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To the Board of Directors and Stockholders of Grupo Lamosa, S. A. B. de C.V.
Opinion
We have audited the 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, 2021 and 2020, and the consolidated
statements of income, consolidated statements of other comprehensive income, consolidated statements of changes in
stockholders’ equity and consolidated statements of cash flows for the years then ended, and notes to the consolidated
financial statements, including a summary of significant accounting policies.
In our opinion, the accompanying consolidated financial statements present fairly, in all the material respects, the consolidated financial position of the Grupo Lamosa, S. A. B. de C. V. and Subsidiaries (the Company) as of December 31, 2021 and 2020, and their consolidated financial performance and their consolidated 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 Auditors’ Responsibilities for the Audit of the Consolidated 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.
The accompanying consolidated financial statements have been translated into English for the convenience of readers.
Emphasis of Matter
As mentioned in note 2b., on September 1, 2021, the Company acquired 100% of the shares representing the common
stock of Tiles Investments and Holdings, S.L., together with those of its subsidiaries (“Roca Tiles”). Its main business activity
involves the manufacture and marketing of ceramic coverings for floors and walls. As this acquisition classifies as a business
combination according to the requirements of International Financial Reporting Standard 3, “Business combinations”, the
purchase method will be applied to measure the assets acquired and the liabilities assumed in the transaction. The acquisition
amount, settled on a debt-free basis, was the equivalent of $241.1 million US dollars, net of received cash, thereby generating
preliminary goodwill of $2,240,291. The Company is currently in the 12-month period established for obtaining the fair values
of certain tangible and intangible assets with the support of independent expert appraisers. Accordingly, these headings and
the goodwill heading must be considered as preliminary and may be modified according to the guidelines permitted by IFRS.
Key Audit Matters
Key audit maters are those matters that, in our professional judgment, were of most significance in our audit of the
2021 consolidated financial statements. These matters were addressed in the context of our audit of the consolidated
financial statements as a whole, and in forming our opinion thereon; therefore, we did not express a separate opinion
on those audit matters.
The Company records a deferred income tax asset derived from tax loss carryforwards and undeducted interest. For this purpose, Management estimates the probability of applying these deferred income tax assets to generate a future economic benefit and supports their recognition in its consolidated financial statements.
Given the importance of the deferred income tax asset derived from tax losses and undeducted interest as of December 31, 2021, for the amount of $937,844 and $221,551, respectively, the determination of which require the use of significant judgments and estimates to calculate future projections of the Company’s tax results, we focused on this heading and performed the following procedures, among others:
The results of our audit procedures were satisfactory. The accounting policy established by the Company for recording deferred income taxes, together with details of their disclosure, are included in Notes 4t. and 22, respectively, to the accompanying consolidated financial statements.
As discussed in Note 2a., to the consolidated financial statements, the Company acquired all the shares representing the common stock of Eurocerámica, S.A.S. (“Eurocerámica”), which is primarily engaged in the manufacture and sale of ceramic products for walls and floors in Colombia. The total payment was the equivalent of US$35.6 million and was paid in Colombian pesos in two stages: 51% on October 1, 2020 and the remaining 49% on January 20, 2021. The fair value of the acquired assets and assumed liabilities determined and recognized at the acquisition date were $981,769 and $323,841, respectively. Goodwill of $94,713 was also recognized.
Given the significant level of judgment used by Management in the valuation models utilized to determine the payment and the fair values of the acquired assets and assumed liabilities, we involved our valuation experts to evaluate the premises and criteria used by Management and its independent expert, subsequently applying the following procedures:
The results of our procedures were satisfactory and we agree with the fair value amount determined for recognized assets and assumed liabilities.
Other matters
As mentioned in Note 2a., as of December 31, 2020, the preliminary figures reported for the fair values of acquired assets and assumed liabilities derived from the acquisition of Eurocerámica were reclassified to noncurrent assets to reflect the price allocation.
