable, of such Subordinated Indebtedness and accrued and
unpaid interest thereon in the event of a Change of Control Repurchase Event or (b) 100% of the
principal amount or accreted value, as applicable, of such Subordinated Indebtedness and accrued and
unpaid interest thereon in the event of an Offer to Purchase required by the covenant described above
under the caption “—Repurchase at the Option of Holders—Asset Sales,” in connection with any
change of control offer or asset sale offer required by the terms of such Subordinated Indebtedness,
but only if: (i) in the case of a Change of Control Repurchase Event, the Company has first complied
with and fully satisfied its obligations under the covenant described above under the caption “—
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Repurchase at the Option of Holders—Change of Control” or (ii) in the case of an Offer to Purchase
required by the covenant described above under the caption “—Repurchase at the Option of
Holders—Asset Sales,” the Company has first complied with and fully satisfied its obligations under
the covenant described above under the caption “—Repurchase at the Option of Holders—Asset
Sales”; and
(10) so long as no Event of Default has occurred and is continuing or would be caused thereby, other
Restricted Payments in an aggregate amount not to exceed US$15.0 million since the Issue Date.
The amount of all Restricted Payments (other than cash) will be the Fair Market Value on the date of the
Restricted Payment of the asset(s) or securities proposed to be transferred or issued to or by the Company or such
Subsidiary, as the case may be, pursuant to the Restricted Payment.
Limitation on Indebtedness
The Company will not, and will not permit any Restricted Subsidiary to, Incur any Indebtedness; provided,
however, that the Company or any Restricted Subsidiary may Incur Indebtedness if,
(A) after giving effect to the Incurrence of such Indebtedness and the receipt and application of the proceeds
therefrom, the Fixed Charge Coverage Ratio for the Company’s most recently ended four full fiscal
quarters for which internal financial statements are available immediately preceding the date on which such
additional Indebtedness is Incurred would be at least 2.50 to 1.00, and
(B) on the date of such Incurrence and after giving effect to the Incurrence of such Indebtedness and the receipt
and application of the proceeds therefrom, the Consolidated Leverage Ratio would be equal to or less than
3.50 to 1.00.
The first paragraph of this covenant will not prohibit the Incurrence of any of the following items of
Indebtedness:
(1) Existing Indebtedness;
(2) Indebtedness of the Company and the Guarantors represented by the Notes (other than Additional Notes)
and the related Note Guarantees;
(3) Indebtedness of the Company or any Restricted Subsidiary represented by Capital Lease Obligations,
mortgage financings or purchase money obligations, in each case, Incurred for the purpose of financing all
or any part of the purchase price or cost of construction or improvement of property, plant or equipment
used in the business of the Company or such Restricted Subsidiary (including any reasonably related fees
or expenses Incurred in connection with such acquisition, construction or improvement), in an aggregate
amount, including all Permitted Refinancing Indebtedness Incurred to refund, refinance or replace any
Indebtedness Incurred pursuant to this clause (3), not to exceed the greater of US$25.0 million and 2.0%
of Consolidated Net Tangible Assets at any time outstanding;
(4) Permitted Refinancing Indebtedness of the Company or any Restricted Subsidiary in exchange for, or the
net cash proceeds of which are used to refund, refinance or replace Indebtedness that was permitted by the
Indenture to be Incurred under the first paragraph of this covenant or clauses (1), (2), (3), (4), or (13) of
this paragraph;
(5) Indebtedness of the Company or any Restricted Subsidiary owing to and held by the Company or any
Restricted Subsidiary; provided, however, that:
(a) if the Company or any Guarantor is the obligor on such Indebtedness, such Indebtedness must be
unsecured and, unless held by the Company or any Guarantor, expressly subordinated in right of
payment to the prior payment in full in cash of all Obligations with respect to the Notes, in the case of
the Company, or the Note Guarantee, in the case of a Guarantor; provided that if the Company or any
Guarantor is the obligor on such Indebtedness and such Indebtedness is not expressly subordinated as
provided in this subclause (a), any event that results in such Indebtedness being held by any Person
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other than the Company or any Guarantor will be deemed, in each case, to constitute an Incurrence of
such Indebtedness by the Company or such Guarantor, as the case may be, that was not permitted by
this clause (5); and
(b) any event that results in any such Indebtedness being held by a Person other than the Company or a
Restricted Subsidiary (except for any pledge of such Indebtedness constituting a Permitted Lien until
the pledgee commences actions to foreclose on such Indebtedness) will be deemed, in each case, to
constitute an Incurrence of such Indebtedness by the Company or such Restricted Subsidiary, as the
case may be, that was not permitted by this clause (5);
(6) the Guarantee by the Company or any Restricted Subsidiary of Indebtedness of the Company or a
Restricted Subsidiary that was permitted to be Incurred by another provision of this covenant;
(7) Indebtedness of the Company or any Restricted Subsidiary under Hedging Obligations that are Incurred
for the purpose of fixing, hedging or swapping interest rate, commodity price or foreign currency
exchange rate risk (or to reverse or amend any such agreements previously made for such purposes), and
not for speculative purposes;
(8) Indebtedness of the Company or any Restricted Subsidiary arising from agreements providing for
indemnification, adjustment of purchase price or similar obligations, or Guarantees or letters of credit,
surety bonds or performance bonds securing any obligations of the Company or any Restricted Subsidiary
pursuant to such agreements, in any case Incurred in connection with the disposition of any business,
assets or Capital Stock of a Restricted Subsidiary (other than Guarantees of Indebtedness Incurred by any
Person acquiring all or any portion of such business, assets or Capital Stock of a Restricted Subsidiary for
the purpose of financing such acquisition), so long as the amount does not exceed the gross proceeds
actually received by the Company or any Restricted Subsidiary in connection with such disposition;
(9) Indebtedness of the Company or any Restricted Subsidiary arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument drawn against insufficient funds in the ordinary
course of business, provided, however, that such Indebtedness is extinguished within five Business Days
of its Incurrence;
(10) Indebtedness of the Company or any Restricted Subsidiary constituting reimbursement obligations with
respect to letters of credit issued in the ordinary course of business, including letters of credit in respect of
workers’ compensation claims, or other Indebtedness with respect to reimbursement obligations regarding
workers’ compensation claims; provided that, upon the drawing of such letters of credit or the Incurrence
of such Indebtedness, such obligations are reimbursed within 30 days following such drawing or
Incurrence;
(11) Indebtedness of the Company or any Restricted Subsidiary to the extent the net cash proceeds thereof are
promptly deposited to defease or to satisfy and discharge the Notes as described under “—Legal
Defeasance and Covenant Defeasance” or “—Satisfaction and Discharge”;
(12) Indebtedness of any Person that is acquired by or merged into the Company or any Restricted Subsidiary
in accordance with the terms of the Indenture; provided that such Indebtedness was not Incurred or issued,
as applicable, in connection with, or in contemplation of, such acquisition or merger; provided, further,
that, in each case, after giving effect to such acquisition or merger, (i) the Company would be permitted to
Incur at least US$1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test and
the Consolidated Leverage Ratio test set forth in the first paragraph of this covenant or (ii) the Company
would have a Consolidated Leverage Ratio that is equal to or less than the Company’s Consolidated
Leverage Ratio immediately prior to such acquisition or merger and the Company would have a Fixed
Charge Coverage Ratio that is equal to or greater than the Company’s Fixed Charge Coverage Ratio
immediately prior to such acquisition or merger; and
(13) additional Indebtedness of the Company or any Restricted Subsidiary in an aggregate amount at any one
time outstanding, including all Permitted Refinancing Indebtedness Incurred to refund, refinance or
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replace any Indebtedness Incurred pursuant to this clause (13), not to exceed the greater of US$125.0
million and 10.0% of Consolidated Net Tangible Assets.
For purposes of determining compliance with this covenant, in the event that any proposed Indebtedness meets
the criteria of more than one of the categories described in clauses (1) through (13) above, or is entitled to be
Incurred pursuant to the first paragraph of this covenant, the Company will be permitted to classify, and may later
reclassify, such item of Indebtedness or a part thereof in any manner that complies with this covenant.
For purposes of determining compliance with any U.S. dollar-denominated restriction on the incurrence of
Indebtedness, the U.S. Dollar Equivalent principal amount of Indebtedness denominated in a foreign currency shall
be calculated based on the relevant currency exchange rate in effect on the date such Indebtedness was incurred (or
first committed, in the case of revolving credit debt); provided that if such Indebtedness is incurred to refinance
other Indebtedness denominated in a foreign currency, and such refinancing would cause the applicable U.S. dollar
denominated restriction to be exceeded if calculated at the relevant currency exchange rate in effect on the date of
such refinancing, such U.S. dollar-denominated restriction shall be deemed not to have been exceeded so long as the
principal amount of such refinancing Indebtedness does not exceed the principal amount of such Indebtedness being
refinanced.
The principal amount of any Indebtedness incurred to refinance other Indebtedness, if incurred in a different
currency from the Indebtedness being refinanced, shall be calculated based on the currency exchange rate applicable
to the currencies in which such respective Indebtedness is denominated that is in effect on the date of such
refinancing.
The Company will not Incur any Indebtedness that is subordinate in right of payment to any other Indebtedness
of the Company unless it is subordinate in right of payment to the Notes at least to the same extent. The Company
will not permit any Guarantor to Incur any Indebtedness that is subordinate in right of payment to any other
Indebtedness of such Guarantor unless it is subordinate in right of payment to such Guarantor’s Note Guarantee at
least to the same extent. For purposes of the Indenture, no Indebtedness will be deemed to be subordinated in right
of payment to any other Indebtedness of the Company or any Guarantor, as applicable, solely by reason of any Liens
or Guarantees arising or created in respect thereof or by virtue of the fact that the holders of any secured
Indebtedness have entered into intercreditor agreements giving one or more of such holders priority over the other
holders in the collateral held by them.
Limitation on Liens
The Company will not, and will not permit any Restricted Subsidiary to, create, incur, assume or otherwise
cause or suffer to exist or become effective any Lien of any kind (other than Permitted Liens) upon any of their
property or assets, now owned or hereafter acquired, unless all payments due under the Indenture and the Notes or
Note Guarantees are secured by a Lien on such property or assets on an equal and ratable basis with the obligations
so secured (or, in the case of Indebtedness subordinated to the Notes or the related Note Guarantees, senior in
priority thereto, with the same relative priority as the Notes will have with respect to such subordinated
Indebtedness) until such time as such obligations are no longer secured by a Lien.
Limitation on Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries
The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, create or permit
to exist or become effective any consensual encumbrance or restriction on the ability of any Restricted Subsidiary
to:
(1) pay dividends or make any other distributions on its Capital Stock (or with respect to any other interest or
participation in, or measured by, its profits) to the Company or any Restricted Subsidiary (it being
understood that the priority of any Preferred Stock in receiving dividends or liquidating distributions prior
to dividends or liquidating distributions being paid on Common Stock shall not be deemed a restriction on
the ability to make distributions on Capital Stock);
(2) pay any liabilities owed to the Company or any Restricted Subsidiary;
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(3) make loans or advances to the Company or any Restricted Subsidiary (it being understood that the
subordination of loans or advances made to the Company or any Restricted Subsidiary to other
Indebtedness Incurred by the Company or any Restricted Subsidiary shall not be deemed a restriction on
the ability to make loans or advances); or
(4) transfer any of its properties or assets to the Company or any Restricted Subsidiary.
However, the preceding restrictions will not apply to encumbrances or restrictions:
(1) existing under, by reason of or with respect to Existing Indebtedness or any other agreements in effect on
the Issue Date and any amendments, modifications, restatements, renewals, extensions, supplements,
refundings, replacements or refinancings thereof, provided that the encumbrances and restrictions in any
such amendments, modifications, restatements, renewals, extensions, supplements, refundings,
replacements or refinancings, taken as a whole, are not materially more restrictive than those contained in
the Existing Indebtedness or such other agreements, as the case may be, as in effect on the Issue Date;
(2) set forth in the Indenture, the Notes and the Note Guarantees;
(3) existing under or by reason of applicable law, rule, regulation, order or decree;
(4) with respect to any Person or the property or assets of a Person acquired by the Company or any Restricted
Subsidiary existing at the time of such acquisition and not incurred in connection with or in contemplation
of such acquisition, which encumbrance or restriction is not applicable to any Person, or the properties or
assets of any Person, other than the Person, or the property or assets of the Person, so acquired, and any
amendments, modifications, restatements, renewals, extensions, supplements, refundings, replacements or
refinancings thereof, provided that the encumbrances and restrictions in any such amendments,
modifications, restatements, renewals, extensions, supplements, refundings, replacements or refinancings,
taken as a whole, are not materially more restrictive than those in effect on the date of the acquisition;
(5) that restrict in a customary manner the subletting, assignment or transfer of any property or asset that is a
lease, license, conveyance or contract or similar property or asset;
(6) existing by virtue of any transfer of, agreement to transfer, option or right with respect to, or Lien on, any
property or assets of the Company or any Restricted Subsidiary not otherwise prohibited by the Indenture;
(7) arising or agreed to in the ordinary course of business, not relating to any Indebtedness, and that do not,
individually or in the aggregate, detract from the value of property or assets of the Company or any
Restricted Subsidiary in any manner material to the Company or any Restricted Subsidiary;
(8) existing under, by reason of or with respect to any agreement for the sale or other disposition of all or
substantially all of the Capital Stock of, or property and assets of, a Restricted Subsidiary that restrict
distributions or transfer by that Restricted Subsidiary pending such sale or other disposition;
(9) on cash or other deposits or net worth, which encumbrances or restrictions are imposed by customers or
suppliers or required by insurance, surety or bonding companies, in each case, under contracts entered into
in the ordinary course of business;
(10) on the transfer of assets subject to any Permitted Lien;
(11) arising from customary restrictions imposed on the transfer of copyrighted or patented materials;
(12) arising from customary provisions in joint venture agreements and other similar agreements entered into in
the ordinary course of business and which the Board of Directors of the Company determines in good faith
will not adversely affect the Company’s ability to make payments of principal or interest on the Notes; and
(13) with respect to any agreement governing Indebtedness of any Guarantor that is permitted to be Incurred by
the covenant described under the caption “—Limitation on Indebtedness” above and any extensions,
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renewals, replacements, amendments or refinancings thereof permitted to be Incurred by the covenant
described under the caption “—Limitation on Indebtedness” above.
Maintenance of Priority
The Company shall ensure that its payment obligations with respect to the Notes will constitute its direct,
unconditional and general senior unsecured obligations and will rank senior or pari passu (except for Indebtedness
that is subordinated in right of payment to the Notes) in priority of payment and in all other respects with respect to
its future Indebtedness, except for certain obligations that in case of the Company’s insolvency or bankruptcy are
granted preferential treatment pursuant to the laws of Peru.
Each Guarantor shall ensure that its payment obligations with respect to its Note Guarantee will constitute its
direct, unconditional and general senior unsecured obligations and will rank senior or pari passu (except for
Indebtedness that is subordinated in right of payment to its Note Guarantee) in priority of payment and in all other
respects with respect to its future Indebtedness, except for certain obligations that in case of such Guarantor’s
insolvency or bankruptcy are granted preferential treatment pursuant to the laws of Peru.
Merger, Consolidation or Sale of Assets
The Company. The Company will not, directly or indirectly: (1) consolidate or merge with or into another
Person (whether or not the Company is the surviving Person), or (2) sell, assign, transfer, convey or otherwise
dispose of all or substantially all of the properties and assets of the Company and the Restricted Subsidiaries, taken
as a whole, in one or more related transactions, to another Person, unless:
(1) immediately after giving effect to such transaction, no Default or Event of Default exists;
(2) either:
(a) the Company is the surviving corporation; or
(b) the Person formed by or surviving any such consolidation or merger (if other than the Company) or to
which such sale, assignment, transfer, conveyance or other disposition will have been made (the
“Surviving Entity”) (i) is a Person organized or existing under the laws of Peru, the United States of
America, any state thereof or the District of Columbia or any other country that is a member country of
the European Union, provided that in the case where such Person is not a corporation, a co-obligor of
the Notes is a corporation and (ii) assumes all the obligations of the Company under the Notes and the
Indenture pursuant to a supplemental indenture;
(3) immediately after giving effect to such transaction on a pro forma basis, the Company or the Surviving
Entity, as the case may be, (i) will be permitted to Incur at least US$1.00 of additional Indebtedness
pursuant to the Fixed Charge Coverage Ratio test and the Consolidated Leverage Ratio test set forth in the
first paragraph of the covenant described above under the caption “—Limitation on Indebtedness” or (ii)
would have a Consolidated Leverage Ratio that is equal to or less than the Company’s Consolidated
Leverage Ratio immediately prior to such transaction and would have a Fixed Charge Coverage Ratio that
is equal to or greater than the Company’s Fixed Charge Coverage Ratio immediately prior to such
transaction;
(4) each Guarantor, unless such Guarantor is the Person with which the Company has entered into a transaction
under this covenant, will have confirmed to the Trustee in writing that its Note Guarantee will apply to the
obligations of the Company or the Surviving Entity in accordance with the Notes and the Indenture; and
(5) the Company delivers to the Trustee an Officers’ Certificate (attaching the arithmetic computation to
demonstrate compliance with clause (3) above) and Opinion of Counsel, in each case stating that such
transaction and such agreement comply with this covenant and that all conditions precedent provided for in
the Indenture relating to such transaction have been complied with;
provided, however, that clause (3) above will not apply to any consolidation, merger, sale, assignment, transfer,
conveyance or other disposition of assets between or among the Company and any Restricted Subsidiary.
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Upon any consolidation, merger, sale, assignment, transfer, conveyance or other disposition in accordance with
this covenant, the Surviving Entity formed by such consolidation or into or with which the Company is merged or to
which such sale, assignment, transfer, conveyance or other disposition is made will succeed to, and be substituted
for (so that from and after the date of such consolidation, merger, sale, assignment, conveyance or other disposition,
the provisions of the Indenture referring to the “Company” will refer instead to the Surviving Entity and not to the
Company), and may exercise every right and power of, the Company under the Indenture and the Notes with the
same effect as if such Surviving Entity had been named as the Company in the Indenture and the Notes.
In addition, the Company and the Restricted Subsidiaries may not, directly or indirectly, lease all or
substantially all of the properties or assets of the Company and the Restricted Subsidiaries considered as one
enterprise, in one or more related transactions, to any other Person.
Although there is a limited body of case law interpreting the phrase “all or substantially all,” there is no precise
established definition of the phrase under applicable law. Accordingly, in certain circumstances there may be a
degree of uncertainty as to whether a particular transaction would involve “all or substantially all” of the property or
assets of a Person.
The Guarantors. A Guarantor will not, directly or indirectly: (1) consolidate or merge with or into another
Person (whether or not such Guarantor is the surviving Person), or (2) sell, assign, transfer, convey or otherwise
dispose of all or substantially all of the properties and assets of the Guarantor, in one or more related transactions, to
another Person, other than the Company or another Guarantor, unless:
(1) immediately after giving effect to that transaction, no Default or Event of Default exists; and
(2) either:
(a) the Guarantor is the surviving corporation, or the Person formed by or surviving any such
consolidation or merger (if other than the Guarantor) or to which such sale, assignment, transfer,
conveyance or other disposition which has been made (i) is organized or existing under the laws of the
jurisdiction of the Guarantor’s organization or under the laws of Peru, the United States of America,
any state thereof or the District of Columbia or any other country that is a member country of the
European Union, (ii) agrees to pay any Additional Amounts that may be payable in respect of its
jurisdiction of organization and (iii) assumes all the obligations of that Guarantor under the Indenture,
including its Note Guarantee, pursuant to a supplemental indenture; or
(b) such sale, assignment, transfer, conveyance or other disposition or consolidation or merger complies
with the covenant described above under the caption “—Repurchase at the Option of Holders—Asset
Sales.”
Limitation on Transactions with Affiliates
The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly make any
payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property
or assets from, or enter into, make, amend, renew or extend any transaction, contract, agreement, understanding,
loan, advance or Guarantee with, or for the benefit of, any of their Affiliates (each, an “Affiliate Transaction”),
unless:
(1) such Affiliate Transaction is on fair and reasonable terms that are no less favorable to the Company or the
relevant Restricted Subsidiary than those that would have been obtained in a comparable arm’s-length
transaction by the Company or such Restricted Subsidiary with a Person that is not an Affiliate of the
Company or any Restricted Subsidiary; and
(2) the Company delivers to the Trustee:
(a) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate
consideration in excess of US$5.0 million, a Board Resolution set forth in an Officers’ Certificate
certifying that such Affiliate Transaction or series of related Affiliate Transactions complies with this
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covenant and that such Affiliate Transaction or series of related Affiliate Transactions has been
approved by a majority of the members of the Board of Directors of the Company; and
(b) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate
consideration in excess of US$20.0 million, an opinion issued by an independent accounting, appraisal
or investment banking firm of international standing stating that such Affiliate Transaction or series of
related Affiliate Transactions is fair to the Company or such Restricted Subsidiary from a financial
point of view.
The following items will not be deemed to be Affiliate Transactions and, therefore, will not be subject to the
provisions of the prior paragraph:
(1) transactions between or among the Company and/or its Restricted Subsidiaries;
(2) Restricted Payments that are permitted by the provisions of the Indenture described above under the caption
“—Limitation on Restricted Payments;”
(3) any issuance or sale of Equity Interests (other than Disqualified Stock) of the Company;
(4) transactions pursuant to agreements or arrangements in effect on the Issue Date and described in this
offering memorandum, or any amendment, modification, or supplement thereto or replacement thereof, as
long as such agreement or arrangement, as so amended, modified, supplemented or replaced, taken as a
whole, is not materially more disadvantageous to the Company and the Restricted Subsidiaries than the
agreement or arrangement in existence on the Issue Date;
(5) payments by the Company (and any direct or indirect parent thereof) and its Subsidiaries pursuant to tax
sharing agreements among the Company (and any such parent) and its Subsidiaries on customary terms to
the extent attributable to the ownership or operation of the Company and its Subsidiaries; provided that in
each case the amount of such payments in any fiscal year does not exceed the amount that the Company, its
Restricted Subsidiaries and its Unrestricted Subsidiaries (to the extent of amounts received from
Unrestricted Subsidiaries) would be required to pay in respect of foreign, U.S. federal, state and local taxes
for such fiscal year were the Company and its Subsidiaries (to the extent described above) to pay such taxes
separately from any such parent entity;
(6) payment of reasonable and customary fees to, and reasonable and customary indemnification arrangements
and similar payments on behalf of, directors of the Company or any Subsidiary thereof;
(7) any employment, consulting, service or termination agreement, or reasonable and customary
indemnification arrangements, entered into by the Company or any Restricted Subsidiary with officers and
employees of the Company or any Subsidiary thereof and the payment of compensation to officers and
employees of the Company or any Subsidiary thereof (including amounts paid pursuant to employee
benefit plans, employee stock option or similar plans), so long as such agreement, arrangements or payment
(i) have been approved by a majority of the members of the Board of Directors of the Company and (ii) are
substantially consistent with the practice of the Company or such Restricted Subsidiary, as the case may be,
at or prior to the Issue Date; and
(8) transactions conducted on an arm’s-length basis on the same terms as would be conducted with a nonAffiliate involving the purchase and sale of goods and services with Affiliates in the ordinary course of
business and consistent with prior practice; provided that the Company shall provide an Officers’
Certificate to the Trustee within 30 days of the end of each fiscal year certifying that all such transactions
made pursuant to this clause (8), taken as a whole, were no less favorable than those that could reasonably
be expected to be obtained in a comparable transaction at such time on an arm’s-length basis from a Person
that is not an Affiliate of the Company.
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Designation of Restricted and Unrestricted Subsidiaries
The Board of Directors of the Company may designate (a “Designation”) any Restricted Subsidiary other than
Casa Grande, Cartavio, San Jacinto and Azucarera Olmos to be an Unrestricted Subsidiary; provided that:
(1) any Guarantee by the Company or any Restricted Subsidiary of any Indebtedness of the Subsidiary being
so designated will be deemed to be an Incurrence of Indebtedness by the Company or such Restricted
Subsidiary, as the case may be, at the time of such designation, and such Incurrence of Indebtedness would
be permitted under the covenant described above under the caption “—Limitation on Indebtedness;”
(2) the aggregate Fair Market Value of all outstanding Investments owned by the Company and the Restricted
Subsidiaries in the Subsidiary being so designated (including any Guarantee by the Company or any
Restricted Subsidiary of any Indebtedness of such Subsidiary) will be deemed to be an Investment made as
of the time of such designation and that such Investment would be permitted under the covenant described
above under the caption “—Limitation on Restricted Payments;”
(3) such Subsidiary does not hold any Capital Stock or Indebtedness of, or own or hold any Lien on any
property or assets of, or have any Investment in, the Company or any Restricted Subsidiary; provided that
such Subsidiary may hold Indebtedness of the Company or any Restricted Subsidiary if, at the time of and
after giving pro forma effect to such Designation, Incurrence of such Indebtedness would be permitted
under the covenant described above under the caption “—Limitation on Indebtedness” and any such
Indebtedness will be deemed to be an Incurrence of Indebtedness by the Company or such Restricted
Subsidiary, as the case may be, at the time of such Designation;
(4) the Subsidiary being so designated:
(a) is not party to any agreement, contract, arrangement or understanding with the Company or any
Restricted Subsidiary unless the terms of any such agreement, contract, arrangement or understanding
are no less favorable to the Company or such Restricted Subsidiary than those that might be obtained
at the time from Persons who are not Affiliates of the Company; and
(b) is a Person with respect to which neither the Company nor any Restricted Subsidiary has any direct or
indirect obligation (i) to subscribe for additional Equity Interests or (ii) to maintain or preserve such
Person’s financial condition or to cause such Person to achieve any specified levels of operating
results; provided that the Company or any Restricted Subsidiary may have a direct or indirect
obligation to subscribe for additional Equity Interests in such Person, if, at the time of and after giving
pro forma effect to such Designation, the Company or such Restricted Subsidiary would be permitted
under the covenant described above under the caption “—Limitation on Restricted Payments” to make
a Restricted Payment in an amount equal to the amount of the subscription obligation and the
Company or such Restricted Subsidiary will be deemed as having made such Restricted Payment at the
time of such Designation; and
(5) no Default or Event of Default would be in existence following such designation.
Any designation of a Restricted Subsidiary as an Unrestricted Subsidiary will be evidenced to the Trustee by
filing with the Trustee the Board Resolution giving effect to such designation and an Officers’ Certificate certifying
that such designation complied with the preceding conditions and was permitted by the Indenture.
The Board of Directors of the Company may at any time designate any Unrestricted Subsidiary to be a
Restricted Subsidiary; provided that:
(1) such designation will be deemed to be an Incurrence of Indebtedness by a Restricted Subsidiary of any
outstanding Indebtedness of such Unrestricted Subsidiary and such designation will only be permitted if
such Indebtedness is permitted under the covenant described under the caption “—Limitation on
Indebtedness;”
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(2) all outstanding Investments owned by such Unrestricted Subsidiary will be deemed to be made as of the
time of such designation and such designation will only be permitted if such Investments would be
permitted under the covenant described above under the caption “—Limitation on Restricted Payments;”
(3) all Liens upon property or assets of such Unrestricted Subsidiary existing at the time of such designation
would be permitted under the caption “—Limitation on Liens;” and
(4) no Default or Event of Default would be in existence following such designation.
Limitation on Sale and Leaseback Transactions
The Company will not, and will not permit any Restricted Subsidiary to, enter into any Sale and Leaseback
Transaction; provided that the Company or any Restricted Subsidiary may enter into a Sale and Leaseback
Transaction if:
(1) the Company or such Restricted Subsidiary, as applicable, could have (a) Incurred Indebtedness in an
amount equal to the Attributable Debt relating to such Sale and Leaseback Transaction and (b) incurred a
Lien to secure such Indebtedness pursuant to the covenant described above under the caption “—Certain
Covenants—Limitation on Liens;”
(2) the gross cash proceeds of that Sale and Leaseback Transaction are at least equal to the Fair Market Value
of the property that is the subject of that Sale and Leaseback Transaction; and
(3) the transfer of assets in that Sale and Leaseback Transaction is permitted by, and the Company applies the
proceeds of such transaction in compliance with, the covenant described above under the caption “—
Repurchase at the Option of Holders—Asset Sales.”
Business Activities
The Company will not, and will not permit any Restricted Subsidiary to, engage in any business other than
Permitted Businesses, except to such extent as would not be material to the Company and the Restricted Subsidiaries
taken as a whole.
Listing
Application has been made to the Irish Stock Exchange for the Notes to be admitted to the Official List and to
trading on the Global Exchange Market which is the exchange regulated market of the Irish Stock Exchange.
Irish Listing Agent
Arthur Cox Listing Services Limited is the Irish listing agent in respect of the Notes. The Company will
maintain such appointment so long as the Notes are listed on the Global Exchange Market of the Irish Stock
Exchange and the rules of the exchange so require. The address of Arthur Cox Listing Services Limited is set forth
on the inside back cover of this offering memorandum.
Reports
For so long as the Notes remain outstanding, the Company will provide to the Trustee the following items in
English:
(1) its (a) consolidated annual financial statements audited by an internationally recognized firm of
independent public accountants (which may be its current independent public accountants) within 120 days
of the end of each fiscal year, and (b) consolidated quarterly financial statements within five Business Days
after the earlier of (i) the date on which such quarterly financial statements are required to be delivered to
the SMV and (ii) the date on which such quarterly financial statements are delivered to the SMV and, in
case the Company is no longer obliged to deliver such quarterly financial statements to the SMV, within 60
days of the end of each of the first three fiscal quarters of each fiscal year. These annual and quarterly
financial statements will be prepared in accordance with IFRS and such annual financial statements will be
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accompanied by a management discussion on its results of operations for the periods presented; provided
that for the period of six (6) consecutive months immediately following the date on which any Guarantor or
Restricted Subsidiary became a Subsidiary of the Company, any such financial statements provided to the
Trustee during such six-month period (but not thereafter) need not include any financial data or other
information for such Guarantor or Restricted Subsidiary; and
(2) any information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act so long as
the notes are not freely transferable under the Securities Act.
Events of Default and Remedies
Each of the following is an “Event of Default”:
(1) default for 30 days in the payment when due of interest on the Notes;
(2) default in payment when due (whether at maturity, upon acceleration, redemption or otherwise) of the
principal of, or premium, if any, on the Notes;
(3) failure by the Company or any Restricted Subsidiary to make or consummate an Offer to Purchase in
accordance with the provisions described under the captions “—Repurchase at the Option of Holders—
Change of Control,” “—Repurchase at the Option of Holders—Asset Sales” or to comply with the
provisions described under the caption “—Certain Covenants—Merger, Consolidation or Sale of Assets;”
(4) failure by the Company or any Restricted Subsidiary for 45 days after written notice by the Trustee or
Holders representing 25% or more of the aggregate principal amount of Notes outstanding to comply with
any of the other agreements in the Indenture;
(5) default under any mortgage, indenture or instrument under which there may be issued or by which there
may be secured or evidenced any Indebtedness by the Company or any Restricted Subsidiary (or the
payment of which is Guaranteed by the Company or any Restricted Subsidiary) whether such Indebtedness
or Guarantee now exists, or is created after the Issue Date, if that default:
(a) is caused by a failure to make any payment when due at the final maturity of such Indebtedness (a
“Payment Default”); or
(b) results in the acceleration of such Indebtedness prior to its express maturity,
and, in each case, the amount of any such Indebtedness, together with the amount of any other such
Indebtedness that is then subject to a Payment Default or the maturity of which has been so accelerated,
aggregates US$20.0 million or more;
(6) failure by the Company or any Restricted Subsidiary to pay final judgments (to the extent such judgments
are not paid or covered by insurance provided by a reputable carrier) aggregating in excess of US$20.0
million, which judgments are not paid, discharged or stayed for a period of 60 days;
(7) except as permitted by the Indenture, any Note Guarantee will be held in any judicial proceeding to be
unenforceable or invalid or will cease for any reason to be in full force and effect or any Guarantor, or any
Person acting on behalf of any Guarantor, will deny or disaffirm its obligations under its Note Guarantee;
and
(8) certain events of bankruptcy or insolvency with respect to the Company, any Guarantor or any Restricted
Subsidiary that is a Significant Subsidiary of the Company (or any Restricted Subsidiaries that together
would constitute a Significant Subsidiary of the Company).
In the case of an Event of Default described in clause (8) above, all outstanding Notes will become due and
payable immediately without further action or notice. If any other Event of Default occurs and is continuing, the
Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes may declare all the Notes to
be due and payable immediately by notice in writing to the Company specifying the Event of Default.
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Holders of the Notes may not enforce the Indenture or the Notes except as provided in the Indenture. Subject to
the terms of the Indenture, Holders of a majority in principal amount of the then outstanding Notes may direct the
Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of the Notes notice of any
Default or Event of Default (except a Default or Event of Default relating to the payment of principal or interest) if it
determines that withholding notice is in their interest.
The Holders of a majority in aggregate principal amount of the Notes then outstanding by notice to the Trustee
may on behalf of the Holders of all of the Notes waive any existing Default or Event of Default and its consequences
under the Indenture except a continuing Default or Event of Default in the payment of premium or interest on, or the
principal of, the Notes. Subject to the terms of the Indenture, the Holders of a majority in principal amount of the
then outstanding Notes will have the right to direct the time, method and place of conducting any proceeding for
exercising any remedy available to the Trustee. However, the Trustee may refuse to follow any direction that
conflicts with law or the Indenture, that may involve the Trustee in personal liability, or that the Trustee determines
in good faith may be unduly prejudicial to the rights of Holders of Notes not joining in the giving of such direction
and may take any other action it deems proper that is not inconsistent with any such direction received from Holders
of Notes. A Holder may not pursue any remedy with respect to the Indenture or the Notes unless:
(1) the Holder gives the Trustee written notice of a continuing Event of Default;
(2) the Holders of at least 25% in aggregate principal amount of outstanding Notes make a written request to
the Trustee to pursue the remedy;
(3) such Holder or Holders offer the Trustee indemnity reasonably satisfactory to the Trustee against any costs,
liability or expense;
(4) the Trustee does not comply with the request within 60 days after receipt of the request and the offer of
indemnity; and
(5) during such 60-day period, the Holders of a majority in aggregate principal amount of the outstanding
Notes do not give the Trustee a direction that is inconsistent with the request.
However, such limitations do not apply to the right of any Holder of a Note to receive payment of the principal
of, premium, if any, or interest on, such Note or to bring suit for the enforcement of any such payment, on or after
the due date expressed in the Notes, which right will not be impaired or affected without the consent of the Holder.
The Company is required to deliver to the Trustee annually within 90 days after the end of each fiscal year a
statement regarding compliance with the Indenture. Within five Business Days of becoming aware of any Default
or Event of Default, the Company is required to deliver to the Trustee a statement specifying such Default or Event
of Default.
No Personal Liability of Directors, Officers, Employees and Stockholders
No director, officer, employee, incorporator, stockholder, member, manager or partner of the Company or any
Guarantor, as such, will have any liability for any obligations of the Company or the Guarantors under the Notes, the
Indenture, the Note Guarantees or for any claim based on, in respect of, or by reason of, such obligations or their
creation. Each Holder of Notes by accepting a Note waives and releases all such liability. The waiver and release
are part of the consideration for issuance of the Notes. The waiver may not be effective to waive liabilities under the
U.S. federal securities laws.
Legal Defeasance and Covenant Defeasance
The Company may, at its option and at any time, elect to have all of its obligations discharged with respect to
the outstanding Notes and all obligations of the Guarantors discharged with respect to their Note Guarantees (“Legal
Defeasance”). Legal Defeasance means that the Company and the Guarantors will be deemed to have paid and
discharged the entire indebtedness represented by the outstanding Notes on the 91st day after the deposit specified in
clause (1) of the second following paragraph except for:
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(1) the rights of Holders of outstanding Notes to receive payments in respect of the principal of, or interest or
premium, if any, on such Notes when such payments are due from the trust referred to below;
(2) the Company’s obligations with respect to the Notes concerning issuing temporary Notes, registration of
Notes, mutilated, destroyed, lost or stolen Notes and the maintenance of an office or agency for payment
and money for security payments held in trust;
(3) the rights, powers, trusts, duties and immunities of the Trustee, and the Company’s and the Guarantors’
obligations in connection therewith; and
(4) the Legal Defeasance provisions of the Indenture.
In addition, the Company may, at its option and at any time, elect to have the obligations of the Company and
the Guarantors released with respect to certain covenants in the Indenture (“Covenant Defeasance”) and thereafter
any omission to comply with those covenants will not constitute a Default or Event of Default with respect to the
Notes. In the event Covenant Defeasance occurs, certain events (not including non-payment, bankruptcy,
receivership, reorganization and insolvency events) described under “Events of Default” will no longer constitute
Events of Default with respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance:
(1) the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders of the
Notes, cash in U.S. dollars, non-callable Government Securities, or a combination thereof, in such
amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, or interest and premium, if any, on the outstanding Notes on the
Stated Maturity or on the applicable redemption date, as the case may be, and the Company must specify
whether the Notes are being defeased to maturity or to a particular redemption date;
(2) in the case of Legal Defeasance, the Company will have delivered to the Trustee an Opinion of Counsel
reasonably acceptable to the Trustee confirming that (a) the Company has received from, or there has been
published by, the Internal Revenue Service a ruling or (b) since the Issue Date, there has been a change in
the applicable U.S. federal income tax law, in either case to the effect that, and based thereon such
Opinion of Counsel will confirm that, the Holders of the outstanding Notes will not recognize income,
gain or loss for U.S. federal income tax purposes as a result of such Legal Defeasance and will be subject
to U.S. federal income tax on the same amounts, in the same manner and at the same times as would have
been the case if such Legal Defeasance had not occurred;
(3) in the case of Covenant Defeasance, the Company will have delivered to the Trustee an Opinion of
Counsel reasonably acceptable to the Trustee confirming that the Holders of the outstanding Notes will not
recognize income, gain or loss for U.S. federal income tax purposes as a result of such Covenant
Defeasance and will be subject to U.S. federal income tax on the same amounts, in the same manner and at
the same times as would have been the case if such Covenant Defeasance had not occurred;
(4) in the case of Legal Defeasance or Covenant Defeasance, the Company shall have delivered to the Trustee
(i) an Opinion of Counsel to the effect that, based upon Peruvian law then in effect, the Holders will not
recognize income, gain or loss for Peruvian tax purposes, including withholding tax except for
withholding tax then payable on interest payments due, and the amounts to be payable shall not be subject
to any deposit or temporary freezing of funds, as a result of Legal Defeasance or Covenant Defeasance, as
the case may be, and will be subject to Peruvian taxes on the same amounts and in the same manner and at
the same time as would have been the case if such Legal Defeasance or Covenant Defeasance, as the case
may be, had not occurred or (ii) a ruling directed to the Trustee received from tax authorities of Peru to the
same effect as the Opinion of Counsel described in clause (i) above;
(5) no Default or Event of Default will have occurred and be continuing either: (a) on the date of such deposit;
or (b) in the case of Legal Defeasance, insofar as Events of Default from bankruptcy or insolvency events
are concerned, at any time in the period ending on the 91st day after the date of deposit;
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(6) such Legal Defeasance or Covenant Defeasance will not result in a breach or violation of, or constitute a
default under, any material agreement or instrument to which the Company or any of its Subsidiaries is a
party or by which the Company or any of its Subsidiaries is bound;
(7) the Company must have delivered to the Trustee an Opinion of Counsel to the effect that, assuming no
intervening bankruptcy of the Company or any Guarantor between the date of deposit and the 91st day
following the deposit and assuming that no Holder is an “insider” of the Company under applicable
bankruptcy law, after the 91st day following the deposit, the trust funds will not be subject to the effect of
any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally,
including Section 547 of the United States Bankruptcy Code and Section 15 of the New York Debtor and
Creditor Law;
(8) the Company must deliver to the Trustee an Officers’ Certificate stating that the deposit was not made by
the Company with the intent of preferring the Holders over the other creditors of the Company with the
intent of defeating, hindering, delaying or defrauding creditors of the Company or others;
(9) if the Notes are to be redeemed prior to their Stated Maturity, the Company must deliver to the Trustee
irrevocable instructions to redeem all of the Notes on the specified redemption date under arrangements
satisfactory to the Trustee for the giving of notice of such redemption by the Trustee in the Company’s
name and at the Company’s expense; and
(10) the Company must deliver to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating
that all conditions precedent relating to the Legal Defeasance or the Covenant Defeasance have been
complied with.
Satisfaction and Discharge
The Indenture will be discharged and will cease to be of further effect as to all Notes issued thereunder (other
than those provisions which by their express terms survive), when:
(1) either:
(a) all Notes that have been authenticated and delivered thereunder (except lost, stolen or destroyed Notes
that have been replaced or paid and Notes for whose payment money has theretofore been deposited in
trust or segregated and held in trust by the Company and thereafter repaid to the Company or
discharged from such trust) have been delivered to the Trustee for cancellation; or
(b) all Notes issued thereunder that have not been delivered to the Trustee for cancellation (x) have
become due and payable (by reason of the mailing of a notice of redemption or otherwise), (y) will
become due and payable at Stated Maturity within one year, or (z) are to be called for redemption
within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption
by the Trustee in the Company’s name and at the Company’s expense, and in each such case the
Company has irrevocably deposited or caused to be deposited with the Trustee as trust funds in trust
solely for the benefit of the Holders, cash in U.S. dollars, non-callable Government Securities, or a
combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized
firm of independent public accountants, without consideration of any reinvestment of interest, to pay
and discharge the entire indebtedness on the Notes not delivered to the Trustee for cancellation for
principal, premium, if any, and accrued interest to the Stated Maturity or redemption date, as the case
may be;
(2) no Default or Event of Default will have occurred and be continuing on the date of such deposit or will
occur as a result of such deposit and such deposit will not result in a breach or violation of, or constitute a
default under, any other instrument to which the Company or any Guarantor is a party or by which the
Company or any Guarantor is bound;
(3) the Company or any Guarantor has paid or caused to be paid all sums payable by it under the Indenture and
the Notes; and
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(4) the Company has delivered irrevocable instructions to the Trustee under the Indenture to apply the
deposited money toward the payment of the Notes issued thereunder at Stated Maturity or the redemption
date, as the case may be.
In addition, the Company must deliver an Officers’ Certificate and an Opinion of Counsel to the Trustee stating
that all conditions precedent to satisfaction and discharge have been satisfied.
Amendment, Supplement and Waiver
Except as provided in the next two succeeding paragraphs, the Indenture or the Notes may be amended or
supplemented with the consent of the Holders of at least a majority in principal amount of the Notes then
outstanding (including, without limitation, consents obtained in connection with a purchase of, or tender offer or
exchange offer for, Notes), and any existing default or compliance with any provision of the Indenture or the Notes
may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes
(including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer
for, Notes); provided that no amendment or waiver may release any Guarantor from any of its obligations under its
Note Guarantee or the Indenture without the consent of the Holders of at least seventy-five percent (75.0%) in
principal amount of the Notes then outstanding (including, without limitation, consents obtained in connection with
a purchase of, or tender offer or exchange offer for, Notes).
Without the consent of each Holder affected, an amendment or waiver may not (with respect to any Notes held
by a non-consenting Holder):
(1) reduce the principal amount of Notes whose Holders must consent to an amendment, supplement or
waiver;
(2) change the Stated Maturity of the principal of, or any installment of interest on, any Note;
(3) reduce the principal amount of, or premium, if any, or interest on, any Note;
(4) change the optional redemption dates or optional redemption prices of the Notes from those stated under
the caption “—Optional Redemption”;
(5) waive a Default or Event of Default in the payment of principal of, or interest, or premium on, the Notes
(except, upon a rescission of acceleration of the Notes by the Holders of at least a majority in aggregate
principal amount of the Notes, a waiver of the payment default that resulted from such acceleration) or in
respect of any other covenant or provision that cannot be amended or modified without the consent of all
Holders;
(6) make any Note payable in money other than U.S. dollars;
(7) make any change in the amendment and waiver provisions of the Indenture;
(8) impair the right to institute suit for the enforcement of any payment on or with respect to the Notes or the
Note Guarantees;
(9) amend, change or modify the obligation of the Company to make and consummate an Offer to Purchase
with respect to any Asset Sale in accordance with the covenant described under the caption “Repurchase at
the Option of Holders—Asset Sales” after the obligation to make such Offer to Purchase has arisen, or the
obligation of the Company to make and consummate an Offer to Purchase in the event of a Change of
Control Repurchase Event in accordance with the covenant described under the caption “Repurchase at
the Option of Holders—Change of Control” after such Change of Control Repurchase Event has occurred,
including, in each case, amending, changing or modifying any definition relating thereto; or
(10) except as otherwise permitted under the covenants described under the captions “―Certain
Covenants―Merger, Consolidation or Sale of Assets” and “―Note Guarantees―Future Note
Guarantees,” consent to the assignment or transfer by the Company or any Guarantor of any of their rights
or obligations under the Indenture.
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Notwithstanding the preceding, without the consent of any Holder of Notes, the Company, the Guarantors and
the Trustee may amend or supplement the Indenture or the Notes:
(1) to cure any ambiguity, defect or inconsistency;
(2) to provide for uncertificated Notes in addition to or in place of certificated Notes;
(3) to provide for the assumption of the Company’s or any Guarantor’s obligations to Holders of Notes in
accordance with the Indenture in the case of a merger or consolidation or sale of all or substantially all of
the Company’s or such Guarantor’s assets;
(4) to make any change that would provide any additional rights or benefits to the Holders of Notes or that
does not materially, in the good faith determination of the Board of Directors of the Company, adversely
affect the legal rights under the Indenture of any such Holder;
(5) to comply with the provisions described under “―Certain Covenants―Guarantees;”
(6) to evidence and provide for the acceptance of appointment by a successor Trustee;
(7) to provide for the issuance of Additional Notes in accordance with the Indenture; or
(8) to conform the Indenture or the Notes to any provision of this “Description of the Notes” to the extent such
provision is intended to be a verbatim recitation thereof as evidenced by an Officers’ Certificate of the
Company.
Waiver of Immunities
To the extent that the Company may claim for itself or its assets immunity from a suit, execution, attachment,
whether in aid of execution, before judgment or otherwise, or other legal process in connection with the Notes or the
Indenture and to the extent that in any jurisdiction there may be immunity attributable to it or its assets, whether or
not claimed, the Company, for the benefit of the holders of the Notes, irrevocably waives and agrees not to claim
such immunity to the fullest extent permitted by law.
Currency Indemnity
U.S. dollars are the sole currency of account and payment for all sums payable by the Company under or in
connection with the Notes, including damages. Any amount received or recovered in a currency other than dollars
(whether as a result of, or of the enforcement of, a judgment or order of a court of any jurisdiction, in the winding-up
or dissolution of the Company or otherwise) by any holder of a Note in respect of any sum expressed to be due to it
from the Company will only constitute a discharge of the Company to the extent of the dollar amount which the
recipient is able to purchase with the amount so received or recovered in that other currency on the date of that
receipt or recovery (or, if it is not practicable to make that purchase on that date, on the first date on which it is
practicable to do so). If that dollar amount is less than the dollar amount expressed to be due to the recipient under
any Note, the Company will indemnify such holder against any loss sustained by it as a result. In any event, the
Company will indemnify the recipient against the cost of making any such purchase.
For the purposes of the preceding paragraph, it will be sufficient for the holder of a Note to certify in a
satisfactory manner (indicating the sources of information used) that it would have suffered a loss had an actual
purchase of dollars been made with the amount so received in that other currency on the date of receipt or recovery
(or, if a purchase of dollars on such date had not been practicable, on the first date on which it would have been
practicable; it being required that the need for a change of date be certified in the manner mentioned above). These
indemnities constitute a separate and independent obligation from the other obligations of the Company, will give
rise to a separate and independent cause of action, will apply irrespective of any indulgence granted by any holder of
a Note and will continue in full force and effect despite any other judgment, order, claim or proof for a liquidated
amount in respect of any sum due under any Note.
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Concerning the Trustee
Citibank, N.A. is initially serving as Trustee under the Indenture. Citibank, N.A. and its affiliates may have
other business relationships with the Company from time to time.
The Indenture provides that in case an Event of Default occurs and is continuing, the Trustee will be required,
in the exercise of its power, to use the degree of care of a prudent man in the conduct of his own affairs. The
Indenture provides that the Trustee will be under no obligation to exercise any of its rights or powers under the
Indenture at the request of any Holder of Notes, unless such Holder will have offered to the Trustee security and
indemnity satisfactory to it against any loss, liability or expense.
Certain Definitions
Set forth below are certain defined terms used in the Indenture. Reference is made to the Indenture for a full
description of all such terms, as well as any other capitalized terms used herein for which no definition is provided.
“Adjusted Consolidated Cash Flow” means, for any period, the Consolidated Net Income of the Company for
such period plus:
(1) the consolidated income tax expense of the Company and the Restricted Subsidiaries for such period, to the
extent that such income tax expense was deducted in computing such Consolidated Net Income; plus
(2) Fixed Charges of the Company and the Restricted Subsidiaries for such period, to the extent that any such
Fixed Charges were deducted in computing such Consolidated Net Income; plus
(3) depreciation, amortization (including amortization of intangibles but excluding amortization of prepaid
cash expenses that were paid in a prior period) and other non-cash expenses (excluding any such non-cash
expense to the extent that it represents an accrual of or reserve for cash expenses in any future period or
amortization of a prepaid cash expense that was paid in a prior period) of the Company and the Restricted
Subsidiaries for such period to the extent that such depreciation, amortization and other non-cash expenses
were deducted in computing such Consolidated Net Income; minus
(4) non-cash items increasing such Consolidated Net Income for such period, other than the accrual of revenue
in the ordinary course of business;
in each case, on a consolidated basis and determined in accordance with IFRS.
Notwithstanding the preceding, the provision for taxes based on the income or profits of, the Fixed Charges of
and the depreciation and amortization and other non-cash expenses of, a Restricted Subsidiary will be added to
Consolidated Net Income to compute Adjusted Consolidated Cash Flow of the Company (A) in the same proportion
that the Net Income of such Restricted Subsidiary was added to compute such Consolidated Net Income of the
Company and (B) only to the extent that a corresponding amount would be permitted at the date of determination to
be dividended or distributed to the Company by such Restricted Subsidiary without prior governmental approval
(that has not been obtained), and without direct or indirect restriction pursuant to the terms of its charter or any
agreements, instruments, judgments, decrees, orders, statutes, rules and governmental regulations applicable to that
Subsidiary or its stockholders.
“Affiliate” of any specified Person means (1) any other Person directly or indirectly controlling or controlled by
or under direct or indirect common control with such specified Person or (2) any executive officer or director of
such specified Person. For purposes of this definition, “control,” as used with respect to any Person, will mean the
possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such
Person, whether through the ownership of voting securities, by agreement or otherwise. For purposes of this
definition, the terms “controlling,” “controlled by” and “under common control with” will have correlative
meanings.
“Applicable Premium” means, with respect to a Note at any date of redemption, as determined by the
Independent Investment Bank, the excess of (A) the present value at such date of redemption of (1) the redemption
