FORM
6-K
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Report
of Foreign Private Issuer
Pursuant
to Rule 13a-16 or 15d-16
of
the Securities Exchange Act of 1934
For
the month of April, 2015
Commission File Number 1-11080
THE
ICA CORPORATION
(Translation of registrant's name into English)
Blvd.
Manuel Avila Camacho 36
Col. Lomas de Chapultepec
Del. Miguel Hidalgo
11000 Mexico City
Mexico
(Address of principal executive offices)
Indicate
by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.
Form
20-F.....x.... Form 40-F.........
Indicate
by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ____
Indicate
by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ____
Indicate
by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information
to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes
..... No...x...
If
"Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82- ________
Empresas
ICA Announces Unaudited
First
Quarter 2015 Results
April
29, 2015, Mexico City — Empresas ICA, S.A.B. de C.V. (BMV and NYSE: ICA),
the largest infrastructure and construction company in Mexico, announced today its unaudited results
for the first quarter 2015, which have been prepared in accordance with International Financial Reporting Standards.
Summary
for the first quarter of 2015
Consolidated
revenues increased 11%, led by growth in the Construction and Airports segments. Concessions revenues were unchanged compared
to the prior year period. Consolidated operating income and Adjusted EBITDA increased 7% and 6%, respectively, compared to 1Q14.
The Adjusted EBITDA margin reached 19%. Backlog was Ps. 62,203 million, including mining services contracts and contracts of affiliates
and joint ventures, essentially unchanged from December 2014 levels.
Construction
segment revenues rose 7%, led by the contribution from international operations. Concessions traffic volumes grew 7%, and the
Agua Prieta water treatment plant and the El Realito aqueduct started operations. Airport traffic volumes rose 18%.
ICA’s
comprehensive financing cost increased by Ps. 1,625 million as a result of the depreciation of the Mexican peso against the U.S.
dollar. This affected the net result and leverage ratios. However, the currency depreciation does not have an immediate impact
on cash flows.
In
April 2015, ICA signed an agreement to create an operational platform dedicated to transportation projects in Mexico. The platform
initially includes four projects: the Acapulco Tunnel, the Mayab Tollroad, the Río Verde – Ciudad Valles Highway,
and the La Piedad Bypass. Completion of the transaction is subject to standard closing conditions and approval from the Government
of Mexico, and is targeted for the second quarter of 2015.
For
more information please contact:
Elena
Garcia
elena.garcia@ica.mx
Gabriela
Orozco
gabriela.orozco@ica.mx
relacion.inversionistas@ica.mx
+(5255)
5272 9991 x 3608 |
In
the US: Daniel Wilson
+(1212)
689 9560
dbmwilson@zemi.com |
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| • | Construction
backlog was Ps. 36,171 million, as compared to 36,957 million as of December 31, 2014.
New contracts and net contract increases were Ps. 4,491 million, principally for international
projects. |
| • | Long-term
contracts for mining and other services were Ps. 6,357 million, up 24% compared to December
2014. |
| • | In
addition, backlog of non-consolidated subsidiaries and joint ventures reached Ps. 40,993
million, of which ICA’s proportionate share was Ps. 19,675 million. |
| • | The
Construction segment contributed 73% of consolidated revenues and 25% of Adjusted EBITDA
in 1Q15. |
| • | Concessions
contributed 15% of revenues and 43% of Adjusted EBITDA in 1Q15. |
| • | The
traffic volumes for the concessioned highways in 1Q15 rose 7% as a result of traffic
growth in most of the operating projects. |
| • | As
of March 31, 2015, Concessions participated in 18 projects: ten highways, four water
projects, two social infrastructure projects, one port, and one energy project. Of these,
eleven were operational, and seven were under construction. |
| • | Airports
contributed 12% of revenues and 32% of Adjusted EBITDA in 1Q15. |
| • | Consolidated
net loss was Ps. 708 million in 1Q15, and the loss of the controlling interest was Ps.
