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Pensions and Post-Employment Benefits | 12 Months Ended
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Dec. 31, 2018
Text block [abstract] |
Pensions and Post-Employment Benefits |
18) | PENSIONS AND POST-EMPLOYMENT BENEFITS
Defined contribution pension plans The consolidated costs of defined contribution plans for the years ended December 31, 2018, 2017 and 2016 were Ps863, Ps922 and Ps865, respectively. CEMEX contributes periodically the amounts offered by the pension plan to the employee’s individual accounts, not retaining any remaining liability as of the financial statements’ date. Defined benefit pension plans Most of CEMEX’s defined benefit plans have been closed to new participants for several years. Actuarial results related to pension and other post-retirement benefits are recognized in earnings and/or in “Other comprehensive income” for the period in which they are generated, as appropriate. For the years ended December 31, 2018, 2017 and 2016, the effects of pension plans and other post-employment benefits are summarized as follows:
|  |  |  |  | Pensions |  |  | Other benefits |  |  | Total |
Net period cost (income): |  |  |  |  | 2018 |  |  | 2017 |  |  | 2016 |  |  | 2018 |  |  | 2017 |  |  | 2016 |  |  | 2018 |  |  | 2017 |  |  | 2016 |
Recorded in operating costs and expenses |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Service cost |  |  | Ps |  |  |  | 193 |  |  |  | 221 |  |  |  | 151 |  |  |  | 35 |  |  |  | 33 |  |  |  | 25 |  |  |  | 228 |  |  |  | 254 |  |  |  | 176 |
Past service cost |  |  |  |  |  |  | 168 |  |  |  | (55 | ) |  |  | 8 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 168 |  |  |  | (55 | ) |  |  | 8 |
|  |  |  |  |  |  | 361 |  |  |  | 166 |  |  |  | 159 |  |  |  | 35 |  |  |  | 33 |  |  |  | 25 |  |  |  | 396 |  |  |  | 199 |  |  |  | 184 |
Recorded in other financial expenses |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net interest cost |  |  |  |  |  |  | 691 |  |  |  | 693 |  |  |  | 711 |  |  |  | 84 |  |  |  | 74 |  |  |  | 57 |  |  |  | 775 |  |  |  | 767 |  |  |  | 768 |
Recorded in other comprehensive income |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Actuarial (gains) losses for the period |  |  |  |  |  |  | (3,415 | ) |  |  | 20 |  |  |  | 3,985 |  |  |  | 11 |  |  |  | (23 | ) |  |  | 34 |  |  |  | (3,404 | ) |  |  | (3 | ) |  |  | 4,019 |
|  |  | Ps |  |  |  | (2,363 | ) |  |  | 879 |  |  |  | 4,855 |  |  |  | 130 |  |  |  | 84 |  |  |  | 116 |  |  |  | (2,233 | ) |  |  | 963 |  |  |  | 4,971 |
For the years 2018, 2017 and 2016, actuarial (gains) losses for the period were generated by the following main factors as follows:
|  |  |  |  | 2018 |  |  | 2017 |  |  | 2016 |
Actuarial (gains) losses due to experience |  |  | Ps |  |  |  | (1,110 | ) |  |  | 121 |  |  |  | (511 | )
Actuarial (gains) losses due to demographic assumptions |  |  |  |  |  |  | (1,104 | ) |  |  | (46 | ) |  |  | (231 | )
Actuarial (gains) losses due financial assumptions |  |  |  |  |  |  | (1,190 | ) |  |  | (78 | ) |  |  | 4,761 |
|  |  | Ps |  |  |  | (3,404 | ) |  |  | (3 | ) |  |  | 4,019 |
In 2018, net actuarial gains due to financial assumptions were mainly generated by a general increase in the discounts rates applied for the calculation of the pension benefit obligations in the United Kingdom, Germany, United States and Mexico, among others, resulting from the increase in market interest rates after several years in which such rates reached historically low levels. In 2017, net actuarial gains due to financial assumptions were mainly driven by an increase in the discount rates applicable to the benefits’ obligations in Germany and Mexico and by actual returns higher than estimated in the United States, partially offset by a decrease in the discount rate in the United