Information other than the Consolidated Financial Statements and Independent Auditors Report there on
The Company’s Management is responsible for the other information. The other information will include the 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 on 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. If, based on the work we have performed, we conclude that there is a material error in the information, we would have to report this fact. At the date of this report, we have nothing to report on this matter.
Responsibilities of Management and Those Charged with Governance for the Consolidated 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 Consolidated Financial Statements
The objective of our audit is 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:
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.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulations precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public benefits of such communication.
Galaz, Yamazaki, Ruiz Urquiza, S. C.
Member of Deloitte Touche Tohmatsu Limited.
C. P. C. Emeterio Barrón Perales
January 31, 2022
Grupo Lamosa, S. A. B. de C. V. and Subsidiaries
As of December 31, 2021 and 2020
(In thousands of Mexican pesos
Notes | 2021 | 2020 | |||
---|---|---|---|---|---|
Assets |
|||||
Current assets: | |||||
Cash and cash equivalents | 7 | $ | 3,413,435 | $ | 2,609,180 |
Accounts receivable, net | 8 | 4,762,991 | 3,144,228 | ||
Inventories | 9 | 3,353,299 | 1,880,571 | ||
Other current assets | 10 | 502,048 | 238,147 | ||
Current assets | 12,031,773 | 7,872,126 | |||
Real estate inventories | 11 | 98,202 | 114,545 | ||
Property, plant and equipment, net | 12 | 9,532,195 | 8,681,142 | ||
Right-of-use assets, net | 17 | 800,001 | 314,190 | ||
Intangible assets, net | 13 | 8,279,269 | 6,149,541 | ||
Deferred income taxes | 22 | 1,131,708 | 1,274,772 | ||
Other non-current assets | 14 | 438,805 | 226,677 | ||
Total | $ | 32,311,953 | $ | 24,632,993 | |
Liabilities and stockholders’ equity | |||||
Current liabilities: | |||||
Current portion of long-term debt | 16 | $ | 409,853 | $ | 218,238 |
Current portion of finance lease liability | 17 | 167,849 | 100,882 | ||
Trade accounts payable | 3,106,486 | 1,905,321 | |||
Income taxes | 22 | 854,097 | 559,534 | ||
Other current liabilities | 15 | 2,961,365 | 2,016,800 | ||
Current liabilities | 7,499,650 | 4,800,775 | |||
Long-term debt | 16 | 9,468,423 | 6,694,914 | ||
Finance leases | 17 | 678,698 | 205,015 | ||
Derivative financial instruments | - | 80,045 | |||
Employee benefits | 18 | 595,370 | 567,088 | ||
Long term provisions | 24 | 155,335 | 120,795 | ||
Income taxes | 22 | 148,058 | 348,064 | ||
Deferred income taxes | 22 | 408,222 | 344,086 | ||
Total liabilities | 18,953,756 | 13,160,782 | |||
Stockholders’ equity: | |||||
Capital stock | 19 | 203,053 | 203,053 | ||
Purchase of treasury stock | 19 | (937,204) | (417,849) | ||
Additional paid-in-capital | 19 | 139,386 | 139,386 | ||
Retained earnings | 15,027,523 | 11,931,904 | |||
Other comprehensive loss items | 6 and 18 | (1,074,561) | (702,441) | ||
Stockholders’ equity attributable to controlling interest | 13,358,197 | 11,154,053 | |||
Non-controlling interest | - | 318,158 | |||
Total stockholders’ equity | 13,358,197 | 11,472,211 | |||
Total liabilities and stockholders’ equity | $ | 32,311,953 | $ | 24,632,993 |
See accompanying notes to these consolidated financial statements.
