ANNUAL REPORT 2012
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ANNUAL REPORT2012
ANNUALREPORT
1. Letter from the CEO | 4
2. Overview | 6 2.1. Vision 2.2. Mission 2.3. Values 2.4. Business Principles 2.5. Our People 2.6. Board of Directors 2.7. Management Team 2.8. Organizational Chart 2.9. Legal Structure 2.10. Brief History
3. Products & Categories | 22
4. Board of Directors´ Report | 26 4.1. Main Activities 4.2. Market Situation 4.3. Company Strategy 4.4. Summary of the Year 4.5. Operations 4.6. Working Environment 4.7. Research & Development 4.8. Social Responsibility 4.9. Financial Results .10. Allocation of Net Income 4.11. Shares and Shareholders 4.12. Contingency Plan, Risk Management and Uncertainties 4.13 Financial Calendar 4.14 Future Prospects 4.15 Auditors 4.16 Corporate Governance
5. Key Investment Considerations | 38
6. Corporate Governance | 40
7. Independent Auditors’ Report and Audited Financial Statements | 58
Contents
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ANNUAL REPORT 2012
Letter from the CEO
Dear Shareholders, Partners and Collaborators
2012 was a very important year for CAMPOSOL, especially in terms of consolidation. It was the first year of the Company operating under the new matrix structure with Business Unit Managers, which oversee all processes of their crops and ensure their profitability, and so far it is proving to be successful. Also, the reinforcement of the Commercial and Marketing team took place, as well as the opening of a new commercial office in the US along with the strengthening of the existing one in Europe, allowing CAMPOSOL to increase its direct sales rate, one of the Company’s long term main objectives.
Similarly, strategic alliances with companies abroad and local producers fostered CAMPOSOL´s continuous growth, benefiting from its efficient logistic and commercial platforms and expanding its horizons in terms of volumes and new possibilities of year round supplies.
The most important financial highlight was the fact that at the beginning of the year the Company was able to restructure its long term debt by the successful issuance of a USD 125 million 9.875% senior unsecured notes due 2017, thus ensuring a sound financial structure and the possibility to continue investing in the Company’s growth in the short and medium term.
Regarding revenues, in 2012, CAMPOSOL’s total sales amounted to USD 183.2 million, a 9% increase
from 2011. This is mainly explained by higher volumes from third parties and higher selling prices in most products. Unfortunately, there was a mild “El Niño” which impacted negatively our own volumes and thus increased unitary costs, which combined by a reduction on avocado prices in the US, due to record high productions of California and Mexico, resulted on an EBITDA of USD 17 million, significantly lower than the USD 30.8 million in 2011.
Another remarkable achievement for CAMPOSOL during 2012 was to be recognized as the leader in terms of agribusiness corporate reputation by a survey conducted by “Diario Gestión” (Peru). This is the result of the Company´s active corporate social responsibility programs and its constant environmental concerns, which prompts us to keep promoting sustainable development of our stakeholders in areas of influence and society in general.
CAMPOSOL believes that innovation is a key aspect to boost competitiveness and growth in the mid and long term. We are constantly performing field trials of new crops to evaluate their technical, economic and commercial viability in order to continue diversifying crops and complementing our portfolio for our clients.
The Company is currently focused on adding value to its clients through commercial, marketing and service initiatives which should result in higher margins. Additionally, CAMPOSOL is analyzing new opportunities to consolidate its leadership through additional planting of current crops, planting of new crops, strategic alliances and acquisitions.
The consolidation of the above mentioned structural changes within CAMPOSOL, together with the implementation of its current five year strategic plan, will allow the Company to achieve its vision while building a much bigger and profitable company for its stockholders, creating social value to all of its stakeholders while reducing its environmental impact.
In 2013 onwards, CAMPOSOL will continue positioning itself in the US market, the largest and fastest growing market for avocado in the world, now open for Peruvian produce and in other markets with high growth potential.
Sincerely,
Samuel Dyer CoriatEXECUTIVE CHAIRMAN
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ANNUAL REPORT 2012
Overview CAMPOSOL is the leading agro-industrial company in Peru and the largest asparagus exporter in the world. The company owns all the fields where its products are sowed and harvested, having total control of the growing, harvesting and packing phases of its final products.
The CAMPOSOL’s products portfolio include: White & Green Asparagus, Avocados, Grapes, Mangoes, Piquillo Peppers and Citrus (tangerines), which are packed fresh, frozen or canned, and exported to the world. It also operates a shrimp farming business under its subsidiary Marinazul.
By being vertically integrated, from the growing fields to the finished products, CAMPOSOL guarantees that only products of the highest quality are being offered to our wide range of customers.
2.1 VisionOur vision is to be an internationally admired, branded supplier of quality agricultural products.
2.2 MissionOur mission is to reliably satisfy the fruit and vegetables needs of our clients and consumers around the world with efficiency, quality and responsibility.
2.3 ValuesCAMPOSOL has established the following corporate values: • Integrity We are honest, we honor our com-
mitments and we are responsible for the consequences of our actions, always contemplating the triple bottom line: economic, social and environmental.
• Respect We appreciate and esteem people
and we foster good relations within an environment where ideas and fe-edback are highly appreciated.
• Team work We share our objectives and strate-
gies and we strive to be communi-cative and transparent, creating an open and flexible atmosphere whe-re team objectives take precedence over personal goals.
• Excellence We all work to attain the highest
standards of performance, innova-tion and quality in all areas of our processes, activities and products. We give great attention to detail and endeavor to comply with the demands and expectancies of the international market.
• Austerity We work towards achieving efficien-
cy along the whole chain of value while maintaining strict discipline on our cost management and imple-menting policies that impede ques-tionable spending.
2.4 Business Principles
CAMPOSOL abides by four Business Principles which guide the work it carries out and the form of interacting with society:
Human Resources ManagementCAMPOSOL recognizes its commitment to its employees to establish the best working conditions to enable professional and personal wellbeing and development, in a friendly internal atmosphere, with the aim of fulfilling our vision, mission and values. It further provides training opportunities on an ongoing basis and identifies and recognizes outstanding employees.
EthicsCAMPOSOL is convinced that in order to consolidate and develop itself, it must follow its business objectives and ethical principles and apply them in its relations with customers, suppliers, shareholders, employees and society in general. High standards of ethics and integrity ensure our credibility in the eyes of our stakeholders and CAMPOSOL expects all its employees to maintain the highest ethical and integrity standards.Honesty, dignity, respect, loyalty, proper behavior, efficiency, transparency and awareness of ethical principles are the highest values that guide CAMPOSOL’s relationship with our stakeholders.
Social development and community relationsCAMPOSOL is committed to balancing the impacts caused by our industry,
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ANNUAL REPORT 2012
enhancing the positive impacts that create value for the company and the society at large. To this end, we carry out actions in the localities within our area of influence, fostering synergic, ethical relations based on trust among the company; the inhabitants; the local, regional and national government; grassroots organizations and other stakeholders involved; establishing long-lasting relationships of ongoing dialogue and mutual respect with our neighbors.
Quality, Environment, Safety and HealthCAMPOSOL reflects its responsible attitude in all its activities, guaranteeing the satisfaction of its clients, the health and safety of its collaborators and respect for the environment. By complying with the following features, CAMPOSOL undertakes to maintain an Integrated Management System of Quality, Environmental Safety and Occupational Health, based on international standards, oriented towards the principle of continuous improvement in order to obtain products of the highest quality, ensuring the traceability of the same and optimizing processes for the reduction of our environmental impacts, the satisfaction of our clients, collaborators, suppliers, the community, government and shareholders, as well as the principle of avoiding contamination that is present in our activities; guaranteeing compliance with applicable legal requirements and other objectives to which we subscribe.
2.5 Our PeopleAs in most agro-industrial companies, the intensity of labor of CAMPOSOL’s activities varies throughout the year. The number of people employed depends on the season, the product and the volume being harvested and the amounts harvested, all of which have a direct influence on our operations. In this respect, our employees are organized in the field work, in the plant and in administrative tasks, three areas that comprise an integrated and highly competent human team. During 2012 peak seasons, CAMPOSOL registered more than 13,000 employees in its operations in Chao/Viru, Piura and Tumbes and in its offices in Lima. Our labor force is composed of around 95% operational workers and 5% administrative staff and executives.
2.6 Board of DirectorsCAMPOSOL shareholders consider it to be of utmost importance to have a professional, independent Board of Directors. This opinion complies with the recommendations established in the Norwegian Code of Best Corporate Government Practices, especially relating to the independence of the organism.
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ANNUAL REPORT 2012
Mr. Dyer obtained his degree in Business Administration at Miami University in Florida, with a specialization in Finance and Administration. He has a wide experience in the Peruvian fishing industry, having initiated his career in COPEINCA as Fleet Assistant and having subsequently held various positions including Assistant in the frozen products plant, Plant Superintendent, Frozen Products Plant Manager, Fleet Manager, Operations Manager and CEO from 2002 until 2011. Mr. Dyer was appointed member of the Board of Directors of CAMPOSOL in 2008, a position which enabled him to contribute to the transformation of the company into a leading commercial organization employing the principles of corporate government and social responsibility. Mr. Dyer was named President of the Board of CAMPOSOL in 2011 with the object of continuing with the consolidation of the company’s leadership in the agro-industrial sector. In October of the same year he took over the position of CEO thereby becoming the Executive President of CAMPOSOL.
Samuel Dyer Coriat Executive Chairman
of the Board
Mr. Dyer Ampudia earned a degree in Business Administration from Universidad Nacional Federico Villareal and is a graduate student of the Top Management Program – International Business- from Universidad de Piura. He was founding shareholder and Chairman of the Board of COPEINCA, Galvanizadora Peruana S.A., Aceros y Techos S.A. Consorcio Latinoamericano S.A. and Ferreteria Dyer S.A., among others. He is Chairman of the Board of the D&C Group (Dyer Coriat), one of the most successful family business groups in Peru in recent years, which has begun its diversification into mining, agribusiness, real estate and construction businesses, through Apurimac Ferrum S.A. Ausinca, Campoinca and IC Viviendas. He is currently a member of the Board of COPEINCA and CAMPOSOL.
Samuel Dyer AmpudiaDeputy Chairman
Sam AguirreDirector
Mr. Aguirre is a senior managing director in FTI’s Corporate Finance practice and is based in Toronto. Prior to joining FTI, Sam was a partner at PricewaterhouseCoopers in the Corporate Recovery area.Mr. Aguirre’s formal training took place in Canada where he acquired a Chartered Accountant designation and a license to act as trustee in Bankruptcy. His experience includes formal bankruptcy proceedings (receiverships, reorganizations, and bankruptcies), out-of-court restructurings and operational restructurings. He has participated in aggregate debt restructurings in excess of USD 60 billion. Mr. Aguirre has spent significant periods of time on the ground in various Latin American countries participating and overseeing due diligences and negotiations between companies and creditors. Mr. Aguirre brings extensive restructuring experience coupled with in-depth financial and accounting skills, fluency in four languages (English, French, Spanish and Portuguese) and a solid appreciation of cultural differences.
Pavlos AristodemouDirector
Mr. Aristodemou earned an LLM in Banking and Financial Law degree from the Boston University. He is currently a global partner in Harneys - ALYCO IN Cyprus and the managing partner of the Cypriot office. He has vast experience in banking and finance, private equity, capital markets and corporate taxes. He serves leading international banking institutions and investment funds and assists companies with IPOs on international stock exchanges such as NYSE, OSE, London AIM and TASE.He is director of various companies such as Volito Cyprus and OTP Holding Limited – Holding of a Hungarian Bank.
Mimi BerdalDirector
Ms. Berdal earned a law degree at the University of Oslo in 1987 and was admitted to the Norwegian Bar Association in 1990. She was a partner of Arntzen de Besche Law Firm in Oslo until 2005 and since then has worked as an independent legal and corporate counselor. Ms. Berdal is also a director of Itera Consulting Group, Rocksource, Gjensidige Pensjon og Sparing Holding AS, DnB NOR Eiendomsfond 1 AS, Gassco AS, Q-Free, Infratek and COPEINCA.
Gianfranco Castagnola
Director
Mr. Castagnola graduated in Economics from Universidad del Pacífico, with a Master’s Degree in Public Policy from Harvard University. He is CEO of Apoyo Consultoría and Chairman of the Board of AC Capitales SAFI. He was a Member of the Board of the Banco Central de Reserva del Peru and currently is a Member of the Board of Austral Group, Cementos Pacasmayo, Scotiabank, Saga Falabella and Maple Energy.
Mr. Chumbez has a Bachelor’s degree in Accounting from Universidad Ricardo Palma, with studies in banking, finance, management and administration from INCAE Business School (Costa Rica). Experience in Ernst & Young and other Peruvian audit companies. Over 20 years of experience in the Peruvian and International banking sector, (Lloyds Bank PLC, Banco del Sur, Banco del Libertador (Group Luksik Chile), Banco de Lima and others). He has been the Director of Carbolan (Pelikan Peru) and of Copeinca. Since 2004, he has been an associate and Director of Intelfilm S.A. He was appointed Director of CAMPOSOL in 2009.
Walter ChumbezDirector
Mr. Matarazzo is an accomplished business leader with extensive global experience spanning Latin America, Europe and Asia, primarily in leading Agribusiness and fast moving consulting groups, multi-national companies like IRFM, The Coca-Cola Company and Del Monte Foods. He has strong General Management, Operations and Commercial Marketing expertise in both emerging and mature markets. In addition he has worked on a wide range of food industry rationalization, integration, acquisition and turnaround projects. His latest assignment in SEA was to acquire first hand expertise on the Philippines, India, China and Singapore FMCG markets, having successfully led the regional Del Monte Pacific Company to an enhanced professional level. Between January 2010 and October 2011, Fabio was CAMPOSOL´s CEO and after this period he was invited to be part of the Directory. He holds a B.A. with a Major in Economic Theory coupled with numerous post graduate specialized Marketing & Sales courses. He is fluent in Italian, Portuguese, French and Spanish.
Fabio Matarazzo di Licosa
Director
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ANNUAL REPORT 2012
Mr. Dyer obtained his degree in Business Administration at Miami University in Florida, with a specialization in Finance and Administration. He has a wide experience in the Peruvian fishing industry, having initiated his career in COPEINCA as Fleet Assistant and having subsequently held various positions including Assistant in the frozen products plant, Plant Superintendent, Frozen Products Plant Manager, Fleet Manager, Operations Manager and CEO from 2002 until 2011. Mr. Dyer was appointed member of the Board of Directors of CAMPOSOL in 2008, a position which enabled him to contribute to the transformation of the company into a leading commercial organization employing the principles of corporate government and social responsibility. Mr. Dyer was named President of the Board of CAMPOSOL in 2011 with the object of continuing with the consolidation of the company’s leadership in the agro-industrial sector. In October of the same year he took over the position of CEO thereby becoming the Executive President of CAMPOSOL.
Samuel Dyer Coriat Executive Chairman
of the Board
He holds a Master’s Degree in Business Administration and a Bachelor of Science Degree in Mechanical Engineering from University of Miami (Florida USA). He worked as technical and financial analyst for the D&C Group, in the new projects division and General Manager of Apurímac Ferrum, an Iron Ore Exploration Project. He has been a member of Copeinca’s Board of Directors. He started working for CAMPOSOL in 2008 as CFO. He then took office of Deputy General Manager and, since 2012, he was appointed as Research and Development Manager.
Piero Dyer Coriat Manager of Research and Development
Mr. Ramirez graduated in Business Administration with a Master’s Degree in Finance from Loyola University, New Orleans, USA, and with an MBA from ITESM (México) - ESPOL (Ecuador). He has vast international experience in Strategic Planning, Corporate Finance, Mergers & Acquisitions and International Affairs. Mr. Ramirez previously worked for Amanco Group (1995-2008), holding various positions in Ecuador, Costa Rica and Brazil, his last one being CFO for Latin America. He also served as CFO of Copeinca ASA during 2012.
Jorge Ramirez Chief Financial Officer (CFO)
2.7 Management Team
He graduated as a lawyer from the Pontificia Universidad Católica del Perú. He was part of the law firm Rodrigo, Elias & Medrano, from January 2005, acquiring the status of associate in January 2007. He has ample experience in the areas of commercial arbitration and civil litigation. He participated in the training program in negotiations in accordance with the Harvard University Model. In December 2007 he joined CAMPOSOL to form and develop the Legal Affairs Department as the Company’s General Counsel.
Guillermo Lohmann General Counsel
She is an economist from Universidad del Pacifico with an MBA from Universidad de Piura and postgraduate studies in communications, social responsibility and community relations. She has broad experience in the areas of corporate image, communications, public administration and institutional relations. She has served as advisor to the Minister of Economy and Finance, the Minister of Energy and Mines, the President of the Commission for the Promotion of Foreign Investment (now PromPeru) and appointed Director of Press & Communications of the Ministry of Foreign Affairs. She has also been the Image and Communications Manager at BBVA Banco Continental and the BBVA Foundation, as well as Corporate Image Director in TIM Peru (now Claro).
Francesca Carnesella Corporate Affairs Manager
Public Accountant graduated from the Pontificia Universidad Católica del Peru (PUCP) with specialization in Financial Auditing. He has ample experience in financial and internal auditing, accounting and controlling developed in global companies leaders in the mass consumption industry and in financial, tax and business consulting. He joined Camposol in November 2007 to implement the Internal Audit under Corporate Governance Practices, providing assurance on Company’s objectives fulfillment based on internal controls improvement, business process management and risk management. He has worked for PricewaterhouseCoopers, Embotelladora Latinoamericana S.A.- Coca Cola and Deloitte & Touche.
Angel Suarez Chief Audit Executive
Mr. Gomez is a professional with over fifth teen years of experience in sales, marketing and distribution, with demonstrated results in areas such as P&L leadership, new business strategy development and end-to-end supply chain management. He has a broad international experience developing new markets and new products in countries such as Belgium, Holland, Germany, USA, Costa Rica and Peru. Since 2002 he has being appointed to various important positions for Chiquita Brands International, lastly he occupied the position of General Manager in Florida, USA. Mr. Gomez holds a master degree in business administration from INCAE Business School in Costa Rica as well as a Master in Six Sigma from Villanova University in Pennsylvania (USA); he graduated as a Licentiate in Business Administration from Universidad de Lima.
Jose Antonio GomezChief Commercial Officer (CCO)
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ANNUAL REPORT 2012
Aldo holds a Licentiate in Industrial Relations with a specialization in Human Resources and a MBA in the San Ignacio de Loyola University. He has ample experience in leading companies in the Financial, Health and Pharmaceutical sector with developed abilities in the fields of Strategic Planning, Human Resource Systems Administration, Training, Recruitment, Personnel Development, Compensations and Human Welfare. Previously he had held the positions in Human Potential Management in the Credicorp Group, the ACP Group and TEVA Laboratories in Peru.
Economist and Business Administrator graduated from La Universidad de Piura (UDEP). Broad experience in the business consultant industry, as well as internal auditing (risks and process), and evaluation and implementation of world class ERPs (SAP). In 2006 Ramón left the consultant industry at Ersnt & Young to join Camposol to lead the SAP project implementation for the entire operation. In 2010 is promoted to Corporate Chief Information Officer for Camposol and Copeinca and Finance Deputy for Camposol. In 2011 Ramón was challenged and promoted as Business Unit Manager for the Artichokes, Pepper and Mango.
Technical Industrial Engineer from the Universidad Politécnica de Madrid, with a master in Operations Management from the Instituto de Empresa de Madrid. He has wide experience in industrial management guaranteeing the efficient management of resources. He has worked as industrial director in Spanish leading companies such as Vensy España S.A., producer of high quality smoked fish, as well as in Solan de Cabras, producer of mineral water, juices and nectars. He also manages the implementation of the SAP system in the industrial environment, and has acted as Manufacturing Manager Proyect SAP in Danone S.A., a company that produces dairy products such as yogurts, fat-free milk and other food. He also worked as operations and maintenance manager with more than 10 years working in Spain and Portugal.
Aldo Mongilardi FuchsHuman Resources Manager
An Industrial Engineer from the Ricardo Palma University in Lima, trained in the USA in Distribution Models. He has ample experience in logistics, supply chain management and order fulfillment in national and international mass consumption markets. Mr. Guinand also has experience in process re-engineering and automation. From 2007 to 2010 he was Corporate Distribution Director in Yanbal International, and during this period was responsible for improvement and standardization of the logistic processes at corporate level and the implementation of New Distribution Centers in Venezuela, México, Bolivia, Guatemala and Peru. He had previously worked in Unique as Director of Stores and Distribution, leading important projects in order fulfillment with successful results.
An economist from the Universidad del Pacífico, with an MBA from the Tecnológico de Monterrey. Mr. Fegale has more than 15 years experience in the Commercial, Trade and Shopper Marketing and Strategic Planning areas. He worked in Apoyo Consultoría for 3 years and in Procter & Gamble for more than 10 years. He has ample experience in the mass consumption sector, with expertise in new product launching, marketing plans and consumer understanding in Peru, Venezuela and Colombia, as well as the management of distribution channels. His last position was that of Regional Manager for Venezuela, Colombia and Peru for the diaper business.
Andrés Guinand López de RomañaLogistics Manager
Manzur FegaleAvocado and Grape
Business Unit Manager
Jesus Arasti BarriosIndustrial and Agricultural Services Manager
Ramón Camminati HiguerasArtichokes, Pepper and
Mango Unit Manager
Economist with wide experience in Business Process Management, redesign and continuous improvement of processes and organizational design. Design of processes for the implementation of ERP SAP. Likewise, he has experience in preparing strategic plans, private and public assessment of investment projects and projects financed with international cooperation sources such as the BID, GTZ, JBIC.Since 2008, she works with us here in Camposol as Process Manager. In 2011, she takes on the position of Corporate Process Manager for the Group D&C. Before this, she worked as an expert consultant in processes and was the Processes and Rationalization Manager in the Ministry of Housing, Construction and Sanitation, among other.
Rocio Enciso RiveraQuality Management Manager
An Agricultural Engineer from the National Agrarian University in La Molina, Lima with an MBA from ESAN University, Mr. Molina has wide experience in the agro-industrial sector. He began his career CAMPOSOL 14 years ago as Head of Parcel; subsequently he became Head of Farm and in 2004 was appointed Superintendent of New Areas, responsible for the planting of 2.000 hectares of asparagus. In 2004 he was named Manager of New Crops managing a 1,400 hectare plantation of avocado, grape and mandarins in La Libertad. He was appointed to his present position in 2011.
Pedro Javier Morales GracésManager of the Asparragus
Business Unit
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ANNUAL REPORT 2012
2.8 Organizational Chart
Tangerine and Pomegranate
Superintendence
Plant Production Equipment
Piquillo Pepper, Artichoke and
Mango Business Unit
BU ManagerRamon Camminati
BU ManagerJavier Morales
Asparagus and Plum Agricultural
ManagerOscar Fernández
Asparagus Operations Manager
Javier Morales
Superintendence Superintendence SuperintendenceSuperintendence /Headship
CANNED FRESH AND FROZEN
Sales Executive
Sales Executive
Sales Executive
Asparagus Business Unit
Business Analyst
BU Head
Business Analyst
BU Head
Business Analyst
BU Head
Commercial Director
José Antonio Gómez
General Counsel
Guillermo Lohmann
Human Resources Manager
Aldo Mongilardi
Corporate Affairs Manager
Francesca Carnesella
Industrial and HarvestServices Manager
Jesús Arasti
CEO
Samuel Dyer
Fruits Business Unit
BU ManagerManzur Fegale Gómez
Piquillo Pepper and Artichoke Operations
ManagerManuel Alvarado
Mango Operations Manager
Gustavo Miashiro
Avocado Operations Manager
Javier Alegre
Grape Operations Manager
Logistics Manager
Andrés Guinand
Management Quality Manager
Rocío Enciso
Commercial Manager of Canned
Luis Miguel Banante
Corporate Manager Information Technology
Gino Herrera Reyna
CFO
Jorge Ramírez
Research anddevelopment Manager
Piero Dyer
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ANNUAL REPORT 2012
2.9 Legal Structure
Marinasol S.A.
33%
54%
0.01%
12.73%
60.16%
46%
68%
87.27%
9%
68%
67%
23%
Camposol Holding PLC
Siboure Holdings Inc.
Grainlens Ltd.
Blacklocust Ltd.
Madoca Corp.
Campoinca S.A.
Camposol Europa S.L.
Camposol Fresh B.V.
Camposol S.A.
Marinazul S.A.
94%
Camarones S.A.C. Domingo Rodas S.A.
39.83%
32%
Persea INC
Camposol Specialities INC
Camposol Fresh USA INC
Muelles y Servicios Paita S.R.L.
Prodex E.I.R.L.
Empacadora de Frutos Tropicales SAC (Empafrut)
Nor Agro Perú S.A.C.
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ANNUAL REPORT 2012
2.10 Brief History
CAMPOSOL is an agro-industrial company which operations began in 1997 with the purchase of the first strip of land in the northern part of Peru (La Libertad). During the same year, further land was acquired through a public auction by the Special Chavimochic Project.
The Chavimochic irrigation project provided water to more than 47,000 hectares of desert on the northern coast of Peru, generating a total investment of more than USD1,000 million. At present, as a result of this project, 15,000 hectares have been developed in its zone of affluence by several companies.
The acquisition and development of land in Piura began in 1998 with a first stage of 2,800 hectares. CAMPOSOL established its central headquarters in the Chavimochic area where its first agricultural operations began.
By the end of 1999, the Company began its agro-industrial exports. These are processed until today in the Chao industrial complex located in the Viru province, La Libertad department.
The vision and commitment of everyone involved resulted in CAMPOSOL quickly becoming a leading Peruvian agro-industrial company, annually occupying first place in agro-exports and generating, in high seasons, more than 10,000 direct jobs.
Today, the Company has a total of 24,216 hectares in the areas of Chao, Viru and Piura (all three areas located in northern Peru). The CAMPOSOL agro-industrial complex consists of
six processing plants, three of which are focused on processing canned or glass jarred products (preserved), one on frozen products, and the rest are directed for fresh produce. It also owns a participation in a mango packing operation in Piura. Additionally, in 2006 CAMPOSOL also started a shrimp business in the North of Peru which has been consistently growing since then, having today more than 600 operating has, as well as the most modern R&D facility in the region.
In the last years CAMPOSOL successfully revised its strategies and plans in order to adapt to the new market conditions. In this context, CAMPOSOL decided to concentrate in increasing its farming of avocado and introducing new products such as red table grapes and citrus fruits, gaining major efficiencies in its operations as well as research and development of new products.
To date, CAMPOSOL is the largest exporter of asparagus in the world and aims to be the largest producer of avocado in the planet. Also, there are more than 450 ha. of grapes, 100 ha. of citrus, and the Company has successfully finalized the Yakuy Minka project (7-A), the largest private irrigation project in Peru which will allow us to irrigate 1,500 has. on a first stage, and an additional 2,000 has. on a second stage.
As a more mature company, CAMPOSOL is now focusing in innovation and increasing its marketing skills, through a more active international presence and allies with deep experience and coverage around the world. Given the performance experienced in the last decade, the Company can look forward with optimism supported by the solidity of its operations.
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ANNUAL REPORT 2012
Products & categories
CAMPOSOL considers very important to maintain a diversified portfolio of products, in order to better exploit the selling windows and optimize its harvesting, packing, sales and marketing efforts.
CAMPOSOL’s main products are: asparagus (white and green), avocado, piquillo and sweet peppers, mangos, grapes, artichokes and citrus (tangerines). The company also has a shrimp production center (Marinazul) in the north of Peru. All production is currently oriented to the export markets.
Products Categories Main destinations
Green and White Asparagus
Fresh, preserved and frozen
Japan, France, Canada, Germany, The Netherlands, Belgium, Spain and USA.
Avocados Fresh and frozen Japan, Canada, Sweden, Germany, France, Spain, UK, The Netherlands and USA.
Mangoes Fresh, preserved and frozen
USA, Japan, Spain, Canada, Sweden, France, The Netherlands and UK.
Grapes Fresh Russia, Thailand, The Netherlands, Panama, USA and China.
Peppers Preserved USA, Spain, and Germany.
