Annual Report • Apr 28, 2020
Annual Report
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| Chairman's Letter | 4 | |
|---|---|---|
| Board Members | 7 | |
| Worldwide Presence | 8 | |
| Organizational Chart | 10 | |
| 01 | Main Events | 15 |
| 02 | Consolidated Management Report | 27 |
| 03 | Corporate Governance Report | 73 |
| 04 | Sustainability Report | 121 |
| 05 | Consolidated Financial Statements | 199 |
| 06 | Notes to the Consolidated Financial Statements |
209 |
| 07 | Reports and Opinions of the Supervisory Board and the Statutory Auditor |
279 |
In 2019, the global economy recorded its lowest growth rate since the 2008 financial crisis. It was a year dominated by uncertainty, with a slowdown of international trade - for the second consecutive year – several protectionist measures and the trade dispute between the United States and China, which had a significant impact on business investment and economic growth. In Portugal, economic growth also slowed, but remained positive, primarily due to the upward evolution of private consumption and investment. The industrial sector, which is more exposed to the international context, suffered a slowdown, which was offset by the performance of the services and construction sectors.
Corticeira Amorim is particularly exposed to international markets, since it records more than 90% of its consolidated sales to over 100 countries around the world. The complex macroeconomic environment and the rising consumer prices for cork meant made 2019 particularly demanding and challenging.
4 CONSOLIDATED ANNUAL REPORT 2019 CORTICEIRA AMORIM, SGPS, S.A.
However, our entire Organisation aligned itself with the defined objectives and goals, and we strove, in a professional and enthusiastic manner, to raise the levels of excellence of service, sales and results. And we were successful.
In 2019, consolidated sales exceeded €780 million, and all Business Units (BU), with the exception of the Floor and Wall Coverings BU, contributed to this growth. The Cork Stoppers BU made a key contribution and generated over two thirds of consolidated sales. Thanks to its unparalleled product portfolio – which excels in terms of quality, consistency, convenience and sustainability – year after year it surpasses the ambitious goals set. The Composite Cork BU and Insulation Cork BU also recorded outstanding performances, reflecting consumers' growing preference for innovative and more environmentally friendly products and solutions.
Corticeira Amorim's journey, that now spans 150 years of vision, perseverance and audacity, is based on two key pillars: innovation and sustainability combining technology with nature and developing environmentally friendly products and solutions. Year after year, we work together, with unconditional enthusiasm and extraordinary commitment, reinforcing our desire to building a more sustainable future.
We are committed to meeting the Sustainable Development Goals, adopted by the United Nations in 2015, and have therefore designed and implemented programmes to support innovation, research and development, policies and initiatives which aim to help reduce our environmental impact. These initiatives include efficient energy management, optimisation of renewable energy sources, in particular biomass, promotion of wellbeing in the workplace and fostering good health and quality of life.
Our long-term success is intrinsically linked to our teams' dedication, passion and entrepreneurial capacity. The path ahead is an endless journey, with constant challenges on the horizon. However, it is precisely challenges such as these that inspire us, and lead us to strive to respond to the needs of our customers, the market and society as a whole.
In 2020 we are celebrating 150 years of business activity. For this reason, the entire Organisation is paying tribute, not only to this historic milestone, but above all to the multigenerational entrepreneurial vision, which underpins our success, and the values that will shape our future. Over the past 150 years, cork and Corticeira Amorim have made countless friends: ranging from customers to suppliers, from investors to forest producers, from winemakers to astronauts, from architects to fashion designers and, of course, our Employees around the world, who are
unconditional enthusiasts and constitute an integral part of cork's continued renaissance. I would like to express my sincere gratitude to them all.
Aware that this is an unprecedented moment, we join the collective effort to contain the COVID-19 pandemic, with responsibility, solidarity and hope, protecting our Employees, their Families, Communities and all our Stakeholders.
We may be distant, but we remain united.
Warm regards,
António Rios de Amorim Chairman and CEO
| BOARD OF THE GENERAL MEETING | Augusto Fernando Coreia de Aguiar-Branco Chairman |
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| Rita Jorge Rocha e Silva Secretary |
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| BOARD OF DIRECTORS | António Rios Amorim Chairman |
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| Nuno Filipe Vilela Barroca de Oliveira Vice-Chairman |
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| Fernando José de Araújo dos Santos Almeida Member |
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| Cristina Rios de Amorim Baptista Member |
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| Luisa Alexandra Ramos Amorim Member |
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| Juan Ginesta Viñas Member |
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| SUPERVISORY BOARD | Manuel Carvalho Fernandes Chairman |
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| Marta Parreira Coelho Pinto Ribeiro Member |
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| Eugénio Luís Lopes Franco Ferreira Member |
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| — Substitute |
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| STATUTORY AUDITOR | Ernst & Young Audit & Associados — SROC, S.A., represented by Rui Manuel da Cunha Vieira ou por Rui Abel Serra Martins In office |
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| Pedro Jorge Pinto Monteiro da Silva e Paiva (ROC) Alternate |
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| REMUNERATION COMMITTEE | José Manuel Ferreira Rios Chairman |
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| Jorge Alberto Guedes Peixoto Member |
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| Abdul Rehman Omarmiã Mangá Member |
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| As of 31st December 2019 |
Geographic Location Raw Materials
8 CONSOLIDATED ANNUAL REPORT 2019 CORTICEIRA AMORIM, SGPS, S.A.
RAW MATERIALS
Amorim Florestal, S.A.
Amorim Florestal, S.A. Ponte de Sôr – Portugal
Amorim Florestal, S.A. Coruche – Portugal
Amorim Florestal, S.A. Abrantes – Portugal
Amorim Florestal, S.A. Unid. Ind. Salteiros Ponte de Sôr – Portugal
Cosabe – Companhia Silvo - Agrícola da Beira, S.A Lisbon – Portugal
S.I.B.L. – S.A.R.L. Jijel – Algeria
Amorim Florestal España, S.L Algeciras – Spain
Amorim Florestal España, S.L. San Vicente de Alcántara – Spain
Amorim Florestal Mediterrâneo, S.L. San Vicente de Alcántara – Spain
Comatral – Compagnie Marocaine de Transformation du Liège, S.A. Skhirat – Morocco
S.N.L. – Societé Nouvelle du Liège, S.A. Tabarka – Tunisia
Société Tunisienne d'Industrie Bouchonnière Tabarka – Tunisia
Amorim Cork, S.A. Santa Maria de Lamas – Portugal
Amorim Top Series, S.A. Argoncilhe – Portugal
Amorim Cork, S.A. Ind. Unit Valada Valada – Portugal
Amorim Cork, S.A. Ind. Unit Coruche Coruche – Portugal
Amorim Cork, S.A. Ind. Unit Portocork Santa Maria de Lamas – Portugal
Amorim Cork, S.A. Ind. Unit Salteiros Ponte de Sôr – Portugal
Amorim Champcork, S.A. Santa Maria de Lamas – Portugal
Biocape – Importação e Exportação
Mozelos – Portugal Socori, S.A.
de Cápsulas, Lda.
Rio Meão – Portugal Francisco Oller, S.A.
Girona – Spain
Trefinos, S.L. Girona – Spain
Elfverson & Co. AB Påryd – Sweden
Vinolok, a.s. Jablonec nad Nisou – Czech Republic
Production Distribution
Amorim Cork, S.A. Unid. Distribuição Santa Maria de Lamas – Portugal Portocork Internacional, S.A. Santa Maria de Lamas – Portugal
Amorim Cork South Africa (PTY) Ltd. Cape Town – South Africa
Amorim Cork Deutschland, GmbH Bingen am Rhein – Germany Corchos de Argentina, S.A. Mendoza – Argentina
Amorim Australasia PTY Ltd. Adelaide – Australia
Korken Schiesser, GmbH Viena – Austria
Sofia – Bulgaria
Santiago – Chile
Santiago – Chile
Amorim Cork Bulgaria, EOOD
Corchera Gomez Barris, S.A.
Corpack – Bourasse, S.A. Santiago – Chile
Industria Corchera, S.A. Santiago – Chile
Amorim Cork Beijing, Ltd. Beijing – China Agglotap S.A. Girona – Spain
Victor y Amorim, S.L. Navarrete (La Rioja) – Spain Amorim Cork España S.L. San Vicente de Alcántara – Spain
ACIC – USA LLC Napa Valley, CA – USA Portocork America, Inc. Napa Valley, CA – USA
Wine Packaging & Logistic, S.A.
Distribution (cont.)
Trefinos USA LLC Fairfield, CA – USA
Amorim Cork America, Inc. Napa Valley, CA – USA
Amorim France, S.A.S. Eysines, Bordeaux – France
Amorim France S.A.S. Unid. Champfleury Champfleury – France
Bouchons Prioux S.A.R.L. Epernay – France
Amorim Top Series France S.A.S. Merpins – France
S.A.S. Ets Christian Bourasse Tosse – France
Sagrera et Cie Reims – France
S.A. Oller et Cie Reims – France
Société Nouvelle des Bouchons Trescasses, S.A. Le Boulou – France
Portocork France, S.A.S. Bordeaux – France
Hungarokork Amorim, Rt. Veresegyház – Hungary
Portocork Italia, SRL Milan – Italy
Trefinos Italia SRL Treviso – Italy
Amorim Cork Italia, S.p.A. Conegliano – Italy
Amorim Top Series Scotland, Ltd. Dundee– UK
Amorim Cork Composites, S.A.
Amorim Cork Composites, S.A. Mozelos – Portugal
Amorim Industrial Solutions Imobiliária, S.A. Corroios – Portugal
Amorim Sports & Playgrounds, Lda. Mozelos – Portugal
Amorim Cork Composites GmbH Delmenhorst – Germany
Chinamate (Xi'an) Natural Products Co. Ltd. Xi'an – China
Amosealtex Cork Co., Ltd Xangai – China
Amorim Cork Composites, Inc. Trevor, WI – USA
Corticeira Amorim France, S.A.S. Lavardac – France
Amorim (UK) Limited West Sussex – UK
Amorim Cork Composite, LLC Moscow – Russia
Amorim Cork Flooring, S.A.
Amorim Cork Flooring, S.A. S. Paio de Oleiros – Portugal
Amorim Cork Flooring, S.A. Lourosa – Portugal
Amorim Deutschland GmbH Delmenhorst – Germany
Cortex Korkvertriebs GmbH Nürnberg – Germany
Amorim Flooring Austria GmbH Viena – Austria
Timberman Denmark A/S Hadsund – Denmark
Amorim Flooring North America, Inc. Hanover, MD – USA
Amorim Benelux B.V. Tholen – Netherlands
Dom Korkowy, Sp. Zo.o Krakov – Poland
Amorim Flooring Rus, LLC Moscow – Russia
Amorim Flooring Sweden AB Mölndal – Sweden
Amorim Flooring (Switzerland) AG Zug – Switzerland
Korkkitrio Oy. Tampere - Finland
Amorim Cork Insulation, S.A.
Amorim Cork Insulation, S.A. Mozelos – Portugal
Amorim Cork Insulation, S.A. Silves – Portugal
Amorim Cork Insulation, S.A. Vendas Novas – Portugal
Amorim Cork Research, Lda. Mozelos – Portugal
Amorim Cork Services, Lda. Mozelos – Portugal
Amorim Cork Ventures, Lda. Mozelos – Portugal
[ ← ] Our Common Forest. Since 2011, Corticeira Amorim's Volunteers have been promoting reforestation actions in Portugal. More than 20,000 native trees planted, with a preponderance for the cork oak.
The ARCO Madrid VIP Room, a 1,200 m2 artistic space, was lined and decorated with cork, in a creative concept designed by Spanish designer Lázaro Rosa-Violán. Corticeira Amorim offered various cork-based technical solutions and decorative materials, in particular Wicanders' flooring solutions, panels and rolls with multiple cork visuals, Cork Fabrics, Corkwall, as well as technical advice.
"For me, cork is a material that can be used to sculpt, pave, cover and texture. It is a complete, circular material that offers a wide array of uses. What I really liked was the idea that I could rediscover it, because I have been living in spaces where its use was very widespread - where there were specific aromas and textures. "
Lázaro Rosa-Violán
Corticeira Amorim makes a unique contribution to research, development and innovation in all its business units, and provides distinctive leadership of the sector, inclusively in this crucial area of its business activity, that enables it to offer the most advanced solutions for the world's most demanding industries, based on a 100% sustainable raw material.
This award reflects "a work of total dedication, constant search for perfection, originality, leadership skills, know-how and industry recognition", explains Nuno Pires, director of the Revista de Vinhos magazine.
Construction of this building, which initially planned to use concrete, was technically unfeasible. After this setback, it was decided to use concrete mixed with cork, developed with support from Corticeira Amorim, Secil and the Coimbra ITECcons engineering laboratory.
"Since a large part of the cork is introduced in powder form, this enables the concrete to maintain the same chemical reactions between its elements (…), the concrete maintains its qualities in terms of resistance, even though it is much lighter. The building's elevations, for example, are built with this special concrete; it was an interesting solution that I think will be used widely in the future. "
Architect João Luís Carrilho da Graça, in the book, Lisbon Cruise Terminal
Amorim's cork solutions were some of the structural materials used in SKulpod, the igloo capable of functioning as a dwelling in Antarctica, enabling components to be made that guarantee durability, insulation, aesthetics, sustainability and comfort in these extremely harsh climatic conditions.
ARCO Madrid 2019 VIP Lounge ©Rosa Rodriguez
Lisbon Cruise Terminal ©Rita Burmester
Climate Change Leadership Porto Summit underlines the wine industry's commitment to sustainability
Wise by Amorim
Inspired by the testimony of Al Gore, former US Vice President and Nobel Peace Prize winner, hundreds of wine industry experts discussed the fundamental role that the sector can, and should, play in terms of conserving the planet's resources - including water, soil, forests and oceans.
In the second edition of the Porto Summit, António Rios de Amorim, chairman of Corticeira Amorim, underlined the importance of this approach. "We are making sustainability a priority in a business that is, in itself, sustainable. We have a negative carbon footprint. "
Corticeira Amorim was the world's first packaging company to obtain a certification from the FSC - Forest Stewardship Council.
Cork Wise received the Innovation Award for Architecture + Construction at the BAU international building materials fair in Germany. The award is granted by AIT and Xia Intelligent Architecktur, in cooperation with Messe Münchem GmbH.
Wise stands out because it is a PVC-free sustainable solution, with a negative carbon footprint, as well as having excellent technical characteristics (waterproof) and the possibility of being applied in large areas, and high-traffic commercial environments (class 33) without the need for transition joints. "Smart choice. Amazing sensations" is a collection of flooring solutions, with 62 cork and wood visuals.
Leonor Antunes created a cork floor, with drawings by Carlo Scarpa, for the Palazzo Giustinian Lollin, that hosted the Official Portuguese Representation | Portugal Pavilion during the 58th edition of the Venice Biennale.
The Spanish artist Nacho Carbonell, who also attended the biennial, exhibited the "Inside a Forest Cloud" lamp, which fostered a creative dialogue with the impressive Ca 'D'Oro palace. Nacho Carbonell used projected granulated cork to create textures on top of the trees of his forest of light, using three different shades of this raw material, in chromatic harmony with the other materials.
The Helix system – which combines an innovative bottleneck design and a sustainable cork stopper developed by Corticeira Amorim and O-I, offers all the advantages of a cork stopper but dispenses with the need for a corkscrew.
In 2016, Bronco Wine Company, the USA's fifth largest wine company, adopted Helix for its Red Truck brand, and is currently extending use of this solution to The Great American Wine Company.
"Made from natural and sustainable cork, Helix is the most innovative stopper of the 21st century. It ensures convenience, is easy to open and preserves the familiar elements associated to opening a bottle of wine, such as exceptional quality and the familiar "popping" sound that only a cork stopper offers."
Fred Franzia, CEO and Founder of the Bronco Wine Company
With the support of Corticeira Amorim, Typologie magazine published two editions dedicated to the cork stopper and the wine bottle, launched during the Salone del Mobile in Milan. The two editions explored the strong relationship between the cork stopper and the wine bottle and its importance in the ritual of drinking wine.
Typologie chronicled the stories of cork and the wine bottle, two objects that are inseparable in nature, and offered a new look at cork, from its origins in the cork oak tree, exploring its production process within a sustainable industry.
Amorim Top Series - the world's leading supplier of capsulated cork stoppers for the global spirits market – has launched an innovative collection of new stoppers with a bold design, adapted to current market trends. Spice Box incorporates an elegant transparent top with a revolving lid that can be used to store dried herbs and spices, ideal for producing aromatic gins - a new trend, especially among millennial drinkers.
Wines sealed with natural cork stoppers – the premium category of wines – have recorded 65% growth in sales, according to studies by market research company Nielsen, which has collected data from the USA's 100 leading premium wine brands since 2010. Wines sealed with cork stoppers generate an added value of about 4 dollars, when compared with wines sealed with artificial closures.
The second edition of the Architects @Amorim initiative, organised by Amorim Cork Flooring, brought together 150 architects from 27 countries. This event enabled important networking to take place between these professionals from different countries, who share a common interest in cork.
The intense programme of workshops and technical visits allowed architects to get to know the cork industry in greater depth, demonstrating cork's performance, quality and diversity of sustainable products and Amorim Cork Flooring's negative carbon footprint.
The programme also included a guided tour to several key architectural works in the city of Porto, including the Serralves Foundation and the Casa da Música.
In the framework of the partnership between Ikea and Corticeira Amorim, Tom Dixon created a garden incorporating cork and other 100% natural, recyclable and sustainable materials for the Chelsea Flower Show, in London.
Amazed by the potential of cork, Tom Dixon also used it to create his iconic The Manzoni - design restaurant - in Milan, which serves as a showroom for his brand, and opened in April 2019 during the Salone del Mobile.
These two projects brilliantly incorporate cork, highlighting the potential of this unique raw material, that stands out for its versatility and beauty.
Corticeira Amorim was awarded the 2019 Corporate Award in a gala dinner in New York, that marked the 40th anniversary of the Luso American Chamber of Commerce. Pedro Siza Vieira, the Minister of the Economy, was the Guest of Honour and keynote speaker.
Australian wine producer Rockford Winery has opened a second winery that pays a special tribute to cork. Corticeira Amorim joined this initiative, supplying various cork-based materials and specialised technical information, and also organised several cork workshops at Rockford's facilities.
Corticeira Amorim signed an agreement with the Czech Republicbased firm, Preciosa Group, for acquisition of a 50% stake in the company Vinolok, which specialises in the design and production of technical glass and crystal stoppers for premium wines, spirits and mineral water.
The historic association of cork and glass should lead to additional gains in sustainability, convenience and design for premium and ultra-premium packaging solutions for wines and spirits.
Amorim Top Series, in partnership with Amorim Cork Composites, launches 100% natural capsulated stoppers, thereby reinforcing its commitment to sustainability. These stoppers offer suitable physical and mechanical resistance, allying performance, nature and design.
Amorim Cork Insulation, in partnership with Amorim Cork Flooring, attended Construmat 2019 – the International Building Materials Fair, in Barcelona, in May 2019. In this edition, the Amorim stand invited visitors to discover the origins of cork and the varied construction solutions available, combining technical performance and sustainability, in a wide portfolio of products for thermal insulation and floor and wall covering solutions.
Typologie, the bottle and the cork stopper at the Salone del Mobilie, Milan, Italy
"Gardening will save the world", by Tom Dixon takes cork into the Chelsea Flower Show ©Tom Dixon Studio, Design Research Studio, Peer Lindgreen
150 Architects @ Amorim towards cork innovation and sustainability
Vinolok reinforces the historical association between cork and glass
Centro Cultural de Belém | A Square in the Summer featuring Amorim's cork
Go4Cork | Comfort, performance, design and sustainability
The Desert Whisper
Pestana Blue Alvor with Wicanders' cork flooring
For the third consecutive year, blocks of expanded agglomerated cork were used to transform the outer courtyard of the Centro Cultural de Belém (CCB) into Uma Praça no Verão (a square in the summer). As part of this partnership, Amorim Cork Insulation supplied 1900 blocks of agglomerated cork. The cork modelled on the floor creates different spaces and gives form to a playful recreational space among the various constructed geometric shapes.
"It is an honour to be able to count on Amorim's support in the creation of an ephemeral architecture project, which each summer invades the Praça CCB, giving expression to the natural material that is reinterpreted by each of the invited architects. This virtuous partnership has been growing and gaining increasing notoriety, always fuelled by the enthusiasm of Amorim Isolamentos' teams, who embody brilliance and the constant search for innovation, which the Amorim Group takes to the four corners of the world."
Madalena Reis, Director, CCB
Go4Cork is the new brand in Amorim Cork Composites' product portfolio for the DIY segment. With strong design, performance and sustainability credentials, the brand proposes a wide range of products - 100% cork or cork combined with other materials from the circular economy – that can be used to remodel and decorate the home and office while benefiting from the unique properties of cork.
The Gondwana Collection Namibia has created a new accommodation facility in the middle of the desert, called The Desert Whisper. Offering sublime views of the desert, this autonomous cabin-shaped structure, lined with Wicanders' floor and wall coverings uses neutral materials and colours to create a contemporary atmosphere that blends seamlessly into the desert landscape.
Opened in May, the Pestana Blue Alvor Beach & Golf Hotel is Portugal's first and biggest all-inclusive five-star resort. All rooms and communal areas are covered with distinctive Wicanders' floors - more than 20,000 m2 of cork flooring with a wood visual, from the Hydrocork and Wood Go lines.
The choice of cork floors, which are 100% natural, renewable and sustainable, is aligned with the Pestana Group's sustainability strategy, and provides an efficient response to the requirements of this business sector: high shock and impact resistance and greater durability against wear.
The Cork2Cork programme is a pioneering initiative developed by Amorim Cork Flooring in partnership with the NH Hotels hotel chain. It aims to collect cork stoppers used in the numerous hotels of this international chain, which are then recycled by Amorim. This programme began in 2011, with the installation of collection containers for used cork stoppers in 77 hotels of the group, in several countries. Between 2011 and 2015, 2 tons of cork stoppers were collected, which made it possible to produce 8000 m2 of flooring, equivalent to 300 hotel rooms.
The French furniture and decoration company Ligne Roset is known for investing in sustainable production. SUGO CORK RUGS was a natural choice, since it is aligned with the brand's commercial practices and commitment to sustainability. All tapestries are produced by hand and are based on use of cork and Corticeira Amorim's technical knowledge.
SUGO CORK RUGS are part of the recently refurbished rooms and the new Bio Pool Suites of the Sublime Comporta luxury hotel.
"Incorporating natural cork into the creative process has created a visually distinctive design language. Use of cork also offers numerous benefits, such as durability, thermal and acoustic insulation, lightness, comfort and minimising the risk of allergies."
Susana Godinho, founder and creative director of Sugo Cork Rugs
At this annual design event that attracts hundreds of thousands of international participants, a unique visual concept for cork was presented in the Ligne Roset showroom. Cork in the form of natural granulated cork and expanded granulated cork was the material chosen by the architect Bernard Dubois who used its lightness, softness and naturalness to create a series of modular objects with geometric shapes and solid edges, entirely produced by Corticeira Amorim.
"It spanned the geometries of centuries of design, and compressed them into elegant shapes produced with one of the world's oldest and most sustainable materials: cork. "
Felix Burritchter, curator, creative editor for PIN-UP Magazine
ACM52 is the latest multifunctional material from Amorim Cork Composites used as the primary decking solution for cruise ship interiors. With IMO / MED certification (strict fire and smoke safety standards), ACM52 is between 2-5 times lighter than conventional decking solutions, and thereby helps reduce the vessel's final weight,
SUGO CORK RUGS bring Nature into the interior of Sublime Comporta luxury hotel
"Windows to the Future", by Bernard Dubois, in partnership with Ligne Roset and PIN-UP Magazine
City Cortex city five leading American studios to design better cities with cork
The Cork House, by Matthew Barnett Howland, Dido Milne and Oliver Wilton
while ensuring greater comfort and performance with a lower carbon footprint due to cork's natural properties.
The various listed houses in the world include Fallingwater, one of the world's most famous houses, built on a waterfall in Pennsylvania. This house has cork applications on the floors and walls of the six rooms. The natural colour of the cork complements the material palette specified by Wright, the natural surroundings of the space with the additional benefits of acoustics, warmth and softness.
In June 2019, the Austrian Embassy in Lisbon organised a solemn event in remembrance of Caritas Action, a solidarity movement that emerged in the aftermath of World War II.
António Rios de Amorim attended this emotional celebration, which brought together two nations and two cultures, in representation of the Amorim Family, which in the second half of the 20th century was actively involved in the hosting programme for Austrian children recovering from the traumas of war.
Corticeira Amorim launched the first two-disc stopper for sparkling wines, that delivers non-detectable TCA performance*. Validated by independent entities, NDtech is a cutting-edge technology that achieves a revolution in terms of quality control, by using gas chromatography for individualized control of cork stoppers in production lines. It has been possible to reduce the analysis time from 14 minutes to about 16 seconds, thereby enabling the process to be applied on an industrial scale. NDtech Sparkling production lines are expected to operate 24 hours a day, due to the high demand for this solution in Portugal and abroad.
*Releasable TCA content below the 0.5 ng/L quantification limit; analysis performed in accordance to ISO 20752.
The GLEX summit, held at the Champalimaud Foundation in July 2019, brought together the largest exploration societies and explorers from around the planet, in the spirit of Ferdinand Magellan's circumnavigation of the globe, in a unique celebration that brought together world-class institutions such as NASA, MIT and the United Nations.
The event, which was supported by Corticeira Amorim, marked the 500th anniversary of the circumnavigation of the globe, and the 50th anniversary of the arrival of Man on the Moon, in the Apollo XI Mission, in a rocket that incorporated an Amorim cork thermal shield solution.
Commitment to Innovation & Development is crucial. Through Amorim Cork Composites, Corticeira Amorim is the main technological partner for the provision of insulation solutions to NASA and the European Space Agency.
The challenges posed by the climate crisis are too urgent to be ignored. The data provided by the scientific community is irrefutable and time is running short. It is therefore important to think about the solutions currently available to us and how to put them into practice, with confidence, decisiveness and hope.
City Cortex was launched with this objective in mind - to focus on solutions and present innovative proposals capable of creating a better future for everyone. The research programme is curated by Guta Moura Guedes and experimentadesign, and focused on cork and its sustainability potential for contemporary cities.
Five international architecture and design studios - Diller Scofidio + Renfro, Gabriel Calatrava, Leong Leong, Sagmeister & Walsh and Philippe Starck – have been invited to use cork to develop original projects, designed to meet the challenges of urban contexts in the 21st century. New York - the metropolis of metropolises - will be the inaugural stage of the programme - with presentation of works in public and semi-public spaces, scheduled for the summer of 2020.
Simplicity and sustainability were the concepts that inspired the mentors of this idea: Matthew Barnett Howland, Dido Milne and Oliver Wilton, from the Bartlett School of Architecture. Built in Berkshire, United Kingdom, Cork House aims to provide an innovative solution to the inherent complexities of construction of modern houses and is built almost entirely from one natural, sustainable and renewable material: cork, supplied by Amorim Cork Insulation.
Once completed, Cork House is carbon-negative. This factor, combined with its low-impact construction method, is bound to have caught the attention of the jury of the Stephen Lawrence Prize, an award granted by the RIBA (Royal College of British Architects).
"Cork House involves a unique combination of ancient construction methods and state-of-the-art technical research to produce a highly innovative, low-carbon solution with a wide range of applications - from large-scale housing to emergency shelters."
Marco Goldschmied, founder of the Stephen Lawrence Prize.
Corticeira Amorim, Quercus and Missão Continente have once again joined forces in a campaign to collect and recycle corks. The campaign - "Rolhas que dão folhas" (Stoppers that sprout leaves) was launched on World Ozone Day, 16 September 2019, and is part of the Green Cork project. In order to encourage the recycling of cork and contribute to reforestation initiatives in Portugal, Corticeira
Amorim launched yet another recycling campaign, distributing around 500,000 "rolhinhas" to the customers of Continente stores, small portable deposits for collecting cork stoppers.
Since the Green Cork project was launched in 2008, more than 84 million cork stoppers have been collected, which has helped to fund the planting of more than 828,000 autochthonous trees all over Portugal.
Circular economy principles have always been applied at Amorim Cork Composites, since the company was originally set up in order to give new life to surplus cork from the stopper production industry. Based on this model of circularity, new surplus raw material from other industries such as footwear, automobiles, sports or upholstery production is used to develop new composite cork products.
Reusing and saving natural resources creates added value for the business, while the incorporation of non-cork raw materials fosters industrial symbiosis with other companies, creating new products and new trends, increasing the company's competitiveness, and generating differentiation that maintains cork as a distinctive and core raw material. This logic led to the creation of i.cork factory, a pilot innovation factory, as well as a bigger commitment to the area of procurement of raw materials and installation of new crushing and agglomeration lines.
Amorim Cork Composites participates in the RETALT project, which involves the development of cork-based thermal protection solutions for reusable launchers in the aerospace industry. RETALT - Retro Propulsion Assisted Landing Technologies aims to reduce the cost of the next generation of launchers and transport systems, through the use of new technologies that enable them to be reused.
Located in Grândola, in the heart of the Alentejo coast, Sobreiras Country Hotel incorporates 700 m2 of Wicanders flooring, a sustainable solution in perfect harmony with Nature. The project was designed by the British architecture firm FAT - Future Architecture Thinking. This sustainable solution combines contemporary design with cork's unparalleled characteristics in terms of thermal and acoustic comfort. This is particularly important in the Alentejo region, where summers are very hot and winters are cold, and especially in a hotel, where privacy and a quiet and relaxing atmosphere are essential. In this context, Wicanders solutions have proven to offer the best performance.
The Colegio Mayor Colombiano, located on the campus of the Complutense University in Madrid, is a university residence for young Colombians studying in Spain. The project used a Wicanders flooring solution with a cork visual - Originals Shell - from the Resist + range. The architect Silka Barrio chose cork because it is a natural and sustainable material that has unique thermal and acoustic properties,
Stoppers that sprout leaves: more than 84 million cork stoppers collected, 828 thousand trees planted in Portugal
Hydrocork 2.0, a sustainable and competitive cork flooring solution
Serralves Tree Top Walk: enjoying the Park's biodiversity, in the comfort of cork
Cork at Zeits MOCCA underlines Artist William Kenntridge's work
providing a comfortable sensation in any space, and thereby contributing to the well-being of students and teachers.
After the global launch of Hydrocork in 2015, Wicanders' biggestever sales success, in 2019 the brand launched Hydrocork 2.0 that incorporates several upgrades that make this product even more competitive.
In line with the company's environmental concerns, and in favour of offering increasingly sustainable solutions, the composition of Hydrocork 2.0 increases the amount of recycled materials used in the product's core.
The designer Katty Xiomara chose cork for the presentation of her new eco-design collection, After Now, in Paris Fashion Week.
She thereby paid homage to the impermanence and fluidity of life, where everything evolves in a circular motion, without beginning or end.
The cork was supplied by Amorim Cork Composites and used on the floor, forging a contrast with the iron structure. In addition to being used in the runway, cork was incorporated into several items designed by Xiomara.
Conceived by the architect Carlos Castanheira, in collaboration with the architect Álvaro Siza, the Treetop Walk, which overlooks Serralves Park - opened to the public in September 2019. It includes cork in a series of seats, which enable visitors to contemplate nature on a sustainable basis.
The Treetop Walk was created to signal the 30th anniversary of the Serralves Foundation and provides visitors with an impressive experience of observation and study of the fauna and flora of Serralves. A living lesson on biodiversity.
The Zeitz MOCAA museum in Cape Town housed the largestever exhibition dedicated to South Africa's most important living artist, William Kentridge. Entitled "Why Should I Hesitate: Putting Drawings to Work", the entire exhibition path (spanning three floors) is lined with cork.
While visitors' senses of sight and hearing are stimulated by Kentridge's works, the characteristic smell of cork also permeates the space, thereby creating a remarkable sensory experience. The exhibition included about 1200 m2 of compact cork insulation, installed by Amorim Cork South Africa. The main reason for choosing this solution was the acoustic insulation provided by cork. In addition
to absorbing the sound and creating a unique atmosphere, the cork panels also served as a backdrop for Kentridge's beautiful designs.
More and more people are choosing cork for sports surfaces. Used as an infill in synthetic turf, cork is an extremely beneficial solution due to its multiple properties. The system's excellent performance depends on the shock pad located beneath the surface of the pitch. The solutions developed by Amorim Cork Composites, made from cork and recycled materials, guarantee uniform shock absorption, reduced impact intensity, elasticity and other damping properties over the product's life. Easy to install and with minimal impact on the environment, these cork-based shock pads offer long-lasting performance and excellent drainage.
The first two-disc cork stopper for sparkling wines that deliver non-detectable TCA performance received the SIMEI's Innovation Challenge award in Milan, one of the most important technology events for the wine and bottling industry. The award aims to promote and disseminate the best technological innovations presented at SIMEI. NDtech Sparkling, which extends the successful formula of NDtech natural cork stoppers to sparkling wine cork stoppers, obtained the maximum distinction.
In the United States, United Kingdom and France, important distributors are committed to valorising and promoting cork. In the United States, Fairways Wines & Spirits, one of the country's most important distributors in the wine segment, implemented an educational campaign about cork and a cork stopper collection campaign in its stores in New York. In the UK, Berry Bros. & Rudd, the country's oldest wine merchant became the first British retailer to market wines sealed with the revolutionary Helix stopper. In France, the Auchan group recently launched a campaign to collect and recycle cork stoppers, involving 641 supermarkets. The group also announced that over the medium term, all wines distributed under the Auchan brand will use cork stoppers.
"Cork producers are changing their practices to protect the environment" states Fortune magazine, "Amorim, one of the main cork producers in the world, obtained FSC certification in 2005, guaranteeing the traceability of cork and ensuring that the raw material comes from a sustainably managed forest. At the factory, no cork is wasted. Cork that is not used to make corks (…) is converted into biomass, capable of meeting 70% of the company's energy needs." That is how Fortune magazine describes Portugal's role in leading sustainability in the wine industry, which is essential to respond to the impact of climate change. Corticeira Amorim, as the world's largest producer and supplier of cork stoppers, has a decisive role to play. The adoption of good practices at all levels of the production chain and the commitment to the circular economy are just two examples of how the company assumes this leadership.
The challenge presented to the team of professionals of Amorim Cork South Africa, in early September, consisted of recorking a set of rare wines from Tabernacle - South Africa's most iconic wine producer. The delicate recorking operation – which enabled the wines to gain greater longevity and higher value after receiving the new cork stoppers from Amorim - was intended to prepare the wines for a major event, the exclusive Cape Fine & Rare Wine Auction, held on 18 and 19 October at the Rupert Museum in Stellenbosch.
It is no secret that cork stoppers are synonymous with quality. A new independent study published in the United States proves consumers' preference for cork stoppers. In France, a study by Nielsen confirmed the superior performance of wines sealed with cork. Now, a new independent study published in the International Journal of Hospitality Management, in the United States, confirms consumers' preference for cork. This was a blind tasting survey, involving 310 participants, to compare two wines. In fact, the same wine was used, but sealed with different closures. It has been proven that consumers have given a score of 10 to 13 points higher in terms of appearance, taste, aroma and overall quality to a wine that they considered to be sealed with a cork stopper (despite being exactly the same wine!).
Corticeira Amorim participated in the annual meeting of the World Business Council for Sustainable Development (WBCSD) in Lisbon, in October 2019 where more than 500 executives and sustainability professionals underlined the urgent need to move from objectives to action, in order to achieve sustainable development. In recent years, the group has made important investments in research, development and innovation. Cork from Amorim is used in the stoppers of the world's finest wines, on a wide array of different day-to-day objects, sports articles, oil absorbents and organic solvents, leading international construction projects, and state-of-the-art road and rail projects, in the fields of architecture and design and even in spacecraft.
The plantation, an initiative organized in association with Quercus, under the Common Forest programme, will once again focus on the Alentejo region, one of the areas of the country that has the biggest area of cork oak forests.
Portugal's national tree since 2011, the cork oak tree (Quercus suber) is an autochthonous forest species that is distributed throughout the Western Mediterranean basin, constituting a unique forest ecosystem, that is extremely rich in terms of biodiversity. Cork forests play an important role in soil conservation, in the regularization of the hydrological cycle and in water quality, in the production of oxygen and the consequent carbon sequestration, and storage of carbon in the atmosphere. Carbon retention also extends to cork products and is further enhanced through their recycling.
With this initiative, since 2011 Corticeira Amorim's volunteers have contributed to the planting of 22,500 autochthonous trees in Portugal, in particular cork oak trees.
The natural cork stopper is synonymous with quality
WBCSD annual meeting urges to action. Corticeira Amorim presented its challenges and commitments.
[ ← ] These unique cork oak forests, filled with exceptionally resistant trees, are living ambassadors of sustainability.
In 2019, there were clear effects of the sharp slowdown in international trade, after the deceleration in 2018. The impact of certain protectionist measures and, above all, the uncertainty caused by the trade dispute between the United States and China, to name just two intervening parties, constrained business investment and economic growth. The prevailing economic sentiment was of uncertainty, but the economic cycle nonetheless revealed signs of maturation. In 2019 Business Investment also underperformed, reflecting the slower pace of Global Aggregate Demand and lesser political willingness to contemplate expansionary fiscal policies. The World Economy grew by about 2.9% in 2019, the slowest pace since the 2008 financial crisis. Advanced Economies grew by 1.7% while Emerging Economies grew by 3.7%. Global financial conditions gradually revealed a more accommodating stance.
The Eurozone recorded moderate expansion, of around 1.2%, reflecting lower industrial activity and uncertainty in relation to investment. Lower External Demand for the industrial sector, structural challenges posed to the car industry and lack of definition in relation to certain technological segments were clearly noticeable. The Services sector proved to be resilient and enjoyed growth due to higher private consumption. EU institutions elected new leadership after the May elections. The ECB once again failed to meet its price stability target, and inflation was 1.2%. For the third consecutive year, Brexit dominated the UK's economic, social and political context. Political developments led to the negotiation of an exit agreement with the European Union and the definition of 31 January 2020 as the formal separation date. The UK economy grew by around 1.3%. Sweden, a highly open economy, reflected the less favourable international environment and the uncertainty caused by trade disputes. Sweden's Central Bank chose to start the process of normalising monetary policy in a decision that distinguished it from other countries. The Swedish economy grew by 0.9% in 2019.
The United States grew by 2.3%, lower than the 2.9% growth recorded in 2018, and the smallest increase in the last three years, reflecting the lower contribution of tax cuts implemented when the current Administration took office, the effects of the trade dispute with China, which affected business investment and industrial production, and the general effects of the global economic slowdown. Nonetheless, the world's largest economy continued to create jobs, and unemployment fell to 3.5%, the lowest rate of the past 50 years. Private Consumption, which represents about 70% of North American economic activity, recorded growth. Inflation fell marginally below the 2.0% target. Japan grew by 1.0% in 2019, reflecting the better performance of private consumption and robust investment throughout the year. The increase in the rate of consumption tax, introduced in October, dampened economic activity, and led the Government to implement compensatory measures in December. Australia, recorded 1.7% growth, lower
than the level in 2018, and perhaps, reflecting the evolution of the Chinese economy, as well as the drought and forest fires that devastated the country in late 2019.
Emerging and Developing Economies recorded lower growth in 2019. China continued the trend of structural slowdown, already observed since 2017: it grew by a rate of 6.1% after 6.6% growth in 2018. The year was dominated by the trade dispute with the United States, with mutual imposition of tariffs on trade, and the management of the dispute over Huawei. The Chinese authorities implemented several measures to mitigate the economic impact, that was more pronounced for China, given the pattern of trade between both countries. The agreement on a Phase One trade deal between the world's two biggest economies provided a certain amount of relief. Among Emerging Economies, India recorded the most noticeable economic slowdown, due to the lower performance of Domestic Demand, affected by instability in the credit market. The Indian economy grew by 4.8%, well below the forecast of 7.5% made 12 months ago. Latin America experienced marked social contestation in 2019. This highlighted the impact of the fall in the international price of commodities. The region as a whole grew by about 1.0%. Mexico stagnated in 2019, while it is estimated that Brazil recorded 1.2% growth. Argentina, which is grappling with a worsening economic crisis and non-performance of its Debt service, observed changes to its political leadership and economic activity contracted by 3.1%. South Africa, affected by electricity cuts, is expected to have recorded 0.4% growth in economic activity, half of the level recorded in 2018. Like other Eastern European countries, Russia recorded more moderate expansion in 2019; and is estimated to have grown 1.1% vs. 2.3% growth in 2019, with lower Private Consumption and Exports generally affected by the fall in oil prices and the stoppage of the oil pipeline.
In terms of monetary policy, 2019 saw a reversal of the strategy observed in 2018. Monetary conditions gradually became even more expansionist. The policy normalisation process was reversed by the FED in July and by the ECB in September. The inversion of the US Treasury yield curve, a phenomenon that has not been observed since 2007, became visible in March, and left an indelible mark on this context. The People's Bank of China guided its performance by a set of measures that had less visibility, but aimed to mitigate the negative effects of global uncertainty. Most Central Banks maintained or lowered their interest rates. The IMF estimates that without this additional monetary stimulus, world growth would have been about 0.5% lower. Despite the positive evolution of the world economy, the decrease in unemployment and the moderate rise in wages, inflation remained at low levels. There was lower demand for metals and energy factors.
In 2019, Portugal recorded the sixth consecutive year of economic growth after emerging from the economic crisis at the beginning of the decade, that led to an external bailout request. It is estimated that the Portuguese economy grew by 2.0% in 2019, maintaining the slowdown that has been observed since 2017. The growth was supported by the performance of Private Consumption and Investment. The Industry sector recorded a slowdown, which was compensated by the performance of the Services sector, which is relatively immune to the international context, and by Construction. Exports and Imports increased by less than in the previous year, but with a comparative disadvantage for Exports, due to the evolution of Domestic Demand. The Trade Balance deteriorated, with a negative contribution to overall performance. Financing Capacity decreased compared to previous benchmarks, but nonetheless maintained a positive level. As in recent years, fiscal consolidation was the focus of Public Accounts. The trend towards economic improvement has continued and 2019 ended with a primary surplus of about 3.0% of GDP and a global deficit of about 0.3% of GDP. Public investment fell below the level initially forecast. Public debt, in turn, rose to €249.7 billion, an increase of 0.6% over 2018, just below 120% of GDP. Unemployment fell in 2019 to 6.5% (7.0% in 2018). Despite the fall in unemployment and the positive evolution of the Working Population and Employment levels, the Labour Market showed signs of less dynamism from August onwards. Inflation continued its downward trend in 2019, and was estimated to be 0.3% for the year; this variation represents a particularly sharp deceleration in prices vis-à-vis 2018, when inflation was 1.2%, and maintains a negative differential vis-à-vis the Euro Zone average (0.9%).
Cyclically extracted from the cork oak tree, without ever felling it, cork has a combined set of characteristics that no technology has yet been able to match. The most quintessentially Portuguese material, it is also one of the world's most versatile and sustainable raw materials.
The companies that make up the Corticeira Amorim universe are structured into Business Units (BUs). This report sets out their most important activities and developments in 2019.
The Raw Materials Business Unit recorded a current EBITDA of €18.1 million in 2019, a decrease of 40.6% in comparison with the record figure posted in 2018.
The BU's projection for 2019 was to maintain the overall level of profitability of 2018, but with a significant increase in turnover, thereby offsetting the expected loss of profitability resulting from the consumption of raw materials purchased at higher prices. The forecast increase in turnover was expected to result from organic growth and from moving in-house production that had previously been outsourced.
Contrary to expectations, however, turnover grew by only 9.8%. This was due to a reduction in orders from downstream units either because of a reduction in stocks, increased efficiency in raw material consumption or a real reduction in their markets.
The drop in profitability was mainly due to the fact that more corks with a lower quality/price ratio were consumed in 2019 in comparison with 2018. The BU continued to supply the other units in the value chain throughout the year, but, despite increasing prices, it partially absorbed the short-term impact of market price fluctuations.
By industrial unit, the following factors stand out:
• the profitability of the preparation units fell due to their consuming a mix of higher-priced corks (including 2018 corks) without those prices being fully reflected in the prices of their sales to the Group's value chain. In addition, the smaller-than-expected increase in activity made it impossible to recover the difference in value. In 2019, however, foundations were laid for a more robust future. This was achieved by reformulating the mechanism for choosing how to prepare and install the operational model for the automated cork-selection line. Although this was still in an experimental phase in 2019, the BU was able to study the best way of working and the impact the line could have on operations, from the storage yard to cork preparation;
In volume terms, the purchasing campaign for top quality cork (amadia) in Portugal and Spain fell below expectations. This was because the period for extracting the cork was limited by the weather and by extraction difficulties. Although the volume of cork acquired was below the amount forecast, operations in 2020 are not in question, given that sufficient quantities were acquired to ensure uninterrupted supplies to the Group's other BUs at the same level as in 2019.
Purchasing prices for cork harvested in wooded areas fell in relation to 2018. The required volumes of cork for grinding were acquired in the secondary market, not only in the traditional markets in Portugal and Spain, but also by increasing purchases in alternative markets elsewhere. This made it possible to adjust prices to a stable level. In terms of operating efficiency, cost controls remained a priority for the BU. However, this goal proved difficult to maintain, as the structures in place at the beginning of the year were adapted for a level of activity that did not materialise. As a consequence, measures were implemented throughout the year to adjust structures to the level of activity experienced in 2019.
The amount of capital invested increased in relation to 2018, due mainly to the higher level of activity.
The Forestry Intervention Project continued in 2019 with the installation of 251 hectares of irrigated cork oak in the area of Herdade da Sale Nova in Alcácer do Sal. This is another initiative resulting from the new position adopted by Corticeira Amorim, which since 2018 has acquired parcels of land and developed them as agricultural units, either by renting them out to farmers or by managing them in-house as cork oak plantations.
In regard to Herdade da Baliza, Corticeira Amorim announced that, following the acquisition of 100% of the shares of the subsidiary company Cosabe in October 2019 and a subsequent legal action by a third party who invoked preference rights, a sentence in favour of the company was passed on February 21, 2020 in a court of first instance.
Although the sentence is subject to appeal, the amount invested is not at risk because not only is an unfavourable decision by the appeal court improbable, but also because, in that unlikely event, Corticeira Amorim would be reimbursed for the total amount it invested and could possibly also sue for the resulting losses and damages.
Corticeira Amorim will thus continue with its planned investments in Herdade da Baliza as an integral part of its Forestry Intervention Project.
In March 2019, the Group completed the installation of SAP software at its Portuguese and Spanish units. The full benefit of the migration, however, will be delivered only when the installation of SAP software is complete in all BUs.
Raw Materials Sales & EBITDA
Due to spring frosts and summer droughts in the world's three leading wine-producing countries - Italy, France and Spain - world wine production fell 10% in 2019. Winemakers produced 262.8 million hectolitres of wine compared with 294 million in 2018, according to data from 28 countries that represent 85% of world production. After the exceptionally high volume produced in 2018, production in 2019 returned to the average level for 2007-2016, excepting 2013.
In the European Union total wine production dropped 15% in comparison with 2018 to 156 million hectolitres. Among the three main wine-producing countries, production in Spain dropped the most, falling 24% to 34.3 million hectolitres. This was mainly due to adverse weather: a very cold and rainy spring followed by an extremely hot and dry summer. Italy, where production fell 15% to 46.6 million hectolitres, remained the largest wine producer in the world in volume terms. In France, the second largest producer, volumes also fell 15% to 41.9 million hectolitres.
While production in France, Italy and Spain, which together account for about 80% of the wine produced in the EU, fell below the level of 2018 and the average of the previous five years, other European countries, including Germany, Austria, Romania and Hungry, recorded production levels in line with or even greater than the annual average for the previous five years. Portugal, which produced 6.7 million hectolitres in 2019, was the only EU country to produce more wine than in 2018, recording an increase of 10%, 4% higher than its annual average for the previous five years.
Russia, which is making great efforts to increase its agricultural production, produced 6 million hectolitres of wine in 2019, an increase of 7% compared with 2018.
All the BU's health and safety at work indicators improved in 2019. This positive performance reflected the efforts made by its teams as well as the investments made in this area, which is of great importance for the sustainability of the BU's future growth.
The US, which is the world's fourth largest wine producer by volume, accounting for about 12% of production in the northern hemisphere, produced 23.6 million hectolitres in 2019, a 1% drop from 2018. It was the fourth consecutive year that the US recorded a high level of production.
Wine production in the southern hemisphere, where grape harvests begin in January, was also lower than in 2018. Argentina, the largest producer in this region and the fifth largest in the world, recorded a 10% drop in production to 13 million hectolitres, followed by Australia, which produced 12.5 million hectolitres, 3% less than in 2018. Production in Chile fell 7% in comparison with 2018 to 11.9 million hectolitres, but increased 8% compared with the annual average for the previous five years. Drought-hit South Africa was the only big producer whose 2019 production fell for the second consecutive year below its five-year annual average of 9.7 million hectolitres. Brazil, the world's 16th largest producer, produced 2.9 million hectolitres in 2019, 10% above its five-year average.
Wine consumption continued to fall or stagnate in traditional winedrinking countries, benefitting developing markets. This trend, which began in 2000, is characterised by an increasingly greater appreciation of wine outside the country in which it is produced.
Consumer demand for bio and sustainable wines remains buoyant, an on-going trend that was evident in 2019. Alternative packaging
also advanced significantly. Sparkling wine consumption continued to grow worldwide, benefitting from increased demand in new consumer markets. This is reflected in the fact that 21 of the world's 25 largest sparkling wine markets are expanding, while only seven of the 25 largest still wine markets continue to grow. Sparkling wine sales are expanding most strongly in China, Brazil and Canada.
Alcohol consumption continues to fall in the developed world. People are increasingly drawn to alcohol-free nights and the media constantly warn that moderate drinking can lead to excess consumption over the long term. These ideas continued to shape consumer behaviour in 2019. The trend is current among people aged below 35, who consume less alcohol than their older peers. The overall decline in alcohol consumption will mainly affect markets like the UK, the US, Germany and Australia. Consumers are consciously adopting healthier lifestyles by exercising more and being more careful about their diets. At the same time, alternative low-alcohol and alcoholfree drinks with a more interesting and inclusive presentation are emerging to compete with traditional alcoholic beverages.
Knowledge levels regarding the details of wine and where it comes from are also falling. But although consumers know less about wine, they have greater access to information, value new experiences and care more on their lifestyle. Knowledge, involvement and taste have traditionally been strongly correlated with a preference for wine. However, we are now seeing the emergence of consumer segments who also care about and purchase wine, but know relatively little about it; that is, they are consumers with limited knowledge and only moderate levels of involvement with wine. This group actively seeks opportunities for creating experiences involving wine. This behaviour among by both young and older consumers who focus on unique, valued experiences is forcing a change in the marketing strategies of the wine industry.
The impact of the growth of online commerce and social networks means that consumers are more likely to discover marketing content on social networks than from traditional search engines. The typical online consumer is younger, more willing to try new things, has a higher income and drinks more regularly than the average consumer. In addition, millennials are 56% more likely to discover marketing content on social media than through traditional search engines or by email. Many of the new developments we see in the wine trade are a result of changes in the purchasing habits of consumers - how they shop using different digital and physical platforms and the differences in the way they value products and experiences. This change has left producers and distributors struggling to adapt. To keep up, they first need to understand where money is being spent (on which channels) and how to take advantage of new purchasing trends to drive growth. The following trends deserve highlighting for the important challenges they pose to the wine sector:
a change in eating habits is driving a vegan revolution that has already had a considerable impact on economies and is transforming the global industry;
wine consumption motivated by health and well-being. Today's consumers know the origin and methods of wine production, a trend that works to a small degree in favour of organic wines as a symbol of superior quality;
the "infusion" of cannabis in wine has been gaining more and more followers, creating expectations of significant growth in the production and consumption of this product.
The wine market is complex, constantly changing and dependent on the evolution of consumer habits and the experiences they generate. The year of 2019 was another year of strong movement and consolidation in the wine industry. This required foresight and agility in adapting the production process, the production mix and the structure supporting the distribution network.
For the Cork Stoppers BU, 2019 was another year in which sales grew faster than average growth in wine consumption. But it was also characterised by a continuing sharp rise in raw material costs. The BU made significant strategic investments in strengthening its production capacity, modernising production processes and advancing its Digital Transformation programme (the installation of SAP and MES software).
Important projects for eradicating outstanding sensorial issues were launched by presenting customers with appropriate and enduring solutions for their products and markets.
It was also a year in which the sustainability benefits inherent in the BU's products gained increasing worldwide recognition, increasing the company's responsibility as a reference point in this area. Strengthening and promoting this comparative advantage will help attract more companies and partners to the cause.
The BU focused on ensuring that customer needs were met, on implementing strategic projects, many of which related to continuous improvement, and on the digital transformation process. Research and development activities focused on new processes for the industry that are to be implemented in 2020 and which relate to improving existing products and creating new ones. Significant developments in 2019 included:
concluding the "industrial digitalisation process" and beginning the process of making information available;
generating important savings through the energy efficiency programme, now in full operation, and thus contributing to the sustainability culture that characterises Corticeira Amorim, SGPS;
Sales grew 4.7% (an increase de €25 million), with more than 33 million units sold. The BU continued to focus on product mix and customer service to strengthen its presence in the leading wineproducing markets.
Except for France, which was badly affected by the 2017 grape harvest, there was a general increase in sales in traditional markets - Italy, Germany, Spain and Portugal - but new markets were responsible for improving the BU's competitive position worldwide: the US, Australia, the UK and South America. East European markets evolved positively, while China stagnated and new markets related to the spirits sector emerged.
Sales in the Still Wines Segment increased 1.6% in value, due to the poor 2017 harvest in France, which affected bottling in 2019, and a drop in sales for the Acquamark Stoppers group. Sales to the US, Italy, Australia and Chile showed the strongest growth, offsetting the sharp drop in sales to France and a slight fall in sales to Spain.
In a market experiencing a moderate reduction in wine consumption, the BU continued to achieve sustained growth in the still wines segment, especially for its high-end and NDtech service stoppers, continuing to sell to leading customers in the world wine market.
Sustained growth was supported by continuous product improvement and business process modernisation. The BU's reputation for reliability together with the quality of the service it offers contributed decisively to strengthening its position in world markets.
Sales of Natural Cork Stoppers stagnated in comparison with 2018 due to the contraction of the French market (because the 2017 harvest and its impact on bottling in 2019). These stoppers, which are crucial to the sustainability of the business, have evolved significantly in terms of sensory excellence, which has in turn strengthened their reputation as the best closure solution.
Sales of Neutrocork Stoppers grew 21.5%, the largest sales increase in the still wines segment. They stand out for their qualitative and sensorial consistency, making them an excellent solution for low- and medium-priced wines. Their cost-quality relationship results in a significant level of market penetration. Sales increased across world markets, particularly in the US, Italy, France, Spain and Portugal, the most important markets for this product. Their comparative advantages are today well recognised by customers, making them one of the BU's leading products.
The Agglomerate Stoppers Segment continued trading up with a view to improving its mix of products and customers. Sales increased 10.1%, with strong growth in Ukraine, Argentina, France and Portugal. Improvements in the production process and the selection of raw materials guaranteed a high level of sensorial and mechanical quality to leverage the growth of this product.
Sales of Twin Top Stoppers fell slightly in the US. This product has been reinvented, creating solutions adapted to markets' needs. Given its intrinsic quality, sales are expected to expand in 2020.
The US and UK markets were the main drivers of a 12.7% sales increase in the Spirits Segment. The emergence of new markets and accentuated growth in emerging markets were of particular note. The BU operates in 74 countries, six more than in 2018, and has significant growth potential.
Spirits is a stimulating segment, where continual innovation is crucial to the longevity of the business. Consumer appetite for premium brands remains strong and, according to the industry, they are performing before better than ever before in developed markets. Sales of the 'Reserve' portfolio increased 11% in 2018/2019, helping to sustain the sector's growth and profitability.
On average, the sparkling wine market grew 3.5% more than the traditional still wine market. The increase in the consumption of sparkling wine was driven by the habits of younger consumers and the popularity of rosés and Proseccos. Sparkling wine is all about fun and celebration: the simple sound of a cork popping can spark exciting emotions. Sales by the BU's Sparkling Wine Segment increased 6.5% in value terms and 4.5% in volume (a favourable change in the mix had a big impact on value).
Italy, Germany, France, Spain and Russia made important contributions to this growth. The BU maintains an indisputable presence in the world market based on its service quality, product availability and the outstanding quality of its products.
The gross margin increased in comparison with 2018 in spite of higher raw material costs. The sales volume effect and the positive evolution of exchange rates were fundamental to this growth. In operational terms, the "more efficient use of cork programme", the positive performance of NDtech service stoppers and the decelerating increase in raw material cork costs in the second half made contributed significantly to the increase in the gross margin.
Operating costs increased 6.2% in comparison with 2018. Due to a significant increase in activity, the support structure for industrial operations and business functions was adjusted by allocating more resources to the Digital Transformation process under way at the BU. The biggest increases were in staff costs, both in Portugal and across the distribution network, as well as in variable costs such as commissions, specialised work, transport and travel.
The operating efficiency programme, which the BU considers strategic, helped control production costs and resulted in a slight improvement in productivity.
The EBITDA-sales ratio rose from 17.4% to 18.1% in 2019 and EBITDA increased to €101 million.
Sales by the Floor and Wall Coverings BU totalled €108.6 million in 2019, a reduction of 3.2% in comparison with 2018. Sales of manufactured products dropped the most, largely due to a delay in ramping up to industrial scale the production of the new range of Subertech - "Wise by Amorim" products.
The strategy of changing the product portfolio mainly affected the North American market. This is because the portfolio for that market is based on traditional cork solutions, meaning that its entire strategy is oriented towards new waterproof products. The European market remained stable in terms of sales, with positive leverage from Denmark and the impact of the acquisition of a joint venture in Finland. In July 2019, the BU entered into an agreement to acquire 51% of Korkkitrio Oy, an exclusive distributor of Wicanders products based in Tamper, Finland. The company has annual sales of €6 million. The Russian market showed signs of recovery in terms of sales and profitability after consolidating a business model supported by a local structure. Italy stood out among new markets, developing a positive sales trend and investing strongly in promotional communication tools at the point of sale.
In regard to product development and marketing activities, ecoefficiency and sustainability remain the BU's leading competitive advantages. In terms of marketing, the company began in a structured fashion to change the way it presents its products at the point of sale, privileging the means of communication referred to above, using Shop-in-Shop concepts and digital tools. The year of 2019 was also marked by a strong focus on international promotional events, of which the Domotex and Bau trade fairs and an international event for architects were among the highlights. In regard to the BU's development plan, important investment were made in upgrading the Hydrocork line as part of a process of continuous improvement and in leveraging innovative composite solutions based on the new generation of "Wise by Amorim" products (100% sustainable solutions) for both floating and glued applications. These were particularly aimed at the contract segment. The development of the "à la carte" concept for cork flooring will enable the BU to explore new market opportunities, given the flexibility and variety the concept offers, both in terms of dimensions and visuals. Such innovations arise from the BU's deep knowledge of cork, its technological processes and its response to the need to revitalise its range of 100% cork-based products.
An industrial revamping project was implemented in 2019 involving a redesign of processes and flows and a new approach to industrial planning aimed at optimising scale. This created greater synergies, enabling the BU to respond with increased flexibility and speed. It also helped free up capacity and create the potential for a significant reduction in operating costs.
Implementing the first phase of the BU's CRM project in its main markets helped improve sales, providing guidance for promotional activities and developing new business opportunities. The increased market knowledge gained by monitoring point-of-sale information in real time will help make sales operations more efficient and improve customer profitability.
In terms of the distribution chain, the stock management centralisation programme is based on an A, B, C approach that focuses on product supply/portfolios. It is aimed at improving service levels and optimising conditions for production planning. It will also enable slow-selling stocks to be moved upstream, thus reducing maintenance and handling costs for stocks held on downstream distribution platforms.
Sales by the Composite Cork BU totalled €104.5 million, an increase of 2.3% in comparison with 2018 that benefitted from the positive effect of the appreciation of the US dollar and, above all, the unavoidable impact on sales prices of the increased cost of raw material cork.
Current EBITDA rose to €12.4 million, an increase of 20.1%. The EBITDA-sales ratio was 11.9% (2018: 10.1%).
In terms of segments, sales performance in comparison with the previous year was, as usual, mixed. The Sport Surfaces, Flooring Manufacturers and Home Improvement Retail segments recorded expressive growth. The worst performances were in the industrial cluster, including quite a significant drop in sales in the Cork and Cork-rubber Manufacturers segment.
In geographical terms, sales in Europe again grew notably, unlike sales in Asia, where the BU was unable to avoid a drop in sales compared with 2018. Sales in North America increased, thanks to the positive effect of the exchange rate, without which turnover would have stagnated.
Most sales expansion projects implemented in 2019 produced positive results, although in some cases they fell below expectations. Overall, however, the balance fell below that of 2018. This revealed a cyclical difficulty, to which was added the cost of taking advantage of opportunities that arose in the areas of geographical expansion, market intelligence and segment replication. In contrast, projects for launching new products produced important benefits.
The main profitability indicators relating to raw material and industrial costs improved in relation to 2018. Decisive contributions to this performance included:
The amount of capital invested increased substantially in 2019, partly due to some inventory expansion (especially of cork), but mainly because of the large amount of fixed-asset investment aimed at equipping the BU with the necessary conditions for achieving its long- and medium-term growth targets.
The 2019 agenda was again mainly focused on the implementation of planned initiatives considered necessary for meeting the strategic challenge of the BU's profitability. Highlights included:
as the necessary interventions in terms of networks and upstream industrial equipment;
In terms of the market, some highlights stand out among the BU's global activities in 2019 in comparison with the previous year. As usual, the analysis focuses on the segment/geography pairing in line with the BU's own organisational logic.
Thus, segments belonging to the industrial cluster again accounted for the biggest share of turnover, but, at the same time, also recorded the worst market performances in terms of sales, which fell 2.7%, following two consecutive years of growth. The industrial cluster represented 41% of the BU's consolidated sales in 2019.
The following segments registered the biggest increases in sales value: Footwear (+14%), Panels and Composites (+20%) and Aerospace (+20%). While the footwear segment repeated its positive result of 2018, the others recovered from the loses (Panels and Composites) or the stagnation (Aerospace) recorded in the previous year.
On the downside for the industrial cluster, sales dropped in the flowing segments: Cork & Cork-rubber Manufacturers (-19%), Office Products (-13%) and Automotive, Auto Parts & Other Vehicles (-13%). Among the segments that registered the largest deceases in sales in 2019, only Automotive & Auto Parts had also recorded a decline in 2018.
Multi-Purpose Seals & Gaskets remains the biggest segment in the industrial cluster. Sales in this segment fell 5.8% in 2019, having increased 12% in 2018.
Retail remained the second largest cluster in terms of sales, representing 34% of turnover. Overall, sales in this cluster increased 1.9% in comparison with 2018.
The overall performance of this cluster was affected by sales drops in some segments, notably, in order of the value by which their sales decreased: Office Products (-13%), Home & Design Products (-7%) and Broadline Retail (-15%). Except for Office Products, which recorded an increase in sales in 2018, all the other segments also reported a decrease in sales in 2018.
On the positive side, the following segments recorded the most expressive sales increases in value terms: Home Improvement Retail (+23%), Distributors of Flooring & Related Products (+2%) and Construction Specialty Retail (+3%).
Distributors of Flooring & Related Products remained the largest segment in the retail cluster. It registered another slight increase of about 2% in sales, in line with previous years.
Construction, the third and final cluster, again reported significant sales growth. It represented 24% of turnover, up from 21% in 2018, having benefited from an 18.5% increase in sales. All segments in the cluster,
except for Heavy Construction, reported increased sales in value terms, as they did in 2018. Highlights include: Sports Surfaces (+53%), Resilient & Engineered Flooring Manufacturers (+20%) and Building Materials & Fixtures (+10%).
Overall, 2019 was characterised by a great effort to preserve value. This produced very positive results considering the external context of upstream and downstream markets.
Another striking feature of 2019 was the exceptionally large amount invested in fixed assets. This totalled €11.6 million, an historic high for the BU that represented an increase of €5 million on the previous year. Highlights included:
The Insulation Cork BU recorded sales of €14.2 million in 2019, reflecting an 18.2% increase in sales volume across its different markets when compared with 2018. Excluding sales to other BUs in the Group, growth was 14.1%. A need to adjust to the new reality of the market for raw material cork that had made itself felt in previous years determined that the BU continued to increase prices.
EBITDA decreased in comparison with 2018 (€0.2 million in 2019 against €0.6 million in 2018) due to the higher cost of the BU's raw material consumption, as it could not be totally offset by sales price increases and the operational improvements made in recent years.
In 2019, the BU developed a set of initiatives aimed at leveraging its business activities and consolidating its leadership in supplying expanded cork conglomerate products and solutions, as well as at increasing recognition and appreciation of their real value. The main initiatives were:
and companies, mostly from the Gulf region and connected to the civil construction sector, who are looking for insulation solutions using natural and sustainable products;
In terms of operational efficiency, industrial and logistical improvements continued to be made, favouring more rigorous cost controls as well as investments to enhance the continuous improvement of industrial units.
Insulation Cork
Since 2013, Corticeira Amorim has implemented the Forestry Intervention Project, which aims to ensure the maintenance, continuation and enhancement of cork oak forests and thereby ensure the continuing production of high-quality cork. Under the motto "Care for the present, build for the future", the project has been seeking solutions to preserve, improve and make existing areas of cork forest more resilient, while also introducing new silviculture models, technologies and selected plant material that will make it possible to plant new cork forests that are more efficient and resilient to forecast climate scenarios.
In its 2018 report on Combating Desertification in the EU: a growing threat that requires further action, the European Court of Auditors stated that:
"Desertification in the EU – a growing threat driven by climate change and human activity
The region of southern Portugal and Spain, identified in the aforementioned study as one of the zones with the highest risk of desertification, coincides with the main area of cork oak forest, which makes this native species a fundamental instrument for combating desertification and environmental and social issues. In a joint report produced in 2008 by the WWF and the Baeta Neves Centre for Applied Ecology of the Instituto Superior de Agronomia, entitled "The cork oak tree - a barrier against desertification", the tree's importance was underlined: "The cork oak tree is a fundamental instrument in the fight against desertification in Portugal, and plays a decisive role in preventing soil degradation. The sustainable management of cork oak forests, based on an economically efficient model, will benefit the conservation of biodiversity and the well-being of local populations, while warding against the effects of climate change."
Increasing awareness of the urgency to intervene, associated with the knowledge generated during the first phase of the Forestry Intervention Project, led Corticeira Amorim to invest directly in two forest projects involving cork oak trees: in the Herdade da Baliza and the Herdade da Venda Nova. When their installation is complete, these two projects will occupy a combined area of 1451 hectares of cork oak trees with a drip irrigation system. Drip irrigation significantly improves the possibilities of success of the plantation and at the same time makes it possible to obtain greater initial growth of the trees, thereby reducing the time when the first virgin cork may be harvested from the current 25 years to about 10 years. In 2019, the 251 hectares of the plantation in the Herdade da Venda Nova, in Alcácer do Sal, were fully installed.