Kingdom. Net actuarial losses due to financial assumptions during 2016 were mainly generated by a significant reduction in the discount rates applicable to the benefit obligations in the United Kingdom, Germany and other European countries, considering macroeconomic and political uncertainty prevailing at that time, partially offset by an increase in the discount rate in Mexico. These actuarial losses originated by the reduction in the discount rates in 2016 were also partially offset by actual returns higher than estimated in some of the plan assets related to CEMEX’s defined benefit plans. As of December 31, 2018 and 2017, the reconciliation of the actuarial benefits’ obligations and pension plan assets, are presented as follows:
|  |  |  |  | Pensions |  |  | Other benefits |  |  | Total |
|  |  |  |  | 2018 |  |  | 2017 |  |  | 2018 |  |  | 2017 |  |  | 2018 |  |  | 2017 |
Change in benefits obligation: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Projected benefit obligation at beginning of the period |  |  | Ps |  |  |  | 54,910 |  |  |  | 51,055 |  |  |  | 1,436 |  |  |  | 1,164 |  |  |  | 56,346 |  |  |  | 52,219 |
Service cost |  |  |  |  |  |  | 193 |  |  |  | 221 |  |  |  | 35 |  |  |  | 33 |  |  |  | 228 |  |  |  | 254 |
Interest cost |  |  |  |  |  |  | 1,608 |  |  |  | 1,625 |  |  |  | 87 |  |  |  | 76 |  |  |  | 1,695 |  |  |  | 1,701 |
Actuarial (gains) losses |  |  |  |  |  |  | (5,126 | ) |  |  | 727 |  |  |  | 8 |  |  |  | (24 | ) |  |  | (5,118 | ) |  |  | 703 |
Additions through business combinations |  |  |  |  |  |  | — |  |  |  | 2,801 |  |  |  | 111 |  |  |  | 271 |  |  |  | 111 |  |  |  | 3,072 |
Reduction from disposal of assets |  |  |  |  |  |  | (9 | ) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (9 | ) |  |  | — |
Plan amendments |  |  |  |  |  |  | 168 |  |  |  | (55 | ) |  |  | — |  |  |  | — |  |  |  | 168 |  |  |  | (55 | )
Benefits paid |  |  |  |  |  |  | (2,807 | ) |  |  | (2,920 | ) |  |  | (102 | ) |  |  | (81 | ) |  |  | (2,909 | ) |  |  | (3,001 | )
Foreign currency translation |  |  |  |  |  |  | (2,226 | ) |  |  | 1,456 |  |  |  | (30 | ) |  |  | (3 | ) |  |  | (2,256 | ) |  |  | 1,453 |
Projected benefit obligation at end of the period |  |  |  |  |  |  | 46,711 |  |  |  | 54,910 |  |  |  | 1,545 |  |  |  | 1,436 |  |  |  | 48,256 |  |  |  | 56,346 |
Change in plan assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Fair value of plan assets at beginning of the period |  |  |  |  |  |  | 32,665 |  |  |  | 28,828 |  |  |  | 28 |  |  |  | 26 |  |  |  | 32,693 |  |  |  | 28,854 |
Return on plan assets |  |  |  |  |  |  | 917 |  |  |  | 932 |  |  |  | 3 |  |  |  | 2 |  |  |  | 920 |  |  |  | 934 |
Actuarial (gains) losses |  |  |  |  |  |  | (1,711 | ) |  |  | 707 |  |  |  | (3 | ) |  |  | (1 | ) |  |  | (1,714 | ) |  |  | 706 |
Employer contributions |  |  |  |  |  |  | 1,562 |  |  |  | 1,494 |  |  |  | 102 |  |  |  | 81 |  |  |  | 1,664 |  |  |  | 1,575 |
Additions through business combinations |  |  |  |  |  |  | — |  |  |  | 2,841 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 2,841 |
Reduction for disposal of assets |  |  |  |  |  |  | — |  |  |  | (4 | ) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (4 | )
Benefits paid |  |  |  |  |  |  | (2,807 | ) |  |  | (2,920 | ) |  |  | (102 | ) |  |  | (81 | ) |  |  | (2,909 | ) |  |  | (3,001 | )
Foreign currency translation |  |  |  |  |  |  | (1,335 | ) |  |  | 787 |  |  |  | — |  |  |  | 1 |  |  |  | (1,335 | ) |  |  | 788 |
Fair value of plan assets at end of the period |  |  |  |  |  |  | 29,291 |  |  |  | 32,665 |  |  |  | 28 |  |  |  | 28 |  |  |  | 29,319 |  |  |  | 32,693 |
Net projected liability in the statement of financial position |  |  | Ps |  |  |  | 17,420 |  |  |  | 22,245 |  |  |  | 1,517 |  |  |  | 1,408 |  |  |  | 18,937 |  |  |  | 23,653 |