Artichokes Preserved USA, Spain and Germany.
Shrimp Frozen USA
CAMPOSOL continues to be a leading company in the Peruvian non- traditional agro-industry exports with total revenues of USD 183.2 million. The Company has three main product categories: Fresh, Preserved and Frozen. 35% of total reve-nues in 2012 corresponded to preserved products, 41% to fresh products, 10% to frozen products and 14% to shrimp and other products.
During 2012 we experienced a moderate “El Niño” effect, which increased the average temperature from April thru August. The adverse climate conditions had a negative impact on company volumes, specially on avocado and asparagus with a volume decrease for the year of 26.8% and 18.4% respectively. This resulted in higher unitary costs by the absorption of fixed costs on lesser volumes.
Asparagus
One of CAMPOSOL’s main products is the white asparagus which represents more than 30.8% of the Company’s total sales and 82.8% of the total asparagus sales of 2012. Any variation in prices, costs and volumes of this product may have an important impact over the Company’s financial performance.
Due to climate characteristics of Peru, asparagus is harvested all year-long but fresh asparagus´s sales are stronger in the first and fourth quarter. Clearly CAMPOSOL and the other Peruvian producers have an advantage regarding other producing countries, since they are able to offer product outside the traditional windows of the Northern Hemisphere consumption.
The Company sold 5,357 net MTs of fresh white asparagus at an average price of USD 3.66 per net KG during 2012, representing an increase of 17.2% in volume sold and a price increase of 1.2% compared to 2011.
CAMPOSOL sold a total of 14,962 net MTs of preserved white asparagus in 2012, which represented a decrease of 1.5% over the same period in 2011. The average price of the preserved white asparagus sold in 2012 was USD 2.41 per net KG, which was 16.7% higher than during the same period in 2011.
In 2012, total gross margin for asparagus was 18.0%, down 5.1pp (percent points) from the same period the year before.
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ANNUAL REPORT 2012
Avocado
Avocado is the most profitable product on CAMPOSOL’s portfolio, with a gross margin of 51.8% and thus, reductions of volume affect profitability of the company much more than any other crop.
CAMPOSOL sold 11,830 net MTs of fresh avocado during the 2012, at an average price of USD 1.86 per net KG representing a decrease of 25.2% in volume sold and a decrease of 13.4% in price levels compared to the same period of 2011.
As it was previously mentioned, volumes were affected by climate conditions in Peru, while prices were affected by peak production volumes in Mexico and California, which directly affected the US market.
CAMPOSOL sold 2,266 net MTs of frozen avocado in 2012, which represented an increase of 26.7% over 2011. The average price of the frozen avocado sold during 2012 was USD 4.01 per net KG, which was 21.6% higher than 2011.
During 2012 total gross margin for avocado was 51.8%, down 14.8pp (percent points) from the same period the year before.
Pepper
During 2012, CAMPOSOL sold 7,589 net MTs of preserved piquillo peppers at an average price of USD 1.95 per net KG. This represents a decrease of 22.8% in volume sold and a price decrease of 6.3% compared to 2011.
During 2012 total gross margin for pepper was 16.2%, down 9.2pp from the year before. As piquillo pepper is mainly sold to Spain, the crisis in that country affects directly the crop´s performance.
Mango
During 2012 CAMPOSOL sold 8,374 net MTs of fresh mango at an average price of USD 1.05 per net KG. This represents a decrease of 19.6% in volume sold and a price increase of 13.4% compared with 2011.
In 2012 CAMPOSOL sold 2,715 net MTs of frozen mango at an average price of USD 2.05 per net KG. This represents a decrease of 29.4% in volume sold and a price increase of 31.8% compared to 2011.
Total gross margin for mango was 12.9%, down 13.3pp (percent points) from the year before.
Grapes
Grapes are usually harvested during the fourth quarter; therefore significantly lower volumes are normal during the other quarters.
The company sold 7,585 net MTs of fresh grape at an average price of USD 2.38 per net KG. This represents an increase of 18.2% in volume sold and a price increase of 3.4% compared to 2011.
Grapes were one of the crops affected by lower than projected volumes and
higher unitary costs due to unfavorable climate conditions.
During 2012 total gross margin for grapes was 34.9%, down 11.2pp (percent points) from the previous year.
Artichokes
In 2011 the Company started again its operations on this crop, which had previously been discontinued in 2008 due to poor results. After a successful pilot, the size of the operation was significantly increased in 2012. It is worth mentioning, that this crop is mainly from third parties.
CAMPOSOL sold 3,505 net MTs of preserved artichoke during 2012, at an average price of USD 2.80 per net KG representing an increase of 351.1% in volume sold and an increase of 10.2% in price compared to 2011.
During 2012 total gross margin for artichoke was 24.5%, down 7.9pp (percent points) from 2011.
Shrimp
CAMPOSOL sold 2,463 net MTs of shrimp during 2012 at an average price of USD 8.03 per net KG. This represents an increase of 50.7% in volume sold and a price decrease of 1.4% compared to 2011. Such increase in volumes comes from the investments performed in 2011 to upgrade the acquired ponds. During 2012 total gross margin for shrimp was 19.8%, down 0.1pp (percent points) from 2011.
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Board of Directors report
4.1 Main Activities
CAMPOSOL is an agro-industrial company that integrally manages its supply chain: its own fields, processing and distribution. CAMPOSOL’s portfolio includes the following products: asparagus, avocado, piquillo and sweet peppers, mangoes, grapes, artichokes and citrus (tangerines) which are packed fresh, frozen or canned, and exported to the world. It also operates a shrimp farming business under its subsidiary Marinazul.
The planted fields and packaging facilities are located in Peru, in the departments of La Libertad, Piura and Tumbes. The company owns most of the fields where its products are sowed and harvested, having total control of the growing, harvesting and packing phases of its final products. It also has alliances and technical relations with other growers to process and commercialize their products, assuring same quality standards to clients.
In order to ensure high service levels to its clients and to monitor in a close manner trends in its main markets, CAMPOSOL has strengthened its commercial arms through direct offices in Europe and the United States of America.
4.2 Market SituationDuring 2012 CAMPOSOL’s products were exported to 39 countries. Europe accounted for 56% of our sales, US 27%, Asia 9% and others 8% and all of them showed good interest for our products throughout the year despite the financial slow down in important markets.
FRESH PRODUCTS:
Avocado:
The US market, which is the largest world market for Hass avocados, will continue to grow fueled by a marketing investment of over USD 40 million a year in promotional and R&D activities managed by the Hass Avocado Board. The 2012 season had many twists, turns and surprises. The biggest surprise was the unusually large volumes available from California and Mexico. California production went up 50% when compared with the previous year, totaling 420 million pounds for the season, while imports from Mexico into the US increased almost 30%, in both cases due to favorable weather and crop conditions. On the other side, Peruvian avocados faced a double challenge: higher volumes from traditional suppliers and having to consolidate its image on its first complete season on this market, which resulted on a price decrease of 13% compared to 2011.
Europe, a much smaller market when compared to the US, presented more favorable conditions due to lower volumes from Spain and a moderate crop from South Africa. Peru played a balancing act, trying to keep European markets well supplied but not to the extent of oversupplying. Volumes exported from Peru were 7% higher than 2011, reaching 75 thousand MT, due to new planted areas becoming productive. CAMPOSOL experienced a 22% drop in volume vs. 2011 due to unfavorable weather
conditions (mild “El Niño”) combined with the natural alternate bearing of the crop (off year).
Asparagus:
Overall market prices for green and white asparagus improved significantly when compared to previous years. Demand in the US, Europe and Asia increased, and supply in Peru decreased due to the aging of fields and crop replacement. CAMPOSOL fresh white asparagus season was very successful, with over 1 million cases sold directly through our commercial office in Europe. In Germany, the most important market for this product, we managed direct supply agreements at fixed prices with main supermarket chains, in which we ran direct promotions which helped to further increase consumption and thus reduce dependency on spot market sales.
Grapes:
Peruvian production of table grapes continued to grow above 20% per year due to extraordinary agronomical conditions and attractive commercial windows in key markets. Red Globe is the main variety in Peru, accounting for over 70% of total production, but with a growing trend of new seedless varieties. CAMPOSOL produces mainly Red Globe in its northern fields where harvest occurs early in the season, allowing us to supply the Asian and Russian Market during an attractive price window. During 2012 we managed to sell 18% more volume than in 2011 at a 3% higher price.
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PRESERVED PRODUCTS:
Asparagus:
Overall market prices for preserved green and white asparagus have improved significantly vs. previous years. China’s increasing labor costs and focus on strong internal market consumption have challenged their exporting capabilities. We saw some level of shortages on the market during this year, inventories were depleted and not much incremental offer came from China or Peru. Camposol prices for the 2012 season increased by 20%.
Peppers:
Spain is the main market for Piquillo Peppers, and distributors there were carrying large inventories which reduced both their purchase orders and the prices they were willing to pay. CAMPOSOL diversified to the Morron variety, which experienced better market situations in the US.
Artichokes:
CAMPOSOL re incorporated this product to its portfolio, after discontinuing operations in 2008, but this time with a renewed strategy based on 100% third party sourcing from more than 200 growers. The market conditions for the crop were fairly good during the first part of the year, but increased supply from Peru and other producing countries caused inventories to slow down and thus, prices to drop. The Company managed to sell USD 9.8 million in 2012 generating a gross margin of USD 1.9 million.
FROZEN PRODUCTS:
In relation to frozen products, the market continued to be strong and CAMPOSOL managed to position itself as a reliable supplier with strong food safety standards and international certifications that allowed the Company to serve the most demanding customers in countries such as Japan and USA. Our main frozen products are mangos, avocados and asparagus. This business has grown consistently and current demand has surpassed capacity and owned raw material availability, giving us the opportunities to further invest on infrastructure and pursue an aggressive third party sourcing program for raw material. During 2012, there were significant price increases: 22% price increase on Avocados, 32% price increased on Mangos, and 42% price increase on green asparagus.
4.3 Company StrategyIn line with the Company’s vision of becoming an internationally admired provider of high quality branded agricultural products, CAMPOSOL´s strategy is supported by the following rationale:
Be an internationally admired provider of highquality branded agricultural products.
Build a Company with USD 500 million of sales and 20% of EBITDA in 2017 while creating social value to our prioritized stakeholders and reducing our
environmental impact.
Growth of Profitable Sales
Cost and Risk Optimization Capacities
Get key strategic
skills
Create high performance
culture
Implement SRC priority programs
Ensure strategy financing
Implement IT tools to improve decision
makin
4.4 Summary of the Year2012 was a year of consolidation for CAMPOSOL. The Company’s new matrix structure with Business Unit Managers that oversee all processes of their crops and ensure their profitability has almost a year in place and is proving to be successful. Also, the reinforcement of its Commercial and Marketing team as well as the opening of a new commercial office in the US and the strengthening of the existing one in Europe have allowed CAMPOSOL to increase its direct sales rate, one of the Company’s main objectives for the years to come.
Similarly, strategic alliances with companies abroad and local producers have fostered CAMPOSOL´s continuous growth, benefiting from its efficient logistic and commercial platforms and expanding its horizons in terms of volumes and new possibilities of year round supplies. Also noteworthy, at the beginning of 2012, the Company was able to restructure its long term debt by the successful issuance of a USD 125 million 9.875% senior unsecured notes due 2017, thus ensuring a sound financial structure and the possibility to continue investing in the Company’s growth in the short and medium term.
The consolidation of these structural changes within CAMPOSOL, together with the implementation of its current five year strategic plan, will allow the Company to achieve its vision while building a much bigger and profitable company for its stockholders, creating social value to all of its stakeholders while reducing its environmental impact.
Regarding revenues, in 2012, CAMPOSOL’s total sales amounted to USD 183.2 million, a 9% increase from 2011. This is mainly explained by higher volumes from third parties and higher selling prices in most products. Unfortunately, there was a mild “El Niño” which impacted negatively our own volumes and thus increased unitary costs, which combined by a reduction on avocado prices in the US, due to record high productions of California and Mexico, resulted on an EBITDA of USD 17 million, significantly lower than the USD 30.8 million in 2011.
On the other hand, during the last three years, CAMPOSOL has experienced a remarkable growth in its level of employees, from 10 to 13 thousand workers during peak seasons, foreseeing to reach 15 thousand employees by 2016, becoming the first employer of the country, based on the company’s growth strategy in new products, like blueberries and grapes, and the consolidation of its frozen business, among others.
Thus, CAMPOSOL actively implements programs that develop the potential of the employee in order to encourage
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and retain talent and assure the adequacy of the workers with the required job profiles, as well as supporting our certification programs regarding various tasks performed by the company, such as BASC, GLOBAL GAP, HACCP, Global Compact, BSCI, TESCO and SA8000.
Another remarkable achievement for CAMPOSOL during 2012 was to be recognized as the leader in terms of agribusiness corporate reputation by a survey conducted by “Diario Gestión” (Peru). This is the result of the Company´s active corporate social responsibility programs and its constant environmental concerns, which prompts us to keep promoting sustainable development of our stakeholders in areas of influence and society in general.
CAMPOSOL believes that innovation is a key aspect to boost competitiveness and growth in the mid and long term. We are constantly performing field trials of new crops to evaluate their technical, economic and commercial viability in order to continue diversifying crops and complementing our portfolio for our clients.
The Company is currently focused on adding value to its clients through commercial, marketing and service initiatives which should result in higher
margins. Additionally, CAMPOSOL is analyzing new opportunities to consolidate its leadership through additional planting of current crops, planting of new crops, strategic alliances and acquisitions.
Finally, CAMPOSOL will continue positioning itself in the US market, the largest and fastest growing market for avocado in the world, now open for Peruvian produce and in other markets with high growth potential. With only one third of the new fields having given first harvest during this year, current results are in line with the Company’s expectations.
4.5 OperationsCAMPOSOL competitive advantages in operations consist in its complete and integrated control of the whole production chain. We are one of the few companies in the world, which produces with its own harvest materials. Its operations have undergone a process of change since its creation in 1997, and are now headed by business unit managers that are responsible for the results, from top to bottom line, of each crop.
In 2012, operations were located in the departments of La Libertad with 5,288
seeded hectares and Piura with more than 1,192 seeded hectares. In La Libertad, White and Green Asparagus, Avocado, Tangerines, Artichoke, Blueberries, Piquillo Peppers and Grapes are cultivated. The Company also has a plant there that processes, packages and stores our products. In Piura, the company produces Mangoes, Peppers and Grapes. The Shrimp is produced in Tumbes.
During 2012, the operation consisted of crop management, harvesting and processing of our three major categories: fresh, preserved and frozen. We strengthened our focus on improving production efficiencies and continued on our plan to automate labor intense process. In line with this, one asparagus peeling machine was installed which together with the 8 installed up until 2011 are able to process 40 MT / day or 36% of total volume to be peeled during the peak season.
Throughout 2012, the Company also worked on further improving its crop protection system, having as a fundamental pillar the use of biological control and plant extracts with very low impact on the ecosystem. Habanero pepper extract also allowed significant savings in key pest control for the asparagus, peppers and avocado. In addition, we strengthen
our modern bio-technology lab, which will introduce important improvements in our agricultural operations in the future.
During 2012, the Company invested USD 24.7 million (19.7 in 2011), out of which USD 10.5 million were spent in the maintenance of the new planted areas, mainly of avocados, blueberries and tangerines, USD 10.4 million in equipment and infrastructure in order to improve the packing facility, fields and offices and USD 3.8 million in the additional planting of other products (current and new).
As of 31 December 2012, CAMPOSOL had 2,516 Has of asparagus, 2,616 Has of avocado, 450 Has of mango, 451 Has of grapes and 102 Has of tangerines planted. In addition it also has 635 Has of shrimp ponds farmed, 291 Has of pepper, 40 Has of artichoke and 206 Has of blueberries.
4.6 Working EnvironmentCAMPOSOL is the third largest employer of Peru reaching up to 13,000 workers during peak seasons. As an active member of the Global Compact of the United Nations, we act in accordance to the highest ethical principles, aiming to be an example of compliance with labor and social standards, both local and international, with a clear orientation to promote the well being of all of our employees.
Thus, CAMPOSOL provides equal opportunities and working conditions for all employees, regardless of race, color, gender, religion, sexual or political orientation in all of its operations. During the last three years, CAMPOSOL has had a remarkable growth in its level of employees, from 10,000 to 13,000 workers during peak seasons. We foresee to reach 15,000 employees by 2016, and becoming the first employer of the country, based on the company’s growth strategy in new products, like blueberries and grapes, and the consolidation of our frozen business, among others.
During peak seasons, the shortage of manpower in our areas of operations, La Libertad and Piura, has led us to seek for workers in other regions of the country, mainly from the North East.
During 2012, efforts were centered in the development of strategic skills in our workers in order to train and guide them through their personal growth, with the support of a continuous process of acquisition, strengthening and transformation of individual skills and commitment to corporate motivation. Similarly, we have implemented programs that will develop the potential of the employee in order to encourage and retain talent and assure the adequacy of the collaborator with the required job profile, as well as supporting our certification programs regarding various tasks performed by the company, such as BASC, GLOBAL GAP, HACCP, Global Compact, BSCI, and TESCO. Additionally, CAMPOSOL offers other services and benefits to its employees such as personal loans for health or housing, financial benefits for the schooling of their children, as well as counseling and economic benefits to support a death in their families, among others. In the same manner, the Company pays close attention to its employees’ family health, or work problems, among others attended by skilled personnel. In addition, the Social Welfare area coordinates various integration and entertainment activities during the
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4.7 Research & DevelopmentCAMPOSOL believes that innovation is a key aspect to boost competitiveness and growth in the mid and long term. Through market research and analysis of potential new products that could benefit us from the Peruvian climatic advantages and the development of field trials to evaluate the technical, economic and commercial viability of new crops, we seek to diversify our portfolio of products and clients.
The R&D department seeks to find innovative solutions to extend the shelf life of fresh produce and reduce production costs. For example during 2012, with R&D’s support, Camposol was able to extend the shelf life of white asparagus 15 days and reduce the mortality rate of shrimp.
4.8 Social ResponsibilitySince 2008, CAMPOSOL chooses to develop business under the sustainable development approach as an intelligent way of doing business, while respecting human rights and committing to support the society through sustainable projects. Thus, to ensure business sustainability it is a prerequisite to assure that ethical principles, respect for people and the environment are met by acting according to the challenges of sustainability defined by the Company with the advisory support of Pricewaterhouse Coopers.
CAMPOSOL was the first Peruvian agro-industrial company to present a Sustainability Report two years ago. This year our goal is to achieve a “B+” Global Reporting Initiative (GRI) validation, which will demonstrate our commitment to excellence in the management of social responsibility within and outside the organization, developing the highest sustainability among international standards.
We invite you to review our Sustainability Report 2011 on our website: www.camposol.com.pe
year, as well as celebrations such as Labor Day, Mother’s and Father’s Day, among others. CAMPOSOL strongly encourages sports activities, by always providing the time and infrastructure to perform them. As an example, our internal “Olympic Games” which includes a diverse range of sports, have a large turnout and are very enthusiastic and competitive.
During 2012, company implemented the assessment and categorization of its working places which were compared to market compensations statistics. Key success factors for each area and its contribution to company’s result were mapped and will constitute the bases for performance evaluations to be implemented in 2013. Complementarily, CAMPOSOL conducted extensive working environment surveys take into account the perceptions and needs of our employees. The main findings of this study will complement the action plans that complement the management by performance initiative.
4.9 Financial ResultsIn 2012 CAMPOSOL’s total sales amounted to USD 183.2 million (USD 167.8 million in 2011). The main reasons for the increased revenues for the full year 2012 were higher volumes from third parties and higher selling prices of all products, except for avocado, pepper and mango. Average price during 2012 was USD 2.58 per net KG, up 13.7% from 2011.
Total COGS was USD 138.3 million (USD 109.5 million in 2011), representing around 75% of total sales (65% in 2011).
Gross profit decreased to USD 44.9 million (USD 58.3 million in 2011), which resulted in a healthy gross margin of 24.5% as opposed to 34.7% in 2011. The main reasons for the decreased gross profit and margin were due to the unfavorable climatic conditions that affected volumes and thus unitary costs, especially asparagus, avocado and grapes.
Administrative expenses amounted to USD 20.1 million (USD 19.1 million in 2011).
Selling expenses amounted to USD 23.0 million (USD 20.6 million in 2010), as a result of increases of higher volumes sold.
Financial costs amounted to USD 17.9 million (USD 8.5 million in 2011). Such increase is mainly explained by higher interest expense due to the increase in debt after the bond issuance at the beginning of the year.
In 2012, profit amounted to USD 7.5 million compared to USD 33.3 million during the same period last year as a
consequence of lower gross margin, lower adjustment from change in fair value of biological assets and higher financial costs, as explained above.
EBITDA (b.f.v.a.) amounts to USD 16.9 million (USD 30.8 million in 2011).
During 2012, non-current assets increased to USD 377.8 million compared to USD 333.5 million at the end 2011 mainly due to an increase in the non-current portion of biological assets and property, plant and equipment.
Inventories increased to USD 52.7 million at the end of 2012, compared to USD 44.3 million at the end of 2011. Such increase is mainly explained by an increase in the inventory of finished products especially artichoke produced during H212, which will be sold in H113.
Trade accounts receivable increased from USD 29.4 million at the end of 2011 to USD 39.6 million at the end of 2012 This is explained by the additional USD 15 million sales in Q412 compared to Q411
As of 31 December 2012, trade payables were USD 51.3 million, USD 11.2 million higher than at the end of the year 2011. Such increase is mainly explained by higher purchases in Q412 (USD 49.8 million vs. USD 40.9 million in 2011) and the extension of credit terms with selected suppliers.
As a result, total working capital (trade accounts receivable + inventories – accounts payable) increased to USD 41 million at the end of 2012 from USD 33.7 million at the end of 2011. Current
working capital as 31 December 2012 is 22.4% of sales (20.1% at the end of 2012).
Total liabilities increased to USD 260.4 million compared to USD 165.7 million at the end of 2011.
The Company’s debt increased from USD 90.5 million at the end of 2011 to USD 164.9 million at the end of 2012, mainly due to long-term debt. Company’s debt includes USD 121.6 million of the senior unsecured notes (USD 57.6 million of the syndicated loan at the end of 2011), USD 29.8 million of working capital financing (USD 25.8 million), USD 10.2 million in leasings (USD 2.6 million), and USD 3.3 million to sellers of acquired companies (USD 4.5 million).
During 2012, the company used USD 13.9 million (generated 9.5 million in 2011) in operations and invested USD 24.9 million (19.6 million). In financing activities, company raised USD 60.7 million, resulting in a net increase in cash of USD 21.9 million (decrease of 3.3 million in 2011). The company ended the year with USD 28.5 million in cash (6.6 million).
4.10 Allocation of Net IncomeThe Board of Directors has proposed the net income of CAMPOSOL to be attributed to Retained earnings. The proposal is a reflection of the wish to strengthen the equity position of the company.
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4.11 Shares and shareholdersLargest 20 Shareholders as of 31 December, 2012
Investor Shares Percentage
1 DYER-CORIAT HOLDING, S.L 8,571,000 28.73%
2 EUROCLEAR BANK S.A./N.V. ('BA') 6,602,098 22.13%
3 ANDEAN FISCHING L.L.C 3,380,100 11.33%
4 CAMPOSOL S.A. 2,613,130 8.76%
5 FONDO DE INVERSIÓN AGROINDUSTRIAL 1,908,750 6.40%
6 WEILHEIM INVESTMENTS S.L. 1,338,913 4.49%
7 PERU LAND FARMING LLC 960,695 3.22%
8 QVT FUND V LP I 893,741 3.00%
9 QVT FUND LP 707,287 2.37%
10 DEUTSCHE BANK AG LONDON 685,008 2.30%
11 CAMPOSOL HOLDING PLC 355,372 1.19%
12 JPMORGAN CHASE BANK 265,462 0.89%
13 QVT FUND IV LP I 152,329 0.51%
14 JUSTNES REDERIAS 145,300 0.49%
15 MP PENSJON PK 137,000 0.46%
16 JAHRMANN AS 125,200 0.42%
17 BANK OF NEW YORK MELLON SA/NV 107,110 0.36%
18 CLEARSTREAM BANKING 102,108 0.34%
19 SIX SIS AG 25PCT 87,128 0.29%
20 MILLCOM NORGE AS 60,000 0.20%
TOTAL TOP 20 29,197,731 97.88%
OTHERS 636,089 2.12%
TOTAL 29,833,820 100.00%
4.12 Contingency Plan, Risk Management and Uncertainties CAMPOSOL annually identifies and evaluates risks that could affect the achievement of its objectives, and establishes permanent specific control and monitoring activities to mitigate these risks accordingly. The internal controls are detailed in the Company’s main rules and procedures which are incorporated as systematic controls through SAP, supporting a good internal control environment. The risk, control and fraud master templates have been completed for most of the core processes and activities which encompass all internal control, enterprise risk management and fraud detection policy based on the COSO framework model. Furthermore, the Enterprise Risk Management project started in 2011 will be completed during 2012 all strategic risks were mapped and mitigating action plans are being prepared.
CAMPOSOL also applies integrated business principles in accordance with international standards, which reflect its commitment to health, safety and environment.
The preservation of the environment is one of CAMPOSOL’s main concerns. The production process involves factors and conditions that interact with the environment, such as the use of water, fertilizers, generation of waste through emissions and solid waste management. Among some of the Company’s practices to ensure
the preservation of the environment, CAMPOSOL is currently implementing environmental education, internal campaigns, specialized treatment systems, quality management systems, certifications and community relations programs.
4.13 Financial Calendar
CAMPOSOL Holding PLC Financial Calendar 2012
28.02.2012 Non-audited Results 2011 / Q4 2011 19.04.2012 Audited Financial Results 2011 05.05.2012 Q1 2012 12.08.2012 Q2 2012 19.10.2012 Q3 2012
CAMPOSOL Holding PLC Financial Calendar 2013
28.02.2013 Non-audited Results 2012 / Q4 2012 26.03.2013 Audited Financial Results 2012 16.05.2013 Q1 2013 16.08.2013 Q2 2013 29.10.2013 Q3 2013
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ANNUAL REPORT 2012
4.14 Future ProspectsThe Company is currently focused on adding value to its clients through commercial, marketing and service initiatives which should result in higher margins. Additionally, CAMPOSOL is analyzing new opportunities to consolidate its leadership through additional planting of current crops, planting of new crops, strategic alliances and acquisitions.
CAMPOSOL will continue positioning itself in the US market, the largest and fastest growing market for avocado in the world, now open for Peruvian produce and in other markets with high growth potential. With only one third of the new fields having given first harvest during this year, current results are in line with the Company’s expectations.
4.15 AuditorsThe auditors, PricewaterhouseCoopers Limited (PwC) have expressed their willingness to continue in office.
4.16 Corporate GovernanceCAMPOSOL is committed to sound corporate governance practices that strengthen the trust in the Company and thereby contribute to the greatest possible value creation over time, for the benefit of its shareholders, collaborators and other stakeholders in accordance with the Norwegian Code of Practice for Corporate Governance. Camposol´s Corporate Governance rules are set in the Annual Report, section 6.
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ANNUAL REPORT 2012
Key Investment Considerations
A combination of strong fundamentals, solid strategy, management capacity and corporate governance place in a unique position in the competitive landscape.
• Strategic Location: The Peruvian Climatic Advantage. • Due to its location in the Peruvian coastal desert plains, the crops are
exposed to reduced variations of temperatures throughout the year which supports higher yields.
• In addition, company is able to commercialize its products in windows in which there are lower volumes from traditional producer countries (counter-cycle).
• Vertical Integration: CAMPOSOL is present in the entire value chain, and has the flexibility to commercialize its products fresh, preserved or frozen.
• Diversified Product Portfolio: CAMPOSOL produces five of the most important non traditional export produce.
• Global reach with World Class Customers: • Products are sold by the leading retailers in Europe and USA. • Low client concentration risk: Company has been gradually reducing its
exposure to one client. In 2007 the largest client accounted for 25% of total sales while in 2012 only for 16%.