846 million, equivalent to Ps. 1.38 per share or US$ 0.36 per ADS. The loss resulted
principally from the exchange loss of Ps. 1,080 million included in comprehensive financing
cost. |
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Construction
| • | Construction
revenues increased 7% to Ps. 6,053 million in 1Q15, as compared to 1Q14. FCG contracts,
the Mitla-Tehuantepec highway, and the Barranca Larga – Ventanilla highway made
the largest contributions to revenues. |
| • | Operating
income for the quarter was Ps. 187 million, an increase of 20% from the same period of
2014. |
| • | Adjusted
EBITDA was Ps. 400 million, an increase of 1%, with an Adjusted EBITDA margin of 6.6%. |
| • | Construction
segment debt was Ps. 6,557 million, an increase of Ps. 95 million compared to December
2014. Cash was Ps. 1,511 million as of March 31, 2015, a decrease of 10% from the end
of 2014. |
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Construction
Backlog
| • | Construction
backlog was Ps. 36,171 million as of March 31, 2015, and was equivalent to 20 months
work at the average rate for 2015. |
| • | New
contracts and net contract additions were Ps. 4,491 million in 1Q15. |
| • | Projects
outside of Mexico were 14% of backlog. |
Contracted
Mining and Other Services
| • | As
of March 31, 2015, ICA also had Ps. 6,357 million in long-term mining and other services
contracts, principally in San Martín Contratistas Generales. |
Concessions
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| • | Concessions
revenues were Ps. 1,239 million, unchanged from the prior year period. The operating
highways, particularly the Mayab tollroad were the principal contributors to revenues. |
| • | Adjusted
EBITDA was Ps. 684 million, essentially unchanged from 1Q14, with a margin of 55.3%.
In the prior year period, revenue included services for operating the RCO tollroads. |
| • | Debt
was Ps. 20,299 million as of March 31, 2015, an increase of 8% as compared to December
31, 2014, as a result of disbursements for projects under construction; 78% of the total
is associated with projects in operation, and 22% with projects under construction. |
| • | The
segment’s cash balances increased 7% to Ps. 2,423 million as of March 31, 2015
compared to December 31, 2014. |
| • | Average
Daily Traffic Volumes (ADTV) on consolidated highways increased 7% in 1Q15, principally
because of increased traffic on the Rio Verde-Ciudad Valles and Rio de Los Remedios-Ecatepec
highways. |
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Operating
Concessions Information
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Airports
| • | The
Airports segment reported solid results in the quarter as a result of the positive evolution
of passenger traffic, with growth in both aeronautical and non-aeronautical revenues. |
| • | Terminal
passenger traffic increased 18% to 3.8 million in 1Q15; domestic traffic grew 17% and
international traffic increased 18%. Eight new routes were opened during the quarter:
6 domestic and 2 international. |
| • | Aeronautical
revenues rose 21%, principally as a result of traffic growth, and non-aeronautical revenues
rose 20%, as a result of commercial and diversification initiatives. |
| • | Adjusted
EBITDA increased 20% to Ps. 514 million in 1Q15, with an Adjusted EBITDA margin of 51.5%. |
| • | Debt
was Ps. 4,832 million as of March 31, 2015, unchanged from December 31, 2014. |
The
Airports segment includes Grupo Aeroportuario del Centro Norte (known as OMA), Aeroinvest, and Servicios de Tecnología
Aeroportuaria (SETA). The earnings report of GACN, which is the operating company in the Airports segment, can be found at http://ir.oma.aero.
Those results differ from the ones presented here as a result of consolidation effects.
