Annual Report • Apr 1, 2015
Annual Report
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Registered Office: Lugar do Espido, Via Norte, Maia Registered at the Commercial Registry of Maia Registry and Tax Identification Number 506 035 034 Share Capital: EUR 812,107,574.17 Publicly Traded Company
201
26 February 2015
Appendix required by Article 447 of Portuguese Company Law
Appendix required by Article 448 of Portuguese Company Law
Qualified Shareholdings
Statement issued according to and for the purposes of paragraph c) of Article 245 of CMVM Code
Statement of Financial Position
Consolidated Statement of Financial Position Consolidated Income Statement Consolidated Statement of Comprehensive Income Consolidated Statement of Changes in Net Shareholders' Funds Consolidated Statement of Cash Flows Notes to the Consolidated Financial statements
Statutory External Auditor Report Statutory Audit Board Report
Sonae Indústria, SGPS, SA Publicly Listed Company Share Capital € 812 107 574.17 Maia Commercial Registry and Tax Number 506 035 034
26 February 2015
| CHAIRMAN MESSAGE 4 |
|---|
| CEO MESSAGE 5 |
| 1. ABOUT SONAE INDÚSTRIA 7 |
| 1.1. BUSINESS 7 |
| 1.2. HISTORY 8 |
| 1.3. PRODUCTS 9 |
| 1.4. STRATEGY 10 |
| 1.5. IMPROVE OUR WORK (IOW) INITIATIVE 13 |
| 1.6. 2014 KEY CORPORATE EVENTS 16 |
| 2. SECTOR REVIEW 17 |
| 3. BUSINESS REVIEW 19 |
| 3.1. TURNOVER & RECURRENT EBITDA 19 |
| 3.1.1. Sonae Indústria Consolidated 19 |
| 3.1.2. Southern Europe 20 |
| 3.1.3. Northern Europe 22 |
| 3.1.4. Rest of the World (Canada and South Africa) 23 |
| 3.2. CONSOLIDATED FINANCIAL PERFORMANCE 24 |
| 3.2.1. Consolidated Income Statement 24 |
| 3.2.2. CAPEX 25 |
| 3.2.3. Consolidated Statement of Financial Position 26 |
| 3.3. INDIVIDUAL RESULTS OF SONAE INDÚSTRIA, SGPS 27 |
| 3.4. PROPOSED ALLOCATION OF RESULTS 28 |
| 3.5. OUTLOOK FOR 2015 28 |
| 3.6. INFORMATION ON SHAREHOLDINGS AND SHARE PERFORMANCE 28 |
| 3.7. TRANSACTIONS WITH OWN SHARES 30 |
| 3.8. DIVIDEND POLICY 30 |
| 4. RISK MANAGEMENT 31 |
| 4.1. CREDIT RISK MANAGEMENT POLICY 31 |
| 4.2. MARKET RISKS 31 |
| 4.3. LEGAL RISKS 33 |
| 4.4. OPERATIONAL RISKS 33 |
| 5. CORPORATE RESPONSIBILITY 34 |
| 5.1. SOCIAL REPORT 34 |
| 5.2. ENVIRONMENTAL REPORT 40 |
| 6. CLOSING REMARKS AND ACKNOWLEDGEMENTS 44 |
| APPENDIXES TO THE MANAGEMENT REPORT AND QUALIFIED SHAREHOLDINGS 45 |
| APPENDIX REGARDING ARTICLE 447 OF THE COMPANY LAW 45 |
| APPENDIX REGARDING ARTICLE 448 OF THE COMPANY LAW 46 |
| QUALIFIED SHAREHOLDINGS 46 |
| STATEMENT ISSUED UNDER THE TERMS AND FOR THE PURPOSE OF SUB-PARAGRAPH C) OF NO. 1 OF ARTICLE 245 OF THE PORTUGUESE SECURITIES CODE 47 |
| GLOSSARY 48 |
2013 R: According to IFRS 11, which replaces the former IAS 31, the investments in joint ventures (Laminate Park GmbH & Co. KG and Tecmasa, Reciclados de Andalucia, S. L.) are now mandatorily consolidated according to the Equity Method. The 2013 figures were restated accordingly, also considering France, Betanzos and Pontecaldelas as "discontinued operations".
As I complete 50 years in this company, now as always, I strongly believe that the values that shape our identity must always be in our minds when we strive to challenge ourselves to improve and become better. We started as a few hundred and have become thousands, always with a bold mentality. This has led to an important and disruptive growth strategy, where decisions were taken not only with rational coldness, but also, also with emotional intelligence, leading us to take certain challenging decisions and risks. Some of our decisions have not been successful, but once again, with the boldness that characterizes us, we have learned from our mistakes and taken the decision to face our problems, fix them and as a result, reposition Sonae Indústria for the future.
To this end, we have decided to accelerate the implementation of the last part of our restructuring plan as soon as possible, desirably in the 1st semester of 2015. With its execution, we will have completed the desired industrial rationalization leaving us free to focus our human and financial resources on improving our company, by focusing on the assets and geographies where we believe we can excel and create value for all our stakeholders.
I am confident that we have now sown the seeds for future growth at Sonae Indústria, on the back of a better and more efficient industrial footprint, a more sustainable capital structure, a strengthened team and clarity on the business model to pursue, whilst leveraging on our culture, values and identity (the "Sonae way").
2015 marks the beginning of a new cycle at Sonae Indústria, one where, without forgetting the lessons from our long history, we look into the future with renewed confidence and ambition.
There will be new people joining the Board of Directors to be elected at this year's Ordinary Shareholders Meeting, bringing a long experience and know how in areas that are important for Sonae Indústria's future success. I will continue to be very much interested and active in contributing to the definition of the strategy to develop the Portuguese pine forestry sector.
I would like to take this opportunity to thank all our stakeholders that again showed their support during 2014.
Belmiro de Azevedo, Chairman Sonae Indústria
We made considerable progress during 2014 in the execution of our strategic plan. Our achievements make 2014 a particularly important year for Sonae Indústria, as I believe we have established the platform upon which we will be able to reach a more sustainable and more profitable business. In this respect, I would like to emphasize some of the more important accomplishments during the year.
Regarding the planned re-dimensioning of our industrial footprint and concentrating activity on our most competitive plants, we made significant headway having sold two plants in France, Auxerre and Le Creusot, and significantly streamlined our central office in Paris. In Germany we made further progress in closing down our Particleboard operations of Horn and in Spain we closed down our laminate flooring plant, Pontecaldelas. At the same time, we invested in two of our best plants in Europe, having completed strategic investments in Nettgau, Germany (a melamine line and wood recycling equipment) and in Oliveira de Hospital (melamine line with deep embossing capabilities) that should allow us to increase the sales of melamine faced boards in both cases, thus improving our product mix, whilst the wood recycling equipment should enable us to reduce unitary variable costs at Nettgau, improving our competitive position in the particleboard market.
We also delivered improved operating results in the last three consecutive quarters with Recurrent EBITDA improving to 96 million Euros in 2014, 9 million Euros above 2013, on a comparable basis, with a recurrent EBITDA margin of 9.4%, up by 1.2 p.p. when compared to 2013, the best margin since 2007. Notwithstanding the tough market conditions prevailing in the Iberian Peninsula and South Africa, we were able to improve significantly our profitability, driven by the better performance of our operations in Northern Europe and North America.
Importantly, we were successful in implementing our plan to improve our capital structure. We completed a share capital increase raising 112 million Euros, despite the prevailing adverse equity capital markets conditions in Portugal in the second half of the year, and completed the refinancing of circa 320 million Euros of debt. The latter has provided significant benefits to our debt profile, with extended maturity terms, including a three-year grace period, and lower average cost of debt. We also completed an agreement to extend our existing 85 million Euros trade receivables securitisation facility to September 2016. The combination of all these initiatives has led to a much improved capital structure with lower Net Debt and strengthened Shareholders' Funds.
Also important is the Board of Director's decision to finalize in 2015 the restructuring plan of our French assets, started in 2014, as well as of our hardboard plant in Spain, due to the continued losses and cash flow drain of these plants. This decision led us to impair these assets and change the accounting thereof in our consolidated accounts, according to IFRS rules, allowing for a much clearer appreciation of the performance of the continuing business. The execution of the restructuring of these three plants will effectively allow us to complete the planned re-dimensioning of our "Boards' business" and enable us to focus our human and financial resources on our most efficient and competitive sites, where we believe we can obtain the desired levels of efficiency and profitability. Accordingly, we do not foresee the need to incur in any further major restructuring of our "Boards' Business" in the near future.
Notwithstanding the significant achievements of 2014, during 2015 we are still faced with certain challenges and risks to our business. In Europe, in particular, certain economic and political factors particularly related to Eastern Europe, could negatively affect our business in Northern Europe. In Southern Europe we face continued pressure from higher input costs of wood and from higher competition in certain product segments. Also, although to a much lesser extent than in past years, we have short term debt maturities that will need refinancing, but we remain confident that we can achieve this.
I count on Sonae Indústria's team to continue delivering the timely execution of our strategic plan, namely the Improve our Work (IoW) roadmap implementation, the launch of new decorative products, the rump up of the investments executed in 2014 and the planning and deployment of new investments in our core plants.
We thank our stakeholders for their continued support, with particular mention to our shareholders, banks, clients and suppliers, which together with our employees have been fundamental for the successful implementation of our strategic plan.
Rui Correia, CEO Sonae Indústria
With a total of 21 plants located in 6 countries on 3 continents, Sonae Indústria is one of the largest wood-based panel producers in the world. At the end of 2014 the company had 3,596 employees worldwide and a consolidated turnover of 1,015 million Euros1 .
Wood-based panels are valuable alternatives to solid wood with some clear advantages, namely in terms of efficiency on the use of raw materials. Another particular advantage is their dimensional flexibility, which (in contrast to solid wood) allows for the production of tailor-made sizes, which can be adapted to the requirements of client applications. Hence, today we see wood-based panels replacing solid wood in an increasing number of applications.
Compared to other construction materials such as steel and concrete, wood has significantly lower adverse environmental impacts when used as building material. Wood-based panels thus have a positive effect on global warming through improved energy efficiency, which enables homeowners to significantly reduce energy spend. Additionally, when used for construction purposes, wood-based panels function as carbon stores, thereby helping to mitigate CO2 emissions. At the end of their useful life, wood-based panels can be recycled and transformed into new products, in this way re-entering a continuous recycling process. The demand for wood and wood-based panels in the construction industry is therefore expected to steadily increase over time.
In times where extreme climate events like floods and droughts signal that climate change is much more than a theoretical scientific discussion, societies in general – and businesses in particular – are increasingly looking for ways on how to fight these new climate scenarios and realities.
Wood-based products have an important role to play in this reality. Sonae Indústria believes using more wood is a strong contribution to fight climate change, as it reduces CO2 sources and assures CO2 sinks and the storage of carbon. The reduction of CO2 sources results from the fact that wood is a material that stores energy and that it can replace other materials, in several applications, that require more energy – and emissions – in their production. Wood use can also increase CO2 sinks and storage of carbon, as the forest itself is a unique player in carbon sequestration from the atmosphere: as forests grow, they absorb more CO2 while forest products keep the carbon stored during their service life. Using wood products encourages further forest growth, and an effective market for wood products provides a financial incentive to invest in active forest management.
1 Turnover considers only the contribute of continuing operations.
Additionally, when wood products are reused or recycled, carbon storage is extended during another service life, avoiding CO2 emissions to the atmosphere.
Sonae Indústria is the result of an expansion process combining organic growth with acquisitions, which began in 1959. Throughout the 1990s, Sonae Indústria made acquisitions and invested significantly in greenfield projects in Brazil, Canada, South Africa, Portugal, Spain, and the United Kingdom, with the 1998 acquisition of the German group Glunz standing out and allowing expansion into Germany and France.
In the following decade, marked mainly by the spin-off from Sonae SGPS, S.A., in 2005, which had been its shareholder until then, and the ensuing financial crisis in 2008, the following milestones in Sonae Indústria's activity are worthy of mention:
More recently, in September 2012, Sonae Indústria closed the Knowsley plant in the United Kingdom. This decision was the result of long delays in the reconstruction process, following the fire accident of the previous year, namely due to licensing difficulties and the reduced levels of capacity usage at this plant. In December of the same year, negotiations began with workers' representatives with a view to closing the Solsona plant in Spain due to the deep crisis and subsequent fall in demand in the country, particularly in the construction industry. These negotiations were finalised in January 2013, allowing this unit to be definitively closed.
In September 2013, Sonae Indústria entered into negotiations with staff and union representatives with a view to reducing particleboard production at the Horn-Bad Meinberg unit (Germany), in response to a fall in particleboard demand in the market and excess industrial capacity in the region. The plant's particleboard operations ceased definitively in 2014. Additionally, and following the ruling of the local courts during the third quarter of 2014, the on-going dismissal process of the employees of this manufacturing unit is expected to take longer than initially anticipated, which can imply additional costs to be incurred by the company in relation to the employees involved in the process (possibly until the end of first quarter of 2015).
In January 2014, Isoroy SAS, a subsidiary of Sonae Indústria, received an offer for the assets and business of two plants in France: Auxerre and Le Creusot. The process of selling these plants' businesses and assets, including the transfer of affected workers, was concluded on 1 April 2014.
In May 2014, Sonae Indústria's subsidiary, Tafisa, announced its intention to begin negotiations with staff representatives with a view to closing the laminated flooring production plant in Pontecaldelas, Spain. The
employees' consultation process was completed during the 1st half of 2014 and Sonae Indústria closed Pontecaldelas plant definitely during the 2nd half of 2014.
The decision to close the various industrial units mentioned above was based on the most comprehensive costbenefit analysis possible, carried out on a case by case basis. This analysis included an evaluation of the present and future social and environmental impacts of each operation.
Globally, the aforementioned restructuring processes and sale of assets led to a 4.4 million m3 reduction in installed production capacity when compared with the maximum level reached in 2007 of 10.1 million m3 . At the end of 2014, Sonae Indústria's installed capacity was 5.8 million m3 .
Sonae Indústria's base products, typically denominated as "raw products" are comprised of:
More than 50% of the "raw board" production is then transformed into value added products such as melamine faced board, laminates, flooring and accoustic boards. These are used in a great variety of applications such as
INNOVUS, the European brand for decorative products, is being reinforced with the development of new products and a redesigned range of décors, in line with the latest global trends in interior design and home furnishings.
One of the recent additions to the brand was the INNOVUS Coloured MDF, a product that combines the strength and technical properties of the Medium Density Fibreboard with the visual appeal of a versatile range of colours.
Another recent advance for the INNOVUS brand has been the development of a new product range, using embossed in register (EIR) technology, resulting in decorative panels with a look and feel extremely similar to that of real wood. These panels are used in applications that really value the natural effect of wood such as highend furniture collections.
New additions to the range of Laminates & Compacts, such as Colour Boom or Labgrade, have also helped to strengthen the decorative products portfolio, hence positioning Sonae Indústria as a comprehensive partner for furniture production and interior design projects, for both residential and commercial applications (hotels, shops, hospitals and other public spaces). More information at www.innovus.co.
With innovation at the forefront of product development at Sonae Indústria, the Poliface range of laminate flooring could not be left behind. A new collection was designed with new product features such as V-groove beveled edges and a synchro texture for a natural look that reinforces the beauty of the flooring planks. More information at www.poliface.com.
Woodforce is an engineered diced pellet that delivers exceptional polymer reinforcement to Polyolefin compounds. This new-patented technology offers many advantages including both weight and cost savings with design opportunities unrivalled in the natural fibre sector.
Woodforce market launch has now passed key steps by demonstrating full industrialisation at six key leading compounders in Europe. Furthermore, a breakthrough has been achieved by a formal and official approval of a Woodforce based compounds at a major European Automotive OEM. The successful market developments result from the merits of our technology and the proper positioning of Woodforce and Woodforce based compounds:
The positioning of Woodforce as a technically & strategically superior solution, compared to both talc & glass fibre, not only on its environmental advantages, has contributed to establish a strong credibility in the market. A demonstrated capability in terms of industrial process and supply security completes this performance.
More information about this innovative product developed by the company can be found at: www.woodforce.com.
The way in which Sonae Indústria view itself as a company, act and interact with each other and with the surroundings represents a corporate culture that promotes continuous improvement – always challenging ourselves to perform better – and is sustained by the company's Mission, Vision and Values.
To be recognised as a sustainable world leader in the wood-based panels industry, consistently providing our customers with the best value products, upholding the highest standards of service and promoting responsible business and environmental practices.
Our aim is to deliver the full potential of wood-based panels for the benefit of our customers, shareholders, employees, and society.
We base our operations on sound corporate governance, continuously improving the efficiency of our operations, actively promoting innovation and providing a motivated, safe and fair working environment.
Sonae Indústria's values represent the foundation stone on which we build our business and they serve to guide our behaviour.
AMBITION We set challenging but attainable goals. We continuously challenge ourselves to go beyond previously established limits, focusing on becoming and remaining market leader and creating sustainable value for our shareholders.
KNOWLEDGE/ EDUCATION We believe that knowledge is one of the greatest sources of personal fulfilment and career development. We strive to attract motivated people and expect everyone to contribute ideas and be fully committed to the success of the company. We offer professional training and encourage active participation in academic programs.
RISK TAKING We do not accept the status quo. We search for alternatives, new ideas, new approaches and solutions to overcome barriers. We take calculated risks.
INNOVATION We believe that our long-term competitive advantage depends on our ability and determination to innovate, to achieve continuous improvements and increase our efficiency. We encourage our people to generate new ideas, we evaluate their ability to do so and we expect our managers to set an example. We encourage a risk-taking culture, within adequately managed degrees of risk exposure.
READY TO CHANGE We seek commercial solutions. Our employees and companies must be sufficiently flexible to accept new ideas, new ways of doing business and be ready to embrace changes, improve products, processes and respond to new organizational challenges.
AUTHENTIC We remain true to ourselves and are humble, consistent and coherent.
OPEN AND TRANSPARENT We hold ourselves accountable and expect others to do likewise. We foster a culture of openness, transparency and accountability and welcome the opinion of employees and outside observers as a means of obtaining an independent evaluation of our performance, our degree of compliance with best practices and our own values and principles. We strive to be responsive to stakeholder concerns.
COOPERATION We empower our people and expect them to take responsibility. We believe in cooperation and teamwork as a means of sharing know how, experience and responsibilities amongst our people, both in the execution of day-to-day tasks and when solving complex problems.
ETHICAL BEHAVIOUR Relationships with our stakeholders are founded upon respect, transparency, honesty and integrity and we do not tolerate bribery or corruption in any shape or form. We strive to preserve our independence from political pressures in order to speak and act freely, first and foremost in the interests of the company.
SOCIAL CONSCIENCE We are aware that our business activity impacts our social environment and that we have a responsibility to support local communities. We may become involved with social institutions or charities, support cultural, sporting or other activities as part of our corporate responsibility and encourage active participation of our people at all levels of our organization.
NON-DISCRIMINATION We are an equal opportunities employer. We do not accept any form of discrimination in the workplace be it related to age, gender, race, social background, religion, sexual orientation or physical ability. Our career development and reward systems are based on merit.
HEALTH AND SAFETY The physical and mental welfare of our people is of paramount importance to us and we strive to provide a safe and healthy work environment for all. We expect all employees to comply with safety guidelines and practices.
ENVIRONMENTAL AWARENESS We are conscious of the environmental footprints we leave behind and consider that the responsible management of environmental issues is critical to our business success. We are committed to the concept of eco-efficiency and to sustainable sourcing of raw materials and actively respect these principles in all our business practices.
During 2011 special attention was dedicated to define and align the four strategic directions to be pursued in the medium to long term, to significantly improve the company's performance, namely:
Sonae Indústria has been since 2011 implementing the necessary initiatives that will lead on the defined strategic path, towards the ambition to grow and run a profitable business with a commitment towards responsible business practices and sustainable value creation for the shareholders.
This Strategic Plan, defined and started in 2011 that is being implemented, aims to improve the company's operation and economic performance in the medium and long term and comprises the following fundamental strategic directions:
Reduction of installed capacity, through sale and/ or closure of less profitable plants while investing and developing our more efficient and profitable plants, with positive impact in the capacity utilization indexes of the several industrial units (between 2009 and 2013, Sonae Indústria increased the level of its capacity utilization index in circa 7 p.p.). Under this context, Sonae Indústria has concluded the closure processes of Knowsley (UK) and Solsona (Spain) plants in 2012 and of raw particleboard operations in Horn (Germany) , together with the sale of the units, Auxerre and Le Creusot (France) in 2014, being at the moment in the process of completing the closure of Pontecaldelas plant (Spain);
As part of the implementation of this Strategic Plan, Sonae Industria has been focusing in its more profitable markets/ industrial plants, namely Germany and Portugal where the Company has invested, in 2014, 23 million Euros in the:
Continuous Improvement is a key pillar of Sonae Industria's culture and way of working, as a powerful philosophy and methodology to seek productivity and quality, everyday, everywhere, by everyone, creating sustainable value for Sonae Industria's stakeholders.
SONAE "Improving our Work" aims to be the continuous improvement system in Sonae Group sponsored by Paulo Azevedo, which was extended to the other Sonae Companies, like Sonae Industria.
The main goal is standardize and optimize processes to get better efficiency and productivity levels in all areas, reinforcing and developing a continuous improvement culture across the company, wilst developing the competences of all the employees.
IoW Model Design
In order to manage the transversal actions scheduled, five different work streams were created, with a dedicated team. These five work streams are:
It is Sonae Industria's objective to get better everyday, in every process and in every place; encouraging innovation, fostering new ideas and methodologies throughout all organizational levels
Improve our Work (IoW) is becoming a key pillar of Sonae Industria's culture and a way of working, in which the main activities are organized according to this model:
The purpose of the Daily IoW is to create team leaders that develop their teams in order to become autonomous teams in terms of Continuous Improvement (CI) – capable of maintaining and improving their processes and working areas, on a daily basis. The Daily IoW is being implemented horizontally throughout the organization, promoting a CI Culture, to improve attitudes and behaviors and sustain the already achieved improvements.
IoW Projects are usually Value Stream Projects. This means they cross several Functions and Departments and take the form of End to End Projects, aiming to achieve better results, increase process performance and reduce waste.
IoW support purpose is to support Daily IoW and Project IoW activities plan and follow up the IoW Strategy, so that execution is performed with success.
"Excellence is a habit not an act. It takes time and perseverance."
| 6 January 2014 | Announcement of the offer received by Isoroy SAS for the acquistion of the assets of the Auxerre and Le Creusot plants located in France |
|---|---|
| 12 March 2014 | FY13 consolidated results announced |
| 17 March 2014 | Announcement that Isoroy SAS, accepted the offer made for the acquisition of the businesses and assets relating to its Auxerre and Le Creusot plants located in France |
| 1 April 2014 | Announcement that Isoroy SAS, completed the sale of the businesses and assets relating to its Auxerre and Le Creusot plants located in France |
| 4 April 2014 | Announcement of decisions taken at the Shareholders' Annual General Meeting |
| 21 April 2014 | Announcement of acquisition of own shares |
| 7 May 2014 | 1Q14 consolidated results announced Announcement of the approval by the BoD of a Share capital increase in an amount up to 150 million Euros |
| 16 May 2014 | Announcement of negotiations regarding the planned closure of the laminate flooring plant located in Pontecaldelas (Spain) |
| 6 June 2014 | Announcement of acquisition of own shares |
| 16 July 2014 | Announcement that the subsidiary company Tafisa Canada Inc. completed a new medium long term financing transaction, in the amount of 90 million Canadian dollars |
| 30 July 2014 | 1H14 consolidated results announced |
| 28 October 2014 | Announcement of the signature of the final refinancing agreements with the two main creditor banks |
| 30 October 2014 | Annoucement of the approval by the Board of Directors of the terms and conditions of the Share Capital increase |
| 12 November 2014 | 9M14 consolidated results announced |
| 13 November 2014 | Announcement of the advance payment of the subscription for the Share Capital increase by Efanor |
| 28 November 2014 | Announcement of the results of the Public Offer and of the Institutional Placement of the Share Capital increase |
| 1 December 2014 | Announcement of the registry of the Share capital increase, at the competent Commercial Registry |
| 4 December 2014 | Announcement of Qualified Shareholding of Efanor Announcement on transaction by person discharging managerial responsibilities ("Dirigentes") |
In 2014, the global economy continued to struggle to gain momentum as many countries continue to recover from the global financial crisis, and emerging economies are less dynamic than in the past. While economic recovery was felt in both the United States and the United Kingdom, with reduced rates of unemployment and accommodative monetary policy, the recovery has been sluggish in the Euro Area. Although the Southern Europe economies started to report positive GDP growth rates, contrasting with the negative GDP rates of the previous year (mainly Portugal and Spain), the levels of consumption are still affected by the tight fiscal policies with negative consequences in consumption levels of durable goods and in real estate investments.
However, and when compared to 2013, all countries shown in the chart on the right are forecasted to have positive GDP growth rates. As such, during 2014, some signs of economic recovery started to be felt in the European countries, with improved consumer confidence levels, which was also evidenced by some recovery felt in both construction and furniture markets, especially in Northern Europe. Iberian Peninsula, although at a much slower rhythm, has also started to show signs of improvement in the consuming patterns, but unemployment continues to be an area of concern, constraining some of the consumer decisions, notwithstanding the reduction witnessed in this rate in Portugal during 2014 (from 15.1% in the first quarter to 13.1%2 in the third quarter).
In North America, and in spite of the economic recovery felt in the United States with reduced unemployment rates, low interest rates and strong economic growth, the housing market failed to gain the anticipated momentum. Nevertheless, the number of housing starts increased (close to 1 billion units in 20143 ), with positive consequences in the consumption of wood based panels products, compensating the decline felt in the Canadian construction segment.
The South African economy has started to show some signs of improvement, with economic activity picking up. Nevertheless, the country still faces some important challenges that condition the development and the production activities of key economic sectors. Namely the wave of strikes that started in 2013, a reflection of the social pressures felt in the country, persisted in 2014, with the post office strike affecting negatively the economic performance. Another factor that is hurting this somehow stagnant economy is the constant power cuts due to inability of the electricity supply in meeting the increasing demand, with negative impacts in the cost structure of the manufacturing industries.
In terms of performance of the relevant consumer industries of Sonae Indústria products, the activity of the construction sector has improved in Spain, Germany, United States and South Africa, with y.o.y increases in the number of housing permits granted in these countries, whilst Portugal and Canada present a decreasing trend in 2014, when compared to 2013 performance.
3 Source: RISI, February 2015.
2 Source: Banco de Portugal, Boletim Estatístico, January 2015.
According to the estimates released by the European Panel Federation (EPF) in June 2014 4 (the latest available data), the demand faced by the European wood panels sector during 2014 is expected to have started to show some positive signs of improvement, notwithstanding the low performance of both the furniture and construction industries. This continues to be a reflection of the current European economic context, especially in the Southern Europe countries, where the reduced levels of disposable income continue to condition the consumption behaviour, especially for durable goods.
Analysing the performance by product, the European particleboard production in the EPF member countries, after the 5.5% drop experienced in 2012, and the 1.5% reduction of 2013, it is estimated that total production may have, for the 2014 year as a whole, slightly increased (+1.5%) when compared to 2013, which should translate into an overall production figure slightly below 29 million m3 . The behaviour of the production volumes is aligned with the estimated performance of the demand, as measured through the consumptions levels registered in the countries covered by the analysis.
In terms of MDF, the value of production in Europe is estimated to have improved by circa 2% in 2013 to a value slightly above 11 million m³. For 2014 and considering the European market as a whole, MDF consumption is forecasted to increase by circa 3% when compared to the previous year.
European production of OSB is estimated to have increased moderately by circa 6% in 2013, when compared to previous year, reaching a total output close to 3.8 million m3 . The 2014 performance should be similar to the one registered in 2013.
Contrasting with the relatively stable evolution in the European markets, the positive business climate experienced in the United States during 2014, supported by strong economic growth, declining unemployment and low interest rates was expected to have clear positive effects in the construction activity and, consequently, in the demand of wood based panel products in the region. The level of housing starts in the U.S. has increased when compared to the previous, but this evolution failed to gain the expected momentum. Canada continued to witness a disappointing evolution in terms of housing starts during 2014. Notwithstanding this, estimates released by FEA5 indicate that total North America particleboard consumption in 2014 was circa 0.7% above the value registered in 2013. Similar to the evolution on the particleboard segment, total consumption level of MDF during 2014 in region is estimated to have registered a 1.3% y.o.y. increase.
For 2014 particleboard segment in South Africa is expected to have remained under pressure in line with Furniture Retail trends, where demand remains severely constrained and weak. Nevertheless some positive signs were evidenced by improved levels of building permits in this country.
Preliminary figures released by the European Producers of Laminate Flooring (EPLF) indicate a slight increase in the total sales of flooring for 2014, when compared to 2013 (+0.4%6 ), expected to reach a total value close to 465 million m2 .
However if the evolution is considered just in terms of the Western European countries, total 2014 sales are estimated to have actually decreased, when compared to 2013, by approximately 3.6%, an evolution which is consistent with the disappointing trends experienced in the furniture and construction industries, especially in the Southern Europe countries.
6 Source: EPLF, Preliminary figures, World Sales of Flooring, evolution y.o.y. , February 2015
4 Source: EPF, Annual Report 2013-2014, June 2014
5 Source: FEA, Forest Economic Advisors, LLC, PB and MDF Forecast, February 2015
At the end of 2014, Sonae Indústria classified as "discontinued operations" the results of the industrial French units Auxerre and Le Creusot (which were sold in April of 2014), of Pontecaldelas plant (in Spain, whose production activities were stopped during the 1st half of 2014), and of the industrial units of Ussel and Linxe (in France) and Betanzos (in Spain). The analysis presented in this chapter excludes the contribution of the operations classified as "discontinued operations".
2013: restated, consolidating the investment in joint ventures companies according to the Equity Method
Consolidated turnover for Sonae Indústria's continued operations was 1,015 million Euros in 2014, slightly below 2013 level (by 3.4%), on a comparable basis, mainly driven by lower demand in the OSB segment in Germany. In terms of breakdown, the reduction in the consolidated turnover was due to a combination of reduced sales volumes (2.5% below 2013) and slightly lower average selling prices (- 1% when compared to 2013). Top line performance was also negatively impacted in terms of sales mix by the reduced weight of OSB in the sales mix. In the 4Q14, compared to same quarter of 2013, consolidated turnover was 4% below.
In consolidated terms, average variable costs per m3 improved by 1.1%, notwithstanding the pressure from wood and electricity costs. Improvement in the average chemical costs was the main contributor to this decrease. On a quarterly basis, and when compared to previous quarter, unitary variable cost were up by 1.9%, a normal seasonal effect due to the winter period.
Importantly, Sonae Indústria continued to optimize the fixed cost structure thanks to the implementation of several initiatives to adapt the support structures to the reduced industrial footprint. As such, the company was able to achieve a reduction in total fixed costs, on a comparable basis, i.e., without the contribution of the operations considered as discontinued, by approximately 3% in the year, representing a reduction of 7 million Euros when compared to the 2013 value. At the end of 2014, Sonae Indústria's recurrent fixed costs (without the contribution of the operations considered as discontinued and restructuring costs) represented circa 19% of the company's consolidated turnover vs. 20% in 2013.
Total headcount was of 3,596 FTEs at December 2014, a reduction of 574 FTEs when compared to the end of 2013, which is mainly explained by the sale of the two plants in France (Auxerre and Le Creusot), the closure of Pontecaldelasflooring operations in Spain, the definitive stoppage of Horn particleboard operations and the streamlining of the group's supporting structures.
It is important to highlight that, in 2014, the average capacity utilization index of Sonae Indústria plants continued to improve, reaching circa 75%, an increase of 2 p.p. when compared to 2013. Importantly, it should be noted that on a comparable basis, i.e., excluding discontinued production lines, the average capacity utilization index of the group increased to 77.9% (vs. 74.4% for 2013).This improvement was achieved due to the positive contribution of PB operations that more than compensated the reduced capacity utilization level of OSB. This improved performance in the particleboard segment was achieved by concentrating production in the most efficient sites, a reflection of the group's strategy of adjusting the production capacity to the prevailing lower levels of market demand.
LTM: Last twelve months
Sonae Indústria Recurrent EBITDA for full year 2014 was of 96 million Euros, implying a Recurrent EBITDA margin of 9.4%, up by 1.2 p.p. when compared to 2013. Non-recurrent EBITDA items were close to -6 million Euros in the year and were mainly related with redundancy costs (5.2 million Euros) and additional costs associated with inactive sites (15.5 million Euros). These costs were partly compensated by the income registered in relation to an insurance settlement (13.2 million Euros) associated with the discontinued plant in Knowsley (UK) and with the gains generated in the sale of part of the equipment of previously closed sites (2 million Euros). As result of these developments, total EBITDA for 2014 reached 90 million Euros, up by 17 million Euros, when compared to similar scope in 2013.
Southern Europe performance analysis considers the performance of the operations considered as "continued" in the Iberian Peninsula plus West Europe and overseas Export activities, thus excluding France operations, Betanzos and Pontecaldelas plants.
*Turnover per region includes intercompany group sales (between regions)
Southern Europe performance continued to be, throughout 2014, negatively impacted by the prevailing challenging macroeconomic conditions, with restrictive credit conditions and high marginal tax rates over households' disposable income. These measures conditioned the families' capacity to invest in durable goods. As such, the construction activity in Portugal continued to show a y.o.y. decrease, with housing permits granted decreasing by 7.9%7 but some positive signs started to show in Spain, with an increase in the new housing indicator in this country (+5.1%8 , y.o.y.).
In terms of 2014 financial performance, and when compared to 2013, the following key items are worth highlighting for this region:
8 Source: Ministierio de Fomento, February 2015 (cumulative YTD evolution until November 2014)
7 Source: Instituto Nacional de Estatística, February 2015 ("Nova habitação residencial", cumulative YTD evolution until December 2014)
(R) Restated, consolidating the investment in the joint venture (Laminate Park) according to the Equity Method.
*Turnover per region includes intercompany group sales (between regions)
Northern Europe market performance showed some improvements during 2014, as evidenced by the evolution of new house construction permits in Germany (up by 4.3%9 in 2014). This continuous recovery in the construction segment was accompanied by improved demand on the furniture segments.
Driven by the above market conditions, the key highlights of the Northern Europe region performance during 2014 were the following:
9 Source: German Federal Statistics Office, February 2015 (cumulative YTD evolution until November 2014)
*Turnover per region includes intercompany group sales (between regions)
The North American market witnessed a mixed performance of the construction sector, with improved figures for the level of housing starts in U.S. market, up by 8%10 when compared to 2013, whilst the Canadian housing starts experienced a decline of 13%11 when compared to the previous year performance. In South Africa the construction market evidenced a similar trend to the one experienced in the U.S. market, with the level of residential building permits increasing by 6% 12 y.o.y.
