Annual / Quarterly Financial Statement • May 7, 2020
Annual / Quarterly Financial Statement
Open in ViewerOpens in native device viewer
FINANCIAL STATEMENTS AS OF 31 DECEMBER 2019
Corporate Bodies
Calling of Ordinary Shareholders' Meeting
Report on Operations
2019 Consolidated Non-Financial Statement pursuant to Italian Legislative Decree no. 254/2016
Consolidated Statement of Financial Position Consolidated Income Statement Consolidated Statement of Comprehensive Income Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Accounting Standards and Explanatory Notes to the Consolidated Financial Statements Attachment 1 – List of Equity Investments Held by Directors, Statutory Auditors as well as their Spouses and Underage Children Attachment 2 – Certification pursuant to art. 154-bis of Italian Legislative Decree no. 58/1998
Statement of Financial Position Income Statement Statement of Comprehensive Income Statement of Changes in Equity Statement of Cash Flows Accounting Standards and Explanatory Notes to the Separate Financial Statements Attachment 1 – Certification pursuant to art. 154-bis of Italian Legislative Decree no. 58/1998 Attachment 2 – List of Equity Investments in Direct Subsidiaries
Report of the Independent Auditors on the Consolidated Financial Statements Report of the Independent Auditors on the Separate Financial Statements Report of the Independent Auditors on the Consolidated Non-Financial Statement Report of the Board of Statutory Auditors on the Separate Financial Statements
| CHAIRMAN | MR | FILIPPO CASADIO |
|---|---|---|
| EXECUTIVE DIRECTOR | MR | FRANCESCO GANDOLFI COLLEONI |
| NON-EXECUTIVE DIRECTOR | MR | GIANFRANCO SEPRIANO |
| NON-EXECUTIVE DIRECTOR | MR | ORFEO DALLAGO |
| INDEPENDENT DIRECTOR | MS | FRANCESCA PISCHEDDA |
| INDEPENDENT DIRECTOR | MS | GIGLIOLA DI CHIARA |
| CHAIRMAN | MR | FABIO SENESE |
|---|---|---|
| STANDING STATUTORY AUDITOR | MR | ADALBERTO COSTANTINI |
| STANDING STATUTORY AUDITOR | MS | DONATELLA VITANZA |
| SUBSTITUTE STATUTORY AUDITOR | MR | GIANFRANCO ZAPPI |
| SUBSTITUTE STATUTORY AUDITOR | MS | CLAUDIA MARESCA |
PricewaterhouseCoopers S.p.A.
MS GIGLIOLA DI CHIARA MR GIANFRANCO SEPRIANO MS FRANCESCA PISCHEDDA
MS FRANCESCA PISCHEDDA MR GIANFRANCO SEPRIANO MS GIGLIOLA DI CHIARA
MR FABRIZIO BIANCHIMANI
MR FRANCESCO BASSI MR GABRIELE FANTI MR GIANLUCA PIFFANELLI
The Shareholders are convened to an Ordinary Shareholders' Meeting, in first call for 11.00 on 29 April 2020, at the company's registered office and, if necessary, in second call for 4 May 2020, at the same time and to the same place, save for any updates, which will be promptly disclosed, following developments connected with the COVID-19 medical emergency and any regulatory provisions as may be issued in respect of said emergency, to discuss and resolve on the following
SHARE CAPITAL AND VOTING RIGHTS – The share capital of the Company is equal to € 14,626,560 and divided into 28,128,000 ordinary shares. Each ordinary share gives the right to one vote in the ordinary and extraordinary Shareholders' Meetings of the Company. As of the current date, the Company owns 1,546,988 own shares which represent 5.5% of the share capital, and whose vote is suspended in accordance with art. 2357-ter of the Italian Civil Code.
RIGHT TO ATTEND – In accordance with art. 83-sexies of Italian Legislative Decree no. 58/1998, the right to attend the Shareholders' Meeting and to exercise the voting right is established by a communication addressed to the Company – made by the intermediary, in accordance with its accounting records – in favour of the owner of voting rights and based on the evidence available at the end of the accounting day of the seventh trading day prior to the date established for the Meeting in first call; credit and debit entries made after this deadline are not applicable for determining the right to exercise the voting right in the Meeting. Those determined to be owners of Company shares only after that date will not be entitled to attend and vote in the Meeting. The Company must receive the above-mentioned communication from the intermediary at least two business days before the first call. The above does not prejudice the right to attend and vote should the Company receive the communication beyond that date but before the beginning of the Meeting in first call.
VOTING BY PROXY – Each Shareholder may appoint a proxy, in accordance with the law and in writing, by signing the proxy form issued upon request of the entitled party by qualified intermediaries or available on the website www.irce.it. The proxy can also be sent via registered mail with receipt of return to the registered office of the Company, or certified e-mail to the address [email protected] attaching a copy of a valid identification document of the principal.
The Company has appointed as Designated Representative, in accordance with art. 135-undecies of Italian Legislative Decree no. 58/1998 (Consolidated Financial Act), Ms Stefania Salvini (lawyer), who may be appointed as proxy and receive voting instructions on the condition that she receives this proxy via registered mail with receipt of return to Studio legale Avv. Carlo Zoli, via Mengolina 18, 48018 Faenza, Italy, or certified e-mail to [email protected], by the end of the second trading day prior to the date of the Meeting in first call. The proxy granted in this manner is valid only for proposals for which the principal has provided voting instructions; the principal may revoke the proxy and voting instructions before the above deadline. A proxy form and the voting instructions are available on the website www.irce.it. APPOINTMENT OF THE BOARD OF STATUTORY AUDITORS – Shareholders holding, on aggregate, at least a 2.5% stake in the Company retain the right to present lists for the appointment of the Board of Statutory Auditors. These lists must be filed at the registered office of the Company – also by means of a registered letter with return receipt addressed to the registered office of the Company, or sent by certified email to the address [email protected] attaching a copy of a valid identification document of the delegating party, at least twenty-five days before the date set for the first call of the Shareholders' Meeting, along with information on the shareholders who have submitted the lists, along with the percentage of stake they hold, a declaration from the shareholders other than those who hold, even if jointly, a controlling stake or a relative majority thereof, stating the non-existence of relationships with the latter, in compliance with article 144-quinquies, comprehensive information on the personal and professional characteristics of the candidates, and finally a declaration from the candidates themselves demonstrating that they meet the requirements set forth by the law, as well as their acceptance of the candidacy.
QUESTIONS ON THE TOPICS ON THE AGENDA – Pursuant to art. 27-ter of Italian Legislative Decree no. 58/1998, Shareholders can submit questions on the topics on the agenda even before the Meeting via registered mail with receipt of return to the registered office of the Company or certified e-mail sent to [email protected]. The questions, complete with the personal details of the shareholder asking the question and the certification proving the ownership of the shares, must be delivered to the Company by 10:00 am of the day prior to the date of the Meeting in first call.
ADDITIONS TO THE AGENDA — Shareholders which represent, including jointly, at least 2.5% of the share capital can request – in writing and within 10 days from the date of publication of this notice, and in compliance with the provisions of art. 126-bis of Italian Legislative Decree no. 58/1998 (Consolidated Financial Act) – to add topics to the agenda, indicating in their request any additional topics they propose. This request must be sent via registered mail with return receipt to the Registered Office of the Company or certified e-mail to the address [email protected]. A report on the topics being proposed for discussion must be submitted, by the same deadline and in the same manner, to the Board of Directors of the Company. In addition, and in accordance with the provisions of art. 126-bis, para. 3, of the Consolidated Financial Act, an integration of the agenda on the part of Shareholders is not allowed for topics on which the Meeting is called upon to resolve, upon proposal of the Directors or on the basis of a project they prepare.
DOCUMENTATION – The documentation concerning the Meeting will be available to the public, within the terms established by the laws in force, at the Registered Office of the Company, at Borsa Italiana S.p.A., and on the website www.irce.it. Shareholders are entitled to obtain a copy of the filed documentation.
The terms and conditions for attending the shareholders' meeting, described in the call notice, may change and/or be supplemented in connection with the COVID-19 medical emergency. Any changes and/or supplements to the information given in the notice, will be made available on the company's website www.irce.it and using the other procedures envisaged by the law.
Given the significant impact of the activities of the Parent Company IRCE S.p.A. (hereinafter also referred to as the "Company") on the consolidated financial statements of the IRCE Group, this Report on Operations is drafted jointly for the separate financial statements of IRCE S.p.A. and the consolidated financial statements of the IRCE Group.
For the IRCE Group (hereinafter also referred to as the "Group"), 2019 ended with net profit of € 1.94 million.
Consolidated turnover was € 311.94 million, down by 12.2% compared to € 355.40 million of 2018. The reduction was manly linked to the decline in the sales volumes and in the turnover without metal. Decrease is also affected by the copper price reduction (-2.84% average LME quotation of 2019, compared to the value of last year).
Sales decrease is explained by the demand slowdown in both business sectors in which the company operates. In the winding wire sector, there was a deterioration in the European market, which worsened in the fourth quarter, partly offset by sales outside Europe. In the cables sector, there was a reduction in sales concentrated on the Italian market.
Consolidated turnover without metal1 decreased by 9.1%; the winding wire sector fell by 6.3%, while the cable sector decreased by 18.7%.
| In detail: | |||||
|---|---|---|---|---|---|
| Consolidated turnover without metal | Year 2019 | Year 2018 | Change | ||
| (€/million) | Value | % | Value | % | % |
| Winding wires | 56.43 | 80.2% | 60.25 | 77.8% | -6.3% |
| Cables | 13.94 | 19.8% | 17.15 | 22.2% | -18.7% |
| Total | 70.37 | 100.0% | 77.40 | 100.0% | -9.1% |
The following table shows the changes in results compared to the previous year, including adjusted EBITDA and EBIT.
| Consolidated income statement data (€/million) |
Year 2019 | Year 2018 | Change |
|---|---|---|---|
| Turnover2 | 311.94 | 355.40 | (43.46) |
| EBITDA3 | 7.82 | 14.96 | (7.14) |
| EBIT | 0.42 | 7.54 | (7.12) |
| Profit / (loss) before tax | 2.72 | 10.24 | (7.52) |
| Profit / (loss) for the year | 1.94 | 5.88 | (3.94) |
| Adjusted EBITDA4 | 9.55 | 17.42 | (7.87) |
| Adjusted EBIT4 | 2.15 | 10.00 | (7.85) |
1 Turnover without metal corresponds to the total turnover after deducting the metal component.
The item "turnover" consists in the "sales revenues" as recognised in the income statement.
EBITDA is a performance indicator the Group's Management uses to assess the operating performance of the company and is not an IFRS measure; IRCE S.p.A. calculates it by adding depreciation/amortisation, provisions and write-downs to EBIT.
Adjusted EBITDA and EBIT are calculated as the sum of EBITDA and EBIT and the gains/losses on copper derivatives transactions (€ +1.73 million in 2019 and € +2.46 million in 2018). These are indicators the Group's Management uses to monitor and assess its own operating performance and are not IFRS measures. Given that the composition of these measures is not regulated by the reference accounting standards, the criterion used by the Group may not be consistent with that adopted by others and therefore not comparable.
| Consolidated statement of financial position data (€/million) |
31/12/2019 | 31/12/2018 | Change |
|---|---|---|---|
| Net invested capital | 173.89 | 191.01 | (17.12) |
| Shareholders' equity | 131.50 | 131.30 | 0.20 |
| Net financial debt5 | 42.39 | 59.71 | (17.32) |
Consolidated net financial debt, at the end of December 2019, was € 42.39 million, down from € 59.71 million at the end of 2018, thanks to the decrease of the net working capital.
Investments of the Group in 2019 amounted to € 6.07 million and were primarily related to IRCE S.p.A.
The Group's main risks and uncertainties, as well as risk management policies, are detailed below:
Market risk
The Group is strongly concentrated on the European market; the risk of major contractions in demand or of worsening of the competitive scenario may significantly impact the results. To address these risks, the medium-term strategy of the Group focuses on geographic diversification in non-EU and Asian countries, with a constant recovery of margins in the Group's structure. In line with this strategy, the company Irce Electromagnetic Wire (Jiangsu) Co. Ltd was set up in China, aiming at reaching the local market.
Exchange rate risk
The Group primarily uses the Euro as the reference currency for its sales transactions. It is exposed to exchange rate risks in relation to its copper purchases, which it partly carries out in dollars; it hedges such transactions using forward contracts. It is also exposed to foreign currency translation risks for its investments in Brazil, the UK, India, Switzerland, Poland, and China.
As for the foreign currency translation risk, the Group believes this risk mainly concerns the investment in Brazil due to the high volatility of the Real, which affects the investment's carrying amount. In 2019, the Brazilian currency depreciated by about 3% since the beginning of the year.
Interest rate risk
The Group obtains short and medium/long-term bank financing at floating rates. The risk of wide fluctuations in interest rates is not considered significant and therefore the Group does not implement special hedging policies.
Risks related to fluctuations in the prices of raw materials
The main raw material used by the Group is copper. The changes in its price can affect margins as well as financial requirements. In order to mitigate the potential effect on margins of changes in the price of copper, the Group implements a hedging policy using forward contracts on the positions generated by operating activities. The average Euro/Kg copper price for 2019 has shown a decrease of 2.84% as compared to the same figure for 2018.
5 Net financial debt is measured as the sum of short-term and long-term financial liabilities minus cash and financial assets, see Note 16. It should be noted that the methods for measuring net financial debt comply with the methods for measuring the net financial position as defined by Consob Resolution no. 6064293 of 28 July 2006 and CESR recommendation of 10 February 2005.
These are risks associated with financial resources.
Credit risk
There are no significant concentrations of credit risk. The Group monitors this risk using adequate assessment and lending procedures with respect to each credit position. Selected insurance policies are taken out in order to limit insolvency risk.
Liquidity risk Based on its financial position, the Group rules out the possibility of difficulties in meeting obligations associated with liabilities. The limited used of credit lines suggests that liquidity risk is not significant.
The early months of 2020 have confirmed the slow-down to demand on the reference markets as a result of the worsening of the economic situation, and Europe in particular. Additionally, recent weeks have seen us faced with the issue of the spread of the Coronavirus, the effects of which are presently unforeseeable.
The Group is involved in cost-cutting programmes and efficiency drives.
The financial statements of the parent company IRCE S.p.A. show a turnover of € 203.02 million – a decrease compared with the previous year results of € 233.06 million.
In the winding wire sector, sales fell compared to 2018. This showed the effects of the slowdown in European market demand which had already begun in the first half of the year.
The cable sector experienced a decrease in sales in the Italian market.
Against this backdrop, the Group posted a profit of € 3.60 million, down from € 7.90 million in 2018.
The transactions between the Parent Company and the subsidiaries are of a commercial and financial nature.
For more details, please refer to Note 34 of the separate financial statements and to Note 31 of the consolidated financial statements.
With regard to transactions with related parties, including intra-group transactions, it should be noted that they can be classified neither as atypical nor unusual, as they are part of the normal course of business of the Group's companies and have been carried out at arm's length.
IRCE S.p.A. adopts the provisions of the Corporate Governance Code published by Borsa Italiana S.p.A. as a reference for its corporate governance.
The report on corporate governance and the shareholding structure pursuant to art. 123-bis of the Consolidated Financial Act is available at www.irce.it – Investor Relations, in compliance with art. 89-bis of Regulation no. 11971/1999 issued by Consob. This report aims to provide the market and shareholders with a complete disclosure on the governance model chosen by the Company and its actual compliance with the provisions of the Code.
On 28 March 2008, the Company IRCE S.p.A. adopted the organisational, management and control model pursuant to Italian Legislative Decree no. 231/2001 and created the Supervisory Body, which is responsible for monitoring the operation, updating and compliance of the model.
On 12 September 2019, the company updated its Code of Ethics and its Organisational, Management and Control Model, after completion of the planned activities to review and update the Model 231 as well as all the relevant documentation.
For issues regarding compliance with and interpretation of the Organisational Model, a Supervisory Body was set up when adopting the first version of the Organisational Model.
The current Supervisory Body was appointed by the Board of Directors on 12 September 2019.
The number of own shares as of 31 December 2019 was 1,537,988, i.e. 5.47% of total shares and equal to a nominal value of €/000 800. As of 31 December 2019, the Company does not own shares in the parent company Aequafin S.p.A., nor did it trade in them during 2019.
Research and development activities in 2019 focused on projects to improve processes and products.
This year, expenses for development activities were recognised in the income statement, as they are not certain to be recovered in the future through future profits.
In 2019, costs were capitalised in intangible fixed assets for €/000 176, incurred for product approval tests run at external laboratories, necessary to obtain technical suitability for the supply of materials to a publiclyowned company.
With regard to the Conditions for the Listing of Shares of Companies with Control over Companies Established and Regulated under the Law of non-EU Countries pursuant to arts. 36 and 39 of the Markets Regulations (Consob Resolution No. 16191/2007), the Company declares it complies with the provisions of the above-mentioned Regulation.
The attached consolidated and separate annual financial statements are audited by the company PricewaterhouseCoopers S.p.A.
The Board of Directors of IRCE S.p.A. approved the consolidated non-financial statement", which covers environmental and social issues, as well as issues relating to staff, respect for human rights and the fight against corruption. The statement has been included in the financial statements in accordance with the provisions of Italian Legislative Decree no. 254/2016.
Starting February 2020, there has been a rapid spread of the Coronavirus pandemic all over the globe. In Italy and elsewhere in Europe, the situation has worsened quickly, not only in medical terms but also impacting the production system.
In a bid to cope with the emergency, the Italian government has issued a series of measures, through to the Decree issued on Sunday, 22 March 2020, which required a series of production activities to close from 24 March to 3 April 2020, including our plants for cable production, which consequently ceased operating for the period established by the government.
All the Group's plants used to produce winding wires, in Europe and Brazil, which in fact account for the majority of our business, instead continue to produce normally, in complete compliance with strict rules of conduct designed to protect the health of workers, which we have adopted.
The only exception, in the segment of winding wires, is the small thin enamelled wire production unit we have in India (Kerala), of entirely marginal importance in terms of the total figure, whose production has been temporarily suspended to comply with the provisions issued by the government of that country.
With reference to employees, we have adopted working procedures and rules of conduct that prevent the aggregation of employees in offices and minimise the number of people present, where possible adopting remote working solutions and using holiday and permits.
As regards the additional risks brought about by the spread of the virus, we are carefully, constantly monitoring our supply chain, in which, for now, no particular problems have emerged, and have decided to increase stocks of the most critical materials. The availability of several plants in different countries and geographic areas, with production capacity reserves, reduces our exposure to the risk of temporary closures of individual units, putting us in a better position than many of our competitors.
Firmly convinced that we have adopted suitable policies by which to minimise health risks and aware of the possibilities offered by the geographic distribution of our production capacity, our financial solidity and the additional room for improvement available to us, we have every confidence in our ability to cope with the risks and uncertainties linked to the spread of the Coronavirus, including the impact that such a spread may have on the general economic performance.
In respect of possible impacts on 2020, we cannot exclude that there may be an effect on the financial statement items most impacted by assessment analyses, but we are presently unable to reliably estimate such impacts.
Dear Shareholders,
we invite you to approve the separate financial statements of IRCE S.p.A. as of 31 December 2019, reporting a profit of € 3,603,483.
We propose to approve the distribution of a € 0.03 dividend per share, to be paid out of the profit of the year, with ex-dividend date on 18 May 2020, record date on 19 May 2020, and payment date on 20 May 2020. In addition, we propose to allocate the remaining net profit after the payment of the dividends to the Extraordinary Reserve.
The Board thanks the Shareholders for their trust, all personnel for the service rendered during the year, and the Board of Statutory Auditors for the control activities carried out and the valuable advice.
Imola, 13 March 2020
The IRCE Group falls within the scope of application of Italian Legislative Decree no. 254/2016 – issued in implementation of Directive 2014/95/EU of the European Parliament and of the Council of 22 October 2014 – which provides for the obligation to disclose non-financial information and information on diversity by certain companies and certain large groups.
This consolidated non-financial statement (also "NFS" or "Statement"), referring to the year ended as of 31 December 2019, represents IRCE Group's commitment to report the non-financial impacts of its business, in accordance with the provisions of the Decree: IRCE has chosen to include the Statement in its 2019 Report on Operations.
The reporting scope of this Statement includes the following Companies belonging to the IRCE Group:
The following companies were excluded from the reporting scope:
These exclusions are due to the fact that the social, economic and environmental impacts of these companies were not considered significant given their low incidence in terms of turnover compared to the consolidated total, the limited number of employees out of the total, and the type of business (exclusively commercial, not productive). This option is envisaged by art. 4 of Italian Legislative Decree no. 254/2016, according to which the statement may exclude companies that, even if included in the accounting scope of consolidation, are not necessary to understand the Group's business, its performance and the results and impact produced by such business.
The qualitative and quantitative information reported in the NFS are prepared according to the standards issued in 2016 by the Global Reporting Initiative, in compliance with the requirements of the Decree on the use of reporting standards issued by supranational, international or national authorities (art. 3, para. 3). The level of application of GRI Standards corresponds to the Referenced option (see Chapter 7 – GRI Content Index – GRI Correlation Table).
The reporting process was developed according to the following work phases:
This consolidated non-financial statement is available on the Group website under the section Investor Relations > Financial Statements and Reports > Financial Statements as of 31 December 2019.
In order to define the material issues subject to reporting herein, IRCE analysed the provisions of art. 3 of Italian Legislative Decree no. 254/2016.
Following this analysis, IRCE defined a process – described below – aimed at identifying the most significant issues for Stakeholders and the Group, i.e. those issues which were identified as being both highly significant, and representative of the nature of IRCE's business.
The process for determining material issues was carried out through the compilation of a questionnaire and following a benchmark activity, in order to complete the materiality analysis and highlight the issues considered most significant for both the IRCE Group and its Stakeholders, as reported herein.
The materiality analysis saw direct participation from key contact staff from the main business functions of the various branches which are included in the reporting scope. These were staff who play a supporting role at a group level for the non-financial statement and who were given a questionnaire concerning a series of issues classified under six macro areas: Governance and Anti-Corruption, Economic Responsibility, Product Responsibility, Environmental Aspects, Human Resources and Respect for Human Rights. For each issue, the representatives had to give a score from 1 (least relevant) to 4 (most relevant) based on their own perception and sensitivity to the topic examined, in order to highlight the issues which are most relevant for the Group.
Stakeholders were considered to be employees, shareholders, customers, suppliers, unions and local communities. It was decided that the analysis would be carried out indirectly, using a questionnaire, and asking key internal contacts to give a score from 1 to 4 for each of the issues under consideration. The scores were also based on the perceived relevance that specific Group Stakeholders assigned to each issue, according to their own personal assessment.
The materiality analysis described above allowed the most significant issues for the Group to be identified, based on those which had a score higher than what has been termed the 'defined threshold of materiality'. The issues which emerged as being material, as shown in the following chart, define the focus areas for reporting.
IRCE management identified the main risks, generated or suffered, in relation to the above issues resulting from business activities, and then identified suitable prevention and mitigation measures.
| Table – Material Issues | ||
|---|---|---|
| -- | ------------------------- | -- |
| MATERIAL ISSUES | RELATED RISKS | RISK MANAGEMENT METHODS |
IMPROVEMENT OBJECTIVES |
|---|---|---|---|
| Corporate governance Compliance with laws and regulations Ethics and integrity Fight against active and passive corruption Risk assessment |
Committing corporate crimes Committing crimes relating to corruption Failed compliance or violation of reference legislation or applicable regulations Loss of certifications, approvals or authorisations to operate Loss of reputation |
Code of Ethics Organisation, Management and Control Model pursuant to Legislative Decree no. 231/2001 Supervisory Body Control and Risks Committee |
Promotion of stakeholder engagement to guarantee the most realistic and correct representation of materiality. |
IRCE has adopted and implemented a business model described in the previous sections of this Report on Operations, an Organisation, Management and Control Model pursuant to Italian Legislative Decree no. 231/2001 and consequently, a Supervisory Board - as described in the Report on Operations and summarised below.
The Corporate Governance structure of the Parent Company IRCE is based on the classic model and is composed of the Shareholders' Meeting, the Board of Directors and the Board of Statutory Auditors.
The Board of Directors is composed of three to twelve members, elected by the Shareholders' Meeting. Their term of office lasts for a period of no more than three years, as established at the time of appointment, and it ends on the date of the Shareholders' Meeting convened to approve the financial statements relating to their last year of office.
The Board is currently composed as follows:
For more information on the corporate bodies, internal committees and the internal control and risk management system, please refer to the Corporate Governance Report published on the website www.irce.it.
| Governance members by gender | ||||||
|---|---|---|---|---|---|---|
| 2019 | 2018 | |||||
| Number of individuals | Men | Women | Total | Men | Women | Total |
| Board of Directors | 13 | 2 | 15 | 13 | 2 | 15 |
| Board of Statutory Auditors | 2 | 1 | 3 | 2 | 1 | 3 |
| Supervisory Board | 3 | - | 3 | 3 | - | 3 |
| Total | 18 | 3 | 21 | 18 | 3 | 21 |
The IRCE Group is an important multinational player in the European market, operating in the sector of winding wires and electrical cables. Production takes place at four plants in Italy and five located abroad. The Group also includes five commercial subsidiaries, four of which are foreign. IRCE stands out thanks to its cutting-edge technology, advanced production and self-monitoring processes. These guarantee maximum quality and production standards.
IRCE complies with the standards of the following certifications:
* For the Companies IRCE S.p.A., Fd Sims Ltd and IRCE Ltda.
** Certification present at the Imola plant (IRCE S.p.A.) and at FD Sims Ltd.
The Group also approved specific policies concerning the environment, safety and prevention of major accidents according to Seveso III Directive (Directive 2012/18/EU of 4 July 2012, implemented in Italy by Legislative Decree no. 105 of 26 June 2015).
In compliance with the provisions of art. 4 of the Corporate Governance Code, the Board of Directors established within itself the Control and Risks Committee with consultation and proposal functions.
The objectives of the financial reporting process can be identified in terms of the trustworthiness, accuracy, reliability, and timely nature of the disclosure. Risk management activities are an integral part of the internal control system.
IRCE has adopted and implemented a Code of Ethics, an integral part of the 231 Organisation, Management and Control Model, which contains the values as well as the moral and professional standards to be observed during the performance of all business activities.
The Code of Ethics applies to all participants in the IRCE organisation, namely: directors, auditors, managers, employees, collaborators, consultants, customers, suppliers, business partners and any parties that, directly or indirectly, permanently or temporarily, establish relationships with the Company.
The Code states that, when carrying out their activities and exercising their responsibilities, all workers must behave correctly, transparently and objectively. Moreover, the performance of all business activities must take place in compliance with applicable laws and corporate procedures, according to the criteria of diligence, honesty, collaboration, fairness and loyalty.
Any violations will be reported to the Supervisory Board and the Internal Control Bodies, and may lead to disciplinary, civil or criminal consequences.
On the basis of the Code of Ethics, all Group companies, according to the values of honesty and transparency, undertake to implement all necessary measures to prevent and avoid cases of corruption and conflict of interest.
All collaborators must know, have full awareness of and adapt their activities to the principles and directives of the Code and refrain from conduct that does not comply with the aforementioned principles, also cooperating in the assessment of any violations and reporting any information relevant for the identification of offenders.
Any collaborators who acquire knowledge of alleged non-compliant conduct are required to report information on such conduct to their supervisors, and/or the Head of Human Resources of the Company, or the Supervisory Board.
All employees have the right and the duty to consult their direct supervisors and/or the Head of Human Resources for any clarification regarding the interpretation and application of the principles and directives of the Code, as well as the conduct to be adopted in case of any doubts as to their correctness or compatibility with the Code itself and/or its inspiring principles.
In case of violation of the Code of Ethics, IRCE adopts disciplinary measures against those responsible for such violation – if considered necessary for the protection of corporate interest and in line with the provisions of the current regulatory framework and employment contracts – which may lead to the removal of the persons responsible from the Company, in addition to compensation for any damages deriving from the violation.
The processes/corruption offences risk matrix was used to calculate the number of activities at risk of corruption in relations with the public administration and at risk of corruption between private parties. 46 activities at risk of corruption out of 81 activities sensitive to the types of offences envisaged by the model 231 (corresponding to 57% of processes) were identified. Based on our organisational and control system, the residual risk of such offences occurring has been reduced to a low level. The increase in activities sensitive to the crimes of corruption is due to the update of the model 231 and the in-depth analysis of the risk mapping process in respect of the effective corporate situation.
IRCE has various risk assessment systems and contextual management methods available, each of which is related to a specific topic:
Governance, strategy and internal control system (Corporate Governance, Internal Control System as per Law 262 and the Strategic Plan);
| MATERIAL ISSUES | RELATED RISKS | RISK MANAGEMENT METHODS |
IMPROVEMENT OBJECTIVES |
|---|---|---|---|
| Diversity and equal opportunity Respect for human rights Health and safety of employees Professional training and growth Industrial relations |
Damage and/or injuries due to incompetence and negligence Risk of discrimination and unequal treatment Increase in the number of injuries Increase in work related stress |
Code of Ethics Organisation, Management and Control Model pursuant to Legislative Decree no. 231/2001 Supervisory Body Safety systems in the workplace IRCE S.p.A., internal union representation |
Development by the Parent Company of coordination and supervision of training activities, in order to identify the training needs of each employee category and raise awareness about training Development and scaling up of initiatives concerning prevention, awareness and employees' health protection |
People represent an important and central resource for the IRCE Group.
The Group is committed to the implementation of programmes that protect the health and safety of its workers and focuses on programmes for professional growth, guaranteeing equal opportunity and lack of discrimination.
IRCE is dedicated to improving the workplace and systematically identifies and assesses potential risks for workers and parties involved, defining suitable prevention measures.
Plant operators are the main representatives with respect to risk prevention and are responsible for developing and implementing the Policy for accident prevention, for regularly checking the state of implementation of the Safety Management System adopted and for achieving the objectives set.
All workers are informed, trained and prepared to operate with full knowledge of the potential risks involved in their activities.
The IRCE Group's philosophy aims to pursue excellent performance in an environment where individual satisfaction and wellbeing is a priority, since high retention rates are believed to be crucial for the achievement of corporate objectives.
As of 31 December 2019, the IRCE Group counted a total of 704 employees, while employees of companies analysed in the NFS are 625; nearly all of them were hired with a permanent employment contract, confirming the Group's commitment to fostering stable and long-lasting relationships with its employees.
The reduction in the number of employees was due to the implementation of a restructuring plan at Smit Draad Nijmegen BV in the Netherlands.
| Total number of employees broken down by type of contract (permanent or fixed-term employment) and gender |
||||||
|---|---|---|---|---|---|---|
| Type of contract | 2019 | 2018 | ||||
| Men | Women | Total | Men | Women | Total | |
| Permanent | 542 | 72 | 614 | 568 | 75 | 643 |
| Fixed-term | 10 | 1 | 11 | 4 | 2 | 6 |
| Total | 552 | 73 | 625 | 572 | 77 | 649 |
In cases where production activities typically focus on production and shift work, 88% of the staff shown are male.