Throughout 2019, Corticeira Amorim continued to promote these new methods of installing cork oak trees to forest producers, either by setting an example, through the installation of the aforementioned plantations, or by providing technical advice and technology transfer. The company thereby aimed to mobilize producers to achieve the target of 50,000 new hectares of cork oak trees with a density higher than the current average, within approximately 10 years. It is expected that an increase of 7% in the area of cork oak forest will correspond to an increase of 35% in production of raw material, responding to the supply needs of the expanding cork sector.
The focus on installing new plantations is extremely important to effectively combat climate change, desertification and foster the sustainability and longevity of the business. At the same time, increasing the attractiveness of this species for future plantations depends on the continuation of research projects currently underway, that carefully select the cork oak trees to be planted, by looking for varieties that offer better behaviour in dry seasons. Success of this project also depends on the combat against pests and diseases, and ensuring compatibility with other agricultural activities, as a way to increase forestry revenues.
Through the Forestry Intervention Project, Corticeira Amorim is committed to maximising so-called "positive externalities" of the ecosystem of the cork oak forest. In a scenario of climate change, it is crucial that the cork oak tree is highlighted as a privileged species, which is best placed to respond to future challenges. As a native Portuguese tree species, the cork oak tree is perfectly adapted to local climate conditions and arid soils, lives about 200 years, offers a very positive set of externalities, and has a unique ability to resist forest fires.
Developed and patented by Amorim, NDtech is an individualized quality control screening technology for natural cork stoppers that delivers the world's first natural cork with a non-detectable TCA performance*.
*A non-detectable TCA guarantee means that if any TCA remains in a cork it is below the detection threshold of 0.5 nanograms/litre.
The genesis of Corticeira Amorim is deeply linked to the cork industry, which is its core business. The Group has emerged today as an outstanding leader in the cork sector worldwide, offering a wide range of cork products for a diverse set of business sectors.
In keeping with Corticeira Amorim's upward path of growth and expansion, and, in particular, its proactive business strategy of continuous investment in research, development and innovation (RD&I), each business unit has developed its own R&D skills, in parallel with Amorim Cork Research, the hub for all the group's R&D skills.
At the R&D level, the team continued to focus on eradicating TCA/organoleptic defects from discs and cork stoppers, having implemented the industrial component of the CORKNOVA project. The project was launched in 2014 in partnership with Lisbon's Universidade Nova with the aim of developing curative processes for eliminating the compounds responsible for sensory abnormalities in cork. Given the excellent results obtained, the concept was expanded and extended during 2019, with four pieces of equipment currently in operation.
The BU also continued to focus on two automation projects, which are innovations in the cork sector and are aimed at achieving significant cost reductions and improvements in the use of cork:
Major advances were made in 2019 in projects related to decontaminating cork products of TCA and other volatile compounds with unpleasant aromas that might eventually affect wines. The implementation of eradication projects for natural and granulated cork stoppers continued at a marked pace, with industrial implementation following at a similar speed. The objective is to install the necessary industrial capacity to treat all the BU's production.
In close cooperation with the forestry area, the new disc decontamination systems implemented on the ground were validated during 2019 at a sensory, physical-mechanical and oenological level. The results of these validations were highly successful.
In regard to NDtech technology, continuous improvement projects were implemented during 2019 with a view to optimising the operation, including mechanical and chromatographic improvements. Based on the results generated by the equipment, algorithms were developed that will enable the system to control itself in real time. The use of data science in NDtech is extremely important because of the quality of the results obtained. This was also the first example of the use of Industry 4.0 tools by the BU. NDtech Champagne was also launched and consolidated in 2019, with the necessary adjustments being made to ensure the normal functioning of the equipment.
Wine/cork interaction has become a topic of increasing importance as the different evolution of the same bottled wine using different stoppers has proven. Many comparisons between stoppers took place during 2019 with the aim of identifying which closure was best suited to different wines, taking into account, among other issues, their fragility, the oenological practices used to make them and the length of their ageing in the bottle.
A number of projects were launched in 2019 to study the intrinsic characteristics of natural cork stoppers with a view to enhancing their performance in regard to the evolution of wines.
A scientific study related to cork stoppers, which was promoted by the company among universities, resulted in the launch in 2019 of a PhD funded by BU and the submission of several scientific papers on the results obtained from these collaborative projects with the company.
An intensive technical training programme, held in collaboration with the technical and R&D department, took place in 2019 with a view to training the largest possible number of company employees both in Portugal and abroad. The subjects related to technical areas, product quality and advocacy, good bottling practices and the type of wine evolution that different cork stoppers are associated with, among other areas. A significant number of training sessions were held in which 158 employees participated.
Projects were carried out on the research and validation of glues, additives and bio surface treatments. Several products were tested, of which three were validated on a semi-industrial scale. Bottling in a customer's wine cellars using stoppers produced with these new products showed a high level of performance compared to reference stoppers.
Another important project was the validation of new filling processes, resulting in the replacement of current systems with cleaner and safer ones. This reorganization made it possible to optimise the number of referrals.
More efficient machines enabled the production process stage known as "washing" to be carried out with a reduction in the consumption of chemicals and water.
Automation of the production process for natural cork stoppers is already a reality at the BU, a development that was significantly advanced in 2019. Production processes have undergone a profound revolution, resulting in significant improvements in productivity and quality.
Capsulated stoppers, produced for Amorim Top Series, have also benefitted from this industrial revolution. A third version of a blasting machine is being studied that will enable stoppers of different calibres to be filled using automatic adjustment. Continuing its mission of presenting customers with innovative packaging solutions that offer a sensory experience, Amorim Top Series launched a series of innovations in 2019:
In 2019, the Floor & Wall Coverings BU continued to invest in sustainable products, which stand out because of the added value they contribute, in both technical and environmental terms.
The highlight of the year was the launch of the "WISE by Amorim" range (developed in 2018), a high performance flooring solution, which results from a major R&D investment, and has excellent sustainability credentials. This PVC-free waterproof flooring solution, made from cork and recycled materials, is suitable for all types of spaces, and has a negative carbon footprint. The fact that the entire range incorporates cork, through a multilayer structure, means that it offers cork's well-known benefits: natural thermal and acoustic insulation; impact resistance; greater walking comfort and improved indoor air quality. The product's unique credentials have been recognized at an international level, including the Innovation Award for Architecture + Construction at BAU - the prestigious international building materials trade fair, in Germany. In 2019, the "WISE by Amorim" range also received a Blue Angel certification - a German seal of quality for PVC-free products that observe the highest standards of design of sustainable products.
In terms of new R&D projects in 2019, the main priority was to refresh the glued flooring solution, CORK PURE, that has a negative carbon footprint. The distinguishing characteristic of the Cork Pure Signature collection is that personalised patterns can be created, with over 17,000 possible combinations. Customers can design different patterns, choosing from 17 natural cork visuals, and combine them with the 31 available colours, with different finishes, dimensions and thicknesses. The main goal is to match the style of each space or project, endowing a unique and contemporary look to cork floors, together with all of cork's inherent benefits.
Another new product line is Stone Concept that enhances stone visuals, with 12 design options. The three available ranges - Amorim WISE Stone Pure, Amorim WISE Stone Inspire 700 and Wicanders Stone Essence - are based on digital printing technology, and offer different installation systems, thicknesses and finishes, thereby able to adapt to each project's needs, combining advanced technology with the exclusive natural properties of cork. The main goal was to develop new visuals by digitally printing on agglomerated cork, while keeping the texture and appearance of the cork visible, offered in new dimensions with a more resistant surface finish, which still has a natural look.
Another priority in the development of new products was to upgrade the Resist + collection, which now comprises non-PVC visuals. The project aimed to ensure that this technical solution, which is perceived to be the best in the market, as an alternative to high-density fibre LVT flooring, is now also recognised to be more environmentally friendly, without any degradation in terms of technical performance. The main challenges were to maintain the fire resistance class and the mechanical resistance of the surface.
In 2019, the Composite Cork BU focused on energising the circular economy project, developing new technologies for processing composite cork and new applications. These strategic priorities were carried over from 2018.
The first two areas led to the prototyping and development of a number of new composite materials. These focused on the intrinsic characteristics of cork, but also involved the use of other natural and synthetic materials, both "prime" materials and materials derived from other industrial by-products.
In this way, the BU associated itself in an indelible way with new trends in sustainability, industrial synergies and the circular economy.
Building on the possibilities of combining cork with other materials is part of a development effort that will enable the BU to discover new applications, to enhance the performance of the materials currently used in its applications and to respond to the growing market demand to replace plastic with other materials.
In this area, new technologies for granulation, composition and extrusion, mixing and thermoforming have gained special importance. Although normal in other industrial sectors, these have been little explored in the cork industry.
Of particular note are the development and patenting efforts put into launching Corkeen, a new construction system for playgrounds, leisure and recreational areas.
The following projects stand out among the different clusters in which the BU operates:
Construction:
DIY:
• SprayCork Project – the beginning a collaborative project with the University of Porto to develop granulated cork spraying and coating systems;
• launch of new composite materials for injection and moulding processes in the manufacture of soles and inter-soles;
These projects form part of the BU's efforts to fulfil its mission to create greater value from cork and to expand its portfolio of materials and applications.
Project lifecycle management, composite materials based on cork and new technologies will remain the BU's priorities in the coming years, together with the search for new applications that are both profitable and sustainable.
In 2019, the Insulation Cork BU continued the development cycles relating to R&D projects in consortium that it began in 2018. These projects form part of the BU's development and innovation strategy that focuses on creating new applications for adding value to raw material cork.
Another highlight of 2019 was the consolidation of the Evaporcork project developed in partnership with IteCons to study the passive evaporative cooling of facades. The project is based on an innovative construction solution that uses cork in higher value added solutions. The main aims are:
Amorim Cork Ventures (ACV) has accompanied the rising interest of entrepreneurs and startups to develop cork-based products, through business proposals received via the outlets that it has made available for this purpose. Using this vehicle, which can easily be accessed by any entrepreneur / company, ACV reduces initial barriers and encourages the creation of new businesses that will generate added value for cork, with a positive impact on the circular economy.
In 2019, AVC's activity primarily focused on creating conditions that are suitable for the development of startups that will be included within its investment portfolio, helping them to prosper. Throughout 2019, ACV continued to receive several proposals which were carefully analysed. All cases with business potential, but which did not satisfy the fundamental requirements for ACV to enter as an investor, were channelled to other Group companies, in order to receive other forms of support.
Since its foundation, ACV has received 350 applications, of which 20 have received support, and 11 are still active. 8 patent and utility model applications have been submitted and 3 startups remain in ACV's investment portfolio. In 2019, these startups had total sales turnover of €1.4 million, 75% outside Portugal, and contributed to the creation of 22 jobs (10 direct and 12 indirect jobs).
The footwear brand ASPORTUGUESAS (launched by the startup, Ecochic Portuguesas), recorded a significant increase in business activity in 2019, fuelled by important growth in its main markets and penetration of new markets.
The company's positioning in these markets and sales growth across all continents, was boosted by the presence in several trade fairs, in particular CIFF (Copenhagen), FN PLATFORM (California), MICAM (Milan), Atlanta Shoe Market (USA), Moda Footwear (Birmingham), Toronto Shoe Show (Canada), Targy Mody Poznan (Poland), Gallery Shoes Dusseldorf (Germany), Panorama and FFANY (New York) and Panorama Berlin (Germany).
2019 was also marked by the launch of the Autumn / Winter collection, inspired by nature, and the "Say no to plastic" slippers collection, as well as by reinforcing the eco-friendly positioning of the brand, ASPORTUGUESAS.
GRÕWANCORK initially focused on the production of corkbased insulated chassis for equipment used by the commercial refrigeration market. In 2019 it launched solutions for the construction segment, that benefit from the technical and natural properties of the main raw material used - expanded agglomerated cork. In 2019, the company launched new sandwich panels for thermal and acoustic insulation (simple or composite) in the CONCRETA trade fair, held in Exponor. These panels may be customised with various types of finish, applied in the coverings of interior walls and partition walls.
For the refrigeration sector, which remains the company's core business, partnerships were established in 2019 to further its internationalisation process, which are expected to deliver results in the near future. In addition to refrigeration and construction, GRÕWANCORK is committed to diversifying its portfolio in other areas that at present are in the R&D stage.
The SUGO CORK RUGS brand (owned by the TD Cork company) is a pioneer in the production of cork-based carpets. It has been investing in new designs of its products and enjoyed increasing interest in the markets where it operates, above all in Europe, which led to a significant increase in business activity in 2019.
In 2019, the company's presence in the Maison&Objet Paris trade fairs (January and September editions), Portugal Home Week and Interior Lifestyle Living Tokyo, helped reinforce the SUGO CORK RUGS brand's positioning in national and international markets. The company's presence in leading projects and selection by important interior decoration brands, boosted the dissemination of its products, which offer innovative designs adapted to market demands.
SUGO CORK RUGS has several projects under development in order to diversify its portfolio, which are expected to create the basis for future growth.
Sustainability and innovation are intrinsic pillars to Corticeira Amorim culture and strategy. The goal is simple, combine technology with nature and promote a sustainable balance between them.
Over the last years, Corticeira Amorim has been working with different stakeholders, in quite distinct areas, but that share with each other an unconditional enthusiasm for the innovation in this area. Leader of an industry known as one of the most sustainable in the world, Corticeira Amorim maintain and reinforce, year by year, its commitment with the future, to maintain as a solid brand, cohesive and dynamic, with the sustainability as the main reference.
Corticeira Amorim develops its activity based on cork – a raw material harvested cyclically from trees without harming them. Cork promotes the economic and social sustainability of the areas in risk of desertification, promoting the preservation of the cork oak forest.
The application of the principles of the circular economy, trough the valorisation of its main raw material and waste generated, is one of the Corticeira Amorim main strategies. Achieving the notable landmark of 100% use of cork, the by-products generated during the production process of cork stoppers, cork that does not have adequate characteristics for its production or recycled cork at the end of life, are incorporated into other applications with high added value. The part that cannot be incorporated in products is used as an energy source (biomass).
Since cork is a material that promotes synergies with other materials and by-products, whenever feasible, are used as raw material, recyclable materials of other industries, thereby saving the planet's natural resources and reducing the problems associated with their depletion.
As a 100% natural, 100% renewable and 100% recyclable product, cork stands out for its lightness, excellent insulation, and not only is an excellent alternative to reduce the global dependence on non-renewable products and lower the carbon footprint of the final products, but it also has extraordinary credentials in the efficient use of the planet's finite resources.
During 2019, it was calculated the net value added to society by Corticeira Amorim, revealing that it exceeded one billion euros. This value is, mainly, supported by the impact that is has on the cork oak forest ecosystem – as one of the 36 biodiversity hotspots in the world, this ecosystem provides, also, other environmental benefits: CO2 retention, protection against fires or controlling the hydrological cycle avoiding the risk of soil erosion and reducing the risk of desertification.
Corticeira Amorim considers that all their stakeholders are fundamental to identify the strategic priorities, so Corticeira Amorim sustainability management considers their concerns and expectations regarding the materials to monitor and communicate. On the other hand, it is extremely important the engagement of the top management and responsible teams for the implementation of the sustainability initiatives.
The organizational structure enables the management and effective alignment between the strategy, policies and sustainable development practices. The support area focuses on coordinating the activities of each BU and their respective functional areas with the Executive Commission responsible for their periodic monitoring.
According to its sustainability strategy the Group identified the SDGs that are most related to the material themes, and selected performance indicators and key targets for each relevant SDG. 12 SDGs and 44 targets were identified as priorities for Corticeira Amorim sustainable development strategy. SDG 17 is aligned with all the sustainable strategies defined, since it is common to all the others.
To ensure an effective management of the social and environment aspects, the companies of the Group implemented the politics and the management systems most appropriate to non-financial risks that their activities integrate or to the opportunities emerging on the markets where operate. The year of 2019 stands out for the consolidation of this important alignment, with the renovation of certificates of different management subsystems, in different companies.
Below there is a summary table with these management systems, which does not dispense the consulting of the respective certificates.
Further information about the performance and initiatives developed by Corticeira Amorim for each of the strategic pillars are available on the Sustainability Report 2019 and on the website.
| Company (Country) | Cork Stopper Manufacturing Practice |
Quality | Environment | Energy | Food Security | |||
|---|---|---|---|---|---|---|---|---|
| Systecode Base Premium Excelente |
ISO9001 | ISO14001 | ISO50001 | ISO22000 | FSSC 22000 | HA CCP | ||
| Raw Materials BU | ||||||||
| Amorim Florestal (Portugal) | x10 | x15 | x5 | |||||
| Amorim Florestal España (Spain) | x18 | |||||||
| Amorim Tunisie (Tunisia) | x | |||||||
| Comatral (Morocco) | x | |||||||
| Cork Stoppers BU | ||||||||
| All Closures In (Portugal) | x | x | x | |||||
| Amorim & Irmãos (Portugal) | x1 | x2 | x1 | x6 | x7 | x8 | x6 | x14 |
| Amorim Australasia (Australia) | x | |||||||
| Amorim Champcork (Portugal) | x | x | x | x | x | |||
| Amorim Cork América (USA) | x | |||||||
| Amorim Cork Deustchland (Germany) | x | x | ||||||
| Amorim Cork Itália (Italy) | x | x | ||||||
| Amorim Cork South África (South Africa) | ||||||||
| Amorim France (France) | x 16 x16 | x3 | x16 | x16 | ||||
| Amorim Top Series (Portugal) | x | x | x | x | x | |||
| Amorim Top Series France (France) | x | x | x | |||||
| Corchos de Argentina (Argentina) | ||||||||
| Francisco Oller (Spain) | x | x | x | x | x | x | ||
| Hungarokork Amorim (Hungary) | x | |||||||
| Industria Corchera (Chile) | ||||||||
| Korken Schiesser (Austria) | x | |||||||
| Portocork América (USA) | x14 | |||||||
| Portocork France (France) | ||||||||
| Portocork Internacional (Portugal) | x | x | x | |||||
| Portocork Itália (Italy) | ||||||||
| S.A.S Ets Christian Bourassé | ||||||||
| Socori (Portugal) | x | x | ||||||
| Terefinos (Spain) | x | x | x | x | x | |||
| Victor & Amorim (Spain) | x | |||||||
| Floor and Wall Coverings BU | ||||||||
| Amorim Revestimentos (Portugal) | x17 | x13 | ||||||
| Amorim Benelux (Netherlands) | ||||||||
| Amorim Deuschtland (Germany) | ||||||||
| Composite Cork BU | ||||||||
| Amorim Cork Composites (Portugal) | x | x | x | x | ||||
| Amorim Cork Composites (USA) | x | |||||||
| Cortiçeira Amorim France (France) | ||||||||
| Insulation Cork BU | ||||||||
| Amorim Isolamentos (Portugal) | x4 |
| Food Security (cont.) | Forest Products Chain-of-Custody |
Health and Safety | |||||
|---|---|---|---|---|---|---|---|
| IFS Standard PAC Secure |
IFS Broker | BBEEE | BRC | FSC | PEFC | OHSAS ISO 18001 |
ISO 45001 |
| x10 | x13 | ||||||
| x11 | |||||||
| x12 | |||||||
| x | |||||||
| x | |||||||
| x | |||||||
| x | x | ||||||
| x | x | ||||||
| x16 | |||||||
| x | |||||||
| x13 | |||||||
| x | |||||||
| x | |||||||
| x14 | |||||||
| x | |||||||
| x | x | x | |||||
| x | |||||||
| x | |||||||
| x | x | ||||||
| x | |||||||
| x19 | x13 | ||||||
| x | |||||||
| x | |||||||
| x | x | x | |||||
| x | x | ||||||
| x9 |
BU - Business Unit; DU - Distribution Unit; IU - Industrial Unit
1) IU-Lamas, DU-Amorim Distribuição, IU-De Sousa, IU-Portocork, IU-Equipar, IU-VL; 2) DU-Amorim Distribuição, IU-Portocork, IU-Equipar; 3) DU-Eysines; 4) IU-Mozelos, IU-Silves; 5) IU-Coruche; 6) DU-Amorim Distribuição; 7) IU-Lamas, IU-De Sousa, IU-Equipar; 8) IU-De Sousa, IU-Equipar, IU-Portocork; 9) IU-Mozelos, IU-Vendas Novas; 10) IU-Ponte Sôr, IU-Coruche, IU-Salteiros; 11) IU-S V Alcantara; 12) IU-Lamas, IU-Portocork, IU-De Sousa, IU-Equipar; 15) IU-Ponte Sôr, IU-Coruche; 16) DU-Eysines, DU-Champleury; 17) IU-Lourosa, IU-SP Oleiros; 18) IU - S V Alcantara, IU Algeciras; 19) IU SP Oleiros.
(13) - In progress; (14) - Ensured practice
Corticeira Amorim's Personnel Management policies and practices are oriented towards guaranteeing safe, healthy and balanced work environments from a physical, social and psychological perspective, in which employees feel encouraged to achieve high levels of performance, attaining high levels of personal development and professional development, which correspond to their expectations.
In the context of Corticeira Amorim's overall business dynamics and the strong business activity of most companies, in 2019 Personnel Management continued the trends recorded in previous years: major recruitment intensity, focus on rejuvenation of staff and technical training, implementation of diverse projects and consequent need to mobilise teams to provide rapid responses. Staff were required in different functional areas and with different profiles, and therefore new training programmes were developed, closely linked to current projects, with intensification of internal communication activities, in multiple channels and different formats.
Occupational Safety recorded positive overall evolution in terms of indicators of accidents.
The commitment to a management model that emphasises people's contribution to the company was also consolidated in 2019, developing, qualifying and promoting staff autonomy and responsibility.
In December 2019, Corticeira Amorim had 4424 Employees, 72% (3164) in Portugal - where most of Corticeira Amorim's industrial operations are located. The three other main locations of employees were Spain (6.7%), France (4.2%) and the United States (3.7%). The number of employees at the end of the year was lower than the average number in 2019, around 4500, reflecting a notable rotation in the number of employees, with Corticeira Amorim registering almost 500 new employees in 2019.
With regard to general absenteeism (including all causes of short, medium and long-term absenteeism), the situation worsened compared to 2018, and was around 6% at the end of 2019. This increase is solely linked to long-term absenteeism and maternity/ paternity leave.
In terms of absenteeism caused by work accidents, there was around an 18% overall decrease in days lost for this reason. All companies, except for the Insulation Cork BU lowered the indicators of frequency and severity of work accidents.
Corticeira Amorim aims to reduce the work accident rate by 50% by the end of 2020. This objective was outlined at the end of 2017. This reduction programme encompasses various actions within the Group's different companies, including preparatory activities for ISO 45 001 certification by the Raw Materials BU and the Floor and Wall Coverings BU, wherein the latter already conducted the final audit in December, and is awaiting the final validation.
As has occurred in recent years, there was strong recruitment in 2019, spanning all segments of the company: industrial operators, specialist maintenance technicians, middle and senior staff, especially sales staff.
Rejuvenation of the company's staff is advancing successfully, and in 2019, the average age of all staff lowered by one year, to 43 years old, compared to 44 years old in 2018.
As in previous years, companies reinforced their relationship with different Higher Education Institutions and renewed existing protocols for curricular and professional internships. Trainee programmes are underway in most BUs and a very significant proportion of these young graduates remain in the respective companies after the internships, in technical and management careers. Many of our companies' current staff began their professional life in the Group through an internship programme. This recruitment enables integrated development of technical, management and behavioural skills, aligned with the organisation's values and culture.
Another important initiative is the launch of the People microsite, on Amorim's institutional page (www.amorim.com) that aims to publicise the Group, its different structures and professional positions, and is another way of bringing the company closer to the job market, with the objective of promoting Corticeira Amorim's Employer Branding.
Implementation of a new ERP and new information systems in the various BUs has marked our teams' daily lives. These are high impact projects (implementation of a new ERP that links all operations and activities), which affect the organisation of work, the tasks associated to different job positions, the need for new skills, and therefore involves major transformation of daily work routines. The success of this type of programmes depends on projects that involve very strong communication, training and change management and require 100% dedication from project teams. After implementation of the ERP in the Raw Materials BU in 2018, the system was implemented in the Cork Stoppers BU (Portugal) in 2019, and in 2020 will be implemented in the Floor & Wall Coverings BU, Composite Cork BU and Insulation Cork BU.
Digitisation of working processes does not end here. Digital media has been increasingly strengthened within the different BUs, through e-learning and internal communication. In 2019, through preparation of the first transversal e-learning programme for all of the Group's companies - Cork Fundamentals - the first training module was developed to welcome new employees. This is an interactive multimedia programme that offers an introduction to all of Corticeira Amorim's business areas, complemented by in-depth training in cork as a raw material. The programme was developed in Portuguese and English, and is therefore available to all of the Group's employees.
It is also important to mention preparation of the "Investors in People" certification, prepared in late 2019 by the Floor & Wall Coverings BU. This international certification attests to good practices in Personnel management, based on structured, integrated and consistent processes. Everything is analysed through audits, surveys and focus groups, ranging from skills development, performance evaluation, and practices of recognition, compensation, internal communication and leadership. There are several levels of accreditation (the baseline level already requires a significant differentiation of practices in personnel management) and the framework provides a guide and a set of indications, to evolve in an integrated manner in the various dimensions of personnel management.
The Gender Equality Plan was also one of the major challenges defined as a key commitment over the coming years. This programme is based on reinforcing the presence of female staff in job positions and areas that until now have been predominantly male, whether in technical or management functions.
Corticeira Amorim has made a commitment to several objectives in this regard, and will work on several aspects, including recruitment and awareness / training, with a view to raising awareness of gender biases in the world of work, and thereby foster practices that will lead to change.
This work began with a diagnosis of the company's practices and will continue over the coming years, with the awareness that this is a long-term programme that implies a change in corporate culture. However, with the appropriate milestones to be met, it will be transformational and have a differentiating effect on the company's life.
Corticeira Amorim's share capital is currently €133 M, represented by 133 million common shares with a par value of 1 euro, which confer the right to dividends. The shares of the company (then called Corticeira Amorim, S.A.) were listed on the BVLP - Lisbon and Porto Stock Exchange, on April 18, 1988, and included within the national continuous trading system from December 11, 1991.
Under the terms, and for the purposes of, Law No. 15/2017, of May 3, and Decree-Law No. 123/2017, of September 25, Corticeira Amorim's Board of Directors decided to convert the shares from bearer sharers representing the company's capital (ISIN code: PTCOR0AE0006) to registered shares; and the respective conversion to the centralised trading system took place on October 26, 2017.
At the end of 2019, Corticeira Amorim's share price rose to €11.30 - 25.6% higher than the price at the end of 2018. Approximately 9.5 million shares were traded on the Euronext Lisbon regulated market in 2019, in almost 38,000 transactions, which jointly amounted to approximately 96.2 M €.
In 2019, the average transaction price was €10.062 per share; the maximum price was €11.52 per share, registered on 19 December; the minimum price was €8.71 euros registered on January 2; the amplitude between the highest and lowest share price was 32.3%. The graphics below illustrate Corticeira Amorim's stock market performance.
Evolution of Corticeira Amorim's share price versus PSI20 (2019): Source: Euronext
PSI20 CORTICEIRA AMORIM
Source: Euronext
| 2015 | 2016 | 2017 | 2018 | 2019 | |
|---|---|---|---|---|---|
| Quantity of shares traded | 12,693,424* | 10,801,324 | 19,290,907 | 14,884,641 | 9,481,944 |
| Share prices (€): | |||||
| Maximum | 6.290 | 9.899 | 13.300 | 12.000 | 11.520 |
| Average | 4.340 | 7.303 | 11.067 | 10.604 | 10.062 |
| Minimum | 2.990 | 5.200 | 8.180 | 8.370 | 8.710 |
| Year-end | 5.948 | 8.500 | 10.300 | 9.000 | 11.300 |
| Trading frequency | 98.8% | 100.0% | 100.0% | 100.0% | 100.0% |
| Stock market capitalization at year-end (million €) | 791.08 | 1,130.50 | 1,369.90 | 1,197.00 | 1.502,90 |
*including 7,399,262 shares traded in an ABB
Sales increased by 9% to €763 million, highlights:
Announcement of payment of a gross dividend of € 0.185 per share
Sales increased by 9% to €202 million, highlights:
Investmark Holdings, B.V. reported that it had decided to launch a private placement offering for the sale of up to 4,600,000 shares in Corticeira Amorim, SGPS, S.A., representing up to 3.46% of the company's share capital.
Investmark Holdings, BV announced that it had completed the sale of 4,600,000 shares representing 3.46% of the share capital of Corticeira Amorim, SGPS, SA The total payment for the offering amounted to 43,700,000.00 Euros, corresponding to a price per share of 9.50 Euros.
From June 5, 2019, the securities investment funds managed by Santander Asset Management, S.A., S.G.I.I.C. owned 3,045,823 shares, corresponding to 2.29% of the Corticeira Amorim's share capital and 2.29% of voting rights, thereby crossing the 2 % minimum threshold for qualified shareholding positions.
Announcement of the acquisition of 50% of the company VINOLOK, a.s., located in the Czech Republic
Consolidated results of the business activity conducted in the first half of 2019
Sales rose by 3% to €412 million, highlights:
As a result of the merger of Investmark Holdings B.V. with Great Prime, S.A. (Great Prime), wherein the former was merged into the latter, Investmark was extinguished and its rights and obligations were transferred to Great Prime. As a result, the 13,725,157 shares representing 10.32% of Corticeira Amorim's share capital and voting rights, previously held by Investmark, are now held directly by Great Prime.
Disclosure of the Gender Equality Plan 2019-2020
Consolidated results for the business activity developed in the third quarter of 2019
Sales rose by 3.2% to €603 million, highlights:
Announcement of payment of a gross dividend of € 0.085 per share
Communication on the change of title for the allocation of voting rights
As a result of the merger of Amorim - Sociedade Gestora de Participações Sociais, SA (Amorim SGPS) with Amorim International Participations, BV (AIP BV), through incorporation of the latter into the former, by global transfer of the assets of AIP BV to Amorim SGPS, the qualified holding of 13,414,387 shares representing 10.086% of Corticeira Amorim's share capital and voting rights, previously held directly by AIP BV (and indirectly by Amorim SGPS) is now held directly by Amorim SGPS.
Corticeira Amorim's results reflect the overall situation identified in the previous points. The consolidated results for 2019 reveal a decrease compared to the previous year, primarily explained by the lower profitability of the BUs. This decrease was mitigated by improved gains in associate companies and lower tax payments, and would otherwise have been more significant.
Total sales grew by 2.4%, primarily driven by the growth of the Cork Stoppers BU (+ 4.7%) and the Insulation Cork BU (+18.2%). If we exclude the Floor & Wall Coverings BU, whose decrease in sales (-3.2%) has already been duly explained in point 2.3 of this report, the growth in consolidated sales would have been 3.3%. The Composite Cork BU increased sales by 2.3%, in line with the growth of consolidated sales.
Appreciation of the EUR/USD exchange rate, over the first nine months of the year, was another factor that boosted Corticeira Amorim's sales and profitability. If we exclude the exchange rate effect, sales growth would have been 1.5%.
EBITDA was €124.7 million, a decrease of 6.9% compared to the €134.0 million recorded in 2018.
The EBITDA / Sales ratio was 16.0%, compared to 17.6% in 2018. The decrease in this ratio was expected, due to the rising cost of raw materials over recent years. This impact was more relevant in 2019, since it reflected the start of consumption of raw materials from the 2018 campaign. Purchase prices of cork attained a peak in 2018, and it is expected that the normalisation of purchase prices, already verified in 2019, will continue over the coming years. Despite this factor, the efficiency measures adopted, in terms of the contracted processes and services, made it possible to avoid a further decline in Corticeira Amorim's profitability.
The adoption of IFRS 16 - Leases did not have a significant impact on Corticeira Amorim's financial statements. As of December 31, 2019, the main impacts were: an increase in EBITDA of €1.4 million, an increase in depreciation of €1.4 million and an increase in debt of €4.2 million.
Net debt at the end of 2019 was €161.1 million, an increase of €22.1 million compared to the end of 2018 (€139.0 million). Financial expenses for the period were €2.2 million, lower than the amount for 2018 (€3.5 million), in which this item reflected the update of Bourrassé's financial liabilities. Due to the revision of Bourrassé's forecast results, the effect of the update of liabilities in 2019 resulted in a gain in the result for the year. This fact explains the decrease in financial expenses compared to 2018, despite the increase in interest incurred due to the increase in average debt. Non-recurring expenses (net) are mainly due to the recognition of transaction costs of subsidiaries / associates and the restructuring of the Floor & Wall Coverings BU, the Cork Stoppers BU (in the subsidiary Socori) and the Insulation Cork BU.
Tax payments benefited from the reversal of provisions, in particular due to the final tax audit that made it possible to use tax losses in a subsidiary in Spain and recognition of tax benefits for investment in 2018, the value of which was only determined in 2019. The effect of the calculation of investment tax benefits (RFAI and SIFIDE), in comparison with the reversal of provisions for tax benefits, also helps explain the reduction achieved in 2019.
Corticeira Amorim's consolidated net result was €74.9 million, representing a 3.2% decrease compared to 2018.
Due to its very positive financial position, Corticeira Amorim was able to maintain the distribution of dividends at around €35.9 million, which corresponded to 27 cents per share.
Since there were no material changes in Corticeira Amorim's universe of companies, the financial statements for the year 2019 are comparable with those for 2018.
Consolidated sales were €781.1 million, 2.4% higher than 2018, when sales were €763.1 million. Sales were boosted by the exchange rate effect (essentially the EUR/USD exchange rate). In the absence of an exchange rate variation, sales would have grown by 1.5%.
Sales of the Raw Materials BU increased by 9.8%, essentially to other Corticeira Amorim group companies. Sales outside the group decreased from €20.5 million to €14.8 million. In 2018, given price instability, companies outside the group increased their purchases, which increased the BU's sales volume in that year and, in return, led to a reduction in their needs in 2019.
The Cork Stoppers BU increased its proportion of total sales to 70.3%, with a 4.7% increase in sales. The Composite Cork BU and Insulation Cork BU also recorded an increase in their respective sales. The Floor & Wall Coverings BU recorded a 3.2% decrease in sales.
The relative weight of each BU's sales in the group as a whole remains stable, with a slight variation reflecting the increase in the weight of the Cork Stoppers BU and a decrease in the weight of the Floor & Wall Coverings BU.
In geographic terms, the main market for the group's sales continued to be France (19%), a position it has occupied since 2018, followed by the United States (17%). Italy remained the third main sales market, and continues to increase its relative weight. Fourth, fifth and sixth positions are occupied by Germany, Spain and Portugal maintaining the relative position they held in 2018.
*excludes Portugal; includes Switzerland and Norway.
The gross margin (sales plus production variation, minus the cost of incorporated materials) was 49%, remaining at the same level as 2018. There was a positive variation in production of around €5 million, with a more relevant contribution from the Cork Stoppers BU, essentially reflecting the increased cost of raw materials.
As already mentioned, the adoption of IFRS 16 - Leases did not have a significant impact on the income statement. As of December 31, 2019, the main impacts were: an increase in EBITDA of €1.4 million and an increase in depreciation of €1.4 million.
In terms of operating expenses, there was an increase of 5.0%. Supplies and external services increased by 0.5%. It should be noted that if IFRS 16 had not been adopted, this increase would have been approximately 1.6%. In the different sub-items of external supplies
and services, it is worth highlighting the 3% reduction in electricity costs, which was offset by the 1.3% increase in transport costs. The increase of approximately €5.7 million (+ 4.2%) in personnel costs is explained by the higher number of employees. Considering the average salary per employee, the increase was 1.8%.
The increase in depreciations, in addition to including the effect of adopting IFRS 16 (€1.4 million), also includes the impact of the increased investments made over recent years.
The impairment item was €1.2 million, compared to an almost null figure in 2018. The value of this year's impairments essentially concerns receivables, with emphasis on one customer of the Raw Materials BU.
In other operating gains and expenses, the variation was negative - €2.6 million. The effect of exchange rate differences on assets receivable and liabilities payable and the respective exchange rate hedges resulted in a loss of €1.0 million; in 2018, the loss was €1.5 million. Variation in this item was explained by the decrease in investment subsidies (-€0.7 million). Last year there was also the positive impact of the reversal of provisions (€1.0 million).
Current EBITDA is €124.7 million, 6.9% lower than in 2018 (€134.0 million). The EBITDA / sales ratio was 16.0%, slightly lower than in 2018 (17.6%). The perimeter was identical to the previous year.
As disclosed in the Segment Report, the Cork Stoppers BU and the Composite Cork BU were the only business units to record EBITDA growth; in the other business units, EBITDA was adversely affected by the higher raw material costs. The Raw Materials BU decreased its profitability, essentially as a result of the higher raw materials costs, offset by the slight price increase to the group's other business units. If we consider the combined results of the Raw Materials BU and the Cork Stoppers BU there was lower overall profitability, despite the favourable performance of the Cork Stoppers BU. The Composite Cork BU managed to improve its profitability, benefiting from the positive impacts of the higher EUR/USD exchange rate and the repercussions on the sale prices of the higher cost of incorporating cork.
| EBITDA/Sales (%) | 2017 | 2018 | 2019 |
|---|---|---|---|
| Raw Materials + Cork Stoppers |
23.3% | 22.3% | 20.5% |
| Floor and Wall Coverings | 6.8% | 2.6% | -2.3% |
| Composite Cork | 15.2% | 10.1% | 11.9% |
| Insulation Cork | 15.9% | 5.4% | 1.6% |
| Consolidated | 19.0% | 17.6% | 16.0% |
EBIT was €89.5 million, 12.8% lower than 2018. A contributing factor to this decrease was the 12.5% increase in depreciation, as mentioned above.
In net terms, non-recurring income was negative, at €1.6 million. This reflects restructuring measures at the Floor & Wall Coverings BU, Insulation Cork BU and the subsidiary Socori (of the Cork Stoppers BU), as well as transaction costs related to acquisition of the associate company, Vinolok.
Consolidated indebtedness was €161.1 million. The increased level of indebtedness was mainly due to the increase in working capital (€13.1 million), investment (€58.8 million), and acquisitions (€17.1 million) and the application of IFRS 16 (€4.2 million). In terms of investment, the Cork Stoppers BU (€33.5 million) and Composite Cork (€10.9 million) stand out, aimed at increasing autonomy and productive capacity. The increase in working capital was due to the reduction in suppliers, resulting from internalisation, through in-house production of part of purchases made in the secondary market, wherein the reduction in the inventories account heading offset the suppliers impact.
The financial function decreased, despite the higher average debt. Updating of the value of the agreements for acquisition of noncontrolling interests, which lowered, due to a decline in Bourrassé's results, had a favourable impact on the Group's financial function. In terms of gains in associate companies, the value of profits appropriated by Corticeira Amorim from companies in which it does not hold a majority stake in the share capital and / or voting rights was €5.6 million. The increased amount compared to 2018 is essentially due to the recognition as a result of part of the contingent amount receivable for the sale of US Floors (€2.9 million), which occurred in 2017. It is not expected that any additional value will result from this sale in future financial years.
In 2019, there was an improvement in the effective tax rate (Income tax / (Pre-tax income - Gains from associate companies)), which rose to 13.9%. This decrease was influenced by the reversal of provisions for taxes. Without this reversal, there would have been outgoing cash flow from Corticeira Amorim. The final tax audit made it possible to use tax losses in a subsidiary in Spain and recognition of tax benefits for investment made in 2018, the value of which was only determined in 2019. The effect of calculating tax benefits on investment (SIFIDE - Incentive System) Taxes on Business R&D and RFAI - Investment Support Tax Regime), in comparison with the reversal of provisions on tax benefits (wherein Corticeira Amorim's recognition policy remains conditional on the future achievement
of objectives), had a positive impact on the result, that should be maintained in future financial years.
The reduction in non-controlling interests is essentially due to the decrease in the share of the results that were appropriated by Bourrassé's minority shareholders, since an additional 10% of the group was acquired in 2019.
After an estimated income tax of €12.0 million, and the appropriation of €4.5 million of results for non-controlling interests, Corticeira Amorim's consolidated net profit in 2019 was €74.9 million, a decrease of 3.2% compared to €77.4 million in 2018.
In terms of financial position, total assets were €994 million, registering an increase of approximately €28 million. As specified in the acquisition contract, in 2019 the first 10% tranche was purchased, which increased the financial shareholding in Bourrassé from 60% to 70%. Over the next 3 years, equivalent tranches will be purchased until the total shareholding in Bourrassé is 100%. Since the liability for the acquisition of non-controlling interests was already recognised from the moment of acquisition, the main impact was in terms of the reduction of noncontrolling interests, as a counterpoint in terms of reserves.
The items that had the biggest impact on the increase in assets were tangible fixed assets (an increase of €19 million resulting from the fact that the increase in investment was higher than the depreciation amount), investment in associated companies (through the acquisition of Vinolok), Right of use (result of the application of IFRS 16). The reduction in Inventories and customer items offset the increases in total assets.
In terms of shareholders' funds, the €41 million variation is essentially due to the results for the period (€74.9 million) and the distribution of dividends (€35.9 million). Non-controlling interests decreased by €1.8 million.
In relation to liabilities, the €13 million reduction resulted from compensating effects: the remunerated debt increased by €23 million, which was compensated by suppliers, that fell by €33 million.
On December 31, net interest-bearing debt was €161.1 million, an increase of €22.1 million compared to 2018. This variation is explained by the increase in the investment fund (an increase of €13.1 million essentially due to the decrease in suppliers above all due to the reduction in purchases from the secondary market), investments (€58.8 million), dividends paid (€35.9 million) and acquisition of companies (€17.1 million essentially due to the acquisition of Vinolok and the 10% acquisition of Bourrassé's shares, as explained above), which more than offset the EBITDA generated in the period. Excluding the effect of adoption of IFRS 16, as mentioned above, the net interest-bearing debt would be €156.9 million.
The financial autonomy ratio was 54.3%, higher than in 2018 (51.6%).
controlling interests
Income
(amounts in €million)
results
Associates
results
| EBITDA/Sales (%) | 2019 | 2018 | yoy | 4T 19 | 4T 18 | qoq | |
|---|---|---|---|---|---|---|---|
| Vendas | 781.057 | 763.117 | 2,4% | 178.431 | 179.359 | -0,5% | |
| Gross Margin – Value | 387.378 | 386.456 | 0,2% | 92.034 | 88.790 | 3,7% | |
| 1) | 49,1% | 49,2% | -0,1p.p. | 52,6% | 46,6% | +6,0p.p. | |
| Operating Costs - current | 297.832 | 283.751 | 5,0% | 72.960 | 70.894 | 2,9% | |
| EBITDA - current | 124.724 | 133.984 | -6,9% | 27.918 | 25.566 | 9,2% | |
| EBITDA/Sales | 16,0% | 17,6% | -1,6p.p. | 15,6% | 14,3% | +1,4p.p. | |
| EBIT - current | 89.547 | 102.705 | -12,8% | 19.075 | 17.896 | 6,6% | |
| Non-current results | 2) | -1620 | 57 | N/A | -581 | -624 | N/A |
| Net Income | 74.947 | 77.389 | -3,2% | 20.538 | 18.799 | 9,2% | |
| Earnings per share | 0,564 | 0,582 | -3,2% | 0,154 | 0,141 | 9,2% | |
| Net Bank Debt | 161.091 | 139.009 | 22.082 | - | - | - | |
| Net Bank Debt/EBITDA (x) | 3) | 1,29 | 1,04 | 0,25x | - | - | - |
| EBITDA/Net Interest (x) | 4) | 88,2 | 108,0 | -19,77x | 79,0 | 70,4 | 8,56x |
1) Related to production.
2) Figures refer to restructuring and acquisition of new subsidiaries costs (2019) and the reversal of provisions for Amorim Argentina, Amorim Revestimentos restructuring and transaction costs for subsidiaries acquisition (2018).
3) Current EBITDA for the last 4 quarters was considered.
4) Net interest includes interest paid on loans minus interest on investments
(excludes I. Stamp duty and commissions).
During the year, the non-executive members of the Board of Directors regularly attended the monthly meetings of the Board, where all matters that could not be delegated or were included on the agenda because of their importance, scale or critical timing were discussed and analysed.
The meetings were organised administratively to ensure that all board members, executive and non-executive, could adequately prepare beforehand, encouraging the active participation of all members in the debate, analysis and tabling of decisions in benefit of the productivity of the meetings and the efficiency of the group. The calendar of ordinary meetings of the Board of Directors was agreed at the end of 2017, to enable all members to attend. Any board member, including non-executive members, could submit points or discussion subjects for inclusion in the agenda up to two working days before each meeting.
A system has been implemented that enables the Executive Board to report to the Board of Directors in such a way as to ensure that the activities of the two bodies are properly aligned and that all members of the Board of Directors are informed in a timely fashion of the activities undertaken by the Executive Board.
As a consequence, and excepting matters that are of the exclusive competence of the Board of Directors, non-executive board members were informed of and able to follow:
As an initial note, it is important to note that the following text, inserted in this chapter, was written before the global Covid-19 pandemic. Corticeira Amorim nonetheless considered that this text should be maintained, since it contained relevant information regarding the initial future perspectives for the macroeconomic environment in 2020. The impact of the Covid-19 pandemic is specified in point 19 of the subsequent events.
The world economy should register economic growth of around 3.3% in 2020, a moderate increase compared to the estimated 2.9% growth for 2019. Although the United Kingdom's withdrawal from the European Union has been carried out through a formal agreement between the parties, thereby avoiding a disorderly exit, and a minimum trade understanding has been reached between the United States and China, the projections initially prepared by the IMF in October 2019 have been revised marginally downwards, incorporating India's slightly weaker performance. Growth will be supported, in part, by the biggest combination of interest rate cuts in Advanced and Emerging Economies since the 2008 crisis, and will occur in the context of longevity in the world economic cycle. Developed Economies are expected to grow at a marginally lower rate than in 2018, estimated at 1.6%, while Emerging Economies are expected to grow by around 4.4%. Regardless of prudence in the economic forecasts, extraordinary factors, such as the attack on the Iranian military leader, or the pandemic that has begun in China, the impact of these factors may (negatively) change the forecast perspectives and their scope is not fully understood. The context will be marked by the US presidential elections and any protectionist initiatives that may be determined by the US Government, and by the negotiation process of the terms of the future relationship between the United Kingdom and the European Union, whose conclusion is feared will not be possible to conclude by the end of 2020, the deadline for the current transition period. Geopolitical risks, social challenge and initiatives aimed at reversing globalisation, are significant risks in 2020. Their materialisation may expose the weaknesses of years of extraordinarily expansionist policies and persistent injection of liquidity into the world economy. International Trade, which was stagnating in 2019, should record growth of around 2.9%. It is feared that this is conditioned by high levels of political uncertainty and discomfort regarding the system of rules for global trade. A slight acceleration of inflation is forecast in Advanced Economies and moderate acceleration in Emerging Economies.
The Eurozone is expected to record growth of around 1.3% in 2020, a marginal increase compared to 2019, which will reflect the effects of moderate fiscal expansion. France is forecast to achieve better economic performance while Spain is expected to continue to decelerate. Industrial activity is expected to remain strongly conditioned by the external environment, despite the signs of bottoming-out observed at the end of 2019. Germany, that is more sensitive to the evolution of the industrial and export sector, should
nevertheless see its economic performance improve, compared to 2019, and is estimated to grow by 1.1%. Germany will always be at the forefront of the impact of possible protectionist measures imposed by the United States or by the lower performance of China, its main trading partner. The United Kingdom, which left the European Union on January 31, 2020 is expected to grow by around 1.4%, supported by an expansionary fiscal policy. The sentiment of UK economic agents, and corresponding macro effects, will depend on the evolution of negotiations with the European Union on the terms of the future economic relationship. Sweden, a highly open economy, should record growth of around 1.5%, higher than in 2019.
The economic and social context of the United States will be marked by the presidential elections in November. In view of the polarisation of US society, it is anticipated that the economic situation will reflect the effects of the political campaign and debate and, thus, also initiatives aimed at re-election, in particular in terms of trade negotiations with other economic blocs. Additional protectionist measures should not be ruled out. The United States is expected to grow by less than in 2019, with forecast growth of 2.0%. This slowdown will lead to lower tax revenues, a diminishing marginal effect of the monetary impulse and longevity of the economic cycle, notably due to the constraints of a labour market in full employment. The drop in Boeing's production will have a negative economic impact and is expected to be materially relevant. The structural imbalances in the US economy have worsened over the last twelve months and, as such, the risk of placing constraints on the economy has become more palpable. Japan is expected to end 2019 with contraction, reflecting the impact of the higher consumption tax. It is anticipated that the fiscal stimulus implemented in December, as a countermeasure, and the preparation for the Olympic Games, will be sufficient to lead to recovery of the Japanese economy. On an annual basis, growth of 0.7% is forecast, less than that recorded in 2019.
Emerging and Developing Economies are expected to record higher growth. In China, however, structural slowdown of the growth rate will continue, with the economy having to manage the high level of indebtedness and the transition to a different growth pattern. Forecasts indicate 6.0% growth. The signing of a more comprehensive trade agreement with the United States remains an expectation. Despite the uncertainty underlying the assessment of its total impact, it is feared that the Covid-19 virus pandemic will have an impact on China's level of economic expansion and the growth mix. India is expected to grow by 5.8% in 2020, recovering from the unexpected slowdown in 2019. Mexico is expected to record lower growth after the stagnation observed in 2019; Brazil, on the other hand, should observe a different dynamic, with faster economic growth following the approval of pension reforms, with forecast growth of 2.2%; Argentina is expected to contract for the third consecutive year. South Africa is expected to achieve 0.8% growth in 2020, double the amount observed in the previous year. The local economic context faces significant challenges, starting with the regular and stable supply of electricity, the stability of Public Finances and the ability to maintain the country's credit rating. In addition, there is a delay in implementing structural reforms and ensuring sustainable growth. Central and Eastern Europe is expected to maintain robust growth. Russia is forecast to record 1.9% growth in economic activity. Pursuit of a credible monetary policy and accurate prudential management of the banking system are expected to remain distinctive features, thereby building credibility and boosting the economy.
Financial conditions are expected to remain broadly expansionary. The lagged effects of decisions implemented in 2019 are expected to
support economic recovery in 2020. After having reversed the course of monetary normalisation, pursued since the end of 2015, lowering the target rate three times in 2019 - to between 1.50 % and 1.75% the Federal Reserve is expected to maintain unchanged conditions in 2020. The ECB, in a year marked by deep strategic reflection, should also keep monetary conditions unchanged. Both institutions must proceed with the purchase of assets. The People's Bank of China is expected to continue with individual measures aimed at maintaining and increasing the flow of credit in the economy.
In 2020, in view of the unfavourable external risks, Portugal is expected to maintain the trend towards economic deceleration, anticipating growth of around 1.7%, close to its potential growth rate. The Portuguese economy is expected to continue to grow faster than the Eurozone average, albeit to a lesser extent. Growth will be based on Domestic Demand, but to a lesser extent than in 2019, since private consumption and investment are expected to slow down. Exports are expected to contribute to growth of the economy, but perhaps below the average of recent years. The Trade Balance will continue to reflect the higher evolution of Imports, resulting in a higher trade deficit compared to 2019. For the eighth consecutive year, the combined Current and Capital Account should record a positive balance. This surplus will translate into a positive financing capacity for the Portuguese economy. As in recent years, there should be continued consolidation of Public Finances. Available data suggests increased public revenues and increased public expenditure, with tax and contributory revenue offsetting the increase in staff expenditure (rigid expenditure); a reduction in interest paid on public debt is forecast. The Government expects a slight budgetary surplus, with a primary surplus of around 2.9% and a reduction in Public Debt to 116% of GDP. Inflation is expected to reflect the moderate evolution of prices, albeit above the level recorded in 2019, forecast to be 1.0% in 2020. The Labour market is expected to maintain the positive evolution of recent years, but at a moderate pace, consistent with maturation of the economic cycle and fewer incentives for job creation: the Unemployment rate is expected to have been 6.7% in the last quarter of 2019, inverting the downward trend recorded since 2012; Employment is expected to continue to grow although at a more moderate pace; the Unemployment Rate is expected to decrease to 6.4% in 2020.
For the year 2020, the Raw Materials BU predicts stabilisation compared to the previous year, consolidating the increase in production achieved in 2019.
In the cork preparation units, in addition to the focus on maximising the profitability of the cork batches, the business unit plans to implement the automation process for cork selection in its three units. This process will make it possible to reduce operating costs and introduce greater objectivity in this operation. There are also ongoing projects that will increase efficiency in upstream processes, in operations that until now the BU had no interference, such as operations carried out in woodlands.
In the cork disc production units, the priority will be stabilisation of the new disc manufacturing process, which will improve the efficiency in the processes upstream of cork selection and will ensure that the cork disc-manufacturing units have a much higher level of efficiency than other cork production units do around the world. This consolidation process may enable the production of discs from other Group units to be concentrated in this BU.
In terms of R&D projects, in 2019 the BU stabilised the TCA eradication process in 2019, and in 2020 foresees application of the concept to the entire cork disc production line. This new process for eliminating sensory deviations will attain its peak of development and consolidation in 2020, which will provide the market with a unique sensory performance, ensuring that stoppers are endowed with an unprecedented level of organoleptic neutrality, thereby responding to the market's growing demands.
With regard to the Forestry Intervention Project, above all in terms of "setting an example", the Herdade da Venda Nova project will continue and we hope to have the necessary conditions to start with a cork plantation project with drip irrigation in the Herdade da Baliza.
The worldwide cork stoppers market was valued at USD 287.39 billion in 2016 and is expected to rise to USD 402 billion by 2023, with an annual growth rate of 5.8% for the 2019-2023 period. In terms of international trade, the European region represents more than 50% of global trade. There are currently approximately 1 million small- to largescale wine producers. The world's most famous wine brands are French (around 84%). Wine consumption is declining in traditional markets, but is growing rapidly in Asian markets. Asia-Pacific represents 16% of global wine imports, in value.
The market has a life of its own and market dynamism is driven by consumers and key consumer trends.
The demand for specialist wine bars, as a means to enjoy wine and socialise is expected to rise in 2020, increasing the need to innovate in new products and concepts, in a world that is eager for novelty and experiences.
With more buyers purchasing wine online, it will make sense for retailers to be aware of electronic retail opportunities and their global digital experience.
According to a report by the international trade fair, Prowein, "the retail channels through which wine is sold to consumers are in an unprecedented state of flux". Many key markets are recording growth of online shopping models.
Although rosé wines have done more than enough to earn their reputation as a cheap and cheerful drink, their growing popularity has paved the way for premiumisation. A prime example is how Moet Hennessy, LVMH's wine and spirits branch, acquired a 55% stake in Chateau d'Esclans, the French producer behind the very popular rosé wine, Whispering Angel. This elegant "pink" wine joins a portfolio that includes legendary brands such as Chateau d'Yquem and Cheval Blanc, as well as Dom Perignon Champagne.
Convenience and sustainability are key drivers of the wine market, obliging the global packaging industry to propose new and more
sustainable packaging solutions. Although many consumers continue to uphold traditional packaging preferences, small steps suggest that the market may evolve in different directions, which will force changes. Although this trend is moving faster in larger markets, we are likely to see a slight increase in the variety of wines supplied in any format other than the standard 750ml glass bottle.
Wine has always been an "experiential" product, but this is now amplified by the social media. According to a Nielsen report on beverage trends for 2020, "memorable and unique experiences for consumers is a lasting trend" that will be a driving force for commerce in 2020.
The BU will focus on the development of new technologies in 2020, associated with continuous product improvement and strengthen the customer relationships, seeking to respond to its business needs, giving it an adequate level of service, in line with its expectations.
The strategy for the 3-year period, 2020-2022, is based on four pillars: sustainable growth, process and product innovation and the continuous search for operational excellence, based on a Digital Transformation programme that began in 2019.
Given the significant growth of capital invested in 2019, the BU has set ambitious targets for 2020, which will require considerable control and discipline. On the other hand, the operational activity, that has set goals for improving productivity in 2020, will require a follow-up, focused on the projects and actions included in the Business Plan.
Improving customer retention and service levels, as a means of guaranteeing growth and consolidation, will be supported by the increase in production capacity and reinforcement of critical skills. In this context, the Cork Stoppers BU will pursue the following strategic priorities:
intensify the continuous improvement programme and Customer Think initiative;
intensify sustainability practices and highlight the advantages of cork compared to other closures;
The return on the investment of projects implemented in 2019 will be recorded in 2020. The Floor & Wall Coverings BU's agenda of priorities is clearly defined and focuses on lowering the BU's operational breakeven point. With this goal in mind, strong contributions are expected in terms of the gross margin and control of operating costs.
In terms of sales, a recovery in manufactured products is expected, based on three strategic approaches:
The product diversification achieved by the "à la carte" collection will attract a new type of customers, who value customised solutions.
Positive effects on the gross margin are expected, both in terms of sales prices, and consumer sales volume and prices. The fall in raw material prices for cork and other raw materials, whether from domestic sources or imported from Asia, will have a strong impact on the decline in consumption levels. The reengineering project of the product range was launched, which will make it possible to reduce industrial costs, while maintaining the technical properties of the products. Finally, and in line with the concern to foster environmental sustainability, the implementation of circular economy measures, with the use of waste generated during manufacturing process will lead to a lower need for consumption of raw materials and waste disposal costs.
At the operational level, the gains from the industrial Revamping project successfully implemented in 2019 will be consolidated, as well as reduction of stocks and costs to support smooth operation of the supply chain.
In the context of innovation, the company will continue to invest in product solutions for the contract segment - a technical and specialised segment that values the properties of cork. A strong commitment will also be made to new product dimensions, adapted to market requirements, as well as a continued commitment to producing stateof-the-art visuals.
No significant changes in terms of consumption of the main cork and non-cork raw materials are expected for 2020, unlike the situation in 2018 and 2019.
The business unit's strategic plans are likely to re-establish the focus on growth, capitalising on an important set of infrastructures that have been made available in order to achieve a new scale of operations.
Within this strategy, product differentiation and the exploration of market partnerships will be the key drivers of results.
In addition to the strategic initiatives carried over from 2019, the new strategic actions to be implemented in 2020 are:
The results in 2020 will also depend on the ability to effectively manage available resources, combat waste and to maximise returns from cork, both in the industrial and market aspects.
The BU expects a growth in sales in 2020 in the expanded agglomerated cork segment, seeking to adjust its sustainability in view of the effect of the strong increase in the price of raw material that has occurred over recent years. The price of the raw material, falca cork, is expected to stabilise in 2020.
The BU will continue to invest in retaining current markets, as well as expanding into new geographic markets, leveraging the argument of genuine sustainability in a global market that is increasingly aware of the use of natural products.
The outlook for the world economy in 2020 is less encouraging than initially expected. This is one more variable that could call into question current forecasts. Covid-19's impacts on the growth of the world economy are not yet measurable. The only certainty at present is that the pandemic will have a negative impact. The variation in the EUR / USD exchange rate is another source of uncertainty that will condition Corticeira Amorim's performance in 2020.
In 2020 it is expected that the effect of consumption of cork purchased at higher prices will start to reverse. This impact will tend to be greater as we draw towards the end of 2020. In 2019 there was a decrease of around 7% in the purchase prices of cork, running contrary to the effects of previous years (2018 campaign: a 17% increase). This factor should remove some pressure on Corticeira Amorim's results, however the normalisation of prices in the secondary market will not be immediate, it is important to continue the review of conditions of sale of products and solutions and in-house operational efficiency measures.
The recurring results of 2019 interrupted the growth trend recorded in previous years, and it was the second year in which there was a fall in profitability, as measured by the EBITDA / Sales ratio.
In terms of Corticeira Amorim's regular business activity, measured by indicators such as EBITDA and the EBITDA / sales ratio, the constraint associated to the higher cost of raw materials forced a continuous increase in operational efficiency, the search for new markets, diversification of solutions available, in order to respond to customer needs. The company will maintain these gains and continue to search for further improvements.
In the Cork Stoppers BU, despite the slowdown in the consumption of wine, sparkling wines and spirits, the unit will aim to achieve further growth. There are relevant spirits markets that are yet to be explored, lower demand for plastic closures opens doors to the alternative solutions presented by Corticeira Amorim. The BU will continue to invest in sales growth and improving operational efficiency.
The Composite Cork BU will continue to focus on organic growth, despite limitations on the increase in final retail prices. It will be a major challenge to maintain the BU's sales and profitability levels. This will require major discipline in terms of the yield from granulation operations because the market will have a limited capacity to absorb price increases.
The Floor & Wall Coverings BU, after two years of underperforming results, currently has all the conditions necessary to reverse this situation. Improvements are expected due to non-repetition of costs that occurred in 2019 and the impacts of the industrial revamping project. The sales team is prepared to achieve the sales objectives that will guarantee the BU's break-even.
The Insulation Cork BU has already moved beyond its critical point in terms of the increase in the cost of raw materials. However, it should continue to implement new measures of production efficiency that will make it possible to obtain higher profitability from the raw materials used.
Over the course of its history – which spans the 19th, 20th and 21st centuries - Corticeira Amorim has successfully confronted various profound, even radical, transformations of society, including two World Wars, and has correctly and promptly diagnosed the risks and uncertainties of its businesses, viewing them firmly as opportunities and challenges.
The difficulties experienced by some of the world's major economies continue to affect the development of economic activity in general. Corticeira Amorim, like all other economic agents, therefore continues to operate in an uncertain economic climate, which affects several export markets:
I. The world wine sector – whereas in 2019 it continued to be difficult to ascertain the true capacity to recover wine consumption per capita in the European Union, it is also true that there appeared to be greater stability, after the marked decline recorded in the 1990s and the early part of the last decade in important wine markets such as France or Spain. Although a complete reversal in the evolution of wine consumption levels in the EU is unlikely, there may be an increase in the quality of products, as opposed to a rise in the quantity and frequency of wine consumption. This scenario would probably be positive for Corticeira Amorim's cork stopper products, but also opens up the possibility of greater acceptance of packaging formats in which cork may play a less crucial role. To this effect, and in order to respond to these questions, Corticeira Amorim continues to implement a Research & Development and Innovation policy that makes it possible to develop a product range of stoppers that can satisfy the needs of any wine producer, in any market, in terms of quality, quantity and price.
The United States maintained its significant weight in the global wine market in 2019, and continued to attract the efforts of all exportorientated wine producers. Despite the disruption experienced during 2019 as a result of the imposition of import tariffs for European products, the size of the US market and its obvious ability to accommodate premium prices mean that this market remains a key target for boosting the future growth of the wine industry , which is also positive for cork stoppers, given United States consumers' clear preference for such stoppers.
It should be noted that, after the slowdown in 2018 in the growth of wine consumption in the United States, the world's biggest wine market, during 2019 there was also a decrease in the total volume traded, especially in the off-premise segment. However, in terms of overall value, the market continued to grow, especially in the Premium segment.
Demographic adjustments may eventually compensate for this slowdown in growth, mainly because in the "millennials" segment the demographic advance is certainly likely to lead to greater wine consumption; however, this may not compensate for the demographic decline of the baby-boomers segment.
Direct-to-consumer sales (DTC) and e-commerce in the US continued
to grow in 2019, complementing growth already seen in 2018 and, even more than in 2017. This a sales model that interests an increasing number of wine producers. Given the current public health situation, observed in the beginning of 2020, it is expected that the DTC and e-commerce channel will assume even greater relevance in the sales mix of wine producers. Data for 2020 also suggests an increase in the importance of home delivery channels, with companies located in New York City reporting daily sales at the level of some of the most important national holidays in the USA.
These trends are expected to accentuate as a result of the recent COVID-19 pandemic, which will also cause a transfer of wine consumption levels from the on-premise segment to the off-premise segment. There is, however, an element of instability in relation to these trends and related to any analysis that incorporates the pandemic recorded in early 2020, which cannot be fully estimated, especially with regard to the possible impact on the integrity of the supply chain. As the pandemic progresses, it will be necessary to incorporate possible lockdown scenarios that may be enacted by different governments, which will inevitably have an impact on the productive capacity of companies upstream and downstream of the international wine trade, such as producers of bottles and other products that are essential for the commercialisation of wines, sparkling wines and spirits.
Two other important issues are the ability to keep international transport lines open - which continues to be volatile given the fluidity of the situation in international ports - and the ability to practice viticulture without too many constraints. The end of the first quarter and second quarter of 2020 will be crucial for wine development, and the impact of COVID 19 on the availability of qualified labour cannot be overlooked. Given the possible impact on both the quantity and quality of wine production over the coming months and the consequent impact on Corticeira Amorim's business, emphasis should be placed on the inherent risk associated to these two issues.
Wine consumption in China also fell in 2019, which, along with post-Brexit uncertainties (the United Kingdom remains one of the world's biggest wine markets) and the US / China trade war has generated further instability in the wine industry. Sales of champagne also stagnated, however to a large extent this change was offset by the increase in sales recorded by producers of prosecco, cava and cremant wines and therefore, the Sparkling Wines segment continued to grow in 2019.
Overall, sales conducted via electronic channels continued to increase their market share throughout 2019, and in recent months there has also been a strengthening of the role of wine tourism in direct sales to consumers, something that will be influenced by the public health situation in 2020, at least during the first half of the year. "Bio" and Sustainability issues are also no longer a passing trend, and have assumed decisive importance. In this regard, it is worth highlighting the very positive positioning of Corticeira Amorim's products and their ability to help reduce the carbon footprint of our customers' products, leveraging their competitive capacity. In this context, it is important to highlight the study published in 2019 on the CO2 retention capacity attributed to Neutrocork stoppers.
In the case of wines, spirits and beer, premiumisation continues to create a more favorable territory for cork packaging solutions, to the detriment of synthetic closures.
Another issue that continued to be important in 2019 is convenience and ease of opening of packaging. Perception of this trend, clearly felt within the company over recent years, led to the launch of the
innovative Helix twist-to-open solution. For the first time, Helix enables consumers to enjoy the technical, sustainability and premium image advantages of cork stoppers without the need to use a corkscrew. It is expected that this innovation will facilitate consumption of wines intended for rapid consumption, which is the main target of this product, thereby boosting the fractional consumption of wines without loss of quality. This already occurs in important markets such as South Africa and the United States and in 2019 the latter became the largest market for the Helix solution.
In 2019 the NDtech individual screening technology also continued to reinforce the quality perception of wines sealed with Amorim products. This technology remains the only solution available in the market with international scientific validations. This recognition greatly reinforces market expectations regarding Corticeira Amorim's ability to significantly boost production capacity and broaden the framework of the concept of undetectable TCA. As expected, this innovative technology was consolidated in 2019, reinforcing Amorim's position as a leader in the production, sale and distribution of natural cork stoppers that deliver individual non-detectable TCA performance. The solution was supplied to over 2,000 customers around the world during the year.
II. The construction sector - the strong slowdown in the business activity of this sector, both in terms of new construction and renovation of existing buildings, and the postponing of purchase decisions by end consumers, has significantly dampened global demand for products intended for this sector, such as thermal and acoustic insulation and floor and wall coverings.
This global slowdown may be counteracted by taking advantage of identified growth opportunities, either by strengthening the company's presence in markets already identified as having high growth potential, especially emerging markets, or by increasing the market share in more mature markets. These opportunities will be significantly reinforced by the launch of new collections, development of the product portfolio and expansion of the product range.
Growing awareness of sustainability factors amongst end consumers is likely to increase demand for cork coverings, which will be an important driver of growth in sales volume.