price of such Note at August 2, 2017 (such redemption price being described under “—Optional Redemption”) plus
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(2) all remaining required interest payments due on such Note through August 2, 2017 (excluding accrued but
unpaid interest to the date of redemption), computed using a discount rate equal to the Treasury Rate plus 50 basis
points, over (B) the principal amount of such Note.
“Asset Sale” means:
(1) the sale, lease, conveyance or other disposition (each, a “Transfer”) of any assets by the Company or any
Restricted Subsidiary; and
(2) the issuance of Equity Interests by any Restricted Subsidiary or the Transfer by the Company or any
Restricted Subsidiary of Equity Interests in any of its Subsidiaries (other than directors’ qualifying shares
and shares issued to foreign nationals to the extent required by applicable law).
Notwithstanding the preceding, the following items will be deemed not to be Asset Sales:
(1) any single transaction or series of related transactions that involves assets or Equity Interests having a Fair
Market Value of less than US$5.0 million;
(2) a Transfer of assets that is governed by the provisions of the Indenture described above under the caption
“—Repurchase at the Option of Holders—Change of Control” and/or the provisions described above
under the caption “—Certain Covenants—Merger, Consolidation or Sale of Assets;”
(3) a Transfer of assets or Equity Interests between or among the Company and the Restricted Subsidiaries;
(4) an issuance of Equity Interests by a Restricted Subsidiary to the Company or to another Restricted
Subsidiary;
(5) a Transfer of any assets in the ordinary course of business;
(6) a Transfer of Cash Equivalents;
(7) a Transfer of accounts receivable in connection with the compromise, settlement or collection thereof in
the ordinary course of business or in bankruptcy or similar proceedings;
(8) a Transfer that constitutes a Restricted Payment that is permitted by the covenant described above under
the caption “—Certain Covenants—Limitation on Restricted Payments” or a Permitted Investment;
(9) a Transfer of any property or equipment that has become damaged, worn out or obsolete; and
(10) the creation of a Lien not prohibited by the Indenture (but not the sale of property subject to a Lien).
“Attributable Debt” in respect of a Sale and Leaseback Transaction means, at the time of determination, the
present value of the obligation of the lessee for net rental payments during the remaining term of the lease included
in such Sale and Leaseback Transaction, including any period for which such lease has been extended or may, at the
option of the lessor, be extended. Such present value will be calculated using a discount rate equal to the rate of
interest implicit in such transaction, determined in accordance with IFRS.
“Azucarera Olmos” means Azucarera Olmos S.A.
“Beneficial Owner” has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Exchange
Act, except that in calculating the beneficial ownership of any particular “person” (as that term is used in Section
13(d)(3) of the Exchange Act), such “person” will be deemed to have beneficial ownership of all securities that such
“person” has the right to acquire by conversion or exercise of other securities, whether such right is currently
exercisable or is exercisable only upon the occurrence of a subsequent condition. The terms “Beneficially Owns”
and “Beneficially Owned” will have a corresponding meaning.
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“Board of Directors” means:
(1) with respect to a corporation, the board of directors of the corporation or, except in the context of the
definition of “Change of Control,” a duly authorized committee thereof;
(2) with respect to a partnership, the Board of Directors of the general partner of the partnership; and
(3) with respect to any other Person, the board or committee of such Person serving a similar function.
“Board Resolution” means a resolution certified by the General Manager of the Company to have been duly
adopted by the Board of Directors of the Company and to be in full force and effect on the date of such certification.
“Business Day” means any day other than a Legal Holiday.
“Capital Lease Obligation” means an obligation that is required to be classified and accounted for as a capital
lease for financial reporting purposes in accordance with IFRS; and the amount of Indebtedness represented thereby
at any time shall be the amount of the liability in respect thereof that would at that time be required to be capitalized
on a balance sheet in accordance with IFRS.
“Capital Stock” of any Person means any and all shares, interests (including general or limited partnership
interests, limited liability company or membership interests or limited liability partnership interests), participations
or other equivalents of or interests in (however designated) equity of such Person, including any Preferred Stock.
“Cartavio” means Cartavio S.A.A.
“Casa Grande” means Casa Grande S.A.A.
“Cash Equivalents” means:
(1) United States dollars and such local currencies held by the Company or any Restricted Subsidiary from
time to time in the ordinary course of business;
(2) securities issued or directly and fully guaranteed or insured by the United States government or any agency
or instrumentality thereof (provided that the full faith and credit of the United States is pledged in support
thereof), maturing, unless such securities are deposited to defease any Indebtedness, not more than one year
from the date of acquisition;
(3) securities issued or directly and fully guaranteed or insured by the Peruvian government or any agency or
instrumentality thereof (provided that the full faith and credit of the Republic of Peru is pledged in support
thereof), maturing, unless such securities are deposited to defease any Indebtedness, not more than one year
from the date of acquisition;
(4) demand deposits, certificates of deposit and time deposits with maturities of six months or less from the
date of acquisition, bankers’ acceptances with maturities not exceeding one year and overnight bank
deposits, in each case, with (a) any commercial bank organized under the laws of the United States or any
state, commonwealth or territory thereof or any non-U.S. bank, in each case having capital and surplus in
excess of US$500.0 million and a rating at the time of acquisition thereof of P-1 or better from Moody’s or
A-1 or better from S&P or such local equivalent thereof or, (b) with respect to the definitions of “Permitted
Investments” and “Permitted Liens” in this “Description of the Notes”, (i) with respect to Cash Equivalents
of any Person whose principal place of business is in a jurisdiction other than the United States or any
member state of the European Union, a bank operating in such other jurisdiction having capital and surplus
in excess of US$250.0 million, (ii) any branch or Subsidiary of a bank (such bank, the “parent institution”)
organized under the laws of the United States or any state, commonwealth or territory thereof or the
European Union or any member state thereof, if the rating of such parent institution at the time of
acquisition thereof is P-3 or better from Moody’s or A-3 or better from S&P or such local equivalent
thereof, (iii) any bank to the extent the Company or any of its Subsidiaries maintains any deposits with such
bank in the ordinary course of business, so long as any such deposit is outstanding for less than thirty (30)
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days and (iv) any other bank, specified in the Indenture, with which the Company or any of its Subsidiaries
maintains any deposit at the Issue Date;
(5) repurchase obligations with a term of not more than thirty (30) days for underlying securities of the types
described in clauses (2) and (4) above entered into with any financial institution meeting the qualifications
specified in clause (4) above;
(6) commercial paper having the highest rating obtainable from Moody’s or S&P and in each case maturing
within one year after the date of acquisition;
(7) securities issued and fully guaranteed by any state, commonwealth or territory of the United States of
America, or by any political subdivision or taxing authority thereof, rated at least “A” by Moody’s or S&P
and having maturities of not more than one year from the date of acquisition;
(8) money market funds at least 95% of the assets of which constitute Cash Equivalents of the kinds described
in clauses (1) through (7) of this definition; and
(9) instruments equivalent to those referred to in clauses (1) through (8) above denominated in U.S. dollars or
any other foreign currency comparable in credit quality and tenor to those referred to above and
customarily used by corporations for cash management purposes in any jurisdiction outside the United
States to the extent reasonably required in connection with any business conducted by the Company or any
Restricted Subsidiary organized in such jurisdiction.
“Change of Control” means the occurrence of any of the following:
(1) the direct or indirect sale, transfer, conveyance or other disposition (other than by way of merger or
consolidation), in one or a series of related transactions, of all or substantially all of the properties or assets
of the Company and the Restricted Subsidiaries, taken as a whole, to any “person” (as that term is used in
Section 13(d)(3) of the Exchange Act) other than the Permitted Holders;
(2) the adoption of a plan relating to the liquidation or dissolution of the Company;
(3) the Permitted Holders cease to be the Beneficial Owner, directly or indirectly, of a majority in the
aggregate of the total voting power of the Voting Stock of the Company, on a fully diluted basis, whether
as a result of issuance of securities of the Company, any merger, consolidation, liquidation or dissolution of
the Company, or any direct or indirect transfer of securities by the Company; or
(4) individuals appointed by the Permitted Holders cease for any reason to constitute a majority of the
members of the Board of Directors of the Company.
“Change of Control Repurchase Event” means the occurrence of both a Change of Control and a Rating
Downgrade Event.
“Commission” means the United States Securities and Exchange Commission.
“Common Stock” means, with respect to any Person, any Capital Stock (other than Preferred Stock) of such
Person, whether outstanding on the Issue Date or issued thereafter.
“Comparable Treasury Issue” means the United States Treasury security or securities selected by an
Independent Investment Bank as having an actual or interpolated maturity comparable to the remaining term of the
Notes to be redeemed to August 2, 2017 that would be utilized, at the time of selection and in accordance with
customary financial practice, in pricing new issues of corporate debt securities of a comparable maturity to the
remaining term of such Notes to August 2, 2017.
“Comparable Treasury Price” means, with respect to any redemption date, (A) the average of the Reference
Treasury Dealer Quotations for such redemption date, after excluding the highest and lowest such Reference
Treasury Dealer Quotations, or (B) if the Independent Investment Bank obtains fewer than four such Reference
Treasury Dealer Quotations, the average of all such quotations.
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“Consolidated Leverage Ratio” means, as of any Transaction Date, the ratio of (i) the aggregate amount of
Indebtedness of the Company and its Restricted Subsidiaries on a consolidated basis outstanding on such
Transaction Date, to (ii) the aggregate amount of Adjusted Consolidated Cash Flow of the Company and its
Restricted Subsidiaries for the Company’s most recently ended four full fiscal quarters for which internal financial
statements are available immediately preceding such Transaction Date (the “Four Quarter Period”).
For purposes of calculating the Consolidated Leverage Ratio:
(1) pro forma effect shall be given to any Indebtedness that is to be incurred or repaid on the Transaction Date;
(2) acquisitions and dispositions of business entities or property and assets constituting a division or line of
business of any Person that have been made by the Company or any Restricted Subsidiary (or by any
Person that has subsequently become a Restricted Subsidiary or has subsequently merged or consolidated
with or into the Company or any Restricted Subsidiary), including through mergers or consolidations, and
the designation or redesignation of an Unrestricted Subsidiary, in each case, during the Four Quarter Period
or subsequent thereto and on or prior to the Transaction Date will be given pro forma effect as if they had
occurred on the first day of the Four Quarter Period and Adjusted Consolidated Cash Flow for the Four
Quarter Period will be calculated on a pro forma basis, but without giving effect to clause (3) of the proviso
set forth in the definition of Consolidated Net Income;
(3) the Adjusted Consolidated Cash Flow attributable to discontinued operations, as determined in accordance
with IFRS, will be excluded; and
(4) whenever pro forma effect is to be given to an acquisition or disposition, the pro forma calculations will be
made in good faith by a responsible financial or accounting officer of the Company.
“Consolidated Net Income” means, for any period, the aggregate of the net income (loss) of the Company and
the Restricted Subsidiaries for such period, on a consolidated basis, determined in accordance with IFRS; provided
that:
(1) the net income (loss) of any Person that is not a Restricted Subsidiary or that is accounted for by the equity
method of accounting will be included only to the extent of the amount of dividends or distributions paid in
cash to the Company or a Restricted Subsidiary (subject, in the case of dividends or distributions paid to a
Restricted Subsidiary, to the limitations contained in clause (2) below);
(2) the net income (but not the net loss) of any Restricted Subsidiary will be excluded to the extent that the
declaration or payment of dividends or similar distributions by that Restricted Subsidiary of that net income
is not at the date of determination permitted without any prior governmental approval (that has not been
obtained) or, directly or indirectly, by operation of the terms of its charter or any agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation applicable to that Restricted Subsidiary or
its equityholders;
(3) the net income (loss) of any Person acquired during the specified period for any period prior to the date of
such acquisition will be excluded;
(4) any gain or loss, together with any related provision for taxes on such gain or loss, realized in connection
with: (a) any sale of assets outside the ordinary course of business of the Company; or (b) the disposition of
any securities by the Company or a Restricted Subsidiary or the extinguishment of any Indebtedness of the
Company or any Restricted Subsidiary, will be excluded;
(5) any extraordinary gain or loss, together with any related provision for taxes on such extraordinary gain or
loss, will be excluded;
(6) any non-cash compensation expense realized for grants of performance shares, stock options or other rights
to officers, directors and employees of the Company and any Restricted Subsidiary will be excluded;
provided that such shares, options or other rights can be redeemed at the option of the holder only for
Capital Stock (other than Disqualified Stock of the Company); and
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(7) the cumulative effect of a change in accounting principles will be excluded.
“Consolidated Net Tangible Assets” of any person means, as of any date, (a) all amounts that would be shown
as assets on a consolidated balance sheet of such person and its Restricted Subsidiaries prepared in accordance with
IFRS, less (b) the amount thereof constituting goodwill and other intangible assets as calculated in accordance with
IFRS, less (c) current liabilities, excluding current maturities of long-term debt.
“Default” means any event that is, or with the passage of time or the giving of notice or both would be, an Event
of Default.
“Disqualified Stock” means any Capital Stock that, by its terms, by the terms of any security into which it is
convertible, or for which it is exchangeable, or by contract or otherwise, is, or upon the happening of any event or
passage of time would be, required to be redeemed on or prior to the date that is one year after the date on which the
Notes mature, or is redeemable at the option of the holder thereof, or is convertible into or exchangeable for debt
securities in any such case on or prior to such date. Notwithstanding the preceding sentence, any Capital Stock that
would constitute Disqualified Stock solely because the holders thereof have the right to require the Company to
repurchase such Capital Stock upon the occurrence of a change of control or an asset sale will not constitute
Disqualified Stock if (i) the “asset sale” or “change of control” provisions applicable to such Capital Stock are no
more favorable to the holders of such Capital Stock than the provisions contained in “—Repurchase at the Option of
Holders—Asset Sales” and “—Repurchase at the Option of Holders—Change of Control” covenants described
herein and (ii) such Capital Stock specifically provides that such Person will not repurchase or redeem any such
stock pursuant to such provision prior to the Company’s repurchase of such Notes as are required to be repurchased
pursuant to “—Repurchase at the Option of Holders—Asset Sales” and “—Repurchase at the Option of Holders—
Change of Control” covenants. The term “Disqualified Stock” will also include any options, warrants or other rights
that are convertible into Disqualified Stock or that are redeemable at the option of the holder, or required to be
redeemed, prior to the date that is one year after the date on which the Notes mature.
“Equity Interests” means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but
excluding any debt security that is convertible into, or exchangeable for, Capital Stock).
“Equity Offering” means any (i) public sale or (ii) underwritten private offering in accordance with Rule 144A,
Regulation S and/or another exemption under the Securities Act, in each case of Capital Stock (other than
Disqualified Stock) of the Company in excess of US$50.0 million (other than pursuant to a registration statement on
Form S-8 or otherwise relating to equity securities issuable under any employee benefit plan of the Company) to any
Person other than any Subsidiary thereof.
“Existing Indebtedness” means the aggregate amount of Indebtedness of the Company and the Restricted
Subsidiaries (other than Indebtedness under the Notes and the related Note Guarantees) in existence on the Issue
Date after giving effect to the application of the proceeds of the Notes.
“Fair Market Value” means the price that would be paid in an arm’s-length transaction between an informed
and willing seller under no compulsion to sell and an informed and willing buyer under no compulsion to buy, as
determined in good faith by the Board of Directors of the Company, whose determination, will be conclusive if
evidenced by a Board Resolution.
“Fitch” means Fitch Inc., a Subsidiary of Fimalac, S.A.
“Fixed Charge Coverage Ratio” means for any period, the ratio of the Adjusted Consolidated Cash Flow of the
Company for such period to the Fixed Charges of the Company for such period.
For purposes of calculating the Fixed Charge Coverage Ratio:
(1) in the event that the Company or any Restricted Subsidiary Incurs, repays, repurchases or redeems any
Indebtedness or issues, repurchases or redeems Preferred Stock subsequent to the commencement of the
period for which the Fixed Charge Coverage Ratio is being calculated and on or prior to the date on which
the event for which the calculation of the Fixed Charge Coverage Ratio is made (the “Calculation Date”),
then the Fixed Charge Coverage Ratio will be calculated giving pro forma effect to such Incurrence,
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repayment, repurchase or redemption of Indebtedness, or such issuance, repurchase or redemption of
Preferred Stock, and the use of the proceeds therefrom as if the same had occurred at the beginning of such
period;
(2) acquisitions and dispositions of business entities or property and assets constituting a division or line of
business of any Person that have been made by the Company or any Restricted Subsidiary (or by any
Person that has subsequently become a Restricted Subsidiary or has subsequently merged or consolidated
with or into the Company or any Restricted Subsidiary), including through mergers or consolidations, and
the designation or redesignation of an Unrestricted Subsidiary, in each case, during the four-quarter
reference period or subsequent to such reference period and on or prior to the Calculation Date will be
given pro forma effect as if they had occurred on the first day of the four-quarter reference period and
Adjusted Consolidated Cash Flow for such reference period will be calculated on a pro forma basis, but
without giving effect to clause (3) of the proviso set forth in the definition of Consolidated Net Income;
(3) the Adjusted Consolidated Cash Flow attributable to discontinued operations, as determined in accordance
with IFRS, will be excluded;
(4) the Fixed Charges attributable to discontinued operations, as determined in accordance with IFRS, will be
excluded, but only to the extent that the obligations giving rise to such Fixed Charges will not be
obligations of the Company or any Restricted Subsidiary following the Calculation Date;
(5) whenever pro forma effect is to be given to an acquisition or disposition, the amount of Adjusted
Consolidated Cash Flow relating thereto and the amount of Fixed Charges associated with any
Indebtedness Incurred in connection therewith, unless otherwise specified, the pro forma calculations will
be made in good faith by a responsible financial or accounting officer of the Company;
(6) Fixed Charges attributable to interest on any Indebtedness (whether existing or being Incurred) computed
on a pro forma basis and bearing a floating interest rate will be computed as if the rate in effect on the
Calculation Date (taking into account any interest rate option, swap, cap or similar agreement applicable to
such Indebtedness if such agreement has a remaining term in excess of 12 months or, if shorter, at least
equal to the remaining term of such Indebtedness) had been the applicable rate for the entire period; and
(7) Fixed Charges attributable to interest on any Indebtedness incurred under a revolving credit facility
computed on a pro forma basis will be calculated based on the average daily balance of such Indebtedness
for the four fiscal quarters subject to the pro forma calculation to the extent that such Indebtedness was
Incurred solely for working capital purposes.
“Fixed Charges” means, for any period, the sum, without duplication, of:
(1) the consolidated interest expense of the Company and the Restricted Subsidiaries for such period, whether
paid or accrued, including, without limitation, amortization of debt issuance costs and original issue
discount, non-cash interest payments, the interest component of any deferred payment obligations, the
interest component of all payments associated with Capital Lease Obligations, imputed interest with respect
to Attributable Debt, commissions, discounts and other fees and charges incurred in respect of letter of
credit or bankers’ acceptance financings, and net of the effect of all payments made or received pursuant to
Hedging Obligations; plus
(2) the consolidated interest of the Company and the Restricted Subsidiaries that was capitalized during such
period; plus
(3) any interest expense on Indebtedness of another Person that is Guaranteed by the Company or one of the
Restricted Subsidiaries or secured by a Lien on assets of the Company or a Restricted Subsidiary, whether
or not such Guarantee or Lien is called upon; plus
(4) the product of (a) all dividends, whether paid or accrued and whether or not in cash, on any series of
Disqualified Stock of the Company or a Restricted Subsidiary or Preferred Stock of a Restricted
Subsidiary, other than dividends on Equity Interests payable solely in Equity Interests (other than
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Disqualified Stock) of the Company or to the Company or a Restricted Subsidiary, times (b) a fraction, the
numerator of which is one and the denominator of which is one minus the then current combined U.S.
federal, state, local statutory tax rate of the issuer of such Disqualified or Preferred Stock, expressed as a
decimal,
in each case, on a consolidated basis and in accordance with IFRS.
“Government Securities” means securities that are direct obligations of the United States of America for the
timely payment of which its full faith and credit is pledged.
“Guarantee” means, as to any Person, a guarantee other than by endorsement of negotiable instruments for
collection in the ordinary course of business, direct or indirect, in any manner, including, without limitation, by way
of a pledge of assets or through letters of credit or reimbursement agreements in respect thereof, of all or any part of
any Indebtedness of another Person, but excluding endorsements for collection or deposit in the normal course of
business.
“Guarantors” means:
(1) the Initial Guarantors; and
(2) any other subsidiary that executes a Note Guarantee in accordance with the provisions of the Indenture;
and their respective successors and assigns until released from their obligations under their Note Guarantees and
the Indenture in accordance with the terms of the Indenture.
“Hedging Obligations” means, with respect to any specified Person, the obligations of such Person under:
(1) any interest rate protection agreement, interest rate future agreement, interest rate option agreement,
interest rate swap agreement, interest rate cap agreement, interest rate collar agreement or other similar
agreement or arrangement;
(2) any commodity forward contract, commodity swap agreement, commodity option agreement or other
similar agreement or arrangement; or
(3) any foreign exchange contract, currency swap agreement or other similar agreement or arrangement.
“Holder” means a Person in whose name a Note is registered.
“IFRS” means the International Financial Reporting Standards as adopted by the International Accounting
Standards Board which are in effect from time to time.
“Incur” means, with respect to any Indebtedness, to incur, create, issue, assume, Guarantee or otherwise
become directly or indirectly liable for or with respect to, or become responsible for, the payment of, contingently or
otherwise, such Indebtedness (and “Incurrence” and “Incurred” will have meanings correlative to the foregoing);
provided that (1) any Indebtedness of a Person existing at the time such Person becomes a Restricted Subsidiary will
be deemed to be Incurred by such Person at the time it becomes a Restricted Subsidiary and (2) neither the accrual
of interest nor the accretion of original issue discount nor the payment of interest in the form of additional
Indebtedness with the same terms or the payment of dividends on Disqualified Stock or Preferred Stock in the form
of additional shares of the same class of Disqualified Stock or Preferred Stock (to the extent provided for when the
Indebtedness or Disqualified Stock or Preferred Stock on which such interest or dividend is paid was originally
issued) will be considered an Incurrence of Indebtedness.
“Indebtedness” means, with respect to any specified Person, whether or not contingent:
(1) all indebtedness of such Person in respect of borrowed money;
(2) all obligations of such Person evidenced by bonds, notes, debentures or similar instruments;
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(3) all obligations of such Person in respect of banker’s acceptances, letters of credit or similar instruments (or
reimbursement obligations in respect thereof);
(4) all Capital Lease Obligations of such Person and Attributable Debt;
(5) all obligations of such Person in respect of the deferred and unpaid balance of the purchase price of any
property or services, except any such balance that constitutes an accrued expense or trade payable;
(6) all Hedging Obligations of such Person;
(7) all Disqualified Stock issued by such Person, valued at the greater of its voluntary or involuntary
liquidation preference and its maximum fixed repurchase price plus accrued dividends;
(8) all Indebtedness of others secured by a Lien on any asset of the specified Person (whether or not such
Indebtedness is assumed by the specified Person), provided that the amount of such Indebtedness will be
the lesser of (A) the Fair Market Value of such asset at such date of determination and (B) the amount of
such Indebtedness; and
(9) to the extent not otherwise included, the Guarantee by the specified Person of any Indebtedness of any
other Person.
For purposes hereof, the “maximum fixed repurchase price” of any Disqualified Stock which does not have a
fixed repurchase price will be calculated in accordance with the terms of such Disqualified Stock as if such
Disqualified Stock were repurchased on any date on which Indebtedness will be required to be determined pursuant
to the Indenture.
The amount of any Indebtedness outstanding as of any date will be the outstanding balance at such date of all
unconditional obligations as described above and, with respect to contingent obligations, the maximum liability
upon the occurrence of the contingency giving rise to the obligation. The amount of any Indebtedness described in
clauses (1) and (2) above will be:
(1) the accreted value thereof, in the case of any Indebtedness issued with original issue discount; and
(2) the principal amount thereof, together with any interest thereon that is more than 30 days past due, in the
case of any other Indebtedness.
For purposes of determining any particular amount of Indebtedness, (x) Guarantees, Liens or obligations with
respect to letters of credit supporting Indebtedness otherwise included in the determination of such particular amount
shall not be included, and (y) any Liens granted pursuant to the equal and ratable provisions referred to in the
“Limitation on Liens” covenant shall not be treated as Indebtedness.
“Independent Investment Bank” means one of the Reference Treasury Dealers appointed by the Company.
“Initial Guarantors” means Casa Grande, Cartavio, San Jacinto and Azucarera Olmos.
“Initial Purchasers” means Merrill Lynch, Pierce, Fenner & Smith Incorporated and Citigroup Global Markets
Inc.
“Investments” in any Person means all direct or indirect investments in such Person in the form of loans or other
extensions of credit (including Guarantees), advances, capital contributions (by means of any transfer of cash or
other property to others or any payment for property or services for the account or use of others), purchases or other
acquisitions for consideration of Indebtedness, Equity Interests or other securities issued by such Person, together
with all items that are or would be classified as investments on a balance sheet prepared in accordance with IFRS.
If the Company or any Restricted Subsidiary sells or otherwise disposes of any Equity Interests of any direct or
indirect Restricted Subsidiary such that, after giving effect to any such sale or disposition, such Person is no longer a
Restricted Subsidiary, the Company will be deemed to have made an Investment on the date of any such sale or
disposition equal to the Fair Market Value of the Investment in such Subsidiary not sold or disposed of. The
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acquisition by the Company or any Restricted Subsidiary of a Person that holds an Investment in a third Person will
be deemed to be an Investment by the Company or such Restricted Subsidiary in such third Person in an amount
equal to the Fair Market Value of the Investment held by the acquired Person in such third Person unless such
Investment in such third party was not made in anticipation or contemplation of the Investment by the Company or
such Restricted Subsidiary and such third party Investment is incidental to the primary business of such Person in
whom the Company or such Restricted Subsidiary is making such Investment.
“Investment Grade” means
(1) with respect to Moody’s (or any successor company acquiring all or substantially all of its assets), a rating
of Baa3 (or its equivalent under any successor rating category of Moody’s) or better;
(2) with respect to S&P (or any successor company acquiring all or substantially all of its assets), a rating of
BBB- (or its equivalent under any successor rating category of S&P) or better;
(3) with respect to Fitch (or any successor company acquiring all or substantially all of its assets), a rating of
BBB-(or its equivalent under any successor rating category of Fitch) or better; and
(4) if any Rating Agency ceases to exist or ceases to rate the Notes for reasons outside of the control of the
Company, the equivalent investment grade credit rating from any other “nationally recognized statistical
rating organization” within the meaning of Rule 15c3-1(c)(2)(vi)(F) under the Exchange Act selected by
the Company as a replacement agency.
“Issue Date” means the first date Notes are issued under the Indenture.
“Legal Holiday” means a Saturday, a Sunday or a day on which banking institutions in The City of New York,
New York, United States of America, Lima, Peru, or at a place of payment are authorized or required by law,
regulation or executive order to remain closed.
“Lien” means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of
any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law,
including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other
agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction.
“Moody’s” means Moody’s Investors Service, Inc. and its successors.
“Net Available Cash” means the aggregate proceeds, including payments in respect of deferred payment
obligations (to the extent corresponding to the principal, but not the interest component, thereof), received in Cash
Equivalents by the Company or any Restricted Subsidiary in respect of any Asset Sale (including, without
limitation, any Cash Equivalents received upon the sale or other disposition of any non-cash consideration received
in any Asset Sale), net of (1) the direct costs relating to such Asset Sale, including, without limitation, legal,
accounting, investment banking and brokerage fees, and sales commissions, and any relocation expenses incurred as
a result thereof, (2) taxes paid or payable as a result thereof, in each case, after taking into account any available tax
credits or deductions and any tax sharing arrangements, (3) in the case of any Asset Sale by a Restricted Subsidiary,
payments to holders of Equity Interests in such Restricted Subsidiary in such capacity (other than such Equity
Interests held by the Company or any Restricted Subsidiary) to the extent that such payment is required to permit the
distribution of such proceeds in respect of the Equity Interests in such Restricted Subsidiary held by the Company or
any Restricted Subsidiary and (4) appropriate amounts to be provided by the Company or the Restricted Subsidiaries
as a reserve against liabilities associated with such Asset Sale, including, without limitation, pension and other postemployment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification
obligations associated with such Asset Sale, all as determined in accordance with IFRS; provided that (a) excess
amounts set aside for payment of taxes pursuant to clause (2) above remaining after such taxes have been paid in full
or the statute of limitations therefor has expired and (b) amounts initially held in reserve pursuant to clause (4) no
longer so held, will, in the case of each of subclause (a) and (b), at that time become Net Available Cash.
“Note Guarantee” means a Guarantee of the Notes pursuant to the Indenture.
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“Obligations” with respect to any Indebtedness means any principal, interest, penalties, fees, indemnifications,
reimbursements, damages and other liabilities payable under the documentation governing such Indebtedness.
“Offer to Purchase” means an offer to purchase Notes by the Company from the Holders commenced by
mailing a notice to the Trustee and each Holder stating:
(1) the provision of the Indenture pursuant to which the offer is being made and that all Notes validly tendered
will be accepted for payment on a pro rata basis;
(2) the purchase price and the date of purchase, which shall be a business day no earlier than 30 days nor later
than 60 days from the date such notice is mailed (the “Payment Date”);
(3) that any Note not tendered will continue to accrue interest pursuant to its terms;
(4) that, unless the Company defaults in the payment of the purchase price, any Note accepted for payment
pursuant to the Offer to Purchase shall cease to accrue interest on and after the Payment Date;
(5) that Holders electing to have a Note purchased pursuant to the Offer to Purchase will be required to
surrender the Note, together with the form entitled “Option of the Holder to Elect Purchase” on the reverse
side of the Note completed, to the Paying Agent at the address specified in the notice prior to the close of
business on the business day immediately preceding the Payment Date;
(6) that Holders will be entitled to withdraw their election if the Paying Agent receives, not later than the close
of business on the third business day immediately preceding the Payment Date, a telegram, facsimile
transmission, letter or other written notice setting forth the name of such Holder, the principal amount of
Notes delivered for purchase and a statement that such Holder is withdrawing his election to have such
Notes purchased; and
(7) that Holders whose Notes are being purchased only in part will be issued new Notes equal in principal
amount to the unpurchased portion of the Notes surrendered; provided that each Note purchased and each
new Note issued shall be in a principal amount of US$100,000 or an integral multiple of US$1,000 in
excess thereof.
On the Payment Date, the Company shall (a) accept for payment on a pro rata basis Notes or portions thereof
(and, in the case of an Offer to Purchase made pursuant to “Repurchase at the Option of Holders―Asset Sales,” any
other Pari Passu Debt included in such Offer to Purchase) tendered pursuant to an Offer to Purchase; (b) deposit, on
the Business Day prior to such Payment Date, with the Paying Agent money sufficient to pay the purchase price of
all Notes or portions thereof so accepted; and (c) deliver, or cause to be delivered, to the Trustee all Notes or
portions thereof so accepted together with an Officers’ Certificate specifying the Notes or portions thereof accepted
for payment by the Company. The Paying Agent shall promptly mail or send by wire transfer to the Holders of
Notes so accepted payment in an amount equal to the purchase price, and the Trustee shall promptly authenticate
and deliver to such Holders a new Note equal in principal amount to any unpurchased portion of the Note
surrendered; provided that each Note purchased and each new Note issued shall be in a principal amount of
US$100,000 or an integral multiple of US$1,000 in excess thereof. The Company will publicly announce the results
of an Offer to Purchase as soon as practicable after the Payment Date. The Trustee shall act as the Paying Agent for
an Offer to Purchase. The Company will comply with Rule 14e-1 under the Exchange Act and any other securities
laws and regulations thereunder, to the extent such laws and regulations are applicable, in the event that the
Company is required to repurchase Notes pursuant to an Offer to Purchase. To the extent that the provisions of any
securities laws or regulations conflict with the provisions of the Indenture relating to an Offer to Purchase, the
Company will comply with the applicable securities laws and regulations and will not be deemed to have breached
its obligations under such provisions of the Indenture by virtue of such conflict.
“Officer” means, with respect to any Person, the Chairman of the Board, the Chief Executive Officer, the
President, the Chief Operating Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the
Controller, the Secretary or any Vice-President of such Person.
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“Officers’ Certificate” means a certificate signed on behalf of the Company by at least two Officers of the
Company, one of whom must be the principal executive officer, the principal financial officer, the treasurer or the
principal accounting officer of the Company, that meets the requirements of the Indenture.
“Opinion of Counsel” means an opinion from legal counsel who is reasonably acceptable to the Trustee (who
may be counsel to the Company) that meets the requirements of the Indenture.
“Pari Passu Debt” means (a) any Indebtedness of the Company that ranks equally in right of payment with the
Notes or (b) any Indebtedness of a Guarantor that ranks equally in right of payment with such Guarantor’s Note
Guarantee.
“Permitted Business” means any business conducted or proposed to be conducted (as described in this offering
memorandum) by the Company and the Restricted Subsidiaries on the Issue Date and other businesses ancillary
thereto.
“Permitted Holders” means the Rodríguez Family.
“Permitted Investments” means:
(1) any Investment in the Company or in a Restricted Subsidiary;
(2) any Investment in Cash Equivalents;
(3) any Investment by the Company or any Restricted Subsidiary in a Person, if as a result of such Investment:
(a) such Person becomes a Restricted Subsidiary; or
(b) such Person is merged, consolidated or amalgamated with or into, or transfers or conveys all or
substantially all of its assets to, or is liquidated into, the Company or a Restricted Subsidiary;
(4) any Investment made as a result of the receipt of non-cash consideration from an Asset Sale that was made
pursuant to and in compliance with the covenant described above under the caption “—Repurchase at the
Option of Holders—Asset Sales;”
(5) Hedging Obligations that are designed solely to protect the Company or its Restricted Subsidiaries against
fluctuations in interest rates, commodity prices or foreign currency exchange rates (or to reverse or amend
any such agreements previously made for such purposes), and not for speculative purposes, and that do not
increase the Indebtedness of the obligor outstanding at any time other than as a result of fluctuations in
interest rates, commodity prices or foreign currency exchange rates or by reason of fees, indemnifies and
compensation payable thereunder;
(6) (i) stock, obligations or securities received in satisfaction of judgments, foreclosure of Liens or settlement
of Indebtedness and (ii) any Investments received in compromise of obligations of any trade creditor or
customer that were incurred in the ordinary course of business, including pursuant to any plan of
reorganization or similar arrangement upon the bankruptcy or insolvency of any such Person;
(7) advances to customers or suppliers in the ordinary course of business that are, in conformity with IFRS,
recorded as accounts receivable, prepaid expenses or deposits on the balance sheet of the Company or the
Restricted Subsidiaries and endorsements for collection or deposit arising in the ordinary course of
business;
(8) commission, payroll, travel and similar advances to officers and employees of the Company or any
Restricted Subsidiary that are expected at the time of such advance ultimately to be recorded as an expense
in conformity with IFRS;
(9) an Investment existing on the Issue Date, and any Investment that replaces, refinances or refunds an
existing Investment; provided that the new Investment does not increase the amount of the Investment so
replaced, refinanced or refunded except by an amount equal to any premium or other reasonable amount
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paid in respect of the underlying obligations and fees and expenses incurred in connection with such
replacement, refinancing or refunding;
(10) repurchases of the Notes and the related Guarantees made (i) in the open market in an aggregate amount
not to exceed US$30.0 million since the Issue Date pursuant to this subclause (i) or (ii) as a result of any
offer to all Holders to purchase their Notes, including where any such offer is made in accordance with the
provisions set forth in the covenant described under the caption “Repurchase at the Option of Holders—
Asset Sales”; provided that any such repurchased Notes (and related Guarantees) must be delivered to the
Trustee for cancellation or held continuously by the Company or any Restricted Subsidiary after any such
repurchase and may not be transferred by any means to any Person other than the Company or any
Restricted Subsidiary;
(11) Investments in one or more Permitted Joint Ventures having an aggregate Fair Market Value that do not
exceed in the aggregate US$5.0 million in any calendar year (with unused amounts in any calendar year
being carried over to the next succeeding calendar year subject to a maximum of US$10.0 million in the
aggregate in any calendar year) (with the Fair Market Value of each Investment being measured at the
time made and without giving effect to subsequent changes in value);
(12) Investments in one or more Qualified Acquisitions having an aggregate Fair Market Value (measured on
the date each such Investment was made and without giving effect to subsequent changes in value), when
taken together with all other Investments made pursuant to this clause (12) since the Issue Date, not to
exceed US$30.0 million; and
(13) other Investments in any Person having an aggregate Fair Market Value (measured on the date each such
Investment was made and without giving effect to subsequent changes in value), when taken together with
all other Investments made pursuant to this clause (13) since the Issue Date, not to exceed US$10.0
million.
“Permitted Joint Venture” means any agreement, contract or other arrangement between the Company or any
Restricted Subsidiary and any Person engaged principally in a Permitted Business that permits one party to share
risks or costs, comply with regulatory requirements or satisfy other business objectives customarily achieved
through the conduct of such Permitted Business jointly with third parties.
“Permitted Liens” means:
(1) Liens in favor of the Company or any Restricted Subsidiary that is a Guarantor;
(2) Liens on property of a Person existing at the time such Person is merged with or into or consolidated with
the Company or any Restricted Subsidiary; provided that such Liens were in existence prior to the
contemplation of such merger or consolidation and do not extend to any assets other than those of the
Person merged into or consolidated with the Company or the Restricted Subsidiary;
(3) Liens on property existing at the time of acquisition thereof by the Company or any Restricted Subsidiary
of the Company, provided that such Liens were in existence prior to the contemplation of such acquisition
and do not extend to any property other than the property so acquired by the Company or the Restricted
Subsidiary;
(4) Liens securing the Notes and the Note Guarantees;
(5) Liens existing on the Issue Date;
(6) Liens securing Permitted Refinancing Indebtedness; provided that such Liens do not extend to any
property or assets other than the property or assets that secure the Indebtedness being refinanced;
(7) Liens on property or assets securing Indebtedness used to defease or to satisfy and discharge the Notes;
provided that (a) the Incurrence of such Indebtedness was not prohibited by the Indenture and (b) such
defeasance or satisfaction and discharge is not prohibited by the Indenture;
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(8) Liens securing obligations that do not exceed the greater of US$50.0 million and 5.0% of Consolidated
Net Tangible Assets at any one time outstanding;
(9) Liens to secure Indebtedness (including Capital Lease Obligations) permitted by clause (3) of the second
paragraph of the covenant described under the caption “—Certain Covenants—Limitation on
Indebtedness;” provided that any such Lien (i) covers only the assets acquired, constructed or improved
with such Indebtedness and (ii) is created within 365 days of such acquisition, construction or
improvement;
(10) Liens on Cash Equivalents securing Hedging Obligations of the Company or any Restricted Subsidiary (a)
that are Incurred for the purpose of fixing, hedging or swapping interest rate, commodity price or foreign
currency exchange rate risk (or to reverse or amend any such agreements previously made for such
purposes), and not for speculative purposes, or (b) securing letters of credit that support such Hedging
Obligations;
(11) Liens incurred or deposits made in the ordinary course of business in connection with worker’s
compensation, unemployment insurance or other social security obligations (including any Lien securing
letters of credit issued in connection therewith in the ordinary course of business consistent with past
practice);
(12) Lien, deposits or pledges to secure the performance of bids, tenders, contracts (other than contracts for the
payment of Indebtedness), leases, or other similar obligations arising in the ordinary course of business;
(13) survey exceptions, encumbrances, easements or reservations of, or rights of other for, rights of way,
zoning or other restrictions as to the use of properties, and defects in title which, in the case of any of the
foregoing, were not incurred or created to secure the payment of Indebtedness, and which in the aggregate
do not materially adversely affect the value of such properties or materially impair the use for the purposes
of which such properties are held by the Company or any Restricted Subsidiary;
(14) judgment and attachment Liens not giving rise to an Event of Default and notices of lis pendens and
associated rights related to litigation being contested in good faith by appropriate proceedings and for
which adequate reserves have been made;
(15) Liens, deposits or pledges to secure public or statutory obligations, surety, stay, appeal, indemnity,
performance or other similar bonds or obligations; and Liens, deposits or pledges in lieu of such bonds or
obligations, or to secure such bonds or obligations, or to secure letters of credit in lieu of or supporting the
payment of such bonds or obligations;
(16) Liens in the ordinary course of business in favor of collecting or payor banks having a right of set-off,
revocation, refund or chargeback with respect to money or instruments of the Company or any Subsidiary
thereof on deposit with or in possession of such bank;
(17) Liens upon specific items of inventory or other goods and proceeds of any Person securing such Person’s
obligations in respect of bankers’ acceptances issued or created in the ordinary course of business for the
account of such Person to facilitate the purchase, shipment or storage of such inventory or other goods;
(18) Liens securing reimbursement obligations with respect to commercial letters of credit which encumber
documents and other property relating to such letters of credit and products and proceeds thereof;
(19) any interest or title of a lessor, licensor or sublicensor in the property subject to any lease, license or
sublicense (other than any property that is the subject of a Sale and Leaseback Transaction);
(20) Liens for taxes, assessments and governmental charges not yet delinquent or being contested in good faith
and for which adequate reserves have been established to the extent required by IFRS;
(21) Liens arising from precautionary UCC financing statements regarding operating leases or consignments;
(22) Liens of franchisors in the ordinary course of business not securing Indebtedness;
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(23) Liens imposed by law, such as (i) carriers’, warehousemen’s and mechanics’, materialmen’s, landlords’, or
repairmen’s Liens, or (ii) other like Liens arising in the ordinary course of business securing obligations
which are not overdue by more than 60 days or which if more than 60 days overdue, the period of grace, if
any, related thereto has not expired or which are being contested in good faith by appropriate proceedings;
provided that a reserve or other appropriate provision shall have been made therefor as appropriate in
accordance with IFRS;
(24) Liens on assets of Restricted Subsidiaries that are not Guarantors securing Indebtedness of such Restricted
Subsidiaries permitted to be incurred under the covenant described under “Certain Covenants—Limitation
on Indebtedness”;
(25) Liens on Capital Stock or other securities or assets of any Unrestricted Subsidiary that secure Indebtedness
of such Unrestricted Subsidiary; and
(26) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs
duties in connection with the importation of goods in the ordinary course of business.
“Permitted Refinancing Indebtedness” means any Indebtedness of the Company or any Restricted Subsidiary
issued in exchange for, or the net cash proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or any Restricted Subsidiary (other than Indebtedness owed to the
Company or to any Subsidiary of the Company); provided that:
(1) the amount of such Permitted Refinancing Indebtedness does not exceed the amount of the Indebtedness so
extended, refinanced, renewed, replaced, defeased or refunded (plus all accrued and unpaid interest thereon
and the amount of any reasonably determined premium necessary to accomplish such refinancing and such
reasonable expenses incurred in connection therewith);
(2) such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and
has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity
of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded;
(3) if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is subordinated in
right of payment to the Notes or the Note Guarantees, such Permitted Refinancing Indebtedness is
subordinated in right of payment to the Notes or the Note Guarantees, as applicable, on terms at least as
favorable, taken as a whole, to the Holders of Notes as those contained in the documentation governing the
Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded;
(4) if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is Pari Passu Debt,
such Permitted Refinancing Indebtedness ranks equally in right of payment with, or is subordinated in right
of payment to, the Notes or such Note Guarantees; and
(5) such Indebtedness is Incurred by either (a) the Restricted Subsidiary that is the obligor on the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded or (b) the Company or a Guarantor.
“Person” means any individual, corporation, partnership, joint venture, association, joint-stock company, trust,
unincorporated organization, limited liability company or government or other entity.
“Preferred Stock” means, with respect to any Person, any Capital Stock of such Person that has preferential
rights to any other Capital Stock of such Person with respect to dividends or redemptions upon liquidation.
“Qualified Acquisition” means the acquisition by the Company or any Restricted Subsidiary of any Person,
subject to the following conditions:
(1) immediately prior to such acquisition, such Person was not an Affiliate of the Company;
(2) immediately after giving effect to such acquisition, the Company properly designates such Person as an
Unrestricted Subsidiary in accordance with the Indenture; and
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(3) immediately after giving effect to such acquisition, the Company, directly or indirectly, owns the majority,
but not all, of the aggregate of the total voting power of the Voting Stock in such Person, on a fully diluted
basis (without regard to directors’ qualifying shares or Investments by foreign nationals mandated by
applicable law).
“Rating Agency” means each of Moody’s, S&P, Fitch and, if any of Moody’s, S&P or Fitch ceases to exist or
ceases to rate the Notes for reasons outside of the control of the Company, any other “nationally recognized
statistical rating organization” within the meaning of Rule 15c3-1(c)(2)(vi)(F) under the Exchange Act selected by
the Company as a replacement agency.
“Rating Downgrade Event” means the rating on the Notes is lowered from their rating then in effect by any of
the Rating Agencies on any date during the period (the “Trigger Period”) commencing 60 days prior to the first
public announcement by the Company of any Change of Control (or pending Change of Control) and ending
60 days following consummation of such Change of Control (which Trigger Period will be extended following
consummation of a Change of Control for so long as any of the Rating Agencies has publicly announced that it is
considering a possible ratings change); provided that a Rating Downgrade Event otherwise arising by virtue of a
particular lowering in rating will not be deemed to have occurred in respect of a particular Change of Control (and
thus will not be deemed a Rating Downgrade Event for purposes of the definition of Change of Control Repurchase
Event hereunder) if the Rating Agency making the lowering in rating to which this definition would otherwise apply
does not announce or publicly confirm or inform the Trustee in writing in response to a request made at the direction
of Holders of a majority in principal amount of the then outstanding Notes that the reduction was the result, in whole
or in part, of any event or circumstance comprised of or arising as a result of, or in respect of, the applicable Change
of Control (whether or not the applicable Change of Control shall have occurred at the time of the Rating
Downgrade Event). Notwithstanding the foregoing, no Rating Downgrade Event will be deemed to have occurred
in connection with any particular Change of Control unless and until such Change of Control has actually been
consummated.
“Reference Treasury Dealer” means each of Merrill Lynch, Pierce, Fenner & Smith Incorporated, Citigroup
Global Markets Inc., plus three others or their affiliates which are primary U.S. Government securities dealers, and
their respective successors; provided, however, that if any of the foregoing or their affiliates shall cease to be a
primary U.S. Government securities dealer in The City of New York (a “Primary Treasury Dealer”), the Company
shall substitute therefor another Primary Treasury Dealer.
“Reference Treasury Dealer Quotations” means, with respect to each Reference Treasury Dealer and any
redemption date, the average, as determined by the Independent Investment Bank, of the bid and asked prices for the
Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the
Independent Investment Bank by such Reference Treasury Dealer at 3:30 p.m. New York time on the third business
day preceding such redemption date.
“Replacement Assets” means (1) non-current assets that will be used or useful in a Permitted Business,
(2) substantially all the assets of a Permitted Business, or (3) a majority of the Voting Stock of any Person engaged
in a Permitted Business that will become on the date of acquisition thereof a Restricted Subsidiary.
“Restricted Subsidiary” means any Subsidiary of the Company that is not an Unrestricted Subsidiary.
“Rodríguez Family” means (i) Vito Modesto Rodríguez Rodríguez, Jorge Columbo Rodríguez Rodríguez and
Claudio José Rodríguez Huaco, (ii) any spouse or child of the individuals referred to in the preceding clause (i) and
(iii) any non-natural Person that is an Affiliate of any of the Persons referred to in the preceding clauses (i) and (ii)
and with respect to which a Person or Persons listed in the preceding clauses (i) and (ii) owns the majority of the
aggregate of the total voting power of the Voting Stock in such non-natural Person, on a fully diluted basis.
“S&P” means Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc. and its
successors.
“Sale and Leaseback Transaction” means, with respect to any Person, any transaction involving any of the
assets or properties of such Person whether now owned or hereafter acquired, whereby such Person sells or
otherwise transfers such assets or properties and then or thereafter leases such assets or properties or any part thereof
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or any other assets or properties which such Person intends to use for substantially the same purpose or purposes as
the assets or properties sold or transferred.
“San Jacinto” means Agroindustrias San Jacinto S.A.A.
“Significant Subsidiary” means any Subsidiary that would constitute a “significant subsidiary” within the
meaning of Rule 1-02(w) of Article 1 of Regulation S-X of the Securities Act.
“SMV” means the Peruvian Superintendencia del Mercado de Valores, or any successor entity.
“Stated Maturity” means, with respect to any installment of interest or principal on any series of Indebtedness,
the date on which such installment of interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and will not include any contingent obligations to repay, redeem or repurchase any
such interest or principal prior to the date originally scheduled for the payment thereof.
“Subordinated Indebtedness” means any Indebtedness that by its terms is subordinated in right of payment to
the Notes or any Note Guarantee.
“Subsidiary” means, with respect to any Person:
(1) a corporation a majority of whose Voting Stock is at the time owned or controlled, directly or indirectly, by
such Person, one or more Subsidiaries thereof or such Person and one or more Subsidiaries thereof; and
(2) any other Person (other than a corporation), including, without limitation, a partnership, limited liability
company, business trust or joint venture, in which such Person, one or more Subsidiaries thereof or such
Person and one or more Subsidiaries thereof, directly or indirectly, at the date of determination thereof, has
at least majority ownership interest entitled to vote in the election of directors, managers or trustees thereof
(or other Person performing similar functions);
provided that Fideicomiso Mercantil Consorcio Azucarero Ecuatoriano and its Subsidiaries (together, the “La
Troncal Trust Group”) will be deemed to be Subsidiaries of the Company so long as the results of the La
Troncal Trust Group are fully consolidated into the consolidated results of the Company in accordance with
IFRS.
“Transaction Date” means, with respect to the incurrence of any Indebtedness by the Company or any of its
Restricted Subsidiaries, the date such Indebtedness is to be incurred.
“Treasury Rate” means, with respect to any redemption date, the rate per annum equal to the semiannual
equivalent yield to maturity or interpolated (on a day count basis) of the Comparable Treasury Issue, assuming a
price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for such redemption date.
“U.S. Dollar Equivalent” means with respect to any monetary amount in a currency other than U.S. dollars, at
any time for determination thereof, the amount of U.S. dollars obtained by converting such foreign currency
involved in such computation into U.S. dollars at the spot rate for the purchase of U.S. dollars with the applicable
foreign currency as published in The Wall Street Journal in the “Exchange Rates” column under the heading
“Currency Trading” on the date two business days prior to such determination.
“Unrestricted Subsidiary” means any Subsidiary of the Company that is designated by the Board of Directors of
the Company as an Unrestricted Subsidiary pursuant to a Board Resolution in compliance with the covenant
described under the caption “—Certain Covenants—Designation of Restricted and Unrestricted Subsidiaries,” and
any Subsidiary of such Subsidiary.
“Voting Stock” of any Person as of any date means the Capital Stock of such Person that is ordinarily entitled to
vote in the election of the Board of Directors of such Person.
“Weighted Average Life to Maturity” means, when applied to any Indebtedness at any date, the number of years
obtained by dividing:
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(1) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking
fund, serial maturity or other required payments of principal, including payment at final maturity, in respect
thereof, by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such
date and the making of such payment; by
(2) the then outstanding principal amount of such Indebtedness.
Book Entry; Delivery and Form
The Notes are being offered and sold in this initial offering in the United States solely to “qualified institutional
buyers” under Rule 144A under the Securities Act and outside the United States in offshore transactions to persons
other than U.S. persons, as defined in Regulation S under the Securities Act, in reliance on Regulation S. Following
this offering, the notes may be sold:

