Interim / Quarterly Report • Aug 27, 2020
Interim / Quarterly Report
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REGULATED INFORMATION1 Ieper, August 27, 2020, 8:00 am CET
1 The enclosed information constitutes regulated information as defined in the Royal Decree of November 14, 2007, regarding the duties of issuers of financial instruments which have been admitted for trading on a regulated market.
2 Note that Picanol Group published, in addition to this interim report, also a press release on the HY20 results. This press release can be consulted on our website www.picanolgroup.com.
| 1. | MANAGEMENT REPORT 3 | ||
|---|---|---|---|
| 1.1. | GROUP KEY EVENTS 3 | ||
| 1.2. | GROUP KEY FIGURES 4 | ||
| 1.3. | OPERATING SEGMENTS PERFORMANCE REVIEW5 | ||
| 2. | STATEMENT ON THE TRUE AND FAIR VIEW OF THE CONDENSED CONSOLIDATED FINANCIAL INFORMATION AND THE FAIR OVERVIEW OF THE MANAGEMENT REPORT 7 |
||
| 3. | CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION AT JUNE 30, 2020 8 | ||
| 3.1. | CONDENSED CONSOLIDATED INCOME STATEMENT8 | ||
| 3.2. | CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 8 | ||
| 3.3. | CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION9 | ||
| 3.4. | CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY10 | ||
| 3.5. | CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS11 | ||
| 3.6. | NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL INFORMATION12 | ||
| 4. | INDEPENDENT AUDITORS' REPORT ON THE REVIEW OF THE CONDENSED CONSOLIDATED FINANCIAL INFORMATION AS PER JUNE 30, 2020 29 |
||
| 5. | FINANCIAL GLOSSARY 30 | ||
| 6. | ALTERNATIVE PERFORMANCE MEASURES 31 |
| (Million EUR) | HY20 | HY19 | % change | % change excl. fair value adjustment3 |
|---|---|---|---|---|
| Revenue | 1,135.6 | 1,187.9 | -4% | -4% |
| Adjusted EBITDA4 | 195.5 | 144.2 | 36% | 13% |
| Adjusted EBIT5 | 98.8 | 50.2 | 97% | 22% |
| EBIT | 99.3 | 44.4 | 123% | 33% |
| Profit/(loss) for the period | 72.6 | 26.3 | 176% | 42% |
| Minority interest | 36.0 | 5.6 | 543% | 64% |
| Profit/(loss) for the period attributable to the equity holders of the company |
36.6 | 20.7 | 77% | 25% |
| Total comprehensive income attributable to the equity holders of the company |
31.1 | 16.2 | 93% | 26% |
| Capital expenditure | 46.0 | 50.2 | -8% | -8% |
| Cash flow from operating activities | 156.2 | 137.7 | 13% | 13% |
| % change excl. fair value |
||||
|---|---|---|---|---|
| (Million EUR) | HY20 | HY19 | % change | adjustment |
| Revenue | 1,135.6 | 1,187.9 | -4% | -4% |
| Machines & Technologies | 200.6 | 262.8 | -24% | -24% |
| Agro | 362.2 | 352.7 | 3% | 3% |
| Bio-valorization | 287.6 | 265.3 | 8% | 8% |
| Industrial Solutions | 250.6 | 272.3 | -8% | -8% |
| T-Power | 34.6 | 34.8 | 0% | 0% |
| Adjusted EBITDA | 195.5 | 144.2 | 36% | 13% |
| Machines & Technologies | 13.5 | 28.3 | -52% | -52% |
| Agro | 84.5 | 51.9 | 63% | 20% |
| Bio-valorization | 45.3 | 18.2 | 149% | 80% |
| Industrial Solutions | 24.8 | 21.3 | 16% | 0% |
| T-Power | 27.4 | 24.4 | 12% | 12% |
| Adjusted EBIT | 98.8 | 50.2 | 97% | 22% |
| Machines & Technologies | 7.8 | 22.8 | -66% | -66% |
| Agro | 50.7 | 18.2 | 179% | 25% |
| Bio-valorization | 26.7 | 0.3 | 10,431% | 252% |
| Industrial Solutions | 4.8 | 3.1 | 58% | 2% |
| T-Power | 8.9 | 5.9 | 51% | 51% |
| EBIT adjusting items | 0.4 | -5.7 | -108% | -166% |
| EBIT | 99.3 | 44.4 | 123% | 33% |
3 % change excluding the depreciation of the fair value adjustment which was recognized on initial consolidation of Tessenderlo Group. The HY19 results are impacted by a one-time inventory depreciation of -29,1 million EUR, next to the recurring depreciation of the revalued assets.
4 Adjusted EBITDA equals adjusted EBIT plus depreciation and amortization.
5 Adjusted EBIT is considered by the group to be a relevant performance measure in order to compare results over the period 2019-2020 as it excludes EBIT adjusting items.
In the first half of 2020, revenue dropped slightly (-4%). Machines & Technologies experienced a sharp decline in revenue (-24%) as a result of impact of the COVID-19 pandemic on the global machine market. When excluding the foreign exchange effect, Agro revenue remained stable (+1.1%), while the revenue of Biovalorization increased by +8.0%, mainly thanks to favorable market conditions and improved product mix. The revenue of Industrial Solutions decreased by -8.1%, mainly due to lower DYKA Group volumes impacted by the pandemic. T-Power contributed 34.6 million EUR to the HY20 revenue, which was in line with expectations.
The HY20 adjusted EBITDA increased by 36% but this was impacted by the fair value adjustment on inventory (-29.1 million EUR) in the HY19 EBITDA. Excluding this one-time impact EBITDA increased by 13%. Adjusted EBITDA decreased in Machines & Technologies (-52%), whereas the contribution of the operating segments Bio-valorization (+84.5%), Agro (+16.9%) and T-Power (+12.5%) increased while the contribution of Industrial Solutions remained stable (-0.3%).
The profit for the first half of 2020 amounts to 36.6 million EUR compared to 20.7 million EUR for the same period the previous year or a 77% increase. Excluding the impact of the fair value adjustment profit increased by 25%. The strong revenue drop in the Machines & Technologies segment was more than compensated by the increased profit in the segments of Tessenderlo Group.
| MACHINES & TECHNOLOGIES | |||
|---|---|---|---|
| (Million EUR) | HY20 | HY19 | % change |
| Revenue | 200.6 | 262.8 | -24% |
| Adjusted EBITDA | 13.5 | 28.3 | -52% |
| Adjusted EBITDA – margin | 7% | 11% | |
| Adjusted EBIT | 7.8 | 22.8 | -66% |
| Adjusted EBIT – margin | 4% | 9% |
Revenue fell by 24% in the first half of 2020 as a result of a worldwide slowdown in the machine market due to the COVID-19 pandemic. The HY20 Adjusted EBITDA decreased by 52% compared to the previous year as fixed costs, although lower than HY19, did not decrease in line with revenue.
| AGRO | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| (Million EUR) | After fair value adjustment | Excluding fair value adjustment | |||||||
| HY20 | HY19 | % change | HY20 | HY19 | % change | ||||
| Revenue | 362.2 | 352.7 | 3% | 362.2 | 352.7 | 3% | |||
| Adjusted EBITDA | 84.5 | 51.9 | 63% | 84.5 | 70.7 | 20% | |||
| Adjusted EBITDA – margin |
23% | 15% | 23% | 20% | |||||
| Adjusted EBIT | 50.7 | 18.2 | 179% | 69.3 | 55.5 | 25% | |||
| Adjusted EBIT – margin |
14% | 5% | 19% | 16% |
HY20 revenue remained stable when excluding the foreign exchange effect (+1.1%), where Crop Vitality revenue increased thanks to higher volumes. The Adjusted EBITDA, when excluding the foreign exchange effect, increased by +16.9% compared to prior year. The Adjusted EBITDA of Crop Vitality and Tessenderlo Kerley International increased thanks to favorable market circumstances, while the Adjusted EBITDA of NovaSource remained stable.
| BIO-VALORIZATION | ||||||||
|---|---|---|---|---|---|---|---|---|
| (Million EUR) | After fair value adjustment | Excluding fair value adjustment | ||||||
| HY20 | HY19 | % change | HY20 | HY19 | % change | |||
| Revenue | 287.6 | 265.3 | 8% | 287.6 | 265.3 | 8% | ||
| Adjusted EBITDA | 45.3 | 18.2 | 149% | 45.3 | 25.2 | 80% | ||
| Adjusted EBITDA – margin |
16% | 7% | 16% | 9% | ||||
| Adjusted EBIT | 26.7 | 0.3 | 10,431% | 28.1 | 8.0 | 252% | ||
| Adjusted EBIT – margin |
9% | 0% | 10% | 3% |
Revenue increased by +8.0% when excluding the foreign exchange effect, mainly thanks to favorable market conditions and improved product mix. The Adjusted EBITDA increased to 45.3 million EUR or increased by +84.5% when excluding the foreign exchange effect, mainly thanks to favorable market circumstances and realized efficiency improvements.
| INDUSTRIAL SOLUTIONS | ||||||||
|---|---|---|---|---|---|---|---|---|
| (Million EUR) | After fair value adjustment | Excluding fair value adjustment | ||||||
| HY20 | HY19 | % change | HY20 | HY19 | % change | |||
| Revenue | 250.6 | 272.3 | -8% | 250.6 | 272.3 | -8% | ||
| Adjusted EBITDA | 24.8 | 21.3 | 16% | 24.8 | 24.7 | 0% | ||
| Adjusted EBITDA – margin |
10% | 8% | 10% | 9% | ||||
| Adjusted EBIT | 4.8 | 3.1 | 58% | 10.1 | 9.9 | 2% | ||
| Adjusted EBIT – margin |
2% | 1% | 4% | 4% |
HY20 Industrial Solutions revenue decreased by -8.1% when excluding the foreign exchange effect, mainly due to lower DYKA Group revenue. DYKA Group volumes were negatively impacted by the Corona pandemic in the period March-May, mainly due to the disruption of production at the French plant in Sainte-Austreberthe and the temporary closure of a number of JDP sales branches in the United Kingdom. Performance Chemicals revenue slightly decreased as sulfur derivatives volumes were negatively impacted by reduced tannery activities, while the revenue of the remaining activities included in Industrial Solutions remained stable.