In terms of financial performance, and when compared to 2013, the following key evolutions were experienced in these regions:
12 Source: Statistics South Africa, February 2015 (cumulative YTD evolution until November 2014).
10 Source: RISI, February 2015 (cumulative YTD evolution until December 2014).
11 Source: Canada Mortgage and Housing Corporation, February 2015 (cumulative YTD evolution until December 2014).
| P&L ACCOUNT | 2014 R / | 4Q14 R / | 4Q14 R / | |||||
|---|---|---|---|---|---|---|---|---|
| Million euros | 2013 R | 2014 R | 2013 R | 4Q13 R | 3Q14 R | 4Q14 R | 4Q13 R | 3Q14 R |
| Consolidated turnover | 1,051 | 1,015 | (3%) | 250 | 245 | 241 | (4%) | (2%) |
| Southern Europe* | 381 | 360 | (6%) | 9 3 |
8 3 |
8 5 |
(9%) | 3 % |
| Northern Europe* | 497 | 448 | (10%) | 115 | 108 | 9 9 |
(13%) | (8%) |
| Rest of the World* | 261 | 263 | 1 % |
6 1 |
6 8 |
7 0 |
13% | 2 % |
| Other operational income | 26 | 40 | 55% | 8 | 18 | 6 | (25%) | (69%) |
| EBITDA | 73 | 90 | 22% | 18 | 35 | 15 | (17%) | (57%) |
| Recurrent EBITDA | 87 | 96 | 10% | 20 | 26 | 23 | 13% | (12%) |
| Southern Europe | 2 1 |
2 2 |
4 % |
5 | 5 | 7 | 34% | 45% |
| Northern Europe | 2 8 |
3 7 |
33% | 7 | 1 1 |
5 | (22%) | (53%) |
| Rest of the World | 3 7 |
3 6 |
(3%) | 8 | 1 0 |
1 1 |
27% | 5 % |
| Recurrent EBITDA Margin % | 8.3% | 9.4% | 1.2 pp | 8.1% | 10.7% | 9.6% | 1.4 pp | -1.1 pp |
| Depreciation and amortisation | (63.3) | (64.1) | (1%) | (16) | (16) | (16) | (3%) | (0%) |
| Provisions and impairment Losses | (0.5) | (10.3) | - | (8) | (9) | 0 | (103%) | 103% |
| Operational profit | 12 | 18 | 50% | (5) | 11 | 0 | (109%) | (96%) |
| Net financial charges | (53.0) | (49.7) | 6 % |
(14) | (13) | (11) | 18% | 13% |
| o.w. Net interest charges | (29.4) | (30.7) | (4%) | (6) | (9) | (6) | 5 % |
37% |
| o.w. Net exchange differences | (0.4) | 0.9 | - | 0 | 1 | (0) | - | - |
| o.w. Net financial discounts | (14.2) | (13.2) | 7 % |
(4) | (3) | (4) | (2%) | (15%) |
| Share in results of Joint Ventures | (4.7) | (3.3) | 31% | (2) | (1) | (1) | (40%) | 41% |
| Profit before taxes continued operat. (EBT) | (46) | (35) | 24% | (21) | (3) | (12) | 40% | - |
| Taxes | 16 | (7) | 143% | (21) | 1 | 5 | 122% | - |
| o.w. Current tax | (6.9) | (5.8) | 16% | (2) | (2) | (2) | 12% | (14%) |
| o.w. Deferred tax | 2 3 |
(1.2) | - | 2 3 |
0 | (3) | 113% | - |
| Profit / (loss) from continued operations | (30) | (42) | (40%) | 1 | (4) | (17) | - | - |
| Profit / (loss) from discontinued operations | (49) | (74) | (51%) | (34) | (5) | (51) | - | - |
| Losses (income) attrib. to non-controllintg interests | (1) | (0) | 82% | (0) | 0 | (0) | (77%) | (138%) |
| Net profit/(loss) attributable to Equity Holders | (78) | (116) | (48%) | (33) | (10) | (68) | (107%) | - |
2014 R: Considering France operations, Betanzos and Pontecaldelas plants as "discontinued operations".
2013 R: According to IFRS 11, which replaces the former IAS 31, the investments in joint ventures (Laminate Park GmbH & Co. KG and Tecmasa, Reciclados de Andalucia, S. L.) are now mandatorily consolidated according to the Equity Method. The 2013 figures were restated accordingly, also considering France, Betanzos and Pontecaldelas as "discontinued operations".
*Turnover per region includes intercompany group sales (between regions).
As at the end of 2014, the French operations (carried out by the subsidiaries Isoroy and Darbo) as well as the operations of the hardboard plant and Pontecaldelas plant (in Spain) were classified as discontinued operations. The total contribution of these operations to the consolidated results of Sonae Indústria, including the losses of the year and, was booked under the consolidated income statement line "profit / (loss) from discontinued operations". As such, with the exception of this line, the consolidated income statement considers only the activity of the continued operations.
Consolidated EBITDA for 2014 was 90 million Euros, 17 million Euros above the 2013 value, on a comparable basis. This improvement was primarily due to better performance during second and third quarters, notwithstanding the impact of the non-recurrent costs associated with inactive sites and the additional negative impacts of the on-going restructuring measures. It should be highlighted that the non-recurrent costs of 21 million Euros were partly offset by the positive contribution of the insurance settlement received during the 3Q14 related with the discontinued Knowsley plant in UK, in a total amounting to 13.2 million Euros and with the gains generated in the sale of part of the equipment of previously closed sites (2 million Euros), leading to a net effect of -5.8 million Euros in the nonrecurrent EBITDA of 2014. As such, Sonae Indústria Recurrent EBITDA was 96 million Euros, up by 10% when compared to previous year, generating a Recurrent EBITDA margin of 9.4%, the best since 2007.
Recurrent EBITDA for the fourth quarter was 23 million Euros, with an implied recurrent EBITDA margin of 9.6% (up by 1.4 p.p. vs. 4Q13 R).
Depreciation and amortization charges for 2014 were of 64 million Euros, slightly above the value registered in 2013, on a comparable basis, by 1%.
Provisions and impairments losses registered in the year totalled a net amount of circa 10.3 million Euros, for continued operations: (i) net increase of 3.9 million Euros in provisions (majority related with the Horn restructuring process), and (ii) asset impairment losses of 6.3 million Euros, mostly in Germany, being the majority associated with the Horn site (booked in the last quarter of 2014). At the end of 2014, a net amount of 38 million Euros of impairments losses were booked for the discontinued operations, as a result of the calculation of their fair value, considering the potential market value of these industrial units.
When compared to 2013, Net Financial charges improved by 6% and were 3.2 million Euros below the value registered in the previous year, due to a lower level of net financial discounts and the positive contribution from net exchange differences. Net interest expense was 1.2 million Euros above 2013 due to a higher average cost of debt, which stood at approximately 6.1%, 0.6 p.p. above the level registered in the previous year. This evolution continued to be driven by the increase in spreads prevailing in Portugal and Spain, as Euribor rates remained at historically low levels. Nevertheless, it should be noted that the completion of the refinancing agreements made possible by the capital increase as allowed for a reduction of the average cost of debt to 5.3% on December 2014.
During 2014, an additional cost associated with deferred tax was booked, in the net amount of 1.2 million Euros. Current tax charges registered in 2014 were 5.8 million Euros, 1.1 million Euros lower than the value of 2013 mainly due to lower tax charges in all operations with exception of Canada.
The combination of the above factors led to a consolidated net loss of 42 million Euros for Continued Operations, a deterioration of 12 million Euros when compared to 2013. Nevertheless, it should be noted that the net result of the previous year was positively impacted by the 23 million Euros positive gain booked under deferred tax assets (the majority of which was related with the impact of the "Land and Buildings" revaluation carried out in 2013). Total net results were a loss of 116 million Euros, mostly driven by the impact of discontinued operations, in the amount of -74 million Euros.
In cumulative terms, since the beginning of 2014, Additions to Gross Fixed Tangible Assets reached 43million Euros, which compares with 22 million Euros during the same period in 2013. The majority of investments were associated with the strategic investments implemented in Nettgau, in Germany (associated with the increase of capacity of melamine production and in the enlargement of the wood
recycling facilities) and in Oliveira do Hospital, in Portugal (replacement of an old melamine facing line with a new line that allows the production of melamine-faced chipboard through a new technology named "Embossed in Register®"). These investments were in the amount of 23 million Euros and were fully completed during 2014.
From the remaining amount invested in 2014, circa 18 million Euros were related with maintenance and health & safety improvements in the continued operations and circa 1.7 million Euros were related with the "Non-current assets classified as available for sale".
| BALANCE SHEET | |||
|---|---|---|---|
| Million euros | 2013 | 2013 R | 2014 |
| Non current assets | 940 | 939 | 830 |
| Tangible assets | 811 | 791 | 700 |
| Goodwill | 82 | 82 | 82 |
| Deferred tax asset | 34 | 33 | 28 |
| Other non current assets | 13 | 32 | 20 |
| Current assets | 302 | 292 | 244 |
| Inventories | 123 | 118 | 99 |
| Trade debtors | 121 | 118 | 99 |
| Cash and cash equivalents | 27 | 27 | 12 |
| Other current assets | 30 | 29 | 35 |
| Non-current assets classified as available for sale | 4 | 4 | 12 |
| Total assets | 1,246 | 1,235 | 1,086 |
| Shareholders' Funds | 127 | 127 | 111 |
| Equity Holders | 128 | 128 | 111 |
| Non-controlling interests | (1) | (1) | (0) |
| Liabilities | 1,119 | 1,108 | 965 |
| Interest bearing debt | 705 | 702 | 576 |
| Non current | 275 | 275 | 457 |
| Current | 430 | 427 | 119 |
| Trade creditors | 156 | 153 | 156 |
| Other liabilities | 257 | 253 | 233 |
| Liabilities directly associated to non-current assets | 0 | 0 | 10 |
| classified as available for sale | |||
| Total Shareholders'Funds and liabilities | 1,246 | 1,235 | 1,086 |
| Net debt | 678 | 675 | 564 |
| Net debt to LTM recurrent EBITDA* | 8.4 x | 7.8 x | 5.9 x |
| Working Capital** | 88 | 82 | 41 |
2013 R: Restated, consolidating the investment in joint ventures according to the Equity Method.
*LTM: last twelve months
** Working Capital as defined by the company: Inventories + Trade Debtors – Trade Creditors
The value of the assets and liabilities of the discontinued operations of Isoroy and Darbo (France), as well as the hardboard plant, in Spain, are considered in two single lines: "Non-current assets classified as available for sale" and "Liabilities directly associated with non-current assets classified as available for sale". It is also worth noting that, as investments in joint ventures are now consolidated under the Equity method, the net value of their assets and liabilities is now considered in "Other current assets". In addition, it should be noted that the company's consolidated assets and liabilities, as at the end of
2014, were also impacted by the sale of two French plants (Auxerre and Le Creusot), by the sale of part of the discontinued equipment of Solsona site, in Spain, completed during the year. As such, the value of Tangible Assets at the end of 2014 was of 700 million Euros, 91 million below 2013 value, impacted by the aforementioned items.
Consolidated working capital decreased by 41 million Euros to 41 million Euros, when compared to December 2013 (restated values), due to the positive impact of improvements in the average collection period and reduced levels of inventories (also a direct consequence of a reduced industrial footprint), whilst the value of Trade Creditors was kept relatively stable.
At the end of 2014, net debt was significantly reduced by 111 million Euros, to 564 million Euros, when compared to the end of 2013, benefiting from proceeds of the Share Capital increase process that took place in 2014.
The combination of the improved level of recurrent EBITDA with the reduced level of Net Debt, lead to a significant improvement of the Net Debt to Recurrent EBITDA ratio to 5.9x (vs. 7.8x at December 2013, on a comparable basis).
Total Shareholder's Funds at the end of December 2014 amounted to 111 million Euros, negatively impacted by the net losses registered in the year (-116 million Euros), driven primarily by the negative contribution of the operations considered as discontinued. The negative impact of the net results of the year was almost fully compensated by the Share Capital increase in the amount of circa 112 million Euros.
During the 4th quarter of 2014, it was signed the final refinancing agreements with the two main creditor banks (representing the majority of Sonae Indústria's consolidated gross debt). In this way, Sonae Indústria achieved refinancing of 319 million Euros of debt, under significantly improved conditions, not only in terms of maturity profile (6 to 8 years final maturities, with a minimum 3 years grace period for principal repayments), but also in terms of cost of debt.
In addition, Sonae Indústria also signed an agreement to extend its trade receivables securitisation facility, with a maximum amount of 85 million Euros, until 30 September 2016.
Sonae Indústria, SGPS, SA, as the holding company of the Sonae Indústria Group, defines the strategic guidelines for the Group, actively manages shareholdings and monitors the business activity of its subsidiaries. In addition, the holding structure is responsible for the functioning of the group finance activities, allocating funds and managing the treasury requirements of its subsidiaries.
Sonae Indústria SGPS SA, as the holding company of the Group, on an individual accounts basis, generated a negative Net Result of 132,057,821.66 Euros for 2014.
The Board of Directors will propose at the Shareholders Annual General Meeting to transfer this negative Net Result to retained earnings.
For 2015, and as part of the defined strategy, we expect to pursue the necessary steps to complete the restructuring of the assets that are currently classified as available for sale, thus concluding the process of concentrating our wood based panels' production capacity in the most efficient plants. We also expect to capture the economic benefits of the strategic investments concluded during 2014. As previously indicated, this strategic plan is expected to better position the company to capture additional share of value added segments and increase the usage of recycled material in our plants.
In terms of variable costs, we expect to continue to face the same challenges in terms of input prices and availability of wood, due to the prevailing unbalance between demand and supply that subsists mostly in Europe. As such, we will continue to take the necessary measures to address this issue with the continuous improvement of our efficiencies, together with a balanced consumption of the different types of wood material, adapted to the specificities of each market.
The planned investments in OSB manufacturing facilities in Eastern Europe are expected to cause additional pressure in the balance between the supply and demand of this product in Northeast Europe. Nevertheless, we expect to partially mitigate this situation with a higher share of exports of our OSB products to other regions in Europe and, if possible, to overseas markets.
After the significant developments achieved during 2014 in terms of our capital structure, we again expect to be able to refinance most of the 2015 debt maturities, basically comprised of short term bank facilities and commercial paper, taking advantage of the much improved financial situation, and to continue to explore new sources of medium and long term financing.
We will continue to implement our strategic plan of concentrating our production in the most efficient plants, improving our sales mix with higher share of value added products, continuously seeking for operating efficiencies and productivity improvements and investing in training and improvement of our people's capabilities.
In 2015, and with the continuous support from our key stakeholders, we remain confident that we will be able to successfully complete the execution of the defined strategy, significantly improving the competitive position of the company and better positioning it for the future upturn of the economic cycle.
Sonae Indústria, SGPS, SA is a company listed in the NYSE Euronext Lisbon, with a majority shareholder – EFANOR – that currently controls approximately 68.6% of the share capital.
Sonae Indústria was a subsidiary of Sonae, SGPS until 2005, when a spin-off from that company took place, thus allowing the company to focus exclusively on its core competency: the production of wood-based panels.
Through sound corporate governance rules, efficient risk management and genuine concerns for the environment and the safety of its people, Sonae Indústria aim is to be recognized as a sustainable world leader in the wood-based panels industry.
Following the approval of the Board of Directors, on 6th May 2014 and on 29th October, of a Share Capital Increase of up to 150 million Euros, with the favourable opinion of the Statutory Audit Board, Sonae Indústria, SGPS, SA increased its share capital from 700 million Euros to 812,107,574.17 Euros through the issue and consequent subscription of 11,210,757,417 new ordinary, nominal, book-entry shares, without nominal value, with the issue value and unit subscription price of 0.01 Euros. The offer was addressed to shareholders with preemption rights, investors that acquired subscription rights and the general public, having been subscribed 74.74% of the total number of shares of the Offer, resulting in gross proceeds of 112,107,574.17 Euros.
The share price performance of Sonae Indústria is typically affected by macroeconomic cycles, as the financial performance of the company is highly dependent on the evolution of both the construction and the furniture industries. Over the past few years, Sonae Indústria share price may have also been affected by the sovereign debt crisis in Europe, namely as a result of the increased risk aversion of foreign investors towards investments in Portuguese securities. More recently, during 2014, the share price was also impacted by the turmoil felt in the Portuguese Stock Exchange and by the share capital increase process the company went through.
Under a context of macroeconomic and financial challenges, and turmoil in the Portuguese Capital Markets, the share price of Sonae Indústria decreased by approximately 99% during 2014. This decrease in the value of the share is mostly related with the issue price established for the new shares, at 0.01€.
The highest daily turnover in Sonae Indústria shares was registered on the day the new shares started trading in the Portuguese Stock Exchange, on December 3rd .
The minimum share price during 2014 was registered on December 29th (0.0059 Euros per share) and the maximum share price in 2014 was reached on February 21st (0.866 Euros per share).
Importantly, in terms of liquidity, Sonae Indústria's share had an average turnover of 4,390,031 shares per day during 2014, being the highest volume traded during the period post Share Capital increase, as expected.
| ISIN Code Bloomberg Code Reuters Code |
PTS3P0AM0017 SONI SONI.LS |
|||
|---|---|---|---|---|
| 2012 | 2013 | 2014 | ||
| Share Capital | 700,000,000 | 700,000,000 | 812,107,574.17 | |
| Total number of shares | 140,000,000 | 140,000,000 | 11,350,757,417 | |
| Net Results | -98,876,879 | -78,045,917 | -115,720,185 | |
| Net Results per share | -0.71 | -0.56 | -0.01 | |
| Dividends per share* | 0.00 | 0.00 | 0.00 | |
| Prices | ||||
| Year High | 0.7100 | 0.6630 | 0.8660 | |
| Year Low | 0.3900 | 0.4500 | 0.0059 | |
| Year Average | 0.5600 | 0.5559 | 0.4552 | |
| Share price as at 31-Dec | 0.4890 | 0.5630 | 0.0064 | |
| Market Capitalization as at 31-Dec | 68,460,000 | 78,820,000 | 72,644,847 | |
| Average trading volumes per day (shares) | 150,479 | 413,413 | 4,390,031 |
* distributed in the following year
During 2014, for the purpose of fulfilling the undertakings towards Sonae Indústria's employees and senior executives, foreseen under the Medium Term Incentive Plan, pursuant to the authorisations granted by shareholders at the Shareholders General Meeting, Sonae Indústria purchased between April 15 th and June 6th , through the Euronext Lisbon Stock Exchange, a total of 174,673 own shares, representing approximately 0.1248% of its share capital (at the date of acquisition). The average purchase price of these acquisitions was 0.610 Euros per share.
On 12th June 2014, in compliance with the undertakings under Sonae Indústria's employees and senior executives Medium Term Incentive Plan, Sonae Indústria sold, with discount, the 174,673 own shares, with an applicable reference price of €0.458 per share, by transactions executed over the counter, to the respective employees and senior executives.
Following the above identified transactions, Sonae Indústria, SGPS, SA did not hold, as at the end of 2014, any own shares.
The Board of Directors has set a target to distribute to its shareholders 50% of the company's yearly profits.
The actual dividend pay-out ratio is proposed by the Board of Directors each year, taking into consideration the sustainability of the company's capital structure and the available financing sources, as well as the current investment plans.
Sonae Indústria credit risk derives mainly from account receivables items associated with its operating activity.
The main objective of Sonae Indústria Credit Risk Management is to guarantee the effective collection of its operating receivables, according to the most reduced payment terms possible, while maintaining the level of debtors' impairments as low as possible.
In order to mitigate credit risk related with potential customers defaulting on payment of outstanding receivables, Group companies have:
To foster the sharing of experiences, the alignment of procedures and practices and to ensure the enforcement of sound controlling rules, Sonae Indústria promotes, on a regular basis, the "Customer's Credit Risk Management Forum".
In addition to its operating activities and the related trade debtor balances, Group companies have other financial assets, which are mainly associated with its cash management activities and with deposits in financial institutions. As a result of these bank movements and balances, credit risk arises from the potential counterparty default by the applicable financial institutions. This risk is, nevertheless, considered as low due to the limited amounts typically involved in bank deposits and to the creditability of the financial institutions used by group companies.
Due to the significant proportion of floating rate debt on Sonae Indústria's consolidated Statements of Financial Position and the consequent cash flows related to interest payments, the company is exposed to interest rate risk.
As a general rule, Sonae Indústria does not hedge its exposure to floating interest rates. This approach is based on the principle of the existence of a positive correlation between the interest rate levels and the "operating cash flow before net interest charges", which creates a natural hedge on the "operating cash flow after net interest charges" for Sonae Indústria.
As an exception to its general rule, Sonae Indústria may engage in certain interest rates derivatives, solely aimed at hedging existing risk exposures and to only to the extent that the risks and valuation of such derivatives can be accurately assessed by the company. Sonae Indústria subsidiaries do not engage in interest rate derivatives for trading, speculative or profit making purposes.
As a geographically diversified Group with subsidiaries spread throughout three different continents, Sonae Indústria is exposed to foreign exchange risk. Consolidated Statements of Financial Position and Profit and Loss are exposed to foreign exchange translation risk and Sonae Indústria subsidiaries are exposed to foreign exchange risk of both translation and transaction type.
As a Group rule, whenever possible and economically viable, subsidiaries aim to offset assets and liabilities denominated in the same foreign currency, thus mitigating exchange risks.
Also as a rule, in situations where relevant exchange risk arises from trade in a currency other than that of the subsidiary, exchange risk should be mitigated through the use of short term forward exchange rate agreements contracted by the subsidiary exposed to such risk. Sonae Indústria subsidiaries do not engage in forward exchange rate agreements for trading, speculative or profit making purposes.
As a policy, translation risk in connection with the conversion of the Equity investments in foreign non-Euro subsidiaries is not hedged, as these are considered long-term investments. Also, it is assumed that hedging transactions would not add value in the long term. Gains and losses related to the translation at different exchange rates of Equity investments in foreign non-Euro subsidiaries are accounted under the "accumulated other comprehensive income".
Liquidity risk management in Sonae Indústria aims to ensure that the Company can obtain, on a timely basis, the financing required to properly carry on its business activities, implement its strategy and meet its payment obligations when due, under the most favourable terms and conditions.
For this purpose, Liquidity Management at the Group comprises:
Sonae Indústria and its subsidiaries are required, and actively promote, respect for applicable laws in countries and regions where they operate. Changes in these legal environments can result in changes or restrictions to the present conditions of exploitation and can lead to increased costs.
Sonae Indústria, SGPS, SA is and intends to continue being recognised for the way it abides by the rules and values of competition based on merit, the force of free markets and unrestricted respect for the consumer. In order to achieve that goal, measures are in place to reinforce the promotion and dissemination of the existing compliance initiatives within the Group. Such measures include training for employees in order to ensure that all parts of our organisation, across all geographies, have a deeper and more complete awareness of and a more rigorous respect for their legal obligations.
The production of wood-based panels is an industrial activity with a significant operational risk, which arises from eventual fire and explosion accidents. Consequently, operational risk management is a key concern of the company and we are active in the implementation of standards and best practices and in the selection of systems that are capable of reducing industrial risks.
For a detailed description of these risks and the initiatives undertaken to mitigate them, please refer to the Corporate Governance Report.
At Sonae Indústria, we believe that people are the support to drive change towards the future. We care for the safety and well-being of our employees and we strive to support their personal and professional development so that they fulfil their own career goals. Each employee is an individual and it is this diversity that makes up the richness in Sonae Indústria's culture. We have expressed our commitment towards our people in the corporate values of Cooperation, Non-discrimination and Health and Safety.
At the end of 2014, Sonae Indústria in total employed 3,596 people in 8 different countries. The reduction against the end of 2013 is mostly explained by the sale of the two French plants, Auxerre and Le Creusot, the closure of laminate flooring operations, and the streamline of the group support structures.
Workforce by age group
The most representative age group at Sonae Indústria corresponds to ages between 45 and 54 years old (corresponding to 35% of the total employees). It should also be noted that women represent approximately 17% of the total workforce of the company, evidencing a slight increase (+1 p.p.) when compared to 2013.
Over the last years, productivity has been strongly increasing, particularly driven by the restructuring process that we went through.
Absenteeism rate (%)
Absenteeism had been consistently decreasing over the last years, but experienced an increase in the last two years, due to due to long term illness leaves in Portugal. In face of these results, Sonae Indústria took the decision to set up a working group to address this area in order to reduce the absenteeism levels in a responsible way.
Training hours and % by employee
Notwithstanding lower levels of training hours registered in the past two years, training continues to be a priority for Sonae Industria. In 2014 the number of training hours per employee increased significantly, being the results of the IoW (Improving our Work) training initiatives, which involves a significant number of participants and
training hours. Similar to last year, these continuous improvement programs that were supported by external entities, have now been replaced with internal training activities and best practices sharing in specific forums.
With the objective of developing and improving the characteristics of our products and to build a Centre for Research, Development and Innovation, we have developed a partnership with two Portuguese universities, Faculdade de Engenharia da Universidade do Porto (FEUP) and Escola Superior Tecnológica de Viseu (ESTV), with the support of ARCP - Associação Rede de Competência em Polímeros 13(an association. This partnership provides the basis for product and process innovation in the group and encourages the proximity between our company and the university community. At the moment, and within a competences framework defined, the main objectives of our research centre are the following:
With the above objectives in mind, Sonae Indústria, though one of its subsidiaries, Eurosinas, has a series of facilities and equipment in the university's campus.
With this partnership Sonae Indústria has privileged access to equipment and techniques, knowledge of the researchers, development of new technologies and methodologies and a permanent access to high value technicians that could be potentially be integrated in company.
We believe that irrespective of nationality, at Sonae Indústria most of our people have a common inherent desire to improve the conditions of those in need in the local communities where we are present. In some specific situations, the employees become involved in social institutions or charities, and the company encourages its people to actively participate in these initiatives.
In the different countries where Sonae Indústria operates, the specific needs for help and contribution vary greatly depending on the communities' level of welfare, presence of social security systems as well as the culture and values of the local citizens. Therefore, the community-related activities are prioritized and managed at local level.
Sonae Indústria also opens the doors of both its head office and manufacturing plants to high school and university students. In 2014, 270 students visited both our Corporate Centre and the industrial units of Mangualde and Oliveira do Hospital, in Portugal. With these visits, the students have a brief insight of the daily tasks performed at these locations, and start to have a better understanding of Sonae Indústria's business.
In Portugal, the voluntary programme T-Shirt is active since 2008, continuously supporting the local community where Sonae Indústria units are located, through the implementation of initiatives and campaigns to increase awareness among employees by involving them in the community issues.
The T-shirt programme gives all company employees the opportunity to put on the socially responsible t-shirt and spend as much as three working days every year doing volunteer work. The days are funded by the company with the aim of encouraging employees to engage in local communities and projects.
14 Volatile organic compound emissions
13 Association Network for Competence in Polymers
Education and children's wellbeing is an important part of this commitment and in 2014 the group continued to work with the Woody education programme. Sonae Indústria volunteers visit local schools to promote the virtuous cycle of wood to children from pre-school to 4th grade. By starting at an early age, children will grow up with an understanding of the need for and the advantages of recycling. With this aim in mind, it was printed a 40 page soft covered book were "Woody" tells the story of how he needs the forest and the trees to survive. Woody becomes, as such, a tool to teach children about the important role trees play in the survival of the planet and encourages them to be more aware of the environmental matters and the impact they may have on our daily lives. This project is a reflection of the company's commitment to appeal to the reflection on the impact of the forest in everyday life, and specifically on the environmental, social and economic levels, portraying, for example, life in the forest, the economic activities associated with the forestry sector, the use in day-to-day products and services originating from the forest and also promoting the recycling of wood.
During 2014 Sonae Indústria volunteers visited 3 schools and 11 classes to teach 162 children the importance of looking after the forests. Since the program started in October of 2011, the company volunteers have visited 44 schools, 144 classrooms and had the privilege of spending these hours with 3,057 children.
During the month of December the usual Christmas Campaign was held and, once again, Sonae Indústria employees showed their solidarity by donating plenty of books, clothes and toys which were collected and then offered to local institutions.
Throughout the year, Sonae Indústria manufacturing units offered various donations to schools, institutions and universities. The products were distributed to nine institutions such as the Red Cross, local scout groups, fire departments and a local hospital.
With this initiative, similar to the past few years, Sonae Indústria aims to continue its environmentally responsible attitude, thus helping to protect the forest heritage, contributing to the sustainability of natural resources and drawing attention to the importance of national forests. In addition, it challenges economic players to jointly promote more and better forests, so that it may generate more value, both from an environmental and a socialeconomical perspectives.
In 2014, 109 employees, family and friends from Sonae Indústria units were involved in the reforestation process in Vouzela, to support Floresta Unida, an organization whose target is to plant 400 million trees in 30 years and protect 150 million others.
In Madrid, Sonae Indústria joined the Comedor Social de Ventas, and the result was the birth of a new hostel Asociación Manos Ayuda (Association Helping Hands). Sonae Indústria helped furnish this hostel with furniture donated by Movelpartes and with this helped to build new dreams!
Once again Spain went ahead with the food collecting campaign over the Christmas period. A total of 582 kilograms of food was donated by the staff from the five locations and distributed to the Red Cross, Caritas and the local Food Banks.
In Germany, Sonae Indústria companies made various contributions to institutions such as local Fire Brigades, a primary school and a gymnasium, amongst others.
The companies have also made contributions of group products to a Youth Centre and a Children's Playground in Beeskow.
In 2014, Tafisa Canada and its employees continued their engagement to support the Fondation du Centre de Santé et de Services Sociaux du Granit (Health and Social Services Foundation). The Foundation's main objective is to help maintain and improve the quality and quantity of care and services provided to the entire population of the MRC du Granit.
Tafisa Canada also supported "Project HOME", which was started by a group of students from the l'École d'Entrepreneurship de Beauce, as part of their training. The 21 entrepreneurs have agreed to use their contacts and energy to realize the construction of a 12-unit apartment building that will be given to the town of Lac-Mégantic. The affordable housing unit will be open in 2015 and help address the housing issue that rised since the destruction of Lac-Mégantic's downtown area in 2013.
Helping the community preserve a certain normalcy was also essential. Tafisa Canada ensured to continue supporting long-standing activities and events that provide people with the opportunity to get together and have fun, as well as promote the region through tourism. Tafisa Canada also made significant contributions to various sports activities involving children and employees.
In South Africa, Sonae Indústria's company, Sonae Novobord, has engaged in several actions, not only through financial assistance, but also through active partnerships, promoting and participating in awareness campaigns. The main focuses are Education (including bursaries and skills), Worldwide Fund for Nature (WWF) and providing education initiatives to teachers.
In 2014, Sonae Novobord continued to provide support for the youth, ensuring a framework to help them grow and, hopefully, realize their full potential.
Integrated in the global program of the company, during this year, the following activities were carried out:
The management of CSI initiatives is the responsibility of a defined committee that is chaired by an independent consultant, being the remaining members Sonae Novobord employees.
During 2014, several actions, best practices and improved procedures continued to be implemented across our plants, with the objective of continuously improving Sonae Indústria's safety indicators.
The figure below represents the country-wide and global Lost Workday Cases (LWC) rate15:
LWC Rate = (Number of LWC x 200,000) / Number of hours worked calculated on a 200,000 employee-hour base (100 full-time employees working 50 weeks, 40 hours per week).
15 Lost Workday Cases: Any occupational injury or illness that prevents the employee from reporting to work on any subsequent scheduled shift. Fatal injuries and illnesses are LWCs regardless of the time between injury and decease in length of the illness.
The overall LWC rate of Sonae Industria improved 14% (compared with 2013 rate). Notwithstanding this important result, that is coherent with the previous year's performance, evidencing that we are on the right path to achieve our goals in the medium term, we believe that we still need to improve further to achieve the targets set. As such, the reduction in the number of accidents must be the result of an effective and sustained decrease in all our sites, within Sonae Indústria group, and not only the result of the combination of different factors that randomly contribute for its improvement.
To support the above approach and objective, it was implemented in the beginning of 2014 a Communication Incident Procedure that determines, as mandatory, the report of all accidents, together with its investigation results, in a way to promote the identification of the real root causes of the incidents, promoting the implementation of suitable actions. This has been another significant step in raising awareness for the Health & Safety issues inside the group, and in promoting a broader engagement of all our employees regarding Health & Safety procedures. We expect the implementation of this new procedure to significantly impact our group results, supporting the consistent improvement of our Health & Safety indicators.
Looking at the results by operation, it is worth highlighting the good results achieved in Germany, Non-Board Business and in Canada (reductions of 19%, 26%, and 68%, respectively, when compared with last year). In Iberian Peninsula several accidents were registered during the year which led to a significant increase in the LWC rate (+48% when compared to 2013). In France it was also witnessed a slight increase (up by 3% when compared with 2013) due to higher number of accidents vs. previous year.
The Severity rate is related with the seriousness of the injuries based on the days lost, and is meant to show the level of safety problems by exposing how critical each injury is.
Contrary to the improved value of the LWC rate, the Severity rate16 increased globally by 17% in 2014, when compared with the previous year. The main factor that contributed to this increase was the seriousness of the incidents occurred in the Iberian Peninsula, leading to a significant increase in the rate of this region and consequently impacting negatively the global rate of the group. Notwithstanding the negative evolution of the global index, it must be highlighted the good improvement occurred in France (-34%), Canada (-75%) and South Africa (-16%). In France, despite the increase in the number of occurrences, its consequences were less severe than in previous year, thus leading to a reduction in the level of the rate in this country.
Notwithstanding these results, our main aim remains unchanged and we will strive to continue to reduce these rates year on year.
Wood is Sonae Indústria's primary raw material. As a major user of this natural, renewable and recyclable material, we believe that using recycled wood and wood by-products in our production is part of our sustained contribution towards mitigating CO2 emissions and climate change.
In the figures below we present the global evolution of the wood mix consumption and wood use efficiency figures, which illustrate our continuous efforts within this key operational area.
Global specific wood consumption for Sonae Indústria's portfolio was slightly lower when compared to 2013, and aligned with the best performance in the last 5 years. This was mainly a result of the improvements registered in the MDF production activities in Portugal, Spain, France and Germany (Laminate flooring jointventure).
Wood consumption by type
16 Severity Rate = Number of workdays lost due to LWC*1,000 / Number of hours worked
The global wood supply mix of Sonae Indústria revealed an improvement in the value of the recycled raw materials contribution. This was mainly due to the continued increase of recycled wood consumption of Sonae Indústria's Canadian operation, following the investment in recycling equipment done in the previous year.
During 2014, the relative contribution of sawmill by-products also increased, partly compensating the trend of the previous years.
Municipal, surface and underground water
As it is well known, globally, clean water is steadily becoming a scarcer resource. As Sonae Indústria's production processes require water, it is the company's objective to continuously make sustained efforts to re-use treated wastewater and to measure and reduce the levels of water consumption as far as possible.
MDF manufacturing process consumes higher volumes of water when compared with both the particleboard and the OSB production processes. Following the restructuring processes undergone by Sonae Indústria in the recent years, MDF production is gaining a higher weight in the global panel's production portfolio of the group. As such, Sonae Indústria's global specific water consumption figures have been increasing in the past years, as shown in the chart below.
The above mentioned effect was more visible in the group's French operations, and at a lower level, also in the Spanish operations.
The global indicator on specific waste generation registered an increase in 2014, when compared to 2013 performance, having all countries operations contributed to this increase. Notwithstanding the overall negative performance, it must be highlighted that this indicator was improved in all active manufacturing sites. The negative performance was caused by the contribution of the inactive operations of Horn site.
Quality, environmental and Health & Safety management systems are an important part of Sonae Indústria's standardised way of operating. During 2014, there were no significant changes to the certification situation for these areas, that already portraits a good example in terms of certification level.
Energy management has also gradually been incorporated in Sonae Indústria integrated view for standardised management systems. In this case, several plants have already formalised their system implementation, based in the ISO 50001 international standard. At this moment, all Sonae Indústria German operations, as well as the MDF operation of Mangualde, in Portugal, have this independent certification.
At the end of 2014, the situation regarding the certification of chain-of-custody for forest-based raw materials in Sonae Indústria operations was the following:
The situation of Sonae Indústria management systems certifications, at the end of 2014, was the following:
| Quality | Environment | Energy | Forest products chain-of- custody |
Health & Safety |
||
|---|---|---|---|---|---|---|
| ISO 9001 | ISO 14001 | ISO 50001 | PEFC | FSC | OHSAS 18001 |
|
| Maia* | $\infty$ | $\odot$ | $\odot$ | $\odot$ | ||
| Mangualde | $\bigotimes$ | $\bigodot$ | $\bullet$ | $\bigcirc$ | $\odot$ | $\bigodot$ |
| Oliveira do Hospital | $\bigotimes$ | $\bigodot$ | $\bigcirc$ | $\odot$ | $\odot$ | |
| Sines** | $\bigotimes$ | $\odot$ | $\odot$ | $\odot$ | ||
| Alcanede*** | $\bigotimes$ | $\bigodot$ | $\bigodot$ | |||
| Vilela*** | $\bigotimes$ | $\odot$ | $\odot$ | |||
| Castelo de Paiva**** | $\bigotimes$ | $\bigodot$ | $\bigcirc$ | $\odot$ | $\odot$ | |
| Betanzos | $\bigotimes$ | $\odot$ | $\odot$ | $\odot$ | $\bigodot$ | |
| Linares | $\bigotimes$ | $\bigodot$ | $\odot$ | $\odot$ | $\bigodot$ | |
| Valladolid | $\bigotimes$ | $\bigodot$ | $\bigodot$ | $\odot$ | $\bigcirc$ | |
| Cuellar* | $\bigotimes$ | $\bigodot$ | $\bigodot$ | $\bigodot$ | $\bigodot$ | |
| Linxe | $\bigotimes$ | $\odot$ | $\odot$ | |||
| Ussel | $\bigotimes$ | $\odot$ | $\odot$ | |||
| Meppen | $\bigotimes$ | $\bigodot$ | Ø | $\odot$ | $\odot$ | $\bigodot$ |
| Eiweiler | $\bigotimes$ | $\bigodot$ | ◙ | $\odot$ | $\odot$ | $\bigcirc$ |
| Nettgau | $\bigotimes$ | $\bigodot$ | $\bullet$ | $\bigcirc$ | $\bigodot$ | $\bigodot$ |
| Hörn | $\bigotimes$ | $\bigodot$ | $\bullet$ | $\odot$ | $\bigodot$ | $\bigodot$ |
| Beeskow | $\bigotimes$ | $\bigodot$ | Ø | $\bigcirc$ | $\bigodot$ | $\bigcirc$ |
| Kaisersesch** | $\bigotimes$ | $\bigodot$ | Ø | $\odot$ | $\bigodot$ | $\bigodot$ |
| Panbult | $\bigotimes$ | $\odot$ | $\odot$ | $\odot$ | ||
| White River | $\bigotimes$ | $\bigodot$ | $\odot$ | $\bigcirc$ | ||
| Lac-Mégantic | $\bigotimes$ | $\odot$ | $\odot$ | $\bigodot$ |
* HPL plant
** Resin and paper impregnation plant
*** Components plant
**** Wood venner plant
***** Sawmill
****** Paper impregnation plant
All Non-Executive Board Members of Sonae Indústria are part of the Board Committees (for a full description of composition and main tasks of each committee please refer to the Corporate Governance Report). In this context, these Board Members analyse matters that are within the competence of the respective Committee, giving guidance to the company about them and making proposals to the Board of Directors. Beyond the participation in Board committees, Non-Executive Board Members are actively participating in meetings of the Board of Directors, where they discuss and question the decisions taken. According to their respective professional experience, Non-Executive Board Members also participate in the analysis of industrial optimisation projects, of restructuring and expansion projects and in the development of relevant international networking with possible partners and authorities in current and potential geographical areas of investment.