to qualified institutional buyers under Rule 144A;

outside the United States in compliance with Regulation S; and

under other exemptions from, or in transactions not subject to, the registration requirements of the
Securities Act, as described under “Transfer Restrictions.”
Exchanges between the Global Notes
Transfers by an owner of a beneficial interest in a Regulation S Global Note to a transferee, who takes delivery
of that interest through a Note offered and sold in the United States to qualified institutional buyers pursuant to Rule
144A Global Note, will be made only in accordance with applicable procedures and upon receipt by the trustee of a
written certification from the transferee of the beneficial interest in the form provided in the indenture to the effect
that the transfer is being made to a qualified institutional buyer within the meaning of Rule 144A in a transaction
complying with the requirements of Rule 144A. Transfers by an owner of a beneficial interest in a Rule 144A
Global Note to a transferee who takes delivery of the interest through a Regulation S Global Note will be made only
upon receipt by the trustee of a certification from the transferor that the transfer is being made outside the United
States to a non-U.S. person in accordance with Regulation S.
Any beneficial interest in one of the Global Notes that is transferred to a person who takes delivery in the form
of an interest in another Global Note will, upon transfer, cease to be an interest in that Global Note and become an
interest in the other Global Note and, accordingly, will then be subject to any transfer restrictions and other
procedures applicable to beneficial interests in the other Global Note.
Global Notes
Upon receipt of the Regulation S Global Note and the Rule 144A Global Note, DTC will credit, on its internal
system, the respective principal amount of the individual beneficial interests represented by such Global Note to the
accounts of persons who have accounts with DTC. Such accounts initially will be designated by or on behalf of the
Initial Purchasers. Ownership of beneficial interests in a Global Note will be limited to persons who have accounts
with DTC (“DTC Participants”), including Euroclear Bank S.A./N.V., as operator of Euroclear System
(“Euroclear”) and Clearstream Banking, sociétè anonyme (“Clearstream”), or persons who hold interests through
DTC Participants. Ownership of beneficial interests in the Global Notes will be shown on, and the transfer of that
ownership will be effected only through, records maintained by DTC or its nominee (with respect to interests of
DTC Participants) and the records of DTC Participants (with respect to interests of persons other than DTC
Participants).
So long as DTC, or its nominee, is the registered owner or holder of a Global Note, DTC or such nominee, as
the case may be, will be considered the sole owner or Holder of the Notes represented by such Global Note for all
purposes under the Indenture and the Notes. Except as described in “—Certificated Notes”, owners of beneficial
interests in a Global Note will not be entitled to have any portions of such Global Note registered in their names,
will not receive or be entitled to receive physical delivery of Notes in certificated form and will not be considered
the owners or holders of the Global Note (or any notes represented thereby) under the Indenture or the Notes. In
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addition, no beneficial owner of an interest in a Global Note will be able to transfer that interest except in
accordance with DTC’s applicable procedures (in addition to those under the Indenture referred to herein and, if
applicable, those of Euroclear and Clearstream.
Euroclear and Clearstream will hold interests in the Global Notes on behalf of their account holders through
customers’ securities accounts in their respective names on the books of their respective depositaries, which, in turn,
will hold such interests in the Global Notes in customers’ securities accounts in the depositaries’ names on the books
of DTC.
Payments of the principal of and interest on Global Notes will be made to DTC or its nominee as the registered
owner thereof. Neither we nor any Initial Purchaser will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership interests in the Global Notes or for
maintaining, supervising or reviewing any records relating to such beneficial ownership interests. We anticipate that
DTC or its nominee, upon receipt of any payment of principal or interest in respect of a Global Note representing
any Notes held by its nominee, will credit DTC Participants’ accounts with payments in amounts proportionate to
their respective beneficial interests in the principal amount of such Global Note as shown on the records of DTC or
its nominee. We also expect that payments by DTC Participants to owners of beneficial interests in a Global Note
held through such DTC Participants will be governed by standing instructions and customary practices, as is now the
case with securities held for the accounts of customers registered in the names of nominees for such customers. Such
payments will be the responsibility of such DTC Participants.
Transfers between DTC Participants will be effected in accordance with DTC’s procedures, and will be settled
in same-day funds. The laws of some jurisdictions require that certain persons take physical delivery of securities in
certificated form. Consequently, the ability to transfer beneficial interests in a Global Note to such persons may be
limited. Because DTC can only act on behalf of DTC Participants, who in turn act on behalf of indirect participants
and certain banks, the ability of a person having a beneficial interest in a Global Note to pledge such interest to
persons or entities that do not participate in the DTC system, or otherwise take actions in respect of such interest,
may be affected by the lack of a physical certificated note in respect of such interest. Transfers between
accountholders in Euroclear and Clearstream will be effected in the ordinary way in accordance with their respective
rules and operating procedures.
Subject to compliance with the transfer restrictions applicable to the Notes described above, crossmarket
transfers between DTC participants, on the one hand, and directly or indirectly through Euroclear or Clearstream
account holders, on the other hand, will be effected in DTC in accordance with DTC rules on behalf of Euroclear or
Clearstream, as the case may be, by its respective depositary; however, such cross-market transactions will require
delivery of instructions to Euroclear or Clearstream, as the case may be, by the counterparty in such system in
accordance with its rules and procedures and within its established deadlines. Euroclear or Clearstream, as the case
may be, will, if the transaction meets its settlement requirements, deliver instructions to its respective depositary to
take action to effect final settlement on its behalf by delivering or receiving interests in the Global Notes in DTC,
and making or receiving payment in accordance with normal procedures for same day funds settlement applicable to
DTC. Euroclear and Clearstream account holders may not deliver instructions directly to the depositaries for
Euroclear or Clearstream.
Because of time zone differences, the securities account of a Euroclear or Clearstream account holder
purchasing an interest in a Global Note from a DTC Participant will be credited during the securities settlement
processing day (which must be a business day for Euroclear or Clearstream, as the case may be) immediately
following the DTC settlement date and such credit of any transactions in interests in a Global Note settled during
such processing day will be reported to the relevant Euroclear or Clearstream accountholder on such day. Cash
received in Euroclear or Clearstream as a result of sales of interests in a Global Note by or through a Euroclear or
Clearstream account holder to a DTC Participant will be received for value on the DTC settlement date but will be
available in the relevant Euroclear or Clearstream cash account only as of the business day following settlement in
DTC.
DTC has advised that it will take any action permitted to be taken by a Holder (including the presentation of
Notes for exchange as described below) only at the direction of one or more DTC Participants to whose account or
accounts with DTC interests in the Global Notes are credited and only in respect of such portion of the aggregate
principal amount of the Notes as to which such DTC Participant or DTC Participants has or have given such
149
direction. However, in the limited circumstances described above, DTC will exchange the Global Notes for
certificated Notes (bearing a restrictive legend, unless the Company determines otherwise in compliance with
applicable law), which will be distributed to its participants. Holders of indirect interests in the Global Notes through
DTC Participants have no direct rights to enforce such interests while the Notes are in global form.
The giving of notices and other communications by DTC to DTC Participants, by DTC Participants to persons
who hold accounts with them and by such persons to holders of beneficial interests in a Global Note will be
governed by arrangements between them, subject to any statutory or regulatory requirements as may exist from time
to time.
DTC has advised as follows: DTC is a limited purpose trust company organized under the laws of the State of
New York, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the Uniform
Commercial Code and a “Clearing Agency” registered pursuant to the provisions of Section 17A of the Exchange
Act. DTC was created to hold securities for DTC Participants and to facilitate the clearance and settlement of
securities transactions between DTC Participants through electronic book-entry changes in accounts of DTC
Participants, thereby eliminating the need for physical movement of certificates. DTC Participants include security
brokers and dealers, banks, trust companies and clearing corporations and may include certain other organizations.
Indirect access to the DTC system is available to others such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a DTC Participant, either directly or indirectly (“indirect
participants”).
Although DTC, Euroclear and Clearstream have agreed to the foregoing procedures in order to facilitate
transfers of interests in the Regulation S Global Note and in the Rule 144A Global Note among participants and
accountholders of DTC, Euroclear and Clearstream, they are under no obligation to perform or continue to perform
such procedures, and such procedures may be discontinued at any time. Neither we nor the Initial Purchasers will
have any responsibility for the performance of DTC, Euroclear or Clearstream or their respective participants,
indirect participants or accountholders of their respective obligations under the rules and procedures governing their
operations.
Certificated Notes
If (1) DTC or any successor to DTC is at any time unwilling or unable to continue as a depositary for a Global
Note and a successor depositary is not appointed by us within 90 days, (2) any of the Notes has become immediately
due and payable in accordance with “—Events of Default and Remedies” or (3) if the Company, at its sole
discretion, determines that the Global Notes will be exchangeable for certificated notes and the Company notifies
the Trustee thereof, the Company will issue certificated notes in registered form in exchange for the Regulation S
Global Note and the Rule 144A Global Note, as the case may be. Upon receipt of such notice from DTC or a paying
agent, as the case may be, the Company will use its best efforts to make arrangements with DTC for the exchange of
interests in the Global Notes for certificated Notes and cause the requested certificated Notes to be executed and
delivered to the Registrar in sufficient quantities and authenticated by the Registrar for delivery to Holders. Persons
exchanging interests in a Global Note for certificated Notes will be required to provide the Registrar with (a) written
instruction and other information required by the Company and the Registrar to complete, execute and deliver such
certificated Notes and (b) certification that such interest is being transferred in compliance with the Securities Act.
In all cases, certificated Notes delivered in exchange for any Global Note or beneficial interests therein will be
registered in the names, and issued in any approved denominations, requested by DTC. Certificated Notes will not
be eligible for clearing and settlement through the DTC, Euroclear or Clearstream.
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TAXATION
The following discussion summarizes certain Peruvian and U.S. federal income considerations that may be
relevant to you if you invest in the notes. This summary is based on laws, regulations, rulings and decisions now in
effect in Peru and the United States, which, in each case, may change. Any change could apply retroactively and
could affect the continued validity of this summary.
This summary does not describe all of the tax considerations that may be relevant to you or your situation,
particularly if you are subject to special tax rules. You should consult your tax advisors about the tax consequences
of holding the notes, including the relevance to your particular situation of the considerations discussed below, as
well as of state, local and other tax laws.
Peruvian Tax Considerations
The following summary of certain Peruvian tax matters as in force on the date of this offering memorandum
describes the principal tax consequences of an investment in the offered notes by a person who is not a resident of
Peru and does not hold the offered notes or a beneficial interest therein in connection with the conduct of a trade or
business through a permanent establishment in Peru (“non Peruvian holder”). This summary is not intended to be a
comprehensive description of all of the tax considerations that may be relevant to a decision to make an investment
in the offered notes. In addition, it does not describe any tax consequences: (a) arising under the laws of any taxing
jurisdiction other than Peru or (b) applicable to a resident of Peru or to a person with a permanent establishment in
Peru.
For purposes of this section, “non-Peruvian holders” means either: (i) a legal entity which has not been
incorporated in Peru, except that the notes are assigned to a branch, agent or a permanent establishment in Peru of a
foreign entity or (ii) an individual who is not a Peruvian tax resident. For Peruvian tax purposes, an individual is
deemed to be a Peruvian tax resident if such individual is (i) a Peruvian citizen and has a regular residence in Peru,
or (ii) not a Peruvian citizen but has resided or has remained in Peru for more than 183 calendar days during any 12month period.
Peru has entered into treaties to avoid double taxation with Brazil, Canada, Chile, and the Andean Community
countries. Additionally, Peru is in the process of approving a similar treaty with Mexico.
Income Tax
Payment of interest
Interest, commissions, premiums and other financial expenses in connection with the notes are subject to
Peruvian Income Tax, as Peruvian source income, considering that we are domiciled in Peru.
Therefore, accrued interest on the notes received by non-Peruvian holders that are legal entities will be subject
to a 4.99% withholding tax. Similarly, interest payments derived from the notes received by non-Peruvian holders
who are individuals is subject to withholding income tax at a rate of 4.99%, provided that interest does not derive
from a transaction “from or through a tax haven.” If the latter requirement is not fulfilled, the applicable withholding
rate will be 30%. In addition, in order to qualify for the preferential withholding income tax rate of 4.99%, the nonPeruvian holders and the Company must not be deemed related parties. We are required to act as withholding agent
for income tax, if any, due with respect to interest paid on the notes. We have agreed, subject to specific exceptions
and limitations, to pay additional amounts to the holders of the notes in respect of the Peruvian income taxes
mentioned above. See “Description of the Notes—Additional Amounts”.
Capital gains
Proceeds received by a non-Peruvian holder on a sale, exchange or disposition of a beneficial interest in the
Global Notes held through a Clearing System will not be subject to any Peruvian withholding or capital gains tax.
In the event that the beneficial interests in the Global Notes are exchanged for definitive notes, any capital gain
arising from the sale, exchange or other disposition of these notes by non-Peruvian holders would be subject to
Peruvian income tax with a 5% rate, only if these two requirements are satisfied: (i) the notes are registered in the
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Securities Public Registry and (ii) the notes are negotiated in a Peruvian Stock Market. Otherwise, capital gains will
be taxable at a 30% rate.
Capital gain would be the positive difference between the sale value and the acquisition value, taking into
consideration that the acquisition value has to be certified by Peruvian Tax Administration through a request
submitted by the seller. This certification is not required if the sale is through the Peruvian Stock Market.
The Income Tax Law provides a temporal exemption on the assessment of income tax on capital gains resulting
in the sale of securities issued by Peruvian entities performed by individuals (Peruvian or foreign), for the first
S/.18,250 (5 UIT) gained in a calendar year. This exemption will be in effect until December 31, 2012.
Nevertheless, it is customary to extend the validity of these exemptions.
Prospective purchasers should discuss with their own tax advisors the application of any income tax described
herein to their particular situations.
Value Added Tax (VAT)
Payments of interest on the notes made to holders of the notes shall be subject to Peruvian value added tax
(Impuesto General a las Ventas) provided that the proceeds from the offering of the notes will be used in Peru.
On June 9, 2011, an amendment was introduced to the Peruvian Value Added Tax Law, which includes a new
exemption. Said amendment exempts from VAT the payment of interest generated by securities registered in the
Securities Public Registry (“Registro Público del Mercado de Valores”) and issued by Peruvian entities which were
offered in an international issuance if (i) it has a local tranche within Peru and (ii) the issuance is made pursuant to
the Peruvian Securities Law or the Peruvian Investment Fund Law. This exemption will expire on December, 31,
2012. Such exemption has been commonly extended, however, we cannot assure that such exemption will be
renewed after December 31, 2012. We expect to comply with the exemption requirements, and therefore, the
payment of interest under the notes shall be VAT-exempt until December 31, 2012, unless such exemption is
extended.
Financial Transaction Tax
Finally, it is important to mention that in Peru there is a Financial Transactions Tax (“FTT”) which is a tax at a
0.005% rate on debits and credits in Peruvian bank -or other financial institutions- accounts, either in national or
foreign currency. If the interest from the notes or the issue price paid for the notes is deposited in a Peruvian
Financial System (“PFS”) bank account, such amount will be levied at the corresponding FTT tax rate. The
taxpayer of the FTT is the holder of the PFS bank account.
U.S. Federal Income Tax Considerations
The following is a description of certain U.S. federal income tax considerations relevant to the acquisition,
ownership, disposition and retirement of notes by a holder thereof. This description only applies to notes held as
capital assets and does not address, except as set forth below, aspects of U.S. federal income taxation that may be
applicable to holders that are subject to special tax rules, such as:

financial institutions,

insurance companies,

real estate investment trusts,

regulated investment companies,

certain former citizens or long-term residents of the United States,

grantor trusts,

tax-exempt organizations,
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
dealers or traders in securities or currencies, including those that mark to market,

holders that will hold a note as part of a position in a straddle or as part of a hedging, conversion or
integrated transaction for U.S. federal income tax purposes,

holders that will hold the notes through a partnership or other pass-through entity, or