The HY20 Adjusted EBITDA decreased by -0.3%, when excluding the foreign exchange effect. The Adjusted EBITDA of DYKA Group decreased as a result of lower volumes, and this was partially offset by the favorable development of input costs and cost saving measures taken to mitigate the COVID-19 impact. The Adjusted EBITDA of the other activities remained stable.
| T-POWER | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| (Million EUR) | After fair value adjustment | Excluding fair value adjustment | |||||||
| HY20 | HY19 | % change | HY20 | HY19 | % change | ||||
| Revenue | 34.6 | 34.8 | 0% | 34.6 | 34.8 | 0% | |||
| Adjusted EBITDA | 27.4 | 24.4 | 12% | 27.4 | 24.4 | 12% | |||
| Adjusted EBITDA – margin |
79% | 70% | 79% | 70% | |||||
| Adjusted EBIT | 8.9 | 5.9 | 51% | 8.9 | 5.9 | 51% | |||
| Adjusted EBIT – margin |
26% | 17% | 26% | 17% |
T-Power contributed in the first half of 2020 34.6 million EUR to the revenue and 27.4 million EUR to the Adjusted EBITDA of the group. These results were in line with expectations, as T-Power fulfilled all tolling agreement requirements. The Adjusted EBITDA improvement was mainly realized thanks to a continued cost optimization.
Mr. Stefaan Haspeslagh (Chairman) and Mr. Luc Tack (Managing Director) certify, on behalf and for the account of Picanol Group, that, to their knowledge,
a) the condensed consolidated interim financial statements, which have been prepared in accordance with IAS 34 "Interim Financial Reporting" as adopted by the European Union, give a true and fair view of the financial position, income statement, statement of comprehensive income and statement of cash flows of the company, and the entities included in the consolidation as a whole,
b) the management report includes a fair overview of the information required under Article 13, §5 and §6 of the Royal Decree of November 14, 2007, on the obligations of issuers of financial instruments admitted to trading on a regulated market.
| (Million EUR) | Notes | HY20 | HY19 |
|---|---|---|---|
| Revenue | 6 | 1,135.6 | 1,187.9 |
| Cost of sales6 | -855.0 | -951.8 | |
| GROSS PROFIT | 280.7 | 236.0 | |
| Distribution expenses | -59.0 | -59.6 | |
| Administrative expenses | -67.5 | -69.1 | |
| Sales and marketing expenses | -38.0 | -40.4 | |
| Other operating income and expenses | -17.3 | -16.8 | |
| Adjusted EBIT | 6 | 98.8 | 50.2 |
| EBIT adjusting items | 8 | 0.4 | -5.7 |
| EBIT (PROFIT/(LOSS) FROM OPERATIONS) | 99.3 | 44.4 | |
| Finance (costs)/income – net | 9 | -10.3 | -9.7 |
| Share of result of equity accounted investees, net of income tax | -1.2 | 0.5 | |
| PROFIT (+) / LOSS (-) BEFORE TAX | 87.8 | 35.3 | |
| Income tax expense | 10 | -15.2 | -9.0 |
| PROFIT (+) / LOSS (-) FOR THE PERIOD | 72.6 | 26.3 | |
| Non-controlling interest | 36.0 | 5.6 | |
| PROFIT (+) / LOSS (-) FOR THE PERIOD. ATTRIBUTABLE TO THE EQUITY HOLDERS OF THE COMPANY |
36.6 | 20.7 | |
| Basic earnings per share (in EUR) | 15 | 2.1 | 1.2 |
| Diluted earnings per share (in EUR) | 15 | 2.1 | 1.2 |
| (Million EUR) | Notes | HY20 | HY19 |
|---|---|---|---|
| PROFIT (+) / LOSS (-) FOR THE PERIOD | 72.6 | 26.3 | |
| Translation differences | -3.2 | -3.6 | |
| Net change in fair value of derivative financial instruments, before tax | -0.2 | 0.0 | |
| Other movements | 0.0 | 0.0 | |
| Income tax on other comprehensive income | 0.1 | 0.0 | |
| Share in other comprehensive income of joint ventures accounted for using the equity method |
-0.1 | 0.0 | |
| Items of other comprehensive income that are or may be reclassified subsequently to profit or loss: |
-3.4 | -3.6 | |
| Remeasurements of the net defined benefit liability, before tax | 17 | -7.6 | -8.8 |
| Other movements | 0.0 | 1.1 | |
| Income tax on other comprehensive income | 0.2 | 0.0 | |
| Items of other comprehensive income that will not be reclassified subsequently to profit or loss: |
-7.3 | -7.7 | |
| Other comprehensive income, net of income tax | -10.7 | -11.3 | |
| TOTAL COMPREHENSIVE INCOME | 61.9 | 15.0 | |
| Non-controlling interest | 30.7 | -1.2 | |
| TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO THE EQUITY HOLDERS OF THE COMPANY |
31.1 | 16.2 |
6 As compared to the HY19 interim report, R&D expenses for an amount of 7.3 million EUR were reclassified from "Cost of sales" to "Other operating income and expenses" to be comparable to HY20 classification.
| (Million EUR) | Notes | 30/06/2020 | 31/12/2019 |
|---|---|---|---|
| TOTAL NON-CURRENT ASSETS | 1,694.5 | 1,738.4 | |
| Property, plant and equipment | 12 | 1,067.6 | 1,078.4 |
| Goodwill | 42.0 | 42.1 | |
| Intangible assets7 | 506.4 | 537.9 | |
| Investments accounted for using the equity method | 19.3 | 18.9 | |
| Other investments | 11.3 | 11.3 | |
| Deferred tax assets | 33.8 | 30.8 | |
| Trade and other receivables | 14.1 | 19.0 | |
| TOTAL CURRENT ASSETS | 1,054.8 | 1,039.5 | |
| Inventories | 13 | 352.9 | 380.3 |
| Trade and other receivables | 13 | 381.3 | 364.7 |
| Derivative financial instruments | 0.0 | 0.0 | |
| Cash and cash equivalents | 14/16 | 320.0 | 290.3 |
| Assets held for sale | 7 | 0.6 | 4.1 |
| TOTAL ASSETS | 2,749.4 | 2,777.9 | |
| Equity attributable to equity holders of the company | 801.9 | 773.1 | |
| Issued capital | 21.7 | 21.7 | |
| Share premium | 1.5 | 1.5 | |
| Reserves & retained earnings | 778.6 | 749.9 | |
| Non-controlling interest | 19 | 670.0 | 659.9 |
| TOTAL EQUITY | 1,471.9 | 1,433.0 | |
| TOTAL NON-CURRENT LIABILITIES | 838.6 | 860.1 | |
| Loans and borrowings | 16 | 408.5 | 426.3 |
| Employee benefits | 17 | 71.5 | 64.7 |
| Provisions | 132.6 | 132.3 | |
| Trade and other payables | 12.4 | 10.1 | |
| Derivative financial instruments | 18 | 28.3 | 31.5 |
| Deferred tax liabilities | 185.3 | 195.2 | |
| TOTAL CURRENT LIABILITIES | 438.8 | 484.8 | |
| Bank overdrafts | 16 | 0.1 | 0.1 |
| Loans and borrowings | 16 | 73.3 | 98.9 |
| Trade and other payables | 13 | 329.9 | 348.1 |
| Derivative financial instruments | 18 | 12.2 | 12.7 |
| Current tax liabilities | 6.8 | 4.1 | |
| Employee benefits | 17 | 1.4 | 1.5 |
| Provisions | 15.2 | 19.3 | |
| TOTAL EQUITY AND LIABILITIES | 2,749.4 | 2,777.9 |
7 Intangible assets decrease mainly due to the depreciation of the fair value adjustment on customer lists and brand names for 20.8 million EUR.