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Consolidated
Results for the First Quarter of 2015
| • | Revenues
increased 11% to Ps. 8,822 million in 1Q15, principally as a result of the Construction
and Airport segments. |
| • | Cost
of sales was Ps. 6,847 million, and includes interest expense for concessioned projects
during the construction phase. |
| • | Selling,
general, and administrative expenses were Ps. 725 million in 1Q15, equivalent to
8.2% of revenues. SG&A rose 26% compared to 1Q14 as a result of the consolidation
of Facchina effective 2Q14 and increased expenses for promotions and bid preparation. |
| • | Other
income (cost) was a loss of Ps. 95 million, and includes provisions for organizational
restructuring to be carried out in the second quarter. |
| • | Operating
income was Ps. 1,155 million in 1Q15, an increase of 7% compared to the prior year
period. |
| • | Adjusted
EBITDA was Ps. 1,676 million, with a margin of 19%, an increase of Ps. 97 million
from 1Q14. |
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| • | Comprehensive
financing cost was Ps. 2,491 million in 1Q15, as compared to Ps. 866 million in the
prior year period. The increase was principally the result of exchange loss of Ps. 1,080
million, a derivatives valuation loss of Ps. 131 million, and an increase in interest
expense of Ps. 468 million. |
| • | Share
of earnings of affiliated companies and joint ventures rose by Ps. 64 million compared
to the prior year period. This line item includes ICA’s participation in the earnings
of ICA Fluor and other joint businesses. The annexes to this report include supplementary
information on the performance of these affiliates and joint ventures. |
| • | Discontinued
operations include the after-tax operating results of the social infrastructure projects. |
| • | Consolidated
net loss was Ps. 708 million in 1Q15 compared to net income of Ps. 237 million in
1Q14, due to Comprehensive financing cost. |
| • | Net
income of the non-controlling interest was Ps. 138 million, and includes principally
the minority shareholdings in OMA and San Martin. |
| • | Net
loss of the controlling interest was Ps. 846 million in 1Q15, or Ps. 1.38 per share
and US$ 0.36 per ADS. The principal factor in the net loss was the Comprehensive Financing
Cost discussed above. |
Investments
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| • | During
1Q15, ICA investments totaled approximately Ps. 2,042 million. It is important to note
that the investments in Concessions and other projects are expected to generate revenues
from the operation of the assets upon completion of construction and start of operations. |
| • | ICA
participates across the entire cycle of developing infrastructure projects: including
formulation, engineering, structuring and financing, construction, operation, and management
as part of a portfolio of assets. This is a dynamic process that implies monetizing assets
that are in the operating stage, while arranging new projects under development. |
Debt
| • | Total
debt was Ps. 56,203 million as of March 31, 2015, a 5% increase as compared to December
31, 2014. |
| • | Total
cash and cash equivalents as of March 31, 2015 was Ps. 7,275 million, an increase of
Ps. 249 million compared to December 31, 2014. Restricted cash was Ps. 2,338 million.
Net debt was Ps. 48,928 million as of March 31, 2015. |
| • | Construction
accounted for 12% of total debt, and consisted principally of short-term working capital
credit lines required to carry out the work program. The source of payment of these obligations
is client payments and advances. |
| • | Concessions
accounted for 36% of total debt. Such debt consisted principally of structured project
finance credit facilities. Each project carries its own debt which will be paid with
the revenues generated by the project. This debt is expected to be gradually amortized
as resources are generated from project operation. |
| • | Corporate
and other debt represented 44% of total debt, and consisted principally of the three
U.S. dollar-denominated notes issued by the parent company. |
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| • | Short-term
debt represented 14.5% of total debt. Of this amount, Ps. 2,302 million was debt in the
Concessions and Airports segments whose source of repayment is the operations of these
segments; Ps. 1,636 million was parent level bridge loans used to complete projects,
and which are expected to be refinanced as long term debt in the concessions segment
once the projects become operational. Finally Ps. 4,212 million are short-term working
capital lines in the Construction segment, that are continuously being paid and disbursed
based on the execution of projects and client collections. |
| • | As
of March 31, 2015, 54% of debt was denominated in foreign currency. Bond interest payment
coupons during the call protection period are hedged (i.e., until 2017 on the bonds due
2021, and until 2019 on the bonds due 2024). |
| • | ICA
contracts derivatives so that the financing of projects is in the same currency as the
source of payments. In addition, ICA contracts derivates to reduce exchange and interest
rate risk. ICA expects to be remain active in the capital markets to finance and refinance
infrastructure projects that create value for the Company. |
Subsequent
Events
On
April 14, 2015, ICA and the Federal Electricity Commission, CFE, signed a memorandum of understanding for the joint development
of electricity generation projects. In the first stage, CFE and ICA will jointly carry out technical and feasibility analyses
of a range of possible projects.
On
April 23, 2015, ICA held its annual shareholder’s meeting. Among other items, the shareholders elected one new independent
board member, ratified the other members of the Board of Directors, which now includes 12 members including seven independent
directors and elected the chairs of the board committees.
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On
April 24, 2015, Shell Canada Energy and ICA Fluor agreed to terminate the contract for the fabrication of well pads for Shell’s
Carmon Creek project in Alberta, Canada. The unexecuted balance of the contract, which was originally booked in 4Q14, was
Ps. 4,007 million.