U.S. Holders (as defined below) that have a functional currency other than the U.S. dollar.
Moreover, this description does not address the U.S. federal estate and gift tax or alternative minimum tax
consequences of the acquisition, ownership, disposition or retirement of the notes and does not address the U.S.
federal income tax treatment of holders that do not acquire the notes as part of the initial distribution at their issue
price including purchasers of additional notes. The “issue price” of a note is equal to the first price to investors (not
including bond houses, brokers or similar persons or organizations acting in the capacity of underwriters, placement
agents or wholesalers) at which a substantial amount of the notes is sold for money. Each prospective purchaser
should consult its tax advisor with respect to the U.S. federal, state, local and foreign tax consequences of acquiring,
holding and disposing of the notes.
This description is based on the Internal Revenue Code of 1986, as amended (the “Code”), existing and
proposed Treasury Regulations (“Regulations”), administrative pronouncements and judicial decisions, each as
available and in effect on the date hereof. All of the foregoing is subject to change, possibly with retroactive effect,
or differing interpretations which could affect the tax consequences described herein.
For purposes of this description, a “U.S. Holder” is a beneficial owner of the notes who for U.S. federal income
tax purposes is:

an individual who is a citizen or resident of the United States;

a corporation or any other entity treated as a corporation for U.S. federal income tax purposes organized in
or under the laws of the United States, any state thereof or the District of Columbia;

an estate the income of which is subject to U.S. federal income taxation regardless of its source; or

a trust (1) that is subject to the primary supervision of a court within the United States and the control of
one or more U.S. persons as described in Section 7701(a)(30) of the Code or (b) that has a valid election in
effect under applicable Regulations to be treated as a U.S. person.
A Non-U.S. Holder is a beneficial owner of notes that is neither a U.S. Holder nor a partnership (or any other
entity treated as a partnership for U.S. federal income tax purposes).
If a partnership (or any other entity treated as a partnership for U.S. federal income tax purposes) holds the
notes, the tax treatment of the partnership and a partner in such partnership generally will depend on the status of the
partner and the activities of the partnership. Such partner or partnership should consult its own tax advisor regarding
the specific consequences of the acquisition, ownership and disposition of the notes.
TREASURY DEPARTMENT CIRCULAR 230 DISCLOSURE
PURSUANT TO TREASURY DEPARTMENT CIRCULAR 230, WE HEREBY INFORM YOU THAT THE
DESCRIPTION SET FORTH HEREIN WITH RESPECT TO U.S. FEDERAL TAX ISSUES WAS NOT
INTENDED OR WRITTEN TO BE USED, AND SUCH DESCRIPTION CANNOT BE USED, BY ANY
TAXPAYER FOR THE PURPOSE OF AVOIDING ANY PENALTIES THAT MAY BE IMPOSED ON
THE TAXPAYER UNDER THE CODE. SUCH DESCRIPTION WAS WRITTEN TO SUPPORT THE
PROMOTION OR MARKETING OF THE NOTES. TAXPAYERS SHOULD SEEK ADVICE BASED ON
THE TAXPAYER’S PARTICULAR CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISOR.
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Interest
It is expected, and this discussion assumes, that the notes will not be issued with original issue discount (as such
term is described under the Regulations) for U.S. federal income tax purposes. Therefore, if you are a U.S. Holder,
interest paid to you on a note, including Additional Amounts, if any, with respect thereto as described under
“Description of the Notes—Additional Amounts,” will be includible in your gross income as ordinary interest
income in accordance with your usual method of U.S. federal income tax accounting. In addition, interest on the
notes will be treated as foreign source income for U.S. federal income tax purposes.
We may redeem all or part of the notes at any time at a redemption price equal to 100% of the principal amount
of notes redeemed plus the applicable “make-whole” premium (see “Description of the Notes—Optional
Redemption”). Similarly, you may require us to repurchase your notes in the event of a change of control
repurchase event (see “Description of the Notes—Repurchase at the Option of Holders—Change of Control”).
Under the Regulations governing contingent payment debt instruments (“CPDIs”), the possibility of a contingent
payment on a note may be disregarded if the likelihood of the contingent payment, as of the issue date, is “remote or
incidental.” We believe that as of the expected issue date of the notes, the likelihood of either a change of control
repurchase event or our redemption of the notes is, for this purpose, remote and, therefore, we do not intend to treat
the notes as CPDIs. Our determination, however, is not binding on the Internal Revenue Service (“IRS”), and if the
IRS was to challenge this determination, you may be required to accrue income on the notes that you own in excess
of stated interest, and to treat as ordinary income rather than capital gain any income realized on the taxable
disposition of such notes before the resolution of the contingency. In the event that such contingency were to occur,
it would affect the amount and timing of the income that you recognize. U.S. Holders are urged to consult their own
tax advisors regarding the potential application to the notes of the CPDI rules and the consequences thereof. The
remainder of this discussion assumes that the notes will not be treated as CPDIs.
Subject to the discussion below under the caption “—U.S. Backup Withholding Tax and Information
Reporting,” if you are a Non-U.S. Holder, payments to you of interest on a note generally will not be subject to U.S.
federal income tax unless the income is effectively connected with your conduct of a trade or business in the United
States.
Sale, Exchange, Retirement or Other Taxable Disposition
If you are a U.S. Holder, upon the sale, exchange, retirement or other taxable disposition of a note you will
recognize taxable gain or loss equal to the difference, if any, between the amount realized on the sale, exchange,
retirement or other taxable disposition, other than accrued but unpaid interest which will be taxable as ordinary
interest income, and your adjusted tax basis in the note. Your adjusted tax basis in a note generally will equal the
cost of the note to you. Any such gain or loss will be capital gain or loss. If you are a noncorporate U.S. Holder, the
maximum marginal U.S. federal income tax rate applicable to the gain will be lower than the maximum marginal
U.S. federal income tax rate applicable to ordinary income (other than certain dividends) if your holding period for
the notes exceeds one year (i.e., such gain is long-term capital gain). Any gain or loss realized on the sale,
exchange, retirement or other taxable disposition of a note generally will be treated as U.S. source gain or loss, as
the case may be. The deductibility of capital losses is subject to limitations.
Subject to the discussion below under the caption “—U.S. Backup Withholding Tax and Information
Reporting,” if you are a Non-U.S. Holder, any gain realized by you upon the sale, exchange, retirement or other
taxable disposition of a note generally will not be subject to U.S. federal income tax, unless:

the gain is effectively connected with your conduct of a trade or business in the United States; or

if you are an individual Non-U.S. Holder, you are present in the United States for 183 days or more in the
taxable year of the sale, exchange, retirement or other taxable disposition and certain other conditions are
met.
U.S. Backup Withholding Tax and Information Reporting
A backup withholding tax and information reporting requirements apply to certain payments of principal of, and
interest on, an obligation and to proceeds of the sale or redemption of an obligation, to certain holders of notes that
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are U.S. persons. Information reporting generally will apply to payments of principal of, and interest on, notes, and
to proceeds from the sale or redemption of, notes within the United States, or by a U.S. payor or through certain
U.S.-related financial intermediaries, to a holder of notes that is a U.S. person (other than an exempt recipient). The
payor will be required to backup withhold on payments made within the United States, or by a U.S. payor or through
certain U.S.-related financial intermediaries, on a note to a holder of a note that is a U.S. person, other than an
exempt recipient, if the holder fails to furnish its correct taxpayer identification number or otherwise fails to comply
with, or establish an exemption from, the backup withholding requirements. Payments within the United States, or
by a U.S. payor or through certain U.S. -related financial intermediaries, of principal and interest to a holder of a
note that is not a U.S. person will not be subject to backup withholding tax and information reporting requirements if
an appropriate certification is provided by the holder to the payor and the payor does not have actual knowledge or a
reason to know that the certificate is incorrect. The backup withholding tax rate is 28% for taxable years beginning
before January 1, 2013.
Backup withholding is not an additional tax. You generally will be entitled to credit any amounts withheld
under the backup withholding rules against your U.S. federal income tax liability provided the required information
is furnished to the IRS in a timely manner.
In the case of payments to certain trusts or certain partnerships, the persons treated as the owners of the trust or
the partners of the partnership, as the case may be, will be required to provide the certification discussed above in
order to establish an exemption from backup withholding tax and information reporting requirements.
Medicare Tax
For taxable years beginning after December 31, 2012, a U.S. Holder that is an individual or estate, or a trust that
does not fall into a special class of trusts that is exempt from such tax, will be subject to a 3.8% tax (the “Medicare
tax”) on the lesser of (1) the U.S. Holder’s “net investment income” (in the case of individuals) or “undistributed net
investment income” (in the case of estates and trusts) for the relevant taxable year and (2) the excess of the U.S.
Holder’s “modified adjusted gross income” (in the case of individuals) or “adjusted gross income” (in the case of
estates and trusts) for the taxable year over a certain threshold (which in the case of individuals will be between
US$125,000 and US$250,000, depending on the individual’s circumstances). A U.S. Holder’s net investment
income generally will include its interest income on the notes and its net gains from the disposition of the notes,
unless such interest income or net gains are derived in the ordinary course of the conduct of a trade or business
(other than a trade or business that consists of certain passive or trading activities). U.S. Holders that are
individuals, estates or trusts should consult their own tax advisors regarding the applicability of the Medicare tax to
their income and gains in respect of the notes.
“Specified Foreign Financial Asset” Reporting
Under legislation enacted in 2010, owners of “specified foreign financial assets” with an aggregate value in
excess of US$50,000 (and in some circumstances, a higher threshold), may be required to file an information report
with respect to such assets with their U.S. federal income tax returns. “Specified foreign financial assets” generally
include any financial accounts maintained by foreign financial institutions as well as any of the following, but only
if they are not held in accounts maintained by financial institutions: (i) stocks and securities issued by non-U.S.
persons, (ii) financial instruments and contracts held for investment that have non-U.S. issuers or counterparties and
(iii) interests in foreign entities. U.S. Holders are urged to consult their tax advisors regarding the application of this
legislation to their ownership of the notes.
The above description is not intended to constitute a complete analysis of all tax consequences relating to the
ownership of the notes. Prospective purchasers of notes should consult their own tax advisors concerning the
tax consequences of their particular situations.
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PLAN OF DISTRIBUTION
Subject to the terms and conditions contained in a purchase agreement between us and the initial purchasers, we
have agreed to sell to the initial purchasers, and each of the initial purchasers has, severally and not jointly, agreed to
purchase from us, the principal amount of the notes that appears opposite its name in the table below.
Initial Purchasers
Principal
Amount of Notes
Merrill Lynch, Pierce, Fenner & Smith
Incorporated .....................................................................................................
Citigroup Global Markets Inc. ..............................................................................................
Total.......................................................................................................................................
US$162,500,000
162,500,000
US$325,000,000
The purchase agreement provides that the obligations of the initial purchasers to purchase the notes offered
hereby are subject to certain conditions precedent and that the initial purchasers will purchase all of the notes offered
by this offering memorandum if any of the notes are purchased.
After the initial offering, the initial purchasers may change the issue price and other selling terms.
We have agreed to indemnify the initial purchasers against certain liabilities, including liabilities under the
Securities Act, and to contribute to payments the initial purchasers may be required to make in respect of any of
these liabilities.
The notes have not been registered under the Securities Act. Each initial purchaser has agreed that it will offer
or sell the notes only (1) in the United States to qualified institutional buyers in reliance on Rule 144A under the
Securities Act or (2) in offshore transactions in reliance on Regulation S under the Securities Act. See “Transfer
Restrictions”.
New Issue of Securities
The notes are a new issue of securities with no established trading market. Application has been made to the
Irish Stock Exchange for the notes to be admitted to the Official List and to trading on the Global Exchange Market
which is the exchange regulated market of the Irish Stock Exchange. However, we cannot assure you that the
application will be approved. The initial purchasers may make a market in the notes after completion of the
offering, but will not be obligated to do so, and may discontinue any market-making activities at any time without
notice. Neither we nor the initial purchasers can provide any assurance as to the liquidity of the trading market for
the notes or that an active public market for the notes will develop. If an active public trading market for the notes
does not develop, the market price and liquidity of the notes may be adversely affected.
No Sales of Similar Securities
We and the Guarantors have agreed that we will not, for a period of 90 days after the date of this offering
memorandum, without the prior consent of the initial purchasers, offer, sell, contract to sell, pledge, otherwise
dispose of, or enter into any transaction which is designed to, or might reasonably be expected to, result in the
disposition (whether by actual disposition or effective economic disposition due to cash settlement or otherwise) by
us or any of our direct or indirect subsidiaries, directly or indirectly, or announce the offering, of any debt securities
issued or guaranteed by us (other than the notes), and having a tenor of greater than one year, except in an offering
exclusively offered, directed and sold within Peru.
Stabilization Transactions
In connection with the offering of the notes, the initial purchasers may engage in over-allotment and stabilizing
transactions, but are not required to do so. Over-allotment involves sales in excess of the offering size, which
creates a short position for the initial purchasers. Stabilizing transactions involve bids to purchase the notes in the
open market for the purpose of pegging, fixing or maintaining the price of the notes. Stabilizing transactions may
cause the price of the notes to be higher than it would otherwise be in the absence of those transactions. If the initial
purchasers engage in stabilizing covering transactions, they may discontinue them at any time.
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Sales Outside the United States
Neither we nor the initial purchasers are making an offer to sell, or seeking offers to buy, the notes in any
jurisdiction where the offer and sale is not permitted. You must comply with all applicable laws and regulations in
force in any jurisdiction in which you purchase, offer or sell the notes or possess or distribute this offering
memorandum, and you must obtain any consent, approval or permission required for your purchase, offer or sale of
the notes under the laws and regulations in force in any jurisdiction to which you are subject or in which you make
such purchases, offers or sales. Neither we nor the initial purchasers will have any responsibility therefor.
Peru
In Peru, this offering will be considered a public offering directed exclusively to institutional investors under
CONASEV Resolution No. 079-2008-EF/94.01.1.
The notes and this offering memorandum have been registered with the SMV in accordance with the procedure
set forth in SMV Resolution No. 004-2011-EF/94.01.1, applicable to international offerings with a placement
tranche in Peru executed in reliance with Rule 144A of the Securities Act.
In order to purchase the notes, institutional investors in Peru must sign a statement representing that they
understand (i) differences which exist among the accounting and tax treatment in Peru and the country or countries
where the notes will be traded, and (ii) the terms and conditions of the notes.
Notice to Prospective Investors in the European Economic Area
In relation to each Member State of the European Economic Area which has implemented the Prospectus
Directive (each, a “Relevant Member State”), each initial purchaser has requested and agreed that with effect from
and including the date on which the Prospectus Directive is implemented in that Relevant Member State (the
“Relevant Implementation Date”), it has not made and will not make an offer for the notes which are the subject of
the offering contemplated in this offering memorandum to the public in that Relevant Member State other than:
A. to any legal entity which is a qualified investor as defined in the Prospectus Directive;
B. to fewer than 100 or, if the Relevant Member State has implemented the relevant provision of the 2010 PD
Amending Directive, 150, natural or legal persons (other than qualified investors as defined in the
Prospectus Directive), as permitted under the Prospectus Directive, subject to obtaining the prior consent of
Merrill Lynch, Pierce, Fenner & Smith Incorporated and Citigroup Global Markets Inc.; or
C. in any other circumstances falling within Article 3(2) of the Prospectus Directive, provided that no such
offer of notes shall require the Issuer, the initial purchasers or the Guarantors to publish a prospectus
pursuant to Article 3 of the Prospectus Directive or supplement a prospectus pursuant to Article 16 of the
Prospectus Directive.
Each person in a Member State of the European Economic Area which has implemented the Prospectus
Directive (each, a “Relevant Member State”) who receives any communication in respect of, or who acquires any
notes under, the offers to the public contemplated in this offering memorandum will be deemed to have represented,
warranted and agreed to and with each initial purchaser and the Issuer that:
(a) it is a qualified investor within the meaning of the law in that Relevant Member State implementing Article
2(1)(e) of the Prospectus Directive; and
(b) in the case of any notes acquired by it as a financial intermediary, as that term is used in Article 3(2) of the
Prospectus Directive, (i) the notes acquired by it in the offering have not been acquired on behalf of, nor
have they been acquired with a view to their offer or resale to, persons in any Relevant Member State other
than qualified investors, as that term is defined in the Prospectus Directive, or in circumstances in which
the prior consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated and Citigroup Global Markets Inc.
has been given to the offer or resale; or (ii) where notes have been acquired by it on behalf of persons in
any Relevant Member State other than qualified investors, the offer of those notes to it is not treated under
the Prospectus Directive as having been made to such persons.
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For the purpose of the above provisions, the expression “an offer to the public” in relation to any notes in any
Relevant Member State means the communication in any form and by any means of sufficient information on the
terms of the offer and the notes to be offered so as to enable an investor to decide to purchase or subscribe the notes,
as the same may be varied in the Relevant Member State by any measure implementing the Prospectus Directive in
the Relevant Member State and the expression “Prospectus Directive” means Directive 2003/71/EC (including the
2010 PD Amending Directive, to the extent implemented in the Relevant Member States) and includes any relevant
implementing measure in the Relevant Member State and the expression “2010 PD Amending Directive” means
Directive 2010/73/EU.
Notice to Prospective Investors in the United Kingdom
Each of the initial purchasers has represented and agreed that:
(a) it has only communicated or caused to be communicated and will only communicate or cause to be
communicated an invitation or inducement to engage in investment activity (within the meaning of Section
21 of the Financial Services and Markets Act 2000 ("FSMA")) received by it in connection with the issue
or sale of any notes in circumstances in which Section 21(1) of the FSMA does not apply to the Issuer or
the Guarantors; and
(b) it has complied and will comply with all applicable provisions of the FSMA with respect to anything done
by it in relation to the notes in, from or otherwise involving the United Kingdom.
In addition, in the United Kingdom, this document is being distributed only to, and is directed only at, and any
offer subsequently made may only be directed at persons who are “qualified investors” (as defined in the Prospectus
Directive) (i) who have professional experience in matters relating to investments falling within Article 19 (5) of the
Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the “Order”) and/or (ii)
who are high net worth companies (or persons to whom it may otherwise be lawfully communicated) falling within
Article 49(2)(a) to (d) of the Order (all such persons together being referred to as “relevant persons”). This
document must not be acted on or relied on in the United Kingdom by persons who are not relevant persons. In the
United Kingdom, any investment or investment activity to which this document relates is only available to, and will
be engaged in with, relevant persons.
Republic of Chile
The notes will not be registered under Law 18,045, as amended, of Chile with the Superintendencia de Valores
y Seguros (Chilean Securities Commission), and accordingly, they may be not be offered to persons in Chile, except
in circumstances that do not constitute a public offering under Chilean law.
Republic of Colombia
The notes have not been and will not be offered in Colombia through a public offering of securities pursuant to
Colombian laws and regulations, nor will they be registered in the Colombian National Registry of Securities and
Issuers or listed on a regulated securities trading system such as the Colombian Stock Exchange.
Other Relationships
Some of the initial purchasers and their affiliates have engaged in, and may in the future engage in, investment
banking and other commercial dealings in the ordinary course of business with us or our affiliates. They have
received, or may in the future receive, customary fees and commissions for these transactions.
In addition, in the ordinary course of their business activities, the initial purchasers and their affiliates may
make or hold a broad array of investments and actively trade debt and equity securities (or related derivative
securities) and financial instruments (including bank loans) for their own account and for the accounts of their
customers. Such investments and securities activities may involve securities and/or instruments of ours or our
affiliates. Certain of the initial purchasers or their affiliates that have a lending relationship with us routinely hedge
their credit exposure to us consistent with their customary risk management policies. Typically, such initial
purchasers and their affiliates would hedge such exposure by entering into transactions which consist of either the
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purchase of credit default swaps or the creation of short positions in our securities, including potentially the notes
offered hereby. Any such short positions could adversely affect future trading prices of the notes offered hereby.
The initial purchasers and their affiliates may also make investment recommendations and/or publish or express
independent research views in respect of such securities or financial instruments and may hold, or recommend to
clients that they acquire, long and/or short positions in such securities and instruments.
Settlement
Delivery of the notes is expected on or about August 2, 2012, which will be the fifth business day following the
date of pricing of the notes. Purchasers who wish to trade notes on the date of pricing or the next succeeding
business day will be required, by virtue of the fact that the notes initially will settle in T+5, to specify an alternate
settlement cycle at the time of any such trade to prevent a failed settlement. Purchasers of the notes who wish to
trade the notes on the pricing date or the next succeeding business day should consult their own advisor.
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TRANSFER RESTRICTIONS
The notes have not been registered and will not be registered under the Securities Act, any U.S. state securities
laws or the laws of any other jurisdiction (other than Peru), and may not be offered or sold except pursuant to an
effective registration statement or pursuant to transactions exempt from, or not subject to, registration under the
Securities Act and the securities laws of any other jurisdiction. Accordingly, the notes are being offered and sold
only:

in the United States to qualified institutional buyers (as defined in Rule 144A) in reliance on Rule 144A
under the Securities Act; and