Over the long term, Corticeira Amorim's performance may also be influenced by the following factors, which are continuously monitored and evaluated:
I. Exchange rate volatility - a potential erosion factor for business margins. In the short term, the effects of exchange rate volatility have been counteracted by an active policy of replacing billing currencies - in the current year consolidated sales in non-Euro currencies represented 31.5% of billing to Customers outsider the Amorim group, and by a hedging policy against exchange rate risk that has been consistently adopted (whether natural hedging or by contracting appropriate financial instruments). Over the long term, Corticeira Amorim has been committed to the development of new products / solutions with greater added value, in order to achieve a product mix that will be capable of overcoming these constraints. An organisational model has therefore been adopted that is orientated towards the creation of value for the business - moving up the value chain, and thereby overcoming this risk.
II. Climate change – a potential factor that may reduce availability of the raw material, to the extent that climate change may lead to an imbalance in the ecosystem of the cork oak forest, in particular due to the occurrence of severe droughts, which would hinder the propagation and growth of cork oak trees.
The ability of the cork oak tree and cork itself (in the form of raw material and products) to sequester carbon is very important since this helps mitigate greenhouse gas emissions, the underlying cause of climate change. In this regard, the conclusions of a group of researchers from the Instituto Superior de Agronomia (ISA) left no doubt about the important role of the cork oak tree and its surrounding ecosystem: for each ton of cork produced, the cork oak forest sequesters up to 73 tons of carbon dioxide.
The cork oak tree is the basis of a unique ecological system in the world, which ensures the survival of many species of indigenous fauna and helps safeguard the environment. Cork oak forests only exist in seven countries in the Western Mediterranean Basin - Portugal, Spain, France, Italy, Morocco, Algeria and Tunisia, where they act as a barrier to the advance of the desert, because they can prosper in climates with low rainfall, and make a positive contribution to fixation of the soil and organic matter, reducing erosion and increasing water retention.
Corticeira Amorim's products are also important carbon sinks, throughout their useful life. This was noted by the researchers and authors of the study coordinated by the University of Aveiro, released in 2016, which quantified the carbon footprint of the cork sector: "the use of cork products help mitigate climate change, whether due to their capacity to retain carbon or by substituting more energyintensive alternative products ".
Industrial valorisation of cork extracted from cork oak trees is the greatest guarantee of the preservation and development of the cork oak forests, ensuring their economic viability. Today, the cork oak forest is a key concern, and has specific legislation to protect it, as well as several programmes by non-governmental organizations that seek to preserve the forest, by improving and certifying forest management practices. It is essential that there is development of subericulture which is capable of promoting the crucial role played by the cork oak forest while simultaneously, stimulating market growth for cork products.
In this manner the aforementioned factors will provide an opportunity to differentiate cork products (due to their CO2 retention) thereby increasing their use in thermal insulation allied to the development of eco construction.
III. Development of alternative closures - as in previous years, in 2019 there was a continued trend of decreasing use of alternative closures by wine producers, especially in the case of plastic stoppers that have lost market share in key countries. The growth rate of screwcaps continued to decline in many markets, but at a more stable rate in 2019. This scenario is underpinned by market studies published over recent years by several international market research companies, which reinforce the role played by cork stoppers in the growth and profitability of the brands that use cork stoppers in the world's biggest wine markets.
In the United States, 72% of the top 100 premium brands are sealed with cork (Nielsen USA, June 2017) and 97% of consumers say that cork is an indicator of high quality wine (Wine Opinions, July 2017). US wine consumers are willing to pay a premium of \$3.87 for a wine sealed with cork. Sales of cork-sealed wines increased by 43% between 2010-2017, while sales of wines with other types of closures registered 16% growth (Nielsen USA, June 2017).
In the UK, surveys conducted by Nielsen UK (October 2017) analysed the top 1500 wine brands and concluded that, on average, wine bottles sealed with natural cork sold at a premium of £1.52 per bottle compared to screwcap-sealed wines. In the case of red wines, the average price of a bottle sealed with a natural stopper is £7.15, compared to £5.26 for a bottle sealed with a screwcap - a price differential of over 36%. Cork-sealed wines enjoy strong annual growth (+ 6.1%) which is even more expressive for red wines (+ 11.3%). Surveys carried out by CGA (October 2017) on the UK's 30 largest wine brands revealed 17% annual growth for cork-sealed wines, compared to 9% growth for wines sealed with artificial closures. The data revealed that the price of cork wines has increased by more than 11% since 2015, compared to +6% for wines sealed with artificial closures. The volume of cork-sealed wines cork has increased by 48% since 2015, compared to just 10% growth in volume of wines sealed with artificial closures.
This clear preference for cork doesn't just exist in the USA and the United Kingdom. It is also mirrored in other important wine markets, such as China, France, Italy and Spain.
Manufacturers of artificial closures are also trying to develop formulae that are more in line with the micro-oxygenation needs of the wines produced by different wine producers in different countries. If these attempts continue to fail to deliver significant results, manufacturers of plastic stoppers will continue to search for alternative sources to petroleum as a raw material. Despite these efforts, plastic stoppers continue to be associated with low-end wines and with lower profitability levels for producers and distributors.
Screwcaps continue to be conditioned by the following factors:
accompanies the technical development of competing materials, with regard to compliance with certifications, requirements, formats, price competitiveness and performance, which is only possible in the world of cork through the development of:
Corticeira Amorim is convinced that the valorisation of cork and the recognition of its technical and environmental properties will enable its continuous and progressive global affirmation. In this context there should be continued communication of the added values of cork, taking into account long-term concerted strategies currently underway, especially in the Composite Cork BU, which will make it possible to implement this vision:
Corticeira Amorim's activities are exposed to a variety of financial risks: market risks (including exchange rate and interest rate risks), credit risks, liquidity risks and capital risks. According to the terms of line e) of number 5, of article 508-C of the Commercial Company Code, the Company's objectives and policies in terms of managing these risks, including the coverage policies for each of the main forecast transaction categories for which coverage accounting is applied, and the exposure to pricing, credit, liquidity and cash flow risks are duly set out in the Note on "Managing Financial Risks" included in the Notes to the Consolidated Accounts.
There were no transactions involving Corticeira Amorim's own shares, so at the end of the year Corticeira Amorim held no treasury stock.
Considering that, based on the individual financial statements for the year ended 31 December 2019, the Company registered a net profit for the year of € 45,141,744.16 (forty-five million, one hundred and forty-five thousand, seven hundred and fortyfour euros and sixteen cents), the Board of Directors of Corticeira Amorim, S.G.P.S., S.A.
that the Shareholders consider and approve a resolution that the above net profit for the year in the amount of € 45,141,744.16 be appropriated as follows:
As part of the annual assessment of the Company's performance in terms of corporate governance, the Board of Director recognises and underlines the professional, diligent, judicious and proactive work of all the members of Corticeira Amorim's Board of Directors and Executive Board and their non-executive members towards:
In accordance with line c) of number 1 of article 245 of the Portuguese Securities Code, the members of the Board of Directors state that, to the best of their knowledge, the annual accounts and other documents included in the statement of accounts were drawn up in accordance with the applicable accounting standards, giving a true and accurate account of assets and debts, of the financial situation and profits/losses of Corticeira Amorim, S.G.P.S., S.A. and the companies that are consolidated by the group. They also state that the management report faithfully expresses the business evolution, performance and position of Corticeira Amorim, S.G.P.S., S.A. and the companies that are consolidated by the group and that the report includes a special chapter describing the main risks and uncertainties of the company's businesses.
The worldwide Covid-19 pandemic, and the impact of the containment measures subsequently taken by the various public authorities, are expected to cause a sharp deterioration in global economic growth in 2020.
Corticeira Amorim is an international company (more than 90% of its sales come from outside Portugal, as detailed in note 9.3 of the management report) and, as such, it is exposed to the global economy, in particular to private consumption. If the spread of the Covid-19 outbreak significantly affects consumption, this will impact customers and, consequently, the value chain, and therefore, it could have an effect on the company's business activity. The scale, dimension and duration of the current moment of uncertainty, makes it difficult to assess the extent of the respective direct and indirect impacts, and, as such it is currently difficult to estimate its value. However, it is important to highlight the following considerations:
Impacts on business activity:
Impacts on the value chain:
Between December 31, 2019 and the publication date of this report, there were no other relevant facts that could materially affect the financial position and future results of Corticeira Amorim and the group of subsidiary companies included within the consolidation perimeter.
The Board of Directors would like to take this opportunity to express its gratitude to:
To all our Employees, whose professionalism, willingness and commitment have contributed so much to the development and growth of the companies belonging to the Corticeira Amorim Group, we express our sincere appreciation.
Mozelos, 23rd March 2020
The Board of Directors of Corticeira Amorim, S.G.P.S., S.A.
[ ← ] 100% natural, recyclable and renewable, cork is extremely light, impermeable to liquids and gases, elastic, compressible and resilient.
Corticeira Amorim has been reviewing its corporate governance since 1999, the date on which the Portuguese Securities Market Commission (CMVM) published the first recommendations on the governance of listed companies, aiming at the improvement of mechanisms for the protection of investors in securities markets. The Company compares it with, on the one hand, what are considered best practices, and on the other, with the circumstances of its activity and the challenges it has to meet. As a result, it has been implementing a set of measures which, overall, have the main objectives of strengthening the internal systems of control and supervision, enhancing transparency, fostering the participation of shareholders in the life of the company and ensuring the sustained creation of shareholder value.
This document describes corporate governance policies and practices adopted by the Company, while also providing a qualitative assessment of them compared with the best practices listed in the CMVM corporate governance code of the Portuguese Institute of Corporate Governance (IPCG).
Section 8 of this report also includes the information referred to in article 447 of the Portuguese Companies' Code (CSC), in article 3 of Law No. 28/2009, of 19 July (Remuneration Policy), in article 245-A(1)(r) of the Portuguese Securities' Code (diversity in management and supervisory bodies) and in article 5 of Law no. 62/2017 of 1 August (balanced representation of women and men in management and supervisory bodies).
PART I Mandatory information on Shareholder structure, organisation and corporate governance
1. The capital structure (share capital, number of shares, distribution of capital by shareholders, etc.), including an indication of shares that are not admitted to trading, different classes of shares, rights and duties of same and the capital percentage that each class represents (Article 245-A/1/a).
Corticeira Amorim's share capital amounts to EUR 133 million and is represented by 133 million ordinary registered shares for a nominal value of one euro each, and which grant the right to dividends.
All shares issued by the Company are listed on Euronext Lisbon - Sociedade Gestora de Mercados Regulamentados, S.A.
| Shareholder | No. of shares owned |
Stake | Voting rights |
|---|---|---|---|
| (quantity) | (%) | (%) | |
| Qualifying interests: | |||
| Amorim Investimentos e Participações, SGPS, S.A. |
67,830.000 | 51.000% | 51.000% |
| Great Prime, S.A. | 13,725.157 | 10.320% | 10.320% |
| Amorim Soc. Gestora de Participações Sociais, S.A. |
13,414.387 | 10.086% | 10.086% |
| Freefloat* | 38,030.456 | 28.194% | 28.594% |
| Total | 133,000.000 | 100.000% | 100.000% |
* includes 3,045,823 shares (2.29%) held by fund managed by Santander Asset Management, SA, SGIIC (communication received by the company on 6 June 2019)
2. Restrictions on the transfer of shares, such as clauses on consent for disposal, or limits on the ownership of shares (Article 245-A/1/b).
There are no restrictions on the transfer of shares.
3. Number of treasury shares, the percentage of share capital that it represents and corresponding percentage of voting rights that corresponded to treasury shares (Article 245-A/1/a).
As at 31 December 2018 Corticeira Amorim held no treasury shares and it did not engage in transactions during 2019, reason why as at 31 of December 2019 the company did not own treasury shares.
4. The disclosures of important agreements to which the company is a party and that come into effect, amend or terminated in cases such as a change in the control of the company after a takeover bid, and the respective effects, except where due to their nature, would be seriously detrimental to the company; this exception does not apply where the company is specifically required to disclose said information pursuant to other legal requirements (Article 245-A/1/j).
The company has not entered into any agreements as described in this paragraph except for the normal "change of ownership" clauses included in certain loan agreements entered into during the normal course of operations and which, on a case-by-case basis, have been analysed and their contractualisation considered appropriate for the company's interests. At 31 December 2019 there were covenants requiring the maintenance of Corticeira Amorim's controlling interest in contracts regarding loans totalling sixty million euros (31-12-2018: forty-five million euros). In the case of change of shareholder control, the contracts provide the possibility - but not the obligation - of early repayment of the amounts loaned. This circumstance is not likely to impair the free assessment by shareholders of the performance of the members of the Board of Directors.
5. A system that is subject to the renewal or withdrawal of countermeasures, particularly those that provide for a restriction on the number of votes capable of being held or exercised by only one shareholder individually or together with other shareholders.
The Articles of Association of the Company do not include measures of this type and, to the best knowledge of Corticeira Amorim, there are no other arrangements and/or measures with that same goal.
Corticeira Amorim has no knowledge of the existence of any shareholders' agreements that might lead to the aforementioned restrictions.
7. Identificação das pessoas singulares ou coletivas que, direta ou indiretamente, são titulares de participações qualificadas (art. 245.º-A, nº 1, als. c) e d) e art. 16.º), com indicação detalhada da percentagem de capital e de votos imputável e da fonte e causas de imputação.
| Shareholder Amorim Investimentos e Participações, SGPS, S.A. (a) |
No. of shares | % of share capital with voting rights |
|---|---|---|
| Directly | 67,830,000 | 51.000% |
| Attributable total | 67,830,000 | 51.000% |
(a) The shares with voting rights in Amorim Investimentos e Participações, SGPS, S.A. are wholly owned by three companies, Amorim Holding Financeira, SGPS, S.A. (11.392%), Amorim Holding II, SGPS, S.A. (38.608%) and Amorim - Sociedade Gestora de Participações Sociais, S.A. (50%) without any of them having a controlling stake in the company, thereby ending the imputation chain, under the terms of Article 20 of the Portuguese Securities Code. The share capital and voting rights of these three companies, in turn, are held, respectively in the case of the first two, directly and indirectly (through Imoeuro SGPS, S.A. and Oil Investment, B.V.) by Ms. Maria Fernanda Oliveira Ramos Amorim and daughters, and in the third case by Mr. António Ferreira de Amorim, wife and children.
| Shareholder Great Prime S.A. (b) |
No. of shares | % of share capital with voting rights |
|---|---|---|
| Directly | 13,725,157 | 10.320% |
| Attributable total | 13,725,157 | 10.320% |
| Maria Fernanda Oliveira Ramos Amorim |
No. of shares | % of share capital with voting rights |
|---|---|---|
| Directly | - | - |
| Through the shareholder Great Prime, S.A. (b) |
13,725,157 | 10.320% |
| Attributable total | 13,725,157 | 10.320% |
(b) The share capital of Great Prime, S.A. is wholly owned by three Companies: API Amorim Participações Internacionais, SGPS, S.A. (19.80%), Vintage Prime, SGPS, S.A. (19.80%) and A Porta da Lua, S.A. (60.40%), this latter wholly owned by Maria Fernanda Oliveira Ramos Amorim.
| Shareholder Amorim, Sociedade Gestora de Participações Sociais, S.A. (c) |
No. of shares | % of share capital with voting rights |
|---|---|---|
| Directly | 13,414,387 | 10.086% |
| Attributable total | 13,414,387 | 10.086% |
(c) The capital of Amorim, Sociedade Gestora de Participações Sociais, S.A. is held by António Ferreira de Amorim, by his wife and children, but none of them holds a controlling interest in the company.
(*) Held directly and indirectly through the companies Imoeuro, SGPS, S.A. and Oil Investments, B.V.
a) Corticeira Amorim shares held and/or traded directly by members of the governing bodies of the Company:
• The members of the governing bodies did not trade any shares representing the share capital of the Company during the 2019 financial year. At 31 December 2019, they did not hold any shares in Corticeira Amorim.
b) Corticeira Amorim shares traded by companies in which the members of the Company's governing bodies exercise management or supervisory responsibility:
• On 5 June 2019, following the successful conclusion of the Public Offering, Investmark Holdings, B.V. sold 4,600,000 shares representing 3.46% of Corticeira Amorim's share capital and voting rights, at a price of 9.50 euros/share. The settlement of the offer was on 7 June 2019. Luisa Alexandra Ramos Amorim (Member of the Board of Directors of Corticeira Amorim) held, at the time of this transaction, the position of Director of the Investmark Holdings, B.V. company.
c) Other changes in direct ownership of Corticeira Amorim shares in companies in which the members of the Company's governing bodies exercise management or supervisory responsibility:
• On 30 July 2019, following the completion of the crossborder merger of Investmark Holdings, B.V. and Great Prime, S.A., Investmark Holdings, B.V. ceased to exist, transferring its rights and obligations to Great Prime, S.A. and, as a result, the 13,725,157 shares representing 10.320% of the share capital and voting rights of Corticeira Amorim, previously held by Investmark Holdings, B.V., were transferred to Great Prime, S.A. Luisa Alexandra Ramos Amorim (Member of the Board of Directors of Corticeira Amorim) held, at the time of this transaction, the position of Director of the Investmark Holdings, B.V. Company and Member of the Board of Directors of Great Prime, S.A. Nuno Filipe Vilela Barroca de Oliveira (Vice-Chairman of
the Board of Directors of Corticeira Amorim) is married to Marta Cláudia Ramos Amorim Barroca de Oliveira who, at the time, held the position of Director of Great Prime, S.A.
• On 18 December 2019, following the completion of the cross-border merger of Amorim International Participations, B.V. and Amorim – Sociedade Gestora de Participações Sociais, S.A., Amorim International Participations, B.V. ceased to exist, transferring its rights and obligations to Amorim – Sociedade Gestora de Participações Sociais, S.A. and, as a result, the 13,414,387 shares representing 10.086% of the share capital and voting rights of Corticeira Amorim, previously held by Amorim International Participations, B.V., were transferred to Amorim – Sociedade Gestora de Participações Sociais, S.A. António Rios de Amorim and Cristina Rios de Amorim
Baptista (respectively, Chairman and Member of the Board of Directors of Corticeira Amorim) held, at the time, the position of Directors of the company Amorim – Sociedade Gestora de Participações Sociais, S.A.
d) Corticeira Amorim shares held by companies in which the members of the Company's governing bodies exercise management or supervisory responsibility:
The ownership recorded on 31 December 2019, referred to in sections i., ii. and iii. remains unchanged at the issue date of this report.
According to notices received from persons/entities covered by this regulation, it is hereby reported that, in 2019, transactions involving the Corticeira Amorim's shares were not carried out by entities related to the company's Directors and Officer, with the exception of those mentioned in sub-paragraphs b) and c).
No company which controls Corticeira Amorim or any of Corticeira Amorim's directors or officers or any person closely related to such directors or officers carried out transactions involving Corticeira Amorim's financial instruments.
f) List of Shareholders holding at least one-tenth of the Company's share capital:
The share ownership referred to in paragraphs i., ii. and iii. refers to 31 December 2019, remaining unchanged at the date of publication of this report.
It is the responsibility of Corticeira Amorim's Board of Directors to maintain effective control over the activities of the Company. It is the highest strategic decision making body and also the body responsible for monitoring the most important and relevant aspects of the Company's business and affairs, including significant matters decided on or simply examined by the Executive Committee, therefore ensuring that all members of the Board of Directors are aware of the measures adopted as a response to Board decisions and can monitor their implementation and effectiveness.
As provided for in the Portuguese Companies' Code, the role of the Board of Directors is to manage the Company's business and affairs and decide on any matter relating to its management while abiding by the resolutions adopted by the General Meeting or the decisions made by the Supervisory Board whenever required by law or the Articles of Association.
These duties include, among others:
j) change of head office;
k) merging, de-merging or changing the legal status of the Company;
The Company's Articles of Association1 give the Board of Directors the following powers: the exercise of all powers of direction, management, administration and representation of the company; transfer the head office of the company to any other location permitted by law; create in any part of the national territory or abroad, delegations, agencies, subsidiaries, branches, offices or other forms of representation of the company; acquire, dispose of or encumber in any way the company's own shares and debt instruments and any rights, as well as perform the operations on those securities deemed appropriate; acquire, sell, exchange and lease real estate by any acts or contracts as well as encumber them, even if through the pledging of assets; exercise and promote the exercise of rights of the company in the companies in which it holds interests; acquire, sell, exchange, lease or encumber in any manner movable property; negotiate with credit institutions financing operations; carry out transactions in bank accounts, deposit and withdraw money, issue, accept, sign and endorse cheques, bills of exchange, promissory notes, invoice statements and other negotiable instruments; admit fault, give up or settle any legal action, as well as enter into arbitration and approve the resulting rulings; perform any other duties envisaged herein and in law.
The Board of Directors may delegate any of their powers2 as follows:
As far as increases in the share capital are concerned and in accordance with article 8 of the Company's Articles of Association the Board may, by unanimous decision of its members, increase the share capital, one or more times, in accordance with the law, up to EUR 250 million. It is the Board of Directors' responsibility to fix the terms and conditions for share capital increases as well as the share subscription period and payment procedures.
In the financial year under review, the Board of Directors has not decided to undertake any increase of the share capital of the Company.
The Company did not conduct any business operation or deal with holders of qualifying interests or the entities with which they are in any relationship in accordance with Article 20 of the Portuguese Securities' Code outside normal market conditions. Any business that occurred fell under the current activity of the contracting parties. The procedures applicable to these transactions are described in paragraphs 89 to 91 below.
[1] The company's Articles of Association provide that, by unanimous decision of its members, the Board of Directors may pass resolutions about capital increases, once or more times, in accordance with the law, up to EUR 250 million. It is also responsible for deciding on the respective terms, conditions method and length of the subscription and payment period. However, according to the general law such discretion is not currently in force:
Additional information: in October 2000 no capital increases were issued under the powers of the Board of Directors.
[2] Regarding the current term of office (2017-2019), the Board of Directors decided to delegate powers to an Executive Committee as follows:
Powers delegated to Executive Committee: the implementation of the decisions made by the Board of Directors and the management of the Company's ordinary course of business, and through the issue of binding instructions, the management of the ordinary course of companies directly and indirectly controlled by the Company, setting the limits of delegation as set out below:
The following powers are not delegated to the Executive Committee: to choose the chairman of the executive committee; to co-opt directors; to request the calling of general meetings of the Company; to approve management reports and annual accounts; to provide bonds and personal or real guarantees by the Company; to change the registered office and increase the capital, in accordance with the articles of association; merger, de-merger and transformation projects of the Company;
For the purposes of this delegation, the following are not considered to be management powers of ordinary course of the Company, and are therefore not delegated to the Executive Committee: approval of investments/disinvestments by the Company and companies controlled directly or indirectly by the Company in an amount exceeding EUR 1,500,000.00 (one million five hundred thousand euros); acquisition, sale or encumbrance of real estate of the Company and companies controlled directly or indirectly by the Company in an amount exceeding EUR 500,000.00 (five hundred thousand euros); constitution or holding, namely through the direct or indirect acquisition of shareholdings, in companies in excess of 500,000.00 euros (five hundred thousand euros); approval and change of strategic plans and annual targets of the Company and the group; transactions of the company, or of companies controlled directly or indirectly by the company, with related entities or with any shareholders of the Company in excess of EUR 1,500,000.00 (one million five hundred thousand euros); definition or modification of the organisational structure of the company and the group; issue of bonds or other Company debt instruments in excess of EUR 5,000,000.00 (five million euros); amendments to the articles of the companies controlled by the Company; demerger, merger, winding-up projects of any companies controlled by the Company; conclusion by the companies controlled by the Company of subordination contracts and parity group contracts; proposal and exercise of voting rights by the Company with regard to the appropriation of profits/distribution of dividends by companies directly held by the Company.
Corticeira Amorim is the holding company of an economic group based in Portugal, solidly established internationally, through subsidiaries, associate companies and joint ventures. The vast portfolio of products and solutions it continually develops responds to diverse markets and consumers.
The governance of Corticeira Amorim addressing the challenges arising from this framework, advocates a policy of diversity in the composition of its corporate bodies, in particular the Board of Directors and the Supervisory Board, as a way to:
Corticeira Amorim therefore acknowledges the need to continually promote diversity in its corporate bodies and other management bodies, particularly the Board of Directors and the Supervisory Board, especially in the following areas:
As regards the Board of Directors and the Supervisory Board, with the composition remaining unchanged, compliance is verified with the policy indicated in section 19 (Board of Directors) and 33 (Supervisory Board) of this report. It is to be noted, in particular, that in both cases the body includes 33.3% of people of the under-represented gender.
As better detailed in section 15 of this report, the Company has adopted a system of corporate governance commonly known as the "strengthened Latin" model, which is based on a clear separation between management and supervisory bodies as well as double supervision through a supervisory board and a statutory auditor.
11. Details and position of the members of the Presiding Board of the General Meeting and respective term of office (beginning and end).
The Presiding Board of the General Meeting consists of a chairman and a secretary. These posts were held in the current term of office (2017 to 2019) by:
Beginning of first term of office: 24 May 2014 Date of first renewal of term of office: 07 April 2017 End of current term of office: 31 December 2019, remaining in office until a new election pursuant to law.
No changes in the composition of the Presiding Board of the General Meeting took place during 2019.
Professional qualifications and other relevant information of the curriculum of the members of the Board of the General Meeting:
Graduate in law from the Faculty of Law of the University of Coimbra. He is a lawyer, registered with the Portuguese Bar Association since 1975. He is the executive chairman of the law firm Aguiar-Branco & Associados and legal advisor to private and public companies, connected to financial, industrial and sales activities. He has held important positions in associations of a professional nature, namely in the Portuguese Association of Young Lawyers and in the Portuguese Bar Association. He is an arbitrator of the Commercial Arbitration Centre of the Commercial Associations of Lisbon and Porto. He is the delegate for North Portugal of the European Lawyers' Union (UAE).
He combines his professional activity with some cultural associations, such as the Fundação Eng.º António de Almeida foundation (Director) and the Instituto para a Cooperação e Desenvolvimento Portugal-Oriente institute (member of the Advisory Council).
Gender: Male Age: 69
Graduate in law from the Faculty of Law of the University of Porto; is a lawyer, registered with the Portuguese Bar Association since 2008. She is a lawyer and legal consultant for public and private companies, connected to the financial, industrial and sales activities. Gender: Female Age: 37
12. Any restrictions on the right to vote, such as restrictions on voting rights subject to holding a number or percentage of shares, deadlines for exercising voting rights, or systems whereby the financial rights attaching to securities are separated from the holding of securities (Article 245-A/1/f).
There are no statutory guidelines providing for the existence of shares that do not carry voting rights or determining that voting rights exceeding a certain threshold shall not be counted if such votes are cast by only one shareholder or by a shareholder who is related to that shareholder. The Articles of Association do not envisage mechanisms that aim to cause a time lag between the entitlement to receive dividends or subscribe for new securities and the voting rights of each ordinary share.
Each share is entitled to one vote.
The blocking of shares to attend the General Meeting must be made at least five business days before the date designated for the respective meeting. The same rule applies when a General Meeting is scheduled for a later date, when the initial session of the General Meeting is suspended.
The Articles of Association provide for the possibility of shareholders voting by mail, provided that the ballots reach the Company at least three business days before the General Meeting. Postal ballot forms must reach the registered office of the Company not less than three business days (by 6.00 p.m.) before the Annual General Meeting. Votes sent by mail are equivalent to negative votes for proposals submitted after the date on which such votes were cast. The presence of the shareholder at the General Meeting revokes the vote it may have sent by mail.
Corticeira Amorim's Articles of Association allow electronic voting, provided that there are adequate technical resources available to enable checking the validity of electronic votes and ensuring their data integrity and confidentiality. Votes sent by electronic means must be received by the Company by the third business day prior to the General Meeting. The Chairman of the General Meeting must check prior to the convening of the General Meeting, the existence of technical means and communication to ensure the safety and reliability of the votes cast. If the Chairman of the Board of the General Meeting decides that the technical requirements for voting by electronic means are met, such information shall be included in the Notice calling the meeting. Such requirements were not met in 2018. Votes sent by electronic means are equivalent to negative votes for proposals submitted after the date on which such votes were cast. The presence of the shareholder at the General Meeting revokes the vote it may have sent by mail or by electronic means.
Postal ballot forms are available from Corticeira Amorim's registered office (Rua de Meladas, no. 380 – 4536-902 Mozelos - Portugal) and from the Company's website(www.corticeiraamorim.com). At the request of a shareholder, such postal ballot forms may be provided by e-mail.
13. Details of the maximum percentage of voting rights that may be exercised by a single shareholder or by shareholders that are in any relationship as set out in Article 20/1.
The Articles of Association do not provide for any limit on the number of votes that each shareholder (either separately or jointly with other shareholders) is entitled to cast or exercise.
14. Details of shareholders' resolutions that, imposed by the Articles of Association, may only be taken with a qualified majority, in addition to those legally provided, and details of said majority.
The Company's Articles of Association establish specific requirements for convening/decision-making quorums, for the following situations:
a) Identical to those of general law:
• removal from office of a director elected under the special rules set out in article 392 of the Portuguese Companies' Code - the removal from office will not become effective if shareholders accounting for at least 20 per cent of the share capital have voted against the removal of such director, irrespective of the just cause invoked for such removal from office;
b) Higher that those of general law:
a) Composition
The Company has adopted a system of corporate governance commonly known as the "strengthened Latin" model, which is based on a clear separation between management and supervisory bodies as well as double supervision through a supervisory board and a statutory auditor.
The Board of Directors considers that the adoption of this model has resulted in the constitution of a supervisory body with stronger and effective supervisory powers composed entirely of members subject to an incompatibility regime and broader independence regulations. It also considers that attributing these powers to an autonomous body – the Supervisory Board – helps create an efficient corporate governance model because it establishes a clear division between the management and supervisory bodies, avoiding the granting of supervisory powers to individual members of the Board of Directors, which by law is a collegial body.
As a consequence, the Board of Directors is confident that the corporate governance model adopted is suitable for the specific circumstances of Corticeira Amorim for the following reasons:
Corticeira Amorim encourages an internal reflection on corporate governance structures and practices adopted by the Company by comparing their efficiency with the potential benefits to be gained from implementing other practices and/or measures established as a reference in the Portuguese Institute of Corporate Governance (IPCG) Corporate Governance Act or by other organisations.
This matter – as well as Corticeira Amorim's organisational development issues – has been reviewed by the Executive Committee. Reflection on the corporate governance structure itself has been conducted by the Executive Committee and by the Board of Directors.
16. Articles of association rules on the procedural and material requirements governing the appointment and replacement of members of the Board of Directors, the Executive Board and the General and Supervisory Board, where applicable (Article 245-A/1/h).
The rules governing the appointment and replacement of members to the board of directors are those provided for in law, in addition to a number of specific features set out in the Company's Articles of Association:
The election of members to the board shall be done on the basis of lists specifying the office to be filled by each Director. The voting shall be carried out in the following manner:
First: one Director shall be elected separately from among the people proposed on the lists subscribed by the groups of shareholders who own between 10% and 20% of the share capital. Each list must propose at least two eligible persons for each office to be filled, but the same shareholder may not subscribe to more than one list. If, on a first poll, there are lists submitted by more than one group of shareholders, then a poll shall be first taken among all such lists and, thereafter, among the names of the candidates listed in the winning list. The lists of candidates may be submitted to the General Meeting before the business on the agenda relating to the election of Directors starts to be discussed;
Second: the General Meeting shall elect the remaining directors. All shareholders present may take part in the respective resolution, regardless of whether or not they signed or voted on any of the lists of the first phase. The General Meeting cannot elect the remaining Directors until it has elected one of the nominees on the lists of the first phase, unless no list has been proposed.
The term of office of the Board members is three calendar years. At the end of the Directors' term, the shareholders must elect new directors or re-elect - one or more times - current Directors.
At the time of voting the management report, the annual financial statements and the proposal for appropriation of profit, the Annual General Meeting may decide to remove any or all directors from the Board. This will not imply the payment of any compensation to any Director so removed from office regardless of whether a Director's discharge from employment has been for cause or without cause. However, this provision will not apply to a Board member elected under special election procedures on a first poll if members holding at least a 20% stake in the share capital of the Company resolve against removing any such Director from office regardless of the cause for a Director's discharge from employment.
When a Director is declared to be definitively absent, and there are no substitutes, he/she shall be replaced by co-option, unless the directors in office are not sufficient in number for the board to function. If there is no co-option within 60 days of the absence, the supervisory board appoints a replacement. The co-option and appointment by the supervisory board shall be subject to ratification at the next general meeting.
If a director elected under the special rules of the first stage is absent permanently, and there is no respective substitute, a new election shall be held, at which the special rules of the first phase apply, with necessary adaptation.
17. Composition of the Board of Directors, with details of the Articles of Association's minimum and maximum number of members, duration of term of office, number of effective members, date when first appointed and end of the term of office of each member.
According to the Articles of Association, the company is administered by a Board of Directors composed of a Chairman, a Vice-Chairman and one to nine other members. In the current term, the Board of Directors consists of a Chairman, a Vice-Chairman and four members, all incumbent members.
The duration of the term of office of the Board of Directors is three calendar years.
The Board of Directors was composed of six effective members over 2019:
Date of first appointment to the Board of Directors: 29 March 1990
First appointment as Chairman of the Board of Directors: 31 March 2001
End of term of current office: 31 December 2019, remaining in office until a new election pursuant to law.
Date of first appointment to the Board of Directors: 28 March 2003
End of term of current office: 31 December 2019, remaining in office until a new election pursuant to law.
Date of first appointment to the Board of Directors: 31 July 2009
End of term of current office: 31 December 2019, remaining in office until a new election pursuant to law.
Date of first appointment to the Board of Directors: 20 July 2012
End of term of current office: 31 December 2019, remaining in office until a new election pursuant to law.
Date of first appointment to the Board of Directors: 28 March 2003 Elected as member of the Board of Directors at the General
Meeting of Shareholders of 4 April 2013 End of term of current office: 31 December 2019, remaining in office until a new election pursuant to law.
Date of first appointment to the Board of Directors: 20 July 2012
End of term of current office: 31 December 2019, remaining in office until a new election pursuant to law.
Considering the composition of Corticeira Amorim's Board of Directors mentioned in the preceding paragraph (six effective members), this body delegated the executive management to an Executive Committee composed of three members, i.e., in a number equal to the non-executive directors:
| Chairman: | António Rios de Amorim |
|---|---|
| Vice-Chairman: | Nuno Filipe Vilela Barroca de Oliveira |
| Board Member: | Fernando José de Araújo dos Santos Almeida |
| Board Member: | Cristina Rios de Amorim Baptista |
|---|---|
| Board Member: | Luisa Alexandra Ramos Amorim |
| Board Member: | Juan Ginesta Viñas |
The Board of Directors considers that this delegation of powers is in the interests of the company, in particular the agility of its decisionmaking, maintaining a number of non-executive members that it considers appropriate to the functions they perform and the size of the company.
None of the non-executive members are independent.
Chairman of the Board and CEO of Corticeira Amorim since March 2001. He was CEO of Amorim & Irmãos (1996-2001), Director of Sociedade Figueira-Praia (1993-2006), operational manager at Amorim - Empreendimentos Imobiliários, promoter of the Lisbon Towers and Arrábida Shopping projects (1993-1995), and Executive Director of Amorim Hotéis, SA, in charge of the development of the Ibis and Novotel chains in Portugal. Degree of Commerce – Faculty of Commerce and Social Sciences – University of Birmingham (1989) and attended The Executive Program in Business Administration: Managing the Enterprise – Columbia University Graduate School of Business (1992), Managerial Skills for International Business – INSEAD (2001) and Executive Program in Strategy and Organization – Graduate School of Business Stanford University (2007). He was a member of the European Round Table of Industrialists - the only Portuguese corporate group to belong to this association (1991- 1995). Chairman of the Portuguese Cork Association (2002-2012) and the Confédération Européenne du Liège (since 2003). In February 2006, he was awarded the Commendation of Grand Officer of the Order of Agricultural, Commercial and Industrial Merit by the Portuguese President.
Gender: Male | Age: 52
Graduate in business administration from Portuguese Catholic University. He served as a Non-Executive Director of Corticeira Amorim, from March 2003 to September 2005; he then proceeded to carry out executive functions from that date and is currently Vice-Chairman of the Board of Directors.
Non-executive director of various companies in the Amorim Group (since 2000).
Executive director of Barrancarnes (2000-2005).
After a year in the commercial area of Møre Codfish (Norway), he took part in the Comett programme and held an internship in Merril Lynch
(London), then began his professional activity in the Banco Comercial Português Group, where, for three years, he collaborated in the areas of Studies and Planning, International Area and Investment Funds. Gender: Male | Age: 49
Graduated with a Bachelor's Degree in Economics from the University of Porto, Faculty of Economics (1983/84). He joined Corticeira Amorim in 1991 and held various positions in several of the Group's member companies. In 2002, he took over as Manager of Organisational Development and Business Management Planning and Control at Corticeira Amorim. Gender: Male | Age: 58
Cristina Rios de Amorim Baptista (Member):
She graduated in Economics from the Faculty of Economics of Porto, in 1991. She completed an MBA in International Banking and Finance from the University of Birmingham (UK) in 1992. In 2001, she took a postgraduate degree in International Management at the Universidade Católica Portuguesa.
She began working in 1992, for international institutions such as S.G. Warburg España (Corporate Finance) in Madrid (1992), N.M. Rothschild & Sons Limited (Corporate Finance) in London (1993), Rothschild Asset Management Limited (Asset Management) in London (1993), and Soserfin, S.A. (management of economic studies and research) in 1994. She was a Member of the Board of Directors of Fundação Casa da Música (2006 to March 2013) and of Fundação AEP (from 2009 to April 2013).
She joined the upper management of Amorim Investimentos e Participações, SGPS, S.A. (holding company of the Amorim Group) in 1994 and is currently Vice-Chairman and CFO of the Group. In 1997 she took office as Investor Relations Officer at Corticeira Amorim, SGPS, SA. (position held until the end of 2017) and, in July 2012, as member of the Board of Directors of the same company. In April 2017 she was elected a non-executive member of the Board of Directors of Banco BPI, S.A. Gender: Female | Age: 51
With a degree in Marketing from ISAG and Hospitality from EHTE and EHTP, completing several areas of training in Hospitality at the Centre International de Glion, in Marketing from UCI Communication - US and Management at EGP Porto. Director of Amorim – Investimentos e Participações (since 2002), of Quinta Nova – Nossa Senhora do Carmo (since 2006) and, more recently, of Amorim Negócios Internacionais (since 2016). Was the CEO of Natureza, S.G.P.S (2002-2006), Director of Marketing for JW Burmester (2000-2002) and Member of the Hospitality Management in Amorim Hotéis e Serviços and Sociedade Figueira Praia (1996-1997), when she began her role with the Amorim Group. Worked in Management consulting sector at Deloitte & Touche, Porto (1998-2000).
In addition to the business activity, she is the founder and president of the Associação Bagos d´Ouro (since 2010) and Member of the Board of Directors of the Fundação Museu do Douro (2006-2011). Gender: Female | Age: 46
With a wide and extensive professional experience in managing businesses, he has played relevant roles in several international companies such as International Harvester (sales manager), DEMAG EO (sales manager), Hunter Douglas (General Manager and the person responsible for the industrial firms located in Brazil, Argentina and Chile) and Torras Domenech (Managing Director and CEO). He has been a director of Trefinos, SL since 1996. Gender: Male | Age: 78
Companies holding or to which qualifying holdings exceeding 2% of the voting rights of Corticeira Amorim are attributable, which have directors of Corticeira Amorim on their Board of Directors:
Maria Fernanda Oliveira Ramos Amorim is Luisa Alexandra Ramos Amorim's mother, and Nuno Filipe Vilela Barroca de Oliveira's mother-in-law.
António Ferreira de Amorim is the father of António Rios de Amorim and Cristina Rios de Amorim Baptista.
There are no customary and meaningful commercial relations between the members of the Board of Directors and shareholders to whom a qualifying interest is imputed.
21. Organisational charts or flowcharts concerning the allocation of powers between the various corporate boards, committees and/or departments within the company, including information on delegating powers, particularly as regards the delegation of the company's daily management.
As provided for in Corticeira Amorim's articles of association, the committee members currently in office are:
Composition and term of office as described in section 11 herein.
Composition and term of office as described in section 17 of this report; duties as described in section 9 of this report.
Composition and term of office as described in section 28 of this report; duties as described in section 29 of this report.
Composition and term of office as described in section 31 of this report; duties as described in sections 37 and 38 of this report.
Composition, term of office and duties as described in section 39 herein.
Composition, term of office and duties as described in section 67 herein.
As detailed in section 9, the role of the Board of Directors is to manage the Company's business and affairs and decide on any matter relating to its management while abiding by the resolutions adopted by the Annual General Meeting or the decisions made by the Supervisory Board whenever required by law or the articles of association. As provided for in law and the articles of association, the Board of Directors has delegated the day to day management to an Executive Committee, as described in sections 28 and 29 of this report.
The non-executive members of the Board of Directors regularly attend the monthly meetings of the Board of Directors, which analyse and decide on the evolution of all non-delegable matters and all issues whose relevance, materiality and / or criticality becomes pertinent to their inclusion in the agenda of the Board.
The organisation of meetings allows all Directors – both executive and non-executive directors – to adequately prepare themselves in advance in order to participate fully in the meeting and to assess and devise measures to improve meeting productivity and organisation efficiency. The calendar of regular Board meetings is agreed upon at the beginning of every financial year so that all members may be able to be present. Any Director, including non-executive directors, may request the inclusion of items/topics in the agenda to be considered by the directors, up to the second business day prior to any board meeting.
Whenever matters are examined and/or decided in which one or more members of the Board of Directors have particular interests which conflict with the interests of the company, the member(s) in conflict shall inform the Board of this circumstance, providing all necessary information but abstaining from voting on such matters.
A reporting system between the Executive Committee and the Board of Directors has been implemented across the organisation with a view to ensuring alignment of their activities and that the Directors are informed of the activities of the Executive Committee in a timely
fashion. The Executive Committee provides in good time and an appropriate manner to the request, all information requested by other Board Members and which are necessary in accordance with their respective duties.
In the scope of its powers, the Board of Directors has timely access to all information, documents and employees, both from the company and its main subsidiaries, with a view to monitoring the business, evaluating performance and development prospects, and seeking the full explanation of any matter that it deems pertinent.
Thus, in addition to matters which by law or the articles of association fall to be considered exclusively by the Board of Directors, nonexecutive directors are aware of and monitor:
Adopting a management model based on a strategic-operational holding concept, the BUs are coordinated by the Executive Board of Corticeira Amorim.
Each BU has a Board of Directors composed of non-executive and executive members. This body is the authority responsible for deciding on all matters deemed relevant. Each BU has an Executive Management, which is composed of highly qualified, independent executives who have the adequate technical and professional competences to conduct the business and to manage the specific challenges of the business activity developed and foreseen. The executive management in the BU is exclusively the responsibility of independent professional managers, i.e. the Chairman of the Board of Directors does not conduct the executive management of the same, which is the responsibility of the CEO of that BU. In the case of the Cork Stoppers BU, given the complexity of the business, there are two independent Co-CEOs.
The strategic alignment of the entire organisation is enhanced through the use of a balanced scorecard approach by Corticeira Amorim and its BUs. In this regard, Corticeira Amorim's Board of Directors is responsible for approving strategic initiatives and goals (i) for the organisation as a whole, (ii) specifically for Corticeira Amorim, and
(iii) for each BU, in close cooperation with the respective Executive Management.
The diagram below shows how the management structure of the business is currently organised:
The Support Divisions are responsible for monitoring and coordinating the operation of the BUs and their functional areas, under the coordination of the members of the Executive Committee, as shown in the diagram bellow:
The activities of the support areas are periodically reported to the Executive Committee, and its activity is accompanied by an Executive Director. In the year being analysed, Nuno Barroca monitored Internal Audit; Fernando Almeida: Strategic Planning, Organisational Development, Information Systems and Technology and Management Control; the remaining financial sections were monitored by António Amorim.
At intervals deemed appropriate, the managing director of the relevant support division or the Executive Committee or even the Board of Directors may request a review (and they effectively do so) of the activity carried out by the different support divisions in order that the need or opportunity to create new positions or implement new strategies may be considered by the Board of Directors.
[3] The Company's Articles of Association provide for the possibility of the Board of Directors being advised by one to three Advisors, to be appointed by it from among persons of recognised merit and experience, with terms of office coinciding with those of the Directors. The Advisors to the Board of Directors are people who advise the Board of Directors about the various issues addressed at board meetings, but they don't have the right to vote on resolutions passed at meetings.
The Board of Directors elected on 7 April 2017 for the 2017-2019 term did not appoint Advisors to the Board of Directors.
Chairman Manuel Carvalho Fernandes Member Marta Parreira Coelho Pinto Ribeiro Member Eugénio Luís Lopes Franco Ferreira Alternate —
Chairman Augusto Fernando Correia Aguiar Branco
Secretary Rita Jorge Rocha e Silva
In Office ERNST & YOUNG AUDIT & ASSOCIADOS — SROC, S.A., representada por Rui Manuel da Cunha Vieira ou por Rui Abel Serra Martins Alternate Pedro Jorge Pinto Monteiro Silva Paiva
Chairman José Manuel Ferreira Rios
Member Jorge Alberto Guedes Peixoto
Member Abdul Rehman Omarmiã Mangá
In Office
Pedro Jorge Ferreira Magalhães Alternate Pedro Nuno Esteves Duarte
Chairman António Rios de Amorim
Vice-Chairman Nuno Filipe Vilela Barroca Oliveira
Member Fernando José Araújo Santos Almeida
Member Cristina Rios de Amorim Baptista
Member Luisa Alexandra Ramos Amorim
Member Juan Ginesta Viñas
Executive Committee
Chairman António Rios de Amorim
Member
Nuno Filipe Vilela Barroca Oliveira
Member Fernando José Araújo Santos Almeida
The modus operandi of the Board of Directors of Corticeira Amorim scrupulously complies with all applicable rules of procedure regarding the Board of Directors, specifically those set out in the Portuguese Companies' Code, in the Company's Articles of Association and in the regulations issued by the CMVM. This already constitutes real rules of procedure, that are adequate to and foster its efficient operation to safeguard the performance of this collegiate body in the efficient pursuit of the interests of the Company and all its shareholders.
Hence, although no formal Internal Rules as referred in this section do actually exist, Corticeira Amorim believes that the principles of good business practice are part of the core values upheld by both the members of this governing body and the other staff who assist and/ or advise them.
Given that these internal rules have not yet been formalised, they are not available on the Company's website. However, the Board of Directors complies with all rules of procedure prescribed by law (Portuguese Companies' Code, Portuguese Securities' Code, regulations and instructions issued by the CMVM) or by the Company's articles of association, which are available at the CMVM's website (www.cmvm.pt) or at the Company's website (www.corticeiraamorim.com), respectively.
Pursuant to the Articles of Association, the Board of Directors shall meet when and where corporate interest requires. Ten meetings of the Board of Directors were held throughout 2019 (2018: 10 meetings), and all the members of the Board in office attended the meetings. The individual and global attendance was of 100%.
Pursuant to the articles of association, the General Meeting or a Committee it elects shall decide on the assessment of the performance of the directors, including executive directors.
As stated in section 67 of this report, there is a Remuneration Committee (term of office of three years, 2017 to 2019), which is responsible for carrying out the assessment referred to in this point, and it effectively did so.
Pursuant to the statement on the policy for remunerations awarded to the Board of Directors approved at the Shareholders' General Meeting of 12 April 2019, as proposed by the company's Remuneration Committee (Section 69), whenever such is adequate and feasible, such remuneration shall primarily consist of a fixed pay (for executive and non-executive directors) plus a variable pay (for executive directors only) as performance-based premium. The award of the variable pay component of remuneration referred to in the preceding paragraph shall be a bonus resulting from short term performance evaluation and from the contribution of the annual performance to medium / long term economic, environmental and social sustainability of the Organisation. The actual amount of the variable pay shall depend on the appraisal to be carried out every year by the Remuneration Committee on the performance of the Board members, examining the contribution of each individual executive director to both the Company's profit in the relevant financial year and compliance with the Company's targets and implementation of the medium/long-term strategies adopted by the Company; the development of the results and the level of compliance with the following strategic objectives: innovation, organisational development and safety, competitiveness, growth, financial soundness and value creation. The payment of the variable pay component, if any, may be made wholly or in part after determination of the profit (or loss) in respect of a three-year period. There is, therefore, the possibility of the variable pay being reduced if the profit for the year reflects a significant deterioration in the Company's performance in the last financial year or if it is expectable that a significant deterioration will occur in the financial year underway.
26. The availability of each member of the Board of Directors, the General and Supervisory Board and the Executive Board, where applicable, and details of the positions held at the same time in other companies within and outside the group, and other relevant activities undertaken by members of these boards throughout the financial year.
| Company | Position Held |
|---|---|
| CORTICEIRA AMORIM Group | |
| Amorim, S.A. | Chairman of the Board of Directors |
| Amorim Cork, S.A. | Chairman of the Board of Directors |
| Amorim Cork, S.G.P.S., S.A. | Chairman of the Board of Directors |
| Amorim Bartop – Investimentos e Participações, S.A. | Chairman of the Board of Directors |
| Amorim Champcork, S.A. | Chairman of the Board of Directors |
| Amorim Cork Composites, S.A. | Chairman of the Board of Directors |
| Amorim Cork Research, Lda. | Director |
| Amorim Cork Services, Lda. | Director |
| Amorim Florestal España, S.L. | Chairman of the Board of Directors |
| Amorim Florestal, S.A. | Chairman of the Board of Directors |
| Amorim Florestal II, S.A. | Chairman of the Board of Directors |
| Amorim Florestal III, S.A. | Chairman of the Board of Directors |
| Amorim Industrial Solutions – Imobiliária, S.A. | Chairman of the Board of Directors |
| Amorim Cork Insulation, S.A. | Chairman of the Board of Directors |
| Amorim Natural Cork, S.A. | Chairman of the Board of Directors |
| Amorim Cork Flooring, S.A. | Chairman of the Board of Directors |
| Amorim Tops Series, S.A. | Chairman of the Board of Directors |
| Chapius, S.L. | Chairman of the Board of Directors |
| Comatral – Compagnie Marrocaine de Transformation du Liège, S.A. | Chairman of the Board and Chairman of the Presiding Board of the General Meeting |
| Compruss – Investimentos e Participações, Lda. | Director |
| Cosabe – Companhia Silco-Agrícola da Beira, S.A. | Chairman of the Board of Directors |
| Dom Korkowy, Sp. Zo.o | Member of the Board of Directors |
| Equipar – Participações Integradas, SGPS, Lda. | Director |
| ETS Christian Bourrassé, S.A. | Chairman of the Board of Directors |
| Francisco Oller, S.A. | Chairman of the Board of Directors |
| Korken Schiesser GmbH | Chairman of the Board of Directors |
| Olimpíadas Barcelona 92, S.L. | Chairman of the Board of Directors |
| SIBL – Société Industrielle Bois Liège, S.A.R.L. | Director |
| Société Nouvelle des Bouchons Trescasses, S.A. | Director |
| TKCork – Advanced Cork Technology, S.A. | Chairman of the Board of Directors |
| Vinolock, A.S. | Director |
| OTHER COMPANIES | |
| Amorim – Investimentos e Participações, S.G.P.S., S.A. | Member of the Board of Directors |
| Amorim – Serviços e Gestão, S.A. | Chairman of the Board of Directors |
| Amorim – Sociedade Gestora de Participações Sociais, S.A. | Member of the Board of Directors |
| Amorim – Viagens e Turismo, Lda. | Director |
| Amorim Desenvolvimento – Investimentos e Serviços, S.A. | Chairman of the Board of Directors |
| Amorim Global Investors, SGPS, S.A. | Chairman of the Board of Directors |
| Amorim II, SGPS, S.A. | Director |
| Gierlings Velpor – Veludo Português, S.A. | Member of the Board of Directors |
| Montinho das Ferrarias de Baixo – Sociedade Agroflorestal, S.A. | Director |
| OSI – Sistemas Informáticos e Electrotécnicos, Lda. | Director |
| QM1609 – Investimentos Imobiliários, S.A. | Chairman of the Board of Directors |
| Quinta Nova de Nossa Senhora do Carmo, S.A. | Member of the Board of Directors |
| Company | Position Held | ||
|---|---|---|---|
| CORTICEIRA AMORIM Group | |||
| Amorim Cork, S.A. | Vice-Chairman of the Board of Directors | ||
| Amorim Cork, S.G.P.S., S.A. | Member of the Board of Directors | ||
| Amorim Cork Composites, S.A. | Member of the Board of Directors | ||
| Corecochik – Corking Shoes Investments, Lda | Director | ||
| Amorim Florestal, S.A. | Member of the Board of Directors | ||
| Amorim Florestal II, S.A. | Member of the Board of Directors | ||
| Amorim Florestal III, S.A. | Member of the Board of Directors | ||
| Amorim Industrial Solutions – Imobiliária, S.A. | Member of the Board of Directors | ||
| Amorim Cork Insulation, S.A. | Member of the Board of Directors | ||
| Amorim Natural Cork, S.A. | Member of the Board of Directors | ||
| Amorim Cork Flooring, S.A. | Member of the Board of Directors | ||
| Cosaabe – Companhia Silvo-Agrícola da Beira, S.A. | Member of the Board of Directors | ||
| OTHER COMPANIES | |||
| Ahorro Corporatión Financiera h, SL | Advisor | ||
| Amorim – Investimentos e Participações, S.G.P.S., S.A. | Member of the Board of Directors | ||
| Amaroka – Lda. | Director | ||
| Atitlan Real Estates Porto Imóveis, S.A. | Member of the Board of Directors | ||
| Atitlan Porto Investments, S.A. | Member of the Board of Directors | ||
| API – Amorim Participações Internacionais, S.G.P.S., S.A. | Member of the Board of Directors | ||
| Casa das Heras – Empreendimentos Turísticos, S.A. | Member of the Board of Directors | ||
| Imobis – Empreendimentos Imobiliários Amorim, S.A. | Member of the Board of Directors | ||
| Mosteiro de Grijó – Empreendimentos Turísticos e Imobiliários, S.A. | Member of the Board of Directors | ||
| OSI – Sistemas Informáticos e Electrotécnicos, Lda. | Director | ||
| Paisagem de Alqueva, S.A. | Member of the Board of Directors | ||
| Quinta Nova de Nossa Senhora do Carmo, S.A. | Member of the Board of Directors | ||
| TB Vinhos, S.A. | Member of the Board of Directors |
| Company | Position Held |
|---|---|
| CORTICEIRA AMORIM Group | |
| Amorim Cork Services, Lda. | Director |
| Amorim Cork Flooring, S.A. | Member of the Board of Directors |
| OSI – Sistemas Informáticos e Electrotécnicos, Lda. | Director |
| Vatrya – Consultoria e Marketing, Lda. | Director |
| Company | Position Held | |
|---|---|---|
| OTHER COMPANIES | ||
| Amorim – Investimentos e Participações, S.G.P.S., S.A. | Vice-Chairman of the Board of Directors | |
| Amorim – Sociedade Gestora de Participações Sociais, S.A. | Member of the Board of Directors | |
| Banco BPI, S.A. | Member of the Board of Directors | |
| OTHER INSTITUTIONS: | ||
| AEP — Associação Empresarial de Portugal | Member of the General Board, representing Amorim Cork, S.A. | |
| BCSD Portugal – Conselho Empresarial para o Desenvolvimento Sustentável | Member of the Board | |
| AEM — Associação de Empresas Emitentes de Valores Cotados em Mercado | Member of the General Board, representing Corticeira Amorim, SGPS, S.A. |
| Company | Position Held | ||||
|---|---|---|---|---|---|
| OUTRAS SOCIEDADES | |||||
| Amorim – Investimentos e Participações, SGPS, S.A. | Member of the Board of Directors | ||||
| Amorim – Serviços e Gestão, S.A. | Member of the Board of Directors | ||||
| Amorim – Viagens e Turismo, Lda. | Director | ||||
| Amorim Desenvolvimento – Investimentos e Serviços, S.A. | Member of the Board of Directors | ||||
| Amorim Global Investors, SGPS, S.A. | Member of the Board of Directors | ||||
| Amorim Negócios Internacionais, S.A. | Chairman of the Board of Directors | ||||
| Amorim Negócios II, SGPS, S.A. | Chairman of the Board of Directors | ||||
| Bucozal – Investimentos Imobiliários e Turísticos, Lda. | Director | ||||
| Época Global, SGPS, S.A. | President of the Board of Directors | ||||
| Great Prime, S.A. | Member of the Board of Directors | ||||
| LUYNES – Investimentos, S.A. | Chairman of the Board of Directors | ||||
| OSI – Sistemas Informáticos e Electrotécnicos, Lda. | Director | ||||
| Quinta Nova de Nossa Senhora do Carmo, S.A. | Chairman of the Board of Directors | ||||
| Vintage Prime, SGPS, S.A. | Member of the Board of Directors | ||||
| Taboadella, S.A. | Chairman of the Board of Directors | ||||
| OTHER INSTITUTIONS: | |||||
| Associação Bagos D'Ouro – IPSS | Chairman of the Board | ||||
| Company | Position Held | |
|---|---|---|
| CORTICEIRA AMORIM Group | ||
| Trefinos, S.A. Chairman of the Board of Directors |
||
| OTHER COMPANIES | ||
| Les Finques, S.A. | Director |
c) Committees within the Board of Directors or Supervisory Board and Board Delegates
There is an Executive Committee, created by delegation of powers by the Board of Directors. Although there are no formal rules of procedure available for viewing, the functioning of the Executive Committee complies with all the rules governing its work, namely those of the Portuguese Companies' Code, the Articles of Association and the procedures adopted internally. This constitutes by itself adequate rules of procedure that enable the implementation of the best practices, safeguarding the effectiveness of the Company and creating value for shareholders.
As already referred to regarding the Board of Directors, it should be added that the principles of good business practice are part of the core values upheld by both the members of this committee and the staff members who assist and/or advise them.
The Executive Committee shall consist of three members, i.e., a Chairman and two Members:
| Chairman: | António Rios de Amorim |
|---|---|
| Board Member: | Nuno Filipe Vilela Barroca de Oliveira |
| Board Member: | Fernando José de Araújo dos Santos Almeida |
The term of office of the Executive Committee coincides with that of the Board of Directors.
The Executive Committee exercises the powers delegated to it by the Board of Directors - in the precise terms provided for in the articles of association and in law, as described in section 9 herein -, with a view to streamlining management practices and making possible closer and continuous monitoring of the Company's different areas (management, operations and support) and its operating and business processes.
According to Corticeira Amorim's articles of association, the Executive Committee is vested with the power to implement the decisions made by the Board of Directors, manage the Company's ordinary course of business and implement certain management duties. The activity of the Executive Committee was conducted in 2019 according to these duties, with the purpose of performing:
the implementation of the decisions taken by the Board of Directors;
the alignment of the activity of the various business units that constitute the Company, and analysis of the respective reporting;
Whenever matters are examined and/or decided in which one or more members of the Executive Committee have particular interests which conflict with the interests of the company, the member(s) in conflict shall inform the Board of this circumstance, providing all necessary information but abstaining from voting on such matters.
In the scope of its powers, the Executive Committee has timely access to all information and employees, both from the company and its main subsidiaries, with a view to monitoring the business, evaluating performance and development prospects. Accordingly, the Executive Committee receives notices, work orders and documentation to support all meetings in which it analyses and/or decides on the strategy, implementation and actions and evaluates the results of the various Business Units of Corticeira Amorim; it participates in the management meetings of these Business Units and has broad access to any documents or employees appropriate to the clarifications that it deems pertinent.
With a properly implemented reporting system within the Company, information flows from the members of the Executive Committee to the Directors, thus ensuring that the performance of the members of both the Board and the Committee are aligned and that every director is informed of the work and activities of the Executive Committee in a timely manner.
The Chairman of the Executive Committee, who is also the Chairman of the Board of Directors, provides timely minutes of the Executive Committee meetings to the Chairman of the Supervisory Board.
The Executive Committee met 11 times during 2019. The attendance rate was 100% (in global and individual terms).
The Company has adopted the governance model commonly known as the "reinforced Latin" model, with a double supervisory mechanism consisting of a supervisory board and a statutory auditor.
The articles of association establish that the Supervisory Board consists of three incumbent members and one or several alternate members.
The Supervisory Board was composed exclusively of three members considered independent during the current mandate (2017-2019). During the year under review they exercised the duties of:
Date of first appointment to the Supervisory Board: 24 March 2014
Date of first reappointment to the Supervisory Board: 07 April 2017
End of term in office: 31 December 2019, remaining in office until a new election pursuant to law
Date of appointment to the Supervisory Board, as Alternate: 12 April 2019
Date of appointment to the Supervisory Board as Incumbent Member (following Ana Paula Africano de Sousa e Silva's
departure): 18 June 2019
End of term in office: 31 December 2019, remaining in office until a new election pursuant to law
Eugénio Luís Lopes Franco Ferreira
Date of first appointment to the Supervisory Board: 24 March 2014 Date of first reappointment to the Supervisory Board: 07 April 2017
End of term in office: 31 December 2019, remaining in office until a new election pursuant to law
Ana Paula Africano de Sousa e Silva
Date of first appointment to the Supervisory Board: 24 March 2014 Date of first reappointment to the Supervisory Board: 07 April 2017 Resigned on 31 May 2019
32. Details of the members of the Supervisory Board, which are considered to be independent pursuant to Article 414 (5) of the Portuguese Companies' Code.
As far as the Company knows, all members of the Supervisory Board, both incumbent and alternate members, meet the independence criteria set out in Article 414 (5) as well as the incompatibility rules envisaged in Article 414-A(1), both of the Portuguese Companies' Code.
Graduated with a Bachelor's Degree in Economics from the University of Porto, Faculty of Economics. MBA from Katholieke Universiteit Leuven (Leuven, Belgium). Professional career in the financial sector (1979 - 1995) - Banco Português do Atlântico, State Secretary of the Treasury (1986-1988), President of Banco Comercial de Macau (1989-1995), the Insurance Company Bonança (1992-1995) and of the Portuguese Banks' Union (1993- 1995). Director of Banco Mais (1997-2011), Seguros Sagres (2006- 2008), Finibanco (2004-2006). CEO of SGAL - Sociedade Gestora Alta de Lisboa (1998-2007). Gender: Male | Age: 67
Marta Parreira Coelho Pinto Ribeiro (Member):
Graduated with a Bachelor's Degree in Economics and a Master's Degree in Economics from the University of Porto, Faculty of Economics. PhD degree in Economics (specialisation in Behavioural Economics) from the London School of Economics and Political Science (LSE), 2004. Since 2004, she has been a staff member of LSE. From 2004 to 2014, she was responsible for the subject of Negotiation, turning it into a reference subject at LSE. Since 2017, she is a staff member of Oxford University, Saïd Business School, at the Negotiation for Executives course. In this course, she holds a teaching role, as well as coaching executives. In terms of research, Marta is essentially devoted to the study of over-optimism and over-confidence of economic agents and the implications of such deviations in economic decision-making (namely decisions related to entrepreneurship). Her research topics are central themes in the field of Behavioural Economics as evidenced by the reference to her work by the Nobel Prize in Economics, Daniel Kahneman, in his book "Thinking Fast and Slow". In addition to her teaching and research roles, she has played, and still does, an advisory role. Among other advisory roles, namely in the area of negotiation, she participated in studies on price reform in the pharmaceutical industry in Portugal and studies on regional economic development. In order to develop her communication skills, she took a course in this area in September 2019. She has been regularly invited by Oxford University to give presentations on Negotiation styles. Gender: Female | Age: 50
Education and professional training: graduated with a Bachelor's Degree in Economics from the University of Porto, Faculty of Economics in 1976 where he lectured Financial Mathematics in 1976/1977. Throughout his career he attended numerous training activities in several European countries and the United States; Member of the Ordem dos Economistas and member of the Portuguese Institute of Corporate Governance. In 2016 he voluntarily cancelled his enrolment in the Ordem dos Revisores Oficiais de Contas (Statutory Auditors' Association) and the Ordem dos Contabilistas Certificados (Chartered Accountants' Association).Professional experience: is, since 2009 to date, a Consultant as an independent contractor; 1977-2008: joined the office in Porto of the then Price Waterhouse (PW), currently PricewaterhouseCoopers (PwC). After a brief stint at the Paris office (1986), he was admitted as a Partner in 1991, transferring to the Lisbon office in 1996. He initially joined the Audit department and later the Transaction Services department, having participated in numerous audits and consulting projects, particularly in the area of transactions and corporate reorganisations, in almost all business sectors, including in cork companies, covering the entire manufacturing sector. As an auditor, the scope of responsibilities included, in most cases, the performance of the duties of the Investmark Holdings, B.V. members of the Supervisory Board or the Statutory Auditor; at different times he performed various internal functions at PW / PwC, namely (i) the head of the Porto office (1989-1998); (ii) territorial responsibility for the technical audit function and risk management ("Technical Partner" and "Risk Management Partner"); (iii) responsibility for administrative functions, financial and internal IT ("Finance & Operations Partner"); (iv) in charge of the Audit Department; (v) member of the Executive Committee ("Territory Leadership Team"); 1966- 1976: initiated activity in a small company in the automotive sector, interrupted between 1971-1974 for the fulfilment of military service.Management positions held in the last five years: manager of VMR&MR, Lda, since 2019. Gender: Male | Age: 69
The Bylaws of the Supervisory Board of the Company can be viewed at https://www.amorim.com/xms/files/Investidores/2_Orgaos_ Sociais/2016_07_CA_RegCF_EN.pdf
The Supervisory Board meets whenever called by the Chairman or by any other two members of the Supervisory Board, and at least every quarter, pursuant to article 10 of the rules of procedure of that body. The Supervisory Board met five times during 2019 with an overall and individual attendance of 100%.
36. The availability of each member of the Supervisory Board, indicating the positions held simultaneously in other companies inside and outside the group, and other relevant activities undertaken by members of these Boards.
| Company | Position Held | |||
|---|---|---|---|---|
| Group AFSA, SGPS, S.A. - management positions: | ||||
| AFSA, SGPS, S.A. | Director | |||
| COEPAR – Consultoria e Investimentos, S.A. |
Director | |||
| S2IS – Serviços e Investimentos, SGPS, S.A. |
Director | |||
| BRASILIMO – Investimentos Imobiliários no Brasil, SGPS, S.A. |
Director | |||
| SSL – Serviços e Investimentos, S.A. | Director | |||
| Other Companies – management positions: | ||||
| Faceril – Fábrica de Cerâmica do Ribatejo, S.A. | ||||
| Coeprimob – promoção Imobiliária, S.A. | ||||
| Quaternaire, S.A. | Director | |||
| Group AFSA, SGPS, S.A. — other positions: | ||||
| Douro Empreendimentos Imobiliários, Lda. |
Advisory Board | |||
| Brasilimo Empreendimentos Imobiliários, Lda. |
Advisory Board |
She has a PhD degree in Economics from the London School of Economics and Political Science (LSE), 2004, where she has been a staff member ever since; since 2017, she has also been a staff member of Oxford University, Saïd Business School, at the Negotiation for Executives course. In addition to teaching and coaching roles, she also dedicates herself to research and an advisory role.
She doesn't hold any other company positions in other companies, be it in or out of Corticeira Amorim.
| Company | Position Held | |
|---|---|---|
| Other companies - management positions: | ||
| VMR&MR, Lda. | Director |
He acts professionally as a self-employed consultant.