The Board of Directors would like to thank the shareholders, customers, suppliers, financial institutions and other business associates of Sonae Indústria for their continuing involvement and for the confidence that they have once more shown in the organisation, with special emphasis for the support given during the Share Capital increase and refinancing processes.
The Board of Directors would also like to express its sincere gratitude towards all employees for their efforts, commitment and dedication demonstrated throughout the year.
26th February 2015,
The Board of Directors,
Belmiro de Azevedo
_________________________
_________________________
_________________________
_________________________
Carlos Moreira da Silva
________________________
________________________
_________________________
_________________________
Paulo Azevedo
Rui Correia
Albrecht Ehlers
Chris Lawrie
Javier Vega
Jan Bergmann
| Acquisitions | Subscription of Share Capital Increase | Sales | Balance at 31.12.2014 |
|||||
|---|---|---|---|---|---|---|---|---|
| Date | amount | € average value | amount | € value | amount | € average value | amount | |
| Belmiro Mendes de Azevedo Efanor Investimentos, SGPS, SA (1) ( 1 share is held by the spouse) Sonae Indústria, SGPS, SA ( held by the spouse ) |
49,999,997 1,010 |
|||||||
| Duarte Paulo Teixeira de Azevedo Efanor Investimentos, SGPS, SA (1) Migracom, SGPS, SA (2) |
1 1,999,996 |
|||||||
| Rui Manuel Gonçalves Correia Sonae Indústria, SGPS, SA Acquisition resulting from the allocation of shares under the Medium Term Incentive Plan |
12/06/2014 | 50 452 | 0,458* | 6 807 809 | ||||
| Subscription of Share Capital Increase Agostinho Conceição Guedes Sonae Indústria, SGPS, SA |
28/11/2014 | 6 744 857 | 0,01 | 2,520 | ||||
| Acquisitions | Subscription of Share Capital Increase | Sales | Balance at 31.12.2014 |
|||||
| Date | amount | € average value | amount | € value | amount | € average value | amount | |
| (1) Efanor Investimentos, SGPS, SA Sonae Indústria, SGPS, SA Subscription of Share Capital Increase Pareuro, BV (3) |
28/11/2014 | 4 797 857 142 | 0,01 | 4,842,637,142 5,583,100 |
||||
| (2) Migracom, SGPS, SA Sonae Indústria, SGPS, SA Subscription of Share Capital Increase Imparfim, SGPS, SA (4) |
28-11-204 | 9 642 857 | 0,01 | 9 732 857 150,000 |
||||
| (3) Pareuro, BV Sonae Indústria, SGPS, SA Subscription of Share Capital Increase |
28/11/2014 | 2 905 569 107 | 0,01 | 2 932 687 752 | ||||
| (4) Imparfin, SGPS, SA Sonae Indústria, SGPS, SA Subscription of Share Capital Increase |
28/11/2014 | 29 820 428 | 0,01 | 30 098 752 |
* Reference price aplicable to the transaction
| Number of shares at 31.12.2014 | |
|---|---|
| Efanor Investimentos, SGPS, SA Sonae Indústria,SGPS, SA |
4,842,637,142 |
| Pareuro, BV | 5,583,100 |
| Pareuro, BV Sonae Indústria, SGPS, SA |
2,932,687,752 |
Complying with Article 8, no.1 b) of the CMVM Regulation nº 05/2008
| Shareholder | No. of shares | % Share Capital | % Voting rights |
|---|---|---|---|
| Efanor Investimentos, SGPS, SA (1) | |||
| Directly | 4,842,637,142 | 42.6636% | 42.6636% |
| By Pareuro, BV ( controlled by Efanor) | 2,932,687,752 | 25.8369% | 25.8369% |
| By Maria Margarida CarvalhaisTeixeira de Azevedo (Director of Efanor) | 1,010 | 0.000009% | 0.000009% |
| By Migracom, SGPS,SA (Company controlled by Efanor´s Director, Paulo Azevedo) | 9,732,857 | 0.0857% | 0.0857% |
| By Linhacom, SGPS,SA (Company controlled by Efanor´s Director, Cláudia Azevedo) | 2,507,400 | 0.0221% | 0.0221% |
| Total allocation | 7,787,566,161 | 68.6083% | 68.6083% |
(1) Under the terms of paragraph b) of no. 1 of Article 20 and of no. 1 of Article 21 of the Portuguese Securities Code, Belmiro Mendes de Azevedo is the ultimate beneficial owner, since he holds around 99% of the share capital and voting rights of Efanor Investimentos SGPS, SA, which, in her turn, is the dominant company of Pareuro BV.
(Free translation from the original in Portuguese)
| _________ | __________ |
|---|---|
| Belmiro Mendes de Azevedo | Carlos António da Rocha Moreira da Silva |
| _________ | _________ |
| Duarte Paulo Teixeira de Azevedo | Rui Manuel Gonçalves Correia |
| _________ | _________ |
| Javier Vega de Seoane Azpilicueta | George Christopher Lawrie |
| _________ | _________ |
| Albrecht Olof Luther Ehlers | Jan Bergmann |
| Capacity Utilization Index |
Finished-Available Production (m3 ) / Installed production capacity (m3 ); raw boards only |
|---|---|
| CAPEX | Investment in Tangible Fixed Assets |
| EBITDA | Earnings Before Interests and Taxes + Depreciations and Amortizations + (Provisions and impairment losses - Impairment losses in trade receivables + Reversion of impairment losses in trade receivables) |
| FTEs | Full Time Equivalent |
| Fixed Costs | Overheads + Personnel costs (internal and external); management accounts concept |
| Gross Debt | Bank loans + Debentures + Obligations under finance leases + other loans + Loans from related parties |
| Headcount | Total number of internal FTEs, excluding trainees |
| MDF | Medium Density Fibreboard |
| Net Debt | Gross Debt - Cash and cash equivalents |
| Net Debt to LTM Rec. EBITDA |
Net Debt / Last Twelve Months Recurrent EBITDA |
| OSB | Oriented Strand Board |
| Recurrent EBITDA | EBITDA excluding non-recurrent operational income / costs |
| Recurrent EBITDA margin | Recurrent EBITDA / Turnover |
| Turnover (regions) | Sales Finished Goods and merchandise + Services Rendered; excluding sales of other materials like for ex. wood by-products, management accounts concept |
| Working Capital | Inventories + Trade Debtors – Trade Creditors |
| Subscription of Share Capital Increase | Balance at 31.12.2014 |
|||
|---|---|---|---|---|
| Date | amount | € value | amount | |
| Rui Manuel Gonçalves Correia | ||||
| Sonae Indústria, SGPS, SA | 6,807,809 | |||
| Subscription of share capital increase | 28-11-2014 | 6,744,857 | 0.01 | |
| Efanor Investimentos, SGPS, SA* | ||||
| Sonae Indústria,SGPS, SA | 4,842,637,142 | |||
| Subscription of share capital increase | 28-11-2014 | 4,797,857,142 | 0.01 | |
| Pareuro BV* | ||||
| Sonae Indústria,SGPS, SA | 2,932,687,752 | |||
| Subscription of share capital increase | 28-11-2014 | 2,905,569,107 | 0.01 | |
| Migracom, SGPS, SA* | ||||
| Sonae Indústria,SGPS, SA | 9,732,857 | |||
| Subscription of share capital increase | 28-11-2014 | 9,642,857 | 0.01 | |
| Linhacom, SGPS, SA* | ||||
| Sonae Indústria,SGPS, SA | 2,507,400 | |||
| Subscription of share capital increase | 28-11-2014 | 2,484,214 | 0.01 | |
| Imparfin, SGPS, SA* | ||||
| Sonae Indústria,SGPS, SA | 30,098,752 | |||
| Subscription of share capital increase | 28-11-2014 | 29,820,428 | 0.01 |
*The communication obligations result from the fact that these companies constitute persons closely connected with the Person Discharging Managerial Responsibilities ("Dirigentes") of Efanor Investimentos, SGPS, SA, in the terms and for the purposes of no. 4 of Article 248-B of the Portuguese Securities Code, since these companies are entities direct or indirectly controlled by the Person Discharging Managerial Responsibilities ("Dirigentes"), or companies of which the Person Discharging Managerial Responsibilities ("Dirigentes") of Efanor Investimentos are also managers and in, same cases, are also Person Discharging Managerial Responsibilities ("Dirigentes") of Sonae Indústria, SGPS, SA, as hereinafter clarified
| Nº de Ações | % Direitos de Voto | |
|---|---|---|
| Belmiro Mendes de Azevedo | ||
| (director of Sonae Indústria and Efanor Investimentos) holds: | ||
| Efanor Investimentos, SGPS, SA | 49,999,996 | 99.999992 |
| Efanor Investimentos, SGPS, SA, held by Maria Margarida Carvalhais | ||
| Teixeira de Azevedo (spouse) | 1 | 0.000002 |
| Sonae Indústria, SGPS, SA held by Maria Margarida Carvalhais Teixeira de Azevedo | 1010 | 0.000009 |
| Efanor Investimentos, SGPS, SA hold: | ||
| Pareuro BV | 5,583,100 | 100 |
| Maria Margarida Carvalhais Teixeira de Azevedo | ||
| (director of Efanor Investimentos) holds: | ||
| Efanor Investimentos, SGPS, SA | 1 | 0.000002 |
| Efanor Investimentos, SGPS, SA holds by Belmiro Mendes de Azevedo (spouse) | 49,999,996 | 99.999992 |
| Sonae Indústria, SGPS, SA | 1010 | 0.000009 |
| Duarte Paulo Teixeira de Azevedo | ||
| (director of Sonae Indústria and Efanor Investimentos) holds: | ||
| Migracom, SGPS, SA | 1,999,996 | 98.4998 |
| Maria Cláudia Teixeira de Azevedo | ||
| (director of Efanor Investimentos) holds: | ||
| Linhacom, SGPS, SA | 99,996 | 99.996 |
Duarte Paulo Teixeira de Azevedo and Maria Cláudia Teixeira de Azevedo are directors of the company Imparfin, SGPS, SA
Sonae Indústria, SGPS, SA
Publicly Listed Company Share Capital € 812 107 574.17 Maia Commercial Registry and Tax Number 506 035 034
26 February 2015
| A. | SHAREHOLDER STRUCTURE 3 | |
|---|---|---|
| I. | Capital Structure 3 | |
| II. | Shareholdings and Bonds Held 4 | |
| B. | GOVERNING BODIES AND COMMITTEES 5 | |
| I. | General Meeting 5 | |
| a) | Composition of the general meeting board 5 | |
| b) | Exercise of Voting rights 5 | |
| II. | Management and Supervision 6 | |
| a) | Composition 6 | |
| b) | Functioning 10 | |
| c) | Committees within the Management and Supervisory bodies and board delegates 14 | |
| III. | Supervision 17 | |
| a) | Composition 17 | |
| b) | Functioning 19 | |
| c) | Responsibilities and functions 20 | |
| IV. | Statutory External Auditor 21 | |
| V. | External Auditor 21 | |
| C. | INTERNAL ORGANISATION 23 | |
| I. | Articles of Association 23 | |
| II. | Reporting of irregularities 23 | |
| III. | Internal Control and Risk Management 25 | |
| IV. | Investor Relations 34 | |
| V. | Website 34 | |
| D. | REMUNERATIONS 36 | |
| I. | Competencies for approval of remunerations 36 | |
| II. | Remunerations Committee 36 | |
| III. | Remuneration structure 37 | |
| IV. | Disclosure of Remuneration 42 | |
| V. | Agreements with impact on Remuneration 43 | |
| VI. | Share plans or stock options plans 43 | |
| E. | TRANSACTIONS WITH RELATED PARTIES 45 | |
| I. | Control mechanisms and procedures 45 | |
| II. | Information concerning transactions 46 | |
| PART II – ASSESSMENT OF THE CORPORATE GOVERNANCE 47 | ||
| 1. | Identification of the corporate governance code adopted 47 | |
| 2. | Analysis of compliance with the Corporate Governance Code adopted 47 | |
Sonae Indústria's share capital amounts to 812,107,574.17 Euros and is represented by 11,350,757,417 ordinary nominal shares without nominal value. All shares are admitted to trading on the NYSE Euronext Lisbon.
During the year 2014, Sonae Indústria increased its Share Capital from 700,000,000 euros to 812,107,574.17 euros, through a Public Offering and through a private placement for Institutional Investors, with the emission of 11,210,757,417 shares with an issue price of 0.01€ per share. The shares issued under the scope of the capital increase process were admitted to trading on 3rd December 2014.
No restrictions are in place regarding the transfer and sale of the company's shares.
The company at the date of 31st December 2014 did not own any of its own shares.
As of 31 December 2014, loans from financial institutions, amounted to a total circa 392 million Euros (69% of the consolidated net debt), relative to which the respective creditors have the option to consider the debt due in the event of a change in shareholder ownership.
| Summary | Million € | N. Contracts |
|---|---|---|
| Commercial Paper | 126 | 4 |
| Bonds | 150 | 1 |
| Bank Loans | 112 | 4 |
| Overdrafts | 4 | 2 |
| Total | 392 | 11 |
Nevertheless, such agreements do not harm the free trading of the company shares, nor they interfere with the shareholders evaluation on the management bodies' performance, as these defend the social interests, aiming to ensure the sustainability of the business in the long term under the current market conditions.
No other relevant agreements were established in relation to changes or cessation, in the event of a transfer in the control of the company.
There are no statutory constraints regarding the number of votes that may be cast by a single shareholder.
The company is unaware of the existence of a shareholders' agreement, which may restrict the transfer of securities or voting rights.
II. SHAREHOLDINGS AND BONDS HELD
| Shareholder | No. of shares % Share Capital | % Voting rights | |
|---|---|---|---|
| Efanor Investimentos, SGPS, SA (1) | |||
| Directly | 4,842,637,142 | 42.6636% | 42.6636% |
| By Pareuro, BV ( controlled by Efanor) | 2,932,687,752 | 25.8369% | 25.8369% |
| By Maria Margarida Carvalhais Teixeira de Azevedo (Director of Efanor) |
1,010 | 0.000009% | 0.000009% |
| By Migracom, SGPS,SA (Company controlled by Efanor´s Director, Paulo Azevedo) |
9,732,857 | 0.0857% | 0.0857% |
| By Linhacom, SGPS,SA (Company controlled by Efanor´s Director, Cláudia Azevedo) |
2,507,400 | 0.0221% | 0.0221% |
| Total allocation | 7,787,566,161 | 68.6083% | 68.6083% |
(1) Under the terms of paragraph b) of no. 1 of Article 20 and of no. 1 of Article 21 of the Portuguese Securities Code, Belmiro Mendes de Azevedo is the ultimate beneficial owner, since he holds around 99% of the share capital and voting rights of Efanor Investimentos SGPS, SA, which, in her turn, is the dominant company of Pareuro BV.
The Sonae Indústria directors detained the following company shares as of 31 December 2014:
| Number of Shares | Number of Shares | ||
|---|---|---|---|
| Belmiro Mendes de Azevedo | (1) Efanor Investimentos, SGPS, SA | ||
| Efanor Investimentos, SGPS, SA (1) | 49,999,997 | Sonae Indústria, SGPS, SA | 4,842,637,142 |
| (1 share is held by the spouse) | Pareuro, BV (2) | 5,583,100 | |
| Sonae Indústria, SGPS, SA | 1,010 | ||
| (held by the spouse) | |||
| Duarte Paulo Teixeira de Azevedo | (2) Pareuro, BV | ||
| Efanor Investimentos, SGPS, SA (1) | 1 | Sonae Indústria, SGPS, SA | 2,932,687,752 |
| Migracom, SGPS, SA (3) | 1,999,996 | ||
| (3) Migracom, SGPS, SA | |||
| Sonae Indústria, SGPS, SA | 9,732,857 | ||
| Rui Manuel Gonçalves Correia | Imparfin, SGPS, SA (4) | 150,000 | |
| Sonae Indústria, SGPS, SA | 6807809 | ||
| (4) Imparfin, SGPS, SA | |||
| Sonae Indústria, SGPS, SA | 30,098,752 | ||
The Sonae Indústria Board of Directors may decide to increase the company's share capital up to the amount of one thousand and two hundred million Euros, one of more times, through cash injections under the terms established by law. These powers were renewed in the General Meeting held on 4 April 2014 and may be
exercised over a period of five years from that date, notwithstanding the general meeting decision to renew these powers again.
The Board of Directors under the use of the powers that were attributed has decided in 2014, with the favourable opinion of the Supervisory Board to proceed with a share capital increase in an amount up to 150 million euros, limited to the subscriptions collected, which were in an amount of 112,107,574.17 euros, being this capital increase stated in the item 1 of this report.
There are no significant commercial relationships between the owners of the qualified shareholdings and the company.
| I. GENERAL MEETING |
||
|---|---|---|
| a) | Composition of the general meeting board |
The Board of the Shareholders' General Meeting was elected at the Shareholders' Annual General Meeting of Sonae Indústria held on 4 th April 2014, for the mandate 2012-2014 and is composed by:
António Agostinho Guedes served until March 2014 as Secretary of the General meeting Board.
| b) | Exercise of Voting rights | |
|---|---|---|
| ---- | --------------------------- | -- |
Under the terms of Sonae Indústria's Articles of Association, the Shareholders' General Meeting is composed only of shareholders with voting rights who provide evidence of their ownership, according to the terms established by law.
The Article 23º-C of the Securities Code, added, establishes that, who is entitled to participate, discuss and vote in the Shareholders' General Meeting, are shareholders who at the record date, which corresponds to 0 hours of the 5th trading day prior to the date of the meeting, hold at least one vote, according to law and the statutes.
Under the terms of Sonae Indústria's Articles of Association, shareholders may be represented at Shareholders' General Meetings under the terms established by the law and by the respective notice of the meeting.
Under Sonae Indústria's Articles of Association, Shareholders' General Meetings can meet at the first session, as long as shareholders representing over fifty percent of the Company's share capital are present or represented.
The Company's Articles of Association stipulate that, while the Company is regarded as a listed and "publicly traded company", shareholders are allowed to vote by post in relation to all items on the agenda of the Shareholders' General Meeting, following the rules for the exercise of voting by post. The Company's Articles of Association establish that votes can only be considered when sent to the headquarters of the Company by
registered post with notification of receipt addressed to the Chairman of the Shareholders' General Meeting. These votes should be received at least three days before the date of the General Meeting and are subject to the normal rules regarding evidence of share ownership. Postal votes are considered negative votes in relation to any proposals presented after the date on which they were issued. A standard form for postal voting is available at Sonae Indústria's corporate website www.sonaeindustria.com and at its head offices.
Sonae Indústria Articles of Association stipulate that the postal voting may be exercised by electronic means if this medium is made available to shareholders and is included in the notice of the meeting. This possibility has not been used yet. Nevertheless, the company is currently developing a system to implement the electronic vote, which is expected to be available for the Shareholder's General Meeting of 2016.
The preliminary information for the General Meeting and the proposals submitted by the Board of Directors are available at the time of disclosure of the notice of meeting.
The company has not adopted any mechanism that causes a time lag between the entitlement to receive dividends or the subscription of new securities and the right to vote of each share.
Each share corresponds to one vote, with no limitation.
The decisions are taken by simple majority, apart from when law stipulates otherwise.
| II. | MANAGEMENT AND SUPERVISION | |
|---|---|---|
| a) | Composition |
The Sonae Indústria's Articles of Association define a corporate governance model of the company composed by a Board of Directors, a Statutory Audit Board and a Statutory External Auditor.
The Board of Directors examines annually the advantages and possible disadvantages of adopting this model.
The Board of Directors believes that the model favours the interests of the company and its shareholders, being effective and having not faced any constraints to its operation.
Under the terms of the Articles of Association, the Board of Directors may consist of an even or odd number of members, with a minimum of five and a maximum of nine, elected by the General Meeting for three-year mandates.
Members of the Board of Directors are elected by the Shareholders' General Meeting. Groups of shareholders representing between 10% and 20% of the Company's share capital, may submit a stand-alone proposal to nominate a Director in advance of the Shareholders' General Meeting. Such shareholder cannot support more than one list of Directors and each list must identify at least two eligible persons to fill each position on the Board. If lists are submitted by more than one group of shareholders, the voting will be based on all of these lists.
In the event of death, resignation or temporary or permanent inability of any of the Directors, the Board of Directors is responsible for his or her replacement. If the Director in question was nominated by minority shareholders, a new separate election must be held.
The Sonae Indústria Board of Directors on 31 December 2014 comprised 8 directors, all elected in the Annual General Meeting held on 29 March 2012 for the 2012-2014 mandate, apart from George Christopher Lawrie, who was elected in the Annual General Meeting held on 12 April 2013 and of Carlos António da Rocha Moreira da Silva which was co-opted on the Board of Directors meeting of 12 November 2014, having both been elected until the end of the current mandate.
Date of the Sonae Indústia Directors first appointment:
On 31st December 2014 the Board of Directors of Sonae Indústria was composed of:
Among the eight (8) directors, three (3) are executive members and five (5) are non-executive members.
Among the non-executive Directors, three (3) are independent. As for the director Albrecht Olof Lothar Ehlers, it is deemed that the annual payment of 12,300 Euros, which he receives from the subsidiary Glunz, AG for his role as part of its Supervisory Board, does not compromise his independence.
Belmiro de Azevedo (Chairman of the Board of Directors): obtained a degree in Chemical Engineering at the University of Oporto, a PMD from Harvard Business School, participation in the Financial Management Programme from Stanford University and has occupied a diverse number of positions in the Efanor/Sonae Group from an early stage. Mr Belmiro de Azevedo is today Chairman of the Board of Sonae, SGPS, SA, Chairman of the Board of Sonae Capital, SGPS S.A., and member of the European Union Hong Kong Business Cooperation Committee, of the International Advisory Board of Allianz AG and of the Harvard Business School International Advisory Board. He has been awarded on a number of occasions, some of the most prominent being the "Encomienda de Numero de la Ordem del Mérito Civil" from His Majesty D.Juan Carlos, King of Spain, the "Ordem of the Cruzeiro do Sul" from the President of the Brazilian Federal Republic, the "Grã Cruz da Ordem do Infante D. Henrique" from the President of the Portuguese Republic, nomination as "Honorary Fellow" of the London Business School and member of the "Order of Outstanding Contributors to Sustainable Development" from the World Business Council for Sustainable Development.
Javier Vega (Independent): obtained a degree in Mining Engineering by the Escuela Técnica Superior de Ingenieros of Minas of Madrid and in Business Management from Glasgow Business School (UK). He was a member of the Board of Directors of several companies such as Robert Bosch, Red Electrica de España, SEAT and Grupo Ferrovial. Currently performs other Board positions.
Paulo Azevedo: Holds a degree in Chemical Engineering from the Lausanne Polytechnic School (Switzerland) and a post-graduate degree in Business Studies (MBA) from the Oporto Business School (ex-EGP). Was CEO of Optimus – Telecomunicações S.A. between 1998 and 2000; CEO of Sonaecom between 2000 and 2007 and is CEO of Sonae SGPS, S.A. since May 2007. Holds a number of managerial and directorship roles in the Efanor/Sonae Group. Paulo Azevedo is Belmiro de Azevedo's son.
Albrecht Ehlers (Independent): lawyer; law degree from the University of Münster (Germany). From 1987 to 2000 held various positions in the legal and human resources departments of Glunz AG, having been appointed in 1995 to join the Executive Board (Vorstand) of that company, with responsibilities in several areas including human resources and legal department. Between 2000 and 2004 he was senior vice president of Hochtief AG (Germany) with particular responsibility in the areas of human resources and corporate services. From 2004 until 2009 he joined the Executive Board (Vorstand) of that company. Since the year 2010 he holds functions of chancellor at the Technical University of Dortmund (Germany).
Carlos Moreira da Silva (Independent): Degree in Mechanical Engineering – Universidade do Porto, MSc in Management Sci. and Operational Research (University of Warwick – UK) and PhD in Management Sciences (University of Warwick – UK). Auxiliary professor of Faculdade de Engenharia of U.P. between November 1982 and March 1987, director of EDP, Electricidade de Portugal, E.P. (March 1987 and August 1988), occupied several positions in companies of Sonae Group / Sonae Indústria Group between September 1988 and January 2000, having, thereafter, in 2003, occupied the position of CEO of Sonae Indústria, SGPS, SA until April 2005, as well as in other companies of Sonae Indústria Group. Was member of Advisory Board of 3i Spain (2005-2012), member of the Supervisory Board of Jeronimo Martins Dystrybucja, SA (2009 to 2012) and Chairman of the Board of Directors of La Seda de Barcelona (2010-2014). Currently exercises position of Chairman of BA Group, is member of the Board of Directors of Banco BPI and member of the Management of Cotec Portugal."
Rui Correia (CEO): holds a degree in Economics from the University of Oporto and a post graduate degree in Business Management from the Oporto Institute of Business Studies. Having exercised functions in the Efanor/Sonae Group since 1994, he was head of the Finance Department of Sonae SGPS from 2000 and since 2001, he has also held a number of managerial and directorship roles in the Efanor/Sonae Group. He was appointed as Sonae Indústria CFO in 2005 and Sonae Indústria CEO in February 2013.
Christopher Lawrie (CFO): BA (Honours) Degree in Business Studies and Finance of Greenwich University (UK). He has broad experience in investment banking, having worked with Schroders, BZW and Credit Suisse where he was Director of the Corporate Finance Division covering specifically Southern European Telecoms markets. In 2001, he joined Sonae/Efanor Group as CFO of Sonaecom and, later, he was appointed CEO of Sonae Retail Properties. In 2013, he was appointed CFO of Sonae Indústria.
Jan Bergmann (CITO): obtained a degree in Engineering by Berlin University (Germany), "Dr.-ING" Technical University of Berlin, Business Administration and Finance for Technical Managers – European School of Management and Technology. Held various positions within the Group DuPont and joined Glunz AG in January 2011.
The non-executive director Belmiro de Azevedo is the majority shareholder of Efanor Investimentos, SGPS, SA and the non-executive director Paulo Azevedo is the son of Belmiro de Azevedo.
21. Organisational charts with distribution of competencies of the various statutory bodies, committees and/or departments of the company, including information regarding delegation of competencies, particularly in what concerns the delegation of day-to-day company business
The responsibilities of the different governing bodies and committees of the company is split as follows:
The Board of Directors has delegated powers to the Executive Committee to manage day-to-day operations of the Company except:
c) convening Shareholders' General Meetings;
d) approving the Annual Report and Accounts;
| b) Functioning |
||
|---|---|---|
The Board of Directors and the Executive Committee are regulated by the functioning rules that can be read at the company website www.sonaeindustria.com.
The Board of Directors convened 10 times in 2014, with the respective minutes recording all the deliberations made. All the meetings were attended by all the board members 100% of the time, apart from Jan Bergmann who attended 90% of the meetings.
The company's Remuneration Committee, in connection with the Board of Nomination and Remuneration Committee assessed the performance of the executive directors.
The performance assessment criteria of the executive directors are predefined, based on the performance indicators of the company, the working teams under their responsibility and their own individual performance. These criteria are further explained in the Remunerations section of this report.
The pre-determined criteria for evaluation of the executive directors are as follows: objective criteria related to the degree of successful implementation of initiatives and actions that were agreed for implementation in the year in question; and subjective criteria related to the contribution in terms of experience and knowledge to the discussions by the Board of Directors, the quality of preparation of meetings and the contribution to discussions of the Board of Directors and Committees as well as the commitment to the success of the company, among others.
The members of the Executive Committee work full time on the management of Sonae Indústria and its subsidiaries.
The other members of the Board of Directors currently perform their roles of members as of the Board of Directors and the Supervisory bodies of other companies, as listed below.
Agloma Investimentos, SGPS, S.A.
Tableros Tradema, SL
Tafiber, Tableros de Fibras Ibéricos, SL
Glunz AG (Supervisory Board Chairman – "Aufsichtsrat")
Imoassets-Sociedade Imobiliária, SA (Chairman)
Erich-Brost-Institut für Journalismus in Europa GmbH
Ydilo Voice Solutions, SA
c) Committees within the Management and Supervisory bodies and board delegates
To improve the operational efficiency of the Board of Directors and in line with the best practices for company governance, the Board of Directors appointed an Executive Committee, as well as 3 Specialised Committees.
The rules regulating the functioning of the Executive Committee can be read on the company website: www.sonaeindustria.com.
The Executive Committee is appointed by the members of the Board of Directors and comprises 3 members allocated the following areas of responsibility:
| Executive Committee | ||
|---|---|---|
| Rui Correia (CEO) |
||
| Christopher Lawrie (CFO) |
||
| Jan Bergmann (CITO) |
The fields of responsibility of the Executive Committee are split as follows:
| Executive Committee | ||||||
|---|---|---|---|---|---|---|
| Southern Europe |
Northern Europe |
North America | South Africa | Non-Board Business |
||
| CEO | HUMAN RESOURCES & COMPETITIVENESS, SALES AND MARKETING | |||||
| CFO | FINANCE, PLANNING & CONTROL, ADMINISTRATIVE, INTERNAL AUDIT | |||||
| CITO | INDUSTRIAL & TECHNOLOGY, ENVIRONMENT, HEALTH & SAFETY | |||||
| FUNCTIONALORGANIZATION | MATRIX ORGANIZATION |
The Executive Committee normally meets at least once every month, excluding August and additionally whenever the Chairman of the Executive Committee calls a meeting. Meetings can only take place if the majority of the members are present or represented. The Chairman of the Executive Committee presides the meeting.
In 2014 the Executive Committee convened 26 times, with the respective minutes recording the deliberations made. The attendance level of the Executive members to the meetings was as follows: 100% for Rui Correia, 92.3% for Christopher Lawrie and 65.4% for Jan Bergmann.
Decisions made by the Executive Committee are taken with the favourable votes of the majority of the members present or represented, including those voting by post. In the absence of quorum, the Executive Committee must submit the matter under consideration to the Board of Directors for deliberation.
In order to keep the Board of Directors and the Statutory Audit Board constantly updated of the decisions made by the Executive Committee, the Chairman of the Executive Committee provides the minutes of the Executive Committee's meetings to all the members of both the Board of Directors and the Supervisory Audit Board. At the end of each year, the Executive Committee drew up the schedule of its meetings for the following year, informing the Board of Directors and the Statutory Audit Board of this schedule.
The members of the Executive Committee provided all the information requested by other members of the governing bodies on time and appropriately.
The Board of Directors also appointed three committees with specialised expertise.
The BAFC is composed of the following Non-Executive Directors:
The BAFC normally meets at least 5 times yearly and is responsible for:
Over the course of 2014, the BAFC held 5 meetings with the respective minutes having been drafted.
Responsibilities attributed to BAFC as a specialised committee of the Board of Directors, are developed in terms of company management and do not override the functions of the Statutory Audit Board, as a supervisory board. The BAFC is a Committee within the Board of Directors and according to its empowerment is responsible for an in-depth analysis of the financial statements, analysis of internal and external audit works, risk management processes and the performance of the key financial ratio, among other areas. It also issues recommendations for final deliberation at the Board of Directors, thereby improving its operational functioning.
The SREEC is composed of the following Non-executive Members:
This Committee is responsible for:
This Committee has an Ethics sub-committee composed by an independent non-executive member of the Board of Directors, by the Internal Auditor and by the Global Human Resources Director, which have the function to advise the SREEC. The Ethics sub-committee prepares at least one annual report to the Board of Directors, and when appropriate also the auditing bodies of the related country, issues related with the corporate governance or business ethics.
The current members of the Ethics sub-committee are:
SREEC met once during 2014 and recorder in the minutes their deliberations.
The Ethics Sub Committee met once.
The BNRC is composed of the following Non-Executive Members:
Committee meetings are normally held at least twice a year. The BNRC's main functions are to review and submit proposals and recommendations on behalf of the Board of Directors to the Shareholder's Remuneration Committee in relation to the remuneration and other compensations of Board members. Additionally, it analyses and approves proposals and recommendations on behalf of the Board of Directors in relation to the remuneration and other compensations for other senior executives of the Sonae Indústria Group, depending on the activity performed by them. BNRC is also responsible for finding potential candidates with a profile to be a Board Member both for the company itself and for its affiliated companies.
The BNRC liaises with the Sonae Indústria Shareholders' Remuneration Committee since this is the only means through which to guarantee that the Shareholders' Remuneration Committee has the necessary knowledge on the performance of every director throughout the year. This is particularly important in the case of the Executive Directors, given that the Shareholders' Remuneration Committee does not closely shadow the performance of every Director and therefore does not have the necessary knowledge that enables them to perform their functions in the best way. The BNRC may also be assisted by external entities provided absolute confidentiality is ensured in relation to the information obtained arising from that cooperation.
Over the course of 2014, the BNRC met on two occasions with the respective minutes having been drafted.
| III. | SUPERVISION |
|---|---|
| a) | Composition |
The Statutory Audit Board may comprise an even or odd number of members, with a minimum of three and a maximum of five with one or two substitutes appointed, depending on the number of members being either three or more, respectively. The members are elected for three-year mandates.
The Statutory Audit Board was elected at the 2012 Shareholders' Annual General Meeting for the 2012-2014 mandate and has the following composition:
Armando Luís Vieira de Magalhães -Member
Jorge Manuel Felizes Morgado Member
The current members of the Statutory Audit Board were elected for the first time on the following dates:
All members of the Statutory Audit Board comply with the rules of incompatibilities referred to in paragraph 1 of art. 414-A and the criteria of independence set out in paragraph 5 of art. 414, both of the Companies Law.
To ensure at all times the independence of members of the Statutory Audit Board prior to their appointment, such members issued statements attesting that: (i) not to incur in any of the incompatibilities provided in Article 414º-A of the Companies Law as well as they were not in any situation that affects their independence in accordance with paragraph 5 of Article 414º of the same law; (ii) committed themselves to immediately notify the company of anything that may lead to their loss of independence or to any incompatibility during their mandate.
The Statutory Audit Board Regulation also states that if, during the course of their term of office, any situation related to loss of independence or incompatibility regarding any member of the Statutory Audit Board arises, the respective member should immediately communicate this to the Chairman of the Board of Directors. Any situation of legal incompatibility shall lead to forfeiture of the term of office of the Statutory Audit Board member.
MANUEL HELENO SISMEIRO (Chairman of the Statutory Audit Board): Degree in Finance, SCEF (Portugal), Accountant, ICL (Portugal). Currently he is a specialist consultant in the areas of internal audit and internal control and is Chairman of the Statutory Audit Board of OCP Portugal Produtos Farmacêuticos SA, Sonae Industria, SGPS, SA and Sonae Capital, SGPS, SA. Prior to this he was a partner at Coopers & Lybrand and Bernardes, Sismeiro & Associados and from 1998 to 2008 at PricewaterwhouseCoopers - auditors and Statutory External Auditor and responsible for the Audit and official review in various activity sectors. He was also responsible for managing the office of those companies at Porto and Director of Audit Division in the period of 1998 – 2002 as well as member of the management board at PricewaterhouseCoopers.
ARMANDO LUÍS VIEIRA DE MAGALHÃES (Statutory Audit Board Member): Bachelor of Accounting (former-ICP and current ESCAP), Degree in Economics (University of Porto), Executive-MBA European Management (IESF / IFG). He performed various functions in a credit institution (1964-1989) and since 1989 has practiced as an external auditor, first on a stand-alone basis but subsequently as partner of Santos Carvalho & Associados, SROC and currently of Armando Magalhães, Carlos Silva & Associados, SROC, Lda.
JORGE MANUEL FELIZES MORGADO (Statutory Audit Board Member): Management Degree (ISEG, Technical University of Lisbon), MBA in Finance-IEDE Madrid, MBA in Management and Information Systems (Catholic University), Official External Auditor. Mr. Morgado held various roles as auditor in Coopers & Lybrand (1980- 1989), responsible for Management Control and Internal Audit of the Coelima Group (1989-1991) before becoming a partner of Deloitte (1991-2004). From 2004 he has been an Official Statutory Auditor and Partner of Econotopia-Consultoria e Gestão, SA.