outside of the United States, to certain persons, other than U.S. persons, in offshore transactions meeting
the requirements of Rule 903 in reliance on Regulation S under the Securities Act.
The notes are being offered in Peru only to “institutional investors” (as such term is defined in the Seventh Final
Disposition of CONASEV Resolution No. 141-98-EF/94.10.1).
Purchasers’ Representations and Restrictions on Resale and Transfer
Each purchaser of notes (other than the initial purchasers in connection with the initial issuance and sale of
notes) and each owner of any beneficial interest therein will be deemed, by its acceptance or purchase thereof, to
have represented and agreed as follows:
(1)
it is purchasing the notes for its own account or an account with respect to which it exercises sole
investment discretion and it and any such account is either (a) a qualified institutional buyer and is aware that
the sale to it is being made pursuant to Rule 144A or (b) a non-U.S. person that is outside the United States;
(2)
it acknowledges that the notes have not been registered under the Securities Act or with any
securities regulatory authority of any U.S. state or any other jurisdiction (other than Peru) and may not be
offered or sold within the United States or to, or for the account or benefit of, U.S. persons except as set forth
below;
(3)
it understands and agrees that notes initially offered in the United States to qualified institutional
buyers will be represented by a Global Note and that notes offered outside the United States pursuant to
Regulation S will be represented by a separate Global Note;
(4)
it will not resell or otherwise transfer any of such notes except (a) to us, (b) within the United
States to a qualified institutional buyer in a transaction complying with Rule 144A under the Securities Act,
(c) outside the United States in compliance with Rule 903 or 904 under the Securities Act, (d) pursuant to
another exemption from registration under the Securities Act (if available) or (e) pursuant to an effective
registration statement under the Securities Act;
(5)
it agrees that it will give to each person to whom it transfers the notes notice of any restrictions on
transfer of such notes;
(6)
it acknowledges that prior to any proposed transfer of notes (other than pursuant to an effective
registration statement), the holder of such notes may be required to provide certifications relating to the manner
of such transfer as provided in the indenture governing the notes;
(7)
it acknowledges that the trustee, registrar or transfer agent for the notes will not be required to
accept for registration the transfer of any notes, except upon presentation of evidence satisfactory to us that the
restrictions set forth herein have been complied with;
(8)
it acknowledges that we, the initial purchasers and other persons will rely upon the truth and
accuracy of the foregoing acknowledgements, representations and agreements and agrees that if any of the
acknowledgements, representations and agreements deemed to have been made by its purchase of the notes are
no longer accurate, it will promptly notify us and the initial purchasers; and
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(9)
if it is acquiring the notes as a fiduciary or agent for one or more investor accounts, it represents
that it has sole investment discretion with respect to each such account and it has full power to make the
foregoing acknowledgements, representations and agreements on behalf of each account.
Representations and Restrictions on Resale and Transfer in the European Economic Area
Each person in a Relevant Member State who receives any communication in respect of, or who acquires any
notes under, the offers to the public contemplated in this offering memorandum will be deemed to have represented,
warranted and agreed to and with each initial purchaser and the Issuer that:
(a)
it is a qualified investor within the meaning of the law in that Relevant Member State
implementing Article 2(1)(e) of the Prospectus Directive; and
(b)
in the case of any notes acquired by it as a financial intermediary, as that term is used in Article
3(2) of the Prospectus Directive, (i) the notes acquired by it in the offering have not been acquired on behalf of,
nor have they been acquired with a view to their offer or resale to, persons in any Relevant Member State other
than qualified investors, as that term is defined in the Prospectus Directive, or in circumstances in which the
prior consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated and Citigroup Global Markets Inc. has
been given to the offer or resale; or (ii) where notes have been acquired by it on behalf of persons in any
Relevant Member State other than qualified investors, the offer of those notes to it is not treated under the
Prospectus Directive as having been made to such persons.
Representations and Restrictions on Resale and Transfer of Peruvian Purchasers
The notes are being offered in Peru only to “institutional investors” (as such term is defined in the Seventh Final
Disposition of CONASEV Resolution No. 141-98-EF/94.10.1).
The notes in Peru are subject to the transfer and resale restrictions and may not be transferred or resold in Peru
except as permitted under CONASEV Resolution No. 079-2008-EF/94.01.1.
Legends
The following is the form of restrictive legend which will appear on the face of the Rule 144A Global Note
(unless we determine otherwise in compliance with applicable law), and which will be used to notify transferees of
the foregoing restrictions on transfer:
“THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY U.S. STATE SECURITIES
LAWS. THE HOLDER HEREOF, BY PURCHASING THIS NOTE, AGREES FOR THE
BENEFIT OF THE ISSUER THAT THIS NOTE OR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE OFFERED, RESOLD, PLEDGED OR
OTHERWISE TRANSFERRED ONLY (1) TO THE ISSUER, (2) SO LONG AS THIS
NOTE IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE
SECURITIES ACT (“RULE 144A”), TO A PERSON WHO THE SELLER REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A)
IN ACCORDANCE WITH RULE 144A, (3) IN AN OFFSHORE TRANSACTION IN
ACCORDANCE WITH RULE 903 OR 904 OF REGULATION S UNDER THE
SECURITIES ACT, (4) PURSUANT TO ANOTHER EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT (IF AVAILABLE) OR (5) PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT,
AND IN EACH OF SUCH CASES IN ACCORDANCE WITH ANY APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR OTHER
APPLICABLE JURISDICTION. THE HOLDER HEREOF, BY PURCHASING THIS
NOTE, REPRESENTS AND AGREES THAT IT SHALL NOTIFY ANY PURCHASER OF
THIS NOTE FROM IT OF THE RESALE RESTRICTIONS REFERRED TO ABOVE.
161
THIS LEGEND MAY BE REMOVED SOLELY AT THE DISCRETION AND AT THE
DIRECTION OF THE ISSUER.”
The following is the form of restrictive legend which will appear on the face of the Regulation S Global Note
(unless we determine otherwise in compliance with applicable law), and which will be used to notify transferees of
the foregoing restrictions on transfer:
“THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY U.S. STATE SECURITIES
LAWS. THE HOLDER HEREOF, BY PURCHASING THIS NOTE, AGREES THAT
NEITHER THIS NOTE NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE
OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED IN THE ABSENCE
OF SUCH REGISTRATION UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR
NOT SUBJECT TO, SUCH REGISTRATION AND IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF ANY OTHER APPLICABLE JURISDICTION.
For further discussion of the requirements (including the presentation of transfer certificates) under the
indenture to effect exchanges or transfers of interest in Global Note and certificated notes, see “Description of the
Notes”.
162
LEGAL MATTERS
The validity of the notes will be passed upon for us by Milbank, Tweed, Hadley & McCloy LLP, our U.S.
counsel, as to matters of U.S. Federal and New York law and for the initial purchasers by Shearman & Sterling LLP,
U.S. counsel to the initial purchasers, as to matters of U.S. Federal and New York law.
Certain matters of Peruvian law relating to the notes will be passed upon for us by Rubio Leguía Normand, our
Peruvian counsel. Miranda & Amado Abogados, Peruvian counsel to the initial purchasers, will pass upon certain
matters of Peruvian law relating to the notes for the initial purchasers.
INDEPENDENT AUDITORS
Our audited consolidated annual financial statements as of December 31, 2011 and 2010 and at January 1, 2010
(transition date) and for the years ended December 31, 2011 and 2010, included in this offering memorandum have
been audited by Dongo-Soria Gaveglio y Asociados Sociedad Civil de Responsabilidad Limitada, a member firm of
PricewaterhouseCoopers, independent auditors, as stated in their audit report appearing herein. Dongo-Soria
Gaveglio y Asociados Sociedad Civil de Responsabilidad Limitada are certified public accountants under the
applicable rules of the Association of Public Accountants of Lima, Peru (Colegio de Contadores Publicos de Lima).
163
LISTING AND GENERAL INFORMATION
1.
The Global Notes have been accepted for clearance and settlement through DTC, Euroclear and Clearstream.
The CUSIP and ISIN numbers for the notes are as follows:
Rule 144A
Global Note
CUSIP ................................................................................................
21987V AA2
ISIN ................................................................................................... US21987VAA26
Regulation S
Global Note
P31353 AA6
USP31353AA66
2.
Copies of our (i) audited consolidated annual financial statements at and for the years ended December 31, 2011
and 2010, (ii) unaudited condensed consolidated interim financial statements at and for the period ended March
31, 2012, (iii) future audited consolidated annual financial statements, and (iv) any future unaudited condensed
consolidated interim financial statements, if any, and copies of our articles of association and our by-laws
(estatutos sociales), copies of the articles of association and by-laws of each of the Guarantors, as well as the
indenture (including forms of notes and the guarantees), may be obtained free of charge at our principal
executive office at Av. República de Panamá 2461, La Victoria, Lima 13, Peru. For the life of the listing
particulars, the documents referred to this paragraph may be inspected, by physical or electronic means.
3.
Except as disclosed in this offering memorandum, there has been no material adverse change, or any
development reasonably likely to involve an adverse material change, in our and the Guarantors’ condition
(financial or otherwise) and in our and the Guarantors’ general affairs since December 31, 2011, the date of our
latest audited financial statements included in this offering memorandum and there has been no significant
change in our or the Guarantors’ financial or trading position since March 31, 2012.
4.
Except as disclosed in this offering memorandum, we and the Guarantors are not involved in any legal,
governmental, litigation or arbitration proceedings (including any such proceedings of which we are aware),
during a period covering the last 12 months), relating to claims or amounts that are material nor so far as we or
each of the Guarantors are aware is any such legal, governmental, litigation or arbitration threatened.
5.
Application has been made to the Irish Stock Exchange for the approval of this document as Listing Particulars.
Application has been made to the Irish Stock Exchange for the notes to be admitted to the Official List and to
trading on the Global Exchange Market which is the exchange regulated market of the Irish Stock Exchange.
The Global Exchange Market is not a regulated market for the purposes of Directive 2004/39/EC. We will
comply with any undertakings assumed or undertaken by us from time to time to the Global Exchange Market
of the Irish Stock Exchange in connection with the notes, and we will furnish to them all such information as
the rules of the Global Exchange Market of the Irish Stock Exchange may require in connection with the listing
of the notes.
6.
The issuance of the notes was authorized by our shareholders on July 16, 2012. The issuance of each of the
guarantees was authorized by the respective Boards of Directors of Casa Grande, Cartavio, San Jacinto and
Azucarera Olmos on July 16, 2012.
7.
We and the Guarantors accept responsibility for the information contained in this offering memorandum. To the
best of our knowledge, having taken all reasonable care to ensure that such is the case, the information
contained in this offering memorandum is in accordance with the facts and does not omit anything likely to
affect the import of such information.
8.
Arthur Cox Listing Services Limited is acting solely in its capacity as listing agent for the Issuer in connection
with the notes and is not itself seeking admission of the notes to trading on the Global Exchange Market of the
Irish Stock Exchange.
9.
Coazucar was incorporated on October 26, 2005 in Lima, Peru, pursuant to registration number 11810689 and
its registered address is Av. República de Panamá 2461, La Victoria, Lima 13, Peru.
10. Casa Grande was incorporated on May 13, 1997 in Trujillo, Peru, pursuant to registration number 11001178
and its registered address is Av. Parque Fábrica s/n Casa Grande, Ascope, La Libertad, Peru and its main
164
telephone number is +51 (44) 433-038. Its Board of Directors consists of Jorge Columbo Rodríguez Rodríguez
(President), Vito Modesto Rodríguez Rodríguez, Claudio José Rodríguez Huaco, José Odón Rodríguez
Rodríguez and John Carty Chirinos, all of whose business address is Av. República de Panamá 2461, La
Victoria, Lima 13, Peru. Two members of its Board of Directors, Jorge Columbo Rodríguez Rodríguez and
Vito Modesto Rodríguez Rodríguez, indirectly own a majority ownership interest in Casa Grande. Coazucar
owns 57.1% of the outstanding shares of Casa Grande. The rights of Coazucar as shareholder of Casa Grande
are contained in Casa Grande’s bylaws. Casa Grande operates in accordance with its bylaws and with the
provisions of Peruvian law.
11. Cartavio was incorporated on April 28, 1997 in Trujillo, Peru, pursuant to registration number 11003296 and its
registered address is Plaza la Concordia Nº 18 Centro Poblado de Cartavio Distrito de Santiago de Cao, Ascope,
La Libertad, Peru and its main telephone number is +51 (44) 432-039. Its Board of Directors consists of Vito
Modesto Rodríguez Rodríguez (President), Jorge Columbo Rodríguez Rodríguez and Claudio José Rodríguez
Huaco, all of whose business address is Av. República de Panamá 2461, La Victoria, Lima 13, Peru. Two
members of its Board of Directors, Jorge Columbo Rodríguez Rodríguez and Vito Modesto Rodríguez
Rodríguez, indirectly own a majority ownership interest in Cartavio. Coazucar owns 87.2% of the outstanding
shares of Cartavio. The rights of Coazucar as shareholder of Cartavio are contained in Cartavio’s bylaws.
Cartavio operates in accordance with its bylaws and with the provisions of Peruvian law.
12. San Jacinto was incorporated on June 22, 1992 in Trujillo, Peru, pursuant to registration number 11170681 and
its registered address is Plaza la Concordia Nº 18 Centro Poblado de Cartavio Distrito de Santiago de Cao,
Ascope, La Libertad, Peru and its main telephone number is +51 (43) 463-086. Its Board of Directors consists
of Jorge Columbo Rodríguez Rodríguez (President), Vito Modesto Rodríguez Rodríguez and Claudio José
Rodríguez Huaco, all of whose business address is Av. República de Panamá 2461, La Victoria, Lima 13, Peru.
Two members of its Board of Directors, Jorge Columbo Rodríguez Rodríguez and Vito Modesto Rodríguez
Rodríguez, indirectly own a majority ownership interest in San Jacinto. Coazucar owns 82.6% of the
outstanding shares of San Jacinto. The rights of Coazucar as shareholder of San Jacinto are contained in San
Jacinto’s bylaws. San Jacinto operates in accordance with its bylaws and with the provisions of Peruvian law.
13. Azucarera Olmos was incorporated on May 9, 2012 in Lima, Peru, pursuant to registration number 12847508
and its registered address is Av. República de Panamá 2461, La Victoria, Lima 13, Peru and its main telephone
number is +51 (1) 470-7170. Its Board of Directors consists of Jorge Columbo Rodríguez Rodríguez
(President), Vito Modesto Rodríguez Rodríguez and Claudio José Rodríguez Huaco, all of whose business
address is Av. República de Panamá 2461, La Victoria, Lima 13, Peru. Two members of its Board of Directors,
Jorge Columbo Rodríguez Rodríguez and Vito Modesto Rodríguez Rodríguez, indirectly own a complete
ownership interest in Azucarera Olmos. Coazucar owns 100.0% of the outstanding shares of Azucarera Olmos.
The rights of Coazucar as shareholder of Azucarera Olmos are contained in Azucarera Olmos’ bylaws.
Azucarera Olmos operates in accordance with its bylaws and with the provisions of Peruvian law.
14. We estimate the expenses in relation to admitting the notes to the Official List and to trading on the Global
Exchange Market of the Irish Stock Exchange to be €10,440.
165
INDEX TO FINANCIAL STATEMENTS
Audited Consolidated Financial Statements of Coazucar as of December 31, 2011 and 2010 and at
January 1, 2010 (transition date) and for the years ended December 31, 2011 and 2010
Independent Auditors’ Report ....................................................................................................................
Consolidated Statement of Financial Position ............................................................................................
Consolidated Statement of Comprehensive Income ...................................................................................
Consolidated Statement of Changes in Equity ...........................................................................................
Consolidated Statement of Cash Flows ......................................................................................................
Notes to the Consolidated Financial Statements.........................................................................................
F-2
F-4
F-5
F-6
F-7
F-8
Unaudited Condensed Consolidated Interim Financial Statements of Coazucar as of March 31, 2012
and for the three months ended March 31, 2012 and 2011
Condensed Consolidated Interim Statement of Financial Position.............................................................
Condensed Consolidated Interim Statement of Comprehensive Income....................................................
Condensed Consolidated Interim Statement of Changes in Equity ............................................................
Condensed Consolidated Interim Statement of Cash Flows.......................................................................
Notes to the Condensed Consolidated Interim Financial Statements .........................................................
F-58
F-59
F-60
F-61
F-62
F-1
F-2
F-3
F-4
8
9
11
12
16
11
6
7
8
Note
4,241,937
278,204
300,395
117,317
114,277
810,193
2,805,594
202,727
378,978
29,811
6,410
8,224
3,431,744
At 31 December
2011
S/.000
The accompanying notes on pages 7 to 56 are part of the consolidated financial statements.
TOTAL ASSETS
CURRENT ASSETS
Biological assets
Inventories
Trade and other accounts receivable
Cash and cash equivalents
Total current assets
NON-CURRENT ASSETS
Property, plant and equipment
Intangible assets
Biological assets
Investments in associates
Deferred income tax assets
Trade and other accounts receivable
Total non-current assets
ASSETS
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
CORPORACION AZUCARERA DEL PERU S.A.
2010
S/.000
2,800,440
222,099
80,870
102,017
70,982
475,968
2,025,253
130,743
155,721
1,303
3,470
7,982
2,324,472
2,440,966
111,105
76,385
84,938
21,367
293,795
1,907,566
131,477
82,726
1,306
3,650
20,446
2,147,171
At 1 January
2010
S/.000
13
14
15
3.3
CURRENT LIABILITIES
Borrowings
Trade and other accounts payable
Provisions and other liabilites
Derivative financial instruments
Total current liabilities
TOTAL EQUITY AND LIABILITIES
Total liabilities
13
14
15
16
3.3
17
Note
NON-CURRENT LIABILITIES
Borrowings
Trade and other accounts payable
Provisions and other liabilites
Deferred income tax liabilities
Derivative financial instruments
Total non-current liabilities
EQUITY
Share capital
Cumulative translation adjustment
Legal and other reserves
Retained earnings
Equity attributable to equity holders of the parent
Non-controlling interest
Total shareholders equity
EQUITY AND LIABILITIES
-
4,241,937
1,755,982
291,657
412,384
6,316
10,558
720,915
259,973
296,047
8,566
470,481
1,035,067
287,011
(8,941)
44,039
1,053,024
1,375,133
1,110,822
2,485,955
At 31 December
2011
S/.000
2010
S/.000
-
2,800,440
1,260,372
186,335
302,425
3,161
491,921
347,284
43,153
9,086
353,854
15,074
768,451
287,011
44,674
687,375
1,019,060
521,008
1,540,068
-
2,440,966
1,316,275
159,476
326,310
1,147
486,933
284,201
192,187
8,197
329,574
15,183
829,342
270,136
21,299
425,181
716,616
408,075
1,124,691
At 1 January
2010
S/.000
CORPORACION AZUCARERA DEL PERU S.A.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Note
Sales of products
Cost of products sold
Gross profit
Initial recognition and change in fair value of biological assets
Profit before operating expenses
Selling expenses
Administrative expenses
Other operating expenses, net
Profit from operations before financing and taxation
Finance income
Finance expenses
Exchange difference, net
Financial results, net
Profit before income tax
Income tax expense
Profit for the year
Other comprehensive income:
- Exchange differences on translating foreign operations, net of
deferred income tax
- Fair value change in cash flow hegde, net
Total comprehensive income for the year
For the year ended
December 31,
2011
2010
S/.000
S/.000
18
19
8
19
19
21
22
22
16
Attributable to:
Equity holders of the parent
Non-controlling interest
Earning per share attributable to the equity holders of the parent
during the year
Basic and diluted earnings per share
24
The accompanying notes on pages 7 to 56 are part of the consolidated financial statements.
F-5
1,304,415
(705,229)
599,186
188,355
787,541
(30,248)
(66,386)
(157)
690,750
2,461
(47,446)
18,354
(26,631)
664,119
(104,584)
559,535
937,854
(498,467)
439,387
177,852
617,239
(18,563)
(42,924)
(19,623)
536,129
1,621
(45,388)
11,096
(32,671)
503,458
(75,769)
427,689
(13,336)
(877)
545,322
-
(5,141)
422,548
365,586
179,736
545,322
279,347
143,201
422,548
1.27
0.97
F-6
23
17
287,011
-
16,875
16,875
287,011
-
-
270,136
-
(8,941)
(8,941)
(8,941)
-
-
-
(47)
(47)
44,039
(588)
(588)
26,776
(2)
26,774
44,674
-
(3,399)
(3,399)
21,299
-
(9,465)
(9,465)
1,053,024
375,114
(26,776)
6,771
(547)
(20,552)
687,375
375,114
282,746
425,181
282,746
Attributable to equity holders of the controlling interest
Cumulative
Legal and
Share
translation
other
Retained
capital
adjustment
reserves
earnings
S/.000
S/.000
S/.000
S/.000
The accompanying notes on pages 7 to 56 are part of the consolidated financial statements.
Balances at 1 January 2010
Profit for the year
Other comprehensive income:
Fair value change in cash flow hegdes, net
Total comprehensive income for the year
Equity transactions with owners:
Contributions
Dividends distribution
Transfer to legal reserve
Acquisition of non-controlling interest in subsidiaries
Others
Total equity transactions with owners
Balances at 31 December 2010
Profit for the year
Other comprehensive income:
Exchange differences on translating foreign operations
Fair value changes in cash flow hegdes, net
Total comprehensive income for the year
Equity transactions with owners:
Dividend distribution
Non controlling interest of subsidiaries acquired
Others
Total equity transactions with owners
Balances at 31 December 2011
Note
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARS ENDING 31 DECEMBER 2011 AND 2010
CORPORACION AZUCARERA DEL PERU S.A.
(9,512)
(9,512)
1,375,133
(8,941)
(588)
365,585
16,875
6,771
(549)
23,097
1,019,060
375,114
(3,399)
279,347
716,616
282,746
Total
S/.000
(38,922)
450,051
(1,052)
410,077
1,110,822
(4,395)
(289)
179,737
(8,058)
(23,060)
850
(30,268)
521,008
184,421
(1,742)
143,201
408,075
144,943
Noncontrolling
interest
S/.000
(38,922)
450,051
(10,564)
400,565
2,485,955
(13,336)
(877)
545,322
16,875
(8,058)
(16,289)
301
(7,171)
1,540,068
559,535
(5,141)
422,548
1,124,691
427,689
Total
S/.000
CORPORACION AZUCARERA DEL PERU S.A.
CONSOLIDATED STATEMENT OF CASH FLOWS
Note
CASH FLOW FROM OPERATING ACTIVITIES
Cash generated from operations
Income tax paid
Net cash generated from operating activities
For the year ended
December 31,
2011
2010
S/.000
S/.000
25
466,853
(79,026)
387,827
185,399
(39,546)
145,853
23
6
(49,470)
(186,486)
2,946
(991)
(8,897)
(44,604)
2,137
(285,365)
(34,769)
(193,937)
(294)
50,819
17
(178,164)
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from issuance of ordinary shares
Proceeds from borrowings
Repayments of borrowings
Dividends paid to non - controlling interests
Interests paid
Net cash used in financing activities
406,358
(388,348)
(38,922)
(38,255)
(59,167)
16,875
332,708
(228,016)
(8,058)
(31,583)
81,926
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at the end of year
43,295
70,982
114,277
49,615
21,367
70,982
CASH FLOW FROM INVESTING ACTIVITIES
Acquisition of subsidiaries, net of cash acquired
Purchase of property, plant and equipment
Proceeds from sale of property, plant and equipment
Purchase of intangible assets
Purchase of investment in Producargo S.A.
Loans granted to related parties
Interests received
Net cash used in investing activities
7
12
The accompanying notes on pages 7 to 56 are part of the consolidated financial statements.
F-7
CORPORACION AZUCARERA DEL PERU S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE
YEARS ENDED 31 DECEMBER 2011 AND 2010 AND 1 JANUARY 2010
1
GENERAL INFORMATION
Corporación Azucarera del Perú S.A. (hereinafter indistinctly the “Company” or “Coazucar”) is a
holding company primarily engaged, through its operating subsidiaries, in sugarcane agro-industrial
activities (production of sugar and ethanol). These activities are carried out through operations in Perú,
Ecuador and Argentina.
The Company and its operating subsidiaries are collectively referred to hereinafter as the “Group”.
The Company was established in Peru on 10 October 2005 and has subsequently grown significantly
both organically and through acquisitions. See note 27 for the description of the Group companies.
The Company is the Group´s ultimate parent company and is an entity incorporated and domiciled in
Peru. The address of its registered office is Avenida República de Panamá 2461, La Victoria - Lima,
Peru.
The issuance of these consolidated financial statements as of and for the year ended 31 December
2011, was approved by the Board of Directors in its meeting held on 2 July 2012.
2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of these consolidated financial statements
are set out below. These policies have been consistently applied to all years presented, unless
otherwise stated.
2.1
Basis of preparation
The consolidated financial statements of the Group have been prepared in accordance with
International Financial Reporting Standards (IFRS), issued by the International Accounting Standard
Board (IASB), effective as of 31 December 2011 and they are the first consolidated financial
statements prepared by the Group in accordance with IFRS. Until 31 December 2010, the consolidated
financial statements of the Group were prepared under generally accepted accounting principles in
Peru (Peruvian GAAP).
Except for certain mandatory exceptions and for certain permitted exemptions for the IFRS transition
period, described in note 30, the Group has consistently applied accounting policies in the preparation
of its statement of financial position at 1 January 2010 and in all the periods presented, as if such
accounting policies had been always effective. Note 30 explains the effect of the Group’s IFRS
transition on its financial position, its performance and cash flows of the Group, including the nature
and effect of the major changes made in accounting policies as compared to those used in the
preparation of its consolidated financial statements for the period ended 31 December 2010 under
Peruvian GAAP.
Presentation in the consolidated statement of financial position differentiates between current and noncurrent assets and liabilities. Assets and liabilities are regarded as current if they mature within one
year or are held for sale. The consolidated financial statements are presented in thousands of Nuevos
Soles, the local currency in Peru, unless otherwise specifically stated.
F-8
The consolidated financial statements have been prepared under the historical cost convention as
modified by derivative instruments and biological assets measured at fair value.
The preparation of consolidated financial statements according to IFRS requires the use of certain
critical accounting estimates. It also requires Management to exercise its judgment in the process of
applying the Group’s accounting policies. The areas involving a high degree of judgment or complexity,
or areas where assumptions and estimates are significant to the consolidated financial statements are
described in note 4.
a) Standards, amendments and interpretations to existing standards effective in 2011, and adopted
by the Group in 2011
There are no new standards, amendments and interpretations to existing standards that are effective
for the first time for the year beginning on 1 January 2011 that would be expected to have a material
impact on the Group.
b) Standards, amendments and interpretations to existing standards effective in 2011, but not
relevant to the Group’s operations
An amendment to IAS 32 “Financial Instruments: Presentation” was issued in October 2009. The
amendment clarifies that rights issues, options and warrants denominated in a currency other than the
issuer’s functional currency and offered on a pro-rata basis to all owners of the same class of equity
must be classified as equity. Such rights issues have so far been accounted for as liabilities. The
change relates only to issuances of a fixed number of shares at a fixed foreign-currency exercise price.
The amendment is to be applied for annual periods beginning on or after 1 February 2010. Earlier
application is permitted. The amendment was effective for the Group’s year ended 31 December 2011,
and did not have an impact on the presentation of the Group’s financial position, results of operations
or earnings per share.
The IASB issued IAS 24 (revised) “Related Party Disclosures” in November 2009. The revision
provides a partial exemption on the disclosure requirements for government-related entities and
simplifies the definition of a related party. The revision is applicable for accounting periods beginning
on or after 1 January 2011. Earlier application is permitted. The revised standard was effective for the
Group’s year ended 31 December 2011, and did not have an impact on the presentation of the Group’s
financial position, results of operations or earnings per share.
In November 2009, the IFRIC issued IFRIC 19 “Extinguishing Financial Liabilities with Equity
Instruments”. The interpretation addresses the accounting treatment in cases where a company settles
all or part of a financial liability by issuing equity instruments to the creditor. It is to be applied for
annual periods beginning on or after 1 July 2010. Earlier application is permitted. The amendment was
effective for the Group’s year ended 31 December 2011, and did not have an impact on the
presentation of the Group’s financial position, results of operations or earnings per share.
In November 2009 amendments were issued to IFRIC 14 “IAS 19 – The Limit on a Defined Benefit
Asset, Minimum Funding Requirements and their Interaction”, an interpretation of IAS 19 “Employee
Benefits”. The amendments apply when a company is subject to minimum pension plan funding
requirements. They enable prepayments of the respective contributions to be recognized as an asset.
The amendments are to be applied for annual periods beginning on or after 1 January 2011. Earlier
application is permitted. The amendment was effective for the Group’s year ended 31 December 2011,
and did not have an impact on the presentation of the Group’s financial position, results of operations
or earnings per share.
On 6 May 2010, the IASB issued Improvements to IFRSs – a collection of amendments to seven
IFRSs – as part of its program of annual improvements to its standards. The amendments are effective
for annual periods beginning on or after 1 July 2010 and 1 January 2011 (thus effective for the Group’s
year ended 31 December 2011), although entities are permitted to adopt them earlier.
F-9
These amendments relate to IFRS 1 “First Time Adoption of IFRS”, IFRS 3 “Business Combination”,
IFRS 7 “Financial Instruments: Disclosures”, IAS 1 “Presentation of Financial Statements”, IAS 27
“Consolidated and separate financial statements”, IAS 34 “Interim Financial Reporting” and IFRIC 13
“Customer Loyalty Programmes”. The amendments did not have a material impact on the
presentation of the Group’s financial position, results of operations or earnings per share.
c) Standards, amendments and interpretations to existing standards which are not yet effective
The following standards, amendments and interpretations to existing standards have been published
and are mandatory for the Group’s accounting periods beginning on or after 1 January 2012 or later
periods and the Group has not early adopted them:
In November 2009, the IASB issued IFRS 9 “Financial Instruments”. The standard incorporates the first
part of a three-phase project to replace IAS 39 “Financial Instruments: Recognition and Measurement”.
IFRS 9 prescribes the classification and measurement of financial assets. IFRS 9 requires that
financial assets are subsequently measured either “at amortized cost” or “at fair value”, depending on
whether certain conditions are met. In addition, IFRS 9 permits an entity to designate an instrument,
that would otherwise have been classified in the “at amortized cost” category, to be “at fair value” if that
designation eliminates or significantly reduces measurement or recognition inconsistencies. The
prescribed category for equity instruments is at fair value through profit or loss, however, an entity may
irrevocably opt for presenting all fair value changes of equity instruments not held for trading in other
comprehensive income. Only dividends received from these investments are reported in profit or loss.
In October 2010, the IASB issued further additions to IFRS 9. These bring forth the guidance for
derecognizing financial instruments and most of the requirements for the classification and
measurement of financial liabilities currently included within IAS 39. The additions include amortized
cost accounting for most financial liabilities, with bifurcation of embedded derivatives. The main change
is that in cases where the fair value option is taken for financial liabilities, the part of a fair value
change due to an entity’s own credit risk is recorded in other comprehensive income rather than the
statement of income, unless this creates an accounting mismatch. The remaining phases of the
project, dealing with impairment of financial instruments and hedge accounting, have not yet been
finalized. IFRS 9, as well as its additions, shall be applied retrospectively for annual periods beginning
on or after 1 January 2015. Earlier adoption is permitted. The Group is currently analyzing the resulting
effects on the presentation of the Group’s results of operations, financial position or cash flows.
In October 2010, the IASB issued an amendment to IFRS 7 “Financial Instruments: Disclosures”. The
amendment requires additional disclosures in respect of risk exposures arising from transferred
financial assets. The amendment includes a requirement to disclose by class of asset the nature,
carrying amount and a description of the risks and rewards of financial assets that have been
transferred to another party yet remain on the entity’s statement of financial position. Disclosures are
also required to enable a user to understand the amount of any associated liabilities, and the
relationship between the financial assets and associated liabilities. The amendment to IFRS 7 shall be
applied for annual periods beginning on or after 1 July 2011, with earlier application permitted. The
amendment is not expected to have a material impact on the presentation of the Group’s results of
operations, financial position or cash flows.
In December 2010, the IASB amended IAS 12 “Income taxes”, to introduce an exception to the existing
principle for the measurement of deferred tax assets or liabilities arising on investment property
measured at fair value. The IASB has added another exception to the principles in IAS 12: the
rebuttable presumption that investment property measured at fair value is recovered entirely by sale.
This presumption is rebutted if the investment property is depreciable (for example, buildings and land
held under a lease) and is held within a business model whose objective is to consume substantially all
of the economic benefits embodied in the investment property over time, rather than through sale
before the end of its economic life. The presumption cannot be rebutted for freehold land that is an
investment property, because land can only be recovered through sale.
F-10
The amendments are effective for annual periods beginning on or after 1 January 2012. The
amendment is not expected to have an impact in the Group’s results to the extent it does not have
investment properties measured at fair value.
On May 2011, the IASB issued IFRS 10 “Consolidated Financial Statements” which establishes
principles for the presentation and preparation of consolidated financial statements when an entity
controls one or more other entities. IFRS 10 replaces the consolidation requirements in SIC 12
“Consolidation - Special Purpose Entities” and IAS 27 “Consolidated and Separate Financial
Statements” and is effective for annual periods beginning on or after 1 January 2013. Earlier
application is permitted. IFRS 10 builds on existing principles by identifying the concept of control as
the determining factor in whether an entity should be included within the consolidated financial
statements of the parent company. The standard provides additional guidance to assist in the
determination of control where this is difficult to assess. The Group is in the process of analyzing the
resulting effects on the presentation of the Group’s results of operations, financial position or cash
flows.
On May 2011, the IASB issued IFRS 11 “Joint Arrangements” which provides for a more realistic
reflection of joint arrangements by focusing on the rights and obligations of the arrangement, rather
than its legal form (as is currently the case). The standard addresses inconsistencies in the reporting of
joint arrangements by requiring a single method to account for interests in jointly controlled entities.
IFRS 11 is effective for annual periods beginning on or after 1 January 2013. Earlier application is
permitted. The Group is in the process of analyzing the resulting effects on the presentation of the
Group’s results of operations, financial position or cash flows.
On May 2011, the IASB issued IFRS 12 “Disclosure of Interests in Other Entities”. IFRS 12 is a new
and comprehensive standard on disclosure requirements for all forms of interests in other entities,
including subsidiaries, joint arrangements, associates and unconsolidated structured entities. IFRS 12
is effective for annual periods beginning on or after 1 January 2013. Earlier application is permitted.
The application of IFRS 12 is likely to increase the disclosures required for subsidiaries and joint
arrangements.
On May 2011, the IASB issued IFRS 13 “Fair Value Measurement” which replaces the fair value
measurement guidance currently dispersed across different IFRS standards with a single definition of
fair value and extensive application guidance. IFRS 13 provides guidance on how to measure fair
value and does not introduce new requirements for when fair value is required or permitted. It also
establishes disclosure requirements to provide users of financial statements with more information
about fair value measurements. IFRS 13 was developed in a joint project with the US Financial
Accounting Standards Board (FASB) and the guidance in IFRS 13 is largely converged with FASB’s
ASC Topic 820 Fair Value Measurement and Disclosures. IFRS 13 is effective for annual periods
beginning on or after 1 January 2013. Earlier application is permitted. The Group is in the process of
analyzing this standard although it expects it will not have a material impact on the Group’s results of
operations, financial position and cash flows. However, the application of IFRS 13 is likely to increase
the disclosures required about fair value measurements.
In June 2011, the IASB issued an amendment to IAS 1 “Presentation of financial statements”. The
amendment improves the consistency and clarity of the presentation of items of other comprehensive
income (“OCI”). The main change is a requirement for entities to group items presented in OCI on the
basis of whether they are potentially reclassifiable to profit or loss subsequently (reclassification
adjustments). The amendment to IAS 1 shall be applied for annual periods beginning on or after 1 July
2012, with earlier application permitted. The Group is in the process of analyzing the resulting effects
on the presentation of the Group’s results of operations, financial position or cash flows.
There are no other standards, amendments or interpretations that are not yet effective that would be
expected to have an impact on the Group.
F-11
2.2
Scope of consolidation
The consolidated financial statements include the assets, liabilities and results of the Company and of
all of its subsidiaries as from the date that control commences to the date that control ceases. The
consolidated financial statements also include the Group´s share of the after-tax results of its interest
in associates on an equity accounting basis as from the date at which significant influence
commences, to the date that it ceases.
a) Subsidiaries Subsidiaries are all entities over which the Group has the power to govern their financial and operating
policies generally accompanying a shareholding of more than one half of the voting rights. The
existence and effect of potential voting rights that are currently exercisable or convertible are
considered when assessing whether the Group controls another entity. Subsidiaries are fully
consolidated from the date on which control is transferred to the Group until the date in which control
ceases.
The Group accounts for acquisitions using the purchase method of accounting as prescribed by IFRS
3R. Consideration is measured as the fair value of the assets given, equity instruments issued and
liabilities incurred or assumed at the date of exchange. Identifiable assets acquired and liabilities and
contingent liabilities assumed in a business combination are measured initially at their fair values at the
acquisition date, irrespective of the extent of any non-controlling interest. The excess of consideration
over the fair value of the Group’s share on the identifiable net assets acquired is recorded as goodwill
(see note 23 for details).
Inter-company transactions, balances and unrealized gains on transactions between Group companies
are eliminated. Unrealized losses are also eliminated unless they are assessed as an impairment
indicator of the asset transferred. Accounting policies of subsidiaries are changed where necessary to
ensure consistency with the policies adopted by the Group.
b) Transactions with non-controlling interest in a subsidiary without change in control Transactions with non-controlling stockholders that do not result in loss of control are accounted for as
equity transactions, that is, as transactions with owners in their capacity as owners. The difference
between fair value of any consideration paid and the corresponding share acquired of the carrying
value of net assets of the subsidiary is recorded in equity. Gains or losses on a disposal of noncontrolling interests in a subsidiary, which does not imply a change of control over the subsidiary, are
also recorded in equity (see note 17.b iii).
c) Associates Associates are all entities over which the group has significant influence but not control, generally
accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates
are accounted for using the equity method of accounting. Under the equity method, the investment is
initially recognized at cost, and the carrying amount is increased or decreased to recognize the
investor’s share of the profit or loss of the investee after the date of acquisition.
The group’s share of post-acquisition profit or loss is recognized in the income statement, and its share
of post acquisition movements in other comprehensive income is recognized in other comprehensive
income with a corresponding adjustment to the carrying amount of the investment. When the Group’s
share of losses in an associate equals or exceeds its interest in the associate, including any other
unsecured receivables, the Group does not recognize further losses, unless it has incurred legal or
constructive obligations or made payments on behalf of the associate.
F-12
The Group determines at each reporting date whether there is any objective evidence that the
investment in the associate is impaired. If this is the case, the Group calculates the amount of
impairment as the difference between the recoverable amount of the associate and its carrying value
and recognizes such amount as income (loss) attributable to associates.
2.3
Segments information
According to IFRS 8, operating segments are reported in a manner consistent with the internal
reporting provided to the chief operating decision-maker. The Board of Directors is responsible for
allocating resources and assessing performance of the operating segments and steering the business
success of the segments and is considered the Chief Operating Decision-Maker within the meaning of
IFRS 8.
2.4
Foreign currency translation
a) Functional and presentation currency Items included in the financial statements of each of the Group´s entities are measured using the
currency of the primary economic environment in which the entity operates (the functional currency).
The consolidated financial statements are presented in Nuevos Soles, which is the Group’s
presentation currency.
b) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates
prevailing at the date of transactions or valuation date where items are remeasured. Foreign
exchange gains and losses resulting from the settlement of such transactions and from the translation
at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are
recognized in the income statement, except when deferred as “other comprehensive income” in
transactions that qualify as cash flow hedges.
The Group’s foreign exchange gains and losses are presented in the statement of comprehensive
income under “exchange difference, net”.
c) Group companies The results and financial position of all of the Group entities (none of which has the currency of a
hyper-inflationary economy) that have a functional currency different from the presentation currency
are translated into the presentation currency as follows:
i)
Assets and liabilities of each statement of financial position presented are translated at the rate
prevailing at the date of that statement of financial position;
ii) Income and expense for each statement of income are translated at average exchange rates
(unless this average is not a reasonable approximation of the cumulative effect of the rates
prevailing on the transaction dates, in which case income and expenses are translated at the
rate on the date of the transaction), and
iii) All resulting exchange differences are recognized in other comprehensive income.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets
and liabilities of the foreign entity and translated at the closing rate.
F-13
2.5 Property, plant and equipment Property, plant and equipment are recorded at cost, less accumulated depreciation and impairment
losses, if any. Historical cost comprises the purchase price and any costs directly attributable to the
acquisition.
Where individual components of an item of property, plant and equipment have different useful lives,
they are accounted for as separate items, which are depreciated separately.
Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as
appropriate, only when it is probable that future economic benefits associated with the item will flow to
the Group and the cost of the item can be measured reliably.
The carrying amount of the replaced part is derecognized. All other repairs and maintenance are
charged to the statement of income during the period in which they are incurred.
Assets in the construction stage are capitalized as separate components. At their completion, the cost
is transferred to the adequate category. Work in progress is not depreciated.
Land is not depreciated. Depreciation on other assets is calculated using the straight-line method, to
allocate their cost to their residual values over their estimated useful lives, as follows:
Years
Buildings and other construction
Machinery and equipment
Furniture and fixtures and others
Vehicles
Up to 40
between 3 and 30
between 3 and 10
between 3 and 25
The assets’ residual values and useful lives are reviewed and adjusted, if appropriate, at the date of
each statement of financial position. An asset’s carrying amount is immediately written down to its
recoverable amount if it is greater than its estimated recoverable amount.
Gains and losses on disposals correspond to the difference between the proceeds and the carrying
amount of the assets, which are included in the consolidated statement of comprehensive income.
2.6
Leases -
The Group classifies its leases at the inception as finance or operating leases. Leases are classified as
finance leases whenever the terms of the lease transfer substantially all the risks and rewards of
ownership to the lessee. All other leases are classified as operating leases. Finance leases are
capitalized at the lease’s inception at the lower of the fair value of the leased property and the present
value of the minimum lease payments. Each lease payment is allocated between the liability and
finance charges so as to achieve a constant rate on the finance balance outstanding. The
corresponding rental obligations, net of finance charges, are included as “Borrowings” in the statement
of financial position. The interest element of the finance cost is charged to the statement of income
over the lease period. Property, plant and equipment acquired under finance leases is depreciated
over the shorter of the asset’s useful life and the lease term.
Payments made under operating leases (net of any incentives received from the lessor) are charged to
the statement of income on a straight-line basis over the period of the lease.
F-14
2.7
Goodwill
Goodwill represents future economic benefits arising from assets that are not capable of being
individually identified and separately recognized by the Group on a business acquisition. Goodwill is
computed as the excess of the consideration over the fair value of the Group’s share of net assets of
the acquired subsidiary undertaking at the acquisition date and is allocated to those cash generating
units expected to benefit from the acquisition for the purpose of impairment testing. Goodwill arising on
the acquisition of subsidiaries is included within “Intangible assets” on the statement of financial
position, whilst goodwill arising on the acquisition on associates forms part of the carrying amount of
the investments. Goodwill arising on the acquisition of foreign entities is treated as an asset of the
foreign entity denominated in the local currency and translated at the closing rate.
Goodwill is not amortized but is tested for impairment on an annual basis, or more frequently if there is
an indication of impairment.
2.8
Other intangible assets
Other intangible assets that are acquired by the Group, which have finite useful lives, are measured at
cost less accumulated amortization and impairment losses, if any. These intangible assets comprise
computer software and are amortized on a straight-line basis over their useful lives estimated to be of
4 years.
2.9
Impairment of assets
Goodwill
For the purpose of impairment testing, assets are grouped at the lowest levels for which they
separately generate identifiable cash flows. This group of assets is known as cash-generating units. If
the recoverable amount of a cash-generating unit is less than the carrying amount of the assets within
the unit, an impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to
the unit and then to the other assets of the unit on a pro-rata basis based on the carrying amount of
each asset in the unit. Goodwill impairment losses recognized cannot be reversed in a subsequent
periods. The recoverable amount of goodwill is the higher of its fair value less costs to sell and its
value in use. In assessing the value in use, the estimated future cash flows are discounted to their
present value using a pre-tax discount rate that reflects current market assessments of the time value
of money and the risks specific to the asset for which the estimates of future cash flows have not been
adjusted (see note 4 for details).
Property, plant and equipment and finite useful live intangible assets At each statement of financial position date, the Group reviews the carrying amounts of its property,
plant and equipment and finite useful live intangible assets to determine whether there is any indication
that those assets have suffered an impairment loss. If any such indication exists, the recoverable
amount of the asset is estimated in order to determine the extent, if any, of the impairment loss. Where
the asset does not generate cash flows that are independent from other assets, the Group estimates
the recoverable amount of the cash generating unit to which the asset belongs. If the recoverable
amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the
carrying amount of the asset or cash-generating unit is reduced to its recoverable amount.
An impairment loss is recognized immediately in the statement of income. Where an impairment loss
subsequently reverses the carrying amount of the asset or cash-generating unit is increased to the
revised estimate of its recoverable amount, which should not exceed the carrying amount that would
have been determined had no impairment loss been recognized for the asset or cash-generating unit
in prior years. A reversal of an impairment loss is recognized in the statement of income.
F-15
2.10
Biological assets
Biological assets comprise the plantations of sugarcane which are assets capable of produce more
than one harvest (bearer biological assets).
The Group distinguishes between mature and immature biological assets. “Mature” biological assets
are those that are able to sustain regular harvests (for bearer biological assets). “Immature” biological
assets are those assets other than mature biological assets.
The Group presents biological assets (sugarcane) as current and non-current assets based on their
nature. For that purpose, the Group estimates of the portion of biological assets that will be consumed
over a period of 12 months or less to be able to classify said portion as a current asset.
Costs are capitalized as biological assets if, and only if, (a) it is probable that future economic benefits
will flow to the entity, and (b) the cost can be measured reliably. The Group capitalizes costs such as:
planting, harvesting, weeding, seedlings, irrigation, agrochemicals, fertilizers and a systematic
allocation of fixed and variable production overheads that are directly attributable to the management
of biological assets, among others. Costs that are expensed as incurred include administration and
other general overhead and unallocated production overhead, among others.
Biological assets, both at initial recognition and at each subsequent reporting date, are measured at
fair value less costs to sell, except where fair value cannot be reliably measured. Cost approximates
fair value when little biological transformation has taken place since the costs were originally incurred
or the impact of biological transformation on price is not expected to be material.
Gains and losses that arise on measuring biological assets at fair value less costs to sell and
measuring agricultural produce at the point of harvest at fair value less costs to sell are recognized in
the statement of income in the period in which they arise in the line item “Changes in fair value of
biological assets”.
Where there is an active market for a biological asset, quoted market prices in the most relevant
market are used as a basis to determine the fair value. Otherwise, when there is no active market or
market-determined prices are not available, fair value of biological assets is determined through the
use of valuation techniques. Therefore, the fair value of biological assets is generally derived from the
expected discounted cash flows of the related agricultural produce. The fair value of agricultural
produce at the point of harvest is generally derived from market determined prices. The determination
of the fair value of sugarcane is based on the Group’s business segments as follows:

The fair value of sugarcane depends on the variety, location and maturity of the plantation. The
sugarcane is accounted for as plantations and is felled until their optimum economic age for use
has expired, generally between 7 to 9 years.

Sugarcane, for which biological growth is not significant, is valued at cost, which approximates its
fair value. When sugarcane has attained significant biological growth, it is measured at fair value.

The fair value of sugarcane considers estimated revenues based on yearly production volume
(which will be destined the production of sugar, mainly). The sale price of sugar is calculated as
the average of its daily prices in the local market of each country where the Group operates.
Projected costs include maintenance, land lease, harvesting and transportation.