| (Million EUR) | Note | Issued capital | Share premium | Other reserves and retained earnings |
Translation differences |
Equity attributable to equity holders of the company |
Non-controlling interest |
Total equity |
|---|---|---|---|---|---|---|---|---|
| Balance on December 31, 2019 | 21.7 | 1.5 | 744.4 | 5.5 | 773.1 | 659.9 | 1,433.0 | |
| Profit (+) / loss (-) for the period | 36.6 | 36.6 | 36.0 | 72.6 | ||||
| Other comprehensive income: | ||||||||
| - Translation differences | -0.9 | -1.2 | -2.1 | -1.1 | -3.2 | |||
| - Remeasurements of the net defined benefit liability, net of tax |
17 | -3.3 | -3.3 | -4.0 | -7.3 | |||
| - Net change in fair value of derivative financial instruments, net of tax |
-0.1 | -0.1 | -0.1 | -0.1 | ||||
| - Share in other comprehensive income of associates and joint ventures accounted for using the equity method |
0.0 | 0.0 | -0.1 | -0.1 | ||||
| - Other movements | 0.0 | 0.0 | 0.0 | 0.0 | ||||
| Comprehensive income, net of income taxes |
0.0 | 0.0 | 32.3 | -1.2 | 31.1 | 30.7 | 61.9 | |
| Transactions with owners, recorded directly in equity |
||||||||
| - Shares issued | ||||||||
| - Dividends | -3.5 | -3.5 | -3.5 | |||||
| - Change in non-controlling interest | 1.2 | 1.2 | -20.5 | -19.3 | ||||
| Total contributions by and distributions to owners |
0.0 | 0.0 | -2.3 | 0.0 | -2.3 | -20.5 | -22.9 | |
| Balance on June 30, 2020 | 21.7 | 1.5 | 774.3 | 4.3 | 801.9 | 670.0 | 1,471.9 |
| (Million EUR) | Issued Capital | Share premium | Reserves | Translation differences |
of the company attributable to equity holders Equity |
Non-controlling interest |
Total equity |
|---|---|---|---|---|---|---|---|
| At 31/12/2018 | 21.7 | 1.5 | 710.0 | 5.6 | 739.9 | 739.9 | |
| Adjustment opening balacnce sheet on initial consolidation of Tessenderlo Group |
6.1 | 6.1 | 698.4 | 704.6 | |||
| At 01/01/2019* | 21.7 | 1.5 | 716.2 | 5.6 | 745.0 | 698.4 | 1,443.5 |
| Adjustment on initial application of IFRS16, net of tax |
-1.8 | -1.8 | -2.6 | -4.4 | |||
| Adjusted balance at January 1, 2019 | 21.7 | 1.5 | 714.4 | 5.6 | 743.2 | 695.8 | 1,439.1 |
| PROFIT (+) / LOSS (-) FOR THE PERIOD | 20.7 | 20.7 | 5.6 | 26.3 | |||
| Other comprehensive income: | |||||||
| Translation differences | -1.5 | 0.1 | -1.4 | -2.2 | -3.6 | ||
| Actuarial gains (losses) | -3.6 | -3.6 | -5.3 | -8.8 | |||
| Other movements | 0.5 | 0.5 | 0.7 | 1.1 | |||
| Comprehensive income, net of taxes | 0.0 | 0.0 | 16.0 | 0.1 | 16.2 | -1.2 | 15.0 |
| Dividends | -3.5 | -3.5 | -3.5 | ||||
| Change in non-controlling interest8 | -5.0 | -5.0 | -35.7 | -40.7 | |||
| At 30/06/2019 | 21.7 | 1.5 | 722.0 | 5.7 | 751.0 | 658.9 | 1,409.9 |
8 The change in non-controlling interest includes the purchase of Tessenderlo Group shares for 39.6 million EUR and the distribution of 1.1 million EUR to the non-controlling interest holders of PB Gelatins (Wenzhou) Co. Ltd following the liquidation of this entity.
| (Million EUR) | Notes | HY20 | HY19 |
|---|---|---|---|
| PROFIT (+) / LOSS (-) FOR THE PERIOD | 72.6 | 26.3 | |
| Depreciation, amortization and impairment losses on tangible and intangible assets | 97.1 | 94.0 | |
| Changes in provisions | -3.6 | 3.1 | |
| Finance costs | 9 | 17.5 | 20.6 |
| Finance income | 9 | -7.2 | -10.9 |
| Loss/(profit) on sale of non-current assets | 7 | -1.3 | -0.1 |
| Share of result of equity accounted investees, net of income tax | 1.2 | -0.5 | |
| Income tax expense | 10 | 15.2 | 9.0 |
| Changes in inventories | 13 | 24.8 | 60.4 |
| Changes in trade and other receivables | 13 | -25.5 | -30.5 |
| Changes in trade and other payables | 13 | -15.8 | -13.6 |
| Write-offs on inventories | 5.4 | 3.8 | |
| Other cash flows from operating activities9 | -7.0 | -1.7 | |
| Cash from operating activities | 173.4 | 159.9 | |
| Income tax paid | 10 | -17.3 | -22.2 |
| Dividends received | 0.1 | 0.1 | |
| Cash flow from operating activities | 156.2 | 137.7 | |
| Acquisition of property, plant and equipment | 12 | -45.0 | -50.1 |
| Acquisition of intangible assets | 12 | -1.0 | -0.1 |
| Acquisition of subsidiaries net of cash acquired10 | 7 | -5.7 | 164.0 |
| Acquisition of equity accounted investees | 6 | -2.0 | 1.1 |
| Proceeds from the sale of property, plant and equipment | 8 | 5.1 | 0.2 |
| Proceeds from te sale of subsidiaries, net of cash disposed of | -0.1 | ||
| Cash flow from investing activities | -48.7 | 115.1 | |
| Acquisition of non-controlling interest | 19 | -19.3 | -39.6 |
| Payment of lease liabilities | 16 | -11.5 | -12.1 |
| Proceeds from new borrowings | 0.3 | 5.0 | |
| (Reimbursement) of borrowings | 16 | -37.6 | -69.7 |
| Interest paid | -5.4 | -7.8 | |
| Interest received | 1.4 | 2.7 | |
| Dividends paid | -3.5 | -3.5 | |
| Settlement interest rate swap T-Power | 0.0 | -8.0 | |
| Other cash flows from financing activities | -0.7 | -2.4 | |
| Cash flow from financing activities | -76.4 | -135.4 | |
| Net increase / (decrease) in cash and cash equivalents | 31.1 | 117.5 | |
| Effect of exchange rate differences | -1.3 | 1.2 | |
| Cash position at the beginning of the period | 14/16 | 290.2 | 173.0 |
| Cash position at the end of the period | 14/16 | 320.0 | 291.7 |
9 Includes change in emission rights (-1.8 million EUR), revaluation of electricity forward contract (-0.4 million EUR) and the bargain purchase recognized fllowing the acquisition of Rehau Tube (see note 8).
10 The 164 million EUR in HY19 represents the cash of Tessenderlo Group on January 1, 2019, acquired as a result of the initial consolidation of Tessenderlo Group.
| 1. | REPORTING ENTITY13 |
|---|---|
| 2. | STATEMENT OF COMPLIANCE 13 |
| 3. | SIGNIFICANT ACCOUNTING POLICIES 13 |
| 4. | CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS 13 |
| 5. | RISKS AND UNCERTAINTIES 14 |
| 6. | SEGMENT REPORTING17 |
| 7. | ACQUISITIONS AND DISPOSALS20 |
| 8. | EBIT ADJUSTING ITEMS21 |
| 9. | FINANCE COSTS AND INCOME22 |
| 10. | INCOME TAX EXPENSE 22 |
| 11. | SEASONALITY OF OPERATIONS 22 |
| 12. | PROPERTY, PLANT AND EQUIPMENT AND OTHER INTANGIBLE ASSETS22 |
| 13. | WORKING CAPITAL23 |
| 14. | CASH AND CASH EQUIVALENTS23 |
| 15. | EARNINGS PER SHARE 23 |
| 16. | LOANS AND BORROWINGS 24 |
| 17. | EMPLOYEE BENEFITS 24 |
| 18. | FINANCIAL INSTRUMENTS24 |
| 19. | NON-CONTROLLING INTEREST25 |
| 20. | CONTINGENCIES26 |
| 21. | RELATED PARTIES 27 |
| 22. | SUBSEQUENT EVENTS 28 |
Picanol nv (hereafter referred to as 'the company'), the parent company, is a company domiciled in Belgium. The condensed consolidated interim financial statements for the six month period ended June 30, 2020, comprises the company and its subsidiaries (together referred to as 'the group') and the group's interests in jointly controlled entities.
This condensed consolidated interim financial statements for the six month period ended June 30, 2020, have been prepared in accordance with International Financial Reporting Standard (IFRS) IAS 34 Interim Financial Reporting, as adopted for use by the European Union. It does not include all of the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of the group as at and for the year ended December 31, 2019, which have been prepared in accordance with IFRS. The condensed consolidated financial information is denominated in EUR, the functional currency of the group, and rounded in million EUR.
This condensed consolidated interim financial statements was approved by the Board of Directors on August 26, 2020. This condensed consolidated interim financial statements have been reviewed, not audited.