As of December 31, 2018 and 2017, based on the hierarchy of fair values, plan assets are detailed as follows:
|  |  |  |  | 2018 |  |  | 2017 |
|  |  |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Total |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Total |
Cash |  |  | Ps |  |  |  | 701 |  |  |  | — |  |  |  | — |  |  |  | 701 |  |  | Ps | 579 |  |  |  | — |  |  |  | — |  |  |  | 579 |
Investments in corporate bonds |  |  |  |  |  |  | 131 |  |  |  | 6,720 |  |  |  | — |  |  |  | 6,851 |  |  |  | 144 |  |  |  | 6,067 |  |  |  | 1 |  |  |  | 6,212 |
Investments in government bonds |  |  |  |  |  |  | 1,649 |  |  |  | 6,786 |  |  |  | — |  |  |  | 8,435 |  |  |  | 1,701 |  |  |  | 9,407 |  |  |  | — |  |  |  | 11,108 |
Total fixed-income securities |  |  |  |  |  |  | 2,481 |  |  |  | 13,506 |  |  |  | — |  |  |  | 15,987 |  |  |  | 2,424 |  |  |  | 15,474 |  |  |  | 1 |  |  |  | 17,899 |
Investment in marketable securities |  |  |  |  |  |  | 5,089 |  |  |  | 1,557 |  |  |  | — |  |  |  | 6,646 |  |  |  | 6,212 |  |  |  | 1,735 |  |  |  | — |  |  |  | 7,947 |
Other investments and private funds |  |  |  |  |  |  | 973 |  |  |  | 4,172 |  |  |  | 1,541 |  |  |  | 6,686 |  |  |  | 991 |  |  |  | 3,279 |  |  |  | 2,577 |  |  |  | 6,847 |
Total variable-income securities |  |  |  |  |  |  | 6,062 |  |  |  | 5,729 |  |  |  | 1,541 |  |  |  | 13,332 |  |  |  | 7,203 |  |  |  | 5,014 |  |  |  | 2,577 |  |  |  | 14,794 |
Total plan assets |  |  | Ps |  |  |  | 8,543 |  |  |  | 19,235 |  |  |  | 1,541 |  |  |  | 29,319 |  |  | Ps | 9,627 |  |  |  | 20,488 |  |  |  | 2,578 |  |  |  | 32,693 |
The most significant assumptions used in the determination of the benefit obligation were as follows:
|  | 2018 |  |  | 2017 |
|  |  |  |  | United |  |  | United |  |  | Range of rates in |  |  |  |  |  | United |  |  | United |  |  | Rates ranges in |
|  | Mexico |  |  | States |  |  | Kingdom |  |  | other countries |  |  | Mexico |  |  | States |  |  | Kingdom |  |  | other countries |
Discount rates |  |  | 10.8% |  |  |  | 4.5% |  |  |  | 2.9% |  |  |  | 1.3% – 7.5% |  |  |  | 9.3% |  |  |  | 3.9% |  |  |  | 2.4% |  |  |  | 1.3% – 6.3% |
Rate of return on plan assets |  |  | 10.8% |  |  |  | 4.5% |  |  |  | 2.9% |  |  |  | 1.3% – 7.5% |  |  |  | 9.3% |  |  |  | 3.9% |  |  |  | 2.4% |  |  |  | 1.3% – 6.3% |
Rate of salary increases |  |  | 4.0% |  |  |  | — |  |  |  | 3.3% |  |  |  | 2.3% – 6.0% |  |  |  | 4.0% |  |  |  | — |  |  |  | 3.2% |  |  |  | 1.5% – 6.0% |
As of December 31, 2018, estimated payments for pensions and other post-employment benefits over the next 10 years were as follows:
|  |  |  |  | 2018 |
2019 |  |  | Ps |  |  |  | 2,904 |
2020 |  |  |  |  |  |  | 2,663 |
2021 |  |  |  |  |  |  | 2,641 |
2022 |  |  |  |  |  |  | 2,662 |
2023 – 2028 |  |  |  |  |  |  | 15,714 |
As of December 31, 2018 and 2017, the aggregate projected benefit obligation (“PBO”) for pension plans and other post-employment benefits and the plan assets by country were as follows:
|  |  |  |  | 2018 |  |  |  |  |  | 2017 |
|  |  |  |  | PBO |  |  | Assets |  |  | Deficit |  |  |  |  |  | PBO |  |  | Assets |  |  | Deficit |
Mexico |  |  | Ps |  |  |  | 3,300 |  |  |  | 582 |  |  |  | 2,718 |  |  |  | Ps |  |  |  | 3,213 |  |  |  | 840 |  |  |  | 2,373 |
United States |  |  |  |  |  |  | 5,619 |  |  |  | 3,428 |  |  |  | 2,191 |  |  |  |  |  |  |  | 6,378 |  |  |  | 4,031 |  |  |  | 2,347 |
United Kingdom1 |  |  |  |  |  |  | 28,771 |  |  |  | 20,775 |  |  |  | 7,996 |  |  |  |  |  |  |  | 35,602 |  |  |  | 23,145 |  |  |  | 12,457 |
Germany |  |  |  |  |  |  | 3,973 |  |  |  | 195 |  |  |  | 3,778 |  |  |  |  |  |  |  | 4,362 |  |  |  | 213 |  |  |  | 4,149 |
Other countries |  |  |  |  |  |  | 6,593 |  |  |  | 4,339 |  |  |  | 2,254 |  |  |  |  |  |  |  | 6,791 |  |  |  | 4,464 |  |  |  | 2,327 |