The operating cash flows are discounted at a discount rate, which reflects current market
assessment of the time value of money and risks involved.
2.11
Inventories -
Inventories comprise raw materials, finished goods (including harvested agricultural produce) and
others.
F-16
The cost of finished products comprises the fair value of the agriculture produce less cost necessary to
sell at the harvest point (an amount transferred from biological asset to productive process) plus the
cost incurred in the industrial production process, such as direct labor, other direct cost and overhead
production costs.
Inventories are measured at the lower of cost and net realizable value. Cost is determined using the
weighted average method, except for in-transit inventory, which is stated by using the specific
identification method. The net realization value is the estimated sales price of the product during the
ordinary course of business, based on the current price less estimated costs to complete its production
and expenses to place inventory in sales conditions.
2.12
Financial assets
Classification The Group financial assets qualify only as loans and receivables. The classification depends on the
purpose for which the financial assets were acquired. Management determines the classification of its
financial assets at initial recognition.
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are
not quoted in an active market. They are included in current assets, except for maturities greater than
12 months after the date of the statement of financial position. Loans and receivables comprise “trade
and other receivables” and “cash and cash equivalents” in the statement of financial position.
Recognition and measurement Loan and receivables are initially recognized at fair value plus transaction costs, if any. Loans and
receivables are subsequently carried at amortized cost using the effective interest method.
The Group assesses at each statement of financial position date whether there is objective evidence
that a financial asset or a group of financial assets is impaired. Impairment testing of trade receivables
is described in note 11.
Offsetting financial instruments Financial assets and liabilities are offset and the net amount reported in the statement of financial
position when there is a legally enforceable right to offset the recognized amounts and there is an
intention to settle on a net basis, or realize the asset and settle the liability simultaneously.
2.13
Derivative financial instruments and hedging activities
Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are
subsequently remeasured at their fair value. The fair value of interest rate swaps has been calculated
using a discounted cash flow analysis.
The Group manages exposures to financial risk using hedging instruments that provide the appropriate
economic outcome. The principal hedging instruments used may include foreign exchange forward
contracts and interest rate swaps. The Group does not use derivative financial instruments for
speculative purposes.
The Group’s policy is to apply hedge accounting to hedging relationships where it is permissible under
IAS 39, practical to do so and its application reduces volatility, but transactions that may be effective
hedges in economic terms may not always qualify for hedge accounting under IAS 39. Any derivatives
that the Group holds to hedge these exposures are classified as “held for trading” and are shown in a
separate line on the face of the statement of financial position. Gains and losses on interest rate and
foreign exchange rate derivatives are classified within ‘Financial results, net’ and “Exchange difference,
net”, respectively.
F-17
2.14
Trade receivables -
Trade receivables are recognized initially at fair value and subsequently measured at amortized cost
using the effective interest method, less allowance for trade account receivables. An allowance for
trade receivables is established when there is objective evidence that the Group will not be able to
collect all amounts due according to the original terms of the receivables. Significant financial
difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganization, and
default or delinquency in payments are considered indicators that the trade receivable is impaired. The
amount of the provision is the difference between the asset’s carrying amount and the present value of
estimated future cash flows, discounted at the original effective interest rate. The carrying amount of
the asset is reduced through the use of an allowance account, and the amount of the loss is
recognized in the statement of income within selling expenses. When a trade receivable is
uncollectible, it is written off against the allowance account for trade receivables. Subsequent
recoveries of amounts previously written off are credited against selling expenses in the statement of
income.
2.15
Cash and cash equivalents -
Cash and cash equivalents include cash in hand, deposits held at call with banks and other short-term
highly liquid investments with original maturities of three months or less.
2.16 Trade payables Trade payables are obligations to pay for goods or services that have been acquired in the ordinary
course of business from suppliers. Trade payables are initially recognized at fair value and
subsequently measured at amortized cost using the effective interest method.
2.17 Borrowings Borrowings are initially recognized at fair value, net of transaction costs incurred. Borrowings are
subsequently measured at amortized cost using the effective interest method. Borrowings are
classified as current liabilities unless the Group has an unconditional right to defer settlement of the
liability for at least 12 months after the date of the statement of financial position. Borrowing costs
associated with qualifying assets are capitalized during the period of time that is required to complete
and prepare the asset for its intended use.
2.18
Provisions -
Provisions are recognized when (i) the Group has a present legal or constructive obligation as a result
of past events; (ii) it is probable that an outflow of resources will be required to settle the obligation;
and (iii) a reliable estimate of the amount of the obligation can be made. Provisions are measured at
the present value of the expenditures expected to be required to settle the obligation using a pre-tax
rate that reflects current market assessments of the time value of money and the risks specific to the
obligation.
2.19 Current and deferred income tax The Group’s tax expense for the year comprises the charge for current tax payable and deferred
taxation attributable to the Group’s operating subsidiaries. Tax is recognized in the statement of
income, except to the extent that it relates to items recognized directly in equity. In this case, the tax is
also recognized in equity.
F-18
The current income tax charge is calculated on the basis of the tax laws enacted or substantively
enacted at the date of the statement of financial position in the countries where the Group’s
subsidiaries operate and generate taxable income. Management periodically evaluates positions taken
in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It
establishes provisions where appropriate on the basis of amounts expected to be paid to the tax
authorities.
Deferred income tax is recognized, using the liability method, on temporary differences arising
between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial
statements. However, the deferred income tax is not accounted for if it arises from initial recognition of
an asset or liability in a transaction other than a business combination that at the time of the
transaction affects either accounting nor taxable profit or loss. Deferred income tax is determined using
tax rates (and laws) that have been enacted or substantively enacted by the date of the statement of
financial position and are expected to apply when the related deferred income tax asset is realized or
the deferred income tax liability is settled.
Deferred income tax assets are recognized only to the extent that it is probable that future taxable
profit will be available against which the temporary differences can be utilized.
Deferred income tax is provided on temporary differences arising on investments in associates, except
where the timing of the reversal of the temporary difference is controlled by the Group and it is
probable that the temporary difference will not reverse in the foreseeable future.
2.20
Revenue recognition -
The Group’s primary activities comprise agricultural and agro-industrial activities.
The Group’s agro-industrial activities comprise the selling of manufactured products (i.e. sugar,
ethanol, among others). Sales of manufacture products are measured at the fair value of the
consideration received or receivable, net of returns and allowances, trade and other discounts, net of
sales taxes, as applicable. The Group recognizes revenue when the amount of revenue can be reliably
measured, it is probable that the future economic benefits will flow to the entity and when the
Company has delivered the products to the customers in the designated mode of transport (the
products are delivered to the customer in the store of the seller) ,considering the risks and benefits
associated with such property are transferred and when the collection of accounts receivable is
reasonably assured. For export shipments, transfer occurs upon loading of the goods onto the relevant
carrier.
2.21 Basic earnings per share Basic earnings per share is calculated by dividing the net income for the period attributable to equity
holders of the controlling interest by the weighted average number of ordinary shares outstanding
during the year. Diluted net earnings per share is computed by dividing the net income for the period
by the weighted average number of ordinary shares outstanding, and when dilutive, adjusted for the
effect of all potentially dilutive shares.
3
FINANCIAL RISK MANAGEMENT
3.1 Financial risk factors The Group’s activities are exposed to a variety of financial risks. The Group’s overall risk management
program focuses on the unpredictability of financial markets and seeks to minimize the Group’s capital
costs by using suitable means of financing and to manage and control the Group’s financial risks
effectively. The Group uses financial instruments to hedge certain risk exposures.
F-19
The Group’s approach to the identification, assessment and mitigation of risk is carried out by the
Board of Directors, which focuses on timely and appropriate management of risk. The Board of
Directors has overall accountability for the identification and management of risk across the Group.
The principal financial risks arising from financial instruments traded by the Group are: i) exchange rate
risk, ii) interest rate risk, iii) liquidity risk, iv) credit risk and v) end-product price risk. This section
provides a description of the principal risks and uncertainties that could have a material adverse effect
on the Group’s strategy, performance, results of operations and financial condition. The principal risks
and uncertainties facing the business, set out below, do not appear in any particular order of potential
materiality or probability of occurrence.
i)
Foreign exchange risk
The Group’s functional currency is the New Peruvian sol, therefore the Group’s cash flows,
performance and financial position are exposed to the risk of fluctuations in exchange rates of other
currencies. Currency risks as defined by IFRS 7 arise on account of monetary assets and liabilities
being denominated in a currency that is not the functional currency.
A significant amount of the Group’s business activities is conducted in the respective functional
currencies of its subsidiaries (Nuevos Soles, Argentine Pesos and in US Dollars). However, certain
transactions of the Group are performed in currencies other than the respective functional currencies
of its subsidiaries.
The following tables show the Group’s net monetary position broken down by various currencies for
each functional currency in which the Group operates for all the periods presented. All amounts
presented below are stated in Nuevos Soles.
Net monetary position
(Liability)/Asset
Argentine Peso
US Dollar
Nuevos Soles
Total
Net monetary position
(Liability)/Asset
Argentine Peso
US Dollar
Nuevos Soles
Total
Net monetary position
(Liability)/Asset
Argentine Peso
US Dollar
Nuevos Soles
Total
2011
Functional currency
Argentine
US
Peso
Dollars
(
(
(
20,711)
29,630)
50,341)
(
(
321,296)
)
321,296)
2010
Functional currency
Argentine
US
Peso
Dollars
-
-
1 January 2010
Functional currency
Argentine
US
Peso
Dollars
-
-
F-20
Nuevos
Soles
(
(
(
337,613)
310,993)
648,606)
Peruvian
New Sol
(
(
(
253,316)
444,900)
698,216)
Peruvian
New Sol
(
(
(
278,340)
557,083)
835,423)
Total
(
20,711)
(
688,539)
(
310,993)
( 1,020,243)
Total
(
(
(
253,316)
444,900)
698,216)
Total
(
(
(
278,340)
557,083)
835,423)
The Group’s analysis is carried out based on the exposure of the functional currency of each
subsidiary against the New Peruvian sol. Considering other variables constant, the Group estimates
that, a 3% devaluation (revaluation) of the respective functional currencies of the subsidiaries against
the Nuevos Soles at year-end would have had decreased or (increased) reported profit (loss) before
income tax for the years ended 31 December 2011 and 2010 and 1 January 2010, as follows:
Net monetary position sensibility
(Liability)/Asset
Argentine Peso
US Dollar
Nuevos Soles
(Increase) or decrease in
profit before income tax
Net monetary position sensibility
(Liability)/Asset
Argentine Peso
US Dollar
Nuevos Soles
(Increase) or decrease in
profit before income tax
ii)
2011
Functional currency
Argentine
US
Peso
Dollars
(
n/a
889)
)
(
889)
-
-
Total
n/a
-
(
9,330)
n/a
)
(
10,219)
)
-
(
9,330)
(
10,219)
2010
Functional currency
Argentine
US
Peso
Dollars
n/a
-
Peruvian
New Sol
Nuevos
Soles
Total
)
n/a
-
(
13,347)
n/a
)
(
13,347)
)
)
-
(
13,347)
(
13,347)
End-product price risk
Prices of the products traded by the Group have historically been cyclical, reflecting overall economic
conditions and changes in capacity within the industry affecting the profitability of entities engaged in
the agribusiness industry. The Group’s commercial team combines different actions to minimize price
risk. The Group manages minimum and maximum prices for each product. The Group does not use
derivative financial instruments to hedge end-product price risk.
Considering other variables constant, the Group estimates that, for the years ended 31 December
2011 and 2010 a 5% increase (or decrease) in prices of the Group’s end products would have
(increased) or decreased reported profit (loss) before income tax by approximately S/.33.2 millions and
S/.25.2 millions, respectively.
iii) Liquidity risk The Group is exposed to liquidity risks, including risks associated with refinancing borrowings as they
mature, the risk that borrowing facilities are not available to meet cash requirements and the risk that
financial assets cannot readily be converted to cash without loss of value. Failure to manage financing
risks could have a material impact on the Group’s cash flow and statement of financial position.
Prudent liquidity risk management includes managing the profile of debt maturities and funding
sources, close oversight of cash flows projections, maintaining sufficient cash, and ensuring the
availability of funding from an adequate amount of committed credit facilities and the ability to close out
market positions. The Group’s ability to fund its existing and prospective debt requirements is
managed by maintaining diversified funding sources with adequate lines o credit available; preferably
long-term lines of credit.
As of 31 December 2011, cash and cash equivalents of the Group totaled S/.114.3 millions, which
could be used for managing liquidity risk.
F-21
The table below analyses the Group’s non-derivative financial liabilities and derivative financial
liabilities into relevant maturity groupings based on the remaining period at the statement of financial
position to the contractual maturity date. The amounts disclosed in the table are the contractual
undiscounted cash flows and as a result they do not reconcile to the amounts disclosed on the
statement of financial position except for short-term payables when discounting is not applied.
Less than
1 year
S/.000
At 31 December 2011
Borrowings (excluding finance
leases liabilities)
Leases
Trade and other accounts payables
At 31 December 2010
Borrowings (excluding finance
leases liabilities)
Leases
Trade and other accounts payables
At 1 January 2010
Borrowings (excluding finance
leases liabilities)
Leases
Trade and other accounts payables
iv) Interest rate risk -
Between 1
and 2 years
S/.000
Between 2
and 5 years
S/.000
Over 5
years
S/.000
Total
S/.000
310,149
2,319
257,903
570,371
108,490
780
62,059
171,329
195,971
298
54,512
250,781
8,891
135,940
144,831
623,501
3,397
510,414
1,137,312
200,274
2,615
192,222
395,111
160,944
2,023
25,492
188,459
223,948
994
27,687
252,629
11,256
274
11,530
596,422
5,632
245,675
847,729
171,128
4,645
201,108
376,881
204,242
3,474
25,492
233,208
72,496
3,589
27,691
103,776
28,120
846
28,966
475,986
11,708
255,137
742,831
The Group’s financial costs may be affected by interest rate volatility. Borrowings under the Group’s
interest rate management policy may at fixed or floating rates. The Group maintains adequate
committed borrowing facilities and holds most of its financial assets primarily in short-term that are
readily convertible into known amounts of cash.
The Group’s interest rate risk arises from long-term borrowings. Borrowings issued at floating rates
expose the Group to cash flows interest rate risk. Borrowings issued at fixed rates expose the Group to
fair value interest rate risk. The Group occasionally manages its cash flows interest rate risk exposure
by using floating-to-fixed interest rate swaps. Such interest rate swaps have the economic effect of
converting borrowings from floating to fixed interest rates.
The following table shows a breakdown of the Group’s fixed-rate and floating-rate borrowings per
currency denomination and functional currency of the subsidiary obligor of the loans (excluding finance
leases).
2011
Functional currency
Argentine
US
Nuevos
Rate per currency denomination
Peso
Dollars
Soles
Total
Fixed rate:
Argentine Peso
US Dollar
Nuevos Soles
Subtotal fixed-rate borrowings
1,700
35,305
37,005
F-22
-
137,893
250,916
388,809
1,700
173,198
250,916
425,814
Rate per currency denomination
Variable rate:
Argentine Peso
US Dollar
Subtotal variable-rate borrowings
Total borrowings as per analysis
Finance leases
Total borrowings as per statement
of financial position
Rate per currency denomination
Fixed rate:
US Dollar
Nuevos soles
Subtotal fixed-rate borrowings
Variable rate:
US Dollar
Subtotal variable-rate borrowings
Total borrowings as per analysis
Finance leases
Total borrowings as per statement
of financial position
2011
Functional currency
Argentine
US
Peso
Dollars
Nuevos Soles Total
5,436
2,658
8,094
45,099
280
-
114,620
114,620
503,429
2,822
5,436
117,278
122,714
548,528
3,102
45,379
-
506,251
551,630
2010
Functional currency
Argentine
US
Peso
Dollars
Nuevos
Soles
Total
-
-
45,698
318,127
363,825
45,698
318,127
363,825
-
-
164,717
164,717
528,542
5,077
164,717
164,717
528,542
5,077
-
-
533,619
533,619
At 31 December 2011 and 2010, if interest rates on floating-rate borrowings had been 1% higher (or
lower) considering all other variables constant, profit (loss) before income tax for each year would have
(increased) or decreased as follows:
Rate per currency denomination
2011
Functional currency
Argentine
US
Peso
Dollars
Variable rate:
Argentine Peso
US Dollar
Total effect before income tax
Rate per currency denomination
Variable rate:
US Dollar
Total effect before income tax
54
27
81
-
2010
Functional currency
Argentine
US
Peso
Dollars
-
-
F-23
Nuevos
Soles
-
Total
54
1,173
1,227
1,146
1,146
Nuevos
Soles
1,647
1,647
Total
1,647
1,647
The sensitivity analysis has been determined assuming that the change in interest rates had occurred
at the date of the statement of financial position and had been applied to the exposure to interest rate
risk for financial instruments in existence at that date. The 100 basis point increase or decrease
represents management’s assessment of a reasonable possible change in those interest rates, which
have the most impact on the Group (specifically the United States and Argentina rates), over the
period until the next annual statement of financial position date.
v) Credit risk The Group’s exposure to credit risk takes the form of a loss that would be recognized if counterparties
failed to, or were unable to, meet their payment obligations. These risks may arise in certain
agreements in relation to amounts owed for physical product sales and the investment of surplus cash
balances. The Group is also exposed to political and economic risk events, which may cause nonpayment of foreign currency obligations to the Group. The current credit crisis could also lead to the
failure of companies in the sector, potentially including customers, partners, contractors and suppliers.
The Group is subject to credit risk arising from outstanding receivables, cash and cash equivalents.
The Group’s policy is to manage credit exposure to trading counterparties within defined trading limits.
All of the Group’s significant counterparties are assigned internal credit limits.
The Group sells manufactured products and agricultural products to a large base of customers. Type
and class of customers may differ depending on the Group´s business segments.
No credit limits were exceeded during the reporting periods and management does not expect any
losses from non-performance by these counterparties. If any of the Group’s customers are
independently rated, these ratings are used. Otherwise, if there is no independent rating, the Group
assesses the credit quality of the customer taking into account its financial position, past experience
and other factors. The Group may seek cash collateral, letter of credit or parent company guarantees,
as considered appropriate. Sales to customers are primarily made by credit with customary payment
terms. The maximum exposure to credit risk is represented by the carrying amount of each financial
asset in the statement of financial position after deducting any impairment allowance. The Group’s
exposure of credit risk arising from trade receivables is set out in note 11.
The Group is exposed to counterparty credit risk on cash and cash equivalent balances. The Group
holds cash on deposit with a number of financial institutions. The Group manages its credit risk
exposure by limiting individual deposits to clearly defined limits.
The Group cash deposits are maintained in high quality banks and financial institutions. The maximum
exposure to credit risk is represented by the carrying amount of cash and cash equivalents in the
statement of financial position. As of 31 December 2011 and 2010, the total amount of cash and cash
equivalents mainly comprise cash in banks and short-term bank deposits. The Group is authorized to
work with banks rated “BBB+” or higher. The Group does not have investment in securities or other
financial instruments for which risk may have increased due to the financial credit crisis. The Group’s
exposure to credit risk arising from cash and cash equivalents is set out in note 12.
3.2 Capital risk management The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a
going concern in order to provide returns for members and benefits for other stakeholders and to
maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the
capital structure, it may adjust the amount of dividends paid to shareholders, return capital to
shareholders, issue new shares or sell assets to reduce debt. The Group monitors capital on the basis
of the gearing ratio.
F-24
This ratio is calculated as total debt (including current and non-current borrowings and trade and other
accounts payable as shown in the consolidated statement of financial position, if applicable) divided by
total capital. Total capital is calculated as equity, as shown in the consolidated statement of financial
position, plus total debt. During the year ended 31 December 2011, the strategy, which was
unchanged from 2010, was to maintain the gearing ratio no greater than 1.5, as follows:
At December, 31
2011
2010
S/.000
S/.000
Total debt
Total equity
Total capital
Gearing ratio
1 January
2010
S/.000
1,260,061)
2,485,955)
3,746,016)
879,197)
1,540,068)
2,419,265)
962,174
1,124,691)
2,086,865
0.34)
0.36)
0.46
3.3 Derivative financial instruments As part of its business operations, the Group uses derivative financial instruments to manage its
exposure to currency exchange rate risk and interest rate risk. As part of this strategy, the Group may
enter into (i) interest rate derivatives to manage the composition of floating and fixed rates debt; and (ii)
currency derivatives to manage the currency composition debt; the Group’s policy is not to trade
speculative derivatives.
Derivative financial instruments involve, to a varying degree, elements of market and credit risk not
recognized in the financial statements. The market risk associated with these instruments resulting
from price movements is expected to offset the market risk of the underlying transactions, assets and
liabilities, being hedged. The counterparties to the agreements relating to the Group’s contracts
generally are large institutions with credit ratings equal to or higher than BBB+. The Group continually
monitors the credit rating of such counterparties and seeks to limit its financial exposure to any of
these financial institutions. While the contract or notional amounts of derivative financial instruments
provide one measure of the volume of these transactions, they do not represent the amount of the
Group’s exposure to credit risk. The amounts potentially subject to credit risk (arising from the possible
inability of counterparties to meet the terms of their contracts) are generally limited to the amounts, if
any, by which the counterparties’ obligations under the contracts exceed the Group’s obligations to the
counterparties.
Cross currency interest rate swap
The Group through one of its subsidiaries issued a USD-denominated floating rate bond. The
subsidiaries functional currency is the Nuevos Soles. The facility comprises a three-year US$49.8
million loan bearing interest at 180 - day LIBOR plus a spread per annum. Since the above transaction
exposed the Group to the risk of foreign currency and interest rate, in March 2009, the Group entered
into a receive-floating pay fixed cross currency swap. The cross currency swap designated as the
hedging instrument in a cash flow hedge of the USD bond. Through the combination of the USD bond
and the cross currency swap, the Group obtained synthetically a Nuevos Soles fixed-rate liability. The
notional amount of the instrument is US$49.8 million and expires on 6 November 2012.
As of 31 December 2011, 2010 and 1 January 2010, the Group recognized a liability amounting to
S/.10.6 millions, S/.15.1 million and S/.15.2 millions, respectively, that corresponds to the estimated fair
value of the swap at each of those dates. The bond and the cross currency swap expired on 6
November 2012.
F-25
The Group evaluated the impact of changes in the fair value on the interest rate swap considering an
immediate 100 basis point change in the interest rates. As of 31 December 2011 and 2010, a 100
basis point increase/decrease in the interest rates would have resulted in an approximate S/.0.04
millions and S/.0.03 millions increase/decrease in the fair value of the interest rate swap, respectively.
The fair value of the swap has been calculated using a discounted cash flow analysis.
4
CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS
Critical accounting policies are those that are most important to the portrayal of the Group’s financial
condition, results of operations and cash flows, and require management to make difficult, subjective
or complex judgments and estimates about matters that are inherently uncertain. Management bases
its estimates on historical experience and other assumptions that it believes are reasonable under the
circumstances. The Group’s critical accounting policies are discussed below.
Actual results may differ from estimates used in employing the critical accounting policies and, as
such, could have a material impact on the Group’s results of operations. The Group also has other
policies that are considered key accounting policies, such as the revenue recognition accounting
policy. However, these other policies, which are discussed in the notes to the Group’s financial
statements, do not meet the definition of critical accounting estimates, because they do not generally
require estimates to be made or judgments that are difficult or subjective.
a) Business combinations – purchase price allocation
Accounting for business combinations requires the allocation of the Group’s purchase price to the
various assets and liabilities of the acquired business at their respective fair values. The Group uses all
available information to determine this fair value, and for major acquisitions, may hire an independent
appraisal firm to assist in estimating fair values. In some instances, assumptions with respect to the
timing and amount of future revenues and expenses associated with an asset might have to be used in
determining its fair value. Actual timing and amount of net cash flows from revenues and expenses
related to that asset over time may differ materially from those initial estimates, and if the timing is
delayed significantly or if the net cash flows decline significantly, the asset may become impaired.
b) Biological assets
The nature of the Group’s biological assets and the basis for determining their fair value are explained
under in note 2.10. The discounted cash flows model requires the input of highly subjective
assumptions which include observable and non - observable data. Generally the estimation of the fair
value of biological assets is based on models or inputs that are not observable in the market and the
use of non - observable inputs is significant to the overall valuation of the assets. Non - observable
inputs are determined based on the best information available, for example by reference to historical
information of past practices and results, statistical and agronomical information, and other analytical
techniques.
Key assumptions include future market prices, estimated yields at the point of harvest, estimated
production cycle, future cash flows, future costs of harvesting and other costs, and estimated discount
rate.
Market prices are generally determined by reference to observable data in the principal market for the
agricultural produce. Harvesting costs and other costs are estimated based on historical and statistical
data. Yields are estimated based on several factors including the location, environmental conditions,
infrastructure and other restrictions and growth at the time of measurement. Yields are subject to a
high degree of uncertainty and may be affected by several factors out of the Group’s control including
but not limited to extreme or unusual weather conditions, plagues and other crop diseases, among
other factors.
F-26
The key assumptions discussed above are highly sensitive. Reasonable shifts in assumptions
including but not limited to increases or decreases in prices, costs and discount rates used would
result in a significant increase or decrease of the fair value of biological assets. In addition, cash flows
are projected over a number of years and based on estimated production. Estimates of production by
themselves are dependent on various assumptions, in addition to those described above, including but
not limited to several factors such as location, environmental conditions and other restrictions.
Changes in these estimates may materially impact on estimated production, and therefore may affect
estimates of future cash flows used in the assessment of fair value.
Valuation models and their assumptions are reviewed annually, or quarterly if required, and, if
necessary, adjusted.
Major assumptions for the calculation of the fair value of biological assets are as follows:
At 31 December
2011
Unit
Sugarcane Stock of sugar cane
Harvested cane in the period
Harvested hectares in the period
Ton
Ton
Has
Forecasts Cane forecasts
Sugarcane cuts
Life of the cane plant
Hectares of cane
Hectares of harvested cane
Market price per ton
of cane
Discount rate
Ton
Number
Years
Has
Has
Nuevos
Soles
%
(
4,553,135)
4,384,382)
37,307)
At
1 January
2010
2010
(
3,833,664)
3,535,604)
22,612)
(
4,036,822)
2,975,908)
20,473)
19,674,037
6
7
48,707
160,779
15,480,260
6
8
33,170
98,967
18,678,070
6
7
33,578
110,748
119
12.00%
89
11.70%
75
14.00%
The increase in the market price per sugar cane ton is basically explained by the increase of the prices
of sugar per bags in the countries where the group operates.
The market price of sugar cane per ton was based on historical prices (obtained from prices at which
the Group invoices to its clients) multiplied by a factor of sugar back/packs per ton of cane.
Additionally, Management carried out a price analysis prospectively and considers that its estimates
are consistent with the market and current economic conditions of the agribusiness sector at each
country.
The decrease in the discount rate is substantially explained by the changes in the weighted average
cost of capital of the Group (adjusted to take account of the way in which the market would assess
specific risks associated with the estimated cash flows) and by the inflation rates of each year.
The following is shown the effect of a table reflects the sensitivity analysis to a reasonably possible
change in the discount rate, on the Group’s pre-tax profit, assuming with all other variables held
constant:
Change in fair value
31.12.2011 31.12.2010
1.1.2010
+1%
-1%
+0.5%
-0.5%
(
(
14,111)
14,718)
7,129)
7,282)
(
(
6,155)
6,368)
3,104)
3,156)
(
(
3,632)
3,775)
1,833)
1,869)
Following is shown the effect of a reasonably possible change in sugar prices, on the Group’s pre-tax
profit, assuming all other variables constant:
F-27
Change in fair value
31.12.2011
31.12.2010
+
+
-
1%
1%
0.5%
0.5%
(
(
16,467)
16,467)
8,233)
8,233)
(
(
9,854)
9,854)
4,928)
4,928)
1.1.2010
(
(
9,234)
9,234)
4,617)
4,617)
c) Impairment testing
At the date of each statement of financial position, the Group reviews the carrying amounts of its
property, plant and equipment and intangible assets with finite useful lives to determine whether there
is any indication that their carrying values are impaired. If any such indication exists, the recoverable
amount of the asset is estimated in order to determine the extent, if any, of the impairment loss. Where
the asset does not generate cash flows that are independent from other assets, the Group estimates
the recoverable amount of the cash-generating unit to which the asset belongs. Generally the Group’s
property, plant and equipment items do not generate independent cash flows.
Goodwill on acquisition is initially measured at cost being the excess of the cost of the business
combination over the Group’s interest in the net fair value of the identifiable assets, liabilities and
contingent liabilities acquired. As of the acquisition date, any goodwill is allocated to the cashgenerating unit (‘CGU’) expected to benefit from the business combination.
Following initial recognition, goodwill is measured at cost less any accumulated impairment losses.
Goodwill is tested for impairment, annually or more frequently if events or changes in circumstances
indicate that the carrying amount of the asset may be impaired. The impairment review requires
management to undertake certain judgments, including estimating the recoverable value of the CGU to
which the goodwill relates, based on either fair value less costs-to-sell or the value-in-use, as
appropriate, in order to reach a conclusion on whether the goodwill is impaired or not.
For purposes of the impairment testing, each CGU represents the smallest identifiable group of assets
that generate cash inflows that are largely independent from the cash inflows of other assets or group
of assets.
Management has identified of six CGUs.
CGUs tested using the value-in-use model for the years ended 31 December 2011 and 2010:
The Group has identified 4 CGUs located in Peru, 1 CGU located in Ecuador and 1 located in
Argentina. The Group tested all the CGUs identified using the value-in-use model. In performing the
value-in-use calculation, the Group applied pre-tax rates to discount the future pre-tax cash flows of
each CGU. In each case, key assumptions of management reflect its past experience and are
consistent with relevant external sources of information, such as appropriate market data.
Key assumptions used by management to determine the value-in-use which are considered to be the
most sensitive to the calculation are:
F-28