The IRCE Group's geographic distribution sees 60% of staff employed in Italy, 13% in the Netherlands, 16% in Brazil, 5% in the UK, 4% in India and 2% in Germany.
| Total number of employees broken down by type of contract (full-time and part-time) and gender |
||||||
|---|---|---|---|---|---|---|
| 2019 | 2018 | |||||
| Type of contract | Men | Women | Total | Men | Women | Total |
| Full-time | 546 | 47 | 593 | 567 | 48 | 615 |
| Part-time | 6 | 26 | 32 | 5 | 29 | 34 |
| Total | 552 | 73 | 625 | 572 | 77 | 649 |
| Number of employees broken down by function and gender | |||||||
|---|---|---|---|---|---|---|---|
| Job category | 2019 | 2018 | |||||
| Men | Women | Total | Men | Women | Total | ||
| Executives | 11 | 1 | 12 | 11 | 1 | 12 | |
| Function managers | 22 | 2 | 24 | 21 | 1 | 22 | |
| White collars | 53 | 44 | 97 | 59 | 46 | 105 | |
| Blue collars | 466 | 26 | 492 | 481 | 29 | 510 | |
| Total | 552 | 73 | 625 | 572 | 77 | 649 |
| Number of external staff broken down by job category and gender | ||||||
|---|---|---|---|---|---|---|
| Job category | 2019 | 2018 | ||||
| Men | Women | Total | Men | Women | Total | |
| Workers from external agencies | 31 | 13 | 44 | 28 | 13 | 41 |
| Others | - | - | - | - | - | - |
| Total | 31 | 13 | 44 | 28 | 13 | 41 |
| Percentage of total employees covered by collective bargaining agreements | |||||
|---|---|---|---|---|---|
| Number of employees 2019 2018 |
|||||
| Total number of employees | 625 | 649 | |||
| Total number of employees covered by collective bargaining agreements |
596 | 623 | |||
| Total % | 95.4% | 96.0% |
The protection of human rights is an important topic for IRCE and this is highlighted and explained in the Company's Code of Ethics. This is in part related to the other issues addressed herein, such as health and safety and contractual fairness.
People are a crucial element for company operations; for this reason, the IRCE Group gives great importance to personal dignity, protection of moral integrity, tolerance, transparency and, in general, the fundamental rights of every individual.
The health and safety of employees is a priority for the Group. The adequacy of the working environment and equipment, staff training and preparation and everything necessary for compliance with safety requirements are crucial.
The risk assessment document in which company risks are identified and assessed in terms of probability and severity is regularly updated. It is the Group's policy to carry out regular meetings on safety.
In terms of injuries, 2019 saw 32 injuries occur (35 in 2018); the related data and indicators are given in the tables below.
| Lost days (employees) | ||||||
|---|---|---|---|---|---|---|
| Number of days | 2019 | 2018 | ||||
| Men | Women | Total | Men | Women | Total | |
| Lost days due to injury | 776 | 0 | 776 | 471 | 8 | 479 |
| Injury rates | 2019 | 2018 |
|---|---|---|
| Severity (number of lost days for workplace injuries/total number of hours worked) x 1,000 |
0.74 | 0.40 |
| Frequency (number of injuries/total number of hours worked) x 1,000,000 |
30.31 | 32.30 |
The increase in the severity indicator is influenced by prolonged injuries from last year.
In line with the business strategy, the IRCE Group has set itself the aim of increasing its staff's competences. Training activities involved both employees and external workers.
The Group follows integrated training programmes concerning the environment, quality, safety, accident risk and information systems.
| Hours of annual training for employees and external workers | |||
|---|---|---|---|
| 2019 | 2018 | ||
| Total hours of training provided to internal and external workers | 3,360 | 2,777 | |
| Average hours of training per worker | 5.0 | 4.0 |
The IRCE Group does not oppose or discriminate against joint union representation. IRCE entertains relations with public authorities, trade associations and unions, in order to improve company operations and establish methods of cooperation for mutual benefit.
The companies IRCE S.p.A., FD Sims, Smit Draad and Stable Magnet Wire all have internal union representatives. Information sessions are regularly held with these representatives to discuss business performance and address matters of mutual interest.
The relevant issues in terms of environmental management are summarised in the table below, together with the main risks identified by IRCE. The following pages describe the policies, the management model and the results achieved.
| MATERIAL ISSUES | RELATED RISKS | RISK MANAGEMENT METHODS |
IMPROVEMENT OBJECTIVES |
|---|---|---|---|
| Energy consumption Water consumption Waste management Emissions to air |
Non-continuous electricity supply Air, soil and water pollution |
Code of Ethics Organisation, Management and Control Model pursuant to Legislative Decree no. 231/2001 IRCE S.p.A. Imola plant ISO 14001 ISO 14001 environmental management system |
To increase awareness and attention regarding responsible resource management with respect for the environment |
IRCE organised an environmental management system based on the ISO 14001 guidelines and ensures the compliance of management with current environmental regulations.
In addition to falling within the scope of application of Italian Legislative Decree no. 81/2008, as subsequently amended, on workplace health and safety, IRCE S.p.A also falls within the scope of application of Italian Legislative Decree no. 105/2015, since the plant in Imola (Bologna) contains and uses substances and preparations (paints and solvents) classified as hazardous and exceeding the thresholds indicated in the Decree.
Activities with a significant accident risk are identified according to Seveso III Directive (Directive 2012/18/EC of 4 July 2012, implemented in Italy by Legislative Decree no. 105 of 26 June 2015) through a simple mechanism that takes into account the inherent danger of the substances and preparations produced, used, handled or stored at the plant, including those that may be generated in case of accident, and the amounts of the same, making it mandatory for operators of the aforementioned activities to submit to the competent authorities documents certifying the performance of appropriate risk assessment.
All Group companies cooperate through the adoption of responsible and environmentally friendly conduct, in line with the parent company's management system.
The Group is committed to using products and processes that save resources and minimise the environmental impact.
For the transformation of energy consumption into Giga joules (GJ), conversion factors taken from current technical literature were adopted.
| Energy Consumption | |||||
|---|---|---|---|---|---|
| Unit | 2019 | 2018 | |||
| Total | Total GJ | Total | Total GJ | ||
| Natural Gas | m3 | 1,741,235 | 62,406 | 2,051,614 | 72,081 |
| Diesel | l | 547,630 | 19,706 | 524,760 | 18,866 |
| LPG | tonnes | 55.7 | 2,571 | 85.23 | 3,933 |
| Electricity (*) | kWh | 114,095,842 | 410,745 | 122,465,059 | 440,874 |
| TOTAL ENERGY CONSUMPTION |
GJ | 495,428 | 535,754 |
(*) The amount of electricity communicated by the supplier includes a portion of energy from renewable sources.
The percentage of total energy consumption out of the total consumption of raw materials are higher than in the previous year: 7.79 GJ/Ton in 2019 and 7.32 GJ/Ton in 2018, due to lower production volumes.
Also in 2019, IRCE S.p.A. has continued to develop energy saving projects for the Imola and Umbertide plants, obtaining energy savings certificates (ESC), as well as projects aimed at recovering heat to be used in the production process.
| Water consumption (m3 ) |
||||
|---|---|---|---|---|
| Resource | Unit | 2019 | 2018 | |
| Surface water (lake, river, other) | 2,272 | 4,109 | ||
| Groundwater (aqueduct) | 60,191 | 59,791 | ||
| Rain water | m3 | 7,719 | 7,719 | |
| Other | 13,345 | 13,794 | ||
| Total | 83,527 | 85,413 |
In the Imola plant, an automatic, real time monitoring system has been installed for statistics on drinking and industrial water consumption.
The IRCE Group aims to reduce and responsibly manage the waste it produces. Also in 2019, the main projects for correct waste management that IRCE has invested in include:
| WASTE (tonnes) | ||||||
|---|---|---|---|---|---|---|
| 2019 | 2018 | |||||
| Type of waste | Hazardous | Non hazardous |
Total | Hazardous | Non hazardous |
Total |
| Re-use | - | 2.0 | 2.0 | - | 2.3 | 2.3 |
| Recycling | 78.6 | 3,164.5 | 3,243.1 | 50.6 | 3,194.3 | 3,244.9 |
| Composting | - | 20.0 | 20.0 | - | 39.0 | 39.0 |
| Recovery (also of energy) |
44.2 | 563.7 | 607.9 | 15.4 | 667.8 | 683.2 |
| Incineration | - | 3.2 | 3.2 | - | 0.5 | 0.5 |
| Deep well injection | - | - | - | - | - | - |
| Landfill | 15.9 | 66.3 | 82.2 | 13.1 | 95.6 | 108.6 |
| On-site storage | - | - | - | - | - | - |
| Other | 164.4 | 0.1 | 164.5 | 278.6 | 10.1 | 288.7 |
| Total | 303.1 | 3,819.9 | 4,123.0 | 357.6 | 4,009.6 | 4,367.1 |
From the data shown in the above table, it follows that the majority of waste disposed in 2019 was destined for recycling (78.7%) and recovery (14.7%).
CO2 emissions resulting from consumption are shown in the previous section.
The IRCE Group calculates its 'carbon footprint' in terms of CO2 emissions, reporting on:
| Direct GHG emissions (Scope 1) | |||||
|---|---|---|---|---|---|
| Unit | 2019 Total tCO2e |
2018 | |||
| Total | tCO2e | ||||
| Emissions from natural gas consumption |
m3 | 1,741,235 | 3,536 | 2,051,614 | 4,199 |
| Emissions from fuel oil consumption |
l | 547,630 | 1,421 | 524,760 | 1,410 |
| Emissions from LPG consumption |
GJ | 2,571 | 169 | 3,933 | 258 |
| Indirect GHG emissions (Scope 2) | |||||
| Unit | 2019 | 2018 | |||
| Total | tCO2e | Total | tCO2e | ||
| Electricity | kWh | 114,095,842 | 3,540,394 | 122,465,059 | 4,048,695 |
Scope 2 emissions have been calculated in accordance with the location-based method provided in GHG Protocol Scope 2 Guidance – An Amendment to the GHG Protocol Corporate Standard (2015).
Sources used for the calculation of emissions are:
The relevant issues in terms of product management are summarised in the table below, together with the main risks identified by IRCE's Management. The following pages describe the policies, the management model and the results achieved.
| MATERIAL ISSUES | RELATED RISKS | METHODS FOR MANAGING RISK |
IMPROVEMENT OBJECTIVES |
|---|---|---|---|
| Research, development and product quality Customer satisfaction |
Possible delayed and/or inadequate response to customer returns and expected satisfaction levels Non-compliance of product information Loss of reputation Possible problems arising from after sales service |
ISO 9001 Quality management system |
Improve complaints management Increase resources dedicated to research and development |
IRCE is a leading European industrial group, with two areas of business:
Winding wires for electrical machines are used in a wide range of applications such as engines and electric generators, transformers, inductors and relays.
Electric wires are used in the installation of electric systems in civil and industrial buildings and for the supply and connection of electrical equipment.
The IRCE Group fosters relationships with strategic suppliers, with the intent of jointly building a common organisational process based on sustainability throughout the production chain. IRCE Group's suppliers procure the main raw materials needed for the production processes: copper, aluminium, and various chemicals. The Group is committed to achieving environmental and social targets, also selecting qualified suppliers and suitable materials.
The IRCE Group has an important internal R&D office, which constantly focuses on activities for:
In 2019, no market withdrawal was reported in relation to the safety and quality of the products and services offered by the Companies belonging to the IRCE Group.
In total, in 2019 approximately 63,600 tonnes of raw materials (copper, aluminium and insulating materials) were used, down compared to 73,200 tonnes in 2018, mainly due to the decline in sales made on the European market.
The raw materials used also include quantities on manufacturing account supplied by customers and raw materials obtained through reusing rejected products.
IRCE monitors customer satisfaction using two types of indicators:
The IRCE Group's quality and service are considered top tier on the market, i.e. at the highest levels in the sector. The scorecards of major customers revealed ratings and assessments which placed IRCE in the top supplier bracket.
With regard to issues concerning the policies, management models and risks related to economic aspects, please refer to the information provided in the financial statements of the IRCE Group.
As specific non-financial information, the following table shows the value added reclassified income statement, for the entire financial consolidation scope:
| Economic value generated and distributed | ||||
|---|---|---|---|---|
| Amounts in €/000 | 31/12/2019 | 31/12/2018 | ||
| Revenues | 311,938 | 355,404 | ||
| Other income | 1,009 | 1,001 | ||
| Financial income | 2,996 | 3,743 | ||
| Profit/loss from the sale of tangible and intangible assets |
||||
| Total economic value generated by the Group | 315,943 | 360,148 | ||
| Operating costs | 274,933 | 309,092 | ||
| Financial charges | 862 | 1,084 | ||
| Personnel costs | 30,195 | 32,357 | ||
| Remuneration to lenders | ||||
| Dividends paid to shareholders | ||||
| Remuneration of the Public Administration** | ||||
| Taxes | 750 | 4,391 | ||
| External largesse | ||||
| Result attributable to non-controlling interests | 31 | (25) | ||
| Total economic value distributed by the Group | 306,772 | 346,900 | ||
| Bad debts | 104 | 353 | ||
| Write-downs | ||||
| Exchange rate differences | (167) | (39) | ||
| Adjustments to tangible and intangible assets | 0 | 0 | ||
| Adjustments to financial assets | 0 | (0) | ||
| Depreciation/amortisation | 7,292 | 6,855 | ||
| Provisions | 0 | 203 | ||
| Retained earnings/losses | 1,942 | 5,876 | ||
| Economic value retained by the Group | 9,171 | 13,248 |
(in euros)
| ASSETS | Notes | 31/12/2019 | 31/12/2018 |
|---|---|---|---|
| NON-CURRENT ASSETS | |||
| Intangible assets | 1 | 256,300 | 127,491 |
| Property, plant and equipment | 2 | 48,354,131 | 48,595,984 |
| Equipment and other tangible assets | 2 | 1,750,118 | 1,427,154 |
| Assets under construction and advances | 2 | 1,436,379 | 2,399,588 |
| Non-current financial assets and receivables | 3 | 234,765 | 111,850 |
| Non-current tax receivables | 4 | 375,564 | 811,582 |
| Receivables for deferred tax assets | 5 | 1,375,021 | 1,879,382 |
| TOTAL NON-CURRENT ASSETS | 53,782,278 | 55,353,031 | |
| CURRENT ASSETS | |||
| Inventories | 6 | 82,308,481 | 95,785,674 |
| Trade receivables | 7 | 63,130,268 | 70,214,345 |
| Tax receivables | 8 | 832,772 | - |
| (of which: related parties) | 196,803 | - | |
| Receivables due from others | 9 | 2,053,794 | 4,039,416 |
| Current financial assets | 10 | 385,919 | 589,977 |
| Cash and cash equivalents | 11 | 8,631,545 | 7,019,127 |
| TOTAL CURRENT ASSETS | 157,342,779 | 177,648,539 | |
| TOTAL ASSETS | 211,125,057 | 233,001,570 |
| SHAREHOLDERS' EQUITY AND LIABILITIES | Notes | 31/12/2019 | 31/12/2018 |
|---|---|---|---|
| SHAREHOLDERS' EQUITY | |||
| SHARE CAPITAL | 12 | 14,626,560 | 14,626,560 |
| RESERVES | 12 | 115,276,611 | 111,168,471 |
| RESULT FOR THE PERIOD | 12 | 1,942,159 | 5,875,885 |
| TOTAL SHAREHOLDERS' EQUITY ATTRIBUTABLE TO GROUP SHAREHOLDERS |
131,845,330 | 131,670,916 | |
| SHAREHOLDERS' EQUITY ATTRIBUTABLE TO NON-CONTROLLING INTERESTS |
(343,966) | (375,091) | |
| TOTAL SHAREHOLDERS' EQUITY | 131,501,364 | 131,295,825 | |
| NON-CURRENT LIABILITIES | |||
| Non-current financial liabilities | 13 | 8,746,825 | 17,032,831 |
| Deferred tax liabilities | 5 | 127,125 | 704,309 |
| Provisions for risks and charges | 14 | 901,284 | 1,893,027 |
| Provisions for employee benefits | 15 | 5,099,185 | 5,312,834 |
| TOTAL NON-CURRENT LIABILITIES | 14,874,419 | 24,943,001 | |
| CURRENT LIABILITIES | |||
| Current financial liabilities | 16 | 42,300,450 | 49,995,296 |
| Trade payables | 17 | 13,454,746 | 16,212,015 |
| Tax payables | 18 | 126,082 | 1,025,696 |
| (of which: related parties) | - | 185,668 | |
| Social security contributions | 19 | 1,848,422 | 1,964,232 |
| Other current liabilities | 20 | 7,019,574 | 7,565,505 |
| TOTAL CURRENT LIABILITIES | 64,749,274 | 76,762,744 | |
| TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES |
211,125,057 | 233,001,570 |
The effects of related party transactions on the consolidated statement of financial position are reported in Note 33 "Related party disclosures".
(In euros)
parent company
| Notes | 31/12/2019 | 31/12/2018 | |
|---|---|---|---|
| Sales revenues | 21 | 311,937,790 | 355,403,851 |
| Other income | 22 | 1,009,464 | 1,001,081 |
| TOTAL REVENUES | 312,947,254 | 356,404,932 | |
| Costs for raw materials and consumables | 23 | (240,879,183) | (284,742,756) |
| Change in inventories of work in progress and finished goods | (5,240,697) | 5,612,839 | |
| Costs for services | 24 | (27,688,404) | (28,768,259) |
| Personnel costs | 25 | (30,195,481) | (32,356,876) |
| (of which: non-recurring) | - | (943,964) | |
| Depr./amort. and impairment of tangible and intangible assets |
26 | (7,291,619) | (6,855,200) |
| Provisions and write-downs | 27 | (104,027) | (556,076) |
| Other operating costs | 28 | (1,124,959) | (1,194,118) |
| EBIT | 422,884 | 7,544,486 | |
| Financial income/(charges) | 29 | 2,300,442 | 2,697,360 |
| PROFIT BEFORE TAX | 2,723,326 | 10,241,846 | |
| Income taxes | 30 | (750,042) | (4,390,967) |
| PROFIT FOR THE PERIOD | 1,973,284 | 5,850,879 | |
| Loss for the period attributable to non-controlling interests | (31,125) | 25,006 | |
| PROFIT FOR THE PERIOD ATTRIBUTABLE TO THE PARENT COMPANY |
1,942,159 | 5,875,885 | |
| Earnings/(loss) per share (EPS) - basic EPS for the year attributable to shareholders of the parent |
31 | 0.073 | 0.221 |
| company - diluted EPS for the year attributable to shareholders of the |
31 | 0.073 | 0.221 |
The effects of related party transactions on the consolidated income statement are reported in Note 32 "Related party disclosures".
| CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME |
31/12/2019 | 31/12/2018 |
|---|---|---|
| €/000 RESULT OF THE GROUP AND NON-CONTROLLING INTERESTS |
1,973 | 5,851 |
| Translation difference on financial statements of foreign companies |
(270) | (4,281) |
| Total components of comprehensive income that will be reclassified under the profit/(loss) of the year |
(270) | (4,281) |
| Re-determination of defined-benefit plans | (199) | 294 |
| Income taxes | 74 | (62) |
| (125) | 232 | |
| Total components of comprehensive income that will not be reclassified under the profit/(loss) of the year |
(125) | 232 |
| Total comprehensive profit (loss) for the period, net of taxes |
1,578 | 1,803 |
| Attributable to: | ||
| Shareholders of the Parent Company | 1,547 | 1,828 |
| Minority shareholders | 31 | (25) |
With regard to the items of the statement of comprehensive income, please refer to note 12.
| Share capital | Other reserves | Retained earnings | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| €/000 | Share capital | Own shares | Share premium reserve |
Own shares (shares premium) |
Other reserves |
Foreing currency reserve |
Legal reserve |
Extraordinary reserve |
Reserve IAS 19 |
Unidivided profit |
Result for the period |
Total | Minority interest |
Total shareholders' equity |
| Balance as of 31 december 2017 | 14,627 | (734) | 40,539 | 258 | 45,924 | (18,343) | 2,925 | 32,277 | (1,304) | 11,897 | 4,685 | 132,749 | (350) | 132,400 |
| Change accounting standards (IFRS 15)* | (1,322) | (1,322) | (1,322) | |||||||||||
| Balance as of 01 january 2018 | 14,627 | (734) | 40,539 | 258 | 45,924 | (18,343) | 2,925 | 30,955 | (1,304) | 11,897 | 4,685 | 131,427 | (350) | 131,077 |
| Result for the period Other comprehensive profit / (loss) |
(4,281) | 232 | 5,876 | 5,876 (4,049) |
(25) | 5,851 (4,049) |
||||||||
| Total profit / (loss) from statement of comprehensive income |
(4,281) | 232 | 5,876 | 1,828 | (25) | 1,803 | ||||||||
| Allocation of the result of the previous year Dividends |
4,864 (1,333) |
(181) | (4,685) | (1,333) | (1,333) | |||||||||
| Sell / purchase own shares | (54) | (194) | (248) | (248) | ||||||||||
| Balance as of 31 december 2019 Result for the period Other comprehensive profit / (loss) |
14,627 | (788) | 40,539 | 64 | 45,924 | (22,624) (270) |
2,925 | 34,486 | (1,071) (125) |
11,714 | 5,876 1,942 |
131,671 1,942 (395) |
(375) 31 |
131,296 1,973 (395) |
| Total profit / (loss) from statement of comprehensive income |
(270) | (125) | 1,942 | 1,547 | 31 | 1,578 | ||||||||
| Allocation of the result of the previous year Dividends Sell / purchase own shares |
(12) | (31) | 7,903 (1,333) |
(2,027) | (5,876) | (1,333) (43) |
(1,333) (43) |
|||||||
| Balance as of 31 march 2019 | 14,627 | (800) | 40,539 | 33 | 45,924 | (22,894) | 2,925 | 41,059 | (1,196) | 9,687 | 1,943 | 131,845 | (344) | 131,501 |
With regard to the items of consolidated shareholders' equity, please refer to note 12.
| CONSOLIDATED STATEMENT OF CASH FLOWS | Notes | 31/12/2019 | 31/12/2018 |
|---|---|---|---|
| €/000 | |||
| OPERATING ACTIVITIES | |||
| Profit/(loss) for the period | 1,942 | 5,876 | |
| Adjustments for: | |||
| Depreciation/amortisation | 26 | 7,194 | 6,855 |
| Net change in deferred tax (assets)/liabilities Capital (gains)/losses from the realisation of fixed assets |
(73) (25) |
744 69 |
|
| (Profit)/loss on unrealised exchange rate differences | (464) | (35) | |
| Current taxes | 30 | (782) | 3,750 |
| Financial (income)/charges | 29 | (2,133) | (2,658) |
| Operating profit/(loss) before changes in working capital | 5,659 | 14,600 | |
| Taxes paid | (2,478) | (4,172) | |
| Financial charges paid | 29 | (852) | (1,084) |
| Financial income received | 29 | 2,996 | 3,743 |
| Decrease/(increase) in inventories | 6 | 13,477 | (12,516) |
| Change in trade receivables Change in trade payables |
7 17 |
7,084 (2,757) |
15,128 (8,476) |
| Net change in current assets and liabilities for the period | 3,763 | (2,115) | |
| Net change in non-current assets and liabilities for the period | (1,328) | 662 | |
| Exchange rate difference on translation of financial statements in foreign currency | (71) | (2,542) | |
| CASH GENERATED FROM OPERATING ACTIVITIES | 25,491 | 3,228 | |
| INVESTING ACTIVITIES | |||
| Investments in intangible assets | 1 | (182) | (75) |
| Investments in tangible assets | 2 | (5,885) | (6,372) |
| Consideration received for the sale of tangible and intangible assets | 19 | 347 | |
| CASH GENERATED FROM/USED IN INVESTING ACTIVITIES | (6,048) | (6,100) | |
| FINANCING ACTIVITIES | |||
| Entering into loans | 13 | - | 9,452 |
| Financing refunds | 13 | (8,425) | (4,386) |
| Net change in short-term financial payables | 16 | (7,784) | (684) |
| Exchange rate difference on translation of financial statements in foreign currency | (776) | (233) | |
| Change in current financial assets | 10 | 204 | (577) |
| Change in non-controlling interests | 31 | (25) | |
| Change in foreign currency translation reserve and other effects on equity Dividends paid |
(125) (1,330) |
232 (1,333) |
|
| Management of own shares (sales-purchases) | (43) | (247) | |
| CASH GENERATED FROM/USED IN FINANCING ACTIVITIES | (18,247) | 2,199 | |
| NET CASH FLOW FOR THE PERIOD | 1,196 | (673) | |
| CASH BALANCE AT THE BEGINNING OF THE PERIOD | 11 | 7,019 | 7,752 |
| COMPREHENSIVE NET CASH FLOW FOR THE PERIOD | 1,196 | (673) | |
| Exchange rate difference | 417 | (60) | |
| CASH BALANCE AT THE END OF THE PERIOD | 11 | 8,632 | 7,019 |
These annual consolidated financial statements as of 31 December 2019 were approved by the Board of Directors of IRCE S.p.A. (hereinafter also referred to as the "Company") on 13 March 2020.
The IRCE Group owns 9 manufacturing plants and is one of the major players in the European winding wire industry, as well as in the Italian electrical cable sector.
Italian plants are located in the towns of Imola (Bologna), Guglionesi (Campobasso), Umbertide (Perugia) and Miradolo Terme (Pavia), while foreign operations are carried out by Smit Draad Nijmegen BV in Nijmegen (NL), FD Sims Ltd in Blackburn (UK), Irce Ltda in Joinville (SC – Brazil), Stable Magnet Wire P.Ltd in Kochi (Kerala – India) and Isodra GmbH in Kierspe (D).
The distribution network consists of agents and the following commercial subsidiaries: Isomet AG in Switzerland, DMG GmbH in Germany, Isolveco S.R.L. and Isolveco 2 S.R.L. in Italy, Irce S.L. in Spain, and IRCE SP.ZO.O in Poland.
Finally, Haian (China) hosts the offices of Irce Electromagnetic Wire (Jiangsu) Co. Ltd, a recently established company.
The annual financial statements for the year 2019 were prepared in accordance with the IFRSs (International Financial Reporting Standards) issued by the IASB (International Accounting Standards Board) and endorsed by the European Union. The term IFRS also refers to all revised International Accounting Standards ("IAS") and all interpretations of the International Financial Reporting Interpretations Committee (IFRIC), including those previously issued by the Standing Interpretations Committee (SIC).
The consolidated financial statements are drafted in euros and – in order to facilitate their interpretation – all amounts in the explanatory notes are rounded to the nearest thousand, unless otherwise specified.
The formats used for the consolidated financial statements of the IRCE Group have been prepared in accordance with the provisions of IAS 1. In particular:
The consolidated financial statements include the financial statements of the Parent Company IRCE S.p.A. and those of the subsidiaries, prepared as of 31 December 2019. The financial statements of the subsidiaries were prepared by adopting the same accounting standards used by the parent company. The main consolidation criteria adopted in drafting the consolidated financial statements are as follows:
Subsidiaries are companies over which the Company has the right to exercise, directly or indirectly, control, as defined by IFRS 10 - Consolidated Financial Statements. In particular, control exists when the controlling entity simultaneously holds decision-making power over the investee company; has the right to take part in or is exposed to the variable (positive and negative) results of the investee company; has the ability to exercise power over the investee company in such a way as to affect its profits.
Non-controlling interests represent that part of profits or losses and of net assets that are not owned by the Shareholders of the Parent Company.
The following table shows the list of companies included in the scope of consolidation as of 31 December 2019:
| Company | % of investment |
Registered office |
Currency capital |
Share | Consolidation |
|---|---|---|---|---|---|
| Isomet AG | 100% | Switzerland | CHF | 1,000,000 | line by line |
| Smit Draad Nijmegen BV | 100% | Netherlands | € | 1,165,761 | line by line |
| FD Sims Ltd | 100% | UK | £ | 15,000,000 | line by line |
| Isolveco S.R.L. | 75% | Italy | € | 46,440 | line by line |
| DMG GmbH | 100% | Germany | € | 255,646 | line by line |
| IRCE S.L. | 100% | Spain | € | 150,000 | line by line |
| IRCE Ltda | 100% | Brazil | BRL | 157,894,223 | line by line |
| ISODRA GmbH | 100% | Germany | € | 25,000 | line by line |
| Stable Magnet Wire P.Ltd. | 100% | India | INR | 165,189,860 | line by line |
| IRCE SP.ZO.O | 100% | Poland | PLN | 200,000 | line by line |
| Isolveco 2 S.R.L. | 100% | Italy | € | 10,000 | line by line |
| Irce Electromagnetic Wire (Jiangsu) Co. Ltd |
100% | China | CNY | 15,209,587 | line by line |
In the first six months of 2019, the parent company IRCE S.p.A. paid and subscribed a capital increase of the subsidiary Irce Electromagnetic Wire (Jiangsu) Co. Ltd for CNY/000 7,307 equal to €/000 1,000.
Below is a brief description of the most significant accounting standards and assessment criteria used in preparing the consolidated financial statements.
The consolidated financial statements are presented in euros, which is the presentation currency adopted by the Group. Each entity of the Group determines its functional currency, which is used to measure the items in the individual financial statements. Foreign currency transactions are initially recognised at the spot exchange rate (referring to the functional currency) at the date of the transaction. Monetary assets and liabilities, denominated in foreign currency, are translated into the functional currency at the spot exchange rate at the reporting date. All exchange rate differences are recognised in the income statement. Nonmonetary items measured at their historical cost in a foreign currency are translated using the spot exchange rates at the date of the initial recognition of the transaction. Non-monetary items measured at fair value in a foreign currency are translated using the spot exchange rate at the measurement date.
The subsidiaries using a functional currency other than the Euro are listed in the following table:
Isomet AG Swiss Franc FD Sims LTD British Pound IRCE LTDA Brazilian Real Stable Magnet Wire Private Limited Indian Rupee IRCE SP.ZO.O Polish Zloty IRCE Electromagnetic wire Co.Ltd Chinese Renminbi
At the reporting date, the assets and liabilities of these subsidiaries are translated into euros at the spot exchange rate at that date, and their income statement is translated using the average exchange rate for the year. The exchange rate differences arising on the translation are directly recognised in shareholders' equity and separately reported in the foreign currency translation reserve.
Tangible assets are measured at their purchase cost after deducting discounts and rebates, or at the construction cost, including directly attributable costs less any accumulated depreciation and accumulated impairment losses.
The carrying amount of tangible assets is tested for impairment if events or changes in circumstances indicate that it might be impaired. If there is any such indication, and the asset's carrying amount exceeds its recoverable amount, the asset is written down to this lower value. The recoverable amount of tangible assets is the higher of net price to sell and value in use.
The capitalisation of costs related to the expansion, renovation or improvement of the structural elements owned or leased from third parties is exclusively carried out to the extent that they meet the requirements for separate classification as an asset or part of an asset by applying the "component approach" criterion.
On disposal, or when no future economic benefits are expected from the use of an asset, this is derecognised from the financial statements and any gain or loss (calculated as the difference between the disposal value and the carrying amount) is recognised in profit or loss in the year the asset is derecognised. Land, including that ancillary to buildings, is not depreciated.
Assets under construction and advances paid for the acquisition of tangible assets are measured at cost. Amortisation begins when the asset is available and ready for use, and assets are allocated to a specific category from the same date.
Depreciation was calculated on the basis of rates that were deemed representative of the estimated useful life of the relevant tangible assets. The rates applied on an annual basis by Group companies are included in the following ranges:
| Buildings | 3.0% - 10.0% |
|---|---|
| Plant and equipment | 5.0% - 17.5% |
| Industrial and commercial equipment | 25.0% - 40.0% |
| Other assets | 12.0% - 25.0% |
Intangible assets are recognised under assets, in accordance with the provisions of IAS 38 (Intangible Assets) when it is probable that the use of the asset will generate future economic benefits and when the cost of the asset can be determined in a reliable manner.