OSCAR ALÇADA DA QUINTA (Statutory Audit Board Substitute-Member): Degree in Economics (University of Porto). He has held various functions in both the administrative and financial departments of different companies (1982-1986) and since 1986 has provided services within the external audit of the Official Statutory Auditors Association. Through this activity in 1990 he was included in the List of Official External Auditors, a function which he works on exclusivity, initially on a stand-alone basis but subsequently as partner of Óscar Quinta, Canedo da Mota & Pires Fernandes, SROC.
All members of the Supervisory Audit Board have adequate competencies o exercise their respective functions.
b) Functioning
The rules regulating how the Statutory Audit Board functions can be read at the company website: www.sonaeindustria.com.
In 2014 the Statutory Audit Board convened 8 times. The minutes were drawn up recording the respective deliberations. All the members attended 100% of the meetings.
36. Availability of each member of the Statutory Audit Board, indicating offices held in other companies, inside and outside the group, as well as other relevant activities held by those members during the financial year.
The Statutory Audit Board members exercised their roles in conjunction with the functions listed below, as outlined in section 33.
Functions exercised by Statutory Audit Board members as of 31 December 2014:
Sonae Capital, SGPS, SA (Chairman of the Statutory Audit Board)
Sonaecom - SGPS, S.A. (Statutory Audit Board)
| c) Responsibilities and functions |
|---|
| -------------------------------------- |
If the company or any of its subsidiaries has the intention to hire the services of the external auditor or any entities with which they have joint shareholdings or which are part of the same network, other than auditing services, the Statutory Audit Board must previously approve such hiring.
The Statutory Audit Board main responsibilities are as follows:
k) appointing and hiring services from experts to help one or more members in the exercise of their duties. The hiring of and fees for these experts should bear in mind the complexity of the matters involved and the financial position of the Company;
l) overseeing the process of preparation and disclosure of financial information;
Besides those responsibilities the Statutory Audit Board must issue prior opinion on any transaction with shareholders or entities with whom they are in any relationship, under Article 20 of the Securities Code (reference shareholders), in the terms set forth in section 91.
The Statutory Audit Board's Report, available on the company website together with the other accounting documents, details the supervisory activity carried out, with no constraints detected.
| IV. | STATUTORY EXTERNAL AUDITOR |
|---|---|
The Statutory External Auditor is PriceWaterHouseCoopers & Associados, SROC, Lda, represented by Hermínio António Paulos Afonso.
PriceWaterhouseCoopers has been the statutory external auditor of the company since the Annual General Meeting of 2006, and is currently undertaking its third three-year mandate.
In 2014 PriceWaterHouseCoopers provided other compliance and assurance services.
V. EXTERNAL AUDITOR
The external auditor of the company is PriceWaterHouseCoopers & Associados, SROC, Lda, represented by Hermínio António Paulos Afonso, registered in the CMVM under no. 9077.
PriceWaterhouseCoopers has been the external auditor of the company since 2006. Its current representative, Hermínio Afonso, has represented it since 20 September 2011.
Sonae Indústria has adopted the principle of not proceeding with the rotation of the external auditor at the end of its third mandate, only if the Statutory Audit Board concludes that, if the external auditor is kept in functions beyond the before mentioned period, it will not collide with its independence, and if the cost-benefit analysis of this replacement are in favour of the renewal of this mandate.
As for the Statutory External Auditor representative, on top of ensuring compliance with the legal stipulations, it must also be conducted an evaluation to ensure its independence.
The Statutory Audit Board monitors the performance and execution of the works conducted by the external auditor throughout each period, meeting with him whenever it deems fit. Moreover, the Statutory Audit Board evaluates, on a yearly basis, the global performance of the external auditor, including an appraisal on its independence.
During 2014 a subsidiary of Sonae Indústria hired other services of Human Capital, so as to perform an assessment on its commercial team, benchmarking with current market practices, in the amount of 4,500 euros, representing 0.74% of the total amount paid by Sonae Indústria group. The Statutory Audit Board approved the hiring of these services.
Sonae Indústria and its subsidiaries paid PriceWaterhouseCoopers the following amounts in 2014:
| By the Company | |
|---|---|
| Auditing Services (€) | 13,730 € / 2.25% |
| Other reliability guarantee services (€) | 87,696 € / 14.37% |
| By other group entities | |
| Auditing Services (€) | 374,683€ / 61.38% |
| Other reliability guarantee services (€) | 129,790 € / 21.26% |
| Other services other than auditing services (€) | 4,500 € / 0.74% |
The rules applicable to amendments of the Articles of Association are established by law. It is up to the Shareholders' General Meeting to decide on the amendment of the Articles of Association. However, the Board of Directors can decide to change the registered office within the national territory, as well as deliberate on increases in the Company's share capital through new cash injections up to one thousand and two hundred million Euros, on one or more times.
|--|
Sonae Indústria has a Code of Conduct that includes the irregularities communication policy, which is available at the website www.sonaeindustria.com. Sonae Indústria's Code of Conduct and irregularities communication policy aims to create the climate and means for its employees and service providers to express their concerns about any behaviour or decision that they believe does not respect the company's ethics or Code of Conduct.
Any information on a suspected irregularity should be sent via e-mail or post to one of the following addresses:
By e-mail: [email protected]
By post: Sonae Industria SGPS, S.A.
Subcomissão de Ética da Comissão de Responsabilidade Social, Ambiente e Ética Lugar do Espido, Via Norte Apartado 1096 4470-177 Maia Codex Portugal
A meeting to clarify the alleged irregularity can then be arranged with the Ethics Subcommittee of the Social Responsibility, Environment and Ethics Committee, when required.
Each irregularity report will be received by the Ethics Subcommittee, who is responsible for initiating and supervising the investigation into all reports. Once the research is concluded and if the irregularity reported corresponds to wrongful conduct, the Ethics Subcommittee of the Social Responsibility, Environment and Ethics Committee, shall notify the situation to the superior of the employee or the Service Provider's employer in order to apply corrective actions and / or initiate disciplinary proceedings.
As the Company wishes to encourage good faith reporting of any alleged irregularity while avoiding damage to the reputation of innocent persons initially indicated as allegedly suspected of wrongful misconduct, anonymous reports are not accepted.
The investigation will be conducted in a confidential manner and the Company ensures that there will be no discriminatory or retaliatory action against any employee or service provider who reports an alleged irregularity in good faith. If any employee or service provider believes that he or she has been retaliated against for reporting or participating in an investigation, he/she should immediately report such perceived retaliation to the Ethics Subcommittee of the Social Responsibility, Environment and Ethics Committee.
The company provides a means by which to report irregularities on its intranet
The Ethics Subcommittee shall inform the Statutory Audit Board about any report of non-ethical behaviour received.
The company maintains a record of all complaints and cases investigated as well as their findings which is be available for consultation by the statutory bodies and external auditor.
The Code of Conduct of Sonae Indústria contains a set of standards based on our shared values that govern the activities of Sonae Indústria. It applies to everyone employed by the Group, including members of the statutory bodies of Group companies, managing directors, senior executives, employees and people whose status is equivalent to that of employees, such as temporary staff and service providers. The Code sets out guidance on those matters of business ethics to be complied with by all employees and service providers when carrying out their professional duties.
Sonae Indústria adheres to and actively promotes the highest ethical standards of professional conduct at all levels of the Group. Commitment to standards of conduct must emanate from the top. Therefore, Sonae Indústria's top managers are expected to set an example for the rest of the organisation through their actions, by actively leading the adoption and by monitoring the enforcement of these standards. As such, the senior managers must guarantee, in their area of responsibility, strict compliance with the law, permanently monitoring such compliance, and clearly explaining to their employees that the transgression of any law will have both legal and disciplinary consequences.
It is particularly important that a commitment to these standards of conduct is accepted by all employees and service providers at all Group companies, wherever they operate. Country operations are also required to adopt appropriate principles and actions to deal with specific ethical issues that may arise in their own countries.
The Code of Conduct of Sonae Indústria was defined in such a way that clearly explains the conduct to be followed with all stakeholders, as well as to connect it with the company's values. The code of conduct is structured in the following way:
Transparency
The complete code of conduct can be found at the company site www.sonaeindustria.com.
Both Internal Control and Risk Management are important parts of Sonae Indústria culture, being present in the management processes and responsibilities of all group employees, at the different levels of the organization. This is supported by the Group transversal functions, notably the Risk Management, Internal Audit and Planning and Management Control departments, with specialized teams that report hierarchically to the Board of Directors.
The Risk Management department's mission is to support the companies in achieving their business objectives through a structured and systematic approach of identifying and managing risks and opportunities. It has also the objective to promote the consistency of principles, concepts, methodologies and tools to evaluate and manage the risks of all business units of the Group.
The Internal Audit department's mission is to identify and evaluate, in a systematic and independent way, the correct functioning of the risk management and internal control systems, as well as the implementation effectiveness and efficiency of the controls and mitigation actions. It must also inform and alert, on a regular basis, the Board of Directors and the Statutory Audit Board of the more relevant observations and recommendations, identifying improvement opportunities.
The Planning and Management Control (PMC) department promotes and supports the integration of the risk management activities in the planning and management control processes of the companies. This department, supported by robust information systems, produces reports containing operational, financial and compliancerelated information. Through its Procedural Manual, defines and implements a set of rules and procedures relative to the planning processes, reporting, management accounts and investment approval process.
Sonae Indústria has integrated a Skills Centre into the framework of its Global Business Processes and Systems, which works with the local operations and corporate departments as a centre of excellence to achieve key objectives, such as: prioritisation, development and implementation of processes and systems (including control activities); definition of the best practices and assessment of the performance of the processes, establishing the connection between the business needs and the system application component.
Ongoing monitoring activities of control are in place, namely: approvals, authorisations, verifications, reconciliations, reviews of operating performance, security of assets and segregation of duties. Pertinent information is identified, captured and communicated within a form and timeframe which enables employees to fulfil their responsibilities.
The centralised accounting back-office, Shared Service Centre (SSC) performs the accounting of all subsidiaries, with the exception of the Canadian, thus helping to guarantee alignment of policies and strengthening of procedures and controls.
The reliability and integrity risks of the accounting and financial information are also evaluated and reported by the External Audit activity.
Sonae Indústria has a reasonable level of confidence in the internal control framework which is currently in place. Communication of the Vision, Values and Principles throughout the organization reinforces the importance in
terms of ethical behaviour. The existence of the Code of Conduct, of the Whistle-blower (reporting of irregularities) tool and the Ethics Subcommittee, enhance the control culture of the organisation.
It is the responsibility of the Board of Directors to create the necessary structures and services to ensure that the internal control and risk management system works properly. For this purpose, the Board of Directors, though the Board Audit and Finance Committee, monitors the activities of Internal Audit and Risk Management.
The Internal Audit and Risk Management departments report functionally to and meet the Statutory Audit Board at least twice a year as well as the Board Audit and Finance Committee, whose chairman is an Independent Director. Both Governing Bodies can request information or clarifications whenever they wish.
The competences of the Statutory Audit Boards include reviewing the effectiveness of the risk management system as well as that of the internal control and audit systems. The Statutory Audit Board has access to all the information whenever it deems necessary and can liaise with the heads of the respective departments, receiving the reports related to those activities.
The Statutory Audit Board is presented with the internal audit and risk management plan of activities, and may issue its opinion on it, in addition to the suitability of the resources allocated to the different activities.
The External Auditor reviews the effectiveness and operation of the internal control mechanisms according to work plan aligned with the Statutory Audit Board, to whom it also reports its findings.
Sonae Indústria is based on integrity and ethical values, as outlined in the company's Code of Conduct, which emanate from the top down with the example then being set by management.
The different governing bodies have been born from a management philosophy and operating style based on a strong organizational structure with adequate assignment of authority and responsibilities. Sound Human Resource policies and procedures and the existence of the Code of Conduct are enshrined in such structure.
Sonae Indústria faces a variety of risks from external and internal sources which must be assessed and we have installed in our company a culture of prevention and early detection. As you will see subsequently, an Enterprise-Wide Risk Management Framework was developed and is updated periodically. Additionally, it is also each functional area of the Group the responsibility of controlling and monitoring of the risks inherent to each function.
Sonae Indústria's activity is reliant upon the macroeconomic environment and the profile of the markets in which it operates. Sonae Indústria's subsidiaries' products are fundamentally commodities, having the nature of durable goods, and are mainly intended for the construction and furniture sectors. The Group's operational activity is, therefore, cyclical, being positively correlated with general economic cycles and, in particular, with the evolution of the sectors mentioned. Thus, Sonae Indústria's and its subsidiaries' businesses can be negatively affected by periods of economic recession, in particular by a drop in household consumption levels which, in turn, are influenced, among other things, by wage policies and unemployment levels, as well as prevailing confidence and social protection levels. The availability of credit in the economy is also relevant for Sonae Indústria Group's business due to its potential impact on the property market. Sonae Indústria, through its subsidiaries, has a strong presence in international markets, where it produces and sells, contributing almost 90% of its consolidated turnover. Its most important markets are the Eurozone, North America (namely Canada and the United States) and South Africa. These markets have different macroeconomic, political and social profiles and, as such, are reacting differently to the global economic and financial crisis. In fact, the rate at which the various markets emerge from the current crisis depends on variables outside of Group's control. Equally,
possible political and/or social and/or religious tensions in any of the markets may have a material impact on Sonae Indústria Group's operations and financial situation that is impossible to estimate.
The activity developed by Sonae Indústria through its subsidiaries faces stiff competition in all the markets in which it is present (namely in Iberian Peninsula, Germany, Canada and South Africa),which could have adverse effects on the Group's financial situation and results to the extent that new competing factories and/or the adoption of a more aggressive pricing policy by these competitors, could lead to a reduction in turnover and/or the need to review prices by Sonae Indústria's subsidiaries, with a knock-on effect on the profitability and sustainability of its operations. Based on Sonae Indústria's diversified assets and geographical exposure to various European markets, but also the North American and South African markets, and also others through exports, as well as the initiatives taken with respect to resizing the industrial presence by closing and selling the least profitable units, the increased focus on higher added value products as a way of differentiating, and the effort to contain costs as part of a strategy already being implemented, could protect the competitive position of the Company and allow it to achieve its objectives of being recognised as a reference player in the wood-based panels sector. It must also be mentioned that the potential closure or sale of industrial units by Sonae Indústria as part of the ongoing Strategic Plan may affect its market position, where it has a presence, since such closures and/or sales may mean a reduction in installed production capacity and a loss of market position compared to its competitors. This loss of market position may have adverse effects on the Group's profitability, since competing companies may adopt a more aggressive strategy in terms of pricing and supply policy within these markets, with consequences for the sustainability of the Group's turnover and cost structure.
Some of the businesses developed by Sonae Indústria may require additional investment, the conditions of which could depend on the financial framework, on its current indebtedness level and by the evolutions of its activity and that of its subsidiaries. Financing of the additional component may be obtained through its own and/or external capital. Sonae Indústria cannot guarantee that these funds, if necessary, will be obtained, or that they will be subject to the predicted conditions. If there is a need for external capital, the current macroeconomic and financial framework involves a set of constraints, namely a lack of liquidity and the resulting increase in spreads charged to the companies, which may affect or preclude access to bank credit and/or issues of commercial paper. Even under a recovery context, the speed and manner in which this takes place is subject to considerable uncertainty, meaning the financing of Sonae Indústria and/or of its subsidiaries possible future investments cannot be guaranteed.
Since industrial activity in the sector is dependent on considerably large factory units, Sonae Indústria's consolidated cost structure has a significant fixed component, i.e. not dependent on sales volume and upon which the Group can only act through restructuring or efficiency increase initiatives. An insufficient turnover or gross margin on sales to offset fixed costs could determine losses that could be sustained by Sonae Indústria and its subsidiaries.
On the other hand. the variable cost structure of the subsidiaries of Sonae Indústria, notably in the case of raw materials, mainly wood, chemicals and air-dried paper, is exposed to external factors (that are outside the company´s control), with a positive or negative impact on the availability of such raw materials and their purchase price. In particular, the risk associated with access to wood, the raw material essential to the production process, in terms of suitable quantity, type, quality and price, could have ramifications not only for the subsidiaries ability to provide its customers with products according to agreed time frames and conditions, but could also affect expected profitability when it comes to setting a sale price for its products. In an extreme scenario, the inability to access wood in sufficient quantities could lead to a temporary interruption in production at the industrial unit in question, with knock-on effects for operational profitability. To mitigate this risk, Sonae Indústria's subsidiaries have diversified their supply sources and the types of wood used, namely through recycling waste, and introducing different types of wood and alternative by-products.
The ability of Sonae Indústria and its subsidiaries to develop and offer higher added value products on competitive terms at global level is an increasingly crucial objective in the current context of the wood-based
materials sector. This is dependent on technological developments, which may be difficult to predict and monitor. Failure by Sonae Indústria to monitor and anticipate technological advances, or to predict the receptiveness of new products, could affect its business and the results of its operations.
Sonae Indústria's activities are subject to certain operational risks, especially with respect to industrial production of its subsidiaries. There are multiple factors, not directly controllable by Sonae Indústria nor by its subsidiaries, which may interrupt production and have potentially negative effects on operations and, consequently, its financial situation and results. The manufacture of wood-based panels is an industrial activity that entails high operational risk due to the possibility of accidents involving fire or explosions. As a result, the management of operational risk is a central concern of the Company, which takes an active stance in terms of implementing regulations and best practice, as well as selecting systems capable of reducing industrial risks. In addition, flawed policies for the management and control of operational risks could affect the Group's business and operational results.
The main financial risk that Sonae Indústria is exposed to is the risks associated with its customer portfolio, namely credit risk. The credit risk is related to receivables from customers, i.e. the risk that a customer is late in paying or does not pay for the goods and services acquired, basically due to a lack of liquidity. Sonae Indústria Group's credit risk control systems are, above all, related to receivables from customers, having as main purpose to guarantee the effective collection of the receivables from customers in accordance with the agreed conditions. Among other procedures implemented by Sonae Indústria to mitigate this risk, Sonae Indústria makes use of credit insurance, as a mandatory tool to mitigate this risk, in all regions where it is present and such insurance is available. In specific situations where we are not able to contract credit insurance to mitigate this risk, alternative and/or complementary solutions (like bank guarantees, letters of credit and confirming, among others) are explored together with our clients in order to achieve the largest possible turnover volumes in an environment of minimum and controlled risk. In the limit situation where we are not able to obtain risk coverage for a specific customer or operation, we develop a detailed internal process with the objective of analysing every particular aspect of such business, so an informed and complete decision can be taken over a possible own risk-taking situation.
It should be noted that none of Sonae Indústria Group's customers represent more than around 6% of its consolidated turnover. Sonae Indústria has been signing multi-annual supply contracts with its largest customers, being the most recent one in place until 31 August 2017. Despite the greater spread of the customers' base, the possible non-renewal of these agreements could impact upon the profitability of Sonae Indústria's business.
The second financial risk is related with the existence of financial covenants in Sonae Indústria financing agreements.
The refinancing agreements signed during 2014 with the two main creditor banks include one financial covenant. Sonae Indústria undertakes to maintain a Financial Autonomy Ratio, calculated annually from 31 December 2015 onwards, higher than 6.97%. The non-compliance with this financial autonomy ratio requirement may lead to an event of default of the contractual obligations assumed in the before mentioned refinancing agreements, which could lead to its termination, including the early repayment of the associated financial debt.
The economic risks that Sonae Indústria is exposed to include: Interest Rate Risk, Foreign Exchange Risk and Liquidity Risk.
Interest Rate Risk depends on the proportion of floating rate debt on Sonae Indústria's consolidated Statements of Financial Position and the consequent cash flows related to interest payments. As a general rule, Sonae Indústria does not hedge its exposure to floating interest rates through financial derivatives. This approach is based on the principle of the existence of a positive correlation between the interest rate levels and the "operating cash flow before net interest charges" which creates a natural hedge on the "operating cash flow after net interest charges" for Sonae Indústria. As such, and as an exception to its general rule, Sonae Indústria Group may engage into interest rates derivatives, and is this case, the following principles should be observed: (i) derivatives should not be used for trading, profit making, or speculative purposes; (ii) engage preferably in derivative transactions with Investment Grade financial institutions; (iii) match exact periods, settlement dates
and base interest rate of the underlying exposures; and (iv) maximum financial charges (aggregate of the derivative and the underlying exposure) should be known and limited on the inception of the hedging period. The inefficiencies, whenever they exist, are booked under the financial results item of the consolidated income statement
Foreign Exchange Risk exposure is due to the fact that it is a geographically diversified group, with subsidiaries located in three different continents, and as such it is subject to transactions and balances denominated in pound sterling, South African rand, Canadian dollar, American dollar, Swiss franc and polish zloty. The Consolidated Statements of Financial Position and Income Statement are exposed to the risk of a change in exchange rates (risk relative to the value of capital invested in subsidiaries outside the Eurozone) and Sonae Indústria's subsidiaries are exposed to the risk of a change in both exchange and transaction rates (risk associated with commercial transactions made in currencies other than the euro). Transaction risk arises when there is exchange risk related to a cash flow in other than a subsidiary local currency. The Group company cash flows are largely denominated in the subsidiary local currency. This is valid independently of the nature of the cash flows, i.e.: operating or financial, and provides a degree of natural hedging, reducing the Group's transaction risk. In line with this reasoning, Sonae Indústria's subsidiaries only contract debt that is denominated in the respective local currency. Also, in situations where there is a relevant exchange risk as a result of operational activity involving currencies other than the local currency of each subsidiary, the exchange risk must, as a general rule, be mitigated by the subsidiary exposed to the exchange rate risk contracting foreign exchange derivatives. In turn, the currency conversion risk emerges from the fact that, when preparing the Group's consolidated accounts, the financial statements of the subsidiaries denominated in currencies other than that of the consolidated accounts (euro), must be converted into euros. As exchange rates vary between accounting periods and as the value of the subsidiaries' assets do not match their liabilities, volatility in the consolidated accounts arise as a result of conversion in different periods at different exchange rates.
Liquidity Risk aims mainly to ensure that the company can obtain the financing required to properly carry on its business activities on time, implement its strategy and meet its payment obligations when due, while avoiding the need for having to obtain funding under unfavourable terms. For this purpose, liquidity management at Sonae Indústria mainly comprises consistent financial planning, diversification of financing sources and diversification of debt maturities issued.
The potential disposal of assets and/or companies considered to be non-core, or less profitable, with the aim of strengthening the profitability and the capital structure of Sonae Indústria as part of the ongoing Strategic Plan could lead to the posting of losses or gains from the difference between the sale price and the contribution to the business when determining the consolidated value of Sonae Indústria. The booking of such gains or losses will have an impact on the value of Sonae Indústria's equity that could be negative in the case of the posting of losses.
Also, within the scope of the implementation of the Strategic Plan by Sonae Indústria Group, a decision of closure of manufacturing units, which have been registering consecutive losses, could lead to the booking of impairment losses in the net book value of the closed assets and the booking of non-recurring shut-down costs, with a consequent impact on Sonae Indústria's economic and financial situation
Regarding Legal Risks, the main risk of the Group's business relates to legislative changes that may occur at the level of the activity (environmental law and labour, among others) that can encumber the activity to such an extent that its profitability may be affected.
The activities of Sonae Indústria and its subsidiaries are, as industrial activities, subject to regulatory frameworks in a number of areas, including national regulations, European Union directives and international agreements, by which Sonae Indústria is bound and which may influence its management and strategic decisions. Indeed, Sonae Indústria, through its subsidiaries, is subject not only to different legal frameworks in countries as diverse as Canada, South Africa, Germany, Spain, Portugal or France, but also to legislation in different areas, such as industrial and forestry, environmental, labour, hazardous materials transportation, health and safety, construction and housing, urban planning, among others. The non-compliance with such regulations could lead to operational restrictions, investment needs or even the revocation of licences, authorization or permits or in sanctions. Possible changes to regulations, legislation, or changes in interpretation on the part of competent
authorities, the position of authorities or difficulties in complying with new laws and regulations could lead to increased adjustment costs, namely industrial and operational, or, in the limit, constricting the respective operating income, which could have an adverse impact on Sonae Indústria and its subsidiaries activity and operating results. It should be highlighted the on-going regulatory changes of both REACH1 , on the reclassification of formaldehyde as dangerous substance and of the European Industrial Emissions Directive2 in the definition of the best practices in the wood based panels sector. In the reclassification of formaldehyde – substance used in the manufacturing process of urea-formaldehyde resins, which are the bonding agent of the vast majority of the products manufactured by the Sonae Indústria – there is already a recommendation to reclassify this substance as "category 1B carcinogen" (presumed to have carcinogenic potential for humans, classification largely based on animal evidence)3 , which is expected to enter into force from 2015 onwards. This reclassification may have consequences both in the definition of the emission standards of Sonae Indústria's industrial operations, and on the restrictive levels of concentration of formaldehyde in the workplace environments. These changes may lead to additional investments needs in Sonae Indústria's manufacturing units. Although a general ban on the utilization of formaldehyde may be a possible theoretical scenario, it is not considered a likely one, being more foreseeable that such regulatory changes result in restrictions as the ones previously described. As for the definition of the best possible practices in the wood based panels sector, Sonae Indústria considers that additional investment may be required to comply with such practices, in a period between two to five years, with the aim of incorporating some of those practices in the activities where they are not currently considered.
Internal Audit is an independent and objective activity, which aims helping Sonae Industria to achieve their goals by participating in the process of value creation. Uses a systematic and structured approach to evaluate and improve the effectiveness of risk management, internal control procedures and corporate governance.
Internal Audit operates in accordance with International Standards for the Professional Practice of Internal Auditing, established by the Institute of Internal Auditors, including its Code of Ethics.
In fulfilling its responsibilities, Internal Audit has access to any persons, records, information, systems and assets deemed necessary.
Internal Audit reports functionally to the Board Audit and Finance Committee (BAFC) and to the Statutory Audit Board.
The planning of the activity of Internal Audit is essentially developed based on a prior assessment of the systematic business risks of Sonae Indústria. The annual plan of Internal Audit activity is approved in advance by the Executive Committee and submitted to the Board Audit and Finance Committee (BAFC) and to the Statutory Audit Board.
Descriptive reports of the activity of Internal Audit are periodically prepared and sent to the Executive Committee, the Board Audit and Finance Committee (BAFC) and to the Statutory Audit Board of Sonae Industria, which includes the summary of significant internal control deficiencies and shortcomings in procedures and policies set by Company.
The reporting system implemented ensures regular feedback, a proper review of the activities and the possibility to adjust the plan of activities to emerging needs.
Board Audit and Finance Committee (BAFC) and the Statutory Audit Board are responsible for overseeing the effectiveness of the internal audit function. Accordingly, Internal Audit has developed a quality assurance and quality promotion, which includes ongoing analysis and regular and periodic evaluations of the quality conducted internally and externally.
3 In experiences performance on animals in relation to which there are enough evidence to support carcinogenicity consequences to animals (presumed carcinogenic for humans).
1 Registration, Evaluation, Authorisation and Restriction of Chemicals; Regulation (CE) n. 1907/2006, of 18 December or Decree-law n. 293/2009, of 13 October.
2 Directive n. 2010/75/EU.
Risk Management is a key concern within the Sonae Indústria culture and is present in all management processes, forming part of the delegated responsibility of managers and employees at all levels within the Sonae Indústria Group.
Risk Management comprises the process of identifying potential risks, analysing their possible impact on the organisation's strategic goals and seeking ways to minimise the probability of their materialisation, in order to determine the best procedures to manage exposure to them.
A global approach is in place to assure a suitable and balanced coverage of the operational risk through its transfer to our reinsurance panel. Sonae Indústria developed various insurance programs to place the risk, aiming to cover:
Sonae Indústria adopts global and local insurance policies as a support to its processes of risk management that better approach specific risks and topics and is committed to improve its assets protection and prevention levels to reinforce the partnership with the insurance market.
The production of wood-based panels is an industrial activity with a significant operational risk arising from fire and explosion. Consequently, the operational risk management is active in the implementation of standards and the choice of systems that are capable of reducing industrial unit risks.
The Risk Management Area is separated in two responsibilities to guarantee a more focused and specialized approach - Operational Risk Management and Integrated Risk Management (which includes the area of Insurance Management).
Operational Risk Management reports directly to the company Industrial Manager, in order to be focused on developing and implementing measures to mitigate risks in industrial operations.
A formally coordinated network of Country Risk Officers exists and at each of the sites there is a dedicated Plant Risk Officer.
The Operational Risk Management is also related to the Corporate Department IndBest ("Industrial Best Practices"). This department is responsible for the implementation and sharing of industrial best practices and procedures, through an effective coordination with local teams, namely the Plant Managers, and support to the implementation of industrial investments. This team is also responsible for the promotion of several actions to optimise energy efficiency and to ensure a global coordination of the maintenance works carried out at the plants.
Sonae Indústria has also established an autonomous Continuous Improvement team, which promotes the implementation of continuous improvement best practices, which lead to higher efficiency and productivity levels in the group, gradually implementing a cultural change in the company's employees. Its objective is to promote throughout all people a faster and more efficient way of work, not only in the industrial areas, but also in commercial and support activities of the company.
The integrated risk management is encompassed into the Internal Audit & Risk Management area.
The goal of the insurance management, which is included in the Integrated Risk management area, is to bring about more efficient and effective management of the Group's different insurance policies, in order to mitigate
insurance risks. It is responsible for drawing up and implementing procedures that minimize exposure to risk, reducing the likelihood of risk situations occurring and ensuring maximum coverage.
This Department is also responsible for implementing the Enterprise Wide Risk Management (EWRM) methodology, detecting, assessing and prioritising the risks and their potential impact on the organisation's activities.
The company Risk model, aggregates the business risks into three categories (Business Division Risk, Business Process Risks and Risk Information for Decision Making) and contains the quantification of the relevance (impact on EBITDA and operating efficiency) as well as probability (frequency of the event or scenario occurring) of the critical risks for Sonae Indústria.
The management of financial risks, incorporated into the business process risks is carried out and monitored within the ambit of the finance function.
Sonae Indústria aims to improve its industrial process by implementing more efficient and sustainable practices. The operational risks are assessed and mitigated in order to raise awareness about the new risks and change behaviour in relation to the current risks.
Operational risk management activities were carried out in 2014 to achieve the goals set as regards risk control environment.
Taking into account all the risks an industrial activity such as ours entails, the protection of the key assets, as well as the loss prevention activities, are ongoing concerns of the Group, and have been defined as priorities for 2014.
The CORS were developed with reference to international standards such as NFPA4 and/or FM5 data sheets, bringing together the best engineering protective practices against fire at Sonae Indústria, and in the wood industry. These standards were validated with external experts and specialists from the risk management and insurance market fields. They aim to ensure standardisation of processes and procedures in all geographies in an effort to improve operational risk management by leaving little or no room for uncertainty.
The Corporate Operational Risk Standards (CORS) are divided into three areas:
World class developed knowledge in fire detection and protection inherent to the wood based panels industry: wet and dry particle handling and transport, dryers, hot presses;
4 National Fire Protection Association
5 Factory Mutual
Specific issues such as, thermal and hydraulic oil installations, electrical cabinets, and rooms, or transformers.
Under the scope of the risk reduction plan adopted by Sonae Indústria, namely prevention of risk of explosions, a specialized company has been hired to conduct an analysis of the several systems installed in the different industrial units. The potential improvements will be followed through an action plan prepared by each unit.
In 2014, a new procedure was implemented that determines, as mandatory, the report of all incidents that occur at Sonae Indústria. On top of ensuring consistency in the information provided it will allow a benchmark between all industrial units.
The topic "Lessons Learned", included in this new procedure, collects all relevant data from the investigation, as well as the real root causes of the incidents. The analysis of this information will allow to focus on the reduction of the level of incidents in all Group.
The CORS have become the processes and procedures by which the audit risks are oriented to check the exposure of each plant. This permits greater transparency and harmonisation in the audit process.
In 2014, following the change in the Insurance program of Sonae Indústria's assets, a significant change was made to the external auditing process.
Sonae Indústria was insured through a Global Insurance program until end of April 2014, and from May onwards through Local Insurance policies.
For the Global Program, the Quality Index Number of previous years was kept (QIN of 7.2), however there no longer exists a unique classification as the insurance companies contracted are different in each geography. Due to this change some industrial units had inspections under the scope of two programs. As such, six audits were performed under the scope of the Global Program, being their results reflected in the before mentioned QIN, at the end of April, and eleven audits were performed under the scope of the different Local Programs. The results of these new audits are followed taking into consideration the indications of each geography insurance company.
Following the organisational changes made in 2014, the internal visits were focused in monitoring the visits performed by the different insurance companies that are part of the Local Programs, as well as on compliance with the Corporate Operational Risk Standards.
The result of the visits is reported and the implementation of the recommendations is tracked.
Each individual plant plan (which is updated annually) defines a set of measures to be taken towards achieving full compliance with the Corporate Operational Risk Standards and corporate directives published. The main objectives encompass:
In 2014, following the previously mentioned changes, the follow up of the recommendations, was performed according to the existing model, but not on a regular quarterly basis.
| IV. INVESTOR RELATIONS |
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Sonae Indústria has its own Investor Relations' Department, responsible for managing the relationship between the Company and shareholders, investors, analysts and market authorities including the CMVM (the Portuguese Securities Exchange Regulator).
Each quarter, the Investor Relations Department is responsible for coordinating the preparation of an earnings announcement to be issued to the market and provides statements whenever necessary to disclose or clarify any relevant fact or event that could affect the share price. The Investor Relations Department is available at all times to respond to any general questions posed by the market. The Company is available to meet investors, either at road shows or in one-to-one meetings upon request, or by participating at conferences.
Sonae Indústria's Investor Relations Department comprises two staff members. Its manager is António Castro. The Department may be contacted,
by e-mail: [email protected] or by telephone: +351 220 100 655.
Sonae Indústria's legal Representative for Relations with Capital Markets is its executive director George Christopher Lawrie, who can be contacted via the Investor Relations Department or alternatively, directly by email: [email protected]
The company keeps a record of the requests made to the Investor Relations Department and how each request was dealt with. In 2014 the Department received contacts and requests for clarification from 83 investors, of which 15 were non-resident. In overall terms, the average response time to the information requests from investors was less than 48 hours. No information requests from earlier years are pending.
V. WEBSITE
The company's website is www.sonaeindustria.com.
Information on the company's firm, the quality of publicly traded company, headquarters and other elements mentioned in Article 171 of the Companies Code is available at:
http://www.sonaeindustria.com/page.php?ctx=2,0,27 (Portuguese version) http://www.sonaeindustria.com/page.php?ctx=1,0,27 (English version)
The company's Articles of Association are available at:
http://www.sonaeindustria.com/page.php?ctx=2,0,31 (Portuguese version) http://www.sonaeindustria.com/page.php?ctx=1,0,31 (English version)
The functioning regulations of the Board of Directors, Executive Committee and Statutory Audit Board are available at:
http://www.sonaeindustria.com/page.php?ctx=2,0,109 (Portuguese version) http://www.sonaeindustria.com/page.php?ctx=1,0,109 (English version)
62. Place where information regarding the identification of the members of the governing bodies, the Representative for the Relations with the Capital Markets, the Investor Relations Department or its equivalent, respective roles and contact details is available
The identity of the members of the company's governing bodies is available at:
http://www.sonaeindustria.com/page.php?ctx=2,0,29 (Portuguese version) http://www.sonaeindustria.com/page.php?ctx=1,0,29 (English version)
Information about the Representative for the Relations with the Capital Markets is available at:
http://www.sonaeindustria.com/page.php?ctx=2,0,30 (Portuguese version) http://www.sonaeindustria.com/page.php?ctx=1,0,30 (English version)
Information about the Investor Relations Department is available at:
http://www.sonaeindustria.com/page.php?ctx=2,0,55 (Portuguese version) http://www.sonaeindustria.com/page.php?ctx=1,0,55 (English version)
The company's accounting documents are available at:
http://www.sonaeindustria.com/page.php?ctx=2,0,42 (Portuguese version) http://www.sonaeindustria.com/page.php?ctx=1,0,42 (English version) http://web3.cmvm.pt/sdi2004/emitentes/emit\_contas.cfm?num\_ent=%25%23D%3FT%21%3D%3C%20%0A
The half-yearly schedule of company events is available at:
http://www.sonaeindustria.com/page.php?ctx=2,0,53 (Portuguese version) http://www.sonaeindustria.com/page.php?ctx=1,0,53 (English version)
The notifications convening the general meetings and all the preparatory information and information subsequent to the meetings are available at:
http://www.sonaeindustria.com/page.php?ctx=2,0,32 (Portuguese version) http://www.sonaeindustria.com/page.php?ctx=1,0,32 (English version) http://web3.cmvm.pt/sdi2004/emitentes/emit\_convocatorias.cfm?num\_ent=%25%23D%3FT%21%3D%3C%20 %0A
The record of the deliberations made in the general meetings, capital represented and the results of the votes are available at:
http://www.sonaeindustria.com/page.php?ctx=1,0,32 (Portuguese version) http://www.sonaeindustria.com/page.php?ctx=1,0,32 (English version)
I. COMPETENCIES FOR APPROVAL OF REMUNERATIONS
As defined in the Articles of Association of the company, the Shareholders' General Meeting is responsible for establishing the remuneration of the members of the governing bodies or for electing a committee for this purpose. As for the members of the Board of Directors, the Remuneration Committee talks to the Board Nomination and Remuneration Committee. Only as such can the Remuneration Committee gain the necessary knowledge about the performance of each director, and especially the executive directors, throughout the year.
|--|
Sonae Indústria's Shareholders' Remuneration Committee is appointed by the Shareholders' General Meeting for a three-year term and was elected at the Shareholders' General Meeting held in March 2012 for the mandate 2012-2014. Currently this committee is composed by Efanor Investimentos - SGPS, SA, represented by Belmiro Mendes de Azevedo, by, Imparfin - SGPS, SA, represented by José Fernando Oliveira de Almeida Côrte-Real and by the Professor José Manuel Neves Adelino.