• Future Strong Growth without additional planting investments: • Only 32% of Avocado’s planted area are fully matured and thus generating
the optimum yields. • They will all reach maturity in a 1 to 4 years term. • The US, which is the largest market for avocados, was fully open for
Peruvian products in 2011 as the cold treatment was no longer required. • Strong competitive position versus local peers due to its scale.
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ANNUAL REPORT 2012
Corporate Governance
CAMPOSOL is committed to the practice of sound corporate governance, which strengthens the confidence in the Company and contributes, as a result, to the best possible value for the shareholders, the employees, and other stakeholders. The objective of corporate governance is to regulate the division of roles between shareholders, the Board, and management in a more comprehensive way compared to what is required by current legislation.
CAMPOSOL HOLDING PLC (CAMPOSOL or the Company) is a public company with limited responsibility, established and incorporated under the laws of Cyprus. Furthermore, as CAMPOSOL is listed in the Oslo Stock Exchange (OSE) in Norway, it voluntarily complies with the Norwegian Corporate Governance Code as well as other relevant Laws and requirements of Norway.
The Norwegian Corporate Governance Board (NCGB) has issued the Norwegian Code of Practice for Corporate Governance (the Code). Adherence to the Code is based on the “comply or explain” principle, which means that a company must comply with the recommendations of the Code or explain why it has chosen an alternative approach to specific recommendations. The OSE requires listed companies to publish an annual overview of their policy on corporate governance in accordance with the Code applicable at the time.
The principles of CAMPOSOL’s corporate governance are based on the code published on 23 October 2012, which can be found on the web page www.ncbg.no.
The development and the improvements of the Company’s corporate governance principles constitute a continuous and important process, to which both the Board of Directors (the Board) and management find themselves very committed.
The management - and control - of CAMPOSOL are shared between the shareholders, represented by the General Meeting, the Board and the Chief Executive Officer (CEO) in accordance with the applicable company law and the company’s articles of association that are audited by an independent external auditor.
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6.1 Implementation and reports on corporate government
Code: The board of directors must ensure that the Company implements sound corporate governance practices.
The Board of Directors must provide a report on the Company’s corporate governance in the director´s report or in a document that is referred to in the director´s report. The report on the company´s corporate governance must cover every section of the Code of Practice. If the company does not fully comply with this Code of Practice, the company must provide an explanation of the reason for the deviation and what solution is selected.
The Board of Directors should define the Company´s basic corporate values and formulate ethical guidelines and guidelines for corporate social responsibility in accordance with these values.
The Board of CAMPOSOL is responsible for the implementation of solid corporate governance in the Company. As part of this, the Board and management hold an annual meeting to review the principles for corporate governance.
CAMPOSOL provides information on corporate governance in the Annual Report and on the Company’s web page www.camposol.com.pe.
Corporate values and ethical guidelines
Trust in CAMPOSOL as a company is essential for the continuance of the competitiveness of the group. The transparency seen in relation to the systems and procedures for the management of the group strengthens the creation of value, builds internal and external confidence as well as promoting an ethical and sustainable attitude towards the business.
CAMPOSOL has established the corporate values detailed in the Overview Section of this Annual Report. Also, The Company has ethical guidelines for all personnel, in accordance with these values. These are included in the Internal Working Rules (RIT) that presents the key criteria to direct the conduct of all company personnel, the policies of human resources as well as the published “Code of Conduct”.
CAMPOSOL CODE OF CONDUCT
1. Safety
The health and safety of our employees are priority concerns for CAMPOSOL, as well as preventing possible harm to the environment and interacting with the communities in our area of operations.
2. Responsibility
We respect occupational health and safety policies, conducting training in accident prevention and first aid, installing first aid kits, implementing contingency plans for earthquakes,
flooding and fire. Toxic substances are stored in a responsible manner.
3. Equality
We promote a positive and constructive working atmosphere in which there is no discrimination due to race, sex, sexual orientation, disability, marital state, age, religion or political ideology.
4. Integrity
We consider that abuse of authority and intimidation are unacceptable forms of behavior. By intimidation we mean any action that makes an individual feel threatened, humiliated or oppressed. Neither physical nor psychological ill treatment will be tolerated.
5. Horizontality
CAMPOSOL recognizes in theory and practice the right of all employees to establish working organizations under their own criteria and to collectively negotiate their conditions of work.
6. Transparency
The contracting of personnel and the acquisition of goods and services by CAMPOSOL will be carried out by the Human Resources Department and the Logistics Department respectively. The payment process is documented.
7. Coherency
CAMPOSOL does not participate in political activities and prohibits political campaigning in its production
facilities. It does however; respect the political options its employees may wish to exercise in their private activities.
8. Sobriety
The consumption, possession and distribution of alcoholic drinks, or illegal drugs are strictly forbidden in the Company, as is attendance at work under the influence of these.
9. Honesty
Bribery, unnecessary payments and other attitudes that could be considered as direct or indirect dishonesty are inadmissible.
10. Legality
All employees are informed of their rights, obligations and responsibilities.
CAMPOSOL, by means of its Chief Audit Executive has implemented a confidential complaints system where employees and third parties are able to formally and discretely present any complain they may have, with the assurance that they will be attended.
The Company has been admitted to the Global Compact of the United Nations Organization. This pact forces the Company to monitor progress in terms of human and labor rights, environment and corruption practices. CAMPOSOL also has a commitment to publish an Annual Report on social responsibility (Sustainability Report) and a Communication on Progress Report to be sent to the United Nations Global Compact also once a year.
The Company has set the following Social Responsibility guidelines
At CAMPOSOL we are constantly concerned about:
• The wellbeing of the community and our employees: Contributing to develop their quality of life, promoting elements that provide tranquility and human satisfaction.
• Care for the environment: Reducing the environmental impact created by the various Company activities by working under the highest environmental efficiency and sustainable development standards, so as to protect biodiversity and culture.
• Quality assurance and product traceability: Constantly satisfying the needs of our customers by knowing the location and path of our products along the productive chain at any given time.
• Development of products and markets: Re-thinking the market, constantly improving the quality of products so as to satisfy the changing needs of consumers and at the same time participate in markets where we have not competed previously.
• Creation and protection of shared value: Performing activities that create competitiveness in the long-term, reporting benefits to society and minimizing negative impacts to the environment; a win-win relationship.
• Reputation management: Building positive feelings and attitudes of the
stakeholders towards the Company, through the creation and protection of shared value.
To ensure compliance with these guidelines, CAMPOSOL has set up an IMS Committee (Integrated Management System) represented by members of the Company and employees. This committee contemplates security, environmental care, social responsibility and production and quality issues, among others.
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6.2 The businessCode: The Company’s business should be clearly defined in its articles of association.
The company should have clear objectives and strategies for its business within the scope of the definition of its business in its articles of association. The Annual Report should include the business activities clause from the articles of association and describe the Company’s objectives and principal strategies.
Nevertheless, a complete description of the commercial activities of CAMPOSOL as well as its objectives and strategies can be found in this Annual Report.Although the company has clear objectives regarding its business, in the last few years consultancies have been hired to review and define the strategies for the compliance of those objectives. Those strategies are expected to be defined during year 2013 and, thus, there is no definition to date of such matters in the Company’s articles of association. It is projected to include in the General Meeting’s agenda for 2014 an amendment to the articles of association in order to include objectives and strategies
within the scope of the definition of “business”.
Nevertheless, a complete description of the commercial activities of CAMPOSOL as well as its objectives and current strategies can be found in this Annual Report.
6.3 Equity and dividendsCode: The Company should have an equity capital at a level appropriate to its objectives, strategy and risk profile.
The Board of Directors should establish a clear and predictable dividend policy as the basis for the proposals on dividend payments that it makes to the general meeting. The dividend policy should be disclosed.
Mandates granted to the Board of Directors to increase the Company’s share capital should be restricted to defined purposes. If the general meeting is to consider mandates to the Board of Directors for the issue of shares for different purposes, each mandate should be considered separately by the meeting. Mandates
granted to the Board should be limited in time to no later than the date of the next annual general meeting. This should also apply to mandates granted to the Board for the Company to purchase its own shares.
Equity
The Board considers that CAMPOSOL’s equity is satisfactory. The amount of capital is sufficient and is constantly reviewed with regards to the company’s objectives, strategy and risk profile.
Dividend policy
The objective of CAMPOSOL is to provide the shareholders with a competitive return on capital invested, by means of a combination of distribution of dividends and an increase in the price of the shares. When evaluating the amount of dividends to be paid in future, the Board places its focus on security, foreseen ability and stable development, the company’s payment capacity, the solid and optimum capital requirements as well as the adequate financial resources for growth and investments in future, applicable legal or contractual restrictions and the wish to minimize the cost of capital.
Increases in Share Capital and purchase of own shares
At the Annual General Meeting (AGM) held on 23 May 2012, the Board was given an authorization to purchase CAMPOSOL shares with aggregate nominal value up to NOK 4,475,073, which corresponds to 10% of the current share capital.
The purchase price per share shall not be lower than NOK 5 and be higher than NOK 100. The method for acquisition and disposal of own shares shall be at the Board’s discretion.
This authorization was limited in time until the AGM is held in 2013, on 30 June 2013 at the latest.
In the board meeting held on 27 February 2012, the Board of Directors authorized the Company to repurchase own shares of up to 10% of the share capital of the Company offering a maximum price per share of NOK 26.45.
On 12 March, the Company announced an offer to repurchase own shares. As of 26 March, after the settlement of the offer, CAMPOSOL HOLDING PLC owns 1,087,372 own shares, equivalent to approximately 3.64% of the total shareholding.
On 7 June, the Company announced a second offer to repurchase own shares, and, as of 16 June , after the settlement of such second offer, Camposol Holding Plc and its subsidiaries own, together with those shares acquired on the first offer, a total of 2,968,502 own shares, equivalent to approximately 9.95% of the total shareholding. After settlement of the above mentioned offers, the Company owned 2,968,502 shares (9.95% of the total shareholding), which is the same amount as of 31 December 2012.
6.4 Equal treatment of shareholders and transactions with close associatesCode: The Company should only have one class of shares.Any decision to waive the pre-emption rights of existing shareholders to subscribe for shares in the event of an increase in share capital must be justified. Where the Board of Directors resolves to carry out an increase in share capital and waive the pre-emption rights of existing shareholders on the basis
of a mandate granted to the Board, the justification must be publicly disclosed in a stock exchange announcement issued in connection with the increase in share capital.
Any transactions the Company carries out in its own shares should be carried out either through the stock exchange or at prevailing stock exchange prices, if carried out in any other way. If there is limited liquidity in the Company’s shares, other ways to ensure equal treatment of all shareholders should be considered.
In the event of any not immaterial transactions between the Company and shareholders, a shareholder´s parent company, members of the Board of Directors, members of the Executive Management or close associates of any such parties, the Board shall arrange for a valuation to be obtained from an independent third party. This will not apply if the transaction requires the approval of the General Meeting pursuant to the requirements of the Public Companies Act. Independent valuations should also be arranged in respect of transactions between companies in the same group where any of the companies involved have minority shareholders.
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The Company should operate guidelines to ensure that members of the Board of Directors and Executive Management notify the Board if they have any material direct or indirect interest in any transaction entered into by the Company.
Equal treatment
The Articles of Association do not impose any restriction on the right to vote. All the shares have equal rights and there is only one class of shares in CAMPOSOL. The Company has issued 29,833,820 ordinary shares with a par value of EUR 0.01 each. Each share carries one vote, and gives equal rights in the Company.
In addition to this, the Company has issued 2,570,000 dormant shares each with a par value of EUR 0.01. The Dormant Shares are not listed on Oslo
Axess, nor registered with the VPS. The Dormant Shares have no voting rights and no dividend rights, and they only were created due to requirements under Cypriot law to have seven registered shareholders in a public company. The Dormant Shares are not included for the purposes of calculating the mandatory bid requirements and the requirements relating to disclosure of large shareholdings.
The Board of CAMPOSOL and executive management are committed to treating all shareholders equally and any transaction that the company carries out with its own shares is carried out by means of the Oslo Stock Exchange and in full compliance with its rules.
Transactions with close associates
In the case of any material transaction between the company and shareholders,
members of the Board, members of executive management or close associates of such parties; the Board will arrange for a third party independent evaluation.
If the fee exceeds 5% of the total CAMPOSOL share capital, such transaction will be approved by the shareholders at a General Meeting.
The directors and executive management will notify the Board if they have any direct or indirect material interest in any transaction in which CAMPOSOL is involved.
6.5 Free Negotiability Code: The Company’s shares must, in principle, be freely negotiable. Therefore, no form of restriction on negotiability should be included in a Company’s articles of association.
The shares of CAMPOSOL are freely negotiable. The articles of association do not impose any restriction on the transfer of shares. Additionally, CAMPOSOL is listed on the Oslo Stock Exchange.
6.6 General Shareholders’ Meeting (AGM)Code: The Board of Directors should take steps to ensure that as many shareholders as possible may exercise their rights by participating in general meetings of the Company and that general meetings are an effective forum for the views of shareholders and the Board.
Such steps should include:
• making the notice calling the meeting and the support information on the resolutions to be considered at the General Meeting, including the recommendations of the Nomination Committee, available on the Company’s website no later than 21 days prior to the date of the General Meeting.
• ensuring that the resolutions and supporting information distributed are sufficiently detailed and comprehensive to allow shareholders to form a view on all matters to be considered at the meeting
• setting any deadline for shareholders to give notice of their intention to attend the meeting as close to the date of the meeting as possible
• The Board of Directors and the person chairing the meeting making appropriate arrangements for the general meeting to vote separately on each candidate nominated for election to the company’s corporate bodies
• ensuring that the members of the Board of Directors and the Nomination Committee and the auditor are present at the General Meeting
• making arrangements to ensure an independent chairman for the General Meeting
Shareholders who cannot attend the meeting in person should be given the opportunity to vote. The company should:
• Provide information on the procedure for presentation at the meeting through a proxy.
• Nominate a person who will be available to vote on behalf of the shareholders as their proxy.
• To the extent possible prepare a form for the appointment of a proxy, which allows separate voting instructions to be given for each matter to be considered by the meeting and for each of the candidates nominated for the election.
Shareholders exercise the supreme authority in CAMPOSOL by means of the General Meetings. The Board strives to ensure that the General Meetings constitute effective forums for communication between the shareholders and the Board.
Preparation for the Annual General Meeting
The CAMPOSOL Annual General Meeting (AGM) is held every year before the end of the month of June. Although the date has not been published in the company’s
financial calendar, the date will be communicated to all shareholders in due course.
The notice announcing the AGM is distributed to shareholders and placed on the company web page at least 21 days before the AGM. This notice includes all the information needed for the shareholders to form their point of view on the items on the agenda. Shareholders that cannot attend the meeting can vote by proxy. The Company will normally nominate the Chairman of the Board to vote on behalf of shareholders as their proxy. It is also possible for the shareholders to name their own proxy. The proxy form allows the shareholder to give separate voting instructions for each item on the agenda, including voting separately for each candidate to be voted for in any election, but still does not include the possibility to vote separately for each candidate in any election.
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The Chairman of the Board, usually chairs the AGM, other members of the Board are encouraged to participate.
Agenda and conduction of the AGM
The Board decides the agenda of the AGM. The main points of the agenda are determined by the requirements of the Limited Responsibility Public Companies Act and the Articles of Association. Among other things the AGM will approve the annual accounts, the report from the Board and the distribution of dividends. It will also approve the resolutions required under the applicable laws.
Each AGM names a Chairman for the meeting, in this way the presence of an independent president is ensured, according to the recommendations of the Code.
Normally the Chairman is designated with anticipation and he is named in the notice calling the meeting. The minutes of the AGM are published on the CAMPOSOL web page (www.camposol.com.pe) and on the Oslo Stock Exchange –OSE web page (www.newsweb.no).
The Board may call for an extraordinary General Meeting when it considers it to be necessary or when it is a legal requirement. The CAMPOSOL Auditor and any shareholder or group of shareholders representing more than 5% of the issued and subscribed share capital of the Company may demand that the Board calls for an extraordinary General Meeting.
6.7 Nomination CommitteeCode: The Company should have a Nomination Committee, and the General Meeting should elect the chairperson and members of the Nomination Committee and should determine the Committee’s remuneration.
The Nomination Committee should be laid down in the Company’s articles of association. The General Meeting should stipulate guidelines for the duties of the Nomination Committee.
The members of the Nomination Committee should be selected to take into account the interests of shareholders in general. The majority of the committee should be independent of the Board of Directors and the Executive Management. At least one member of this committee should not be a member of the Corporate Assembly, committee of representatives or the Board. No more than one member of the Nomination Committee should be a member of the Board of Directors, and any such member should not offer himself for re-election to the Board. The Nomination Committee should not include the Company’s Chief Executive Officer or any other member of the Executive Management.
The Nomination Committee’s duties are to propose candidates for election to the Corporate Assembly and the Board of Directors and to propose the fees to be paid to
members of these bodies. The Nomination Committee should justify its recommendations.
The Company should provide information on the membership of the Committee and any deadlines for submitting proposals to the Committee.
In accordance with section 100A of the Articles of Association of the company, CAMPOSOL has a nomination committee made up of three members. The committee is elected by the AGM which also decides on their remuneration.
Information on the committee members is available on section 6.9 The Work of the Board.
The committee will make its recommendations to the Annual General Meeting on the appointment and retirement of Directors, as well as their remuneration.
6.8 Corporate Assembly and Board of Directors: Composition and independenceCode: Where a Company has a corporate assembly, the composition of the corporate assembly should be determined with w view to ensuring that it represents a broad cross-section of the Company’s shareholders.
The composition of the Board of Directors should ensure that the board can attend to the common interests of all shareholders and meets the Company’s need for expertise, capacity and diversity. Attention should be paid to ensuring that the Board can function effectively as a collegiate body.
The composition of the Board should ensure that it can operate independently of any special interests. The majority of the shareholder-elected members of the Board should be independent of the Executive Management and material business contacts. At least two of the members of the Board elected by shareholders should be independent of the Company’s main shareholder(s).
The Board of Directors should not include representatives of the Executive Management. Otherwise, the Company should provide an explanation for its decision and implement consequential adjustments to the organization of the work of the Board, including the use of board committees to help ensure more independent preparation of matters for discussion by the board.
The chairman of the Board should be elected by the General Meeting so long as the Public Companies Act does not require that the chairman shall be appointed either by the Corporate Assembly or by the Board of Directors as a consequence of an agreement that the Company shall not have a Corporate Assembly.
The term of office for members of the Board of Directors should not be longer than two years at a time. The annual report should provide information to illustrate the expertise of the members of the Board of Directors, and information on their record of attendance at board meetings. In addition, the annual report should identify which members are considered to be independent.
Members of the Board of Directors should be encouraged to own shares in the Company.
The Board of Directors of CAMPOSOL has at least two directors according to section 68 of the company’s Articles of Association. Currently the Board has seven members, one woman and six men.
The composition of the Board satisfies the company’s needs in terms of experience, knowledge, capacity and diversity. The CAMPOSOL web page and the Annual Report provide information to illustrate the experience and capacity of the Board members and identify which members are considered independent.
A majority of the members of the Board are independent of the Company’s management and main commercial partners. The Board does not include any representatives from the CAMPOSOL executive team. Also, five of the directors are independent of the Company’s main shareholders.
During 2012, 9 board meetings were held. The following shows the attendance of each director.
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Samuel Dyer Coriat Executive Chairman 8Samuel Dyer Ampudia Deputy Chairman 9Christopher Yetter Director* 2Samuel Aguirre Director* 5Mimi K. Berdal Director 8Pavlos Aristodemou Director 4Fabio Matarazzo Director 9Gianfranco Castagnola Director 7Walter Chumbez Director 7Alberto Camet Alternate Director 1Rosa Coriat Valera Alternate Director 1
CAMPOSOL does not have a corporate assembly or any employee representative on the Board.
The Chairman of the Board is elected at the AGM. Board members are elected for a two-year term each time and are encouraged to own shares in the company. A summary of the shares owned by the members of the Board is included in the Company’s Annual Report.
* Please note that on February 27th 2012, Mr. Christopher Yetter presented his resignation to the Board of Directors of Camposol Holding Plc. On that same date, Mr. Samuel Aguirre was appointed as member of the Board of Directors of Camposol Holding Plc on February 2012.
6.9 Work of the BoardCode: The Board of Directors should produce an annual plan for its work, with particular emphasis on objectives, strategy and implementation. The Board of Directors should issue instructions for its own work as well as for the Executive Management with particular emphasis on clear internal allocation of responsibilities and duties.
In order to ensure a more independent consideration of matters of a material character in which the chairman of the board is, or has been, personally involved, the board’s consideration of such matters should be chaired by some other member of the board.
The Public Companies Act stipulates that large companies must have an audit committee. The entire Board of Directors should not act as the company’s audit committee. Smaller companies should give consideration to establishing an audit committee. In addition to the legal requirements of the Audit Committee, the majority of the members of the audit committee should be independent.
The Board of Directors should also consider appointing a remuneration committee in order to help ensure thorough and independent preparation of matters relating to compensation paid to the executive personnel. Membership of such committee should be restricted should be restricted to members of
the board who are independent of the company’s executive personnel.
The Board of Directors should provide details in the annual report of any committees appointed. Moreover the Board of Directors should evaluate its performance and expertise annually.
The work of the Board
The responsibilities of the Board include the strategic direction of CAMPOSOL, the effective monitoring of top management, the control and monitoring of the company’s financial situation and communications with shareholders and stakeholders.
These obligations can be found in the applicable legislation, in the articles of association, in the authorizations and instructions given by the General Meeting and instructions or resolutions adopted by the Board itself.
The Board’s duties may be divided into two main categories:
• The management of the Company by the Board.• The supervisory responsibility of the Board.
The Board will discuss all matters related to the important activities of the company or those of an extraordinary nature. It will produce an annual work plan focused on those tasks that are oriented towards developing corporate strategy as well as monitoring its implementation. Additionally it will execute supervisory actions to ensure that the company is managing its business, its assets and a prudent and satisfactory control of risks. The Board is responsible for the appointment of the General Manager.
Financial Control
The Board will keep itself informed of the financial situation of the Company and will ensure that the operations, the accounts and the management of company assets are subject to satisfactory controls.
Board Mandate
In accordance with the applicable law, the terms of reference for the Board are established in a formal mandate that includes specific rules and guidelines on the work of the Board and its decision making. Additionally, CAMPOSOL has prepared specific instructions for the work of the Board, including procedural rules as well as indications as to discussions, duties and responsibilities of the Board in relation to the CEO.The Chairman of the Board is responsible for ensuring that the work of the Board is carried out effectively, and correctly, according to applicable legislation. The Board
has named a Deputy Chairman as the Code recommends.
Committees
CAMPOSOL has four committees:
• Strategy, New Business, Marketing, Acquisitions, and Finance Committee
Objective: To evaluate the possibility of new investments by CAMPOSOL in accordance with its financial situation and forecasts.
Such committee is composed by the following members: Mr. Samuel Dyer Coriat as President and Secretary, Mr. Samuel Aguirre, Mr. Gianfranco Castagnola and Mr. Samuel Dyer Ampudia as members.
• Audit, Control & Risks Committee Objective: To assist the Board in
complying with its responsibilities in relation to the financial report issuing process, the internal control system, the internal auditing process and observance of the governance provisions, rules and code of conduct.
Such committee is composed by the following members: Mr. Gianfranco Castagnola as President, Mr. Samuel Aguirre and Mr. Walter Chumbez as members and Mr. Angel Suarez as Secretary.
• Human Resources, Ethics, Corporate Government and Social Responsibility Committee.
Such committee is composed by the following members: Mr. Samuel Dyer Ampudia as President, Mrs. Mimi K. Berdal and Mr. Samuel Aguirre as members and Mr. Samuel Dyer Coriat as Secretary.
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• Nominations Committee Such committee is composed by
the following members: Mr. Samuel Dyer Ampudia as President and Secretary, Mrs. Patricia Teullet and Mr. Constantinos Economides as members.
The Board constantly evaluates the need to create new committees.
Mandate for the CEO
The Board issues a mandate for the work of the CEO, including his duties and responsibilities to the Board. There is a clear division between the responsibilities of the Board and those of executive management. The CEO is responsible for the daily management of the company’s activities, according to the strategy and guidelines adopted by the Board.
The Board will ensure that the CEO reports on a monthly basis on the company’s financial situation.
Financial Reports
The Board receives periodic reports on the commercial and financial situation of CAMPOSOL. The Company follows a timetable established by the Oslo Stock Exchange and the CySEC (Cypriot Security Exchange Commission) for the publication of annual and interim reports.
Annual Evaluation of the Board
Annually, at the first meeting of the calendar year, the Board performs an evaluation of its own performance, as well as those of the committees and of each individual Director.
For the evaluation to be effective, the Board sets objectives, both at collective and individual level, against which it will be able to measure its performance.
The Board also carries out a similar evaluation of the CEO.
6.10 Risk Management and Internal ControlCode: The Board of Directors must ensure that the Company has sound internal control and systems for risk management that are appropriate in relation to the extent and nature of the Company’s activities. Internal control and the systems should also encompass the Company’s corporate values, ethical guidelines and guidelines for corporate social responsibility.
The board of Directors should carry out an annual review of the Company’s most important areas of exposure to risk and its internal control arrangements.
The board of directors should provide an account in the Annual Report of the main features of the company’s internal control and risk management systems as they relate to the company’s financial reporting.
The Board is responsible for ensuring that the Company has efficient and sound processes for internal control. The Board must be completely up to date with the Company’s financial and operational performance, the company’s commercial model, the risks associated with its economic activities and long term sustainability.
In summary, the Board must be completely sure that the company has the necessary control systems installed in all its areas and that these systems are constantly updated to guarantee their optimum operation.CAMPOSOL annually identifies and evaluates risks that could affect the achievement of its objectives, and establishes permanent specific control and monitoring activities to mitigate these risks accordingly. The internal
controls are detailed in the Company’s main rules and procedures which are incorporated as systematic controls through SAP, supporting a good internal control environment. The risk, control and fraud master templates have been completed for most of the core processes and activities which encompass all internal control, enterprise risk management and fraud detection policy based on the COSO framework model. Furthermore, since 2012 CAMPOSOL has implemented the risk management policy guide and corresponding procedures both approved by the CEO. The risk evaluation process applied in strategy setting and across the enterprise identifies potential events that may affect the entity and responds with mitigation programs that reduce the likelihood of downside outcomes, increasing the upside.
During 2011, the Company consolidated its Information Technology and Business Contingency Plan driving it to ensure operational continuity and improving its capacity for contingencies detection and response by implementing alternate system servers basically for the ERP SAP and mail at corporate level
CAMPOSOL also applies integrated business principles in accordance with
international standards, which reflect its commitment to health, safety and environment.
The preservation of the environment is one of CAMPOSOL’s main concerns. The production process involves factors and conditions that interact with the environment, such as the use of water, fertilizers, generation of waste through emissions and solid waste management. Among some of the Company’s practices to ensure the preservation of the environment, CAMPOSOL is currently implementing environmental education, internal campaigns, specialized treatment systems, quality management systems, certifications and community relations programs.
6.11 Remuneration of Board MembersCode: The remuneration of the Board of Directors should reflect the Board’s responsibility, expertise, time commitment and the complexity of the Company’s activities.
The remuneration of the Board of Directors should not be linked to
the Company’s performance. The Company should not grant share options to members of its Board.
Members of the Board of Directors and/or companies with which they are associated should not take on specific assignments for the company in addition to their appointment as a member of the Board. If they do nonetheless take on such assignments this should be disclosed to the full Board. The remuneration for such additional duties should be approved by the Board.
Any remuneration in addition to normal director’s fees should be specifically identified in the annual report.
The remuneration granted to the members of the Board is decided by the AGM. The Annual Report provides information on all the remuneration paid to each Board member.
The directors, or the companies with whom they are associated, will not accept other appointments or commitments for CAMPOSOL without the knowledge of the Board. In such cases, any remuneration must be approved by the AGM.
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6.12 Remuneration of executive managementCode: The Board of Directors is required by law to established guidelines for the remuneration of the Executive Management. These guidelines are communicated to the Annual General Meeting.