Intangible assets which are acquired separately are initially capitalised at cost while those which are acquired through business combination transactions are capitalised at their fair value on their acquisition date. After initial recognition, intangible assets are measured at cost less any accumulated amortisation and accumulated impairment losses. Internally generated intangible assets, with the exception of development costs, are not capitalised and are recognised in profit or loss as incurred. The Group capitalises development costs only when it is likely that they will be recovered. The useful life of intangible assets is either finite or indefinite. Intangible assets with a finite useful life are amortised over their useful life and tested for impairment whenever there is an indication of a potential impairment loss. The amortisation period and the amortisation method applied are reviewed at the end of each financial year or more frequently, if necessary. Changes in the expected useful life, or in the manner the Group obtains the future economic benefits associated with the intangible asset, are recognised by modifying the amortisation period or the amortisation method and treated as changes in accounting estimates. The amortisation charges for intangible assets with finite useful lives are recognised in profit or loss within the cost category that is consistent with the function of the intangible asset.
Gains or losses arising from the disposal of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the intangible asset, and are recognised in profit or loss when the fixed asset is disposed of.
| A description of intangible assets and the amortisation method used is shown in the following table. | |||
|---|---|---|---|
| -- | ------------------------------------------------------------------------------------------------------ | -- | -- |
| Asset | Useful life |
Rate | Internally produced or acquired |
Impairment test |
|---|---|---|---|---|
| Patent and intellectual property rights |
Finite | 50% | Acquired | Review of the amortisation method at each reporting date and impairment test if |
| Concessions and licenses |
Finite | 20% | Acquired | indicators of impairment exist Review of the amortisation method at each reporting date and impairment test if indicators of impairment exist |
| Trademarks and similar rights |
Finite | 5.56% | Acquired | Review of the amortisation method at each reporting date and impairment test if indicators of impairment exist |
The amortisation rates for intangible assets were determined as a function of their specific residual useful lives and are reviewed at each reporting date.
Following the coming into force of the new accounting standard IFRS 16, starting 1 January 2019, lease contracts are booked on the basis of a single accounting model similar to that regulated by IAS 17 on the booking of financial leases.
When each contract is stipulated, the Group:
• determines if the contract is or contains a lease, which is the case when it attributes the right to control use of a specified asset for a period of time in exchange for a price. This assessment is repeated in the event of subsequent changes to the terms and conditions of the contract.
• separates the components of the contract out, splitting the contract price up between each lease or non-lease component.
• determines the term of the lease as the period during which the lease cannot be cancelled, in addition to any periods covered by an extension or lease termination option.
As of the start date of each contract in which the Group is the lessee of an item, the asset consisting of the right of use is booked, measured at cost, and the financial liability for the lease, equal to the current value of residual future payments, discounted using the implicit interest rate of the lease or, alternatively, the Group's marginal financing rate. Thereinafter, the asset consisting of the right of use is measured applying the cost model, i.e. net of amortisation/depreciation and any impairment accrued and adjusted to take into account any new valuations or changes to the lease. The lease liability is instead measured by increasing the book value to take interest into account, reducing the book value to take payments due and made into account, and redetermining the book value to take any new valuations or changes to the lease into account.
The assets are amortised/depreciated over a period represented by the term of the lease contract, except where the term of the lease contract is shorter than the useful life of the asset on the basis of the rates applied for tangible fixed assets and there is reasonable certainty of the transfer of ownership of the leased asset at the natural expiry of the contract. In this case, the amortisation/depreciation period will be calculated on the basis of the criteria and rates indicated for tangible assets.
For lease contracts with a term of within 12 months of the initial application date, and which do not envisage renewal options, and for contracts for which the underlying asset is of low value, lease charges are booked as profit and loss on a straight-line basis for the duration of the respective contracts.
According to the provisions of IFRS 3, subsidiaries acquired by the Group are accounted for by applying the purchase method, under which:
the acquisition cost is the fair value of the assets, considering any issue of equity instruments, as well as assumed liabilities;
the excess of the acquisition cost over the fair value of the Group's interest in the net assets is recognised as goodwill;
if the acquisition cost is less than the fair value of the Group's interest in the net assets of the acquiree, the difference is directly recognised in profit or loss.
Goodwill and, more generally, assets with an indefinite useful life are not amortised but allocated to the Cash Generating Units (CGUs) and tested for impairment on an annual basis, or more frequently, if events or changes in circumstances indicate that it may be impaired, in accordance with the provisions of IAS 36 Impairment of Assets. After initial recognition, goodwill and assets with an indefinite useful life are measured at cost less any accumulated impairment losses.
Assets with finite useful life falling within the scope of application of IAS 36 are tested for impairment whenever indicators of impairment exist.
To that end, both internal and external information sources are considered. In regard to the first category (internal sources) the following information is considered: obsolescence or physical damage to the asset; any significant changes in the use of the asset; and the economic performance of the asset as compared to expectations. In regard to external sources, the following information is considered: market price trends for the asset; any changes in technology, markets or laws; the trend in market interest rates or the cost of capital used for valuing investments; and market capitalisation below the net asset carrying amounts for the entity.
In this case, the net carrying amount of the assets is compared with the estimated recoverable amount and, if the former is higher, they are written down.
An asset's recoverable amount is shown as whichever is the higher of an asset's fair value (net of associated disposal costs) and its value in use (meaning present value of estimated future cash flows to be derived from the asset). In determining the value in use, the expected future cash flows are discounted using a pretax discount rate that reflects current market assessments of the value of money (relating to the period of investment) and risks specific to the asset.
In order to verify the presence of impairment, intangible and tangible assets are grouped at the level of the smallest separately identifiable cash generating unit. Impairment for a CGU is first attributed to reducing the carrying amount of any goodwill attributed to the asset, and subsequently to reducing other assets. This must be done in proportion to their carrying amount and the limits of the asset's associated recoverable value.
If the assumptions underlying a previous write-down no longer apply, the carrying value is reinstated with an entry to the relevant income statement. This is done within the limits of the net carrying value that the asset would have had, if it had not been written down and the related amortisation had been applied.
The drafting of the financial statements in accordance with the IFRS requires the use by the Management of estimates and assumptions, which influence the value of assets and liabilities recorded in the statement of financial position as well as in the disclosures published in the explanatory notes regarding potential assets and liabilities at the reporting date, and the revenues and costs for the period.
These estimates are based on experience and on other factors considered relevant. The effective results could thus differ from those estimated. The estimates are revised on a regular basis and the effects of each change to the same are reflected in the income statement of the period in which the estimate is revised. The most significant accounting principles that require greater subjectivity by directors when preparing estimates are described below:
At the time of their initial recognition, financial assets must be classified into one of the three categories described below, on the basis of the following elements:
Financial assets are subsequently derecognised only if the transfer of ownership has also transferred substantially all of the associated risks and rewards belonging to said asset. On the other hand, whenever a significant part of the risks and rewards belonging to the financial asset being transferred have been retained, then that asset will continue to be recognised, even if legal ownership of said asset has effectively been transferred.
Included in this category are financial assets which satisfy both of the following conditions:
Upon initial recognition, these assets are accounted for at fair value, including costs or revenues for the transaction which are directly attributable to said instrument. After initial recognition, the financial assets in question are valued at amortised cost, using the effective interest rate method. The amortised cost method is not used for assets which are valued at historical cost, where it is considered that the short duration makes the effect of applying the discounting approach negligible. This applies to those assets which do not have a defined maturity, and revocable loans.
Included in this category are financial assets which satisfy both of the following conditions:
Included in this category are equity interests which do not qualify as interests in subsidiaries, associated
companies or jointly controlled entities, and which are not held in order to trade. Furthermore, the company must have exercised the option to designate their measurement at fair value with an impact on overall profitability.
Upon initial recognition, these assets are accounted for at fair value, including costs or revenues for the transaction which are directly attributable to said instrument. After initial recognition, equity interests (other than interests in subsidiaries, associated companies or jointly controlled entities) are measured at fair value and amounts are entered and offset against net assets (statement of comprehensive income). These amounts may not subsequently be transferred to the income statement, even if ownership of the asset itself is transferred. The only component that is entered to the income statement for the equity securities in question, are those amounts which represent the associated dividends.
For equity securities included in this category which are not listed on an active market, historical cost is used as an estimate of fair value only if no other method applies, and is limited to a small number of circumstances. Or rather, measurement at historical cost is only done when the most recent information for measuring fair value is insufficient, or where there is a wide range of possible fair value measurements and historical cost represents the best estimate of fair value among such a range.
Classified in this category are those financial assets which are not classified as 'financial assets measured at amortised cost' or 'financial assets measured at fair value with an impact on overall profitability'.
Included in this category are financial assets which are held for trading, and derivative contracts which cannot be classified as hedging (which are shown as assets if the fair value is positive, or as liabilities if the fair value is negative).
Upon initial recognition, financial assets measured at fair value with an impact on the income statement are entered at fair value, without considering transaction costs or proceeds which are directly attributable to said instrument. On subsequent reporting dates, these assets are assessed at fair value and the impact of valuations is charged against the income statement.
In accordance with the arrangements of IFRS 9, the Group uses a simplified approach for estimating full lifetime expected credit losses for financial instruments. This approach takes into consideration the company's historical experience with credit losses, and is adjusted on the basis of specific outlook factors depending on the nature of the Group's receivables and the economic context.
In summary, the Group measures the expected losses for financial assets in a way that reflects:
Financial assets are credit-impaired when one or more events have occurred which will have a negative impact on future estimated cash flows for the financial asset. Evidence that the financial asset has been credit-impaired includes observable data in relation to one or more of the following events (it is possible that the company may not be able to identify one individual event, and so the impairment of financial assets may be due to the combined effect of several events):
a) significant financial difficulty of the issuer or borrower;
For financial assets that have been accounted for using the amortised cost method, when an impairment has been identified then the amount of that impairment is measured as the difference between the carrying amount of the asset and the present value of expected future cash flows (discounted on the basis of the original effective interest rate). This amount will be recognised in the income statement.
Inventories are measured at the lower of cost and net realisable value.
The costs incurred are recognised as follows:
The presumed net realisable value for metal is measured separately from the other components, inasmuch as it is subject to separate negotiation at the time of sale.
Cash and cash equivalents include cash on hand as well as demand and short-term bank deposits recognised at their nominal amounts; in the latter case, the original maturity shall not exceed three months.
Financial liabilities and trade payables are recognised when the Group becomes party to the relevant contractual clauses. They are initially measured at fair value, adjusted for costs which are directly attributable to the transaction.
They are subsequently valued at amortised cost, using the effective interest rate method.
Financial liabilities are derecognised when the contractual rights over the related cash flows expire, or when the financial liability is transferred along with substantially all the risks and rewards which come from responsibility for said liability.
Financial assets
A financial asset (or, where applicable, part of a financial asset or part of a group of similar financial assets) is derecognised when:
In cases where the Group transferred its rights to receive cash flows from an asset and has not substantially transferred nor withheld all the risks and rewards or has not lost control over the asset, this is recognised in the financial statements of the Group to the extent of the latter's continuing involvement in the asset. The continuing involvement – which takes the form of guaranteeing the transferred asset – is measured at the lower of the initial carrying amount of the asset and the maximum amount of the consideration that the Group could be required to pay.
In cases where the continuing involvement takes the form of an option that is issued and/or acquired with respect to the transferred asset (including cash-settled options, or similar options), the extent of the Group's involvement corresponds to the amount of the transferred asset which the Group may buy back; however, in the case of a put option which is issued on an asset that is measured at fair value (including the options settled in cash or with similar provisions), the extent of the Group's continuing involvement is limited to the lower of the fair value of the transferred asset and the exercise price of the option.
A financial liability is derecognised when the obligation underlying the liability is settled, cancelled or discharged.
If an existing financial liability is replaced by another from the same lender – and with substantially different terms – or if the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, recognising any differences between the carrying amounts through profit or loss.
Provisions for risks and charges include provisions arising from present obligations (legal or constructive) as a result of past events and for which an outflow of resources is probable. Changes in estimates are reflected in the income statement for the period in which the change occurs. If the effect of discounting the value of money is material, the provisions are discounted using a pre-tax discount rate that reflects, where appropriate, the risks specific to the liability. When discounting is used, the increase in the provision that arises from the passage of time is recognised as a financing cost.
Employee benefits substantially include provisions for employee termination indemnities of the Group's Italian companies as well as provisions for retirement benefits plans. Italian Law no. 296 of 27 December 2006 ("2007 Budget Law") introduced significant changes to the allocation of quotas of the employee termination indemnities. Up until 31 December 2006, employee termination indemnities were part of postemployment benefit plans of the "defined benefit plans" type, and were measured, in accordance with IAS 19, by independent actuaries using the projected unit credit method. This calculation consists in estimating the amount of the benefit an employee will receive on the estimated date of termination of the work relationship by using demographical and financial assumptions. The amount determined in this manner is discounted and recalculated on the basis of the accrued service as a proportion of the total length of service and represents a reasonable estimate of the benefits each employee has already earned for past service. Following the occupational pension reform, the provisions for employee termination indemnities – for the amounts accruing from 1 January 2007 – should be considered essentially comparable to a "defined
contribution plan". More specifically, these changes gave employees the opportunity to choose how to
allocate their accruing employee termination indemnities: in companies with more than 50 employees, employees can decide to transfer the accruing employee termination indemnities into pre-defined pension schemes or keep them with the company, which will transfer them to INPS (Italy's social security institute). In summary, following the occupational pension reform and with regard to the employee termination indemnities accrued before 2007, the Group actuarially measured them without including the component referring to future salary increases. The benefits subsequently accrued were instead recognised in accordance with the methods for defined contribution plans.
The Group used derivative financial instruments such as forward contracts for the purchase and sale of copper and aluminium in order to hedge against its exposure to the risk of changes in raw material prices as well as forward contracts for currency purchases.
Any gains or losses arising from changes in the fair value of derivatives, which are outstanding as of the reporting date and do not qualify for hedge accounting, are recognised directly in the income statement.
The fair value of forward contracts for the sale of copper outstanding as of the reporting date is determined on the basis of forward prices of copper with reference to the maturity dates of contracts outstanding as of the reporting date.
For the purposes of hedge accounting, hedges are classified as:
At the inception of a hedge, the Group formally designates and documents the hedging relationship to which it intends to apply hedge accounting as well as its risk management objectives and the pursued strategy. The documentation includes the identification of the hedging instrument as well as of the hedged item or transaction, the nature of the risk, and how the company intends to measure the effectiveness of the hedge in offsetting the exposure to changes in the fair value of the hedged item or cash flows attributable to the hedged risk.
These hedges are expected to be highly effective in offsetting the exposure of the hedged item to changes in the fair value or cash flows attributable to the hedged risk. The measurement of the effectiveness of these hedges is conducted on an ongoing basis during the years in which they have been designated.
If the company reacquires its own shares, these are deducted from shareholders' equity. In particular, they are measured at their nominal amount in the "own shares reserve" and the excess of the purchase amount over the nominal amount is accounted for as a deduction from "other reserves". The purchase, sale, issue or cancellation of equity instruments does not result in the recognition of any gain or loss in the income statement, but is rather recognised directly as a change in shareholders' equity.
Revenues from contracts with customers are recognised when the following conditions are met:
the contractual performance obligations have been satisfied.
The Group recognises revenue from contracts with customers at a point in time, or over time, when performance obligations are fulfilled by transferring the promised goods or services to the customer (namely, the asset). The asset is transferred at a point in time, or over time, when the customer obtains control of the asset.
The Group transfers control of the goods or services over time (and thus fulfils the performance obligations and recognises the revenue over time) if the situation satisfies one of the following criteria:
If the performance obligation is not satisfied over time, it is satisfied at a point in time. In such a situation, the Group recognises revenue at the time when the customer obtains control of the promised asset.
The Group allocates the contractual price to the individual performance obligations by reference to the relative standalone selling prices (SSP) for the individual performance obligations. When there is no SSP, the Group estimates the SSP using an adjusted market assessment approach.
In this case, the Group uses judgement to determine the performance obligation, variable consideration and allocation of the transaction price.
Dividends are recognised as at the date of the Shareholders' Meeting when the resolution establishing the right to receive payment is passed.
Dividends approved at the Shareholders' Meeting are shown as movements in net assets for the financial year in which they were approved.
Costs are recognised on an accrual basis. Research, advertising and promotional costs are recognised in the income statement in the year in which they are incurred.
Financial income and charges are recognised in the income statement when they are incurred.
As required by IAS 33, the Group presents on the face of the income statement basic and diluted earnings per share for profit or loss from continuing operations attributable to the ordinary equity holders of the parent entity. The information is presented only on the basis of the consolidated data, in accordance with the requirements of the aforementioned IAS.
Basic earnings per share are calculated by dividing the profit or loss attributable to the ordinary equity holders of the parent entity by the weighted number of ordinary shares outstanding during the period, excluding own shares. The weighted average of the shares was applied retroactively for all previous years.
Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to tax authorities. The tax rates and tax laws used to calculate the amount are those that have been enacted or are expected to apply as of the reporting date.
Deferred tax assets and liabilities are calculated using the so-called liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date.
Deferred tax liabilities are recognised for all taxable temporary differences, except:
Deferred tax assets are recognised for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilized, except when:
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized. Unrecognised deferred tax assets are reviewed on an annual basis at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax assets to be recovered.
Deferred tax assets or liabilities relating to items recognised directly in equity are recognised directly in equity and not in the income statement.
Starting 1 January 2019, the Group adapted to the new standard IFRS 16 – Leases for all contracts that, in exchange for consideration, convey the right to control the use of an identified asset for a period of time with the exception of leases with a term of less than 12 months and leases of low-value assets - pursuant to the provisions of paras. 5, B3-B8 of the standard. The lease term was defined on the basis of the contractually agreed duration and, where applicable, the reasonable certainty of exercising o not an option to extend or to terminate the contract, considering all relevant facts and circumstances that create an economic incentive for the lessee to exercise such option.
The Group applied the standard by adopting the simplified retrospective approach, recording, for the leases previously classified as operating leases, the lease liability at the current value of the remaining payments due, discounted using the incremental borrowing rate of the lessee at the date of initial application, and recognising the asset consisting of the right to use for an amount equal to the liability. Therefore, no cumulative effects adjusted the opening balance of shareholders' equity. In particular, as shown in the table below, the net assets (right of use) recorded at the date of first application amounted to €/000 291 and, likewise, the financial liabilities for leasing amounted to €/000 291.
It should be noted that the Group chose to adopt IFRS 16 without restating the comparative figures for 2018, as allowed by the standard.
The leases entered into by the Group are mainly attributable to lease contracts for buildings and cars.
The effect on the financial statements as of 1 January 2019 is shown below:
| €/000 | |||
|---|---|---|---|
| Statement of financial position (extract) | 31/12/2018 | IFRS 16 | 01/01/2019 |
| without the | with the effects | ||
| effects of IFRS 16 |
of IFRS 16 |
||
| Non-current assets | |||
| Property, plant and equipment | 48,596 | 209 | 48,805 |
| Equipment and other tangible assets | 1,427 | 107 | 1,534 |
| Effect on assets | 316 | ||
| non-current liabilities | 17,033 | 106 | 17,139 |
| non-current liabilities | 49,995 | 210 | 50,205 |
| Effect on liabilities | 316 |
The following table sets out the effect of the application of IFRS 16 on the financial statements as of 31 December 2019, which led to a reduction in the result for the period of €/000 9:
| Statement of financial position (extract) | Amounts without adoption of IFRS 16 |
IFRS 16 | 31/12/2019 with the effects of IFRS 16 |
|---|---|---|---|
| Non-current assets | |||
| Intangible assets | 1,595 | (1,339) | 256 |
| Property, plant and equipment | 46,868 | 1,486 | 48,354 |
| Equipment and other tangible assets | 1,679 | 71 | 1,750 |
| Effect on assets | 218 | ||
| non-current financial liabilities | 8,608 | 139 | 8,747 |
| current financial liabilities | 42,212 | 88 | 42,300 |
| Effect on liabilities | 227 |
| Income statement (extract) | Amounts without adoption of IFRS 16 |
IFRS 16 | 31/12/2019 with the effects of IFRS 16 |
|---|---|---|---|
| Costs for services | 27,788 | (100) | 27,688 |
| Depreciation/amortisation | 7,194 | 98 | 7,292 |
| Financial charges | 2,290 | 10 | 2,300 |
| Effect on profit/(loss) for the period | 9 |
As at the date of approval of these Financial Statements, the European Union competent bodies have completed the approval process required for the adoption of the following accounting standards and amendments, not adopted in advance by the IRCE Group:
| Definition of Material | On 31 October 2018, the IASB published the document Definition of |
|---|---|
| (Amendments to IAS 1 and | Material (Amendments to IAS 1 and IAS 8). It introduced an |
| IAS 8) | amendment to the definition of "material" contained in IAS 1 - |
| Presentation of Financial Statements and IAS 8 – Accounting Policies, | |
| Changes in Accounting Estimates and Errors. This amendment aims to | |
| make the definition of "material" more specific and introduced the | |
| concept of "obscured information" alongside the concepts of omitted or | |
| incorrect information, already present in the two standards being | |
| amended. The amendment clarifies that information is obscured if it | |
| has been described in such a manner so as to produce a similar effect | |
| for the primary readers of the financial statements to that produced if | |
| such information had been omitted or incorrect. The amendments | |
| introduced were approved on 29 November 2019 and apply to all | |
| transactions after 1 January 2020. | |
| Amendments to References to | On 29 March 2018, the IASB published an amendment to the |
| the Conceptual Framework in | References to the Conceptual Framework in IFRS Standards. The |
| IFRS Standards | amendment is effective for periods starting on or after 1 January 2020, |
| but early application is permitted. The Conceptual Framework defines | |
| the essential concepts for the financial disclosure and guides the Board | |
| in developing IFRS standards. The document helps guarantee that the | |
| standards are conceptually consistent and that similar transactions are | |
| treated in the same way, so as to provide information that is useful to | |
| investors, lenders and other creditors. The Conceptual Framework | |
| supports businesses in the development of accounting standards when | |
| no IFRS applies to a specific transaction and, more generally, helps the | |
| parties concerned to understand and interpret the standards. The | |
| amendments introduced were approved on 29 November 2019 and | |
| apply to all transactions after 1 January 2020. | |
| Amendments to IFRS 9, IAS 39 | On 26 September 2019, the IASB published the Amendments to IFRS 9, |
|---|---|
| and IFRS 7: Interest Rate | IAS 39 and IFRS 7: Interest Rate Benchmark Reform. This amends |
| Benchmark Reform | IFRS 9 - Financial Instruments and IAS 39 - Financial Instruments: |
| Recognition and Measurement as well as IFRS 7 - Financial | |
| Instruments: Disclosures. More specifically, the amendment alters some | |
| of the requirements laid down for the application of hedge accounting, | |
| envisaging temporary derogations from such, so as to mitigate the | |
| impact deriving from the uncertainty of the IBOR reform (still in | |
| progress) on future cash flows in the period prior to its completion. The | |
| amendment also requires companies to provide additional information | |
| in the financial statements on their hedging relations directly involved | |
| by the uncertainties generated by the reform and to which said | |
| derogations apply. The changes come into force on 1 January 2020, but | |
| companies may apply them early. The amendments introduced were | |
| approved on 15 January 2020 and apply to all transactions after 1 | |
| January 2020. |
The preliminary analyses carried out by the IRCE Group do not suggest any significant impacts deriving from the application of such standards.
Furthermore, as at the date of approval of these separate Financial Statements, the European Union competent bodies have not yet completed the approval process required for the adoption of the following accounting standards and amendments:
| Accounting standard/amendment | Endorsed by the EU | Effective date |
|---|---|---|
| IFRS 17 Insurance Contracts | NO | Annual periods beginning on or after 1 January 2021 |
| Amendment to IFRS 3 Business Combinations | NO | Annual periods beginning on or after 1 January 2021 |
| Amendments to IAS 1 Presentation of Financial Statements: Classification of Liabilities as Current or Non-current (issued on 23 January 2020) |
NO | Not available |
The preliminary analyses carried out by the IRCE Group do not suggest any significant impacts deriving from the application of such standards.
The Group uses the following type of derivative instruments:
Derivative instruments related to copper forward transactions with maturity after 31 December 2019. The Group entered into sale contracts to hedge against price decreases relating to the availability of raw materials, and purchase contracts to prevent price increases relating to sale commitments with fixed copper values. The fair value of forward contracts outstanding at the reporting date is determined on the basis of forward prices of copper and aluminium with reference to the maturity dates of contracts outstanding at the reporting date. These transactions do not qualify as hedging instruments for the purposes of hedge accounting.
A summary of derivative contracts related to commodity for forward sales and purchases outstanding at 31 December 2019 is shown below:
| Measurement unit of the notional amount |
Notional amount with maturity within one year net tonnes |
Notional amount with maturity after one year |
Result with fair value measurement as of 31/12/2019 €/000 |
|---|---|---|---|
| Copper | 1,050 | 361 |
Derivative instruments related to USD and GBP forward purchase and sale contracts with maturity after 31 December 2019. These transactions do not qualify as hedging instruments for the purposes of cash flow hedge accounting.
A summary of derivative contracts related to USD forward purchases and sales outstanding at 31 December 2019 is shown below:
| Measurement unit of the notional amount |
Notional amount in foreign currency with maturity within one year |
Notional amount with maturity after one year |
Result with fair value measurement as of 31/12/2019 €/000 |
|---|---|---|---|
| USD GBP |
9,211 6,000 |
(113) 11 |
|
| Total |
Here below is the breakdown of financial instruments referring to the items of the financial statements:
| As of 31 December 2018 - €/000 | Amortised cost |
FV with a balancing entry in the income statement |
FV with a balancing entry in equity |
Total |
|---|---|---|---|---|
| Non-current financial assets | ||||
| Non-current financial assets and receivables | 112 | 112 | ||
| Current financial assets | ||||
| Trade receivables | 70,214 | 70,214 | ||
| Current financial assets | 295 | 295 | 590 | |
| Cash and cash equivalents | 7,019 | 7,019 | ||
| FV with a | FV with a | |||
| As of 31 December 2019 - €/000 | Amortised cost |
balancing entry in the income statement |
balancing entry in equity |
Total |
| Non-current financial assets | ||||
| Non-current financial assets and receivables | 122 | 235 | ||
| Current financial assets | ||||
| Trade receivables | 63,130 | 63,130 | ||
| Current financial assets | 14 | 372 | 386 | |
| Cash and cash equivalents | 8,632 | 8,632 |
| Amortised | FV with a balancing entry in the income |
FV with a balancing entry in |
||
|---|---|---|---|---|
| As of 31 December 2018 - €/000 | cost | statement | equity | Total |
| Non-current financial liabilities | ||||
| Financial payables | 17,033 | 17,033 | ||
| Current financial liabilities | ||||
| Trade payables | 16,212 | 16,212 | ||
| Other payables | 10,555 | 10,555 | ||
| Financial payables | 49,931 | 64 | 49,995 | |
| As of 31 December 2019 - €/000 | Amortised cost |
FV with a balancing entry in the income statement |
FV with a balancing entry in equity |
Total |
| Non-current financial liabilities | ||||
| Financial payables | 8,747 | 8,747 | ||
| Current financial liabilities | ||||
| Trade payables | 13,455 | 13,455 | ||
| Other payables | 8,994 | 8,994 | ||
| Financial payables | 42,187 | 113 | 42,300 | |
A comparison between the carrying amount of financial instruments held by the Group and their fair value did not yield significant differences in value.
IFRS 13 defines the following three levels of fair value for measuring the financial instruments recognised in the statement of financial position:
The following tables show the assets and liabilities that are measured at fair value as of 31 December 2018 and as of 31 December 2019 broken down by level of fair value hierarchy (€/000):
| 2018 | Level 1 | Level 2 | Level 3 | Total |
|---|---|---|---|---|
| Assets: | ||||
| Derivative financial instruments | - | 295 | 295 | |
| AFS | - | - | - | |
| Total assets | - | 295 | 295 | |
| Liabilities: | ||||
| Derivative financial instruments | - | (64) | - | (64) |
| Total liabilities | - | (64) | - | (64) |
| 2019 | Level 1 | Level 2 | Level 3 | Total |
| Assets: | ||||
| Derivative financial instruments | - | 372 | - | 372 |
| AFS | - | - | - | - |
| Total assets | - | 372 | - | 372 |
| Liabilities: | ||||
| Derivative financial instruments Total liabilities |
- - |
(113) (113) |
- - |
(113) (113) |
During the year, there were no transfers between the three fair value levels specified in IFRS 7.
IFRS 8 defines an operating segment as follows. An operating segment is a component of an entity: a) that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity);
b) whose operating results are reviewed regularly by the entity's chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance; and c) for which discrete financial information is available.
With regard to the two types of products sold, IRCE S.p.A.'s management only monitors the breakdown of revenues between winding wires and cables. Unallocated balance refers to revenues from the sale of other materials and services that cannot be classified within the two types of products sold.
Revenues are then analysed by geographical area (revenues from Italian customers, EU customers excluding Italy, and non-EU customers).
The winding wire segment supplies manufacturers of electric motors and generators, transformers, relays and solenoid valves.