The Supervisory Board is responsible for monitoring the independence of the Statutory Auditor, especially in relation to the provision of additional services.
It should be noted that the entry into force on 1 January 2016 of Law No. 140/2015 of 7 September, approving the new Regulation of the Portuguese Institute of Statutory Auditors and Law No. 148/2015 of 9 September approving the Legal Regime for Audit Supervision, implied that the provision of services by the Statutory Auditor is substantially limited (a wide range of services are legally prohibited and the rest are limited to 70% of the total fees paid to the Statutory Auditor for statutory audit services) and that the non-prohibited services require the prior approval of the Supervisory Board.
Thus, while always requiring the prior approval by the Supervisory Board, services other than the statutory audit were contracted from the Statutory Auditor. These services essentially comprise work to comply with formalities established by law and work to ensure the reliability of the half-yearly financial statements.
There are, therefore, no issues regarding the independence of the work of the Statutory Auditor.
The Supervisory Board is responsible, under the law and respective Rules of Procedure, for the following:
monitor the effectiveness of the risk management system, internal control system and internal audit system, if any;
receive reports of irregularities presented by shareholders, company employees or others, giving them due treatment;
to the annual directors' report, the annual accounts, and other accounting documents required by law or CMVM Regulations, to the best of its knowledge, the information was prepared in accordance with applicable accounting standards, giving a true and fair view of the assets and liabilities, financial position and profit/loss of the company and the companies included in the consolidation perimeter, and that the management report faithfully describes the evolution of the business, the company's performance and position and of the companies included in the consolidation perimeter, and it contains a description of the principal risks and uncertainties that they face;
The Supervisory Board is guaranteed access to all documentation and employees of the company to obtain regular information on the evolution of the activity in general, and the areas that are its special competence in particular. A system of regular reporting is also in place, covering, among others, the minutes of the meetings of the Executive Committee, internal audit reports and the list of transactions with related parties.
The Statutory Auditor shall consist of one member and one alternate member, any one of which may be a statutory auditor or statutory auditor firm.
The Shareholders' General Meeting, held on 7 April 2017, elected for the current term of office (2017-2019):
ERNST & YOUNG AUDIT & ASSOCIADOS – SROC, S.A., represented by Rui Manuel da Cunha Vieira or by Rui Abel Serra Martins
Pedro Jorge Pinto Monteiro da Silva e Paiva End of term of office: 31 December 2019, remaining in office until a new election pursuant to law.
ERNST & YOUNG AUDIT & ASSOCIADOS – SROC, S.A. was elected on 7 April 2017, for the current term of office (2017-2019). 2019 was the third year of its term of office and, consequently, its third consecutive year in office.
During the year under review, ERNST & YOUNG AUDIT & ASSOCIADOS - SROC, S.A., including other entities belonging to the same network, was hired by the Company and its associated companies, to deliver audit and statutory audit services and other services subject to prior examination and approval by the Supervisory Board, such as the review of interim financial information and other reliability assurance services.
Further assurance services include the audit, in accordance with the ISAs, of Amorim Cork Sweden's sales and accounts receivable and cost of sales and inventories, verification of the sustainability report, limited review of the consolidated accounts for the first half of 2019 and assessment of the environmental, social and economic impacts of the Corticeira Amorim group.
The independence of these service providers is not called into question as the leadership of the projects such service providers take on is always assumed by the appropriate department of Corticeira Amorim.
The total amount of those services are stated in section 47.
42. Details of the external auditor appointed in accordance with Article 8 and the partner that represents same in carrying out these duties, and the respective registration number in the CMVM.
The external audit of Corticeira Amorim is performed by the Statutory Auditor (as identified in section 39).
43. State the number of years that the external auditor and respective partner that represents same in carrying out these duties consecutively carries out duties with the company and/or group.
As set out in section 40 above.
44. Rotation policy and schedule of the external auditor and the respective partner that represents said auditor in carrying out such duties.
As set out in section 40 above.
45. Details of the Board responsible for assessing the external auditor and the regular intervals when said assessment is carried out.
As set out in section 40 above.
46. Details of services, other than auditing, carried out by the external auditor for the company and/or companies in a control relationship and an indication of the internal procedures for approving the hiring of such services and a statement on the reasons for said hire.
As set out in section 41 above (identification of work) and in section 37 (internal procedures).
47. Details of the annual remuneration paid by the company and/ or legal entities in a control or group relationship to the auditor and other natural or legal persons pertaining to the same network and the percentage breakdown relating to the services:
| Type of service | Audit and certification of accounts |
The review of interim financial information and other reliability assurance services |
Other services |
TOTAL | ||
|---|---|---|---|---|---|---|
| Value | 22,200 | 15,000 | 0 | 37,200 | ||
| Corticeira Amorim | % | 60% | 40% | 0% | 100% | |
| Value | 147,950 | 0 | 58,000 | 205,950 | ||
| EY SROC | Group companies | % | 72% | 0% | 28% | 100% |
| Value | 170,150 | 15,000 | 58,000 | 243,150 | ||
| Total | % | 70% | 6% | 24% | 100% | |
| Corticeira Amorim | Value | 0 | 0 | 0 | 0 | |
| % | 0% | 0% | 0% | 0% | ||
| Companies of EY's | Group companies | Value | 69,040 | 0 | 0 | 69,040 |
| Network | % | 100% | 0% | 0% | 100% | |
| Value | 69,040 | 0 | 0 | 69,040 | ||
| Total | % | 100% | 0% | 0% | 100% | |
| Value | 22,200 | 15,000 | 0 | 37,200 | ||
| Total | Corticeira Amorim | % | 60% | 40% | 0% | 100% |
| Value | 216,990 | 0 | 58,000 | 274,990 | ||
| Group companies | % | 79% | 0% | 21% | 100% | |
| Total % |
Value | 239,190 | 15,000 | 58,000 | 312,190 | |
| 77% | 5% | 19% | 100% |
Year after year, we work together, with unconditional enthusiasm and extraordinary commitment, reinforcing our desire to building a more sustainable future.
The rules governing the amendment of the Articles of Association of the Company are those provided for by law, with the addition of the following specific provisions set out in the aforementioned articles: the Company is managed by a Board of Directors consisting of a Chairman, a Vice-Chairman and from one to nine other Members. This statutory provision may be amended only with the approval by a majority of shareholders representing at least two-thirds of the Company's share capital.
It is the responsibility of Corticeira Amorim's Supervisory Board - in accordance with its rules of procedure – to receive the information on wrongful acts reported by shareholders, employees or other individuals or bodies and to treat such whistle-blowing reports appropriately.
Such reports shall be addressed to:
Supervisory Board of Corticeira Amorim, SGPS, S.A. Address - Registered office of the company: Rua de Meladas, n.º 380 – Apartado 20 - 4536-902 MOZELOS Telephone: 22 747 54 00
The Company ensures that the Supervisory Board will be the first to be made aware of the contents of such whistle-blowing reports (no employee of the Company is authorised to open mail specifically addressed to this corporate body or any of its individual members).
It is the Supervisory Board's responsibility to review any such reports and ask the Company's other governing bodies and officers for any explanations on the disclosed events and the circumstances surrounding the situation. In dealing with concrete situations, the Supervisory Board is entitled to:
The Company guarantees that the identity of whistle-blowers will not be disclosed throughout the process, unless they expressly choose to disclose their identity.
Corticeira Amorim believes that there are a number of measures, i.e. (i) the assignment of such responsibilities to the Supervisory Board – a body composed entirely of independent members, thus ensuring the impartial handling and consideration of irregularities reported to the Company; (ii) the non-imposition of the use of a specific format for such reports and the fact that the whistle-blower may use the channels it deems most suitable to make the report; (iii) the obligation to ensure protection of personal data (scrupulously following the instructions given by whistle-blowers regarding confidentiality) that safeguard the rights of both whistle-blowers and other staff members involved, while ensuring that the reporting process remains simple, and contribute effectively to promoting the impartial investigation and clarification of the situations reported.
50. Individuals, boards or committees responsible for the internal audit and/or implementation of the internal control systems.
The Internal Audit Department has powers over such matters.
51. Details, even including organisational structure, of hierarchical and/or functional dependency in relation to other boards or committees of the company.
These departments work under the command of the Board of Directors, closely directed by the Executive Committee.
The main aim of the Board of Directors and the Executive Committee is to establish an integrated overview of critical success factors in terms of profitability and/or associated risks with a view to creating sustainable value for both the Company and its shareholders.
Because of Corticeira Amorim's specific business characteristics, two critical factors have been identified at the operational level: (i) market risk and business risk and (ii) raw materials (cork) risk. The management of such risks is the responsibility of the relevant BU.
The management of the procurement, storage and preparation of the single variable common to all business activities of Corticeira Amorim, i.e. the raw material (cork) is centralised in the Raw Materials BU, an autonomous BU with professional and independent management. This allows to:
production process;
In the first instance, market risk and business risk are managed by the four BUs – Cork Stoppers, Floor and Wall Coverings, Cork Composites and Insulation Cork – that are involved in the markets that deal in Corticeira Amorim's finished products.
In devising a strategic plan for these BUs – a strategic plan based on balanced scorecard methodology – a number of key factors for value creation are identified by using a multifaceted approach that encompasses the outlook for finance, market/customers, processes and infrastructures. Using this approach, strategic objectives and goals are defined as well as the actions required to achieve them.
The adopted method strengthens alignment between the defined strategy and operational planning where such are defined, for a shorter time horizon, the priority actions to develop to reduce risk and ensure sustained value creation. The Executive Management of each BU is responsible for pursuing the executive processes that allow the systematic monitoring of the actions, which are subject to periodic monitoring and monthly evaluation by the Board of Directors of the BU.
As far as legal risks are concerned, the main risk to the business of Corticeira Amorim and its subsidiaries relates to the potential for loss arising from amendments made to legislation – in particular, labour legislation, environmental regulations and similar –, which could have an impact on Corticeira Amorim's operations and affect its business' performance and profitability.
The Legal Department in cooperation with the Organisational Development and Strategic Planning area seek to anticipate such amendments and adapt corporate governance practices accordingly. The numerous certification processes (food safety, quality, environmental management, human resources, etc.), as described in more detail in Chapter 5 of the Management Report, are based on procedures designed, implemented and regularly and strictly audited by certifying organisations, thus guaranteeing the
minimisation of such risks. Wherever possible and practicable, the Organisation takes out insurance to mitigate the effects of uncertain but potentially unfavourable events.
As Corticeira Amorim is one of Portugal's most international companies, it pays special attention to managing exchange rate risk as well as liquidity and interest rate risk.
In addition to the responsibilities of the finance department regarding identification, monitoring and management of the above risks, the main objectives of this department are to assist with the definition and implementation of global financial strategies and with the coordination of the financial management of the group's BUs. It is structured as follows:
The financial organisational structure is coordinated as follows:
Under the direction of the Board of Directors and assisted by an Executive Committee or an Executive Director, Corticeira Amorim's support divisions play an important role in managing critical risk factors, including risk identification. The finance department, the organisational development department, the management planning and control department and the internal audit department play an essential role in this regard.
The system of internal control, risk management and detection/ prevention of irregularities currently implemented in the company stems from an in-depth and continuous process of improvement and adaptation of internal reflection in the company, involving both the Board of Directors, in particular its Executive Committee, and the different support areas - in particular the area of Organisational Development and Strategic Planning - or the support of external specialised consultants, where appropriate.
Also noteworthy is the Internal Audit area, whose work has significant impact on reducing the organisation's operational risks and detection/prevention of irregularities and non-conformities. The main tasks are to assess and review internal control systems with a view to optimising resources and safeguarding assets as well as monitoring activities carried out in order to provide the management bodies with a reasonable degree of certainty that business goals will be achieved.
The reporting system implemented in the Company – either at regular intervals or on demand of the Board of Directors, the Executive Committee or officers responsible for the Management – includes both measurement and objective evaluation of such risks which – after being discussed by the Board of Directors or the Executive Committee – will, if appropriate, give rise to the determination of additional or corrective measures whose implementation and impact will be followed up by the governing body that approved such measures.
The growing complexity of the business environment triggers off a close monitoring of the systems implemented in the Company. Such monitoring includes contributions and opinions from both the Supervisory Board and the Statutory Auditor and this leads to the adoption of more effective procedures when it is deemed advisable.
Under the Bylaws of the Supervisory Board, it is this Board's responsibility to monitor the effectiveness of the risk management system, the internal control system and the internal auditing system.
55. Core details on the internal control and risk management systems implemented in the company regarding the procedure for reporting financial information (Article 245-A/1/m).
In regard to the preparation and disclosure of financial information - including the consolidated, the Company promotes close cooperation among all those involved in the process to ensure that:
Disclosure complies with all applicable legal requirements and best practices in terms of transparency, relevance and reliability;
The information has been properly checked both internally and by the appropriate supervisory bodies;
The information has been approved by the appropriate governing body;
Its public disclosure complies with all relevant legal requirements and recommendations, specifically those of the CMVM and is made in the following order: first, via the data dissemination system of the Portuguese Securities Market Commission (www.cmvm.pt); second, via the Company's website (www.corticeiraamorim.com); third, by means of a long list of Portuguese and foreign media contacts; and fourth, to Corticeira Amorim's staff and to shareholders, investors, analysts and other stakeholders, whose contacts are stored in a database.
The process of preparation of financial information, including consolidated information, is dependent on the process of registration of the operations and the support systems. There is an Internal Controls Procedures Manual and an Accounting Manual implemented at the Group level. These manuals contain a set of policies, rules and procedures to (i) ensure that the process of preparation of financial information follows homogeneous principles and (ii) the quality and reliability of the financial information is ensured.
The implementation of accounting policies and internal control procedures relating to the preparation of financial information is subject to evaluation by the internal and external auditors.
The consolidated financial information by Business Unit is assessed, validated and approved by the management of the respective Business Unit, every quarter. This procedure has been consistently adopted by all the Corticeira Amorim's business units.
The consolidated financial information of Corticeira Amorim is approved by the Board of Directors and presented to the Supervisory Board, before its publication.
It is also to be emphasized that the referred Internal Control Procedures Manual contains a set of rules intended to ensure that the process of disclosure of financial information, including consolidated information, guarantees the quality, transparency and fairness in the dissemination of information.
Corticeira Amorim ensures, through the Investor Relations Officer, the existence of permanent contact with the Capital Markets, promoting the communication of relevant and up-to-date information to the financial community. Its activity is based on the principles of transparency, rigour and integrity, respecting the principle of equality of Shareholders and preventing asymmetries in access to information by Investors, Financial Analysts and Regulatory Entities.
The Investor Relations Officer brings together and coordinates the work of professionals from other departments (Consolidation, Management Control, Legal and tax, Administrative, Financial, Communication) of Corticeira Amorim in order to provide impartial and timely replies to all requests from investors (whether shareholder or not).
The Investor Relations Officer of Corticeira Amorim has the following responsibilities:
• regular publication of the Company's operation performance evaluation reviews and financial results, including co-ordination and preparation of their twiceyearly public presentation delivered at the Company's registered office (either in person or via conference call);
The following measures carried out in 2019 in the context of contact with investors are especially noteworthy:
The management team, whenever possible and appropriate, were involved in the actions described above, both those of Corticeira Amorim and of the various BUs.
Corticeira Amorim has been using its information technology to regularly disclose and disseminate its economic and financial information, including the Company's operation performance evaluation reports and financial results as well as its answers to specific questions and queries raised by investors.
Meeting during a 21-day period prior to the date fixed for the meeting;
From the beginning of 2009 onwards, the minutes of the General Meetings and statistical information on the attendance of shareholders at the General Meetings are also made available for consultation within five working days of the holding of the Annual General Meeting.
This Department can be reached by telephone at +351 22 747 54 00, by fax +351 22 747 54 07 or by e-mail at [email protected].
The Investor Relations Officer of Corticeira Amorim is Ana Negrais de Matos.
The response rate to requests for information is 100%. The reply is provided, on average, within 24 hours (working days), except for highly complex cases (average response time of five working days) that require consultation with external resources to the Company and are, therefore, dependent on the deadlines for the reply from such resources. These cases accounted for less than 5% of total requests for information in 2019. There were no pending replies at the end of the year.
Corticeira Amorim provides a vast range of information on its website www.corticeiraamorim.com about its corporate structure, business activity and the development of its business.
60. Place where information on the firm, public company status, headquarters and other details referred to in Article 171 of the Commercial Companies' Code is available.
https://www.amorim.com/en/for-investors/institutionalinformations/legal-structure/
Articles of Association: https://www.amorim.com/en/for-investors/institutionalinformations/legal-structure/
Rules of procedure of the Supervisory Board: https://www.amorim.com/en/for-investors/institutionalinformations/board-members/
62. Place where information is available on the names of the corporate boards' members, the Investor Relations Officer, the Office of Investor Assistance or comparable structure, respective functions and contact details.
Holders of corporate positions: https://www.amorim.com/en/for-investors/institutionalinformations/board-members/
Investor Relations Officer: https://www.amorim.com/en/for-investors/institutionalinformations/
The Office of Investor Assistance, its duties and means of accessing this Office:
https://www.amorim.com/en/for-investors/institutionalinformations/
63. Place where the documents are available and relate to financial accounts reporting, which should be accessible for at least five years and the half-yearly calendar on company events that is published at the beginning of every six months, including, inter alia, general meetings, disclosure of annual, half-yearly and where applicable, quarterly financial statements.
https://www.amorim.com/en/for-investors/annual-report/ https://www.amorim.com/en/for-investors/annual-report/
Half-yearly calendar of company events: https://www.amorim.com/en/for-investors/calendar-of-events/
https://www.amorim.com/en/for-investors/institutionalinformations/general-annual-meeting/
65. Place where the historical archive on the resolutions passed at the company's General Meetings, share capital and voting results relating to the preceding three years are available.
https://www.amorim.com/en/for-investors/institutionalinformations/general-annual-meeting/ I. POWER TO ESTABLISH
66. Details of the powers for establishing the remuneration of corporate boards, members of the executive committee or chief executive and directors of the company.
It is the responsibility of the Annual General Meeting to appoint a Remuneration Committee. The ability and capacity of the members of the Committee to perform the duties assigned to them in an independent manner for their entire term of office, i.e. to determine the remuneration policy of the members of the governing bodies that shall foster over the medium and long-term the alignment of the interests with those of the Company.
The adoption of the balanced scorecard methodology, which assesses performance using both financial and non-financial measures, enables the Remuneration Committee to evaluate every financial year, whether or not goals are achieved and to what degree. The balanced scorecard serves also as the basis for preparation of the reports of the Remuneration Committee and the Board of Directors on the remuneration policy for members of the Board and the supervisory board as well as on the remuneration policy for other senior executives and officers, respectively, to be submitted every year to the Annual General Meeting for approval.
Thus,
67. Composition of the remuneration committee, including details of individuals or legal persons recruited to provide services to said committee and a statement on the independence of each member and advisor.
Pursuant to the Articles of Association, the Remuneration Committee has three members, who will choose the respective President.
The Shareholders' General Meeting, held on 7 April 2017, elected the Remuneration Committee for the current term of office (2017- 2019):
Chairman: José Manuel Ferreira Rios Board Member: Jorge Alberto Guedes Peixoto Board Member: Abdul Rehman Omarmiã Mangá
End of term in office: 31 December 2019, remaining in office until a new election pursuant to law.
The Remuneration Committee may decide to hire consulting services that it deems appropriate and suitable for the full exercise of its functions, and must ensure that the selection of the respective providers obeys criteria of competence and independence. In the financial year under review no natural or legal person was hired to assist the Remuneration Committee.
The Remuneration Committee met five times in 2019. The global attendance rate was 100%.
It is the responsibility of this Committee to present the Remuneration Policy to be submitted to the Shareholders' General Meeting regarding the remuneration to be paid to members of the Presiding Board of General Meeting, for the Supervisory Board and for the Statutory Auditor. It is also responsible for deciding on the remuneration of each director, which directors' remuneration consists of profit sharing as well as the percentage attributable to each of these.
The members of Corticeira Amorim's Remuneration Committee should not be formally considered independent from the Board of Directors. However, it is generally believed – particularly by the Annual General Meeting which elected the Committee members – that they have adequate technical skills, practical experience and balanced personality to enable them to fully and effectively discharge their role.
Members of the Remuneration Committee were selected on the basis of their wide experience in managing human resources, monitoring and benchmarking other companies' remuneration policies and their knowledge in terms of best remuneration practices and labour law.
Graduated with a Bachelor's Degree in Economics from the Faculty of Economics of Porto. Property Damage Claims Specialist Course (2016) and frequents various courses on Safety and Human Resources. Has performed since 1975 Management positions in various companies, including, among others, leadership in human resources departments, with extensive experience in human resource management, definition of analysis metrics and performance evaluation.
Currently also holds the titles of Chairman of the General Meeting of the Portuguese Cork Association (APCOR); member of the Supervisory Committee of the Cork Technology Centre (CINCORK) and member of the Board of Directors of the Fundação Terras de Santa Maria.
Gender: Male |Age: 70
Graduated with a Bachelor's Degree in Economics from the Faculty of Economics of Porto.
Started working in 1969, as an accountant. He has worked at the Amorim Group since 1970, as an accountant, CFO, general BU manager and director at several companies.
Experience in the management of human resources and remuneration practices, which comes from the numerous positions held.
Gender: Male |Age: 68
Bachelor of Accounting from the Commercial Institute of Lourenço Marques, Mozambique. He worked as the managing director of the Cervejeiro Moçambicano Group and general director of the Footwear Units after the independence of Mozambique, with direct responsibility for the management of Human Resources. Managing Director of Ormac – Organização, Máquinas e Artigos para Calçado, SA, also in charge of Human Resources.
Since June 1988, he has been the administrative director and person in charge of human resources at Amorim Investimentos e Participações, SGPS SA. Gender: Male | Age: 71
Under the proposal submitted by the Company's Remuneration Committee, the Shareholders' General Meeting held on 12 April 2019 approved the following remuneration policy:
1.The remuneration of the Members of the Presiding Board of the General Meeting and of the Supervisory Board is in the form of an attendance fee. This is established for the entire term of office, considering the characteristics of the Company and market practices;
The remuneration of the Statutory Auditor is in the form of a provision of services. This is established annually, considering the characteristics of the Company and market practices;
The Members of the Board of Directors shall be paid adequate remuneration taking into account:
the individual remuneration package agreed upon between the Company and each Director;
whenever such is adequate and feasible, such remuneration shall primarily consist of a fixed pay (for executive and non-executive directors) plus a variable pay (for executive directors only) as performance-based premium;
The award of the variable pay component of remuneration referred to in the preceding paragraph shall be a bonus resulting from short term performance evaluation and from the contribution of the annual performance to medium / long term economic, environmental and social sustainability of the Organisation;
the members of the Board of Directors are prohibited from concluding contracts with the Company or with its subsidiaries and/or companies in which it holds an interest, which may mitigate the risk inherent to the variability of the remuneration as determined by the Company.
It is the Company's policy to assign the following duties to the members of its governing bodies:
the allotment of shares and/or options to acquire shares or based on share price variation; or
70. Information on how remuneration is structured so as to enable the aligning of the interests of the members of the Board of Directors with the company's long-term interests and how it is based on the performance assessment and how it discourages excessive risk taking.
The remuneration policy approved by the General Meeting and described in section 69 is fully adopted.
The remuneration policy approved by the General Meeting and described in section 69 is fully adopted. The executive members of the Board of Directors earn a variable remuneration component which depends on the evaluation of their performance, in particular the respective contribution either to the profit obtained in the financial year in question or to comply with goals and implementation of the strategies defined by the Company for the medium/long term (results, innovation, sustainability, financial soundness, value creation, competitiveness and growth).
The remuneration policy approved by the General Meeting and described in section 69 is fully adopted. In those terms, the payment of the variable pay component, if any, may be made wholly or in part after determination of the profit (or loss) for the years in respect of the whole term of office. There is, therefore, the possibility of the variable pay being reduced if the profit for the year reflects a significant deterioration in the Company's performance in the last financial year or if it is expectable that a significant deterioration will occur in the financial year underway.
In the financial year under review there were no deferred payments of part of variable component of remuneration as the deterioration referred to in the previous paragraph did not occur.
73. The criteria whereon the allocation of variable remuneration as shares is based, and also on maintaining company shares that the executive directors have had access to, on the possible share contracts, including hedging or risk transfer contracts, the corresponding limit and its relation to the total annual remuneration value.
Variable remuneration in the form of shares as described in this section does not exist.
Variable remuneration in the form of stock options as described in this section does not exist.
There are no other systems of annual bonus or other non-cash benefits besides those identified in the previous sections.
76. Key characteristics of the supplementary pensions or early retirement schemes for Directors and state date when said schemes were approved at the general meeting, on an individual basis.
There are no supplementary pensions or early retirement schemes.
As mentioned in section 69, the Remuneration Committee of Corticeira Amorim submitted to the General Meeting held on 12 April 2019 the remuneration policy for the members of the Board of Directors. This proposal, which was approved, expressly stated
that the award of the benefits referred to in this note is not the remuneration policy.
Although no retirement benefit systems similar to the ones described in this subsection were in place in the Company on the date hereof, should their implementation be proposed, the General Assembly shall assess the characteristics of the systems adopted and in force in the respective financial year (just as it assessed the nonassignment).
77. Details on the amount relating to the annual remuneration paid as a whole and individually to members of the company's Board of Directors, including fixed and variable remuneration and as regards the latter, reference to the different components that gave rise to same.
In the 2019 financial year, all the members of the Board of Directors earned remunerations from Corticeira Amorim amounting to EUR 800,384.80:
In the 2019 financial year none of the members of the Board of Directors earned remunerations from other associate or subsidiary companies included in the consolidated accounts of Corticeira Amorim.
The variable component of the remuneration package for Directors is similar to a performance bonus and is contingent on the degree of compliance with the Company's strategic targets, goals and initiatives and its three-year priority action plan and annual variations. Of note for this purpose were, among others, the analysis of the development of the results and the level of compliance with the following strategic objectives: innovation, sustainability, financial soundness, value creation, competitiveness and growth.
The amounts paid to the members of the Board of Directors pursuant to this section are broken down in section 77.
No compensation was paid or is owed to former Directors regarding the termination of their duties in 2019.
The members of the Supervisory Board earned as a whole remuneration amounting to EUR 33,600 (Manuel Carvalho Fernandes: EUR 12,000; Ana Paula Africano de Sousa e Silva: EUR 4,800; Marta Parreira Coelho Pinto Ribeiro: EUR 7,200; Eugénio Luís Lopes Franco Ferreira: EUR 9,600). Under the remuneration policy set out herein, the members of the Supervisory Board did not earn any variable remuneration.
The Chairman and the Secretary of the Board of the General Meeting earned total remuneration EUR 10,000 and EUR 3000, respectively.
83. The envisaged contractual restraints for compensation payable for the unfair dismissal of Directors and the relevance thereof to the remunerations' variable component.
No contractual restraints are envisaged in accordance with this section.
84. Reference to the existence and description, with details of the sums involved, of agreements between the company and members of the Board of Directors and managers, pursuant to Article 248-B/3 of the Securities' Code that envisages compensation in the event of resignation or unfair dismissal or termination of employment following a takeover bid. (art. 245-A/1/l).
There are no agreements according to the terms set out in this section. No agreements providing for the payment of compensations to the Company's directors and officers (other than where required by law) have been entered into by and between the Company and its Directors or Officers.
85. Details of the plan and the number of persons included therein.
No share award or stock option plans exist in the Company.
86. Characteristics of the plan (award conditions, non-transfer of share clauses, criteria on share pricing and the exercising option price, the period during which the options may be exercised, the characteristics of the shares or options to be awarded, the existence of incentives to purchase and/or exercise options).
Pursuant to the remuneration policy approved at the General Meeting and as described in section 85, there are no share award or stock option plans in the Company.
The Company believes that if plans of this type are to be implemented, the General Meeting should consider the characteristics of the plans to adopt, as well as their achievement in each financial year.
87. Option rights to acquire shares ("stock options") granted to company workers and employees.
Option rights of this type do not exist in the Company.
88. Control mechanisms for a possible employee-shareholder system inasmuch as the voting rights are not directly exercised by said employees (Article 245-A/1/e).
Control mechanisms of this type do not exist in the Company.
All business conducted by the Company with related parties respects the interests of the Company and its subsidiaries, it is examined by the competent body of the Business Unit that is a counterparty in the transaction and undertaken in normal market conditions. Business of significant value (transaction greater than EUR 1 million) or, by their nature, of particular relevance to the Company, is analysed by the Executive Committee and/or Board of Directors.
In accordance with the regulation on transactions with holders of qualifying holdings approved and in force since 1 August 2014, conducting transactions with holders of qualifying holdings4 and/or related entities should be subject to prior opinion of the Supervisory Board in the following cases:
i) Transactions whose value per transaction exceeds one million euros or where the value accumulated during the year exceeds three million euros. The prior opinion of the Supervisory Board will not be necessary for continuous implementation contracts or renovations in terms substantially similar to those of the contract previously in force;
ii) transactions with a significant impact on the business activity of Corticeira Amorim and/or its subsidiaries due to their nature or strategic importance, regardless of the original value;
iii) transactions exceptionally undertaken, outside of normal market conditions, regardless of the respective value.
[4] In spite of the fact the approved rules on transactions with holders of qualifying holdings and in force from 1 August 2014, are not available to the public, the relevant content of the same is reported in this note 89, which governs any transfer of resources, services or obligations between, on the one hand, Corticeira Amorim or a company in which it has a holding of more than 5O% and/or management control ("Subsidiary") and, on the other hand, any holder of a qualified holding under the terms of Article 16 of the Portuguese Securities' Code and/or an entity with which it is in one of the situations set out in Article 20 of the same law ("Related Entity").
The assessment to be made under the authorisation procedures and prior opinion applicable to transactions with holders of qualifying holdings and/or related entities shall take into account, among other relevant aspects and according to the specific case, the principle of equal treatment of shareholders and other stakeholders, the pursuit of the interests of the Company, as well as the impact, materiality, nature and justification of each transaction.
The value of these transactions is disclosed annually in the Consolidated Annual Report and Accounts of Corticeira Amorim (section 92 herein).
In the year under review there were no transactions subject to the prior opinion of the Supervisory Board.
91. A description of the procedures and criteria applicable to the supervisory body when same provides preliminary assessment of the business deals to be carried out between the company and the holders of qualifying interests or entity-relationships with the former, as envisaged in Article 20 of the Securities' Code.
As set out in section 89 above.
92. Details of the place where the financial statements including information on business dealings with related parties are available, in accordance with IAS 24, or alternatively a copy of said data.
The transactions of Corticeira Amorim with related parties are, in general, due to the provision of services by the subsidiaries of Amorim – Investimentos e Participações, S.G.P.S., S.A., (Amorim Serviços e Gestão, S.A., Amorim Viagens e Turismo, Lda., OSI – Sistemas Informáticos e Electrotécnicos, Lda.). The total of services provided by these companies to the companies of Corticeira Amorim was EUR 11.107 million (2018: EUR 10.346 million). The transactions in the opposite direction amounted to EUR 98 thousand (2018: EUR 138,000).
The sales of Quinta Nova, S.A., a subsidiary of Amorim – Investimentos e Participações, S.G.P.S., S.A., to the companies of the universe of Corticeira Amorim totalled EUR 46 thousand (2018: EUR 48 thousand). The transactions in the opposite direction amounted to EUR 318 thousand (2018: EUR 161,000).
Purchases of reproduction cork during the year from companies owned by the major indirect shareholders of Corticeira Amorim amounted to EUR 444 thousand (2018: EUR 1124 thousand) corresponding to less than 2% of total purchases of the cork raw material.
In matters of corporate governance Corticeira Amorim is governed by: (i) current Portuguese legislation, in particular the Portuguese Companies' Code, Portuguese Securities' Code and the regulations issued by the Portuguese Securities Market Commission (CMVM), which may all be accessed on the CMVM's website: www. cmvm.pt; (ii) its own articles of association, which are available on the Company's website at: https://www.amorim.com/en/ for-investors/institutional-informations/legal-structure/. It also welcomes the Corporate Governance Code issued by the Portuguese Institute of Corporate Governance (IPCG) and, although it is only a recommendatory framework, it is an important reference point of good practice, which is also available at www.cgov.pt.
In this report, Corticeira Amorim assesses its practices in relation to the aforementioned Corporate Governance Code on a 'comply or explain' basis. This report on Corticeira Amorim's corporate governance structures and practices is benchmarked against all legislation, regulations and recommendations to which our Company is subject.
CHAPTER I - GENERAL
I.1. Company Relations with Investors and Information I.1.1. The company must establish mechanisms that adequately and precisely ensure the production, treatment and timely disclosure of information to its corporate bodies, shareholders, investors and other stakeholders, financial analysts and the market in general.
Complies. Sections 55, 56, 57 and 58.
I.2. Diversity in the composition and functioning of corporate bodies
I.2.1. Companies must establish criteria and requirements related to the profile of new members of the corporate bodies appropriate to the function to be performed. In addition to individual attributes (such as competence, independence, integrity, availability and experience), these profiles should consider diversity requirements, particularly to gender, which can contribute to improving the performance of the body and to the balance in its composition.
Complies. Part I - introduction to Chapter B., sections 19 and 26. (Board of Directors), and sections 33 and 36 (Supervisory Board), section 11. (Board of the General Meeting); sections 67 and 68. (Remuneration Committee).
Corticeira Amorim adopts policies and practices aimed at promoting diversity in governing bodies (https://www.amorim. com/en/for-investors/institutional-informations/boardmembers/)
Corticeira Amorim is the holding company of an economic group based in Portugal, solidly established internationally, through subsidiaries, associate companies and joint ventures. The vast portfolio of products and solutions it continually develops responds to diverse markets and consumers.
The governance of Corticeira Amorim addressing the challenges arising from this framework, advocates a policy of diversity in the composition of its corporate bodies, in particular the Board of Directors and the Supervisory Board, as a way to:
Corticeira Amorim thus recognises the need to continuously promote diversity in its corporate bodies, particularly in the Board of Directors and the Supervisory Board, particularly in the following areas:
The result of the adoption of these policies is reflected in the composition of the members of their governing bodies, in particular those who are particularly covered by this recommendation.
I.2.2. The management and supervisory bodies and their internal committees must have internal regulations - in particular for the exercise of their duties, chairmanship, frequency of meetings, operation and framework of duties of their members - and detailed minutes of the respective meetings must be drawn up.
As explained in sections 22 and 27, there are no formalised internal rules for the Board of Directors or the Executive Committee established from it, which becomes limited by the scope of the resolution of delegation that gave rise to it. As referred to in these sections, these two bodies act in a legal, statutory and procedural framework which, as a whole, already establishes appropriate functioning rules conducive to the adoption of best practices, in order to safeguard the efficiency of the company and the creation of value for the shareholder.
The internal rules of the Supervisory Board exist and are available on the Company's website.
Detailed minutes of the meetings of these bodies are drawn up.
I.2.3. The internal rules of management and supervisory bodies and their internal committees must be fully disclosed on the website.
Adopted for the Supervisory Board (sections 22, 34 and 61). There are no formalised internal rules for the other bodies, so they are not disclosed on the company's website.
Complies. Sections 17 and 23 (Board of Directors); sections 28 and 29 (Executive Committee); and sections 31 and 35 (Supervisory Board).
I.2.5. The company's internal rules must provide for the existence and operation of mechanisms for the detection and prevention of irregularities, as well as the adoption of a whistleblowing policy that guarantees adequate means for the communication and treatment of the same safeguarding the confidentiality of the information transmitted and the identity of the person who provided it, when this is requested.
Complies. Section 49 and Section III - Internal Control and Risk Management of Chapter C - Internal Organisation.
I.3.1. The articles of association or other equivalent means adopted by the company must establish mechanisms to ensure that, within the limits of applicable legislation, the members of the management and supervisory bodies are permanently assured access to all information and employees of the company for performance evaluation, the status and the prospects for the development of the company including, in particular, the minutes, supporting documents for the decisions taken, notices and archives of meetings of the executive management body, without prejudice to access to any other documents or persons who may be asked to provide explanations.
Does not formally comply. Although not provided for in the statutes or other equivalent means, access to all the information and other elements referred to in this recommendation is fully and permanently ensured. Sections 21, 29 and 38.
I.3.2. Each body and committee of the company must ensure, in a timely and adequate manner, the flow of information, starting with the respective notices and minutes, necessary for the performance of the legal and statutory powers of each of the remaining bodies and committees.
Complies. Sections 21, 29 and 38.
I.4.1. The obligation for members of corporate bodies and committees to inform the respective body or committee in a timely manner of the facts that may constitute or cause a conflict between their interests and those of the company.
I.4.2. Procedures must be adopted to ensure that the member in conflict does not interfere in the decision-making process, without prejudice to the duty to provide information and clarifications requested by the body, the committee or its members.
Complies. Sections 21 and 29.
I.5.1. The management body must define, with the prior and binding opinion of the supervisory body, the type, scope and minimum value, individual or aggregate, of related party transactions that: (i) require the prior approval of the management body (ii) and those that, because they are of a higher value, still require a prior favourable opinion from the supervisory body.
Partially adopted. Section 38, 89, 90 and 91.
The businesses covered by Recommendation I.5.1. are communicated to the Supervisory Board on a quarterly basis. The value of these transactions is disclosed annually in the Corporate Governance Report (section 92).
II.1.The company must not set an excessively large number of shares necessary to confer the right to a vote, and should state in the governance report its option whenever it implies a deviation from the principle that each share corresponds to one vote.
Complies. Section 12.
II.2. The company shall not adopt mechanisms that hinder the passing of resolutions by shareholders, including fixing a quorum for resolutions greater than that provided for by law. This practice is considered equivalent to the proposal in this recommendation, i.e. to safeguard the same interests. Section 14.
As detailed in section 14, the Articles of Association of Corticeira Amorim enshrine a quorum for calling meetings to order/taking decisions that is greater than that established in law in the following situations:
• Restriction or withdrawal of pre-emption rights in share capital increases – the Company's articles of association require that the Annual General Meeting be attended by shareholders accounting for at least 50 per cent of the paidup share capital (article 7);
Therefore, non-compliance with this Recommendation and the requirement of a higher quorum than that provided for by the Portuguese Companies' Code gives shareholders - particularly small or minority shareholders - an important role in a number of decisions that can have significant impact on corporate life (winding-up), corporate governance model (removal of a Director proposed by minority shareholders and change in the composition of the Board of Directors), ownership rights of shareholders (restriction or abolition of shareholders' pre-emptive subscription rights in share capital increases) and an appropriate participation in Annual General Meetings convened by shareholders.
Thus, we are of the opinion that keeping these conditions will contribute to enhance and protect shareholders' rights and role in respect of significant corporate governance matters – values that the Corporate Governance Code seeks to protect.
Voting by mail (postal ballot) is permitted. The votes, addressed to the Chairman of the Board of the General Meeting must be received at the Company's headquarters on or before six pm of the third business day prior to the day set for the General Meeting and under the other conditions expressly announced in each Notice of General Meeting. The presence of the shareholder at the General Meeting revokes any vote it may have sent by mail.
Corticeira Amorim's Articles of Association allow electronic voting, provided that there are adequate technical resources available to enable checking the validity of electronic votes and ensuring their data integrity and confidentiality. If the Chairman of the Board of the General Meeting decides that the technical requirements for voting by electronic means are met, such information shall be included in the Notice calling the meeting.
Such requirements were not met in 2019.
For Corticeira Amorim, the Shareholders' General Meeting is an event of special relevance to the company and its Shareholders, as a privileged forum for communication between the company (via the members of its statutory bodies) and its shareholders, encouraging transparency, joint reflection, the exchange of ideas and arguments and the alignment of interests. Thus, the high active participation of Corticeira Amorim's Shareholders in the General Meetings motivates the company to maintain the current system of participation and voting (in person and vote by mail) ensuring, on the one hand, the participation of all those who cannot or do not intend to participate in person and, on the other hand, enhancing the traditional participation in person which largely exceeds 80% of the total shares issued.
In addition, it is considered that (i) for the Shareholder, the complexity associated with secure electronic voting is disproportionate to the vote by mail, which also allows for nonpresential participation, which can even be revoked by the presence of the Shareholder, (ii) both for the Shareholder and for the company, the resulting costs are materially relevant.
This practice is considered equivalent to the proposal in this recommendation, i.e. to safeguard the same interests. The Articles of Association of Corticeira Amorim do not allow taking part in the Shareholders' General Meeting by telematic means.
As mentioned in the preceding paragraph, Corticeira Amorim favours the attendance in person of the Shareholder at the General Meetings for the reasons given. The very high levels of Shareholder participation indicate that this is also the favoured method of Shareholders in their interaction with the company and with the members of their governing bodies.
Therefore, taking this reality as a basis and taking into account the complexity associated with holding general meetings by telematic means (in particular material resources and technical means, control system and verification of shareholder status) as well as the risks of computer tampering and the associated costs for both parties to avoid these risks, Corticeira Amorim believes that it is appropriate to maintain current practice with regard to holding and participating in Shareholders' General Meetings.
II.5. The company's articles of association that provide for the restriction of the number of votes that may be held or exercised by a sole shareholder, either individually or jointly with other shareholders, shall also foresee for a resolution by the General Assembly (5 year intervals), on whether that statutory provision is to be amended or prevails – without super quorum requirements as to the one legally in force – and that in said resolution, all votes issued be counted, without applying said restriction.
Not applicable. Section 5. Section 13.
The articles of Corticeira Amorim do not provide for the limit on the number of votes that each shareholder (either separately or jointly with other shareholders) is entitled to cast or exercise.
II.6. Measures that determine the payment or assumption of fees by the company in the event of change of control or change in the composition of the Board and that which appear likely to impair financial interests in the free transfer of shares and free assessment by shareholders of the performance of the directors shall not be adopted.
Complies. The Company has not entered into any agreements that determine payments or the assumption of charges by the Company in the event of a change of control or change in the composition of the Board of Directors, except for the normal "change of ownership" clauses included in certain financing agreements entered into in the ordinary financing of operations and which, on a case-by-case basis, have been analysed and their acceptance considered the most appropriate for the company's interests. This information is disclosed annually in the accounts of the Company, reason why the hiring/maintenance of these clauses is not likely to impair the free assessment by shareholders of the performance of the members of the Board of Directors.
No measures have been implemented specifically targeting the effects described in this recommendation. Sections 4 and 84.
III.1. Without prejudice to the legal duties of the chairman of the board of directors, if he/she is not independent, the independent directors must designate a lead independent director from among them, namely: (i) acting as liaison with the chairman of the board of directors and other managers, (ii) ensure that they have all the necessary conditions and means to carry out their duties; and (iii) coordinate them in the evaluation of performance by the management body provided for in recommendation V.1.1.
This practice is considered equivalent to the proposal in this recommendation, i.e. to safeguard the same interests. There are no independent directors, which prevents the adoption of the practice in the precise terms in which it is advocated.
However, it is considered that the objectives are fully taken care of (i) by the careful and collegial performance of the Board of Directors, both in its monthly meetings where all relevant issues for company are discussed with the presence of its chairman (attendance record: 100%); (ii) the implemented system ensures, on the one hand, the timely reporting of the Executive Committee to all members of the Board of Directors and, on the other hand, the preparation of meetings of the Board of Directors, scheduling them in advance and circulating the agenda of the same and respective supporting documents with the necessary advance for study and questions; (iii) the evaluation is done collegially, by all the members that make up the Board of Directors.
III.2. The number of non-executive members of the management body as well as the number of members of the supervisory board and the number of members of the committee for financial matters should be appropriate to the size of the company and the complexity of the risks inherent in its activity, but sufficient to efficiently ensure the tasks entrusted to them.
Complies. Section 18 (Board of Directors), and section 31 (Supervisory Board).
III.3. In any case, the number of non-executive directors must be higher than that of executive directors.
Section 18. Although the number of non-executive directors is equal to the number of executive directors, they are considered to perform their responsibilities fully and efficiently – as described in a separate chapter of the Director's Report "Activity by non-executive members of the Board of Directors of Corticeira Amorim" - and it may also block any resolution of the Board of Directors.
III.4. Each company must include a number not less than one-third but always plural, of non-executive directors who meet the requirements of independence. For the purposes of this recommendation, a person who is not associated with any specific interest group in the company nor is it likely under any circumstance to affect his or her exemption in terms of analysis or decision-making, shall be considered independent, in particular by virtue of:
(i) Having exercised for more than twelve years, on a continuous or interim basis, roles in any corporate body;
(ii) Having been a worker of the company or company with which it is in a control or group relationship in the last three years; (iii) Having, in the past three years, provided services or established a significant business relationship with the company or company with which it is in a control or group relationship, whether directly or as a shareholder, director, manager or leader of a legal person;
(iv) Being the beneficiary of remuneration paid by the company or company with which it is in a control or group relationship, beyond the remuneration resulting from the exercise of the role of director;
(v) Living in a common-law union or being the spouse, relative or similar relationship in a straight line and up to the 3rd degree, inclusive, in a collateral line, of directors of the company, of directors of legal persons directly or indirectly holding qualifying holdings, or of directors of natural persons directly or indirectly holding qualifying holdings;
(vi) Being the holder of a qualifying holding or representative of a shareholder having qualifying holdings.
This practice is considered equivalent to the proposal in this recommendation, i.e. to safeguard the same interests. Sections 18 and 20.
Although there are no independent directors, non-executive directors have a wide and diversified academic and professional experience, as well as high standards of ethics and professional conduct that give added guarantees of performance in the pursuit of the greater interest of the company and shareholders in general, to the detriment of private interests.
The existence of clear and mandatory internal rules governing transactions between related parties as well as the obligation to abstain from decisions in which they may have a particular interest, make it impossible for them to act for their own benefit, thus ensuring impartial professional activity.
III.5. The provisions of paragraph (i) of recommendation III.4 shall not preclude the qualification of a new director as independent if at least three years have elapsed between the termination of duties in any company body and the appointment to the new role (cooling-off period).
Not applicable.
III.6. Non-executive directors must participate in the definition by the management body of the strategy, main policies, corporate structure and decisions that should be considered strategic to the company by virtue of their amount or risk, as well as in evaluating their compliance.
Complies. Chapter 12 of the Consolidated Management Report (Activity by non-executive members of the Board of Directors of Corticeira Amorim); sections 9 (Non-delegable duties and powers of the Board of Directors) and 21 (Structure and business management).
III.7. The general and supervisory board must, within the framework of its legal and statutory powers, collaborate with the executive board of directors in defining the strategy, main policies, corporate structure and decisions that should be considered strategic for the company, due to the amounts or risk, as well as assessing compliance with these.
Not applicable. The model adopted by Corticeira Amorim does not include this body, as described in section 15; the powers to define policy and strategies under this recommendation are powers that cannot be delegated by the Board of Directors. The Supervisory
Board and the Statutory Auditor have supervisory powers, with the specific nature arising from the scope of the respective activity.
III.8. In compliance with the powers conferred upon it by law, the supervisory body shall, in particular, monitor, evaluate and issue its decision on the strategic guidelines and risk policy defined by the management body.
Does not comply. Section 38.
III.9. The companies must establish specialised internal committees that are appropriate to their size and complexity, covering, separately or cumulatively, matters of corporate governance, remuneration and performance appraisal, and appointments.
Does not comply. There are no internal committees, consisting mainly of members of the company bodies, specialized in matters of corporate governance, appointments, performance appraisal and remuneration which, given the size of the company, are dealt with at the Board of Directors and Executive Committee level. Sections 27 and 29, with the exception of the matters of performance appraisal and remuneration for which the Remuneration Committee, elected by the Shareholders, is responsible.
III.10. The risk management, internal control and internal audit systems must be structured in terms appropriate to the size of the company and the complexity of the risks inherent to its activity.
Complies. Section III - Internal Control and Risk Management of Chapter C - Internal Organisation.
III.11. The supervisory body and the financial matters committees must oversee the effectiveness of systems and risk management, internal control and internal audit, and propose any adjustments that may prove necessary.
Complies. Sections 38 and 54.
III.12. The supervisory body must issue its opinion on the work plans and resources concerning the internal control services, including control of compliance with the standards applying to the company (compliance services) and internal audit services, and shall be the addressees of the reports made by such services, at least in the case of matters relating to the rendering of accounts, the identification of or settling of conflicts of interest and the detection of potential irregularities.
Complies. Sections 37 and 38.
IV.1. The management body must approve, through internal regulations or through equivalent means, the performance scheme for executives and the exercise by them of executive duties in entities outside the group.
This practice is considered equivalent to the proposal in this recommendation, i.e. to safeguard the same interests.
Although there are no internal rules formalised in the terms foreseen in this recommendation: (i) there is the formal delegation of duties of the Board of Directors to the Executive Committee which, together with the legislation in force, already establish a scheme for performance of the members of the Executive Committee, and (ii) there are clear and generally observed internal rules for the Board of Directors to have information on possible corporate positions, executive or not, in entities not related to the Corticeira Amorim Group.
IV.2. The management body must ensure that the company acts in accordance with its objectives and must not delegate powers as regards the following: i) definition of the strategy and the general policies of the company, ii) organisation and coordination of the business structure; (iii) matters which are to be considered strategic in view of their amount, risk or special characteristics.
Complies. Section 21.
IV.3. The management body must set risk-taking objectives and ensure that they are pursued.
Complies.
IV.4. The supervisory body must be internally organised, implementing periodic control mechanisms and procedures to ensure that the risks effectively incurred by the company are consistent with the objectives set by the management body.
Complies. The Supervisory Board regularly monitors the company's activity, meeting among themselves and/or with the participation of members of other governing bodies (in particular the Executive Committee) or heads of functional areas related to these matters, namely Planning, Internal Control, Internal Audit. This monitoring and these meetings take place whenever the Supervisory Board deems it appropriate and convenient for the full and diligent performance of the duties that, by law, the operating regulations of this body or implemented practice, are assigned to it.
V.1 Annual Performance Assessment
V.1.1. The management body must annually assess its performance, as well as the performance of its committees and delegated directors, taking into account compliance with the company's strategic plan and budget, risk management, internal operations and the contribution of each member to that end, and the relationship between the bodies and committees of the company.
Complies. Chapter 17 of the Consolidated Management Report.
V.1.2. The supervisory body must supervise the management of the company and, in particular, annually assess compliance with the company's strategic plan and budget, risk management, the internal functioning of the management body and its committees, as well as the relationship between the company's bodies and committees.
Complies. Section 24, 25 and Section 38.
V.2.1. The remunerations shall be determined by a committee whose composition ensures its independence from the management.
Partially adopted. Sections 66, 67 and 68.
V.2.2. The Remuneration Committee shall, at the beginning of each term of office, annually approve and confirm the remuneration policy for the members of the company's corporate bodies and committees. Accordingly, it shall establish the fixed components and, for executive directors or directors who sporadically conduct executive duties, and if there is a variable component of remuneration, the respective allocation and measurement criteria, the mechanisms of limitation, the mechanisms for deferring payment of the remuneration and the remuneration mechanisms based on the company's own options or shares.
Complies. Sections 69, 70, 71, 72, 77 and 79.
V.2.3. The statement on the remuneration policy for the members of the Board of Directors and Supervisory Boards as set out in Article 2 of Law No. 28/2009 of 19 June, shall also contain:
(i) The total remuneration broken down by the different components, the relative proportion of fixed remuneration and variable remuneration, an explanation of how total remuneration complies with the remuneration policy adopted, including how it contributes to the long-term performance of the company, and information on how the performance criteria have been applied; (ii) Remuneration from companies belonging to the same group; (iii) The number of shares and stock options granted or offered, and the main conditions for the exercise of rights, including the price and date of such exercise and any change in those conditions;
(iv) Information on the possibility of requesting the reestablishment of variable remuneration;
(v) information on any departure from the procedure for the implementation of the approved remuneration policy, including an explanation of the nature of the exceptional circumstances and an indication of the specific elements subject to derogation; (vi) Information regarding the enforceability or unenforceability of payments for the termination of appointment of board members.
Complies. The statement on the remuneration policy for the members of the Board of Directors and Supervisory Boards presented and approved at the Shareholders' General Meeting held on 12 April 2019 contains all the information referred to in this recommendation.
V.2.4.For each term of office, the remuneration committee shall also approve the pension scheme of directors if the articles of association permit such, and the maximum amount of any compensation to be paid to the member of any body or committee of the company by virtue of the termination of their duties.
Not applicable. Pursuant to the statement on remuneration policy approved at the Shareholders' General Meeting, based on proposal of the Remuneration Committee, it is not the Company's policy to assign retirement benefit systems to the members of its corporate bodies.
This practice is considered equivalent to the proposal in this recommendation, i.e. to safeguard the same interests. The maximum amount of compensation in the event of termination of duties: the maximum amount of all compensation to be paid to the member of any company body or committee due to termination of duties from the general law applicable to each situation, with no amount allocated that is defined in a contract, agreement or resolution, nor any intervention by the Remuneration Committee.
V.2.5. In order to provide information or clarification to the shareholders, the chairman or, in his/her absence, another member of the remuneration committee, shall be present at the annual general meeting and any other meetings if the respective agenda includes matters concerning the remuneration of the members of the corporate bodies and committees, or if such presence has been requested by shareholders.
Complies. It is standard practice for the Remuneration Committee to be present or represented at the General Meetings. A Member of this Committee was present at the Shareholders' General Meeting referred to in V.2.3., both on his/her own behalf and on behalf of the other members of this Committee, including its Chairman. In the year under review, the aforementioned General Meeting was the only one whose agenda included matters related to the remuneration of the members of the bodies and committees. No request was received from shareholders requesting the presence of members of the Remuneration Committee at the General Meetings held in 2019.
V.2.6. The remuneration committee must be free to decide, within the budgetary constraints of the company, on the contracting by the company of the consultancy services necessary or convenient for the performance of its duties. The Remuneration Committee shall ensure that the services are provided independently and that the respective providers will not be hired for the provision of any other services to the company itself or to other companies that are in a control or group relationship without the express authorisation of that Committee.
Complies. Section 67.
V.3.1. In view of the alignment of interests between the company and executive directors, a portion of their remuneration should be of a variable nature that reflects the sustained performance of the company and does not encourage excessive risk-taking.
Complies. Sections 69, 70 and 71.
V.3.2. A significant part of the variable component must be partially deferred over time for a period of not less than three years, associating it with the confirmation of the sustainability of the performance, in the terms defined in the company's internal rules.
Complies. Sections 69 and 72.
V.3.4. When the variable remuneration includes options or other instruments directly or indirectly dependent on the value of shares, the beginning of the exercise period shall be deferred for a period not less than three years.
Not applicable. Pursuant to the statement on remuneration policy approved at the Shareholders' General Meeting, based on proposal of the Remuneration Committee, it is not the Company's policy to assign shares and/or stock option systems to the members of its corporate bodies, based on stock price changes.
V.3.5. The remuneration of non-executive directors shall not include any component whose value depends on the performance of the company or its value.
Complies. Sections 77 and 78.
V.3.6. The company must be equipped with the appropriate legal instruments so that the termination of duties before the term of office does not directly or indirectly give rise to the payment to the director of any amounts other than those provided by law. It must explain the legal instruments adopted in the company's governance report.
Complies. Sections 83 and 84 and The mandate contracts and/or resolutions for the election of members of the Board of Directors do not provide for any amount to be allocated as compensation in addition to the payments provided for by law.
V.4.1. The company must, under such terms as it deems appropriate, but perfectly demonstrable, ensure that proposals for the election of members of corporate bodies are accompanied by a statement of the adequacy of the profile, knowledge and curriculum of each candidate for the role.
Complies. Sections 83 and 84 and The mandate contracts and/or resolutions for the election of members of the Board of Directors do not provide for any amount to be allocated as compensation in addition to the payments provided for by law.
V.4.2. Unless the size of the company does not justify it, the role of monitoring and supporting appointments of senior management must be attributed to an appointments committee.
This practice is considered equivalent to the proposal in this recommendation, i.e. to safeguard the same interests. Given the organisation of the Company's activity (i) in specialised Business Units, with integrated but autonomous activities, which respond to markets, challenges and promote non-homogeneous strategies, and also (ii) the size of the Company, the function of monitoring and supporting the appointment of managers is carried out by the Human Resources Department of the respective Business Unit or by the Human Resources Department of Corticeira Amorim (holding company).
Not applicable. There is no Appointments Committee.
V.4.4. The Appointments Committee shall make its terms of reference available and shall, to the extent of its competences, induce transparent selection procedures that include effective mechanisms for identifying potential candidates, and that those proposed have the greatest merit, are most adequate to the demands of the function and promote, within the organisation, adequate diversity including in terms of gender.
Although there is no Appointments Committee as stated in V.4.2., in Corticeira Amorim the Human Resources Departments act in accordance to a set of internally established procedures that advocate and enable:
VI.1. The management body must discuss and approve the company's strategic plan and risk policy, including the definition of acceptable levels of risk.
Complies. Section 54.
VI.2. The company must establish a risk management system based on its risk policy, identifying
(i) the main risks to which it is subject in the performance of its business activity,
(ii) the probability of their occurrence and the respective impact,
(iii) the instruments and measures to be adopted with a view to their mitigation,
(iv) the monitoring procedures, with a view to their monitoring and (v) the oversight procedure, periodic evaluation and adjustment of the system.
Complies. Section 54.
VI.3. The company must annually evaluate the degree of internal compliance and the performance of the risk management system, as well as the perspective of changing the previously defined risk framework.
Complies. Section 54.
VII.1 Financial information
VII.1.1. The internal rules of the supervisory body must establish that it supervises the adequacy of the preparation and disclosure of financial information by the management body, including the adequacy of accounting policies, estimates, judgements, relevant disclosures and their consistent application between financial periods, duly documented and communicated.
Complies. Section 38.
VII.2 Statutory audit and supervision
VII.2.1. The supervisory body must define the following by means of internal rules:
(i) The criteria and selection process of the statutory auditor; (ii) The company's communication methodology with the statutory auditor;
(iii) Supervisory procedures designed to ensure the independence of the statutory auditor;
(iv) Non-audit services that cannot be provided by the statutory auditor.
Complies. The Supervisory Board has established an internal procedure that covers these matters.
VII.2.2. The supervisory body must be the main liaison with the statutory auditor of the company's accounts and the first recipient of the relevant reports, and is responsible, inter alia, for proposing the relevant remuneration and ensuring that the proper conditions for the provision of services are provided within the company.
It is the responsibility of the Supervisory Board to propose the Statutory Auditor and the respective remuneration, within the framework of the Remuneration Policy approved at the Shareholders' Meeting.
VII.2.3. The supervisory board must annually assess the work performed by the statutory auditor, its independence and suitability for the performance of the functions and propose to the competent body its dismissal or termination of the contract as to the provision of the services when there is a valid basis for said dismissal.
Complies. Section 38.
VII.2.4. The statutory auditor shall, within the scope of its duties, verify the implementation of remuneration policies and systems of the corporate bodies as well as the efficiency and effectiveness of the internal control mechanisms and report any shortcomings to the supervisory body.
Not applicable (no. 8 of IPCG's Interpretative Note).
VII.2.5. The statutory auditor must cooperate with the supervisory body and must immediately provide it with information on any significant irregularities concerning the performance of the role of the supervisory body which it has detected, and any difficulties encountered in the performance of its duties.
Not applicable (no. 8 of IPCG's Interpretative Note).
Mozelos, March 23 2020
The Board of Directors of Corticeira Amorim, S.G.P.S., S.A.
[ ← ] Part of one of the world's biodiversity hotspots, cork oak forests have recognized protection status, contribute to climate regulation, are a driving force for sustainable development and play a crucial role in the world´s ecological balance.
Corticeira Amorim places great emphasis on strengthening its vision and commitment to sustainability through various initiatives and strategies. The good practices of regular reporting, in place since 2006, promote transparency and encourage the adoption of sustainability principles, both in the value chain and from its main stakeholders.
This Sustainability Report, included in the Consolidated Annual Report, reflects Corticeira Amorim's commitment and approach to sustainability issues, and has been prepared in accordance with the guidelines of the Global Reporting Initiative (GRI), GRI Standards 2016, for the Core level, whilst satisfying the legal requirements introduced by Portugal´s Decree-Law no. 89/2017 of July 28, being, under Article 508-G of the Commercial Companies Code, a consolidated Non-Financial Statement of Corticeira Amorim, SGPS, S.A..
Throughout the report, we highlight the material issues for Corticeira Amorim: Promotion of the Montado, its Biodiversity and Ecosystems Services; Economic Performance, Research, Development and Innovation; Energy Efficiency and Climate Change; Health and Safety at Work; Circular Economy; Product Environmental Impact (including the topic of Product Quality and Responsibility). In view of its importance for the Organisation, the topic of Training and Development was also considered to be relevant for the purpose of this report.
Since Corticeira Amorim is a group of companies and given the difficulty in implementing sustainability systems in smaller companies, the scope of the report does not include all the companies in the Corticeira Amorim Group. This report accounts for 90% of the industrial units which employ 82% of all employees of the company and corresponds to 82% of consolidated sales for 2019.
The information contained in this report has been audited by Ernst & Young Audit & Associados, SROC, SA.
This document is available at www.amorim.com/en/sustainability/ sustainability-reports/, and any clarification be sought from Corticeira Amorim by email at [email protected].
Level of importance of the topic for Corticeira Amorim
124 CONSOLIDATED ANNUAL REPORT 2019 CORTICEIRA AMORIM, SGPS, S.A.
Sustainability and innovation are intrinsic pillars of the Corticeira Amorim culture and strategy. Our goal is simple, to combine technology with nature and promote a sustainable balance between the two.
As a leader in one of the most sustainable industries globally, Corticeira Amorim has, year on year, maintained and strengthened its commitment to the future and to maintaining a strong, cohesive and dynamic brand, with sustainability at the heart of its identity.
A deep-set ambition to push the boundaries has driven Corticeira Amorim to invest in ongoing projects with a strong focus on research and innovation that result in products and solutions with unparalleled advantages, including reducing the carbon footprint of the end product, saving energy or water, cleaning the environment, improving indoor air quality and promoting well-being and comfort.
The vision, entrepreneurship, work and passion of the entire Corticeira Amorim team have contributed to the company's objectives, which are intrinsically linked with the Sustainable Development Goals set by the United Nations in 2015. These goals include, inter alia, the will to support research, development and innovation, boost economic growth, promote training and welfare for all, ensure health and safety of employees, apply the principles of circular economy, develop green products, reduce the environmental impact of operations and preserve the cork oak forests and ecosystem services.
In order to achieve these goals, we promote various initiatives which we present in this report, initiatives that enable growth towards sustainable leadership.
During this last year, conscious of the fact that nature is always the starting point for a better future, our group has brought several studies to shine light on the environmental, economic and social impact of Corticeira Amorim in Portugal and assess the cork oak forest ecosystem services.
In 2019, our efforts to manufacture products with a positive impact on climate regulation did not go unnoticed once again as our lifecycle evaluation studies of natural cork stoppers and sparkling wine proved the negative carbon footprint of our products, highlighting the differentiating factor of cork.
We have more than 4400 employees working worldwide, and it is through their passion for the business, their desire to go further, that we are able to overcome challenges, led by example and promote the well-being of the communities closest to us and, indeed, society at large.
To one and all, I would like to offer a special word of appreciation for the work and the trust placed in us.
Cordially,
Board Member and Director of Sustainability
Corticeira Amorim's figures for 2019 exemplify this effort and dedication for a more sustainable business, society and world.
CARBON BALANCE OF THE PRODUCTS
*considering carbon sequestration in the cork oak forest
average value estimated of the ecosystem services associated with a cork oak forest properly managed
total net value of Corticeira Amorim's contributions to society when considering ecosystem services induced by the activity (over 7x higher than the estimated direct gross value added)
Corticeira Amorim is one of the largest, most entrepreneurial and dynamic multinationals of Portuguese origin. Its origins in the cork business date back to 1870 and today it is the world leader in the sector. Operating under the motto "not just one market, not just one client, not just one currency, not just one product", the company has been growing and reinventing itself by introducing new products and entering new markets.
| MISSION | ||||
|---|---|---|---|---|
| To add value to cork, in a competitive, differentiating and innovative manner, in perfect harmony with Nature |
||||
| VALUES | ||||
| PRIDE | AMBITION | INITIATIVE | SOBRIETY | ATTITUDE |
Maintaining the family hallmark, Corticeira Amorim has a presence on five continents, through its operations in the fields of production, distribution, joint ventures or market agency. With its registered office in Portugal, the company is listed on Euronext Lisbon.
| Portuguese multinational, with head office in Mozelos, Santa Maria da Feira |
27 Countries in which it has a presence |
4,424 Employees |
|---|---|---|
| 1 | 29 | 51 |
| Main raw | Industrial | Distribution |
| material | units | companies |
Globalization is irreversible and poses a constant challenge for the vision and innovation of Corticeira Amorim. Technological development has been at the forefront of the objectives of the company, which has been diversifying its business model through the various Business Units (BU) and products it offers. The business model it has implemented, based on good management practices, is also founded on an integrated and vertical process that makes use of the principles of circular economy in order to minimise the waste created.
Cork, at the heart of Corticeira Amorim's operations, comes from several producers with whom the company maintains a close relationship and promotes good forest management practices, thereby ensuring the continued production of a good quality raw material.
The Corticeira Amorim Group has a broad portfolio of products made from cork for different markets and applications. This raw material, of enormous importance for the company, has been the focus of continual investment in the area of research, development and innovation in order to promote the use of all its natural properties and to diversify Corticeira Amorim's portfolio. Through its business units, and through anticipating market trends, the company has surpassed the expectations of some of the most demanding industries worldwide.
| BUSINESS UNIT | MAIN FOCUS | KEY ACHIEVEMENTS |
|---|---|---|
| Raw Materials BU Responsible for overall and integrated management of the company's value chain, it plays a key role in promoting synergies between the various units to ensure optimisation of the raw materials flow. |
Cork Stoppers BU, Floor & Wall Coverings BU, Composite Cork BU and Cork Insulation BU. |
+ 50,000 ha targeted total area of new plantations in partnership with forestry producers. |
| Cork Stoppers BU World leader in the production and supply of cork stoppers, this BU has its own distribution network, which puts it in a unique position to provide the ideal stopper for any wine segment, anywhere in the world. |
Cork stoppers for wine, sparkling wines and spirits. |
5,500,000,000 cork stoppers / year. |
| Floor & Wall Coverings BU World leaders in the production and distribution of cork-based floor and wall coverings, this BU uses a multilayer structure that ensures high quality and sustainable products and promotes improved quality of life with unique benefits such as a greater acoustic and thermal insulation. |
Flooring and coverings. | 10,000,000 m2/year of installed capacity. |
| Composite Cork BU The most technological of the business units in the Corticeira Amorim universe, explores the natural properties of cork to produce granules, aggregate and cork composites in various formats and for various purposes. |
Aerospace, panels and composites, automotive, seals and gaskets, electrical, construction, sports surfaces, flooring, household goods, furniture and footwear industries. |
200,000 blocks and 40,000 cylinders produced/ year. |
| Insulation Cork BU Dedicated to the production of 100% natural insulation materials of exceptional technical performance, this BU manufactures products that combines virtually unlimited durability, low embodied energy, and an indoor air quality rating of A+ with excellent thermal, acoustic and anti-vibration insulation properties. |
Sustainable construction and interior design. |
60,000 m3 of insulating cork/ year. |
Our ambition to push the boundaries has resulted in ongoing projects that respond to current global challenges and limit adverse impacts on society. Corticeira Amorim is unrelenting in its focus to leave its mark, make a difference and continually challenge itself, in order to solidify a future of sustainable leadership.