The guidelines for the remuneration of the Executive Management should set out the main principles applied in determining the salary and other remuneration of the Executive Personnel. The guidelines should help to ensure convergence of the financial interests of the Executive Personnel and the shareholders.
Performance-related remuneration of the Executive Personnel in the form of share options, bonus programmes or the like should be linked to value creation for shareholders or the Company’s earnings performance over time. Such arrangements, including share option arrangements, should incentivize performance and be based on quantifiable factors over which the employee in question can have influence. Performance-related remuneration should be subject to an absolute limit.
The Board adopts guidelines for the remuneration of the management team that are reported to the General Meeting. The salary and other payments to the CEO are determined by the Board.
Details of remuneration paid to the executives as well as the remuneration guidelines for the General Manager and other top executives are included in the notes to the financial accounts in the Annual Report.
6.13 Information and CommunicationCode: The Board of Directors should establish guidelines for the Company’s reporting of financial and other information based on openness and taking into account the requirement for equal treatment of all participants in the securities market.The Company should publish an overview each year of the dates
for major events such as its Annual General Meeting, publication of interim reports, public presentations, dividend payment date if appropriate etc.
All information distributed to the Company’s shareholders should be published on the Company’s web site at the same time as it is sent to shareholders.
The Board of Directors should establish guidelines for the Company’s contact with shareholders other than through General Meetings.
CAMPOSOL maintains regular dialogue with analysts and investors and considers it very important to inform shareholders and other stakeholders about the Company’s commercial and financial performance. CAMPOSOL is committed to ensuring that all the participants in the stock market receive the same information at the same time.
Additionally the company proactively communicates its long term ambitions, including its strategies and risk factors. The Company has a policy of open and reliable communications with the investors and a web page which is continuously updated.
Although the Management is responsible of the communication with all stakeholders, the Executive Chairman of the Board and the other directors are available to meet with any shareholders and develop a balanced understanding of the topics of their interest or concern, subject always to applicable law and the rules of the stock exchange. The
Executive Chairman ensures that the shareholders’ points of view are duly communicated to the Board.
CAMPOSOL strives to communicate all relevant information to the market in a timely, efficient and non-discriminate manner. All the notices issued by the Company are available on the web page, as well as the website of OSE (www.newsweb.no) and news agencies through Thomson Reuters (https://inpublic.huginonline.com).
Financial reports and events
CAMPOSOL normally publishes its provisional annual financial statement at the end of February. The complete Annual Report and the accounts statements are distributed to shareholders at least three weeks before the AGM. Quarterly interim reports are published within two months from the end of each quarter.
The Company publishes an annual financial calendar that includes the dates on which it is planned to publish the quarterly results. The calendar can be found on the web page www.camposol.com.pe and is distributed as a stock market notice. It can also be found on Oslo Stock Exchange’s website, www.oslobors.no. The calendar is published at the end of each fiscal year.
CAMPOSOL gives quarterly presentations open to the public. These sessions provide a financial and operational review of the previous quarter, as well as a review of the market conditions and the Company’s outlook.
The presentations are given by the Executive Chairman and/or the CFO.
After each quarterly presentation the managers give other presentations for investors in various locations. The quarterly interim reports and presentation materials can be found on the CAMPOSOL web page.
6.14 Take-oversCode: The Board of Directors should establish guiding principles for how it will act in the event of a take-over bid.
In a bid situation, the Company’s Board of Directors and Executive Management have an independent responsibility to help ensure that shareholders are treated equally,
and that the Company’s business activities are not disrupted unnecessarily. The Board has a particular responsibility to ensure that shareholders are given sufficient information and time to form a view of the offer.
The Board of Directors should not hinder or obstruct take-over bids for the Company’s activities or shares.
Any agreement with the bidder that acts to limit the Company’s ability to arrange other bids for the Company’s shares should only be entered into where it is self-evident that such an agreement is in the common interest of the Company and its shareholders. This provision shall also apply to any agreement
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on the payment of financial compensation to the bidder if the bid does not proceed. Any financial compensation should be limited to the costs the bidder has incurred in making the bid.
Agreements entered into between the Company and the bidder that are material to the market’s evaluation of the bid should be publicly disclosed no later than at the same time as the announcement that the bid will be made is published.
In the event of a take-over bid for the Company’s shares, the Company’s Board of Directors should not exercise mandates or pass any resolutions with the intention of obstructing the take-over bid unless this is approved by the general meeting following announcement of the bid.
If an offer is made for a Company’s shares, the Company’s Board of Directors should issue a statement making a recommendation as to whether shareholders should or should not accept the offer. The Board’s statement on the offer should make it clear whether the views expressed are unanimous, and if this is not the case it should explain the basis on which specific members of the board have excluded themselves from the Board’s statement. The Board should arrange a valuation from an independent expert. The valuation should include an explanation, and should be made public no later than at the time of the public disclosure of the board’s statement.
Any transaction that is in effect a disposal of the Company’s activities should be decided by a general meeting, except in cases where such decisions are required by law to be decided by the corporate assembly.
Fundamental Commitments and Guidelines
The CAMPOSOL Board is committed to treat all shareholders equally, as well as ensuring transparency with regard to any offer to acquire the company.
However, the Board has not prepared formal guidelines for its conduct in the case where an offer is made for CAMPOSOL, as is recommended by the Code.
CAMPOSOL will not establish any mechanism that impedes an acquisition unless this has been resolved by a General Meeting and with a majority of two thirds (of votes issued and share capital represented).
The Norwegian Securities Negotiation Act (chapter 6) indicates the formal requirements related to the obligation in a hostile bid and a friendly bid in connection with possible acquisitions of CAMPOSOL.
Evaluation of an Offer
If a formal offer is received for CAMPOSOL, the Board will normally attempt to obtain other competitive offers. This will not apply if the Board can definitely recommend an offer received, or if the process of seeking a competitive offer could provoke the withdrawal of the offer already received.
Should an offer be received for the shares of CAMPOSOL, the Board will issue a statement evaluating the offer together with a recommendation to the shareholders to accept or not accept the said proposal. If the Board cannot recommend a decision on the offer, it should explain the reasons for such abstention. If the statement by the Board is not unanimous, this should also be explained. The Board should also consider if a valuation by an independent expert is pertinent.
6.15 AuditorCode: The auditor should submit the main features of the plan for the audit of the Company to the audit Committee Annually.
The auditor should participate in meetings of the Board of Directors that deal with the annual accounts. At these meetings the auditor should review any material changes in the Company’s accounting principles, comment on any material estimated accounting figures and report all material matters on which there has been disagreement between the auditor and the Executive Management of the Company.
The auditor should at least once a year present to the Audit Committee a review of the Company’s internal control procedures, including identified weaknesses and proposals for improvement.
The Board of Directors should hold a meeting with the auditor at least
once a year at which neither the chief executive nor any other member of the Executive Management is present.
The Board of Directors should establish guidelines in respect of the use of the auditor by the Company’s Executive Management for services other than the audit.
The Board of Directors must report the remuneration paid to the auditor at the Annual General Meeting, including details of the fee paid for audit work and any fees paid for other specific assignments.
Election of the Auditor
CAMPOSOL’s financial statements for 2012 have been audited by PricewaterhouseCoopers (PwC). Cyprus law requires that the auditor is elected by the shareholders in the General Meeting. The Board will make recommendations to the General Meeting on the appointment, removal and remuneration of the auditor.
Relationship of the Auditor with the Board
The auditor participates in the Annual General Shareholders Meeting. At the meeting, the auditor informs the Board of the plan for the audit. The Board holds one or more meetings every year with the auditor without the CEO being present.
Also, the auditor participates in the meetings in which the Board considers the annual accounts. In these the auditor comments on any material changes in the principles and the
accounting figures of the company, reporting at the same time all material matters where there has been disagreement between the auditor and the company’s executive management.
At the AGM, the auditor presents to the Board a review of the company’s internal control procedures, including proposals for improvements.
CAMPOSOL has established an audit committee that supports the Board in revising, evaluating and, when necessary, propose appropriate measures related to the internal and external auditing of the group.
58 59
Independent Auditors’ Report and
Audited Financial Statements
GENERAL INFORMATION
DirectorsSamuel Barnaby Dyer Coriat - Chairman Samuel Edward Dyer Ampudia Pavlos Aristodemou Gianfranco Dante Máximo Castagnola Zúñiga Mimi Kristine Berdal Richard Christopher Yetter (resigned 27 February 2012) Hugo Walter Chumbez Panesi Fabio Matarazzo Di Licosa Samuel Aguirre (appointed 27 February 2012)
Company SecretaryAltruco Secretarial LimitedArch. Kyprianou & Ag. Andreou,Loukaides Court, 5th Floor3036 Limassol,Cyprus
Registered officeKanika International Business Center, 6th Floor,Profiti Ilia No 4 Germasogeia, Limassol 4046,Cyprus
Independent auditorsPricewaterhouseCoopers LimitedCyprus
60 61 CAMPOSOLANNUAL REPORT 2012
The Board of Directors presents its report together with the audited consolidated financial statements of Camposol Holding Plc (the “Company”) and its subsidiaries (collectively referred to as the “Group”) for the year ended 31 December 2012.
Principal activities
Camposol Holding PLC is the holding company of the Camposol Group (hereinafter the “Group”). During the year the Group continued its agricultural activities consolidating its position as a key player in the fruits and vegetables industry.
Financial results
The Group’s results for the year are set out on page 8. The Board of Directors does not recommend the payment of a dividend and the net profit for the year is retained.
During 2012 a moderate “El Niño” effect occurred, which increased the average temperature from April through August. The adverse climate conditions had a negative impact on Group production volumes, especially on avocado and asparagus with a production volume decrease for the year of 26.8% and 18.4% respectively. This resulted in higher unitary costs by the absorption of fixed costs on lesser volumes. In addition, the total volume of avocado available in the US market during 2012 was higher than in 2011 due to record high production in California and Mexico, (the main suppliers of avocado to the US), which affected prices negatively in the United State market. The high production in California and Mexico during 2012 is considered to be one-off; therefore, prices and gross profit margins are expected to return to the high levels of previous years.
Review of developments, position and performance of the Group’s business and its position
The profit of the Group for the year ended 31 December 2012 was USD7,478,000 (2011: profit of USD33,345,000). Turnover in 2012 increased to USD183 million, compared to sales for 2011 of USD168 million. On 31 December 2012 the total assets of the Group were USD533 million (2011: USD442 million) and the net assets were USD272 million (2011: net assets USD277 million). The financial position, development and performance of the Group as presented in these consolidated financial statements are considered satisfactory.
Future developments
The Group sets as its strategic priorities for the three years from 2013 to 2015 the maintenance of its position as a global leader in the asparagus and avocados markets and the diversification in new products to satisfy demand, such as red table grapes, tangerines and blueberries.
During 2012, the Company opened a commercial office in the United States which is already selling avocado directly. Due to the importance of this market for the growth in avocado volumes coming from its young plantations, it will be a strategic priority for the Group to consolidate its commercial presence there during this period. On 2013, the Company signed a Memorandum of Understanding with AGRICOM, one of the major fruit exporters from Chile, to jointly commercialize its products in Europe. Such agreement, if ratified after proper due diligence process, will allow us to offer avocado almost year round to our clients. Among the products we will commercialize together are avocados, grapes, citrus, blueberries, pomegranates among others; therefore, revenue and gross profit are expected to return to the high levels of previous years.
BOARD OF DIRECTORS’ REPORT
Risk management
Like other agricultural businesses the Group is exposed to risks, the most significant of which are natural phenomena such as the cold and hot ocean currents of “El Nino” and “La Nina” which impact agricultural production, adverse movements in the market prices for fruit and vegetables, interest rate risk and liquidity risk.
The Group monitors and manages these risks through various control mechanisms. Detailed information relating to risk management is set out in Notes 3 and 4 to the financial statements.
Branches
The Group did not operate through any branches during the year.
Share capital
The Group was authorized to acquire own shares up to a maximum of 10% of the issued shares of the Company granted by the Annual General Meeting held on 24 May 2011. As of 31 December 2012, the Group holds 2,968,502 own shares, constituting approximately 9.95% of the issued shares in the Company.
Directors
The Directors of the Company at the date of this report are as shown on page 1.
The Directors who served during the year and up to the date of this report, except for Richard Christopher Yetter are the following:
Appointed Resigned
Samuel Barnaby Dyer Coriat 15 January 2008 - Samuel Edward Dyer Ampudia 15 January 2008 - Pavlos Aristodemou 27 May 2010 - Gianfranco Dante Máximo Castagnola Zúñiga 10 June 2008 - Mimi Kristine Berdal 19 June 2009 - Richard Christopher Yetter 19 June 2009 27 February 2012 Hugo Walter Chumbez Panesi 19 June 2009 - Fabio Matarazzo Di Licosa 9 October 2011 - Samuel Aguirre 27 February 2012 -
All of the Directors, except for Richard Christopher Yetter shall hold office until the next Annual General Meeting and are eligible for re-appointment by the shareholders.
62 63 CAMPOSOLANNUAL REPORT 2012
During 2012, there were no significant changes in the assignment of responsibility and remuneration (Note 36) of the Board of Directors.
Bonds
On 26 January 2012, Camposol S.A., Camposol Holding PLC´s subsidiary, successfully issued a USD125 million 9.875% senior unsecured notes due in 2017, which will be guaranteed by Camposol PLC as parent guarantor and Marinazul S.A. and Campoinca S.A. as subsidiary guarantors.
Settlement of the bond issue occurred on 2 February 2012. The net proceeds from the bond issue were used to pay long term debt, to finance capital expenditures and in general corporate purposes.
With this transaction, the Company increased the maturity of its long term debt to 4.9 years under much more flexible conditions than the previous long-term debt facility, which will allow it to better face its strategic challenges in the next years.
Independent auditors
PricewaterhouseCoopers Limited has expressed their willingness to continue in office. A resolution giving authority to the Board of Directors to fix their remuneration will be proposed at the Annual General Meeting.
By order of the Board
Samuel Barnaby Dyer Coriat - Chairman ________________________________ Signature
Samuel Edward Dyer Ampudia - Director ________________________________ Signature
Cyprus26 March 2013
64 65 CAMPOSOLANNUAL REPORT 2012
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At 31 December
Note 2012 2011USD000 USD000
ASSETSNON-CURRENT ASSETSProperty, plant and equipment 6 127,733 117,354
Investment in associate 7 559 493 Intangible assets 8 20,343 22,610 Non-current portion of biological assets 9 229,135 193,015 Total non-current assets 377,770 333,472
CURRENT ASSETSPrepaid expenses 821 812 Current portion of biological assets 9 16,564 16,145 Inventories 12 52,696 44,349 Other accounts receivable 13 10,073 6,459 Income tax credit 6,792 5,093 Trade accounts receivable 14 39,565 29,429 Cash and cash equivalents 15 28,523 6,604 Total current assets 155,034 108,891 Total assets 532,804 442,363
Equity attributable to shareholders of the parentShare capital 16 507 507 Share premium 16 212,318 212,318 Treasury shares 16 (11,592)Share-based payments 16 - 927 Retained earnings 70,622 62,331
271,855 276,083 Non-controlling interest 580 569 Total equity 272,435 276,652
LIABILITIESNON-CURRENT LIABILITIESLong - term debt 19 132,352 55,031 Deferred income tax 17 26,038 23,919
158,390 78,950
CURRENT LIABILITIESCurrent portion of long-term debt 19 2,759 9,712 Trade accounts payable 20 51,288 40,074 Other accounts payable 21 18,052 11,178 Bank loans 22 29,880 25,797
101,979 86,761 Total liabilities 260,369 165,711 Total equity and liabilities 532,804 442,363
Approved for issue and signed on behalf of the Board of Directors of Camposol Holding PLC on 26 March 2013.
Directors
Samuel Barnaby Dyer Coriat - Chairman Signature
Samuel Edward Dyer Ampudia - Director Signature
The notes on pages 72 to 145 are an integral part of these consolidated financial statements.
66 67 CAMPOSOLANNUAL REPORT 2012
For the year ended 31 December
Note 2012 2011USD000 USD000
Continuing operations:Revenue 24 183,181 167,810 Cost of sales 25 (138,299) (109,543)
Gross profit 44,882 58,267 Gain arising from change in fair value of biological assets 9 26,966 34,112 Profit after adjustment for biological assets 71,848 92,379
Selling expenses 26 (22,961) (20,581)Administrative expenses 27 (20,115) (19,050)Other income 29 1,145 868 Other expenses 29 (1,736) (2,302)Operating profit 28,181 51,314
Profit attributable to associate 7 66 111 Financial income 30 1,557 27 Financial cost 30 (17,879) (8,502)Net foreign exchange transactions losses (2,042) (1,316)Profit before income tax 9,883 41,634 Income tax expense 32 (2,258) (8,014)Profit for the year from continuing operations 7,625 33,620 Discontinued operations:Loss for the year from discontinued operations 33 (147) (275)Profit for the year 7,478 33,345 Attributable to: Owners of the parent 7,403 33,336 Non-controlling interest 75 9
7,478 33,345
Basic and diluted earnings per ordinary share
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
- From continuing operations (expressed in U.S. Dollars per share)
34 0.274 1.127
- From discontinued operations (expressed in U.S. Dollars per share)
34 (0.005) (0.009)
0.269 1.118
Statement of comprehensive incomeProfit for the year 7,478 33,345Other comprehensive income:Currency translation adjustment (10) (8)Other adjustment (98) - Total comprehensive income for the year 7,370 33,337 Attributable to:Equity shareholders of the parent 7,359 33,328 Non-controlling interests 11 9
7,370 33,337
Total comprehensive income attributable to equity sharehol-ders arises from:- Continuing operations 7,506 33,603 - Discontinued operations (147) (275)
7,359 33,328
The notes on pages 72 to 145 are an integral part of these consolidated financial statements.
68 69 CAMPOSOLANNUAL REPORT 2012
Companies which do not distribute 70% of their profits after tax, as defined by the Special Contribution for the Defence of the Republic Law, by the end of the two years after the end of the year of assessment to which the profits refer, will be deemed to have distributed this amount as dividend. Special contribution for defence at 15% will be payable on such deemed dividend to the extent that the shareholders for deemed dividend distribution purposes at the end of the period of two years from the end of the year of assessment to which the profits refer, are Cyprus tax residents.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFOR THE YEARS ENDED 31 DECEMBER 2012 AND 2011
ATTRIBUTABLE TO OWNERS OF THE PARENT
Note Number of shares
Share capital
Share premium
Treasury shares
Share-based payments
Retained earnings Total Non-controlling
interest ‘‘Total equity”
000 USD000 USD000 USD000 USD000 USD000 USD000 USD000 USD000
Balances as of 1 January 2011 32,404 507 212,318 922 28,853 242,600 560 243,160 Comprehensive income:Profit for the year - - - - - 33,336 33,336 9 33,345 Other comprehensive income:Currency translation adjustment - - - - - (8) (8) - (8)Total comprehensive income - - - - - 33,328 33,328 9 33,337 Transactions with owners:Share-based payments 16 - - - - 155 - 155 - 155 Expired share options and warrants 16 - - - - (150) 150 - - - Total transactions with owners - - - - 5 150 155 - 155 Balances as of 31 December 2011 32,404 507 212,318 - 927 62,331 276,083 569 276,652
Comprehensive income:Profit for the year - - - - - 7,403 7,403 75 7,478 Other comprehensive income:Currency translation adjustment - - - - - (10) (10) - (10)Other adjustments - - - - - (34) (34) (64) (98)Total comprehensive income - - - - - 7,359 7,359 11 7,370 Transactions with owners: Treasury shares 16 (2,969) - - (11,592) - - (11,592) - (11,592)Share-based payments 16 - - - - 5 - 5 - 5 Expired share options 16 - - - - (932) 932 - - - Total transactions with owners (2,969) - - (11,592) (927) 932 (11,587) - (11,587)Balances as of 31 December 2012 29,435 507 212,318 (11,592) - 70,622 271,855 580 272,435
Special contribution for defence rate increased to 17% in respect of profits of year of assessment 2009, and to 20% in respect of profits of years of assessment 2010 and 2011. The amount of this deemed dividend distribution is reduced by any actual dividend paid out of the profits of the relevant year by the end of the period of two years from the end of the year of assessment to which the profits refer. This special contribution for defence is paid by the Company for the account of the shareholders.
The notes on pages 72 to 145 are an integral part of these consolidated financial statements.
70 71 CAMPOSOLANNUAL REPORT 2012
For the year ended 31 December
Note 2012 2011USD000 USD000
CASH FLOWS FROM OPERATING ACTIVITIESCollections 172,888 157,058 Payment to suppliers and employees (186,425) (146,515)
Interest paid (10,589) (8,094)Custom duties refund collections 7,057 6,647
Other collections 2,929 442 Debt termination fee 19 (407) - Net cash (used in) generated from operating activities 31 (14,547) 9,538 CASH FLOWS FROM INVESTING ACTIVITIESPurchases of property, plant and equipment 6 (14,471) (10,611)Investment in biological assets (10,603) (8,711)Purchase of intangibles, excluding goodwill 8 (288) (408)Acquisition of subsidiary, net of cash acquired 23 - (259)Proceeds from sale of property, plant and equipment 29 429 372 Net cash used in investing activities (24,933) (19,617)
CASH FLOWS FROM FINANCING ACTIVITIESBank loans proceeds 22 59,370 94,394 Bank loans payments 22 (55,287) (85,297)Repurchase of own shares 16 (11,592) - Repayment of syndicated loan 19 (58,524) - Bonds issue, net of transaction costs 121,013 - Long-term debt proceeds 19 8,566 1,615 Payments of long-term debt 19 (2,147) (3,944)Net cash generated from financial activities 61,399 6,768
Net increase (decrease) in cash and cash equivalents 21,919 (3,311)Cash and cash equivalents at beginning of year 6,604 9,915 Cash and cash equivalents at end of year 15 28,523 6,604
CAMPOSOL HOLDING PLC AND SUBSIDIARIESCONSOLIDATED STATEMENT OF CASH FLOWS
The notes on pages 72 to 145 are an integral part of these consolidated financial statements.
CAMPOSOL HOLDING PLC AND SUBSIDIARIESOVERVIEW OF NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2012
CONTENTS
Note1 GENERAL INFORMATION2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES3 RISK MANAGEMENT4 CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS5 SEGMENT INFORMATION6 PROPERTY, PLANT AND EQUIPMENT7 INVESTMENT IN ASSOCIATE8 INTANGIBLE ASSETS9 BIOLOGICAL ASSETS10 FINANCIAL INSTRUMENTS BY CATEGORY11 CREDIT QUALITY OF FINANCIAL ASSETS12 INVENTORIES13 OTHER ACCOUNTS RECEIVABLE14 TRADE ACCOUNTS RECEIVABLE15 CASH AND CASH EQUIVALENTS16 SHAREHOLDERS’ EQUITY17 DEFERRED INCOME TAX18 WORKERS’ PROFIT SHARING19 LONG-TERM DEBT20 TRADE ACCOUNTS PAYABLE21 OTHER ACCOUNTS PAYABLE22 BANK LOANS23 BUSINESS COMBINATIONS24 REVENUE25 COST OF SALES26 SELLING EXPENSES27 ADMINISTRATIVE EXPENSES28 PERSONNEL EXPENSES29 OTHER INCOME AND EXPENSES30 FINANCIAL INCOME AND COSTS31 CASH GENERATED FROM OPERATIONS32 INCOME TAX EXPENSE33 DISCONTINUED OPERATIONS34 BASIC AND DILUTED EARNINGS PER SHARE35 CONTINGENT LIABILITIES36 TRANSACTIONS WITH SHAREHOLDERS AND OTHER RELATED PARTIES37 COMMITMENTS AND GUARANTEES38 EVENTS AFTER THE REPORTING PERIOD
72 73 CAMPOSOLANNUAL REPORT 2012
1 GENERAL INFORMATION
a) Business activities -
Camposol Holding PLC (hereinafter the Company) was incorporated as a private company and is domiciled in Cyprus from 9 July 2007, under the name Halemondi Holdings Limited, in accordance with the provisions of the Cyprus Companies Law, Cap. 113. The Company was converted into a public limited liability company on 8 November 2007. The name of the Company was changed to Camposol Holding PLC on 11 February 2008. Camposol Holding PLC and subsidiaries (hereinafter the Group) through their subsidiaries are engaged in investing in the agriculture business and managing the export of agricultural products mainly to the United States and to the European Unión.
The Company’s legal address is Kanika International Business Center, 6th Floor, Profiti Ilia No 4 Germasogeia, Limassol 4046, Cyprus.
As from May 2008 the shares of the Company are listed on the Oslo Axess Stock Exchange.
The subsidiaries and their activities are as follows:
Company Principal activityCountry of incorporation
Direct or indirect equity interest as of 31 December
2012 2011% %
Camposol S.A. Agribusiness Peru 100.00 100.00Campoinca S.A. Farmland owner Peru 100.00 100.00Nor Agro Perú S.A.C. Agriculture Perú 100.00 100.00Sociedad Agrícola Las Dunas S.R.L. Agriculture Peru - 99.99Prodex S.A.C. Agriculture Peru 100.00 100.00Balfass S.A. Agriculture Peru - 100.00Vegesol S.A. Agriculture Peru 100.00 100.00Muelles y Servicios Paita S.R.L. Services Peru 100.00 100.00Preco Precio Económico S.A.C. (*) Retail Peru - 50.00Marinazul S.A. (*) Shrimp farming Peru 94.55 94.55Domingo Rodas S.A. Shrimp farming Peru 100.00 100.00Camarones S.A.C. Shrimp farming Peru 100.00 100.00Marinasol S.A. Fish canning Peru 100.00 100.00Camposol Europa S.L. Distribution Spain 100.00 100.00Camposol Fresh B.V. Distribution Netherlands 100.00 100.00Madoca Corp. Holding Panama 100.00 100.00
Grainlens Ltd. Holding Cyprus 100.00 100.00
Blacklocust Ltd. Holding Cyprus 100.00 100.00
Siboure Holding Ltd. Holding Cyprus 100.00 100.00
Persea, Inc. Holding USA 100.00 -
Camposol Fresh U.S.A., Inc. Distribution USA 100.00 -
Camposol Specialties, Inc. Distribution USA 100.00 -
(*) The non-controlling interests have granted the control of this entity in favor of Camposol Holding PLC.
CAMPOSOL HOLDING PLC AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS31 DECEMBER 2012 Empacadora de Frutos Tropicales S.A.C. is an associate of the Group engaged in the processing and commercialization of
fresh fruits products (Note 7).
Camposol S.A. is one of the subsidiaries of the Group which is a Peruvian agribusiness corporation incorporated in the city of Lima on 31 January 1997. Camposol S.A. contributes substantially with all of the consolidated Group’s revenues and net profit.
The legal address of Camposol S.A. is Calle Francisco Graña 155, La Victoria, Lima, Peru; its operating and commercial office is located in Carretera Panamericana Norte Km. 497.5, Chao, Viru, La Libertad., three production establishments or agricultural lands are located in Carretera Panamericana Norte Kms. 510, 512 and 527 in the department of La Libertad, Peru. In addition Camposol S.A. operates two administrative offices in the department of Piura.
On 21 May 2011, Muelles y Servicios Paita S.R.L. (a subsidiary of the Company) acquired Nor Agro Perú S.A.C. (Note 23).
During 2012, Preco Precio Económico S.A.C., Sociedad Agrícola la Dunas S.R.L. and Balfas S.A. were liquidated because those Companies had been dormant and had no income or expenses in 2012 and 2011.
During 2012, were established the companies Persea, Inc., Camposol Fresh U.S.A., Inc., Camposol Specialities, Inc.