The cable segment supplies the following industries: construction, civil and industrial engineering (cabling), and consumer durables (electrical devices).
| €/000 | Year 2019 | Year 2018 | ||||||
|---|---|---|---|---|---|---|---|---|
| Winding wires |
Cables | Not allocated |
Total | Winding wires |
Cables | Not allocated |
Total | |
| Revenues | 257,666 | 54,247 | 25 | 311,938 | 290,021 | 65,353 | 30 | 355,404 |
| % of total | 82.6% | 17.4% | 0.0% | 100.0% | 81.6% | 18.4% | 0.0% | 100.0% |
| Year 2019 | Year 2018 | |||||||
|---|---|---|---|---|---|---|---|---|
| €/000 | Italy | EU (excluding Italy) |
Non-EU | Total | Italy | EU (excluding Italy) |
Non-EU | Total |
| Revenues | 113,301 | 122,319 | 76,318 | 311,938 | 125,807 | 148,374 | 81,223 | 355,404 |
| % of total | 36.3% | 39.2% | 24.5% | 100.0% | 35.4% | 41.7% | 22.9% | 100.0% |
This item refers to intangible assets from which future economic benefits are expected. The changes in their net carrying amount are shown below:
| €/000 | Patent and intellectual property rights |
Licenses, trademarks, similar rights and other multi-year charges |
Assets under development |
Total |
|---|---|---|---|---|
| Net carrying amount as of | ||||
| 31/12/2017 | 136 | 23 | 189 | 348 |
| Changes during the period | ||||
| . Investments | 70 | 5 | - | 75 |
| . Effect of exchange rates | (4) | (2) | - | (6) |
| . Reclassifications | 4 | - | - | 4 |
| . Write-downs | - | - | (189) | |
| . Depreciation/amortisation | (100) | (4) | - | (104) |
| Total changes | (30) | (1) | (189) | (221) |
| Net carrying amount as | ||||
| of 31/12/2018 | 106 | 22 | - | 127 |
| Changes during the period | ||||
| . Investments | 5 | 177 | - | 182 |
| . Effect of exchange rates | 1 | - | - | 1 |
| . Reclassifications | - | - | - | 0 |
| . Write-downs | - | - | - | 0 |
| Depreciation/amortisation | (43) | (12) | - | (55) |
| Total changes | (37) | 165 | - | 128 |
| Net carrying amount as of 31/12/2019 |
69 | 187 | - | 256 |
"Investments in licences, trademarks, similar rights and other multi-year charges" include costs for €/000 176 incurred for product approval tests run at external laboratories, necessary to obtain technical suitability for the supply of materials to a publicly-owned company.
| Industrial and | Assets under | ||||||
|---|---|---|---|---|---|---|---|
| Plant and | commercial | Other | construction | ||||
| €/000 | Land | Buildings | equipment | equipment | assets | and advances | Total |
| Net carrying amount as of | |||||||
| 31/12/2017 | 11,616 | 15,263 | 23,887 | 962 | 576 | 2,211 | 54,516 |
| Changes during the period | |||||||
| . Investments | - | 47 | 4,418 | 252 | 146 | 1,509 | 6,372 |
| . Effect of exchange rates | (1) | (259) | (1,177) | (4) | 3 | (2) | (1,440) |
| . Reclassifications | - | - | 1,198 | 92 | - | (1,294) | (4) |
| . Divestments | - | - | (585) | (82) | (238) | (24) | (929) |
| . Depreciation related to | |||||||
| disposals | - | - | 379 | 82 | 198 | - | 659 |
| . Depreciation of the period | - | (1,086) | (5,105) | (393) | (167) | - | (6,751) |
| Total changes | (1) | (1,298) | (872) | (53) | (58) | 189 | (2,093) |
| Net carrying amount as of | |||||||
| 31/12/2018 | 11,615 | 13,965 | 23,015 | 909 | 518 | 2,400 | 52,423 |
| Changes during the period | |||||||
| . Right-of-use assets (IFRS | |||||||
| 16) | - | 209 | - | - | 107 | - | 316 |
| . Investments | 1,339 | 27 | 3,721 | 389 | 292 | 117 | 5,885 |
| . Effect of exchange rates | 88 | 148 | (79) | 5 | (1) | - | 161 |
| . Reclassifications | - | 407 | 476 | 192 | - | (1,075) | - |
| . Divestments | - | - | (4,866) | 23 | (278) | (6) | (5,127) |
| . Depreciation related to disposals |
- | - | 4,866 | (23) | 276 | - | 5,119 |
| . Depreciation related to | |||||||
| IFRS 16 | - | (62) | - | - | (36) | - | (98) |
| . Depreciation of the period | - | (1,055) | (5,461) | (439) | (183) | - | (7,138) |
| Total changes | 1,427 | (326) | (1,343) | 147 | 177 | (964) | (882) |
| Net carrying amount as of | |||||||
| 31/12/2019 | 13,042 | 13,639 | 21,672 | 1,056 | 695 | 1,436 | 51,541 |
| - Of which IFRS 16 | 1,339 | 147 | - | - | 71 | - | 1,557 |
"Land and buildings" refers to production plants owned by the group, while the investment made of €/000 1,339 under "land" refers to the purchase under a forty-year concession, of land by the Chinese subsidiary.
The item "fixed assets under construction" includes machinery available and not yet installed.
Investments totalled € 5.89 million and concerned mainly the Parent Company IRCE S.p.A. for the purchase of machinery.
The exchange effect is mainly due to the conversion from local currency to euros of changes to fixed assets of IRCE Ltda, Isomet AG and FD Sims Ltd.
Divestments refer primarily to machinery no longer in use and depreciated in full, while reclassifications of assets under construction refer to machinery purchased in the previous years that have become operational.
Non-current financial assets and receivables are broken down as follows:
| €/000 | 31/12/2019 | 31/12/2018 |
|---|---|---|
| - Equity investments in other companies | 113 | 112 |
| - Other receivables | 122 | - |
| Total | 235 | 112 |
The item "equity investments in other companies" refers to a shareholding held by the Indian subsidiary Stable Magnet Wire P. Ltd in a non-operational company.
The item "other receivables" refers to Energy Savings Certificates (ESC) held by the parent company IRCE S.p.A., issued in 2019.
The item refers for €/000 376 to the tax credit for the 2011 IRES rebate application, art. 2, para. 1-quater of Italian Decree Law no. 201/2011 of the parent company IRCE S.p.A.; the reduction of €/000 436 on the previous year is due to the rebate obtained in December 2019 for the years 2007 and 2008.
Deferred tax assets and liabilities are broken down as follows: €/000 31/12/2019 31/12/2018
| - Deferred tax assets | 1,375 | 1,879 |
|---|---|---|
| - Deferred tax liabilities | (127) | (704) |
| Total deferred tax assets (net) | 1,248 | 1,176 |
The changes for the period are shown below:
| €/000 | 31/12/2019 | 31/12/2018 |
|---|---|---|
| Deferred tax assets (net) as of 1 January IFRS 15 (opening effects as of 1 January 2018) |
1,176 - |
1,407 511 |
| Exchange rate differences | (34) | 24 |
| Income statement effect | 32 | (704) |
| Effect on shareholders' equity | 74 | (62) |
| Deferred tax assets (net) as of 31 December | 1,248 | 1,176 |
Here below is the breakdown of deferred tax assets and liabilities and the relevant changes for the period, without considering the offsetting of items within the same fiscal jurisdiction:
| €/000 | 31/12/2019 | 31/12/2018 |
|---|---|---|
| - Allocations to provisions for risks and charges | 77 | 536 |
| - Allocations to the taxed bad debt provision | 233 | 236 |
| - Tax losses which can be carried forward | 89 | 309 |
| - Intra-group margin | 54 | 58 |
| - Allocations to the provision for inventory obsolescence | 885 | 751 |
| - Isomet AG Reserve | 172 | 179 |
| - IFRS 15 | 575 | 476 |
| - IFRS 19 | 74 | 40 |
| - Other | 63 | 88 |
| Total | 2,212 | 2,673 |
Tax losses that can be carried forward refer to the subsidiary IRCE Ltda.
The Group also has tax losses that can be carried forward relating to foreign subsidiaries in the amount of €/000 1,598 against which no prepaid tax assets had been booked as of 31 December 2019, as the related recovery through future taxable income was not considered likely.
The table below shows the changes in deferred tax assets during 2018 and 2019:
| Taxed provisions | IFRS 15 | Tax losses carried forward | Other | Total | |
|---|---|---|---|---|---|
| balance as of 01/01/2018 | 1,473 | 567 | 411 | 2,451 | |
| IFRS 15 | 511 | 511 | |||
| effect on income statement | 50 | (35) | (292) | (15) | (292) |
| effect on shareholders' equity | (40) | (40) | |||
| exchange rate difference | 34 | 9 | 43 | ||
| balances as of 31/12/2018 | 1,523 | 476 | 309 | 365 | 2,673 |
| effect on income statement | (338) | 99 | (236) | (85) | (561) |
| effect on shareholders' equity | 74 | 74 | |||
| exchange rate difference | 16 | 9 | 25 | ||
| balances as of 31/12/2019 | 1,185 | 575 | 89 | 363 | 2,212 |
The effects on shareholders' equity refer to changes in the actuarial reserve as per IAS 19. Deferred tax assets were recognised for temporary differences between the tax bases of assets and liabilities and their carrying amounts and to the extent that it is probable that taxable profit will be available against which these differences can be utilised.
Deferred tax liabilities are broken down as follows:
| Deferred tax liabilities - €/000 | 31/12/2019 | 31/12/2018 |
|---|---|---|
| - Depreciation/amortisation | 36 | 36 |
| - IAS capital gains on buildings of IRCE S.p.A. | 97 | 97 |
| - IAS capital gains on land of IRCE S.p.A. | 413 | 413 |
| - Effect of application of IAS 19 | - | 22 |
| - Effect of tax depreciation of the Isomet AG building | 210 | 225 |
| - Effect of tax inventory difference of Isomet AG | 119 | 259 |
| - Effect of tax depreciation of Smit Draad Nijmegen | - | 23 |
| - Effect of tax inventory difference of Smit Draad Nijmegen | - | 422 |
| - Exchange gains from adjustment | 88 | - |
| Total | 963 | 1,497 |
The table below shows the changes in deferred tax liabilities during 2018 and 2019:
| Depreciation/ amortisation |
IAS capital gain on land and building |
ISOMET AG | Simit Draad BV |
Effect of IAS 19 |
Other | Total | |
|---|---|---|---|---|---|---|---|
| balance as of 01/01/2018 | 42 | 510 | 489 | 3 | 1,044 | ||
| effect on income statement | (6) | (24) | 445 | (3) | 412 | ||
| effect on shareholders' equity | 22 | 22 | |||||
| exchange rate difference | 19 | 19 | |||||
| balances as of | |||||||
| 31/12/2018 | 36 | 510 | 484 | 445 | 22 | - | 1,497 |
| effect on income statement | (214) | (445) | (22) | 88 | (593) | ||
| effect on shareholders' equity | |||||||
| exchange rate difference | 59 | 59 | |||||
| balances as of 31/12/2019 |
36 | 510 | 329 | 88 | 963 |
Inventories are broken down as follows:
| €/000 | 31/12/2019 | 31/12/2018 |
|---|---|---|
| - Raw materials, ancillary and consumables | 28,584 | 37,269 |
| - Work in progress and semi-finished goods | 12,977 | 11,110 |
| - Finished products and goods | 44,671 | 51,218 |
| - Provision for write-down of raw materials | (2,759) | (2,876) |
| - Provision for write-down of finished products and goods | (1,165) | (935) |
| Total | 82,308 | 95,786 |
Recognised inventories are not pledged nor used as collateral.
The provision for the write-down of raw materials corresponds to the amount deemed necessary to cover the risks of obsolescence, mainly of packaging, whilst the provision for the write-down of finished products and goods is made against slow-moving or non-moving finished products.
The table below shows the changes in the provision for write-down of inventories during 2019:
| €/000 | 31/12/2018 | Allocations | Uses | 31/12/2019 |
|---|---|---|---|---|
| Provision for write-down of raw materials |
2,876 | - | (117) | 2,759 |
| Provision for write-down of finished products and goods |
935 | 345 | (115) | 1,165 |
| Total | 3,811 | 345 | (232) | 3,924 |
| €/000 | 31/12/2019 | 31/12/2018 |
|---|---|---|
| - Customers/Bills receivable - Bad debt provision |
63,781 (651) |
70,963 (748) |
| Total | 63,130 | 70,214 |
The balance of receivables due from customers is entirely composed of receivables due within the next 12 months.
The reduction in trade receivables is connected to revenue performance and a reduction in raw material prices, as explained in the report on operations.
The trade receivables sold during the year came to €/000 23,507, whilst at year end they totalled €/000 7,669.
The table below shows the changes in the bad debt provision during 2018 and 2019:
| €/000 | 31/12/2017 | Allocations | Uses | 31/12/2018 |
|---|---|---|---|---|
| Bad debt provision | 825 | 134 | (211) | 748 |
| €/000 | 31/12/2018 | Allocations | Uses | 31/12/2019 |
| Bad debt provision | 748 | 104 | (201) | 651 |
Tax receivables, of €/000 807, refer to tax advances paid partially offset by current tax payables.
The item is broken down as follows:
| €/000 | 31/12/2019 | 31/12/2018 |
|---|---|---|
| - Accrued income and prepaid expenses | 119 | 146 |
| - Receivables due from social security institutions | 110 | 84 |
| - Other receivables | 761 | 1,481 |
| - VAT receivables | 1,064 | 2,328 |
| Total | 2,054 | 4,039 |
"Other receivables" mainly includes insurance reimbursements of the parent company IRCE S.p.A. and advances for customs expenses of the Brazilian subsidiary IRCE Ltda; the change on last year is mainly due to the receipt, during 2019, by the parent company IRCE S.p.A., of the bonus on electricity consumption assigned by the Electricity Authority, by authorisation of the Minister of Economic Development.
| €/000 | 31/12/2019 | 31/12/2018 |
|---|---|---|
| - Mark to Market copper forward transactions - Guarantee deposits |
372 14 |
295 295 |
| Total | 386 | 590 |
The item "Mark to Market copper forward transactions" refers to the fair value of derivative contracts for the forward purchase and sale of copper on the LME and derivative contracts related to GBP forward sale contract outstanding as of 31 December 2019 of the parent company IRCE S.p.A.
This item includes bank deposits, cash and cash equivalents.
| €/000 | 31/12/2019 | 31/12/2018 |
|---|---|---|
| - Bank and postal deposits | 8,621 | 6,158 |
| - Cash and cash equivalents | 11 | 861 |
| Total | 8,632 | 7,019 |
Outstanding bank and postal deposits are not subject to constraints or restrictions.
The share capital is composed of 28,128,000 ordinary shares worth € 14,626,560. The shares are fully subscribed and paid up and bear no rights, privileges or restrictions as far as dividend distribution and capital distribution, if any, are concerned.
In the year 2019, a dividend of €/000 1,333 (€ 0.05 per share) was distributed.
Here below is the breakdown of reserves:
| €/000 | 31/12/2019 | 31/12/2018 |
|---|---|---|
| - Own shares (share capital) | (800) | (788) |
| - Share premium reserve | 40,539 | 40,539 |
| - Own shares (share premium) | 33 | 64 |
| - Other reserves | 45,924 | 45,924 |
| - Foreign currency translation reserve | (22,894) | (22,624) |
| - Legal reserve | 2,925 | 2,925 |
| - Extraordinary reserve | 41,059 | 34,486 |
| - IAS 19 reserve | (1,196) | (1,071) |
| - Undistributed profits | 9,687 | 11,714 |
| Total | 115,277 | 111,168 |
This reserve refers to the par value and share premium of own shares held by the Company; they are recognised as a deduction from shareholders' equity.
Own shares as of 31 December 2019 amounted to 1,537,988 and corresponded to 5.47% of the share capital. The number of shares outstanding at the beginning and at the end of the last two years is shown below:
| Thousands of shares | |
|---|---|
| Balance as of 31/12/2017 | 26,716 |
| Share buyback | (104) |
| Balance as of 31/12/2018 | 26,612 |
| Share buyback | (23) |
| Balance as of 31/12/2019 | 26,590 |
This item refers to the higher issue value compared to the par value of IRCE S.p.A. shares issued at the time of the share capital increase when the Company was first listed on the stock exchange in 1996.
The item "other reserves" refers mainly to:
Foreign currency translation reserve
This reserve represents the value accounting differences which result from the foreign currency translation of the financial statements of the foreign subsidiaries Isomet AG, FD Sims Ltd, IRCE Ltda, Stable Magnet Wire P.Ltd, IRCE SP.ZO.O and IRCE Electromagnetic wire Co. Ltd by using the official exchange rate as of 31 December 2018.
Extraordinary reserve
The extraordinary reserve consists mainly of retained earnings of the Parent Company.
IAS 19 reserve
This reserve includes actuarial gains and losses accumulated as a result of the application of IAS 19 Revised. The change in the reserve is as follows:
| balance as of 01.01.2018 | (1,304) |
|---|---|
| Actuarial valuation Tax effect on actuarial valuation |
294 (62) |
| balance as of 31.12.2018 | (1,071) |
| Actuarial valuation Tax effect on actuarial valuation |
(199) 74 |
| balance as of 31.12.2019 | 1,196 |
Undistributed profits
The reserve for undistributed profits primarily refers to the subsidiaries' retained earnings.
The distribution of the reserves and profits of subsidiaries is not planned.
Profit for the year
The profit attributable to the Group, net of the portion attributable to non-controlling interests, totalled €/000 1,942 (€/000 5,876 as of 31 December 2018).
SHAREHOLDERS' EQUITY ATTRIBUTABLE TO NON-CONTROLLING INTERESTS
Capital and reserves attributable to non-controlling interests
This amount refers to the portion of shareholders' equity of investees consolidated using the line-by-line method attributable to non-controlling interests.
Losses attributable to non-controlling interests
This represents the portion of loss for the year of investees consolidated using the line-by-line method attributable to non-controlling interests.
| €/000 | Currency | Rate | Company | 31/12/2019 | 31/12/2018 | Due date |
|---|---|---|---|---|---|---|
| Banco Popolare | EUR | Floating | IRCE S.p.A. | 3,125 | 4,375 | 2023 |
| Banca di Imola | EUR | Floating | IRCE S.p.A. | - | 1,260 | 2020 |
| CARISBO | EUR | Floating | IRCE S.p.A. | - | 4,000 | 2020 |
| Mediocredito | EUR | Floating | IRCE S.p.A. | 4,154 | 5,077 | 2025 |
| Banco Popolare | EUR | Floating | Isomet AG | 1,329 | 2,321 | 2021 |
| IFRS 16 | EUR | Floating | IRCE S.p.A. | 28 | - | 2023 |
| IFRS 16 | EUR | Floating | IRCE SL | 90 | - | 2023 |
| IFRS 16 | EUR | Floating | Magnet Wire Ltd | 21 | - | 2022 |
| Total | 8,747 | 17,033 |
As regards the items related to the application of the new IFRS 16 standard, please refer to the paragraph "Accounting Standards".
The table below shows the changes in non-current financial liabilities during 2019:
| €/000 | Company | 31/12/2018 | Loans | Repayments | 31/12/2019 |
|---|---|---|---|---|---|
| Banco Popolare | IRCE S.p.A. | 4,375 | - | (1,250) | 3,125 |
| Banca di Imola | IRCE S.p.A. | 1,260 | - | (1,260) | - |
| CARISBO | IRCE S.p.A. | 4,000 | - | (4,000) | - |
| Mediocredito | IRCE S.p.A. | 5,077 | - | (923) | 4,154 |
| Banco Popolare | Isomet AG | 2,321 | - | (992) | 1,329 |
| IFRS 16 | IRCE S.p.A. | - | 28 | - | 28 |
| IFRS 16 | IRCE SL | - | 90 | - | 90 |
| IFRS 16 | Magnet Wire Ltd | - | 21 | - | 21 |
| Total | 17,033 | 139 | (8,425) | 8,747 |
Covenants
For the year ended at 31 December 2019, the covenants were respected. The parameters used to calculate compliance with covenants are those of the Group's consolidated financial statements.
Provisions for risks and charges are broken down as follows:
| €/000 | 31/12/2018 | Allocations | Uses | 31/12/2019 |
|---|---|---|---|---|
| Provision for risks and charges | 1,599 | 627 | (1,530) | 696 |
| Severance payments | 294 | 2 | (91) | 205 |
| Total | 1,893 | 629 | 1,621) | 901 |
The item "provision for risks and charges" refers for €/000 495 to costs to be incurred by the Dutch subsidiary Smit Draad Nijmegen BV, classified in the income statement amongst personnel costs, and for €/000 201 to miscellaneous disputes of the parent company IRCE S.p.A.
Period uses of €/000 1,530 mainly refer to the corporate restructuring implemented by the Dutch subsidiary Smit Draad Nijmegen BV.
"Provision for severance payments to agents" refers to allocations made for severance payments relating to outstanding agency contracts.
The table below shows the changes in the Provision for employee defined benefits.
| €/000 | 31/12/2019 | 31/12/2018 |
|---|---|---|
| Provision for employee benefits as of 01/01 | 5,313 | 5,720 |
| Financial charges | 40 | 51 |
| Actuarial (gains)/losses | 199 | (294) |
| Service cost | (44) | 175 |
| Payments | (447) | (386) |
| Effect of exchange rates | 38 | 47 |
| Provision for employee benefits as of 31/12 | 5,099 | 5,313 |
The Provision includes €/000 4,009 related to the Parent Company IRCE S.p.A., €/000 1,012 related to the subsidiary ISOMET AG, €/000 65 related to the subsidiary Isolveco S.R.L., and €/000 13 related to the subsidiary Isolveco 2 S.R.L.
The Provision for employee benefits is part of the defined benefit plans.
In order to determine the relevant liability, the Company used the Projected Unit Credit (PUC) cost method, which consists in the following:
Here below are the demographic assumptions used by the actuary in measuring the provision for employee benefits:
For the Parent Company IRCE S.p.A., the following technical-economic assumptions were made:
| 31/12/2019 | 31/12/2018 | |
|---|---|---|
| Annual discount rate | 0.37% | 1.13% |
| Annual inflation rate | 1.20% | 1.50% |
| Annual rate of increase of employee termination indemnities |
2.40% | 2.625% |
The IBOXX Corporate AA index with a 7-10 year duration as of the measurement date was used as a benchmark for the discount rate.
The annual rate of increase of employee termination indemnities is equal to 75% of inflation, plus 1.5 percentage points.
Here below are the disclosures required by IAS 19
Sensitivity analysis of IRCE S.p.A.'s main measurement parameters:
| €/000 | DBO change as of 31/12/2019 |
|---|---|
| Inflation rate +0.25% | 4,062 |
| Inflation rate -0.25% | 3,958 |
| Discount rate +0.25% | 3,926 |
| Discount rate -0.25% | 4,096 |
| Turnover rate +1% | 3,977 |
| Turnover rate -1% | 4,045 |
Service cost: 0.00 Duration of the plan: 9.0
Sensitivity analysis of ISOMET AG's main measurement parameters:
| €/000 | DBO change as of 31/12/2019 |
|---|---|
| Inflation rate -0.25% | 1,035 |
| Inflation rate +0.25% | 994 |
| Discount rate -0.25% | 859 |
| Discount rate +0.25% | 1,155 |
| Turnover rate -0.25% | 1,055 |
| Turnover rate +0.25% | 970 |
2019 service cost with +0.25% discount rate: €/000 97 2019 service cost with +0.25% turnover rate: €/000 108
Duration of the plan: 17.3.
Financial liabilities are broken down as follows:
| €/000 | 31/12/2019 | 31/12/2018 |
|---|---|---|
| - Payables due to banks | 42,099 | 49,931 |
| - Mark to Market derivatives | 113 | 64 |
| - IFRS 16 | 88 | - |
| Total | 42,300 | 49,995 |
The item "Mark to Market derivatives" refers to the fair value of USD forward purchase contracts outstanding as of 31 December 2019 of the Parent Company IRCE S.p.A.
As regards the item related to the application of the new IFRS 16, please refer to the paragraph "Accounting Standards".
With regard to financial liabilities, the overall net financial position of the Group, calculated in accordance with the provisions of Consob Communication 6064293 dated 28 July 2006 and CESR recommendation dated 10 February 2005, was as follows:
| €/000 | 31/12/2019 | 31/12/2018 |
|---|---|---|
| Cash Other current financial assets* |
8,632 25* |
7,019 295* |
| Liquid assets | 8,657 | 7,314 |
| Current financial liabilities | (42,300) | (49,995) |
| Net current financial debt | (33,643) | (42,681) |
| Non-current financial liabilities | (8,747) | (17,033) |
| Non-current financial debt | (8,747) | (17,033) |
| Net financial debt | (42,390) | (59,714) |
* These items differ from the corresponding items of the statement of financial position, since the fair value measurement of copper forward contracts is not included.
Trade payables are all due in the next 12 months. As of 31 December 2019, they amount to €/000 13,455, compared to €/000 16,212 as of 31 December 2018; the decrease was mainly due to the lower amount of copper purchased at the end of 2019.
The item is equal to €/000 126 as of 31 December 2019 and refers to payables due for income taxes of foreign subsidiaries.
This item, equal to €/000 1,848 as of 31 December 2019, primarily refers to IRCE S.p.A.'s payables for social security contributions due to INPS.
Other payables are broken down as follows:
| €/000 | 31/12/2019 | 31/12/2018 |
|---|---|---|
| - Payables due to employees | 3,366 | 3,647 |
| - Deposits received from customers | 1,957 | 1,867 |
| - Accrued liabilities and deferred income | 262 | 353 |
| - Other payables | 476 | 628 |
| - VAT payables | 476 | 593 |
| - Employee IRPEF (personal income tax) payables | 483 | 477 |
| Total | 7,020 | 7,566 |
"Payables due to employees" include the liabilities for the thirteenth month's salary, for holiday accrued and not taken and for production premiums.
The item "deposits received from customers" refers to deposits for packaging which will be credited back to customers when they return the packaging.
Other payables are mainly amounts due to tax authorities for withholdings and other miscellaneous liabilities
These refer to revenues from the sale of goods, net of returns, rebates and the return of packaging. Consolidated turnover in 2019, equal to €/000 311,938, was down 12.2% compared to the previous year (€/000 355,404). For additional details, refer to the previous paragraph on segment reporting.
Other income was broken down as follows:
| €/000 | 31/12/2019 | 31/12/2018 | change |
|---|---|---|---|
| - Increases in internally generated fixed assets | 116 | 217 | (101) |
| - Capital gains on disposals of assets | 25 | 23 | 2 |
| - Insurance reimbursements | 132 | 54 | 78 |
| - Contingent assets | 118 | 50 | 68 |
| - Other revenues | 618 | 657 | (39) |
| Total | 1,009 | 1,001 | 8 |
This item, equal to €/000 240,879, includes costs incurred for the acquisition of raw materials, of which the most significant are those represented by copper, insulating materials and materials for packaging and maintenance, net of the change in inventories (€/000 8,496).
These include costs incurred for the supply of services pertaining to copper processing as well as utilities, transportation, commercial and administrative services, and the costs for the use of third-party goods, as detailed below:
| €/000 | 31/12/2019 | 31/12/2018 | change |
|---|---|---|---|
| - External processing | 5,240 | 5,283 | (43) |
| - Utility expenses | 10,166 | 10,960 | (794) |
| - Maintenance | 2,134 | 1,834 | 300 |
| - Transportation expenses | 4,773 | 4,757 | 16 |
| - Payable fees | 267 | 303 | (36) |
| - Compensation of Statutory Auditors | 69 | 68 | 1 |
| - Other services | 4,743 | 5,250 | (507) |
| - Costs for the use of third-party goods | 296 | 313 | (17) |
| Total | 27,688 | 28,768 | (1,080) |
Savings in "utility expenses" are due to the lesser costs incurred by the production companies in Europe (IRCE S.p.A., FD Sims and Smit Draad) as a consequence of the lesser consumption of electricity due to the decline in production.
The item "other services" includes primarily technical, legal and tax consulting fees as well as insurance and business expenses.
Here below is the breakdown of personnel costs:
| €/000 | 31/12/2019 | 31/12/2018 | change |
|---|---|---|---|
| - Salaries and wages | 20,860 | 21,728 | (868) |
| - Social security charges | 5,482 | 5,694 | (212) |
| - Retirement costs for defined-contribution plans | 1,301 | 1,470 | (169) |
| - Other costs | 2,552 | 3,465 | (913) |
| Total | 30,195 | 32,357 | (2,162) |
The item "other costs" includes costs for temporary work, contract work, and the compensation of Directors.
The lower personnel costs were due to a reduction in the number of employees in some European subsidiaries, on the basis of a reorganisation plan. Additionally, in 2018 "other costs" had included the costs and redundancy benefits included in the reorganisation plans.
The Group's average number of personnel for the year and the current number at year-end is shown below:
| Personnel | 2019 Average | 31/12/2019 | 31/12/2018 |
|---|---|---|---|
| - Executives | 23 | 22 | 23 |
| - White collars | 156 | 155 | 159 |
| - Blue collars | 529 | 527 | 541 |
| Total | 708 | 704 | 723 |
The average number of employees is calculated according to the Full-Time Equivalent method and includes both internal and external (temporary and contract) staff.
Personnel is classified according to the type of employment contract.
Here is the breakdown of depreciation/amortisation:
| €/000 | 31/12/2019 | 31/12/2018 | change |
|---|---|---|---|
| - Amortisation of intangible assets | 55 | 104 | (49) |
| - Depreciation of tangible assets | 7,139 | 6,751 | 388 |
| - Depreciation/amortisation IFRS 16 | 98 | - | 98 |
| Total amortisation/depreciation and write-downs | 7,292 | 6,855 | 437 |
Provisions and write-downs are broken down as follows:
| €/000 | 31/12/2019 | 31/12/2018 | change |
|---|---|---|---|
| - Write-downs of receivables | 104 | 134 | (30) |
| - Credit losses | - | 219 | (219) |
| - Provisions for risks | - | 203 | (203) |
| Total provisions and write-downs | 104 | 556 | (452) |
Other operating costs are broken down as follows:
| €/000 | 31/12/2019 | 31/12/2018 | change |
|---|---|---|---|
| - Non-income taxes and duties | 814 | 904 | (90) |
| - Capital losses and contingent liabilities | 123 | 124 | (1) |
| - Other costs | 188 | 166 | 22 |
| Total | 1,125 | 1,194 | (69) |
The item "non-income taxes and duties" mainly consists of non-deductible taxes for Brazilian subsidiary IRCE Ltda.
Financial income and charges are broken down as follows:
| €/000 | 31/12/2019 | 31/12/2018 | change |
|---|---|---|---|
| - Other financial income | 2,995 | 3,742 | (747) |
| - Interest and other financial charges | (862) | (1,084) | 222 |
| - Foreign exchange gains/(losses) | 167 | 39 | 128 |
| Total | 2,300 | 2,697 | (397) |
Here below is the breakdown of "other financial income":
| €/000 | 31/12/2019 | 31/12/2018 | change |
|---|---|---|---|
| - Interest income from banks | 6 | 5 | 1 |
| - Interest income on receivables due from customers | 8 | 4 | 4 |
| - Income from LME derivatives | 1,734 | 2,456 | (722) |
| - Other financial income | 1,247 | 1,277 | (30) |
| Total | 2,995 | 3,742 | (747) |
The item "income from LME derivatives" refers to the closing and Mark to Market (fair value) measurement of copper derivative contracts of the parent company IRCE S.p.A.
"Other financial income" refers mainly to the Brazilian subsidiary IRCE Ltda and concerns interest income on extended payment terms granted to customers due to the use of factoring.
Here below is the breakdown of "Interest and other financial charges":
| €/000 | 31/12/2019 | 31/12/2018 | change |
|---|---|---|---|
| - Interest expense for short-term payables | 32 | 22 | 10 |
| - Interest expense for medium to long-term payables | 106 | 121 | (15) |
| - Sundry interest expense | 40 | 51 | (11) |
| - Bank fees and expenses | 99 | 88 | 11 |
| - Interest expense on factoring | 585 | 802 | (217) |
| Total | 862 | 1,084 | (222) |
The item "sundry interest expense" refers mainly to the interest cost deriving from the discounting of employee termination indemnity in accordance with IAS 19 of the parent company IRCE S.p.A. and the subsidiary ISOMET AG.
"Interest expense on factoring" refers to the expenses relative to the discount without recourse of trade receivables due from the subsidiary IRCE Ltda and the parent company IRCE S.P.A.
| €/000 | 31/12/2019 | 31/12/2018 | changes |
|---|---|---|---|
| - Current taxes - Deferred tax assets/(liabilities) |
(782) 32 |
(3,687) (704) |
2,905 736 |
| Total | (750) | (4,391) | 3,641 |
As required by IAS 33, here below are the disclosures on the data used to calculate basic and diluted earnings per share.
For the purposes of calculating the basic earnings per share, the profit or loss for the period less the portion attributable to non-controlling interests was used as the numerator. In addition, it should be noted that there were no preference dividends, settlements of preference shares, and other similar effects to be deducted from the profit or loss attributable to the ordinary equity holders. The weighted average number of ordinary shares outstanding was used as the denominator; this figure was calculated by deducting the average number of own shares held during the period from the overall number of shares composing the share capital.
Basic and diluted earnings per share were equal, as there are no ordinary shares that could have a dilutive effect and no shares or warrants that could have a dilutive effect will be exercised.
| 31/12/2019 | 31/12/2018 | |
|---|---|---|
| Net profit/(loss) for the period | 1,942,159 | 5,875,885 |
| Average weighted number of ordinary shares outstanding | 26,590,012 | 26,612,686 |
| Basic earnings/(loss) per share | 0.073 | 0.221 |
| Diluted earnings/(loss) per share | 0.073 | 0.221 |
In compliance with the requirements of IAS 24, the annual compensation received by the members of IRCE S.p.A.'s Board of Directors is shown below:
| €/000 | Compensation for the office held |
Compensation for other tasks |
Total |
|---|---|---|---|
| Directors | 235 | 319 | 554 |
This table shows the compensation paid for any reason and in any form, excluding social security contributions.