Professor José Manuel Neves Adelino is an independent member of the Remuneration Committee.
The participation of Belmiro de Azevedo at the Shareholders' Remuneration Committee, who is also Chairman of the Board of Directors, corresponds to the representation of shareholder interests in the Shareholders' Remuneration Committee, as he intervenes in that capacity. Belmiro de Azevedo does not participate in the discussion nor is present in the moment of the meeting in which his own payment is discussed therefore ensuring the necessary impartiality and transparency.
No company was hired to assist the Shareholders' Remuneration Committee nor the Board Nomination and Remuneration Committee. For the benchmark salary level of Board of Directors members, these Committees use multi-company studies prepared by international consultants present in Portugal which are available in the market.
The representative of Imparfin, José Corte Real, works for the Efanor Group on Human Resources' area; his extensive knowledge and vast experience in Human Resources, namely in regard to remuneration policy contribute very positively to the work of the Shareholders' Remuneration Committee.
| III. | REMUNERATION STRUCTURE |
|---|---|
At the General Meeting held in 2014 the Remuneration Committee approved a declaration concerning the remuneration and compensation policy of the governing bodies and the managers, and a share attribution plan.
The remuneration and compensation policy to be applied to the Statutory Governing Bodies of Sonae Indústria and other Senior Management complies with European guidelines, Portuguese law and the recommendations of the Portuguese Securities Market Commission (CMVM) and is based on the understanding that initiative, competence and commitment are the essential foundations for good performance and that the latter should be aligned with the medium and long term interests of the Company, in order to achieve sustainability.
In determining the remuneration policy comparisons are made with market studies available in Portugal and other European markets, including those prepared by the specialised consultant Hay Group. Comparisons are also made with remuneration practice of comparable companies issuers of securities listed at the stock market.
The fixed remuneration of the Directors is fixed in function of their level of responsibility, is subject to annual review and is placed in the median position in comparable circumstances.
Besides the fixed remuneration, the executive directors participate on an incentives plan, also named by variable bonus. The total remuneration is placed in the third quartile in comparable circumstances.
The fixed remuneration and the incentives plan are decided by the Shareholders' Remuneration Committee in coordination with the Board Nomination and Remuneration Committee.
The incentives plan, awarded to Executive Directors, is subject to maximum percentage limits and is determined by pre-established and measurable performance criteria - performance indicators - agreed with each executive director for each financial year.
The variable bonus is assessed by evaluating performance using a set of performance indicators, both business indicators mainly of an economic and financial nature "Key Performance Indicators of Business Activity" (Business KPIs), and individual indicators, combining the latter performance indicators mainly quantified "Personal Key Performance Indicators" (Personal KPIs). The content of the performance indicators and their specific weight in determining actual remuneration awarded, ensure the alignment of Executive Directors with the strategic objectives defined and compliance with the laws that apply to the Company's activities.
The variable component of remuneration to be awarded is based on an individual performance assessment, which is made by the Shareholders' Remuneration Committee, in coordination with the Board Nomination and Remuneration Committee. This assessment takes place after the results of the Company are known.
Thus, for each financial year, an evaluation is made of business activity and of the performance and individual contributions to the collective success, which, obviously, impacts the awards of the fixed and variable components of the remuneration package of each Executive Director.
In each financial year, the effective payment of at least fifty per cent of the value of the variable bonus awarded to an Executive Director in result of the individual and company' performance assessments is deferred for a period of three years. This deferred component of variable bonus (the "Medium Term Variable Bonus") is determined based on the company's shares, being applied the plan of the Medium Term Variable Bonus under the terms of the respective "Characteristics and Regulation", attached as an Appendix to this Proposal.
In applying the Remuneration and Compensation Policy consideration is given to roles and responsibilities performed in affiliated companies.
The Company's Remuneration and Compensation Policy incorporates the principle of not contemplating any compensation to members of the Board of Director, or to members of other Statutory Governing Bodies, related with the termination of a mandate, whether such termination occurs at the end of the respective mandate, or there is an early termination for any reason or on any basis, without prejudice of the Company's obligation to comply with the applicable law.
The Remuneration and Compensation Policy does not include any additional benefits system, particularly retirement benefits, in favour of the members of the governing bodies or other "Senior Management", without prejudice of the Shareholders' Remuneration Committee having the option to proceed with the payment of part of the amounts due through the attribution of retirement saving plans.
To ensure the effectiveness and transparency of the objectives of the Remuneration and Compensation Policy, the Executive Directors have not, and will not, enter into agreements with the Company or third parties that have the effect of mitigating the risk inherent in the variability of their remuneration awarded by the Company.
the definition of the remuneration and compensation policy of members of the Company's statutory bodies, the main objective is to seize talent with high performance level, which represent a relevant and material contribution to the sustainability of the Company's businesses. With that in mind, remuneration parameters of statutory bodies are set and periodically reviewed in accordance with remuneration practices of comparable national and international companies, aligning, in individual and aggregate terms, the maximum target amounts to be paid to members of the statutory bodies, with market practices, differentiating on an individual and positive manner the members of statutory bodies according to, amongst others, the respective profile and curriculum, the nature and job description and the responsibilities of the relevant statutory body and of the member itself, and the direct correlation degree between individual performance and businesses performance.
To determine the global market reference values is considered the average of values applicable to top management in Europe. The companies considered as peers for remuneration purposes are those included in the group of companies which are listed in Euronext Lisbon, being the maximum potential amounts to be paid to members of the statutory bodies the following, according to market references:
| Board of Directors |
Components | Market Positioning |
Circumstances when the amounts are due |
|
|---|---|---|---|---|
| Executive Directors |
Fixed | Base Remuneration |
Median | N/A |
| Variable Short |
Term Variable Bonus (STVB) |
Third Quartile | Compliance with objective and subjective KPIs |
|
| Medium Term Variable Bonus (MTVB) |
Third Quartile | Compliance with objective and subjective KPIs |
||
| Non-Executive Directors |
Fixed | Remuneration | Median | N/A |
| Statutory Audit Board |
Fixed | Remuneration | Median | N/A |
| Statutory External Auditor |
Fixed | Remuneration | Median | N/A |
The Company will not assume any contractual responsibilities which are based on and have as effect the enforceability of any payments regarding dismissal or termination of functions of directors, notwithstanding the legal responsibility regime applicable to the dismissal of directors without due cause
As for the Company's Statutory Governing Bodies, the approved policy establishes the following:
The remuneration and compensation policy for the Executive Directors (EDs) includes, in the way it is structured, control mechanisms, taking into account the connection to personal and collective performance, to prevent
behaviours that involves excessive risk-taking. This objective is also reinforced by the fact that each Key Performance Indicator is limited to a maximum value.
The remuneration of EDs normally includes two components: (i) a fixed component, which includes a Base Remuneration paid with reference to one year period (remuneration is paid in 12 months) and an annual responsibility allowance, (ii) a variable bonus, awarded in the first half of the year following the year to which it relates (the "Performance Year") and subject to the accomplishment of the targets and objectives fixed for the Performance Year. The variable component is divided into two parts (a) a Short Term Variable Bonus which is paid immediately after it is awarded, and (b) a Medium Term Variable Bonus which vests and is paid after a 3 years deferral period, considering that the exposure of EDs to fluctuations in the share price is the most appropriate way to align the interests of EDs with those of shareholders.
(i) The fixed remuneration of an ED is based on the personal competences and level of responsibility of the function exercised by each ED and is reviewed annually. Each ED is attributed a classification named internally as Management Level ("Grupo Funcional"). EDs are classified under one of the following Management Levels: "Group Leader", "Group Senior Executive" and "Senior Executive". The Management Levels are structured according to Hay's international model for the classification of corporate functions, thereby facilitating market comparisons as well as helping to promote internal equity.
(ii) The variable bonus is designed to motivate and reward the EDs to achieve predetermined targets and objectives, which are based on indicators of Company performance, of working teams under their responsibility and of their own personal performance. Variable remuneration is awarded after the annual accounts are closed and after their performance evaluation has been completed.
The amount of the variable bonus of EDs without a specific geographic responsibility is based on the Company KPI's, at 100%, resulting 70% from the Operational Cash Flow and 30% from Fixed Costs. Thereafter, a multiplication factor will be applied. This multiplication factor results from the performance assessment and can range between 0 and 150% according with the individual performance classification attributed to the relevant ED. Regarding EDs with geographic responsibility, the calculation is similar to the previously described but the combine result of the Company's Operational Cash Flow and Fixed Costs has a weight of 70%, 50% for the Operational Cash Flow and 20% for Fixed Costs, and the weight of the relevant geography represents the remaining 30%, of which 20% is allocated to the Operational Cash Flow and 10% to Fixed Costs. The multiplication factor resultant from the performance assessment is applied in the same way. As the determination of the respective amount is subject to the accomplishment of targets and objectives, there is no guarantee that any payment will be made.
The Short Term Variable Bonus corresponds to a maximum of 50% of the amount of the total variable bonus. This bonus is paid in cash in the first half of the year following the year to which it relates, unless the Shareholders' Remuneration Committee decides that this bonus is paid, within the same term, in shares, in the terms and conditions set forth in the Medium Term Variable Bonus.
This bonus is designed to enhance the connection of the EDs with the Company, aligning their interests with the interests of shareholders, and increasing their awareness of the importance of their performance on the overall success of the organisation. The value awarded corresponds to at least 50% of the total variable bonus.
The value awarded in euros is divided by the average of the share prices to determine the number of shares it corresponds to. The amount converted into shares is adjusted for any changes to the share capital that occurred or any dividends distributed (Total Shareholder Return) during the 3 years deferral period. During this deferral period, the value of the bonus converted into shares may also be adjusted by the level of compliance of the long term KPIs to be defined by the Shareholders' Remuneration Committee to reinforce the alignment with the long term sustainability business objectives.
In line with the statement of a policy that strengthens the alignment of the executive directors with the company long term interests, the Shareholders' Remuneration Committee can, at its discretion, determine that the executive director contributes to the acquisition of shares up to a percentage that cannot exceed 5% of its share price at the date of the share transmission.
On the vesting date, the company has the choice to settle in cash instead of shares.
Taking the two variable components together, the target values set in advance range between 40% and 60% of the total annual remuneration (fixed remuneration and target variable bonus).
In respect to the calculation of the results the value awarded is limited to the minimum 0% and the maximum of 120% of the target value set in advance.
The payments may be made by any of the forms of termination of an obligation as set forth in the law and in the Company's articles of association.
The remuneration of the Non-Executive Members of the Board of Directors (NEDs) shall be based on market comparables, and be structured as follows: (1) a Fixed Remuneration (of which approximately 15% depends on attendance at Board of Directors and Board Committee meetings); (2) an Annual Responsibility Allowance. Fixed Remuneration may be increased by up to 5% for those NEDs serving as Chairman of any Board Committee. There is no remuneration as variable bonus.
The remuneration of the members of the Company's Statutory Audit Board shall be based exclusively on fixed amounts, which include an Annual Responsibility Allowance. The levels of remuneration are determined by taking into consideration the Company's situation and by benchmarking against the market.
The Company's Statutory External Auditor shall be remunerated in accordance with normal fee levels for similar services, benchmarked against the market, under the supervision of the Statutory Audit Board and the Board Audit and Finance Committee.
The remuneration of the members of the Board of the Shareholders' General Meeting shall correspond to a fixed amount, based on the Company's situation and benchmarked against the market.
Under the terms of Paragraph 3 of Article 248.º - B of the Portuguese Securities Code, in addition to the members of the Statutory Governing Bodies mentioned above, Senior Management also includes individuals who have regular access to Privileged Information and are involved in taking management and business strategy decisions at the Company.
The remuneration policy applicable to other individuals who, under the terms of the law, are considered to be Senior Management, shall be equivalent to the one adopted for other managers with the same level of function and responsibility, without awarding of any other additional benefits in addition to those which result from the respective Management Level
With regard to the non-executive directors, the attribution of only a fixed remuneration, as explained in the previous point, allows the interests of these directors to be matched to the long-term interests of the company.
As for the executive directors, the attribution of remuneration comprising a fixed component and a variable component, the latter calculated in line with a series of specifically weighted performance indicators, ensures that the executive directors' interests are aligned with the long-term interests of the company and discourages risk taking. The result of the performance assessment of each of the executive directors serves as a multiplier factor of the other defined KPIs (for a more detailed explanation of how the different KPIs work, see the previous point).
As mentioned in the two previous points, the remuneration of the executive directors comprises a variable component, whereby the performance assessment impacts on this part of the remuneration (for more detailed explanation of the impact of the performance assessment on the variable remuneration component see point 69).
The Medium-Term Variable Bonus is deferred for a 3-year period.
The criteria regulating the variable remuneration in shares, the maintenance of these shares, the possible signing of contracts relative to these shares, as well as their proportion of the total annual remuneration, are detailed in the remuneration policy in point 69 and the share attribution plan in point 86.
The company does not attribute options.
The parameters and explanation of the annual bonus system are outlined in the remuneration policy in point 69.
The company has not implemented any supplementary pension or early retirement regime.
| 2014 | Total Fixed Annual Remuneration |
Total Short term Variable Bonus |
Total Medium term Variable Bonus |
Total | ||||
|---|---|---|---|---|---|---|---|---|
| 2013 | 2014 | 2013 (a) | 2014 (b) | 2013 (c) | 2014 (d) | 2013 | 2014 | |
| Belmiro de Azevedo (Chaiman) | 182,010 | 182,200 | 182,010 | 182,200 | ||||
| Paulo Azevedo | 28,110 | 28,300 | 28,110 | 28,300 | ||||
| Javier Veja | 30,200 | 31,000 | 30,200 | 31,000 | ||||
| Albrecht Ehlers(e) | 40,800 | 41,400 | 40,800 | 41,400 | ||||
| Carlos Moreira da Silva | 0 | 0 | 0 | |||||
| Rui Correia | 277,010 | 276,880 | 28,985 (i) | 99,838 (iv) | 43,512 (vii) | 149,757 (x) | 349,507 | 526,475 |
| Cristopher Lawrie (f) | 149,267 | 222,905 | 94,681 (ii) | 89,990 (v) | 94,681 (viii) | 89,990 (xi) | 338,629 | 402,885 |
| Jan Bergmann (g) | 250,000 | 250,000 | 27,966 (iii) | 93,264 (vi) | 42,012 (ix) | 139,896 (xii) | 319,978 | 483,160 |
| Total of Board of Directors | 957,397 1,032,685 | 151,632 | 283,092 | 180,205 | 379,643 | 1,289,234 1,695,420 |
(a) Relative to 2013, amount approved and paid in 2014.
(b) Relative to 2014, estimated value subject to real KPI achievement and to subsequent approval by the Shareholder's Remuneration Committee. (c)Relative to 2013, approved in 2014, deferred for the three-year vesting period until 2017.
(d) Relative to 2014, estimated value subject to real KPI achievement and to subsequent approval by the Shareholder's Remuneration Committee. The initial amount, to be attributed in 2015 and linked to the share price performance, is deferred for a three-year vesting period until 2018 and will be booked linearly over that three-year period.
(e) Out of the amount paid in 2013, 28,500 Euros were paid by Sonae Indústria, SGPS, SA and 12,300 by Glunz AG.
Out of the amount earned in 2014, 29,100 Euros were paid by Sonae Indústria, SGPS, SA and 12,300 Euros by Glunz AG.
(f) Relative to eight months in 2013.
(g) Amounts paid in their entirety by Glunz AG.
(i) Fixed from the target value of the year in the amount of 110,000 Euros.
(ii) Fixed from the target value of the year in the amount of 108,258 Euros.
(iii) Fixed from the target value of the year in the amount of 100,000 Euros.
(iv) Fixed as from the target value of the year in the amount of 110,000 Euros.
(v) Fixed from the target value of the year in the amount of 108,258 Euros.
(vi) Fixed from the target value of the year in the amount of 100,000 Euros.
(vii) Fixed from the target value of the year in the amount of 165,000 Euros. (viii) Fixed from the target value of the year in the amount of 108,258 Euros.
(ix) Fixed from the target value of the year in the amount of 150,000 Euros.
(x) Fixed from the target value of the year in the amount of 165,000 Euros.
(xi) Fixed from the target value of the year in the amount of 108,258 Euros.
(xii) Fixed from the target value of the year in the amount of 150,000 Euros.
The amounts paid by other companies in the group are shown in the table in point 77.
The bonuses paid to the executive directors are outlined in the table in point 77.
No indemnity was paid to the former executive directors upon termination of their functions during the year.
In 2014 the members of the Statutory Audit Board earned a total remuneration of 26,600 Euros. Its Chairman earned 10,200 Euros and each of the two members 8,200 Euros.
In 2014 the Chairman of the Board of the General Meeting earned the total remuneration of 4,125 Euros. It should be noted that the actual Chairman of the Board of the General Meeting was only elected at the Shareholder's General meeting of April 2014, holding until that time the position of Secretary.
The Remuneration and Compensation Policy approved in the General Meeting maintains its principle of not awarding compensation to the directors upon termination of their mandate, notwithstanding mandatory compliance by the company with the legal stipulations in force concerning this matter.
No agreements were signed between the company and the directors that stipulated indemnity in the event of resignation, dismissal without justification or termination of the employment relationship following a change in the control of the company.
| VI. | SHARE PLANS OR STOCK OPTIONS PLANS |
|---|---|
| ----- | ------------------------------------ |
As mentioned earlier, the Share Attribution Plan (Plan) is applicable to the Medium-Term Variable Bonus (MTVB) which the executive directors are entitled to, and which was subject to deliberation by the General Meeting.
The regulations of the Plan establish the following:
MTVB is one of the components of SONAE INDÚSTRIA's Remuneration Policy. This component differs from the others, as it has a restricted and casuistic character, being subject to the eligibility rules set out in this document.
MTVB allows the eligible persons to share with shareholders, the value that is created as a result of their direct influence on the strategy definition and management of the underlying businesses, in the proper measurement of the annual assessment of their performance.
The MTVB constitutes a way of aligning the executive directors' interests with the company interests, reinforcing their commitment and strengthening the perception of the importance of their performance for the success of Sonae Indústria, reflected in the market capitalisation of the share.
The executive directors of Sonae Indústria and of its subsidiary companies are eligible to be awarded the MTVB.
According with the remuneration policy approved by the Board of Directors, employees who, through that policy, are entitled to the present plan are also eligible for the award of the MTVB.
| Eligible Members | Reference value for the Medium Term Variable Bonus (% of the total variable Bonus target) |
|---|---|
| Sonae Indústria Executive Directors | at least 50% |
| Executive Directors of Business Units | at least 50% |
| Employees | under terms to be defined by the Board of Directors of each company |
MTVB is set on an annual basis, for periods of three years. From the beginning of the third consecutive plan will occur, at each moment, the coexistence of three plans of three years each.
The MTVB is valued at the date of attribution using prices which represent the price of the share, in the Portuguese stock market, considering for this effect the most favourable of the following: closing share price of the first day of trading after the General Meeting of Shareholders or the average closing share price (regarding the thirty-day period of trading prior to the General Meeting of Shareholders).
Members entitled to MTVB have the right to acquire a number of shares corresponding to the division between the amount of MTVB granted and the price of the share at the date of attribution calculated under the terms of the previous paragraph. Such right can be exercised three years after attribution, which may be adjusted, through the deferral period by the completion level of long term KPIs to be defined by the Shareholders' Remuneration Committee, in order to reinforce the alignment with the long term sustainability business objectives.
In line with the statement of a strengthens policy of the alignment of executive directors with the company's long term interests, the Shareholders' Remuneration Committee can, at its discretion, determine that the executive director contributes to the acquisition of shares up to a percentage that cannot exceed 5% of its share price at the date of the share transmission.
If, after the granting date and before its exercise, dividends are distributed, changes in the nominal value of shares or in the share capital of the company occur or any other change in equity with impact in the economic value of the attributed rights, the number of shares attributed will be adjusted to an equivalent figure considering the effect of the mentioned changes.
On the vesting date of the MTVB, the company reserves the right to deliver, instead of shares, cash in the amount the equivalent to its market value at exercise date.
The acquisition right of the shares attributed by the MTVB become due three years after its attribution.
The right to exercise the acquisition right of shares granted under the plan expires if the contractual link between the member and the company ceases before the three year period subsequent to its attribution, notwithstanding situations included in the following paragraphs.
The right will remain valid in case of permanent incapacity or death of the member, in which case the payment is made to the member himself or to his/her heirs on the vesting date.
In case of retirement of the member, the attributed right can be exercised in the respective vesting date.
The current policy is extensive to all active plans regarding which shares have not yet been transmitted.
The company does not have plans to attribute share purchase options.
No control mechanisms are in place regarding an employee participation system in the company's share capital.
| I. CONTROL MECHANISMS AND PROCEDURES |
|---|
| ----------------------------------------- |
The mechanisms implemented by the company for the purposes of controlling transactions with related parties are thorough, transparent and in strict compliance with the market's competition rules. Such transactions are subject to specific administrative procedures that are regulated by rules, namely rules governing transfer prices or the voluntary adoption of internal verification and control systems.
Sonae Indústria did not carry out any transactions with members of the Board of Directors nor with the Statutory Audit Board members.
All transactions with holding or other related companies represent normal operational activity and were made under "open market" conditions and at prices that comply with transfer pricing regulations.
Any transaction with shareholders or entities with whom they are in any relationship, under Article 20 of the Securities Code (reference shareholders), greater than 10 million Euros, should be subject to prior opinion of the Statutory Audit Board. The request for an opinion must be accompanied by all the elements required to allow a comparative analysis with the market and how potential conflicts of interest will be managed.
Transactions that have been contracted with reference shareholders shall be a result of a competitive process and when lower than 10 million Euros will be exempt from the prior opinion of the Statutory Audit Board but will need to be reported to the Statutory Audit Board under the procedures mentioned below.
The Sonae Indústria CFO is responsible for reporting to the Statutory Audit Board:
In 2014 the Statutory Audit Board gave its favourable opinion to the financing agreement celebrated between Sonae Indústria and the shareholder Pareuro, BV (company fully controlled by Efanor Investimentos SGPS, SA) in the amount of sixteen million six hundred and sixty six thousand and sixty six euros.
II. INFORMATION CONCERNING TRANSACTIONS
The information relative to related parties' transactions may be found in Note No 36 of the Notes to the Consolidated Financial Statements.
Sonae Indústria, SGPS, SA adopted the Corporate Governance Code published by CMVM (the Portuguese Securities Market Commission) in 2013, which is posted at www.cmvm.pt.
The decision to select the Corporate Governance Code of the CMVM is justified by the fact that it guarantees a suitable degree of shareholder protection and corporate governance transparency, and is also the Governance Code that the investors are most familiar with.
Sonae Indústria complied with all recommendations of the Corporate Governance Code aforementioned during the 2014 exercise. Besides fulfilling the legal requirements and recommendations of the referred Code, Sonae Industria, being aware of the importance of good corporate governance for business and for its shareholders, constantly seeks to adopt best practices in all areas in which operates, and as such prepared its own Code of Conduct, which can be found on the company's website www.sonaeindustria.com.
| RECOMMENDATION | Degree of compliance |
Corporate Governance report |
|---|---|---|
| I. VOTING AND CORPORATE CONTROL |
||
| I.1 Companies should encourage their shareholders to attend and vote at general meeting sand shall not set na excessively large number of shares required for the entitlement of one vote, and implement the means necessary to exercise the right to vote by mail and electronically. |
Comply | 12 and 13 |
| I.2 Companies 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. |
Comply | 14 |
| I.3 Companies shall not establish mechanisms intended to cause mismatching between the right to receive dividends or the subscription of new securities and the voting right of each common share, unless duly justified in terms of long-term interests of shareholders. |
Comply | 12 |
| I.4 The company's Articles of Association that provide for the restriction of the number of votes that may be held or exercised by a single shareholder, either individually or in concert with other shareholders, shall also foresee for a resolution by the General Assembly (five years interval), 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 |
Comply | 13 |
| RECOMMENDATION | Degree of compliance |
Corporate Governance report |
|---|---|---|
| resolution, all votes issued be counted, without applying said restriction. I.5 Measures that require payments 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 the free transfer of shares and the free assessment by shareholders of the performance of Board members, shall not be |
Comply | 4 |
| adopted. II. SUPERVISION, MANAGEMENT AND AUDITING |
||
| II.1 Supervision and Management | ||
| II.1.1. Within the limits established by Law, and except for the small size of the company, the Board of Directors shall delegate the daily management of the company and said delegated powers shall be identified in the Annual Report on Corporate Governance. |
Comply | 27 and 28 |
| II.1.2. The Board of Directors shall ensure that the Company acts in accordance with its objectives, and shall not delegate its own responsibilities as regards the following: i) definition of the strategy and general policies of the company; ii) definition of the business structure of the Group; iii) decisions considered strategic due to the amount, risk and particular characteristics involved. |
Comply | 28 |
| II.1.3 The General and Supervisory Board, in addition to its supervisory duties, shall take full responsibility at corporate governance level, whereby through the statutory provision or by equivalent means, shall enshrine the requirement for this body to decide on the strategy and major policies of the company, the definition of the corporate structure of the group and the decisions that shall be considered strategic due to the amount or risk involved. This body shall also assess compliance with the strategic plan and the implementation of key policies of the company. |
Not applicable | |
| II.1.4. Except for small-sized companies, the Board of Directors and the General and Supervisory Board, depending on the model adopted, shall create the necessary committees in order to: |
||
| a) Ensure a competent and independent assessment of the performance of the executive directors and its own overall performance, as well as of other committees; |
||
| b) Reflect on the system structure and governance practices adopted, verify its efficiency and propose to the competent bodies, measures to be implemented with a view to their improvement. |
Comply | 15 and 27 to 29 |
| II.1.5. The Board of Directors or the General Supervisory Board, depending on the applicable model, should set goals in terms of risk-taking and create systems for their control to ensure that the risks effectively incurred are consistent with those goals. |
Comply | 50 to 52 |
| RECOMMENDATION | Degree of compliance |
Corporate Governance report |
|
|---|---|---|---|
| members ensuring effective Board. |
II.1.6 The Board of Directors shall include a number of non-executive monitoring, supervision and assessment of the activity of the remaining members of the |
Comply | 17 and 18 |
| independent members, |
II.1.7. Non-executive directors shall include an appropriate number of taking into account the adopted governance model, the size of the company, its shareholder structure and the respective free float .The independence of the members of the General and Supervisory Board and members of the Audit Committee shall be assessed as per the law in force. The other members of the Board of Directors are considered independent the member is not associated with any group with specific interests in the company nor is under any circumstance likely to affect an exempt analysis or decision, particularly due to: |
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| a. company |
Having been an employee at the company or at a holding a controlling or group relationship, in the past three years; |
||
| b. | Having, in the past three years, provided services or established a commercial relationship with the company or company with which it is in a controlling or group relationship, either directly or as a partner, board member, manager or director of a legal person; |
Comply | 18 |
| c. | Being paid by the company or by a company with which it is in a controlling or group relationship other than the remuneration arising from the exercise of the role of a board member; |
||
| d. | Living with a partner or a spouse, relative or any first degree next of kin up to and including the third degree of collateral affinity of board members or individuals who are, directly or indirectly, holders of qualifying holdings; |
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| e. Being a |
qualifying shareholder or a representative of a qualifying shareholder. |
||
| the request. | II.1.8. When Board members that carry out executive duties are requested by other Board Members shall provide the information requested in a timely and appropriate manner to |
Comply | 28 |
| minutes of the respective meetings. | II.1.9. The Chairman of the Executive Board or of the Executive Committee shall submit, as applicable, to the Chairman of the Board of the Directors, the Chairman of the Statutory Audit Board, the Chairman of the Audit Committee, the Chairman of the General and Supervisory Board and the Chairman of the Financial Matters Committee, the convening notices and |
Comply | 28 |
| II.1.10 If the Chairman of the Board of Directors has an executive role, said body shall appoint, from amongst its members, an independent member to ensure the coordination of the work of |
Not applicable |
| RECOMMENDATION | Degree of compliance |
Corporate Governance report |
|---|---|---|
| other non-executive members and the conditions so that body can make independent and informed decisions or to ensure the existence of an equivalent mechanism for such coordination. |
||
| II.2. Auditing | ||
| II.2.1 Depending on the applicable model, the Chairman of Statutory Audit Board, the Chairman of the Audit Committee or the Chairman of the Financial Matters Committee shall be independent in accordance with the applicable legal standard and shall have the necessary skills to carry out the respective duties. |
Comply | 32 and 33 |
| II.2.2 The Auditing Body shall be the main interface between the external auditor and the first recipient of the relevant reports, and is responsible, inter alia, for proposing the respective remuneration and ensuring that proper conditions for the provision of services are provided within the company. |
Comply | 45 |
| II.2.3 The Auditing Body shall assess the external auditor on na annual basis and propose to the competent body its dismissal or termination of the contract as to the provision of their services when there is a valid basis for said dismissal. |
Comply | 45 |
| II.2.4. The Auditing Body shall assess the functioning of the internal control systems and risk management and propose adjustments as may be deemed necessary. |
Comply | 51 |
| II.2.5. The Audit Committee, the General and Supervisory Board and the Statutory Audit Board decide on the work plans and resources concerning the internal audit services and services that ensure compliance with the rules applicable to the company (compliance services), and should be recipients of reports made by these services at least in what concerns matters related to accounting, identification or resolution of conflicts of interest and detection of potential improprieties |
Comply | 51 |
| II.3 Remuneration Setting | ||
| II.3.1 All members of the Remuneration Committee or alike shall be independent from the executive board members and shall include at least one member with knowledge and experience in matters of remuneration policy. |
Comply | 67 and 68 |
| II.3.2 Any natural or legal person that provides or has provided services in the past three years to any structure under the Board of Directors, to the Board of Directors itself, or who has a current relationship with the company or a company consultant shall not be hired to assist the Remuneration Committee in the performance of its duties. This recommendation also applies to any natural or legal person that is related by employment contract or provision of services with the above. |
Comply | 67 |
| II.3.3 A statement on the remuneration policy of the management and supervisory bodies referred to in Article 2 of Law No. 28/2009 dated 19 June, shall also include the following: |
Comply | 69 |
| RECOMMENDATION | Degree of compliance |
Corporate Governance report |
|---|---|---|
| a) Identification and details of the criteria for determining the remuneration paid to the members of the governing bodies; |
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| b) Information regarding the maximum potential, in individual terms, and the maximum potential, in aggregate form, to be paid to the members of corporate bodies, and identify the circumstances whereby these maximum amounts may be payable; |
||
| c) Information regarding the enforceability or unenforceability of payments for the dismissal or termination of appointment of board members. |
||
| II.3.4 The Approval of plans for the allotment of shares and/or options to acquire shares based on share price variation to board members shall be submitted to the General Meeting. The proposal shall contain all the necessary information in order to correctly assess said plan. |
Comply | 85 and 86 |
| II.3.5 Approval of any retirement benefit scheme established for members of corporate bodies shall be submitted to the General Meeting. The proposal shall contain all the necessary information in order to correctly assess said system. |
Not applicable | |
| III. REMUNERATIONS |
||
| III.1 The remuneration of the executive board members shall be based on actual performance and shall discourage taking on excessive risk. |
Comply | 69 |
| III.2 The remuneration of non-executive board members and the remuneration of the members of the Auditing Body shall not include any component dependent on the company performance or of its value. |
Comply | 69 |
| III.3 The variable component of the remuneration shall be reasonable overall in relation to the fixed component of the remuneration and maximum limits shall be set for all components. |
Comply | 69 |
| III.4 A significant part of the variable remuneration shall be deferred for a period not less than three years and its payment shall depend on the continued positive performance of the company during said period. |
Comply | 69 and 72 |
| III.5 Members of the Board of Directors shall not enter into contracts with the company or with third parties which intend to mitigate the risk inherent to the remuneration variability set by the company. |
Comply | 69 |
| III.6 The Executive Directors shall keep the company's shares that were allotted by virtue of variable remuneration schemes, up to twice the value of total annual remuneration, except for those shares that must be sold for the payment of taxes on the gains of said shares, until the end of their mandate. |
Comply | 69 |
| RECOMMENDATION | Degree of compliance |
Corporate Governance report |
|---|---|---|
| III.7 When the variable remuneration includes stock options, the beginning of the exercise period shall be deferred for a period of not less than three years. |
Not applicable | |
| III.8 When the dismissal of a board member is not due to serious breach of duties nor to the unfitness for the normal exercise of the functions but, yet, is due to an inadequate performance, the company shall be endowed with the adequate and necessary legal instruments so that any damages or compensation beyond that which is legally due, is unenforceable. |
Comply | 83 |
| IV. AUDIT | ||
| IV.1 The external auditor, within the scope of its duties, shall 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 company's Supervisory Board. |
Comply | 51 |
| IV.2 The company or any entity with which it maintains a controlling relationship shall not engage the external auditor or any entity with which it finds itself in a group relationship or that incorporates the same network, for services other than audit services. If there are reasons for hiring such services - which must be approved by the Auditing body and must be explained in the Annual Corporate Governance Report - said services should not exceed 30% of the total value of services rendered to the company. |
Comply | 46 and 47 |
| IIV.3 Companies shall support the rotation of auditors after two or three terms whether these are four or three year mandates, respectively. The continuance beyond this period must be based on a specific opinion of the Supervisory Board that explicitly considers the conditions of auditor independence and the benefits and costs of replacement. |
Comply | 44 |
| V. CONFLICTS OF INTEREST AND RELATED PARTY TRANSACTIONS |
||
| V.1 The company's business with holders of qualifying holdings or entities with which they are in any type of relationship pursuant to Article 20 of the Portuguese Securities Code shall be conducted during normal market conditions. |
Comply | 90 |
| V.2 The Supervisory Body or the Auditing Body shall establish procedures and criteria that are required to define the relevant level of significance of business with holders of qualifying holdings - or entities with which they are in any of the relationships described in Article 20/1 of the Portuguese Securities Code - thus significant relevant business is dependent upon prior opinion of that body. |
Comply | 91 |
| VI. INFORMATION |
| RECOMMENDATION | Degree of compliance |
Corporate Governance report |
|---|---|---|
| VI.1 Companies shall provide, via their websites, in both Portuguese and English languages, access to information on their progress as regards the economic, financial and governance state of play. |
Comply | 59 to 65 |
| VI.2 Companies shall ensure the existence of an investor support and market liaison office which responds to requests from investors in a timely manner and which keeps record of the submitted requests and their processing. |
Comply | 56 and 58 |
Separate Statements of Financial Position Separate Income Statements Separate Statement of Comprehensive Income Separate Statements of Changes in Shareholders' Funds Separate Statements of Cash Flows Notes to the Financial Statements
SEPARATE STATEMENTS OF FINANCIAL POSITION AT 31 DECEMBER 2014 AND 2013
| (Values in EUR) | |
|---|---|
| ASSETS | Notes | 31.12.14 | 31.12.13 | |
|---|---|---|---|---|
| NON CURRENT ASSETS: | ||||
| Tangible assets | 3 | 1.339 | 2.801 | |
| Intangible assets | 4 | - | - | |
| Investment in associates | 6 | 545.741.926 | 605.187.656 | |
| Available-for-sale investments | 6 | 122.922 | 122.922 | |
| Deferred tax assets | 7 | 4.743.026 | 5.527.236 | |
| Other non current assets | 8 | 378.640.939 | 513.808.092 | |
| Total Non Current Assets | 929.250.152 | 1.124.648.706 | ||
| CURRENT ASSETS | ||||
| Trade debtors | 9 | 24.856 | 24.150 | |
| Other debtors | 9 | 11.914.800 | 13.302.794 | |
| Taxes and other contributions receivable | 9 | 921.022 | 1.102.868 | |
| Other current assets | 10 | 408.960 | 89.367 | |
| Cash and cash equivalents | 11 | 34.598 | 297.991 | |
| Total Current Assets | 13.304.235 | 14.817.170 | ||
| Total Assets | 942.554.387 | 1.139.465.877 | ||
| SHAREHOLDER'S FUNDS AND LIABILITIES | ||||
| SHAREHOLDER'S FUNDS: | ||||
| Share Capital | 12 | 812.107.574 | 700.000.000 | |
| Legal reserve | 12 | 3.131.757 | 3.131.757 | |
| Other reserves and retained earnings | 12 | -199.435.134 | -65.896.265 | |
| Accumulated other comprehensive income | 177.210 | 80.009 | ||
| Total Shareholder's Funds | 615.981.407 | 637.315.501 | ||
| NON CURRENT LIABILITIES | ||||
| Bank loans - long term - net of current portion | 13 | 114.099.921 | 83.101.488 | |
| Debentures - long term - net of current portion | 13 | 147.604.120 | 118.908.927 | |
| Total Non Current Liabilities | 261.704.041 | 202.010.415 | ||
| CURRENT LIABILITIES | ||||
| Current portion of long term bank loans | 13 | 7.270.202 | 6.639.814 | |
| Bank loans - short term | 13 | 39.969.550 | 150.677.246 | |
| Current portion of long term debentures | 13 | - | 129.918.927 | |
| Other loans | 14 | 448.843 | 174.361 | |
| Trade Creditors | 15 | 13.995.609 | 7.542.528 | |
| Other creditors | 15 | 892.260 | 729.554 | |
| Taxes and other contributions payable | 16 | 2.292.474 | 4.457.531 | |
| Total Current Liabilities | 64.868.939 | 300.139.961 | ||
| Total Shareholder's Funds and Liabilities | 942.554.387 | 1.139.465.877 |
Notes 31.12.14 31.12.13 Operating Income: 0 0 Other Operating Income 21 91.996 140.636 Total operating income 91.996 140.636 Operating Costs: - - External supplies and services -491.496 -599.065 Staff costs -1.272.464 -1.102.268 Amortisation and Depreciation 3/4 -1.462 -1.053 Provisions and impairment losses 17 - - Other operating costs 21 -644.211 -179.024 Total operating costs -2.409.632 -1.881.410 Operating profit/(loss) -2.317.637 -1.740.774 Financial profi/(loss) 22 1.220.518 1.559.453 Profit/(loss) on other investments 23 -131.619.660 -150.212.759 Profit/(Loss) before tax -132.716.779 -150.394.080 Corporate income tax - current tax 24 1.443.167 866.597 Corporate income tax - deferred tax 24 -784.210 -1.236.269 Net Profit/(loss) on continuing operations -132.057.822 -150.763.752 Profit/(loss) for the period -132.057.822 -150.763.752 Profit (loss) per Share Excluding Descontinued operations Basic 25 -0,01 -1,08 (Values in EUR) Diluted -0,01 -1,08
(Values in EUR)
| NOTES | 31.12.14 | 31.12.13 | |
|---|---|---|---|
| Profit/(loss) for the period | 12 | - 132 057 822 | - 150 763 752 |
| Other comprehensive income for the period | |||
| Change in fair value of available-for-sale financial assets | |||
| Change in fair value of cash flow hedge derivatives | - | - | |
| Gains on property revaluation | |||
| Actuarial gains / (losses) on benefit pension plans | |||
| Share of other comprehensive income of associates | |||
| Income tax relating to components of other comprehensive income | |||
| Other comprehensive income for the period | 97 201 | 33 785 | |
| Other comprehensive income for the period, net of tax | 97.201 | 33.785 | |
| TOTAL COMPREHENSIVE INCOME FOR THE PERIOD | - 131 960 621 | - 150 729 967 |
| Accumulated other comprehensive income | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Share capital | reserve Legal |
Other Reserves and Retained earnings |
sale financial Available-for- assets |
Cash flow derivatives hedge |
revaluation Property |
(losses) on Actuarial pension gains / benefit plans |
ve income of comprehensi associates Share of other |
related to other comprehensive Income tax income |
comprehensiv e income for the period Other |
Subtotal | shareholder's Total funds |
||
| NOTES | 12 | 12 | 12 | ||||||||||
| Balance as at 1 January 2014 | 700 000 000 | 3 131 757 | -65 896 265 | 80 009 | 80 009 | 637 315 501 | |||||||
| Appropriation of previous year's net profit / (loss) | |||||||||||||
| Net profit / Loss for the period Total comprehensive income |
12 | - 132 057 822 | - 132 057 822 | ||||||||||
| Other comprehensive income Total |
- 132 057 822 | - 132 057 822 | |||||||||||
| Others | 112 107 574 | -1 481 047 | 97 201 | 97 201 | 110 723 728 | ||||||||
| Balance as at 31 December 2014 | 12 | 812 107 574 | 3 131 757 | -199 435 134 | 177 210 | 177 210 | 615 981 407 | ||||||
| Balance as at 1 January 2013 | 700 000 000 | 3 131 757 | 84 867 487 | 46 224 | 46 224 | 788 045 468 | |||||||
| Appropriation of previous year's net profit / (loss) | |||||||||||||
| Total comprehensive income | |||||||||||||
| Net profit / Loss for the period Other comprehensive income |
12 | - 150 763 752 | - 150 763 752 | ||||||||||
| Total | - 150 763 752 | - 150 763 752 | |||||||||||
| Others | 33 785 | 33 785 | 33 785 | ||||||||||
| Balance as at 31 December 2013 | 12 | 700 000 000 | 3 131 757 | -65 896 265 | 80 009 | 80 009 | 637 315 501 | ||||||
The notes are an integral part of the individual financial statements
FOR THE PERIODS ENDED AT 31 DECEMBER 2014 AND 2013
(Values in EUR)
| OPERATING ACTIVITIES | Note | 31.12.2014 | 31.12.2013 | ||
|---|---|---|---|---|---|
| Cash receipts from trade debtors | 0 | ||||
| Cash paid to trade creditors | 1.067.760 | 671.726 | |||
| Cash paid to employees | 1.121.122 | 1.230.788 | |||
| Operational Cash Flow | -2.188.882 | -1.902.514 | |||
| Corporate income tax paid / received | -1.481.922 | -1.059.208 | |||
| Other cash receip/ payments relating to operating activities | 11 | 979.822 | -173.263 | ||
| Net cash flow from operating activities [1] | 272.862 | -1.016.569 | |||
| INVESTMENTS ACTIVITIES: | |||||
| Cash receipts arising from: | |||||
| Financial investments | 1.042.543 | ||||
| Tangible assets | 169 | ||||
| Dividends | 23 | 363.644 | |||
| Interest assets and similar income | 363.644 | 4.570.960 | 5.613.672 | ||
| Cash payments owing to: | |||||
| Financial investments | 6 | 72.537.574 | 15.727.008 | ||
| Tangible assets | 905 | ||||
| Intangible assets | 72.538.479 | 15.727.008 | |||
| Net cash flow from investing activities [2] | -72.174.835 | -10.113.335 | |||
| FINANCIAL ACTIVITIES | |||||
| Cash receipts arising from: | |||||
| Interest and similar charges | 1.199.882 | 1.700.507 | |||
| Increase in share capital | 110.634.172 | ||||
| Loans granted | 328.780.925 | 251.930.506 | |||
| Loans obtained | 3.357.143.169 | 3.797.758.148 | 2.435.000.000 | 2.688.631.013 | |
| Cash payments owing from: | |||||
| Interest and similar costs | 33.014.061 | 24.579.180 | |||
| Loans granted | 162.175.000 | 237.305.303 | |||
| Loans obtained | 3.530.758.383 | 2.390.495.197 | |||
| Others | 3.725.947.444 | 2.652.379.680 | |||
| Net cash flow from financing activities [3] | 71.810.703 | 36.251.334 | |||
| Net increase / decrease in cash and cash equivalents | -91.270 | 25.121.430 | |||
| Cash and cash equivalents - opening balance | 11 | 120.745 | -25.000.685 | ||
| Cash and cash equivalents - close balance | 11 | 29.475 | 120.745 | ||
| Net increase / decrease in cash and cash equivalents | -91.270 | 25.121.430 |
(Amounts expressed in Euros)
SONAE INDÚSTRIA, SGPS, S.A. is based at Lugar do Espido, Via Norte, Apartado 1096, 4470-177 Maia, Portugal.