The table below presents details of the agricultural land where the Group carries out its activities:
Land Peruvian region Area in Hectares (Ha)
2012 2011
Mar Verde La Libertad 2,496 2,496
Agricultor La Libertad 1,726 1,726Gloria La Libertad 1,018 1,018
Agromás La Libertad 414 414
Virú - San José La Libertad 616 616
Compositan La Libertad 3,778 3,778
Yakuy Minka La Libertad 2,770 2,770
Huangala - Terra Piura 2,677 2,662
Santa Ana Piura 3,370 3,370
Santa Anita Piura 128 128
Santa Julia Piura 2,105 2,105
María Auxiliadora Piura 1,980 1,980
La Merced Piura 1,000 1,000
Ocoto Alto Piura 112 112
Ocoto Bajo Piura 31 31
Ica Ica 175 175
Tumbes Tumbes 933 933
25,329 25,314
74 75 CAMPOSOLANNUAL REPORT 2012
The Group carries out its activities over the following planted areas:
Area in Hectares (Ha)
2012 2011
Asparagus 2,516 2,633Avocados 2,616 2,488Mangoes 450 415Grapes 451 451Shrimp 635 628Pepper 291 294Tangerine 102 102Blueberry 206 -
7,267 7,011
b) Group reorganization -
Camposol AS was established on 5 September 2007. On 17 October 2007 Camposol AS acquired 100% of the shares in Siboure Holding Ltd (previously Siboure Holdings Inc. which held 100% of Camposol S.A.) through a loan obtained from the Credit Suisse amounting to USD65 million in November 2007.
On 3 March 2008, the Company made a voluntary offer for the acquisition of all the outstanding shares of Camposol AS in exchange of its own shares. The shareholders of Camposol AS became shareholders of the Company, holding the same number of shares and warrants as the number held in Camposol AS. As a result of this exchange, Camposol AS became a wholly-owned subsidiary of the Company. This transaction does not represent a business combination and is outside the scope of IFRS 3 (2007). There was no economic substance in terms of any real alteration of the composition or ownership of the Group. Accordingly the consolidated financial statements are presented as a continuation of the Camposol AS group using a method similar to the pooling of interests. The application of this method implied that, the items of the financial statement of the combining enterprises for the period in which the combination occurred and for any comparative periods disclosed were presented as if they had been combined from the beginning of the earliest period presented.
Camposol AS was liquidated on 22 December 2008 with no impact on the Group’s financial statements as all its rights and obligations were transferred to Camposol Holding PLC.
c) Approval of the financial statements -
The 2012 consolidated financial statements of the Group were approved by the Board of Directors Meeting held in the offices of the Company in Cyprus on 26 March 2013.
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 the 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), as adopted by the European Union (EU), IFRIC Interpretations and the requirements of the Cyprus Companies Law, Cap. 113.The financial statements have been prepared under the historical cost convention, as modified by biological assets recognized at fair value and the investment in associate recognized under the equity method accounting. The preparation of financial statements in conformity with IFRSs 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 higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 4.
2.2 Going concern -
During 2012 a mild “El Niño” effect was experienced in Peru, which increased the average temperature from April to August. The adverse climate conditions had a negative impact on company volumes, especially on avocado and asparagus with a volume decrease for the year of 26.8% and 18.4% respectively.
As a result of the issue of the senior unsecured notes for USD125 million maturing in 2017, which was used to repay the syndicate loan, finance capital expenses and general corporate purposes. EBITDA for the year ended 31 December 2012 amounts to USD16,878,000 (USD30,794,000 at 31 December 2011).
The Directors have the reasonable expectation that the Group has adequate resources to continue operational existence in the foreseeable future. Therefore the Group continues to adopt the going concern basis in preparing its consolidated financial statements.
2.3 Adoption of new and revised IFRSs -
As of the date of the authorisation of the consolidated financial statements, all International Financial Reporting Standards issued by the International Accounting Standards Board (IASB) that are effective as of 1 January 2012 have been adopted by the EU through the endorsement procedure established by the European Commission, with the exception of certain provisions of IAS 39 “Financial Instruments: Recognition and Measurement” relating to portfolio hedge accounting.
During the current year the Group adopted all the new and revised International Financial Reporting Standards (IFRS) that are relevant to its operations and are effective for accounting periods beginning on 1 January 2012. This adoption did not have a material effect on the accounting policies of the Group.
76 77 CAMPOSOLANNUAL REPORT 2012
At the date of approval of these financial statements the following financial reporting standards were issued by the International Accounting Standards Board but were not yet effective:
i) Adopted by the European Union
New standards
• IFRS 10,“Consolidated Financial Statements” (effective for annual periods beginning on or after 1 January 2014).• IFRS 11, “Joint Arrangements” (effective for annual periods beginning on or after 1 January 2014).• IFRS 12, “Disclosure of Interests in Other entities” (effective for annual periods beginning on or after 1 January 2014).• IFRS 13, “Fair Value Measurement” (effective for annual periods beginning on or after 1 January 2013).• IAS 27, “Separate Financial Statements” (effective for annual periods beginning on or after 1 January 2014).• IAS 28, “Investments in Associates and Joint Ventures” (effective for annual periods beginning on or after 1 January 2014).
Amendments
• Amendment to IAS 12 “Income Taxes” on deferred tax relating to recovery of underlying assets (effective for annual periods beginning on or after 1 January 2013).
• Amendment to IFRS 1 “First-time adoption of International Financial Reporting Standards” on severe hyperinflation and removal of fixed dates for First Time Adopters (effective for annual periods beginning on or after 1 January 2013).
• Amendment to IAS 1 “Financial Statements Presentation” on Presentation of Items of Other Comprehensive Income” (effective for annual periods beginning on or after 1 July 2012).
• Amendments to IAS 19 “Employee Benefits” (effective for annual periods beginning on or after 1 January 2013).• Amendments to IFRS 7 “Financial Instruments: Disclosures” on Offsetting Financial Assets and Financial Liabilities
(effective for annual periods beginning on or after 1 January 2013).• Amendments to IAS 32 “Financial Instruments: Presentation” on Offsetting Financial Assets and Financial Liabilities
(effective for annual periods beginning on or after 1 January 2014).
New IFRICs
• IFRIC 20 “Stripping Costs in the Production Phase of a Surface Mine” (effective for annual periods beginning on or after 1 January 2013).
ii) Not yet adopted by the European Union
New standards
• IFRS 9 “Financial Instruments” (and subsequent amendments to IFRS 9 and IFRS 7) (effective for annual periods beginning on or after 1 January 2015).
Amendments
• Amendment to IFRS 1 “First-time adoption of International Financial Reporting Standards” on IAS 20 ‘Accounting for Government Grants and Disclosure on Government Assistance’ - exemption on the retrospective application of IFRSs in relation to government grants (effective for annual periods beginning on or after 1 January 2013).
• Annual Improvements 2011 (effective for annual periods beginning on or after 1 January 2013).
• Amendments to IFRS 10, IFRS 12 and IAS 27 on consolidation for investment entities (effective for annual periods beginning on or after 1 January 2014).
• Amendments to IFRS 10, IFRS 11 and IFRS 12 on transition guidance (effective for annual periods beginning on or after 1 January 2013).
The Board of Directors expects that the adoption of these financial reporting standards in future periods will not have a material effect on the financial statements of the Group, with the exception of the following:
(i) Amendment to IAS 1 “Financial statements presentation” on presentation of items of other comprehensive income”. The main change resulting from this amendment is a requirement for entities to group items presented in ‘other comprehensive income’ (OCI) on the basis of whether they are potentially reclassifiable to profit or loss subsequently (reclassification adjustments). The amendment does not address which items are presented in OCI. This amendment is effective for annual periods beginning on or after 1 July 2012.
(ii) IFRS 9, ‘Financial instruments’. IFRS 9 addresses the classification, measurement and recognition of financial assets and financial liabilities. It replaces the parts of IAS 39 that relate to the classification and measurement of financial instruments. IFRS 9 requires financial assets to be classified into two measurement categories: those measured as at fair value and those measured at amortised cost. The determination is made at initial recognition. The classification depends on the entity’s business model for managing its financial instruments and the contractual cash flow characteristics of the instrument. For financial liabilities, the standard retains most of the IAS 39 requirements. 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 income statement, unless this creates an accounting mismatch. The standard is effective for annual periods beginning on or after 1 January 2015 and has not yet been endorsed by the European Union.
(iii) IFRS 10, Consolidated financial statements’. 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 standard is effective for annual periods beginning on or after January 2014.
(iv) IFRS 13, “Fair Value Measurement”. IFRS 13 aims to improve consistency and reduce complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across IFRSs. The requirements do not extend the use of fair value accounting but provide guidance on how it should be applied where its use is already required or permitted by other standards. The standard is effective for annual periods beginning on or after 1 January 2013.
2.4 Consolidation
The consolidated financial statements include the assets, liabilities, results and cash flows of the Company and its subsidiaries detailed in Note 1-a).
a) Subsidiaries -
Subsidiaries are all entities over which the Group has the power to govern the 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
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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. They are deconsolidated from the date that control ceases.
The Group uses the acquisition method of accounting to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. On an acquisition-by-acquisition basis, the Group recognizes any non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net assets.
The fair value of services received in relation with business combinations are recognized in equity when they are settled with the Group’s own equity instrument (such as warrants).
The excess of the consideration paid for the transfer of any non-controlling interest in the acquiree and the fair value at acquisition-date of any previous equity interest held in the acquiree over the fair value of the identifiable net assets acquired is recorded as goodwill (note 2.8 - a). If this is less than the fair value of the net assets of the subsidiary acquired the difference is recognized directly in profit or loss.
Inter-company transactions, balances and unrealized gains on transactions between group companies are eliminated. Unrealized losses are also eliminated, unless the transaction evidences the impairment of the transferred asset. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.
b) Associates -
Associates are all entities over which the Group has significant influence but not control, generally accompanying a shareholding of between 20% and less than 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting and are initially recognized at cost. The Group’s investment in associates includes goodwill identified on acquisition, net of any accumulated impairment loss.
The Group’s share on its associates’ post-acquisition profits or losses is recognized in profit or loss, and its share of post-acquisition other comprehensive income movements are recognized in other comprehensive income. The cumulative post-acquisition movements are adjusted against 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 obligations or made payments on behalf of the associate.
Unrealized gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the Group.
Dilution gains and losses arising in investments in associates are recognized in the consolidated statement of comprehensive income.
2.5 Segment information
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources, assessing performance of the operating segments and making strategic decisions, has been identified as the Board of Directors.
2.6 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 USD Dollars, 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 dates of the transactions or valuation where items are re-measured. 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 consolidated statement of comprehensive income.
Foreign exchange gains and losses that relate to borrowings, cash and cash equivalents and other accounts are presented in the consolidated statement of comprehensive income within ‘net foreign exchange transactions losses’.
c) Group companies -
The results and financial position of all 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:
(a) assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of that consolidated statement of financial position;
(b) income and expenses for each income statement 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 dates of the transactions);
(c) equity balances, except for retained earnings, are translated at the historical exchange rates; and (d) all resulting exchange differences are recognized as profit or loss in other comprehensive income and included in
retained earnings.
On consolidation, exchange differences arising from the translation of the net investment in foreign operations, and of borrowings and other currency instruments designated as hedges of such investments, are taken to other comprehensive income. When a foreign operation is partially disposed of or sold, exchange differences that were recorded in other comprehensive income in the consolidated statement of comprehensive income recognized as income from continuing operations in the consolidated statement of comprehensive income as part of the gain or loss on sale.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.
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2.7 Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses.
Historical cost comprises the purchase price and any cost directly attributable to bringing the asset into working condition for its intended use. Cost of replacing part of the plant and equipment is recognized in the carrying amount of the plant and equipment if the recognition criteria are satisfied. All other repair and maintenance costs are recognized in profit or loss as incurred. The present value of the expected cost for the decommissioning of the asset after its use is included in the cost of the respective asset if the recognition criteria for a provision are met. Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalized as part of the cost of that asset.
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 amounts of replaced parts are derecognized. All other repairs and maintenance are charged to profit or loss during the financial period in which they are incurred.
The cost less the residual value of each item of property, plant and equipment is depreciated over its useful life.
Depreciation is calculated on a straight-line basis over the estimated useful life of individual assets, as follows:
Years
Buildings and other constructions 33Irrigation structure 70Plant and equipment Between 5 and 10Furniture and fixtures 10Other equipment Between 3 and 10Vehicles 5
Depreciation commences when assets are available for use as intended by management. Land is not depreciated.
The assets residual values and useful lives are reviewed, and adjusted prospectively if appropriate, at each financial year end.
An asset’s carrying amount is written-down immediately to its recoverable amount, if the asset’s carrying amount is greater than its estimated recoverable amount (Note 2.9).
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognized within ‘Other income and other expenses – net’ in the consolidated statement of comprehensive income.
2.8 Intangible assets
a) Goodwill -
Goodwill is initially measured at cost which is the excess of the cost of the consideration paid over the fair value of the net acquirer’s identifiable assets, liabilities, contingent liabilities and non-controlling interest at the date of acquisition. When the accounting for a business combination is not completed by the end of the reporting period in which the business combinations took place, the Group reports provisional amounts for the items the valuation process of which is incomplete.
The net identifiable assets acquired and liabilities assumed accounted at provisional fair values at acquisition date may be retroactively adjusted to reflect additional information gathered on facts and circumstances existing at acquisition date which, if known, would have affected the measurement of the amounts originally recognized. The period allowed by the IFRS 3 for the amendment of provisional amounts recognized should not exceed one year from the acquisition date.
Goodwill on acquisition of subsidiaries is included in ‘intangible assets’ in the consolidated statement of financial position.
Goodwill is tested for impairment annually or more frequently whenever events or changes in circumstances indicate a potential impairment. The carrying value of goodwill is compared to the recoverable amount, which is the higher of value in use and the fair value less costs to sell. Any impairment is recognized immediately as an expense. After initial recognition, goodwill is carried at cost less any accumulated impairment losses.
For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-generating units that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the acquire are allocated to those units. Impairment is determined for goodwill by assessing the recoverable amount of each cash-generating unit (or group of cash-generating units) to which the goodwill relates. Where the recoverable amount of the cash-generating unit is less than their carrying amount an impairment loss is recognized.
Where goodwill is allocated to a specific cash-generating unit and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the cash-generating unit retained.
When the acquisition is made under favorable conditions (when the fair value of the net assets and liabilities acquired is higher than the purchase consideration), the Group recognizes such amount as income in its consolidated statement of comprehensive income.
b) Customer relationships -
Customer relationships are initially recognized at fair value at the date of acquisition in a business combination and subsequently at cost less amortization over their estimated useful lives which range from 2 to 8 years.
The intangible asset is valued using an income approach and the “multi-period excess earnings” method. The excess of earnings is defined as the difference between after-tax operating cash flow generated by the existing customers at the acquisition date; and, the cost contribution required by the remaining assets (tangible and intangible) for maintaining the relationships with the customer. The application of the “multi-period excess earnings” requires the following estimations:
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• Future sales attributable to the existing customer list at the acquisition date, excluding any sales from other customers without an established and clear relationship. The sales forecast for each customer, or customer category, takes into consideration organic sales growth as well as the deterioration rate for this customer list.
• Calculation of operating margins (EBIT), taking into account only costs related to the existing customer base at the acquisition date.
c) Computer software -
Acquired computer software licenses are capitalized on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortized over their estimated useful lives (ten years).
Costs associated with maintaining computer software or programs are recognized as an expense as they are incurred. Development costs that are directly attributable to the design and testing of identifiable and unique software products controlled by the Group are recognized as intangible assets when the following criteria are met:
• It is technically feasible to complete the software product so that it will be available for use;• Management intends to complete the software product and use or sell it;• There is an ability to use or sell the software product;• It can be demonstrated how the software product will generate probable future economic benefits;• Adequate technical, financial and other resources to complete the development and to use or sell the software
product are available; and• The expenditure attributable to the software product during its development can be reliably measured.
Directly attributable costs capitalized include: software development, employee costs and an appropriate portion of relevant overheads.
Other development expenditures that do not meet these criteria are expensed as incurred.
Development costs previously recognized as an expense are not recognized as an asset in a subsequent period.
2.9 Impairment of non-financial assets
The carrying amounts of assets that are subject to depreciation or amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. At each reporting date the Group assesses if there are indicators of impairment and if so, or if an impairment test for an asset is required, an assessment is undertaken to determine whether the carrying values are in excess of their recoverable amount. Such review is undertaken on an asset by asset basis, except where such assets do not generate cash flows independent of other assets, in which case the assessment is undertaken at cash-generating unit level. If the carrying amount of an asset or of a cash-generating unit exceeds its recoverable amount, the asset is considered to be impaired and is written down to its recoverable amount. Impairment losses are recognized in consolidated statement of comprehensive income.
The recoverable amount of assets is the greater of their value in use or their fair value less costs to sell. Fair value is based on an estimate of the amount that the Group may obtain in a sale transaction on an arm’s length transaction. In assessing the value in use of an asset, its estimated future cash flows are discounted to their present value using a post-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that
does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the cash -generating unit to which the asset belongs. The Group’s cash-generating units are the smallest identifiable groups of assets that generate cash inflows that are largely independent of the cash inflows from other assets or groups of assets.
For non-financial assets excluding goodwill, an impairment loss is reversed if there has been a change in the estimates used to determine their recoverable amount. An impairment loss is reversed only to the extent that the adjusted asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized in prior periods. Impairment losses relating to goodwill are not reversed in future periods.
2.10 Financial assets
Classification -
The Group classifies its financial assets in the following categories: at fair value through profit and loss, loans and receivables, held-to-maturity and available-for-sale. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition. As of December 31, 2012 and 2011 the Group only holds financial assets in the category of loans and receivables.
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and for which there is no intention of trading the receivable. They are included in current assets, except for maturities greater than 12 months after the end of the reporting period. These are classified as non-current assets. The Group’s loans and receivables comprise ‘trade and other accounts receivable’ and ‘cash and cash equivalents’ in the consolidated statement of financial position (Notes 14, 13 and 15, respectively).
Recognition and measurement -
Loans and receivables are initially recognized at fair value plus transaction costs. Loans and receivable are derecognized when the rights to receive cash flows from the assets have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. Loans and receivables are subsequently carried at amortized cost using the effective interest method.
Offsetting financial instruments -
Financial assets and liabilities are offset and the net amount reported in the consolidated 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.
2.11 Impairment of financial assets
The Group assesses 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.
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The criteria that the Group uses 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;- The Group, for economic or legal reasons relating to the borrower’s financial difficulty, granting 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.
The Group first assesses 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 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, the Group measures impairment on the basis of the instrument’s fair value using an observable market price.
A provision for impairment of trade accounts receivable is estimated when there is objective evidence that the Group 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.
2.12 Biological assets
Biological assets are living animals or plants managed by the Group for sale. These are asparagus, avocados, mangoes, grapes, shrimp, pepper, tangerine and blueberry which are to be harvested as agricultural produce.
Biological assets are those assets capable of producing more than one harvest or are able to sustain regular harvests (as for example: asparagus, mangoes, avocados and grapes). Costs of producing and harvesting biological assets are expensed as incurred. Costs that increase the number of units produced of the biological asset owned or controlled by the Group are added to the carrying amount of the relevant assets. Biological assets are classified as current and non-current depending on their maturity period.
Expenses that relate to the agricultural activity include planting, harvesting, seedlings, irrigation, agrochemicals, fertilizers and others. Costs of producing and harvesting biological assets are charged to expense when incurred and the costs that increased the number of units of the biological assets owned or controlled by the Group are added to the carrying amount of the assets. The line item “cost of agricultural produce and biological assets sold and services rendered” includes: i)
the cost of agricultural produce held in inventory, ii) biological assets valued at fair value less costs to sell, and iii) the costs of providing agricultural services. Therefore, “cost of production” accumulates the costs incurred during the growth of the biological assets and the line item “cost of agricultural produce and biological assets sold and services rendered” accumulates the costs of items from inventory and/ or biological assets expensed when sold.
Biological assets are measured at fair value less costs to sell on initial recognition and at each statement of financial position date, except where fair value cannot be reliably measured. Cost approximates fair value when little or no 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.
Costs to sell include all incremental costs directly attributable to the sale of the biological assets, excluding finance costs and income taxes. The fair value of a biological asset in its present location and condition is determined based on the present value of expected net cash flows from the biological asset discounted at a current market-determined pre-tax rate.
In determining the fair value of a biological asset based on the expected net discounted cash flows, the following factors have been taken into account:
i) the productive life of the asset;ii) the period over which the asset will mature;iii) the expected future sales price;iv) the cost expected to arise through the life of the asset; andv) a pre-tax nominal discount rate.
Expected future sale prices for all biological assets are determined by reference to observable data in the relevant market. Costs expected to arise through the life of the biological assets are estimated based on historical and statistical data.
The gain or loss arising from initial recognition of a biological asset at fair value less costs to sell and from a change in fair value less costs to sell of a biological asset is recognized in the consolidated statement of comprehensive income in the period in which they arise. Agricultural produce harvested from the Group’s biological assets is initially measured at its fair value less costs to sell at the point of harvest. The fair value of agricultural produce is determined based on market prices. The gain or loss arising from initial recognition of agricultural produce as a result of harvesting is recognized in the consolidated statement of comprehensive income for the period in which it arises. The cost of the agricultural produce included in inventories for subsequent sale is deemed to be the fair value of the produce less costs to sell at the point of harvest in the local market.
2.13 Inventories
Inventories are valued at the lower of average cost and net realizable value.
The cost of biological products is determined as the fair value less estimated point of sale costs at the time of harvest (Note 2.12).
The net realizable value is the estimated sale price in the ordinary course of business, less estimated costs to place inventories in selling condition and commercialization and distribution expenses.
The cost of inventories may not be recovered if: i) the inventories are damaged or become wholly or partially obsolete; and
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ii) their selling prices decline or the estimated necessary costs to be incurred to produce their sale increase. In such circumstances, inventories are written-off to their net realizable value. The Group determines the provision for obsolescence as follows:
Fresh and frozen products 100% of cost at expirationPreserved products 50% of cost after 2 years 100% of cost at expiration The provision for obsolescence is estimated on an item by item basis or for groups of items with similar characteristics (with same crop, market and similar other characteristics).
2.14 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 the Group 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.
2.15 Cash and cash equivalents
In the consolidated statement of cash flows, cash and cash equivalents includes cash at banks and in hand, deposits held at call with banks, short-term highly investments funds, convertible to known amounts of cash and subject to insignificant risk of changes in value and other short-term highly liquid investments with original maturities of three months.
2.16 Share capital
Ordinary shares are classified as equity. Any excess over the par value of issued shares is classified as share premium.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.
Where any group company purchases the Company’s equity share capital (treasury shares), the consideration paid, including any directly attributable incremental costs (net of income taxes) is deducted from equity attributable to the Company’s equity holders until the shares are cancelled or reissued. Where such shares are subsequently reissued, any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, and is included in equity attributable to the Company’s equity holders.
2.17 Trade accounts payable
Trade accounts payable are obligations to pay for goods or services that have been acquired in the ordinary course of
business from suppliers. Trade accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities.
Trade accounts payable are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method when the effect of cost of money is important; otherwise these accounts are subsequently measured at their face value.
2.18 Borrowings
Borrowings are recognized initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortized cost. Any difference between the proceeds (net of transaction costs) and the redemption value is recognized in the consolidated statement of comprehensive income over the period of the borrowing using the effective interest method. The amortized costs of the loans that are settled in advance are immediately affected to consolidated statement of comprehensive income. For those loans that replace existing loans, they can be regarded as an extinguishment of debt to the extent that the present value of new loans recognized at amortized cost is different from previous funding by more than 10 percent of its value.
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 consolidated statement of financial position date.
2.19 Leases
The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement at inception date: whether the fulfillment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset.
Leases that transfer to the Group substantially all risks and benefits incidental to ownership of the leased items are capitalized as finance leases at the inception of the lease at the fair value of the leased property, or if lower, at the present value of the minimum lease payments. Finance lease payments are apportioned between finance charges and reduction in the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance costs are recognized in the consolidated statement of comprehensive income. Capitalized leased assets are depreciated over the shorter of their estimated useful life and the lease term, if there is no reasonable certainty that the Group will obtain ownership at the end of the lease term.
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases are charged to the statement of comprehensive income on a straight line basis over the period of the lease.
2.20 Current and deferred income tax
Income tax expense for the period comprises current and deferred income tax. Income tax is recognized in the consolidated statement of comprehensive income, except to the extent that it relates to items recognized in profit or loss or directly in equity. In this case the income tax is also recognized in profit or loss or directly in equity, respectively.
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The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the consolidated statement of financial position date in the countries where the Company and its 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 when it arises from the initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects accounting for either the taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the consolidated statement of financial position date 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 subsidiaries and 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.
Deferred income tax assets and deferred income tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current income tax liabilities and the deferred income taxes relate to the same taxable entity and the same taxation authority.
2.21 Share-based payments
The Group operates a number of equity-settled share-based compensation plans. The cost of equity settled transactions is measured by reference to the fair value of the equity instruments at the date on which they are granted using the Black and Scholes - Merton model. The cost, together with the corresponding increase in equity, is recognized on a straight-line basis over the vesting period in which the performance and/ or service conditions are fulfilled. At each consolidated statement of financial position date, the Group revises its estimates of the number of options that are expected to vest and recognizes the change in cost if any, in the consolidated statement of comprehensive income, with a corresponding adjustment to equity.
2.22 Provisions
Provisions are recognized when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognized as a financial expense.
2.23 Employee benefits
Workers’ profit sharing and other employee benefits -In accordance with Peruvian Legislation the Group is required to provide for workers’ profit sharing equivalent to 10% of taxable income in Peru of each year. This amount is charged to the statement of comprehensive income (distributed among cost of sales, administrative expenses and selling expenses, as appropriate). This charge is a deductible expense for income tax purposes.
Statutory bonuses -
The Group recognizes the expense in bonuses and the related liabilities under legal tax regulations. Statutory bonuses consist of two (02) annual one-month salaries paid in July and December every year.
Employees’ severance indemnities -
Employees’ severance indemnities of the Group personnel comprise indemnities determined under local laws and regulations and which has to be credited to bank accounts selected by employees in May and November every year. The annual employees’ severance indemnities equal one-month salary. The Group does not have obligations of additional payments once these annual deposits, to which each worker is entitled to, are made.
2.24 Revenue recognition
Revenue comprises the fair value of the consideration received or receivable for the sale of goods in the ordinary course of the Group activities. Revenue is shown net of value-added tax, returns and discounts and after eliminating sales within the Group.
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognized:
a) 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:
• Exports of fresh products. This mainly includes fresh products of asparagus, avocados, mangoes and grapes. Some of these exports are invoiced at a fixed price while others on a preliminary liquidation basis (provisionally priced), which is determined on current market prices at the date of issuance of the export invoice. In the case of sales on a preliminary liquidation basis, an adjustment to the provisional price is made based on current market prices at the date agreed with the customer, usually within a period ranging from 7 to 30 days after the export delivery. The value of the provisionally priced fresh products is re-measured using the forward selling price for the respective quotational period agreed with the customer until this quotational period ends. The selling price of fresh products can be measured reliably as these products are actively traded on international markets. The change in value of provisionally priced contracts is recorded as an adjustment to revenue and to trade receivables.
• Exports of preserved products. Revenue is recognized when export delivery conditions are met.
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• Export of frozen products. Revenue is recognized when export delivery conditions are met.
• Domestic sales. Revenue is recognized on delivery.
b) Interest income -
Revenue is recognized as interest accrues using the effective interest method.
2.25 Costs and expenses
Cost of sales corresponds to the cost of production of goods sold, and is recorded simultaneously with the recognition of revenue. Other costs and expenses are recognized on an accrual basis and recorded in the periods to which they are related.
2.26 Dividend distribution
Dividend distribution to the Group’s shareholders is recognized as a liability in the consolidated statement of financial position in the period in which the dividends are approved by the shareholders.
2.27 Contingent liabilities and assets
Contingent liabilities are not recognized in the financial statements and are disclosed in notes to the financial statements unless their occurrence is estimated as remote. Contingent assets are not recognized in the financial statements and are disclosed only if their realization is assessed as probable.
2.28 Custom duties refunds
Custom duties refunds (drawback) correspond to a tax benefit granted by the Peruvian Government by means of which the Company is reimbursed for the custom duties paid on the importation of goods that are a component of the FOB value of the exported products. The refund of these custom duties is credited to the cost of sales in the consolidated statement of comprehensive income when the Group has the right to claim the refund (when the exportation is completed).