Following the introduction of art. 123-ter of the Consolidated Financial Act, further details on these amounts are provided in the Remuneration Report, which will be made available within the time limits prescribed by the law at the registered office of the Company, as well as on the website www.irce.it.
There are no particularly important commitments made by the Group as of the reporting date, however we note the issue, by the parent company IRCE S.p.A., of surety in the amount of €/000 670 in the favour of a publicly-owned company, as a guarantee of a three-year supply of electric wires.
The Group's main risks and uncertainties, as well as risk management policies, are detailed below:
The Group is strongly concentrated on the European market; the risk of major contractions in demand or of worsening of the competitive scenario may significantly impact the results. To address these risks, the medium-term strategy of the Group focuses on geographic diversification in non-EU and Asian countries, with a constant recovery of margins in the Group's structure. It is the pursuit of this strategy that led to the establishment in China of the company Irce Electromagnetic Wire (Jiangsu) Co. Ltd with the aim of producing and serving the local market.
Exchange rate risk
The Group primarily uses the Euro as the reference currency for its sales transactions. It is exposed to exchange rate risks in relation to its copper purchases, which it partly carries out in dollars; it hedges such transactions using forward contracts. It is also exposed to foreign currency translation risks for its investments in Brazil, the UK, India, Switzerland, Poland, and China.
As for the foreign currency translation risk, the Group believes this risk mainly concerns the investment in Brazil due to the high volatility of the Real, which affects the investment's carrying amount. In 2019, the Brazilian currency depreciated by about 3% since the beginning of the year.
Here below is a sensitivity analysis that shows the hypothetical accounting effects on the Group's statement of financial position, simulating a +5% (further depreciation of the Real) -5% (recovery of the Real) change in the EUR/BRL exchange rate compared to 31 December 2019 (4.516 EUR/BRL):
| Change in EUR/BRL exchange rate | |||
|---|---|---|---|
| Consolidated statement of financial position data €/million |
31/12/2019 | +5% Change |
-5% Change |
| Non-current assets | 53.78 | (0.57) | 0.63 |
| Current assets | 157.34 | (1.35) | 1.50 |
| TOTAL ASSETS | 211.12 | (1.92) | 2.13 |
| Total Shareholders' Equity | 131.50 | (1.81) | 2.00 |
| Non-current liabilities | 14.87 | 0.00 | 0.00 |
| Current liabilities | 64.75 | (0.11) | 0.13 |
| TOTAL LIABILITIES | 211.12 | (1.92) | 2.13 |
Interest rate risk
The Group obtains short and medium/long-term bank financing at floating rates. The risk of wide fluctuations in interest rates is not considered significant and therefore the Group does not implement special hedging policies.
Here below is a sensitivity analysis showing the effects on the result, simulating a +/- 25 basis points change in interest rates:
| Change in interest rates | ||||
|---|---|---|---|---|
| Consolidated income statement data | +25 bps | -25 bps | ||
| €/million | Year 2019 | Change | Change | |
| Turnover | 311.94 | - | - | |
| EBITDA | 7.82 | - | - | |
| EBIT | 0.42 | - | - | |
| Net profit | 1.94 | (0.10) | 0.10 |
Risks related to fluctuations in the prices of raw materials
The main raw material used by the Group is copper. The changes in its price can affect margins as well as financial requirements. In order to mitigate the potential effect on margins of changes in the price of copper, the Group implements a hedging policy using forward contracts on the positions generated by operating activities. The average Euro/Kg copper price for 2019 has shown a decrease of 2.84% as compared to the same figure for 2018.
A sensitivity analysis is provided below which shows the effects on the turnover and profit/loss of the Group by simulating a change in the copper price of +/- 5% versus the average LME price in 2019 and assuming that no hedge is in place in relation to EBITDA:
| Change in the price of copper | |||
|---|---|---|---|
| Consolidated income statement data | +5% | -5% | |
| €/million | Year 2019 | Change | Change |
| Turnover | 311.94 | 12.11 | (12.11) |
| EBITDA | 7.82 | 3.96 | (1.85) |
| EBIT | 0.42 | 3.96 | (1.85) |
These are risks associated with financial resources.
Credit risk
There are no significant concentrations of credit risk. The Group monitors this risk using adequate assessment and lending procedures with respect to each credit position. Selected insurance policies are taken out in order to limit insolvency risk.
Liquidity risk
Based on its financial position, the Group rules out the possibility of difficulties in meeting obligations associated with liabilities. The limited used of credit lines suggests that liquidity risk is not significant.
Comparative data as of 31 December 2018 and 2019 regarding financial assets and liabilities and the composition of payables is shown below:
| Consolidated financial data | ||||
|---|---|---|---|---|
| €/million | Cash | Finimport and self-liquidating lines |
Medium to long-term loan |
Total |
| Total assets as of 31/12/2018 | 7.02 | 116.50 | 22.28 | 145.80 |
| Consolidated financial data | ||||
| From 1 to 5 | ||||
| €/million | Within 1 year | years | Over 5 years | Total |
| Financial liabilities | 53.34 | 19.60 | 72.94 | |
| Commitments | 0.08 | 0.22 | 0.30 | |
| Trade payables and other payables | 26.69 | 3.07 | 3.19 | 32.94 |
| Total debt by expiry date | 80.11 | 22.89 | 3.19 | 106.18 |
| Consolidated financial data | ||||
|---|---|---|---|---|
| €/million | Cash | Finimport and self-liquidating lines |
Medium to long term loan |
Total |
| Total assets as of 31/12/2019 | 8.63 | 121.30 | 16.04 | 145.97 |
| Consolidated financial data | ||||
| From 1 to 5 | ||||
| €/million | Within 1 year | years | Over 5 years | Total |
| Financial liabilities | 44.71 | 14.12 | 58.84 | |
| Commitments | 0.20 | 0.67 | 0.87 | |
| Trade payables and other payables | 22.77 | 2.49 | 3.06 | 28.32 |
| Total debt by expiry date | 67.68 | 17.28 | 3.06 | 88.03 |
The table does not include copper purchase commitments, as this is a commodity quoted on the LME market easily disposed of.
Commitments include the issue, by the parent company IRCE S.p.A., of surety in the amount of €/000 670 in the favour of a publicly-owned company, as a guarantee of a three-year supply of electric wires.
As of 31 December 2019, the financial statements included cash for € 8.63 million, trade receivables for € 63.13 million and inventories for € 82.31 million.
Here below is the breakdown of receivables by internal rating.
The classification of receivables takes into account any positions subject to renegotiation.
| Risk level | 2019 Exposure €/000 |
2018 Exposure €/000 |
|---|---|---|
| Low | 49,312 | 42,691 |
| Medium | 12,999 | 19,720 |
| Above-average | 592 | 7,439 |
| High | 878 | 1,113 |
| Total | 63,781 | 70,963 |
| Due date | 2019 Exposure | 2018 Exposure |
| €/000 | €/000 | |
| Not yet due | 59,404 | 67,713 |
| < 30 days | 1,997 | 1,477 |
| 31-60 | 1,058 | 416 |
| 61-90 | 122 | 126 |
| 91-120 | 104 | 56 |
| > 120 | 1,096 | 1,175 |
| Total | 63,781 | 70,963 |
The fair value of trade receivables corresponds to their nominal exposure.
The bad debt provision, equal to €/000 651, refers to the range between 91-120 and > 120 days and to the above-average and high risk level.
In accordance with the provisions of IFRS 8, para. 34, please note that for the years ended on 31 December 2019 and 2018, there are no third party customers generating revenues that exceed 10% of total revenues.
The primary objective in managing the Group's capital is to maintain a solid credit rating and adequate capital ratios in order to support operations and maximise shareholder value.
| €/000 | 31/12/2019 | 31/12/2018 |
|---|---|---|
| Net financial debt (A) | 42,390 | 59,714 |
| Shareholders' equity (B) | 131,501 | 131,296 |
| Total capital (A) + (B) = (C) | 173,891 | 191,010 |
| Gearing ratio (A) / (C) | 24% | 31% |
Here below is a comparison between the carrying amount and fair value of all the Group's financial instruments broken down by category:
| €/000 | Carrying amount | Fair value | ||
|---|---|---|---|---|
| 31/12/2019 | 31/12/2018 | 31/12/2019 | 31/12/2018 | |
| Financial assets | ||||
| Cash and cash equivalents | 8,632 | 7,019 | 8,632 | 7,019 |
| Other financial assets | 386 | 590 | 386 | 590 |
| Financial liabilities | ||||
| Current loans | 42,300 | 49,995 | 42,300 | 49,995 |
| Non-current loans | 8,747 | 17,033 | 8,747 | 17,033 |
| Other financial liabilities |
The following statement, drafted in accordance with art. 149-duodecies of Consob Issuers' Regulations, shows the compensation for 2018 for auditing services and for other services, including expenses, supplied by the independent auditor or by entities belonging to its network to the Group's companies.
| €/000 | Entity supplying the service | Recipient | Compensation for the year 2018 |
|---|---|---|---|
| Auditing services Auditing services |
PricewaterhouseCoopers PricewaterhouseCoopers |
Euro IRCE S.p.A Euro Foreign subsidiaries |
104 93 |
During the financial year, the parent company IRCE S.p.A. received a subsidy from the Italian Government's State Aid Register in relation to the year 2017. A benefit was also received in 2019 through reduced general service charges for 'energyintensive' companies based on law no. 167/2017, with charges reduced by an amount of € 3,443,854 split over the production facilities as follows:
IMOLA (Bologna) € 2,474,797 UMBERTIDE (Perugia) € 652,791 GUGLIONESI (Campobasso) € 273,644 MIRADOLO TERME (Pavia) € 42,622
In accordance with Consob Communication dated 28 July 2006, here below is the reconciliation between the result for the year and shareholders' equity of the Group as of 31 December 2018 and 2019 with the corresponding amounts in the Parent Company separate financial statements:
| 31 december 2019 | 31 december 2018 | ||||
|---|---|---|---|---|---|
| €/000 | Shareholders' equity | Result | Shareholders' equity | Result | |
| Shareholders' equity and result for the year as per the parent Company's financial | |||||
| statement Cancellation of book value of consolidated equity investments |
151,342,005 | 3,603,483 | 149,249,941 | 7,902,954 | |
| a) difference between book value and pro-rata value of shareholders' equity | (751,156) | - | 2,276,567 | - | |
| b) investees' pro-rata results d) Reversal of gains / losses on foreign currency loans interco |
(1,358,892) 5,313,888 |
(1,358,892) - |
(3,354,456) 5,256,057 |
(3,354,456) 57,831 |
|
| Reversal of write-down of equity investments in subsidiaries IRCE Ltda dividend |
736,566 - |
736,566 (1,000,000) |
1,586,542 - |
1,586,542 - |
|
| Reversal of provision for bad debts towards subsidiary companies | 1,404,921 | 1,404,921 | |||
| Financial statements change in foreign currency | (22,894,045) | - | (22,624,294) | - | |
| Write-off of capital gains from disposal of intra-group assets | (137,208) | 34,976 | (172,184) | -108,719 | |
| Reversal of deferred tax | (1,597,772) | (61,387) | (1,540,665) | (57,923) | |
| Write-off of unrealized intra-group margin | (212,972) | 18,545 | (231,516) | 4,649 | |
| Group shareholders' equity and result for the year | 131,845,339 | 1,973,288 | 131,670,916 | 5,850,876 | |
| Shareholders' equity and result for the year attributable to non-controlling interests | (343,966) | (31,125) | (375,091) | 25,006 | |
| Consolidated shareholders' equity and net result | 131,501,372 | 1,942,167 | 131,295,825 | 5,875,885 |
As for events after the reporting date, reference should be made to the paragraph "Events after the reporting date" of the Report on Operations for 2019.
| SURNAME AND NAME | INVESTEE COMPANY |
NO. OF SHARES OWNED AS OF 31/12/2019 |
NO. OF SHARES ACQUIRED |
NO. OF SHARES SOLD |
NO. OF SHARES OWNED AS OF 31/12/2020 |
|---|---|---|---|---|---|
| Casadio Filippo | IRCE S.p.A. | 561,371 | 561,371 | ||
| Gandolfi Colleoni Francesco | IRCE S.p.A. | 559,371 (*) 30,000 |
559,371 (*) 30,000 |
||
| Sepriano Gianfranco | IRCE S.p.A. | 3,500 | 3,500 | ||
| Pischedda Francesca | IRCE S.p.A. | 0 | 0 | ||
| Dallago Orfeo | IRCE S.p.A. | 587,267 | 587,267 | ||
| Gigliola Di Chiara | IRCE S.p.A. | 0 | 0 | ||
| Senese Fabio | IRCE S.p.A. | 0 | 0 | ||
| Vitanza Donatella | IRCE S.p.A. | 0 | 0 | ||
| Costantini Adalberto | IRCE S.p.A. | 0 | 0 |
(*) Shares owned by his wife, Casadio Carla
Attachment 2
We, the undersigned, Mr Filippo Casadio, Chairman, and Ms Elena Casadio, Manager responsible for preparing the corporate accounting documents of IRCE S.p.A., hereby certify, taking into account the provisions of art. 154-bis, para. 5, of Italian Legislative Decree no. 58 of 24 February 1998:
of the administrative and accounting procedures used to prepare the consolidated financial statements.
In addition, we hereby certify that the consolidated financial statements:
Imola, 13 March 2020
(in euros)
| ASSETS | Notes | 31/12/2019 | 31/12/2018 |
|---|---|---|---|
| NON-CURRENT ASSETS | |||
| Intangible assets | 1 | 170,638 | 4,000 |
| Property, plant and equipment | 2 | 21,163,594 | 20,083,550 |
| Equipment and other tangible assets | 2 | 1,255,951 | 834,898 |
| Assets under construction and advances | 2 | 1,338,853 | 2,268,614 |
| Non-current financial assets and receivables | 3 | 18,782,425 | 18,362,610 |
| (of which: related parties) | 18,660,317 | 18,362,442 | |
| Equity investments | 3 | 75,180,322 | 75,428,418 |
| Non-current tax receivables | 4 | 375,564 | 811,582 |
| Receivables for deferred tax assets | 5 | 1,169,865 | 1,446,626 |
| TOTAL NON-CURRENT ASSETS | 119,437,212 | 119,240,298 | |
| CURRENT ASSETS | |||
| Inventories | 6 | 56,402,788 | 67,348,039 |
| Trade receivables | 7 | 36,913,430 | 44,200,660 |
| Receivables due from subsidiaries | 8 | 9,649,150 | 8,990,006 |
| Tax receivables | 9 | 807,186 | - |
| Receivables due from others | 10 | 345,951 | 1,828,847 |
| Current financial assets | 11 | 385,919 | 589,977 |
| Cash and cash equivalents | 12 | 757,782 | 1,126,482 |
| TOTAL CURRENT ASSETS | 105,262,206 | 124,084,011 | |
| SHAREHOLDERS' EQUITY AND LIABILITIES | Notes | 31/12/2019 | 31/12/2018 |
|---|---|---|---|
| SHAREHOLDERS' EQUITY | |||
| SHARE CAPITAL | 13 | 14,626,560 | 14,626,560 |
| RESERVES | 13 | 133,111,960 | 126,720,427 |
| PROFIT FOR THE PERIOD | 13 | 3,603,483 | 7,902,954 |
| TOTAL SHAREHOLDERS' EQUITY | 151,342,003 | 149,249,941 | |
| NON-CURRENT LIABILITIES | |||
| Non-current financial liabilities | 14 | 7,307,343 | 14,711,925 |
| Provisions for risks and charges | 15 | 6,877,856 | 7,631,162 |
| Provisions for employee benefits | 16 | 4,009,497 | 4,145,929 |
| TOTAL NON-CURRENT LIABILITIES | 18,194,696 | 26,489,016 | |
| CURRENT LIABILITIES | |||
| Current financial liabilities | 17 | 38,199,601 | 46,331,817 |
| Trade payables | 18 | 9,945,769 | 12,466,922 |
| Payables due to subsidiaries | 19 | 356,446 | 1,023,308 |
| Tax payables | 20 | - | 1,004,117 |
| (of which: related parties) | - | 185,668 | |
| Social security contributions | 21 | 1,608,589 | 1,726,811 |
| Other current liabilities | 22 | 5,052,314 | 5,032,377 |
| TOTAL CURRENT LIABILITIES | 55,162,719 | 67,585,352 | |
| TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES |
224,699,418 | 243,324,309 |
(in euros)
| Notes | 31/12/2019 | 31/12/2018 | |
|---|---|---|---|
| Sales revenues | 23 | 203,020,950 | 233,059,112 |
| (of which: related parties) | 7,377,827 | 9,263,181 | |
| Other income | 24 | 688,132 | 663,637 |
| (of which: related parties) | 105,037 | 166,832 | |
| TOTAL REVENUES | 203,709,082 | 233,722,749 | |
| Costs for raw materials and consumables | 25 | (156,322,019) | (183,929,158) |
| (of which: related parties) | (759,303) | (1,613,149) | |
| Change in inventories of work in progress and finished goods |
(3,541,794) | 2,665,716 | |
| Costs for services | 26 | (20,001,588) | (20,836,201) |
| (of which: related parties) | (922,984) | (999,682) | |
| Personnel costs | 27 | (17,590,498) | (17,531,987) |
| Depreciation/amortisation | 28 | (3,350,888) | (2,940,072) |
| Provisions and write-downs | 29 | (92,268) | (229,692) |
| Other operating costs | 30 | (450,357) | (455,581) |
| EBIT | 2,359,670 | 10,465,774 | |
| Write-back/(impairment) of equity investments | 31 | (736,566) | (1,586,541) |
| Financial income/(charges) | 32 | 2,561,502 | 2,175,772 |
| (of which: related parties) | (94,102) | (83,622) | |
| PROFIT BEFORE TAX | 4,184,606 | 11,055,005 | |
| Income taxes | 33 | (581,123) | (3,152,050) |
| PROFIT FOR THE PERIOD | 3,603,483 | 7,902,955 |
| SEPARATE CASH FLOW STATEMENT | Notes | 31/12/2019 | 31/12/2018 |
|---|---|---|---|
| €/000 | |||
| OPERATING ACTIVITIES | |||
| Profit for the period | 3,603 | 7,903 | |
| Adjustments for: | 0 | ||
| Depreciation/amortisation | 28 | 3,301 | 2,940 |
| Net change in (assets) / provisions for deferred tax (assets) liabilities | 5 | 277 | 4 |
| 0 | |||
| Capital (gains)/losses from the realisation of fixed assets | (25) | 69 | |
| (Profit)/loss on unrealised exchange rate differences | (329) | (14) | |
| Current taxes | 33 | (261) | 3,171 |
| Financial (income)/charges | 32 | (2,715) | (2,418) |
| Operating profit/(loss) before changes in working capital | 3,902 | 11,654 | |
| 0 | |||
| Taxes paid | (2,093) | (3,594) | |
| Financial charges paid | 32 | (256) | (226) |
| Financial income received | 32 | 2,972 | 2,644 |
| Decrease/(increase) in inventories | 6 | 10,945 | (7,977) |
| Change in trade receivables | 7 | 7,287 | 12,098 |
| Change in trade payables | 18 | (2,809) | (8,569) |
| Net change in current assets and liabilities for the period | 2,993 | (1,471) | |
| Net change in current assets and liabilities of the year with respect to related | |||
| parties | (1,326) | (2,898) | |
| Net change in non-current assets and liabilities for the period | (1,012) | 358 | |
| Net change in non-current assets and liabilities of the year with respect to related | |||
| parties CASH GENERATED FROM OPERATING ACTIVITIES |
(50) 20,552 |
(2,310) (291) |
|
| 0 | |||
| INVESTING ACTIVITIES | 0 | ||
| Investments in intangible assets | 1 | (181) | (8) |
| Investments in tangible assets | 2 | (3,795) | (4,557) |
| Consideration received for the sale of tangible and intangible assets | 19 | 347 | |
| CASH GENERATED FROM/USED IN INVESTING ACTIVITIES | (4,075) | (4,218) | |
| 0 | |||
| FINANCING ACTIVITIES | 0 | ||
| Increase in financing | 14 | 0 | 9,452 |
| Decrease in financing | 14 | (7,444) | (3,696) |
| Net change in short-term financial payables | 17 | (8,162) | 459 |
| Change in current financial assets | 11 | 204 | (577) |
| Dividends paid | (1,333) | (1,333) | |
| Changes with effects on shareholders' equity | 13 | (138) | 72 |
| Management of own shares (sales-purchases) | (43) | (247) | |
| CASH GENERATED FROM/USED IN FINANCING ACTIVITIES | (16,847) | 4,130 | |
| NET CASH FLOW FOR THE PERIOD | 0 (370) 0 |
(379) | |
| CASH BALANCE AT THE BEGINNING OF THE PERIOD | 12 | 1,127 | 1,506 |
| COMPREHENSIVE NET CASH FLOW FOR THE PERIOD | (370) | (379) | |
| CASH BALANCE AT THE END OF THE PERIOD | 12 | 758 | 1,127 |
| Share capital | Other reserves | Ret a ined earnings | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| €/000 | Share capital | Own shares | Share premium reserve |
Own shares (shares premium) |
Other reserves |
Legal reserve Extraordinar | y reserve | Unidivided profit |
Reserve IAS 19 |
Result for the period |
Total |
| Balance as of 31 december 2017 | 14,627 | (734) | 40,539 | 258 | 43,087 | 2,925 | 32,389 | 6,462 | (686) | 4,864 | 144,178 |
| Change accounting standards (IFRS 15)* | (1,322) | ||||||||||
| Balance as of 01 january 2018 | 14,627 | (734) | 40,539 | 258 | 43,087 | 2,925 | 31,517 | 6,462 | (686) | 4,864 | 144,178 |
| Result for the period | 7,903 | 7,903 | |||||||||
| Other comprehensive profit / (loss) | 71 | 71 | |||||||||
| Total profit / (loss) from statement of | 11 | 7,903 | 7,974 | ||||||||
| comprehensive income | |||||||||||
| Allocation of the result of the previous year | 4,864 | (4,864) | |||||||||
| Dividends | (1,333) | (1,333) | |||||||||
| Sell/purchase own shares | (54) | (194) | (248) | ||||||||
| Balance as of 31 december 2017 | 14,627 | (788) | 40,539 | 64 | 43,087 | 2,925 | 35,047 | 6,462 | (615) | 7,903 | 149,250 |
| Result for the period | 3,603 | 3,603 | |||||||||
| Other comprehensive profit / (loss) | (138) | (138) | |||||||||
| Total profit / (loss) from statement of | (138) | 3,603 | 3,465 | ||||||||
| comprehensive income | |||||||||||
| Allocation of the result of the previous year | 7,903 | 7,903 | |||||||||
| Dividends | (1,330) | (1,330) | |||||||||
| Sell/purchase own shares | (12) | (31) | (43) | ||||||||
| Balance as of 31 december 2018 | 14,627 | (800) | 40,539 | 33 | 43,087 | 2,925 | 41,620 | 6,462 | (753) | 3,603 | 151,342 |
With regard to the items of shareholders' equity, please refer to note 13.
| SEPARATE STATEMENT OF COMPREHENSIVE INCOME | 31/12/2019 | 31/12/2018 |
|---|---|---|
| €/000 | ||
| PROFIT/(LOSS) FOR THE PERIOD | 3,603 | 7,903 |
| Re-determination of defined-benefit plans Tax effect |
(182) 44 |
93 (22) |
| Total components of the statement of comprehensive income that will later be reclassified to period profit/loss, net of the tax effects |
(138) | 71 |
| Total other gains/(losses) for the period | 3,465 | 7,974 |
These annual financial statements as of 31 December 2019 were authorised for publication by the Board of Directors on 13 March 2020.
IRCE S.p.A. (hereinafter also referred to as the "Company") is a company incorporated under the law of the Italian Republic and has its registered office in via Lasie 12/a, Imola (Italy), Economic & Administrative Index no. 266734 BO 001785.
IRCE S.p.A. owns four manufacturing plants and is one of the major industrial players in the winding wires sector in Europe, as well as in low-voltage electrical cables in Italy.
Its plants are located in Imola (Bologna), Guglionesi (Campobasso), Umbertide (Perugia), and Miradolo Terme (Pavia).
The annual financial statements for the year 2019 were prepared in accordance with the IFRSs (International Financial Reporting Standards) issued by the IASB (International Accounting Standards Board) and endorsed by the European Union. The term IFRS also refers to all revised International Accounting Standards ("IAS") and all interpretations of the International Financial Reporting Interpretations Committee (IFRIC), including those previously issued by the Standing Interpretations Committee (SIC).
The formats used for the financial statements have been prepared in accordance with the provisions of IAS 1; in particular:
Below is a brief description of the most significant accounting standards and assessment criteria used in preparing the separate financial statements.
The functional and presentation currency adopted by IRCE S.p.A. is the Euro. The following criteria were used:
Tangible assets are measured at their purchase cost after deducting discounts and rebates, or at the construction cost, including directly attributable costs less any accumulated depreciation and accumulated impairment losses.
At the time of the transition to the IFRSs, certain elements of the items "land and buildings" and "industrial machinery and equipment" were measured by adopting the re-determined value, which was equal to the fair value at the date of the transition to the IFRSs. This value was then used as the deemed cost at the transition date, generating an FTA – First Time Adoption reserve.
The carrying amount of tangible assets is tested for impairment if events or changes in circumstances indicate that it might be impaired. If there is any such indication, and the asset's carrying amount exceeds its recoverable amount, the asset is written down to this lower value. The recoverable amount of tangible assets is the higher of net price to sell and value in use.
Depreciation, in compliance with IFRS requirements, is calculated by using the straight-line method and on the basis of rates which reflect the estimated useful life of the assets to which they refer.
Costs incurred after the acquisition are only capitalised if they result in an increase in the intrinsic future economic benefits of the asset to which they refer; if this is not the case, they are recognised as an expense when incurred.
On disposal, or when no future economic benefits are expected from the use of an asset, this is derecognised from the financial statements and any gain or loss (calculated as the difference between the disposal value and the carrying amount) is recognised in profit or loss in the year the asset is derecognised.
Land, including that ancillary to buildings, is not depreciated.
Assets under construction and advances paid for the acquisition of tangible assets are measured at cost. Amortisation begins when the asset is available and ready for use, and assets are allocated to a specific category from the same date.
Depreciation was calculated on the basis of rates that were deemed representative of the estimated useful life of the relevant tangible assets. The rates applied on an annual basis are included in the following ranges:
| Buildings | 3.0% - 10.0% |
|---|---|
| Plant and equipment | 7.5% - 17.5% |
| Industrial and commercial equipment | 25.0% - 40.0% |
| Other assets | 12.0% - 25.0% |
Intangible assets are recognised under assets, in accordance with the provisions of IAS 38 (Intangible Assets) when it is probable that the use of the asset will generate future economic benefits and when the cost of the asset can be determined in a reliable manner.
Intangible assets which are acquired separately are initially capitalised at cost while those which are acquired through business combination transactions are capitalised at their fair value on their acquisition date. After initial recognition, intangible assets are measured at cost less any accumulated amortisation and accumulated impairment losses. Internally generated intangible assets, with the exception of development costs, are not capitalised and are recognised in profit or loss as incurred. The Company capitalises development costs only when there is reasonable certainty they will be recovered. The useful life of intangible assets is either finite or indefinite. Intangible assets with a finite useful life are amortised over their useful life and tested for impairment whenever there is an indication of a potential impairment loss.
The amortisation period and the amortisation method applied are reviewed at the end of each financial year or more frequently, if necessary. Changes in the expected useful life, or in the manner the Group obtains the future economic benefits associated with the intangible asset, are recognised by modifying the amortisation period or the amortisation method and treated as changes in accounting estimates. The amortisation charges for intangible assets with finite useful lives are recognised in profit or loss within the cost category that is consistent with the function of the intangible asset.
IRCE S.p.A. did not recognise intangible assets with an indefinite useful life.
Gains or losses arising from the disposal of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the intangible asset, and are recognised in profit or loss when the fixed asset is disposed of.
A description of intangible assets and the amortisation method used is shown in the following table.
| Asset | Useful life |
Rate | Internally produced or acquired |
Impairment test |
|---|---|---|---|---|
| Patent and intellectual property rights |
Finite | 50% | Acquired | Review of the amortisation method at each reporting date and impairment test if indicators of impairment exist |
| Concessions and Licenses |
Finite | 20% | Acquired | Review of the amortisation method at each reporting date and impairment test if indicators of impairment exist |
| Trademarks and similar rights |
Finite | 5.56% | Acquired | Review of the amortisation method at each reporting date and impairment test if indicators of impairment exist |
The amortisation rates for other intangible assets were determined as a function of their specific residual useful lives and are reviewed at each reporting date.
Assets with a finite useful life falling within the scope of application of IAS 36 are tested for impairment whenever indicators of impairment exist.
To that end, both internal and external information sources are considered. In regard to the first category (internal sources) the following information is considered: obsolescence or physical damage to the asset; any significant changes in the use of the asset; and the economic performance of the asset as compared to expectations. In regard to external sources, the following information is considered: market price trends for the asset; any changes in technology, markets or laws; the trend in market interest rates or the cost of capital used for valuing investments; and market capitalisation below the net asset carrying amounts for the entity.
In this case, the net carrying amount of the assets is compared with the estimated recoverable amount and, if the former is higher, they are written down.
An asset's recoverable amount is shown as whichever is the higher of an asset's fair value (net of associated disposal costs) and its value in use (meaning present value of estimated future cash flows to be derived from the asset). In determining the value in use, the expected future cash flows are discounted using a pretax discount rate that reflects current market assessments of the value of money (relating to the period of investment) and risks specific to the asset.
In order to verify the presence of impairment, intangible and tangible assets are grouped at the level of the smallest separately identifiable cash generating unit. Impairment for a CGU is first attributed to reducing the carrying amount of any goodwill attributed to the asset, and subsequently to reducing other assets. This must be done in proportion to their carrying amount and the limits of the asset's associated recoverable value.
If the assumptions underlying a previous write-down no longer apply, the carrying value is reinstated with an entry to the relevant income statement. This is done within the limits of the net carrying value that the asset would have had, if it had not been written down and the related amortisation had been applied.
The drafting of the financial statements in accordance with the IFRS requires the use by the Management of estimates and assumptions, which influence the value of assets and liabilities recorded in the statement of financial position as well as in the disclosures published in the explanatory notes regarding potential assets and liabilities at the reporting date, and the revenues and costs for the period.
These estimates are based on experience and on other factors considered relevant. The effective results could thus differ from those estimated. The estimates are revised on a regular basis and the effects of each change to the same are reflected in the income statement of the period in which the estimate is revised.
The most significant accounting principles that require greater subjectivity by directors when preparing estimates are described below:
mortality and resignation rates. Any changes to the aforementioned assumptions could have significant effects on the liabilities for retirement benefits;
At the time of their initial recognition, financial assets must be classified into one of the three categories described below, on the basis of the following elements:
Financial assets are subsequently derecognised only if the transfer of ownership has also transferred substantially all of the associated risks and rewards belonging to said asset. On the other hand, whenever a significant part of the risks and rewards belonging to the financial asset being transferred have been retained, then that asset will continue to be recognised, even if legal ownership of said asset has effectively been transferred.