Financial projections
Yield average growth rates
Future pricing increases
Future cost increases
Discount rates
Perpetuity rate
31 December
2011
2010
covers 5 years
between 1% and 9%
between - 1% and 0%
between - 3% and 13%
9.91%
2.50%
covers 5 years
8%
between 0% and 1%
-5%
9.67%
2.50%
Discount rates are based on the risk-free rate for U.S. government bonds, adjusted for a risk premium
to reflect the general increased risk of investments in South America and in particular in Peru. The risk
premium adjustment is assessed by factors specific to the respective CGUs and reflects the country in
which the CGU operates in.
The following table shows the CGUs to which goodwill was allocated as of 31 December 2011 and
2010 and the corresponding book value of the goodwill allocated to each CGU:
2011
S/.000
CGU / Country
Casagrande / Peru
San Isidro / Argentina
La Troncal / Ecuador
Closing net book amount of goodwill allocated to CGUs
Closing net book amount of PPE items and other assets
Total assets allocated to 3 CGUs
128,609
8,600
63,177
200,386
2,366,578
2,566,964
2010
S/.000
128,609
128,609
1,398,904
1,527,513
No goodwill was allocated to the remaining identified CGUs: Cartavio, San Jacinto and Sintuco.
Based on the value in use testing above, the Group has determined that none of the CGUs were
impaired as of 31 December 2011 and 2010.
Management considers views these assumptions in the value in use calculations as conservative and
does not believe that any reasonable change in the assumptions would cause the carrying value of
these CGU’s to exceed the recoverable amount.
d) Income taxes The Group is subject to income taxes in numerous jurisdictions. Significant judgment is required in
determining the worldwide provision for income taxes. There are many transactions and calculations
for which the ultimate tax determination is uncertain. The Group recognizes liabilities for anticipated tax
audit issues based on estimates of whether additional taxes will be due. Where the final
tax outcome of these matters is different from the amounts that were initially recorded, such
differences will impact the current and deferred income tax assets and liabilities in the period in which
such determination is made.
Deferred tax assets are reviewed each reporting date and reduced to the extent that it is no longer
probable that sufficient taxable income will be available to allow all or part of the asset to be recovered.
Deferred tax assets and liabilities are not discounted. In assessing the recoverability of deferred tax
assets, management considers whether it is probable that some portion or all of the deferred tax
assets will not be realized.
F-29
The ultimate realization of deferred tax assets is dependent upon the generation of future taxable
income during the periods in which those temporary differences become deductible. Management
considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax
planning strategies in making this assessment.
e) Fair value of derivative financial instruments The fair value of interest rate swaps has been calculated using a discounted cash flow analysis (see
note 3.3).
5
SEGMENT INFORMATION
IFRS 8 “Operating Segments” requires an entity to report financial and descriptive information about its
reportable segments, which are operating segments or aggregations of operating segments that meet
specified criteria. Operating segments are components of an entity about which separate financial
information is available that is evaluated regularly by the chief operating decision maker (“CODM”) in
deciding how to allocate resources and in assessing performance. The CODM, which has been
identified as the Board of Directors, evaluates the business based on the different locations. The
amounts reported by each segment is the measure reported to the Board for these purposes.
The Group operates in three geographic segments: Peru, Ecuador and Argentina as of December 31,
2011. In 2010, the Group operated only one segment.
The measurement principles for the Group’s segment reporting structure are based on the IFRS
principles adopted in the consolidated financial statements. Revenue generated and goods exchanged
between segments are calculated on the basis of market prices.
The following table presents information with respect to the Group’s reportable segments. Certain
other activities of a holding function nature not allocable to the segments are disclosed in the column
‘Corporate’.
Ecuador
La Troncal
S/.000
Peru
S/.000
31 December 2011
Sales of products
Cost of products sold
Gross profit
Initial recognition and change in fair
value of biological assets
Profit before operating expenses
Selling expenses
Administrative expenses
Other operating expenses, net
Profit from operations before financing and taxation
(
(
(
(
1,129,134)
605,128) (
524,006)
189,776) (
713,782)
21,596) (
38,084) (
1,592)
652,510)
31 December 2011
Property, plant and equipment
Biological assets
Investment in associates
Goodwill
Inventories
Total segment assets
Borrowings
Total segment liabilities
2,012,798
595,625
832
128,609
127,789
2,865,653
280,758
280,758
F-30
Corporate
S/.000
Total
S/.000
98,098)
49,050) (
49,048)
77,183)
51,051)
26,132)
-
1,304,415)
( 705,229)
599,186)
1,236)
47,812)
3,593)
21,305)
1,114)
24,028)
185)
25,947)
4,290) (
4,033) (
356)
17,268) (
-
188,355)
787,541)
769) (
30,248)
2,964) (
66,386)
677) (
157)
3,056)
690,750)
Ecuador
La Troncal
S/.000
Peru
S/.000
Argentina
San Isidro
S/.000
471,804
49,964
63,177
142,455
727,400
-
(
(
(
(
Argentina
San Isidro
S/.000
-
197,488
11,593
Corporate
S/.000
Total
S/.000
8,600
23,421
241,102
123,504
28,979
6,730
159,213
2,805,594
657,182
29,811
200,386
300,395
3,993,368
45,379
45,379
225,493
225,493
551,630
551,630
Peru
S/.000
31December 2010
Sales of products
Cost of products sold
Gross profit
Initial recognition and change in fair value of biological assets
Profit before operating expenses
Selling expenses
Administrative expenses
Other operating expenses, net
Profit from operations before financing and taxation
Corporate
S/.000
937,854)
498,467)
439,387)
177,852)
617,239)
17,892)
41,468)
20,740)
537,139)
(
(
(
(
Peru
S/.000
31 December 2010
Property, plant and equipment
Biological assets
Investment in associates
Goodwill
Inventories
Total segment assets
671)
1,456)
1,117)
1,010)
(
(
(
937,854)
498,467)
439,387)
177,852)
617,239)
18,563)
42,924)
19,623)
536,129)
Total
S/.000
1,916,162
377,820
832
128,609
77,639
2,501,062
109,091
471
3,231
112,793
2,025,253
377,820
1,303
128,609
80,870
2,613,855
316,179
316,179
217,440
217,440
533,619
533,619
Peru
S/. 000
Borrowings
Total segment liabilities
(
(
Corporate
S/.000
Borrowings
Total segment liabilities
1 January 2010
Property, plant and equipment
Biological assets
Investment in associates
Goodwill
Inventories
Total segment assets
(
(
-
Total
S/.000
Corporate
S/. 000
Total
S/. 000
1,880,466
193,831
832
128,609
73,532
2,277,270
27,100
474
2,853
30,427
1,907,566
193,831
1,306
128,609
76,385
2,307,697
247,697
247,697
195,980
195,980
443,677
443,677
Total segment assets are measured in a manner consistent with that of the consolidated financial
statements. These assets are allocated based on the operations of the segment and the physical
location of the asset. The Group’s investment in the associate (acquired in December 2011) is located
in Ecuador and therefore, the Group’s share of profit or loss after income taxes and its carrying amount
will be reported within this segment.
Total reportable segments’ assets are reconciled to total assets as per the statement of financial
position as follows:
31 December
2011
S/.000
Total reportable assets as per Segment information
Intangible assets (excluding goodwill)
Deferred income tax asset
Trade and other accounts receivables
Cash and cash equivalents
Total assets as per the statement of financial position
3,993,368
2,341
6,410
125,541
114,277
4,241,937
2010
S/.000
2,613,855
2,134
3,470
109,999
70,982
2,800,440
1 January
2010
S/.000
2,307,697
2,868
3,650
105,384
21,367
2,440,966
Total segment liabilities are measured in a manner consistent with that of the consolidated financial
statements. These liabilities are allocated based on the operations of each segment.
Total reportable segments’ liabilities are reconciled to total assets as per the statement of financial
position as follows:
F-31
31 December
2011
S/.000
Total reportable liabilities as per Segment information
Trade and other accounts payable
Provisions and other liabilities
Derivative financial instruments
Deferred income tax liability
Total liabilities as per the statement of financial position
1 January
2010
S/.000
2010
S/.000
551,630
708,431
14,882
10,558
470,481
1,755,982
533,619
345,578
12,247
15,074
353,854
1,260,372
443,677
518,497
9,344
15,183
329,574
1,316,275
The following table presents information with respect to the Peru segment consisting of 4 CGUs: Casa
Grande, Cartavio, San Jacinto and Sintuco:
Casa
Grande
S/.000
31 December 2011
Sales of products
Cost of products sold
Gross profit
Initial recognition and change in fair value
of biological assets
Profit before operating expenses
Selling expenses
Administrative expenses
Other operating expenses, net
Profit from operations before
financing and taxation
(
(
(
(
583,390)
277,175)
306,215)
401,718)
267,529)
134,189)
24,819) ( 65,906)
159,008)
141,487)
10,380) (
670)
14,516) ( 12,518) (
4,114) (
1,613) (
913)
9,216)
948)
82)
11,772)
-
(
(
(
(
12,054)
2,426)
13,364)
4,021)
189,776)
713,782)
( 21,596)
( 38,084)
(
1,592)
367,761)
138,226)
8,350)
11,772)
(
285)
652,510)
1,202,117)
355,773) (
)
128,609)
(
71,730)
1,758,229)
(
(
(
(
Borrowings
Total liabilities of Peru
56,211) (
56,211)
105,406) (
105,406)
San
Jacinto
S/.000
Cartavio
S/.000
490,760)
233,833)
256,927)
(
362,134)
242,790)
119,344)
(
Sintuco
S/.000
122,687)
70,926)
51,761)
55,138)
12,322)
)
)
222)
67,682)
-
(
13,972)
7,054)
6,918)
(
) (
) (
42,641)
31,927)
10,714)
(
10,714)
-
(
(
(
(
341,582)
119,321)
54,200)
11,690)
10,714)
(
1,109,470)
247,369) (
)
128,609)
(
42,065)
1,527,513)
(
(
158,439)
158,439)
428,050)
77,123) (
5,109)
)
30,638) (
540,920)
324,336)
42,335) (
399)
)
4,792) (
371,862)
53,152) (
53,152)
104,588) (
104,588)
F-32
(
(
(
(
(
) (
) (
6,277)
837)
9,090)
4,018)
368)
Elimination
S/.000
54,306)
10,993)
)
)
144)
65,443)
-
-
280,758)
280,758)
Total
S/.000
94,340)
88,063)
6,277)
(
5,538)
12,456)
769)
3)
Sintuco
S/.000
) (
)
Elimination
S/.000
19,774)
71,535)
245)
16,258) (
832) (
San
Jacinto
S/.000
1,129,134)
( 605,128)
524,006)
Total
S/.000
-
20,352) (
139,696)
8,834) (
12,964) (
1,423) (
Cartavio
S/.000
82,333)
70,279)
12,054)
)
2,012,798)
) ( 595,625)
4,676)
832)
)
128,609)
) ( 127,789)
4,676)
2,865,653)
(
(
(
(
Corporate
S/.000
(
(
132,188)
389,115)
9,650) (
20,567) (
17,316)
Casa
Grande
S/.000
31 December 2010
Property, plant and equipment
Biological assets
Investment in associates
Goodwill
Inventories
Total assets of Peru
334,305)
116,097) (
399)
)
11,133) (
461,934)
(
Elimination
S/.000
Sintuco
S/.000
421,238)
111,433) (
5,109)
)
44,704) (
582,484)
119,141)
119,141)
Casa
Grande
S/.000
San
Jacinto
S/.000
Cartavio
S/.000
(
Borrowings
Total liabilities of Peru
126,686)
(
46,040)
34,268)
11,772)
Total
S/.000
98,138)
404,353)
12,972) (
23,466) (
154)
(
164,855)
89,274)
75,581)
Elimination
S/.000
Corporate
S/.000
15,464)
7,161)
8,303)
31 December 2011
Property, plant and equipment
Biological assets
Investment in associates
Goodwill
Inventories
Total segment assets
(
Sintuco
S/.000
(
(
Casa
Grande
S/.000
31 December 2010
Sales of products
Cost of products sold
Gross profit
Initial recognition and change in fair value
of biological assets
Profit before operating expenses
Selling expenses
Administrative expenses
Other operating expenses, net
Profit from operations before
financing and taxation
San
Jacinto
S/.000
Cartavio
S/.000
937,854)
( 498,467)
439,387)
(
(
(
177,852)
617,239)
17,892)
41,468)
20,740)
537,139)
Total
S/.000
)
1,916,162)
-)
( 377,820)
4,676)
832)
)
128,609)
) (
77,639)
4,676)
2,501,062)
-
) (
)
316,179)
316,179)
Casa
Grande
S/.000
1 January 2010
Property, plant and equipment
Biological assets
Investment in associates
Goodwill
Inventories
Total assets of Peru
1,072,168)
119,473) (
)
128,609)
(
37,853)
1,358,103)
(
Borrowings
Total liabilities of Peru
6
Cartavio
S/.000
(
109,677)
109,677)
San
Jacinto
S/.000
Elimination
S/.000
Sintuco
S/.000
430,077)
55,128) (
5,109)
)
33,576) (
523,890)
323,670)
13,474) (
399)
)
2,030) (
339,573)
93,660) (
93,660)
44,360) (
44,360)
54,551)
5,756)
)
)
73)
60,380)
-
(
(
(
(
(
) (
) (
Total
S/.000
)
1,880,466)
-)
( 193,831)
4,676)
832)
)
128,609)
) (
73,532)
4,676)
2,277,270)
-
) (
)
247,697)
247,697)
PROPERTY, PLANT AND EQUIPMENT
a) The movement of the property, plant and equipment and the related accumulated depreciation for
the years ended 31 December 2011 and 31 December 2010, and 1 January 2010 was as follows:
Land
S/.000
At 1 January 2010
Cost
Accumulated depreciation
Net book value
Year ended 31 December 2010
Opening net book value
Additions
Disposals
Transfers and adjustments
Depreciation charge (note 19)
Closing net book value
At 31 December 2010
Cost
Accumulated depreciation
Net book value
At 31 December 2011
Cost
Accumulated depreciation
Net book value
Machinery
and
equipment
S/.000
Vehicles
S/.000
Furniture
and fixtures
and others
S/.000
Work
in
progress
S/.000
Total
S/.000
1,330,077)
(
1,330,077)
531,315)
374,296) (
157,019)
659,184)
427,168) (
232,016)
75,233)
43,939) (
31,294)
48,739)
15,739)
33,000)
1,330,077)
65,954)
(
1,255) (
4,421)
(
1,399,197)
157,019)
6,178)
204) (
37,171)
10,308) (
189,856)
232,016)
425)
1,195) (
101,074)
37,157) (
295,163)
31,294)
52)
82) (
12,199) (
6,453) (
37,010)
33,000)
124,160)
1,907,566)
22,284)
99,044)
193,937)
15,684)
(
18,420)
4,179) ( 150,844) (
158)
3,754)
(
57,672)
31,667)
72,360)
2,025,253)
709,619)
(414,456) (
295,163)
84,432)
47,422) (
37,010)
48,512)
16,845)
31,667)
1,399,197
(
1,399,197
Land
S/.000
Year ended 31 December 2011
Opening net book value
Acquisition of subsidiaries (*)
Exchange differences
Additions
Disposals
Transfers and adjustments
Depreciation charge (note 19)
Closing net book value
Buildings
and other
constructions
S/.000
569,296)
379,440)
189,856)
Buildings
and other
constructions
S/.000
Machinery
and
equipment
S/.000
Vehicles
S/.000
Furniture
and fixtures
and others
S/.000
1,399,197)
369,657)
(
7,347) (
1,293)
(
38) (
305)
(
1,763,067)
189,856)
142,719)
2,737) (
358)
528) (
22,151)
14,735) (
337,084)
295,163)
140,161)
2,688) (
4,383)
13) (
88,951)
47,232) (
478,725)
37,010)
5,865)
112)
176)
56)
6,978)
8,636)
41,225)
1,763,067
1,763,067
730,443)
(393,359) (
337,084)
941,242)
462,517) (
478,725)
96,866)
55,641) (
41,225)
(
(
(
(
124,160)
2,768,708)
( 861,142)
124,160)
1,907,566)
72,360
2,883,416)
( 858,163)
72,360
2,025,253)
Work
in
progress
S/.000
Total
S/.000
31,667)
72,360)
2,025,253)
3,389)
23,171)
684,962)
65) (
444) (
13,393)
10,350)
169,926)
186,486)
492) (
1,009) (
2,136)
4,227) ( 114,521) (
363)
4,612)
(
75,215)
36,010)
149,483)
2,805,594)
53,895)
17,885)
36,010)
149,483)
3,734,996)
( 929,402)
149,483)
2,805,594)
(*) Includes fixed assets of Vehra S.A. and Grupo Azucarero EQ2 for S/.196.9 million and S/.488.0
million, respectively (see note 23).
b) Work in progress comprises all assets under construction and/or in set-up process, the costs of
which are accumulated until such assets are ready for their intended use /operation; time in which
when they are transferred to their final classification asset account.
F-33
Work in progress comprises:
At 31 December
2011
S/.000
Buildings
Machinery and equipment
Other
2010
S/.000
50,049
95,900
3,534
149,483
(
At
1 January
2010
S/.000
14,599
53,465
4,296
72,360
33,243
90,876
41
124,160
During 2011 and 2010 investment projects in progress developed in Peru are related to: i) the
acquisition of energy power generators for sugar plant, ii) freezing equipment, installation of sugar
plant, mill expansion, improvements on centrifuge process, installation of irrigation equipment,
mechanical harvester machine, construction of Garrapon Dam.
c) The depreciation for the years ended 31 December was recorded in the following line items:
2011
S/.000
Cost of products sold (note 19)
Selling expenses (note 19)
Administrative expenses (note 19)
2010
S/.000
68,113
375
6,727
75,215
55,509
306
1,857
57,672
d) The net carrying amount of machinery and equipment, vehicles and furniture and fixtures acquired
under lease or leaseback agreements comprises the following:
At 31 December
2011
S/.000
Cost
Depreciation
Net
10,774)
4,828)
5,946)
(
At 1 January
2010
S/.000
2010
S/.000
(
10,774)
4,390) (
6,384)
13,772)
2,798)
10,974)
e) Certain of the Group’s assets have been pledged as collateral to secure its borrowings and other
payables. The net book value of pledged assets amounts to S/.297 million as of 31 December 2011
(2010: S/.228 million).
f) As of 31 December 2011, assets recognized in the financial statements as property, plant and
equipment are insured up to a value of US$95 million. Management believes that the amount
insured is consistent with international practices in the industry and takes into account the nature of
the assets in estimating the risk of eventual damages.
7
INTANGIBLE ASSETS
The movement on intangible assets and its related accumulated amortization for the years ended 31
December 2011 and 2010 has been as follows:
Goodwill
S/.000
At 1 January 2010
Cost
Accumulated amortization
Net book value
128,609
128,609
F-34
Software
S/.000
(
5,330)
2,462)
2,868)
Total
S/.000
(
133,939)
2,462)
131,477)
Software
S/.000
Goodwill
S/.000
8
Year ended 31 December 2010
Opening net book amount
Additions
Amortization charge (note 19)
Closing net book value
128,609
128,609
At 31 December 2010
Cost
Accumulated amortization
Net book value
128,609
128,609
Year ended 31 December 2011
Opening net book amount
Acquisition of subsidiary (*)
Additions
Disposals
Amortization charge (note 19)
Closing net book value
128,609
71,777
200,386
At 31 December 2011
Cost
Accumulated amortization
Net book amount
200,386
200,386
(
(
(
(
(
Total
S/.000
2,868)
294)
1,028)
2,134)
5,624)
3,490)
2,134)
2,134)
1,211)
991)
1,079)
916)
2,341)
6,747)
4,406)
2,341)
(
(
(
(
(
131,477)
294)
1,028)
130,743)
134,233)
3,490)
130,743)
130,743)
72,988)
991)
1,079)
916)
202,727)
207,133)
4,406)
202,727)
(*) Includes goodwill of Vehra S.A. and Grupo Azucarero EQ 2 for S/.8.6 million and S/.63.2 million
respectively (see note 23).The total of the amortization charge for the years ended 31 December 2011
and 2010 is included in administrative expenses in the consolidated statement of comprehensive
income.
BIOLOGICAL ASSETS
Changes in the Group’s biological assets were as follows:
At 31 December
2011
S/.000
Beginning of the year
Cost incurred during the year
Acquisition of subsidiaries (*)
Harvest
Initial recognition and changes in fair value of
biological assets (due to price and physical
changes)
Exchange difference
End of the year
(
(
377,820)
246,239)
64,318)
217,934)
188,355)
1,616)
657,182)
2010
S/.000
(
)
193,831)
189,766)
183,629)
177,852)
377,820)
At
1 January
2010
S/.000
(
(
)
268,493)
165,423)
179,941)
60,144)
)
193,831)
(*) Includes biological assets of Vehra and Grupo Azucarero EQ 2 for S/.11.3 million and S/.53.0
million, respectively (see note 23).
The balance of the biological assets account is shown in the statement of financial position as follows:
F-35
At 31 December
2011
2010
S/.000
S/.000
Non-current
Current
Total biological assets
9
378,978
278,204
657,182
155,721
222,099
377,820
At
1 January
2010
S/.000
82,726
111,105
193,831
INVENTORIES
This item comprises:
At December 31,
2011
2010
S/.000
S/.000
Raw materials
Products in process
Finished products (a)
Packaging and casing
Other supplies (b)
3,589
6,541
188,778
1,754
99,733
300,395
696
3,052
37,664
1,994
37,464
80,870
At January 1,
2010
S/.000
533
2,771
32,050
1,878
39,153
76,385
(a) Finished products comprise 134,665 tons of sugar the book value of which amounts to S/.163.9 million
(35,287 and S/.25.5 million, and 25,779 tns and S/.20.7 million, at 31 December 2010 and 1 January 2010,
respectively) y 7,185,102 Its of alcohol the book value of which amounts to S/.13.4 million (5,567,704 Its and
S/.8 million, and 4,695,001 Its and S/.6.6 million, at 31 December 2010 and 1 January 2010, respectively).
(b) This account comprises spare parts, materials and supplies used in connection with the maintenance of the
sugar plants located in Perú, Ecuador and Argentina.
10
FINANCIAL INSTRUMENTS BY CATEGORY
The following table shows the carrying amounts of financial assets and financial liabilities by category
of financial instrument and reconciliation to the corresponding line item in the statements of financial
position, as appropriate. Since the line items “Trade and other accounts receivable”, “Trade and other
accounts payable” and “Provisions and other liabilities” contain both financial instruments as well as
non-financial assets and liabilities (such as taxes receivables or payments in advance), the
reconciliation is shown in the columns headed as “Non-financial assets” and “Non-financial liabilities.”
Loans and
receivables
S/.000
31 December 2011
Assets as per statement of
financial position:
Cash and cash equivalents
Trade and other accounts receivable
Total
114,277
86,826
201,103
F-36
Subtotal
financial
assets
S/.000
114,277
86,826
201,103
Nonfinancial
assets
S/.000
38,715
38,715
Total
S/.000
114,277
125,541
239,818
Liabilities as per statement of
financial position:
Borrowings (excluding finance lease)
Finance lease
Trade and other accounts payables
Provision and other liabilities
Total
Other
financial
liabilities
S/.000
548,528
3,102
604,223
1,155,853
Loans and
receivables
S/.000
31 December 2010
Assets as per statement of financial position:
Cash and cash equivalents
Trade and other accounts receivable
Total
Liabilities as per statement of
financial position:
Borrowings (excluding finance lease)
Finance lease
Trade and other accounts payable
Provision and other liabilities
Total
70,982
87,901
158,883
Other
financial
liabilities
S/.000
528,542
5,077
297,669
831,288
Loans and
receivables
S/.000
1 January 2010
Assets as per statement of financial position:
Cash and cash equivalents
Trade and other accounts receivables
Total
Liabilities as per statement of
financial position:
Borrowings (excluding finance lease)
Finance lease
Trade and other accounts payable
Provision and other liabilities
Total
21,367
88,559
109,926
Other
financial
liabilities
S/.000
433,091
10,586
455,845
899,522
Subtotal
financial
liabilities
S/.000
548,528
3,102
604,223
1,155,853
Subtotal
financial
assets
S/.000
Nonfinancial
liabilities
S/.000
104,208
14,882
119,090
Nonfinancial
assets
S/.000
70,982
87,901
158,883
Subtotal
financial
liabilities
S/.000
528,542
5,077
297,669
831,288
Subtotal
financial
assets
S/.000
22,098
22,098
Nonfinancial
liabilities
S/.000
-
Nonfinancial
assets
S/.000
21,367
88,559
109,926
Subtotal
financial
liabilities
S/.000
433,091
10,586
455,845
899,522
47,909
12,247
60,156
16,825
16,825
Nonfinancial
liabilities
S/.000
-
62,652
9,344
71,996
Total
S/.000
548,528
3,102
708,431
14,882
1,274,943
Total
S/.000
70,982
109,999
180,981
Total
S/.000
528,542
5,077
345,578
12,247
891,444
Total
S/.000
21,367
105,384
126,751
Total
S/.000
433,091
10,586
518,497
9,344
971,518
Other financial liabilities are carried at amortized cost. The account “Other financial liabilities” includes
liabilities under finance leases in which the Group acts as the lessee, therefore such balances are measured
F-37
in accordance with IAS 17. The categories disclosed above have been determined by reference to IAS 39.
Finance leases are excluded from the scope of IFRS 7. Therefore, finance leases have been shown
separately.
Derivative financial instruments are accounted for under “hedge accounting” as defined by IAS 39 (see note
3.3).
Because of the short maturities of trade accounts receivable and payable, other receivables and liabilities,
their carrying amounts at the dates of the statements of financial position do not differ significantly from their
respective fair values. The fair value of long-term borrowings is disclosed in note 13.
Income, expenses, gains and losses on financial instruments shown in the statement of
comprehensive income correspond to the following categories:
Loans and
receivables
S/.000
31 December 2011
Interest income
Interest expense
-
31 December 2010
Interest income
Interest expense
-
2,461
1,621)
Other
financial
liabilities
S/.000
(
(
-
-
Total
S/.000
47,446)
(
2,461
47,446)
45,388)
(
1,621
45,388)
Fair values determination
IAS 39 defines the fair value of a financial instrument as the amount for which a financial asset could
be exchanged, or a financial liability settled, between knowledgeable, willing parties in an arm’s length
transaction. All financial instruments recognized at fair value are allocated to one of the valuation
hierarchy levels of IFRS 7. This valuation hierarchy provides for three levels. The initial basis for the
allocation is the “economic investment class”. Only if this does not result in an appropriate allocation
the Group deviates from such an approach in individual cases. The allocation reflects which of the fair
values derive from transactions in the market and where valuation is based on valuation models
because there is lack of market transactions.
For the years ended 31 December 2011 and 2010, the financial instruments recognized at fair value on
the statement of financial position comprise only derivative financial instruments.
In the case of Level 1, valuation is based on unadjusted quoted prices in active markets for identical
financial assets that the Group can refer to at the date of the statement of financial position. A market
is deemed active if transactions take place with sufficient frequency and in sufficient quantity for price
information to be available on an ongoing basis. Since a quoted price in an active market is the most
reliable indicator of fair value, this should always be used if available. The Group does not have
financial instruments allocated to this level for any of the years presented.
Not traded derivatives allocated to Level 2 are valued using models based on observable market data.
For this, the Group uses inputs directly or indirectly observable in the market, other than quoted prices.
If the financial instrument concerned has a fixed contract period, the inputs used for valuation must be
observable for the whole of the period. The financial instruments the Group has allocated to this level
comprise interest-rate swaps and foreign-currency interest-rate swaps.
In the case of Level 3, the Group uses valuation techniques not based on inputs observable in the
market. This is only permissible insofar as no observable market data are available. The inputs used
reflect the Group’s assumptions regarding the factors which market players would consider in their
pricing. The Group uses the best available information for this, including internal company data.
F-38
The Group does not have any financial instruments allocated to this level for any of the years
presented.
11
TRADE AND OTHER ACCOUNTS RECEIVABLE
This item comprises:
At 31 December
2011
2010
S/.000
S/.000
Non-current
Accounts receivables to related parties (note 28)
Current
Trade accounts receivable
Trade accounts receivables to related
parties (note 28)
Trade accounts receivable
Prepaid expenses
Value Added Tax (VAT)
Tax claims
Loans to third parties
Payments in advance of the income tax
Accounts receivable to related parties (note 28)
Miscellaneous accounts receivable
Total other accounts receivable
Total current accounts receivable
Total trade and other accounts receivable
At 1 January
2010
S/.000
8,224
7,982
20,446
36,029
21,203
28,728
17,827
53,856
6,031
21,057
8,152
10,665
3,475
2,569
11,512
63,461
117,317
125,541
47,508
68,711
6,319
8,449
4,773
5,009
2,557
2,476
3,723
33,306
102,017
109,999
28,145
56,873
2,779
2,514
9,473
2,436
2,059
1,994
6,810
28,065
84,938
105,384
The fair values of current trade and other accounts receivable approximate their respective carrying
amounts due to their short-term maturity. The fair values of non-current trade and other accounts receivable
approximate their carrying amount, as the impact of their discount is not significant for the financial
statements taken a whole.
The carrying amounts of the Group’s trade and other accounts receivable are denominated in the
following currencies (expressed in Nuevos Soles):
At December 31
2011
S/.000
Currency
Nuevos Soles
US Dollars
Argentine Peso
52,625
47,812
25,104
125,541
January 1
2010
S/.000
2010
S/.000
56,094
53,905
109,999
44,682
60,702
105,384
The Group recognizes an allowance for doubtful trade accounts receivable when there is objective
evidence that the Group will not be able to collect all amounts due according to their original terms.
Delinquency in payments is considered an indicator that the trade accounts receivable may be
impaired.
However, management considers all available evidence in determining when a receivable is impaired.
Generally, trade accounts receivable, which are more than 180 days past due are fully provided for.
However, certain accounts receivable which are more than 180 days overdue are not provided for
based on a case-by-case analysis of the credit quality of the account. Furthermore, accounts
receivables, which are not more than 180 days overdue, may be provided for if specific analysis
indicates their potential impairment.
F-39
As of 31 December 2011 and 2010 and 1 January 2010, the allowance for doubtful trade and other
accounts receivable amounted to S/.14.8 million.
The maximum exposure to credit risk at the reporting date is the carrying value of each class of
receivable mentioned above (see note 3.1.v).
12
CASH AND CASH EQUIVALENTS
At 31 December
2011
2010
S/.000
S/.000
Cash at bank and on hand
Short-term bank deposits
13
113,419
858
114,277
At 1 January
2010
S/.000
64,329
6,653
70,982
16,334
5,033
21,367
BORROWINGS
This item comprises:
At 31 December
2011
2010
S/.000
S/.000
Non-current
Promissory notes
Leases
Current
Overdrafts
Promissory notes
Leases
Total borrowings
At 1 January
2010
S/.000
258,982
991
259,973
344,526
2,758
347,284
277,657
6,544
284,201
1,763
287,783
2,111
291,657
551,630
918
183,098
2,319
186,335
533,619
1,442
153,992
4,042
159,476
443,677
These loans are mainly collateralized by property, plant and equipment and shares of certain
subsidiaries of the Group as disclosed in note 26 d).
The maturity of the Group’s borrowings (excluding obligations under finance leases) and the Group’s
exposure to fixed and variable interest rates are as follows:
At 31 December
2010
2011
S/.000
S/.000
Fixed rate:
Less than 1 year
Between 1 and 2 years
Between 2 and 5 years
More than 5 years
Variable rate:
Less than 1 year
Between 1 and 2 years
Between 2 and 5 years
More than 5 years
Total borrowings
F-40
At 1 January
2010
S/.000
215,802
80,347
121,006
8,659
425,814
142,820
60,984
149,129
10,892
363,825
119,346
82,713
22,544
3,010
227,613
73,744
12,377
36,593
122,714
548,528
41,196
72,157
51,364
164,717
528,542
36,088
108,472
37,170
23,748
205,478
433,091
The carrying amounts of the Group’s borrowings are denominated in the following currencies
(expressed in Nuevos Soles):
At 31 December
2011
2010
S/.000
S/.000
Nuevos Soles
Argentine Peso
US Dollar
250,916
7,136
290,476
548,528
At 1January
2010
S/.000
318,127
210,415
528,542
177,470
255,621
433,091
Group’s borrowings with fixed rates in the following currencies, are as follows:
At 31 December
2011
2010
%
%
Nuevos Soles
Argentine Peso
US Dollar
6.90 - 7.75
1.50 - 15.00
2.11 – 14.00
At 1January
2010
%
3.92 - 7.75
2.80 – 3.43
5.40 - 11.50
6.24 - 7.63
The exposure of fixed interest bearing borrowings to changes in market interest rates and their
corresponding reprising date at year-end is shown in the liquidity risk assessment in note 3.1.iii.
Obligations under finance leases The maturity of the Group’s minimum lease payments is as follows:
At 31 December
2011
2010
S/.000
S/.000
Minimum payments
Lower than 1 year
From 1 to 5 years
Future financial charges
Present value of lease obligations
(
2,319)
1,078)
3,397)
295)
3,102)
(
2,615)
3,017)
5,632)
555)
5,077)
At 1January
2010
S/.000
(
4,645)
7,063)
11,708)
1,122)
10,586)
The Group estimates that the carrying amount of short-term loans approximates their fair value due to
their short-term nature. The Group estimates the fair values of long-term bank loans based on current
rates available for the Group for debt of similar terms and maturities. The Group’s fair value of longterm bank loans was not significantly different from the carrying value at December 31, 2011 and 2010
and 1 January 2010.
14
TRADE AND OTHER ACCOUNTS PAYABLE
At 31 December
2011
2010
S/.000
S/.000
Non-current:
Trade accounts payable to related parties (note 28)
Tax debt
Payroll and social security payable
Account payable from acquisition
of subsidiaries (note 23)
Other accounts payable
Total non-current portion
F-41
1 January
2010
S/.000
10
52,339
12,594
27,687
4,194
7,656
27,691
2,877
150,171
227,009
4,095
296,047
3,616
43,153
11,448
192,187
At 31 December
2011
2010
S/.000
S/.000
1 January
2010
S/.000
Current
Trade accounts payable
Trade accounts payable to related parties (note 28)
Payroll and social security payable
Accounts payable from acquisition of subsidiaries (note 23)
Accounts payable from acquisition of associate (*)
Income tax payable
Dividends payable
Payments in advances to customers
Other accounts payable
Total current portion
97,681
87,744
104,205
18,486
19,619
38,521
12,416
13,348
20,364
412,384
61,130
103,217
78,193
24,022
19,693
16,170
302,425
73,057
85,505
93,248
11,158
48,617
14,725
326,310
Total trade and other accounts payable
708,431
345,578
518,497
(*) This account corresponds to the amount outstanding for the acquisition of 50% of the shares of
Compañía Producargo S.A. amounting to S/.28.5 million (US$10.6 million) according to the
agreement signed on 14 December 2011.
The fair values of current trade and other accounts payable approximate their respective carrying
amounts due to their short-term maturity. The fair values of non-current trade and other accounts
payable approximate their carrying amounts, as the impact of their discount is deemed to be
insignificant.
15
PROVISIONS AND OTHER LIABILITIES
The Group is subject to several laws, regulations and business practices in the countries where it
operates. In the ordinary course of business, the Group is subject to certain contingent liabilities with
respect to existing or potential claims, lawsuits and other proceedings, including those involving labor
and social security and civil amounting to S/.11 million and S/.3.8 million respectively (S/.8.9 million
and S/.3.3 million respectively at 31 December 2010 and S/.6.1 million and S/.3.3 million respectively
at 1 January 2010)
The Group accrues liabilities when it is probable that future costs will be incurred and their amounts
can be reasonably estimated. The Group bases its accruals on up to-date developments, estimates of
the outcomes of the matters and legal counsel experience in contesting, litigating and settling matters.
As the scope of the liabilities becomes better defined or more information is available, the Group may
require to change its estimates of future costs, which could have a material effect on its results of
operations and financial condition or liquidity.
The table below shows the movements in the Group’s provisions for other liabilities:
Total
S/.000
At 1 January 2010
Additions
At 31 December 2010
Additions
At 31 December 2011
(
(
9,344)
2,903)
12,247)
2,635)
14,882)
The balance of the provisions and other liabilities account is shown in the statement of financial
position as follows:
F-42
At 31 December
2011
S/.000
Non-current
Current
Total provisions and other liabilities
16
8,566
6,316
14,882
At
1 January
2010
S/.000
2010
S/.000
9,086
3,161
12,247
8,197
1,147
9,344
TAXATION
Coazucar is subject to the applicable Peruvian general tax regulations.
The Group’s income tax has been calculated on the estimated assessable taxable profit for the year at
the rates prevailing in the respective foreign tax jurisdictions. The subsidiaries of the Group in the
jurisdictions where the Group operates are required to calculate their income taxes on a separate
basis; thus, they are not permitted to compensate subsidiaries´ losses against subsidiaries income.
The details of the income tax charged to the statement of comprehensive income for the years ended
31 December are as follows:
2011
S/.000
Current income tax
Deferred income tax
Income tax expense
2010
S/.000
79,248
25,336
104,584
51,309
24,460
75,769
The details of the provision for the Group’s income tax by country are as follows:
2011
S/.000
Current income tax:
Perú
Argentina
Ecuador
Deferred income tax:
Peru
Argentina
Ecuador
(
Total
2010
S/.000
67,369
6,664
5,215
79,248
51,309
51,309
27,077)
65)
1,806)
25,336)
24,460
24,460
104,584)
75,769
The statutory tax rate in the countries where the Group operates for all of the years presented are:
Tax jurisdiction
Peru (*)
Argentina
Ecuador
Income tax rate
30%
35%
22%
(*) According to Peruvian tax legislation currently in effect, entities engaged in the agro-industrial
activity have a temporary tax holyday by means of a reduction of the general income tax rate to 15%
until 31 December 2021.
F-43
The analysis of deferred tax assets and deferred tax liabilities is as follows:
Deferred income tax asset
Recoverable in 12 months
Recoverable in more than 12 months
Total assets
Deferred income tax liabilities
Recoverable in 12 months
Recoverable in more than 12 months
Total liability
Net
At 31 December
2011
S/.000
2010
S/.000
(
(
(
(
(
(
4,126)
9,272)
13,398)
At 1January
2010
S/.000
847)
8,936)
9,783)
24,832
452,637
477,469
464,071
(
(
(
2,184)
9,380)
11,564)
17,245
342,922
360,167
350,384
14,065
323,423
337,488
325,924
The movement in the deferred income tax assets and liabilities during the year, without taking into
consideration the offsetting of balances within the same tax jurisdiction, is as follows:
Property
Plant and
equipment
S/.000
Deferred income tax liabilities
At 1 January 2010
Charged / (credit) to Statement of Comprehensive
Income
At 31 December 2010
Charged / (credit) to Statement of Comprehensive
Income
Acquisition of subsidiary
At 31 December 2011
Deferred income tax assets
At 1 January 2010
Charged / (credit) to Statement
of Comprehensive Income
At 31 December 2010
Charged / (credit) to Statement
of Comprehensive Income
Charged / (credit) to other
comprehensive Income
At 31 December 2011
Cumulative trans
lation adjustment
S/.000
Others
S/.000
Total
S/.000
330,049)
6,907
532)
337,488
(
3,880)
326,169)
26,678 (
33,585 (
119)
413)
22,679
360,167
(
(
(
3,213)
86,739)
409,695)
28,135 (
5,834 (
67,554 (
193)
)
220)
24,729
92,573
477,469
Derivatives
S/.000
Provisions
and
vacations
payable
S/.000
Provision
for inventory impairment
S/.000
-
Others
S/.000
Total
S/.000
-
(
4,555) (
2,202) (
1,602)
(
3,205) (
11,564)
-
(
33) (
4,522) (
71) (
2,273) (
15) )
1,617) (
1,834)
1,371) (
1,781))
9,783))
1,355) (
874) (
135) )
- ) )
3,167) (
) )
3,147) (
(
(
Biological
assets
S/.000
4,222)
4,222) (
-
261)
) )
1,752) (
-
) (
1,110) (
607)
4,222)
13,398)
The tax on the Group’s profit before tax differs from the theoretical amount that would arise using the
weighted average tax rate applicable to profits of the consolidated entities as follows:
2011
S/.000
Income before income tax as per each entity
of the Group’s financial statements
Income tax by applying at the tax rates applicable
to profits in the respective countries
Non-deductible items
Non-taxable income
Tax losses for which no deferred income tax asset
was recognized
Others
Income tax expense
(
(
(
F-44
2010
S/.000
664,119)
503,458)
106,347)
4,231)
7,228)
75,428)
2,812)
3,622)
1,696)
462)
104,584)
(
(
(
898)
253)
75,769)
17
EQUITY
a) Capital As of 31 December 2011 the Company’s authorized, issued and paid – in capital is represented by
287,011,574 common shares of S/.1.00 par value each (287,011,574 and 270,135,574 common
shares as of 31 December 2010 and as of 1 January 2010, respectively) from which the Company
owns 99.99% interest. The remaining interest is held by three other stockholders.
b) Legal and other reserves
(i)
As established under Peruvian Corporate Law, a legal reserve is made with a transfer of
10% of the annual profits obtained until it reaches a 20% of the paid-in capital. If not
undistributed profits or freely available reserves exist, the legal reserve may be applied to
offset tax losses, but it has to be replenished with profits to be obtained in subsequent
periods. This reserve may be capitalized, but it has to be subsequently replenished.
(ii)
As established under Ecuador Corporate Law, a legal reserve is made with a transfer of
10% of the annual profits obtained until it reaches a 50% of the paid-in capital. As
established under Argentine Corporate Law, a legal reserve is made with a transfer of 5% of
the annual profits obtained until it reaches a 20% of the paid-in capital.
(iii)
Acquisition of additional interest in a subsidiary On March 2010, the Company acquired an additional 10.01% of the issued shares of
Agroindustrias San Jacinto S.A.A. (SJ) for a purchase consideration of S/.13.9 million. After
this acquisition, the Group holds an 82.63% interest in SJ. The carrying amount of the noncontrolling interest in SJ on the transaction was S/.17.9 million. The Group derecognized
the non-controlling interest of S/.17.9 million and recorded an increase in the equity
attributable to the owners of the parent of S/.3.6 million.
On August 2010, the Company acquired an additional 12.40% of the issued shares of
Empresa Agrícola Sintuco S.A. (EAS) for a purchase consideration of S/.2.3 million. After
this acquisition the groupholds a 57.69% interest in EAS. The carrying amount of the noncontrolling interest in EAS on the date of transaction was S/.5.1 million. The group
derecognized non-controlling interest of S/.5.1 million and recorded an increase in equity
attributable to the owners of the parent of S/.3.2 million.
The effect of changes in the ownership interest of Coazucar S.A. on the equity attributable
to owners of the Company during 2010 is summarized as follows:
S/.000
Carrying amount of non-controlling interests acquired
Consideration paid to non-controlling interests
Excess of consideration paid recognized in parent’s equity
(
23,060)
16,289)
6,771)
There were no transactions with the non-controlling interest in 2011.
c) Retained earnings Under Peruvian current legislation, there are no restrictions on the remittance of dividends or for the
repatriation of capital to foreign investors. In Ecuador, dividends distributed to individuals and entities
domiciled in tax heavens are subject to a 24% income tax rate as from fiscal 2011. In Argentina
dividends are not subject to taxes.
F-45
18
SALES OF PRODUCTS
Revenue for the years ended December 31 comprises:
2011
S/.000
Sugar:
- Brown
- White
- Organic
Ethanol
Other
19
2010
S/.000
738,892
375,215
52,121
93,401
44,786
1,304,415
581,121
248,811
74,912
33,010
937,854
EXPENSES BY NATURE
The following table provides the nature of expenses and their relationship to the function within the
Group:
Administrative
expenses
2011
2010
S/.000
S/.000
Cost of products sold Selling expenses
2011
2010
2011
2010
S/.000
S/.000
S/.000
S/.000
Inventory variance
Raw materials
Cost of products sold
Other manufacturing expenses
Consumables used in
manufacturing activities
Salaries and social security
expenses (note 20)
Fees, commissions and
legal advisors
Transport and travel expenses
Freights
Maintenance and repairs
Export taxes / selling taxes
Depreciation (note 6)
Amortization (note 7)
Services
Other
20
( 107,487) (
5,695)
413,964)
264,627)
) 32,094) ) 23,956)
94,143)
67,400)
36,290)
14,076
118,635)
64,285)
- )
)
- )
- )
27,169)
7,282)
- )
68,113) ) 55,509) )
- )
)
22,308) )
7,027) )
)
)
705,229)
498,467)
-
-
-
-
-
-
-
-
2,615
526
14,321
4,062
1,156
19,503
15
144
375
280
2,098
30,248
2,850
55
14,185
7
20
306
330
284
18,563
8,870
1,853
-
1,346
5,374
6,727
916
10,439
16,540
66,386
Total
2011
S/.000
(
)
2010
S/.000
107,487) (
5,695)
413,964)
264,627)
32,094)
23,956)
94,143)
67,400)
36,290)
14,076)
12,649
135,571)
77,460)
2,437
1,005
)
151
4,522
1,857
1,028
4,999
14,276 (
42,924 (
12,932)
5,287)
3,009)
1,060)
19,503)
14,185)
28,530)
7,440)
5,518)
4,542)
75,215)
57,672)
916)
1,028)
33,027)
12,356)
18,638) ( 14,560)
801,863)
559,954)
SALARIES AND SOCIAL SECURITY EXPENSES
The salaries and social security expenses for the years ended 31 December comprises the following:
2011
S/.000
Wages and salaries
Social contributions
Bonus
Employees’ severance indemnities
Worker’s profit sharing
Vacation leave
Other benefits
58,621
8,060
4,748
3,711
55,753
1,996
2,682
135,571
F-46
2010
S/.000
28,298
1,486
3,670
2,324
37,637
2,190
1,855
77,460
21
OTHER OPERATING EXPENSES
The other operating expenses for the years ended 31 December comprises the following:
2010
S/.000
2011
S/.000
Other operating income:
Profit from fixed asset sale
Recovery of tax claims
Recovery of provisions
Equipment rentals
Other income
1,231)
1,547)
1,419)
1,362)
1,994)
7,553)
Other operating expenses:
Write-off of property, plant and equipment
Labor and legal claims
Loss from fixed asset sale
Destruction of products
Other expenses
22
(
(
(
(
(
(
(
784)
2,635)
)
1,086)
3,205)
7,710)
157)
)
1,897)
1,492)
634)
6,412)
10,435)
(
(
(
(
(
(
(
17,949)
2,903)
155)
2,560)
6,491)
30,058)
19,623)
FINANCIAL INCOME (EXPENSES)
The financial income (expenses) for the years ended 31 December comprises the following:
2011
S/.000
Financial income:
Interests on bank deposits
Interest on loans
Other
Total financial income
Financial expenses:
Interest on borrowings
Interest on other obligations
Interest on commercials loans
Interest on tax debts
Loss on financial instruments
Other financial expenses
Total financial expenses
23
2010
S/.000
1,591
229
641
2,461
361
539
721
1,621
40,138
713
197
445
3,993
1,960
47,446
29,096
3,651
45
2,652
8,748
1,196
45,388
BUSINESS COMBINATIONS
a) Acquisition of Verha S.A. (Ingenio San Isidro)
On August 2011, the Group acquired 60% of the issued share capital of Verha S.A., an Argentinebased company involved in the sugarcane agricultural industry. The purchase price of S/.90.8 millions
was fully paid in cash. The activities of Verha are developed in the plantations and facilities jointly
named “Ingenio San Isidro”. Ingenio San Isidro is located in the city of Campo Santo, some 59
kilometers away from the city of Salta.
F-47
In the period from its acquisition to 31 December 2011, Verha contributed revenues of S/. 77.2 million
and profits before taxation of S/.22.2 millions to the Group’s consolidated results. If Verha had been
acquired on 1 January 2011, combined revenues of the Group would have been S/.107.8 millions
(unaudited) and profits would have been S/.6.4 millions (unaudited) for the year ended 31 December
2011.
Results, assets and liabilities of Verha as from the acquisition date are included within the Argentina
segment.
Details of the net assets acquired and goodwill are as follows:
S/.000
Consideration at 31 August 2011
- Cash paid
Total purchase consideration
Fair value of net assets
Non - controlling interest
Fair value of net assets acquired
Goodwill (note 7)
(
90,750)
90,750)
136,916)
54,766)
82,150)
8,600)
Goodwill generated on the acquisition was attributable mainly to the Group’s expected benefits from
diversification and expansion into high-yield potential farmland properties.
The assets and liabilities at the date of acquisition are as follows:
S/.000
At 31 August 2011
Property, plant and equipment (note 6)
Biological assets (note 8)
Inventories
Trade and other accounts receivables
Cash and cash equivalents
Borrowings
Trade and other accounts payables
Payroll and social security liabilities
Deferred income tax liabilities (note 16)
Fair value of net assets
(
(
(
(
196,956)
11,299)
25,176)
36,975)
2,371)
47,583)
16,405)
12,796)
59,077)
136,916)
The cash flow and cash equivalents on the acquisition can be calculated as follows:
Cash paid
Cash and cash equivalents of the acquired subsidiary
Net cash outflow from acquisition
(
(
90,750)
2,371)
88,379)
b) Acquisition of a company in Ecuador On September 2011, the Group acquired 36.4% of the issued share capital of Grupo Azucarero EQ2
S.A, an Ecuadorian company involved in the sugarcane agricultural industry. The purchase price
includes an upfront cash payment of S/.37.3 millions and a long term liability amounting S/.252.1
millions bearing interest at 5%. The liability is payable over a 15 year-period. Grupo Azucarero EQ2
S.A. is known in Ecuador as Ingenio La Troncal. The sugarcane plantations and mills are located in the
province of Cañar, South East of Guayaquil and 128 km North West of the city of Cuenca.
F-48
In the period from acquisition to 31 December 2011, Grupo Azucarero EQ2 S.A contributed revenues
of S/. 98.1 million and profits before taxation of S/. 25.5 million to the Group’s consolidated results. If
Grupo Azucarero EQ2 S.A had been acquired on 1 January 2011, combined revenues of the Group
would have been S/.48.9 millions (unaudited) and profits would have been S/.6.3 millions (unaudited)
for the year ended 31 December 2011.
Results, assets and liabilities of Grupo Azucarero EQ2 S.A as from the acquisition date are included
within the Ecuador segment.
Details of the net assets acquired and goodwill are as follows:
S/.000
Consideration at September, 2011
- Cash paid
- Present value of outstanding purchase price (*)
Total purchase consideration
Fair value of net assets
Non-controlling interest
Fair value of net assets acquired
Goodwill (note 7)
(
37,342)
252,066)
289,408)
621,516)
395,285)
226,231)
63,177)
(*) Discounted at present value as of the date of acquisition using the interest rate of 8.34% (note 14).
The goodwill generated on the acquisition was attributable mainly to the Group’s expected benefits
from diversification and expansion into high-yield potential land properties.
The assets and liabilities at the date of acquisition are as follows:
S/.000
At September 2011
Property, plant and equipment (note 6)
Intangible assets (note 7)
Biological assets (note 8)
Inventories
Trade and other accounts receivables
Cash and cash equivalents
Trade and other accounts payables
Payroll and social security liabilities
Income tax payable
Deferred income tax liabilities (note 16)
Fair value of net assets
(
(
(
(
488,006)
1,211)
53,019)
136,529)
99,991)
76,251)
168,618)
20,296)
11,083)
33,494)
621,516)
The cash flow and cash equivalents on the acquisition can be calculated as follows:
S/.000
Cash paid
Cash and cash equivalents of the acquired subsidiary
Net cash received from acquisition
24
(
(
(
37,342)
76,251)
38,909)
EARNINGS PER SHARE
Basic earnings and diluted per share is calculated by dividing the profit attributable to equity holders by
the weighted-average of outstanding common shares as of the date of the statement of financial
position. For all periods presented, there were no differences in the weighted-average outstanding
common shares used for the calculation of the basic and diluted earnings per share since the
Company does not have any financial instrument with dilutive features.
F-49
2011
S/.000
Profit for the year attributable to equity holders of the Group
Weighted average number of shares in issue
(thousands)
Basic and diluted earnings per share
25
2010
S/.000
365,586
279,347
287,012
1.27
287,012
0.97
CASH FROM OPERATING ACTIVITIES
The reconciliation from profit before income tax to cash generated from operations is as follows:
2011
S/.000
Profit before income tax
Adjustments:
- Depreciation (note 6)
- Amortization (note 7)
- Fair value of biological assets (note 8)
- Fair value gains on derivative financial instruments (note 3.3)