3 RISK MANAGEMENT
3.1 Financial risk factors
The Group’s activities expose it to a variety of financial risks: operational risk, market risk (including currency risk, fair value interest rate risk, cash flows interest rate risk and price risk), credit risk and liquidity risk.
The Group’s senior management and the Board of Directors oversee the management of these risks and implement a risk management program aiming at reducing at a minimum any potential adverse effect on the Group’s financial performance.
a) Operational risk -
The financial position and future development of the Group will depend significantly on the sales prices of its fruit and vegetables production. The Group produces fresh, frozen and preserved products. Fresh products tend to be more profitable, followed by frozen products and finally preserved goods. However, the complexity of production and the distribution logistics are greater in the case of fresh and frozen products compared to preserved goods. In this way there is an inversely proportional relationship between profitability and commercial complexity of the product type.
Fresh products, because of their very nature, have a much quicker rotation and almost no inventory of finished products. Preserved products may be stored for up to 5 years and this means that in the distribution chain there are times of very high or very low inventories that have a significant impact on prices.
Natural phenomena such as the warmer and colder ocean currents called “El Niño” and “La Niña”, respectively present a threat to farming during half of each year.
“La Niña” generally means that the winter is colder than usual and this has a positive or negative repercussion on our activities according to the crop. For example, in the case of avocado, the cold weather reduces the rate at which the fruit grows and it reaches its period for harvesting at a lower weight per fruit than usual. In the case of asparagus; however, although growth is slow during the period of the cold current, the plants that are maturing and will be harvested at the end of the year have volumes well in excess of the average. “El Niño”, which is usually predictable some months in advance, increases the temperature in both summer and winter. This phenomenon benefits the avocado plant, producing a fruit of higher weight but on the other hand it reduces the harvest levels of asparagus in the months following warmer weather.
During 2012 it experienced a moderate “El Niño” effect, which increased the average temperature from April thru August. The adverse climate conditions had a negative impact on company volumes, especially on avocado and asparagus with a volume decrease for the year of 26.8% and 18.4% respectively.
b) Market risk -
i) Foreign exchange risk -
The Group buys and sells its products and services and obtains funding for its working capital and investments mainly in its functional currency. A third of the Group’s costs are incurred in Nuevo Sol and therefore its financial results are not significantly affected by exchange rate fluctuations between the US Dollar and the Nuevo Sol. However, upon significant transactions management evaluates and decides the use of economically hedge contracts to hedge any possible risk of adverse changes in the foreign currency rate that will affect the cash outflows.
As of 31 December 2012 and 2011 the Group had the following assets and liabilities in the Nuevo Sol (PEN) and Euros (expressed in USD000):
92 93 CAMPOSOLANNUAL REPORT 2012
2012 Total 2011 Total
PEN000 €000 USD000 PEN000 €000 USD000
Assets -
Cash and cash equivalents 3,118 1,451 4,569) 1,960 287 2,247
Trade and other accounts
receivable 10,370 9,305 19,675 6,442 6,080 12,522
13,488 10,756 24,244 8,402 6,367 14,769
Liabilities -
Accounts payable 23,545 2,704 26,249 21,008 1,040 22,048
(Liability) asset position, net (10,057) (8,052) (2,005) (12,606) 5,327 (7,279)
The remaining balance of cash and cash equivalents and trade and other accounts receivable amounting to USD60,709,000 relates to balances denominated in United States Dollar (2011: USD32,816,000).
The remaining balance of liabilities, except the deferred income tax, amounting to USD208,082,000 relates to balances denominated in United States Dollar (2011: USD119,744,000).
The following table demonstrates the sensitivity to a reasonably possible change in Nuevo Sol exchange rate and Euro exchange rate for twelve months, with all other variables held constant, on the Group’s pre-tax profit:
Increase/decrease PEN rate
Effect onin profit
before tax
Increase/decrease
€ rate
Effect onin profit
before tax
USD000 USD000
2012 +4% 1,026 +4% 430-4% (1,026) -4% (430)
2011 +4% 716 +4% 364-4% (716) -4% (364)
ii) Interest rate risk -
Changes in interest rates impact primarily loans and borrowings by changing either their fair value (fixed rate debt) or their future cash flows (variable rate debt).
Since all interest-bearing loans and borrowings have a fixed interest rate, the Group is not exposed to cash flow interest rate risk.
Fixed rate borrowings of the Group are negotiated at market rates on a timely basis, in order to reduce the Group´s exposure to fair value interest rate risk.
iii) Price risk -
Almost all of the Group’s products are sold in the international market. A further economic slowdown in the key markets may cause lower sales volumes and prices, and losses on trade receivables. Produce prices have a material impact on the Group´s results of operations. Prices are significantly affected by changes in global economic conditions and related industry cycles. Generally, agricultural producers are unable to influence prices directly; however, the Group profitability is managed through the control of its cost base and the efficiency of its operations.The Group manages its price risk mainly with price sales commitments built into sales contracts. The Group does not use hedge instruments to manage its price risks.
The following table shows the sensitivity of the outstanding balance of the trade accounts receivable at the date of the financial statements in the profit before income and related tax if the forward price of its produce had weakened/strengthened by 5%:
Increase/decreasein price
Effect in profit beforeincome and related taxes
2012 +5% 1,978-5% (1978)
2011 +5% 1,471-5% (1,471)
c) Credit risk -
Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract leading to a financial loss. The Group is exposed to credit risk on trade and other receivables and deposits with banks. The maximum exposure to credit risk is the carrying amount of accounts receivable as shown on the consolidated statement of financial position. Sales transactions are carried out with a number of different counterparties, which mitigates credit risk concentration. The Group seeks for external assistance to evaluate the rating of the possible new customer. With this information, a credit limit for the customer is set. Management makes efforts in building long-lasting relationships with customers (over 6 months). As of 31 December 2012 and 2011, no credit limits had been breached.
The accounts receivable from a single customer represent 33% per cent of the balance as of 31 December 2012 (13 per cent as of 31 December 2011). All new transactions with this customer are being executed with letters of credit to mitigate credit risk exposure.
In addition, the Group has a multimarket credit insurance coverage over the exports of fresh and preserved products in an aggregate amount up to USD40 million at 31 December 2012 and 2011.
d) Liquidity risk -
The Group has sufficient credit capacity to have access to credit lines with top-ranked financial institutions (institutions with no history of default and prestigious locally) under market terms. In addition, the Group develops new bank relationships in order to have adequate funding available all the time. However, with the current world financial crisis there is risk that banks may revise the terms of the lines of credit.
94 95 CAMPOSOLANNUAL REPORT 2012
The table below analyses the Group’s non-derivative financial liabilities and allocates them into relevant maturity groupings based on the remaining period at the statement of financial position date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows:
Within 1 year Between 1and 2 years
Between 2and 6 years Total
USD000 USD000 USD000 USD0002012 -Long - term debt 16,905 16,779 155,925 189,609Trade accounts payable 51,288 - - 51,288Other accounts payable 14,001 - - 14,001Bank loans 30,149 - - 30,149
112,343 16,779 155,925 285,0472011 -Long - term debt 15,042 13,093 51,815 79,950Trade accounts payable 40,074 - - 40,074Other accounts payable 7,395 - - 7,395Bank loans 26,089 - - 26,089
88,600 13,093 51,815 153,508
3.2 Capital risk management
The Group objectives when managing capital are to safeguard the Group’s ability to continue as a going concern and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group 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. This ratio is calculated as net debt divided by total capital plus net debt. Net debt is calculated as total borrowings, less cash and cash equivalents. Total capital is calculated as equity as shown in the consolidated statement of financial position, less unrealized gains reserve.
As of 31 December 2012 and 2011, the Group’s strategy was to maintain the gearing ratio in no more than 1.
The gearing ratios at 31 December 2012 and 2011 were as follows:
2012 2011USD000 USD000
Bank loans (Note 22) 29,880 25,797Long - term debt (Note 19) 135,111 64,743Less cash and cash equivalents (Note 15) (28,523) (6,604)Net debt (a) 136,468 83,936
Total capital as per statement of financial position (b) 272.435 276,652
Total capital and net debt (a) + (b) 408,903 360,588
Gearing ratio (a) / (a) + (b) 0.33 0.23
The increase in the gearing ratio is mainly due to the increase in bank loan balances, issue of bonds to repay existing loans and finance working capital needs.
3.3 Fair value estimation
The carrying value less impairment provision of trade accounts receivable and accounts payable are assumed to approximate their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments.
As of 31 December 2012 and 2011, the Group does not maintain any financial assets or liabilities measured at fair value since they are measured at the amortized cost.
4 CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS
4.1 Critical accounting estimates and assumptions
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.
96 97 CAMPOSOLANNUAL REPORT 2012
Critical accounting estimates made by management are continually evaluated and are based on historical experience and other factors, including expectation of future foreseeable events that are believed to be reasonable under the circumstances. Management performs sensitivity analyses of the estimates made as a way of determining the related error margins.
The most significant use of judgment is the estimation of the fair value of biological assets, including asparagus, avocados, mangoes, artichokes, grapes, pepper and shrimp. The inputs to the valuation models are derived from observable market data where possible, but where observable market data are not available, judgment is required to establish fair values. The judgments include considerations of plantation volumes, cost per ton, depletion and the discount rate used to estimate the present values. The valuation of biological assets is described in more detail in Note 9. Management performs sensitivity analyses of the cash flow performed as a way of determining the related error margins.The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below.
- Recognition and determination of useful lives of customer relationships - Notes 2.8.b and 8
At the date of acquisition, the Group valued the customer relationships (trained and assembled workforce, customer and distribution relationships) using an income approach and the “multi-period excess earnings”, to estimate the accounting value that should be recognized as intangible assets. The useful life of this intangible asset was determined to be between 2 to 8 years and based on the estimated cash flows to be generated in the future. This estimation was changed as a result of a re-assessment of the customer relationship by Management and given the decrease in the volumes of sales entered into with these customers.
Customer relationships are amortized on a straight-line basis over their estimated useful lives.
Revenue forecasts for intangible assets represent management’s best estimates and are based on actual revenues earned for similar assets and such forecasts are reviewed by management at last annually. Ultimate responsibilities for revenue forecasts rest with the Group’s Management. The main factors which could influence the Group’s revenue forecasts and ultimately the amortization of intangibles are: growth expectation, future financial crisis and political risk.
If any one of the factors or assumptions, on which the revenue forecasts above are based, were to decrease by more than 10%, then the carrying amount of the customer relationships would decrease by more than USD750,000.
- Estimation of income tax - Notes 2.20, 17 and 32
Determination of the tax obligations and expenses requires interpretations of the applicable tax laws and regulations. The Group receives advice from its professional legal tax counsel before making any decision on tax matters. Even though Management considers its estimates are prudent and appropriate, differences of interpretation may arise with Tax Authorities that may require future tax adjustments. The Group recognizes liabilities for situations observed in preliminary tax audits based on estimates as to whether the payment of additional taxes is required. When the final tax result of these situations is different from the amounts that were initially recorded, the differences are charged to the current and deferred income tax assets and liabilities in the period in which this fact is determined. The Group performed sensitivity analysis on the possibility of inappropriate interpretations of tax law. In this it has assessed the probability of error to quantify its impact on the financial statements. Where the actual final outcomes (on the judgment areas) differ by 10% from management’s estimates, the Group would need to:
Effect on income tax2012 2011
USD000 USD000
Decrease the income tax liability (226) (801)Increase the income tax liability 226 801
- Estimation of fair value of biological assets - Note 2.12 and 9
To assess the fair value of biological assets the Company takes 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 biological asset will be recovered and assumptions to be used in its determination. In this regard, to determine the fair value, the Management uses estimates for plantation volumes, cost per ton and exhaustion to the point of harvest. The changes in assumptions or estimates used in the calculations could influence the outcome thereof. The growth model inputs involve estimates that are updated regularly. The fair value has been determined in US dollars and the discounted net cash flows included in estimates of management consider a discount rate determined in relation to the cost of financing of the Company (Weighted Average Cost of Capital). The Company carries out a sensitivity analysis of the biological assets taking into consideration the WACC discount, and taking into account the discount rate that the most representative companies used in the market and determines the interest rate to use as a middle point of the market rates.
Management considers that volatility levels of higher/lower than 5% would give rise to a material effect in its profits for the year. These sensitivity percentages have been determined based on the effect on profits for the year resulting of the application of the fair value of biological assets under IAS 41. The variables used in the determination of the fair values of the biological assets that may be subject to variance are: i) the forecast of revenue and costs, and ii) determination of the discount rate under WACC. With respect to the revenue and costs forecasts, it should be noted that it has been determined based on the harvest and investment forecast for the coming years, which Management considers their error margins depend on quality factors of the produce. These quality factors are monitored by Production Management through a detailed ongoing follow-up. With respect to the discount rate under WACC, its determination has been subject to sensitivity analysis in relation with comparable companies having a similar financial structure.
Increase/ decrease rate Effect on in profit before taxUSD000
2012 + 5% 1,348- 5% (1,348)
2011 + 5% 1,706- 5% (1,706)
98 99 CAMPOSOLANNUAL REPORT 2012
- Review of long lived assets carrying amounts and impairment charges - Notes 6 and 8
The Group estimates that the value of its non-financial assets will be recovered in the normal course of its operations. Its estimates are supported by assumptions regarding the international price of its products, world production levels and the estimates of future production of the Group. At the date of the consolidated financial statements the available projections of these variables show trends favorable to the interests of the Group which supports the recovery of its non-financial assets. Management performs sensitivity analyses of the impairment tests performed on its assets as a way of determining the related error margins.
4.2 Critical judgments in applying the Group´s accounting policies
- Determination of functional currency - Note 2.6
Management has determined the functional currency of the Group’s principal operating entities to be the US Dollar. 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 US Dollars and the price of some raw materials and supplies are influenced by the US Dollar. The borrowings and cash balances of these entities are held in US Dollars. Management has used its judgment to determine the 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 United States Dollar.
5 SEGMENT INFORMATIONThe Group’s Chief Operating Decision Maker uses product information to manage resources and to identify those production lines which may eventually cease to generate value for the Group, and based on that information, decisions are made to develop other production lines. The Group has eight operating segments which are also cash-generating units, namely asparagus, avocado, artichoke, pepper, mango, shrimp, grapes and blueberry. Goodwill arising from the acquisition of Camposol S.A. was allocated to the cash generating units of asparagus and avocado.
The five operating segments are engaged in producing, processing and commercializing a number of agricultural products, as fresh, preserved and frozen, which are mainly exported to European markets and the United States of America.
Disclosure of segment profit measure is made using the gross profit, which is critical in assessing the performance of each segment.
The products include asparagus, avocado, artichoke, pepper, mango, shrimp, grapes and blueberry. These are further distinguished in fresh, canned and frozen products.
All production and related assets are in Peru.
The analysis of sales below is based on the country/area in which the customer is located.
2012 2011
USD000 USD000
Europe 102,540 107,483
USA 49,036 35,987
Canada 4,795 6,046
Asia 17,036 11,012
Other 9,774 7,282
183,181 167,810
The following table shows revenues and gross profit by product:
Asparagus Avocado Artichoke Pepper Mango Shrimp Grapes Blueberry Other Total
USD000 USD000 USD000 USD000 USD000 USD000 USD000 USD000 USD000 USD000
2012 -
Revenues 68,078 31,436 9,837 15,299 14,722 21,149 18,178 - 4,482 183,181
Cost of sales 55,796 15,141 7,430 12,813 12,829 16,958 11,843 - 5,489) 138,299
Gross profit 12,282 16,295 2,407 2,486 1,893 4,191 6,335 - (1,007) 44,882
Gain arising from
changes in fair value
of biological assets (4,183) 26,074 - 330 (5,668) 1,319 (8,962) 14,973 3,083 26,966
Current portion of
biological assets 3,455 3,419 - 619 688 5,203 2,848 332 - 16,564
Non-current portion
of biological assets 21,225 167,555 - - 5,569 - 13,236 16,090 5,460 229,135
Goodwill 3,778 9,219 - - - - - - - 12,997
Finished products 10,621 1,387 6,997 11,272 1,140 467 1,175 - - 32,059
Property, plant and equipment 29,789 41,721 - 4,057 7,806 15,219 6,199 507 21,735 127,033
2011 –
Revenues 57,870 39,873 1,973 20,420 16,021 13,300 14,755 - 3,598 167,810
Cost of sales 44,521 13,324 1,333 15,227 11,830 10,579 7,948 - 4,781 109,543
Gross profit 13,349 26,549 640 5,193 4,191 2,721 6,807 - (1,183) 58,267
Gain arising from
changes in fair value
of biological assets (638) 37,046 - (608) (674) (510) (245) - (259) 34,112
Current portion of
biological assets 4,683 2,707 - 79 1,212) 3,099 4,365 - - 16,145
Non-current portion
of biological assets 28,765 132,629 - - 9,805) - 20,290 - 1,526 193,015
Goodwill 3,778 9,219 - - - - - - - 12,997
Finished products 15,384 845 1,661 9,560 446 627 853 - - 29,376
Property, plant and equipment 28,824 36,391 3,768 6,455 15,047 5,561 21,308 117,354
100 101 CAMPOSOLANNUAL REPORT 2012
The following table shows revenues and gross profit by customer:
Major 10customers
Major 11 to 20customers
Major 21 to 28customers
Othercustomers Total
USD000 USD000 USD000 USD000 USD000Year 2012Revenues 83,852 22,919 10,621 65,789 183,181Gross profit 19,531 5,185 2,172 17,994 44,882
Year 2011Revenues 63,365 25,726 13,901 64,818 167,810Gross profit 23,838 9,483 4,684 20,262 58,267
Gross profit by type of produce for the year ended 31 December is as follows:
2012 2011
Revenue Cost ofsales
Grossprofit Revenue Cost of
salesGrossprofit
USD000 USD000 USD000 USD000 USD000 USD000
Fresh 74,776 (44,333) 30,443 78,994 (38,205) 40,789
Preserved 63,867 (55,056) 8,811 56,687 (45,508) 11,179
Frozen 38,115 (30,679) 7,436 28,998 (21,217) 7,781Others 6,423 (8,231) (1,808) 3,131 (4,613) (1,482)
183,181 (138,299) 44,882 167,810 (109,543) 58,267
6 PROPERTY, PLANT AND EQUIPMENT
Opening balance Additions Disposals Adjustments Transfers Closing
balanceNet book
value
USD000 USD000 USD000 USD000 USD000 USD000 USD000
2012
Cost
Land 42,071 171 (60) - - 42,182
Buildings and other constructions 29,008 61 - 45 3,425 32,539
Plant and equipment 47,484 582 - 1,721 7,748 57,535
Furniture, fixtures and other equipment 5,971 2,537 (87) 37 - 8,458
Vehicles 5,307 833 (266) 117 - 5,991
Construction in progress 15,373 10,287 (7) 1,787 (11,173) 16,267
145,214 14,471 (420) 3,707 - 162,272
Accumulated depreciation
Land - - - - - - 42,182
Buildings and other constructions (5,272) (1,056) - - - (6,328) 26,211
Plant and equipment (16,184) (5,160) - - - (21,344) 36,191
Furniture, fixtures and other equipment (2,944) (778) 3 - - (3,719) 4,739
Vehicle (3,460) (603) 215 - - (3,848) 2,143
Construction in progress - - - - - 16,267
Total (27,860) (7,597) 218 - - (35,239) 127,733
2011
Cost
Land 40,945 248 - 878 - 42,071
Buildings and other constructions 25,047 - - - 3,961 29,008
Plant and equipment 44,390 34 (733) 1,539 2,254 47,484
Furniture, fixtures and other equipment 5,092 818 ((3) 64 - 5,971
Vehicle 5,264 142 (99) - - 5,307
Construction in progress 11,590 9,369 - 629 6,215) 15,373
132,328 10,611 (835) 3,110 - 145,214
Accumulated depreciation
Land - - - - - - 42,071
Buildings and other constructions (4,477) (795) - - - (5,272) 23,736
Plant and equipment (10,807) (4,620) - (757) - (16,184) 31,300
Furniture, fixtures and other equipment (2,270) (644) 3 (33) - (2,944) 3,027
Vehicle (2,889) (627) 56 - - (3,460) 1,847
Construction in progress - - - - - - 15,373
Total (20,443) (6,686) 59 (790) - (27,860) 117,354
102 103 CAMPOSOLANNUAL REPORT 2012
a) As of 31 December 2012 the Group made acquisitions amounting to USD7,257,000 related to the construction of the freezing plant; USD3,486,000 related to the purchase machinery and equipment; USD334,000 related to the expansion of offices and systems; USD1,415,000 related to plum and grape; USD1,308,000 related to irrigation equipment; USD500,000 related to the purchase of vehicles for administration, and USD171,000 for acquisition of agricultural land, bridges and implementing offices in Tumbes, north Sea, Campana and Paracas. As of 31 December 2011 the Group made acquisitions of assets amounting to USD1,511,000 related to the purchase of machinery and plant equipment, packing machines and facilities; USD2,800,000 related to the construction of field infrastructures in Frusol and Arbus, the construction of reservoirs and wells in Piura and equipment for planting mango and pomegranate; USD2,200,000 related to the implementation and restructuring of Noragro plant as well as the installation of systems and others; USD4,100,000 related to the construction of shrimp ponds, earthworks, bridges and the implementation of offices in Tumbes, Mar Norte, Campana and Paracas.
b) As of 31 December 2012 the gain on disposal of property, plant and equipment amounts to USD227,000 (loss of USD404,000 as of 31 December 2011) (see Note 29). The net book value of assets disposed of during 2012 amounts to USD202,000 (USD776,000 as of 31 December 2011).
c) As of 31 December 2012, property, plant and equipment include fixed assets acquired under finance leases which book value amounts to USD8,100,000 (USD2,327,000 as of 31 December 2011) net of their corresponding accumulated depreciation. The payments of these obligations are secured with the assets acquired under the lease contracts.
d) At 31 December 2012 the adjustments correspond to the increase in balances by USD1,920,000 that resulted from leaseback
on machinery and equipment, the reclassification of materials amounting to USD 906,000 related to the constructions of the frozen plant and USD 881,000 corresponding to the variation of permanent investments for the year. At 31 December 2011 the adjustments corresponds to the net assets acquired in the business combination described in Note 23 amounting to USD1,717,000; an increase in balances by USD146,000 that resulted from leaseback on machinery and equipment and the remaining adjustments, by USD457,000 correspond to the variation of permanent investments for the year.
e) As of 31 December 2012 and 2011, property, plant and equipment is insured up to a value of USD40 million. Management believes that this policy is consistent with international practices in the industry and takes into account the risk of eventual losses due to the nature of the assets.
f) The total depreciation for the years 2012 and 2011 includes USD1,569,000 each year that corresponds to the depreciation of the fair value of acquired assets in business combinations (see Note 8).
g) The allocation of the depreciation charge is as follows:
2012 2011USD000 USD000
Cost of sales (Note 25) 6,838 5,856Selling expenses (Note 26) - 6Administrative expenses (Note 27) 759 824
7,597 6,686
h) Bank borrowings are secured by fixed assets the value of which amounts to USD47 million in 2012 (USD60 million in 2011) (Note 19).
7 INVESTMENT IN ASSOCIATE
% share in the
capital stock 2012 2011% USD000 USD000
Empacadora de Frutos Tropicales S.A.C. 40.00 559 493
On 30 September 2006 Camposol S.A. participated in the incorporation of Empacadora de Frutos Tropicales S.A.C (Empafrut), a Peruvian company engaged in the processing and commercialization of fresh fruits products, mainly mangoes. The cost of the investment amounted to USD600,000.
The Group’s share in the 2012 income of this company amounted to USD66,000 (USD111,000 in 2011) which are shown separately in the consolidated statement of comprehensive income.
The summarized financial information at 100% for this associated company for the year ended 31 December is as follows:
2012 2011
USD000 USD000
Total assets 2,992 2,491Total liabilities 1,439 1,185Total revenue 3,010 4,267Gain for the year 258 278Total equity 1,553 1,306
104 105 CAMPOSOLANNUAL REPORT 2012
8 INTANGIBLE ASSETS
The movement of the cost and the accumulated amortization of intangibles assets is as follows:
Opening balance Additions Disposals Adjustments Closing
balanceNet book
value
USD000 USD000 USD000 USD000 USD000 USD000
2012CostGoodwill 12,997 - - - 12,997Customer relationships 9,566 - - - 9,566Software 4,151 288 - - 4,439Others 162 - - - 162
26,876 288 - - 27,164
Accumulated amortizationGoodwill - - - - - 12,997Customer relationships 3,169 2,132 - - 5,301 4,265Software 1,093 423 - - 1,516 2,923Others 4 - - - 4 158
4,266 2,555 - - 6,821 20,343
2011CostGoodwill 10,589 - - 2,408 12,997Customer relationships 9,566 - - - 9,566Software 3,780 408 (37) - 4,151Others 162 - - - 162
24,097 408 (37) 2,408 26,876
Accumulated amortizationGoodwill - - - - - 12,997Customer relationships 2,722 447 - - 3,169 6,397Software 694 409 (10) - 1,093 3,058Others 4 - - - 4 158
3,420 856 (10) - 4,266 22,610
In 2011 the Group recorded an adjustment of USD2,408,000 to the deferred tax liability, which has been recognized in goodwill instead of the result for the year, since it related to Peruvian tax laws which existed at the date of Group reorganization and affected fixed assets acquired as part of that transaction (see Note 1-b).
The amortization of costumer relationship of USD2,132,000 (USD447,000 for 2011) was charged to selling expenses (Note 26) and the amortization of software was charged to administrative expenses (Note 27) by USD416,000 (USD397,000 for 2011) and to cost of sales (Note 25) by USD7,000 (USD12,000 for 2011) in the consolidated statement of comprehensive income.
Goodwill -
On 17 October 2007, Camposol AS acquired 100% of the outstanding shares of Siboure Holding Inc, parent of Camposol S.A.; as a result of this transaction the Group recognized a goodwill amounting to USD9,542,000.
During 2010 Marinazul S.A. acquired 100% of the outstanding shares of Domingo Rodas S.A. for a consideration of USD164 thousand. The fair value of the net liabilities acquired amounted to USD883,000 giving rise to a goodwill amounting to USD1,047,000. In addition the Group acquired during 2010 100% of the outstanding shares of Camarones S.A. for a consideration of USD321,000. The fair value of the net assets acquired amounted to USD399,000, giving rise to the recognition of a negative goodwill amounting to USD78,000 which was recognized as other income (Note 23) in the consolidated statement of comprehensive income.
Impairment tests on goodwill -
An impairment test on goodwill was performed by comparing the fair value less costs to sell of the cash-generating units and their carrying amount (including goodwill). To estimate the fair value less costs to sell, the Group has used the following assumptions:
• Projections are based on the Group’s forecasts approved by management • A 5-year term of cash flows has been used in the calculation, as the forecasted cash flows can be based on reasonable
and reliable assumptions. • Projections do not include cash inflows or outflows from financing activities.• Future cash flows are post-tax. • The discount rate is the `Group’s WACC of 8.71% as this rate is affected by the specific industry and market risks;
therefore it represents the rate that a market participant would use. • Goodwill is allocated to two cash-generating units (asparagus and avocado). • Cash flows projections comprise the entire cash flows expected to be generated in the normal course of business,
including the cash flows that relate to biological assets. All non-current assets have been allocated to each CGU.
The recoverable amount of a CGU is determined based on fair value less costs to sell calculations. These calculations use post-tax cash flow projections based on financial budgets approved by management covering a five-year period. Cash flows beyond the five-year period are extrapolated using the estimated growth rates of zero. The growth rate does not exceed the long-term average growth rate for a similar business in which the CGU operates.
The key assumptions used for fair value less costs to sell calculations in 2012 and 2011 are as follows:
106 107 CAMPOSOLANNUAL REPORT 2012
2012 2011Asparagus Avocado Asparagus Avocado
% % % %
Gross margin 22 62 22 62
Growth rate 15 44 3 20Discount rate 8.71 8.71 8.71 8.71
Management determined budgeted gross margin based on past performance and its expectations of market development. The average growth rates used are consistent with the actual performance in the avocado segment and with the forecasts included in industry reports. The discount rates used are post-tax and reflect specific risks relating to the relevant operating segment.