Included in this category are financial assets which satisfy both of the following conditions:
represented solely by payments of principal and interest on the amount of capital to be returned (the test known as the 'SPPI test' has been satisfied).
Upon initial recognition, these assets are accounted for at fair value, including costs or revenues for the transaction which are directly attributable to said instrument. After initial recognition, the financial assets in question are valued at amortised cost, using the effective interest rate method. The amortised cost method is not used for assets which are valued at historical cost, where it is considered that the short duration makes the effect of applying the discounting approach negligible. This applies to those assets which do not have a defined maturity, and revocable loans.
Included in this category are financial assets which satisfy both of the following conditions:
Included in this category are equity interests which do not qualify as interests in subsidiaries, associated companies or jointly controlled entities, and which are not held in order to trade. Furthermore, the company must have exercised the option to designate their measurement at fair value with an impact on overall profitability.
Upon initial recognition, these assets are accounted for at fair value, including costs or revenues for the transaction which are directly attributable to said instrument. After initial recognition, equity interests (other than interests in subsidiaries, associated companies or jointly controlled entities) are measured at fair value and amounts are entered and offset against net assets (statement of comprehensive income). These amounts may not subsequently be transferred to the income statement, even if ownership of the asset itself is transferred. The only component that is entered to the income statement for the equity securities in question, are those amounts which represent the associated dividends.
For equity securities included in this category which are not listed on an active market, historical cost is used as an estimate of fair value only if no other method applies, and is limited to a small number of circumstances. Or rather, measurement at historical cost is only done when the most recent information for measuring fair value is insufficient, or where there is a wide range of possible fair value measurements and historical cost represents the best estimate of fair value among such a range.
Classified in this category are those financial assets which are not classified as 'Financial assets measured at amortised cost' or 'Financial assets measured at fair value with an impact on overall profitability'.
Included in this category are financial assets which are held for trading, and derivative contracts which cannot be classified as hedging (which are shown as assets if the fair value is positive, or as liabilities if the fair value is negative).
Upon initial recognition, financial assets measured at fair value with an impact on the income statement are entered at fair value, without considering transaction costs or proceeds which are directly attributable to said instrument. On subsequent reporting dates, these assets are assessed at fair value and the impact of valuations is charged against the income statement.
In accordance with the arrangements of IFRS 9, the Company uses a simplified approach for estimating full lifetime expected credit losses for financial instruments. This approach takes into consideration the company's historical experience with credit losses, and is adjusted on the basis of specific outlook factors depending on the nature of the Company's receivables and the economic context.
In summary, the Company measures the expected losses for financial assets in a way that reflects:
Financial assets are credit-impaired when one or more events have occurred which will have a negative impact on future estimated cash flows for the financial asset. Evidence that the financial asset has been credit-impaired includes observable data in relation to one or more of the following events (it is possible that the company may not be able to identify one individual event, and so the impairment of financial assets may be due to the combined effect of several events):
For financial assets that have been accounted for using the amortised cost method, when an impairment has been identified then the amount of that impairment is measured as the difference between the carrying amount of the asset and the present value of expected future cash flows (discounted on the basis of the original effective interest rate). This amount will be recognised in the income statement.
Equity investments in subsidiaries, joint ventures and associates are valued using the cost method, including the costs directly attributable to the investment, adjusted for impairment.
Subsidiaries are companies over which the Company has the right to exercise, directly or indirectly, control, as defined by IFRS 10 – Consolidated Financial Statements. In particular, control exists when the controlling entity simultaneously:
• holds decision-making power over the investee company;
• has the right to take part in or is exposed to the variable (positive and negative) results of the investee company;
• has the ability to exercise power over the investee company in such a way as to affect its profits.
A joint venture is a joint arrangement in which the parties which hold joint control have rights over the net assets of the arrangement and, therefore, have a stake in the joint venture.
An associate is a company in which the Company holds at least 20% of the voting rights or exercises significant influence, but not control or joint control, over the financial and managerial policies.
At each reporting date, the Company reviews the carrying amount of the equity investments to determine whether there are any indications of impairment and, in that case, it carries out impairment tests.
Given objective indications of impairment, recoverability is verified by comparing the carrying amount with the recoverable amount, which is the higher of the fair value (net of disposal costs) and the value in use generally determined within the limits of the relevant portion of equity.
The Company writes back the value of equity investments when the reasons that had led to their impairment cease to apply.
Inventories are measured at the lower of cost and net realisable value.
The costs incurred are recognised as follows:
The presumed net realisable value for metal is measured separately from the other components, inasmuch as it is subject to separate negotiation at the time of sale.
Cash and cash equivalents include cash on hand as well as demand and short-term bank deposits recognised at their nominal amounts; in the latter case, the original maturity shall not exceed three months.
Financial liabilities and trade payables are recognised when the Company becomes party to the relevant contractual clauses. They are initially measured at fair value, adjusted for costs which are directly attributable to the transaction.
They are subsequently valued at amortised cost, using the effective interest rate method.
Financial liabilities are derecognised when the contractual rights over the related cash flows expire, or when the financial liability is transferred along with substantially all the risks and rewards which come from responsibility for said liability.
A financial asset (or, where applicable, part of a financial asset or part of a group of similar financial assets) is derecognised when:
In cases where the Company transferred its rights to receive cash flows from an asset and has not substantially transferred nor withheld all the risks and rewards or has not lost control over the asset, this is recognised in the financial statements of the Company to the extent of the latter's continuing involvement in the asset. The continuing involvement – which takes the form of guaranteeing the transferred asset – is measured at the lower of the initial carrying amount of the asset and the maximum amount of the consideration that the Company could be required to pay.
Financial liabilities
A financial liability is derecognised when the obligation underlying the liability is settled, cancelled or discharged.
If an existing financial liability is replaced by another from the same lender – and with substantially different terms – or if the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, recognising any differences between the carrying amounts through profit or loss.
Provisions for risks and charges include provisions arising from present obligations (legal or constructive) as a result of past events and for which an outflow of resources is probable. Changes in estimates are reflected in the income statement for the period in which the change occurs. If the effect of discounting the value of money is material, the provisions are discounted using a pre-tax discount rate that reflects, where appropriate, the risks specific to the liability. When discounting is used, the increase in the provision that arises from the passage of time is recognised as a financing cost.
Employee benefits substantially include employee termination indemnities as well as retirement funds. Italian Law no. 296 of 27 December 2006 ("2007 Budget Law") introduced significant changes to the allocation of quotas of the employee termination indemnities. Up until 31 December 2006, employee termination indemnities were part of post-employment benefit plans of the "defined benefit plans" type, and were measured, in accordance with IAS 19, by independent actuaries using the projected unit credit method. This calculation consists in estimating the amount of the benefit an employee will receive on the estimated date of termination of the work relationship by using demographical and financial assumptions. The amount determined in this manner is discounted and recalculated on the basis of the accrued service as a proportion of the total length of service and represents a reasonable estimate of the benefits each employee has already earned for past service.
Following the occupational pension reform, the provisions for employee termination indemnities – for the amounts accruing from 1 January 2007 – should be considered essentially comparable to a "defined contribution plan". More specifically, these changes gave employees the opportunity to choose how to allocate their accruing employee termination indemnities: in companies with more than 50 employees, employees can decide to transfer the accruing employee termination indemnities into pre-defined pension schemes or keep them with the company, which will transfer them to INPS (Italy's social security institute).
In summary, following the occupational pension reform and with regard to the employee termination indemnities accrued before 2007, the Company actuarially measured them without including the component referring to future salary increases. The benefits subsequently accrued were instead recognised in accordance with the methods for defined contribution plans.
The company used derivative financial instruments such as forward contracts for the purchase and sale of copper and aluminium in order to hedge against its exposure to the risk of changes in raw material prices as well as forward contracts for currency purchases.
Any gains or losses arising from changes in the fair value of derivatives, which are outstanding as of the reporting date and do not qualify for hedge accounting, are recognised directly in the income statement.
The fair value of forward contracts for the sale of copper outstanding as of the reporting date is determined on the basis of forward prices of copper with reference to the maturity dates of contracts outstanding as of the reporting date.
For the purposes of hedge accounting, hedges are classified as:
At the inception of a hedge, the company formally designates and documents the hedging relationship to which it intends to apply hedge accounting as well as its risk management objectives and the pursued strategy. The documentation includes the identification of the hedging instrument as well as of the hedged item or transaction, the nature of the risk, and how the company intends to measure the effectiveness of the hedge in offsetting the exposure to changes in the fair value of the hedged item or cash flows attributable to the hedged risk.
These hedges are expected to be highly effective in offsetting the exposure of the hedged item to changes in the fair value or cash flows attributable to the hedged risk. The measurement of the effectiveness of these hedges is conducted on an ongoing basis during the years in which they have been designated.
If the company reacquires its own shares, these are deducted from shareholders' equity. In particular, they are measured at their nominal amount in the "own shares reserve" and the excess of the purchase amount over the nominal amount is accounted for as a deduction from "other reserves". The purchase, sale, issue or cancellation of equity instruments does not result in the recognition of any gain or loss in the income statement, but is rather recognised directly as a change in shareholders' equity.
Revenues from contracts with customers are recognised when the following conditions are met:
The Company recognises revenue from contracts with customers at a point in time, or over time, when performance obligations are fulfilled by transferring the promised goods or services to the customer (namely, the asset). The asset is transferred at a point in time, or over time, when the customer obtains control of the asset.
The Company transfers control of the goods or services over time (and thus fulfils the performance
obligations and recognises the revenue over time) if the situation satisfies one of the following criteria:
If the performance obligation is not satisfied over time, it is satisfied at a point in time. In such a situation, the Company recognises revenue at the time when the customer obtains control of the promised asset.
The Company allocates the contractual price to the individual performance obligations by reference to the relative standalone selling prices (SSP) for the individual performance obligations. When there is no SSP, the Company estimates the SSP using an adjusted market assessment approach.
In this case, the Company uses judgement to determine the performance obligation, variable consideration and allocation of the transaction price.
Dividends are recognised as at the date of the Shareholders' Meeting when the resolution establishing the right to receive payment is passed.
Dividends approved at the Shareholders' Meeting are shown as movements in net assets for the financial year in which they are approved.
Costs are recognised on an accrual basis. Research, advertising and promotional costs are recognised in the income statement in the year in which they are incurred.
Financial income and charges are recognised in the income statement when they are incurred.
Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to tax authorities. The tax rates and tax laws used to calculate the amount are those that have been enacted or are expected to apply as of the reporting date.
Deferred tax assets and liabilities are calculated using the so-called liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date.
Deferred tax liabilities are recognised for all taxable temporary differences, except:
when deferred tax liabilities arise from the initial recognition of goodwill or of an asset or liability in a transaction which is not a business combination and which, at the time of the transaction itself, affects neither accounting profit nor taxable profit/loss;
in respect of taxable temporary differences associated with investments in subsidiaries, associates and joint ventures, when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.
Deferred tax assets are recognised for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilized, except when:
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized. Unrecognised deferred tax assets are reviewed on an annual basis at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax assets to be recovered.
Deferred tax assets or liabilities relating to items recognised directly in equity are recognised directly in equity and not in the income statement.
Starting 1 January 2019, the Company adapted to the new standard IFRS 16 – Leases for all contracts that, in exchange for consideration, convey the right to control the use of an identified asset for a period of time with the exception of leases with a term of less than 12 months and leases of low-value assets - pursuant to the provisions of paras. 5, B3-B8 of the standard. The lease term was defined on the basis of the contractually agreed duration and, where applicable, the reasonable certainty of exercising or not an option to extend to terminate the contract, considering all relevant facts and circumstances that create an economic incentive for the lessee to exercise such option.
The Company applied the standard by adopting the simplified retrospective approach, recording, for the leases previously classified as operating leases, the lease liability at the current value of the remaining payments due, discounted using the incremental borrowing rate of the lessee at the date of initial application, and recognising the asset consisting of the right to use for an amount equal to the liability. Therefore, no cumulative effects adjusted the opening balance of shareholders' equity. In particular, as shown in the table below, the net assets (right of use) recorded at the date of first application amounted to €/000 118 and, likewise, the financial liabilities for leasing amounted to €/000 118.
It should be noted that the Company chose to adopt IFRS 16 without restating the comparative figures for 2018, as allowed by the standard.
The leases entered into by the Company are mainly attributable to lease contracts for buildings and cars.
The effect on the financial statements as of 1 January 2019 is shown below:
| €/000 | |||
|---|---|---|---|
| Statement of financial position (extract) | 31/12/2018 without the effects of IFRS 16 |
IFRS 16 | 01/01/2019 with the effects of IFRS 16 |
| Non-current assets | |||
| Property, plant and equipment | 20,084 | 30 | 20,114 |
| Equipment and other tangible assets | 835 | 88 | 923 |
| Effect on assets | 118 | ||
| non-current liabilities | 14,712 | 66 | 14,778 |
| non-current liabilities | 46,332 | 52 | 46,384 |
| Effect on liabilities | 118 |
The following table sets out the effect of the application of IFRS 16 on the financial statements of 31 December 2019, which led to a reduction in the result for the period of €/000 2:
| Statement of financial position (extract) | Amounts without adoption of IFRS 16 |
IFRS 16 | 31/12/2019 with the effects of IFRS 16 |
|---|---|---|---|
| Non-current assets | |||
| Property, plant and equipment | 21,155 | 9 | 21,164 |
| Equipment and other tangible assets | 1,197 | 59 | 1,256 |
| Effect on assets | 68 | ||
| non-current financial liabilities | 7,279 | 28 | 7,307 |
| current financial liabilities | 38,162 | 38 | 38,200 |
| Effect on liabilities | 66 |
| Income statement (extract) | Amounts without adoption of IFRS 16 |
IFRS 16 | 31/12/2019 with the effects of IFRS 16 |
|---|---|---|---|
| Costs for services | 156,370 | (48) | 156,322 |
| Depreciation/amortisation | 3,301 | 50 | 3,351 |
| Financial charges | 2,561 | 1 | 2,562 |
| Effect on profit/(loss) for the period | 2 |
As at the date of approval of these financial statements, the European Union competent bodies have completed the approval process required for the adoption of the following accounting standards and amendments, not adopted in advance by the Company:
| Definition of Material (Amendments to IAS 1 and IAS 8) |
On 31 October 2018, the IASB published the document Definition of Material (Amendments to IAS 1 and IAS 8). It introduced an amendment to the definition of "material" contained in IAS 1 - Presentation of Financial Statements and IAS 8 – Accounting Policies, Changes in Accounting Estimates and Errors. This amendment aims to make the definition of "material" more specific and introduced the concept of "obscured information" alongside the concepts of omitted or incorrect information, already present in the two standards being amended. The amendment clarifies that information is obscured if it has been described in such a manner so as to produce a similar effect for the primary readers of the financial statements to that produced if such information had been omitted or incorrect. The amendments introduced were approved on 29 November 2019 and apply to all transactions after 1 January 2020. |
|---|---|
| Amendments to References to the Conceptual Framework in IFRS Standards |
On 29 March 2018, the IASB published an amendment to the References to the Conceptual Framework in IFRS Standards. The amendment is effective for periods starting on or after 1 January 2020, but early application is permitted. The Conceptual Framework defines the essential concepts for the financial disclosure and guides the Board in developing IFRS standards. The document helps guarantee that the standards are conceptually consistent and that similar transactions are treated in the same way, so as to provide information that is useful to investors, lenders and other creditors. The Conceptual Framework supports businesses in the development of accounting standards when no IFRS applies to a specific transaction and, more generally, helps the parties concerned to understand and interpret the standards. The amendments introduced were approved on 29 November 2019 and apply to all transactions after 1 January 2020. |
| Amendments to IFRS 9, IAS 39 and IFRS 7: Interest Rate Benchmark Reform |
On 26 September 2019, the IASB published the Amendments to IFRS 9, IAS 39 and IFRS 7: Interest Rate Benchmark Reform. This amends IFRS 9 - Financial Instruments and IAS 39 - Financial Instruments: Recognition and Measurement as well as IFRS 7 - Financial Instruments: Disclosures. More specifically, the amendment alters some of the requirements laid down for the application of hedge accounting, envisaging temporary derogations from such, so as to mitigate the impact deriving from the uncertainty of the IBOR reform (still in progress) on future cash flows in the period prior to its completion. The amendment also requires companies to provide additional information in the financial statements on their hedging relations directly involved by the uncertainties generated by the reform and to which said derogations apply. The changes come into force on 1 January 2020, but companies may apply them early. The amendments introduced were approved on 15 January 2020 and apply to all transactions after 1 January 2020. |
The preliminary analyses carried out by the Company do not suggest any significant impacts deriving from the application of such standards.
Furthermore, as at the date of approval of these separate financial statements, the European Union competent bodies have not yet completed the approval process required for the adoption of the following accounting standards and amendments:
| Accounting standard/amendment | Endorsed by the EU | Effective date |
|---|---|---|
| IFRS 17 Insurance Contracts | NO | Annual periods beginning on or after 1 January 2021 |
| Amendment to IFRS 3 Business Combinations | NO | Annual periods beginning on or after 1 January 2021 |
| Amendments to IAS 1 Presentation of Financial Statements: Classification of Liabilities as Current or Non-current (issued on 23 January 2020) |
NO | Not available |
The preliminary analyses carried out by the Company do not suggest any significant impacts deriving from the application of such standards.
The Company uses the following type of derivative instruments:
Derivative instruments related to copper forward transactions with maturity after 31 December 2019. The Group entered into sale contracts to hedge against price decreases relating to the availability of raw materials, and purchase contracts to prevent price increases relating to sale commitments with fixed copper values. The fair value of forward contracts outstanding at the reporting date is determined on the basis of forward prices of copper and aluminium with reference to the maturity dates of contracts outstanding at the reporting date. These transactions do not qualify as hedging instruments for the purposes of hedge accounting.
A summary of derivative contracts related to commodity for forward sales and purchases outstanding at 31 December 2019 is shown below:
| Measurement unit of the notional amount |
Notional amount with maturity within one year (tonnes) |
Notional amount with maturity after one year |
Result with fair value measurement as of 31/12/2019 €/000 |
|---|---|---|---|
| Copper | 1,050 | 361 | |
Derivative instruments related to USD and GBP forward purchase and sale contracts with maturity after 31 December 2019. These transactions do not qualify as hedging instruments for the purposes of cash flow hedge accounting.
A summary of derivative contracts related to USD and GBP forward purchases and sales outstanding at 31 December 2019 is shown below:
| Measurement unit of the notional amount |
Notional amount in foreign currency with maturity within one year |
Notional amount with maturity after one year |
Result with fair value measurement as of 31/12/2019 €/000 |
|---|---|---|---|
| USD GBP |
9,221 6.000 |
(113) 11 |
|
| Total |
Here below is the breakdown of financial instruments referring to the items of the financial statements:
| As of 31 December 2019 - €/000 | Amortised cost | FV with a balancing entry in the income statement |
FV with a balancing entry in equity |
Total |
|---|---|---|---|---|
| Non-current financial assets | ||||
| Other non-current financial assets and receivables | 18,782 | 18,782 | ||
| Current financial assets | ||||
| Trade receivables | 46,563 | 46,563 | ||
| Other current financial assets | 14 | 372 | 386 | |
| Cash and cash equivalents | 758 | 758 | ||
| As of 31 December 2018 - €/000 | Amortised cost | FV with a balancing entry in the income statement |
FV with a balancing entry in equity |
Total |
|---|---|---|---|---|
| Non-current financial assets | ||||
| Other non-current financial assets and receivables | 18,363 | 18,363 | ||
| Current financial assets | ||||
| Trade receivables | 53,191 | 53,191 | ||
| Other current financial assets | 295 | 295 | 590 | |
| Cash and cash equivalents | 1,126 | 1,126 |
| As of 31 December 2019 - €/000 | Amortised cost | FV with a balancing entry in the income statement |
FV with a balancing entry in equity |
Total |
|---|---|---|---|---|
| Non-current financial liabilities Financial payables |
7,307 | 7,307 | ||
| Current financial liabilities Trade payables Other payables Financial payables |
10,302 6,661 38,087 |
113 | 10,302 6,661 38,200 |
| As of 31 December 2018 - €/000 | Amortised cost | FV with a balancing entry in the income statement |
FV with a balancing entry in equity |
Total |
|---|---|---|---|---|
| Non-current financial liabilities Financial payables |
14,712 | 14,712 | ||
| Current financial liabilities Trade payables Other payables Financial payables |
13,490 7,763 46,268 |
64 | 13,490 7,763 45,332 |
A comparison between the carrying amount of financial instruments held and their fair value did not yield significant differences in value.
IFRS 13 defines the following three levels of fair value for measuring the financial instruments recognised in the statement of financial position:
The following tables show the assets and liabilities that are measured at fair value as of 31 December 2019 and as of 31 December 2018 broken down by level of fair value hierarchy (€/000):
| 2018 | Level 1 | Level 2 | Level 3 | Total |
|---|---|---|---|---|
| Assets: | ||||
| Derivative financial instruments | - | 295 | - | 295 |
| Total assets | - | 295 | - | 295 |
| Liabilities: | ||||
| Derivative financial instruments | - | (64) | - | (64) |
| Total liabilities | - | (64) | - | (64) |
| 2019 | Level 1 | Level 2 | Level 3 | Total |
|---|---|---|---|---|
| Assets: | ||||
| Derivative financial instruments | - | 372 | - | 372 |
| Total assets | - | 372 | - | 372 |
| Liabilities: | ||||
| Derivative financial instruments | - | (113) | - | (113) |
| Total liabilities | - | (113) | - | (113) |
During the year, there were no transfers between the three fair value levels specified in IFRS 7.
IFRS 8 defines an operating segment as follows. An operating segment is a component of an entity: a) that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity);
b) whose operating results are reviewed regularly by the entity's chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance; and c) for which discrete financial information is available.
With regard to the two types of products sold, starting from 2011 IRCE S.p.A.'s management only monitors the breakdown of revenues between winding wires and cables. Unallocated balance refers to revenues from the sale of other materials and services that cannot be classified within the two types of products sold.
Revenues are then analysed by geographical area (revenues from Italian customers, EU customers excluding Italy, and non-EU customers).
The winding wire segment supplies manufacturers of electric motors and generators, transformers, relays and solenoid valves.
The cable segment supplies the following industries: construction, civil and industrial engineering (cabling), and consumer durables (electrical devices).
| €/000 | Year 2019 | Year 2018 | ||||||
|---|---|---|---|---|---|---|---|---|
| Winding wires | Cables | Not allocated |
Total | Winding wires |
Cables | Not allocated |
Total | |
| Revenues | 157,216 | 45,780 | 25 | 203,021 | 176,374 | 56,656 | 30 | 233,059 |
| % of total | 77.4% | 22.5% | 0.0% | 100.0% | 75.7% | 24.3% | 0.0% | 100.0% |
| Year 2019 | Year 2018 | |||||||
|---|---|---|---|---|---|---|---|---|
| €/000 | Italy | EU (excluding Italy) |
Non-EU | Total | Italy | EU (excluding Italy) |
Non-EU | Total |
| Revenues | 112,396 | 75,205 | 15,420 | 203,021 | 126,014 | 87,305 | 19,740 | 233,059 |
| % of total | 55.4% | 37.0% | 7.6% | 100.0% | 54.1% | 37.5% | 8.5% | 100.0% |
This item refers to intangible assets from which future economic benefits are expected. The changes in their net carrying amount are shown below:
| €/000 | Patent and intellectual property rights |
Licenses, trademarks, similar rights and multi-year charges |
Assets under development |
Total |
|---|---|---|---|---|
| Net carrying amount as of 31/12/2017 |
43 | - | 190 | 233 |
| Changes during the period | ||||
| . Investments | 8 | - | - | 8 |
| . Reclassifications | - | - | - | - |
| . Write-downs | - | - | (190) | (190) |
| . Depreciation/amortisation | (47) | - | - | (47) |
| Total changes | 8 | - | - | 8 |
| Net carrying amount as of 31/12/2018 |
4 | - | - | 4 |
| Changes during the period | ||||
| . Investments | 5 | 176 | - | - |
| . Reclassifications | - | - | - | - |
| . Depreciation/amortisation | (6) | (8) | - | (14) |
| Total changes | (1) | 168 | - | 167 |
| Net carrying amount as of 31/12/2019 |
3 | 168 | - | 171 |
On a recurring basis, the Company incurs R&D expenses that are recognised in the income statement, as they do not meet the conditions for capitalisation pursuant to IAS 38.
| Plant and | Industrial and commercial |
Other | Assets under construction and |
||||
|---|---|---|---|---|---|---|---|
| €/000 | Land | Buildings | equipment | equipment | assets | advances | Total |
| Net carrying amount as of | |||||||
| 31/12/2017 | 7,835 | 3,767 | 7,197 | 462 | 434 | 2,055 | 21,750 |
| Changes during the period | |||||||
| . Investments | - - |
2,957 | 212 | 53 | 1,336 | 4,558 | |
| . Reclassifications | - - |
880 | 25 | - | (905) | - | |
| . Divestments . Depreciation related to |
- - |
(389) | (80) | (182) | (217) | (868) | |
| disposals | - - |
379 | 80 | 181 | - | 640 | |
| . Depreciation of the year | - (389) |
(2,151) | (220) | (132) | - | (2,892) | |
| Total changes | - (389) |
1,676 | 17 | (81) | 214 | 1,437 | |
| Net carrying amount as of | |||||||
| 31/12/2018 | 7,835 | 3,378 | 8,873 | 479 | 354 | 2,269 | 23,187 |
| Changes during the period | |||||||
| . Value in use (IFRS 16) | - 30 |
- | - | 88 - |
118 | ||
| . Investments | - 21 |
3,113 | 358 | 288 | 15 | 3,795 | |
| . Reclassifications | - 407 |
394 | 139 | - (940) |
- | ||
| . Divestments | - - |
(4,866) | (1) | (272) | (5) | (5,144) | |
| . Depreciation related to | |||||||
| disposals | - - |
4,866 | 1 | 272 | - | 5,139 | |
| . Depreciation related to | |||||||
| IFRS 16 | - (21) |
- | - | (29) | - | (50) | |
| . Depreciation of the year | - (346) |
(2,519) | (274) | (148) | - | (3,287) | |
| Total changes | - 91 |
988 | 223 | 199 | (930) | 571 | |
| Net carrying amount as of 31/12/2019 |
7,835 | 3,469 | 9,861 | 702 | 553 | 1,339 | 23,758 |
| - Of which IFRS 16 | - 9 |
- | - | 59 - |
68 |
IRCE S.p.A.'s investments amounted to € 3.80 million in 2019. They concerned the purchase of machinery.
Divestments refer primarily to machinery no longer in use and depreciated in full, while reclassifications of assets under construction refer to machinery purchased in the previous years that have become operational.
The item "fixed assets under construction" includes machinery available and not yet installed.
| €/000 | 31/12/2019 | 31/12/2018 |
|---|---|---|
| - Non-current financial assets and receivables - Equity investments |
18,783 75,180 |
18,363 75,428 |
| Total | 93,963 | 93,791 |
| €/000 | 31/12/2019 | 31/12/2018 |
|---|---|---|
| - DMG GmbH | 1,707 | 1,706 |
| - FD Sims Ltd | 7,420 | 7,055 |
| - IRCE S.L | 1,594 | 1,588 |
| - IRCE Ltda | - | 15 |
| - ISODRA GmbH | 1,871 | 1,934 |
| - ISOMET AG | 602 | 602 |
| - IRCE SP.ZO.O | 134 | 136 |
| - SMIT DRAAD | 5,322 | 5,317 |
| - ISOLVECO 2 | 10 | 10 |
| Total | 18,660 | 18,363 |
The receivables reported above refer to intra-group interest bearing loans.
Management has undertaken an analysis in order to verify the recoverability of the above receivables. Taking into account the expected results and provisions for the coverage of losses of subsidiaries recorded in the financial statements, these receivables are entirely recoverable.
The list of equity investments included in Attachment 2 forms part of these Explanatory Notes.
The carrying amount of the equity investments in FD Sims Ltd, IRCE Ltda, Smit Draad Nijmegen B.V. and Isomet AG was tested for impairment, after indicators of impairment were identified. This test was carried out projecting the cash flows estimated in the most recent business plan, prepared by subsidiaries' local management and approved separately and prior to these financial statements by central Management. These business plans – which were prepared in nominal terms – were drafted over a period of five years and reflect past experience while excluding any flows deriving from restructuring, optimisation or improvements to operations.
In line with the provisions of IAS 36, the impairment test was carried out by comparing the recoverable amount of the investments net of the net financial position ("NFP") as of 31 December 2019 ("Equity Value") with the related carrying amounts for the equity investments as of 31 December 2019.
For the purposes of estimating the recoverable amount, the Equity Value of the investments was calculated using the Discounted Cash Flow method, which considers the cash flows from operations expected by the company based on the plans approved by management and subtracting the net financial position at the reporting date.
The discount rate used for cash flows is the Weighted Average Cost of Capital (WACC) relating to the equity investment. The method applied is the Capital Asset Pricing Model: the rate is calculated based on a mathematical model given by the sum of a risk-free asset plus a market premium risk. The market premium risk in its turn is the product of the market average risk multiplied by the specific beta for the sector.
The central Management has applied a Small Size Premium of 1% and an execution risk of between 0.5% and 3% (with differentiation based on the degree to which expected results included in the plan are considered reachable).
In applying this method, the main assumptions used are the estimate of future increases in sales, the gross margin, operating costs, the growth rate of the terminal values, the investments, the changes in working capital and the weighted average cost of capital (discount rate).
The terminal value of the Cash Generating Unit (CGU) was estimated on the basis of a cash flow (equal to the normalised cash flow of the last period) discounted at growth rates (g) equal to 0.0% for FD Sims Ltd, Smit Draad Nijmegen B.V., Isomet AG and 5.0% for IRCE Ltda over an indefinite period of time. The 5-year business plans are prepared in nominal terms (including the forecast inflation rate).
The nominal WACC, net of the tax effect, used in the test was equal to 7.9% for FD Sims Ltd, 6.9% for Smit Draad Nijmegen B.V., 5.7% for Isomet AG and 11.1% for IRCE Ltda; the risk premium inherent in the cost of equity was equal to 5.4% and is common among companies in the sector, as well as the borrowing rate used. The rates used were determined by taking into account the market rates on the basis of the current economic situation. With reference to the value of equity investments shown in the financial statements, both the company FD Sims Ltd and Smit Draad Nijmegen B.V. were found to have a risk profile which would entail the need for a write-down of these investments based on the results of impairment tests and sensitivity analysis carried out. The other group companies did not show a risk profile, as detailed below.
A sensitivity analysis is shown below, comparing the carrying amount of the CGU's invested capital with the corresponding Equity Value calculated on the basis of a discount rate (WACC) and a growth rate (g) half a percentage point below or above the parameters used.
FD Sims Ltd, parameters used WACC 7.9%; (g) 0.0%.
| "g"=0.0% | WACC | ||
|---|---|---|---|
| €/000 | 7.4% | 7.9% | 8.4% |
| Equity value | 6,905 | 6,038 | 5,277 |
| Carrying amount of equity investment | 7,125 | 7,125 | 7,125 |
| Difference between equity value and | |||
| carrying amount | (220) | (1,087) | (1,848) |
| "g"=0.5% | WACC | ||
| €/000 | 7.4% | 7.9% | 8.4% |
| Equity value | 7,704 | 6,726 | 5,873 |
| Carrying amount of equity investment | 7,125 | 7,125 | 7,125 |
| Difference between equity value and | |||
| carrying amount | 579 | (399) | (1,252) |
The results of the impairment test showed the need to adjust the amount of the equity investment shown in IRCE S.p.A.'s financial statements, since the Equity Value was lower than the carrying amount of the equity investment. Considering this along with the sensitivity analysis, the Directors have therefore resolved to write down the value of equity investments of the company FD Sims to the tune of €/000 1,087.