According to the WBCSD (World Business Council for Sustainable Development), the circular economy has great potential to promote global economic growth and to help accelerate society to a more sustainable future.
Designing out waste and pollution, keeping products and materials in use and regenerating natural systems are the three principles behind the circular economy (according to the Ellen MacArthur Foundation). This concept poses a constant challenge for business and society to promote the reuse of products and materials and thereby contribute to mitigating climate change and the regeneration of ecosystems.
• Corticeira Amorim is committed to applying the principles of circular economy through reducing waste, extending the life of materials and regenerating natural systems.
Corticeira Amorim bases its production process on the principle of 100% use regarding cork, which means that optimising the use and consumption of cork throughout the production cycle is one of the Group's key strategies. Corticeira Amorim's production process treats even the smallest granules as an important source of energy.
In addition to 100% use of cork, and wherever feasible, the Group uses recycled materials from other industries, saving natural resources on the planet and reducing the problems associated with their disposal. The company supports several initiatives that collect and recycle cork on five continents and, while no trees are cut down throughout the production process, some of these programmes, particularly the Green Cork programme in Portugal, favour a reforestation approach with indigenous trees, including cork oak tree. Corticeira Amorim, through its Composite Cork BU in particular, has a wide range of products that uses by-products from other industries that previously ended up in landfills and that meet the needs of diverse industries such as aerospace, footwear, automotive, sports or construction. This approach centres on the social responsibility of re-using and saving natural resources in order to generate added value for its business, in some cases by improving the performance of the material and providing more cork to meet the market needs of all business segments.
In 2019, 100% of all cork was used in the process, more than 80% of the materials used came from renewable sources, approximately 90% of all waste was recovered, and 485 tonnes of cork was recycled at the end of life.
Conscious of the impact of its operations on the regions in which it operates and on the Portuguese economy, Corticeira Amorim conducted a study, with the support of EY, to assess this impact.
Understanding the dynamics of an increasingly complex society is essential for gaining a competitive edge and for generating real value for the communities, people and economy. The companies that are prepared to meet the challenges of an increasingly fast-paced society, are those that transform their earnings into impacts on the regions in which they operate. This value creation can be understood as either an externality or shared value – shared value refers to the exchanges with stakeholders (customers, employees, suppliers and local communities), while externalities refer to an exchange of value with society in general that generate benefits or losses for third parties.
• Corticeira Amorim promotes policies to boost economic growth in a sustainable and inclusive manner, ensuring efficient production and decent work for all.
Taking four premises as its starting point – the world's largest company of cork related products, a leader in innovation and diversification of cork products, an example of how to extract economic value from sustainable operations and with a recognized strategic vision of natural resources (in the long run). – EY conducted a study on the environmental, economic and social impacts of Corticeira Amorim's operations in Portugal. This study enabled an accounting of the Group's impact on the Portuguese economy relative to the value created and sustained for 2018. Corticeira Amorim is not fully vertical integraded across
the cork value chain (as it does not hold significant areas of cork oak forest) and, as such, their activities have a major impact on other national companies and sectors upstream. In adopting an inputoutput methodology applied to cross-sectoral data of the Portuguese economy, the study calculated the direct impacts and estimated the indirect and the induced impacts of household consumption, generated by Corticeira Amorim's operations. The results reinforce the Group's commitment to maximising its value by creating jobs and opportunities, through innovation and diversification of products and its support in promoting responsible management of the cork oak forests and use of natural resources.
The direct, indirect and induced impact of Corticeira Amorim on the Portuguese economy are noteworthy. In numerical terms, Corticeira Amorim makes a total net contribution to society of 1,175 million euros per year, including the environmental impact of their activities and the impact of the cork oak forest ecosystem services it makes possible. This value is more than seven times the direct value added by its business activities in Portugal. The value created by Corticeira Amorim is also translated by its multiplier – every euro of production by Corticeira Amorim generates a total of 2.17 euros in domestic production. With regard to exports, 93% of products are exported, a direct result of operations in Portugal and the leadership position it has secured in various markets. In terms of procurement, approximately 75% of purchases made by the Portuguese subsidiaries are from Portuguese suppliers. It is worth highlighting, inter alia, the local impact of Corticeira Amorim, which is responsible for 39% of exports in the municipality of Santa Maria da Feira, where the company has its headquarters and a significant part of its operations, as well as 51% of the jobs created in the forestry sector in Ponte de Sor and Coruche, the municipalities from which the Company acquires much of the cork raw material.
Cork, being a 100% natural, renewable, recyclable and reusable product, is an excellent alternative for reducing global dependence on non-renewable products. Corticeira Amorim's goal is to guarantee quality through continuous improvement of its processes, products and services, whilst striving for innovative solutions supported by technological development, so that it can respond to the client's needs with sustainable, competitive and differentiating solutions. Contributing to the transition to a low-carbon economy is part of the Group's mission.
Population growth is placing unprecedented pressure on the finite resources of the world, awakening a sense of awareness and need for minimisation of the impacts created by companies. A more efficient use of resources is critical for achieving the Sustainable Development Goals and reducing the environmental impact of human activities on the planet.
Sustainable Development Goals
• Corticeira Amorim aims to maintain a proactive role in developing the already vast scope of application of cork, sustained by the innate properties of the material.
Conscious of the impact of its activities, Corticeira Amorim develops products and solutions that are efficient in terms of the use of resources, and sponsors studies that enable data to be obtained from the impact of its products on the environment. These studies come at a time where there is increasing awareness among consumers about the product's environmental impact and prefer products with unquestionable sustainability credentials. Two such studies were carried out by EY in 2019 and follows the life cycle of natural cork and sparkling wine stoppers and another study, carried out by PwC in 2018, builds on a carbon footprint assessment of Neutrocork. These studies took the ISO 14040/44 (ISO, 2006) standard as their basis and adopted a cradle to gate approach, in which the product life cycle from raw material extraction to completion of the production process was evaluated and is aligned with the Product Environmental Category Rules (PEFCR) for still and sparkling wines, issued by the European Commission in 2018.
The results confirm the negative carbon footprint of Corticeira Amorim cork stoppers and show that the production of natural cork stoppers has a carbon footprint of -5.7 gCO2eq/stopper. For the sparkling wine stopper, the carbon footprint is -2.5 gCO2eq/stopper and for the Neutrocork stopper it is -1.8 gCO2eq/stopper. When considering the sequestration of the cork oak ecosystem, made possible by the cyclical extraction of cork, the conclusions are even more striking and show that the carbon balance can reach:
For natural cork stoppers, compared to the previous evaluation in 2008 (PwC/Ecobilan, 2008), comparable impacts assessed for the main stages of the industrial and transport processes were reduced from -2.3 gCO2eq/cork to -4.3 gCO2eq/cork, illustrating significant improvements in environmental performance due, inter alia, to efficiency brought about by the use of energy-efficiency resources and methods.
These studies highlight the differentiating factor between cork and other forestry products. Given that the cork oak retains the carbon throughout its life (which can exceed 200 years), regardless of the cork extraction, the economic exploitation of the cork oak forest for the production of cork makes it possible to perpetuate a unique ecosystem that maintains ecosystem services that are of inestimable value to Society, including carbon sequestration, thus contributing positively to climate regulation.
Nature is the starting point for a better future, and biodiversity is fundamental to the proper functioning of the ecosystem – without it, an ecosystem is not healthy. In this context, Corticeira Amorim promotes good management practices for cork oak forests and related ecosystem services.
Translating ecosystem services into monetary and non-monetary value is essential if companies are to align with biodiversity strategies. The cork oak forest, with its unique characteristics, acts as a natural barrier against fire, promotes jobs in arid and semiarid areas and reduces the risk of desertification. It also plays an important role in promoting ecological functions such as carbon storage, soil conservation, water cycle regulation or supporting a unique and fragile ecology which is a habitat for rare or endangered species. The cork oak forests are part of one of 36 global ecosystems with greatest relevance for the conservation of biodiversity.
• By increasing knowledge, mobilising resources and proposing initiatives, Corticeira Amorim is striving to preserve the cork oak forests and associated ecosystem services.
Corticeira Amorim sponsored EY to conduct an independent study to evaluate the multi-functionality of the cork oak forests based on four case studies that illustrate cork oak forest areas with good management. The quantitative evaluation, based on avoided costs, considered the variability of ecosystem service capacity and was based on different management practices and geographical, soil and climate conditions. Three regulatory services were monetised: global climate regulation, regulation of extreme events: fire prevention, water regulation and soil protection. Other services were also evaluated and quantified wherever there was available data, which included regulatory services such as habitat maintenance, biodiversity and pollination, provision and cultural services.
The study concluded that the ecosystem services evaluated in the cork oak forest provide benefits to society of an average of more than €1,300/ha/year. Furthermore:
| Ecosystem services (ES) | ES delivery (average) |
Indicator | Avoided costs (€/ ha.year) |
|---|---|---|---|
| Global climate regulation | 11 | Carbon sequestration (tCO2/ ha.year) |
596 |
| Extreme events regulation: fire prevention |
N/A | N/A | 546 |
| Hydrological regulations and soil protection |
45 | Avoided erosion (t/ha.year) |
220 |
It should also be noted that the total quantified value of the cork oak forest is underestimated. The cork oak forest has a crucial role in maintaining biodiversity and habitats and is therefore of immeasurable value that is not yet fully understood.
Right at the core of Corticeira Amorim's operations is cork – a 100% natural raw material, extracted cyclically from cork oak trees without damaging them. Cork promotes the economic and social sustainability of areas at risk of desertification, while encouraging the preservation of the cork oak forest – part of one of the world's biodiversity hotspots, which provides numerous environmental benefits, including of CO2 retention, fire protection, regulation of the hydrological cycle of the soils and avoiding their erosion.
Corticeira Amorim believes that all of its stakeholders are fundamental in identifying strategic priorities, and as such, the Corticeira Amorim Sustainability Management team places great stock in listening to their concerns and expectations regarding the issues to be monitored and communicated. Moreover, the involvement of top management and the teams responsible for the implementation of sustainability initiatives is of vital importance.
The organisational structure facilitates effective management and alignment between the strategy, policies and sustainable development practices. The support areas are geared up to coordinate the activities of the BUs and the respective functional areas, and regular monitoring is the responsibility of the Executive Committee. Sustainability is overseen by António Rios de Amorim, CEO and Chairman of Corticeira Amorim.
Listening to stakeholders on a regular basis is considered fundamental for the definition and subsequent validation of strategic options and for understanding the expectations of the main stakeholders.
The strategic alignment of the entire organisation is enhanced by the use of the balanced scorecard methodology, with the Board of Directors being responsible for approving the strategic objectives, strategic initiatives and priority actions.
The teams responsible for implementing sustainable development practices in each BU implement the necessary initiatives and actions to meet the defined objectives and monitor performance on a regular basis under a structured programme called Natural Choice.
In 2018, Corticeira Amorim revised its sustainable development strategy through a materiality analysis to promote alignment with the expectations and feedback of its stakeholders. In line with its sustainability strategy, the Group has identified the most relevant SDGs in terms of the material issues, selecting performance indicators and targets for each relevant SDG. As a result of this, 12 SDGs were identified as the priority for the Corticeira Amorim sustainable development strategy. Note that SDG 17 overlaps all the others and is therefore in line with all defined sustainability strategies represented in the figure below.
In addition to the 12 SDGs, Corticeira Amorim has identified priority targets to ensure the sustainable development of its business. The following are the main identified targets for each pillar, along with certain associated performance indicators. Information on the initiatives is presented in chapters 4, 5 and 6 of this report.
Preserve the cork oak forest and ecosystem services by increasing knowledge, mobilising resources and proposing initiatives
Reduce the environmental impact of operations by adopting renewable, affordable and efficient solutions
+50,000 ha new plantations in partnership with the forestry producers > 90% cork and cork products purchased from controlled sources 29 establishments with FSC® chain of custody certification
63% energy from renewable sources (biomass) 62,000 tCO2eq emissions avoided -17% reduction of carbon intensity (scope 1 and 2) in 2011-2018, in Portugal
Apply the principles of circular economy through the reduction of waste, extend the life of materials and regeneration of natural systems
Maintain a proactive role in developing the already vast scope of application of cork, sustained by the innate properties of the material
Goals
100% natural, renewable, recyclable and reusable thermal and acoustic insulation, impermeable to liquids and gases light, elastic and compressible and shock absorbent fire retardant, hypoallergenic and softtouch
100% use of cork
Support and promote research, development and innovation and foster sustainable solutions
8,000,000 € average annual investment in R&D+I 14 patents submitted in 3 years
20 projects supported in Amorim Cork Ventures since 2014
≈ 726,000,000 € distributed to stakeholders 75% goods and services purchased in Portugal from local establishments (2018) Zero irregularities identified and communicated
Promote training, welfare and personal and professional development for all
Ensure the safety of employees in the workplace and access to quality health conditions
100% employees covered by collective bargaining agreements in Portugal 14 hrs of training on average per employee 25% female employees
18.8 accident frequency index 527 number of lost working days 5.7% absenteeism rate
Corticeira Amorim believes in the importance of its stakeholders in the sustainable management of its activities and improving the Group's performance.
The involvement of stakeholders is a strategic priority for Corticeira Amorim, in that understanding their concerns and expectations regarding the issues to be monitored and communicated is fundamental for validating and identifying strategic priorities. All persons or entities that have or may have an influence, dependency and/or liability for the Group, are identified as Corticeira Amorim stakeholders. Based on this selection criteria, there are eight main groups of stakeholders: Shareholders and Investors, Clients, Employees, Official and Government Entities, Suppliers, Media, NGOs and the Community, Partners and Civil Society.
Since 2009, Corticeira Amorim has implemented a consultation and engagement process with its stakeholders, to promote their participation and contributions to the Group's business model.
The priority that Corticeira Amorim places on the involvement of its stakeholders and on managing their expectations and concerns, together with the way it relates and communicates with them, is reflected in the results obtained in the last consultation process with stakeholders in 2018.
Promotion of the Montado, its Biodiversity and Ecosystem Services
Economic Performance
Ethics and Anti-Corruption
Materials Management
Waste and Effluent Management
The management of communication channels promotes greater alignment with the needs and expectations of stakeholders. Corticeira Amorim uses a distinct set of media that are regularly available and allow a wide range of information to be made to its stakeholders.
| SHAREHOLDERS AND INVESTORS | CLIENTS |
|---|---|
| General shareholders' meeting | Sustainability report |
| Meetings with investors and analysts | Environmental education/awareness actions |
| Periodic disclosure of developments in the business | Support for initiatives/projects |
| Reports & accounts | Satisfaction surveys |
| Sustainability report | Participation in fairs and industry events |
| Regular meetings and contacts | Awareness and technical support programmes |
| Responses to external requests | Cooperation agreements for R&D+I |
| Visits to the cork oak forest and | Publication of technical articles |
| Corticeira Amorim | Working groups |
| Website | Regular meetings and contacts |
| Newsletter and Press releases | Various seminars and workshops |
| Information brochures | Responses to external requests |
| Visits to the cork oak forest and Corticeira Amorim | |
| Website | |
| Newsletter and press releases | |
| Information brochures | |
| EMPLOYEES | OFFICIAL AND GOVERNMENT ENTITIES |
| Sustainability report | Periodic disclosure of developments in the business |
| Cork oak forest protection initiatives | Reports & accounts |
| Environmental education/awareness actions | Sustainability report |
| Support for initiatives/projects | Cork oak forest protection initiatives |
| Satisfaction surveys | Participation in fairs and industry events |
| On-site information panels | Cooperation agreements for R&D+I |
| Procedures and policies | Publication of technical articles |
| Intranet | Support for initiatives/projects |
| Performance management systems | Satisfaction surveys |
| Various seminars and workshops | Awareness and technical support programmes |
| Thematic and awareness-raising internal actions | Working Groups |
| Responses to external requests | Regular meetings and contacts |
| Visits to the cork oak forest and Corticeira Amorim | General and sector meetings |
| Website | Various seminars and workshops |
| Newsletter and press releases | Responses to external requests |
| Information brochures | Visits to the cork oak forest and Corticeira Amorim |
| Website | |
| Newsletter and press releases | |
| Information brochures | |
| SUPPLIERS | MEDIA |
|---|---|
| Reports & accounts Sustainability report Environmental education/awareness actions Support for initiatives/projects Selection and assessment of suppliers Participation in fairs and industry events Awareness and technical support programmes Cooperation agreements for R&D+I Publication of technical articles Working Groups Regular meetings and contacts Various seminars and workshops Responses to external requests Visits to the cork oak forest and Corticeira Amorim Website Newsletter and press releases Information brochures |
Periodic disclosure of developments in the business Reports & accounts Sustainability report Support for initiatives/projects Participation in fairs and industry events Publication of technical articles Responses to external requests Visits to the cork oak forest and Corticeira Amorim Website Newsletter and press releases Information brochures |
| NGOs AND THE COMMUNITY | PARTNERS AND CIVIL SOCIETY |
| Periodic disclosure of developments in the business Reports & accounts Sustainability report Cork oak forest and environmental protection initiatives Environmental education/awareness actions Community engagement initiatives Support for initiatives/projects Cooperation agreements for R&D+I Working groups Regular meetings and contacts General and sector meetings Various seminars and workshops Thematic and awareness-raising internal actions Responses to external requests Visits to the cork oak forest and Corticeira Amorim Website Newsletter and press releases Information brochures |
Sustainability report Cork oak forest and environmental protection initiatives Environmental education/awareness actions Community engagement initiatives Support for initiatives/projects Participation in fairs and industry events Cooperation agreements for R&D+I Publication of technical articles Working groups Regular meetings and contacts General and sector meetings Various seminars and workshops Responses to external requests Visits to the cork oak forest and Corticeira Amorim Website Newsletter and press releases Information brochures |
Corticeira Amorim is committed to ensuring high standards in ethical management and corporate governance. As a result, it has taken on a full complement of voluntary commitments in terms of ethics and social and environmental responsibility through the development and implementation of policies and principles which govern its activity.
Aware of the risks to which its activity and the interests of its stakeholders is subject and maintaining its conviction in the effectiveness of prevention and risk control, Corticeira Amorim regularly reviews these issues, fomenting reflection and improvement in the area.
Corticeira Amorim's Code of Ethics and Professional Conduct formalizes a set of rules and guidelines on the professional conduct of all employees, as well as its external relations. This Code of Ethics and Professional Conduct is developed based on the values that characterise Corticeira Amorim and covers all employees and companies it controls.
The Code of Ethics and Professional Conduct is regularly reviewed so that it promotes, always, the adoption of the policies and practices considered appropriate to meet the commitments, challenges and activities of the Company. In 2020, a new revision of this Code will be made, which, upon completion, will be made available to all employees, who will also be trained in this field, and publicly on the Group's website.
The current version of Code in force covers the following areas:
Corticeira Amorim carries out its activity in an ethical, fair and transparent manner, producing results that are the fruit of its management vision, the efficiency of its processes, continuous innovation, the professionalism and competence of its workforce, the competitiveness of its market offer and its reputation.
The Executive Committee, together with the BU Management, is responsible for assessing the risks associated with corruption and bribery in markets where Corticeira Amorim operates, according to the characteristics of each. Monitoring these risks is complemented by audits of the internal control processes, whose function is to examine the conformity of the processes and to identify inefficiencies.
Any irregularities identified are reported in accordance with a defined procedure for the proper treatment of irregularities (and are addressed to the Audit Committee of the company) by shareholders, employees or other persons/entities. The Company's Audit Committee is made up of independent members and is tasked with analysing any anomalies identified and suggesting mitigation measures for the prevention and occurrence of these anomalies.
In 2019, no irregularities were identified and reported. More detailed information can be found in chapter C. Internal organisation, II. Reporting of irregularities, of the Corporate Governance Report.
Corticeira Amorim assumes, as a structuring principle for all its activities, the respect and protection of human rights: dignity, non-discrimination, equal rights, safety and well-being, education, personal and professional development and freedom of association.
In line with this principle, Corticeira Amorim undertakes daily not only to develop and promote human dignity but also to manage and motivate its employees around these values:
Corticeira Amorim:
Corticeira Amorim:
Corticeira Amorim's supply chain carries out its activities in accordance with the institutional and legal structures and the working conditions applied to satisfy the labour legislation in force in the countries in which it operates. As a result of this, there is no risk to the company's activity and throughout the supply chain.
Based on this commitment and collective effort, Corticeira Amorim has not identified any situations of discrimination, risk of child labour, forced or compulsory labour or restrictions on freedom of association and union membership in any of the activities and operations carried out.
In striving for effective management of environmental and social aspects related to the business and in targeting the achievement of its strategic objectives, Corticeira Amorim implements a set of policies and management systems that are tailored to the non-financial risks inherent in its activities or the emerging opportunities in the markets in which it operates. In this sense, several of the Group's BUs are certified in different management systems suited to its activities.
In 2019, this practice continued to be strengthened, with the renewal of certifications for different management subsystems in the various BUs. More information on these Management Systems can be found in chapter 6 of the Consolidated Management Report.
Corticeira Amorim strives to implement its ethical commitments and economic, environmental and social responsability, as referred to in chapter 3.1 Responsible conduct, at all levels of the business plan. In this regard, the company considers a chain of raw material suppliers, predominantly cork, and stable transport services, to be fundamental in guaranteeing good sustainability practices both at source and in its operating processes.
Corticeira Amorim's business model integrates all stages of production, from the purchase of the raw material, to the company's operations, distribution and marketing of various cork products, with more than 27 thousand customers serviced and 93% of sales made outside Portugal, in more than 100 countries.
At the end of 2019, a total of 270,026 thousand euros was spent on cork and cork products, of which 71% came from Portugal, 7% from North Africa and 22% from other sources in the Mediterranean Basin.
The raw materials BU is the starting point for global and integrated management of Corticeira Amorim's value chain. The Raw Materials BU is responsible for preparing, discussing and deciding on the multi-annual procurement policy of the Company, ensuring optimisation of the flow of all types of cork raw materials to be used in other BUs in the Group and respective market applications. Cork production takes place in the Mediterranean Basin and it is in this region that the majority of Corticeira Amorim's operations are located (more than 80% of jobs), promoting the need for environmental conservation as well as social and economic investment in these areas. In recent years, a strategy has been developed to diversify supply sources in order to enhance cork extraction in all production regions, ensuring the capacity for a quick and efficient response to any increases in raw material consumption.
| Purchases of cork and cork products (thousand euros) | ||||
|---|---|---|---|---|
| 2019 | 2018 | 2017 | ||
| Portugal | 191,911 | 189,673 | 197,785 | |
| North Africa | 18,300 | 10,909 | 9,373 | |
| Other Origins | 59,814 | 62,407 | 55,313 | |
| Total | 270,026 | 262,989 | 262,472 |
In addition to the management of the cork supply, the activities of the Raw Materials BU are focused on gaining knowledge of the cork oak forest and improving the production of quality cork. In this regard, Corticeira Amorim maintains a close relationship with its cork producers, and promotes compliance with the CE Liège Code of Cork Stopper Manufacturing Practice and forestry certification from the Forest Stewardship Council (FSC®).
Corticeira Amorim was the first packaging company in the world to achieve FSC® certification in the cork industry in 2004. Currently, it continues to operate the activity in accordance with FSC® principles resulting in numerous initiatives in the area. In 2019, about 29 Corticeira Amorim's establishments had FSC® chain of custody certification - indisputable proof of its concern and call to action to protect biodiversity, the rights of employees, the rights of indigenous peoples and areas of environmental importance and significant cultural value.
As a leader in the industry, Corticeira Amorim recognises the influence of its activities on the valuation of the cork oak forest and on the implementation of best management practices. A strong focus on forestry research and development and process innovation is a constant priority for this BU and a determining factor in business competitiveness. In order to improve the quality and quantity of cork production, new production techniques have been implemented, in particular, the REGACORK Project, which forms part of the Forestry Intervention Project. More information can be found in chapter 5.1 Promotion of the Montado, its Biodiversity and Ecosystem Services.
Amorim Florestal and the University of Evora coordinate the operational group REGACORK, a project aimed at valuing the cork industry from producers to processors in anticipation of cork production, favouring the growth of cork oaks in intensive production stands and promoting their vitality by mitigating water stress events. This initiative comes in response to a reduction, both in quality and quantity, in global cork production and has the support of several owners and research and conservation institutes whereby ten trial areas are currently being monitored, mostly in the Alentejo region.
Corticeira Amorim's centralised Purchasing Department is responsible for managing suppliers and the purchase of all non-cork products, services, transport and works. The management efforts, from a global perspective, are focused on the search for excellence of the goods purchased and the services rendered, also in line with the company's strategic objectives, which further value to be added to the Group in terms of sustainability.
Corticeira Amorim seeks to establish lasting and stable relationships with its suppliers, ensuring product quality control and a high degree of loyalty with key suppliers.
The acquisition of non-cork products involves a supplier prequalification, qualification and evaluation process. Qualified suppliers are expected to meet the quality standards for supplies, delivery times and the social and environmental responsibility indices defined by Corticeira Amorim. To this end, a defined methodology is applied by the company, characterised by social responsibility (IRSoc) and environmental responsibility (IRAmb) indices5:
Depending on the index under consideration, for each requirement that the supplier does not commit itself to meeting, 25% will be subtracted from either the IRSoc or IRAmb. If the supplier does not meet one or more of the requirements in its commitment, the IRSoc or IRAmb will be zero.
The selected suppliers are subject to an audit programme which takes place annually based on the following criteria:
After each audit, the supplier's performance is evaluated in order to validate the qualification criteria and detect any non-conformities. When non-conformities are identified, an action plan is requested and, depending on the criticality of the non-conformities detected, follow-up audits are carried out and all non-conformity mitigation measures are verified in the Corticeira Amorim Group companies. In addition, there may still be a need to work with the supplier to resolve the non-conformities or find alternatives to the supplier in question.
In 2019, Corticeira Amorim did not replace suppliers as a result of the supplier pre-qualification, quantification and evaluation process.
The transport of products along the Corticeira Amorim value chain has a significant impact on the business, at an economic and environmental level, and is therefore a priority for the Group to ensure its sustainable management.
In this context, the Transportation Department of Corticeira Amorim, operating under the auspices of Central Purchasing, carries out its activities based on the values of commitment, credibility, integrity (ethics) and the search for excellence, and is responsible for:
Given the importance of having a responsible supply chain, Corticeira Amorim has implemented new ways of mitigating the impact of transport, making a positive difference to the international competitiveness of its business. An example of these actions is the preference for maritime transport. In addition, several projects are carried out in the context of maximising the amount of product transported per packaging unit, optimising transport flows of raw materials and products.
[5]More information can be found at www.amorim.com/en/sustainability/ integrated-management-system/policies-and-management-system/
Faced with the perennial challenge to innovate and differentiate its products, Corticeira Amorim bases part of its business strategy and ambition to continue to be a leader in the various segments of its business on research and development. The uniqueness of the natural properties and the potential of cork allows the Group to continue to develop new applications, which stand out for their difference and ability to add value.
This commitment has translated into an average annual investment of about eight million euros and the registration of 14 new patents in the last three years, which has led to diversification of the portfolio and the scope of application of cork as a raw material in diverse markets. Investment in research, development and innovation (R&D+I) has been ongoing and has allowed the Group to sustain its competitive edge.
8,000,000€ average annual investment in R&D+I
Corticeira Amorim invests in the development of specific structures within each BU, each guided by the same key principles:
CONSOLIDATED ANNUAL REPORT 2019 CORTICEIRA AMORIM, SGPS, S.A.
The Group looks to this BU for the identification, evaluation and implementation of best practices related to the cork oak forest. In addition to the Forestry Intervention Project (more information can be found in chapter 5.1. Promotion of the Montado, its Biodiversity and Ecosystem Services.
In partnership with various academic and technological institutions, the Cork Stoppers´ BU R&D+I team has developed several innovative solutions that provide a better understanding of the properties of cork and its effectiveness in sealing wines. Among other solutions, there is the cutting-edge quality control technology Ndtech, which allows the TCA levels to be measured in parts per trillion in each cork stopper in a matter of seconds.
Operating under the motto "leadership in innovation", investment in R&D+I in this BU has resulted pioneering technological solutions. 2019 saw the launch of the highly innovative and sustainable brand AMORIM WISE, with products free from PVCs made entirely from cork and recycled materials. The brand AMORIM WISE has embraced the commitment that all its products have a negative carbon footprint.
Following the circular economy model that distinguishes this BU, worth mentioning is the innovative underscreed. Composed of cork and recycled PU-based foams, this acoustic blanket provides excellent impact noise reduction in new buildings. Designated U38, and with excellent technical performance, this product has brought to market a new ground-breaking value proposition, combining cork with alternative recycled raw materials. Therefore, in addition to innovating, a way to utilise raw materials has also been found through circular economy practices. By combining cork with other materials, U38 will strengthen the Cork Inside product portfolio in the Composite Cork BU.
One of the latest solutions from this BU, the MCRICE, still under development, proposes the use of rice husks and cork to develop new innovative materials, including panels for vertical dividers, hard-wearing floors mats, floor coverings, acoustic diffusers and anti-vibration supports for equipment. The purpose of this BU is simple, create environmentally friendly products, which are industrially produced at a reduced rate of energy consumption and without the use of additives.
Given the importance of innovation, the Group decided to create Amorim Cork Ventures, whose purpose is to support entrepreneurs with innovative ideas and applications for the cork sector.
Its mission is to promote and encourage innovation in the cork sector through investment in startups with innovative projects, products or business models that can further optimise the use of cork and the steady and sustainable growth of the Group. Since its inception, Amorim Cork Ventures (ACV) has analysed approximately 350 proposals, it has supported 20 projects and submitted eight applications for patents, as well as sponsoring a further five acceleration programmes.
Grõwancork – Estruturas Isoladas com Cortiça Lda., one of the Amorim Cork Ventures startups, which, as well as providing solutions for the commercial refrigeration sector, began to take the first steps in the construction market in 2019, presenting a variety of thermal and acoustic insulation sandwich panels, which exploit the technical and natural properties of cork.
The activities associated with the various production systems existing in the cork oak montado, foster the economic and social development of the areas involved, promoting sustainable development, generating employment and protecting the ecosystem.
With a raw material with unique properties at the base, Corticeira Amorim has developed numerous innovative products and solutions used by many of the most demanding industries today, from wines, to aerospace, construction, sport and design.
Each year, the Group has consolidated its position as leader in its sector, generating and distributing value through its stakeholders.
In 2019, Corticeira Amorim generated an economic value of 785,010 thousand euros, with 725,908 thousand euros distributed among the stakeholders
In all the countries in which it operates, Corticeira Amorim contributes to the local social security schemes, in accordance with the applicable specific legislation, which covers all its employees. In 2019, the amount grew 2% compared to the previous reporting period to 22,511 thousand euros.
| 2019 | 2018 | 2017 | |
|---|---|---|---|
| Contributions to local social security schemes |
22,511 | 22,056 | 19,996 |
Given the activities carried out by Corticeira Amorim, with cork right at heart of operations, good management and promotion of the cork oak forests, biodiversity and associated ecosystem services are considered critical.
According to the study conducted by EY in 2019 (more information can be found in chapter 1.2 Global challenges and strategic development, Challenge 4: Promoting ecosystem services), the cork oak forest forms part of a biodiversity hotspot, with protection status under the EU Habitats Directive (habitat 6310 –cork oak forest and habitat 9330 –Quercus suber forests) and also under priority habitat 6220 (Pseudo-steppe with grasses and annuals (Thero-Brachypodietea)). As part of the Mediterranean Basin, the montado is inserted in one of the 36 world biodiversity hotspots, as stipulated in the Critical Ecosystem Partnership Fund in partnership with Conservation International (CEPF, 2017). The Mediterranean Basin is home to 0.9% of all vertebrates and 4.3% of all plants, translating into around 770 species of vertebrates and more than 25,000 plant species, more than half of which are indigenous (Myers et al., 2010). The evergreen trees with a long lifespan, coupled with the verticality and density of the shrub stratum foster the coexistence of indigenous flora and fauna (Pereira et al., 2011). As an agrosilvopastoral ecosystem, the harmonious relationship with extensive agricultural practices and soft traditional extraction methods, such as the one used in cork extraction are essential for the maintenance of good quality habitats. . The cork oak forest is a habitat for more than 130 species of vertebrates, 75 of which are birds, 28 mammals, 10-15 reptiles and 5-7 amphibians. Around 95% of all terrestrial mammals in Portugal exist in the cork oak forest (Pinto Correia et al., 2013). The endangered Iberian Lynx (Lynx pardinus) is one of the species that historically lives and hunts in the cork oak forest, but which is currently only found in very limited numbers. The decline in the population of wild-rabbits (Oryctolaguscuniculus) is one of the main reasons. In total, more than 28 cork oak forest fauna species are classified as protected (Batista et al., 2017). As regards the flora, there are more than 1,350/ha of vascular plants in this ecosystem, many of these are classified as rare or have protection status (Batista et al., 2017).
This same study highlights, once again, the critical importance of the cork oak forest for ecosystem services, especially the crucial role the cork oak forest plays in preserving biodiversity and habitats and is therefore of immeasurable value.
According to the Instituto de Conservação da Natureza e Florestas (ICNF), the areas in which Corticeira Amorim carries out its industrial activities are not classified as protected areas, so there is no significant impact on biodiversity at this level.
The cork oak forest plays an important role in, inter alia, global climate regulation, fire prevention, water regulation and soil protection, as a result of its multifunctional properties, not to mention the wide biodiversity it fosters. It is highlighted the important carbon sink role played, since the stripping has a negligible effect on the total storage of carbon and the cork oak can live 200 years on average.
The cork oak forest provides several economic, social and environmental advantages. Cork creates the most valued products of this ecosystem, mainly due to the production of cork stoppers. This raw material is also used in several other sectors of activity with enormous economic and social relevance in terms of the contribution to job creation and local development of rural areas.
Stripping is a manual job that requires a deep understanding of the technique and forest. As it is a regular, cyclical process, it creates continuous activity and contributes to the settlement of people in areas at risk of desertification. The World Wildlife Fund (WWF) estimates that more than 100,000 people depend on the economic activities of the cork oak forest.
The cork oak plays such an important role that the Assembly of the Republic unanimously consecrated it the National Tree of Portugal in late 2011 and has also been protected by law since the thirteenth century.
The Group undertakes numerous actions for the maintenance, preservation and enhancement of the cork oak forests to support its role in preserving this natural resource. These actions, which are in line with the commitments made by Corticeira Amorim regarding its contribution to the Sustainable Development Goals, are founded on guidelines that enable:
The Forestry Intervention Project is an example of the efforts made by Corticeira Amorim to promote the cork oak forest, biodiversity and related ecosystem services.
Operating under the motto "take care of the present, built the future", Corticeira Amorim has developed the Forestry Intervention Project for the preservation and sustainable development of the cork oak forest. This project is based on the development of fertigation methods for cork oak trees on a scientific basis, sequencing of the cork oak genome, improvement of the cork oak forests and combating pests and diseases and kicked off in 2013 with a research project that sought to find a new subericulture model through irrigation.
2019 saw the continuation of the efforts started in 2017 with the first large-scale plantations. These plantations benefit from the installation of an improved irrigation system with drip irrigation. This irrigation system will be used until the first extraction of cork, from which point the cork oak will return to its normal growth, with the cork extraction being carried out in cycles of nine years.
This is a project of great importance for Corticeira Amorim, not only because of the impact in terms of change of land use, but also because it marks the beginning of the company's journey as a forest owner, through the purchase of a farm. The purchase of the company Cosabe in 2018, owner of the Herdade da Baliza estate, which spans a total area of 2866 hectares, will help promote and spread the implementation of new techniques for managing the national cork oak forest.
It is worth highlighting that during the reporting year, 250 hectares of eucalyptus trees were converted into a cork oak plantation where the most current forestry techniques were used, namely the installation of a drip irrigation system.
In addition, Corticeira Amorim also oversees other cork oak plantations, where this forestry model was implemented in partnership with the University of Évora and several forest owners. The goal of these partnerships is to create, share and disseminate knowledge.
In 2020, Corticeira Amorim aims to continue this process either through the implementation of new areas held by the company, or in partnership with forestry producers or providing technical support. The company also intends to start the internationalisation of this project with improved irrigation system implementing some parcels in Spain.
of new plantations
The long-term goal for the Forestry Intervention Project is to plant 50,000 hectares of cork oaks, with the involvement and support of forest owners, at a higher density than the current forest, thus increasing the total area of cork oak forest in Portugal by 7% and the production of cork by 35%.
Corticeira Amorim considers critical, in view of the current climate change scenario, that the cork oak be singled out as a privileged species, due to its long-term retention of carbon dioxide, regulation of extreme events, protection of the soil and combating desertification, not to mention the associated biodiversity.
Corticeira Amorim has made a year-on-year commitment to develop more productive processes and implement technologies that promote and continuously improve its environmental performance. This is a growing concern and global challenge, with a real and measurable impact on climate change, scarcity of resources and transition to low-carbon energy.
In terms of the positive contribution to the mitigation of climate change, it is important to highlight the fact that Corticeira Amorim is an important sponsor of cork oak forests and thereby contributes to the positive sequestration of CO2 enabled by this ecosystem. As the cork oak is a slow growth species, with an average lifespan of 200 years, this plays an important role in the capture and storage of CO2 through the action of its roots, leaves, trunk and bark – the cork.
Corticeira Amorim has strengthened its commitment to a sustainable future through the implementation of sustainable practices along the value chain - from the production of cork, to the transformation of cork into products with low or negative carbon impact at the end of life of the product. In order to minimise the negative environmental impact of the processes in the different phases of the value chain, a series of common principles were established for all BUs and subsidiaries, which include:
In order to achieve these principles, different management systems have been implemented in the various BUs, certified by various standards as described in sub-chapter 3.1. Responsible conduct – Management Systems.
In 2019, Corticeira Amorim's total energy consumption (in gigajoules, GJ) decreased by 3% compared to the previous reporting year. The primary source of energy consumed by Corticeira Amorim is biomass (63%), followed by electricity (32%). However, fossil fuels (gasoline, diesel, propane and natural gas) are also consumed, and represent the remaining 5% of the energy consumed by the Group.
With regard to energy intensity, in 2019, there was a decrease of about 2%, as a result of the implementation of a set of operational/energy efficiency measures, the renewal of the ISO 50001 management system certification in the Cork Stoppers BU and the completion of the certification process in the Composite Cork BU. A total of 1,605 thousand euros were invested, which resulted in savings of more than 60 thousand GJ.
Corticeira Amorim applies the principles of circular economy and has implemented an integrated production process that allows and promotes the reuse of all the byproducts associated with the processing of cork. Even the smallest grains are used as an importantsource of energy.
| 2019 | 2018 | |
|---|---|---|
| Energy intensity (GJ/Million € sales) * recalculated according to the methodological notes |
2,452 | 2,500* |
The Group organises the Energy Efficiency Forum twice a year to facilitate sharing and interaction between the various energy managers of the Group. Among other goals, the Forum aims to:
With a view to improving efficiency in the production, transport and consumption of compressed air, a far-reaching project was carried out to survey, inventory and profile the status of each compressed air system in each of the Group's industrial units. This project was based on two general premises: i) to combat leaks and misuse of resources and ii) implement technological measures associated with the equipment, accessories and maintenance.
Since its implementation in 2018, this energy efficiency process has enabled:
In 2019, scope 1 and 2 emissions reached a total of 43,627 tCO2eq, calculated by the market method, with a 27% decrease on the previous year (recalculated according to the methodological notes). The market method allows the evolution of the company's choices in the procurement of electricity services to be reflected in the calculation. This has proven to be of great importance in monitoring the performance of Corticeira Amorim, given the weighting of electricity in the energy mix of the Company and, therefore, the method chosen to present the evolution of this indicator in this report.
62,000 tCO2 eq emissions avoided
Biomass (mostly cork dust) is the main source of energy consumed by the group and can be defined as solar energy stored in the form of energy. The use of this energy source does not produce a net increase in carbon dioxide emissions and is a way of exploiting a waste product. In 2019, the production of energy from biomass totalled around 988 thousand GJ. This practice, along with the operational/energy efficiency measures implemented, resulted in more than 62 thousand tCO2eq avoided.
In order to fall in line with the recommendations of the Greenhouse Gas Protocol – Corporate Accounting and Reporting Standard from the World Resources Institute/World Business Council for Sustainable Development, as in previous years, indirect energy emissions (scope 2) were calculated using the location-based and market-based methods, as illustrated below. The increase in emissions using the location method reflects an increase in electricity consumption, since the emission factor did not change in 2019.
Cork oak forests are important natural CO2 sinks, they regulate the hydrological cycle, protect against erosion and fire, and foster a level of biodiversity comparable to regions such as Amazonia, Borneo and the African savanna.
| 2019 | 2018 | 2017 | |
|---|---|---|---|
| Electricity (tCO2eq): location method |
66,544 | 63,355 | 53,624 |
| Electricity (tCO2eq): market method * recalculated according to the methodological notes |
38,291 | 53,768* | 54,792 |
Between 2018 and 2019, Corticeira Amorim changed to the market method for calculating the carbon intensity of its activities, in order to achieve comparability with the carbon footprint study carried out by the Group. As regards carbon intensity, there is a reduction of 35% over the previous year, primarily reflecting a lower emission factor from the electricity service provider.
| 2019 | 2018 | |
|---|---|---|
| Carbon intensity (tCO2eq /Million € sales) *recalculated according to the methodological notes |
67.8 | 92.0* |
An increase in the production capacity of technical cork stoppers created the need to increase the thermal energy production capacity of the thermal fluid circuit. Therefore, in 2019, a new boiler was acquired and the network was restructured. These actions have allowed not only to increase the capacity of the equipment and infrastructure, but also to develop unique circuits with different critical points to improve the energy ratio of the activity. The reduction in energy consumption targets two critical high consumption areas in the IU: electrical support of the moulding machines, and discontinuation of natural gas consumption in the milling dryer.
The technology implemented in the new boiler system has increased the reliability of the energy use compared to the previous equipment, allowing a lower level of excess air and gas outlet temperature due to the operation of the economiser for preheating the primary air and heat recovery from the thermofluid before it enters the boiler. The new boiler also has an additional heat recovery system for producing hot water to supply the steaming and boiler systems.
Since its implementation, the new boiler has enabled an efficiency increase of over 16% compared to the previous system, representing:
In the scope 3 emissions calculated for 2019, there was a 24% reduction compared to the previous reporting year, which represents a total of 82,308 tCO2eq.
Transport has a significant impact on business, at the economic and environmental level, due not only to rising costs, including the increased cost of fuel, but also to fuel consumption and emissions of greenhouse gases from the activities upstream and downstream of the value chain.
Within the scope calculated (more information can be found in chapter 7.5 Energy efficiency and climate change - emissions in the value chain), the transportation of raw materials and products is the main generator of emissions in the value chain and is made by external logistics service providers.
In order to minimise the impact of the growth of logistics activity, a series of projects have been developed to optimise routes by reducing distances travelled, increasing load capacity and the number of deliveries per distance travelled.
| Consumption outside the organisation (GJ) In Portugal |
CO2 emissions scope 3 (tCO2eq) In Portugal |
|||
|---|---|---|---|---|
| 2019 | 2018 | 2019 | 2018 | |
| Upstream transportation and distribution |
342,069 | 444,101 | 25,329 | 32,916 |
| Waste generated in operations |
3,644 | 3,820 | 266 | 283 |
| Business travel | 17,866 | 14,137 | 1,277 | 1,020 |
| Employee commuting |
31,854 | 36,039 | 2,589 | 2,677 |
| Downstream transportation and distribution |
713,682 | 983,750 | 52,846 | 71,917 |
Downstream and upstream transportation and distribution accounts for approximately 95% of the energy consumption outside the organisation for 2019.
95% of scope 3 emissions calculated in 2019 are associated with the transport of raw materials and products.
Corticeira Amorim accounts for and reports the emissions resulting from its own activities (scope 1 and scope 2 emissions) and also, through its activity in Portugal, certain sources of indirect emissions (scope 3 emissions), such as upstream transportation and distribution, waste generated in operations, business travel, employee commuting, downstream transportation and distribution. In order to improve the calculation of these emissions in the value chain, to encourage their reduction and update the previous study conducted in 2011, Corticeira Amorim carried out a detailed calculation of the carbon footprint of all its business areas in 2019. The study was carried out by EY based on the data from 2018 and encompassed the activities carried out in Portugal, based on the GHG Protocol methodology.
All categories of indirect emissions from the activity were identified by supplementing the calculation usually conducted by Corticeira Amorim with categories related to the production of goods and services purchased, any activities related to fuel and energy (not included in the scope 1 and 2 calculations) and waste treatment.
The results obtained showed that in 2018, Corticeira Amorim's activities generated 274,481 tCO2eq, of which 1.7% were generated by scope 1 activities, 18.3% by scope 2 activities and 80% by scope 3 activities. The value of greenhouse gases (GHG) scope 1 and 2 emissions intensity was calculated and used to compare the Group's performance between 2011 and 2018, and the results showed that there was a 17% reduction in carbon intensity.
When considering the carbon sink effect of the cork oak forest, it was found that the annual estimated carbon sequestration in the forest through Corticeira Amorim's activities equated to 4.6 million tCO2, 17 times the amount of greenhouse gases emitted across the value chain in a year of activity.
Corticeira Amorim has set up videoconferencing rooms in each of its business units, configured for both individual events and for meetings with various stakeholders. The video conferencing solution implemented by the Group, offers an improved user experience that is easy to use and assures the quality of both the video and audio through cameras that are configured to identify the participating speaker. This initiative helps to minimise transport-related emissions through air, train and car travel, which would otherwise be necessary for collaboration between the BU and other business partners.
The Group has developed initiatives to minimise any impacts related to water management and use. In 2019, there was an increase of 5% in the withdrawal of water over the previous year, with a higher incidence from the Raw Materials BU. As in 2018, this increase is due primarily to increased operations, particularly the significant upscaling of the boiling process in the Raw Materials BU, and the expanded perimeter of companies included in the report. In terms of the origin of the water, the main source is groundwater (91%). Public network water accounts for just 9% of the total water used.
| 2019 | 2018 | 2017 | |
|---|---|---|---|
| Public network | 48,106 | 41,692 | 30,259 |
| Groundwater | 482,300 | 465,673 | 453,863 |
| Total | 530,405 | 507,365 | 484,122 |
| 2019 | 2018 | |
|---|---|---|
| Water intensity (litres/€ sales) | 0.8 | 0.8 |
There are several initiatives undertaken by Corticeira Amorim that enable it to manage this precious resource efficiently. Examples include:
Aware of the impacts of its operations on the environment, Corticeira Amorim implements measures to mitigate the specific impacts of each unit, in particular by:
At a time when carbon neutrality presents itself as one of society's greatest challenges to ensure the preservation of Planet Earth, Corticeira Amorim conducts its operations with a positive impact on climate regulation promoting CO2 sequestration levels that exceed emissions. All this is made possible by the primary raw material used by the Group: cork.
Winemakers from all over the world rely on the commitment of Amorim Cork to provide the best cork stoppers. In recent years, the company has continuously invested in improving the quality of its cork stoppers. Also of critical importance is the work carried out to mitigate the environmental impact of the products, thus positioning itself as the best alternative for customers seeking to minimise their carbon footprint. When quantifying the carbon sequestration of the cork oak forest, the carbon balance comes to -309 gCO2eq for the iconic nature stopper, -392 gCO2eq for the Neutrocork and -562 gCO2eq for the sparkling wine cork stopper. The results can contribute to the decarbonisation of the wine industry. With an annual production of 5.5 billion corks, this is an impact with global repercussions.
Buoyed by the active contribution made to the environment and the health and comfort of people, Amorim Cork Flooring develops products that guarantee a better quality of life, whilst preserving and protecting the environment – 62% of its products have a negative carbon footprint, 100% contributes with credits to LEED and BREEAM certification schemes (for sustainable building projects) and have T Ü V certification and indoor air quality A+.
In addition to the example of innovation in the use of products containing cork and cork composites, Amorim Cork Composites is a beacon as regards circular economy practices. With over 56 years' experience in circular economy practices, more than 500 applications with sustainability credentials and a new products research, development and innovation area of over 850m2, Amorim Cork Composites products translate into sustainable solutions designed for their comfort and utility to the end user.
When compared to conventional products, Amorim Cork Insulation products stand out for their longevity and environmental characteristics. These products offer thermal, acoustic insulation and anti-vibration protection simultaneously, are 100% natural, recyclable and reusable, have a negative carbon footprint, a long life, and an indoor air quality rating of A+.
It is this commitment to developing responsible and high-quality products that drives Corticeira Amorim's sense of responsibility toward the environment, society and the economy. The Group acts responsibly, implementing strict control systems in its various BUs that enable compliance with the stipulated requirements and guarantee the quality of the products and services made available.
Recovery of its main raw material and waste generated is one of Corticeira Amorim's main strategies and challenges. Operating under the motto "nothing is wasted, everything is valued" since 1963, the Group strives continuously to end general and cork waste, therefore optimising the added value of all its raw materials.
consumed materials from renewable sources
It is the natural properties of cork which make it possible to integrate the principles of circular economy and waste recovery in Corticeira Amorim. In addition to the 100% use of cork, this biological, nontoxic material with several exceptional properties, allows synergies to be exploited with other renewable materials or by-products from other industries, expanding the range of applications.
RECUPERA, an initiative from the Floor & Wall Coverings BU aims to reincorporate the surplus offcuts and profiling of cork composites, and as a result more than 700 tonnes of cork composites have been used with since its launch in 2018.
The main objective of this programme is to reuse by-products of cork composite sanding, cutting and profiling processes by means of micronisation and classification by homogeneous properties, thus allowing controlled dosing in the subertech and hydrocork product composite process. In 2020 it is estimated that more than 1,000 tonnes per year of natural fibre-containing composites are exploited and reused in production processes.
Although it will never be reused in stoppers, recycled cork can have a new lease of life and be used in coverings, insulation, memo boards, high competition kayaks, badminton rackets, tennis and cricket balls, car and aircraft components, design and fashion items and a multitude of other uses. Recycling, in addition to increasing reuse of the raw material, extends the cork life cycle and its environmental benefits, in particular its CO2 retention capacity
Following the logic of promoting products of ecological value, Amorim Cork Composites has updated a wide range of products, incorporating by-products of the footwear, automotive, sports and packaging industries that were previously ended up in landfills. The main objective is aligned with the creation of added value for the business and, in some cases, improving the performance of the material and providing more cork to meet different market needs in various business areas.
In this context, it is worth mentioning the installation of a new composite line, in the reporting year, which has enabled improvements in the material, particularly in terms homogeneity of colour and increased production efficiency and capacity by more than 50%.
This philosophy of fully exploiting the raw materials has motivated the development of unprecedented cork recycling initiatives. These initiatives, which originated in Portugal, already have strong support in other countries on five continents, such as France, Italy, USA, Canada, South Africa, Australia and China.
Corticeira Amorim collects corks and other cork applications for treatment and grinding at three plants, all licensed in the national territory for cork recycling. The material, after having been converted into granules, is reintegrated into the production process, particularly for the Composite Cork BU and Insulation Cork BU products. In 2019, 485 tonnes of cork were recycled in Corticeira Amorim's facilities.
While not incorporated into stoppers, there are several environmental benefits of recycling cork. In addition to increasing the reuse of raw materials, it allows the life cycle of cork to be extended along with its environmental benefits, including its CO2 retention capacity.
Of the various recycling projects promoted by Corticeira Amorim, the following initiatives stand out in 2019:
Greencork is the Quercus project that has been promoting the collection and recycling of cork stoppers since 2008. One of the main objectives of this programme is to finance the planting of indigenous trees through the Floresta Comum programme. To date, this initiative has allowed the collection of over 90 million cork stoppers and the planting of over 971,000 trees. In 2019, Corticeira Amorim joined Missão Continente and Quercus in the distribution of 500,000 "rolhinhas" (containers for the collection of cork stoppers in Portugal), in the campaign "Stoppers for leaves". "Rolhinhas" are small cork stopper containers that are taken home by consumers to collect their cork stoppers. When the time comes to the throw them away, consumers can do so themselves in the special bins provided in the Continente stores (usually located next to the customer service desk). www.greencork.org/
Amorim Cork Flooring has joined forces with the NH Hotel Group to promote a more sustainable world with the Cork2Cork project. In 2019, the second phase of the project kicked off with 74 containers placed in hotels in Spain and Italy. The first phase began in 2011, with the supply of 68 bins for the collection of corks stoppers in hotels in Belgium, Spain, Italy, Germany, France and Holland. To date, more than two tonnes of corks have been recycled and 8,000 m2 of flooring has been produced (equivalent to approximately 300 hotel rooms).
amorimflooring.com/en/newsdetail/cork2cork-programamorim-revestimentos-and-nh-hotels/
This is an Italian recycling programme which started in 2011 and involves associations and institutions that mobilise around a thousand volunteers and generate more than five thousand collection points throughout Italy. In 2019, SUBER collection was conceived by two Italian architects. The recycled cork stoppers were transformed into small granules and then combined with other materials for a new lease of life in objects such as lighting, tables, chairs, door umbrella stands and uniquely styled hangers. www.amorimcorkitalia.com/it/etico
The recovery of waste to prolong its use in the economy is an important business concept for Corticeira Amorim. To this end, the Group has implemented numerous initiatives, some of which are outlined in this report, which aim to extend the useful life in the economy and the benefits of the products. The waste products are recycled and reused in purpose-built plants which have their own processes for labelling, storing, handling and transporting dangerous goods.
| ≈ 90% | |
|---|---|
| waste recovery rate | |
| Waste (tonnes) | ||||
|---|---|---|---|---|
| 2019 | 2018 | 2017 | ||
| Hazardous industrial waste | 493 | 373 | 282 | |
| Recovery | 225 | 237 | 170 | |
| Disposal | 267 | 135 | 112 | |
| Non-hazardous industrial waste | 10,740 | 10,059 | 8,544 | |
| Recovery | 9,633 | 9,114 | 7,811 | |
| Disposal | 1,107 | 945 | 733 | |
| Total | 11,233 | 10,432 | 8,826 |
Note: Corticeira Amorim does not consider cork dust to be a waste product and instead values it as an energy source.
In this chapter, 82% of the employee population was considered for the calculation of the indicators. The employees who do not feature in this analysis are mainly from the sales and business support areas.
After 150 years and four generations of operations, Corticeira Amorim employs more than 4400 people to ensure success its activities daily. Promoting a safe and balanced working environment at the physical, social and psychological level is fundamental for the management of its employees, and is reflected in the Group's concern for their personal and professional development, the management of their expectations, the incentive to reach high levels of performance and support in achieving the desired targets.
Corticeira Amorim's employee management system relies on its people motivation policies and management practices (more information can be found at www.amorim.com/en/sustainability/ integrated-management-system/policies-and-managementsystem/) which are governed by:
Corticeira Amorim counts with more than 4,400 employees, working worldwide, and with its passion for this business, its desire to go further, overcoming challenges, leading by example and promoting the well-being of the communities closest to them and, indeed, society at large.
*Figures within the entire Corticeira Amorim Group perimeter
In 2019, there were a total of 4,424 employees at the end of the year, with a decrease of less than 1% over the previous year. In terms of geographical distribution, and compared to previous years, there has been no considerable change in the proportion of employees in Portugal (72%).
Within the scope of this report, and the companies covered hereby, about 63% of employees are production operators in the various business areas, with about half of them working in the cork stopper business area.
In 2019, there was no significant variation in the gender distribution of employees. This employee gender distribution is mainly reflected in the category of directors, managers and sales staff where there is a higher prevalence of males. The largest percentage of women can be found in the category of administrative staff.
In 2019, there were no significant variations in the number of employees in management and supervisory positions. Production operators and management support technicians saw the highest growth.
The commitment to manage people in a sustainable manner, which favours stability in the medium and long term, is reflected in the effectiveness of employees, where 84% have a permanent contract.
Like the trends from other years, one of the main inflows are production operators in order to respond to the Group's diversification efforts in general, which tend attract more male candidates. If we look at the other categories, there is a growing trend in recruiting female employees. More information is available in chapter 8 - GRI Table.
| 2019 | 2018 | 2017 | |
|---|---|---|---|
| Rate of new hires | 15% | 14% | 12% |
| Turnover rate | 11% | 14% | 12% |
The right to association and collective bargaining is an important principle for Corticeira Amorim; about 1/5 of its employees actively exercises this right.
In Portugal, 100% of employees are covered by collective bargaining agreements that are integrated into the regulation of the working conditions of the Group's employees and cover aspects such as timetables, pay and access to training, among others.
Employees benefit from various services, salary bonuses and support for a healthy work-life balance, including:
The involvement and commitment of its employees is crucial for Corticeira Amorim. There are initiatives in place in the area of labour relations. The companies with the largest numbers of employees monitor the company climate at least every two years, while others do it on an annual basis. The questionnaires that form the basis for the collection of information are anonymous and passed out to all employees. The data compiled allow the company to analyse areas with room for improvement and each BU defines specific action plans.
One of the Corticeira Amorim goals is to develop a culture of feedback. In this area, performance management is an ideal tool. In 2019, Amorim Cork Flooring carried out exceptional work in ensuring that almost all its employees were involved in this type of practice, along with Amorim Cork which conducted an organisational climate study.
Encouraging feedback from employees in organisational culture and management aspects and identifying needs and opportunities for improvement is the main objective of Amorim Cork's Organisational Climate Study.
Based on the Great Place to Work questionnaire, the Organisational Climate Study is a tool that encourages employees to be heard and involved in the continuous improvement process, especially in the areas of working conditions, safety, company culture, leadership practices, people management and the development of initiatives. In February 2019, the 4th Organisational Climate study was launched to all Amorim Cork employees, and the feedback reflected a significant increase in employee satisfaction (71%). Most employees think that Amorim Cork is an innovative company (78%), with a sense of social responsibility/sustainability (74%), where fairness (66%) and communication (66%) are the areas with the greatest potential for development/improvement. Considering the results of the survey, Amorim Cork has established an action plan that is being implemented and monitored by the company's Executive Committee.
For Corticeira Amorim, people are a core asset in ensuring the sustainable development of the business. The Group believes that the efforts and commitment of its employees is influenced by the investment it makes in their growth and professional development. To this end, Corticeira Amorim strives to ensure that all employees have access to quality education, offering opportunities to learn and improve their technical, behavioural and managerial skills.
At the end of 2019, a total 46,717 hours of training were conducted, the largest proportion of which was accounted for by Management Support Technicians, Production Operators and Maintenance, Quality and Logistics Technicians. Despite the strong growth in the production side of the business, which resulted the straining of resources in certain areas that traditionally invest in training, the training levels of recent years have been maintained. Additional figures of the employee development indicators can be found in chapter 8 - GRI Table.
| 2019 | 2018 | 2017 | |
|---|---|---|---|
| Average hours of training, per year, per employee |
14 | 17 | 13 |
There are several employee training projects and activities that focus on both the technical and process optimisation components, as well as the ones targeting conduct and critical thinking development. Training is also designed to cover all categories of employee, particularly young people on internship programmes or young employees early on in their career, employees in leadership positions and operators, among others. Two initiatives stand out in 2019 due to their innovative nature and impact for the future.
The ACC Academy hosts a series of informal sessions throughout the year so that employees can reflect and discuss the most challenging or innovative issues within the four pillars: market, operations, corporate and innovation. In 2019, 16 ACC Talks were held with the participation of outside experts, dealing with various topics such as Industry 4.0, product design, leadership, sales, project management and strategy
The goal of the SAP implementation project is to optimise process management and encourage the development of new skills and qualifications among employees. SAP training will take place in all the Corticeira Amorim Group companies to enable all employees to be trained in the new management system. This cross-sectional project is remarkable for its transformational character, the investment in the training of people and the management of change, with an impact on all the companies and in nearly all the functional areas.
As a defender of diversity and equal opportunities, Corticeira Amorim implements a people management and motivation policy that promotes equal opportunities in recruitment and nondiscrimination of any kind, be it in the promotion and training of its employees, their remuneration or working conditions.
Corticeira Amorim's century-old experience in people management recognises the importance of having diversity of talent in order to increase its value proposition and provide a better response to market needs. Regardless of the situation, people are integrated into the workforce according to a strict criterion of equity, with a healthy focus on using their skills, regardless of their gender, age, race or religion.
In terms of equal opportunities, the Group is committed to implementing human resource models and policies that are in line with its values and principles around the integration and appreciation of people. In general, there has been an overall positive trend in the pay gap between male and female employees. This can be seen in the salary ratios between women and men below (more information can be found in chapter 8 - GRI Table).
| Salary ratios between women and men, by professional category | |||||||
|---|---|---|---|---|---|---|---|
| 2019 2018 2017 |
|||||||
| Managers | 0.7 | 0.7 | 0.7 | ||||
| Heads of Department | 1.0 | 0.9 | 0.8 | ||||
| Sales Staff | 0.9 | 0.6 | 0.5 | ||||
| Management Support Technicians | 0.8 | 0.8 | 0.9 | ||||
| Team Leaders | 1.1 | 1.2 | 1.1 | ||||
| Administrative Staff | 1.1 | 1.1 | 1.1 | ||||
| Maintenance, Quality and Logistics Technicians |
0.8 | 0.9 | 0.9 | ||||
| Production Operators | 0.9 | 1.0 | 1.0 |
The company's intervention in this area includes, inter alia, communication and raising awareness actions on these issues, the implementation of work-life balance measures and, more recently, the roll out of the Gender Equality Plan.
The Gender Equality Plan has been developed in line with the company values and the principles of equality between men and women. It is divided into seven sections, which encompass specific actions for each area, and focus on the Group's mission and strategy, the management of human resources, the worklife balance, respect for the integrity and dignity of employees, social dialogue and participation and internal and external communications.
This plan attests to Corticeira Amorim's commitment to promote gender equality and combat stereotypes and beliefs that result from the social and cultural bias that shaped the organisational structure of the companies and are no longer consistent with their current values and conduct.
Part of the Corticeira Amorim people management policy, evaluating merit and rewarding performance is a process that dissects the entire organisation. In this way, any employee can achieve any position or professional category, remuneration is not limited by factors that are not related to ability and actual performance, with on restrictions on gender, race or religion. More information can be found in chapter 8 - GRI Table.
Corticeira Amorim recognises that working conditions are one of the key factors of success for an organisation. Ensuring the health, safety and welfare of employees at work is important not only for the Group, but also for all its stakeholders.
Aware of the risks related to safety at work, Corticeira Amorim promotes and encourages a culture of safety among all employees, ensuring a safe working environment for the employees themselves and those around them, and encourages a healthy lifestyle and sustainable living.
In the context of occupational health and safety (OHS), Corticeira Amorim has defined the following objectives for all its businesses:
To this end, Corticeira Amorim is committed to reducing the number of accidents by more than 50% in its facilities in Portugal (2018- 2020), promoting the physical, social and psychological welfare of its employees. In recent years, there has been a significant reduction in the frequency of accidents and the Group is confident that these commitments will be met.
At the end of 2019, there was a total of 107 accidents in the workplace, a reduction of 7% compared to last year and 18% compared to 2017.
As in 2018, absenteeism rose again in 2019, registering 5.7%. This increase is due to a change in the calculation assumptions in accordance with the methodological notes.
| 2019 | 2018 | 2017 | |
|---|---|---|---|
| Work-related accidents | 107 | 115 | 130 |
| Portugal | 89 | 96 | 118 |
| Rest of the world | 18 | 19 | 12 |
| Number of fatalities | 0 | 0 | 1* |
| Accident frequency index | 18.8 | 20.9 | 21.1 |
| Portugal | 18.2 | 20.0 | 22.2 |
| Rest of the world | 22.7 | 26.9 | 14.1 |
* Accident in itinere
Overall, progress has been made in the safety-related indicators (more information can be found in chapter 8 - GRI Table), particularly in the accident frequency index, the work-related illness rate and lost working days rate.
Meeting the target set for the end of 2020 has involved an investment in this area and an effort to develop structured safety plans, which are monitored for their ongoing optimisation, and the establishment of risk prevention practices aimed at mitigating the impacts of accidents on stakeholders.
Conscious of the fact that the safety of its people is a fundamental factor in social and corporate responsibility, Amorim Florestal and Amorim Cork Flooring decided to implement an occupational health and safety management system based on the ISO 45001 standard.
The OHS Management System, whose purpose is to prevent work-related injuries and health problems by providing safe and healthy working environments is a strategic and operational decision for the company. Its success depends on the leadership, commitment and participation of all levels and functions of the organisation. Implemented the first phase in 2019, the process is expected to progress at the beginning of the second half of 2020 with external certification audits
Corticeira Amorim promotes compliance with all legal requirements, rules and procedures in the field of OHS, in all countries in which it operates, through the application of good practices, namely:
In recent years, there has been increased focus on establishing solid and sustainable structures in the area of safety. Certification of the units will be an ideal way of guaranteeing this and is now a growing priority. Certification under the OHSAS ISO 18001/ISO 45001 international standard currently covers about 12% of employees and it is estimated that it can cover more than 30% soon.
Investment in this field also involves raising awareness and training for employees, from small initiatives focused on employee awareness and technical training to support employee skills, to physical activity and workplace exercise programmes.
As part of this project, the existing work posts were analysed in the sectors along with the physical condition of each worker. After the analysis, proposals for improvement at the ergonomic level were drafted for the work posts, as well as for the standardisation of tasks, individual postural training for carrying out work tasks with a lower risk of skeletal muscle injury, implementation of physical activity programmes, and also active recovery programmes targeting the group treatment of specific pathologies. A reduction in the work-related illness leave and in the number of accidents at work and an increase in team morale are just some of the impacts that have been observed in the participants.
In addition to its leadership activity in the cork industry, Corticeira Amorim places great emphasis in its involvement in the community and in promoting social equilibrium. Corticeira Amorim plays a key role in supporting the communities in their challenges and, indeed, in building resilient communities. This social concern has characterised the 150 years of activity of the Group, who was one of the first companies to make a canteen and a doctor available to all workers in 1938. Involvement in the community is assured by the various projects and initiatives in which Corticeira Amorim participates both in Portugal and further afield. Several actions have been implemented that involve the group's stakeholders, including the training of employees to raising awareness among customers and the local communities in the areas in which the Group operates on issues such as sustainable development. Some of these activities are presented below.
This programme has been renewed annually since 2008 in order to:
The Corticeira Amorim environmental education programme takes place every year and was conceived with the objective of supporting schools in environmental education and raising the awareness of the wider community of the need to protect and value the national forests, including the cork oak forests, by further promoting the recycling of cork and the conservation of the environment. In 2019, 2,868 students participated in this programme by learning more about the environment and sustainability, contributing to a better tomorrow.
Corticeira Amorim and Quercus planted
2,000 cork oaks in Alcácer do Sal, and the Herdade Castelo de Arez estate in 2019. This initiative included the participation of over 100 employees and volunteers from the company and has become a tradition of the two entities since 2011. Corticeira Amorim has been a partner of the Green Cork Project since its inception in 2008. The project has entailed recycling cork stoppers in support of preserving the national indigenous forest and promoting, in 2019, the planting of over 143,000 trees through the Floresta Comum project, meaning more than 971,000 native trees planted since 2008.
With a total of 35 training sessions in 2019, the purpose of the Junior Achievement has been to demonstrate the importance of existing natural, human and capital resources in Europe. The idea is to enrich the students' knowledge about Europe, its countries, languages and currencies. The initiative has resulted from the Porto Futuro Project, an existing protocol with the Porto City Council since 2005, which facilitates the collaboration of Corticeira Amorim with a group of city schools to transpose some business practices in schools.