Management performs a sensitivity analysis to assess the impact of changes in the assumptions used in the valuation model. In this respect, during 2012 the WACC rate used by the Group was 8.71%. By increasing the discount rate to 16.61% and 14.98% for asparagus and avocado, respectively, the recovery amounts would be equal to carrying values. Sensitivity analysis of asparagus and avocado -
The recoverable amounts based on the sensitivity analysis performed are as follows:
2012
USD000
Asparagus
17% 102,586
22% 128,804
23% 134,353
Avocado
59% 429,059
62% 460,182
63% 469,717
2011
USD000
Asparagus
21% 71,643
22% 74,521
23% 77,440
Avocado
61% 258,760
62% 263,645
63% 268,526
Despite the large growth rate in avocado, there is enormous potential for growth based on the opening of new markets for the coming years, improvements in production processes, and improvement in the performance of harvest.
Customer relationships -
The relationships with customers established over time become a valuable intangible for the Group. The loyalty of the customers had positive impacts on sales and profits during the last 10 years of operation of Camposol Group enabling the Group to reach a foreseeable growth.
Predictable commercial relationships generate a set of economic benefits to the Group, including increased sales and minimization of sharp fluctuations in sales. Currently, the Group has a base of 194 customers, 16 of which explain 13 per cent of its sales according to 2012 commercial statistics (194 customers, 40 of which explain 63 per cent of its sales in 2012).
At the date of the acquisition of Camposol S.A., the fair value was assigned to customer relationships by using the income approach and the “multi-period excess earnings” method to calculate the excess of earnings attributable to customer relationships during their economic life. The excess of earnings is defined as the difference between:
• After-tax operating cash flows generated by the existing customers at the acquisition date; and, • Cost contribution required by the remaining assets (tangible and intangible) for maintaining the relationships with
customer
The application of the “multi-period excess earnings” requires the following estimations:
• Future sales attributable to the existing customers with an established relationship. The sales forecast for each customer, or customer category, must take into consideration organic sales growth as well as the deterioration rate for this customer list.
• Calculation of operating margins (EBIT), taking into account only costs related to the existing customer base at the acquisition date.
The useful life of customer relationships is amortized over their estimated useful lives which range from 2 to 8 years.
108 109 CAMPOSOLANNUAL REPORT 2012
9 BIOLOGICAL ASSETS
The Group measures the value of agricultural plants and shrimps using the expected cash flows for the production of each of its biological assets. The cash flows included in the projections are discounted at the rate of 10.7%.
The net effect of the IAS 41 fair value adjustment is USD19,897,000 (USD26,524,000 in 2011), and is determined as follows:
Asparagus Avocados Mangoes Pepper Shrimp Grapes Tangerine Blueberry Total
USD000 USD000 USD000 USD000 USD000 USD000 USD000 USD000 USD000
2012
Change in fair value less cost to sell of biological assets
(8,767) 35,639 (4,760) 540 2,104 (8,569) 3,932 16,422 36,541
Net cost of permanentplantations andmaintenance
4,584 (9,565) (908) (211) (785) (393) (851) (1,446) (9,575)
Gain arising from changein fair value of biologicalassets
(4,183) 26,074 (5,668) 329 1,319 (8,962) 3,081 14,976 26,966
Deferred income tax 627 (6,892) 860 (50) (198) 1,613 (607) (2,422) (7,069)
IAS 41 adjustment, net of deferred taxes
(3,556) 19,182 (4,808) 279 1,121 (7,349) 2,474 12,554 19,897
2011
Change in fair value less cost to sell of biological assets
(4,484) 42,233 (325) (1,383) 820 3,562 398 - 40,821
Net cost of permanentplantations andmaintenance
3,846 (5,187) (349) 775 (1,330) (3,807) (657) - (6,709)
(Loss) gain arising from change in fair value of biological assets
(638) 37,046 (674) (608) (510) (245) (259) - 34,112
Deferred income tax 96 (7,627) 78 91 76 (341) 39 - (7,588)
IAS 41 adjustment, net of deferred taxes
(542) 29,419 (596) (517) (434) (586) (220) - 26,524
The net cost of permanent plantations and maintenance of farms is as follows:
Asparagus Avocados Mangoes Pepper Shrimp Grapes Tangerine Blueberry Total
USD000 USD000 USD000 USD000 USD000 USD000 USD000 USD000 USD000
2012
New plantations 4,475 (5,725) (669) 21 - (576) (689) (1,444) (4,607)
Change products in process 109 (3,840) ( 239) (232) (785) 183 (162) (2) (4,968)
Net cost of permanent plantations and maintenance
4,584 (9,565) ( 908) (211) (785) (393) (851) (1,446) (9,575)
2011
New plantations 3,526 (4,087) 179 (21) - (3,032) (657) - (4,092)
Change products in process 320 (1,100) (528) 796 (1,330) (775) - - (2,617)
Net cost of permanent plantations and maintenance
3,846 (5,187) (349) 775 (1,330) (3,807) (657) - (6,709)
The transfer of permanent plantations at cost for the year 2012 is USD4,915 thousand (USD4,461 thousand in 2011) (Note 31).
The following table demonstrates the sensitivity to a reasonably possible change in the discount rate, with all other variables held constant, on the Group’s profit before tax:
Increase/ decrease
discount rateEffect on profit
before tax
USD000
2012+1% (9,995)-1% 12,619
+0.5% (5,909)-0.5% 6,171
2011+1% (9,412)-1% 10,266
+0.5% (4,804)-0.5% 5,022
110 111 CAMPOSOLANNUAL REPORT 2012
The main assumptions used to estimate the fair values of the biological assets were as follows:
Asparagus: - 55 lots in Agromás, Pur Pur, Mar Verde, Gloria, Agricultor, Aeropuerto, Oasis, San José, Sincromax, Terra and Yakuy
Minka. (61 lots in 2011)- Lots have a useful life of 10 years. - Each harvest cycle lasts 6 months. - Assumes reduction of production in year 2018 due to the “Fenómeno del Niño”.
Avocados: - 54 lots in Frusol, Agromás and Yakuy Minka. (51 lots in 2011)- Lots have a useful life of 20 years. - Every harvest cycle lasts 1 year. - Assumes reduction of production in year 2018 due to the “Fenómeno del Niño” - Lots have their first harvest after 3 years from planting
Mangoes: - 9 lots in Atypsa, Balfass and Dunas (8 lots in 2011). - Parcels have a useful life of 20 years. - Every harvest cycle lasts 1 year.- Assumes reduction of production in year 2018 due to the “Fenómeno del Niño”. - Lots have their first harvest after 3 years from planting
Grapes: - 14 lots in Agroalgre (2 lots in 2011). - The lots have a useful life of 20 years. - Each harvest cycle last 1 year.
Pepper: - 6 lots lands from Terra (6 lots in 2011).- The lots have a useful life of 8 months. - Each harvest cycle last 8 months including preparation, maintenance and harvest.
Blueberry: - 4 lots in Oro azul and Yakuy Minka. - The lots have a useful life of 13 years. - Each harvest cycle last 1 year.
Tangerine: - 2 lots in Yakuy Minka. - The lots have a useful life of 20 years. - Each harvest cycle last 1 year.
Shrimps: - 48 shrimp farms that cover an area of 252 Area - Each has a useful life of 180 days, approximately 25 weeks. - Each harvest cycle of shrimps lasts approximately 25 weeks, including preparation, maintenance and harvest.
The movement for the period in the fair value of biological assets is as follows:
Opening balance Additions and deductions Closing balance
Area Market value Area Market value
(Note 31) Area Final balance
Les current portion
Non current portion
Has USD000 Has USD000 Has USD000 USD000 USD000
2012Asparagus 2,633 33,448 (117) (8,767) 2,516 24,681 (3,456) 21,225Avocados 2,488 135,336 128 35,639 2,616 170,975 (3,420) 167,555Mangoes 415 11,017 35 (4,760) 450 6,257 (688) 5,569Pepper 294 79 (3) 540 291 619 (619) -Shrimp 628 3,099 7 2,104 635 5,203 (5,203) -Grapes 451 24,655 - (8,569) 451 16,086 (2.850) 13,236Tangerine 102 1,526 - 3,933 102 5,459 - 5,459Blueberry - - 206 16,419 206 16,419 (328) 16,091
7,011 209,160 256 36,539 7,267 245,699 (16,564) 229,135
2011Asparagus 2,633 37,932 - (4,484) 2,633 33,448 (4,683) 28,765Avocados 2,488 93,103 - 42,233 2,488 135,336 (2,707) 132,629Mangoes 415 11,342 - (325) 415 11,017 (1,212) 9,805Pepper 510 1,462 (216) (1,383) 294 79 (79) -Shrimp 290 2,279 338 820 628 3,099 (3,099) -Grapes 420 21,093 31 3,562 451 24,655 (4,365) 20,290Tangerine 102 1,128 - 398 102 1,526 - 1,526
6,858 168,339 153 40,821 7,011 209,160 (16,145) 193,015
The movement in the fair value of biological assets is as follows:
Asparagus Avocados Mangoes Pepper Shrimp Grapes Tangerine Blueberry Total
USD000 USD000 USD000 USD000 USD000 USD000 USD000 USD000 USD000
31 December 2012Initial balance of fair value 33,448 135,336 11,017 79 3,099 24,655 1,526 - 209,160Harvest (6,548) (4,639) (1,574) (550) (6,812) (1,620) (29) - (21,772)Price change 453 20,866 (3,075) 79 2,142 (3,649) 3,951 - 20,767Projected change in Kg (1,302) 17,377 (119) 1,011 (3,300) 11 - 13,678New plantings (1,370) 2,035 8 - 6,774 - - 16,419 23,866Final balance of fair value 24,681 170,975 6,257 619 5,203 16,086 5,459 16,419 245,699
31 December 2011Initial balance of fair value 37,932 93,103 11,343 1,461 2,279 21,093 1,128 - 168,339Harvest (6,110) (2,697) (1,516) (2,399) (3,513) (819) - - (17,054)Price change 3,079 61,350 478 1,648 2,761 16,908 398 - 86,622Projected change in Kg (1,453) (16,988) 712 - - (14,028) - - (31,757)New plantings - 568 - (631) 1,572 1,501 - - 3,010Final balance of fair value 33,448 135,336 11,017 79 3,099 24,655 1,526 - 209,160
112 113 CAMPOSOLANNUAL REPORT 2012
10 FINANCIAL INSTRUMENTS BY CATEGORY
Financial assets as per the statement of financial position as of 31 December 2012 and 2011 are as follow:
Loans and receivables2012Trade accounts receivable (Note 14) 39,565Other accounts receivable (excluding prepayments) 2,562Cash and cash equivalents (Note 15) 28,523
70,650
2011Trade accounts receivable (Note 14) 29,429Other accounts receivable (excluding prepayments) 1,417Cash and cash equivalents (Note 15) 6,604
37,450
Financial liabilities as per the consolidated financial position as of 31 December 2012 and 2011 are as follow:
Other financial liabilitiesUSD000
2012Trade accounts payable (Note 20) 51,288Other accounts payable (excluding statutory liabilities and accruals) 14,001Bank loans (Note 22) 29,880Long-term debt (Note 19) 135,111
230,280
2011Trade accounts payable (Note 20) 40,074Other accounts payable (excluding statutory liabilities and accruals) 7,395Bank loans (Note 22) 25,797Long-term debt (Note 19) 64,743
138,009
11 CREDIT QUALITY OF FINANCIAL ASSETS
The Group assesses the credit quality of its trade accounts receivable by reference to historical information about the counterparties’ default rates as follows:
2012 2011USD000 USD000
Trade accounts receivable
Existing customers (more than 6 months) without non-compliance experience in the past 39,191 29,296Existing customers (more than 6 months) with some non-compliance experience in the past 374 133
39,565 29,429Other accounts receivableExisting customers (more than 6 months) without non-compliance experience in the past 3,348 2,183
See credit quality of deposits in banks in Note 15.
12 INVENTORIES
2012 2011USD000 USD000
Finished products:- Artichokes 6,997 1,661- Asparagus 10,621 15,384- Peppers 11,272 9,560- Shrimp 467 627- Avocados 1,387 845- Mangoes 1,140 446- Grapes 1,175 853Product in process 1,154 410Supplies 7,611 5,997Containers 7,772 7,795Raw material and others 2,081 1,908In-transit raw material and supplies 2,052 1,025Other 451 4
54,180 46,515Provision for obsolescence of inventories (1,484) (2,166)
52,696 44,349
114 115 CAMPOSOLANNUAL REPORT 2012
As of 31 December 2012 and 2011 the Group has not pledged its inventories as guarantee on liabilities.
2012 2011USD000 USD000
Movement in the provision for obsolescence of inventories: Opening balance (2,166) (1,645)Additions (Notes 29 and 31) (918) (1,237)Recoveries 100 -Write-off 1,500 716Balance at the end of the year (1,484) (2,166)
13 OTHER ACCOUNTS RECEIVABLE
2012 2011USD000 USD000
Value added tax 4,778 3,395Custom duties refund - drawback 2,103 1,218Due from employees 145 350Prepayments to suppliers 630 429Accounts receivable for sale of fixed assets - 118Related companies (Note 36) 3 1Loans to third parties 478 213Subsidies 209 124Sales of dehydrated products 914 494Doubtful accounts 786 766Other 816 117
10,859 7,225Less:Provision for impairment of other accounts receivable (786) (766)
10,073 6,459
The movement of the provision for impairment of other accounts receivable is as follows:
2012 2011USD000 USD000
Opening balance (766) (1,133)Additions (Note 29) - 1Recoveries - 13Write-Off - 524Reclassification (20) (169)Balance at the end of the year (786) (766)
Other accounts receivables are current and are not impaired.
The drawback (custom duties refund) recovered during the year 2012 amounted to USD7,057,000 (USD6,647,000 in 2011). Receivables from employees are not interest-bearing and are unsecured.
14 TRADE ACCOUNTS RECEIVABLE
2012 2011USD000 USD000
Third parties 44,566 34,175Less: Provision for impairment of trade accounts receivable (5,001) (4,746)
39,565 29,429
Trade accounts receivable mainly comprise invoices for the sale of fresh, preserved and frozen products. Turnover ranges between 90 and 180 days and are not interest-bearing.
Trade accounts receivable in foreign currency (in thousands) amounts to USD6,876, USD72 and USD4,452 (in 2011 USD4,739, USD115 and USD30) in Euros, Pounds and Nuevo Sol, respectively. The remaining balance for both years are denominated in US Dollars.
116 117 CAMPOSOLANNUAL REPORT 2012
The movement of the provision for impairment of trade accounts receivable is as follows:
2012 2011
USD000 USD000
Opening balance (4,746) (4,702)Additions (Notes 29 and 31) (120) (219)Recoveries (Note 29) 22 212Adjustments - (37)Reclassification (157) -Balance at the end of the year (5,001) (4,746)
The Group does not ask for collaterals to secure the full collection of its trade accounts receivable.
At 31 December 2012 and 2011, the accounts provided for impairment have more than one year past due.
As of 31 December 2012 and 2011, the ageing analysis of trade accounts receivable is as follows:
Total Current 31-90 days
91-180 days
More than 181 days
USD000 USD000 USD000 USD000 USD000
At December 31, 2012 39,565 30.537 8,575 79 374
At December 31, 2011 29,429 22,013 7,283 - 133
As of 31 December 2012, trade accounts receivable amounting to USD374,000 (USD133,000 in 2011) although past due for more than one year, are not impaired; therefore no provision for impairment on these accounts has been accounted for. As of December 31, 2012, trade accounts receivable amounting to USD5,001,000 (USD4,746,000 in 2011) are impaired; for which the Group has recognized a provision for impairment. The individually impaired accounts relate to customers who are in unexpected difficult economic situations or and under litigation. These accounts are past due for more than a year.
As of 31 December 2012 and 2011 these impaired customers have not pledged any security for their debt. The fair value of accounts receivable approximates their carrying amounts due to their short-term maturities.
15 CASH AND CASH EQUIVALENTS
2012 2011USD000 USD000
Cash 29 24Bank current accounts 9,906 6,580In-transit remittances 476 -Time deposits 5,000 -Short-term investments 13,112 -
28,523 6,604
The Group’s bank current accounts (in thousands) amounts to USD5,363, USD3,092 and USD1,451 (in 2011 USD4,366, USD1,939 and USD276) in U.S. Dollars, Nuevo Sol and Euros, respectively. The 2012 time deposits are denominated in U.S. Dollars.
The time deposits comprise balance in banks with maturities of less than three months. As of 31 December 2012 the time deposits have generated interest for USD364,000 (USD15,000 to 31 December 2011) (Note 30).
The short-term investments correspond to a fixed portfolio of debt instruments which bears a short-term market interest rate of 11%. At December 31, 2012 have been generated a profitability for USD1,187,000 (Note 30).
Their credit classification is as follows:
2012 2011USD000 USD000
Bank deposits Classification Aaa 2,023 -Classification A + 24,026 2,524Classification A 1,229 3,877Others 740 179
28,018 6,580
The balances above do not include the balance of cash in hand.
118 119 CAMPOSOLANNUAL REPORT 2012
16 SHAREHOLDERS’ EQUITY
Share capital and premium -
The share capital and premium are as follow:
Number of shares
Share capital
Share premium
Treasury shares Total
USD000 USD000 USD000
31 December 2011 32,404 507 212,318 - 212,825Treasury shares (2,969) - - (11,592) (11,592)31 December 2012 29,435 507 212,318 (11,592) 201,233
In 2012, the total authorized numbers of ordinary shares are 40,000,000 shares with a par value of €0.01 per share. All shares issued have been fully paid-in.
The Group’s 2,570,000 initial shares do not entitled the holder to any voting rights or the right to dividend distribution. These shares correspond to the first capital contribution for purposes of creating the entity.
In April 2008, the Company issued 27,925,070 shares to the shareholders of Camposol AS (Norway) in exchange for an equal number of shares in that company (Note 1-b).
In May 2008, the Company issued 1,908,750 new ordinary shares at a price of USD7,859 per share.
Treasury shares -
The Group was authorized to acquire own shares up to a maximum of 10% of the issued shares of the Company granted by the Annual General Meeting held on 24 May 2011. As of 31 December 2012, the Group holds 2,968,502 own shares, constituting approximately 9.95% of the issued shares in the Company.
The Group paid a total amount of USD11,592,000 for the purchase of 2,968,502 own shares (total nominal value of USD17,000).
Share-based payments -
In previous years, the Group granted 150,000 share-based payments to a former manager, valued at USD257,000. The exercise price of these options ranges from NOK 40 to 52 and 1/3 could be exercised in each of the years between 2008 and 2010. As of 31 December 2010, all options expired without being exercised and were reclassified to retained earnings within equity.
In 2008 the Group granted 300,000 share-based payments to Directors and 585,000 options to management. The fair value of the options was estimated at the grant date by an external expert using the Black and Scholes - Merton option pricing formula, at USD561.000. The exercise price of the options to Directors and management was set at NOK 40 and ¼ can be exercised in each of the years between 2009 and 2012.
During 2010, there were changes in some management positions of the Group, so that 100,000 options granted were terminated. Also, share-based payments granted to replaced Directors of the Group remain effective.
The conditions to be met in order to exercise the options are based on the time frame that each person worked as employee of the Group.
Movements in the number of share-based payments outstanding and their related weighted average exercise prices are as follows:
2012 2011
Average exercise price in NOK per
ShareOptions
Average exercise price in NOK per
ShareOptions
At 1 January 40 490,000 40 585,000Forfeited 40 (490,000) 40 (95,000)At 31 December 40 - 70 490,000Share-based payments expressed in U.S. Dollars -
- 927,000
Share-based payments outstanding at the end of 2011 expired at February 2012.
In calculating the fair value of NOS uses the Black & Scholes - Merton option pricing model. The model uses the following input.
- Issue date share price (Close):
27.03.2008 and 27.08.2008
- Exercise Price:
The exercise price for the options is NOK 40.00. If the share price exceeds three times the strike price (NOK 120.00), the strike will be adjusted upwards so that the difference between the share price and the strike price would not be greater than NOK 80.00. Effectively, there is a cap on the option gain. This cap is included in the fair value calculation.
- Option Life:
Vesting / Grant Date 27.03.2008 27.08.2008
25% 01.02.2009 01.06.2009 25% 01.02.2010 01.06.2010 25% 01.02.2011 01.06.2011 25% 01.02.2012 01.06.2012
120 121 CAMPOSOLANNUAL REPORT 2012
- Volatility: 45% based on similar companies.
- Risk free rate: Rates from Norges Bank on issue date are used (Bonds and Treasury bills).
- Dividend: Expected dividend, if any, should be taken into account when measuring the fair value of the options issued. In this case, no dividends were included as the strike prices of the options are to be adjusted for dividend payouts.
Largest 20 Shareholders -
As of December 31, 2012 the largest 20 shareholders are:
Investor Shares %
1 Dyer-Coriat Holding S.L. 8,571,000 28.732 Euroclear Bank S.A./N.V. (‘BA’) 6,602,098 22.133 Andean Fishing L.L.C. 3,380,100 11.334 Camposol S.A. 2,613,130 8.765 Fondo de Inversión AY Forestal 1,908,750 6.406 Welheim Investments 1,338,913 4.497 Peru Land & Farming LLC 960,695 3.228 BNYBE – QVT Fund V LP I 893,741 3.009 BNYBE – QVT Fund LP 707,287 2.37
10 Deustche Bank AG London 685,008 2.3011 Camposol Holding PLC 355,372 1.1912 JP Morgan Chase Bank Nordea Re:Non-Treaty 265,462 0.8913 BNYBE – QVT Fund IV LP I 152,329 0.5114 Justnes Rederi AS 145,300 0.4915 MP Pensjon 137,000 0.4616 Jahrmann AS 125,200 0.4217 BNYBE – Quintessence Fund LP 107,110 0.3618 Clearstream Banking 102,108 0.3419 Six Sis AG 87,128 0.2920 Millcom Norge AS 60,000 0.2021 Others 636,089 2.12
29,833,820 100.00
Non-controlling interest -
The non-controlling interest is related to the change in the shareholding in Marinazul S.A.
17 DEFERRED INCOME TAXThe movement in the deferred income tax liabilities is as follows:
2012 2011
USD000 USD000
Opening balance 23,919 13,618Expense (profit) for the year (Note 32) 2,119 7,817Business combinations - (79)Adjustment - 2,563
26,038 23,919
Deferred tax relates to the following items:
Opening balance
Income statement
Business combination Adjustments
Closing balance
USD000 USD000 USD000 USD000 USD000
2012
Deferred tax assets -
Tax losses carried-forward 8,214 2,432 - - 10,646
Gain on investments in associates 51 (45) - - 6
Provisions 1,318 237 - - 1,555
Carried forward: 9,583 2,624 - - 12,207
Deferred tax liabilities -
Fair value of biological assets 24,158 7,069 - - 31,227
Fair value of fixed assets at acquisition of subsidiary 6,388 (235) - - 6,153
Fair value of customer relationships 959 (319) - - 640
Differences in depreciation rates 1,175 (646) - - 529
Other 822 (1,126) - - (304)
33,502 4,743 - - 38,245
23,919 2,119 - - 26,038
122 123 CAMPOSOLANNUAL REPORT 2012
Opening balance
Income statement
Business combination Adjustments Closing
balance
USD000 USD000 USD000 USD000 USD000
2011
Deferred tax assets -
Tax losses carried-forward 8,176 (385) 326 97 8,214
Gain on investments in associates 67 (16) - - 51
Provisions 1,157 161 - - 1,318
9,400 (240) 326 97 9,583
Deferred tax liabilities -
Fair value of biological assets 16,570 7,588 - - 24,158
Fair value of fixed assets at acquisition of subsidiary 4,215 (235) - 2,408 6,388
Fair value of customer relationships 1,025 (66) - - 959
Differences in depreciation rates 885 290 - - 1,175
Other 323 - 247 252 822
23,018 7,577 247 2,660 33,502
13,618 7,817 (79) 2,563 23,919
In 2011 the Group recorded an adjustment of USD2,408,000 to the deferred tax liability, which has been recognized in goodwill instead of the result for the year, since it related to Peruvian tax laws which existed at the date of Group reorganization and affected fixed assets acquired as part of that transaction (see Note 1-b).
Deferred income tax assets are recognized for tax losses carried-forward to the extent that the realization of the related tax benefit through future taxable profits is probable. The Group did not recognize deferred income tax assets of USD0.51 million related to the tax losses carried-forward of Marinasol S.A.
The deferred income tax from tax losses carried-forward can be applied to taxable income to be generated in the following years:
2012 2011USD000 USD000
2013 4,460 2,3222014 4,566 5,5,3312015 1,296 2432016 324 318
10,646 8,214
In Peru, tax losses can be carried forward by choosing one of the two tax-loss offsetting regimes available; by one of them, tax losses may be carried forward over 4 consecutive years after the year in which they have been obtained and then they expire; by the second offsetting regime; tax losses are offset at a 50% of the taxable income obtained year after year and they do not expire. The Group has selected the first regime; and at the reporting date; based on Management’s estimate of its future tax losses, no tax loss would expire.
18 WORKERS’ PROFIT SHARING
In accordance with Peruvian Legislation Camposol S.A. shall provide for a workers’ profit sharing equivalent to 10% of the taxable income of each year. The amount of the workers’ profit sharing must be paid during the second quarter of the following year of its determination (Note 2.23).
124 125 CAMPOSOLANNUAL REPORT 2012
19 LONG-TERM DEBT
Creditor and type of debt Guarantee Annual interest rate and maturity 2012 2011USD000 USD000
Bonds Camposol Holding PLC, Marinazul S.A. 9.875% per year with installments payable until 2017 121,598and Campoinca S.A.
Bounty Fresh LLC for purchase of Nor Agro Perú S.A.C. with 19 installments due every three month until 2016 800 1,049Banco Interbank, to finance the capital expenditure Camposol S.A. fixed assets 8.65% per year with installments payable until 2016 - 57,649
122,398 58,698
Santander for purchase of a system of irrigation Property subject to financial lease 7.10 % per year with 12 installments every three months until 2015 3,845 -Banco Interbank for purchase of frozing plant construction Property subject to financial lease 5.50 % per year with 36 installments every three months until 2018 3,394 -Santander for purchase of asparagus peeler Property subject to financial lease 7.50 % per year with 60 installments every months until 2016 1,060 1,303Santander for purchase of thirty two tractors Property subject to financial lease 7.10 % per year with 36 monthly installments until 2015 571 -Banco Interbank for purchase of a asparagus sorter Property subject to financial lease 7.50 % per year with 12 installments every three months until 2015 532 -Scotiabank for purchase of a Spectrometer Property subject to financial lease 4.75 % per year with 12 installments every three months until 2014 177 312Banco Interbank for purchase of a air vacuum cleaner Property subject to financial lease 6.18 % per year with 12 installments every three months until 2011 135 262Banco Interbank for purchase of a air vacuum cleaner Property subject to financial lease 6.22 % per year with 12 installments every three months until 2011 125 242Santander for purchase of thirteen tractors Property subject to financial lease 7.10 % per year with 36 monthly installments until 2015 104 -Banco Interbank for purchase of a engine, oxygen generator Property subject to financial lease 6.93 % per year with 12 monthly installments until 2013 43 76Banco Interbank for purchase of a vehicle Property subject to financial lease 6.99 % per year with 20 monthly installments until 2014 34 26Leasing Perú for purchase of a pick up Toyota Property subject to financial lease 7.05 % per year with 12 installments every three months until 2015 34 -Banco Interbank for purchase of three truck jack Property subject to financial lease 7.69 % per year with 12 installments every three months until 2015 33 -Leasing Perú for purchase of a pick up Hilux Property subject to financial lease 7.05 % per year with 12 installments every three months until 2015 25 -Leasing Perú for purchase of a lathe equipment Property subject to financial lease 7.05 % per year with 12 installments every three months until 2015 22 -Banco Interbank for purchase of a vehicle Property subject to financial lease 6.89 % per year with 20 monthly installments until 2014 17 52Banco Interbank for purchase of a air vacuum cleaner Property subject to financial lease 6.18 % per year with 12 installments every three months until 2011 17 33Banco Interbank for purchase of a electronic boards Property subject to financial lease 6.89 % per year with 20 monthly installments until 2014 14 23Banco Interbank for purchase of termociclador equipment Property subject to financial lease 7.69 % per year with 12 installments every three months until 2015 6BBVA Banco Continental for purchase of a Lab larvaes Property subject to financial lease 7.30 % per year with 12 installments every three months until 2011 - 123BBVA Banco Continental for purchase of pipes Property subject to financial lease 7.30 % per year with 12 installments every three months until 2011 - 97Banco Interbank for purchase of an hydraulic Excavator Property subject to financial lease 8.90 % per year with 10 installments every six months until 2012 - 16Banco Interbank for purchase of a excavator machine Property subject to financial lease 9.11 % per year with 20 monthly installments until 2012 - 10
10,188 2,575Ferreyros to finance capital expenditure Domingo Rodas S.A. fixed assets 3.00 % per year with 26 installments payable every six months until 2018 2,525 3,470
135,111 64,743Less- current portion (2,759) (9,712)
132,532 55,031
126 127 CAMPOSOLANNUAL REPORT 2012
All loans are denominated in United States Dollars.