Federico Toussaint Elosúa
Chief Executive Officer
Jorge Antonio Touché Zambrano
Chief Financial Officer
Grupo Lamosa, S. A. B. de C. V. and Subsidiaries
For the years ended December 31, 2021 and 2020
(In thousands of Mexican pesos, except for the earning per share, which is in Mexican pesos)
Notes | 2021 | 2020 | |||
---|---|---|---|---|---|
Net sales | 25 | $ | 27,186,757 | $ | 19,473,442 |
Cost and expenses: | |||||
Cost of sales | 14,666,359 | 11,289,194 | |||
Operating expenses | 20 | 6,084,408 | 4,639,232 | ||
Other operating income (expenses), net | 158 | (4,449) | |||
20,750,925 | 15,923,977 | ||||
Operating income | 6,435,832 | 3,549,465 | |||
Interest expense | 471,721 | 569,495 | |||
Interest income | (166,866) | (118,915) | |||
Hyperinflation effects on net monetary position | 141,719 | (4,349) | |||
Exchange loss, net | 269,560 | 347,749 | |||
Derivative financial instruments | 6 | 3,225 | 138,463 | ||
719,359 | 932,443 | ||||
Income before income taxes | 5,716,473 | 2,617,022 | |||
Income taxes | 22 | 2,287,384 | 953,819 | ||
Net income of the year | $ | 3,429,089 | $ | 1,663,203 | |
Attributable to: | |||||
Controlling interest | 3,429,089 | 1,647,276 | |||
Non-controlling interest | - | 15,927 | |||
$ | 3,429,089 | $ | 1,663,203 | ||
Earnings per basic and diluted share | 4.v | $ | 9.49 | $ | 4.46 |
See accompanying notes to these consolidated financial statements.
Grupo Lamosa, S. A. B. de C. V. and Subsidiaries
For the years ended December 31, 2021 and 2020
(In thousands of Mexican pesos)
Notes | 2021 | 2020 | |||
---|---|---|---|---|---|
Net income of the year | $ | 3,429,089 | $ | 1,663,203 | |
Other comprehensive income items: | |||||
Item that can be potentially reclassified to net income of the year: | |||||
Valuation of derivative financial instruments, net of taxes | 22 | 169,379 | (24,520) | ||
Cumulative translation adjustments | 19.h | (543,388) | 59,817 | ||
(374,009) | 35,297 | ||||
Item that cannot be reclassified to net income of the year: | |||||
Actuarial remeasurements of defined benefits obligation | 18 and 22 | 1,889 | (24,878) | ||
1,889 | (24,878) | ||||
Total other comprehensive items | (372,120) | 10,419 | |||
Total comprehensive income of the year | $ | 3,056,969 | 1,673,622 | ||
Comprehensive income attributable to: | |||||
Controlling interest | $ | 3,056,969 | 1,655,252 | ||
Non-controlling interest | - | 18,370 | |||
$ | 3,056,969 | $ | 1,673,622 |
See accompanying notes to these consolidated financial statements.