The accounting policies used by the group in the present condensed consolidated interim financial statements are consistent with those used in the preparation of the consolidated financial statements as at and for the year ended December 31, 2019, and are in accordance with IAS 34 Interim Financial Reporting.
There are no new or amended standards or interpretations that are effective for the first time for the interim report for the six month period ended June 30, 2020, that had a significant impact on the condensed consolidated interim financial statements.
For the six month period ended June 30, 2020, the group has not early adopted any standard, interpretation or amendment that has been issued, but is not yet effective. The group is currently assessing the new rules, and at this stage, is not expecting any of these new rules to have a significant impact on the financial statements of the group.
| Closing rate | Average rate | |||
|---|---|---|---|---|
| 1 EUR equals: | 2020 | 2019 | 2020 | 2019 |
| Brazilian real | 6.11 | 4.52 | 5.41 | 4.34 |
| Chinese yuan | 7.92 | 7.82 | 7.75 | 7.65 |
| Polish zloty | 4.46 | 4.26 | 4.41 | 4.29 |
| Pound sterling | 0.91 | 0.85 | 0.87 | 0.87 |
| Turkish lira | 7.68 | 6.68 | 7.15 | 6.34 |
| US dollar | 1.12 | 1.12 | 1.10 | 1.13 |
| Romanian lei | 4.84 | 4.78 | 4.83 | 4.74 |
The following exchange rates have been used in preparing the condensed consolidated interim financial statements:
The preparation of the condensed consolidated interim financial statements in conformity with IFRS as adopted for use by the European Union requires management to make judgments, estimates and assumptions that affect the application of the accounting policies, the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated interim financial statements and the reported amounts of revenue and expenses during the reporting period. Management bases its estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making the reported amounts of revenue and expenses that may not be readily apparent from other sources. Actual results could differ from those estimates.
The areas of judgements, estimates and assumptions used in preparing the condensed consolidated interim financial statementsfor June 30, 2020, are the same as those applied and disclosed in the consolidated financial statements at December 31, 2019.
In view of the continued uncertainty associated with the nature of the Corona pandemic, the significant assumptions and accounting estimates, to support the reported amounts of assets and liabilities, income and expenses, were regularly reviewed, and if needed updated, during the first half of 2020. The main judgements, estimates and assumptions, which might be impacted by the pandemic, are:
As the COVID-19 pandemic further evolves, potential changes in these views over the remainder of 2020 might occur.
Under the explicit understanding that this is not an exhaustive list, the main risk factors and uncertainties for the group for the second semester of 2020 are listed below. Additional risks of which the group is not aware may possibly exist. There may also be risks that the group currently believes to be unimportant, but which can still have an adverse effect. The order in which the individual risks are presented is neither indicative of their likelihood to occur, nor of the severity or significance of the individual risks. Please note that in the 2019 annual report additional risks were included. For a more detailed overview of the major risks for the group, we refer to our 2019 annual report.
During the first half of 2020 the Corona pandemic has not only negatively affected social lives, but also the global economy. Its impact on the condensed consolidated interim financial statements of the group in the first six months of 2020 was significant only in the Machines & Technologies segment which experienced a 24% revenue drop, mainly in it's weaving machines business. The continued pandemic and related uncertainty might further negatively impact the group's results in the second half of the year, mainly in the weaving machines business. It remains difficult to estimate the future impact of the pandemic on the economies where Picanol Group is active, and hence the impact these factors might have on the financial results. Activities could be further impacted in the coming months if too many employees are impacted by COVID-19 and/or if access to raw materials and auxiliary materials or means of transportation becomes more complicated, or if customers are no longer able to process or resell products. Changes in market demand and customer behavior can impact the group's future sales, negatively impacting its results and cash flows.
The group has taken all the necessary steps to ensure that it keeps its people safe and keep its plants and businesses running. This is because the group provides support for vital services and the flow of crucial goods. Tessenderlo Group supplies the basic chemicals for the production of drinking water based on side streams in the form of hydrochloric acid from the production of sulfate of potash (SOP). In addition, the group produces gelatin for medical and food applications, electricity, crop nutrition and crop protection products for agriculture and plastic pipe systems for maintaining drinking water supply systems and polluted water evacuation, while Akiolis protects the meat chain (in France).
The group has a healthy financial position with a net financial debt of 161.9 million EUR as per June 30, 2020 (implying a leverage of only 0.5x), including a cash balance sheet position of 320.0 million EUR. The group has moreover access to committed bi-lateral agreements (till December 2024) for a total amount of 142.5 million EUR with four banks (there were no withdrawals as per June 30, 2020). These facilities have no financial covenants and ensure maximum flexibility for the different activities. The financial position of the group should therefore be able to ensure the going concern of the company, even if future results were negatively impacted by COVID-19.
The group increasingly makes use of information technology systems to process, transmit and store electronic information and as such, to operate efficiently and interface. A significant portion of the communication between the group's personnel, customers and suppliers depends on information technology. The group is dependent on information systems to manage inventory, accounting, purchasing and sales applications and to maintain cost efficient operations. As with all large systems, the group's information systems may be vulnerable to a variety of interruptions due to events beyond its control, including, but not limited to, natural disasters, terrorist attacks, telecommunication failures, computer viruses, hackers or other security issues. These or other similar interruptions may disrupt the group's business, results of operation or financial condition. In the first half of 2020, Picanol Group fell victim to a large-scale ransomware attack which caused a disruption of the group's activities, however with a limited financial impact (less than 1 million EUR).
The group depends on the availability of sufficient volumes of raw materials, which meet the required specifications, against competitive prices. While the group sources most of its raw materials from multiple suppliers, some raw materials are sourced from only few suppliers. As such, the group relies on a number of third party suppliers and other business partners. If the market prices fall below the agreed minimum prices, the group may be required to purchase products at above-market prices.
The group's operations are dependent on its ability to sell, store, re-utilize or otherwise dispose of certain components (such as by-products and co-products) which are produced in the course of the production process of various products. There can be no assurance that the group will be able to do this in the future and will not be required to reduce its overall production levels or invest in new treatment processes.
Several of the group's activities are dependent on weather conditions. The group also has activities which are also subject to seasonality, whereby products are sold within a short timeframe. Products of the group's Agro segment must be supplied to the customers during the planting season. Bad weather conditions can disrupt this process, reduce the possibility to apply product and/or reduce the need for products. The group also sells products in the construction markets in several countries in the northern hemisphere, which are typically affected by winter weather conditions.
▪ The group's current and future investments and/or constructions are subject to the risk of delays, cost overruns and other complications, and may not achieve the expected returns.
The group currently has new projects which are under construction or in ramp-up phase. In addition, the group is implementing a number of major investment projects that are key to its strategy. These projects may be delayed, exceed the budget or the utilized technology may prove to be inadequate or may fail to reach the expected return.
The group sold the majority of its PVC/Chlor-Alkali activities in the third quarter of 2011. The electricity purchase agreement relating to that activity was not part of the sale transaction and therefore the group is still under an obligation to purchase certain quantities of electricity. As the group no longer needs the electricity for its own use, it needs to sell the electricity on the market until the end of the contract. The value of the contract is depending on the current and future difference between market electricity prices and the generation cost based on market gas prices, and on the effect of the hourly pricing optimization as foreseen in the contract. Based on today's electricity prices and the current price of electricity futures, the contract has a negative value in the condensed consolidated interim financial statements as per June 30, 2020 (-15.9 million EUR).
The group is sensitive to commodity prices. As the group is a diversified specialty group that is worldwide active in many areas mechanical engineering, agriculture, food, water management, efficient (re)use of natural resources and other industrial markets, the impact of changes of some raw material prices might have a significant impact on the results of individual activities, however is not expected to have a material impact on the results of operating segments or the group.
The group's products are subject to increasingly stringent industry, regulatory and customer requirements. The activities of the group may expose the group to product liability and warranty claims. The products manufactured by the group are used in various downstream applications including, but not limited to, the food, cosmetics, nutraceutical and pharmaceutical industry and may contain undetected errors or defects, which may lead, for example, to product recalls, increased customer service and support, payment of monetary damages to customers, lawsuits and loss of customers. In addition, the group cannot exclude that customers incorrectly apply the group's products.
The group may not be able to recruit and retain competent personnel for key roles. The group's success depends to a significant extent upon its ability to attract and retain qualified management, scientific, technical, marketing and sales personnel and upon the continued contributions of such personnel. The group's employees may voluntarily terminate their employment at any time. There is no guarantee that the group will be successful in attracting and/or retaining qualified employees to replace existing employees or to further support its growth strategy. The loss of the services of key personnel or the inability to attract additional qualified personnel may have a material adverse effect on the business and its expertise, results of operation or financial condition. Potential impacts might include: loss of knowledge of key systems and specialized skills resulting in a skills and competency gap, high staff turnover, customer dissatisfaction, failure to meet business objectives, increased re-hiring costs, loss of customers because of the customer-employee relationships. Although the group believes that it is well positioned to attract and retain skilled and experienced personnel, there can be no assurance that it will be able to do so. The inability to do so could have a material adverse effect on the group's business, results of operation or financial condition.
The group could be impacted by the political uncertainty caused by circumstances of geo-political nature that could have an impact on the consumer trust.
