Independent Auditors’ Report
to the Board of Directors and Stockholders of Grupo Lamosa, S.A.B. de C.V.
to the Board of Directors and Stockholders of Grupo Lamosa, S.A.B. de C.V.

Opinion
We have audited the accompanying consolidated financial statements of Grupo Lamosa, S. A. B. de C. V. and Subsidiaries (the “Company”), which comprise the consolidated statements of financial position as of December 31, 2016 and 2015, and the related consolidated statements of income, other comprehensive income, changes in stockholders’ equity and cash flows for the years then ended, and a summary of significant accounting policies and other explanatory information.
In our opinion, the accompanying consolidated financial statements present fairly, in all the material respects, the financial position of the Company as of December 31, 2016 and 2015, and their financial performance and their cash flows for the years then ended in accordance with International Financial Reporting Standards (“IFRS”), issued by the International Accounting Standards Board (“IASB”).
Basis for Opinion
We conducted our audits in accordance with International Standards on Auditing (“ISA”). Our responsibilities under those standards are further described in the Auditor´s Responsibilities for the Audit of Financial Statements section of our report. We are independent of the Company in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for professional Accountants (IESBA Code) and with the Ethics Code issued by the Mexican Institute of Public Accountants (“IMCP Code”), and we have fulfilled our other ethical responsibilities in accordance with the IESBA Code and IMCP Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were more important in our audit of the consolidated financial statements of the current period. These matters have been addressed in the context of our audit of the consolidated financial statements as a whole and in the disclosure of our opinion thereon, and we did not express a separate opinion on those audit matters. We have determined that the matters described below are the key audit matters to be disclosed in our report.
- Acquisition of Cerámica San Lorenzo and Cordillera
As mentioned in Note 2, the Company acquired 100% of the shares of 6 entities that comprise Cerámica San Lorenzo and Cordillera, which are located in Argentina, Chile, Peru and Colombia. This acquisition is classified as a business combination; therefore, the Company is using the “Purchase Method” pursuant to IFRS 3, Business Combinations, to account for the assignment of the purchase price. As part of the recognition of net assets acquired in these transactions, the Company is in the process of obtaining fair values of certain tangible and intangible assets, with the support of independent appraisers. As of December 31, 2016, an estimated goodwill of $1,634,526 thousand Mexican pesos has been recorded; therefore, that line item can be amended. Our audit procedures mainly included:- Verified that contractual aspects and events occurred as of the acquisition date, and therefore, date on which control was taken, are in conformity with IFRS 3, by reviewing the correct incorporation of the consolidated financial statements of the assets acquired, identifiable liabilities assumed, and the results for the three months ended December 31, 2016, applying the Company’s accounting policies.
- Verified the compliance with the disclosures of the business combination in the notes to the consolidated financial statements.
Regarding the aforementioned audit procedures, the results were reasonable.
- Bank debt
As mentioned in Note 15, in order to acquire Cerámica San Lorenzo and Cordillera, the Company signed an amendment to the long-term loan agreement corresponding to the debt originally acquired on November 30, 2007, and previously refinanced in 2011 and 2014, maturing in 2021. As part of the amendment, a new debt of $200 million U.S. dollars was acquired. Regarding the commissions for contracting the debt, the Company analyzed whether according to IAS 39, Financial Instruments: Recognition and Measurement, they should be recognized in results for the significance of this line item and its effects on the consolidated financial statements. Our audit procedures included, among others:
- Verified the compliance with restrictions and do-not obligations set forth in debt agreements.
- Obtained the confirmation from the financial institution to validate the principal balances, and their correct valuation in Mexican pesos, and the amount and valuation in Mexican pesos of accrued and outstanding interest.
- Reviewed the calculation set forth in IAS 39 prepared by management to assess whether the debt renegotiation exceeds the thresholds required by the accounting standards to be considered as new debt, and thus assess whether the commissions for contracting it should be recognized in earnings or not.
Regarding the aforementioned audit procedures, the results were reasonable.