Conference
Call Invitation
| • | ICA’s
1Q15 earnings conference call will be held on Thursday, April 30, at 10:00 am Eastern
Time (9:00 am Mexico City time). To participate, please dial toll-free (855) 826-6151
from the U.S. or +1 (559) 549-9841 internationally. The conference ID is 31243203.
The conference call will be Webcast live through streaming audio and available on ICA’s
website at http://ir.ica.mx. |
| • | A
replay will be available until May 7, 2015 by calling toll-free (855) 859-2056
from the U.S. or +1 (404) 537-3406 internationally, again using conference ID
31243203. |
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Consolidated
Financial Statements
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Annexes:
Complementary Information
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Non-Consolidated
Affiliates and Joint Ventures
Construction
| • | This
includes the results of ICA Fluor (ICA’s share 51%), Grupo Rodio Kronsa (50%),
and the construction companies for the Nuevo Necaxa-Tihuatlán highway (60%) and
the El Realito aqueduct (51%). |
Non-Consolidated
Backlog
| • | Non-consolidated
backlog reached Ps. 40,993 million as of March 31, 2015. |
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| • | The
new contracts and net contract additions totaled Ps. 1,992 million. |
Concessions
| • | Includes
principally the concessions for the Nuevo Necaxa-Tihuatlán highway (with ICA holding
a 50% interest), the Mitla-Tehuantepec highway (60%), the El Realito aqueduct (51%),
the Querétaro Aqueduct II (43%), the Lázaro Cárdenas Port operator
(5%), and Proactiva Medio Ambiente (49%). |
Corporate
and Other
| • | Includes
principally Actica (ICA’s interest in the company is 50%) and Los Portales in Peru
(50%). |
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Notes
and Disclaimer
The
unaudited condensed consolidated financial statements of Empresas ICA, S.A.B. de C.V. and subsidiaries have been prepared in accordance
with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and presented
in accordance with IAS 34 “Intermediate Financial Reporting”. These financial statements include all the adjustments,
including those of a normal and recurring nature, required for an adequate presentation of the results of operations. Results
for interim reporting periods may not be indicative of full year results. As a result, the reading and analysis of these interim
financial statements should be done in conjunction with the financial statements for the year ended December 31, 2014, which were
also prepared under IFRS.
Unaudited
financials: Financial statements are unaudited statements.
Prior
period comparisons: Unless stated otherwise, comparisons of operating or financial results are made with respect to the comparable
prior-year period, or balances as of December 31, 2014.
Percentage
changes: Are calculated based on actual amounts.
Adjusted
EBITDA: Adjusted EBITDA is not a financial measure computed under IFRS and should not be considered an indicator of financial
performance or free cash flow. We define Adjusted EBITDA as net income of controlling interest plus (i) net income of non-controlling
interest, (ii) discontinued operations, (iii) income taxes, (iv) share in net income of affiliates, (v) net comprehensive financing
cost, (vi) depreciation and amortization, and (vii) net interest expense included in cost of sales. Our management believes that
Adjusted EBITDA provides a useful measure of its performance, supplemental to net income and operating income, because it excludes
the effects of financing decisions, non-controlling shareholdings, and other non-operating items. The calculation of Adjusted
EBITDA is also provided as a result of requests from the financial community and is widely used by investors in order to calculate
ratios and to make estimates of the total value of our company in comparison to other companies. Financial ratios calculated on
the base of Adjusted EBITDA are also widely used by credit providers in order to gauge the debt servicing capacity of companies
and are relevant measures under one or more of our or our subsidiaries’ financing agreements.
Exchange
rate: Amounts in U.S. dollars (US$) are converted at an exchange rate of Ps. 15.2427 per U.S. dollar as of March 31, 2015,
Ps. 14.7348 as of December 31, 2014, and Ps. 13.1349 as of March 31, 2014.
Financial
Derivative Instruments: ICA enters into financial derivative contracts in the subsidiaries where projects are located solely
in order to reduce the uncertainty on the returns on projects. The instruments entered into are established on a notional amount.
Interest rate derivatives are used in order to fix maximum financial costs. Exchange rate derivatives are entered into in order
to reduce the exchange risk on projects that incur labor and materials costs in a currency different from the currency of the
financing of the project, as well as to convert foreign debt into domestic currencies. ICA enters
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into
its financings in the same currency as the source of repayment. ICA has a policy of not entering into derivatives for speculative
purposes.