Smit Draad Nijmegen B.V., parameters used WACC 6.9% (g) 0.0%
| (g)=0.0% | WACC | ||
|---|---|---|---|
| €/000 | 6.4% | 6.9% | 7.4% |
| Equity value | 8,381 | 7,112 | 6,016 |
| Carrying amount of equity investment | 7,273 | 7,273 | 7,273 |
| Difference between equity value and carrying | |||
| amount | 1,108 | (161) | (1,257) |
| (g)=0.5% | WACC | ||
| €/000 | 6.4% | 6.9% | 7.4% |
| Equity value | 9,512 | 8,059 | 6,818 |
| Carrying amount of equity investment | 7,273 | 7,273 | 7,273 |
| Difference between equity value and carrying | |||
| amount | 2,239 | 786 | (455) |
The results of the impairment test showed the need to adjust the amount of the equity investment shown in IRCE S.p.A.'s financial statements, since the Equity Value was lower than the carrying amount of the equity investment. Considering this along with the sensitivity analysis, the Directors have therefore resolved to write down the value of equity investments of the company Smit Draad to the tune of €/000 161.
Isomet AG, parameters used WACC 5.7%; (g) 0.0%.
| "g"=0.0% | WACC | ||
|---|---|---|---|
| €/000 | 5.2% | 5.7% | 6.2% |
| Equity value | 3,949 | 3,501 | 3,125 |
| Carrying amount of equity investment | 1,435 | 1,435 | 1,435 |
| Difference between equity value and | |||
| carrying amount | 2,514 | 2,066 | 1,690 |
| "g"=0.5% | WACC | ||
| €/000 | 5.2% | 5.7% | 6.2% |
| Equity value | 4,378 | 3,847 | 3,409 |
| Carrying amount of equity investment | 1,435 | 1,435 | 1,435 |
| Difference between equity value and | |||
| carrying amount | 2,943 | 2,412 | 1,974 |
As the above tables show, the CGU is not exposed to any risks that would require a write-down.
IRCE Ltda, parameters used WACC 11.1%; (g) 5.0%.
| (g)=5.0% | WACC | ||
|---|---|---|---|
| €/000 | 10.6% | 11.1% | 11.6% |
| Equity value | 68,705 | 64,062 | 60,117 |
| Carrying amount of equity investment | 58,466 | 58,466 | 58,466 |
| Difference between equity value and | |||
| carrying amount | 10,239 | 5,596 | 1,651 |
| (g)=4.5% | WACC | ||
|---|---|---|---|
| €/000 | 10.6% | 11.1% | 11.6% |
| Equity value | 65,748 | 61,654 | 58,133 |
| Carrying amount of equity investment | 58,466 | 58,466 | 58,466 |
| Difference between equity value and | |||
| carrying amount | 7,282 | 3,188 | (333) |
| (g)=5.5% | WACC | ||
|---|---|---|---|
| €/000 | 10.6% | 11.1% | 11.6% |
| Equity value | 72,242 | 66,900 | 62,427 |
| Carrying amount of equity investment | 58,466 | 58,466 | 58,466 |
| Difference between equity value and | |||
| carrying amount | 13,776 | 8,434 | 3,961 |
As the above tables show, one scenario includes the possibility of impairment losses that the Directors consider entirely attributable to the negative impact of the Euro/Real exchange rate at year-end. The risk profile associated with a possible loss of value of the equity investment in Irce Ltda is in any case considered not to be significant, considering that the forecast cash flow in currency is more than sufficient, whilst the devaluation of the Real has only resulted in a reduction in the book value of the translated net assets in the subsidiary; more specifically, the category "plant and equipment" continues to maintain its list price in euros, given that said plant and equipment is European, as it was purchased from European manufacturers. Consequently, the Directors do not see risk profiles requiring to recognise impairment losses on the equity investment, also in the light of the impairment test results.
As regards the small operating Group companies, for lack of a business plan prepared by the reduced local structure, where losses are recorded, the Directors ensure a substantial alignment with the percentage stake held in the subsidiary's shareholders' equity.
The item refers for €/000 376 to the tax credit for the 2011 IRES rebate application, art.2, para. 1-quater of Italian Decree Law no. 201/2011, the reduction of €/000 436 on the previous year is due to the rebate obtained in December 2019 for the years 2007 and 2008.
The item "deferred tax assets" is the net amount of deferred tax assets less deferred tax liabilities, as shown below:
| €/000 | 31/12/2019 | 31/12/2018 |
|---|---|---|
| - Deferred tax assets | 1,804 | 2,015 |
| - Deferred tax liabilities | (634) | (568) |
| Total | 1,170 | 1,447 |
| The Company recognised deferred tax assets for the following items: | ||||
|---|---|---|---|---|
| €/000 | 31/12/2019 | 31/12/2018 | ||
| - Allocations to Provisions for risks and charges | 77 | 536 | ||
| - Allocations to the taxed Bad debt provision | 223 | 236 | ||
| - Allocations to the Provision for inventory obsolescence | 885 | 751 | ||
| - Other | - | 15 | ||
| - IFRS 15 | 575 | 476 | ||
| - IFRS 19 | 44 | - | ||
| Total | 1,804 | 2,015 |
The table below shows the changes in deferred tax assets during 2018 and 2019:
| Taxed provisions | IFRS 15 | Other | Total | |
|---|---|---|---|---|
| balance as of 01/01/2018 | 1,473 | 21 | 1,494 | |
| IFRS 15 | 511 | 511 | ||
| effect on income statement | 50 | (35) | (6) | 9 |
| effect on shareholders' equity | ||||
| balances as of 31/12/2018 | 1,523 | 476 | 15 | 2,015 |
| effect on income statement | (338) | 98 | (15) | (255) |
| effect on shareholders' equity | 44 | 44 | ||
| balances as of 31/12/2019 | 1,185 | 574 | 44 | 1,804 |
The effects on shareholders' equity refer to changes in the actuarial reserve as per IAS 19.
Deferred tax assets were recognised for temporary differences between the tax bases of assets and liabilities and their carrying amounts and to the extent that it is probable that taxable profit will be available against which these differences can be utilised.
Deferred tax liabilities are broken down as follows:
| €/000 | 31/12/2019 | 31/12/2018 |
|---|---|---|
| - Depreciation/amortisation | 36 | 36 |
| - IAS capital gains on buildings | 413 | 413 |
| - IAS capital gains on land | 97 | 97 |
| - Effect of application of IAS 19 | - | 22 |
| - Exchange gains from adjustment | 88 | - |
| Total | 634 | 568 |
The table below shows the changes in deferred tax liabilities during 2018 and 2019:
| Depreciation/amortisation | IAS capital gain on land and building |
Effect of IAS 19 |
Total | |
|---|---|---|---|---|
| balance as of 01/01/2018 | 42 | 510 | 3 | 555 |
| effect on income statement | (6) | (3) | (9) | |
| effect on shareholders' equity | 22 | 22 | ||
| balances as of 31/12/2018 | 36 | 510 | 22 | 569 |
| effect on income statement | 66 | 66 | ||
| effect on shareholders' equity | ||||
| balances as of 31/12/2019 | 36 | 510 | 88 | 634 |
Inventories are broken down as follows:
| €/000 | 31/12/2019 | 31/12/2018 |
|---|---|---|
| - Raw materials, ancillary and consumables | 20,869 | 28,390 |
| - Work in progress and semi-finished goods | 9,692 | 7,886 |
| - Finished products and goods | 29,383 | 34,845 |
| - Provision for write-down of raw materials | (2,759) | (2,876) |
| - Provision for write-down of finished products | (782) | (897) |
| Total | 56,403 | 67,348 |
Recognised inventories are not pledged nor used as collateral.
The provision for the write-down of raw materials corresponds to the amount deemed necessary to cover the risks of obsolescence, mainly of packaging, whilst the provision for the write-down of finished products and goods is made against slow-moving or non-moving finished products.
The table below shows any changes in the provision for write-down of inventories during 2019:
| €/000 | 31/12/2018 | Allocations | Uses | 31/12/2019 |
|---|---|---|---|---|
| Provision for write-down of raw materials |
2,876 | (117) | 2,759 | |
| Provision for write-down of finished products and goods |
897 | (115) | 782 | |
| Total | 3,773 | (232) | 3,541 |
| €/000 | 31/12/2019 | 31/12/2018 |
|---|---|---|
| 37,522 | 44,895 | |
| - Customers/Bills receivable - Bad debt provision |
(609) | (694) |
| Total | 36,913 | 44,201 |
The balance of receivables due from customers is entirely composed of receivables due within the next 12 months.
The trade receivables sold during the year came to €/000 8,708.
The table below shows the changes in the bad debt provision during 2017 and 2018:
| €/000 | 31/12/2017 | Allocations | Uses | 31/12/2018 |
|---|---|---|---|---|
| Bad debt provision | 749 | 121 | (177) | 693 |
| €/000 | 31/12/2018 | Allocations | Uses | 31/12/2019 |
| Bad debt provision | 693 | 92 | (176) | 609 |
The balance of trade receivables due from subsidiaries is broken down as follows:
| €/000 | 31/12/2019 | 31/12/2018 |
|---|---|---|
| - FD Sims LTD | 133 | 124 |
| - Isolveco S.R.L. in liquidazione | 1,521 | 1,521 |
| - Isomet AG | 4,183 | 2,774 |
| - IRCE S.L | 2,337 | 2,316 |
| - DMG | 7 | 8 |
| - ISODRA GmbH | 897 | 1,180 |
| - IRCE LTDA | 172 | 313 |
| - Stable Magnet Wire P. Ltd. | 1,798 | 1,588 |
| - Smit Draad Nijmegen BV | 6 | 5 |
| - Isolveco 2 S.R.L. | - | 566 |
| - Bad debt provision on receivables from Isolveco S.R.L. | (1,405) | (1,405) |
| Total | 9,649 | 8,990 |
| €/000 | 31/12/2017 | Allocations | Uses | 31/12/2018 |
|---|---|---|---|---|
| Bad debt provision | 1,405 | - | - | 1,405 |
| €/000 | 31/12/2018 | Allocations | Uses | 31/12/2019 |
| Bad debt provision | 1,405 | - | - | 1,405 |
The provision for doubtful debt due from subsidiaries refers to the trade receivable due from the subsidiary Isolveco S.R.L. in liquidazione.
On the basis of the analysis performed by management, the net value of these receivables is fully recoverable.
Tax receivables, of €/000 807, refer to tax advances paid partially offset by current tax payables.
The item is broken down as follows:
| €/000 | 31/12/2019 | 31/12/2018 |
|---|---|---|
| - Accrued income and prepaid expenses | 113 | 130 |
| - Other receivables | 233 | 1,699 |
| Total | 346 | 1,829 |
The item "other receivables" mainly includes insurance reimbursements and the change on last year is mainly due to the receipt, during 2019, of the bonus on electricity consumption assigned by the Electricity Authority, by authorisation of the Minister of Economic Development.
| €/000 | 31/12/2019 | 31/12/2018 |
|---|---|---|
| - Mark to Market copper forward transactions | 372 | 295 |
| - Guarantee deposits | 14 | 295 |
| Total | 386 | 590 |
The item "Mark to Market copper forward transactions" refers to the fair value of derivative forward contracts for the purchase and sale of copper on the LME and of derivative contracts related to GBP forward sales.
This item includes bank deposits, cash and cash equivalents.
| €/000 | 31/12/2019 | 31/12/2018 |
|---|---|---|
| - Bank and postal deposits | 750 | 1,115 |
| - Cash and cash equivalents | 8 | 11 |
| Total | 758 | 1,126 |
Outstanding bank and postal deposits are not subject to constraints or restrictions.
The share capital is composed of 28,128,000 ordinary shares worth € 14,626,560.
The shares are fully subscribed and paid up and bear no rights, privileges or restrictions as far as dividend distribution and capital distribution, if any, are concerned.
In the year 2019, a dividend of €/000 1,333 (€ 0.05 per share) was distributed.
| €/000 | 31/12/2019 | 31/12/2018 |
|---|---|---|
| - Own shares (share capital) | (800) | (788) |
| - Share premium reserve | 40,539 | 40,539 |
| - Own shares (share premium) | 33 | 64 |
| - Other reserves | 43,087 | 43,087 |
| - Legal reserve | 2,925 | 2,925 |
| - Extraordinary reserve | 41,620 | 35,047 |
| - IAS 19 reserve | (753) | (615) |
| - Undistributed profits | 6,462 | 6,462 |
| TOTAL | 133,112 | 126,720 |
Detail of origin, availability and use of equity items:
| Description | Amount | Possibility of use | Quota avalaible | Distributable |
|---|---|---|---|---|
| Share capital | 14,626,560 | |||
| Capital's reserves | ||||
| Share premium reserve | 40,538,732 | A,B,C | 40,538,732 | 40,538,732 |
| Other reserves | 6,035,757 | A,B,C | 6,035,757 | 6,035,757 |
| Total capital's reserve | 46,574,489 | 46,574,489 | 46,574,489 | |
| Earning's reserves | ||||
| Legal | 2,925,312 | B | 2,925,312 | - |
| Extraordinary | 41,620,289 | A,B,C | 41,620,289 | 41,620,289 |
| IAS | 5,709,132 | A,B | 5,709,132 | 1.597.853 |
| Own shares | - 767,153 |
- | - 767,153 - |
767,153 |
| Cash flow hedge | - | A,B | - | - |
| Other reserves | 585,888 | A,B,C | 585,888 | 585,888 |
| Total earning's reserves | 50,073,469 | 50,073,469 | 43,036,878 | |
| Reserves in tax suspension | ||||
| The South incomes | 201,160 | A,B,C | 201,160 | 201,160 |
| Extraordinary revaluation in the financial statements | 22,327,500 | A,B,C | 22,327,500 | 22,327,500 |
| Reavluation n. 266/2005 | 13,935,343 | A,B | 13,935,343 | - |
| Total reserves in tax suspension | 36,464,003 | 36,464,003 | 22,528,660 | |
| Total reserves | 133,111,960 | 133,111,961 | 112,140,027 | |
| Profit 2019 | 3,603,483 | |||
| Total equity | 151,342,003 | |||
| Total reserves available | 133,111,960 | |||
| Not-assignable share for non-amortized start-up and expansion costs. | - | |||
| Quota not avalaible for legal reserves | 2,925,312 | |||
| Quota not available IAS | 4,111,279 | |||
| Quota not avalaible fair value land | 13,935,343 | |||
| Residual quota available | 112,140,027 |
This reserve refers to the par value and share premium of own shares held by the Company; they are recognised as a deduction from shareholders' equity.
Own shares as of 31 December 2019 amounted to 1,537,988 and corresponded to 5.47% of the share capital.
The number of shares outstanding at the beginning and at the end of the last two years is shown below:
| Thousands of shares | |
|---|---|
| Balance as of 01/01/2018 | 26,716 |
| Share buyback | (104) |
| Balance as of 31/12/2018 | 26,612 |
| Share buyback | (23) |
| Balance as of 31/12/2019 | 26,589 |
This item refers to the higher issue value compared to the par value of IRCE S.p.A. shares issued at the time of the share capital increase when the Company was first listed on the stock exchange in 1996.
Other reserves refer to the following:
The extraordinary reserve consists mainly of retained earnings.
This reserve includes actuarial gains and losses accumulated as a result of the application of IAS 19 Revised. The change in the reserve is as follows:
| balances as of 01/01/2018 | (686) |
|---|---|
| Actuarial valuation Tax effect on actuarial valuation |
93 (22) |
| balances as of 31/12/2018 | (615) |
| Actuarial valuation Tax effect on actuarial valuation |
(182) 44 |
| balances as of 31.12.2019 | (753) |
Profit for the year
The profit for the year amounted to €/000 3,603 (€/000 7,903 as of 31 December 2018).
| €/000 | Currency | Rate | 31/12/2019 | 31/12/2018 | Due date |
|---|---|---|---|---|---|
| Banco Popolare | EUR | Floating | 3,125 | 4,375 | 2023 |
| Banca di Imola | EUR | Floating | - | 1,260 | 2020 |
| CARISBO | EUR | Floating | - | 4,000 | 2020 |
| Mediocredito | EUR | Floating | 4,154 | 5,077 | 2025 |
| IFRS 16 | EUR | Floating | 28 | - | 2023 |
| Total | 7,307 | 14,712 |
As regards the item related to the application of the new IFRS 16 standard, please refer to the paragraph "Accounting Standards".
| The table below shows the changes in non-current financial liabilities during 2019: | |||||
|---|---|---|---|---|---|
| €/000 | 31/12/2018 | Loans | Repayments | 31/12/2019 | |
| Banco Popolare | 4,375 | - | (1,250) | 3,125 | |
| Banca di Imola | 1,260 | - | (1,260) | - | |
| CARISBO | 4,000 | - | (4,000) | - | |
| Mediocredito | 5,077 | - | (923) | 4,154 | |
| IFRS 16 | 28 | - | 28 | ||
| Total | 14,712 | 28 | (7,433) | 7,307 |
For the financial year ended 31 December 2019 the covenants were honoured. The parameters used to calculate compliance with covenants are those of the Group's consolidated financial statements.
| €/000 | 31/12/2018 | Allocations | Uses | 31/12/2019 |
|---|---|---|---|---|
| Provision for risks and | 353 | 31 | (183) | 201 |
| charges | ||||
| Severance payments | 288 | - | (90) | 198 |
| Coverage of losses of IRCE SL | 3,653 | 76 | - | 3,729 |
| Coverage of losses of ISODRA | 2,539 | - | (795) | 1,744 |
| Coverage of losses of IRCE | 67 | - | - | 67 |
| SO.ZO.O | ||||
| Coverage of losses of Magnet | 731 | 208 | - | 939 |
| Wire | ||||
| Total | 7,631 | 315 | (1,068) | 6,878 |
Provisions for risks and charges are broken down as follows:
"Provisions for risks and disputes" refer to various disputes.
The item "provision for severance payments to agents" refers to allocations made for severance payments relating to outstanding agency contracts.
The Company has also raised a provision for the coverage of losses of some of the subsidiaries, and the related funds are shown to be equal to the negative equity in the above companies.
The table below shows the changes in the Provision for employee defined benefits.
| €/000 | 31/12/2019 | 31/12/2018 |
|---|---|---|
| Provision for employee benefits as of 01/01 | 4,145 | 4,482 |
| Financial charges | 30 | 40 |
| Actuarial (gains)/losses | 182 | (93) |
| Payments | (348) | (283) |
| Provision for employee benefits as of 31/12 | 4,009 | 4,146 |
The Provision for employee benefits is part of the defined benefit plans.
In order to determine the relevant liability, the Company used the Projected Unit Credit (PUC) cost method, which consists in the following:
Here below are the demographic assumptions used by the actuary in measuring the provision for employee benefits:
In addition, the following technical-economic assumptions were made:
| 31/12/2019 | 31/12/2018 | |
|---|---|---|
| Annual discount rate | 0.37% | 1.13% |
| Annual inflation rate | 1.20% | 1.50% |
| Annual rate of increase of employee termination indemnities |
2.40% | 2.625% |
The IBOXX Corporate AA index with a 7-10-year duration as of the measurement date was used as a benchmark for the discount rate.
The annual rate of increase of employee termination indemnities is equal to 75% of inflation, plus 1.5 percentage points.
Here below are the disclosures required by the new IAS 19.
Sensitivity analysis of IRCE S.p.A.'s main measurement parameters:
| €/000 | DBO change as of 31/12/2019 |
|---|---|
| Inflation rate +0.25% | 4,062 |
| Inflation rate -0.25% | 3,958 |
| Discount rate +0.25% | 3,926 |
| Discount rate -0.25% | 4,096 |
| Turnover rate +1% | 3,977 |
| Turnover rate -1% | 4,045 |
Service cost: 0.00 Duration of the plan: 9.0
Financial liabilities are broken down as follows:
| €/000 | 31/12/2019 | 31/12/2018 |
|---|---|---|
| - Payables due to banks | 38,049 | 46,268 |
| - Mark to Market derivatives | 113 | 64 |
| - IFRS 16 | 38 | - |
| Total | 38,200 | 46,332 |
The item "Mark to Market derivatives" refers to the fair value of USD forward purchase contracts outstanding as of 31 December 2018.
As regards the item related to the application of the new IFRS 16, please refer to the paragraph "Accounting Standards".
With regard to financial liabilities, the net financial position of the Company, excluding intra-group financial receivables, calculated in accordance with the provisions of Consob Communication 6064293 dated 28 July 2006 and CESR recommendation dated 10 February 2005, was as follows:
| €/000 | 31/12/2019 | 31/12/2018 |
|---|---|---|
| Cash Other current financial assets* |
758 25* |
1,126 295* |
| Liquid assets | 783 | 1,421 |
| Current financial liabilities | (38,200) | (46,332) |
| Net current financial debt | (37,417) | (44,911) |
| Non-current financial liabilities | (7,307) | (14,712) |
| Non-current financial debt | (7,307) | (14,712) |
| Net financial debt | (44,724) | (59,623) |
* These items differ from the corresponding items of the statement of financial position since the fair value measurement of forward copper contracts is no included.
Trade payables are due in the next 12 months.
As of 31 December 2019, they amount to €/000 9,946, compared to €/000 12,467 as of 31/12/2018; the decrease was mainly due to the lower amount of copper purchased at the end of 2019.
Trade payables due to subsidiaries were broken down as follows:
| €/000 | 31/12/2019 | 31/12/2018 |
|---|---|---|
| - DMG GmbH | 90 | 99 |
| - FD SIMS Ltd | 2 | 5 |
| - IRCE SL | 66 | 122 |
| - IRCE Ltda | 145 | 613 |
| - SMIT DRAAD | 6 | - |
| - ISODRA | - | 1 |
| - IRCE Sp.Zo.o | - | 59 |
| - ISOLVECO 2 | 47 | 124 |
| Total | 356 | 1,023 |
The item is broken down as follows:
| €/000 | 31/12/2019 | 31/12/2018 |
|---|---|---|
| - Payables due for income taxes | - | 1,004 |
| Total | - | 1,004 |
This item, equal to €/000 1,609, primarily refers to the contributions payable to INPS.
Other payables are broken down as follows:
| €/000 | 31/12/2019 | 31/12/2018 |
|---|---|---|
| - Payables due to employees | 2,329 | 2,472 |
| - Deposits received from customers | 1,779 | 1,617 |
| - Accrued liabilities and deferred income | 36 | 42 |
| - Other payables | 109 | 151 |
| - VAT payables | 273 | |
| 316 | ||
| - IRPEF (personal income tax) payables | 483 | 477 |
| Total | 5,052 | 5,032 |
These refer to revenues from the sale of goods, net of returns, rebates and the return of packaging. 2019 turnover, equal to €/000 203,021, reported a decrease of 12.9% compared to the previous year (€/000 233,059).
For additional details, please refer to the previous paragraph on segment reporting and to the Report on Operations.
Other income was broken down as follows:
| €/000 | 31/12/2019 | 31/12/2018 | change |
|---|---|---|---|
| - Capital gains on disposals of assets | 25 | 120 | (95) |
| - Increases in internally generated fixed assets | 116 | 217 | (101) |
| - Insurance reimbursements | 132 | 48 | 84 |
| - Contingent assets | 104 | 47 | 57 |
| - Other revenues | 311 | 232 | 79 |
| Total | 688 | 664 | 24 |
This item, equal to €/000 156,322, includes costs incurred for the acquisition of raw materials, of which the most significant are those represented by copper, insulating materials and materials for packaging and maintenance, net of the change in inventories (€/000 7,403).
These include costs incurred for the supply of services pertaining to copper processing as well as utilities, transportation, commercial and administrative services, and the costs for the use of third-party goods, as detailed below:
| €/000 | 31/12/2019 | 31/12/2018 | change |
|---|---|---|---|
| - External processing | 5,240 | 5,283 | (43) |
| - Utility expenses | 6,977 | 7,190 | (213) |
| - Maintenance | 831 | 674 | 157 |
| - Transportation expenses | 2,837 | 2,982 | (145) |
| - Payable fees | 1,151 | 1,237 | (86) |
| - Compensation of Statutory Auditors | 69 | 68 | 1 |
| - Other services | 2,897 | 3,403 | (506) |
| Total | 20,002 | 20,836 | (834) |
Savings booked under "utility expenses" and "transportation expenses" are a consequence of the smaller quantities of finished products sold and produced.
The item "other services" includes primarily technical, legal and tax consulting fees as well as insurance and business expenses.
Here below is the breakdown of personnel costs:
| €/000 | 31/12/2019 | 31/12/2018 | change |
|---|---|---|---|
| - Salaries and wages | 11,525 | 11,462 | 63 |
| - Social security charges | 3,645 | 3,706 | (61) |
| - Retirement costs for defined contribution plans | 903 | 838 | 65 |
| - Other costs | 1,518 | 1,526 | (8) |
| Total | 17,591 | 17,532 | 59 |
The item "other costs" includes costs for temporary work, contract work, and the compensation of Directors.
The Company's average number of personnel for the year and the current number at year-end is shown below:
| Personnel | 2019 Average | 31/12/2019 | 31/12/2018 |
|---|---|---|---|
| - Executives - White collars - Blue collars |
13 93 292 |
12 96 290 |
13 93 295 |
| Total | 398 | 398 | 401 |
The average number of employees is calculated according to the Full-Time Equivalent method and includes both internal and external (temporary and contract) staff.
Personnel is classified according to the type of employment contract.
Here is the breakdown of depreciation/amortisation:
| €/000 | 31/12/2019 | 31/12/2018 | change |
|---|---|---|---|
| - Amortisation of intangible assets | 14 | 48 | (34) |
| - Depreciation of tangible assets | 3,287 | 2,892 | 395 |
| - Depreciation/amortisation IFRS 16 | 50 | - | 50 |
| Total depreciation/amortisation | 3,351 | 2,940 | 411 |
Provisions and write-downs are broken down as follows:
| €/000 | 31/12/2019 | 31/12/2018 | change |
|---|---|---|---|
| - Write-downs of receivables | 92 | 121 | (29) |
| - Provisions for risks | - | 108 | (108) |
| Total provisions and write-downs | 92 | 229 | (137) |
Other operating costs are broken down as follows:
| €/000 | 31/12/2019 | 31/12/2018 | change |
|---|---|---|---|
| - Non-income taxes and duties | 300 | 308 | (8) |
| - Capital losses and contingent liabilities | 123 | 114 | 9 |
| - Other | 27 | 34 | (7) |
| Total | 450 | 456 | (6) |
The write-back refers to the subsidiary ISODRA GmbH for €/000 795.
Impairment is broken down as follows:
| 31/12/2019 | 31/12/2018 | change |
|---|---|---|
| 75 | 273 | (198) |
| - | 113 | (113) |
| 208 | 261 | (53) |
| 1,088 | 940 | 148 |
| 161 | - | 161 |
| 1,532 | 1,587 | (55) |
Reversals of impairment are broken down as follows:
| €/000 | 31/12/2019 | 31/12/2018 | change |
|---|---|---|---|
| - Isodra GmbH | 795 | - | 795 |
| Total | 795 | - | 795 |
Financial income and charges are broken down as follows:
| €/000 | 31/12/2019 | 31/12/2018 | change |
|---|---|---|---|
| - Other financial income | 1,878 | 2,560 | (682) |
| - Income from subsidiaries | 1,094 | 84 | 1,010 |
| - Interest and other financial charges | (257) | (226) | (31) |
| - Foreign exchange gains/(losses) | (153) | (242) | 89 |
| Total | 2,562 | 2,176 | 386 |
In 2019, "income from subsidiaries" also includes the dividend of €/000 1000 paid to the Parent Company by the Brazilian subsidiary IRCE Ltda.
Here below is the breakdown of "other financial income":
| €/000 | 31/12/2019 | 31/12/2018 | change |
|---|---|---|---|
| - Interest income on receivables due from customers | 8 | 4 | 4 |
| - Sundry interest income | 136 | 100 | 36 |
| - Income from LME derivatives | 1,734 | 2,456 | (722) |
| Total | 1,878 | 2,560 | (682) |
The item "income from LME derivatives" refers to the closing and Mark to Market (fair value) measurement of copper derivative contracts.
"Sundry interest income" includes interest on extended payment terms granted to customers concerning the use of factoring services.
Here below is the breakdown of "interest and other financial charges":
| €/000 | 31/12/2019 | 31/12/2018 | change |
|---|---|---|---|
| - Interest expense for short-term payables | 26 | 14 | 12 |
| - Interest expense for medium to long-term payables | 94 | 95 | (1) |
| - Sundry interest expense | 31 | 42 | (11) |
| - Bank fees and expenses | 81 | 75 | 6 |
| - Interest expense on factoring | 25 | - | 25 |
| Total | 257 | 226 | 31 |
The item "sundry interest expense" includes the interest cost deriving from the discounting of the employee termination indemnity pursuant to IAS 19.
| €/000 | 31/12/2019 | 31/12/2018 | changes |
|---|---|---|---|
| - Current taxes - Deferred tax assets/(liabilities) |
(260) (321) |
(3,171) 19 |
2,911 (340) |
| Total | (581) | (3,152) | 2,571 |
The numerical reconciliation between the tax charge and the product of accounting profit multiplied by the applicable tax rate is shown below:
| €/000 | 31/12/2019 | 31/12/2018 |
|---|---|---|
| Profit/(Loss) before tax | 4,185 | 11,055 |
| Taxes calculated with applicable IRES rate (24%) | 1,304 | 2,653 |
| Tax impact of non-deductible IRES costs Permanent changes Temporary changes ACE deduction (Allowance for corporate equity) IRAP rate (effective) Taxes related to previous years |
(823) (267) (103) 149 |
116 (64) (91) 557 |
| Total | 260 | 3,171 |
The Company engages in commercial and financial transactions with its companies, as reported below:
| Company | Revenues | Financial | Cost for | Costs for | Financial | Trade | Trade |
|---|---|---|---|---|---|---|---|
| €/000 | Income | purchase | serivces | Credits | Receivables | Payables | |
| FD Sims Ltd Smit Draad Nijmegen BV |
1,172 24 |
30 22 |
538 33 |
8 - |
7,420 5,322 |
133 6 |
2 7 |
| Isomet AG | 4,781 | 2 | - | - | 602 | 4,183 | - |
| IRCE Ltda | 566 | - | 145 | - | - | 172 | 145 |
| Isolveco Srl | - | - | - | - | - | 1,521 | - |
| DMG Gmbh | 29 | 7 | 4 | 410 | 1,707 | 7 | 90 |
| IRCE SL | 10 | 16 | - | 333 | 1,594 | 2,337 | 66 |
| Stable Magnet Wire P.Ltd | 610 | - | - | - | - | 1,798 | - |
| ISODRA Gmbh | 290 | 10 | - | - | 1,871 | 897 | - |
| Isolveco 2 Srl | 1 | - | 39 | 112 | 10 | - | 47 |
| Irce Sp. Zo.o | - | 7 | - | 59 | 134 | - | 59 |
| 7,483 | 94 | 759,000 | 923,000 | 18,660 | 11,054 | 356 |
In compliance with the requirements of IAS 24, the annual compensation received by the members of the Board of Directors is shown below:
| €/000 | Compensation for the office held |
Compensation for other tasks |
Total |
|---|---|---|---|
| Directors | 251 | 334 | 585 |
This table shows the compensation paid for any reason and in any form, excluding social security contributions.