The Company's shares are listed on NYSE Euronext.
The main accounting policies adopted in preparing the accompanying financial statements are as follows:
These financial statements have been prepared in accordance with International Financial Reporting Standards ( IFRS ) and International Accounting Standards ( IAS ) issued by the " International Accounting Standards Board " ( " IASB " ) and Interpretations issued by the " International Financial Reporting Interpretations Committee " ( " IFRIC " ) or the earlier " Standing Interpretations Committee " ( " SIC " ) , applicable to the financial year beginning January 1, 2014 and approved by the European Union .
During the year ended december 31, 2014, entered into force the following standards and interpretations:
IFRS 10 ( new ) , ' Consolidated Financial Statements ' , IFRS 11 ( new ) , ' Joint Arrangements ' , IFRS 12 ( new ) , ' Disclosure of interests in other entities ' ; Amendments to IFRS 10 , IFRS 11 and IFRS 12 , ' transition regime ' , IAS 27 ( revised 2011 ) , ' separate financial statements ' , IAS 28 ( revised 2011 ) , ' Investments in associates and joint ventures ' , IAS 32 (amendment ) ' Compensation of financial assets and liabilities , IAS 36 ( amendment), ' Disclosure of impairment for non-financial assets ' , IAS 39 (amendment ) Renewal derivatives and hedge accounting continued ' ; IFRIC 21 (new) - ' Foreign Government .
The introduction of these standards and improvements, as well as the interpretation had no material impact on the financial statements of the company.
The december 31, 2014 were issued and approved by the European Union the following standards and interpretations to be applied in years beginning ( on or after july, 2014 ) :
IFRS 1 – First-time Adoption, IFRS 3 – Business combinations , IFRS 13 – Fair value measurement IAS 40 – Investment property ; IAS 19 (amendment), Employee benefits ; IFRS 2 – Share-based payment IFRS 8 – Operating segments, IAS 16 – Property ,plant and equipment, IAS 24 – Related party disclosures , IAS 38 – Intangible assets
As at december 31, 2014 , were issued the following standards , which are mandatory in subsequent years ( on or after January 1, 2016 ) , which had not yet been adopted by the European Union :
IAS 1 (amendment), Presentation of Financial Statements ;IAS 16 ( amendment), – Property ,plant and equipment , IAS 38 (amendment), Intangible assets IAS 41 (amendment), Agriculture: transformation of biological assets ; IAS 27 (amendment), Financial statements ;IFRS 5 – Non-current Assets Held for Sale and Discontinued. Operations IFRS 7 –Financial instruments IAS 19 – Employee benefits .IAS 34 – Interim financial report; IFRS 10 ( amendment), financial statements IAS 28 (amendment), investments in associates and joint ventures ; IFRS 12 (amendment),disclosure of Interests in Other Entities ; IFRS 11 (amendment), Join arrangements ; IFRS 14 (new), Regulatory Deferral Accounts
As at december 31, 2014 , were issued the following standards , which are mandatory in subsequent years ( on or after January 1, 2017 ) , which had not yet been adopted by the European Union :
IFRS 15 (new), Revenue from contracts with customers.
As at december 31, 2014 , were issued the following standards , which are mandatory in subsequent years ( on or after January 1, 2018 ) , which had not yet been adopted by the European Union :
IFRS 9 (novo), Financial Instruments.
It is not expected that the future adoption of these rules raise significant to the Financial Statements accompanying impacts.
These financial statements have been prepared from the books and records of the company on a going concern basis and based on historic cost, except for financial instruments which are stated at fair value.
Assets and liabilities of each Group company are measured at their fair value at the date of acquisition. Financial investments in Group and Associated Companies are tested for imparity when appropriate. If an impairment loss exists, it is recorded as a cost.
Subsidiaries are all entities (including special purpose entities) over which the Sonae Indústria, SGPS, has the power to govern the financial and operating policies of those normally associated with the control, directly or indirectly, more than half of the voting rights. Associates are those entities in which Sonae Indústria holds between 20% and 50% of the voting rights, or over which the Sonae Indústria has significant influence in shaping financial and operating policies. Beyond the recognition
of the impairment of the investment in Subsidiary / Associate, Sonae Indústria recognize additional losses if incurred obligations or has made payments on behalf of Subsidiary / Associate. Entities that qualify as subsidiaries are listed in Note 6. Entities that qualify as associates are listed in Note 6.
Revenues from financial investments (dividends received) are recorded on the Profit and Loss statement of the period in which distribution is decided and announced.
Tangible assets acquired up to 1 january 2004 (transition date to IFRS) are recorded at their deemed cost, which corresponds to their acquisition cost or revaluated acquisition cost, in accordance with generally accepted accounting principles in Portugal at that date, net of depreciation and accumulated impairment losses.
Tangible assets acquired after that date, are recorded at acquisition cost, net of depreciation and accumulated impairment losses.
Depreciation is calculated on a straight line basis, as from the date the asset is first used, over the expected useful life for each class of assets.
Depreciation rates used correspond to the following expected useful lives of the underlying assets:
| Other Machinery | 5 <x<20< th=""></x<20<> |
|---|---|
| Office Equipment | 4 |
| Other Tangible Assets | 5 |
Maintenance and repair costs related to tangible assets are recorded directly as expenses in the year they are incurred.
Tangible assets in progress represent fixed assets still under construction/development and are stated at acquisition cost net of impairment losses. These assets are depreciated from the date they are completed or start being used.
Gains or losses arising from the sale or write-off of tangible assets are determined as the difference between the sale price and the accounting net value at the sale/write-off date and are registered as Other Operational Income/ Other Operational Losses.
Intangible assets are stated at acquisition cost, net of depreciation and accumulated impairment losses. Intangible assets are only recognized if it is likely that they will generate future economic benefits, if they are controlled by the company and if their cost can be reliably measured. Development expenses are recognized as an intangible asset if the company demonstrates technical feasibility and intention to complete the asset, ability to sell or use it and the probability that the asset will generate future economic benefits. Development expenses which do not fulfil these conditions are recorded as an expense in the period in which they are incurred.
Intangible assets are recognized only if they are identifiable and it is probable that they will result in future economic benefits to the company, are controlled by it and it can reasonably measure its value.
Internal costs associated with maintenance and software development are recorded as an expense in the period in which they are incurred. Only costs directly attributable to projects for which the generation of future economic benefits is probable are capitalized as intangible assets.
Amortization is calculated on a straight line basis as from the date the asset is first used, over the expected useful life, which ranges from 3 to 6 years.
When accounting for leases in which the company is the lessee, the lease contracts are classified as (i) a finance lease if the risks and rewards incidental to ownership lie with the lessee and (ii) as an operating lease if the risks and rewards incidental to ownership do not lie with the lessee.
A lease is classified as a financial or an operating lease dependent on the substance of the transaction rather than the form of the contract.
Lease payments within operating lease contracts are recognized as expenses on a straight line basis over the lease term.
Assets are assessed for impairment at the end of each year, whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
Whenever the carrying amount of an asset exceeds its recoverable amount, an impairment loss is recorded on the income statement under Provisions and impairment losses.
The recoverable amount is the higher of an asset's fair value net of costs incurred on sale and its value in use. Fair value less sale related costs is the amount obtainable from the sale of an asset in an arm's length transaction less the costs of disposal. Value in use is the present value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life. Recoverable amounts are estimated for individual assets or, if this is not possible, for the cash-generating unit to which the asset belongs.
Reversal of impairment losses recognized in prior years is only recorded when it is concluded that the impairment losses recognized for the asset no longer exist or have decreased. This analysis is performed whenever there is an indication that the impairment loss previously recognized has been reversed. The reversal is recorded on the income statement as Other Operational income. However, the increased carrying amount of an asset due to a reversal of an impairment loss is recognized to the extent it does not exceed the carrying amount that would have been determined (net of depreciation) had no impairment loss been recognized for that asset in prior years.
Borrowing costs are normally recognized as an expense in the period in which they are incurred.
Borrowing costs directly attributable to the acquisition, construction or production of tangible and intangible assets are capitalized as part of the cost of the qualifying asset. Borrowing costs are capitalized from the time of preparation of the activities to construct or develop the asset up to the time the production or construction is complete or when asset development is interrupted. Any income earned on funds temporarily invested pending their expenditure on the qualifying asset, is deducted from the borrowing costs that qualify for capitalization Borrowing costs are recognized as an expense in the period in which they are incurred.
Provisions are recognized when, and only when, the company has an obligation (legal or constructive) resulting from a past event, it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate can be made of that obligation. Provisions are reviewed and adjusted at the report date to reflect the best estimate as of that date.
In situations where it is estimated to have a significant period of time between the moment the obligation and when the respective payment occurs, the provision is recorded at its present value.
a) Investments
Investments are classified into the following categories:
Investments measured at fair value through profit or loss includes the investments held for trading by the company to be sold within a short period of time. They are classified as current assets in the statement of financial position.
Available-for-sale investments are stated as non current assets except if they are intended to be sold within the next 12 months as from the report date.
All purchases and sales of investments are recognized on the trade date, independently of the settlement date.
Investments are initially measured at cost, which is the fair value of the consideration paid for them.
Available-for-sale investments and investments measured at fair value through profit or loss are subsequently carried at fair value, without any deduction for transaction costs which may be incurred on sale, by reference to their quoted market price at the report date. Investments in equity instruments that do not have a quoted market price and whose fair value cannot be reliably measured are stated at cost, less impairment losses.
Changes in the fair value of investments measured at fair value through profit or loss are included in the income statement for the period.
Gains or losses arising from a change in fair value of available-for-sale investments are recognized directly in equity, under Fair value reserve, included in Reserves and retained earnings until the investment is sold or otherwise disposed of, or until it is determined to be impaired, at which time the cumulative gain or loss previously recognized in equity is transferred to net profit or loss for the period.
Receivables are stated at net realizable value corresponding to their nominal value less impairment losses (recorded under the caption Impairment losses in accounts receivable).The impairment losses are recognized in "Impairment loss in costumers".
The impairment losses are recorded when the company know that never go to receive the trade receivables.
The amount of the impairment is the difference between the assets carrying amount and the present value of estimated future cash flows. Discounted at the financial assets original effective interest rate.
The receivables are recorded as currents assets, except when its maturity is greater than twelve months from the balance sheet date, situation when they are classified as non-current assets.
Financial liabilities and equity instruments are classified and accounted for based on their contractual substance, independently from the legal form they assume.
Loans are recorded as liabilities at their nominal value, net of up-front fees and commissions related to the issuance of those instruments. Financial expenses are calculated based on the effective interest rate and are recorded in the income statement on an accruals basis, in accordance with the accounting policy defined in Note 2.13. The portion of the effective interest charge relating to up-front fees and commissions, if not paid in the period, is added to the book value of the loan.
Accounts payable are stated at their nominal value.
The company uses derivatives in the management of its financial risks, only to hedge such risks. Derivatives are not used by the company for trading purposes.
Derivatives classified as cash flow hedge instruments (Swaps) are used by the company mainly to hedge interest risks on loans obtained. Conditions established for these cash flow hedge instruments are identical to those of the corresponding loans in terms of base rates, calculation rules, rate setting dates and repayment schedules of the loans and for these
reasons they qualify as perfect hedges. Inefficiencies that may arise are recorded on the Profit and Loss statement.
The company's criteria for classifying a derivative instrument as a cash flow hedge instrument include:
Cash flow hedge instruments used by the company are initially accounted for at fair value. Changes in fair value of these cash flow hedge instruments are recorded in equity under the caption Hedging reserves, included in Reserves and retained earnings on the statement of financial position, and then recognized in the income statement over the same period in which the hedged instrument affects income statement.
The fair value of these financial instruments is calculated with resource to derivative valuation software and was based on the present value, at report date, of future cash flows of both the fixed and variable legs of the derivative instrument.
Hedge accounting of derivative instruments is discontinued when the instrument matures or is sold. Whenever a derivative instrument can no longer be qualified as a hedging instrument, the fair value differences recorded in equity under the caption Hedging reserve are transferred to profit or loss of the period or to the carrying amount of the asset that resulted from the hedged forecast transaction. Subsequent changes in fair value are recorded in the income statement.
These derivative instruments over which no hedge accounting was applied are initially stated at fair value, and then revalued and calculated with resource to specific software, are accounted for as financial items on the profit and loss statement.
When embedded derivatives exist, they are accounted for as separate derivatives when the risks and the characteristics are not closely related to economic risks and characteristics of the host contract, and this is not stated at fair value. Gains and losses are taken through the profit and loss statement.
Additionally, the company also negotiates, in specific situations, interest derivatives in order to hedge fair values. In these cases, derivatives are stated at fair value through profit or loss. When the hedged instrument is not measured at fair value (i.e. loans which are recorded at amortized cost) the book value is adjusted by the amount which is effectively hedged through profit or loss.
Derivative instruments are stated on the Statement of Financial Position under Other non current assets, Other current assets, Other non current liabilities and Other current liabilities.
For the periods presented, the company has no financial instruments traded derivatives.
The equity instruments that represent a residual interest in assets after deduction of liabilities and are recorded at the amount received net of any costs of issuance.
The own shares are recorded at acquisition cost as a deduction from equity. Gains or losses on the sale of own shares are recorded in Other reserves included in Other reserves and retained earnings.
Cash and cash equivalents include cash on hand, cash at banks, term deposits and other treasury applications which mature in less than three months and for which the risk of change in value is insignificant.
In the statement of cash flows, cash and equivalents also include bank overdrafts, which are included in the balance sheet item Borrowings.
Each year the Company grant their employees that belong to a functional group classified as Executive or above a compensation which is related to the value added in the previous period for the shareholders. This compensation consists in granting a number of the Company's shares, which may choose, on payment date, to deliver the shares or to pay the corresponding amount, taking into consideration the market price of the shares on payment date.
This liability is stated on the Statement of Financial Position under Other reserves, and is stated on the Income Statement under Personnel costs, on a straight line basis over the deferral period, taking into consideration the fair value of granted shares on grant date.
If the employee ceases functions during the period over which payment of previously recognized liabilities is deferred, liabilities will be derecognized from the Statement of Financial Position against Personnel costs on Income Statement.
Contingent liabilities are not recorded in the financial statements. Instead they are disclosed in the notes to the financial statements, unless the probability of a cash outflow is remote, in which case, no disclosure is made.
Contingent assets are not recorded in the financial statements but disclosed when future economic benefits are probable.
Income tax for the year is determined based on the taxable income of the Company, considering the interim period profit and using the estimated effective average annual income tax rate.
The Special Group Tax Regime includes the following companies: Euroresinas – Indústrias Quimicas, S.A., Sonae Indústria de Revestimentos, S.A., Ecociclo – Energia e Ambiente, S.A., Maiequipa – Gestão Florestal, S.A., Movelpartes – Componentes para a Industria de Mobiliário, S.A.,Sonae Industria - Management Services S.A., Agloma Investimentos SGPS SA, Siaf Energia S.A. , Sonae Industria PCDM, S.A., Somit Imobiliaria, S.A. and Imoplamac –Gestão Imoveis S.A.
Deferred taxes are calculated using the report liability method, reflecting the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Deferred tax assets and liabilities are calculated and annually reviewed using the tax rates in place or announced and thereby expected to apply at the time the temporary differences are expected to reverse.
Deferred tax assets are recognised only when it is probable that sufficient taxable profits will be available against which the deferred tax assets can be used, or when taxable temporary differences are recognised and expected to reverse in the same period. At each balance sheet date a review is made of the deferred tax assets recognised, which are reduced whenever their future use is no longer likely.
Deferred tax assets and liabilities are recorded in the income statement, except if they relate to items directly recorded in equity. In these cases the corresponding deferred tax is recorded in equity.
Deferred tax liabilities are recognized for all taxable temporary differences, except those relating to: i) the initial recognition of goodwill, or ii) the initial recognition of assets and liabilities that do not result in a business combination and at the time the transaction does not affect accounting profit nor taxable profit. In respect of taxable temporary differences associated with investments in subsidiaries should not be recognized to the extent that: i) the parent company is able to control the timing of the reversal of the temporary difference and ii) it is probable that the temporary difference not reverse in the foreseeable future.
Revenue from services rendered is recognised in the income statement taking into consideration the stage of completion of the transaction at the report date.
The dividends received from investments in subsidiaries and associates are recognized as income in the period they are assigned to the partners or shareholders. Interest earned from loans are recorded in the period to which they relate, having regard to the period up to the end of each year.
Income and expenses are recorded in the year to which they relate, independently of the date of the corresponding payment or receipt. Income and expenses for which their real amount is not known are estimated.
Other current assets and Other Current Liabilities include income and expenses of the reporting year which will only be invoiced in the future. Those captions also include receipts and payments that have already occurred but will only correspond to income or expenses of future years, when they are to be recognised in the income statement.
Capital gains and losses that result from the sale or write-off of tangible and intangible assets and of investments are presented on the profit and loss statement as the difference between the sale price and the net book value at date of sale or write-off, under the caption Other Operating Profits and Losses.
Exchange gains and losses arising from differences between historical exchange rates and those prevailing at the date of collection, payment or the date of the report, are recorded as income or expenses of the period, except for those related to non-monetary assets or liabilities, for which adjustments to fair value are directly recorded under equity.
Events after the report date that provide additional information about conditions that existed at the report date (adjusting events), are reflected in the financial statements. Events after the report date that are non-adjusting events are disclosed in the notes when material.
As a result of the relevant portion of floating rate debt on Sonae Industria report and the consequent cash flows related to interest payments, the company is exposed to interest rate risk, and it is particularly exposed to the risk of variation of Euro interest rates, as most of its floating rate debt is denominated in Euro.
As a general rule, Sonae Industria, SGPS does not hedge its exposure to floating interest rates.
As an exception to its general rule, Sonae Industria may engage into interest rates derivatives. If this is the case, the following is observed:
Derivatives are not used for trading, profit making, or speculative purposes;
The Company only engage in derivative transactions with Investment Grade Financial Institutions;
Derivatives match exact periods, settlement dates and base interest rate of the underlying exposures;
Maximum financial charges on the aggregate of the derivative and the underlying exposures are always known and limited on the inception of the hedging period;
Quotes from at least two Financial Institutions are considered before closing any interest rate hedging deal.
As at 31st december 2014, Sonae Indústria did not hold material investments classified as "available-for-sale".
Liquidity risk management in Sonae Industria aims to ensure that the company is able to timely obtain the financing required to properly carry on its business activities, implement its strategy, and meet its payment obligations when due, while avoiding the need of having to obtain funding under unfavorable terms.
For this purpose, Liquidity management at the Group comprises:
consistent financial planning and cash flow forecasting at country and consolidated levels with different time horizons (weekly, monthly, annual and business plan);
diversification of financing sources;
The most significant estimations included in these financial statements refer to:
These estimations were based on the best available information at the date these financial statements were prepared and were based on the knowledge and experience of present and past events. Notwithstanding, some situations may occur in future periods which were not included in present estimations as they were not foreseeable. Changes to estimations after these financial statements date will be prospectively corrected through profit or loss in accordance with IAS 8.
Main estimations and assumptions relating to future events included in these financial statements are described in the correspondent notes.
In determining the fair value of an asset or liability if an active market exists, the market price is applied. This is level 1 of the fair value hierarchy as defined in IFRS 13 - Fair Value Measurement. Where there is no active market, valuation techniques generally accepted in the market, based on market assumptions are used. This is level 2 of the fair value hierarchy as defined in IFRS 13. Sonae Indústria, SGPS applies valuation techniques for financial instruments not quoted, such as financial assets available for sale. Valuation models that are used most often are models of discounted cash flows and option valuation models that incorporate, for example, the curves for interest rate and markek volatility. For some types of more complex derivatives, models containing more advanced valuation assumptions and data that are not directly observable in the market, for which Sonae Indústria, SGPS uses internal estimates and assumptions are used. This is level 3 of the fair value hierarchy as defined in IFRS 13.
During the periods ended 31 december 2014 and 2013, movements in tangible assets, accumulated depreciation and impairment losses were as follows:
| 31.12.14 | ||||
|---|---|---|---|---|
| M achinery and equipment |
Office equipment |
Advances on account of tangible assets |
Total | |
| Gro ss asset: | ||||
| Opening balance | 38.099 | 132.619 | 736 | 171.454 |
| Transfers | 736 | (736) | ||
| Closing Balance | 38.099 | 133.355 | - | 171.454 |
| A ccumulat ed amort izat ions,depreciat ions and | ||||
| impairment lo sses | ||||
| Opening balance | 37.897 | 130.756 | - | 166.188 |
| Depreciations for the period | 44 | 1.418 | 1.462 | |
| Closing Balance | 37.941 | 132.174 | 170.115 | |
| C arrying amo unt | 158 | 1.181 | - | 1.339 |
| 31.12.13 | ||||
| M achinery and equipment |
Office equipment |
Advances on account of tangible assets |
Total | |
| Gro ss asset: | ||||
| Opening balance | 38.099 | 132.619 | - | 170.718 |
| Acquisitions | - | 736 | 736 | |
| Closing Balance | 38.099 | 132.619 | 736 | 171.454 |
| A ccumulat ed amort izat ions,depreciat ions and | ||||
| impairment lo sses | ||||
| Opening balance | 37.820 | 129.780 | - | 166.188 |
| Depreciations for the period | 77 | 976 | 1.053 | |
| 37.897 | 130.756 | - | 168.653 |
During the periods ended 31 december 2014 and 2013, movements in intangible assets, accumulated depreciation and impairment losses were as follows:
| 31.12.14 | |||
|---|---|---|---|
| Software | Software | Total | |
| NGI | Total | GI + NGI | |
| Gro ss asset: | |||
| Opening balance | 550 | 550 | 550 |
| Closing Balance | 550 | 550 | 550 |
| A ccumulated amo rtizatio ns,depreciatio ns and | |||
| impairment lo sses | |||
| Opening balance | 550 | 550 | 550 |
| Closing Balance | 550 | 550 | 550 |
| C arrying amo unt | - | - | - |
| 31.12.13 | |||
| Software | Software | Total | |
| NGI | Total | GI + NGI | |
| Gro ss asset: | |||
| Opening balance | 550 | 550 | 550 |
| Closing Balance | 550 | 550 | 550 |
| A ccumulated amo rtizatio ns,depreciatio ns and | |||
| impairment lo sses | |||
| Opening balance | 550 | 550 | 550 |
C arrying amo unt - - -
As of december 31, 2014 and 2013, the assets and liabilities recognized in the statement of financial position correspond to the following categories .
| FINANCIAL INVESTM ENTS | ||||||||
|---|---|---|---|---|---|---|---|---|
| notas | Loans and receivables |
Assets at fair value through profit or loss |
Hedge derivatives |
Available-for-sale assets |
Sub-total | Assets out of scope of IFRS 7 |
Total | |
| 31.12.14 | ||||||||
| Non current assets Available for sale investments Other non current assets |
6 8 |
378.640.939 | 122.922 | 122.922 378.640.939 |
122.922 378.640.939 |
|||
| Current assets Customers Other current debtors Other current assets Cash and cash equivalents T o tal |
9 9 10 11 |
24.856 11.914.800 34.598 390.615.192 |
122.922 | 24.856 11.914.800 34.598 390.738.114 |
408.960 408.960 |
24.856 11.914.800 408.960 34.598 391.147.074 |
||
| 31.12.13 | ||||||||
| Non current assets Available for sale investments Other non current assets |
6 8 |
513.808.092 | 122.922 | 122.922 513.808.092 |
122.922 513.808.092 |
|||
| Current assets Customers Other current debtors Other current assets Cash and cash equivalents |
9 9 10 11 |
24.150 13.302.794 297.991 |
24.150 13.302.794 297.991 |
89.367 | 24.150 13.302.794 89.367 297.991 |
|||
| T o tal | 527.433.027 | 122.922 | 527.555.949 | 89.367 | 527.645.316 | |||
| 31.12.14 | Liabilities at fair value through profit or loss |
Hedge derivatives |
Other financial Liabilities |
Sub-total | Liabilities out of scope of IFRS 7 |
Total | ||
| Non current liabilities Bank loans - net of short term portion Debentures - net of short term portion |
13 13 |
114.099.921 147.604.120 |
114.099.921 147.604.120 |
114.099.921 147.604.120 |
||||
| Current assets Bank loans |
13 | 47.239.752 | 47.239.752 | 47.239.752 | ||||
| Debentures Trade creditors Other current creditors Other current liabilities |
13 14 15 16 |
448.843 13.995.609 |
448.843 13.995.609 |
2.292.474 | 448.843 13.995.609 2.292.474 |
|||
| T o tal | 323.388.245 | 323.388.245 | 2.292.474 | 325.680.720 | ||||
| 31.12.13 | ||||||||
| Non current liabilities Bank loans - net of short term portion Debentures - net of short term portion |
13 13 |
83.101.488 118.908.927 |
83.101.488 118.908.927 |
83.101.488 118.908.927 |
||||
| Current assets Bank loans Debentures Trade creditors |
13 13 14 |
157.317.060 129.918.927 174.361 |
157.317.060 129.918.927 174.361 |
157.317.060 129.918.927 174.361 |
||||
| Other current creditors Other current liabilities |
15 16 |
7.542.528 | 7.542.528 | 4.457.531 | 7.542.528 4.457.531 |
|||
| T o tal | 496.963.291 | 496.963.291 | 4.457.531 | 501.420.822 |
.
| 31.12.14 | 31.12.13 | |||
|---|---|---|---|---|
| Non current | Current | Non current | Current | |
| Investment in group companies | ||||
| Opening balance at 1 January | 938.997.795 | - | 944.009.598 | - |
| Aquisitions over the period | 72.537.574 | - | 15.727.008 | - |
| Other | - | - | (20.738.811) | - |
| Closing balance for the period | 1.011.535.369 | - | 938.997.795 | - |
| Accumulated impairment losses | (465.793.443) | - | (333.810.139) | - |
| 545.741.926 | - | 605.187.656 | - | |
| Investments held for sale | ||||
| Fair value at 1 January | 122.922 | - | 122.922 | - |
| Fair value at the end of the period | 122.922 | - | 122.922 | - |
| 545.864.848 | - | 605.310.578 | - |
At 31 december 2014 and 31 december 2013, details of investments were as follows:
The main changes is related to
Coverage of damages in subsidiary Taiber Tableros Aglomerados Ibericos SL amounting 5.950 euros
Coverage of damages in subsidiary Sonae Industria Revestimentos amounting 559.170 euros Coverage of damages in subsidiary Euroresinas amounting 1.828.083 euros
Coverage of damages in subsidiary Movelpartes amounting 552.543 euros
Capital increase in subsidiary Tafisa Tableros Fibras, S.A. amount of 69.591.828 euros, corresponding the participation on 31 december 2014 to 6.315.388 shares.
The increase in accumulated impairment losses relates to the impairment on the participation of Sonae Indústria de Revestimentos, S.A. in the amount of 3.607.297 euros, on the participation of Movelpartes – Componentes para a Indústria de Mobiliário, S.A. in the amount of 1.711.570 euros on the participation of Tafisa Tableros Fibras, S.A. in the amount of 125.216.576 euros and in the participation of Sonae Industria PCDM in the amount of 1.447.861 euros
At 31 december 2014, Sonae Industria, SGPS had the following holdings in Group and Associated Companies:
| Company | % Share |
Aquisition Value |
Acumulated Impairment Losses |
Sharedolfer´s Funds |
Net profit | |
|---|---|---|---|---|---|---|
| Euroresinas - Industrias Quimicas, S.A. | 100,00% | 17.666.609 | - | 15.249.062 | -502.769 | |
| M aiequipa - Gestão Florestal,S.A. | 100,00% | 3.438.885 | 962.785 | 2.955.467 | -181.979 a)-c) | |
| M ovelpartes - Componentes para Industria do M obiliário,S.A. | 100,00% | 4.732.656 | 3.987.570 | 525.112 | -1.108.819 a)-c) | |
| Sonae Industria de Revestimentos,S.A. | 100,00% | 22.288.363 | 10.195.530 | 11.040.371 | -264.465 a)-c) | |
| Imoplamac - Gestão de Imóveis,S.A. | 100,00% | 6.000.000 | - | 8.624.474 | 387.313 | |
| Sonae Industria -M anagement Services SA | 100,00% | 250.000 | - | 373.256 | 2.070 | |
| Taiber | 0,02% | 34.692 | - | -28.464.016 | -36.592.456 | |
| Tafisa - Tableros de Fibras,S.A. | 99,11% | 946.900.147 | 449.199.698 | 29.355.986 | 10.449.883 b)-c) | |
| Ecociclo - Gestão Ambiental,S.A. | 100,00% | 1.720.021 | - | 195.528 | 15.773 | |
| Sonae Industria - Produção e Comercialização de Derivados de M adeira,S.A. | 2,97% | 3.497.787 | 1.447.861 | 71.278.381 | -530.945 a)-c) | |
| Siaf Energia, S.A. | 0,20% | 5.000 | - | 7.378.587 | 390.507 | |
| Somit Imobiliaria | 0,02% | 10 | - | 3.486.594 | 690.122 | |
| Agloma Investimentos,S.A. | 6,54% | 5.000.000 | - | 100.771.652 | 4.150.949 | |
| Sonae RE, Societé Anonyme | 0,04% | 1.200 | - | 583.413 | -1.672.426 | |
| 1.011.535.370 | 465.793.443 |
An eight-year period was used for projecting cash flows on the grounds of the extension and intensity of the economic cycles affecting the Group's activity.