The group has assessed and mapped the risks associated with the Brexit. The group has a number of customers and suppliers in the United Kingdom and there are intragroup deliveries between the United Kingdom and the European subsidiaries of the group. Because the number of customers and suppliers is rather limited, it is expected that the impact of the Brexit on the results of the group will be rather limited. The group has taken a number of actions to prepare itself with regard to the Brexit, such as setting up customs procedures, adapting the ICT systems and reviewing contractual provisions to ensure that deliveries to and from the United Kingdom continue to run smoothly.
The future results of the group's Machines & Technologies segment are highly dependent on the evolution of the textile industry. Unexpected changes in the economic climate, customers' investment cycles, important developments in production and market acceptance of technologies may affect these industries and, consequently, the group's results.
A substantial part of the activities of Picanol (Machines & Technologies segment) can be attributed to emerging markets in Asia and South America. Picanol's activities in these markets are subject to the usual risks associated with doing business in developing economies, such as political and economic uncertainties, currency controls, exchange rate fluctuations and shifts in government policy.
The maximum exposure to credit risk amounts to 715.4 million EUR as of June 30, 2020. This amount mainly consists of current and non-current trade and other receivables (395.4 million EUR), derivative financial instruments (0.0 million EUR) and cash and cash equivalents (320.0 million EUR).
The group limits this risk through a series of actions:
The currencies given rise to this risk are primarily USD (US Dollar), GBP (Pound sterling) and CNY (Chinese yuan). This exposure is mainly due to intragroup loans and cash and cash equivalents which are not hedged.
The financial debt position is funded by fixed and variable interest rate instruments. The variable interest rate instruments are, for the majority, hedged through forward rate agreements. The bonds, issued in July 2015 for an amount of 192.0 million EUR with a maturity of 7 years and 58.0 million EUR with a maturity of 10 years, are the main fixed interest rate instruments with an interest rate of 2.875% and 3.375% respectively. The T-Power nv loan (154.4 million EUR as per June 30, 2020) is a variable interest rate instrument, for approximately 80% hedged through a series of interest rate swaps.
The group has 5 operating segments based on the principal business activities, economic environments and value chains in which they operate, as defined under IFRS 8 Operating Segments, and relate to textile machinery, electronics and foundry products, agriculture, animal by-product valorization, products, systems and solutions for handling, processing and treatment of water including flocculation and depressants, as well as energy. The
information provided below is consistent with the information that is available and evaluated regularly by the Chief Operating Decision Maker (the Executive Committee).
Within the Industrial Solutions segment, S8 Engineering has ceased to exist. The engineering and construction activities were integrated into Tessenderlo Kerley, Inc. during the first quarter of 2020.
The costs included within Adjusted EBIT, related to the corporate activities, are allocated to the different operating segments they support. Transfer prices between operating segments are similar to transactions with third parties. The measure of segment profit/loss is Adjusted EBIT, which is consistent with information that is monitored by the chief operating decision maker.
The group is a diversified specialty group that is worldwide active in many areas of mechanical engineering, agriculture, food, water management, efficient re(use) of natural resources and other industrial markets. The products of the group are used in various applications, industrial and consumption markets. Although a leadership position is occupied by the group in a number of diverse markets, the diversification of the group's revenue makes the group not reliant on major customers.
The major line items of the income statement and statement of financial position are shown per operating segment in the table below. The income statement information is for the six month period ended June 30, while information from the statement of financial position is compared to December 31, 2019, figures.
| Machines & Technologies |
Agro | Bio-valorization | Industrial Solutions |
T-Power | Non- | allocated | Picanol Group | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (Million EUR) | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 |
| Revenue (internal and external) | 200.6 | 262.8 | 362.8 | 353.0 | 287.6 | 265.3 | 250.9 | 272.6 | 34.6 | 34.8 | 0.0 | 0.0 | 1,136.5 | 1,188.5 |
| Revenue (internal) | 0.6 | 0.3 | 0.3 | 0.3 | 0.9 | 0.6 | ||||||||
| Revenue | 200.6 | 262.8 | 362.2 | 352.7 | 287.6 | 265.3 | 250.6 | 272.3 | 34.6 | 34.8 | 1,135.6 | 1,187.9 | ||
| Of which: | ||||||||||||||
| - At a point in time |
200.6 | 262.8 | 362.2 | 352.7 | 287.6 | 265.3 | 249.6 | 269.2 | 34.6 | 34.8 | 0.0 | 0.0 | 1,134.6 | 1,184.8 |
| - Over time |
1.0 | 3.1 | 1.0 | 3.1 | ||||||||||
| Adjusted EBIT | 7.8 | 22.8 | 50.7 | 18.2 | 26.7 | 0.3 | 4.8 | 3.1 | 8.9 | 5.9 | 98.8 | 50.2 | ||
| Adjusted EBITDA | 13.5 | 28.3 | 84.5 | 51.9 | 45.3 | 18.2 | 24.8 | 21.3 | 27.4 | 24.4 | 195.5 | 144.2 | ||
| Return on revenue (Adjusted EBITDA/revenue) |
6.7% | 10.8% | 23.3% | 14.7% | 15.8% | 6.8% | 9.9% | 7.8% | 79.2% | 70.1% | 17.2% | 12.1% | ||
| Segment assets | 214.9 | 211.8 | 843.9 | 903.4 | 463.7 | 459.2 | 410.2 | 397.8 | 375.6 | 390.1 | 56.6 | 64.3 | 2,364.8 | 2,426.6 |
| Derivative financial instruments | 0.0 | 0.0 | 0.0 | 0.0 | ||||||||||
| Investments accounted for using the equity method |
16.5 | 18.2 | 2.8 | 0.7 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 19.3 | 18.9 | ||
| Other investments | 11.3 | 11.3 | 11.3 | 11.3 | ||||||||||
| Deferred tax assets | 33.8 | 30.8 | 33.8 | 30.8 | ||||||||||
| Cash and cash equivalents | 320.0 | 290.3 | 320.0 | 290.3 | ||||||||||
| Total assets | 214.9 | 211.8 | 860.4 | 921.6 | 466.5 | 459.9 | 410.2 | 397.8 | 375.6 | 390.1 | 421.8 | 396.7 | 2,749.4 | 2,777.9 |
| Segment liabilities | 99.4 | 114.6 | 62.4 | 77.6 | 148.4 | 143.8 | 80.5 | 72.4 | 10.0 | 8.4 | 169.0 | 163.4 | 569.8 | 580.1 |
| Derivative financial instruments | 40.5 | 44.2 | 40.5 | 44.2 | ||||||||||
| Loans and borrowings | 481.8 | 525.3 | 481.8 | 525.3 | ||||||||||
| Deferred tax liabilities | 185.3 | 195.2 | 185.3 | 195.2 | ||||||||||
| Total equity | 1,471.9 | 1,433.0 | 1,471.9 | 1,433.0 | ||||||||||
| Total Equity and Liabilities | 99.4 | 114.6 | 62.4 | 77.6 | 148.4 | 143.8 | 80.5 | 72.4 | 10.0 | 8.4 | 2,348.5 | 2,361.1 | 2,749.4 | 2,777.9 |
| Capital expenditures: property, plant and equipment and intangible assets |
4.9 | 6.7 | 12.7 | 10.1 | 17.9 | 24.3 | 7.5 | 9.0 | 2.1 | 0.0 | 0.9 | 0.1 | 46.0 | 50.2 |
| Depreciation, amortization and impairment losses on tangible assets, goodwill and intangible assets |
5.7 | 5.5 | 33.8 | 33.7 | 18.6 | 17.9 | 20.4 | 18.4 | 18.6 | 18.5 | 0.0 | 0.0 | 97.1 | 94.0 |
The decrease of the segment assets within the operating segment Agro to 843.9 million EUR (as per December 31, 2019: 903.4 million EUR) can be mainly explained by seasonality, resulting in lower inventory levels, only partially offset by higher trade receivables outstanding as well as the impact of te depreciation of the fair value adjustment for 21.9 million EUR.
The increase of the investments accounted for using the equity method within Bio-valorization to 2.8 million EUR (2019: 0.7 million EUR) is related to the establishment of the 50% joint-venture PB Shengda (Zhejiang) Biotechnology Co., Ltd in June 2020 between Tessenderlo Group and Zheijang Shengda Ocean Co., Ltd, a Chinese state-owned company, for the construction of a bone and marine collagen peptides plant. As per June 2020, a cash contribution of 2.0 million EUR was already made by Tessenderlo Group. Total issued capital of the jointventure will amount to 10.0 million EUR.
Non-allocated segment liabilities mainly include environmental provisions recognized for the plants in Belgium (Ham, Tessenderlo and Vilvoorde) and France (Loos).