From
an accounting perspective, there are two classifications for derivative instruments. “Hedging financial instruments”
must meet the specific requirements established in IFRS. Other derivative financial instruments that do not meet IFRS requirements
for hedge accounting treatment are designated as trading derivatives.
ICA
values all derivatives at fair value. Fair value is based on market prices for derivatives traded in recognized markets; if no
active market exists, fair value is based on other recognized valuation methodologies in the financial sector, validated by first
party experts, and supported by sufficient, reliable, and verifiable information.
Fair
value is recognized in the balance sheet as an asset or liability, in accordance with the rights or obligations derived from the
contracts executed and in accordance with accounting norms. For hedging derivatives, changes in fair value are recorded temporarily
in other comprehensive income within stockholders’ equity, and are subsequently reclassified to results at the same time
that they are affected by the item being hedged. For trading derivatives, the fluctuation in fair value is recognized in results
of the period as part of Comprehensive Financing Cost.
ICA
Fluor: ICA Fluor Daniel, S. de R.L. de C.V. (ICAFD) is a 51%-owned ICA company with shared control. Its principal business
includes the engineering, procurement, and construction of all types of industrial facilities, including civil, electromechanical,
and maritime works. It is part of ICA’s industrial construction segment.
Effective
4Q14, ICAFD is included in the segment information in the notes to the ICA’s consolidated financial statements, on a proportional
basis. This change results from a change in the internal structure of ICAFD that occurred in 1Q15 related with reporting of information.
In accordance with IFRS 8 “Operating Segments”, the restructuring of the segment information is being provided for
prior periods.
Glossary
ADTV:
Average Daily Traffic Volume is the number of vehicles that travel the entire length of a highway.
Concessions
Revenues are composed of the following:
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| • | Operating
revenue from concessions: includes tolls and fee payments from the government for
the availability of PPP roads and or tariffs based on traffic volume, according to the
type of concession. |
| • | Operations
and maintenance: revenue from the provision of services for operating and maintaining
highways for non-consolidated affiliates. |
| • | Financial
income: is equal to the financial cost that is capitalized in value of the financial
asset constructed. |
| • | Construction:
the revenue recognized by the concessionaire for costs that are not attributable
to the construction company. |
PPP:
Public-Private Partnership is a legal mechanism that enables a private sector company to provide services to the federal,
state, or municipal government clients through fixed term licenses, generally from 20 to 40 years, to finance, construct, establish,
operate, and maintain a public means of transportation or communication. The client’s payment consists of a fixed payment
for the availability of the highway together with a minimum shadow tariff based on traffic volume.
RCO:
Red de Carreteras de Occidente, S.A.B. de C.V. The company’s principal activity is to operate, maintain, conserve, and
exploit the highways that make up the FARAC 1 package of tollroads, as well as to construct, operate, maintain, conserve, and
exploit the Expansion Works, in accordance with the Concession Agreement with the federal Government, acting through the Ministry
of Communications and Transportation.
Facchina
Construction Group (FCG): A medium sized heavy civil construction company in the United States. Facchina’s principal
markets are in Florida and the Washington DC metropolitan area.
SPC:
Services Provider Contract. 22-year contract for the provision of services to the Ministry of Government, including the construction
and operation of social infrastructure.
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Analyst
coverage
In
compliance with the regulations of the Mexican Stock Exchange, the following is the list of analysts that cover ICA’s securities:
| • | Actinver
- Ramón Ortiz Reyes |
| • | BBVA
Bancomer - Francisco Chávez |
| • | Banorte-Ixe
- José Itzamna Espitia |
| • | Barclays
- Pablo Monsiváis |
| • | Bank
of America Merrill Lynch - Carlos Peyrelongue |
| • | Deutsche
Bank - Esteban Polidura |
| • | Intercam
- Enrique Mendoza |
| • | Morgan
Stanley - Nikolaj Lippmann |
| • | Santander
- Toe Matsumura |
| • | UBS
- Marimar Torreblanca |
This
report contains projections or other forward-looking statements related to ICA that reflect ICA’s current expectations or
beliefs concerning future events. Such forward-looking statements are subject to various risks and uncertainties and may differ
materially from actual results or events due to important factors such as changes in general economic, business or political or
other conditions in Mexico, Latin America or elsewhere, changes in capital markets in general that may affect policies or attitudes
towards lending to Mexico or Mexican companies, changes in tax and other laws affecting ICA’s businesses, increased costs,
unanticipated increases in financing and other costs or the inability to obtain additional debt or equity financing on attractive
terms and other factors set forth in ICA’s most recent filing on Form 20-F and in any filing or submission ICA has made
with the SEC subsequent to its most recent filing on Form 20-F. All forward-looking statements are based on information available
to ICA on the date hereof, and ICA assumes no obligation to update such statements.