Projected cash flows are based on the Group's business plan and are updated annually so as to include changes in the economic outlook of each market where the Group is conducting business.
2014
| Tableros de Fibras | SIR | Maiequipa | Movelpartes | Ecociclo | Sind PCDM | |||
|---|---|---|---|---|---|---|---|---|
| Península Ibérica | Alemanha | Africa Sul | ||||||
| Discount rate (pre-tax) | 9,51% | 7,44% | 17,14% | 9,89% | 9,55% | 9,96% | 9,70% | 9,60% |
| Grow th rate on Perpetuity | 1,00% | 1,00% | 1,00% | 1,00% | 1,00% | 1,00% | 1,00% | 1,00% |
| Period | 8 anos | 8 anos | 8 anos | 8 anos | 8 anos | 8 anos | 8 anos | 8 anos |
| Test Conclusions | Impairment | Impairment | No impairment | Impairment | No impairment | Impairment |
2013
| Tableros de Fibras | Maiequipa | Movelpartes | Ecociclo | |||||
|---|---|---|---|---|---|---|---|---|
| Península Ibérica | Alemanha | França | Africa Sul | |||||
| Discount rate (pre-tax) | 12,20% | 9,38% | 9,62% | 18,86% | 12,12% | 12,12% | 12,12% | 12,12% |
| Grow th rate on Perpetuity | 1,00% | 1,00% | 1,00% | 1,00% | 1,00% | 1,00% | 1,00% | 1,00% |
| Period | 8 anos | 8 anos | 8 anos | 8 anos | 8 anos | 8 anos | 8 anos | 8 anos |
| Test Conclusions | Impairment | No impairment | Impairment | No impairment |
As a result of the tests carried out on 31 december 2014, were recognized impairments related with the company Sonae Industria Revestimentos, S.A. in amount of 3.607.297 euros, related with the company Movelpartes-Componentes para a Indústria de Mobiliário, S.A. in amount of 1.711.570 euros, related with the company Tafisa-Tableros de Fibra, S.A. in amount of 125.216.576 euros and related with the company Sonae Industria PCDM in the amount of 1.447.861 euros ( Note 17).
Available-for-sale investment consists of financial undertakings which do not fulfill the criteria to be stated as subsidiaries or as associates.
Details of deferred tax asset at 31 december 2014 and 31 december 2013 were as follows:
| DEFERRED TAXES - BALANCES | |||||
|---|---|---|---|---|---|
| 31.12.14 | 31.12.13 | ||||
| Assets | Liabilities | Assets | Liabilities | ||
| Impairment of assets | - | - | |||
| Net losses carry-forw ard | 2.764.271 | - | 4.083.078 | - | |
| Others | 1.978.755 | - | 1.444.158 | - | |
| 4.743.026 | - | 5.527.236 | - | ||
| DEFERRED TAXES - FLOWS | |||||
| 31.12.14 | 31.12.13 | ||||
| Assets | Liabilities | Assets | Liabilities | ||
| Opening Balance | 5.527.236 | - | 6.763.505 | - | |
| Recognition in Profit or Loss: Impairment of assets |
- | - | (5.077.625) | - | |
| Net losses carry-forw ard | (1.318.807) | - | 4.083.078 | - | |
| Others | 534.597 | (241.722) | |||
| Sub-total (Note 24) | (784.210) | - | (1.236.269) | - | |
| Closing Balance | 4.743.026 | 5.527.236 | - | ||
The amount included in Other concerns SIFIDE to deduct tax benefits in the coming years.
Details of Other Non Current Assets at 31 december 2014 and 31 december 2013 were as follows:
| 31.12.14 | 31.12.13 | |
|---|---|---|
| Loans Granted To Group Companies (Nota 2.2 e 20) | 378 640 939 | 513 808 092 |
| 378 640 939 | 513 808 092 | |
| Accumulated Imparment Losses (Nota 17) | ||
| 378 640 939 | 513 808 092 |
Loans granted to Group companies have a medium and long term maturity and they yield interest at an average rate of 6.202 %.
No repayment terms are provided, only for interest rate. The repayment is made by availabilities, and is not expected that the repayment will occur on own year.
At 31 december 2014 and 31 december 2013, details of Current Trade Debtors were as follows:
| 31.12.14 | 31.12.13 | |
|---|---|---|
| Current Customer Accounts | 24 856 | 24 150 |
| 24 856 | 24 150 |
| 31.12.14 | 31.12.13 | |
|---|---|---|
| Not due | 23.166 | 23.278 |
| > 90 days | 1.690 | 872 |
| 1.690 | 872 | |
| 24.856 | 24.150 |
At 31 december 2014 and 31 december 2013, details of Other Current Trade Debtors were as follows:
| 31.12.14 | 31.12.13 | |
|---|---|---|
| Group companies -Interest (note 20) | 5.117.470 | 1.464.882 |
| Group companies -current Income Tax (note20) | 1.663.060 | 845.213 |
| Group companies -Loans (Note 20) | 5.128.000 | 10.591.303 |
| 11.908.530 | 12.901.398 | |
| Other debtors | 6.270 | 401.397 |
| 11.914.799 | 13.302.794 |
At 31 december 2014 and 31 december 2013, detail of Others Debtors maturities were as follows:
| AGEING OF OTHER TRADE DEBTORS AGEING OF ADVANCE CREDITORS |
AGEING OF TRADE CREDITORS (ASSET BALANCES) |
TOTAL DEBTORS | ||||
|---|---|---|---|---|---|---|
| 31.12.14 | 31.12.13 | 31.12.14 | 31.12.13 | 31.12.14 | 31.12.13 | |
| Due and not impaired | ||||||
| < 30 days | - | 1.500 | 87 | 87 | 1.500 | |
| 30 - 90 days | - | 37 | - | 37 | ||
| > 90 days | 6.183 | 399.860 | 6.183 | 399.860 | ||
| - | 1.500 | 6.270 | 399.897 | 6.270 | 401.397 |
At 31 december 2014 and 31 december 2013, details of State and Other Public entities were as follows:
| 31.12.14 | 31.12.13 | |
|---|---|---|
| State & Other Public Entities | ||
| Income Tax | 921.022 | 1.102.730 |
| Value Added Tax | - | 138 |
| 921 022 | 1 102 868 |
Details of Other Current Assets at 31 december 2014 and 31 december 2013 were the following:
| 31.12.14 | 31.12.13 | ||
|---|---|---|---|
| Accrued Revenue | 27 308 | 39 247 | |
| Deferred Costs | 381 652 | 50 120 | |
| 408 960 | 89 367 |
At 31 december 2014 and 31 december 2013 detail of Cash and cash equivalents was the following:
| 31.12.14 | 31.12.13 | |
|---|---|---|
| Cash at Hand | 1 078 | 812 |
| Deposits | 33 520 | 297 179 |
| Cash & Cash Equivalents - Balance Sheet | 34 598 | 297 991 |
| Overdraft (1) | (5.123) | (177.246) |
| 29.475 | 120.745 |
(1) In Statement of Financial Position- Bank loans Short term (Note 13)
Cash & equivalents comprise cash at hand, deposits, treasury applications and term deposits with less than three months maturity, and for which the risk of value change is insignificant.
In November 2014, the Company carried out a public offer of until 15 000 000 000 shares. Under this public offer and the subsequent institutional placement, 11 210 757 417 shares were subscribed for, resulting in a cash inflow amounting to 112.107. 574.17 euros recognized under Share Capital, on the Statement of Financial Position.
Expenses related to this public offer amounted to an estimated EUR 1.47 million and were recognized under Other Reserves and Accumulated Earnings, on the Statement of Financial Position.
As a consequence, at the closing date of these financial statements, share capital, which was fully underwritten and paid, amounted to 812.107.574.17 euros ( 700.000.000 euros at 31 december 2013), and was comprised of 11 350 757 417 common shares, without face value (140 000 000 common shares, with a face value of EUR 5 per share at 31 December 2013).
At 31 December 2014 and 2013, shares are not entitled to any fixed income.
At the same date, neither the Company nor any of its affiliates held any shares in the Company.
The following entities had more than 20% of the subscribed capital on 31 december 2014:
| Entity | % |
|---|---|
| Efanor Investimentos, SGPS, S. A. | 42,66 |
| Pareuro BV | 25,83 |
Shareholder's Funds Detail:
| 2014 | 2013 |
|---|---|
| 812.107.574 | 700.000.000 |
| 3.131.757 | 3.131.757 |
| 20.145.630 | 20.145.630 |
| 246.090.315 | 246.000.759 |
| -333.436.047 | -181.198.893 |
| -132.057.822 | -150.763.752 |
| 615.981.407 | 637.315.501 |
Legal Reserve: Commercial legislation establishes that at least 5% of annual net profit has to be intended to strengthen the legal reserve until it represents at least 20% of the capital. This reserve is not distributable to not be in the event of the liquidation of the company, but can be used to absorb losses, after exhausted the other reserves, or incorporated into the capital.
Free Reserves: Relating to profits earned in previous years and are available for distribution, provided it is not necessary to cover losses.
Other Reserves: Includes reserves of the merger of previous years, in amount 245.920.750 euros, which, in terms of Portuguese legislation are not distributable, can be incorporated into the capital.
During 2014 was recognized the amount of 97.201 euros related with Liability for medium and long term incentive plan.
Company changed the medium and long term incentive plan profile according to note 2.10 , concerning of granting a number of company's shares .
The fair value of services acquired was determinate with reference to the fair value of granted shares , calculated based on average stock prices in the 30 days immediately prior to general shareholder's meeting.
The amount, of 97.201 euros, recognized on personnel costs stated in Income statement was registered according to the rules of transactions plans on the basis of shares and settled with own capital.
| 2014 | 2013 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Opening Balance Assigned | Cancelled | Paid | Closing Balance | Opening Balance Assigned Cancelled | Paid | Closing Balance | ||||
| Nº Granted shares | 302.747 | 181.586 | 50.452 | 433.881 | 273.069 | 156.450 | 126.772 | 302.747 | ||
| Fair Value | 187.958 | 138.193 | 21.952 | 304.199 | 184.896 | 88.900 | 85.838 | 187.958 | ||
| Payment date | 2017 | 2015/2016 | ||||||||
| Personnel costs | 97.201 | 55.244 | 21.460 | |||||||
At 31 december 2014 and 31 december 2013 Sonae Industria SGPS, S.A had the following outstanding loans:
| 31.12.14 | 31.12.13 | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Amortised cost | Nominal Value | Amortised cost | Nominal Value | ||||||
| NOTES | Current | Non Current | Current | Non Current | Current | Non Current | Current | Non Current | |
| Loans - Commercial Paper | c) | 36 650 000 | 112 250 000 | 36.650.000 | 112.250.000 | 137 170 117 | 55 000 000 | 137 500 000 | 55 000 000 |
| Bank Loans - Others | a) | 10 584 630 | 1 849 921 | 10 584 630 | 1 944 444 | 19 969 697 | 28 101 488 | 19 969 697 | 28 409 091 |
| Debentures | b) | - | 147 604 120 | - | 150 000 000 | 129.918.927 | 118 908 927 | 130.000.000 | 120 000 000 |
| Bank Overdrafts | 5 123 | - | 5 123 | - | 177 246 | - | 177 246 | - | |
| Gross Debt | 47 239 752 | 261 704 041 | 47 239 752 | 264 194 444 | 287 235 986 | 202 010 415 | 287 646 943 | 203 409 091 | |
| Cash & Cash Equivalents - Balance Sheet | 34 598 | - | 34.598 | - | 297 991 | - | 297 991 | - | |
| Net Debt | 47 205 155 | 261 704 041 | 47 205 155 | 264 194 444 | 286 937 995 | 202 010 415 | 287 348 952 | 203 409 091 | |
| Total Net Debt 308 909 195 |
311 399 599 | 488 948 410 | 490 758 043 |
The loans (nominal value) have the following repayment schedule:
| 31.12.14 | 31.12.13 | |
|---|---|---|
| 2014 | ||
| - | 287.646.943 | |
| 2015 | 47.239.752 | 90.909.091 |
| 2016 | 4.411.111 | 37.500.000 |
| 2017 | 4.133.333 | 70.000.000 |
| 2018 | 86.350.000 | 5.000.000 |
| 2019 | 84.600.000 | - |
| 2020 | 84.700.000 | - |
| 311 434 196 | 491 056 034 |
The average interest rates of each class of debt stated in the previous table were as follows:
| 2014 | 2013 | |
|---|---|---|
| Bank Loans - Others | 7,403% | 7,918% |
| Debentures | 5,809% | 4,064% |
| Loans - Commercial Paper | 6,303% | 7,165% |
At 31 december , 2014 the contracted loans are summarized as follows:
1) On 19 february 2009 Sonae Industria contracted a loan with a financial institution in the total amount of 20.000.000 euros. Interest are calculated at market rate. The loan will be paid between 2009 and 2015. At 31 december 2014, outstanding principal amounted to 909.091 euros, shown under current liabilities (at 31 december 2013 3.636.364 show under non Current Liabilities and 909.091 euros under current liabilities)
2) On 05 august 2010 Sonae Industria contracted a loan with a financial institution in the total amount of 10.000.000 euros, which was amended in august 2014 aiming to postpone maturity from november 2012 to august 2017 , interests are calculated at market rate.At 31 december 2014, outstanding principal amounted to 3.055.555 euros, shown under current liabilities in the amount of 1.111.111 euros and Non Current Liabilities in the amount of 1.044.444 euros.( at 31 december 2013 3.333.333 euros show under current liabilities and 2.500.000 euros under non current liabilities)
3) On 26 december 2012 Sonae Industria contracted a loan with a financial institution in the total amount of 25.000.000 euros, which was made available on march 2013 .This loan pays interest at variable rate with repayment plan from 2015 to 2018 .On November 2014 this loan was totally repaid.
4) On 29 november 2013 Sonae Industria contracted a loan with a Spanish financial institution in the total amount of 13.000.000 euros. Interests are calculated at market rate. The original loan maturity was october 2014, the contract was amended and maturity was altered to march 2015. With repayment schedule to november 2014 , december 2014 ,january 2015 , february 2015 and march 2015.At 31 december 2014, outstanding principal amounted to 4.964.427 euros, shown under current liabilities ( 13.000.000 euros at 31 december 2013)
5) On 22 october Sonae Industria contracted a loan with a financial institution until the total amount 10.000.000 euros , this loan pays interest at a variable rate. Contract are a 1 year term being automatically renewed for equal periods. At 31 december 2014 outstanding principal amounted to 3.600.000 euros ,show under current liabilities.
1) On 28 march 2014 Sonae industria repaid in one instalment the Sonae Indústria 2006/2014 bonds, issued on 28 March 2006, with a principal amount of 50.000.000 euros and a bullet repayment 8 years after issue date. Interest was paid semi-annually in arrears on 28 March and 28 September.
2) On 04 august 2014 Sonae Industria repaid in one instalment the Sonae Industria 2006/2014 bonds, issued on 2 August 2006, with a principal amount of 50.000.000 euros and a bullet repayment 8 years after issue date. Interest was paid semi- annually in arrears on 2 February and 2 August.
3) On 05 may 2014 and 5 november 2014 Sonae industria repaid 2 instalment of 15.000.000 euros of Sonae Industria 2010/2017 bonds, issued on 5 May 2010 through private subscription with a principal amount of 150.000.000 euros and a 7-year period. Interest was paid semi-annually on may and november. On 21 november 2014 sonae industria repaid the total amount which amount to 135.000.000 euros , in same date issued a new Sonae Industria 2014/2020 bonds ,through private subscription with a principal amount of 150.000.000 euros and a six–year period, payment will be done through reduction of nominal value, from the 7 th coupon date , in six successive semi-annual instalments .Interest is paid semi-annually on may and november
1) On january 2006, Sonae Industria SGPS, S.A. contracted commercial paper with several financial institutions. On November 2014 sonae industria proceeded to repurchase commercial paper in the amount 26.650.000 euros . 10.000.000 euros were refinanced under the contract (described c) 7) At 31 december 2014 commercial paper issued to 5.000.000 euros, maturing in the short term.
2) On September 2010 Sonae Indústria SGPS, S.A. contracted a Commercial Paper programme with a maximum nominal amount of 2.500.000 euros , wich was increased to 12.500.000 euros in march 2014.This programme matures in September 2015. At 31 december 2014 there was commercial paper issued for the programme's total amount.
3) On march 2011 Sonae Indústria SGPS, S.A. contracted a Commercial Paper programme , the programme had a maximum nominal amount of 50.000.000 Euros and maturity in march 2015. On november 2014 the contract has been revoked by agreement between the parties, Sonae industria proceeded to repurchase commercial paper in the amount 50.000.000 euros. This amount was refinanced under the contract (described c)7) .
4) On june 2013 Sonae Indústria SGPS, S.A. entered into a new agency agreement with a financial institution to issue commercial paper. The programme had a maximum nominal amount of 50.000.000 euros wich was increased to 100.000.000 euros in December 2013 and the purchase of
commercial paper is not underwritten .the programmes mature in june 2018. On November 2014 sonae industria proceeded to repurchase commercial paper in the amount 30.000.000 euros , 15.000.000 euros were refinanced under the bond loan (described b-4)) At 31 december 2014 commercial paper issued amounted to 17.500.000 euros maturing in short term .
5) On 13 december 2013 Sonae Indústria SGPS, S.A. contracted a Commercial Paper programme with a maximum nominal amount of 65.000.000 euros. The programme had maturity in december 2014 .on November 2014 the contract has been revoked by agreement between the parties, Sonae industria proceeded to repurchase commercial paper in the amount 65.000.000 euros. This amount was refinanced through a new contract between Sonae Industria and Tableros de fibras .
6) On July 2014 Sonae Indústria SGPS, S.A. contracted a Commercial Paper programme with a maximum nominal amount of 10.000.000 euros . The programme will be reduced semi-annually between december 2015 until june 2018. At 31 december 2014 there was commercial paper issued for the programme's total amount with short term maturity in the amount of 1.650.000 euros and long term maturity in amount of 8.350.000.
7) On august 2014 Sonae Indústria SGPS, S.A. contracted a Commercial Paper programme with a maximum nominal amount of 110.000.000 euros .On November 2014 occurred 1ª issue under this programme with a maximum amount of 103.900.000 euros , the programme will be reduced semiannually beginning may 2018 until its maturity November 2020.
At 31 december 2014 and 31 december 2013 all amounts recorded under this item resulted from normal operations. Trade creditors maturities were as follows:
| 31.12.14 | 31.12.13 | |
|---|---|---|
| To be paid | ||
| < 90 days | 417.226 | 140.548 |
| 90 - 180 days | 3.640 | 25.000 |
| > 180 days | 27.978 | 8.814 |
| 448.843 | 174.362 |
At 31 december 2014 and 31 december 2013 details of this item were as follows:
| 31.12.14 | 31.12.13 | |
|---|---|---|
| Other Creditors | ||
| Group companies -current Income Tax (Note 20) | 907.343 | 348.259 |
| Loans From Group Companies (Nota20) | 12.985.500 | 7.151.000 |
| Financial Instrumets | 13.892.843 | 7.499.259 |
| Others Creditors | 102.767 | 43.268 |
| 13.995.609 | 7.542.528 |
Loans from Group companies have a short term maturity and they yield interest at an average rate of 2,052 %.
| 31.12.14 | 31.12.13 | |
|---|---|---|
| State & Other Public Entities | ||
| Income Tax | 800.325 | 684.514 |
| Tax retention | 34.533 | 34.640 |
| Value Added Tax | 36.340 | 3.756 |
| Social Security Contributions | 21.062 | 6.644 |
| Liabilities out of scope of IFRS7 | 892.260 | 729.554 |
At 31 december 2014 and 31 december 2013 this item had the following detail:
| 31.12.14 | 31.12.13 | |
|---|---|---|
| Accrued Costs | ||
| Holidays | 247.646 | 200.161 |
| Insurance | 0 | 966 |
| Interests | 1.539.558 | 4.159.536 |
| External Supllies & Services | 505.270 | 96.869 |
| Liabilities out of scope of IFRS7 | 2 292 474 | 4 457 531 |
Changes in provisions and accumulated impairment losses during the period ended december, 31 2014 and december, 31 2013 were the following:
31.12.2014
| Description | Opening Balance | Increases | Utilisation | Reductions | Closing Balance |
|---|---|---|---|---|---|
| Accumulated Imparment Losses on Investments (Nota 6) | 333.810.139 | 131.983.304 | 465.793.444 | ||
| 333.810.139 | 131.983.304 | 465.793.444 | |||
| 31.12.2013 Description |
Opening Balance | Increases | Utilisation | Reductions | Closing Balance |
| Accumulated Imparment Losses on Investments (Nota 6) | 198.722.687 | 156.667.642 | 20.310.499 | 1.269.691 | 333.810.139 |
| 198.722.687 | 156.667.642 | 20.310.499 | 1.269.691 | 333.810.139 | |
Impairment losses are offset against the corresponding asset on Statement of Financial Position.
Increase in impairment losses relates as described (note6)
At the balance sheet date, the company had irrevocable operational lease contracts with the following payment maturities:
| 31.12.14 | 31.12.13 | |
|---|---|---|
| Maturing in em 2014 | - | 14.217 |
| Maturing in em 2015 | 27.441 | 14.217 |
| Maturing in em 2016 | 25.071 | 11.847 |
| Maturing in em 2017 | 13.224 | - |
| Maturing in em 2018 | 13.224 | - |
| Maturing in em 2019 | 1.102 | - |
| 80.062 | 40.281 |
The liquidity risk described on note 2.17., b), related to gross debt referred to on note 13, can be analysed as follows:
| 2014 Liquidity Risk |
2013 Liquidity Risk |
||||||
|---|---|---|---|---|---|---|---|
| M aturity of Gross Debt |
Interests | Total | M aturity of Gross Debt |
Interests | Total | ||
| 2014 | - | - | - | 2014 | 287.646.943 | 15.621.410 | 303.268.353 |
| 2015 | 47.234.630 | 13.347.874 | 60.582.504 | 2015 | 90.909.091 | 12.119.613 | 103.028.704 |
| 2016 | 4.411.111 | 12.062.340 | 16.473.451 | 2016 | 37.500.000 | 6.592.354 | 44.092.354 |
| 2017 | 4.133.333 | 11.812.634 | 15.945.967 | 2017 | 70.000.000 | 2.706.171 | 72.706.171 |
| 2018 | 86.350.000 | 10.666.037 | 97.016.037 | 2018 | 5.000.000 | 172.000 | 5.172.000 |
| 2019 | 84.600.000 | 6.762.174 | 91.362.174 | 2019 | - | - | - |
| 2020 | 84.700.000 | 2.909.008 | 87.609.008 | 2020 | - | - | - |
| 311.429.074 | 57.560.067 | 368.989.141 | 491.056.034 | 37.211.548 | 528.267.582 |
The calculation of interest in the previous table was based on interest rates at 31 december 2014 and 2013 applicable to each item of debt. Gross debt maturing in 2015 includes scheduled repayment of debt along with the repayment of debt as at end 2014 maturing within less than one year (although some credit limits might be rolled over).
The company entered into negotiations with its two main creditor banks. Following these negotiations, the company was able to obtain a refinancing from these banks in the total amount of €254M, extending the respective final maturities to 6 years, including a minimum grace period for principal repayments of 3 years, and reducing the applicable spreads. Still during the fourth quarter of 2014, a share capital increase was executed, in the amount of €112M, which constituted a condition for the effectiveness of the previously identified agreements and which allowed for a reduction of debt, an improvement in the debt maturity profile and savings in terms of financial costs.
For several years now, the company has maintained a series of bank and commercial paper credit facilities to meet its treasury needs, with maturities typically of up to 1 year, eventually renewable with the agreement of the respective credit entities. On 31 december 2014, the total limit contracted under these short term lines of credit and commercial paper programmes, with guaranteed subscription, amounted to €32.5M. These financing arrangements were not part of the negotiations with the main credit banks for the refinancing and extension of maturities. In addition, during 2013, Sonae Indústria contracted a commercial paper programme, with no guaranteed subscription, for placements with institutional investors, with maturities from 7 up to 364 days. As at 31 December 2014, the maximum amount contracted under this programme was €100M, of which, at that date, €17.5M were outstanding and placed with investors (with maturities until April 2015).
Notwithstanding the capital increase and the agreements with the main creditor banks, the banks involved in these short-term credit lines have a contractual right not to renew these credit operations at maturity. In a similar manner, the level of subscriptions of commercial paper under the above mentioned programme, with no guaranteed subscription, is uncertain. In the event that these credit
facilities are not renewed, Sonae Indústria would have to find alternative sources of financing in the near term, in order to meet its debt service. It is, nevertheless, considered that the agreements reached with the main creditor banks and the share capital increase operation may have positive effects over the chances of renewal of these credit lines, as well over the possibility to negotiate additional short term credit facilities with other financial institutions.
In this respect, the company has already started negotiations with certain relationship banks, with the objective of contracting new credit facilities, and it expects to be able to complete, already during the first quarter of 2015, some of these new financing transactions.
.
The analysis of interest rate risk, described on note 2.17., b), i), consisted in calculating the way net profit before tax would have been impacted if there would have been a change of +0.75% or -0.75% percentage points in actual interest rates of the corresponding period.
| Sensitivity Analysis | ||||||
|---|---|---|---|---|---|---|
| 2014 | 2013 | |||||
| "Notional" | Effect in Profit and Loss (Euros) |
"Notional" | Effect in Profit and Loss (Euros) |
|||
| 0,75% | $-0.75%$ | 0,75% | $-0.75%$ | |||
| Gross Debt | ||||||
| Group | $-12.985.500$ | $-149.275$ | 149.275 | $-7.151000$ | $-79.791$ | 79.791 |
| External | -307.829.074 | $-2.889.834$ | 2.889.834 | -490.878.788 | $-2.886.843$ | 2.886.843 |
| $-320.844.574$ | $-3.039.109$ | 3.039.109 | -498.029.788 | $-2.966.635$ | 2.966.634 | |
| Financial Instruments | ||||||
| Derivates | ||||||
| Loans to group companies |
358.943.053 | 3.687.819 | $-3.687.819$ | 499.242.695 | 3.889.926 | $-3.889.926$ |
| Treasury Aplications | 566 | -566 | ||||
| 358.943.053 | 3.687.819 | $-3.687.819$ | 499.242.695 | 3.890.492 | $-3.890.492$ | |
| 648.710 | $-648.710$ | 923.857 | $-923.858$ |
The amounts of debt included in the above table excludes bank overdrafts and borrowings that are not subject to changes in interest rate. Considering the Euribor 6M as a benchmark for the level of
interest rates in the Euro, an increase of 0.75 percentage points corresponds to 35.7 times the standard deviation of that variable in 2014 (2 times in 2013).
The interest amounts were calculated based on interest rates in effect at 31 december 2014, for each of the values in debt.
Balances and transactions with related parties may be summarized as follows:
| Balance | Accounts Receivable | Accounts Payable | Other Creditors | Other non Currents Assets | Other debtors | |||||
|---|---|---|---|---|---|---|---|---|---|---|
| 31.12.14 | 31.12.13 | 31.12.14 | 31.12.13 | 31.12.14 | 31.12.13 | 31.12.14 | 31.12.13 | 31.12.14 | 31.12.13 | |
| 23.166 | 23.173 | 156.292 | 123.215 | 13.892.843 | 7.151.000 | 378.640.939 | 513.808.092 | 11.908.530 | 10.591.303 | |
| - Agloma Investimentos | - | - | - | - | 78.902 | - | - | - | 589.463 | - |
| - Ecociclo | - | - | - | - | 1.092.921 | - | 320.000 | 197.000 | 40.003 | 5.000 |
| - Euroresinas | - | 7 | - | - | 4.036.092 | - | 2.650.000 | - | 35.411 | 1.973.000 |
| - Implamac | - | - | - | 15.330 | - | 6.046.000 | 2.841.000 | 1.906.714 | 1.079.000 | |
| - SInd-pcdm | 22.274 | 22.274 | 44.934 | 34.925 | 210.021 | - | 21.455.000 | 24.100.000 | 5.229.684 | 7.088.303 |
| - Maiequipa | - | - | - | - | 9.217 | - | 1.268.900 | 1.021.900 | 72.851 | 1.000 |
| - Movelpartes | 892 | 892 | - | - | 54.007 | - | 1.045.000 | - | 228.218 | 327.000 |
| - Somit Imobiliária | - | - | - | - | 160.350 | 1.345.000 | 458.800 | 160.758 | 2.000 | |
| - Siaf Energia | - | - | - | - | 3.489.191 | 2.448.000 | - | - | 180.092 | - |
| - Sonae Industria Revestimentos | - | - | - | 435 | 4.721.540 | 4.703.000 | - | - | 51.745 | - |
| - Sonae ,sgps | - | - | 49.000 | 49.000 | - | - | - | - | - | - |
| - Sind - Management services | - | - | 5.658 | 5.553 | 25.272 | - | 938.000 | 811.000 | 176.720 | 116.000 |
| - Tafisa Tableros Fibra | - | - | - | - | - | - | 51.149.583 | 50.000.000 | 3.236.871 | - |
| - Taiber | - | - | - | - | - | - | 292.423.456 | 434.378.392 | - | - |
| - Raso Viagens Turismo | - | - | 25.552 | 11.287 | - | - | - | - | - | - |
| - Solinca investimentos Turisticos | - | - | 360 | - | - | - | - | - | - | - |
| - Sonaecenter | - | - | 24.525 | 11.851 | - | - | - | - | - | - |
| - Sonae RP | - | - | - | 9.842 | - | - | - | - | - | - |
| - SC-Consultadoria | - | - | 273 | 101 | - | - | - | - | - | - |
| - Imosede | - | - | 332 | 221 | - | - | - | - | - | - |
| - Herco Consultoria risco | - | - | 5.658 | - | - | - | - | - | - | - |
| Transactions | Purchases & Acquired Services |
Interest Income | Interest Expenses | |||
|---|---|---|---|---|---|---|
| 31.12.14 | 31.12.13 | 31.12.14 | 31.12.13 | 31.12.14 | 31.12.13 | |
| 191 264 | 228 379 | 30 724 083 | 27 643 696 | 910 557 | 262 101 | |
| - Agloma | - | - | - | 345 | - | 11.487 |
| - Agloma Investimentos | - | - | 13.314 | 5.748 | - | - |
| - Ecociclo | - | - | 19.091 | 16.961 | 1.885 | 623 |
| - Euroresinas | - | - | 109.768 | 155.006 | 15.741 | 6.377 |
| - SInd-pcdm | 1.154 | 14.168 | 1.933.305 | 886.392 | 509 | 23.069 |
| - Maiequipa | - | - | 70.499 | 55.644 | - | - |
| - Movelpartes | - | - | 48.717 | 1.304 | 7 | 17.303 |
| - Somit Imobiliária | - | - | 78.842 | 70.753 | 262 | - |
| - Siaf Energia | - | - | - | - | 64.510 | 62.033 |
| - Sonae Industria Revestimentos | - | 354 | - | - | 111.346 | 132.266 |
| - Sonaecenter | 10.072 | 23.642 | - | - | - | - |
| - Sonae ,sgps | 50.000 | 50.000 | - | - | - | - |
| - Sind - Management services | 55.200 | 54.176 | 66.705 | 30.361 | - | 8.943 |
| - Tafisa | - | - | 3.236.871 | 1.149.583 | - | - |
| - Solinca investimentos Turisticos | - | 1.015 | - | - | - | - |
| - Taiber | - | - | 24.825.886 | 25.166.983 | - | - |
| - Pareuro | - | - | - | - | 716.297 | - |
| - SC-Consultadoria | 444 | 538 | - | - | - | - |
| - Raso Viagens Turismo | 72.604 | 72.237 | - | - | - | - |
| - Solinca investimentos Turisticos | 360 | - | - | - | - | - |
| - Digitmarket | - | 17 | - | - | - | - |
| - Sonae RP | - | 10.887 | - | - | - | - |
| - Imosede | 1.080 | 1.260 | - | - | - | - |
| - Cronosaude | 350 | - | - | - | - | - |
Remuneration of the Board of Directors of the Company is detailed as follows:
| 31.12.2014 | 31.12.2013 | |
|---|---|---|
| Total Fixed salaries | 761.815 | 923.175 |
| Total Bonus | 145.618 | 159.700 |
| 907.433 | 1.082.875 |
Remuneration of the Supervisory Board, General Assembley and Remuneration Committee is detailed as follow:
| 31.12.2014 | 31.12.2013 | ||
|---|---|---|---|
| Total Fixed salaries | 38.100 | 36.750 |
Fees Paid to the Audit company PricewatherhouseCoopers is detailed as follows:
Total Fees related to audit and legal certification of the accounts 17.850
The remuneration policy of the members of the board of directors and supervisory board, as well as the annual amount earned by their members in an individual are presented in the report of government in society .
644.211 179.024
| Other Operation Gains | 31.12.14 | 31.12.13 |
|---|---|---|
| Supplementary Revenue | - | 30 299 |
| Others | 91 996 | 110 337 |
| 91.996 | 140.636 | |
| Other Operation Losses | 31.12.14 | 31.12.13 |
| Taxes | 400.859 | 114.427 |
| Others | 243.352 | 64.597 |
| 31.12.14 | 31.12.13 | |
|---|---|---|
| Financial Expenses: | ||
| Interest Expenses | 27 214 826 | 24.616.358 |
| Others | 2 288 739 | 1.467.939 |
| Financial Results | 1.220.518 | 1.559.453 |
| 28.435.344 | 26.175.811 | |
| Financial Revenues | ||
| Interest Income | 30 724 083 | 27 643 749 |
| 30.724.083 | 27.643.749 |
| Dividends - Movelpartes - Componentes p/ind.Mobiliário,S.A. 500.000 - Imoplamac - Gestão de Imóveis,S.A. 871.896 Siaf Energia,S.A. 545 3.196 Somit Imobiliaria SA 380 104 - Euroresinas - Indústrias Quimicas,S.A. 1.250.000 Sonae Indústria - Management Services, S.A. 362.720 1.500.000 - Sonae Indústria - P.C.D.M.,S.A. 445.765 - Reversal of Impairment of participation of Maiequipa,S.A.( Nota 6) 1.269.691 - Reversal of Impairment of paraticipation of Agloma,S.A.(Noat 6) 20.310.499 Gains related w ith investments 363.644 26.151.150 - Loss on liquidation of Agloma,S.A.(Nota 6) -19.696.267 Registration of impairment of participation of SIR,S.A.(Nota 6) -3.607.297 -1.937.000 Registration of impairment of participation of Movelpartes,S.A.(Nota 6) -1.711.570 -2.276.000 Registration of impairment of participation of Tafisa,S.A.(Nota 6) -125.216.576 -152.454.642 - Registration of impairment of participation of Sind PCDM SA(Nota 6) -1.447.861 Losses related w ith investments -131.983.304 -176.363.909 Profit/Loss on other investments -131.619.660 -150.212.759 |
2014 | 2013 |
|---|---|---|
The income and deferred taxation recorded at 31 december 2014 and 31 december 2013 were:
| 31.12.14 | 31.12.13 | |
|---|---|---|
| Income taxation | 862.735 | 661.454 |
| Deferred taxation (Note 7) | (784.210) | (1.236.269) |
| 78.525 | (574.815) | |
| Current Tax -Prior Year adjustment | 580.432 | 205.143 |
| 658.957 | (369.672) |
| 2014 | 2013 | |
|---|---|---|
| Net income/(loss) before tax | -132.716.779 | -150.394.080 |
| Current Taxes | 30.524.859 | 37.598.520 |
| Provisions | -99 | |
| Impairment loss of financial assets | -30.356.160 | -38.849.488 |
| Dividends | -83.638 | -1.030.474 |
| Current tax at special rate | -8.699 | -38.596 |
| Deferred tax | ||
| Tax savings | 173.074 | 1.709.293 |
| Others | -170.912 | 36.029 |
| 78.525 | -574.815 |
| 31.12.14 | 31.12.13 | |
|---|---|---|
| Net Profit | ||
| Net Profit Considered for Basic EPS Calculation (Periodic Net Profit) |
- 132 057 822 | - 150 763 752 |
| Net Profit Considered for Diluted EPS Calculation | - 132 057 822 | - 150 763 752 |
| Number of Shares | ||
| Weighted Average Number of Shares for Basic EPS Calculation | 11 350 757 417 | 140 000 000 |
| Weighted Average Number of Shares for Diluted EPS Calculation | 11 350 757 417 | 140 000 000 |
| Net Profit Per Share | -0,01 | -1,08 |
Earnings per share, excluding the effect of discontinued operations, were calculated as follows:
During 2014, no effect from discontinued operations was recorded.