The reconciliation of the profit before tax is as follows:
| (Million EUR) | HY20 | HY19 |
|---|---|---|
| Adjusted EBIT | 98.8 | 50.2 |
| EBIT adjusting items | 0.4 | -5.7 |
| Finance costs - net | -10.3 | -9.7 |
| Share of result of equity accounted investees, net of income tax | -1.2 | 0.5 |
| Profit (+) / loss (-) before tax | 87.8 | 35.3 |
In presenting information on the basis of geographical segments, segment revenue is based on the geographical location of customers. Non-current segment assets (property, plant and equipment, goodwill and intangible assets) are based on the geographical location of the assets.
| Revenue by market | Non-current segment assets | |||
|---|---|---|---|---|
| (Million EUR) | 30/06/2020 | 30/06/2019 | 30/06/2020 | 31/12/2019 |
| Europe | 561.2 | 581.4 | 1,006.6 | 1,019.7 |
| North-America | 345.1 | 338.7 | 537.4 | 562.3 |
| South-America | 37.9 | 46.8 | 50.8 | 54.0 |
| Asia | 164.5 | 195.0 | 13.7 | 14.9 |
| Other | 26.9 | 26.0 | 7.5 | 7.5 |
| Total | 1,135.6 | 1,187.8 | 1,616.0 | 1,658.4 |
The COVID-19 pandemic in the Machines & Technologies segment impacted all geographical segments. In North-America this was compensated by strong revenue growth within Tessenderlo Group.
The decrease of the non-current segment assets in Europe is mainly due to the depreciation of the fair value adjustments of T-Power nv, acquired in 2018. The purchase price allocation resulted in the recognition of a customer list for an amount of 163.7 million EUR and represented the fair value of a tolling agreement which was concluded with RWE group for a period of 15 years (until June 2026) for the full capacity of the plant. This customer list is being amortized over the remaining duration of the tolling agreement.
The total impact of the depreciation of the fair value adjustments on the tangible and intangible assets of Tessenderlo Group was 25.2 million EUR: mainly in North-America (-18.6 million EUR) and Europe (-5.3 million EUR).
In December 2019, Tessenderlo Group announced that it had agreed to acquire the production plant of REHAU Tube in La Chapelle-Saint-Ursin (France) from the German REHAU Group. The plant specialized in the manufacturing of sewer, soil & waste, storm water management and telecom pipes and fittings. Under the terms of the agreements, the group has taken over the real estate, production assets, stocks and 75 employees in sales and operations, all linked to the wastewater and cable ducting business. While the marketing and sales activities for the business were taken over as of March 1, 2020, the acquisition was only completed as of May 1, 2020. Tessenderlo Group is integrating the REHAU Tube business within the DYKA Group activity (operating segment Industrial Solutions). The group obtained 100% control over these activities through a new created company DYKA Tube SAS. The purchase consideration paid in cash amounted to -5.7 million EUR, while the transactionrelated costs were insignificant. In accordance with IFRS 3 Business combinations, the acquired assets and liabilities assumed at acquisition date have been measured at their fair value, which resulted in a bargain purchase gain for an amount of 2.7 million EUR, recognized as EBIT adjusting item as per June 30, 2020 (note 8 – EBIT adjusting items). The bargain purchase allowed REHAU Group to cease all its activities in La Chapelle-Saint-Ursin (France) and to revoke from part of its social obligations in accordance to French legislation ("Plan de sauvegarde de l'emploi"). The table below summarizes the impact of the acquisition on the financial position of the group.
| Acquisitions through business combinations | ||||||||
|---|---|---|---|---|---|---|---|---|
| (Million EUR) | Consideration paid/(received) |
Fair value adjustments |
Recognized values on acquisition |
|||||
| Non-current assets | 1.3 | 3.3 | 4.5 | |||||
| Current assets | 5.6 | 0.4 | 6.0 | |||||
| Non-current liabilities | -0.5 | -0.9 | -1.5 | |||||
| Current liabilities | -0.7 | - | -0.7 | |||||
| Net assets | 5.7 | 2.7 | 8.4 | |||||
| Net cash outflow | -5.7 | |||||||
| Gain from a bargain purchase | 2.7 |
If new information, obtained within one year to the acquisition, about facts and circumstances that existed at the date of acquisition, identifies adjustments to above amounts, the acquisition accounting will be revised.
The contribution to the group's HY20 revenue and result is not significant. If the acquisition had occurred on January 1, 2020, management estimates that the contribution to the group's HY20 revenue and result would have been insignificant as well.
The subsidiary Tessenderlo Trading (Shanghai) Co. Ltd., a Chinese trading company within the operating segment Industrials Solutions, was disposed during the first half of 2020, leading to an insignificant result. The yearly contribution of this activity to the group's results was also not significant.
The assets held for sale at June 30, 2020, include the remaining assets (land & buildings and inventory) of Burcklé for 0.6 million EUR. Per December 31, 2019, next to the Burcklé assets (value of 0.8 million EUR) this also included the head-office in Phoenix (3.3 million EUR), which was sold in HY 2020 (see note 8 – EBIT adjusting items).
The EBIT adjusting items amount to 0.4 million EUR and include:
Net finance costs and income amount to -10.3 million EUR as per June 30, 2020, compared to -9.7 million EUR as per June 30, 2019, and mainly include:
Income taxes amounted to -15.2 million EUR in the first half of 2020, compared with -9.0 million EUR in tax charges in the same period last year and mainly relates to the operations in the United States.
The income taxes paid in HY20 amount to -17.3 million EUR (HY19: -22.2 million EUR), while the income tax receivable, mainly in the United States and Belgium, decreased from 15.4 million EUR as per December 31, 2019, to 7.9 million EUR as per June 30, 2020.
Deferred tax assets on fiscal losses carried forward are recognized for 24.5 million EUR (December 2019: 21.7 million EUR). These are mainly recognized on Tessenderlo Group nv for an amount of 15.7 million EUR (December 2019: 14.1 million EUR). The other deferred tax assets on fiscal losses carried forward recognized amount to 8.8 million EUR (December 2019: 7.6 million EUR). As per June 2020, total tax losses and tax credits carried forward in Tesssenderlo Group nv amount to approximately 152 million EUR, while these amount to approximately 62 million EUR in France.
The decrease in deferred taks liabilities is the result of the depreciation of the fair value adjustments since the initial consolidation of Tessenderlo Group.
Picanol Group demonstrates a limited seasonality pattern at group level for revenue and operating profitability level as expressed by Adjusted EBITDA. The degree of seasonality at group level is primarily determined by selling to customers in several end markets, including food, pet food, construction, agriculture and water treatment. Two important end markets which demonstrate seasonal characteristics are construction and agriculture. The group sells into the construction markets through its operating segment Industrial Solutions in several countries in the northern hemisphere, which are typically impacted by winter weather conditions in the first and fourth quarter. Agriculture related sales made in the operating segment Agro are influenced by the planting seasons, especially the spring planting season. Most of the sales of Crop Vitality – being part of the Agro operating segment – are in the United States, and this normally leads to higher sales and operating profitability in the first half of the year. Agro is the largest contributor to the group operating profitability, which explains why group operating profitability is typically higher in the first half year.
For the six month period ended June 30, 2020, the group's capital expenditure amounted to 46.0 million EUR (HY19: 50.2 million EUR). The investments in tangible fixed assets and intangible assets per operating segment are explained in note 6 – Segment reporting.
The majority of the capital expenditure relates to:
| Working capital | |||
|---|---|---|---|
| (Million EUR) | 30/06/2020 | 31/12/2019 | 30/06/2019 |
| Inventories | 352.9 | 380.3 | 331.8 |
| Current trade and other receivables | 381.3 | 364.7 | 398.2 |
| Current trade and other payables | -329.9 | -348.1 | -348.0 |
| Working capital | 404.3 | 396.9 | 382.0 |
The working capital increased from 382.0 million EUR as per June 30, 2019, to 404.3 million EUR as per June 30, 2020. This evolution can be mainly explained by higher inventory levels within Machines & Technologies, Biovalorization and Industrial Solutions (following the acquisition of REHAU Tube, see also note 7 – Acquisitions and disposals). The decrease of current trade and other receivables and current trade and other payables is mainly due to the timing of sales and supplier payments.
The group expects to recover or settle the inventory, available as per June 30, 2020, within the next twelve months, except for the inventory of non-strategic spare parts (17.3 million EUR as per June 30, 2020, compared to 17.2 million EUR as per December 31, 2019). These parts will be used whenever deemed necessary.
Cash and cash equivalents amount to 320.0 million EUR as per June 30, 2019 (compared to 290.3 million EUR as per 31/12/2019). These include amounts in USD equaling 53.9 million EUR (compared to 18.6 million EUR on December 31, 2019). 57 million USD was sold and converted into EUR during the first half of 2020 at an exchange rate of 1.0802. In July 2020, another 35 million USD was converted into EUR at an exchange rate of 1.15895.
| HY20 | HY19 | |
|---|---|---|
| Adjusted weighted average number of ordinary shares at June 30 | 17,700,000 | 17,700,000 |
| Profit (+) / loss (-) attributable to equity holders of the company (million EUR) | 36.6 | 20.7 |
| Basic earnings per share (in EUR) | 2.1 | 1.2 |
The diluted earnings per share of Picanol Group is equal to the basic earnings per share, both for HY20 and for HY19.
| (Million EUR) | 30/06/2020 | 31/12/2019 |
|---|---|---|
| Non-current loans and borrowings | 408.5 | 426.3 |
| Current loans and borrowings | 73.3 | 98.9 |
| Total loans and borrowings | 481.8 | 525.3 |
| Cash and cash equivalents | -320.0 | -290.3 |
| Bank overdrafts | 0.1 | 0.1 |
| Net loans and borrowings | 161.9 | 235.1 |
As per June 30, 2020, the group net financial debt stood at 161.9 million EUR (implying a leverage of 0.5x), compared to 235.1 million EUR by the end of 2019.