Following the introduction of art. 123-ter of the Consolidated Financial Act, further details on these amounts are provided in the Remuneration Report, which will be made available within the time limits prescribed by the law at the registered office of the Company, as well as on the website www.irce.it.
Here below is the breakdown of receivables by internal rating.
The reclassification of receivables takes into account any positions subject to renegotiation.
| Risk level | 2019 Exposure €/000 |
2018 Exposure, €/000 |
|---|---|---|
| Low Medium Above-average High Total |
23,246 12,836 592 848 37,522 |
15,684 20,750 7,438 1,022 44,894 |
| Due date | 2019 Amount €/000 |
2018 Amount €/000 |
| Not yet due | 36,472 | 43,590 |
| < 30 days 61-90 > 120 Total |
191 16 843 37,522 |
241 41 1,022 44,894 127 |
The fair value of trade receivables corresponds to their nominal exposure.
The bad debt provision, equal to €/000 609, refers to the range between 91-120 and > 120 days and to the above-average and high risk level.
In accordance with the provisions of IFRS 8, para. 34, please note that for the years ended on 31 December 2019 and 2018, there are no third party customers generating revenues that exceed 10% of total revenues.
The primary objective in managing the Company's capital is to maintain a solid credit rating and adequate capital ratios in order to support operations and maximise shareholder value.
| €/000 | 31/12/2019 | 31/12/2018 |
|---|---|---|
| Net financial debt (A) | 44,724 | 59,623 |
| Shareholders' equity (B) | 151,342 | 149,250 |
| Total capital (A) + (B) = (C) | 196,066 | 208,873 |
| Gearing ratio (A) / (C) | 22.8% | 28.5% |
Here below is a comparison between the carrying amount and fair value of all the Company's financial instruments broken down by category:
| €/000 | Carrying amount | Fair value | ||
|---|---|---|---|---|
| 2019 | 2018 | 2019 | 2018 | |
| Financial assets | ||||
| Cash and cash equivalents | 758 | 1,126 | 758 | 1,126 |
| Other financial assets | 386 | 590 | 386 | 590 |
| Financial liabilities | ||||
| Current loans Non-current loans |
38,200 7,307 |
46,332 14,712 |
38,200 7,307 |
46,332 14,712 |
The following statement, drafted in accordance with art. 149-duodecies of the Consob Issuers' Regulations, shows the compensation relative to the year 2018 for auditing services and for other services supplied by the independent auditor or by entities belonging to its network to IRCE S.p.A.
| €/000 | Entity supplying the service | Compensation for the year 2019 |
|---|---|---|
| Annual statutory audit | PricewaterhouseCoopers S.p.A. | 104 |
There are no particularly important commitments made by the Group as of the reporting date, however we note the issue of surety in the amount of €/000 670 in the favour of a publicly-owned company, as a guarantee of a three-year supply of electrical wires.
During the financial year, the parent company IRCE S.p.A. received a subsidy from the Italian Government's State Aid Register in relation to the year 2017. A benefit was also received in 2019 through reduced general service charges for 'energyintensive' companies based on Law no. 167/2017, with charges reduced by an amount of € 3,443,854 split over the production facilities as follows:
IMOLA (Bologna) € 2,474,797 UMBERTIDE (Perugia) € 652,791 GUGLIONESI (Campobasso) € 273,644 MIRADOLO TERME (Pavia) € 42,622
As for events after the reporting date, reference should be made to the paragraph "Events after the reporting date" of the Report on Operations for 2019.
Imola, 13 March 2020
We, the undersigned, Mr Filippo Casadio, Chairman, and Ms Elena Casadio, Manager responsible for preparing the corporate accounting documents of IRCE S.p.A., hereby certify, taking into account the provisions of art. 154-bis, para. 5, of Italian Legislative Decree No. 58 of 24 February 1998:
of the administrative and accounting procedures used to prepare the IAS/IFRS separate financial statements.
In addition, it is hereby certified that the IAS/IFRS separate financial statements:
Imola, 13 March 2020
The amounts referring to foreign investees have been translated into euros using historical exchange rates. Solely for reporting purposes, in the following table, the provision for write-down of equity investments was recognised as a deduction from the carrying amount of the equity investments for which it was set aside. The provision against future losses has been set aside for those subsidiaries whose carrying value has already been written off completely.
| 2019 | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Company | Share | Partecipation Shareholders' uota of Shareholders | Result for | Quota of result | Book value | Future charges | Difference | ||
| capital | equity | equity | the year | for the | |||||
| year | |||||||||
| FD SIMS ltd* | 18,173,127 | 100% | 5,977,355 | 5,977,355 | (1,468,452) | (1,468,452) | 6,038,509 | (61,153) | |
| Smit Draad Nijmegen BV* | 1,165,761 | 100% | 5,795,190 | 5,795,190 | (2,083,307) | (2,083,307) | 7,111,711 | (1,316,521) | |
| Isomet AG* | 674,354 | 100% | 2,880,919 | 2,880,919 | (342,594) | (342,594) | 1,434,650 | 1,446,269 | |
| IRCE Ltda* | 58,809,209 | 100% | 38,001,154 | 38,001,154 | 2,188,181 | 2,188,181 | 58,465,925 | (20,464,771) | |
| Isolveco SRL | 46,440 | 75% | (1,375,864) | (1,031,898) | 124,498 | 93,374 | 0 | (1,031,898) | |
| DMG Gmbh | 255,646 | 100% | 1,297,959 | 1,297,959 | (157,122) | (157,122) | 119,526 | 1,178,434 | |
| IRCE SL | 150,000 | 100% | (3,728,799) | (3,728,799) | (75,393) | (75,393) | 0 | (3,728,799) | 0 |
| Stable Magnet Wire P.Ltd | 2,601,531 | 100% | (938,917) | (938,917) | (215,733) | (215,733) | 0 | (938,917) | (0) |
| Isodra Gmbh | 25,000 | 100% | (1,743, 422) | (1,743, 422) | 794,902 | 794,902 | 0 | (1,743,422) | 0 |
| Isolveco 2 SRL | 10,000 | 100% | 60 | 60 | (13,294) | (13,294) | 10,000 | (9.940) | |
| Irce Electromagnetic wire Co.Ltd | 2,000,000 | 100% | 1,684,299 | 1,684,299 | (175,264) | (175,264) | 2,000,000 | (315,701) | |
| Irce SP.ZO.O | 48,156 | 100% | (58,936) | (58,936) | 3,299 | 3,299 | 0 | (67,977) | 9,041 |
| Total | 75,180,321 | (6,479,115) | (20,566,241) |
(*) subject to specific impairment test.
The Chinese start-up Irce Electromagnetic Wire Co. Ltd was not tested for impairment since it is not operational yet.
in accordance with article 14 of Legislative Decree No. 39 of 27 January 2010 and article 10 of Regulation (EU) No. 537/2014
To the Shareholders of IRCE SpA
We have audited the consolidated financial statements of IRCE SpA (hereinafter, also the "Company" and together with its subsidiaries the "IRCE Group"), which comprise the consolidated statement of financial position as of 31 December 2019, the consolidated income statement, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended and the explanatory notes to the consolidated financial statements, including a summary of significant accounting policies.
In our opinion, the consolidated financial statements give a true and fair view of the financial position of the IRCE Group as of 31 December 2019, and of the result of its operations and cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union, as well as with the regulations issued to implement article 9 of Legislative Decree no. 38/2005.
We conducted our audit in accordance with International Standards on Auditing (ISA Italia). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Consolidated Financial Statements section of this report. We are independent of IRCE SpA pursuant to the regulations and standards on ethics and independence applicable to audits of consolidated financial statements under Italian law. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
See note no. 6 to the consolidated financial statements and paragraphs "Assessment criteria and Accounting standards applied" and "Use of estimates" in the notes to the consolidated financial statements as of 31 December 2019.
As of 31 December 2019 the value of inventories recognized in the consolidated financial statements of the IRCE Group amounted to Euro 82.3 million, equal to 39% of total consolidated assets.
The main raw material used by the IRCE Group in the production process is copper, whose value is the most significant component of raw materials, finished products and work in progress.
When arranging the contract conditions of sale, the IRCE Group agrees with customers the mechanism for determining the consideration for sale broken down by the two components of the finished products: i) for the quantity of copper included in the finished products (i.e. "copper component"), the consideration for sale is fixed, if it is equal to the price of copper when the order is confirmed by customers or alternatively, determinable, if there is a mechanism for determining the consideration for sale linked to the trend in the copper prices in a set period of time; ii) for costs of production other than copper (i.e. "manufacturing component") a fixed consideration for sale is agreed upon with the counterparty.
Our audit approach preliminarily consisted in understanding and assessing the methods, procedures and internal controls defined by the IRCE Group in order to valuate the "copper component" of inventories applying the weighted average cost and to determine the related net realizable value. Taking account of the understanding and assessment of the aforementioned internal controls, we planned and performed tests of details on such financial statement line item.
In this respect, we highlight that the tests of details on the net realizable value of the "copper component" were designed splitting inventories into the following homogeneous classes based on their risk profile: i) sales commitments and orders in place at the balance-sheet date with a fixed price of copper; ii) inventories relating to sales without a fixed price of copper made in the first months of the financial year 2020; iii) inventories without sales commitments and orders with a fixed price of copper which were not sold in the first months of 2020.
Regarding sales commitments and orders in place at the balance-sheet date with a fixed price of copper, in order to verify the correct
For the preparation of the consolidated financial statements, raw materials and the "copper component" of finished products and work in progress, valued separately from the "manufacturing component", are carried at the lower of purchase cost and net realizable value.
The price of copper quoted on the LME ("London Metal Exchange", i.e. the major market for non-ferrous metals) is subject to fluctuations, even significant; therefore, a prolonged downward trend in the copper prices after the closing date of the financial statements entails the potential risk that the net realizable value of copper held within inventories may be lower than its carrying amount and that the value of raw materials, finished products and work in progress needs to be written down.
When preparing the consolidated financial statements, the Directors of IRCE SpA carry out a specific analysis in order to verify if there are the conditions to write down the "copper component" of inventories, taking into account, among others, the mechanism for determining the consideration for sale of the "copper component", the copper prices available until a date close to the approval of the consolidated financial statements, the sales commitments and orders in place at year-end with a fixed price of copper, as well as the expected trend of the copper prices in the months after the approval of the consolidated financial statements.
The valuation of the "copper component" within inventories was considered of particular importance in our audit of the consolidated financial statements of the IRCE Group. It is thus a key audit matter, considering its significance and the methods to calculate the recoverable amount based on management's complex estimates regarding the future trend of copper prices.
measurement in the financial statements of the "copper component", we obtained a detail of these commitments and sales orders from the Company showing a comparison between the weighted average cost of the "copper component" and the selling price, and we checked the mathematical accuracy of such detail, as well as the agreement, on a sample basis, of the related selling price with the supporting documentation (purchase orders from customers and sales invoices).
For sales commitments and orders without a fixed price of copper, whose sale was finalized in the period after the closing date of the financial statements, we obtained a detail of the sales transactions in the first months of 2020 showing, for each transaction, a comparison between the weighted average cost of the "copper component" and the related selling price. We checked the mathematical accuracy of the abovesaid detail and, on a sample basis, the agreement of the selling price reported in that detail with the supporting documentation (purchase orders from customers and sales invoices).
In order to assess the reasonableness of the estimate of the net realizable value of the "copper component" for inventories without sales commitments and orders with a fixed price of copper that were not sold in the first months of 2020 but are expected to be sold within April 2020, on the basis of the average inventory rotation of the IRCE Group, we obtained a detail of the calculation performed by the Company to determine the average of the copper prices on the LME in the period from January to the first days of March 2020, we tested the mathematical accuracy and verified the agreement of the copper prices reported in the abovesaid calculation with publicly available prices. Additionally, we compared the weighted average cost of the "copper component" as at the balance-sheet date and the average copper price mentioned above, to find whether any writedowns were to be entered in the financial statements, considering also the trend of copper prices in March 2020.
Finally, our audit approach entailed performing sample tests on the correctness of the calculation of the weighted average cost used to value the "copper component".
The Directors are responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with International Financial Reporting Standards as adopted by the European Union, as well as with the regulations issued to implement article 9 of Legislative Decree No. 38/2005 and, in the terms prescribed by law, for such internal control as they determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
The Directors are responsible for assessing the IRCE Group's ability to continue as a going concern and, in preparing the consolidated financial statements, for the appropriate application of the going concern basis of accounting, and for disclosing matters related to going concern. In preparing the consolidated financial statements, the Directors use the going concern basis of accounting unless they either intend to liquidate IRCE SpA or to cease operations, or have no realistic alternative but to do so.
The Board of Statutory Auditors is responsible for overseeing, in the terms prescribed by law, the IRCE Group's financial reporting process.
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 auditor's 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 International Standards on Auditing (ISA Italia) 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 the consolidated financial statements.
As part of our audit conducted in accordance with International Standards on Auditing (ISA Italia), we exercised professional judgement and maintained professional scepticism throughout the audit. Furthermore:
x We identified and assessed the risks of material misstatement of the consolidated financial statements, whether due to fraud or error; we designed and performed audit procedures responsive to those risks; we obtained 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 the override of internal control;
We communicated with those charged with governance, identified at an appropriate level as required by ISA Italia 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 identified during our audit.
We also provided those charged with governance with a statement that we complied with the regulations and standards on ethics and independence applicable under Italian law and communicated with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determined 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 described these matters in our auditor's report.
On 29 April 2011, the shareholders of IRCE SpA in general meeting engaged us to perform the statutory audit of the Company's separate and consolidated financial statements for the years ending 31 December 2011 to 31 December 2019.
We declare that we did not provide any prohibited non-audit services referred to in article 5, paragraph 1, of Regulation (EU) no. 537/2014 and that we remained independent of the Company in conducting the statutory audit.
We confirm that the opinion on the consolidated financial statements expressed in this report is consistent with the additional report to the Board of Statutory Auditors, in its capacity as audit committee, prepared pursuant to article 11 of the aforementioned Regulation.
The Directors of IRCE SpA are responsible for preparing a report on operations and a report on the corporate governance and ownership structure of the IRCE Group as of 31 December 2019, including their consistency with the relevant consolidated financial statements and their compliance with the law.
We have performed the procedures required under auditing standard (SA Italia) No. 720B in order to express an opinion on the consistency of the report on operations and of the specific information included in the report on corporate governance and ownership structure referred to in article 123-bis, paragraph 4, of Legislative Decree no. 58/1998, with the consolidated financial statements of the IRCE Group as of 31 December 2019 and on their compliance with the law, as well as to issue a statement on material misstatements, if any.
In our opinion, the report on operations and the specific information included in the report on corporate governance and ownership structure mentioned above are consistent with the consolidated financial statements of IRCE Group as of 31 December 2019 and are prepared in compliance with the law.
With reference to the statement referred to in article 14, paragraph 2, letter e), of Legislative Decree no. 39/2010, issued on the basis of our knowledge and understanding of the Company and its environment obtained in the course of the audit, we have nothing to report.
The Directors of IRCE SpA are responsible for the preparation of the non-financial statement pursuant to Legislative Decree no. 254 of 30 December 2016.
We have verified that the Directors approved the non-financial statement.
Pursuant to article 3, paragraph 10, of Legislative Decree no. 254 of 30 December 2016, the nonfinancial statement is the subject of a separate statement of compliance issued by another auditor.
Bologna, 30 March 2020
PricewaterhouseCoopers SpA
Signed by
Giuseppe Ermocida (Partner)
This report has been translated into English from the Italian original solely for the convenience of international readers.
in accordance with article 14 of Legislative Decree No. 39 of 27 January 2010 and article 10 of Regulation (EU) No. 537/2014
To the Shareholders of IRCE SpA
We have audited the separate financial statements of IRCE SpA (hereinafter, also the "Company"), which comprise the statement of financial position as of 31 December 2019, the income statement, the statement of comprehensive income, the statement of changes in equity and the statement of cash flows for the year then ended, and the explanatory notes to the separate financial statements, including a summary of significant accounting policies.
In our opinion, the separate financial statements give a true and fair view of the financial position of IRCE SpA as of 31 December 2019, and of the result of its operations and cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union, as well as with the regulations issued to implement article 9 of Legislative Decree no. 38/2005.
We conducted our audit in accordance with International Standards on Auditing (ISA Italia). Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the separate financial statements section of this report. We are independent of the Company pursuant to the regulations and standards on ethics and independence applicable to audits of separate financial statements under Italian law. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the separate financial statements of the current period. These matters were addressed in the context of our audit of the separate financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
See note no. 3 to the separate financial statements and paragraphs "Assessment criteria and Accounting standards applied" and "Use of estimates" in the notes to the separate financial statements as of 31 December 2019.
As of 31 December 2019, the value of the equity investments held by IRCE SpA in subsidiaries is equal to Euro 75.2 million, corresponding to 33.5% of total assets, and are carried at cost adjusted for impairment losses.
The Company performs analyses, at least annually, in order to find if there are any impairment indicators of equity investments and if such indicators are identified, it carries out impairment testing, i.e. the evaluation exercise aimed to verify if the recoverable amount of the equity investment is at least equal to its carrying amount, applying the discounted cash flow valuation method.
The determination of the recoverable amount of the equity investments in subsidiaries was considered of a particular significance for the audit of the Company's separate financial statements; it is therefore a key audit matter since it is based on a complex estimate process and on the use of assumptions affected by future market trends specifically regarding future cash flows, the discount rate, the perpetuity growth rate and, where applicable, the exchange rate between the currency of the foreign subsidiary and the Euro.
Our audit approach preliminarily consisted in understanding and assessing the methods and procedures defined by the Company in order to determine the recoverable amount of the equity investements in subsidiaries that were approved by the Company's Board of Directors on 13 March 2020 to comply with IAS 36 adopted by the European Union.
We verified the analysis performed by the Company in order to identify the existence of any impairment indicators of equity investments in subsidiaries and, therefore, those equity investments to be subject to impairment test.
We reviewed the reasonableness of the methods adopted and the main assumptions behind the valuation method (discounted cash flow), also involving the PwC network's valuation experts. Specifically, we verified the reasonableness of the discount rate and the perpetuity growth rate compared with the generally adopted valuation practices for companies belonging to the IRCE Group's business sector.
We also verified the consistency of the cash flows used in the valuation models with those in the 2020-2024 business plans prepared by the Directors of the subsidiaries (the "Business Plans").
We analysed the reasonableness of the projected cash flows included in the Business Plans of the subsidiaries subject to impairment test through interviews of Company's management; to do this, we carried out a critical analysis on the
reasonableness of such forecasts, with particular regard to the performance of revenues and margins. To this end, we also analysed the management's forecast capacity by comparing the forecasts included in the business plans drawn up in the last three years and the actual data, verifying also any variations between the sales turnover in the first two months of the financial year 2020 and the 2020 budget forecasts.
Moreover, we checked the mathematical accuracy of the valuation models prepared by the Company.
Finally, we examined the disclosures provided by the Company in the financial statements in respect of the method adopted to determine the recoverable amount of the equity investments in subsidiaries subject to impairment test, the results of the valuation and the sensitivity analysis.
See note no. 6 to the separate financial statements and paragraphs "Assessment criteria and Accounting standards applied" and "Use of estimates" in the notes to the separate financial statements at 31 December 2019.
As of 31 December 2019 the value of inventories recorded in the separate financial statements of IRCE SpA amounted to Euro 56.4 million, equal to 25.1% of total assets.
The main raw material used by the Company in the production process is copper, whose value is the most significant component of raw materials, finished products and work in progress.
When arranging the contract conditions of sale, the Company agrees with customers the mechanism for determining the consideration for sale broken down by the two components of the finished products: i) for the quantity of copper included in the finished products (i.e.
Our audit approach preliminarily consisted in understanding and assessing the methods, procedures and internal controls defined by IRCE SpA in order to evaluate the "copper component" of inventories applying the weighted average cost and to determine the related net realizable value. Taking account of the understanding and assessment of the aforementioned internal controls, we planned and performed tests of details on such financial statement line item.
In this respect, we highlight that the tests of details on the net realizable value of the "copper component" were designed splitting inventories into the following homogeneous classes based on
"copper component"), the consideration for sale is fixed, if it is equal to the price of copper when the order is confirmed by customers or alternatively, determinable, if there is a mechanism for determining the consideration for sale linked to the trend in the copper prices in a set period of time; ii) for costs of production other than copper (i.e. "manufacturing component") a fixed consideration for sale is agreed upon with the counterparty.
For the preparation of the separate financial statements, raw materials and the "copper component" of finished products and work in progress, valued separately from the "manufacturing component", are carried at the lower of purchase cost and net realizable value.
The price of copper quoted on the LME ("London Metal Exchange", i.e. the major market for non-ferrous metals) is subject to fluctuations, even significant; therefore, a prolonged downward trend in the copper prices after the closing date of the financial statements entails the potential risk that the net realizable value of copper held within inventories may be lower than its carrying amount and that the value of raw materials, finished products and work in progress needs to be written down.
When preparing the separate financial statements, the Directors of IRCE SpA carry out a specific analysis in order to verify if there are the conditions to write down the "copper component" of inventories, taking into account, among others, the mechanism for determining the consideration for sale of the "copper component", the copper prices available until a date close to the approval of the separate financial statements, the sales commitments and orders in place at the year-end with a fixed price of copper, as well as the expected performance of the copper prices in the months after the approval of the separate financial statements. The valuation of the "copper component" within inventories was considered of particular importance in our audit of the separate financial statements of IRCE SpA. It is thus a key audit matter, considering its significance and the
their risk profile: i) sales commitments and orders in place at the balance-sheet date with a fixed price of copper; ii) inventories relating to sales without a fixed price of copper made in the first months of the financial year 2020; iii) inventories without sales commitments and orders with a fixed price of copper which were not sold in the first months of 2020.
Regarding sales commitments and orders in place at the balance-sheet date with a fixed price of copper, in order to verify the correct measurement in the financial statements of the "copper component", we obtained a detail of these commitments and sales orders from the Company showing a comparison between the weighted average cost of the "copper component" and the selling price, and we checked the mathematical accuracy of such detail, as well as the agreement, on a sample basis, of the related selling price with the supporting documentation (purchase orders from customers and sales invoices).
For sales commitments and orders without a fixed price of copper, whose sale was finalised in the period after the closing date of the financial statements, we obtained a detail of the sales transactions in the first months of 2020 showing, for each transaction, a comparison between the weighted average cost of the "copper component" and related selling price. We checked the mathematical accuracy of this detail and, on a sample basis, the agreement of the selling price reported in that detail with the supporting documentation (purchase orders from customers and sales invoices).
In order to assess the reasonableness of the estimate of the net realizable value of the "copper component" for inventories without sales commitments and orders with a fixed price of copper that were not sold in the first months of 2020 but are expected to be sold within April 2020 on the basis of the average inventory rotation of IRCE SpA, we obtained a detail of the calculation performed by the Company to determine the average of the copper prices on the LME in the period from January to the first
methods to calculate the recoverable amount based on management's complex estimates regarding the future trend of copper prices.
days of March 2020, we tested the mathematical accuracy and verified the agreement of the copper prices reported in the abovesaid calculation with publicly available prices. Additionally, we compared the weighted average cost of the "copper component" as at the balance-sheet date and the average copper price mentioned above, to find whether any writedowns were to be entered in the financial statements, considering also the trend of copper prices in March 2020.
Finally, our audit approach entailed performing sample tests on the correctness of the calculation of the weighted average cost used to value the "copper component".
The Directors are responsible for the preparation of financial statements that give a true and fair view in accordance with International Financial Reporting Standards as adopted by the European Union, as well as with the regulations issued to implement article 9 of Legislative Decree No. 38/2005 and, in the terms prescribed by law, for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
The Directors are responsible for assessing the Company's ability to continue as a going concern and, in preparing the financial statements, for the appropriate application of the going concern basis of accounting, and for disclosing matters related to going concern. In preparing the financial statements, the Directors use the going concern basis of accounting unless they either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.
The Board of Statutory Auditors is responsible for overseeing, in the terms prescribed by law, the Company's financial reporting process.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's 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 International Standards on Auditing (ISA Italia) 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 the financial statements.
As part of our audit conducted in accordance with International Standards on Auditing (ISA Italia), we exercised our professional judgement and maintained professional scepticism throughout the audit. Furthermore:
We communicated with those charged with governance, identified at an appropriate level as required by ISA Italia, 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 identified during our audit.
We also provided those charged with governance with a statement that we complied with the regulations and standards on ethics and independence applicable under Italian law and communicated with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determined those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We described these matters in our auditor's report.
On 29 April 2011, the shareholders of IRCE SpA in general meeting engaged us to perform the statutory audit of the Company's separate and consolidated financial statements for the years ending 31 December 2011 to 31 December 2019.
We declare that we did not provide any prohibited non-audit services referred to in article 5, paragraph 1, of Regulation (EU) no. 537/2014 and that we remained independent of the Company in conducting the statutory audit.
We confirm that the opinion on the separate financial statements expressed in this report is consistent with the additional report to the Board of Statutory Auditors, in its capacity as audit committee, prepared pursuant to article 11 of the aforementioned Regulation.
The Directors of IRCE SpA are responsible for preparing a report on operations and a report on the corporate governance and ownership structure of IRCE SpA as at 31 December 2019, including their consistency with the relevant separate financial statements and their compliance with the law.
We have performed the procedures required under auditing standard (SA Italia) No. 720B in order to express an opinion on the consistency of the report on operations and of the specific information included in the report on corporate governance and ownership structure referred to in article 123-bis, paragraph 4, of Legislative Decree no. 58/1998, with the separate financial statements of IRCE SpA as of 31 December 2019 and on their compliance with the law, as well as to issue a statement on material misstatements, if any.
In our opinion, the report on operations and the specific information included in the report on corporate governance and ownership structure mentioned above are consistent with the separate financial statements of IRCE SpA as of 31 December 2019 and are prepared in compliance with the law.
With reference to the statement referred to in article 14, paragraph 2, letter e), of Legislative Decree No. 39/2010, issued on the basis of our knowledge and understanding of the Company and its environment obtained in the course of the audit, we have nothing to report.
Bologna, 30 March 2020
PricewaterhouseCoopers SpA
Signed by
Giuseppe Ermocida (Partner)
This report has been translated into English from the Italian original solely for the convenience of international readers.
Independent Auditors' Report on the consolidated non-financial statement pursuant to article 3, paragraph 10 of Legislative Decree no.254/2016 and of article 5 of CONSOB Regulation n.20267/2018
Tel: +39 051 27.15.54 Fax: +39 051 46.86.021 www.bdo.it
on the consolidated non-financial statement pursuant to article 3, paragraph 10 of Legislative Decree no. 254 of December 30, 2016 and of article 5 of CONSOB Regulation n. 20267 of January 18, 2018
To the Board of Directors of IRCE S.p.A.
Pursuant to article 3, paragraph 10, of the Legislative Decree no. 254 of December 30, 2016 ("Decree") and to article 5 of the CONSOB Regulation n. 20267 of January 18, 2018, we have been engaged to perform a limited assurance engagement on the Consolidated Non-Financial Statement of IRCE S.p.A. and subsidiaries (the "Group") as of December 31, 2019 prepared in accordance with article 4 of the Decree, and approved by the Board of Directors on March 13, 2020 (hereinafter the "NFS").
The Directors are responsible for the preparation of the NFS in accordance with articles 3 and 4 of the Decree and "Global Reporting Initiative Sustainability Reporting Standards" established by GRI – Global Reporting Initiative ("GRI Standards").
The Directors are also responsible, within the terms established by law, for such internal control as they determine is necessary to enable the preparation of a NFS that is free from material misstatement, whether due to fraud or error.
Moreover, the Directors are responsible for the identification of the content of the NFS, within the topics specified in article 3, paragraph 1, of the Decree, taking into account the Group' business and characteristics, to the extent necessary to ensure an understanding of the Group's business, performance, results and the related impacts.
Finally, the Directors are responsible to design a business management model for the organisation of the Group's activities, as well as, with reference to the topics identified and reported in the NFS, for the policies for the identification and management of the risks generated or undertaken by the Group.
The Board of Statutory Auditors is responsible for overseeing, within the terms established by law, compliance with the provisions set out in the Decree.
We are independent in compliance with the independence and all other ethical requirements of the Code of Ethics for Professional Accountants issued by the International Ethics Standards Board for Accountants, which is founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behaviour. Our company applies International Standard on Quality Control 1 (ISQC Italia 1) and, accordingly, maintains a system of quality control that includes directives and procedures concerning compliance with ethical requirements, professional standards and applicable legal and regulatory requirements.
Bari, Bergamo, Bologna, Brescia, Cagliari, Firenze, Genova, Milano, Napoli, Padova, Palermo, Pescara, Potenza, Roma, Torino, Treviso, Trieste, Verona, Vicenza
BDO Italia S.p.A. – Sede Legale: Viale Abruzzi, 94 – 20131 Milano – Capitale Sociale Euro 1.000.000 i.v. Codice Fiscale, Partita IVA e Registro Imprese di Milano n. 07722780967 - R.E.A. Milano 1977842 Iscritta al Registro dei Revisori Legali al n. 167911 con D.M. del 15/03/2013 G.U. n. 26 del 02/04/2013 BDO Italia S.p.A., società per azioni italiana, è membro di BDO International Limited, società di diritto inglese (company limited by guarantee), e fa parte della rete internazionale BDO, network di società indipendenti.
Our responsibility is to express our conclusion based on the procedures performed about the compliance of the NFS with the requirements of the Decree and the GRI Standards. We carried out our work in accordance with the criteria established in the International Standard on Assurance Engagements 3000 (Revised) ~ Assurance Engagements Other than Audits or Reviews of Historical Financial Information ("ISAE 3000 Revised"), issued by the International Auditing and Assurance Standards Board (IAASB) for limited assurance engagements. This standard requires that we plan and perform the engagement to obtain limited assurance whether the NFS is free from material misstatement. A limited assurance engagement is less in scope than a reasonable assurance engagement carried out in accordance with ISAE 3000 Revised, and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters and events that might be identified in a reasonable assurance engagement.
The procedures performed on the NFS are based on our professional judgement and include inquiries, primarily of the company's personnel responsible for the preparation of the information presented in the NFS, analysis of documents, recalculations and other procedures aimed to obtain evidence, as appropriate.
Specifically, we carried out the following procedures:
With reference to these matters, we compared them with the disclosures presented in the NFS and carried out the procedures described in point 5, letter a).
Specifically, we carried out interviews and discussions with the management of IRCE S.p.A. We also performed limited documentary verifications, in order to gather information on the processes and procedures supporting the collection, aggregation, processing and transmittal of non-financial data and information to the department responsible for the preparation of the NFS.
In addition, with respect to significant information, taking into consideration the Group's business and characteristics:
Based on the work performed, nothing has come to our attention that causes us to believe that the NFS of IRCE Group as of December 31, 2019 has not been prepared, in all material respects, in accordance with the requirements of article 3 and 4 of the Decree and the Global Reporting Initiative Sustainability Reporting Standards" established by GRI – Global Reporting Initiative ("GRI Standards").
Bologna, March 30, 2020
Signed by BDO Italia S.p.A.
Alessandro Gallo Partner
This report has been translated into English language Solely for the convenience of international readers.
Building tools?
Free accounts include 100 API calls/year for testing.
Have a question? We'll get back to you promptly.