|  |  | Ps |  |  |  | 48,256 |  |  |  | 29,319 |  |  |  | 18,937 |  |  |  | Ps |  |  |  | 56,346 |  |  |  | 32,693 |  |  |  | 23,653 |
1 | Applicable regulation in the United Kingdom requires to maintain plan assets at a level similar to that of the obligations. Beginning in 2012, the pension fund receives annual dividends of approximately US$20, increasing at a 5% rate per year, from a limited partnership (the “Partnership”), whose assets transferred by CEMEX UK of an approximate value of US$553, are leased back to CEMEX UK. The Partnership is owned, controlled and consolidated by CEMEX UK. In 2037, on expiry of the arrangement, the Partnership will be terminated and under the terms of the agreement, the remaining assets will be distributed to CEMEX UK. Distributions from the Partnership to the pension fund are considered as employer contributions to plan assets in the period in which they occur.
In some countries, CEMEX has established health care benefits for retired personnel limited to a certain number of years after retirement. As of December 31, 2018 and 2017, the projected benefits obligation related to these benefits was Ps1,133 and Ps1,080, respectively. The medical inflation rates used to determine the projected benefits obligation of these benefits in 2018 and 2017 for Mexico were 7.0%in both years, for Puerto Rico 6.2% and 6.9%, respectively, and for the United Kingdom were 6.8% and 6.7%, respectively. In connection with the acquisition of TCL (note 4.1), CEMEX integrated TCL’s consolidated health care benefits into its operations. For 2018 and 2017, the medical inflation rate used to determine the projected benefits obligation was 5.0% in both years. Significant events related to employees’ pension benefits and other post-employment benefits during the reported periods During 2017, CEMEX in Spain removed certain increases in pension benefits which resulted in an adjustment to past service cost generating gains of Ps99 (US$5) in 2017, recognized in the income statement for the year. In addition, due to the acquisition of TCL (note 4.1), CEMEX integrated its consolidated pensions plans, which were fully funded, as well as TCL’s consolidated health care benefits which represented an increase in the net projected liability of Ps271 (US$14) in 2017 and Ps111 (US$6) in 2018 upon conclusion of the purchase price allocation. Sensitivity analysis of pension and other post-employment benefits For the year ended December 31, 2018, CEMEX performed sensitivity analyses on the most significant assumptions that affect the PBO, considering reasonable independent changes of plus or minus 50 basis points in each of these assumptions. The increase (decrease) that would have resulted in the PBO of pensions and other post-employment benefits as of December 31, 2018 are shown below:
|  |  |  |  | Pensions |  |  | Other benefits |  |  | Total |
|  |  |  |  | +50 bps |  |  | -50 bps |  |  | +50 bps |  |  | -50 bps |  |  | +50 bps |  |  | -50 bps |
Assumptions: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Discount Rate Sensitivity |  |  | Ps |  |  |  | (3,074 | ) |  |  | 3,303 |  |  |  | (71 | ) |  |  | 83 |  |  |  | (3,145 | ) |  |  | 3,386 |
Salary Increase Rate Sensitivity |  |  |  |  |  |  | 205 |  |  |  | (177 | ) |  |  | 46 |  |  |  | (37 | ) |  |  | 251 |  |  |  | (214 | )
Pension Increase Rate Sensitivity |  |  |  |  |  |  | 1,902 |  |  |  | (1,698 | ) |  |  | — |  |  |  | — |  |  |  | 1,902 |  |  |  | (1,698 | )

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- Definition The disclosure of defined benefit plans. [Refer: Defined benefit plans [member]] + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Name IAS -Number 19 -IssueDate 2018-01-01 -Paragraph 138 -URI http://eifrs.ifrs.org/eifrs/XBRL?type=IAS&num=19&date=2018-03-01&anchor=para_138&doctype=Standard -URIDate 2018-03-16 + Details
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