With almost 38 years of presence in South Africa, Amorim Cork South Africa is now one of the partner companies in the wine industry that has the greatest active participation in the social development of the communities surrounding the Cape Town vineyards.
Since 2015, it has contributed more than 40,000 euros in scholarships to young people from disadvantaged backgrounds who have the ambition to become winemakers and grape growers. In partnership with the Cape Winemakers Guild and Nedbank, this dream becomes a reality for about five young people every year.
Among the other forms of support is the assistance provided by Amorim Cork South Africa's staff for a home for children who are victims of abandonment or abuse. Twice a year, donations, clothing and food are made to more than 30 children living in the Eersterivier home, outside the town of Stellenbosch.
Having an impact on society and promoting balance through active long-term participation is a concern that has stood the test of time in the Group's 150 years of existence.
Over the years, Corticeira Amorim has made numerous relationships with institutions and associations with a significant impact on communities, actively participating in their development and enhancing their growth through the donation of materials (the Company's products, office supplies, etc.), volunteering or financial support. The social contribution and commitment to social responsibility make it possible to raise awareness of the needs of society, while at the same time adding value and making a positive contribution to improving the quality of the provision of support services to these entities.
The following are some of the associations with which the Group actively collaborates not only in the communities and institutions surrounding their companies, but also in research and innovation.
Associação Bagos D'Ouro is an institution that is dedicated to supporting children and young people in need from Douro region, through monitoring their school career and creating opportunities for the development of successful life projects; Fundação Terras de Santa Maria awards every year the best student in management of the Instituto Superior de Entre Douro e Vouga (ISVOUGA).
A non-profit organisation comprising scientists dedicated to research in the field of winemaking in order to optimise the quality of the wine and to ensure the ageing process proceeds as expected. Since 1992, this institution has supported the work of the researchers by offering them an annual scholarship to fund the scientific work and help to improve knowledge about wine.
This foundation promotes solidarity and appreciation of human advancement in its ethical, religious, cultural and civilizational aspects. It offers humanitarian and social support to causes and projects involving the communities surrounding the Corticeira Amorim companies. It also hopes to boost scientific research in the field of cork preparation and treatment and is expected to award prizes in this and other areas.
Also, in this context, the companies in the Corticeira Amorim Group actively participate in discussion meetings with national and international entities on sustainable development of the geographical regions in which they operate. Many of the Group's representatives form a part of these initiatives and associations to ensure a meaningful and proactive impact. Of the numerous associations, it is worth highlighting the following:
A business association in the cork industry that represents, promotes, publishes and researches the Portuguese cork industry.
A business association that is a member of the WBCSD - World Business Council for Sustainable Development, the largest international organisation to work in the area of sustainable development, with more than 200 associated companies in different countries and 68 independent organisations in the five continents, which together represent more than 20,000 companies and an international network of partnerships.
A group of companies, municipalities, research and development centres, business associations and other entities that are committed to sustainability as a standard for innovation and competitiveness.
A non-profit collective whose objective is to contribute to the production and dissemination of knowledge in the area of waste, to drive actions that value cooperation between entities operating in the waste industry, to promote and support the activities and projects of its members that contribute to the pursuit of the association's objectives.
A platform for all involved in research, technological development and innovation in the Spanish wine industry.
An initiative of the University of Minho that brings more than 80 researchers from various fields of knowledge together, with the aim of finding solutions to complex societal challenges associated with sustainability.
There are several actions that encompass the group's stakeholders, including the training of employees to raising awareness among customers and the local communities.
The corporate landscape has changed in terms of the companies considered within the perimeter for sustainability matters, in particular through the incorporation of three establishments under the Cork Stoppers BU: Biocape, All Closures In. and Portocork Internacional, S.A. .
Chapter 4. Innovation and Economic Performance presents Corticeira Amorim's consolidated figures (100% of companies included). In the remaining chapters, the companies included span 90% of the industrial units and account for 82% of the number of Corticeira Amorim's employees at the end of 2019, and 82% of consolidated sales, as presented in the table below:
| Company | Location | Country | 2019 |
|---|---|---|---|
| Raw Materials BU | |||
| Amorim Natural Cork, S.A. | Vale de Cortiças — Abrantes | PORTUGAL | 100% |
| Amorim Florestal, S.A. | Ponte de Sôr | PORTUGAL | 100% |
| Amorim Florestal II, S.A. | Ponte de Sôr | PORTUGAL | 100% |
| Amorim Florestal III, S.A. | Ponte de Sôr | PORTUGAL | 100% |
| Amorim Florestal España, S.L. | San Vicente Alcántara | SPAIN | 100% |
| Amorim Florestal Mediterrâneo, S.L. | Cádiz | SPAIN | 100% |
| Amorim Tunisie, S.A.R.L. | Tabarka | TUNISIA | 100% |
| Comatral — C. de Maroc. de Transf. du Liège, S.A. | Skhirat | MAROCCO | 100% |
| Cosabe — Companhia Silvo-Agrícola da Beira S.A. | Lisboa | PORTUGAL | 100% |
| Société Nouvelle du Liège, S.A. (SNL) | Tabarka | TUNISIA | 100% |
| Société Tunisienne d'Industrie Bouchonnière | Tabarka | TUNISIA | 55% |
| Cork Stoppers BU | |||
| Amorim Cork, SGPS, S.A. | Santa Maria Lamas | PORTUGAL | 100% |
| All Closures In, S.A. | Paços de Brandão | PORTUGAL | 75% |
| Amorim Cork, S.A. | Santa Maria Lamas | PORTUGAL | 100% |
| Amorim Bartop, S.A. | Vergada | PORTUGAL | 75% |
| Amorim Champcork, S.A. | Santa Maria Lamas | PORTUGAL | 100% |
| Amorim Top Series, S.A. | Vergada | PORTUGAL | 75% |
| Biocape — Importação e Exportação de Cápsulas, Lda. | Mozelos | PORTUGAL | 60% |
| Elfverson & Co. AB | Paryd | SWEDEN | 53% |
| Equipar, Participações Integradas, Lda. | Coruche | PORTUGAL | 100% |
| Francisco Oller, S.A. | Girona | SPAIN | 94% |
| Portocork Internacional, S.A. | Santa Maria Lamas | PORTUGAL | 100% |
| Socori, S.A. | Rio Meão | PORTUGAL | 70% |
| Floor and Wall Coverings BU | |||
| Amorim Cork Flooring, S.A. | S. Paio de Oleiros | PORTUGAL | 100% |
| Amorim Benelux, BV | Tholen | NETHERLANDS | 100% |
| Amorim Deutschland, GmbH | Delmenhorts | GERMANY | 100% |
| Amorim Subertech, S.A. | S. Paio de Oleiros | PORTUGAL | 100% |
| Amorim Flooring (Switzerland) AG | Zug | SWITZERLAND | 100% |
| Amorim Flooring North America Inc. | Hanover — Maryland | USA | 100% |
| Composite Cork BU | |||
| Amorim Cork Composites, S.A. | Mozelos | PORTUGAL | 100% |
| Amorim Compcork, Lda. | Mozelos | PORTUGAL | — |
| Amorim Cork Composites, Inc. | Trevor — Wisconsin | USA | 100% |
| Amorim Industrial Solutions — Imobiliária, S.A. | Corroios | PORTUGAL | 100% |
| Insulation Cork BU | |||
| Amorim Cork Insulation, S.A. | Vendas Novas | PORTUGAL | 100% |
| Holding Cortiça | |||
| Corticeira Amorim, SGPS, S.A. | Mozelos | PORTUGAL | 100% |
| Amorim Cork Research, Lda. | Mozelos | PORTUGAL | 100% |
| Amorim Cork Services, Lda. | Mozelos | PORTUGAL | 100% |
| Amorim Cork Ventures, Lda. | Mozelos | PORTUGAL | 100% |
In the case of energy consumption outside the organisation, and since there are no conversion factors in the bibliography that allow us to accurately refine this data, Corticeira Amorim has made an estimate of the energy consumption based on the emissions figures and the emission factors of the respective fuels, and it has therefore been necessary to make some considerations. For this reason, the calculation shown is an estimate, with a commitment from Corticeira Amorim to continue to work to consolidate the methodology used. The values shown, cover the most important aspects of the Corticeira Amorim value chain, for operations in Portugal.
Therefore, the following activities and assumptions were considered:
All emission factors considered were sourced from the information published by the GHG Protocol and Defra - Department for Environment, Food & Rural Affairs.
The values presented refer to Corticeira Amorim's consolidated figures (100% of companies included).
The revenues correspond to the sum of the following items: Sales and Provision of Services; Supplementary Income; Operating Subsidies; Own Works; Other Operating Income; Finantial Income and Gains; Capital Gains from Real State (after deducting capital losses).
Operating costs do not include depreciation.
Investment into the local community only includes the amount of cash donations and does not include contributions and donations in kind.
The conversion factors used for the SGCIE - Energy Intensive Consumption Management System audits (dispatch 17313/2008) were used for 2019:
| Energy Source | Unit | Conversion factor |
|---|---|---|
| Natural Gas | GJ/1000m3 | 37.9 |
| Propane Gas | GJ/t | 46.7 |
| Diesel | GJ/t | 42.8 |
| Gasoline | GJ/t | 44.5 |
| Biomass (Cork Dust) | GJ/t | 15.7 |
| Biomass (Other) | GJ/t | 11.6 |
| Electricity | GJ/kWh | 0.0036 |
The conversion factors used for the SGCIE - Energy Intensive Consumption Management System audits (dispatch 17313/2008) were used for the calculation of the CO2 emissions. In the case of emissions associated with electricity consumption, the information available at the date of preparation by the Endesa vendor report (location method) and the SGCIE - Energy Intensive Consumption Management System reference (market method), (dispatch 17313/2008) were considered. Emissions located outside Portugal were considered to be of margin material importance (around 8%):
| Emissions Source | Unit | Conversion factor |
|---|---|---|
| Natural Gas | Kg CO2/GJ | 64.1 |
| Propane Gas | Kg CO2/GJ | 63 |
| Diesel | Kg CO2/GJ | 74 |
| Gasoline | Kg CO2/GJ | 69.2 |
| Biomass (Cork Dust) | Kg CO2/GJ | 0 |
| Biomass (Others) | Kg CO2/GJ | 0 |
| Electricity - 2017 Supplier |
g CO2/kWh | 480.24 |
| Electricity - 2018 Supplier* |
g CO2/kWh | 398.88 |
| Electricity - 2019 Supplier |
g CO2/kWh | 270.45 |
| Electricity - Location (Portugal) |
g CO2/kWh | 470.00 |
*Updated according to the latest supplier reference
In view of the diversity of applications and businesses of Corticeira Amorim, it is difficult to define an indicator that will allow us to clearly observe the trends in energy and CO2 emissions in relation to the level of activity. Over time, we have tried to respond to this need by analysing different indicators and in recent years we have opted for the energy consumption/emissions ratio and the value of the company's total sales, which presented us with some limitations. These relate to the differences between the perimeter considered in the numerator (more restricted) and the perimeter considered in the denominator (broader), which become more evident in years of material changes in perimeter. In 2019, this limitation is remedied by matching the perimeter of the numerator with that of the denominator. For the purposes of comparison with 2018, the recalculation was applied. The recalculation for carbon intensity also considers the latest information from the energy supplier. In the calculation of energy intensity and carbon intensity for 2019 and 2018, sales figures were taken to be 643,135 thousand euros and 650,871 thousand euros, which correspond to the consolidated sales of the respective perimeters considered in each year's sustainability report.
The procedure for calculating the frequency rate, occupational disease rate and lost day rate corresponds to the ILO Code of practice. The formulas considered are as follows:
As in the previous financial year, the calculation of the potential days discounted any public holidays that directly affected the absenteeism rate.
To calculate the frequency rate, only the accidents that resulted in lost days were considered.
To determine the days lost, the number of working days are considered, starting from the day following the occurrence of the accident until the return to the work of the person concerned.
CONSOLIDATED ANNUAL REPORT 2019 CORTICEIRA AMORIM, SGPS, S.A.
| GRI REF. | DESCRIPTION | VALUE / LOCATION | |||||
|---|---|---|---|---|---|---|---|
| GRI 102 – GENERAL DISCLOSURES 2016 | |||||||
| Organisational profile | |||||||
| 102-1 | Name of the organisation | 1. Corticeira Amorim – 1.1. Who we are and what we do | |||||
| 102-2 | Activities, brands, products, and services | 1. Corticeira Amorim – 1.1. Who we are and what we do | |||||
| 102-3 | Location of headquarters | 1. Corticeira Amorim – 1.1. Who we are and what we do | |||||
| 102-4 | Location of operations | Consolidated Annual Report 31-12-2019 – Worldwide Presence | |||||
| 102-5 | Ownership and legal form | 1. Corticeira Amorim – 1.1. Who we are and what we do | |||||
| 102-6 | Mercados servidos | 1. Corticeira Amorim – 1.1. Who we are and what we do Consolidated Annual Report 31-12-2019 – Worldwide Presence |
|||||
| 102-7 | Scale of the organisation | 1. Corticeira Amorim – 1.1. Who we are and what we do 6. People – 6.1. Training and development Consolidated Annual Report 31-12- 2019 - Organizational Chart Consolidated Management Report – 10. Consolidated Demonstration of the Financial Position and 11. Main Consolidated Figures |
|||||
| 102-8 | Information on employees and other | 6. People – 6.1. Training and development | |||||
| workers | Total number of employees by gender and employment contract |
2019 | 2018 | 2017 | |||
| Woman | 864 | 831 | 737 | ||||
| Permanent | 748 | 707 | 630 | ||||
| Fixed Term Contract | 116 | 124 | 107 | ||||
| Men | 2,547 | 2,455 | 2,162 | ||||
| Permanent | 2,127 | 2,041 | 1,753 | ||||
| Fixed Term Contract | 420 | 414 | 409 | ||||
| TOTAL | 3,411 | 3,286 | 2,899 | ||||
| Total number of employees by region and employment contract |
2019 | 2018 | 2017 | ||||
| Portugal | 2,935 | 2,810 | 2,469 | ||||
| Permanent | 2,435 | 2,312 | 1,991 | ||||
| Fixed Term Contract | 500 | 498 | 478 | ||||
| Rest of the World | 476 | 476 | 430 | ||||
| Permanent | 440 | 436 | 392 | ||||
| Fixed Term Contract | 36 | 40 | 38 | ||||
| TOTAL | 3,411 | 3,286 | 2,899 | ||||
| Total number of employees by gender and type of work |
2019 | 2018 | 2017 | ||||
| Women | 864 | 831 | 737 | ||||
| Full-time | 855 | 824 | 727 | ||||
| Part-time | 9 | 7 | 10 | ||||
| Men | 2,547 | 2,455 | 2,162 | ||||
| Full-time | 2,524 | 2,423 | 2,125 | ||||
| Part-time | 23 | 32 | 37 | ||||
| TOTAL | 3,411 | 3,286 | 2,899 | ||||
| 102-9 | Supply chain | 3. How we do it – 3.2. Responsible supplier management |
| GRI REF. | DESCRIPTION | VALUE / LOCATION | SDG |
|---|---|---|---|
| 102-10 | Significant changes to the organisation and its supply chain |
In 2019, Corticeira Amorim, celebrated an agreement for the acquisition of 50% of VINOLOK Society, a.s., based in Jablonec nad Nisou, Czech Republic. |
|
| 102-11 | Precautionary principle or approach | Corporate Governance Report – C. Internal Organisation | |
| 102-12 | External initiatives | In, november 2017, Corticeira Amorim subscribed to the Charter of Principles of BCSD Portugal. The Letter establishes the fundamental sustainability principles that companies voluntarily adopt, actively committing themselves to the transition to the sustainability. For further information: www.bcsdportugal.org/en/wp-content/uploads/2019/02/ Carta_Principios_BCSDPortugal_ENG.pdf Corticeira Amorim is a member of Porto Protocol, and is committed to guide its activity through good environmental principles, as well as executing projects that improve its sustainability. The list of the members, including Corticeira Amorim, can be consulted in: www.portoprotocol. com/members/list-of-members/ |
|
| 102-13 | Membership of associations | 6. People – 6.4. Participation in associations | |
| Strategy and analysis | |||
| 102-14 | Statement from senior decision-maker | Consolidated Annual Report 31-12-2019 – Chairman's letter | |
| 102-15 | Key impacts, risks, and opportunities | Consolidated Management Report – 14. Business Risks and Uncertainties |
|
| Ethics and integrity | |||
| 102-16 | Values, principles, standards, and norms of behavior |
1. Who we are and what we do 3. How we do it – 3.1. Responsible conduct |
|
| 102-17 | Mechanisms for advice and concerns about ethics |
3. How we do it – 3.1. Responsible conduct | |
| Governance | |||
| 102-18 | Governance structure | 2. Our sustainability model – 2.1. Sustainability strategy and path Corporate Governance Report - B. Corporate Boards and Committees |
|
| 102-24 | Nominating and selecting the highest governance body |
Corporate Governance Report - B. Corporate Boards and Committees | |
| Stakeholder Engagement | |||
| 102-40 | List of stakeholder groups | 2.Our Sustainability Model – 2.2. Our stakeholders | |
| 102-41 | Collective bargaining agreements | 6.People – 6.1. Training and development | 8 |
| 102-42 | Identifying and selecting stakeholders | 2.Our Sustainability Model – 2.2. Our stakeholders | |
| 102-43 | Approach to stakeholder engagement | 2.Our Sustainability Model – 2.2. Our stakeholders | |
| 102-44 | Key topics and concerns raised | 2.Our Sustainability Model – 2.1. Sustainability strategy and path |
| GRI REF. | DESCRIPTION | VALUE / LOCATION | SDG | |
|---|---|---|---|---|
| Report profile | ||||
| 102-45 | Entities included in the consolidated financial statement |
Introductory note 7. Methodological Notes | ||
| 102-46 | Defining report content and topic boundaries |
Introductory note | ||
| 102-47 | List of material topics | Introductory note | ||
| 102-48 | Restatements of information | Introductory note 7. Methodological Notes | ||
| 102-49 | Changes in reporting | Introductory note 7. Methodological Notes | ||
| 102-50 | Reporting period | January 1st of 2019 to December 31st of 2019 | ||
| 102-51 | Date of most recent report | Sustainability Report 2018, covering the years 2016, 2017and 2018 | ||
| 102-52 | Reporting cycle | Introductory note | ||
| 102-53 | Contact point for questions regarding the report |
Introductory note | ||
| 102-54 | Claims of reporting in accordance with the GRI Standards |
Introductory note | ||
| 102-55 | GRI content index | Present table | ||
| 102-56 | External assurance | Introductory note | ||
| GRI 200 - ECONOMIC STANDARDS 2016 | ||||
| Material aspect: GRI 201 - Economic Performance 2016 | ||||
| Generic management approach | 103-1 | Explanation of the material topic and its boundary |
The material topics of Corticeira Amorim were based on the comparison of the results from stakeholders consultation with the company's internal perspective. In direct relation to economic performance, the topic "Economic Performance" was considered a topic with a high materiality (materiality matrix – Introductory note). |
|
| 103-2 | The management approach and it's components |
Corticeira Amorim has over the years promoted several initiatives related to economic performance (4. Innovation and Economic Performance). |
||
| 103-3 | Evaluation of the management approach | Corticeira Amorim performs the measurement and monitoring of the indicators associated with this aspect and reports them in this Report (4. Innovation and Economic Performance - 4.2. Economic performance). |
||
| 201-1 | Direct economic value generated and distributed |
4. Innovation and Economic Performance - 4.2. Economic performance 7. Methodological Notes – 7.3. Economic performance |
||
| 201-2 | Financial implications and other risks and opportunities due to climate change |
Consolidated Management Report - 14. Business Risks and Uncertainties Corporate Governance Report – C. Internal Organisation, III. Control and Risk Management 4. Innovation and Economic Performance 5. Environment – 5.1. Promotion of the montado, its biodiversity and ecosystem services and 5.2. Energy efficiency and climate change and 5.3. Product environmental impactt and 5.4. Circular economy |
||
| 201-3 | Defined benefit plan obligations and other retirement plans |
4. Innovation and Economic Performance – 4.2. Economic performance 6. People – 6.1. Training and development |
||
| Aspect: GRI 202 – Market presence 2016 | ||||
| 202-1 | Ratios of standard entry level wage by gender compared to local minimum wage |
6. People – 6.1. Training and development | 5 and 8 |
| GRI REF. | DESCRIPTION | VALUE / LOCATION | SDG | |
|---|---|---|---|---|
| Aspect: GRI 204 – Procurement practice 2016 | ||||
| 204-1 Proportion of spending on local suppliers |
3. How We Do It – 3.2 Responsible supplier management | 12 | ||
| Aspect: GRI 205 – Anti-corruption 2016 | ||||
| 205-1 | Operations assessed for risks related to corruption |
3. How We Do It - 3.1. Responsible conduct | ||
| 205-2 | Confirmed incidents of corruption and actions taken |
3. How We Do It - 3.1. Responsible conduct | ||
| 205-3 | Confirmed incidents of corruption and actions taken |
3. How We Do It - 3.1. Responsible conduct | ||
| Material Aspect: Research, development and innovation | ||||
| 103 -1 | Explanation of the material topic and it's boundary |
The material topics of Corticeira Amorim were based on the comparison of the results from the stakeholders consultation with the company's internal perspective. In direct relation to research, development and innovation, the topic "Research, Development and Innovation" was considered a topic with a high materiality (materiality matrix – Introductory note). |
||
| 103-2 | The management approach and it's components |
Corticeira Amorim has over the years promoted several initiatives relating to research, development and innovation (4. Innovation and Economic Performance). |
||
| Generic management approach | 103-3 | Evaluation of the management approach | Corticeira Amorim performs the measurement and monitoring of the indicators associated with this aspect and reports them in this Report (4. Innovation and Economic Performance - 4.1. Research, development and innovation). |
|
| Average annual investment | 4. Innovation and Economic Performance - 4.1. Research,development and innovation |
|||
| Submission of patents | 4. Innovation and Economic Performance - 4.1. Research,development and innovation |
8 and 9 | ||
| GRI 300 – ENVIRONMENTAL STANDARDS 2016 | ||||
| Aspect: GRI 301 - Materials 2016 | ||||
| 301-1 | Materials used by weight or volume | 5. Environment – 5.4. Circular economy Note: report of the percentage of materials consumed that are of renewable origin. |
12 | |
| Material Aspect: GRI 302-Energy 2016 | ||||
| Generic management approach | 103 -1 | Explanation of the material topic and it's boundary |
The material topics of Corticeira Amorim were based on the comparison of the results from stakeholders consultation with the Company's internal perspective. In direct relation to energy, the topic "Energy Efficiency and Climate Change" was considered a topic with a high materiality (materiality matrix – Introductory note). |
|
| 103-2 | The management approach and it's components |
Corticeira Amorim has promoted over the years several initiatives related to energy consumption (5. Environment). |
||
| 103-3 | Evaluation of the management approach | Corticeira Amorim performs the measurement and monitoring of the indicators associated with this aspect and reports them in this Report (5. Environment – 5.2. Energy efficiency and climate change). |
||
| Specific Management approach | Some Corticeira Amorim units are covered by regulations of the Energy Intensive Consumption Management System (SGCIE) |
|||
| 302-1 | Energy consumption within the organisation |
5. Environment – 5.2. Energy efficiency and climate change 7. Methodological Notes - 7.4. Energy efficiency and climate change - energy |
7,11 and 13 |
|
| 302-2 | Energy consumption outside of the organisation |
5. Environment – 5.2. Energy efficiency and climate change 7. Methodological Notes - 7.2. Energy efficiency and climate change – emissions in the value chain |
7,11 and 13 |
|
| 302-3 | Energy intensity | 5. Environment – 5.2. Energy efficiency and climate change 7. Methodological Notes - 7.6. Energy efficiency and climate change – energy intensity and carbon intensity |
7,11 and 13 |
| GRI REF. | DESCRIPTION | VALUE / LOCATION | SDG | ||
|---|---|---|---|---|---|
| 302-4 | Reduction of energy consumption | 5. Environment – 5.2. Energy efficiency and climate change | 7,11 and 13 |
||
| 302-5 | Reductions in energy requirements of products and services |
5. Environment – 5.2. Energy efficiency and climate change | 7,11 and 13 |
||
| Material Aspect: GRI 303-Water 2016 | |||||
| Generic management approach | 103 -1 | Explanation of the material topic and it's boundary |
The material topics of Corticeira Amorim were based on the comparison of the results from stakeholders consultation with the Company's internal perspective. In direct relation to water, the topic "Energy Efficiency and Climate Change" was considered a topic with a high materiality (materiality matrix – Introductory note). |
||
| 103-2 | The management approach and it's components |
Corticeira Amorim has over the years promoted several initiatives related to use and water management (5. Environment). |
|||
| 103-3 | Evaluation of the management approach | Corticeira Amorim performs the measurement and monitoring of the indicators associated with this aspect and reports them in this Report (5. Environment – 5.2. Energy efficiency and climate change). |
|||
| 303-1 | Water withdrawal by source | 5. Environment – 5.2. Energy efficiency and climate change | 6 | ||
| Water intensity 5. Environment – 5.2. Energy efficiency and climate change |
|||||
| Material aspect: Product environmental impact | |||||
| 103 -1 | Explanation of the material topic and it's boundary |
The material topics of Corticeira Amorim were based on the comparison of the results from stakeholders consultation with the Company's internal perspective. In direct relation to the product environmental impact, the topic "Product Environmental Impact" was considered a topic with a high materiality (materiality matrix – Introductory note). |
|||
| 103-2 | The management approach and it's components |
Corticeira Amorim has over the years promoted several initiatives related to product environmental impact (5. Environment). |
|||
| Generic management approach | 103-3 | Evaluation of the management approach | Corticeira Amorim performs the measurement and monitoring of the indicators associated with this aspect and reports them in this Report (5. Environment – 5.3. Product environmental impact). |
||
| Green products | 5. Environment – 5.3. Product environmental impact | 6, 7 and 13 |
|||
| Material aspect: GRI 304 – Biodiversity 2016 | |||||
| 103 -1 | Explanation of the material topic and it's boundary |
The material topics of Corticeira Amorim were based on the comparison of the results from stakeholders consultation with the Company's internal perspective. With direct relation to biodiversity, the topic "Promotion of the Montado, Its Biodiversity and Ecosystem Services" was considered a topic with a high materiality (materiality matrix – Introductory note). |
|||
| 103-2 | The management approach and it's components |
Corticeira Amorim has promoted over the years several initiatives related to biodiversity (5. Environment). |
|||
| Generic management approach | 103-3 | Evaluation of the management approach | Corticeira Amorim performs the measurement and monitoring of the indicators associated with this aspect and reports them in this Report (5. Environment – 5.1. Promotion of the montado, its biodiversity and ecosystem services). |
||
| 304-1 | Operational sites owned, leased, managed in, or adjacent to, protected areas and areas of high biodiversity value outside protected areas |
5. Environment – 5.1. Promotion of the montado, its biodiversity and ecosystem services |
11, 12 and 15 |
||
| 304-2 | Significant impacts of activities, products, and services on biodiversity |
5. Environment – 5.1. Promotion of the montado, its biodiversity and ecosystem services |
11, 12 and 15 |
| GRI REF. | DESCRIPTION | VALUE / LOCATION | SDG | |
|---|---|---|---|---|
| Material Aspect: GRI 305 - Emissions 2016 | ||||
| Generic management approach | 103 -1 | Explanation of the material topic and it's boundary |
The material topics of Corticeira Amorim were based on the comparison from stakeholders consultation with the Company's internal perspective. In direct relation to emissions, the topic "Energy Efficiency and Climate Change" was considered a topic with a high materiality (materiality matrix – Introductory note). |
|
| 103-2 | The management approach and it's components |
Corticeira Amorim has promoted over the years several initiatives related to emissions (5. Environment). |
||
| 103-3 | Evaluation of the management approach | Corticeira Amorim performs the measurement and monitoring of the indicators associated with this aspect and reports them in this Report (5. Environment – 5.2. Energy efficiency and climate change). |
||
| Specific Management Approach | Some Corticeira Amorim units are covered by regulations of the Energy Intensive Consumption Management System (SGCIE) |
|||
| 305-1 | Direct (Scope 1) GHG emissions | 5. Environment – 5.2. Energy efficiency and climate change 7. Methodological Notes - 7.5. Energy efficiency and climate change - emissions |
7, 11 and 13 |
|
| 305-2 | Energy indirect (Scope 2) GHG emissions | 5. Environment – 5.2. Energy efficiency and climate change 7. Methodological Notes - 7.5. Energy efficiency and climate change - emissions |
7, 11 and 13 |
|
| 305-3 | Other indirect (Scope 3) GHG emissions | 5. Environment – 5.2. Energy efficiency and climate change 7. Methodological Notes - 7.5. Energy efficiency and climate change - emissions |
||
| 305-4 | GHG emissions intensity | 5. Environment – 5.2. Energy efficiency and climate change 7. Methodological Notes - 7.6. Energy efficiency and climate change - energy intensity and carbon intensity |
||
| 305-5 | Reduction of GHG emissions | 5. Environment – 5.2. Energy efficiency and climate change | 7, 11 and 13 |
|
| Material Aspect: GRI 306 – Effluents and waste 2016 | ||||
| Generic management approach | 103 -1 | Explanation of the material topic and it's boundary |
The material topics of Corticeira Amorim were based on the comparison of the results from stakeholders consultation with the Company's internal perspective. In direct relation to effluents and waste, the topic "Circular Economy" was considered a topic with a high materiality (materiality matrix – Introductory note). |
|
| 103-2 | The management approach and it's components |
Corticeira Amorim has promoted over the years several initiatives related to the management of effluents and waste (5. Environment). |
||
| 103-3 | Evaluation of the management approach | Corticeira Amorim performs the measurement and monitoring of the indicators associated with this aspect and reports them in this Report (5. Environment – 5.4. Circular economy). |
||
| 306-2 | Waste by type and disposal method | 5. Environment – 5.4. Circular economy | 8 and 12 |
|
| Aspect: GRI 307 – Environmental Compliance 2016 | ||||
| 307-1 | Non-compliance with environmental laws and regulations |
There are no fines or non-monetary penalties for non-compliance with environmental laws and regulations. |
||
| Aspect: GRI 308 – Supplier environmental assessment 2016 | ||||
| 308-2 | Negative environmental impacts in the supply chain and actions taken |
3. How We Do It – 3.2. Responsible supplier management | 8, 12 and 17 |
| GRI REF. | DESCRIPTION | VALUE / LOCATION | SDG | ||||||
|---|---|---|---|---|---|---|---|---|---|
| GRI 400 –SOCIAL STANDARDS 2016 | |||||||||
| Material Topic: GRI 401 – Employment 2016 | |||||||||
| Generic management approach | 103 -1 | Explanation of the material topic and it's boundary |
The material topics of Corticeira Amorim were based on the comparison of the results from stakeholders consultation with the Company's internal perspective. In direct relation to employment, the topic "Training and Development" was considered a topic with a high materiality (materiality matrix – Introductory note). |
||||||
| 103-2 | The management approach and it's components |
Corticeira Amorim has promoted over the years several initiatives related to employment (6. People). |
|||||||
| 103-3 | Evaluation of the management approach | Corticeira Amorim performs the measurement and monitoring of the indicators associated with this aspect and reports them in this Report (6. People – 6.1. Training and development). |
|||||||
| Specific Management Approach The work performed in Corticeira Amorim 's supply chain takes place in compliance with institutional and legal structures. The working conditions in Corticeira Amorim 's supply chain meet the labour legislation in each geography where the activity is developed. |
|||||||||
| 401-1 New employee hires and employee |
6. People – 6.1. Training and development | 5 and 8 | |||||||
| turnover | Number and rate of turnover and new hires by age range, gender and region |
2019 | 2018 | 2017 | |||||
| Number of hires | 524 | 455 | 362 | ||||||
| Rate of new hire | 15% | 14% | 12% | ||||||
| <30 | 6% | 7% | 6% | ||||||
| 30 a 50 | 6% | 6% | 6% | ||||||
| >50 | 3% | 1% | 1% | ||||||
| Female | 4% | 3% | 3% | ||||||
| Male | 12% | 11% | 10% | ||||||
| Portugal | 14% | 10% | 9% | ||||||
| Rest of the World | 24% | 4% | 3% | ||||||
| Number of exits | 392 | 475 | 344 | ||||||
| Turnover rate | 11% | 14% | 12% | ||||||
| <30 | 3% | 4% | 4% | ||||||
| 30 a 50 | 5% | 6% | 5% | ||||||
| >50 | 4% | 5% | 3% | ||||||
| Female | 3% | 3% | 2% | ||||||
| Male | 9% | 11% | 10% | ||||||
| Portugal | 9% | 11% | 9% | ||||||
| Rest of the World | 25% | 3% | 3% | ||||||
| Material Topic: GRI 402 – Labour/Management relations 2016 | |||||||||
| Generic management approach | 103 -1 | Explanation of the material topic and it's boundary |
The material topics of Corticeira Amorim were based on the comparison of the results from stakeholders consultation with the Company's internal perspective. In direct relation to labour relations, the topic "Training and Development" was considered a topic of high materiality (materiality matrix – Introductory note). |
||||||
| 103-2 | The management approach and it's components |
Corticeira Amorim has promoted over the years several initiatives related to labour relations (6. People). |
|||||||
| 103-3 | Evaluation of the management approach | Corticeira Amorim performs the measurement and monitoring of the indicators associated with this aspect and reports them in this Report (6. People – 6.1. Training and development). |
| GRI REF. DESCRIPTION VALUE / LOCATION |
SDG | |||||||
|---|---|---|---|---|---|---|---|---|
| Specific Management Approach | The work performed in Corticeira Amorim 's supply chain takes place in compliance with institutional and legal structures. The working conditions in Corticeira Amorim 's supply chain meet the labour legislation in each geography where the activity is developed. |
|||||||
| 402-1 | Minimum notice periods regarding operational changes |
Regulations concerning prior notice relating to the work location (in particular those that require subsequent amendment) complied with by Corticeira Amorim. |
8 | |||||
| Material Topic: GRI 403 – Occupational health and safety 2016 | ||||||||
| Generic management approach | 103 -1 | Explanation of the material topic and it's boundary |
The material topics of Corticeira Amorim were based on the comparison of the results from stakeholders consultation with the Company's internal perspective. In direct relation to health and safety at work, the topic "Health and Safety at Work" was considered a topic with a high materiality (materiality matrix – Introductory note). |
|||||
| 103-2 | The management approach and it's components |
Corticeira Amorim has promoted over the years several initiatives related to health and safety at work (6. People). |
||||||
| 103-3 Evaluation of the management approach Corticeira Amorim performs the measurement and monitoring of the indicators associated with this aspect and reports them in this Report (6. People – 6.2. Health and safety at work). |
||||||||
| Specific Management Approach The work performed in Corticeira Amorim's supply chain takes place in compliance with institutional and legal structures. The working conditions in Corticeira Amorim's supply chain meet the labour legislation in each geography where the activity is developed. |
||||||||
| 403-2 | Types of injury and rates of injury, occupational diseases, lost days, and absenteeism, and number of work related fatalities |
6. People – 6.2. Health and safety at work 7. Methodological Notes - 7.7. Health and safety at work Ratios of accidents, professional illnesses, lost days, and absenteeism, and number of work-related fatalities, by gender Number of accidents in the workplace Female Male Accident frequency index Female Male Work-related illness rate Female Male Lost working days rate Female Male Absenteeism rate * Female |
2019 107 10 97 18.8 7.2 22.6 3.7 4.3 3.5 527 347 586 5.7% 7.6% |
2018 115 9 106 20.9 6.7 25.4 7.1 10.5 6.0 737 433 800 3.7% 4.8% |
2017 130 21 109 21.1 14.3 23.2 1.6 0.0 2.1 547 304 623 3.4% 4.3% |
3 and 8 | ||
| Male Changing criteria for the certification of occupational disease, as well as validation of several cases pending from previous years * Change in the calculation according to the methodological notes |
5.0% | 3.3% | 3.1% |
| GRI REF. | DESCRIPTION | VALUE / LOCATION | SDG | ||||||
|---|---|---|---|---|---|---|---|---|---|
| Number of accidents and fatalities, for all workers (excluding employees), by gender |
2019 | 2018 | 2017 | ||||||
| Number of accidents in the workplace |
12 | 26 | 13 | ||||||
| Female | 1 | 2 | 0 | ||||||
| Male | 11 | 24 | 13 | ||||||
| Nº of fatalities work-related | 0 | 0 | 0 | ||||||
| Female | 0 | 0 | 0 | ||||||
| Male | 0 | 0 | 0 | ||||||
| Note: for this report we considered 197 workers. | |||||||||
| Material Aspect: GRI 404 – Training and education 2016 | |||||||||
| Generic management approach | 103 -1 | Explanation of the material topic and it's boundary |
The material topics of Corticeira Amorim were based on the comparison of the results of the stakeholders consultation with the Company's internal perspective. In direct relation to training and education, the topic "Training and Development" was considered a topic with a high materiality (materiality matrix – Introductory note). |
||||||
| 103-2 | The management approach and it's components |
Corticeira Amorim has promoted through the years several initiatives related to training and education (6. People). |
|||||||
| 103-3 | Evaluation of the management approach | Corticeira Amorim performs the measurement and monitoring of the indicators associated with this aspect and reports them in this Report (6. People - 6.1. Training and development). |
|||||||
| 404-1 | Average hours of training per year per employee |
6. People - 6.1. Training and development | 4, 5 and 8 |
||||||
| Total hours training |
Hours per employee |
||||||||
| Directors | 68 | 3 | |||||||
| Managers | 2,251 | 24 | |||||||
| Heads of Department | 1,485 | 14 | |||||||
| Sales Staff | 1,018 | 11 | |||||||
| Management Support Technicians |
15,266 | 64 | |||||||
| Team Leader | 1,137 | 12 | |||||||
| Administrative Staff | 2,245 | 10 | |||||||
| Maintenance, Quality and Logistics Technicians |
8,598 | 23 | |||||||
| Production Operators | 14,650 | 7 | |||||||
| Female | 15,711 | 18 | |||||||
| Male | 31,006 | 12 |
| GRI REF. | DESCRIPTION | VALUE / LOCATION | SDG | |||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Material Topic: GRI 405 – Diversity and equal opportunity 2016 | ||||||||||
| Generic management approach | 103 -1 | Explanation of the material topic and it's boundary |
The material topics of Corticeira Amorim were based on the comparison of the results from stakeholders consultation with the Company's internal perspective. In direct relation to diversity and equal opportunities, the topic "Training and Development" was considered a topic with a high materiality (materiality matrix – Introductory note). |
|||||||
| 103-2 | The management approach and it's components |
Corticeira Amorim has promoted over the years several initiatives related to diversity and equal opportunities (6. People). |
||||||||
| 103-3 | Evaluation of the management approach | Corticeira Amorim performs the measurement and monitoring of the indicators associated with this aspect and reports them in this Report (6. People – 6.1. Training and development). |
||||||||
| Specific Management Approach Corticeira Amorim advocates a policy of management and motivation of people that promotes non-discrimination of any kind, equal opportunities in recruitment, promotion and training of employees, remuneration and working conditions. |
||||||||||
| 405-1 | Diversity of governance bodies and employees |
6. People – 6.1. Training and development – Diversity and equal opportunities Total number of employees by professional category, gender and age range |
5 and 8 | |||||||
| Age | Gender | Total | ||||||||
| < 30 | 30 a 50 |
> 50 | Female | Male | ||||||
| Directors | 0 | 5 | 20 | 1 | 24 | |||||
| Managers | 0 | 55 | 37 | 10 | 82 | |||||
| Heads of Department | 13 | 62 | 31 | 33 | 73 | |||||
| Sales Staff | 6 | 52 | 31 | 14 | 75 | |||||
| Management Support Technicians |
91 | 117 | 32 | 102 | 138 | |||||
| Team Leader | 8 | 51 | 36 | 19 | 76 | |||||
| Administrative Staff | 19 | 132 | 82 | 144 | 89 | |||||
| Maintenance, Quality and Logistics Technicians |
59 | 186 | 125 | 80 | 290 | |||||
| Production Operators | 342 | 1,104 | 715 | 461 | 1,700 | |||||
| Total 2017 | 395 | 1,548 | 956 | 737 | 2,162 | 2,899 | ||||
| Total 2018 | 473 | 1,753 | 1,060 | 831 | 2,455 | 3,286 | ||||
| Total 2019 | 538 | 1,764 | 1,109 | 864 | 2,547 | 3,411 | ||||
| GRI REF. | DESCRIPTION | VALUE / LOCATION | SDG | ||||||
|---|---|---|---|---|---|---|---|---|---|
| 405-2 | Ratio of basic salary and remuneration of women to |
6. People – 6.1. Training and development – Diversity and equal opportunities 5 and 8 |
|||||||
| men | Racio of remuneration between women and men, by professional category |
2019 | 2018 | 2017 | |||||
| Managers | 0.7 | 0.6 | 0.7 | ||||||
| Heads of Department | 0.9 | 0.9 | 0.7 | ||||||
| Sales Staff | 0.9 | 0.7 | 0.7 | ||||||
| Management Support Technicians | 0.8 | 0.7 | 0.8 | ||||||
| Team Leaders | 1.0 | 1.1 | 1.0 | ||||||
| Administrative Staff | 1.1 | 1.0 | 1.1 | ||||||
| Maintenance, Quality and Logistics Technicians |
0.8 | 0.9 | 0.8 | ||||||
| Production Operators | 0.8 | 0.9 | 0.9 | ||||||
| Aspect: GRI 413 – Local communities 2016 | |||||||||
| 413-1 | Operations with local community engagement, impact assessments, and development programs |
6. People – 6.3. Operations with local community e 6.4. Participation in associations | |||||||
| Aspect: GRI 414 – Supplier Social Assessments 2016 | |||||||||
| 414-2 | Negative social impacts in the supply chain and actions taken |
3. How We Do It – 3.2. Responsible management of the supply chain 8, 12 and 17 |
|||||||
| Aspect: GRI 415 – Public policy 2016 | |||||||||
| 415-1 | Political contributions | whose mission is essentially political. | Corticeira Amorim is a nonpartisan and non-political organization. It doesn't support financially or in kind, under any circumstances, political parties, organizations or individuals associated with these |
Mozelos, March 23, 2020
The Board of Corticeira Amorim, SGPS, S.A. [9.] Relatório de Verificação Independente
[ ← ] The organic character of cork makes it an incomparable stopper, vital for the evolution of wines and the development of its intrinsic qualities.
Consolidated Statement of Financial Position
| thousand euros | |||
|---|---|---|---|
| Notes | 31 December 2019 | 31 December 2018 | |
| ASSETS | |||
| Tangible assets | 9 | 278,600 | 259,433 |
| Intangible assets | 10 | 10,852 | 7,585 |
| Right of use | 11 | 6,037 | 0 |
| Goodwill | 10 | 13,744 | 13,987 |
| Biological assets | 0 | 240 | |
| Investment property | 12 | 5,387 | 5,481 |
| Investments in associates and joint ventures | 13 | 22,366 | 9,537 |
| Other financial assets | 14 | 1,550 | 1,632 |
| Deferred tax assets | 15 | 14,396 | 13,346 |
| Other debtors | 18 | 3,906 | 4,844 |
| Non-current assets | 356,836 | 316,084 | |
| Inventories | 16 | 397,840 | 406,090 |
| Trade receivables | 17 | 165,484 | 174,483 |
| Income tax assets | 15 | 11,773 | 8,915 |
| Other debtors | 18 | 36,967 | 35,704 |
| Other current assets | 18 | 3,108 | 3,103 |
| Cash and cash equivalents | 19 | 22,144 | 21,695 |
| Current assets | 637,316 | 649,989 | |
| TOTAL ASSETS | 994,152 | 966,074 | |
| EQUITY | |||
| Share capital | 20 | 133,000 | 133,000 |
| Other reserves | 20 | 301,515 | 255,974 |
| Net Income | 74,947 | 77,389 | |
| Non-Controlling Interest | 21 | 30,081 | 31,871 |
| TOTAL EQUITY | 539,543 | 498,234 | |
| LIABILITIES | |||
| Interest-bearing loans | 22 | 59,126 | 39,503 |
| Other financial liabilities | 24 | 23,269 | 30,263 |
| Provisions | 25 | 3,777 | 43,081 |
| Post-employment benefits | 26 | 1,687 | 1,621 |
| Deferred tax liabilities | 15 | 50,370 | 7,737 |
| Non-current liabilities | 138,228 | 122,205 | |
| Interest-bearing loans | 22 | 124,108 | 121,200 |
| Trade payables | 23 | 132,086 | 165,008 |
| Other financial liabilities | 24 | 43,040 | 41,039 |
| Other liabilities | 24 | 15,235 | 16,464 |
| Income tax liabilities | 15 | 1,911 | 1 ,924 |
| Current liabilities | 316,380 | 345,635 | |
| TOTAL LIABILITIES AND EQUITY | 994,152 | 966,074 | |
| (this statement should be read with the attached notes to the consolidated financial statements) |
| thousand euros | |||||
|---|---|---|---|---|---|
| 4Q19 | 4Q18 | ||||
| (non audited) | (non audited) | Notes | 2019 | 2018 | |
| 178,434 | 179,360 | Sales | 8 | 781,060 | 763,117 |
| 79,388 | 101,639 | Costs of goods sold and materials consumed | 398,334 | 408,780 | |
| -7,011 | 11,069 | Change in manufactured inventories | 4,652 | 32,119 | |
| 31,000 | 33,558 | Third party supplies and services | 27 | 124,753 | 124,140 |
| 33,391 | 32,243 | Staff costs | 28 | 139,902 | 134,239 |
| - 187 | - 986 | Impairments of assets | 29 | 1 194 | -73 |
| 2,446 | 2,690 | Other income and gains | 30 | 10,046 | 11,599 |
| 2,358 | 1,097 | Other costs and losses | 30 | 6 851 | 5 765 |
| 27,919 | 25,566 | Operating Cash Flow (current EBITDA) | 124,724 | 133,984 | |
| 8,843 | 7,670 | Depreciation | 9, 10, 11 | 35,177 | 31,279 |
| 19,075 | 17,896 | Operating Profit (current EBIT) | 89,547 | 102,705 | |
| - 581 | - 624 | Non-recurrent results | 31 | -1,620 | 57 |
| 891 | 1,332 | Financial costs | 32 | 2,177 | 3,547 |
| 81 | 34 | Financial income | 32 | 81 | 95 |
| - 146 | 562 | Share of (loss)/profit of associates and joint-ventures | 13 | 5,581 | 2,691 |
| 17,538 | 16,536 | Profit before tax | 91,412 | 102,002 | |
| -4,040 | -2,502 | Income tax | 15 | 11,951 | 19,393 |
| 21,577 | 19,038 | Profit after tax | 79,461 | 82,608 | |
| 1,039 | 239 | Non-controlling Interest | 21 | 4 514 | 5 220 |
| 20,538 | 18,798 | Net Income attributable to the equity holders of Corticeira Amorim |
74,947 | 77,389 | |
| 0.154 | 0.141 | Earnings per share - Basic e Diluted (euros per share) | 0.564 | 0.582 | |
| (this statement should be read with the attached notes to the consolidated financial statements) |
| thousand euros | |||||
|---|---|---|---|---|---|
| 4Q19 (non audited) |
4Q18 (non audited) |
Notes | 2019 | 2018 | |
| 21 577 | 19 038 | Net Income | 79,461 | 82,608 | |
| Itens that may be reclassified through income statement: | |||||
| 753 | 56 | Change in derivative financial instruments fair value | 15 | 206 | - 462 |
| -1,019 | 1,349 | Change in translation differences and other | 15 | 624 | - 626 |
| 500 | 9 | Share of other comprehensive income of investments accounted for using the equity method |
15 | - 378 | -2,844 |
| - 527 | - 637 | Other comprehensive income | 15 | - 832 | 92 |
| - 293 | 777 | Other comprehensive income (net of tax) | - 380 | -3,840 | |
| 21,284 | 19,815 | Total Net compreensive income | 79,081 | 78,768 | |
| Attributable to: | |||||
| 20,539 | 20,315 | Corticeira Amorim Shareholders | 75,135 | 74,078 | |
| 745 | -500 | Non-controlling Interest | 3,946 | 4,690 | |
(this statement should be read with the attached notes to the consolidated financial statements)
(items in this Statement above are disclosed net of tax. The income tax relating to each component of other comprehensive income is disclosed in note 15)
Consolidated statement of cash flow
| thousand euros | |||||
|---|---|---|---|---|---|
| 4Q19 | 4Q18 | Notes | 2019 | 2018 | |
| (non audited) | (non audited) | ||||
| OPERATING ACTIVITIES | |||||
| 213,768 | 189,657 | Collections from customers | 816,503 | 767,722 | |
| - 162,101 | - 158,141 | Payments to suppliers | - 625,717 | - 599,191 | |
| -37,594 | -33,059 | Payments to employees | - 139,541 | - 136,780 | |
| 14,073 | -1,543 | Operational cash flow | 51,245 | 31,751 | |
| -6,992 | -4,501 | Payments/collections - income tax | -13,361 | -9,854 | |
| 27,760 | 11,551 | Other collections/payments related with operational activities |
48,885 | 37,605 | |
| 34,841 | 5,507 | CASH FLOW FROM OPERATING ACTIVITIES | 86,769 | 59,502 | |
| INVESTMENT ACTIVITIES | |||||
| Collections due to: | |||||
| -27 | 671 | Tangible assets | 1,081 | 934 | |
| 0 | - 1 | Intangible assets | 0 | 0 | |
| 66 | -78 | Financial investments | 2,589 | 872 | |
| 13 | 18 | Other assets | 235 | 206 | |
| 156 | -98 | Interests and similar gains | 369 | 169 | |
| 250 | 250 | Dividends | 500 | 500 | |
| Payments due to: | |||||
| -19,572 | -15,671 | Tangible assets | -53,048 | -53,718 | |
| - 454 | 0 | Right of use | -1,816 | 0 | |
| 107 | -9 304 | Financial investments | -12,085 | -14,437 | |
| -3,246 | -2,329 | Intangible assets | -4,143 | -3,587 | |
| 145 | 0 | Other assets | 0 | 0 | |
| -22,563 | -26,542 | CASH FLOW FROM INVESTMENTS | -66,319 | -69,061 | |
| FINANCIAL ACTIVITIES | |||||
| Collections due to: | |||||
| -8,563 | 0 | Loans | 40,000 | 35,000 | |
| 0 | 131 | Government grants | 2,682 | 2,423 | |
| 791 | 811 | Others | 2,931 | 3,943 | |
| Payments due to: | |||||
| -1,127 | -2,651 | Loans | -1,127 | -22,167 | |
| - 448 | - 278 | Interests and similar expenses | -1,940 | -1,657 | |
| 0 | 0 | Transactions with non-controlling interest | -5,042 | 0 | |
| -11,305 | -11,305 | Dividends paid to company's shareholders | -35,910 | -35,910 | |
| - 535 | -1,331 | Dividends paid to non-controlling interest | -2,182 | -2,445 | |
| -2,755 | -1,150 | Government grants | -5,031 | -2,340 | |
| - 152 | - 230 | Others | - 446 | - 586 | |
| -24,094 | -16,003 | CASH FLOW FROM FINANCING | -6,065 | -23,739 | |
| -11,816 | -37,038 | Change in Cash | 14,385 | -33,298 | |
| -82 | - 136 | Exchange rate effect | 6 | - 310 | |
| 361 | 216 | Perimeter variation | 361 | 216 | |
| -12,451 | -1,783 | Cash at beginning | 19 | -38,740 | -5,348 |
| -23,988 | -38,740 | Cash at end | 19 | -23,988 | -38,740 |
| (this statement should be read with the attached notes to the consolidated financial statements) |
Consolidated Statement of Changes in Equity
| thousand euros | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Capital próprio atribuível aos accionistas da Corticeira Amorim, SGPS, S.A. | Non | Total | ||||||||
| Notes | Share capital |
Paid-in Capital |
Hedge Accounting |
Translation Difference |
Legal reserve |
Other reserves |
Net income |
controlling interests |
Equity | |
| Balance sheet as at January 1, 2018 |
133,000 | 38 ,893 | 468 | -1,045 | 18,770 | 167,010 | 73,027 | 29,524 | 459,648 | |
| Profit for the year | 20 | - | - | - | - | 2,725 | 70,303 | -73,027 | - | -0 |
| Dividends | 20 | - | - | - | - | - | -35,910 | - | -2,445 | -38,355 |
| Perimeter variation | 21 | - | - | - | - | - | - | - | 611 | 611 |
| Changes in the percentage of interest retaining control |
21 | - | - | - | - | - | -1,928 | - | - 510 | -2,438 |
| Consolidated Net Income for the period |
20 , 21 | - | - | - | - | - | - | 77,389 | 5,220 | 82,608 |
| Change in derivative financial instruments fair value |
3 | - | - | - 462 | - | - | - | - | - | - 462 |
| Change in exchange differences |
20 , 21 | - | - | - | -96 | - | - | - | -630 | - 626 |
| Other comprehensive income of associates |
13 | - | - | - | -2 919 | - | 75 | - | - | -2,844 |
| Other comprehensive income | - | - | - | - | - | 92 | - | - | 92 | |
| Total comprehensive income for the period |
0 | 0 | - 462 | -3,015 | 0 | 167 | 77,389 | 4,690 | 78,768 | |
| Balance sheet as at December 31, 2018 |
133,000 | 38,893 | 6 | -4,060 | 21,495 | 199,642 | 77,389 | 31,871 | 498,234 | |
| Effect of IFRS 16 application | -52 | -52 | ||||||||
| Balance sheet as at January 1, 2019 |
133,000 | 38,893 | 6 | -4,060 | 21,495 | 199,590 | 77,389 | 31,871 | 498,182 | |
| Profit for the year | 20 | - | - | - | - | 2,977 | 74,412 | -77,389 | - | - 0 |
| Dividends | 20 | - | - | - | - | - | -35,910 | - | -1,901 | -37,811 |
| Perimeter variation | 21 | - | - | - | - | - | - | - | - | 0 |
| Changes in the percentage of interest retaining control |
21 | - | - | - | - | - | 3,927 | - | -3,835 | 92 |
| Consolidated Net Income for the period |
20 , 21 | - | - | - | - | - | - | 74,947 | 4,514 | 79,461 |
| Change in derivative financial instruments fair value |
3 | - | - | 206 | - | - | - | - | - | 206 |
| Change in exchange differences |
20 , 21 | - | - | - | 1,004 | - | - | - | - 380 | 624 |
| Other comprehensive income of associates |
13 | - | - | - | -1,071 | - | 693 | - | - | - 378 |
| Other comprehensive income | - | - | - | - | - | - 644 | - | - 188 | - 832 | |
| 0 | 0 | 206 | -67 | 0 | 49 | 74,947 | 3,946 | 79,081 | ||
| Balance sheet as at December 31, 2019 |
133,000 | 38,893 | 212 | -4,127 | 24,471 | 242 ,068 | 74,947 | 30,081 | 539,543 | |
| (this statement should be read with the attached notes to the consolidated financial statements) |
[ ← ] Wise by Amorim. Layer by layer, the balance becomes reality: more silence, more walking comfort, more warmth, more resistance and positive environmental impact.
CONSOLIDATED ANNUAL REPORT 2019 CORTICEIRA AMORIM, SGPS, S.A.
At the beginning of 1991, Corticeira Amorim, S.A. was transformed into Corticeira Amorim, S.G.P.S., S.A., the holding company for the cork business sector of the Amorim Group. In this report, Corticeira Amorim will be the designation of Corticeira Amorim, S.G.P.S., S.A., and in some cases the designation of Corticeira Amorim, S.G.P.S. together with all of its subsidiaries.
Corticeira Amorim is mainly engaged in the acquisition and transformation of cork into a numerous set of cork and cork related products, which are distributed worldwide through its network of sales company.
Corticeira Amorim is a Portuguese company with a registered head office in Mozelos, Santa Maria da Feira. Its share capital amounts to 133 million euros, which are publicly traded in the Euronext Lisbon – Sociedade Gestora de Mercados Regulamentados, S.A.
Amorim - Investimentos e Participações, S.G.P.S, S.A. held, as of December 31, 2018 and December 31, 2019, 67,830,000 shares of Corticeira Amorim, corresponding to 51.00% of the capital stock. Corticeira Amorim consolidates in Amorim – Investimentos e Participações, S.G.P.S., S.A., which is its controlling and Mother Company. Amorim – Investimentos e Participações, S.G.P.S., S.A. is owned by Amorim family.
These financial statements were approved in the Board Meeting of March 23, 2020. Shareholders have the capacity to modify these financial statements even after their release.
Except when mentioned, all monetary values are stated in thousand euros (Thousand euros = K euros = K€).
The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented.
Pursuant to Decree No. 35/2005, dated 17 February, as subsequently amended by Decree-Law No. 98/2015 of 2 July, which transposed into Portuguese legislation the provisions of Regulation (EC) No. 1606/2002 of the European Parliament and of the Council of 19 July 2002, these consolidated financial statements were prepared in accordance with the International Financial Reporting Standards (IAS/IFRS) issued by the International Accounting Standards Board (IASB) and the Interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC) or the former Standing Interpretations Committee (SIC), adopted by the EU, effective as of 1 January 2019. Consolidated statements were prepared based on a going concern basis, are based on historical cost, except in the case for financial instruments measured at fair value in accordance with IFRS 9, and nonmonetary assets, which are adjusted for inflation, of the associate located in Argentina. The financial statements are prepared using the records as stated in the companies' books included in the consolidation which adopted local general accepted accounting principles. Accounting adjustments were made in order to comply with the International Financial Reporting Standards (IFRS) as adopted in the European Union for periods beginning on January 1, 2019.
The impact of the adoption of the new standards, amendments to standards and interpretations that became effective as of 1 January 2019 is as follows:
the company might decide to maintain the fair value that those associates apply when measuring its subsidiaries by the application of the equity method. This option is taken separately for each investment on the later date considering (a) the initial recognition of the investment in that subsidiary; (b) this subsidiary as becoming an investment entity; and (c) when that subsidiary will be a parent company.
These standards and amendments had no material impact on the consolidated financial statements of Corticeira Amorim, with the exception of IFRS 16 and IFRIC 23.
IFRS 16 was issued in January 2016 and replaced IAS 17 Leases, IFRIC 4 Determine whether an Agreement contains a Lease, SIC 15 Operating Leases - Incentives and SIC 27 Valuation of the Substance of Transactions that involve the Legal Form of a Lease. IFRS 16 establishes the principles applicable to the recognition, measurement, presentation and disclosure of leases and requires lessees to account for all leases in the respective balance sheets according to a single model similar to that provided for in IAS 17 for financial leases.
Corticeira Amorim is the largest producer and supplier of cork stoppers worldwide and the one that the main players in the wine industry trust. Its leadership is based on 150 years of experience, positioning itself at the forefront of innovation, with pioneering examples such as the revolutionary Helix® packaging system and NDtech analysis technology.
The standard provides for two recognition exemptions for lessees lease contracts where the assets are of low value and short term lease contracts (ie, contracts lasting 12 months or less).
At the lease start date, the lessee recognizes the liability for future lease payments (that is, the lease liability) and the asset that represents the right to use the asset during the lease period (that is, the asset under right of use). Lessees must separately recognize the financial cost related to the lease liability and the cost of depreciation or amortization of the asset under the right to use.
Whitin the scope of the standard, lessees are required to remeasure the lease liability when certain events occur (such as a change in the lease period, a change in lease payments as a result of a change in an index or a rate used to determine those payments). Lessees recognize the amount of this remeasurement in the lease liability as an adjustment to the asset under right of use.
IFRS 16, which came into force in periods beginning on or after January 1, 2019, requires lessors and lessees to provide more extensive disclosures than required by IAS 17.
Corticeira Amorim adopted the modified retrospective application, through the recognition of the accumulated effect, in the first period of application of the standard, as an adjustment to equity, in the opening balance of the period in which the standard is adopted. The Group applied the standard to all contracts that were previously identified as leases under IAS 17 and IFRIC 4. Consequently, the Group did not apply the standard to contracts that were not previously identified as containing a lease.
Corticeira Amorim decided to apply the exemptions provided for in the standard for lease agreements whose lease period ends in the next 12 months from the initial application date, and for lease agreements for which the underlying asset is of low value. Corticeira Amorim has lease contracts for certain types of administrative equipment (such as, for example, personal computers, printing machines and photocopiers) which Corticeira Amorim considers to be of low value and therefore outside the scope of the standard.
The impacts of the adoption of IFRS 16 occurred in all segments, not being significant in order to affect the comparability of the financial statements, essentially being limited to the lease of buildings and vehicles.
The impacts of adopting IFRS 16 on the consolidated statement of financial position are presented in the table below:
| thousand euros | |||||||
|---|---|---|---|---|---|---|---|
| December 31, 2018 | IFRS 16 adoption | January 1, 2019 | |||||
| Assets | |||||||
| Tangible assets | 259,433 | -1,969 | 257,464 | ||||
| Right of use | 0 | 6,158 | 6,158 | ||||
| Deferred tax assets | 13,346 | 1 | 13,347 | ||||
| Other non-current assets | 43,306 | 0 | 43,306 | ||||
| Non-current assets | 316,084 | 4,190 | 320,274 | ||||
| Current assets | 649,989 | 0 | 649,989 | ||||
| Total Assets | 966,074 | 4,190 | 970,264 | ||||
| Total Equity | 498,234 | -52 | 498,182 | ||||
| Liabilities | |||||||
| Interest-bearing loans | 39,503 | 3,161 | 42,664 | ||||
| Other non-current liabilities | 82,702 | 0 | 82,702 | ||||
| Non-current liabilities | 122,205 | 3,161 | 125,366 | ||||
| Interest-bearing loans | 121,200 | 1,081 | 122,281 | ||||
| Other current liabilities | 224,435 | 0 | 224,435 | ||||
| Current liabilities | 345,635 | 1,081 | 346,716 | ||||
| Total Liabilities and Equity | 966,074 | 4,190 | 970,264 |
The impacts of adopting IFRS 16 in the consolidated income statement by nature corresponded to an increase in depreciation by 1.4 M € and a reduction in operating expenses with rents by the same amount.
The calculated impacts do not correspond exactly to those presented and disclosed in the note on minimum payments for operating leases (note XXXI of the 2018 financial statements). This difference results from computer equipment and software contracts, for which the recognition criteria set out in IFRS 16 are not met.
The impacts of adopting IFRS 16 on the consolidated statement of cash flows correspond to the reclassification of payments to suppliers to payments due to right of use and payments related to interest and similar costs.
The impacts of adopting IFRS 16 on the consolidated statements of comprehensive income were null.
Following the new interpretation on IAS 12 - Income tax, Corticeira Amorim reassessed all its contingencies and tax disputes, taking into account the provisions of IFRIC 23, with no changes to the estimates previously made by management, except for the reclassification of Provisions (Note 25) to Tax payable / deferred tax (Note 15), in the amount of 42.7 million euros.
The following standards, interpretations, amendments, and revisions were endorsed by the European Union, have mandatory application in future financial years:
No material impacts are estimated on the Group's consolidated financial statements from the application of these standards and amendments.
The following standards, interpretations, amendments and revisions, with mandatory application in future financial years, have not been endorsed by the European Union, until the date of approval of these financial statements:
Corticeira Amorim is evaluating the impact resulting from these changes and will apply these standards in the year in which they become effective, or in advance when permitted.
The consolidated financial statements include, in reference to 31 December 2019, assets, liabilities, profit and loss of the companies in the Group, understood as the entirety of Corticeira Amorim and its subsidiaries, which are presented in Note 6.
An entity is classified as a subsidiary when it is controlled by the Group. Control exists only where the Group has, cumulatively:
(a) power over the investee;
(b) exposure to or rights over variable results derived from its relationship with the investee; and
(c) the ability to use its power over the investee to affect the amount of the results for investors.
Generally, it is assumed that there is control when the Group holds the majority of voting rights. In order to support this assumption and in cases where the Group does not hold the majority of voting rights in the investee, all relevant facts and circumstances are taken into account when determining the existence of power and control, such as:
(a) Any contractual agreements with other holders of voting rights;
(b) Any rights arising from other contractual agreements;
(c) Existing and potential voting rights.
The existence of control by the Group is re-evaluated whenever there is a change in any facts and circumstances that lead to changes in one of the three factors of control mentioned above.
Subsidiaries are included in the consolidation according to the full consolidation method, from the date when control is acquired until the date it effectively ends.
Intergroup balances and transactions, as well as any unrealised gains on transactions between companies in the Group, are eliminated. Unrealised losses are also eliminated, unless the transaction evidences impairment of a transferred asset.
The accounting policies of subsidiaries are changed whenever necessary to ensure consistency with the policies adopted by the Group.
A change in the participating interest in a subsidiary that does not entail loss of control is recorded as a transaction between shareholders. If the Group loses control over the subsidiary, the corresponding assets (including goodwill), liabilities, noncontrolling interests and other equity components are derecognised and any gains or losses are recognised in the income statement. Investments retained are recognised at fair value at the time of the loss of control.
In situations where the Group has substantial control of entities created for a specific purpose, even if it has no direct shareholdings in these entities, they shall be consolidated using the full consolidation method.
Net assets of subsidiaries consolidated through the full consolidation method attributable to the equity stake or shares held by any third parties are recorded in the consolidated statement of financial position, in the line item non-controlling interest.
Interests held by any third parties over the net income of subsidiaries are identified and adjusted by deduction from the equity attributable to the Group shareholders and recorded in the consolidated income statement, in the line item non-controlling interest.
Associates are companies over which Corticeira Amorim exercises significant influence, understood as the power to participate in the financial and operating policy-making process, without, however, exercising control or joint control. Generally, it is assumed that there is a significant influence whenever the holding percentage exceeds 20%.
The classification of financial investments in joint ventures is determined based on the existence of shareholders' agreements that demonstrate and regulate joint control, which is understood to exist when decisions on activities relevant to the venture require a unanimous agreement between the parties.
The existence of significant influence or joint control is determined based on the same type of facts and circumstances applicable in the assessment of control over subsidiaries.
These holdings are consolidated by the equity method, this is, the
consolidated financial statements include the Group's interest in the total recognised gains and losses of the associate/joint venture, from the date on which significant influence/control begins until the date on which it effectively ends. Dividends received from these companies are recorded as a reduction in the value of financial investments.
The Group's share of gains and losses in associates/joint ventures is recognised in the income statement, and its share of operations in post-acquisition reserves are recognised in reserves. The cumulative post-acquisition operations are adjusted according to the cumulative operations in the financial investment. When the Group's share of losses in an associate/joint venture equals or exceeds its investment in that entity, including any unsecured receipt transaction, the Group does not recognise any further losses, unless it has incurred obligations or made payments on behalf of the associate/joint venture.
Any excess of the cost of acquisition of a financial investment over the Group's share in the fair value of the assets, liabilities and contingent liabilities identified on the date of acquisition of the associate/joint venture is recognised as goodwill, which is included in the value of the financial holding and whose recovery is assessed annually as part of the financial investment. If the cost of acquisition is lower than the fair value of the net amount of the assets of the associate/joint venture, the difference is recorded directly in the consolidated income statement.