For purposes of reconciliation with the information provided in the statement of cash flows, following is the movement of long-term borrowings for the years ended 31 December 2012 and 2011:
Other
borrowings BondsBank
borrowingsFinance lease
liabilitiesTotal
long-term debt
US$000 US$000 US$000 US$000 US$000
Balance as of 1 January 2011 3,642 - 58,717 3,256 65,615
Cash transactions
Repayment of long-term borrowings (172) - (1,476) (2,296) (3,944)
Proceeds from long-term borrowings - - - 1,615 1,615
Non-cash transactions
Proceeds Long-term borrowings 1,049 - - - 1,049
Accrued interest - - 408 - 408
Balance as of 31 December 2011 4,519 - 57,649 2,575 64,743
Balances as of 1 January 2012 4,519 - 57,649 2,575 64,743
Cash transactions
Repayment of long-term borrowings (742) - (58,524) (1,405) (60,671)
Proceeds from long-term borrowings - - 8,566 8,566
Bonds - 125,000 - - 125,000
Transaction costs - (3,987) - (3,987)
Non-cash transactions
Proceeds Long-term borrowings - - 452 452
Accrued interest - 585 875 - 1,460
Debt condonation (452) - - - (452)
Balance as of 31 December 2012 3,325 121,598 - 10,188 135,111
The maturity of the non - current portion of long - term debt is as follows:
2012 2011USD000 USD000
1 year 4,688 8,6962 year 1,395 18,6263 years 295 14,539More than 3 years 125,974 13,170
132,352 55,031
Fair values -
The carrying amounts and fair value of the non-current borrowings are as follows:
Carrying amount Fair value
2012 2011 2012 2011US$000 US$000 US$000 US$000
Bank borrowings - 49,807 - 49,456Bonds 122,303 - 111,311 -Finance lease liabilities 7,255 1,619 6,819 1,389Other borrowings 2,794 3,605 2,729 3,148
132,352 55,031 120,859 53,993 a) Bonds -
US$125 million 9.875% Senior Notes due 2017
On 26 January 2012, Camposol S.A. and its guarantors Camposol Holding PLC, Marinazul S.A. and Campoinca S.A. agreed with Credit Suisse Securities (USA) LLC and Santander Investment Securities Inc., as representatives of several purchasers, to issue and sell to the several purchasers, US$125 million of the principal of its 9.875% Senior Notes due in 2017 to be issued under an indenture dated 2 February 2012, signed between Camposol S.A., the Guarantors, and Wells Fargo Bank, National Association, as trustee, guaranteed on an unsecured senior basis by Camposol Holding PLC, Marinazul S.A. and Campoinca S.A. Coupons bear a 9.875% interest and are payable on a semi-annual basis. Cash proceeds are to be used to pay the long term debt obtained to finance capital expenditures and for general corporate uses. The bonds are listed on the Luxembourg Stock Exchange.
The issue of these bonds includes certain restrictive covenants.
If during any period of time that the Notes have Investment Grade Ratings from two Rating Agencies and no payment default or Event of Default has occurred and is continuing, the Issuer, the Parent Guarantor and its Restricted Subsidiaries will not be subject to the following provisions of the Indenture:
i) Change of control: Putable at 101% of principal plus accrued and unpaid interest.
ii) Limitation on indebtedness and Disqualified Stock:
a. The Leverage Ratio is less than (i) 3.5 to 1.0 during the period from the Original Issue Date through June 30, 2013 and (ii) 3.25 to 1.0 from July 1, 2013 through the Maturity Date.
b. Working capital not to exceed 25% of net sales c. Other Indebtedness not to exceed the greater of US$ 20 million and 5% of the total assets.
iii) Limitation on Restricted Payments:
128 129 CAMPOSOLANNUAL REPORT 2012
a. Declare or pay any dividend or make any distribution b. Purchase, redeem, retire or otherwise acquire for value any shares of Capital Stock.c. Dividends up to US$ 10 million for fiscal year up to 2010.d. Year 2011, 50% of net income if leverage is equal or greater than 1.5 to 1e. 75% of net income is lower than 1.5 to 1f. Other restricted payments no to exceed US$ 15 million since the original issue date.
iv) Limitation on Issuances of Guarantees by Restricted Subsidiaries
a. Loans and advances to officers, directors and employees of the Parent Guarantor or any Subsidiary in the ordinary course of business in an aggregate principal amount not exceeding US$ 2.0 million at any time.
v) Limitation on Liens
a. Not to exceed 10% of the total assets
vi) Limitation on Asset Sales
a. At least 75% is paid in cash or temporary cash investments
vii) Limitation on Business Activities
a. Only permitted Businesses
According to the income tax regime currently in force in Peru, Camposol S.A. has to withhold from the payment of coupons a 4.99% as the income tax of non-domiciled entities. Since the bonds purchase agreement does not complete the payment of the withholding tax by the holders, Camposol S.A. will assume it as its own expense.
At 31 December 2012 there is not exist any default.
b) Finance leases -
The future minimum lease payments under finance leases together with the present value of net minimum lease payments are as follows:
2012 2011
Minimum payments
Present valueof payments
Minimumpayments
Present Valueof payments
USD000 USD000 USD000 USD000
Within one year 3,313 3,097 1,112 956After one year but no more than five years 7,494 7,042 1,767 1,619Total minimum lease payments 10,807 10,139 2,879 2,575Less amounts representing finance charges (619) (304)Present value of minimum lease payments 10,188 2,575
c) Syndicate loan -
In June 2010, Camposol S.A. signed a loan agreement with a syndicate of banks led by Banco Interbank for a total amount of USD60 million to be repaid by June 2016, at a fixed interest rate of 8.65%. Interest are payable monthly and amortization of the principal will be performed during the loan term as established in the repayment schedule attached to the credit agreement. Part of this loan was used to pay the entire loan received from Credit Suisse AS of USD50.9 million and to pay the debt termination fee of USD3.7 million (Note 30). The balance of the funds received was used in investments in new plantations.
In accordance with the agreement between Camposol S.A. and the syndicate of banks, the Group has to comply with the following covenants at consolidated level:
- Debt ratio less than 4.0x for the year 2010 and less than 3.5x from year 2011 onwards.- Debt service coverage ratio longer than 1.0x for the year 2010 and longer to 1,5x from year 2011 onwards. - Gearing ratio less or equal to 1.5x.- Flow coverage ratio longer than 3.0x, this ratio will be equal to channeled flows through collecting account into a
period of twelve months divided debt services on the next twelve months.
As at 30 June 2011 the Group failed to meet its financial obligation on debt ratio. The breach was promptly communicated to Interbank, together with the application for a temporary waiver on the compliance of this ratio. At the time Management considered that the Group’s results would improve at December 2011, allowing the Group to comply with this covenant in the future. In August 2011, Interbank approved the waiver requesting a penalty (waiver fee) of USD150 thousand.The waiver given by Interbank on the breach of a covenant (debt/EBITDA ratio) at 30 June 2011 states that Interbank is permanently giving up its right to claim the Group in the future on the basis of this covenant beach.
As at 31 December 2011, Camposol S.A. has complied with all its covenants and with the terms of all other obligations contained in the Credit Agreement with the syndicate of banks.
The Syndicate loan was fully repaid during 2012 with the funds received from the bond issue served to pay long term debt, to finance capital expenditures and in general corporate uses. The repaid amount was USD58.5 million, plus a debt termination fee of USD0.4 million.
20 TRADE ACCOUNTS PAYABLE
2012 2011USD000 USD000
Suppliers 41,490 26,693Bills of exchange payable 9,384 13,050Payables to related parties (Note 36) 414 331
51,288 40,074
Payables to suppliers are mainly in US dollars, are due within 12 months and are not interest-bearing.
130 131 CAMPOSOLANNUAL REPORT 2012
Bills of exchange in U.S. dollars and Nuevo Sol, amounts to USD4,692,000 each currency (In 2011 USD8,781,000 and USD4,269,000, respectively), which are due within 12 months and are bear interest at an average annual rate of 12%.The average payment terms of trade payables are between 30 to 60 days.
21 OTHER ACCOUNTS PAYABLE
2012 2011USD000 USD000
Vacations and other payables to employees 5,390 4,942Provisions (Note 35) 1,877 3,091Taxes payable 510 692Board remuneration - 40Pension fund 1,136 574Interest 5,780 382Deferred gain leaseback 1,664 143Business management services - 391Others 1,695 923
18,052 11,178
Other accounts payable are due within 12 months and are not interest-bearing and are mainly denominated in new Peruvian soles.
2012 2011USD000 USD000
Movement of provisions: Opening balance 3,091 4,057Deductions (1,214) (966)Balance at the end of the year 1,877 3,091
22 BANK LOANS
2012 2011USD000 USD000
Loans -Banco Interbank 6,000 14,900Banco Scotiabank 14,380 5,210Banco Santander - 3,100Latin America Export Found - 2,137Banco de Comercio 1,500 450Banco Continental 5,000 -Multibank, Inc 3,000 -
29,880 25,797
For purposes of reconciliation with the information provided in the statement of cash flows, following is the movement of bank loans for the years ended 31 December:
2012 2011
USD000 USD000
Initial balance 25,797 16,700Bank loans proceeds 59,370 94,394Bank loans payments (55,287) (85,297)Final balance 29,880 25,797
Loans represent promissory notes with maturities up to 180 days, obtained for working capital. These loans bear fixed annual interest rates that are between 3.50 per cent and 6 per cent (between 3.55 per cent and 10.53 per cent in 2011).
132 133 CAMPOSOLANNUAL REPORT 2012
23 BUSINESS COMBINATION
a) Muelles y Servicios Paita S.R.L. -
On 21 May 2011, Muelles y Servicios Paita S.R.L. (subsidiary of the Company) acquired 100% of the outstanding shares of Nor Agro Perú S.A.C. for a consideration of USD1,350 thousand (At 31 December 2011 was paid USD301 thousand), the net assets value of the acquired entity at the purchase date amounted to USD1,838,000, giving rise to the recognition of a gain in the consolidated statement of comprehensive income of USD488.
The acquired entity was engaged in packing of agricultural products. The purchase of this entity was made aiming to facilitate the packaging process of agricultural products of the Group. From its acquisition date until 31 December 2011, the acquired entity generated a profit of USD1,038,000. The acquired entity’s profit for the year 2011 amounted to USD1,055,000. The acquired entity sold assets in December 2011
The gain in the acquisition is detailed bellow:
USD000
Purchase consideration (Cash) 1,350Fair value of net assets acquired (1,838)Gain in acquisition (Note 29) (488)
The fair value of the net assets of the acquired entity is detailed bellow:
USD000
Fair Value:Cash and cash equivalents 42Property, plant and equipment 1,717Trade and other accounts receivable 101Prepaid expenses 17Trade and other accounts payable (117)Borrowings (1)Deferred income tax 79Net assets acquired 1,838
The cash movement in the acquisition of this entity, net of cash acquired amounts to USD259,000.
The gain on acquisition is supported by valuations performed by independent appraisers. The sale and purchase agreement does not contemplate any contingent consideration that may affect the consideration paid for the acquisition.
b) Camarones S.A.C. and Domingo Rodas S.A. –
On 3 May 2010 Marinazul S.A. granted 914,221 shares for the acquisition of Camarones S.A.C. The shares granted represent 5.45% interest of its total share capital. From the its acquisition and until 31
December 2010, the acquired entity generated a profit of USD114,000. The acquired entity´s profit for the year 2012 is USD93,000 (USD176,000 in 2011).
Domingo Rodas S.A. from its acquisition and until 31 December 2010 generated a loss of USD286,000. The acquired entity´s profit for the year 2012 amounted to USD940,000 (USD661,000 in 2011).
Goodwil (gain) in acquisition is detailed bellow:
Domingo Rodas S.A. Camarones S.A.
USD000 USD000
Purchase consideration 164 321Fair value of liabilities / (assets) acquired 883 (399)Goodwill (gain) in acquisition (Note 29) 1,047 (78)
Goodwill of Domingo Rodas S.A.is attributable to the larger market share expected to be obtained by the Company in the shrimp line of business of.
Fair ValueDomingo Rodas S.A. Camarones S.A.
USD000 USD000
Cash and cash equivalents 273 4Property, plant and equipment 3,917 1,052Trade and other accounts receivable 560 117Inventories 453 285Trade and other accounts payable (1,849) (520)Borrowings (4,140) (539)Deferred income tax (97) -Net (liabilities) / assets acquired (883) 399
The cash movement in the acquisition of these entities, net of cash acquired amounts to USD113,000 (Note 23).
134 135 CAMPOSOLANNUAL REPORT 2012
The gain on acquisition is supported by valuations performed by independent appraisers. The sale and purchase agreement does not contemplate any contingent consideration that may affect the consideration paid for the acquisition. The purchase of these entities was made aiming to increase the production of shrimp.
The gain on acquisition is explained by the fact that the former owner needed to exit the specific business of the acquired entity in order to pursue other businesses that is currently developing.
The amounts of the net identifiable assets and liabilities recognized in the consolidated financial statements are final values as established by IFRS 3.
24 REVENUE
Revenue represents the sale of fresh, preserved and frozen biological products.
For the years ended 31 December, comprise the following (Note 5):
2012 2011
USD000 USD000
Asparagus 68,078 57,870Avocado 31,436 39,873Pepper 15,299 20,420Mango 14,722 16,021Shrimp 21,149 13,300Grapes 18,178 14,755Artichoke 9,837 1,973Other 4,482 3,598Total 183,181 167,810
25 COST OF SALES
2012 2011USD000 USD000
Cost of inventories recognized as expenses 92,303 71,872Personnel expenses (Note 28) 46,351 38,263Depreciation (Note 6) 6,838 5,856Custom duties refund (7,193) (6,448)
138,299 109,543
In Peru, Camposol S.A and Marinazul S.A. are beneficiaries of a simplified procedure for custom duties refunding (Drawback), at a rate of 5.0% of FOB value of exports.
The cost of inventories recognized as expenses include amortization of software by USD7,000 (USD12,000 for 2011) (Note 8).
26 SELLING EXPENSES
Selling expenses for the years ended December 31 comprise the following:
2012 2011USD000 USD000
Freight 11,681 11,574Custom duties 4,535 4,403Amortization of customer relationships (Note 8) 2,132 447Personnel expenses (Note 28) 1,184 987Selling commissions 946 637Consulting services 818 670Travel and business expenses 561 558Insurances 382 523Depreciation (Note 6) - 6Other expenses 722 776
22,961 20,581
136 137 CAMPOSOLANNUAL REPORT 2012
27 ADMINISTRATIVE EXPENSES
Administrative expenses for the years ended December 31 are comprised of the following:
2012 2011USD000 USD000
Personnel expenses (Note 28) 9,818 9,744Professional fees 3,211 3,114Depreciation (Note 6) 759 824Travel and business expenses 963 792Transport and telecommunications 757 673Directors’ remuneration (Note 28) 400 360Renting of machinery and equipment 1,035 722Amortization of computer software (Note 8) 416 397Other auditors’ remuneration 66 95Statutory auditors’ remuneration - audit services 210 183Share-based payments (Note 28) 5 155Materials and supplies 873 694Maintenance 522 467Insurances 93 123Other expenses 987 707
20,115 19,050
Other auditors’ remuneration corresponds to other services provided by external consultants, such as due diligence engagements, tax consulting, financial advice and others.
28 PERSONNEL EXPENSES
2012 2011USD000 USD000
Salaries and wages 50,034 42,878Vacations 1,978 2,117Other employees’ benefits 4,949 3,505Share-based payments (Note 27) 5 155Other expenses 787 699
57,753 49,354
Personnel expenses are allocated as follows:
2012 2011USD000 USD000
Cost of sales (Note 25) 46,351 38,263Selling expenses (Note 26) 1,184 987Administrative expenses (Note 27) 9,818 9,744Directors’ remuneration - Administrative expenses (Note 27) 400 360
57,753 49,354
29 OTHER INCOME AND EXPENSES 2012 2011
USD000 USD000 Other income - Debt condonation 452 -Gain on acquisitions (Note 23) - 488Recovery of accounts receivable (Note 14) 22 212Gain on sale of property, plant and equipment (Note 31) 227 -Other 444 168
1,145 868
138 139 CAMPOSOLANNUAL REPORT 2012
2012 2011USD000 USD000
Other expenses - Obsolescence of inventories (Notes 12) (918) (1,237)Donations and samples (236) (312)Loss on sale of property, plant and equipment (Note 31) - (404)Impairment of accounts receivable (Notes 13 and 14) (120) (220)Other (462) (129)
(1,736) (2,302)
30 FINANCIAL INCOME AND COSTS
2012 2011USD000 USD000
Income - Interest 364 15Interest on investment founds 1,187 -Other finance income 6 12
1,557 27 Costs - Interest on bank loans (14,690) (6,810)Interest on finance leases (2,339) (1,356)Tax on financial transactions (821) (266)Interest on accounts payable to suppliers (29) (69)Other finance costs - (1)
(17,879) (8,502)
31 CASH GENERATED FROM OPERATIONS
Note 2012 2011USD000 USD000
Reconciliation of profit for the year to net cash from(used in) operating activities:Profit before income tax 9,883 41,634Depreciation 6 7,597 6,686Amortization 8 2,555 856Transference to biological assets 9 4,915 4,461Impairment of trade accounts receivable 13 and14 120 220Obsolescence of inventories 12 918 1,237Interest expenses 30 17,879 8,502Recovery of doubtful accounts 13 and14 (22) (225)Fair value of biological assets 9 (36,539) (40,821)Gain / (loss) on sale of property, plant and equipment 29 (227) 404Disposals of intangibles 8 - 27Share-based payments expense 28 5 155Gain attributable to associate 7 (66) (111)Deferred income tax 32 2,119 7,817Net exchange difference 349 32Write down off inventories (1,601) -Increase (decrease) of cash flows from operations dueto changes in assets and liabilities: Trade accounts receivable (10,391) (10,747)Other accounts receivable (5,333) 132Inventories (7,665) (11,263)Prepaid expenses (9) 11Trade accounts payable (11,214) 12,780Other accounts payable (10,248) (12,249)Net cash generated from operating activities (14,547) 9,538
140 141 CAMPOSOLANNUAL REPORT 2012
32 INCOME TAX EXPENSE
a) According to the Peruvian tax legislation in force the income tax is determined on separate basis. Management has determined the taxable income under the general income tax regime, which requires adding to and deducting from the result derived from the accounting records maintained in Nuevo Sol is those items considered as taxable and non-taxable, respectively.
As established under Law No.27360 dated 30 October 2000, that amends the Income Tax Law of individuals and legal persons engaged in the growing of crops and /or cattle as well as in industrial agriculture, the applicable income tax rate is 15%. This income tax regulations is applicable until 31 December 31 2021.
The standard rate of Cyprus income tax for 2012 and 2011 is 10% and for the Peruvian subsidiaries it ranges between 30% and 15%.
2012 2011USD000 USD000
Current income tax 139 197Deferred income tax (Note 17) 2,119 7,817Income tax expense / (credit) 2,258 8,014
b) For the years 2012 and 2011 the income tax credited to income differs from the theoretical amount that would arise using the tax rate applicable to profit before workers’ profit sharing and income tax as follows:
2012 2011USD000 USD000
Profit before income tax 9,883 41,634At Peruvian statutory income tax rate at 15% 1,482 6,245Revenue no subject to tax (1,000) (973)Expenses not deductible for tax purposes 1,905 359Adjustments 124 2,460Other (253) (77)Income tax expense / (credit) 2,258 8,014
Profit before income tax only corresponds to Peruvian subsidiaries; therefore taxation charge in the consolidated
statement of comprehensive income corresponds to the Peruvian tax rate of 15%.
c) The Peruvian Tax Authority may review and, if required, amend the income tax or the tax loss carry forward determined by the Company and its subsidiaries in the last four years, as from January 1 of the following year in which the tax return of the corresponding income tax was filed (years open to examination). Since discrepancies may arise over the proper interpretation of the tax law applicable to the Group, it is not possible to anticipate at this date whether additional tax liabilities will arise as a result of eventual examinations. Additional tax, fines and interest, if any, will be recognized in results of the period in which the disagreement with the Peruvian tax authorities is resolved. Management considers that no significant liabilities will arise as a result of any eventual tax examinations.
The following table shows the income tax and value added tax returns subject to review by the Tax Authority corresponding to the Company and its subsidiaries.
Years open to tax review
Company Income Tax Value Added Tax
Camposol Holding PLC 2008-2012 2007-2012 Camposol S.A. 2008-2012 2008-2012Preco Precio Economico S.A.C. 2008-2012 2008-2012Sociedad Agricola Las Dunas S.R.L. 2008-2012 2008-2012Prodex S.A.C. 2008-2012 2008-2012Belfast S.A. 2008-2012 2008-2012Vegetales del Norte S.A.C. 2008-2012 2008-2012Muelles y Servicios Paita S.A.C. 2008-2012 2008-2012Nor Agro Perú S.A. 2008-2012 January 2012 – December 2012Marinasol S.A. 2008-2012 2008-2012Marinazul S.A. 2008-2012 2008-2012Grainlens Ltd. 2008-2012 2008 - 2012Blacklocust Ltd. 2008-2012 2008 - 2012Siboure Holding Ltd. 2008-2012 2008 - 2012Madoca Corp. 2008-2012 2008 - 2012Camposol Europa S.L. 2008-2012 2008 - 2012Campoinca S.A. 2008-2012 2008 - 2012Camposol Fresh B.V. 2009-2012 2009 - 2012Domingo Rodas S.A. 2008-2012 2008 - 2012Camarones S.A.C. 2008-2012 2008 - 2012
142 143 CAMPOSOLANNUAL REPORT 2012
33 DISCONTINUED OPERATIONS
In January 2010, the Board decided to discontinue operations of Marinasol S.A. which was devoted to fishing and harvesting of fish for human consumption. The result from operations of this company is shown under discontinued operations in the statement of comprehensive income of USD147 thousands (Loss of USD275 thousands in 2011).
A summary of the results of Marinasol S.A. is shown below:
2012 2011USD000 USD000
Profit and lossRevenue - 1Cost of sales - (1)Gross loss - -
Administrative expenses - (185)Selling expenses - (5)Other income 1 -Other expenses (202) (251)Impairment of account receivable (Note 13) - -Operating loss (201) (441)
Financial income - 114Financial expenses (1) (2)Currency translation differences 14 44Loss before income tax (188) (285)Deferred income tax 41 10Loss for the year from discontinued operations (147) (275) Cash flowsOperating activities 58 (110)Investing activities - -Financing activities - -
58 (110)
34 BASIC AND DILUTED EARNINGS PER SHARE
Basic earnings per share -
Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Group by the weighted average number of ordinary shares in issue during the year excluding ordinary shares purchased by the company and held as treasury shares (Note 16)
2012 2011
Profit for the year from continuing operations (USD000) 7,625 33,620Loss for the period from discontinued operations (USD000) (147) (275)Profit for the year 7,478 33,345
Weighted average number of ordinary outstanding shares (thousands) 27,828 29,834
From continuing operations (expressed in U.S. dollars per share) 0.274 1.127From discontinued operations (expressed in U.S. dollars per share) (0.005) (0.009)Basic earnings per share (USD) 0.269 1.118
The Company was incorporated on July 9, 2007. One class of 2,570,000 initial shares does not have the voting rights or to participate in dividend distributions and are not taken into account for the purposes of determining earnings per share.
The share capital was increased through the exchange of shares with Camposol S.A. shareholders in March 2008 of 27,925,070 shares and a private placement with Fondo de Inversion Agroindustrial (FIDAF) of 1,908,750 shares.
Diluted earnings per share -
Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The Group has granted Share-based payments which are dilutive. The Group determines the number of potential shares using the average market share price of the Group’s shares for the year. However, since during 2012 and 2011 the exchange value of the potential shares was greater than the fair value of the shares, the Group did not consider any potential ordinary shares for the determination of the dilutive earnings per share, being the dilutive earnings per share the same as the basic earnings per share.
35 CONTINGENT LIABILITIESAs of, December 31, 2012, the Group has several contingencies labor-related and others claims amounting to USD1.0 million (USD2.2 millions in 2011), which is included in the balance of USD1.9 millions (USD3.1 millions in 2011) shown as provisions in other accounts payable (Note 21).
144 145 CAMPOSOLANNUAL REPORT 2012
36 TRANSACTIONS WITH SHAREHOLDERS AND OTHER RELATED PARTIES a) Transactions -
The main transactions carried out between the Group and its related parties are as follows:
2012 2011USD000 USD000
i) Associate - Empacadora de Frutos Tropicales S.A.C. -Sale of finished products 1Purchase of services 1,633 1,876
ii) Entities related to Directors - Apoyo Consultoría S.A.C. -Purchase of services 7 10
Gestion del Pacifico S.A.C -Sales of services 1 1Purchase of services and others 1,255 666Purchase of fixed assets 187 47
Corporación Pesquera Inca S.A. (COPEINCA) -Sales of services 352 293Purchase of services 19
b) Amounts due from/to related parties -
Other accounts receivable (Note 13)
i) Entities related to DirectorsCorporación Pesquera Inca S.A. 35 -Gestión del Pacífico S.A.C. (*) - 1
35 1
Trade payables (Note 20)ii) AssociatesEmpacadora de Frutos Tropicales S.A.C. 308 235
ii) Entities related to Directors Gestión del Pacífico S.A.C. (*) 103 94Apoyo Consultoría S.A.C. (**) 3 2
414 331
(*) A manager of the Group is shareholder of Gestión del Pacífico S.A.C.(**) A Director of the Group is a legal representative of Apoyo Consultoría S.A.C.
The transactions during the year with related companies correspond to purchase of consulting, legal services, cash loans for working capital and purchase of raw materials. These balances have no schedule date for collection or payment and do not bear interest; however the effect on results, if interest would be charged, is not significant.
Other transactions with related parties correspond to share-based payments (granted to Directors and management), the details of which are provided in Note 16 and their balances are shown in the consolidated statement of equity.
c) Compensation of key management personnel of the Group
2012 2011USD000 USD000
Salaries of key management 2,631 2,123Remuneration of Directors (all of which are non - executives) 400 360
37 COMMITMENTS AND GUARANTEES
a) Commitments and guarantees in respect of the bonds are set out in Note 19.
b) On October, 2008, Camposol S.A. signed an agreement with Peru Land & Farming LLC (PL&F) by means of which the Company gives first option to purchase avocado production from a designated area of 800 Ha to be sold in the United States of America. When the US market opens for Peruvian avocado, PL&F will have the right to purchase 100% of the production from that area. The option will gradually decrease over ten years, after which it will maintain a lifetime option for 30% of the production in the designated area. The transactions will be settled at market price. At the reporting date, no changes in the agreement with PL&F have occurred.
38 EVENTS AFTER THE REPORTING PERIOD
No material events occurred after the end of the financial year.
Independent auditor’s report on pages 146 to 147.
146 147 CAMPOSOLANNUAL REPORT 2012
Graphic design: Ursula San Miguel / Carla Franco Photo: Centro de la fotografía / Gonzalo Olmos / Alex Bryce Printed by: Impresso Gráfica S.A.
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