- Loss (profit) on disposal of property, plant and equipment
- Write-off of property, plant and equipment items
- Other provisions
Net changes
- Biological asset
- Inventories
- Trade accounts and other accounts receivables
- Trade accounts and other accounts payables
Cash generated from operations
26
(
(
(
(
(
2010
S/.000
664,119)
503,458)
75,215)
916)
188,355)
5,393)
1,231)
784)
2,635)
57,672)
1,028)
177,852)
109)
1,243)
16,773)
1,571)
28,305)
219,525)
30,156)
135,837)
466,853)
(
(
(
(
(
(
6,137)
4,485)
17,848)
199,047)
185,399)
COMMITMENTS, CONTINGENCIES AND GUARANTEES
a) Environment
The Group, in compliance with the Peruvian General Environmental Law No. 28611 and as a factor of
strategic development and competitiveness has prepared its Environmental Management Program
(PAMA) which involves preliminary monitoring and follow-up activities such as its baseline studies; to
identify possible environmental contamination sources as well as those major environmental
components that may have a significant impact on the environment as a way to:
1. Mitigate the environmental impact and the hazard to health resulting from productive activities,
2. Optimize the consumptions of raw materials, resources and energy, and
3. Adequately dispose of waste and emissions
This will be reflected in significant economic benefits.
With respect to Verha and subsidiaries, since its major product is organic sugar, it does not use
chemical products in its plantations and manufacturing processes; it has 8 ha. dedicated to treat
VINAZA and transform solid waste into organic fertilizer, thus contributing to the environment
protection and conservation.
With respect to Group Azucarero EQ 2 is in the process of lifting the ex post Environment Impact Study
to obtain an environmental license issued by the Ministry of Environment. According to legal counsel,
there is no environmental liability related.
F-50
Once the Environmental Strategic Planning was executed, the Group began developing
environmental instruments such as: Environmental Management Programs as well as
programs for the management of solid waste, identification of environmental hazards, risks
and impacts and record management and contingency plans.
As required by applicable laws and regulations in Peru, expert advice has been obtained from
environmental consulting firms which are assisting the Group in updating authorizations and studies
required by the authorities.
The Company's Environmental Management Program (PAMA) has already been approved by the
environmental agency of the Peruvian Ministry of Agriculture (Dirección General de Asuntos
Ambientales del Ministerio de Agricultura) dated 4 December 2011. This document contains a
diagnosis of the environmental aspects and proposes pollution prevention and control actions required
to prevent, control and mitigate the environmental impacts as contained in this document.
b) Contingencies
Management has not considered necessary to make any additional provision other than the amount
recognized in the financial statements (see note 15). (note 15).
c) Commitment to purchase fixed assets The investment expense not recognized at the date of the statement of financial position is as follows:
31 December
2011
2010
S/.000
S/.000
Property, plant and equipment
109,000
1 January
2010
S/.000
24,000
30,000
d) Guarantees given At December 31, 2011 the Company maintains liens, mortgages and shares pledged for up to S/.160
million, 19 millions Argentinean pesos and US$46.5 million to secure borrowings with financial
institutions (S/.151 million and US$ 27.5 million, at December 31, 2010). Additionally, it has
performance bonds signed with financial institutions amounting to US$184,000.
27
GROUP COMPANIES
The following table details the companies making up the Group as of December 31, 2011 and 2010:
ActivitiesCountry
Percentage of interest
2011
2010
Detail of principal subsidiary
Undertakings:
Operating companies:
Cartavio S.A.A.
Casa Grande S.A.A.
Empresa Agrícola Sintuco S.A.
Agroindustrias San Jacinto S.A.A.
Ecudos S.A.
Sacorpren S.A.
Prosal S.A.
Verha S.A.
Persol S.A.
Pracmac S.A.
Agrícola Agriflorsa S.A.
Broxcel S.A.
Defaxcorza S.A.
Agrícola Chimborazo Chimsa S.A.
Emaisa S.A.
Esdestiva S.A.
Podec S.A.
Bio San Isidro S.A.
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(c)
(c)
(d)
Perú
Perú
Perú
Perú
Ecuador
Ecuador
Argentina
Argentina
Ecuador
Ecuador
Ecuador
Ecuador
Ecuador
Ecuador
Argentina
Ecuador
Ecuador
Argentina
F-51
87.17
57.09
57.69
82.63
36.40
36.40
59.40
60.00
36.40
36.40
36.40
36.40
36.40
36.40
39.15
36.40
36.40
52.92
-
87.17
57.09
45.29
72.62
Percentage of
interest
2011
2010
Activities
Country
-
Ecuador
52.00
-
(d)
Ecuador
36.40
-
Holdings companies:
Fideicomiso Mercantil Consorcio
Azucarero Ecuatoriano
Principal associate:
Producargo S.A.
(a)
(b)
(c)
(d)
28
Mainly sugarcane
Mainly land or equipment rentals to group companies
Mainly loading and unloading services to group companies
Mainly ethanol
RELATED PARTIES
The balances of receivable and payable with related parties were as follows:
At 31 December
2011
2010
S/.000
S/.000
Non-current accounts receivable
Other accounts receivable:
Empresa Agraria Chiquitoy S.A.
Tableros Peruanos S.A.
Other
Total non-current accounts receivable
Current accounts receivable
Trade accounts receivable:
Deprodeca S.A.C.
Gloria S.A.
Tableros Peruanos S.A.
Trupal S.A.
Other
Other accounts receivable:
Deprodeca S.A.C.
Gloria S.A.
Quequeña S.A.
Tableros Peruanos S.A.
Other
Total current accounts receivable
Non- current accounts payable
Other accounts payable:
Deprodeca S.A.C.
Total non-current accounts payable
F-52
At 1 January
2010
S/.000
6,618
799
807
8,224
7,149
833
7,982
19,589
857
20,446
13,131
2,267
1,305
1,043
81
17,827
20,184
15,472
967
10,790
95
47,508
24,606
1,852
554
1,122
11
28,145
195
163
332
825
1,054
2,569
20,396
-
2,140
2,476
49,984
10
10
27,687
27,687
-
4
332
-
13
4
332
1,645
1,994
30,139
27,691
27,691
At 31 December
2011
2010
S/.000
S/.000
Current accounts payable
Trade accounts payable:
Deprodeca S.A.C.
Gloria S.A
Industrias Cachimayo S.A.C.
Racionalización Empresarial S.A.
Yura S.A.
Trupal S.A.
Suiza Fruit Corporation
Other
2,110
2,252
3,107
1,311
650
785
129
10,344
Other accounts payable:
Lakebar Holding S.A.
Deprodeca S.A.C.
Gloria S.A.
Jose Rodriguez Banda S.A.
Clarcrest Investments S.A.
Other
-
25,492
6,718
111
308
44,441
330
77,400
87,744
Total current accounts payable
At 1 January
2010
S/.000
827
991
57
3,875
1,231
1,011
-
434
8,426
25,492
22,205
424
316
46,255
99
94,791
103,217
304
1,350
2,079
6,875
593
144
7
11,352
25,492
17,892
760
322
29,660
27
74,153
85,505
a) Major inter-company transactions were as follows:
2011
S/.000
Sales of goods
Sale of services
Purchase of goods
Purchase of services
Interest on loans received
Interest on loans granted
Loans granted
Loans received
252,607
6,702
51,918
11,108
713
182
45,698
1,094
2010
S/.000
235,973
9,075
25,861
14,512
2,479
136
2,409
53,228
b) Long-term accounts receivable and payable Empresa Agraria Chiquitoy S.A. has been submitted to a procedure before the relevant Peruvian
consumer protection agency (Procedimiento Concursal Ordinario ante el Instituto Nacional de Defensa
de la Competencia y de la Protección de la Propiedad Intelectual) INDECOPI.
Empresa Agraria Chiquitoy S.A. granted a first and preferential lien in favor of Cartavio S.A.A. for up to
US$4 million on a total of 280,000 tons of sugar cane. The said lien has been registered with the
Peruvian public registry office in the name of Cartavio S.A.A.
During 2010, Cartavio S.A. did not acquire new debt (S/.1.6 million in 2009).
These loan debts bear an annual interest rate of 4% per year for first order debts and 1% for fifth order
debts. During 2011 and 2010, no financial income has been recorded for the application of the abovementioned interest rate since they will be recognized to the extent that they are actually collected.
Management estimates that the recovery of the account receivable is feasible, considering that it has
been classified in the third category; additionally, the restructuring of this entity has been approved in
which a flow of payment has been determined in favor of Cartavio S.A.A., which will include interest
and will be paid in approximately 14 years.
F-53
The balance of the account payable to Deprodeca S.A.C. does not have specific guarantees and bears
an annual interest rate of 6%.
The balance payable to Lakebar Holding S.A. corresponds to a loan for the purchase of shares of Casa
Grande S.A.A.; this balance has no definite due date, does not bear interest and has no guarantees.
The balance payable Clarcrest Investments S.A.corresponds mainly to a loan for the purchase of shares
of Cartavio S.A.A. and Agroindustrias San Jacinto S.A.A.; this balance has no definite due date, does
not bear interest and has no guarantees.
c) Commitments
The Group has provided guarantees in favor of financial institutions at 31 December 2011 and 2010
and at January 1 2010.
d) Key personnel remuneration
Key personnel remuneration includes managerial services and management personnel. Key
management personnel and managerial services amount to S/.10.7 million in 2011 (S/.0.8 million in
2010). The Group does not provide long-term benefits to its key management personnel.
The fair value of accounts with related parties is as follows:
At December 31,
2011
2010
S/.000
S/.000
Trade accounts receivable to related parties
Other accounts receivable to related parties
Long-term accounts receivable
Trade accounts payable to related parties
Current accounts payable to related parties
Non-current accounts payable to related parties
17,827
2,569
10,759
12,721
52,066
25,502
47,510
2,476
22,145
22,207
69,683
53,179
At January 1,
2010
S/.000
29,997
1,994
23,388
15, 967
48,840
53,183
The fair value of non-current accounts payable to related parties was determined based on the
forecasted and discounted cash flows at a rate of 6.2% (4.54% in 2010 and 6.8% at 1 January 2010)
which represents a market rate for similar transactions.
29
EVENTS AFTER THE BALANCE SHEET DATE
In May 2012, the Group, through a new subsidiary Azucarera Olmos S.A. created in the same month,
entered into a purchase agreement for the acquisition of 11.100 acres of land of the Olmos Irrigation
Project for an amount of US$ 8.3 million and the right to use irrigation civil works for US$ 41.5 million.
In accordance with this agreement, the ownership of the land will be transferred on the date that the
Group will make the first payment. As of this date, the Group has not made any payments. Future
payments related to the acquisition of land have been guaranteed to the seller through a warranty note
of US$49.8 millions issued by a local bank on behalf of the Group.
30
FIRST –TIME ADOPTION OF IFRS
The Peruvian Superintendencia del Mercado de Valores (SMV, formerly CONASEV) issued on
October 14, 2010 Resolution No.102-2010-EF/94.01.1, by means of which all entities under its
oversight are required to adopt IFRS issued by IASB and effective for periods ending 31 December
2011. In compliance with this regulation, the Group has adopted IFRS for the first time in the
preparation of its general purpose financial statements.
These are the Group’s first consolidated financial statements prepared in accordance with IFRS. Until
2010, the Group prepared its consolidated financial statements in accordance with Peruvian GAAP.
The Group has prepared financial statements under the IFRS applicable for the year ended 31
December 2011, together with the comparative information at 31 December 2010, as described in the
respective accounting policies.
F-54
In preparing its opening IFRS statement of financial position at 1 January 2010, the Group’s transition
date, the Group has adjusted the amounts reported previously in financial statements prepared under
Peruvian GAAP, including the statement of financial position prepared at the transition date and its
financial statements for the year ended 31 December 2010 previously released and distributed.
30.1 Optional exemptions and mandatory exceptions to the retroactive application of IFRS:
IFRS 1, “First-time Adoption of International Financial Reporting Standards”, offers the entity adopting
IFRS for the first time to apply certain optional and mandatory exclusions when applying
retrospectively certain standards at the transition date.
Optional exemptions The following are the optional exemptions applied by the Group:
a)
Exemption for business combinations -
IFRS 1 provides the option to apply IFRS 3, ‘Business combinations’, prospectively from the transition
date or from a specific date prior to the transition date. This provides relief from full retrospective
application that would require restatement of all business combinations prior to the transition date. The
Group elected to apply IFRS 3 prospectively to business combinations occurring after its transition
date. Business combinations occurring prior to the transition date have not been restated.
b)
Fair value as an assumed cost of property, plant and equipment
The value of certain items of property, plant and equipment corresponds (deemed cost) fair value at
the transition date (1 January 2010), which was determined by independent appraisers using the
methodology of the replacement cost of a similar new item. As a result of this process, the Group
increased the value of these items by S/.88.2 million, and it reviewed their remaining useful lives. The
depreciation for 2010 increased by S/.8.8 million as a result of these adjustments, deemed costs and
reviewed useful lives, which were recognized with a charge to the cost of sales. The net adjustment to
the statement of financial position at 31 December 2010 was S/.79.4 million.
Mandatory exception The only mandatory exception applied by the Group is related to accounting estimates.
In accordance with such exception, the accounting estimates applied in preparing the financial
statements under IFRS at 1 January and at 31 December 2010, are consistent with those considered
at the preparation date of the financial statements under Peruvian GAAP (after carrying out adjustment
to reflect any difference with accounting policies).
30.2
Reconciliation between Peruvian GAAP and IFRS
IFRS 1 requires that an entity reconciles the balances of its equity, comprehensive income and cash
flows of prior periods. The Group’s first-time adoption of IFRS did not have an impact on the total
operating cash flows, investments and financing. The tables below show the reconciliations performed
between Peruvian GAAP and IFRS:
-
Statement of comprehensive income for the years ended December 31, 2010.
Equity as of 1 January and 31 December 2010.
F-55
30.2.1
Reconciliation of statement of comprehensive income
For the year ended 31 December 2010:
Note
Sales of product
Cost of product sold
Gross profit
Initial recognition and change in
fair value of biological assets
Profit before operating expenses
(
(30.4.d)
Operating expenses:
Selling expenses
Administrative expenses
Other operating expenses, net
Operating profit
Finance income
Finance cost
Exchange difference
Financial results, net
Profit before income tax
Income tax expense
Profit for the year
(*)
Peruvian
GAAP
S/.000
(
(
(
(
(
(
Reclassi
fications (*)
S/.000
Adjustments
S/.000
921,611)
443,878) (
477,733)
13,907)
13,019) (
888) (
IFRS at
31 December
2010
S/.000
2,336)
41,570) (
39,234)
937,854)
498,467)
439,387)
77,612)
555,345)
100,240) (
101,128) (
)
39,234)
177,852)
617,239)
18,446)
40,778)
5,063) (
491,058)
-
117) (
2,150) (
10,217) (
51,718)
18,563)
42,924))
19,623)
536,129)
1,621)
45,496)
6,063) (
37,812)
453,246)
105,975) (
347,271)
-
-
1,621)
45,388)
11,096)
32,671)
503,458)
75,769)
427,689)
(
4) (
4,343) (
96,789) (
)
)
96,789)
7,431)
89,358)
(
(
(
)
(
108) (
5,033)
5,141) (
46,577)
37,637) (
8,940)
Includes mainly adjustment for workers’ profit sharing for S/.7.3 million and deferred tax for
S/.14.7 million and reclassification of workers’ profit sharing for S/.37.6 million.
30.2.2
Reconciliation of equity
Note
Equity under Peruvian GAAP
Effect on retained earnings of the adjustment in:
Deferred income tax
Worker´s profit sharing
Property, plant and equipment
Biological assets
Impact of income tax of IFRS adjustments
Other
Total IFRS adjustments
At 1 January
2010
S/.000
1,527,579)
(30.4.a)
(30.4.b)
(30.4.c)
(30.4.d)
(30.4.e)
Equity under IFRS
30.2.3
At
31 December
2010
S/.000
(
(
(
150,040)
107,269)
79,381)
12,433)
11,688)
12,489)
1,540,068)
1,200,758)
(
(
(
(
(
150,040)
101,821)
88,205)
100,238)
1,353)
17,168)
76,067)
1,124,691)
Reconciliation of Statement of cash flows
IFRS transition has had a impact of S/.75.6 millions on the reconciliation of the operating activities
stated in the statement of cash flows, relating to the lower depreciation determined as a result of
determining depreciation rates based on useful lives; nevertheless, no impact was detected on the
cash balances and total balances of operating, financing and investing activities.
F-56
30.4
Notes to the reconciliation of the statement of financial position and statement of
comprehensive income at 1 January 2010 and at 31 December 2010
a) Deferred income tax, change in rate
Correspond to the effect of the deferred tax on temporary differences reversing after the tax holiday
period for Peruvian entities (note 6).
b) Worker´s profit sharing
Under Peruvian GAAP, workers profit sharing was recognized following accounting criteria under IAS
12 “Income Tax” the effect of temporary differences between assets and liability balances in the
financial statements and its tax value. Under IAS 19 “Benefits to employees” workers profit sharing
related to services are recognized in the period that services are rendered. Due to workers profit
sharing are expenses for income tax purposes, and the deferred portion was calculated at rate of
23.5% and not at rate of 15%.
Adjustments to eliminate the deferred workers participation portion and to correct the amount of
deferred income tax at 1 January 2010 amounts to S/.102.3 million and S/.108.9 million at 31
December 2010. The effect in comprehensive income of 2010 amounts to S/.6.6 millions.
c) Property, plant and equipment Under Peruvian GAAP, fixed asset items were depreciated using the useful lives established in the
income tax law applicable to these assets. Depreciation of fixed asset items under IFRS is calculated
using the straight-line method to allocate their cost less their residual value over their estimated useful
lives. At the IFRS transition date, the Group recognized an increase in the account of properties, plant
and equipment of S/.88.2 million net of its accumulated depreciation for the reconstruction of the
historical cost of these assets. This adjustment was recognized against retained earnings. The effect in
depreciation of 2010 resulted in an adjustment of S/.8.8 million, which was charged to the cost of
sales.
d)
Biological asset -
At IFRS transition date, the Group includes the cost of land leases based on IAS 41 requirements.
e) Impact on income tax of IFRS adjustments IFRS adjustments have given rise to temporary differences that were recognized as deferred income
tax amounting to S/.148.7 million at 1 January 2010 and S/.162.5 million at 31 December 2010.
F-57
CORPORACION AZUCARERA DEL PERU S.A.
UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS AS OF 31 MARCH 2012 AND FOR THE THREEMONTH PERIODS ENDED 31 MARCH 2012 AND 2011
F-58
8
9
10
10
6
7
8
Note
278,204
300,395
117,317
114,277
810,193
4,241,937
4,328,088
2,805,594
202,727
378,978
29,811
6,410
8,224
3,431,744
At 31 December
2011
S/.000
249,234
267,595
122,520
191,800
831,149
2,816,804
203,135
430,069
31,560
8,405
6,966
3,496,939
At 31 March
2012
S/.000
(Unaudited)
The accompanying notes on pages 62 to 72 are part of condensed consolidated interim financial statements.
TOTAL ASSETS
CURRENT ASSETS
Biological assets
Inventories
Trade and other accounts receivable
Cash and cash equivalents
Total current assets
NON-CURRENT ASSETS
Property, plant and equipment
Intangible assets
Biological assets
Investment in associates
Deferred income tax assets
Trade and other accounts receivable
Total non-current assets
ASSETS
CONDENSED CONSOLIDATED INTERIM STATEMENT OF FINANCIAL POSITION
CORPORACION AZUCARERA DEL PERU S.A.
Total liabilities
TOTAL EQUITY AND LIABILITIES
CURRENT LIABILITIES
Borrowings
Trade and other accounts payable
Provisions and other liabilites
Derivative financial instruments
Total current liabilities
NON-CURRENT LIABILITIES
Borrowings
Trade and other accounts payable
Provisions and other liabilites
Deferred income tax liability
Total non-current liabilities
EQUITY
Share capital
Cumulative translation adjustment
Legal and other reserves
Retained earnings
Equity attributable to equity holders of the parent
Non-controlling interests
Total shareholders' equity
EQUITY AND LIABILITIES
11
12
13
11
12
13
16
Note
1,755,982
4,241,937
1,816,342
4,328,088
-
291,657
412,384
6,316
10,558
720,915
259,973
296,047
8,566
470,481
1,035,067
287,011
(8,941)
44,039
1,053,024
1,375,133
1,110,822
2,485,955
At 31 December
2011
S/.000
300,046
478,754
9,117
10,104
798,021
243,198
299,906
6,745
468,472
1,018,321
287,011
(12,397)
43,892
1,110,748
1,429,254
1,082,492
2,511,746
At 31 March
2012
S/.000
(Unaudited)
CORPORACION AZUCARERA DEL PERU S.A.
CONDENSED CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOME
Note
Sales of products
Cost of products
Gross profit
Initial recognition and change in fair value of biological assets
Profit before operating expenses
Selling expenses
Administrative expenses
Other operating expenses, net
Profit from operations before financing and taxation
Financial income
Financial expenses
Exchange difference, net
Income attributable to associate
Profit before income tax
Income tax expense
Profit for the three month period
Other comprehensive income:
- Exchange differences on translating foreign operations,
net of deferred income tax
- Fair value changes in cash flow hegde, net
Total comprehensive income for the year
Attributable to:
Equity holders of the parent
Non-controlling interest
Earnings per share
Basic and diluted earnings per share
8
14
For the three-month period ended
31 March
2012
2011
S/.000
S/.000
(Unaudited)
(Unaudited)
377,185
(228,157)
149,028
175
149,203
(8,606)
(25,936)
(1,924)
112,737
506
(17,294)
5,966
1,750
103,665
(16,277)
87,388
(5,155)
-
(219)
82,014
(1,285)
146,511
54,983
27,031
82,014
96,859
49,652
146,511
0.192
0.337
The accompanying notes on pages 62 to 72 are part of condensed consolidated interim financial statements.
F-59
309,162
(145,824)
163,338
31,786
195,124
(4,710)
(8,762)
(1,364)
180,288
787
(7,591)
268
173,752
(25,956)
147,796
F-60
.
287,011
-
43,892
(12,397)
(3,456)
-
(3,456)
(147)
(147)
44,039
-
(8,941)
43,824
-
(850)
(850)
44,674
-
-
-
-
287,011
-
-
-
-
-
287,011
-
287,011
-
The accompanying notes on pages 62 to 72 are part of condensed consolidated interim financial statements.
Balances at January 1, 2012
Profit for the period
Other comprehensive income:
Exchange defferences on translating foreign operations
Fair value changes in cash flows hegdes, net
Total comprehensive income for the period
Equity transactions with owners:
Dividend distribution
Others
Total equity transactions with owners
Balances at March 31, 2012
Balances at January 1, 2011
Profit for the period
Other comprehensive income:
Fair value change in cash flows hegdes, net
Total comprehensive income for the period
Equity transactions with owners:
Dividend distribution
Others
Total equity transactions with owners
Balances at March 31, 2011
(861)
(861)
1,110,748
-
(861)
(861)
1,429,254
-
(3,456)
(147)
54,982
1,375,133
58,585
1,053,024
58,585
58,585
5,956
5,956
1,121,874
-
(850)
96,858
1,019,060
97,708
Total
S/.000
5,956
5,956
791,039
-
97,708
687,375
97,708
Attributable to equity holders of the controlling interest
Cumulative
Legal and
other
Retained
Share
translation
earnings
capital
adjustment
reserves
S/.000
S/.000
S/.000
S/.000
CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY
FOR THE THREE-MONTH PERIODS ENDED 31 MARCH 2012 AND 2011
CORPORACION AZUCARERA DEL PERU S.A.
(55,065)
(297)
(55,362)
1,082,492
(1,699)
(72)
27,032
(55,065)
(1,158)
(56,223)
2,511,746
(5,155)
(219)
82,014
2,485,955
87,388
(38,922)
(60)
(38,982)
1,647,596
(38,922)
(6,016)
(44,938)
525,722
1,110,822
28,803
(1,286)
146,510
1,540,068
147,796
Total
S/.000
(436)
49,652
521,008
50,088
Noncontrolling
interest
S/.000
CORPORACION AZUCARERA DEL PERU S.A.
CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS
Note
CASH FLOW FROM OPERATING ACTIVITIES
Cash generated from operations
Income tax paid
Net cash generated from operating activities
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment
Purchase of intangible assets
Loans granted to related parties
Loans repayments received from related parties
Others
Net cash used in investing activities
For the three-month period ended
31 March
2012
2011
S/.000
S/.000
(Unaudited)
(Unaudited)
16
150,559
(25,699)
124,860
6
7
(44,391)
(667)
(10,456)
19,733
1
(35,780)
119,117
(28,156)
90,961
-
(35,857)
(25,785)
(118)
(61,760)
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from borrowings
Repayments of borrowings
Interests paid
Net cash used in financing activities
44,810
(53,196)
(3,171)
(11,557)
22,897
(34,557)
(5,742)
(17,402)
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at the end of period
77,523
114,277
191,800
11,799
70,912
82,711
The accompanying notes on pages 62 to 72 are part of condensed consolidated interim financial statements.
F-61
CORPORACION AZUCARERA DEL PERU S.A.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
AS OF 31 MARCH 2012 AND FOR THE THREE-MONTH PERIODS ENDED 31 MARCH 2012 AND
2011
1
GENERAL INFORMATION
Corporación Azucarera del Perú S.A. (hereinafter indistinctly the “Company” or “Coazucar”) is a
holding company primarily engaged, through its operating subsidiaries, in sugarcane agro-industrial
activities (production of sugar and ethanol). These activities are carried out through operations in Perú,
Ecuador and Argentina. The Company and its operating subsidiaries are collectively referred to
hereinafter as the “Group”.
The Company is the Group’s ultimate parent company and is an entity incorporated and domiciled in
Peru. The address of its registered office is Avenida República de Panamá 2461, La Victoria - Lima,
Peru.
The issuance of these condensed consolidated interim financial statements was approved by the
Management on 2 July 2012.
2
BASIS OF PREPARATION
The information presented in the accompanying interim three-month condensed consolidated financial
statements is unaudited and in management’s opinion reflect all adjustments necessary to present
fairly the financial position of the Group as of 31 March 2012, its results of operations and its cash
flows for the three-month period ended 31 March 2012 and 2011. All such adjustments are of a normal
recurring nature. In preparing the accompanying condensed consolidated interim financial statements,
management has made certain estimates and assumptions that affect the reported amounts in the
financial statements. Actual results may differ from those estimates. The results for interim periods are
not necessarily indicative of annual results. These condensed consolidated interim financial statements
follow the same accounting policies and methods of their application as the Group's audited annual
financial statements as of 31 December 2011. Accordingly, these condensed consolidated interim
financial statements should be read jointly with the audited financial statements of the Group as of
such date.
These condensed consolidated interim financial information as of 31 March 2012 and for the threemonth periods ended 31 March 2012 and 2011 have been prepared in accordance with IAS 34,
“Interim financial reporting”. The annual financial statements for the year ended 31 December 2011
have been prepared in accordance with International Financial Reporting Standards (IFRS) issued by
the International Accounting Standards Board (IASB) and the Interpretations of the International
Financial Reporting Interpretations Committee (IFRIC). These condensed consolidated interim
financial statements are presented in thousands of Nuevos Soles, the local currency in Peru.
A complete list of standards, amendments and interpretations to existing standards published but not
yet effective for the Group is disclosed in note 2.1 to the annual financial statements. None of those
standards became effective for the Group during the three-month period ended 31 March 2012.
During the three-month period ended 31 March 2012, the IASB did not issued new standards that
would have a material impact on the Group’s financial statements as they become effective.
F-62
Seasonality of operations
The Group´s business activities are inherently seasonal. The sugarcane harvesting period varies by
country. In Peru, the harvest period of sugar cane is done throughout the year, while in Ecuador and
Argentina harvesting period begins in July and May, respectively. This creates fluctuations in
sugarcane inventory, usually peaking in December to cover sales between crop harvests. As a result
of the above factors, there may be significant variations in the results of operations from one quarter to
another, as planting activities may be concentrated in a specific quarter whereas harvesting activities
may be concentrated in another quarter. In addition, quarterly results may vary as a result of the
effects of fluctuations in the price of commodities, production yields and costs used in determining the
fair value of biological assets on initial recognition and as of the reporting date.
3
FINANCIAL RISK MANAGEMENT
The Group continues to be exposed to the risks inherent to its financial instruments. These risk
include: end product price risk, exchange rate risk, interest rate risk, liquidity risk and credit risk. A
thorough explanation of the Group’s risks and its approach to their identification, assessment and
mitigation is disclosed in note 3 to the annual financial statements. There have been no changes in the
Group’s exposure and risk management principles and processes since 31 December 2011 (readers
should refer to the annual financial statements for information).
4
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
The Group's critical accounting policies are also consistent with those disclosed in note 4 to the
audited annual financial statements for the year ended 31 December 2011.
5
SEGMENT INFORMATION
The Group operates in three reporting segments: Peru, Ecuador and Argentina.
The measurement principles for the Group’s segment reporting structure are based on the IFRS
principles adopted in the annual consolidated financial statements.
Revenue generated and goods exchanged between segments are calculated on the basis of market
prices.
The following table presents information with respect to the Group’s reportable segments. Certain
other activities of a holding function nature not allocable to the segments are disclosed in the column
“Corporate”.
Peru
S/.000
31 March 2012 (unaudited)
Sales of products
Cost of products sold
Gross profit
Initial recognition and change in fair value of
biological assets
Profit before operating expenses
Selling expenses
Administrative expenses
Other operating expenses, net
Profit from operations before financing and taxation
(
)
(
(
(
Ecuador
S/.000
291,107)
170,276) (
120,831)
Argentina
S/.000
Corporate
S/.000
72,386)
45,928) (
26,458)
13,692)
11,953)
1,739)
)
(
104) (
1,418) )
120,935)
25,040)
7,072) (
799) (
8,699) ( 15,235) (
2,044) (
233) (
103,120)
8,773) )
1,489)
3,228)
735)
1,709)
10)
774)
)
)
(
(
(
(
F-63
Total
S/.000
-)
)
)
377,185)
( 228,157)
149,028)
-
)
175)
149,203)
(
8,606)
( 25,936)
(
1,924)
112,737)
293)
363)
70)
Peru
S/.000
31 March 2012 (unaudited)
Property, plant and equipment
Biological assets
Investment in associates
Goodwill
Inventories
Total segment assets
2,025,028)
606,133)
832)
128,609)
135,283)
2,895,885)
(
Borrowings
Total segment liabilities
31 March 2011 (unaudited)
Sales of products
Cost of products sold
Gross profit
Initial recognition and change in fair value of
biological assets
Profit before operating expenses
Selling expenses
Administrative expenses
Other operating expenses, net
Profit from operations before financing and taxation
31 December 2011
Property, plant and equipment
Biological assets
Investment in associates
Goodwill
Inventories
Total segment assets
Ecuador
S/.000
(
)
(
(
(
Borrowings
Total segment liabilities
459,666)
55,241)
)
63,177)
106,014)
684,098)
Corporate
S/.000
Total
S/.000
200,609)
17,929)
)
8,600)
19,664)
246,802)
131,501
30,728
6,634
168,863
2,816,804)
679,303)
31,560)
200,386)
267,595)
3,995,648)
63,710)
63,710)
215,212
215,212
543,244)
543,244)
264,322)
264,322)
-
309,162) (
145,824) (
163,338) (
-
-
(
(
-)
31,786)
195,124)
4,710)
7,313)
1,392)
181,709)
-
-
)
(
(
(
)
(
)
31,786)
)
195,124)
) (
4,710)
1,449) (
8,762)
28) (
1,364)
1,421)
180,288)
2,012,798)
595,625)
832)
128,609)
127,789)
2,865,653)
(
Argentina
S/.000
(
(
(
(
(
(
)
)
471,804)
49,964)
)
63,177)
142,455)
727,400)
280,758)
280,758)
-
309,162)
) ( 145,824)
163,338)
197,488)
11,593)
)
8,600)
23,421)
241.102)
123,504
28,979
6,730
159,213
2,805,594)
657,182)
29,811)
200,386)
300,395)
3,993,368)
45,379)
45,379)
225,493
225,493
551,630)
551,630)
)
)
Total segment assets are measured in a manner consistent with that of the consolidated financial
statements. These assets are allocated based on the operations of the segment and the physical
location of the asset.
Total segment liabilities are measured in a manner consistent with that of the consolidated financial
statements. These liabilities are allocated based on the operations of the segment.
The following table presents information with respect to the Peru segment consisting of 4 CGUs: Casa
Grande, Cartavio, San Jacinto and Sintuco:
Casa
Grande
S/.000
31 March 2012 (unaudited)
Sales of products
Cost of products sold
Gross profit
Initial recognition and change in fair value
of biological assets
Profit before operating expenses
Selling expenses
Administrative expenses
Other operating expenses, net
Profit from operations before
financing and taxation
(
(
(
(
153,270)
82,056)
71,214)
Cartavio
S/.000
San
Jacinto
S/.000
Sintuco
S/.000
Corporate
S/.000
(
95,749)
70,331)
25,418)
(
48,430)
25,850)
22,580)
(
4,760)
1,596)
3,164)
27,050) (
98,264)
3,596) (
4,433) (
1,623)
5,582)
19,836)
3,359)
3,427)
194)
(
(
(
(
(
24,632)
2,052)
27)
2,983) (
416) (
3,268)
6,432)
172)
14)
(
88,612)
13,244)
(
6,246)
)
F-64
5,478)
(
)
Elimination
S/.000
13,970)
13,289)
681)
(
681)
)
(
(
(
(
(
681)
(
-
(
Total
S/.000
25,072)
22,846)
2,226)
291,107)
( 170,276)
120,831)
-
(
(
2,226)
90)
2,316
185)
104)
120,935)
(
7,072)
(
8,699)
(
2,044)
185)
103,120)
)
Casa
Grande
S/.000
31 March 2012 (unaudited)
Property, plant and equipment
Biological assets
Investment in associates
Goodwill
Inventories
Total segment assets
Borrowings
Total segment liabilities
1,214,502
388,759
128,609
(
73,324
1,805,194
(
31 March 2011 (unaudited)
(
106,801
106,801
(
(
(
(
175,678)
70,361)
105,317)
31 December 2011
Property, plant and equipment
Biological assets
Investment in associates
Goodwill
Inventories
Total segment assets
Borrowings
Total segment liabilities
6
Cartavio
S/.000
99,362)
63,907)
35,455)
11,079)
94,238)
5,570) (
4,486) (
933)
12,655)
48,110)
1,890)
3,048)
1,867)
83,249)
45,039)
Cartavio
S/.000
1,202,117)
355,773) (
)
128,609)
(
71,730)
1,758,229)
(
(
119,141)
119,141)
San
Jacinto
S/.000
55,240
16,046
(
220 (
71,506 (
-
(
(
Sintuco
S/.000
Total
S/.000
2,025,028
606,133
4,676)
832
128,609
) (
135,283
4,676)
2,895,885
-
) (
)
Corporate
S/.000
9,896)
7,553)
2,343)
(
(
(
(
27,924) (
49,193)
13)
3,099) (
680) (
2,286) (
4,573)
(
90)
47) )
2,343(
150)
)
)
(
(
(
(
(
46,761)
4,530)
2,193)
(
(
San
Jacinto
S/.000
(
4,330)
2,043)
2,287)
Elimination
S/.000
Sintuco
S/.000
421,238)
334,305)
111,433) ( 116,097) (
5,109)
399)
)
)
44,704) ( 11,133) (
582,484)
461,934)
56,211) ( 105,406) (
56,211)
105,406)
55,138)
12,322)
)
)
222)
67,682)
-
(
(
(
(
(
) (
) (
264,322
264,322
Elimination
S/.000
(
(
42,243)
20,974)
21,269)
Elimination
S/.000
Sintuco
S/.000
54,040 ( 103,481 (
54,040
103,481
(
Casa
Grande
S/.000
San
Jacinto
S/.000
420,445
334,841
107,087
94,241
5,109
399
48,871 ( 12,868 (
581,512
442,349
(
Casa
Grande
S/.000
Sales of products
Cost of products sold
Gross profit
Initial recognition and change in fair value
of biological assets
Profit before operating expenses
Selling expenses
Administrative expenses
Other operating expenses, net
Profit from operations before
financing and taxation
Cartavio
S/.000
(
Total
S/.000
22,347)
19,014)
3,333)
309,162)
( 145,824)
163,338)
-
(
)
3,333)
2,913)
3,410)
3,053)
31,786)
195,124)
(
4,710)
(
7,313)
(
1,392)
63)
181,709)
Total
S/.000
)
2,012,798)
) ( 595,625)
4,676)
832)
)
128,609)
) ( 127,789)
4,676)
2,865,653)
-
) (
)
280,758)
280,758)
PROPERTY, PLANT AND EQUIPMENT
Total
S/.000
(unaudited)
Three-month period ended 31 March 2012
Opening net book amount as at 1 January 2012
Additions
Disposals
Transfers and adjustments
Exchange difference
Depreciation and amortization
Closing net book amount as at 31 March 2012
(
(
(
(
)
Three-month period ended 31 March 2011
Opening net book amount as at 1 January 2011
Additions
Disposals
Transfers and adjustments
Depreciation and amortization
Closing net book amount as at 31 March 2011
2,025,253)
35,856)
(
532)
164)
(
15,454)
) 2,045,287)
F-65
2,805,594)
44,391)
1,132)
236)
5,981)
25,832)
2,816,804)
For the three-month period ended 31 March 2012 and 2011, the additions include capital expenditures
of investment projects which development isin progress in Peru relating to: i) the acquisition of energy
power generators for sugar plant, ii) freezing equipment, installation of sugar plant, mill expansion,
improvements on centrifuge process, installation of irrigation equipment, mechanical harvester
machine, construction of Garrapon Dam.
As of 31 March 2012, property, plant and equipment include fixed assets acquired under finance
leases for S/.6 million (S/.6.9 million as of 31 March 2011) net of their corresponding accumulated
depreciation. The corresponding liabilities are secured with the same assets leased.
As of 31 March 2012, assets recognized in the financial statements as property, plant and equipment
are insured up to a value of US$95 million. Management believes that the amount insured is consistent
with international practices in the industry and takes into account the nature of the assets in estimating
the risk of eventual damages.
Certain of the Group’s assets have been pledged as collateral to secure its borrowings and other
payables. The net book value of pledged assets amounts to S/.293 million as of 31 March 2012 and
S/.297 million as of 31 December 2011.
7
INTANGIBLE ASSETS
Total
S/.000
(unaudited)
8
Three-month period ended 31 March 2012
Opening net book amount as at 1 January 2012
Additions
Exchange differences
Amortization
Closing net book amount as at 31 March 2012
(
(
(
202,727)
667)
25)
234)
203,135)
Three-month period ended 31 March 2011
Opening net book amount as at 1 January 2011
Amortization
Closing net book amount as at 31 March 2011
(
)
130,743)
195)
130,548)
BIOLOGICAL ASSETS
Changes in the Group´s biological assets during the three-month periods ended 31 March 2012 and
2011 were as follows:
31 March
2012
S/.000
(unaudited)
Beginning of period
Cost incurred during the period
Decrease due to harvest
Initial recognition and changes in fair value of
biological assets (price and physical changes)
Exchange difference
End of period
F-66
(
657,182)
90,217)
67,609)
(
(
175)
662)
679,303)
31 March
2011
S/.000
(unaudited)
(
377,820)
53,326)
54,309)
(
31,786)
)
408,623)
Biological assets as of 31 March 2012 and 31 December 2011 are presented in the statement of
financial position as follows:
31 March
2012
S/.000
(unaudited)
Non-current
Current
9
31 December
2011
S/.000
430,069
249,234
679,303
378,978
278,204
657,182
INVENTORIES
This item comprises:
At 31 March
2012
S/.000
(unaudited)
At 31 December
2011
S/.000
17,439
26,149
Raw materials
Products in process
Finished product
Packaging and casing
Other supplies (*)
123,769
2,785
97,453
267,595
3,589
6,541
188,778
1,754
99,733
300,395
(*) This account comprises spare parts, materials and supplies used in connection with the maintenance of the
sugar plants located in Perú, Ecuador and Argentina.
10
TRADE AND OTHER ACCOUNTS RECEIVABLE
This item comprises:
31 March
2012
S/.000
(unaudited)
Non-current
Accounts receivable to related parties (note 15)
31 December
2011
S/.000
6,966
8,224
29,990
12,117
42,107
36,029
17,827
53,856
Prepaid expenses
Value Added Tax (VAT)
Tax claims
Loans to third parties
Payments in advanced of the income tax
Other accounts receivable to related parties (note 15)
Miscellaneous accounts receivable
Total other accounts receivable
Total current accounts receivable
7,395
27,351
7,806
12,586
3,475
2,190
19,610
80,413
122,520
6,031
21,057
8,152
10,665
3,475
2,569
11,512
63,461
117,317
Total trade and other accounts receivable
129,486
125,541
Current
Trade accounts receivable
Trade accounts receivable from related parties (note 15)
Trade accounts receivable, net
F-67
The fair values of current trade and other accounts receivable approximate their respective carrying
amounts due to their short-term maturity. The fair values of non-current trade and other accounts
receivable approximate their carrying amount, as the impact of their discount is not significant for the
financial statements taken a whole.
The carrying amounts of the Group’s trade and other accounts receivable are denominated in the
following currencies (expressed in Nuevos Soles):
At 31 March
2012
S/.000
(unaudited)
Currency
Nuevos Soles
US Dollar
Argentine Peso
81,545
21,410
26,531
129,486
At 31 December
2011
S/.000
52,625
47,812
25,104
125,541
The Group recognizes an allowance for doubtful trade accounts receivable when there is objective
evidence that the Group will not be able to collect all amounts due according to their original terms.
Delinquency in payments is considered an indicator that the trade account receivable may be impaired.
However, management considers all available evidence in determining when a receivable is impaired.
Generally, trade accounts receivable, which are more than 180 days past due are fully provided for.
However, certain accounts receivable which are more than 180 days overdue are not provided for,
based on a case-by-case analysis of the credit quality of the account. Furthermore, accounts
receivable, which are not more than 180 days overdue, may be provided for if specific analysis
indicates their potential impairment.
The maximum exposure to credit risk at the reporting date is the carrying value of each class of
receivable mentioned above.
11
BORROWINGS
This item comprises:
At 31 March
2012
S/.000
(unaudited)
Non-current
Promissory notes
Finance leases
Current
Overdraft
Promissory notes
Finance leases
Total
At 31 December
2011
S/.000
242,432
766
243,198
258,982
991
259,973
2,074
296,267
1,705
300,046
543,244
1,763
287,783
2,111
291,657
551,630
The maturity date of the promissory notes is between 2012 and 2017 and bear an annual interest rate
which ranges between 6.90% and 7.75% for notes denominated in local currency (Nuevos Soles);
between 1.50% and 15.00% for notes denominated in Argentine Pesos and between 2.42% and
14.00% for notes denominated in U.S. dollars (between 6.90% and 7.75% for those denominated in
local currency (Nuevos Soles), between 1.50% and 17.70% for those denominated in Argentine Pesos
and between 2.11% and 14.00% for those denominated in U.S. dollars at 31 December 2011).
F-68
The maturity of the Group’s borrowings (excluding obligations under finance leases) and the Group’s
exposure to fixed and variable interest rates is as follows:
At 31 March
2012
S/.000
(unaudited)
Fixed rates borrowings:
Less than 1 year
Between 1 and 2 years
Between 2 and 5 years
More than 5 years
Variable rates borrowings:
Less than 1 year
Between 1 and 2 years
Between 2 and 5 years
Total borrowings
At 31 December
2011
S/.000
233,644
58,394
134,378
4,330
430,746
215,802
55,538
145,815
8,659
425,814
64,697
12,324
33,006
110,027
540,773
73,744
12,377
36,593
122,714
548,528
The carrying amounts of the Group’s borrowings are denominated in the following currencies
(expressed in Nuevos Soles):
At 31 March
2012
S/.000
(unaudited)
Nuevos Soles
Argentine Peso
US Dollar
12
242,569
4,403
293,801
540,773
At 31 December
2011
S/.000
250,917
7,136
290,475
548,528
TRADE AND OTHER ACCOUNTS PAYABLE
This item comprises:
At 31 March
2012
S/.000
(unaudited)
Non-current:
Trade accounts payable to related parties (note 15)
Tax debt
Payroll and social security payable
Accounts payable from acquisition of subsidiaries
Others
Carried forward:
F-69
10
55,614
9,128
224,399
10,755
299,906
At 31 December
2011
S/.000
10
52,339
12,594
227,009
4,095
296,047
At 31 March
2012
S/.000
(unaudited)
Brought forward:
Current
Trade accounts payable
Trade accounts payable to related parties (note 15)
Payroll and social security payable
Accounts payable from acquisition of subsidiaries
Accounts payable from acquisition of associates
Income tax payable
Dividends payable
Advances received from customers
Interest payable
Other accounts payable
Total trade and other accounts payable
13
At 31 December
2011
S/.000
299,906
296,047
103,288
84,954
52,901
18,486
19,437
19,793
96,153
47,373
12,820
23,549
478,754
97,681
87,744
104,205
18,486
19,619
38,521
12,416
13,348
6,410
13,954
412,384
778,660
708,431
PROVISIONS AND OTHER LIABILITIES
The Group is subject to several laws, regulations and business practices in the countries where it
operates. In the ordinary course of business, the Group is subject to certain contingent liabilities with
respect to existing or potential claims, lawsuits and other proceedings, including those involving labor
and social security, and civil. The Group accrues liabilities when it is probable that future costs will be
incurred and their amounts can be reasonably estimated. The Group bases its accruals on up to-date
developments, estimates of the outcomes of the matters and legal counsel experience in contesting,
litigating and settling matters. As the scope of the liabilities becomes better defined or more information
is available, the Group may require to change its estimates of future costs, which could have a material
effect on its results of operations and financial condition or liquidity.
There have not been any material changes in the claimed amounts and in the status of current
proceedings since 31 December 2011.
14
TAXATION
Interim period income tax expense is accrued using the tax rate that would be applicable to expected
total annual earnings, that is, the estimated average annual effective income tax rate applied to the
pre-tax income of the interim period.
Income tax expense is recognized based on management’s estimate of the weighted average annual
income tax rate expected for the full financial year. The estimated average annual tax rate used for the
three-month period ended 31 March 2012 is 15.73% (the estimated tax rate for the three-month period
ended 31 March 2011 was 15.05%). The increase in the estimated income tax rate is mainly explained
by the incidence of higher non-deductible expenses for income tax purposes.
15
RELATED PARTIES
The balances of accounts receivable and payable with related parties were as follows:
F-70
At 31 March
2012
S/.000
(unaudited)
Non-current accounts receivable
Other accounts receivable:
Empresa Agraria Chiquitoy SA
Tableros Peruanos S.A.
Other
Total non-current accounts receivable
-
Current accounts receivable
Trade accounts receivable:
Deprodeca S.A.C.
Gloria S.A.
Tableros Peruanos S.A.
Trupal S.A.
Other
Other accounts receivable:
Deprodeca S.A.C.
Gloria S.A
Quequeña S.A.
Tableros Peruanos S.A.
Trupal S.A.
Other
Total current accounts receivable
Non-current accounts payable
Other accounts payable:
Deprodeca S.A.C.
Total non-current accounts payable
Current accounts payable
Trade accounts payable:
Deprodeca S.A.C.
Gloria S.A
Racionalización Empresarial S.A.
Yura S.A.
Trupal S.A.
Suiza Fruit Corporation
Other
Other accounts payable:
Lakebar Holding
Deprodeca S.A.C.
Gloria S.A
Jose Rodriguez Banda S.A
Clarcrest Investments S.A.
Other
Total current accounts payable
F-71
At 31 December
2011
S/.000
6,175
791
6,966
6,618
799
807
8,224
6,336
3,243
1,393
1,105
40
12,117
13,131
2,267
1,305
1,043
81
17,827
13
35
332
844
108
858
2,190
14,307
195
163
332
825
151
903
2,569
20,396
10
10
10
10
669
2,655
1,393
1,330
256
1,365
168
7,836
2,110
2,252
3,107
1,311
650
785
129
10,344
25,492
6,722
463
305
43,972
164
77,118
84,954
25,492
6,718
111
308
44,441
330
77,400
87,744
At 31 March, major inter-company transactions were as follows:
2012
S/.000
(unaudited)
Sales of goods
Sales of services
Purchase of goods
Purchase of services
Interest on loans received
Interest on loans granted
Loans granted
Loans received
2011
S/.000
(unaudited)
85,659
7,859
19,619
5,795
1,297
132
10,456
19,733
252,607
9,075
51,918
11,108
713
182
1,094
45,698
The Group has granted guarantees in favor of financial institutions that at 31 March 2012 and 31
December 2011.
Key personnel remuneration includes managerial services and management personnel. The
remuneration of key management personnel and managerial services for the three–month period
ended 31 March 2012 amounted to S/.3,882,390 (S/.3,943,760 for the same period of 2011). The
Group does not provide long-term benefits to its key management personnel.
16
CASH FROM OPERATING ACTIVITIES
2012
S/.000
(unaudited)
Profit before income tax
Adjustments:
- Depreciation (note 6)
- Amortization (note 7)
- Fair value of biological assets (note 8)
- Fair value gains on derivative financial instruments
- Loss from disposal of property, plant and equipment
- Write-off of property, plant and equipment items
- Share of profit from associates
- Other provisions
Net changes:
- Biological asset
- Inventories
- Trade accounts and other receivables
(
(
(
(
(
- Trade accounts and other payables
Cash from operations
17
)
2011
S/.000
(unaudited)
103,665(
173,752)
25,832)
234)
175)
235)
)
1,132)
1,750)
-
15,454)
195)
31,787)
519)
513)
5)
35)
22,608)
32,800)
13,222)
24,886)
150,559)
(
(
(
(
)
)
835)
34,897)
5,497)
1,028)
119,117)
EVENTS AFTER THE BALANCE SHEET DATE
No significant events subsequent to 31 March 2012 have ocurred that should be reported, other than
those reported in the anual financial statements as of 31 December 2011.
F-72
ISSUER
Corporación Azucarera del Perú S.A.
Av. República de Panamá 2461
La Victoria, Lima 13
Peru
TRUSTEE, REGISTRAR, PAYING AGENT AND TRANSFER AGENT
Citibank, N.A.
388 Greenwich Street, 14th Floor
New York, NY 10013
USA
IRISH LISTING AGENT
Arthur Cox Listing Services Limited
Earlsfort Centre
Earlsfort Terrace
Dublin 2, Ireland
LEGAL ADVISORS TO THE ISSUER AND THE GUARANTORS
As to United States Law
Milbank, Tweed, Hadley & McCloy LLP
One Chase Manhattan Plaza
New York, NY 10005
USA
As to Peruvian Law
Rubio Leguía Normand
Av. Dos de Mayo 1321
San Isidro, Lima 27
Peru
LEGAL ADVISORS TO THE INITIAL PURCHASERS
As to United States Law
Shearman & Sterling LLP
599 Lexington Avenue
New York, NY 10022
USA
As to Peruvian Law
Miranda & Amado Abogados
Av. Larco 1301
Torre Parque Mar, Piso 20
Miraflores, Lima 18
Peru
INDEPENDENT AUDITORS
Dongo-Soria Gaveglio y Asociados Sociedad Civil de Responsabilidad Limitada
Av. Santo Toribio 143, Piso 8
San Isidro, Lima 27
Peru
6.375% Senior Notes due 2022
Unconditionally and Irrevocably Guaranteed by
Certain of its Operating Subsidiaries
____________________
OFFERING MEMORANDUM
____________________
Joint Book-Running Managers
BofA Merrill Lynch
Citigroup
Peruvian Placement Agent
Citicorp Perú S.A. Sociedad Agente de Bolsa
September 13, 2012