- Unamortized intangible assets
Given the significance of unamortized intangible assets, it is important to make sure that unamortized intangible assets impairment is reviewed appropriately to identify potential impairment, where necessary. Determining whether the carrying amount of unamortized intangible assets is recoverable requires the Entity’s management to make significant estimates related to cash flows, discount rates and their growth, based on the point of view of management about future business prospects. During our audit procedures, we, among others:
- Reviewed the identification of relevant Cash Generating Units (CGU) of the group.
- Understood the process followed by the Company to determine fair value and relevant control estimates in order to assess the risk of significant errors related to fair value estimates, and to develop an appropriate audit approach.
- Obtained the fair value analysis.
- Assessed whether the valuation techniques are appropriate in the circumstances, and whether the techniques used to determine the fair value are applied in conformity with prior years.
- Assessed the reasonableness of the valuation assumptions used in the fair value analysis, and whether the valuation assumptions are consistent with what a market participant would use to determine the price.
- Assessed whether the fair value model used is appropriate in the Company’s circumstances.
- Carried out a sensitivity analysis to compare the Company’s value estimate.
- Assessed the evidence obtained from the review of fair value estimates, and that such evidence is consistent with the audit aspects.
- Assessed whether the fair value estimate in the financial statements is in conformity with the applicable accounting framework.
- Verified the completeness and accuracy of the information used for projections, and compared key assumptions to external information of the industry.
The results of our audit tests were reasonable and we agree that the assumptions used, including the discount rate and the impairment amount of the unamortized intangible assets recorded in the year, were appropriate.
Other Matters
The Company’s management is responsible for the other information. The other information will include the other information that will be incorporated in the Annual Report that the Company must prepare pursuant to Article 33, Section I, Subsection b)) of the Fourth Title, First Chapter of the General Provisions Applicable to Issuers and other Participants in the Mexican Stock Exchange and the Instructions attached to these provisions (the Provisions). The Annual Report will be available for our reading after the date of this audit report.
Our opinion of the consolidated financial statements will not cover the other information and we will not express any form of assurance about it.
In connection with our audit of the consolidated financial statements, our responsibility will be to read the Annual Report, when available, and when we do so, to consider whether the other information contained therein is materially inconsistent with the consolidated financial statements or with our knowledge obtained during the audit, or it appears to contain a material error. When we read the Annual Report, we will issue the legend on the reading of the annual report required by Article 33, Section I, Subsection b), number 1.2 of the Provisions.
The accompanying consolidated financial statements have been translated into English for the convenience of readers.
Responsibilities of Management and Those Charged with Governance for the Financial Statements
Management is responsible for the preparation and fair presentation of the accompanying consolidated financial statements in accordance with IFRS, and for such internal control as management determines is necessary to enable the preparation of the consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Company´s ability to continue as a going concern, disclosing, as applicable, matters, related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company´s financial reporting process.
Auditors’ Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISA will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with ISA, we exercise professional judgement and maintain professional skepticism throughout the audit. We also:
- Identify and asses the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or override of internal control.
- Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.
- Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
- Conclude on the appropriateness of management´s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors´ report. However, future events or conditions may cause the Company to cease to continue as a going concern.
- Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We will also provide those responsible for the Company’s government with a statement on our fulfillment of relevant ethical requirements regarding independence, and will communicate any relationship and other matters that might be thought to affect our independence and, when applicable, the related safeguards.
Among the matters that have been subject to communications with those responsible for the Company’s government, we determined that those of most significance in the audit of the consolidated financial statements, are the key audit matters. We described these matters in this audit report, except for those legal or regulatory provisions that prohibit the public disclosure of the matter or, in extremely infrequent circumstances, we determine that a matter should not be disclosed in our report, because it is reasonable to expect that the adverse consequences of doing so would overcome the public benefits thereof.
Galaz, Yamazaki, Ruiz Urquiza, S. C.
Member of Deloitte Touche Tohmatsu Limited
C. P. C. Carlos Iván Pólito Ruiz
February 3, 2017

C. P. C. Carlos Iván Pólito Ruiz
February 3, 2017