Unrealised gains from transactions between the Group and its associates/joint ventures are eliminated to the extent of the Group's share in the respective associates/joint ventures. Unrealised losses are also eliminated, unless the transaction evidences impairment of a transferred asset.
The accounting policies of associates/joint ventures are changed whenever necessary to ensure consistency with the policies adopted by the Group.
Following the application of the equity method, the Group assesses the existence of impairment indicators; should they exist, the Group calculates the recoverable amount of the investment and recognises an impairment loss if the recoverable amount is lower than the carrying amount of the investment, in the line item "Gains/losses in associates and joint ventures" of the income statement.
After the loss of significant influence or joint control (without maintenance of significant influence), the Group initially recognises the retained investment at fair value, and the difference between the carrying value and the fair value held plus the revenue from the sale, are recognised in the income statement.
Euro is the country's currency of Corticeira Amorim, S.G.P.S., S.A., and is the currency in which two thirds of its business is made and so Euro is considered to be its functional and presentation currency.
In non-euro subsidiaries, all assets and liabilities denominated in
foreign currency are translated to euros using year-end exchange rates. Net exchange differences arising from the different rates used in transactions and the rate used in its settlements or balance sheet dates are recorded in the income statement. These differences are recognized in operating results because they are not financially significant.
Assets and liabilities from non-euro subsidiaries are translated at the balance sheet date exchange rate, being its costs and gains from the income statement translated at the average exchange rate for the period.
Exchange differences of this conversion are registered in an equity account "Translation differences" which is part of the line "Other reserves".
Whenever and a non-euro subsidiary is sold or liquidated, accumulated translation differences recorded in equity is registered as a gain or a loss in the consolidated income statement by nature.
Inflationary effects are recognized in the financial statements when the economy of the currency in which the Entity's transactions are recorded is considered hyperinflationary. In 2018 and 2019, Argentina is considered a hyperinflationary economy, so the associate located in this country recognized the accumulated inflation adjustments. This adjustment was applied with reference to the previous year since the effect of 2019 was not yet determined on the date of approval of Corticeira Amorim's consolidated accounts. It is estimated that the effect does not significantly affect the financial position, performance or cash flow of the associate.
The acquisition method is the method used to recognise the entry of subsidiaries in Corticeira Amorim upon their acquisition.
In the acquisition method, the difference between: (i) the consideration transferred along with the non-controlling interests and the fair value of the equity interests previously held, and (ii) the net amount of identifiable assets acquired and liabilities assumed, is recognised, on the date of acquisition, as goodwill, if positive, or as a gain, if negative.
The consideration transferred is measured at fair value, calculated as the aggregate amount of fair values, on the date of acquisition, of assets transferred, liabilities incurred and equity instruments issued by Corticeira Amorim. For the purpose of determining goodwill/ gains resulting from the combination, the transferred consideration is removed from any part of the consideration that concerns another transaction (e.g. remuneration for the provision of future services or settlement of pre-existing relationships) whose margin is recognised separately in profit or loss.
The transferred consideration includes the fair value, on the date of acquisition, of any contingent consideration. Subsequent changes in this value are recognised: (i) as equity if the contingent consideration is classified as equity, (ii) as an expense or income in profit or loss or as other comprehensive income if the contingent consideration is classified as a financial asset or liability and (iii) as expenses, according to IAS 37 or other applicable standards, in remaining cases. Expenses related to the acquisition are not part of the transferred
consideration, so they do not affect the determination of goodwill/ gains resulting from the acquisition and are recognised as expenses in the year they occur.
On the date of acquisition, the classification and designation of all assets acquired and liabilities transferred are reassessed in accordance with IFRS, with the exception of insurance contracts, which are classified and designated based on the contractual terms and conditions, on the commencement date.
Assets arising from contractual indemnities paid by the seller concerning the outcome of contingencies related, in whole or in part, to a specific liability of the combined entity, shall be recognised and measured using the same principles and assumptions of the related liabilities.
The determination of the fair value of assets acquired and liabilities assumed takes into account the fair value of contingent liabilities arising from a present obligation caused by a past event (if the fair value can be reliably measured), regardless of whether an outflow is expected or not.
For each acquisition, Corticeira Amorim can choose to measure "non-controlling interests" at their fair value or by their respective share in the fair value in the assets and liabilities transferred from the acquiree. The choice of a method influences the determination of the amount of goodwill to be recognised. When the business combination is achieved in stages, the fair value on the date of acquisition of the interests held is remeasured to the fair value on the date when control is obtained, by a contrary booking in the income for the period in which control is achieved, affecting the determination of goodwill.
Whenever a combination is not completed on the reporting date, the provisional amounts recognised on the date of acquisition shall be adjusted retrospectively, for a maximum period of one year from the date of acquisition and any additional assets and liabilities shall be recognised if new information is obtained on facts and circumstances existing on the date of acquisition which would result in the recognition of such assets and liabilities, should it have been known on that date.
Goodwill is considered to have an indefinite useful life and thus is not amortisable, being subject to annual impairment tests, regardless of whether or not there is any indication of impairment.
For the purpose of impairment testing, goodwill is allocated, on the date of acquisition, to each of the cash generating units expected to benefit from the business combination, regardless of the remaining assets and liabilities also associated with the cash-generating unit. When the operation, or part of it, associated with a cash generating unit is disposed of, the allocated goodwill is also derecognised and included in the balance of gains/losses of the disposal, calculated as the base for its relative value.
Goodwill related to investments in companies based abroad is recorded in those companies' reporting currency and translated into Euro at the exchange rate in force on the balance sheet date.
Corticeira Amorim chooses to treat multiple transactions in a business combination as separate acquisitions.
When the facts and circumstances indicate that Corticeira Amorim has no control over the shares subject to the agreement, Corticeira Amorim chooses the approach of full recognition of non-controlling interest, in which non-controlling interest continue to be recognized in equity until the moment when the subsequent agreement is implemented. The recognized value of non-controlling interest changes due to allocation of results, changes in other comprehensive income and dividends declared in the reporting period as referred to in note 2 letter b).
When there is an agreement to acquire an additional interest in a subsidiary, a financial liability is recorded. The financial liability for the agreement is accounted for under IFRS 9. On initial recognition, the corresponding debit is made to another component of "Equity" attributable to the parent company. Subsequent changes in the value of the financial liability that result from the remeasurement of the present value payable are recognized in the income statement attributable to the parent company.
When the agreement is realized, Corticeira Amorim accounts for an increase in its ownership interests. At the same time, the financial liability and recognizes an offsetting credit in the same component of equity reduced on initial recognition.
Tangible fixed assets are recorded at acquisition cost net of accumulated depreciation and impairment losses.
Subsequent costs are included in the carrying amount of the asset or recognized as separate assets when it is probable that future economic benefits that exceed the originally measured level of performance of the existing asset will flow to the enterprise and the cost of the asset to the enterprise can be measured with reliability. All other subsequent expenditures are recognized as an expense in the period in which they are incurred.
Financial charges related to financing for production/acquisition of assets are added to the cost of these assets.
Depreciation is calculated on the straight-line basis, over the following years, which represent a reasonable estimate of the useful lives:
| Number of years | |
|---|---|
| Buildings | 20 to 50 |
| Basic equipment | 4 to 10 |
| Transportation equipment | 4 to 7 |
| Office equipment | 4 to 8 |
Depreciation is charged since the beginning of the moment in which the asset is ready to use. The asset's residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date.
Current maintenance on repair expenses are charged to the actual income statement in which they occurred. Cost of operations that can extend the useful expected life of an asset, or from which are expected higher and significative future benefits, are capitalized.
In the event of impairment loss, the value of the tangible fixed asset is adjusted, with the respective adjustment considered a loss for the year.
Gains and losses and disposals are included in the income statement.
Intangible assets are initially measured at cost. Subsequently they are measured at cost less accumulated depreciation.
Research expenditures are recognised in the income statement as incurred.
Expenditure on project development will only be capitalized from the moment it is demonstrate its technical feasibility, the company has the intention and the ability to complete, use or sell it and that future economic benefits are expected from it.
Amortisation of the intangible assets is calculated by the straightline method, and recorded as the asset qualifies for its required purpose:
| Number of years | |
|---|---|
| Industrial property | 10 to 20 |
| Software | 3 to 6 |
The estimated useful life of assets are reviewed and adjusted when necessary, at the balance sheet date.
Biological assets include cork in the tree measured at fair value. In determining this fair value, the present value method of discounted cash flows was used, which were calculated through an independent valuation carried out by an external entity.
Investment property includes land and buildings not used in production.
Investment property are initially registered at acquisition cost plus acquisition or production attributable costs, and when pertinent, financial costs during construction or installation. Subsequently are measured at acquisition cost less cumulative depreciations and impairment, until the residual value.
Periods and methods of depreciation are as follows in the note of tangible fixed assets.
Properties are derecognized when sold. When used in regular activity they are reclassified as tangible fixed asset. When land and buildings are no mores used for production, they will be reclassified from tangible fixed asset to investment property.
Intangible assets with indefinite useful lives are not amortised but are annually tested for impairment, or more frequently if there are events or changes in circumstances that indicate impairment.
Assets under depreciation are tested for impairment purposes whenever an event or change of circumstances indicates that its book value cannot be recovered.
For the estimate of impairments, assets are allocated to the lowest level for which there is separate identifiable cash flows (cash generating units).
In assessing impairment, both internal and external sources of information are considered. Tests are carried out if the level of profitability of cash-generating units is consistently below a minimum threshold, from which there is risk of impairment of assets. Impairment tests are also performed whenever management makes significant changes in operations (for example, total or partial discontinuation of the activity).
Impairment tests are performed internally. Whenever impairment tests are performed, future cash flows are discounted at a specific rate for the cash-generating unit, which includes the risk of the market where it operates.
The Group uses external experts (appraisers) only to determine the market value of land and buildings in situations of discontinuation of operations, where they are no longer recovered by use.
Impairment losses are recognized as the difference between its carrying amount and its recoverable amount. Recoverable corresponds to the higher of its fair value less sales expenses and its value for use.
Impairment losses, if any, are allocated specifically to the individual assets that are part of the cash flow generating unit.
Non-financial assets, which generated impairment losses are valued at each reporting date regarding reversals of that losses, except in the case of goodwill whose impairments can not be reversed.
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
Financial assets are classified, at initial recognition, as subsequently measured at amortised cost, fair value through other comprehensive income (OCI), and fair value through profit or loss.
The classification of financial assets at initial recognition depends on the financial asset's contractual cash flow characteristics and Corticeira Amorim business model for managing them. With the exception of trade receivables that do not contain a significant financing component or for which the Corticeira Amorim has applied the practical expedient, Corticeira Amorim initially measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs. Trade receivables that do not contain a significant financing component or for which Corticeira Amorim has applied the practical expedient are measured at the transaction price determined under IFRS 15.
In order for a financial asset to be classified and measured at amortised cost or fair value through OCI, it needs to give rise to cash flows that are solely payments of principal and interest (SPPI)' on the principal amount outstanding. This assessment is referred to as the SPPI test and is performed at an instrument level.
Corticeira Amorim business model for managing financial assets refers to how it manages its financial assets in order to generate cash flows. The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both.
Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognised on the trade date, this is, the date that Corticeira Amorim commits to purchase or sell the asset.
For purposes of subsequent measurement, financial assets are classified in four categories:
This category is the most relevant to Corticeira Amorim. Corticeira Amorim measures financial assets at amortised cost if both of the following conditions are met:
• the financial asset is held within a business model with the objective to hold financial assets in order to collect contractual cash flows;
and
• the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Financial assets at amortised cost are subsequently measured using the effective interest (EIR) method and are subject to impairment. Gains and losses are recognised in profit or loss when the asset is derecognised, modified or impaired.
The Group's financial assets at amortised cost includes trade receivables and other debtors.
Corticeira Amorim measures debt instruments at fair value through OCI if both of the following conditions are met:
• the financial asset is held within a business model with the objective of both holding to collect contractual cash flows and selling;
and
• the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
For debt instruments at fair value through OCI, interest income, foreign exchange revaluation and impairment losses or reversals are recognised in the statement of profit or loss and computed in the same manner as for financial assets measured at amortised cost. The remaining fair value changes are recognised in OCI. Upon derecognition, the cumulative fair value change recognised in OCI is recycled to profit or loss.
As of December 31, 2019, the Group does not have financial assets classified in this category.
Upon initial recognition, Corticeira Amorim can elect to classify irrevocably its equity investments as equity instruments designated at fair value through OCI when they meet the definition of equity under IAS 32 Financial Instruments: presentation and are not held for trading. The classification is determined on an instrument-byinstrument basis.
Gains and losses on these financial assets are never recycled to profit or loss. Dividends are recognised as other income in the statement of profit or loss when the right of payment has been established, except when Corticeira Amorim benefits from such proceeds as a recovery of part of the cost of the financial asset, in which case, such gains
are recorded in OCI. Equity instruments designated at fair value through OCI are not subject to impairment assessment.
As of December 31, 2019, the Group does not have financial assets classified in this category.
Financial assets at fair value through profit or loss include financial assets held for trading, financial assets designated upon initial recognition at fair value through profit or loss, or financial assets mandatorily required to be measured at fair value. Financial assets are classified as held for trading if they are acquired for the purpose of selling or repurchasing in the near term. Derivatives, including separated embedded derivatives, are also classified as held for trading unless they are designated as effective hedging instruments.
Financial assets with cash flows that are not solely payments of principal and interest are classified and measured at fair value through profit or loss, irrespective of the business model. Notwithstanding the criteria for debt instruments to be classified at amortised cost or at fair value through OCI, as described above, debt instruments may be designated at fair value through profit or loss on initial recognition if doing so eliminates, or significantly reduces, an accounting mismatch.
Financial assets at fair value through profit or loss are carried in the statement of financial position at fair value with net changes in fair value recognised in the statement of profit or loss.
This category includes derivative instruments and, when applicable, listed equity investments which the Group had not irrevocably elected to classify at fair value through OCI.
A derivative embedded in a hybrid contract, with a financial liability or non-financial host, is separated from the host and accounted for as a separate derivative if: i) the economic characteristics and risks are not closely related to the host; ii) a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative; iii) and the hybrid contract is not measured at fair value through profit or loss. Embedded derivatives are measured at fair value with changes in fair value recognised in profit or loss. Reassessment only occurs if there is either a change in the terms of the contract that significantly modifies the cash flows that would otherwise be required or a reclassification of a financial asset out of the fair value through profit or loss category.
A derivative embedded within a hybrid contract containing a financial asset host is not accounted for separately. The financial asset host together with the embedded derivative is required to be classified in its entirety as a financial asset at fair value through profit or loss.
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e., removed from the Group's consolidated statement of financial position) when:
When Corticeira Amorim has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if, and to what extent, it has retained the risks and rewards of ownership.
When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, Corticeira Amorim continues to recognise the transferred asset to the extent of its continuing involvement. In that case, Corticeira Amorim also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that Corticeira Amorim has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that Corticeira Amorim could be required to repay.
Corticeira Amorim recognises an allowance for expected credit losses (ECLs) for all debt instruments not held at fair value through profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that Corticeira Amorim expects to receive, discounted at an approximation of the original effective interest rate. The expected cash flows will include cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms.
ECLs are recognised in two stages. For credit exposures for which there has not been a significant increase in credit risk since initial recognition, ECLs are provided for credit losses that result from default events that are possible within the next 12-months (a 12-month ECL). For those credit exposures for which there has
been a significant increase in credit risk since initial recognition, a loss allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL).
For trade receivables and contract assets, Corticeira Amorim applies a simplified approach in calculating ECLs.
Therefore, the Group does not track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting date. The Group has established a provision matrix that is based on its historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment.
Corticeira Amorim established an impairment matrix based on default criteria of the risk management system, in the credits that were lost in the past, adjusted by specific prospective factors of the debtors and the economic environment.
For debt instruments at fair value through OCI, Corticeira Amorim applies the low credit risk simplification. At every reporting date, Corticeira Amorim evaluates whether the debt instrument is considered to have low credit risk using all reasonable and supportable information that is available without undue cost or effort. In making that evaluation, Corticeira Amorim reassesses the internal credit rating of the debt instrument.
Corticeira Amorim considers a financial asset in default when contractual payments are 90 days past due. However, in certain cases, Corticeira Amorim may also consider a financial asset to be in default when internal or external information indicates that Corticeira Amorim is unlikely to receive the outstanding contractual amounts in full before taking into account any credit enhancements held by the Group. A financial asset is written off when there is no reasonable expectation of recovering the contractual cash flows.
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.
Corticeira Amorim financial liabilities include trade and other payables, loans and borrowings including bank overdrafts, reimbursable grants and derivative financial instruments.
The Group contracts confirming operations with financial institutions, which will be classified as reverse factoring agreements. These agreements are not used to manage the liquidity needs of the group as long as the payment remains on the due date of the invoices (on that date the advance amounts are paid to the financial institution by the group). For this reason, and since they do not give rise to financial expenses for the group, the amounts of the invoices
advanced to the suppliers that adhere to these contracts are kept in liabilities, in trade payables, and the payments at the due time are treated as operational payments. The supplier confirming operations are classified as operating in the Statement of Cash Flows.
The measurement of financial liabilities depends on their classification, as described below:
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss.
Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term. This category also includes derivative financial instruments entered into by the Group that are not designated as hedging instruments in hedge relationships as defined by IFRS 9. Separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments.
Gains or losses on liabilities held for trading are recognised in the statement of profit or loss.
Financial liabilities designated upon initial recognition at fair value through profit or loss are designated at the initial date of recognition, and only if the criteria in IFRS 9 are satisfied.
This is the category most relevant to Corticeira Amorim. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through the EIR amortisation process.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the statement of profit or loss.
This category generally applies to interest-bearing loans and also including reimbursable grants at nil or below-market rate of interest.
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.
When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit or loss.
Financial assets and financial liabilities are offset and the net amount is reported in the consolidated statement of financial position if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.
Corticeira Amorim uses derivative financial instruments, such as forward currency contracts, currency swaps, to hedge its foreign currency risks. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative.
For the purpose of hedge accounting, hedges are classified as:
At the inception of a hedge relationship, Corticeira Amorim formally designates and documents the hedge relationship to which it wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge.
The documentation includes identification of the hedging instrument, the hedged item, the nature of the risk being hedged and how Corticeira Amorim will assess whether the hedging relationship meets the hedge effectiveness requirements (including the analysis of sources of hedge ineffectiveness and how the hedge ratio is determined). A hedging relationship qualifies for hedge accounting if it meets all of the following effectiveness requirements:
i) there is 'an economic relationship' between the hedged item and the hedging instrument;
ii) the effect of credit risk does not 'dominate the value changes' that result from that economic relationship; and
iii) the hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item that the Group actually hedges and the quantity of the hedging instrument that the Group actually uses to hedge that quantity of hedged item.
Hedges that meet all the qualifying criteria for hedge accounting are accounted for, as described below:
The change in the fair value of a hedging instrument is recognised in the statement of profit or loss. The change in the fair value of the hedged item attributable to the risk hedged is recorded as part of the carrying value of the hedged item and is also recognised in the statement of profit or loss as other expense.
For fair value hedges relating to items carried at amortised cost, any adjustment to carrying value is amortised through profit or loss over the remaining term of the hedge using the EIR method. The EIR amortisation may begin as soon as an adjustment exists and no later than when the hedged item ceases to be adjusted for changes in its fair value attributable to the risk being hedged.
If the hedged item is derecognised, the unamortised fair value is recognised immediately in profit or loss.
When an unrecognised firm commitment is designated as a hedged item, the subsequent cumulative change in the fair value of Corticeira Amorim commitment attributable to the hedged risk is recognised as an asset or liability with a corresponding gain or loss recognised in profit or loss.
The effective portion of the gain or loss on the hedging instrument is recognised in OCI in the cash flow hedge reserve, while any ineffective portion is recognised immediately in the statement of profit or loss. The cash flow hedge reserve is adjusted to the lower of the cumulative gain or loss on the hedging instrument and the cumulative change in fair value of the hedged item.
Corticeira Amorim only designates the spot element of forward contracts as a hedging instrument. The forward element is recognised in OCI and accumulated in a separate component of equity under cost of hedging reserve.
The amounts accumulated in OCI are accounted for, depending on the nature of the underlying hedged transaction. If the hedged transaction subsequently results in the recognition of a nonfinancial item, the amount accumulated in equity is removed from the separate component of equity and included in the initial cost or other carrying amount of the hedged asset or liability. This is not a reclassification adjustment and will not be recognised in OCI for the period. This also applies where the hedged forecast transaction of a non-financial asset or non-financial liability subsequently becomes a firm commitment for which fair value hedge accounting is applied.
For any other cash flow hedges, the amount accumulated in OCI is reclassified to profit or loss as a reclassification adjustment in the same period or periods during which the hedged cash flows affect profit or loss.
If cash flow hedge accounting is discontinued, the amount that has been accumulated in OCI must remain in accumulated OCI if the hedged future cash flows are still expected to occur. Otherwise,
the amount will be immediately reclassified to profit or loss as a reclassification adjustment. After discontinuation, once the hedged cash flow occurs, any amount remaining in accumulated OCI must be accounted for depending on the nature of the underlying transaction as described above.
Hedges of a net investment in a foreign operation, including a hedge of a monetary item that is accounted for as part of the net investment, are accounted for in a way similar to cash flow hedges. Gains or losses on the hedging instrument relating to the effective portion of the hedge are recognised as OCI while any gains or losses relating to the ineffective portion are recognised in the statement of profit or loss. On disposal of the foreign operation, the cumulative value of any such gains or losses recorded in equity is transferred to the statement of profit or loss.
As of December 31, 2019, Corticeira Amorim had no hedging instruments for a net investment.
Inventories are valued at the lower of acquisition cost or production cost and net realisable value. Acquisition cost includes direct and indirect expenses incurred in order to have those inventories at its present condition and place. Production cost includes used raw material costs, direct labour, other direct costs and other general fixed production costs (using normal capacity utilisation).
Year-end quantities are determined based on the accounting records, which are confirmed by the physical inventory taking. Raw materials, consumables and by-products are valued at weighted average cost, and finished goods and work-in-progress at the average production cost which includes direct costs and indirect costs incurred in production.
Where the net realisable value is lower than production cost, inventory impairment is registered. This adjustment will be reversed or reduced whenever the impairment situation no longer takes place.
The raw materials usually present alternative use without significant loss of value (for example through changes in caliber, reprocessing or use as raw material in other units). In these cases a specific analysis of impairment is made, being that impairment situations in this instance are reduced.
The intermediate and finished products are not as susceptible of alternative use. In these cases, the amount by which inventories are expected to be realized is influenced by the age of those inventories. Thus, in addition to the specific analysis (priority form of determination of net realizable value), the group applies a criteria based on the rotation to estimate the reduction of expected value of these materials in function of their ageing.
Income tax includes current income tax and deferred income tax. Except for companies included in groups of fiscal consolidation, current income tax is calculated separately for each subsidiary, on the basis of its net result for the period adjusted according to tax legislation. Management periodically addresses the effect of different interpretations of tax law.
Deferred taxes are calculated using the liability method, reflecting the temporary differences between the carrying amount of consolidated assets and liabilities and their correspondent value for tax purposes.
Deferred tax assets and liabilities are calculated and annually registered using actual tax rates or known tax rates to be in vigour at the time of the expected reversal of the temporary differences.
Deferred tax assets are recognized to the extent that it is probable sufficient future taxable income will be available utilisation. At the end of each year an analysis of the deferred tax assets is made. Those that are not likely to be used in the future will be derecognised.
Deferred tax liabilities are recognized for all taxable temporary differences, except those related to i) the initial recognition of goodwill; or ii) the initial recognition of assets and liabilities that do not result from a business combination, and that at transaction date does not affect the accounting or tax result.
Deferred taxes are registered as an expense or a gain of the year, except if they derive from values that are booked directly in equity. In this case, deferred tax is also registered in the same line.
Deferred tax liabilities are not recognized in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in 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.
Provisions for tax contingencies in progress are classified under deferred taxes. In the case of tax proceedings, they are increased annually by the calculation of interest and fines, defined by law. Following IFRIC 23, the balances related to uncertainties in accounting for income taxes are disclosed in the deferred tax line.
Corticeira Amorim Portuguese employees benefit exclusively from the national welfare plan. Employees from foreign subsidiaries or are covered exclusively by local national welfare plans or benefit from complementary contribution plans and defined benefit.
As for the defined contribution plans, contributions are recognised as employee benefit expense when they are due.
Corticeira Amorim operates defined benefit pension plans in the subsidiaries Amorim Cork Italia (Trattamento di Fine Rapporto) and Eflverson. The cost of providing benefits under the defined benefit plan is determined using the projected unit credit method. The remeasures, comprising actuarial gains and losses, the effect
of the asset ceiling, excluding the amounts included in net interest on the defined benefit net liability and the return on plan assets (excluding the amounts included in net interest on net liabilities), are recognized immediately in the statement of financial position with a debt or credit corresponding to retained earnings in the other comprehensive income in the period in which they occur. Remeasurements are not reclassified to profit or loss in subsequent periods.
Corticeira Amorim recognises a liability and an expense for bonuses attributable to a large number of directors. These benefits are based on estimations that take in account the accomplishment of both individual goals and a pre-established Corticeira Amorim level of profits.
Provisions are recognised when Corticeira Amorim has a present legal or constructive obligation as a result of past events, when it is more likely than not an outflow of resources will be required to settle the obligation and when a reliable estimation is possible.
Provisions are not recognised for future operating losses. Restructuring provisions are recognised with a formal detail plan and when third parties affected are informed.
The main items of provisions were recorded based on their nominal value. Provisions for ongoing proceedings are annually increased by the calculation of interest and fines, as defined by law. In all other cases, given the uncertainty regarding the timing of the outflow of resources to cover liability, it is not possible to reliably estimate the effect of the discount, which is estimated to be not material.
When there is a present obligation, resulting from a past event, but it is not probable that an out flow of resources will be required, or this cannot be estimated reliably, the obligation is treated as a contingent liability. This will be disclosed in the financial statements, unless the probability of a cash outflow is remote.
Contingent assets are not recognized in the financial statements but disclosed when it is probable the existence of an economic future inflow of resources.
Revenue from contracts with customers is recorded when the control of goods and services is transferred to customers for an amount corresponding to the compensation that Corticeira Amorim expects to receive in exchange for such goods or services.
Corticeira Amorim generally acts as the "principal" in its agreements with customers, because Corticeira Amorim typically controls the goods and services before transferring them to customers.
The most significant judgments, estimates and assumptions related to the revenue from contracts with customers are disclosed in Note 4.
Revenue from the sale of products is recognized at the time when the control over the goods is transferred to the customer, which usually
happens when the product is delivered. The average day's collection varies, not overcoming 90 days, after billing.
For each contract, Corticeira Amorim assesses whether there are other commitments in the contract that are distinct performance obligations and for which a portion of the transaction price should be allocated. In determining the price of the transaction, Corticeira Amorim takes into account possible variable remuneration, the existence or otherwise of a significant component of financing, nonmonetary consideration receivable and the possibility of payment to the customer.
If the consideration provided for in a contract includes a variable component, Corticeira Amorim estimates the amount it considers to be entitled to receive in exchange for the transfer of the goods to the customer. The variable component is estimated at the inception of the contract and is restricted in the event of uncertainty until it is highly probable that a significant reversal of the recognized revenue will not occur when the uncertainty associated with the variable compensation component is finally dissipated.
Some contracts give the customer the right to return goods and volume rebates. The return rights and the volume discounts give rise to a variable return.
• Right of return
Some contracts give the customer the right to return the products within a certain period. Taking into account historical information, Corticeira Amorim estimates the amount of assets that will not be returned. The retribution includes returnable revenue because Corticeira Amorim estimates that it is highly probable that there will not be a significant reversal of cumulative revenue if the estimate of expitable returns changes.
• Quantity discounts
Corticeira Amorim provides retrospective discounts on volumes to some customers when a certain amount of purchases in a given period exceeds a certain limit established in the agreement. Discounts are recorded on the credit of the customer's account receivable. To estimate the variable remuneration associated with the expected value of quantity discounts granted, Corticeira Amorim is based on the client's history.
The requirements of IFRS 15 to restrict the amounts of estimated variable remuneration are also applicable, and Corticeira Amorim records a liability related to the amount to be granted for discounts.
Using the practical expedient provided for in IFRS 15, Corticeira Amorim does not adjust the amount of the consideration for the financial effect when, it is initially expected, that the period between the transfer of the good or service to the customer and the time at which the customer pays the good or the service is less than a year.
The same happens when Corticeira Amorim receives short-term advances from its clients - in this case, the value of the compensation is not adjusted by the financial effect.
Floor and Wall Coverings BU for certain types of contracts offers guarantees of proper operation of its products. These quality guarantees are accounted for in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets.
Grants received are related generally with fixed assets expenditure. No-repayable grants are present in the balance sheet as deferred income, and recognised as income on a systematic basis over the useful life of the related asset. Repayable grants are presented as Other financial liabilities following the recognition and measurement principles of IFRS 9.
Reimbursable grants with "out of market" interest rates are measured at fair value when they are initially recognised. For each grant, the fair value determination at the initial time corresponds to the present value of the future payments associated with the grant, discounted at the company's financing rate at the date of recognition, for loans with similar maturities.
Difference between nominal and fair value at initial recognition is included in "refundable grants", at Other financial liabilities, being afterwards recognised in net result as "Other income and gains" over the estimated useful life of the related asset. Subsequently these grants are measured at amortized cost.
The grants received are classified as a financial activity in the Statement of Cash Flows.
Corticeira Amorim assesses, at the commencement date of the contract, whether it is or contains a lease. That is, if the contract transfers the right to control the use of an identified asset for a period of time in exchange for consideration.
Corticeira Amorim applies a unique recognition and measurement approach to all leases, except for short-term and low-value asset leases. Corticeira Amorim recognizes lease liabilities corresponding to payments made and right-of-use assets that represent the right to use the underlying assets.
As a lessee, Corticeira Amorim recognizes the Right of use assets on the lease start date (that is, the date on which the underlying asset is available for use). The Right of use assets are measured at cost, less accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of the Right of use assets includes the amount of recognized lease liabilities, initial direct costs incurred and lease payments made at or before the commencement date less any lease incentives received. Right of use assets are depreciated using the straight-line method over the shorter of the lease term and the estimated useful lives of the assets, as follows:
| Number of years | |
|---|---|
| Lands | 60 |
| Buildings | 3 to 10 |
| Vehicles | 3 to 5 |
If ownership of the leased asset transfers to the Group at the end of the lease term or the cost reflects the exercise of a purchase option, depreciation is calculated using the estimated useful life of the asset.
Right-of-use assets are also subject to impairment, in accordance with the policy presented in note g) Impairment of non-financial assets.
At the commencement date of the lease, Corticeira Amorim recognizes lease liabilities measured at the present value of the payments to be made over the term of the contract. Lease payments include fixed payments less any incentives receivables, variable lease payments that depend on an index or rate and amounts you expect to pay related to residual value guarantees. Lease payments also include the exercise price of a purchase option, if it is reasonably expected to be exercised by Corticeira Amorim and payments of penalties for terminating the lease, if the lease term reflects the Corticeira Amorim exercising the option to terminate.
Variable lease payments that do not depend on an index or a rate are recognised as expenses (unless they are incurred to produce inventories) in the period in which the event or condition that triggers the payment occurs.
In calculating the present value of lease payments, Corticeira Amorim uses an incremental borrowing rate on the lease start date, because the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the lease payments (e.g., changes to future payments resulting from a change in an index or rate used to determine such lease payments) or a change in the assessment of an option to purchase the underlying asset.
Corticeira Amorim's lease liabilities are included in interest-bearing debt (note 22).
Corticeira Amorim applies the short-term lease recognition exemption, i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option. It also applies the lease of low-value assets recognition exemption to leases of office equipment that are considered to be low value. Lease payments on short-term leases and leases of low value assets are recognised as expense on a straight-line basis over the lease term.
Leases in which Corticeira Amorim does not transfer substantially all the risks and rewards incidental to ownership of an asset are classified as operating leases. Rental income arising is accounted for on a straight-line basis over the lease terms and is included in revenue in the statement of profit or loss due to its operating nature. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same basis as rental income. Contingent rents are recognised as revenue in the period in which they are earned.
As of December 31, 2019, Corticeira Amorim has no assets as a rental company.
Ordinary shares are included in equity.
When Corticeira Amorim acquires own shares, acquisition value is recognised deducting from equity in the line treasury stock.
Non-recurring operating results that due to their material or nature may distort the financial performance of Corticeira Amorim, as well as their comparability, are presented in a separate line on the Consolidated Income Statement by Nature. These results include, but are not limited to, restructuring costs, transaction costs for the acquisition of subsidiaries and expenses for leaving certain markets.
The caption "cash and cash equivalents" includes cash, deposits and cash investments with short maturities that are readily available without significant risk of change in value.
For the purposes of the statement of cash flows, the caption "Cash and cash equivalents" also includes bank overdrafts included in the caption "Bank loans" and financial assets held for trading.
The Group capitalizes the borrowing expenses (interest and other costs incurred due to borrowings of funds) that are directly attributable to the acquisition, construction or production of an asset that qualifies as part of the cost of that asset, that is, a asset that necessarily takes a substantial amount of time to get ready for its intended use or for sale. All other borrowing costs must be accounted for as an expense in the period in which they are incurred.
Corticeira Amorim recognizes in the financial statements the events that, after the balance sheet date, provide additional information on the conditions that existed on the balance sheet date, including the estimates inherent in the preparation of the financial statements. The group does not recognize events that, after the balance sheet date, provide information on conditions that occur after the balance sheet date.
CONSOLIDATED ANNUAL REPORT 2019 CORTICEIRA AMORIM, SGPS, S.A.
Corticeira Amorim activities expose it to a variety of financial risks: market risks (including currency risk, interest rate risk and raw material price risk), credit risk, liquidity risk and capital risk.
Exchange rate risk management policy established by Corticeira Amorim Board points out to a total hedging of the assets deriving from sales in the most important currencies and from USD acquisitions. As for book orders up to 90 days, each Business Unit responsible will decide according to exchange rate evolution. Book orders, considered relevant, due after 90 days, will be presented by the Business Unit responsible to the Corticeira Amorim Board.
As of December 31, 2019, taking into account the relationship between the amount of the group's exposure to financial assets and liabilities in foreign currency and the notional amount of hedges contracted, exchange rates different from the Euro currency (particularly USD), would have no material effect in the consolidated results of the group. As for hedge book orders any effect would be registered in Equity. As for non-euro net investments in subsidiaries/associate, any exchange rate effect would be registered in Equity, because Corticeira Amorim does not hedge this type of assets. The amount recorded under currency translation differences, including the effect of not covering these investments, reached the amount of -4,127 K€ as of December 31, 2019 (2018: -4,060 K€).
As at 31 December 2019, of the total interest-bearing debt, 32.7 M€ had interest at a fixed rate, of which 30 M€ until March 4, 2025. As of December 31, 2018, of the total interest-bearing debt, 25 M€ were linked to fixed interest rate for a 10 year period.
Most of the risk derives from the non current debt at variable rate (6.8 M€ as of 31/12/2019 and 18.1 M€ as of 31/12/2018) and from the commercial paper program.
As of December 31, 2019, if interest rates were 0.1 percentage points higher, with the remaining variables remaining constant, the pre-tax result would be lower by around 150 thousand euros (136 thousand euros in 2018) as a result of the increase in financial costs with variable rate debt.
In view of the critical nature of this factor, the procurement, storage and preparation management of the only variable common to all Corticeira Amorim activities, which is the raw material (cork), is assembled in an autonomous BU, which, among other objectives, makes it possible to prepare, discuss and decide within the Board of Directors the orientation or the multiannual supply policy to be developed.
The Group's cork procurement team is made up of a group of highly specialized staff, mainly in Portugal, Spain and North Africa. The objective of the buyer's team is to maximize the price / quality ratio of the purchased cork and simultaneously ensure the purchase of sufficient quantity for the desired level of production.
The cork market is an open market where price is determined by the supply and demand law. The price offered by Corticeira Amorim is determined business by business, and depends essentially on the estimated quality of cork. Corticeira Amorim does not have the ability to set the purchase price of the campaign, and this is a result of the operation of the market.
The purchase is concentrated in a certain period of the year, in which the raw material supply is guaranteed for the whole of the following year, the sales prices of the finished products and margins of the business are defined taking into account the cost of acquiring the raw material and estimated availability for the annual campaign.
Credit risk is due, mainly, to receivables from customers related to trade sales. Credit risk is monitored by the operating companies Financial Departments, taking in consideration its history of trade relations, financial situation as well as other types of information that Corticeira Amorim business network has available related with each trading partner. Credit limits are analysed and revised, if necessary, on a regular basis. Due to the high number of customers, spread through all continents, the most important of them weighting less than 3% of total sales, credit risk is naturally diminished.
Normally no guarantees are due from customers. Corticeira Amorim in non-recurring situations use credit insurance.
Credit risk derives also from cash and cash equivalents balances and from financial derivative instruments. Corticeira Amorim previously analysis the ratings of the financial institutions so that it can minimize the failure of the counterparts.
The maximum credit risk is the one that results from the failure to receive all financial assets (December 2019: 220 million euros and December 2018: 226 million euros).
Corticeira Amorim's Cash and Equivalents is dispersed by more than 90 subsidiaries, with the largest weight being 31% of Cash and Equivalents. In terms of the quality of credit risk, associated to Cash and Equivalents, as of December 31, 2019, Corticeira Amorim selects financial institutions whose rating does not risk the realization of these assets.
Corticeira Amorim financial department regularly analyses future cash flows so that it can deliver enough liquidity for the group to provide operating needs, and also to comply with credit lines payments. Excess of cash is invested in interest bearing short-term deposits. This police offer the necessary flexibility to conduct its business.
Financial liabilities estimated non-discounted cash flows maturities are as follows:
| Up to 1 year | 1 to 2 years | 2 to 4 years | More than 4 years |
Total | |
|---|---|---|---|---|---|
| Interest-bearing loans (Note 22) | 121,200 | 8,444 | 13,759 | 17,299 | 160,703 |
| Other financial liabilities (note 24) | 41,039 | 8,608 | 15,897 | 5,758 | 71,302 |
| Trade payables (Note 23) | 165,008 | 165,008 | |||
| Total as of December 31, 2018 | 327,247 | 17,052 | 29,656 | 23,057 | 397,013 |
| Interest-bearing loans (Note 22) | 124,108 | 10,712 | 31,916 | 16,498 | 183,234 |
| Other financial liabilities (note 24) | 43,040 | 9,558 | 10,242 | 3,470 | 66,310 |
| Trade payables (Note 23) | 132,086 | 132,086 | |||
| Total as of December 31, 2019 | 299,234 | 20,270 | 42,158 | 19,967 | 381,630 |
Liquidity risk hedging is achieved by the existence of non-used credit line facilities and, eventually bank deposits.
Based in estimated cash flows, 2020 liquidity reserve, composed mainly by non-used credit lines, will be as follows:
| million euros | |||||
|---|---|---|---|---|---|
| 2020 | |||||
| Opening balance | 210 | ||||
| Operating cash-flow | 128 | ||||
| Capex | -45 | ||||
| Interest and dividends | -26 | ||||
| Income tax | -14 | ||||
| Financial cash-flow (including bank debt payments) | -15 | ||||
| Closing balance | 238 | ||||
| Note: includes dividends to be approved in the April 20, 2020 shareholders meeting |
The financial cash-flow assumes that at the end of 2020, the level of unused credit lines (188 M€) is equal to that of the beginning of the year and cash and cash equivalents will be approximately 22 M€.
The Covid-19 pandemic is not expected to threaten Corticeira Amorim's liquidity.
Corticeira Amorim key objective is to assure business continuity, delivering a proper return to its shareholders and the correspondent benefits to its remaining stakeholders. A careful management of the capital employed in the business, using the proper combination of capital in order to reduce its costs, obtains the fulfilment of this objective. In order to achieve the proper combination of capital employed, the Board can obtain from the General Shareholders Meeting the approval of the necessary measures, namely adjusting the dividend pay-out ratio, the treasury stock, raising capital through new shares issue, sale of assets or other type of measures.
The key indicator for the said combination is the Equity/Assets ratio. Corticeira Amorim establishes as a target a level of not less than 40% of Equity/Assets ratio attending the company features and of the economic sector that she belongs.
The ratio register was:
| thousand euros | |||||||
|---|---|---|---|---|---|---|---|
| December 31, 2019 |
December 31, 2018 |
December 31, 2017 |
|||||
| Equity | 539,543 | 498,234 | 459,991 | ||||
| Assets | 994,152 | 966,074 | 869,407 | ||||
| Equity/Assets | 54.3 | 51.6 | 52.9 |
The Group measures part of its financial assets and liabilities at fair value at the reference date of the financial statements. Derivative financial instruments are included in the categories mentioned above. The derivatives used by Corticeira Amorim have no public quotation because they are not traded in an open market (over the counter derivatives).
According to the accounting standards, a fair value hierarchy is established that classifies three levels of data to be used in measurement techniques at fair value of financial assets and liabilities:
During the year, there were no transfers between the levels mentioned above.
As of December 31, 2019, derivative financial instruments recognised as assets in the consolidated statement of financial position rise 111 K€ as asset (2018: 132 K€) and 234 K€ as liabilities (2018: 565 K€), as stated in notes 18 and 24.
Corticeira Amorim uses forward outrights and options to hedge exchange rate risk, as shown below. Evaluating exchange rate hedge instruments requires the utilisation of observable inputs (level 2). Fair value is calculated using a proprietary model of Corticeira Amorim, developed by Reuters, using discounted cash flows method for forwards outrights. As for options, it is used the Black & Scholes model.
| milhares de euros | |||||||
|---|---|---|---|---|---|---|---|
| 31.12.2019 | 31.12.2018 | ||||||
| Nature | Hierarchy | Type | Notional | Fair Value | Notional | Fair Value | |
| Cash flow hedge | 0 | 0 | 0 | 0 | |||
| Fair value hedge | 12,880 | 111 | 11,067 | 132 | |||
| Trading derivatives | 0 | 0 | 0 | 0 | |||
| Level 2 Total | 12,880 | 111 | 11,067 | 132 | |||
| Total Assets | 12,880 | 111 | 11,067 | 132 | |||
| Cash flow hedge | 24,015 | - 272 | 6,162 | - 1 | |||
| Fair value hedge | 15,333 | 295 | 43,969 | 457 | |||
| Trading derivatives | 0 | 212 | 0 | 109 | |||
| Level 2 Total | 39,349 | 234 | 50,131 | 565 | |||
| Agreement for the acquisition of additional ownership interest in a subsidiary |
15,349 | 14,963 | 19,035 | 20,410 | |||
| Level 3 Total | 15,349 | 14,963 | 19,035 | 20,410 | |||
| Total Liabilities | 54,698 | 15,197 | 69,166 | 20,975 |
The main inputs used in valuation are forward exchange rate curves and estimates of currency volatility.
As of December 31, 2019, options contracts and forward outright related with sales currencies were as follows:
| thousand euros | ||||
|---|---|---|---|---|
| 2019 | 2018 | |||
| USD | 40,986 | 93% | 45,107 | 95% |
| ZAR | 2,572 | 6% | 2,225 | 5% |
| HUF | 0 | 0% | 78 | 0% |
| RUB | 352 | 1% | 259 | 1% |
| Forward - long positions | 43,910 | 100% | 47,669 | 100% |
| USD | 1,118 | 100% | 1,746 | 100% |
| Forward - short positions | 1,118 | 100% | 1,746 | 100% |
| USD | 7,200 | 100% | 11,343 | 100% |
| Options - long positions | 7,200 | 100% | 11,343 | 100% |
| USD | - | - | 440 | 100% |
| Options - short positions | - | - | 440 | 100% |
It is expected that hedged highly probable transactions in foreign currencies occur during the first half of 2020. The corresponded value recognised in equity as hedge accounting will be recorded in income statement in that same period.
The amount recognised in comprehensive income statement as change in derivative financial instruments fair value reached 206 thousand euros (2018: -462 thousand euros).
In relation with fair value hedging, during 2019 a loss of 1,087 K€ was recorded in the hedging instruments (2018: loss of 908 K€) and a gain of 136 K€ was recorded in the hedged items (2018: loss of 594 K€).
The preparation of consolidated financial statements requires the Group's management to make judgments and estimates that affect the statement of financial position and the reported results. These estimates are based on the best information and knowledge about past and/or present events and on the operations that the Company considers it may implement in the future. However, at the date of completion of such operations, their results may differ from these estimates.
Changes to these estimates that occur after the date of approval of the consolidated financial statements will be corrected in the income statement in a prospective manner, in accordance with IAS 8 - "Accounting Policies, Changes in Accounting Estimates and Errors".
The estimates and assumptions that imply a greater risk of giving rise to a material adjustment in assets and liabilities are described below:
To determine the entities to be included in the consolidation perimeter, the Group assesses the extent to which it is exposed, or has rights, to variability in return from its involvement with that entity and can take possession of them through the power it holds over this entity.
The decision that an entity must be consolidated by the Group requires the use of judgment, estimates, and assumptions to determine the extent to which the Group is exposed to return variability and the ability to take possession of them through its power.
Other assumptions and estimates could lead to the Group's consolidation perimeter being different, with direct impact on the consolidated financial statements.
The determination of a possible impairment loss can be triggered by the occurrence of various events, such as the availability of future financing, the cost of capital or other market, economic and legal changes or changes with an adverse effect on the technological environment, many of which are beyond the Group's control.
The identification and assessment of impairment indicators, the estimation of future cash flows, and the calculation of the recoverable value of assets involve a high degree of judgment by the Board.
Goodwill is annually subjected to impairment tests or whenever there are indications of a possible loss of value in accordance with the criteria described in Note 2 b). The recoverable values of the cash-generating units to which goodwill is allocated are determined based on the calculation of current use values. These calculations require the use of estimates by management.
The life of an asset is the period during which the Company expects that an asset will be available for use and this should be reviewed at least at the end of each financial year. The determination of the useful lives of assets, the amortisation/depreciation method to be applied, and the estimated losses resulting from the replacement of equipment before the end of its useful life due to technological obsolescence is crucial in determining the amount of amortisation/ depreciation to be recognised in the consolidated income statement each period.
These three parameters are defined using management's best estimates for the assets and businesses concerned, and taking account of the practices adopted by companies in the sectors in which the Group operates.
The Group periodically reviews any obligations arising from past events, which should be recognised or disclosed. The subjectivity involved in determining the probability and amount of internal resources required to meet obligations may give rise to significant adjustments, either due to changes in the assumptions made, or due to the future recognition of provisions previously disclosed as contingent liabilities.
Deferred income tax assets are recognised only when there is strong assurance that there will be future taxable income available to use the temporary differences or when there are deferred tax liabilities whose reversal is expected in the same period in which the deferred tax assets are reversed. The assessment of deferred income tax assets is undertaken by management at the end of each period taking account of the expected future performance of the Group.
The credit risk on the balances of accounts receivable is assessed at each reporting date, through the use of a collection matrix, which is based on the history of past collections adjusted for the future expectation of evolution of collections, to determine the non-receipt rate. Expected credit losses on accounts receivable are adjusted by the evaluation made, which may differ from the actual risk incurred in the future.
When the fair value of a financial asset or liability is calculated, on an active market, the respective market price is used. When there is no active market, which is the case with some of Corticeira Amorim financial assets and liabilities, valuation techniques generally accepted in the market, based on market assumptions, are used.
The Group applies evaluation techniques for unlisted financial instruments, such as derivatives, financial instruments at fair value and instruments measured at amortised cost. The most frequently used valorisation models are models of discounted cash flows and option models, which incorporate, for example, interest rate and market volatility curves.
For certain types of more complex derivatives, more advanced valuation models are used containing assumptions and data that are not directly observable in the market, for which the Group uses the proprietary model specified in Note 3.
Some contracts give the customer the right to return goods and volume rebates. The right of return and volume discounts give rise to variable remuneration. When estimating the variable consideration, Corticeira Amorim determined that the use of a combination of the most probable quantity method and the value method expected is most appropriate. Before including any amount of variable consideration in the transaction price, Corticeira Amorim considers whether the amount of the variable consideration is restricted. Corticeira Amorim determined that the variable compensation estimates are not limited based on their historical experience, forecast of business and economic conditions. In addition, uncertainty over variable consideration will be resolved in a short period of time.
The description of the main elements of the internal control system and risk management of the group, in relation to the process of the consolidated accounts, is as follows:
The financial information preparation process is dependent on the actors in the registration process of operations and support systems. In the group there is an Internal Control Procedures Manual and Accounting Manual, implemented at the level of the Corticeira Amorim Group. These manuals contain a set of rules and policies to ensure that in the financial information preparation process homogeneous principles are followed, and to ensure the quality and reliability of financial information.
The implementation of accounting policies and internal control procedures relating to the preparation of financial information is subject to the evaluation by the internal and external audit.
Every quarter, the consolidated financial information by business unit is assessed, validated and approved by the management of each of the group's business units.
Before its release, the consolidated financial information of Corticeira Amorim is approved by the Board of Directors and presented to the Supervisory Board.
| Company | Head Office | Country | 2019 | 2018 | |
|---|---|---|---|---|---|
| Raw Materials | |||||
| Amorim Natural Cork, S.A. | Vale de Cortiças - Abrantes | PORTUGAL | 100% | 100% | |
| Amorim Florestal, S.A. | Ponte de Sôr | PORTUGAL | 100% | 100% | |
| Amorim Florestal II, S.A. | Ponte de Sôr | PORTUGAL | 100% | 100% | |
| Amorim Florestal III, S.A. | Ponte de Sôr | PORTUGAL | 100% | 100% | |
| Amorim Florestal España, S.L. | San Vicente Alcántara | SPAIN | 100% | 100% | |
| Amorim Florestal Mediterrâneo, S.L. | Cádiz | SPAIN | 100% | 100% | |
| Amorim Tunisie, S.A.R.L. | Tabarka | TUNISIA | 100% | 100% | |
| Comatral - C. de Maroc. de Transf. du Liège, S.A. | Skhirat | MOROCCO | 100% | 100% | |
| Cosabe - Companhia Silvo-Agrícola da Beira S.A. | Lisbon | PORTUGAL | 100% | 100% | |
| SIBL - Société Industrielle Bois Liége | Jijel | ALGERIA | 51% | 51% | |
| Société Nouvelle du Liège, S.A. (SNL) | Tabarka | TUNISIA | 100% | 100% | |
| Société Tunisienne d'Industrie Bouchonnière | Tabarka | TUNISIA | 55% | 55% | |
| Vatrya - Serviços de Consultadoria, Lda. | Funchal - Madeira | PORTUGAL | 100% | 100% | |
| Cork Stoppers | |||||
| Amorim Cork, SGPS, S.A. | (i) | Santa Maria Lamas | PORTUGAL | 100% | 100% |
| ACI Chile Corchos, S.A. | (d) | Santiago | CHILE | - | 100% |
| ACIC USA, LLC | California | USA | 100% | 100% | |
| Agglotap, S.A. | Girona | SPAIN | 91% | 91% | |
| All Closures In, S.A. | Paços de Brandão | PORTUGAL | 75% | 75% | |
| Amorim Cork, S.A. | (j) | Santa Maria Lamas | PORTUGAL | 100% | 100% |
| Amorim Australasia Pty Ltd. | Adelaide | AUSTRALIA | 100% | 100% | |
| Amorim Bartop, S.A. | Vergada | PORTUGAL | 75% | 75% | |
| Amorim Champcork, S.A. | Santa Maria Lamas | PORTUGAL | 100% | 100% | |
| Amorim Cork América, Inc. | California | USA | 100% | 100% | |
| Amorim Cork Beijing Ltd. | Beijing | CHINA | 100% | 100% | |
| Amorim Cork Bulgaria EOOD | Plovdiv | BULGARIA | 100% | 100% | |
| Amorim Cork Deutschland GmbH & Co KG | Mainzer | GERMANY | 100% | 100% | |
| Amorim Cork España, S.L. | San Vicente Alcántara | SPAIN | 100% | 100% | |
| Amorim Cork Itália, SPA | Conegliano | ITALY | 100% | 100% | |
| Amorim Cork South Africa (Pty) Ltd. | Cape Town | SOUTH AFRICA | 100% | 100% | |
| Amorim France, S.A.S. | Champfleury | FRANCE | 100% | 100% | |
| Amorim Top Series France, S.A.S. | Merpins | FRANCE | 100% | 100% | |
| Amorim Top Series, S.A. | Vergada | PORTUGAL | 75% | 75% | |
| Amorim Top Series Scotland, Ltd | (f) | Dundee | SCOTLAND | 100% | - |
| Biocape - Importação e Exportação de Cápsulas, Lda. | Mozelos | PORTUGAL | 60% | 60% | |
| Bouchons Prioux | Epernay | FRANCE | 91% | 91% | |
| Chapuis, S.L. | Girona | SPAIN | 100% | 100% | |
| Corchera Gomez Barris | (c) | Santiago | CHILE | 50% | 50% |
| Corchos de Argentina, S.A. | (b) | Mendoza | ARGENTINA | 50% | 50% |
| Corpack Bourrasse, S.A. | (e) | Santiago | CHILE | 70% | 60% |
| Elfverson & Co. AB | Paryd | SWEDEN | 53% | 53% |
| Company | Head Office | Country | 2019 | 2018 | |
|---|---|---|---|---|---|
| Equipar, Participações Integradas, Lda. | Coruche | PORTUGAL | 100% | 100% | |
| S.A.S. Ets Christian Bourassé | (e) | Tosse | FRANCE | 70% | 60% |
| FP Cork, Inc. | California | USA | 100% | 100% | |
| Francisco Oller, S.A. | (e) | Girona | SPAIN | 94% | 92% |
| Hungarocork, Amorim, RT | Budapest | HUNGARY | 100% | 100% | |
| Indústria Corchera, S.A. | (c) | Santiago | CHILE | 50% | 50% |
| Korken Schiesser Ges.M.B.H. | Viena | AUSTRIA | 69% | 69% | |
| Olimpiadas Barcelona 92, S.L. | Girona | SPAIN | 100% | 100% | |
| Portocork América, Inc. | California | USA | 100% | 100% | |
| Portocork France, S.A.S. | Bordeaux | FRANCE | 100% | 100% | |
| Portocork Internacional, S.A. | Santa Maria Lamas | PORTUGAL | 100% | 100% | |
| Portocork Itália, s.r.l | Milan | ITALY | 100% | 100% | |
| Sagrera et Cie | Reims | FRANCE | 91% | 91% | |
| S.A. Oller et Cie | (e) | Reims | FRANCE | 94% | 92% |
| S.C.I. Friedland | Céret | FRANCE | 100% | 100% | |
| S.C.I. Prioux | Epernay | FRANCE | 91% | 91% | |
| Socori, S.A. | (e) | Rio Meão | PORTUGAL | 70% | 60% |
| Socori Forestal, S.L. | Cáceres | SPAIN | 70% | 60% | |
| Société Nouvelle des Bouchons Trescases | (b) | Perpignan | FRANCE | 50% | 50% |
| TKCork – Advanced Cork Technology, S.A. | (h) | Santa Maria Lamas | PORTUGAL | - | 100% |
| Trefinos Australia | Adelaide | AUSTRALIA | 91% | 91% | |
| Trefinos Italia, s.r.l | Treviso | ITALY | 91% | 91% | |
| Trefinos USA, LLC | Fairfield, CA | USA | 91% | 91% | |
| Trefinos, S.L. | Girona | SPAIN | 91% | 91% | |
| Victor y Amorim, S.L. | (c) | Navarrete - La Rioja | SPAIN | 50% | 50% |
| Vinolok a.s | (b)(g) | Jablonec nad Nisou | CZECH REP. | 50% | - |
| Wine Packaging & Logistic, S.A. | (b) | Santiago | CHILE | 50% | 50% |
| Floor & Wall Coverings | |||||
| Amorim Cork Flooring, S.A. | (k) | S. Paio de Oleiros | PORTUGAL | 100% | 100% |
| Amorim Benelux, BV | Tholen | NETHERLANDS | 100% | 100% | |
| Amorim Deutschland, GmbH | (a) | Delmenhorts | GERMANY | 100% | 100% |
| Amorim Subertech, S.A. | (l) | S. Paio de Oleiros | PORTUGAL | 100% | 100% |
| Amorim Flooring (Switzerland) AG | Zug | SWITZERLAND | 100% | 100% | |
| Amorim Flooring Austria GesmbH | Viena | AUSTRIA | 100% | 100% | |
| Amorim Flooring Investments, Inc. | Hanover - Maryland | USA | 100% | 100% | |
| Amorim Flooring North America Inc. | Hanover - Maryland | USA | 100% | 100% | |
| Amorim Flooring Rus, LLC | Moscovo | RUSSIA | 100% | 100% | |
| Amorim Flooring Sweden AB | (e) | Mölndal | SWEDEN | 84% | 52% |
| Amorim Flooring UK, Ltd. | Manchester | UK | 100% | 100% | |
| Amorim Japan Corporation | Tokyo | JAPAN | 100% | 100% | |
| Cortex Korkvertriebs, GmbH | Fürth | GERMANY | 100% | 100% | |
| Dom KorKowy, Sp. Zo. O. | (c) | Krakow | POLAND | 50% | 50% |
| Korkkitrio Oy | (g) | Tampere | FINLAND | 51% | - |
| Timberman Denmark A/S | Hadsund | DENMARK | 100% | 100% | |
| Composite Cork | |||||
| Amorim Cork Composites, S.A. | Mozelos | PORTUGAL | 100% | 100% | |
| Amorim (UK), Ltd. | Horsham West Sussex | UK | 100% | 100% | |
| Amorim Compcork, Lda. | (n) | Mozelos | PORTUGAL | - | 100% |
| Amorim Cork Composites, LLC | São Petersburgo | RUSSIA | 100% | 100% | |
| Amorim Cork Composites, GmbH | Delmenhorts | GERMANY | 100% | 100% | |
| Amorim Cork Composites, Inc. | Trevor - Wisconsin | USA | 100% | 100% |
| Company | Head Office | Country | 2019 | 2018 | |
|---|---|---|---|---|---|
| Amorim Deutschland, GmbH | (a) | Delmenhorts | GERMANY | 100% | 100% |
| Amorim Industrial Solutions - Imobiliária, S.A. | Corroios | PORTUGAL | 100% | 100% | |
| Amorim Sports, Lda. | Mozelos | PORTUGAL | 100% | 100% | |
| Amosealtex Cork Co., Ltd. | (b) | Xangai | CHINA | 50% | 50% |
| Chinamate (Shaanxi) Natural Products Co., Ltd. | Shaanxi | CHINA | 100% | 100% | |
| Chinamate Development Co. Ltd. | Hong Kong | CHINA | 100% | 100% | |
| Compruss – Investimentos e Participações, Lda. | Mozelos | PORTUGAL | 100% | 100% | |
| Corticeira Amorim - France, SAS | Lavardac | FRANCE | 100% | 100% | |
| Florconsult – Consultoria e Gestão, Lda. | Mozelos | PORTUGAL | 100% | 100% | |
| Postya - Serviços de Consultadoria, Lda. | Funchal - Madeira | PORTUGAL | 100% | 100% | |
| Insulation Cork | |||||
| Amorim Cork Insulation, S.A. | (m) | Vendas Novas | PORTUGAL | 100% | 100% |
| Holding | |||||
| Corticeira Amorim, SGPS, S.A. | Mozelos | PORTUGAL | 100% | 100% | |
| Ginpar, S.A. (Générale d' Invest. et Participation) | Skhirat | MOROCCO | 100% | 100% | |
| Amorim Cork Research, Lda. | Mozelos | PORTUGAL | 100% | 100% | |
| Amorim Cork Services, Lda. | Mozelos | PORTUGAL | 100% | 100% | |
| Amorim Cork Ventures, Lda. | Mozelos | PORTUGAL | 100% | 100% | |
| Corecochic - Corking Shoes Investments, Lda. | (b) | Mozelos | PORTUGAL | 50% | 50% |
| Gröwancork - Estruturas isoladas com cortiça, Lda. | (b) | Mozelos | PORTUGAL | 25% | 25% |
| TDCork - Tapetes Decorativos com Cortiça, Lda. | (b) | Mozelos | PORTUGAL | 25% | 25% |
| Soc. Portuguesa de Aglomerados de Cortiça, Lda. | Montijo | PORTUGAL | 100% | 100% |
(a) – One single company: Amorim Deutschland, GmbH
(b) – Equity method consolidation.
(c) – CORTICEIRA AMORIM directly or indirectly controls the relevant activities – line-by-line consolidation method.
(d) – Company merged into Corpack in 2019.
(e) – Increase in the percentage of interest.
(f) – Company set-up in 2019.
(g) – Company adquired in 2019.
(h) – Company liquidated in 2019.
(i) – Company previously designated Amorim & Irmãos, SGPS, SA.
(j) – Company previously designated.Amorim & Irmãos, SA.
(k) – Company previously designated Amorim Revestimentos, SA.
(l) – Company previously designated Amorim Flooring, SA.
(m) – Company previously designated Amorim Isolamentos, SA.
(n) – Company merged into Amorim Cork Composites, S.A. in 2019.
The percentages indicated are the percentages of interests and not of control.
For entities consolidated by the full consolidation method, the percentage of voting rights held by "Non-Controlling Interests" is equal to the percentage of share capital held.
| Exchage rates | December 31, 2019 |
Average 2019 |
Average 2018 |
December 31, 2018 |
|
|---|---|---|---|---|---|
| Argentine Peso | ARS | 67.103 | 53.851 | 32.918 | 43.145 |
| Australian Dollar | AUD | 1.600 | 1.611 | 1.580 | 1.622 |
| Lev | BGN | 1.956 | 1.956 | 1.956 | 1.956 |
| Brazilian Real | BRL | 4.516 | 4.413 | 4.308 | 4.444 |
| Canadian Dollar | CAD | 1.460 | 1.485 | 1.529 | 1.561 |
| Swiss Franc | CHF | 1.085 | 1.112 | 1.155 | 1.127 |
| Chilean Peso | CLP | 842.430 | 786.305 | 756.762 | 794.630 |
| Yuan Renminbi | CNY | 7.821 | 7.735 | 7.808 | 7.875 |
| Czech Koruny | CZK | 25.408 | 25.670 | 25.647 | 25.743 |
| Danish Krona | DKK | 7.472 | 7.466 | 7.453 | 7.467 |
| Algerian Dinar | DZD | 133.159 | 133.320 | 137.334 | 135.454 |
| Euro | EUR | 1.000 | 1.000 | 1.000 | 1.000 |
| Pound Sterling | GBP | 0.851 | 0.878 | 0.885 | 0.895 |
| Hong Kong Dollar | HKD | 8.733 | 8.769 | 9.253 | 8.982 |
| Forint | HUF | 330,530 | 325.297 | 318.890 | 320.980 |
| Yen | JPY | 121,940 | 122.006 | 130.396 | 125.850 |
| Moroccan Dirham | MAD | 10.721 | 10.759 | 11.077 | 10.960 |
| Zloty | PLN | 4.257 | 4.298 | 4.261 | 4.301 |
| Ruble | RUB | 69.452 | 72.365 | 74.042 | 79.715 |
| Coroa sueca | SEK | 10.447 | 10.589 | 10.258 | 10.255 |
| Tunisian Dinar | TND | 3.126 | 3.277 | 3.108 | 3.427 |
| Turkish Lira | TRL | 6.684 | 6.358 | 5.708 | 6.059 |
| US Dollar | USD | 1.123 | 1.119 | 1.181 | 1.145 |
| Rand | ZAR | 15.777 | 16.176 | 15.619 | 16.459 |
Corticeira Amorim is organised in the following Business Units (BU): Raw Materials, Cork Stoppers, Floor and Wall Coverings, Composite Cork and Insulation Cork.
There are no differences between the measurement of profit and loss and assets and liabilities of the reportable segments, associated to differences in accounting policies or centrally allocated cost allocation policies or jointly used assets and liabilities.
For purposes of this Report, the Business approach was selected as the primary segment. This is consistent with the formal organization and evaluation of business. Business Units correspond to the operating segments of the company and the segment report is presented the same way they are analysed for management purposes by the board of Corticeira Amorim.
The following table shows the main indicators of the said units, and, whenever possible, the reconciliation with the consolidated indicators:
| thousand euros | ||||||||
|---|---|---|---|---|---|---|---|---|
| 2019 | Raw Materials |
Cork Stoppers |
Floor & Wall Coverings |
Composite Cork |
Insulation Cork |
Holding | Adjustm. | Consolidated |
| Trade Sales | 14,798 | 549,196 | 106,025 | 99,241 | 11,753 | 47 | 0 | 781,060 |
| Other BU Sales | 189,993 | 9,891 | 2,606 | 5,244 | 2,401 | 4,360 | - 214,495 | - |
| Total Sales | 204,791 | 559,087 | 108,631 | 104,484 | 14,154 | 4,407 | - 214,495 | 781,060 |
| EBITDA (current) | 18,109 | 101,056 | -2,515 | 12,389 | 222 | -3,023 | -1,514 | 124,724 |
| Assets (non-current) | 37,410 | 198,534 | 38,021 | 45,649 | 4,180 | 1,553 | 31,488 | 356,836 |
| Assets (current) | 188,400 | 331,926 | 61,904 | 55,844 | 9,832 | 183 | -10,773 | 637,316 |
| Liabilities | 44,398 | 159,814 | 42,698 | 35,274 | 2,264 | 9,431 | 160,729 | 454,609 |
| Capex | 8,847 | 33,529 | 4,873 | 10,910 | 451 | 143 | 0 | 58,752 |
| Year Depreciation | -3,795 | -21,257 | -6,207 | -3,259 | - 544 | - 115 | 0 | -35,177 |
| Gains/Losses in associated companies |
0 | 2,551 | 2,874 | 166 | 0 | -10 | 0 | 5,581 |
| 2018 | Raw Materials |
Cork Stoppers |
Floor & Wall Coverings |
Composite Cork |
Insulation Cork |
Holding | Adjustm. | Consolidated |
|---|---|---|---|---|---|---|---|---|
| Trade Sales | 20,479 | 526,179 | 108,654 | 97,383 | 10,318 | 103 | 0 | 763,117 |
| Other BU Sales | 165,966 | 7,801 | 3,525 | 4,788 | 1,661 | 4,318 | - 188,060 | - |
| Total Sales | 186,446 | 533,980 | 112,179 | 102,171 | 11,979 | 4,422 | - 188 ,060 | 763,117 |
| EBITDA (current) | 30,464 | 92,755 | 2,965 | 10,319 | 642 | -3,397 | 236 | 133,984 |
| Assets (non-current) | 31,936 | 170,547 | 38,496 | 36,854 | 4,242 | 711 | 33,298 | 316,084 |
| Assets (current) | 207,445 | 333,080 | 62,986 | 51,736 | 10,225 | 966 | -16,449 | 649,990 |
| Liabilities | 50,539 | 190,439 | 43,795 | 38,970 | 2,526 | 8,547 | 133,024 | 467,840 |
| Capex | 5,802 | 40,898 | 3,805 | 6,543 | 735 | 67 | 0 | 57,851 |
| Year Depreciation | -3,208 | -18,548 | -5,671 | -2,978 | - 532 | - 342 | 0 | -31,279 |
| Gains/Losses in associated companies |
0 | 1,897 | 817 | 0 | 0 | -22 | 0 | 2,691 |
The decision to report EBITDA figures allows a better comparison of the different BU performances, disregarding the different financial situations of each BU. This is also coherent with the existing Corporate Departments, as the Financial Department is responsible for the bank negotiations, being the tax function the responsibility of the Holding Company.
