2011 Annual Report - Italcementi Group

As in 2010, for the CGUs in the EU countries and North America, a 9-year explicit forecast period was used; in
this way we believe that projected cement consumption is structurally balanced and aligned with the related
long-term estimate implicit in the cement structural demand curve for each country.
For the CGUs in the emerging countries, also subject in part to a change in cyclical patterns compared with the
recent past, but with cement consumption more likely to be influenced by exogenous factors relating to specific
macroeconomic events, the tests were based on expected growth in cement demand over a five-year period.
Terminal value was generally estimated on the basis of CGU activity on its mid-cycle market and takes account
of the market cycle and the changes in the country in question after the explicit forecast period.
The projections are management’s best estimate of future trends and possible economic conditions in the
countries in which the Group operates.
For all CGUs, recoverable value coincides with value in use, with the exception of the CGUs in Turkey and
China, for which fair value less costs to sell, determined on the basis of comparable market transactions or
offers received from third parties, was used.
The discount rates, determined country by country, are obtained by applying the estimated long-term inflation
rate, adjusted in some cases with the country-risk premium, to the weighted average cost of capital (WACC).
WACCs are computed on the basis of the market value of own funds and of sector debt, to which the mean
sector coefficient based on the debt/stock market capitalization ratio is applied.
The assumptions used for the computation for the CGUs in the main countries are set out below:
(in %)
Discount rate
before tax
Growth rate
including inflation
Cash-generating units by country 2011 2010 2011 2010
Italy 8.9 7.7 2.0 1.1
France/Belgium 9.4 8.7 2.0 1.1
Spain 9.3 8.5 2.0 1.0
Greece 14.0 11.0 2.0 1.2
North America 7.7 7.4 1.8 1.2
Egypt 13.2 13.4 5.0 6.0
Morocco 10.7 9.8 2.5 2.4
Kuwait 9.8 9.2 3.5 3.4
Thailand 10.6 9.5 3.5 2.5
India 14.5 12.3 6.3 5.0
Goodwill testing for 2011 generated a goodwill impairment loss of 54.4 million euro for Spain and of 12.1 million
euro for Greece. The Group considered the specific potential risks of the sector of activity, any market values
on the basis of comparable transactions and conducted a sensitivity analysis on recoverable amount in the
event of an increase in the discount rates.
94