Empresas
ICA, S.A.B. de C.V. is Mexico's largest infrastructure company. ICA carries out large-scale civil and industrial construction
projects and operates a portfolio of long-term assets, including airports, toll roads, water systems, and real estate. Founded
in 1947, ICA is listed on the Mexican and New York Stock exchanges. For more information, visit www.ica.mx/ir.
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SIGNATURE
Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Date: April 30, 2015 |
Empresas ICA, S.A.B. de C.V.
/s/ Gabriel de la Concha Guerrero
Name: Gabriel de la Concha Guerrero
Title: Attorney-in-Fact
|
Exhibit 99.1
(Translation) | | File 151.112.32 |
NATIONAL BANKING AND SECURITIES COMMISSION
LIC. RAFAEL COLADO IBARRECHE
Chief Supervisor of Issuers
LIC. ANDREA FABIOLA TINOCO H.
Chief Supervisor for Compliance with Stock Market
Supervision
Mexico City, April 29th, 2015
RE: 151-2/76211/2009
RODRIGO A. QUINTANA KAWAGE, acting in
my capacity as legal representative of Empresas ICA S.A.B. de C.V. (ICA or “the Issuer”) with an address for notifications
located at Blvd. Manuel Ávila Camacho No. 36, 15th floor, Col. Lomas de Chapultepec, 11000, Mexico City, Federal
District, and being duly registered before the National Banking and Securities Commission (CNBV) respectfully appear and state
the following:
On January 20, 2009 I was notified of
Order No. 151-2/76211/2009, File 151.112.32 which requested that ICA disclose qualitative and quantitative information regarding
ICA’s exposure to financial derivative instruments, whether to increase profitability or to hedge risks, in order to provide
investors information that would allow them to understand ICA’s operations with financial derivative instruments.
Based on the foregoing requirement, we state
the following:
I. Qualitative and Quantitative Information
i) ICA only contracts hedging instruments
in order to reduce the uncertainty on the return on its projects. It is the policy to contract financial instruments at the level
of the project in order to mitigate the risks resulting from interest rates and exchange rate fluctuations. From an accounting
perspective, the derivative instruments may be classified as hedging instruments or trading instruments, although in all cases
the objective is to mitigate risks to which ICA is exposed in its projects. Interest rate hedges are established based on a notional
value with the objective to cap maximum financial costs.
Exchange rate hedges are contracted to
ensure that the project will have sufficient resources for labor costs and inputs that are incurred in currencies different from
those provided by the financing of the project, which is in the same currency as the source of repayment. ICA contracts all derivatives
in the subsidiaries where the projects are located.
The contracting of financial derivatives
is linked to the financing of projects, as a result of which it is often the case that the counterparty is the same institution
that is providing the financing or one of its. These derivatives are non exchange traded (OTC) derivatives.
Our internal control policies state that
the contracting of credits (tied to the financing of projects) and the risks inherent in the projects require collaborative analysis
by representatives from the Finance, Law, Administration, and Operations areas, prior to any approval. This analysis also includes
the use of derivatives to hedge the risks of the financing. Once this analysis has been concluded and documented, the responsibility
for contracting derivatives belongs to the Finance area, in accordance with internal control policy.
The hedging instruments are contracted
to fix the variable interest rates of the loans. The changes between the fair value of these instruments and the primary positions
are compensated at an inverse correlation within a range between 80% and 125%. These instruments are classified as highly effective.