The non-current loans and borrowings include two series of bonds, issued in July 2015, with a maturity of 7 years (the "2022 bonds") and 10 years (the "2025 bonds"), both with a fixed rate of 2.875% and 3.375% respectively. These bonds do not contain any covenants.
The T-Power term loan facility agreement amounts to 154.4 million EUR as per June 30, 2020 (December 31, 2019: 167.3 million EUR). The T-Power nv assets and shares are serving as guarantee for the loan. The term loan credit facility contains a covenant stating a minimum required debt service cover ratio (based on the last 12 months cash flow available for debt service). This covenant has been complied with as per June 30, 2020.
The lease liability, in accordance with IFRS 16 Leases, amounts to 62.1 million EUR (December 31, 2019: 67.6 million EUR), of which 41.7 million EUR is included in non-current and 20.4 million EUR in current loans and borrowings.
Tessenderlo Kerley, Inc. has a loan outstanding of 7.0 million EUR, of which 0.9 million EUR is included in current loans and borrowings. The financed Phoenix headquarters building (Arizona, United States) is serving as guarantee for the loan.
The group has access to a Belgian commercial paper program of 200.0 million EUR of which 26.0 million EUR was used at the end of June 2020 and is included in current loans and borrowings (December 31, 2019: 39.0 million EUR). These are issued by Tessenderlo Group nv.
There were no withdrawals as per June 30, 2020, on the 5 year committed bi-lateral credit lines, which have been renewed for 5 years in December 2019. The amount of the committed credit lines amounts to 142.5 million EUR (of which part can be drawn in USD).
The application of IAS 19 Employee benefits as per June 30, 2020 led to a decrease of equity, before tax, by -7.6 million EUR and is mainly the result of a decrease of the rate used to discount the obligations (weighted average discount rate of 0.6% - 0.8% as perJune 30, 2020 compared to 1.0% at year-end 2019) and a lower than estimated return on the Belgian plan assets. The defined benefit liability recognized in the statement of financial position increased to 61.2 million EUR per June 30, 2020 (54.3 million EUR as per December 31, 2019), while no longer a UK net pension asset is recognized (2.3 million EUR as per December 31, 2019).
The following table shows the carrying amounts of derivative financial instruments measured at fair value in the statement of financial position including their levels in the fair value hierarchy:
| June 30, 2020 | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| (Million EUR) | Carrying amount balance sheet | Fair value hierarchy | |||||||
| Current assets |
Non current assets |
Current liabilities |
Non current liabilities |
Level 1 | Level 2 | Level 3 | Total | ||
| Foreign currency swaps | 0.0 | - | -0.0 | - | - | 0.0 | - | 0.0 | |
| Interest rate swaps | - | - | -7.2 | -17.3 | - | -24.4 | - | -24.4 | |
| Electricity forward contracts | - | - | -5.0 | -11.1 | - | -0.1 | -15.9 | -16.1 | |
| Total | 0.0 | - | -12.2 | -28.3 | - | -24.5 | -15.9 | -40.4 |
| December 31, 2019 | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| (Million EUR) | Carrying amount balance sheet | Fair value hierarchy | |||||||
| Current assets |
Non current assets |
Current liabilities |
Non current liabilities |
Level 1 | Level 2 | Level 3 | Total | ||
| Foreign currency swaps | 0.0 | - | -0.0 | - | - | -0.0 | - | -0.0 | |
| Interest rate swaps | - | - | -7.7 | -20.0 | - | -27.7 | - | -27.7 | |
| Electricity forward contracts | - | - | -5.0 | -11.5 | - | - | -16.5 | -16.5 | |
| Total | 0.0 | - | -12.7 | -31.5 | - | -27.7 | -16.5 | -44.2 |
The derivative financial instruments as per June 30, 2020, mainly relate to:
The decrease of the fair value of the interest rate swaps is mainly related to the half yearly payments for forward rate agreements reaching their maturity date. The settlement of the agreements resulted in a cash out of -4.0 million EUR as per June 30, 2020, and is included in the line "interest paid" in the condensed consolidated statement of cash flows. The effective portion of the change in fair value is recognized in the hedging reserves (other comprehensive income).
The fair value of the electricity forward contract is calculated as per June 30, 2020, based on a valuation model, leading to a net fair value of -15.9 million EUR compared to a net fair value of -16.5 million EUR as per December 31, 2019. Because of significant unobservable inputs, a level 3 fair value measurement is applied for the fair value measurement of the electricity purchase agreement ('PPA' – Purchase Power Agreement), for which the ownuse exemption under IFRS 9 is not applicable anymore. The value of the contract is depending on the future difference between market electricity prices and the generation cost based on market gas prices (the "sparkspread"), and on the effect of the hourly pricing optimization as foreseen in the contract. If the 2023 key assumptions would also have been applied for the remaining period till June 2026, a period for which no market data is available, the fair value of the contract (2020-June 2026) would have amounted to -33.1 million EUR. We refer to the 2019 consolidated financial statements for more information on the fair value calculation of the electricity forward contract.
Tessenderlo Group became a subsidiary with a non-controlling interest on January 1,2019.
During the first half of 2020, Picanol, through its subsidiary Verbrugge nv, acquired 746,674 shares of Tessenderlo Group for a total value of 19.3 million EUR (at an average share price of 25.9 EUR). This resulted in a decrease of the non-controlling interest with 1.7% from 56.1% per December 31, 2019 to 54.4% per 30 June 2020.
In accordance with article 7:53 of the Belgian Code of Companies and Associations, Tessenderlo Group has introduced a loyalty voting right for each fully paid-up share that has continuously been registered in the share register on the name of the same shareholder for at least two years. In its last transparency notification in July 2020, Verbrugge nv and Symphony Mills nv announced that they jointly owned 65.2% of the voting rights of Tessenderlo Group.
There are no restrictions on dividend distribution for example from specific debt covenants imposed on Tessenderlo Group.
| Non-controlling interest percentage | |||||
|---|---|---|---|---|---|
| Country | 30/06/2020 31/12/2019 |
||||
| Tessenderlo Group nv | BE | 54.4% | 56.1% |
Summary financial information of subsidiaries with a non-controlling interest at 100% as per June 30, 2020:
| Fair value | After fair value | ||
|---|---|---|---|
| (Million EUR) | As reported | adjustments | adjustment |
| FIXED ASSETS | 1,128.3 | 447.4 | 1,575.7 |
| Goodwill | 34.5 | -34.5 | 0.0 |
| Intangible assets | 151.2 | 353.9 | 505.0 |
| Tangible fixed assets | 867.6 | 128.0 | 995.6 |
| Other fixed assets | 75.0 | 0.0 | 75.0 |
| CURRENT ASSETS | 826.4 | 0.0 | 826.4 |
| Inventories | 283.0 | 0.0 | 283.0 |
| Other current assets | 543.4 | 0.0 | 543.4 |
| NON CURRENT LIABILITIES | 713.3 | 115.5 | 828.8 |
| Deferred tax liabilities | 73.1 | 107.9 | 181.0 |
| Loans and borrowings | 399.0 | 7.6 | 406.6 |
| Other liabilities > 1 year | 241.2 | 0.0 | 241.2 |
| CURRENT LIABILITIES | 341.4 | 0.0 | 341.4 |
| Net assets | 900.1 | 331.9 | 1,231.9 |
| Non-controlling interest % | 54.4% | ||
| Non-controlling interest | 670.0 |
For more information on the financial statements of Tessenderlo Group, we refer to the annual report which is published on the website: www.tessenderlo.com.
The group is confronted with a number of claims or potential claims and disputes, which are a consequence of the daily operational activities. To the extent such claims and disputes are such that it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and when a reliable estimate can be made of the amount of the obligation, suitable provisions have been made.
It is the group's policy to recognize environmental provisions in the balance sheet, when the group has a present obligation (legal or constructive) as a result of a past event, when it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and when a reliable estimate can be made of the amount of the obligation.
These provisions are reviewed periodically and adjusted, if necessary, as assessments and work proceeds and additional information becomes available. Environmental liabilities can change substantially due to the emergence of additional information on the nature or extent of the contamination, a change in legislation or other factors of a similar nature.
While it is not feasible to predict the outcome of all pending environmental exposures, it cannot be excluded that there will be a need for future provisions for environmental costs which, in management's opinion, based on information currently available, would not have a material effect on the group's financial position, but could be material to the group's results in any one accounting period.
Acquisition, investment and joint-venture agreements as well as divestments may contain habitual provisions leading to price adjustments. In addition, for divestments, proper consideration has been given to provisions for possible indemnifications payable to the acquirer, if any, including matters in the area of health, environment, tax, product liability, restructuring, competition, pensions and share incentives. Based on information currently available, the possibility of any significant cash outflow is considered to be remote.