Cork Stoppers BU main product is the different types of existing cork stoppers. The main markets are the bottling countries, from the traditional ones like France, Italy, Germany, Spain and Portugal, to the new markets like USA, Australia, Chile, South Africa and Argentina.
Raw Materials BU is, by far, the most integrated in the production cycle of Corticeira Amorim, with 90% of its sales to others BU, specially to Cork Stoppers BU. Main products are bark and discs.
The remaining Business Units produce and sell a wide range of products that use the raw material left over from the production of stoppers, as well as the cork raw material that is not susceptible to be used in the production of stoppers. Main products are cork floor tiles, cork rubber for the automotive industry and antivibratic systems, expanded agglomerates for insulation and acoustic purposes, technical agglomerates for civil construction and shoe industry, as well as granulates for agglomerated, technical and champagne cork stoppers.
Major markets for flooring and insulation products are in Europe and for composites products the USA. Major production sites are in Portugal, where most of the invested capital is located. Products are distributed in practically all major markets through a fully owned network of sales companies. About 70% of total consolidated sales are achieved through these companies.
Capex was concentrated in Portugal. Assets in foreign subsidiaries totalize 380 M€, and are mostly composed by inventories (131 M€), trade receivables (112 M€) and tangible fixed assets (71 M€).
In non-current assets, special note to 208 M€ (2018: 194 M€) of tangible fixed assets, 5.4 M€ (2018: 5.3 M€) of property investment, 7.6 M€ (2018: 4.2 M€) of intangible assets and 0.1 M€ (2018: 0.2 M€) of other financial assets, located in Portugal.
| thousand euros | ||||
|---|---|---|---|---|
| Mercados | 2019 | 2018 | ||
| European Union | 512,289 | 65.6% | 501,509 | 65.7% |
| From which: Portugal |
54,736 | 7.0% | 55,455 | 7.3% |
| Other European countries |
31,321 | 4.0% | 30,338 | 4.0% |
| United States | 135,814 | 17.4% | 127,856 | 16.8% |
| Other American countries |
46,976 | 6.0% | 47,114 | 6.2% |
| Australasia | 42,026 | 5.4% | 44,397 | 5.8% |
| Africa | 12,634 | 1.6% | 11,904 | 1.6% |
| TOTAL | 781,060 | 100% | 763 117 | 100% |
The value of sales relates in its entirety, as in 2018, to contracts covered by IFRS 15 - Revenue from contracts with customers.
| thousand euros | |||||
|---|---|---|---|---|---|
| Land and Buildings |
Machinery | Other | Tangible Fixed Assets in Progress |
Total Tangible Assets |
|
| Gross Value | 256,656 | 402,649 | 33,620 | 28,040 | 720,964 |
| Depreciation and impairments | - 158,628 | - 304,938 | -29,493 | 0 | - 493,059 |
| Opening balance (Jan 1, 2018) | 98,029 | 97,711 | 4,126 | 28,040 | 227,905 |
| ACQUISITION OF A SUBSIDIARY | 5,335 | 933 | 94 | 183 | 6,544 |
| INCREASE | 10,522 | 15,604 | 2,218 | 26,249 | 54,593 |
| PERIOD DEPREC. AND IMPAIRMENTS | -5,031 | -22,290 | -1,977 | 0 | -29,298 |
| SALES AND OTHER DECREASES | - 221 | - 571 | -56 | - 585 | -1,433 |
| TRANSFERS AND RECLASSIFICATIONS | 11 | 13,972 | 333 | -13,516 | 799 |
| TRANSLATION DIFFERENCES | 375 | - 15 | -32 | - 6 | 322 |
| Gross Value | 273,001 | 432,314 | 35,482 | 40,365 | 781,162 |
| Depreciation and impairments | - 163,982 | - 326,970 | -30,777 | 0 | - 521,729 |
| Closing balance (Dec 31, 2018) | 109,019 | 105,344 | 4,705 | 40,365 | 259,433 |
| Gross Value | 273,001 | 432,314 | 35,482 | 40,365 | 781,162 |
| Depreciation and impairments | - 163,982 | - 326,970 | -30,777 | 0 | - 521,729 |
| Opening balance (Jan 1, 2019) | 109,019 | 105,344 | 4,705 | 40,365 | 259,433 |
| IFRS 16 adoption | |||||
| Gross Value | 0 | -2,883 | 0 | 0 | -2,883 |
| Depreciation and impairments | 0 | 914 | 0 | 0 | 914 |
| Opening balance after IFRS 16 adoption (Jan 1, 2019) |
109,019 | 103,375 | 4,705 | 40,365 | 257,464 |
| INCREASE | 11,362 | 22,981 | 3,139 | 15,085 | 52,567 |
| PERIOD DEPREC. AND IMPAIRMENTS | -5,834 | -23,845 | -2,235 | 0 | -31,914 |
| SALES AND OTHER DECREASES | - 70 | - 736 | -11 | -30 | - 847 |
| TRANSFERS AND RECLASSIFICATIONS | 1,470 | 23,348 | 1,300 | -24,989 | 1,129 |
| TRANSLATION DIFFERENCES | 160 | 52 | 3 | -15 | 200 |
| Gross Value | 282,493 | 469,983 | 38,047 | 30,416 | 820,940 |
| Depreciation and impairments | - 166,386 | - 344,808 | -31,146 | 0 | - 542,340 |
| Closing balance (Dec 31, 2019) | 116,107 | 125,175 | 6,901 | 30,416 | 278,600 |
Due to the adoption of IFRS 16, tangible assets under financial leasing were reclassified to Right of use.
The implementation of SAP at BU Cork Stoppers implied the split between gross values and accumulated depreciations of certain tangible assets that were previously presented at net value. This split had no impact on the net financial position.
Impairment losses recognized in 2019 and 2018 were recognised on the "Depreciation/Amortization" line in the consolidated income statement by nature.
Expenses to place the assets in the required location and condition related with tangible fixed assets had no impact.
No interest was capitalised during the period.
| thousand euros | ||
|---|---|---|
| Intangible Assets |
Goodwill | |
| Gross Value | 10,217 | 9,848 |
| Depreciation and impairments | -6,140 | 0 |
| Opening balance (Jan 1, 2018) | 4,077 | 9,848 |
| ACQUISITION OF A SUBSIDIARY | 0 | 4,259 |
| INCREASE | 3,542 | 0 |
| PERIOD DEPREC. AND IMPAIRMENTS | - 934 | - 103 |
| SALES AND OTHER DECREASES | 14 | 0 |
| TRANSFERS AND RECLASSIFICATIONS | 881 | 0 |
| TRANSLATION DIFFERENCES | 5 | -17 |
| Gross Value | 14,424 | 14,090 |
| Depreciation and impairments | -6,839 | - 103 |
| Closing balance (Dec 31, 2018) | 7,585 | 13,987 |
| Gross Value | 14,424 | 14,090 |
| Depreciation and impairments | -6,839 | - 103 |
| Opening balance (Jan 1, 2019) | 7,585 | 13,987 |
| Opening balance (Jan 1, 2019) | 7,585 | 13,987 |
| INCREASE | 4,615 | 98 |
| PERIOD DEPREC. AND IMPAIRMENTS | -1,043 | 0 |
| SALES AND OTHER DECREASES | -20 | 0 |
| TRANSFERS AND RECLASSIFICATIONS | - 287 | 0 |
| TRANSLATION DIFFERENCES | 2 | - 341 |
| Gross Value | 18,613 | 13,847 |
| Depreciation and impairments | -7,761 | -103 |
| Closing balance (Dec 31, 2019) | 10,852 | 13,744 |
Intangible Assets essentially include software, autonomous product development projects and innovative solutions.
With the exception of goodwill, there are no intangible assets of indefinite life.
Detail of goodwill according to the following table:
| thousand euros | |||||
|---|---|---|---|---|---|
| 2018 | Opening Balance |
Increase | Decrease | Transalation differences |
End Balance |
| Bourrassé | 9,745 | 9,745 | |||
| Elfverson | 0 | 4,242 | 4,242 | ||
| Sodiliège | 103 | 103 | 0 | ||
| Goodwill | 9,848 | 4,242 | 103 | 0 | 13,987 |
| thousand euros | |||||
| 2019 | Opening Balance |
Increase | Decrease | Transalation differences |
End Balance |
| Bourrassé | 9,745 | 9,745 | |||
| Elfverson | 4,242 | - 341 | 3,901 | ||
| Korkkitrio | 0 | 98 | 98 | ||
| Goodwill | 13,987 | 98 | 0 | - 341 | 13,744 |
As stated in note 2 b), impairment tests are made each year. Cash flows were estimated, based on the budget and plans approved by management. The growth assumptions contemplated the expected growth in the wine, champagne and sparkling wine markets, as well as the evolution of the market share of the subsidiaries in this business. In the tests, growth rates of 14% and 22% were used in Bourrassé and Elfverson, respectively, for the period 2020-2022 and 2% for the following years. The discount rate used was 6.98%.
The results of the impairment tests show that the recoverable amounts are sufficiently higher than the accounting values, even in the case of unfavourable developments in the main variables. Even in a scenario of loss of 25% of sales (e.g. resulting from the Covid-19 pandemic), the group would not recognize impairment losses on the recorded goodwill.
CONSOLIDATED ANNUAL REPORT 2019 CORTICEIRA AMORIM, SGPS, S.A.
| thousand euros | |
|---|---|
| Right of Use | |
| Opening balance (Jan 1, 2019) | 0 |
| IFRS 16 adoption | |
| Gross Value | 9,560 |
| Depreciation and impairments | -3,402 |
| Opening balance (Jan 1, 2019) | 6,158 |
| INCREASE | 1,967 |
| PERIOD DEPREC. AND IMPAIRMENTS | -2,087 |
| SALES AND OTHER DECREASES | 0 |
| TRANSFERS AND RECLASSIFICATIONS | 0 |
| TRANSLATION DIFFERENCES | 0 |
| Gross Value | 10,187 |
| Depreciation and impairments | -4,150 |
| Closing balance (Dec 31, 2019) | 6,037 |
Depreciation of the right of use includes leases previously classified as financial, included in tangible assets.
| thousand euros | |
|---|---|
| Investment Property | |
| Gross Value | 22,127 |
| Depreciation and impairments | -16,449 |
| Opening balance (Jan 1, 2018) | 5,678 |
| ACQUISITION OF A SUBSIDIARY | 0 |
| INCREASE | 3 |
| PERIOD DEPREC. AND IMPAIRMENTS | - 140 |
| SALES AND OTHER DECREASES | -1 |
| TRANSFERS AND RECLASSIFICATIONS |
-59 |
| TRANSLATION DIFFERENCES | 0 |
| Gross Value | 22,070 |
| Depreciation and impairments | -16,589 |
| Closing balance (Dec 31, 2018) | 5,481 |
| Opening balance (Jan 1, 2019) | 5,481 |
| INCREASE | 0 |
| PERIOD DEPREC. AND IMPAIRMENTS | -71 |
| TRANSFERS AND RECLASSIFICATIONS |
-24 |
| TRANSLATION DIFFERENCES | 0 |
| Gross Value | 0 |
| Valores Brutos | 22,116 |
| Depreciation and impairments | -16,730 |
| Closing balance (Dec 31, 2019) | 5,387 |
The amount of 5,387 K€, referred as Investment Property (December 2018: 5,481 K€), is due, mainly, to land and buildings that are not used in production.
The fair value of the Investment Property related to the lands and buildings of Corroios (determined on the basis of an independent evaluation) corresponds to the amount recorded in the accounts. This item also includes a property (Interchampagne with a value of 1,410 K€) with a recent valuation that corresponds to the book value. At the end of the year, the management made an analysis of these evaluations considering that they were kept up to date. The remaining Investment Property include a property with an accounting value of 896 K€ whose yield, updated to a market WACC, will correspond approximately to the amount by which they are recorded (cost model) in the financial statements.
These properties are not generating income and conservation and repair costs are insignificant.
| thousand euros | |||
|---|---|---|---|
| 2019 | 2018 | ||
| Opening Balance | 9,537 | 11,006 | |
| In / Out | 11,000 | 0 | |
| Results | 2,708 | 1,874 | |
| Dividends | - 500 | - 500 | |
| Exchange Differences | -1,071 | -2,919 | |
| Other | 693 | 75 | |
| End Balance | 22,366 | 9,537 | |
| Equity method | 2,708 | 1,874 | |
| Gains on disposal of associates | 2,874 | 817 | |
| Share of (loss)/profit of associates and joint-ventures |
5,581 | 2,691 |
The associates and joint-ventures are entities through which the group operates in the markets in which they are based, acting as distribution channels of products.
Gain on the disposal of associates due to the final recognition of the contingent amount receivable from the sale of US Floors, occurred in 2016, which was received in the year.
Wine is life. Cork expands it. Noble and magical, cork and wine interact in a symbiotic relationship that has developed over the centuries.
| thousand euros | ||||
|---|---|---|---|---|
| 2019 | ||||
| Share in net assets |
Goodwill | Total | Contribution to net income |
|
| Trescases | 4,735 | 1,715 | 6,450 | 1,250 |
| Wine Packaging & Logistic | 1,254 | 0 | 1,254 | 0 |
| Corchos Argentina | 2,986 | 0 | 2,986 | 1,153 |
| Vinolok | 11,266 | 0 | 11,266 | 149 |
| Other | 410 | 0 | 410 | 156 |
| End Balance | 20,651 | 1,715 | 22,366 | 2,708 |
| thousand euros | |||||
|---|---|---|---|---|---|
| 2018 | |||||
| Share in net assets |
Goodwill | Total | Contribution to net income |
||
| Trescases | 3,985 | 1,715 | 5,700 | 49 | |
| Wine Packaging & Logistic | 1,164 | 0 | 1,164 | -62 | |
| Corchos Argentina | 2,556 | 0 | 2,556 | 1,910 | |
| Other | 117 | 0 | 117 | - 23 | |
| End Balance | 7,822 | 1,715 | 9,537 | 1,874 |
In July 2019, Corticeira Amotim acquired 50% of Vinolok (for the amount of 11.0 million euros) which it started to consolidate using the equity method since July this year. Vinolok serves the premium international wine and spirits market with an innovative seal that combines creativity and appealing design with strong technical characteristics. This acquisition significantly complements and reinforces the portfolio of solutions made available by Amorim through its unique worldwide distribution network.
| thousand euros | |||
|---|---|---|---|
| Fair value recognized on the acquisition date | |||
| Net asset | 22,034 | ||
| 50% of identifiable net assets | 11,017 | ||
| Acquisition cost | 10,987 | ||
| Goodwill/(Badwill) | -30 |
Vinolok's net assets include the intellectual property relating to Vinolok's seals that will be depreciated over a period of 15 years. No significant differences were identified between the fair value and the respective book value. An almost zero value badwill was determined. The badwill recognized in the accounts is not expected to be tax deductible.
The costs of this transaction, totaling 236 thousand euros, were recorded as non-recurring expenses.
A summary of the respective financial information is presented below:
| 2019 | Trescases (50%) |
Corchos Argentina (50%) |
Vinolok (50%) |
Wine Packaging & Logistic (50%) |
|
|---|---|---|---|---|---|
| K € | K ARS | K CZK | K CLP | ||
| Current assets | 22,391 | NA | 231,242 | 1,746,947 | |
| Non-current assets | 1,256 | NA | 544,155 | 6,792,747 | |
| Assets | 23,647 | NA | 775,397 | 8,539,694 | |
| Equity | 11,113 | 406,325 | 572,451 | 3,241,879 | |
| Current liabilities | 12,534 | NA | 102,946 | 1,997,815 | |
| Non-current liabilities | 0 | NA | 100,000 | 3,300,000 | |
| Sales | 36,007 | 540,373 | 146,232 | 2,773,265 | |
| Operating profit | 1,815 | 234,120 | 5,313 | 756,816 | |
| Net income | 1,255 | 175,122 | 6,833 | 396,343 | |
| Comprehensive income | 1,255 | 175,122 | 6,833 | 396,343 | |
| NA – Associate's financial statements were not concluded by the date of consolidated accounts approval. | |||||
| 2018 | Trescases (50%) |
Corchos Argentina (50%) |
Vinolok | Wine Packaging & Logistic (50%) |
|
| K € | K ARS | K CZK | K CLP | ||
| Current assets | 21,948 | 323,464 | - | 1,074,438 | |
| Non-current assets | 1,345 | 23,718 | - | 7,051,748 | |
| Assets | 23,293 | 347,182 | - | 8,126,186 | |
| Equity | 10,858 | 231,204 | - | 2,804,476 | |
| Current liabilities | 12,435 | 115,978 | - | 2,021,710 | |
| Non-current liabilities | 0 | 0 | - | 3,300,000 | |
| Sales | 37,158 | 393,857 | - | 1,813,195 | |
| Operating profit | 2,213 | 176,784 | - | 135,906 | |
| Net income | 1,509 | 123,494 | - | - 184,487 |
The information in the Vinolok Income Statement corresponds to the period from July to December 2019.
In addition to the above, the Group has significant influence on a set of other individually immaterial associates.
Assets included in Other financial assets (December 31, 2019: 1,550 K€, December 31, 2018: 1,632 K€) refer to financial assets at fair value through profit or loss, including essentially equity instruments. They are measured at fair value and when it is estimated that there are no significant differences in relation to the cost this is maintained. The assets were acquired with the main purpose of sale or resale, as appropriate, and in certain cases ensuring the maintenance and survival of entities that Corticeira Amorim considers partners for its business. The effective management of the underlying operations and assets continues to be exclusively provided by the partners, serving the financial participation as a mere "guarantee" of the investment made.
The difference between the tax due for the current period and prior periods and the tax already paid or to be paid of said periods is booked as "deferred tax" in the consolidated income statement and amounts to 1,331 K€ (31/12/2018: 1,579 K€).
On the consolidated statement of financial position this effect, excluding tax contingencies, amounts to 14,396 K€ (31/12/2018: 13,346 K€) as asset, and to 7,676 K€ (31/12/2018: 7,737 K€) as liability.
According to IFRIC 23, the deferred tax liability item now includes provisions for tax contingencies in the amount of 42.7 M€. In September 2019, the IFRS Interpretation Commitee issued a document in which it concluded that a company is required to present liabilities relating to uncertainty over income ta treatment in current tax or deferred tax. Corticeira Amorim considers that taking into account the previous treatment (in which these liabilities were presented as non-current) and the fact that these contingencies do not imply a transfer of economic resources in the short term, it would be more appropriate to present it under the caption Deferred tax.
Deferred tax related with items directly registered in equity was -36 K€ (debt balance) and relates to hedge accounting. No other deferred tax values related with other equity movements were booked.
It is conviction of the Board that, according to its business plan, the amounts registered in deferred tax assets will be recovered as for the tax carry forward losses.
| thousand euros | |||
|---|---|---|---|
| 2019 | 2018 | ||
| Related with Inventories and third parties | 6,760 | 6,584 | |
| Related with tax losses carry forward | 2,650 | 2,359 | |
| Related with Fixed Tangible Assets / Intang. / Inv. Prop | 1 ,102 | 1,220 | |
| Related with other deductable temporary differences | 3 ,884 | 3,182 | |
| Deferred Tax Assets | 14,396 | 13,346 | |
| Related with Fixed Tangible Assets | 4,217 | 3,931 | |
| Related with other taxable temporary differences | 3,459 | 3,806 | |
| Tax contingencies | 42,694 | 0 | |
| Deferred Tax Liabilities | 50,370 | 7,737 | |
| Current Income Tax | -13,283 | -20,972 | |
| Deferred Income Tax | 1,331 | 1,579 | |
| Income Tax | -11,951 | -19,393 |
The difference between the variation in the financial position (net of 1,111 K€ if excluding tax contingencies) and the value recognised in income statement (1,331 K€) is justified by the translation differences in the non-euro subsidiaries financial position, by the variation in deferred tax related with other comprehensive income of 36 K€ (credit) and by the integration of the new companies within the consolidated perimeter.
Following chart explains the effective income tax rate, starting from the original income tax rate of most of Portuguese companies:
| Income Tax Reconciliation | 2019 | 2018 |
|---|---|---|
| Income Tax - Legal | 21.0% | 21.0% |
| Effect of additional tax rates over base rate (Portugal) | 4.3% | 4.1% |
| Effect of tax benefits | -6.1% | -3.8% |
| Effect of provisions for contingencies | -3.0% | -2.5% |
| Effect of non-taxable gains and losses | 0.1% | -0.3% |
| Effect of different tax rates (foreign subsidiaries) | 0.5% | 1.5% |
| Effect of recognising/non-recognising of differed taxs (foreign subs.) | -0.3% | 0.1% |
| Equity method | -0.6% | -0.4% |
| Effect of tax benefit related to subsidiaries issued shares | -0.6% | 0.0% |
| Effect of excess tax estimate and others | -2.3% | -0.6% |
| Income tax - effective tax rate (1) | 13.1% | 19.0% |
| (1) Income Tax / Pre-tax Profit |
During 2019, a total of 13.4 M€ (2018: 9.8 M€) of income tax was paid. Of this amount, 3.5 M€ (2018: 2.7 M€) was paid in Portugal. In terms of income tax, the decrease in the effective rate was mainly due to the fact that provisions for tax losses of a subsidiary in Spain were reversed and due to the reversal of provisions for tax benefits.
Corticeira Amorim and a large group of its Portuguese subsidiaries are taxed since January 1, 2001, as a group special regime for tax purposes (RETGS), as according to article 69, of the income tax code (CIRC). The option for this special regime is renewable every five years.
According to law, tax declarations for Corticeira Amorim and its Portuguese subsidiaries are subject of revision and possible correction from tax authorities generally during the next four years.
No material effects in the financial statements, are expected by the Board of Corticeira Amorim and subsidiaries from the revisions of tax declarations that will be held by the tax authorities. The tax rate applicable to Portuguese subsidiaries is 21%.
The activity of the subsidiaries of the Group located outside Portugal is subject to the general tax regime in the respective countries and states. During the year 2019 there were no significant changes in the tax rate applicable to subsidiaries in countries where the Group has significant operations.
The only deferred tax amount related to items credited / debited directly in equity is related to the fair value of hedging instruments and amounts to -36 K€ (80 K€ in 2018).
The amount of deferred taxes, excluding tax contingencies, is essentially related to temporary differences that can be realized in the short term. The recovery of tax assets is based on future forecasts for normal rates of return for companies and growth in line with those of business units.
Tax losses carried forward are related with foreign subsidiaries. Total amounts to 19.9 M€, of which around 11.2 M€ are considered to be utilised. This report has a term of use beyond 2023.
Tax relating to components of other comprehensive income is as follows:
| thousand euros | ||||
|---|---|---|---|---|
| 2019 | ||||
| tax | after tax | |||
| Itens that could be reclassified through income statement: | ||||
| Change in derivative financial instruments fair value | 242 | -36 | 206 | |
| Change in translation differences | 624 | 0 | 624 | |
| Share of other comprehensive income of investments accounted for using the equity | - 378 | 0 | - 378 | |
| method | ||||
| Other comprehensive income | - 832 | 0 | - 832 | |
| Other comprehensive income | - 344 | -36 | - 380 |
thousand euros
| 2018 | ||||
|---|---|---|---|---|
| before tax | tax | after tax | ||
| Itens that could be reclassified through income statement: | ||||
| Change in derivative financial instruments fair value | - 542 | 80 | - 462 | |
| Change in translation differences | - 626 | 0 | - 626 | |
| Share of other comprehensive income of investments accounted for using the equity method |
-2,844 | 0 | -2,844 | |
| Other comprehensive income | 92 | 0 | 92 | |
| Other comprehensive income | -3,920 | 80 | -3,840 |
| thousand euros | |||
|---|---|---|---|
| 2019 | 2018 | ||
| Income tax - minimum advances | 9 | 19 | |
| Income tax - advances / to be recovered | 11,603 | 8,758 | |
| Income tax - withholding | 162 | 138 | |
| Income tax - special payment (RERD) | 2,093 | 2,587 | |
| Income tax - special payment (RERD) impairment | -2,093 | -2,587 | |
| Income tax - special payment (PERES) | 5,383 | 5,383 | |
| Income tax - special payment (PERES) impairment | -5,383 | -5,383 | |
| Income tax (assets) | 11,773 | 8,915 | |
| Income tax - Estimation and others | 1,911 | 1,924 | |
| Income tax (liabilities) | 1,911 | 1,924 |
In 2013, Corticeira Amorim made the payment instituted by DL 151-A / 2013 (RERD) in the amount of 4.3 M€, a payment that does not imply the abandonment by Corticeira Amorim of defending the respective processes. In 2016, a final decision was made on one of the paid processes relating to stamp taxes, which was partially won by Corticeira Amorim, which received 1.2 M€ of the amount paid of 1.7 M€. In 2019, the final decision of another process was won by Corticeira Amorim, which implied the receipt of 0.5 M€ In this way, the amount that remains open for ongoing proceedings paid under the RERD is 2.1 M€.
At the end of 2016, a special Plan for the Reduction of Indebtedness to the State (PERES) was approved by Decree-Law no. Corticeira Amorim decided to partially adhere to that measure. In December, approximately 7.4 M€ were paid in respect of Stamp Tax / VAT (2 M€) and Income Tax (IRC) in the amount of 5.4 M€.
To be noted that Corticeira Amorim was not a debtor to the social security and to the tax authority. Those amounts were subject to court litigation. The disputs that were chosen to adhere are old cases whose values of interest on late payments and fines to be paid, in case of loosing, would be high.
RERD and PERES allowed for the payment of the capital without any payment regarding late payment interests and other costs. Due to the fact that adhesion to RERD and PERES does not imply a mandatory abandonment of the court cases and those processes are still in court, Corticeira Amorim will continue to fight for its rights.
The liability amount under this caption includes the estimate of income tax payable by some foreign subsidiaries when the tax return for the year 2019 is presented.
In the year ended December 31, 2019, the main movement in tax contingencies corresponds to the reclassification of contingencies to deferred taxes (Note 25) resulting from the application of IFRIC 23 (note 2 point a), with the item ending with 42.7 million euros.
During the year, the provisions in the Balance Sheet increased by 2.5 M€.
Corticeira Amorim's claims are pending, both in the judicial phase and in the non-contentious phase, and which may adversely affect Corticeira Amorim, refer to the financial years 1997, 1998, 1999 and 2003 to 2015.The most recent fiscal year analysed by Portuguese tax authorities was 2016.
These tax cases are basically related with questions like nonremunerated guarantees given between group companies, group loans (stamp tax), interest costs of holding companies (SGPS), and with the acceptance as tax costs of losses related with the closing of subsidiaries.
At the end of each year, an analysis of the tax cases is made. The procedural development of each case is important to decide new provisions, or reverse or reinforce existing provisions. Provisions correspond to situations that, for its procedural development or for doctrine and jurisprudence newly issued, indicate a probability of an unfavourable outcome for Corticeira Amorim and, if that happens, a cash outflow can be reasonably estimated. Note that during the year there were no developments worthy of note in the processes mentioned above.
The value of tax processes to date for the 2019 accounts amounted to 8.6 M€, being fully provisioned.
In addition to the tax provisions referred to above, Corticeira Amorim has recorded a provision to cover the tax benefits to apply for 2019 and applied in previous years. The certification requirement by ANI of SIFIDE projects, the requirement for maintenance of jobs over five years in RFAI projects as well as other constraints to the realization of benefits, has led Corticeira Amorim to record provisions in order to take account of future breaches of such requirements. It should be noted that the determination of the tax benefits can not be concluded, since its constraints extend over several years, in particular as regards the maintenance of jobs. The main increase in the provision for tax contingencies relates to the provision to cover the tax benefits mentioned, having increased by 4.7 M €. This provision at the end of 2019 has a value of 31.9 M€.
To note that Corticeira Amorim has been recognizing provisions due to the uncertainty about the acceptance by the tax authorities of the existence of tax reports in two Spanish subsidiaries. In 2019, the inspection of one of these companies was completed, and the tax losses used were validated. As a result, the provisions of 2.7 M€ that were previously recognized for these tax losses were reversed. The provision related to the other Spanish subsidiary, which at the end of the year totaled 1.0 M €, still remains booked.
There are no tax proceedings that have not been provisioned, thus, contingent liabilities are zero.
Corticeira Amorim has a large number of other favourable processes. They refer, in essence, to payments related with autonomous taxation, inspection fees and tax benefits. The value of these processes amounts to 1.0 M€, which is not recorded as part of its assets. Total contingent assets amounts to 10.5 M€ (including amounts paid under the RERD and PERES).
| thousand euros | ||
|---|---|---|
| 2019 | 2018 | |
| Goods | 18,169 | 18,387 |
| Raw materials | 218,654 | 226,922 |
| Finished and semi-finished goods | 134,078 | 135,704 |
| Work in progress | 34,431 | 31,736 |
| Finished and semi-finished goods impairments | -5,764 | -4,986 |
| Raw materials impairments | -1,728 | -1,673 |
| Inventories | 397,840 | 406,090 |
| milhares de euros | ||
|---|---|---|
| Impairment losses | 2019 | 2018 |
| Initial Balance | 6,659 | 6,206 |
| Increases | 1,887 | 1,174 |
| Decreases | 1,054 | 720 |
| End Balance | 7,492 | 6,659 |
Raw materials essentially include reproduction cork ("amadia") and virgin cork from pruning the tree ("falcas") (Raw Material BU), products and work in progress essentially include boiled cork and discs (Raw Materials BU) and finished products essentially include a variety of types of cork stoppers (Cork Stoppers BU), coverings (Floor and Wall Coverings BU) and composite products (Composite Cork BU).
Increases in impairment are booked on Costs of goods sold and materials consumed in the income statement.
| thousand euros | |||
|---|---|---|---|
| 2019 | 2018 | ||
| Gross amount | 179,179 | 187,669 | |
| Impairments | -13,695 | -13,186 | |
| Trade receivables | 165,484 | 174,483 | |
| Impairment losses | 2019 | 2018 | |
| Initial Balance (reported) | 13,186 | 11,860 | |
| IFRS 9 application | 0 | 458 | |
| Initial Balance (after IFRS 9 apllication) | 13,186 | 12,318 | |
| Increases | 2,787 | 3,813 | |
| Decreases | -1,898 | -2,672 | |
| Others | - 381 | - 273 | |
| End Balance | 13,695 | 13,186 |
Increases and decreases were recognized under impairment of assets caption in the income statement. In the 2018 increases, the perimeter entry effect is included which was 70 K€.
At the end of each period, Trade receivables credit quality is analysed. As a result of the adoption of IFRS 9 to the balances up to 90 days, an expected credit loss is recognized. From 90 to 120 days a 30% impairment register is considered and from 120 to 180 days 60%. Over 180 days as well as all doubtful balances are fully impaired. These rules do not overcome specific cases analysis.
Due and past due balances are as follows:
| million euros | ||
|---|---|---|
| 2019 | 2018 | |
| Due | 133 | 142 |
| Past due between 0 and 90 days | 29 | 31 |
| Past due between 90 and 120 days | 2 | 2 |
| Past due between 120 and 180 days | 5 | 4 |
| Doubtful and past due over 180 days | 10 | 10 |
| 179 | 188 |
| thousand euros | |||||
|---|---|---|---|---|---|
| 2019 | 2018 | ||||
| Advances to suppliers | 6,078 | 7,399 | |||
| Hedge accounting assets | 111 | 132 | |||
| VAT | 21,336 | 20,783 | |||
| Stamp tax/VAT - special payment (PERES) | 2,051 | 2,051 | |||
| Stamp tax/VAT - special payment (PERES) impairment | - 2,051 | - 2,051 | |||
| Others | 9,442 | 7,390 | |||
| Other debtors | 36,967 | 35,704 |
As of December 31, 2019 and 2018, there were no overdue in the amounts of VAT.
Other non-current debtors include advances to suppliers (3,906 K€), which will only be fulfilled for more than 12 months.
| thousand euros | |||||
|---|---|---|---|---|---|
| 2019 | 2018 | ||||
| Accrued income | 292 | 330 | |||
| Deferred costs | 2,817 | 2,773 | |||
| Other assets | 3,108 | 3,103 |
| thousand euros | ||||
|---|---|---|---|---|
| 2019 | 2018 | |||
| Cash | 368 | 368 | ||
| Bank Balances | 13,829 | 13,704 | ||
| Term deposits | 7,759 | 7,482 | ||
| Others | 187 | 141 | ||
| Cash and cash equivalents as for stament of financial position |
22,144 | 21,695 | ||
| Overdrafts | -46,131 | -60,435 | ||
| Cash and cash equivalents as for cash flow statement |
-23,988 | -38,740 |
As of December 31, 2019, the share capital is represented by 133,000,000 ordinary registered shares, conferring dividends, with a par value of 1 Euro.
The Board of Corticeira Amorim is authorised to raise the share capital, one or more times, respecting the conditions of the commercial law, up to 250,000,000€.
As of December 31, 2019, Corticeira Amorim held no treasury stock.
No purchases were registered during 2019.
Legal reserve and share premium are under the legal reserve rule and can only be used for (art. 296 CSC -Portuguese commercial law):
Legal reserve and share premium values are booked in Corticeira Amorim, SGPS, S.A. separate accounts.
Value is composed from other reserves account and prior year's results of Corticeira Amorim, SGPS, S.A. books, as well as non-distributed cumulative results of Corticeira Amorim, SGPS, S.A. subsidiaries.
In the Shareholders' General Meeting of April 12, 2019 and December 2, 2019, a dividend distribution of 0.185 and 0.085 euros per share was approved.
| thousand euros | ||||
|---|---|---|---|---|
| 2019 | 2018 | |||
| Approved dividends | 35,910 | 35,910 | ||
| Dividends paid | 35,910 | 35,910 |
| thousand euros | |||||
|---|---|---|---|---|---|
| 2019 | 2018 | ||||
| Initial Balance | 31 871 | 29 524 | |||
| In | 562 | 528 | |||
| Out | -4,397 | - 427 | |||
| Results | 4,514 | 5,220 | |||
| Dividends | -1,901 | -2,445 | |||
| Exchange Differences | - 380 | - 530 | |||
| Others | - 188 | 0 | |||
| End Balance | 30,081 | 31,871 |
The amount of Dividends corresponds to the amounts paid by the entities to non-controlling interests.
Out value for 2019 is essentially related to the acquisition of 10% of Bourrassé.
| thousand euros | ||||||
|---|---|---|---|---|---|---|
| 2019 | 2018 | |||||
| Balance Sheet | Net Income | Dividends paid |
Balance Sheet |
Net Income | Dividends paid |
|
| Amorim Bartop | 278 | -3 | 1,036 | 1,319 | 3 | 1,192 |
| Amorim Top Series | 2,970 | 1,469 | 0 | 1,501 | 1,272 | 0 |
| Ets. Christian Bourrassé | 4,818 | 420 | 0 | 6,237 | 672 | 0 |
| Francisco Oller | 1,621 | 9 | 0 | 2,160 | 46 | 34 |
| Industria Corchera | 6,345 | 339 | 90 | 6,477 | 414 | 31 |
| Socori | 7,042 | 630 | 0 | 8,550 | 1,323 | 0 |
| Elfverson | 981 | 311 | 0 | 568 | 236 | 0 |
| Trefinos | 1,699 | 230 | 436 | 1,905 | 206 | 136 |
| Victor y Amorim | 1,017 | 291 | 300 | 1,026 | 350 | 145 |
| Others | 3,309 | 817 | 39 | 2,695 | 934 | 906 |
| End Balance | 30,081 | 4,514 | 1,901 | 31,871 | 5,220 | 2,445 |
| thousand euros | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| 2019 | Bourrassé | Socori | Trefinos | Francisco Oller |
Elfverson | Amorim Bartop |
Amorim Top Series |
Industria Corchera |
Victor y Amorim |
| K € | K € | K € | K € | K SEK | K € | K € | K CLP | K € | |
| Current assets | 18,291 | 43,891 | 15,387 | 17,327 | 24,680 | 3,663 | 24,352 | 11,652,357 | 2,463 |
| Non-current assets | 13,711 | 16,642 | 16,261 | 20,821 | 18,659 | 10,009 | 4,072 | 3,862,095 | 838 |
| Assets | 32,002 | 60,534 | 31 ,649 | 38,148 | 43,339 | 13,672 | 28,424 | 15,514,452 | 3,301 |
| Total Equity | 18,478 | 31,595 | 18,825 | 25,812 | 20,218 | 5,068 | 16,010 | 10,576,571 | 2,036 |
| Current liabilities | 12,661 | 24,142 | 10,629 | 10,033 | 6,403 | 8,604 | 11,340 | 4,937,881 | 114 |
| Non-current liabilities | 863 | 4,798 | 2,195 | 2,304 | 16,718 | 0 | 1,075 | 0 | 151 |
| Sales | 43,457 | 51,171 | 39,444 | 26,353 | 59,518 | 0 | 39,493 | 14,533,670 | 7,985 |
| Operating profit | 1,515 | 1,219 | 3,316 | 185 | 8,501 | -1 | 7,768 | 874,766 | 1,039 |
| Net Income | 1,117 | 1,353 | 2,468 | 80 | 3,514 | -7 | 6,007 | 755,237 | 807 |
| Comprehensive income | 1,117 | 1,353 | 2,468 | 80 | 3,514 | -7 | 6,007 | 755,237 | 807 |
| Cash flow from operating activities |
3,567 | 8,497 | 7,390 | 963 | 10,499 | 406 | 1,952 | -1,228,958 | 483 |
| Cash flow from investing activities |
-2,161 | -2,024 | -3,170 | -1,210 | -5,711 | 2,267 | -1,081 | -1,283,691 | - 131 |
| Cash flow from financing activities |
-1,058 | -2,926 | -4,880 | 245 | - 284 | -2,666 | -1,064 | -17,482 | - 619 |
| Net cash flow | 348 | 3,546 | - 659 | -2 | 4 504 | 6 | - 192 | -2,530,131 | - 267 |
| thousand euros | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| 2018 | Bourrassé | Socori | Trefinos | Francisco Oller |
Elfverson | Amorim Bartop |
Amorim Top Series |
Industria Corchera |
Victor y Amorim |
| K € | K € | K € | K € | K SEK | K € | K € | K CLP | K € | |
| Current assets | 19,408 | 45,846 | 16,331 | 18,032 | 20,151 | 7,202 | 19,884 | 10,959,251 | 2,954 |
| Non-current assets | 11,723 | 15,947 | 15,171 | 20,977 | 11,942 | 11,359 | 3,803 | 2,535,011 | 788 |
| Assets | 31,131 | 61,793 | 31,502 | 39,009 | 32,093 | 18,561 | 23,687 | 13,494,262 | 3,742 |
| Total Equity | 17,373 | 28,536 | 21,158 | 26,158 | 18,989 | 13,990 | 10,003 | 9,677,996 | 2,054 |
| Current liabilities | 12,452 | 25,011 | 8,085 | 9,846 | 10,866 | 4,571 | 12,768 | 3,816,266 | 1,528 |
| Non-current liabilities | 1,305 | 8,246 | 2,259 | 3,005 | 7,239 | 0 | 916 | 0 | 160 |
| Sales | 44,370 | 47,522 | 32,975 | 28,397 | 51,176 | 0 | 35,230 | 16,036,230 | 8,394 |
| Operating profit | 2,662 | 4,001 | 3,131 | 628 | 7,299 | 10,259 | 6,747 | 612,816 | 906 |
| Net Income | 1,943 | 1,949 | 2,300 | 527 | 5,096 | 10,247 | 5,357 | 581,097 | 800 |
| Comprehensive income | 1,943 | 1,949 | 2,300 | 527 | 5,096 | 10,247 | 5,357 | 581,097 | 800 |
| Cash flow from operating activities |
2,186 | 12,082 | 3,516 | 1,922 | -1,904 | - 427 | 10,723 | 1,848,763 | 755 |
| Cash flow from investing activities |
-24 | -2 530 | -3,199 | -3,041 | -2,248 | 2,909 | -1,124 | - 290,326 | - 187 |
| Cash flow from financing activities |
-2,849 | -25,623 | 114 | 1,341 | 2,495 | -2,485 | -11,299 | - 351,918 | - 344 |
| Net cash flow | - 687 | -16,071 | 431 | 222 | -1,657 | -3 | -1,700 | 1,206,519 | 224 |
Loans were denominated in euros, except 15% (Dec. 2018: 11%).
| thousand euros | ||
|---|---|---|
| 2019 | 2018 | |
| Overdrafts and bank loans | 67,426 | 85,850 |
| Leasing | 1,683 | 350 |
| Commercial paper | 55,000 | 35,000 |
| Interest-bearing loans - current | 124,108 | 121,200 |
Non-current interest bearing loans was as follows:
At the end of the period, 94% of loans were denominated in euros
| thousand euros | |||||
|---|---|---|---|---|---|
| 2019 | 2018 | ||||
| Bank loans | 34,507 | 37,948 | |||
| Reimbursable grants | 47 | 70 | |||
| Leasing | 4,572 | 1,485 | |||
| Commercial paper | 20,000 | 0 | |||
| Interest-bearing loans - non-current | 59,126 | 39,503 |
(Dec. 2018:100%).
As of December 31, 2019, maturity of non-current interest bearing debt was as follows:
| thousand euros | |
|---|---|
| Between 01/01/2021 e 31/12/2021 | 10,712 |
| Between 01/01/2022 e 31/12/2022 | 30,448 |
| Between 01/01/2023 e 31/12/2023 | 6,468 |
| After 01/01/2024 | 11,498 |
| Total | 59,126 |
From non-current and current interest bearing debt, 150,497 K€ carries floating interest rates. Remaining 32,737 K€ carries fixed interest rate. Average cost, during 2019, for all the credit utilized was 1.14% (2018: 1.09%).
On March 5, 2015, Corticeira Amorim entered into a loan agreement with the EIB in the amount of 35 M €, ten years, with a four-year grace period. This loan allowed Corticeira Amorim to expand substantially its maturity curve at a competitive price.
In 2019 Corticeira Amorim contracted a commercial paper program with guarantee of subscription by a bank entity. The program has an effective maturity of 3 years, so the emissions made during the first two years are classified as non-current. Only Corticeira Amorim has the option to revoke the program when the first year of the contract has passed.
As of December 2019, Corticeira Amorim had credit lines with contractual clauses that include covenants generally used in these type of contracts, namely: cross-default, pari-passu and in some cases negative pledge.
As of December 31, 2019, two foreign subsidiaries have a 3.9 million euro loan mortgage guarantee on assets. These assets are booked on Statement of financial position of those subsidiaries.
Corticeira Amorim uses credit lines (for a total of 9.6 M€) with associated financial covenants. These included ratios accomplishment that allowed for an accompaniment of the financial position of the company, namely:
The above ratios are not restrictive and the requirements contained in the contracts that formalized the referred financing were largely and fully complied with. In the event of non-compliance, there would be a possibility that this would lead to the early repayment of the debts.
In addition, it is important to inform that the capacity to ensure debt service was further enhanced by the existence, as of December 31, 2019, of 188 million euros of credit lines approved, but not used.
| thousand euros | |||||
|---|---|---|---|---|---|
| 2019 | 2018 | ||||
| Trade payables - current account | 63,220 | 77,584 | |||
| Trade payables - confirming | 59,994 | 77,441 | |||
| Trade payables -invoices pending | 8,872 | 9,983 | |||
| Trade payables | 132,086 | 165,008 |
From the total values, 53% comes from Cork Stoppers BU (2018: 58%) and 21% from Raw Materials BU (2018: 26%).
| thousand euros | |||||
|---|---|---|---|---|---|
| 2019 | 2018 | ||||
| Repayable grants | 12,568 | 13,884 | |||
| Agreement to acquire non controlling interests |
10,007 | 15,454 | |||
| Other | 695 | 925 | |||
| Other financial liabilities - non current |
23,269 | 30,263 | |||
| Repayable grants | 2,464 | 3,573 | |||
| Agreement to acquire non controlling interests |
4,955 | 4,956 | |||
| Accrued costs - supplies and services |
3,545 | 3,735 | |||
| Accrued costs - others | 8,337 | 8,843 | |||
| Other deferred income - others | 93 | 139 | |||
| VAT | 8,470 | 6,072 | |||
| State and social security - withholding and others |
5,907 | 6,529 | |||
| Other | 9,269 | 7,192 | |||
| Other financial liabilities - current | 43,040 | 41,039 |
| thousand euros | |||||
|---|---|---|---|---|---|
| 2019 | 2018 | ||||
| Non-repayable - grants | 3,081 | 3,818 | |||
| Accrued costs - staff costs | 12,154 | 12,646 | |||
| Other liabilities - current | 15,235 | 16,464 |
In Other financial liabilities is included a value of 234 K€ (2018: 565 K€), which refers to exchange rate hedge derivatives.
In Other financial liabilities – non-current (23,269 K€), maturity is as follows: from 1 to 2 years (10,629 K€), from 2 to 4 years (9,385 K€) and more than 4 years (3,255 K€).
The agreement to acquire non-controlling interests results from the purchase of S.A.S. ETS CHRISTIAN BOURRASSÉ, in which 60% of the share capital was first acquired, for the amount of 29 M €. The agreement provides for the subsequent acquisition by 2022 of the remaining 40% ("agreement for acquisition of non-controlling interests") at a price which, based on the value already paid for the first 60%, will also depend on the evolution of BOURRASSÉ's
performance in next years. The first tranche of 10% was acquired during the month of July, and in June 2020 the second tranche corresponding to + 10% of Bourrassé will be acquired.
| thousand euros | |||||
|---|---|---|---|---|---|
| 2019 | 2018 | ||||
| Non-repayable - grants | 3,081 | 3,818 | |||
| Accrued costs - staff costs | 12,154 | 12,646 | |||
| Other liabilities - current | 15,235 | 16,464 |
The balances on grants have evolved as follows:
| thousand euros | ||
|---|---|---|
| Non-repayable grants | 2019 | 2018 |
| Opening Balance | 3,818 | 5,342 |
| Transfer to gains | - 978 | -1,612 |
| Received during the year | 0 | 124 |
| Reclassifications/Transfers | 241 | -36 |
| Closing Balance | 3,081 | 3,818 |
| thousand euros | ||
|---|---|---|
| Repayable grants | 2019 | 2018 |
| Opening Balance | 17,457 | 17,257 |
| Paid during the year | -5,031 | -2,340 |
| Received during the year | 2,679 | 2,293 |
| Reclassifications/Transfers | -72 | 248 |
| Closing Balance | 15,032 | 17,457 |
Transfers is due largely to repayable benefits that were in the meantime, in some subsidiaries, converted into non- repayable and to the recognition of interest through measurement at amortized cost.
Most of the grants received by Corticeira Amorim is intended for investments aimed at increasing the production capacity and modernization of industrial facilities, improving the quality of manufactured products, or improving energy and utilizing its main raw material (cork).
Most of the projects that gave rise to grants classified as repayable; these are normally subject to evaluation, already at cruising stage, and if agreed targets are met, part or even all of the grant is converted into non-refundable.
There are no unpaid amounts associated with subsidies classified as non- repayable, nor are there conditions that are not yet to be met for recognition.
| thousand euros | ||
|---|---|---|
| 2019 | 2018 | |
| Tax contingencies | 707 | 40,829 |
| Guarantees to our customers | 936 | 577 |
| Others | 2,133 | 1,675 |
| Provisions | 3,777 | 43,081 |
thousand euros
| Tax Contingencies | Customer Guarantees |
Others | |||||
|---|---|---|---|---|---|---|---|
| Income tax | Stamp tax | Others | |||||
| Opening balance 2018 | 36,276 | 62 | 8 | 408 | 4,186 | 40,940 | |
| Recognition | Other Costs - Note 30 | 40 | 175 | 215 | |||
| Sales | 168 | 168 | |||||
| Income tax | 7,422 | 7,422 | |||||
| Reversal | Non-recurrent costs | 0 | -2,214 | -2,214 | |||
| Other gains - Note 30 | - 200 | -1,868 | -2,068 | ||||
| Sales | 750 | 750 | |||||
| Income tax | -2,774 | -2,774 | |||||
| Translation differences | -5 | 0 | -5 | ||||
| perimeter variation | 743 | 743 | |||||
| Direct allocation | -96 | -96 | |||||
| Ending balance 2018 | 40,759 | 62 | 8 | 577 | 1,676 | 43,081 |
| thousand euros | |||||||
|---|---|---|---|---|---|---|---|
| Tax Contingencies | Customer | Others | |||||
| Income tax | Stamp tax | Others | Guarantees | ||||
| Opening balance 2019 | 40,759 | 62 | 8 | 577 | 1,676 | 43,081 | |
| Reclassification | -40,759 | 573 | -40,186 | ||||
| Recognition | Other costs - Note 30 | 64 | 549 | 612 | |||
| Sales | 360 | 360 | |||||
| Translation differences | Other gains - Note 30 | - 161 | - 161 | ||||
| Translation differences | 16 | 16 | |||||
| perimeter variation | 0 | ||||||
| Direct allocation | 53 | 53 | |||||
| Ending balance 2019 | 0 | 62 | 645 | 936 | 2,133 | 3,777 |
In the year ended December 31, 2019, the movement in Income tax contingencies corresponds to the reclassification of contingencies to deferred taxes (Note 15) resulting from the issue of IFRIC 23 (note 2 point a), in the amount of 40.2 million euros. The amount disclosed in 2018 as Income tax includes 573 K € of other taxes that were reclassified.
Claims by the tax authorities are related with income tax, stamp tax and marginally VAT.
Trade receivables guarantees are essentially from Floor and wall coverings BU and are accounted for in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets.
Other contingencies include provisions for termination of employment and ongoing law suits.
Regarding the ongoing lawsuits, it should be noted that, following the acquisition of 100% of the shares of the subsidiary Cosabe, carried out in October 2019, and subsequent legal action by a third party claminig a preference right, Corticeira Amorim informs that on February 21, 2020, first instance sentence favorable to its claims was issued.
As the referred sentence is subject to judicial appeal, and in the unlikely event that the appeal sentence is unfavorable, there is no financial risk on the amount invested, as in that circumstance, Corticeira Amorim would be reimbursed for 100% of the investment made, and have the possibility of legally requesting cover loss damage liability. In this sense, Corticeira Amorim will proceed with the projected investments in Herdade da Baliza as an integral part of its Forestry Intervention Project.
| thousand euros | ||
|---|---|---|
| Post-employment benefits | ||
| Opening balance 2018 | 975 | |
| Recognition | Others | 10 |
| Reversal | Other gains - Note 30 | -5 |
| Translation differences | ||
| perimeter variation |
641 | |
| Direct allocation | ||
| Ending balance 2018 | 1,621 |
| thousand euros | ||
|---|---|---|
| Post-employment benefits | ||
| Opening balance 2019 | 1,621 | |
| Recognition | Others | 83 |
| Reversal | Non-current costs | |
| Other gains - Note 30 | -16 | |
| perimeter variation |
||
| Direct allocation | ||
| Ending balance 2019 | 1,687 |
At the Elfverson subsidiary, the company provides a defined benefit pension plan for administrative employees born in 1978 or earlier. The plan is managed by the PRI Pensionsgaranti. In order to estimate its liabilities for the payment of these benefits, the procedure for calculating the actuarial liabilities was determined in accordance with the "Projected Unit Credit Method", in accordance with IFRS.
The main assumptions assumed were as follows: discount rate 2.2%, salary increase 2.2%; median life expectancy: DUS 14 (as determined by the Actuarial Research Board). The total number of employees benefiting from the plan is 27. The estimated responsibility for the end of the year is 657 K€.
Amorim Cork Italia has responsibilities regarding TFR (trattamento di fine rapporto). This is due by the company to the employee when the contractual relationship ends, whether the company or the employee to terminate the connection or at the time of retirement. This amount equals about 1 month / year of work. Amorim Cork Italia has accrued this amount, following the update rules defined by the government (a law is issued annually with the revaluation percentage of amounts from previous years). The value of the liabilities is approximately 588 K€.
Remaining amounts related mainly to the liabilities of the Bourrassé (221 K€), Korken Schiesser (161 K€) and Portocork Italia (55 K€).
| thousand euros | ||
|---|---|---|
| 2019 | 2018 | |
| Communications | 1,309 | 1,353 |
| Data systems | 6,418 | 6,184 |
| Insurance | 3,884 | 3,946 |
| Subcontractors | 2,595 | 4,856 |
| Energy | 14,399 | 14,843 |
| Security | 1,361 | 1,156 |
| Professional Fees | 1,589 | 1,375 |
| Tools | 2,316 | 2,151 |
| Oil and gas | 2,074 | 1,934 |
| Royalties | 915 | 856 |
| Rentals | 4,659 | 6,641 |
| Transports | 26,520 | 26,172 |
| Representation expenses | 1,288 | 1,123 |
| Travel | 5,180 | 4,949 |
| Commissions | 8,767 | 8,503 |
| Specialized Services | 9,778 | 9,797 |
| Advertising | 7,782 | 7,054 |
| Maintenance | 12,973 | 11,820 |
| Others | 10,946 | 9,433 |
| Capitalized Costs | 0 | -7 |
| Third party supplies and services | 124,753 | 124,140 |
| thousand euros | ||
|---|---|---|
| 2019 | 2018 | |
| Board remuneration | 839 | 783 |
| Employees remuneration | 109,280 | 104,990 |
| Social Security and other | 22,511 | 21,994 |
| Severance costs | 2,766 | 2,405 |
| Post-employment benefits | 503 | 374 |
| Other | 4,087 | 3,762 |
| Capitalized Costs | -84 | -69 |
| Staff costs | 139,902 | 134,239 |
| Average number of employees | 4,505 | 4,399 |
| Final number of employees | 4,428 | 4,448 |
Board's remuneration includes Corticeira Amorim, SGPS, SA and any of its subsidiaries. Includes also Fiscal Board and General Meeting board members expenses.
Contributions related with defined contributions plans amounted to 503 K€ (2018: 374 K€).
| thousand euros | ||
|---|---|---|
| 2019 | 2018 | |
| Receivables | 1,458 | 1,615 |
| Tangible, intangible assets and others | - 263 | -1,688 |
| Impairments of assets and non-current costs |
1,194 | -73 |
Receivables include customers and other debtors.
| thousand euros | ||
|---|---|---|
| 2019 | 2018 | |
| Exchange rate hedging: var. derivative fair value (note 3a)) |
136 | 0 |
| Gain in fixed assets and p. investment disposals |
828 | 436 |
| Provisions reversals | 161 | 1,074 |
| Operating subsidies | 314 | 81 |
| Investment subsidies | 978 | 1,612 |
| Suplementary income | 1,972 | 2,076 |
| Building revenues | 318 | 605 |
| Own works | 272 | 23 |
| Other | 5,069 | 5,692 |
| Other income and gains | 10,046 | 11,599 |
| thousand euros | ||
|---|---|---|
| 2019 | 2018 | |
| Exchange rate hedging: exchange differences (note 3a)) |
1,087 | 908 |
| Exchange rate hedging: var. derivative fair value (note 3a)) |
0 | 594 |
| Taxes (other than income) | 2,052 | 1,836 |
| Provisions | 549 | 215 |
| Loss in fixed assets and p. investment disposals |
55 | 78 |
| Bank charges | 446 | 588 |
| Bad debts | 279 | 52 |
| Loss in inventory differences | 177 | 80 |
| Donations and fees | 480 | 448 |
| Other | 1,726 | 966 |
| Other costs and losses | 6,851 | 5,765 |
As for the non-recurring amounts (Note 2 q), the most significant amount recorded in 2019 relates to restructuring expenses, essentially from Floor and wall covering BU in Portugal. Also included in non-recurring expenses are expenses incurred primarily with consultants and attorneys for the acquisition of associate Vinolok.
| thousand euros | ||
|---|---|---|
| 2019 | 2018 | |
| Restructuring costs | -1,384 | -1,428 |
| Goodwill impairment | 0 | - 293 |
| Reversal of provisions in the investment in Amorim Argentina |
0 | 2,214 |
| Transaction costs | - 236 | - 436 |
| Non-current results | -1,620 | 57 |
| thousand euros | ||
|---|---|---|
| 2019 | 2018 | |
| Interest costs - bank loans | 1,528 | 1,620 |
| Interest costs - other entities | -98 | 1,551 |
| Stamp tax | 166 | 143 |
| Interest costs - other | 580 | 234 |
| 2,177 | 3,547 | |
| Interest gains - bank deposits | 28 | 42 |
| Interest gains - other loans | 6 | 7 |
| Interest gains - delayed payments | 19 | 2 |
| Interest gains - other | 28 | 43 |
| 81 | 95 | |
| Net financial costs | 2,096 | 3,452 |
Interest costs – other entities includes 61 K€ (2018: 118 K€) is included to apply the amortized cost and the effect of updating the liability for the acquisition of interests that do not control (-0.5 M€).
Corticeira Amorim consolidates directly in AMORIM – INVESTIMENTOS E PARTICIPAÇÕES, S.G.P.S., S.A. with headoffice at Mozelos (Santa Maria da Feira, Portugal), Amorim Group holding company.
As of December 31, 2019, financial stake of AMORIM – INVESTIMENTOS E PARTICIPAÇÕES, S.G.P.S., S.A. in Corticeira Amorim was 51%, corresponding to 51% of the voting rights.
Corticeira Amorim related party transactions are, in general, due to the rendering of services through some of AIP subsidiaries (Amorim Serviços e Gestão, S.A., Amorim Viagens e Turismo, S.A., OSI – Sistemas Informáticos e Electrotécnicos, Lda.). Total sales of these subsidiaries to the remaining Corticeira Amorim companies totalled 11,107 K€ (2018: 10,346 K€).
Sales from Quinta Nova, S.A., AMORIM - INVESTIMENTOS E PARTICIPAÇÕES, S.G.P.S., S.A. subsidiary to Corticeira Amorim subsidiaries reached 46 K€ (2018: 48 K€). Purchases totaled 318 K€ (2018: 161 K€).
Cork acquired during 2019, from companies held by the main indirect shareholders of Corticeira Amorim, amounted to 444 K€ (2018: 1,121 K€). This corresponds to less than 2% of total acquisitions of that cork raw-material.
Balances at year-end 2019 and 2018 are those resulting from the usual payment terms (from 30 to 60 days) and so are considered to be immaterial.
Services are usually traded with related parties on a "cost plus" basis in the range of 2% to 5%.
EY auditor's remuneration for the group of subsidiaries and for
| thousand euros | ||||||
|---|---|---|---|---|---|---|
| Nature of service | Audit | Review of interim financial information and other assurance engagements |
Other services |
TOTAL | ||
| EY SROC | Corticeira Amorim | Value | 22,200 | 15,000 | 0 | 37,200 |
| % | 60% | 40% | 0% | 100% | ||
| Entities that integrate the | Value | 147,950 | 0 | 58,000 | 205,950 | |
| group | % | 72% | 0% | 28% | 100% | |
| Total | Value | 170,150 | 15,000 | 58,000 | 243,150 | |
| % | 70% | 6% | 24% | 100% | ||
| EY global Corticeira Amorim network companies Entities that integrate the group |
Value | 0 | 0 | 0 | 0 | |
| % | 0% | 0% | 0% | 0% | ||
| Value | 69,040 | 0 | 0 | 69,040 | ||
| % | 100% | 0% | 0% | 100% | ||
| Total | Value | 69,040 | 0 | 0 | 69,040 | |
| % | 100% | 0% | 0% | 100% | ||
| Total | Corticeira Amorim | Value | 22,200 | 15,000 | 0 | 37,200 |
| Entities that integrate the group |
% | 60% | 40% | 0% | 100% | |
| Value | 216,990 | 0 | 58,000 | 274,990 | ||
| % | 79% | 0% | 21% | 100% | ||
| Total | Value | 239,190 | 15,000 | 58,000 | 312,190 | |
| % | 77% | 5% | 19% | 100% |
Corticeira Amorim was 312 K€ (2018: 254 K€) and detailed as follows:
The Review of interim financial information and other assurance engagements line includes the limited review of the consolidated financial statements for the six-month period ended June 30, 2019 and the independent review of the sustainability report.
The Other services item includes a study to assess the Group's
environmental, social and economic impacts.
a) Net profit per share calculation used the average number of issued shares deducted by the number of average owned shares. The non-existence of potential voting rights justifies the same net
| 2019 | 2018 | |
|---|---|---|
| Total issued shares | 133,000,000 | 133,000,000 |
| Average nr. of treasury shares | 0 | 0 |
| Average nr. of outstanding shares | 133,000,000 | 133,000,000 |
| Net Profit (thousand euros) | 74,947 | 77,389 |
| Net Profit per share (euros) | 0.564 | 0.582 |
profit per share for basic and diluted
During its operating activities Corticeira Amorim issued in favour of third-parties guarantees amounting to 1,624 K€ (Dec. 2018: 2,094
| thousand euros | ||
|---|---|---|
| Beneficiary | Amount | Purpose |
| Government agencies | 1,266 | Capex grants / subsidies |
| Other | 358 | Miscellaneous guarantees |
| TOTAL | 1,624 |
K€).
Cork purchase commitments amount to 19,014 K€ (2020: 10,624 K€; 2021: 1,085 K€, 2022: 424 K€ and 2023 and further 6,882 K€).
Financial Assets are mainly registered in the Loans and Other Receivables caption. As for Financial Liabilities they are included in
| thousand euros | |||||
|---|---|---|---|---|---|
| Financial assets at amortized cost |
Financial assets at fair value |
Derivatives as hedging |
Derivatives not designated as hedging |
Total | |
| Trade receivables (note 17) | 174,483 | 174,483 | |||
| Other debtors (note 18) | 28 173 | 132 | 28,305 | ||
| Other financial assets (note 14) | 1,632 | 1,632 | |||
| Cash and cash equivalents (note 19) | 21,695 | 21,695 | |||
| Total as of December 31, 2018 | 224,351 | 1,632 | 132 | 0 | 226,115 |
| Trade receivables (note 17) | 165 ,484 | 165,484 | |||
| Other debtors (note 18) | 30,778 | 111 | 30,889 | ||
| Other financial assets (note 14) | 1,550 | 1,550 | |||
| Cash and cash equivalents (note 19) | 22,144 | 22,144 | |||
| Total as of December 31, 2019 | 218,405 | 1,550 | 111 | 0 | 220,066 |
| thousand euros | ||||||
|---|---|---|---|---|---|---|
| Loans and payables |
Accounts payable |
Agreement to acquire non-controlling interests |
Derivatives as hedging |
Derivatives not designated as hedging |
Total | |
| Interest-bearing loans (note 22) | 160,703 | 160,703 | ||||
| Trade payables (note 23) | 165,008 | 165,008 | ||||
| Other financial liabilities (note 24) | 17,457 | 32,870 | 20,410 | 457 | 108 | 71,302 |
| Total as of December 31, 2018 | 178,160 | 197,878 | 20,410 | 457 | 108 | 397,013 |
| Interest-bearing loans (note 22) | 183,234 | 183,234 | ||||
| Trade payables (note 23) | 132,086 | 132,086 | ||||
| Other financial liabilities (note 24) | 15,032 | 36,081 | 14,962 | 23 | 212 | 66,310 |
| Total as of December 31, 2019 | 198,266 | 168,167 | 14,962 | 23 | 212 | 381,630 |
Customers balances are denominated in USD (7.7%), CLP (5.8%), AUD (2.5%), GBP (1.6%), DKK (1.0%) and ZAR (0.9%), being the remaining almost totally euro based. Exchange differences are due, mainly, to non-euro based customer's balances, as well as foreign currency loans used as a hedge accounting instrument.
Corticeira Amorim understands that the fair value of the classes of financial instruments presented does not differ significantly from its book value, taking into account the contractual conditions of each of these financial instruments.
Current assets and liabilities, given their short-term nature, have an accounting value similar to fair value
Non-current net debt is mostly payable at a variable rate. The only fixed-rate was contracted during the year 2015. As there were no significant changes in the reference interest rates, the rate does not differ substantially from the current market conditions, and therefore the fair value does not differ significantly from the value Accounting.
In the case of Other financial liabilities (mainly grants with no interest bearing measured at fair value at initial recognition), given the initial adjustment differential for recognizing in income, maturities and current interest rate levels, difference between book value and fair value is not significant.
According to the guidelines of the ESMA (European Sales and Marketing Association) of October 2015 on Alternative Performance Measures (APM), Corticeira Amorim presents below a table to reconcile APMs that are not directly readable in the primary financial statements.
| Management report | Consolidated Financial Statements | |
|---|---|---|
| Gross Margin | Sales - Cost of goods sold and materials consumed + Change in manufactured inventories |
|
| Gross Margin % | Gross margin / (Sales + Change in manufactured inventories) | |
| Operational costs | Third party supplies and services + Staff costs + Impairments of assets - Other income and gains + Other costs and losses + Depreciation |
|
| Working capital | Inventories + Trade receivables - Trade payables + other operating assets - other operating liabilities |
|
| Invested capital | Goodwill + Tangible fixed assets + intangible assets + right of use + working capital + investment properties + Investments in associates and joint ventures + other operating assets / (liabilities) |
|
| Net interest-bearing debt / consolidated debt |
Current and non-current Interest-bearing loans - cash and cash equivalents |
|
| Financial autonomy | Equity / Total assets |
The worldwide spread of the Covid-19 virus epidemic, and the impact of the containment measures meanwhile taken by the various authorities, anticipate a sharp deterioration in the profile of economic growth in 2020.
Corticeira Amorim is an international company (more than 90% sales outside Portugal as detailed in note 9.3 of the management report) and, as such, exposed to the global economy, in particular to private consumption. The spread of the Covid-19 outbreak, if it significantly affects consumption, could impact customers and, consequently, the value chain, and therefore, could have an effect on the activity carried out. The scale, dimension and duration of the current moment of uncertainty, makes it difficult to assess the extent of its direct and indirect impacts, and, as such, to estimate, today, its value. However, the following considerations should be highlighted:
Impacts on the activity:
Impacts on the value chain:
Impact on Employees:
At the date of issuance of this report, there were no material events that could materially affect the financial position and future results of Corticeira Amorim and all subsidiaries included in the consolidation.
Mozelos, March 23, 2020
The Board of Corticeira Amorim, S.G.P.S., S.A.
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| Description of the most significant assessed | Summary of our response to the most significant assessed risks of |
|---|---|
| risks of material misstatement | material misstatement |
| As disclosed in notes 15 and 25 of the notes | Our audit approach included the performance of the following |
| to the consolidated financial statements, the | procedures: |
| Group has identified several tax and legal | Understanding and evaluating the monitoring processes for |
| contingencies. Provisions for tax and legal | tax contingencies and reviewing all existing documentation; |
| contingencies are accounted for whenever | Performing an analysis of pending tax claims, as well as |
| the Group considers that an unfavourable | $\mathbf{r}$ |
| outcome is probable, in accordance with IAS | potential tax contingencies, with the support of our tax |
| 37 and, in the case of contingencies related to | specialists; |
| income tax, in accordance with IFRIC 23. The | Making inquiries to the Board of Directors and to the |
| assessment of the likelihood of the outcome is | ٠ |
| supported by the opinion of legal and tax | Directors of the legal and tax departments regarding the |
| advisors. | basis for their estimates and judgements; |
REPORTS AND OPINIONS OF THE SUPERVISORY BOARD AND THE STATUTORY AUDITOR 279
Edifício Amorim I Rua de Meladas, 380 - P.O. Box 20 4536-902 MOZELOS Portugal [email protected] www.corticeiraamorim.com
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