The decision to contract derivative financial
instruments is linked to the amount and level of financing for the project. The levels of authorization do not expressly contemplate
requiring the authorization of the Corporate Practices or Audit Committees. With respect to approval authorization levels, ICA
has documented policies, of which the most important are the following:
| § | The Chief Executive Officer, the Vice President for Finance and Administration,
and/or the responsible Finance officer have limits on their authorities to act, whether in terms of amounts or for unusual or non-recurring
operations. |
| § | The Chief Executive Officer has the authority to establish limits
on the approval authorities of other Officers in terms of amounts or kind of operation. |
| § | In the event that a higher level of authorization is required, the
Board of Directors will make the approval, after considering the opinion of the Chief Executive Officer and/or the applicable Committees. |
The derivatives that are contracted do
not have margin calls, in accordance with what is negotiated with each counterparty. For those projects that require collateral,
the policy is that any required deposits to be made or standby letters of credit be provided at the time of contracting the derivative.
This collateral will only be payable in the event of non-compliance.
In accordance with the standards of the
International Swaps and Derivatives Association (ISDA), it is agreed that counterparties may act as valuation or calculation agents,
in order to determine fair value and required payments.
While there is no formal risk committee,
as previously stated various areas participate in the evaluation, administration, and monitoring of project risks (both financial
and operational). As regards risk administration, there are documented processes that require the periodic review of risks.
ii) ICA uses the valuations of counterparties
(valuation agents) and a price provider authorized by the CNBV in order to calculate the fair value of derivative positions for
accounting purposes. The valuations are made using formal, documented methodologies. The calculated values are based on fair value
measurements techniques recognized in the financial sector and supported by sufficient, reliable and verifiable information. The
data used for the calculations comes from reliable and verifiable sources that reflect market prices.
Fair value is recognized in the balance
sheet as an asset or liability, in accordance with the rights or obligations derived from the contracts executed and in accordance
with accounting norms. Changes in fair value are recorded in the balance sheet. In addition to the valuations that are received,
the pricing provider carries out tests of effectiveness for the derivatives that qualify as hedging instruments from an accounting
perspective.
When the transactions comply with all
hedging requirements, the Company designates the derivatives as hedging financial instrument at the beginning of the relationship.
For fair value hedges, the fluctuation in the fair value of both the derivatives and the open risk position is recognized in results
of the period in which it takes place. For cash flow hedges, the effective portions is temporarily recognized in comprehensive
income within stockholder’s equity and is subsequently reclassifies to results at the same time that they are affected by
the item being hedge; the ineffective portion is recognized immediately in results of the period.
As previously mentioned, occasionally
derivatives contracted as hedges do not qualify for accounting treatment as hedging instruments, and are classified as trading
derivatives for accounting purposes. In these cases, the fluctuation in fair value on these derivatives is recognized in the results
of the period.
iii) ICA has a policy of contracting derivatives
instruments at the project level and not contracting instruments that have margin call or additional credit requirements beyond
those authorized by the responsible committees at the time of approval. At March 31, 2015 there has been no default on the contracts.
iv) Based on the interest rate and exchange
rate projections recently issued by Banco de México, and assuming these rates are maintained, the Issuer does not expect
to suffer any material adverse impact from its derivative positions on its results of operations for the second quarter of 2015
as a result of additional changes in the peso or changes in interest rates since March 31, 2015.
In accordance with your request for this
section, we set forth below the derivatives that matured during the quarter.
The following were the effects of derivative
transactions as of March 31, 2015:
v) Table 1 presents the information requested
regarding all material instruments that the Issuer currently has outstanding through project companies, including subsidiaries
and affiliates.
II. SENSITIVITY ANALYSIS
The derivatives instruments identified
in the table above as hedging derivatives were excluded from the sensitivity analysis because they do not show any ineffectiveness.
Sensitivity analysis was developed
considering three scenarios: a) 25 bp reduction in interest rates; b) 50 bp reduction in interest rates; and c) 100 bp reduction
in interest rates.
In conclusion, on aggregating the potential
losses under the different scenarios described above for the position analyzed, the following results obtain:
Compared to balance sheet concepts and
revenues, one can appreciate that under no scenario, is the effect more than 5% of assets, liabilities, or shareholders’
equity as of December 31, 2014, as shown below. The threshold of 3% of revenues is not exceeded under any scenario as well.
In virtue of the foregoing, the undersigned
respectfully submits to the National Banking and Securities Commission:
FIRST. I have responded on time and in
the appropriate manner, and with the authorities granted to me.
SECOND. I have delivered the information
required in your Order No. 151-2/76211/2009.
Mexico City, April 29th, 2015
________________________________________
Empresas ICA, S.A.B. de C.V.
By: Rodrigo A. Quintana Kawage
Position: Legal Representative