The group has been allocated emission allowances for the period 2013-2020, that are yearly granted free of charge to cover operational emissions for products exposed to carbon leakage. Additional emission allowances will be purchased in case of any deficit. The amount of additional emission allowances expensed during the first semester of 2020 was insignificant. The surplus or deficit of emission allowances over the next years may vary, depending of several factors such as future production volumes, process optimization and energy efficiency improvements, however management expects that the impact of any surplus or deficit of emission allowances over the next years will not significantly impact the group's consolidated financial statements. The carrying amount of emission allowances included in intangible assets amounts to 4.7 million EUR as per June 30, 2020 (December 31, 2019: 2.9 million EUR).
Picanol Group has a related party relationship with its subsidiaries, joint-ventures, its main shareholder, directors and its Executive Committee. The Belgian pension fund "OFP Pensioenfonds", which covers the postemployment benefit obligation of the employees of Tessenderlo Group nv and Tessenderlo Chemie International nv, is also considered to be a related party.
The controlling shareholder of the Picanol Group is Mr. Luc Tack who holds 89.3% of the Picanol shares through Symphony Mills nv and Artela nv. In accordance with article 7:53 of the Belgian Code of Companies and Associations, the extraordinary meeting of shareholders of March 16, 2020 has decided to introduce a loyalty voting right for each fully paid-up share that has continuously been registered in the share register on the name of the same shareholder for at least two years. As per the last transparency notification, received on March 31, 2020, Artela nv and Symphony Mills nv were holding respectively 68.55% and 25.77% of the voting rights.
The group purchased and sold goods and services to related parties in which the group holds a 50% equity interest (investment in joint-ventures). Such transactions were conducted at terms comparable to transactions with third parties.
Premiums for an amount of 0.8 million EUR were paid to the Belgian pension fund, "OFP Pensioenfonds". Liabilities related to employee benefits schemes as per June 30, 2020, include 14.7 million EUR related to the "OFP Pensioenfonds" (December 31, 2019: 11.9 million EUR).
The following transactions have taken place with the joint-ventures, the controlling shareholder, the members of the Executive Committee and the Board of Directors:
| Transactions with joint ventures (for the six month period ended June 30, except for balance sheet comparatives at December 31) |
||||||
|---|---|---|---|---|---|---|
| (Million EUR) | 2020 | 2019 | ||||
| Transactions with joint-ventures – Sales | 0.2 | 0.3 | ||||
| Transactions with joint-ventures – Purchases | 11.0 | 12.7 | ||||
| Non-current assets | 9.8 | 10.5 | ||||
| Current assets | 1.1 | 0.7 | ||||
| Current liabilities | 1.3 | 1.2 |
The non-current assets (9.8 million EUR) refer to a 11.0 million USD loan, given by Tessenderlo Kerley Inc. to the joint-venture Jupiter Sulphur LLC. The loan is interest bearing (3.0%). The loan was originally reimbursable to Tessenderlo Kerley Inc. in the period 2020-2023, however the reimbursement period is currently under review following the ongoing capital expenditure investments and related cash needs in Jupiter Sulphur LLC. Jupiter Sulphur LLC obtained the same amount from the other joint-venture partner. The granted loan is included in 'Other investments' in the group's consolidated statement of financial position. The related interest income is considered to be insignificant and is not eliminated.
There have been no dividends received from joint-ventures in the first half of 2020 and 2019.
Dividends received from other investments amounted to 0.1 million EUR as per June 30, 2020 (June 30, 2019: 0.1 million EUR).
The transactions with the controlling shareholder are commercial transactions related to the sales of weaving machines and spareparts to companies linked to the main shareholder. These transactions were not significant in the first half of 2020 and 2019.
The Executive Committee is composed by the CEO, Luc Tack, the Executive Directors (currently Stefaan Haspeslagh) as well as any other member appointed by the Board of Directors (no one at this stage), and did not change compared to last year.
| (Million EUR) | HY20 | HY19 |
|---|---|---|
| Short-term employee benefits | 1.5 | 1.6 |
| Post-employment benefits | 0.0 | 0.0 |
| Total | 1.5 | 1.6 |
Short-term employee benefits include salaries and bonuses estimated for the period (both including social security contributions), car leases and other allowances where applicable. The post-employment benefits include the periodic pension costs of the pension plan, calculated by an actuary. There was no new issuance of warrants in HY20.
Compared to the disclosures made in the 2019 annual report, the fixed remuneration of the board members of Picanol nv was increased from 15,000 EUR to 17,500 EUR as a result of the inclusion of Tessenderlo Group in the consolidation of Picanol Group. The other remunerations (a fee of 2,000 EUR per meeting and an additional annual remuneration for the chairman of the board of 60,000 EUR) remain unchanged.
No significant subsequent events occurred after the balance sheet date.
We have reviewed the accompanying condensed consolidated statement of financial position of Picanol nv as at June 30, 2020, the condensed consolidated income statement, the condensed consolidated statement of comprehensive income, the condensed consolidated statement of changes in equity and the condensed consolidated statement of cash flows for the six-month period then ended, and notes to the condensed consolidated interim financial statements ("the condensed consolidated interim financial statements"). The board of directors is responsible for the preparation and presentation of the condensed consolidated interim financial statements in accordance with IAS 34, "Interim Financial Reporting" as adopted by the European Union. Our responsibility is to express a conclusion on these condensed consolidated interim financial statements based on our review.
We conducted our review in accordance with the International Standard on Review Engagements 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity". A review of interim financial statements consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Based on our review, nothing has come to our attention that causes us to believe that the accompanying condensed consolidated interim financial statements as at June 30, 2020 and for the six-month period then ended is not prepared, in all material respects, in accordance with IAS 34, "Interim Financial Reporting" as adopted by the European Union.
Zaventem, August 26, 2020
KPMG Réviseurs d'Entreprises / Bedrijfsrevisoren Statutory Auditor represented by
Patrick De Schutter Réviseurs d'Entreprises / Bedrijfsrevisor
Earnings before interests, taxes and EBIT adjusting items.
Earnings before interests, taxes and EBIT adjusting items plus depreciation and amortization.
Profit (+)/loss (-) for the period attributable to equity holders of the company divided by the weighted average number of ordinary shares outstanding during the period.
Amount of money spent to upgrade, acquire or maintain property, plant and equipment (PP&E) and intangible assets.
Profit (+)/loss (-) for the period attributable to equity holders of the company divided by the fully diluted weighted average number of ordinary shares outstanding during the period.
Weighted average number of ordinary shares, adjusted by the effect of warrants on issue.
Profit(+)/loss(-) from operations.
EBIT adjusting items are those items that in management's judgment need to be disclosed by virtue of their size or incidence. Such items are disclosed in the notes to the financial statements. Transactions which may be recognized as EBIT adjusting items are principally related to restructuring, impairment losses, provisions, gains or losses on significant disposals of assets or subsidiaries and the effect of the electricity purchase agreement.
Net financial debt divided by Adjusted EBITDA over the last 12 months.
Non-current and current loans and borrowings minus cash and cash equivalents and bank overdrafts.
Number of shares outstanding at the beginning of the period, adjusted by the number of shares cancelled, repurchased or issued during the period multiplied by a time-weighting factor.
The sum of inventories, current trade and other receivables minus current trade and other payables.
The following alternative performance measures are considered to be relevant in order to compare the results over the 6 month period ended June 30, 2019, and June 30, 2020, and can be reconciled to the condensed consolidated interim financial statements as follows:
| (Million EUR) | HY20 | HY19 |
|---|---|---|
| Adjusted EBIT | 98.8 | 50.2 |
| Gains and losses on disposals | 1.0 | 3.0 |
| Restructuring | 0.7 | -0.4 |
| Impairment losses | -0.5 | -0.1 |
| Provisions and claims | 1.6 | -5.0 |
| Other income and expenses | -2.3 | -3.3 |
| EBIT (Profit (+) / loss (-) from operations) | 99.3 | 44.4 |
| (Million EUR) | HY20 | HY19 |
|---|---|---|
| Adjusted EBITDA | 195.5 | 144.2 |
| Gains and losses on disposals | 1.0 | 3.0 |
| Restructuring | 0.7 | -0.4 |
| Provisions and claims | 1.6 | -5.0 |
| Other income and expenses | -2.3 | -3.3 |
| EBITDA | 196.4 | 138.5 |
| Depreciation | -96.6 | -93.9 |
| Impairment losses | -0.5 | -0.1 |
| EBIT (Profit (+) / loss (-) from operations) | 99.3 | 44.4 |
| (Million EUR) | 30/06/2020 | 31/12/2019 |
|---|---|---|
| Non-current loans and borrowings | 408.5 | 426.3 |
| Current loans and borrowings | 73.3 | 98.9 |
| Cash and cash equivalents | -320.0 | -290.3 |
| Bank overdrafts | 0.1 | 0.1 |
| Net financial debt | 161.9 | 235.1 |
| Adjusted EBITDA | 331.2 | 279.9 |
| Leverage (net financial debt / Adjusted EBITDA last 12 months) | 0.5 | 0.8 |
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