Grupo Lamosa, S. A. B. de C. V. and Subsidiaries
For the years ended December 31, 2021 and 2020
(In thousands of Mexican pesos)
Items of Other Comprehensive Income | |||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Notes | Capital stock | Purchase of treasury stock | Additional Paid-In Capital | Retained Earnings | Valuation of Derivative Financial Instruments | Remeasurement of Defined Benefits Obligations | Cumulative Translation Adjustment | Total of participation controller | Total participation do not controller | Total Stockholders Equity | |||||||||||
Balances as of January 1, 2020 | $ | 203,053 | $ | (130,180) | $ | 139,386 | $ | 10,594,946 | $ | (1,538) | $ | (135,252) | $ | (573,627) | $ | 10,096,788 | $ | - | $ | 10,096,788 | |
Dividends declared | 19.d | (310,318) | (310,318) | (310,318) | |||||||||||||||||
Non-controlling interest in acquired business | 299,788 | 299,788 | |||||||||||||||||||
Purchase of treasury stock | 19.b | (287,669) | (287,669) | (287,669) | |||||||||||||||||
Comprehensive income | 19.h | 1,647,276 | (24,520) | (24,878) | 57,374 | 1,655,252 | 18,370 | 1,673,622 | |||||||||||||
Balances as of December 31, 2020 | 203,053 | (417,849) | 139,386 | 11,931,904 | (26,058) | (160,130) | (516,253) | 11,154,053 | 318,158 | 11,472,211 | |||||||||||
Dividends declared | 19.c | (333,470) | (333,470) | (333,470) | |||||||||||||||||
Non-controlling interest in acquired business | (318,158) | (318,158) | |||||||||||||||||||
Purchase of treasury stock | 19.b | (519,355) | (519,355) | (519,355) | |||||||||||||||||
Comprehensive income | 19.h | 3,429,089 | 169,379 | 1,889 | (543,388) | 3,056,969 | 3,056,969 | ||||||||||||||
Balances as of December 31, 2021 | $ | 203,053 | $ | (937,204) | $ | 139,386 | $ | 15,027,523 | $ | 143,321 | $ | (158,241) | $ | (1,059,641) | $ | 13,358,197 | - | 13,358,197 |
See accompanying notes to these consolidated financial statements.
Grupo Lamosa, S. A. B. de C. V. and Subsidiaries
For the years ended December 31, 2021 and 2020
(In thousands of Mexican pesos)
2021 | 2020 | |||
---|---|---|---|---|
Cash flows from operating activities: | ||||
Income before income taxes | $ | 5,716,473 | $ | 2,617,022 |
Adjustment for: | ||||
Depreciation and amortization | 852,331 | 638,526 | ||
Other miscellaneous expenses | 204,809 | 187,914 | ||
Interest income | (166,866) | (118,915) | ||
Interest expense | 471,720 | 569,495 | ||
Derivative financial instruments | 3,225 | 138,463 | ||
Hyperinflation effects on net monetary position | 141,719 | (4,349) | ||
Exchange loss, net | 269,560 | 347,749 | ||
Asset impairment of property, plant and equipment | 45,430 | 38,969 | ||
Inflationary effect | (126,220) | (23,449) | ||
7,412,181 | 4,391,425 | |||
Changes in working capital: | ||||
Increase (decrease) in accounts receivable | (840,721) | 116,722 | ||
Increase (decrease) in inventories | (339,064) | 620,087 | ||
Increase in trade accounts payable | 542,024 | 185,592 | ||
Increase (decrease) Other current liabilities | (91,253) | 296,195 | ||
Income taxes paid | (1,319,783) | (769,054) | ||
Net cash flows generated by operating activities | 5,363,384 | 4,840,967 | ||
Cash flows from investing activities: | ||||
Acquisition of property, plant and equipment | (632,214) | (271,129) | ||
Interest income | 166,866 | 118,915 | ||
Acquisition of intangible assets | (2,619) | (72,079) | ||
Net cash flows used in acquisition in subsidiaries | (4,966,172) | (406,612) | ||
Net cash flows used in investing activities | (5,434,139) | (630,905) | ||
Cash flows from financing activities: | ||||
Bank loans | 4,379,956 | 3,957,222 | ||
Payments for bank liabilities and finance lease liability | (1,986,412) | (5,671,528) | ||
Interest paid | (426,115) | (491,059) | ||
Purchase of treasury stock | (519,355) | (287,669) | ||
Dividends paid | (315,557) | (293,980) | ||
Net cash flows (provided used) in financing activities | 1,132,517 | (2,787,014) | ||
Net increase in cash and cash equivalents | 1,061,762 | 1,423,048 | ||
Cash and cash equivalents at beginning of year | 2,609,180 | 1,226,968 | ||
Effects from changes in cash value | (257,507) | (40,836) | ||
Cash and cash equivalents at end of the year | $ | 3,413,435 | $ | 2,609,180 |
See accompanying notes to consolidated financial statements.