In october 2010 Sonae Indústria, SGPS, S.A. received a notice of assessment from tax authorities according to which the loss resulting from the dissolution of its subsidiary Socelpac, SGPS, S.A. in 2006, amounting to 74 million Euro, should be considered at 50% for tax calculation purposes. The company filed a lawsuit challenging this interpretation. According to the information available on this date, the Board of Directors considers that the probability of a negative outcome is low, thus no adjustment was done to current tax and deferred tax asset recognized in these financial statements (Note 7).
Was completed in 2012 the Tax audit to IRC group companies for the year 2009, from this audit resulted corrections to taxable income in the amount of 3.743.609 euros, related with Current Tax the amount of 3.131.296 euros, related with special tax the amount of 337.258 euros and related with compensatory interest the amount of 275.055 euros. The company filed a law suit and provided a guarantee from Sonae Industria PCDM to suspend the tax foreclosure process. The Board of Directors considers that the probability of a negative outcome is low, thus no adjustment was recognized in financial statements.
Was completed in 2013 the Tax audit to IRC group companies for the year 2010, from this audit resulted corrections to taxable income in the amount of 1.897.603 euros, related with current tax the amount of 1.612.926 euros, related with special tax the amount of 1.992 euros and related with
disregard deductions the amount of 158.961 euros. The company filed a law suit and provided a guarantee from Sonae Industria PCDM to suspend the tax foreclosure process. The Board of Directors considers that the probability of a negative outcome is low, thus no adjustment was recognized in financial statements.
In the year 2013, was received an additional corrections to taxable income in the IRC group of companies for the year 2009 in the amount of 480.438 euros to fix the value attributed to tax losses reported by AT settlement. The company filed a law suit and provided a guarantee from Sonae Industria PCDM to suspend the tax foreclosure process. The Board of Directors considers that the probability of a negative outcome is low, thus no adjustment was recognized in financial statements.
Was completed in 2014 the Tax audit to IRC group companies for the year 2012, from this audit resulted corrections to taxable income in the amount of 498.494 euros, related with current tax the the amount of 478.766 euros, and related with compensatory interest the amount of 19.729 euros. The company filed a law suit and provided a guarantee , in January 2015, from Sonae Industria PCDM to suspend the tax foreclosure process.
Sonae Industria SGPS has granted a guarantee amounting to 5.049.804 euros to the Institute of Social Security in order to ensure a contingency from Sonae Industria PCDM with this entity, this contingency is in claim phase.
Sonae Industria SGPS signed an amendment to the leasings contracts that Imoplamac has with a bank, in case of disregard of the contract, in the amount of 8.680.000 euros.
On November 2013 Sonae Indústria, SGPS, SA and Taiber, Tableros Aglomerados Ibéricos, S. L. contracted a loan with a Portuguese financial institution for a maximum amount of 50.000.000 euros , which may be withdrawn by each entities over a period up to sixmonths. This loan pays interest at variable rate and matures in October 2015. At 31 december 2014 Taiber, Tableros Aglomerados Ibéricos, S. L. had withdrawn 39 000 000 euros (no amount had been withdrawn by Sonae Indústria, SGPS SA). Shares of the subsidiary Sonae Novobord are pledged as a guarantee for this loan.
On October 2014 Sonae Indústria, SGPS, SA and Tableros de Fibras SA contracted a loan with a Portuguese financial institution for a maximum amount of 65.000.000 euros, withdrawn in November 2014. This loan pays interest at variable rate and matures in November 2022 and will be redeemed in 4 consecutive and equal semi-annual instalments , beginning in may 2021.At 31 december 2014 Tableros de Fibras Sa had withdrawn 65.000.000 euros (no amount had been withdrawn by Sonae Indústria, SGPS SA). Shares of the subsidiary Glunz AG are pledged as a guarantee for this loan.
There is nothing significant to report.
These financial statements were approved by the Board of Directors and authorised for issuance on 26 february 2015.
Consolidated Statements of Financial Position Consolidated Income Statement Consolidated Statement of Comprehensive Income Consolidated Statement of Changes in Shareholders' Funds Consolidated Statement of Cash Flows Notes to the Consolidated Financial Statements
(Amounts expressed in Euros)
| ASSETS | Notes | 31.12.2014 | 31.12.2013 | 01.01.2013 |
|---|---|---|---|---|
| Restated | Restated | |||
| NON CURRENT ASSETS: | ||||
| Tangible fixed assets | 11 | 700 089 421 | 791 474 128 | 780 835 070 |
| Goodwill | 14 | 82 096 717 | 81 840 163 | 92 496 051 |
| Intangible assets | 12 | 7 807 933 | 7 398 158 | 7 062 528 |
| Investment properties | 13 | 1 224 698 | 1 268 956 | 1 313 215 |
| Investment in associates | 10 | 1 354 074 | 1 566 686 | 2 262 846 |
| Investment in joint ventures | 10 | 7 326 715 | 5 638 909 | 9 008 848 |
| Investment available for sale | 10 | 1 128 608 | 1 108 824 | 1 091 540 |
| Deferred tax asset | 15 | 27 754 742 | 33 241 208 | 24 096 895 |
| Other non current assets | 16 | 972 238 | 15 248 819 | 15 564 646 |
| Total non current assets | 829 755 146 | 938 785 851 | 933 731 639 | |
| CURRENT ASSETS: | ||||
| Inventories | 18 | 99 271 758 | 118 045 777 | 124 338 267 |
| Trade debtors | 19 | 98 523 551 | 117 503 156 | 136 607 907 |
| Other current debtors | 20 | 13 851 354 | 5 561 605 | 13 807 903 |
| State and other public entities | 22 | 10 608 923 | 10 013 586 | 7 716 843 |
| Other current assets | 21, 27 | 10 064 096 | 13 894 674 | 12 453 768 |
| Cash and cash equivalents | 23 | 11 948 475 | 26 988 389 | 22 795 232 |
| Total current assets | 244 268 157 | 292 007 187 | 317 719 920 | |
| Non-current assets classified as available for sale | 17 | 11 910 006 | 4 318 092 | 4 411 224 |
| TOTAL ASSETS | 1 085 933 309 | 1 235 111 130 | 1 255 862 783 | |
| SHAREHOLDERS`FUNDS, NON-CONTROLLING INTERESTS AND LIABILITIES | ||||
| SHAREHOLDERS`FUNDS: | ||||
| Share capital | 24.1 | 812 107 574 | 700 000 000 | 700 000 000 |
| Legal reserve | 24.2 | 3 131 757 | 3 131 757 | 3 131 757 |
| Other reserves and accumulated earnings | 24.3 | - 767 474 878 | - 647 867 883 | - 569 867 023 |
| Accumulated other comprehensive income | 24.2 | 63 393 095 | 72 681 459 | - 380 018 |
| Accumulated other comprehensive income directly associated with non-current assets | ||||
| classified as available for sale | 24.4 | |||
| - 27 802 | ||||
| Total | 111 129 746 | 127 945 333 | 132 884 716 | |
| Non-controlling interests TOTAL SHAREHOLDERS`FUNDS |
25 | - 262 099 110 867 647 |
- 795 247 127 150 086 |
- 939 705 131 945 011 |
| LIABILITIES: | ||||
| NON CURRENT LIABILITIES: | ||||
| Bank loans - net of current portion | 26 | 231 403 466 | 123 145 528 | 128 275 420 |
| Non convertible debentures | 26 | 147 604 120 | 118 908 927 | 248 344 033 |
| Finance lease creditors - net of current portion | 26 | 23 440 018 | 30 153 351 | 36 192 908 |
| Other loans | 26 | 54 951 368 | 2 553 262 | 78 868 673 |
| Post-retirement liabilities | 30 | 27 279 500 | 25 651 828 | 27 679 582 |
| Other non current liabilities | 29 | 42 000 326 | 54 031 408 | 62 895 948 |
| Deferred tax liabilities | 15 | 63 291 251 | 72 647 868 | 59 123 409 |
| Provisions | 34 | 7 488 485 | 7 352 456 | 7 356 628 |
| Total non current liabilities | 597 458 534 | 434 444 628 | 648 736 601 | |
| CURRENT LIABILITIES: | ||||
| Current portion of non-current bank loans | 26 | 21 562 801 | 22 165 408 | 92 193 562 |
| Current bank loans | 26 | 85 212 092 | 198 547 978 | 37 381 104 |
| Current portion of non-current non convertible debentures | 26 | 129 918 927 | 55 000 000 | |
| Current portion of non-current finance lease creditors | 26 | 5 829 498 | 5 558 615 | 4 114 170 |
| Other loans | 26 | 6 186 912 | 70 902 123 | 4 060 098 |
| Trade creditors | 31 | 156 378 992 | 153 098 712 | 171 923 831 |
| Taxes and other contributions payable | 32 | 9 619 669 | 12 186 237 | 14 028 311 |
| Other current liabilities | 27, 33 | 77 936 006 | 79 813 873 | 84 461 102 |
| Provisions Total current liabilities |
34 | 5 307 416 368 033 386 |
1 324 543 673 516 416 |
12 018 993 475 181 171 |
| Liabilities directly associated with non-current assets classified as available for sale | 17 | 9 573 742 | ||
| TOTAL SHAREHOLDERS' FUNDS AND LIABILITIES | 1 085 933 309 | 1 235 111 130 | 1 255 862 783 | |
The notes are an integral part of the consolidated financial statements
The Board of Directors
| Notes | 31.12.2014 | 31.12.2013 Restated |
|
|---|---|---|---|
| Sales | 1 009 551 129 | 1 046 311 142 | |
| Services rendered | 40, 45 | 4 980 692 | 4 189 876 |
| Other income and gains | 37, 40, 45 | 39 874 435 | 25 647 342 |
| Cost of sales | 40, 45 | 540 981 344 | 560 857 085 |
| (Increase) / decrease in production | 40 | 3 805 614 | 315 116 |
| External supplies and services | 40, 45 | 256 553 844 | 266 602 906 |
| Staff expenses | 40 | 151 501 141 | 160 995 000 |
| Depreciation and amortisation | 45 | 64 099 693 | 63 321 917 |
| Provisions and impairment losses (increase / reduction) Other expenses and losses |
40, 45 38, 40 |
10 285 817 9 312 194 |
467 432 11 638 078 |
| Operating profit / (loss) | 45 | 17 866 609 | 11 950 826 |
| Financial expenses | 41 | 62 290 708 | 64 948 746 |
| Financial income | 41 | 12 549 544 | 11 977 469 |
| Gains and losses in associated companies | 6 | - 224 516 | - 696 165 |
| Gains and losses in joint ventures | 5 | - 3 267 193 | - 4 702 990 |
| Net profit/(loss) from continuing operations, before taxation | - 35 366 264 | - 46 419 606 | |
| Taxation | 42 | 7 005 794 | - 16 119 133 |
| Consolidated net profit / (loss) from continuing operations, afer taxation | - 42 372 058 | - 30 300 473 | |
| Profit / (loss) from discontinued operations, after taxation | 43 | - 73 507 271 | - 48 615 658 |
| Consolidated net profit / (loss) for the period | - 115 879 329 | - 78 916 131 | |
| Attributable to: Equity Holders of Sonae Industria |
|||
| Continuing operations | - 42 315 604 | - 30 021 717 | |
| Discontinuing operations | - 73 404 581 | - 48 024 200 | |
| Equity Holders of Sonae Industria | - 115 720 185 | - 78 045 917 | |
| Non-controlling interests | |||
| Continuing operations | - 56 454 | - 278 902 | |
| Discontinuing operations | - 102 690 | - 591 312 | |
| Non-controlling interests | - 159 144 | - 870 214 | |
| Profit/(Loss) per share | |||
| Fom continuing operations: | |||
| Basic Diluted |
44 44 |
- 0.0340 - 0.0340 |
- 0.2144 - 0.2144 |
| From discontinued operations: | |||
| Basic Diluted |
44 44 |
- 0.0589 - 0.0589 |
- 0.3430 - 0.3430 |
The notes are an integral part of the consolidated financial statements
The board of directors
(Amounts expressed in Euros)
| Notes | 31.12.2014 | 31.12.2013 Restated |
|
|---|---|---|---|
| Net consolidated profit / (loss) for the period (a) | - 115 879 329 | - 78 916 131 | |
| Other consolidated comprehensive income | |||
| Items that may be reclassified subsequently to profit or loss | |||
| Change in currency translation reserve Change in fair value of available-for-sale financial assets |
24 | 4 060 084 - 1 838 |
- 19 431 262 - 4 926 |
| Income tax relating to items that may be reclassified | |||
| Items that will not be reclassified subsequently to profit or loss | |||
| Revaluation of tangible fixed assets Remeasurements of defined benefit plans Share of other comprehensive income of associates |
2.8, 34 | - 19 672 832 - 3 293 237 |
127 962 409 833 309 1 388 853 |
| Income tax relating to items that will not be reclassified | 15 | - 9 167 910 | 36 868 484 |
| Other consolidated comprehensive income for the period, net of tax (b) | - 9 739 913 | 73 879 899 | |
| Total consolidated comprehensive income for the period (a) + (b) | - 125 619 242 | - 5 036 232 | |
| Total consolidated comprehensive income attributable to: Equity holders of Sonae Industria |
- 125 465 886 | - 4 984 440 | |
| Non-controlling interests | - 153 356 - 125 619 242 |
- 51 792 - 5 036 232 |
The notes are an integral part of the consolidated financial statements
| Share capital | Legal reserve |
Other Reserves and accumulated earnings |
Accumulated other comprehensiv e income |
Total shareholders` funds attributable to the equity holders of Sonae Indústria |
Non controlling interests |
Total shareholders' funds |
|---|---|---|---|---|---|---|
| 24.4 | ||||||
| 700 000 000 | 3 131 757 | -569 867 023 | - 380 018 | 132 884 716 | - 939 705 | 131 945 011 |
| -78 045 917 -78 045 917 |
73 061 477 73 061 477 |
- 78 045 917 73 061 477 -4 984 440 |
- 870 214 818 422 - 51 792 |
- 78 916 131 73 879 899 -5 036 232 |
||
| - 64 388 | - 64 388 | 196 250 | 131 862 127 150 086 |
|||
| 700 000 000 | 3 131 757 | -647 867 883 | 72 681 459 | 127 945 333 | - 795 247 |
| Share capital | Legal reserve |
Other Reserves and accumulated earnings |
Accumulated other comprehensiv e income |
Total shareholders` funds attributable to the equity holders of Sonae Indústria |
Non controlling interests |
Total shareholders' funds |
|
|---|---|---|---|---|---|---|---|
| 24.4 | |||||||
| Balance as at 1 January 2014 | 700 000 000 | 3 131 757 | - 647 867 883 | 72 681 459 | 127 945 333 | - 795 247 | 127 150 086 |
| Total consolidated comprehensive income for the period Net consolidated pofit/(loss) for the period Other consolidated comprehensive income for the period |
-115 720 185 | -9 745 701 | - 115 720 185 - 9 745 701 |
- 159 144 5 788 |
- 115 879 329 - 9 739 913 |
||
| Total | -115 720 185 | -9 745 701 | - 125 465 886 | - 153 356 | - 125 619 242 | ||
| Increase in share capital Share-based payment plan Change in ownership interest Others |
112 107 574 | -1 470 000 201 079 -1 551 038 -1 066 851 |
999 576 - 570 041 |
110 637 574 201 079 - 551 462 -1 636 892 |
117 551 462 134 925 |
110 637 574 201 196 - 1 501 967 |
|
| Balance as at 31 December 2014 | 812 107 574 | 3 131 757 | -767 474 878 | 63 365 293 | 111 129 746 | - 262 099 | 110 867 647 |
The notes are an integral part of the consolidated financial statements
The board of directors
FOR THE PERIODS ENDED 31 DECEMBER 2014 AND 2013
(Amounts expressed in Euros)
| Notes | 31.12.2014 | 31.12.2013 | |
|---|---|---|---|
| OPERATING ACTIVITIES | Restated | ||
| Receipts from trade debtors | 1 119 109 395 | 1 200 947 853 | |
| Payments to trade creditors | 877 170 912 | 968 653 472 | |
| Payments to staff | 178 068 622 | 195 690 835 | |
| Net cash flow from operations | 63 869 861 | 36 603 546 | |
| Payment / (receipt) of corporate income tax | 8 843 931 | 5 685 211 | |
| Other receipts / (payments) relating to operating activities | 72 602 | 1 234 895 | |
| Net cash flow from operating activities (1) | 55 098 532 | 32 153 230 | |
| INVESTMENT ACTIVITIES | |||
| Cash receipts arising from: | |||
| Investments | 4 718 | 187 627 | |
| Tangible fixed assets and intangible assets | 37 | 29 037 621 | 8 973 018 |
| Investment subventions | 775 301 | 156 871 | |
| Dividends | 45 000 | 10 799 | |
| Non-current assets held for sale | 4 466 628 | ||
| 34 329 268 | 9 328 315 | ||
| Cash Payments arising from: | |||
| Investments | 124 821 | ||
| Tangible fixed assets and intangible assets Others |
40 628 940 4 054 |
20 586 834 | |
| 40 757 815 | 20 586 834 | ||
| Net cash used in investment activities (2) | - 6 428 547 | - 11 258 519 | |
| FINANCING ACTIVITIES | |||
| Cash receipts arising from: | |||
| Interest and similar income | 676 665 | 959 826 | |
| Loans granted to related parties | 9 175 000 | 1 500 000 | |
| Loans obtained | 26.5 | 3 644 065 246 | 2 609 598 270 |
| Increase in share capital | 24.1 | 110 734 770 | |
| Others | 9 610 | ||
| 3 764 651 681 | 2 612 067 706 | ||
| Cash Payments arising from: | |||
| Interest and similar charges Loans granted to related parties |
48 808 551 9 175 000 |
44 527 519 1 500 000 |
|
| Loans obtained | 26.5 | 3 759 942 712 | 2 546 578 785 |
| Finance leases - repayment of principal | 5 914 358 | 4 780 235 | |
| Others | 53 930 | ||
| 3 823 894 551 | 2 597 386 539 | ||
| Net cash used in financing activities (3) | - 59 242 870 | 14 681 167 | |
| Net increase in cash and cash equivalents (4) = (1) + (2) + (3) | - 10 572 885 | 35 575 878 | |
| Effect of foreign exchange rate | - 133 284 | 49 595 | |
| Cash and cash equivalents at the beginning of the period | 23 | 20 940 411 | - 14 585 872 |
| Cash and cash equivalents at the end of the period | 23 | 10 500 810 | 20 940 411 |
The notes are an integral part of the consolidated financial statements
The board of directors
(Amounts expressed in Euros)
SONAE INDÚSTRIA, SGPS, SA, whose head-office is at Lugar do Espido, Via Norte, Apartado 1096, 4470-909 Maia, Portugal, is the parent company of a group of companies as detailed in notes 4 to 6 ("Group"). The Group's operations and business segments are described in Note 44.
Sonae Indústria, SGPS, SA is included in the perimeter of consolidation of Efanor Investimentos, SGPS, SA, which is both its immediate and ultimate parent company.
The shares of the company are listed on NYSE Euronext Lisbon.
The main accounting policies adopted in preparing the accompanying consolidated financial statements are as follows:
These consolidated financial statements were prepared in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and with Interpretations issued by the IFRS Interpretations Committee (IFRS IC), applicable to the period beginning 1 January 2014 and endorsed by the European Union.
2.1.1. In the year ended 31 December 2014 the following standards and interpretations, which have been endorsed by European Union, became effective:
IFRS 10 (new), Consolidated Financial Statements. IFRS 10 replaces all principles related to control and consolidation included in IAS 27 and SIC 12 by changing the definition of control and the criteria to be used for identifying control. The core principle that a consolidated entity presents a parent and its subsidiaries as a single entity remains unchanged;
IFRS 11 (new), Joint Arrangements. IFRS 11 focus on rights and obligations arising from joint arrangements rather than on legal form. Joint arrangements may consist of joint operations (rights to the assets and obligations) or joint ventures (rights to the net assets recognized using the equity method). Proportionate consolidation is no longer allowed to measure joint controlled entities;
IFRS 12 (new), Disclosure of Interests in Other Entities. This standard sets out disclosure requirements for all types of interests in other entities, including subsidiaries, joint arrangements, associates and specific purpose entities, in order to assess the nature, risks and financial effects related to interests in other entities;
IFRS 10 (amendment), Consolidated Financial statements, IFRS 11 (amendment), Joint Arrangements, and IFRS 12 (amendment), Disclosure of Interests in Other Entities: 'Transition Guidance'. This amendment clarifies that when the accounting treatment of financial investments under IFRS 10 is different from the one under the former IAS 27/SRC 12, comparative information must only be re-presented for the immediately preceding period. Any differences arising must be recognized through net equity at beginning date of the comparative period. Specific disclosure requirements are included in IFRS 12;
IAS 27 (amended 2011), Separate Financial Statements. IAS 27 was amended after IFRS 10 was issued and contains the recognition and disclosure requirements for investments in subsidiaries, joint ventures and associates of entities that prepare separate financial statements;
IAS 28 (amended 2011), Investments in Associates and Joint Ventures. IAS 28 was amended after IFRS 11 was issued and now includes the accounting treatment for investments in associates and joint ventures as well as the requirements for applying the equity method;
IAS 32 (amendment), Financial Instruments: Presentation – 'Offsetting financial assets and financial liabilities'. This amendment is part of IASB's project for offsetting assets and liabilities, and aims to clarify the statement "have the right to receive or pay a single net amount". It further clarifies that some systems settling two financial instruments (clearing houses) may be equivalent to settlement of a single amount;
IAS 36 (amendment), Impairment of Assets: 'Recoverable amount disclosures for nonfinancial assets'. This amendment refers to disclosure requirements of impaired assets for which recoverable amounts were measured for fair value less estimated costs to sell;
IAS 39 (amendment), Financial Instruments: Recognition and Measurement - 'Novation of derivatives and continuation of hedge accounting'. This amendment allows an entity to keep applying hedge accounting for a derivative that was designated as a hedging instrument, when a law or regulation transfers the counterparty rights to a clearing house;
IFRS 10 (amendment), Consolidated Financial Statements, IFRS 12 (amendment), Disclosure of Interests in Other Entities, and IAS 27 (amendment), Separate Financial Statements: 'Investment entities'. This amendment defines investment entities, which are exempted from applying IFRS 10 to investments in subsidiaries. These ones should be measured at fair value through profit or loss, in accordance with IAS 39. Specific disclosure requirements are included in IFRS 12;
IFRIC 21 (new), Levies. Interpretation to IAS 37 and to recognition of a liability, clarifying that the obligation event that gives rise to a liability to pay a levy is the activity described in the relevant legislation that triggers the payment.
Effects arising from the application of these standards are detailed in note 3.
2.1.2. At 31 December 2014, the following standards and interpretations had been issued and endorsed by the European Union, but had not been applied as they only become effective on later periods:
Annual improvements 2011-2013 (effective for periods beginning on or after 1 July 2014). The amendments include changes from the 2011-2013 cycle of the annual improvements project that affect 4 standards: IFRS 1, First Time Adoption, IFRS 3, Business Combinations, IFRS 13, Fair Value Measurement and IAS 40, Investment Property;
2.1.3. At 31 December 2014, the following standards had been issued, with effective date on later periods and still pending endorsement by the European Union:
IAS 1 (amendment), Presentation of Financial Statements (effective for periods beginning on or after 1 January 2016). This amendment contains guidance relating to materiality and aggregation, presentation of subtotals, structure of financial statements and accounting policies;
IAS 16 (amendment), Tangible Fixed Assets, and IAS 38 (amendment), Intangible Assets (effective for periods beginning on or after 1 January 2016). In this amendment the IASB has clarified that the use of revenue-based methods to calculate the depreciation of an asset is not appropriate because revenue generated by an activity that includes the use of an asset generally reflects factors other than the consumption of the economic benefits embodied in the asset. The IASB has also clarified that revenue is generally presumed to be an inappropriate basis for measuring the consumption of the economic benefits embodied in an intangible asset;
IAS 16 (amendment), Tangible Fixed Assets, and IAS 41 (amendment), Agriculture: 'Bearer Plants' (effective for periods beginning on or after 1 January 2016). This amendment defines the concept of bearer plant and transfers this type of asset from the scope of IAS 41 – Agriculture to the one of IAS 16 – Tangible Assets, with the related effect on measurement. However, biologic assets produced by these plants are kept in the scope of IAS 41 – Agriculture;
IAS 19 (amendment), Employee Benefits (effective for periods beginning on or after 1 July 2014). This narrow scope amendment applies to contributions from employees or third parties to defined benefit plans. The objective of the amendment is to simplify the accounting for contributions that are independent of the number of years of employee service;
IAS 27 (amendment), Separate Financial Statements (effective for periods beginning on or after 1 January 2016). These amendments allow entities to use the equity method to account for investments in subsidiaries, joint ventures and associates in their separate financial statements;
Annual improvements 2010-2012 (effective for periods beginning on or after 1 July 2014). These amendments include changes from the 2010-12 cycle of the annual improvements project, that affect the following standards: IFRS 2 - Share-based Payment, IFRS 3 - Business Combinations, IFRS 8 - Operating Segments, IFRS 13 -
Fair Value Measurement, IAS 16 - Property, Plant and Equipment, IAS 24 - Related Parties Disclosures and IAS 38 - Intangible Assets;
Annual improvements 2012-2014 (generally effective for periods beginning on or after 1 January 2016). This amendment cycle includes changes to the following standards: IFRS 5 – Non-current Assets Available for Sale and Discontinued Operations, IAS 19 – Employee Benefits and IAS 34 – Interim Financial Reporting;
IFRS 9 (new), Financial Instruments (effective for periods beginning on or after 1 January 2018). This standard replaces the guidance in IAS 39. It includes requirements on the classification and measurement of financial assets and liabilities; it also includes an expected credit losses model that replaces the current incurred loss impairment model;
IFRS 10 (amendment), Consolidated Financial Statements, and IAS 28 (amendment), Investment in Associates and Joint Ventures (effective for periods beginning on or after 1 January 2016). These amendments address an inconsistency between the requirements in IFRS 10 and those in IAS 28 in dealing with the sale or contribution of assets between an investor and its associate or joint venture. A partial gain or loss is recognized when a transaction involves assets that do not constitute a business, even if these assets are housed in a subsidiary;
IFRS 10 (amendment), Consolidated Financial Statements, IFRS 12 (amendment), Disclosure of Interests in Other Entities, and IAS 28 (amendment), Investments in Associates and Joint Ventures: 'Investment entities – exemption from consolidation' (effective for periods beginning on or after 1 January 2016). This amendment specifies that an intermediate holding company which is a subsidiary of an investment entity is exempted from consolidation. Furthermore, the optional use of equity method under IAS 28 is extensible to an entity which not being an investment entity, holds an interest in an associate or joint venture which qualifies as investment entity;
IFRS 11 (amendment), Joint Arrangements (effective for periods beginning on or after 1 January 2016). This amendment adds new guidance on how to account for the acquisition of an interest in a joint operation that constitutes a business;
IFRS 14 (new), Regulatory Deferral Accounts (applicable for periods beginning on or after 1 January 2016). This standard allows first-time adopting entities to keep recognizing regulatory assets and liabilities according to the accounting policy used in the former standards. However, to enhance comparability with entities using IFRSs,
which do not recognize regulatory assets or liabilities, the amounts thereon must be separately disclosed on the financial statements;
IFRS 15 (new), Revenue from Contracts with Customers (effective for annual periods beginning on or after 1 January 2017). This new standard only applies to contracts with customers to provide goods or services, and requires an entity to recognise revenue when the contractual obligation to deliver goods or services is fulfilled and for the amount that reflects the consideration the entity is expected to be entitled to, following a five step approach;
The Company does not estimate any significant effect to arise from the application of these standards.
The accompanying consolidated financial statements have been prepared from the books and accounting records of the companies included in the consolidation (Note 4) on a going concern basis and under the historical cost convention, except for financial instruments, which are stated at fair value (Note 2.12).
The consolidation methods adopted by the Group are as follows:
Investments in companies in which the Group holds, directly or indirectly, control, were included in these consolidated financial statements using the full consolidation method.
The Group holds control of entities when it fulfils all the following conditions: (i) power over the entity; (ii) exposure, or rights, to returns from its involvement with the entity; and (iii) the ability to use its power over the entity to affect the amount of its own returns.
Equity and comprehensible income attributable to minority shareholders are shown separately, under the caption Non-controlling Interests, in the Consolidated Statement of Financial Position and in the Consolidated Income Statement, respectively
Comprehensive income and the remaining items of net shareholders' funds are attributed to the holders of non-controlling interests, according to their interest, even if this caption turns negative.
Assets and liabilities of each Group company are measured at their fair value at the date of acquisition. Any excess of the acquisition cost plus the non-controlling holders' share in the fair value of acquired assets and liabilities, or alternatively, plus the fair value of noncontrolling holders' investment in the acquired subsidiary, over the Group's interest in the fair value of the identifiable net assets acquired is recognized as goodwill (Note 2.2.d and 14). If the difference between the acquisition cost plus the non-controlling holders' share in the fair value of acquired assets and liabilities, or alternatively, plus the fair value of noncontrolling holders' investment in the acquired subsidiary, and the fair value of the identifiable net assets acquired is negative, this difference is recognized as income in profit or loss for the period of acquisition, after reassessment of the estimated fair value. Noncontrolling interests include their proportion of the fair value of net identifiable assets and liabilities, or alternatively, the fair value of their investment in the subsidiary acquired.
The results of Group companies acquired or disposed of during the period are included in the Consolidated Income Statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.
Adjustments to the financial statements of Group companies are performed, whenever necessary, in order to adapt accounting policies to those used by the Group. All intra-group transactions, balances, income and expenses and distributed dividends are eliminated on consolidation.
Entities included in these consolidated financial statements are listed on note 4.
Financial investments in joint ventures (companies that the Group holds together with third parties and in which joint control is established in a shareholders' agreement) and in associates (companies where the Group exercises significant influence but does not establish financial and operational policies – usually corresponding to holdings between 20% and 50% in a company's share capital) are accounted for in accordance with the equity method.
Under the equity method, investments are recorded at cost, under Investments in joint ventures or Investments in associates, on the Consolidated Statement of Financial Position, then adjusted by the amount corresponding to the Group's share of changes in equity (including net profit or loss) of the entity, against losses or profits in the period or against other comprehensive income for the period, and against dividends received.
The excess value resulting from the difference between the acquisition cost and the fair value of the assets and liabilities of the entity at the time of acquisition is recorded under Investments in joint ventures or investments in associates, on the Consolidated Statement of Financial Position. If the difference between the acquisition cost and the fair value of the assets at the time of acquisition is negative, it is recognized as income in the period.
Adjustments to the financial statements of the entity are performed, whenever necessary, in order to adapt accounting policies to those used by the Group.
An assessment of investments in joint ventures and in associated companies is performed when there is an indication that the asset might be impaired. Any impairment loss is disclosed on the Consolidated Income Statement. Impairment losses recorded in prior years that are no longer justifiable are reversed.
When the Group's share of losses exceeds the carrying amount of the investment, the investment is reported at nil value and recognition of losses is discontinued, unless the Group is committed beyond the value of its investment.
Gains on transactions with joint ventures or associates are eliminated proportionately to the Group's interest in these entities, against the carrying amount of investment. Losses are also eliminated as long as it does not reflect an impairment situation.
Joint-venture companies are detailed in note 5 and associates are detailed in note 6.
The excess of the acquisition cost plus the non-controlling holders' share in the fair value of acquired assets and liabilities, or alternatively, plus the fair value of non-controlling holders' investment in the acquired subsidiary, over the Group's interest in the fair value of the identifiable net assets acquired is recognized as goodwill (note 13).
Goodwill arising on the consolidation of subsidiaries located in foreign countries is accounted for on the functional currency of these subsidiaries and is then translated into the Group's reporting currency (Euro) at the exchange rate of balance sheet date. Exchange rate differences arising from this translation are disclosed in Other Accumulated Comprehensive Income.
Goodwill is not amortized, but it is subject to impairment tests on an annual basis. Impairment losses identified in the period are disclosed on the Consolidated Income Statement under Provisions and Impairment Losses, and cannot be reversed.
If the difference between the acquisition cost plus the non-controlling holders' share in the fair value of acquired assets and liabilities, or alternatively, plus the fair value of noncontrolling holders' investment in the acquired subsidiary, and the fair value of the identifiable net assets acquired over cost is negative, this difference is recognized as income in profit or loss for the period of acquisition, after reassessment of the estimated fair value.
Assets and liabilities denominated in foreign currencies in the individual financial statements of foreign companies are translated to Euro using exchange rates at the balance sheet date. Profit and loss and cash flows are converted to Euro using the average exchange rate for the period. Exchange rate differences originated after 1 January 2004 are recorded as equity under Translation Reserves in Other Accumulated Comprehensive Income. Exchange rate differences that originated prior to 1 January 2004 (date of transition to IFRS) were written-off through Other Reserves and Accumulated Earnings.
Goodwill and fair value adjustments arising from the acquisition of foreign companies are recorded as assets and liabilities of those companies and translated to Euro using exchange rates at the balance sheet date.
Whenever a foreign company is sold, accumulated exchange rate differences are recorded on the Consolidated Income Statement as a gain or loss on the disposal.
Great Britain Pound 0.7789 0.8060 0.8337 0.8489 South African Rand 14.0351 14.3968 14.5666 12.7730 Canadian Dollar 1.4063 1.4654 1.4671 1.3669 American Dollar 1.2141 1.3267 1.3791 1.3275 Swiss Franc 1.2024 1.2146 1.2276 1.2308 31.12.2014 31.12.2013 Closing rate Average rate Closing rate Average rate
Exchange rates used on translation of foreign group, jointly controlled and associated companies are listed below:
Source: Bloomberg
Tangible fixed assets acquired up to 1 January 2004 (transition date to IFRS) are recorded at acquisition cost, or revaluated acquisition cost, in accordance with generally accepted
accounting principles in Portugal until that date, net of depreciation and accumulated impairment losses.
Tangible assets, except land and buildings, acquired after that date are recorded at acquisition cost, net of accumulated depreciation and impairment losses.
Land and buildings are recognized for their revalued amounts, net of accumulated depreciation, in case of buildings, and impairment losses.
Increase in tangible fixed assets arising from revaluation is recognized through Other comprehensive income for the period revaluation occurs, which will thereafter be transferred to Other reserves and accumulated earnings to match the effect of depreciating or selling the assets.
Further revaluation will be carried out whenever revalued amounts significantly differ from the carrying amount of revalued assets, never exceeding a five-year period between two successive revaluations.
The Group separately recognizes and depreciates the components of Property Plant and Equipment whose useful lives are significantly different from the related main asset's ones and the components that can only be used in connection with a specific asset. These components are depreciated separately on the basis of their useful lives.
Repair and maintenance expenses are recognized in profit or loss in the period they occur.
Depreciation is calculated on a straight line basis, from the date the asset is available for use, over the expected useful life for each class of assets.
Depreciation rates used correspond to the following estimated useful lives of underlying assets:
| Years | |
|---|---|
| Buildings | 20 - 40 |
| Plant & Machinery | 2 - 25 |
| Vehicles | 5 |
| Tools | 5 |
| Fixtures and Fittings | 4 - 10 |
| Other Tangible Assets | 5 |
Tangible assets in progress represent fixed assets still under construction/development and are stated at acquisition cost net of impairment losses. These assets are transferred to the captions of tangible fixed assets according to their nature and are depreciated from the date they are available for use.
Residual values, useful lives and the depreciation method are assessed annually.
Intangible assets are stated at acquisition cost, net of depreciation and accumulated impairment losses. Intangible assets are only recognized if it is probable that future economic benefits will flow from them, if they are controlled by the Group and if their cost can be reliably measured.
Expenditure on research associated with new technical know-how is recognized as an expense recorded on the Consolidated Income Statement when it is incurred (note 38).
Expenditure on development is recognized as an intangible asset if the Group demonstrates the technical feasibility and its intention to complete the asset, its ability to sell or use it and the probability that the asset will generate future economic benefits. Expenditure on development, which does not fulfil these conditions, is recorded as an expense in the period in which it is incurred.
Internal costs associated with maintenance and development of software are recorded as an expense in the period in which they are incurred. Only costs directly attributable to projects for which the generation of future economic benefits is probable are capitalized as intangible assets.
Amortisation is calculated on a straight line basis from the date the asset is available for use, over the expected useful life, which ranges from 3 to 6 years.
Lease contracts are classified as (i) a finance lease if the risks and rewards incidental to ownership lie with the lessee and (ii) as an operating lease if the risks and rewards incidental to ownership do not lie with the lessee.
Whether a lease is classified as finance or operating lease depends on the substance of the transaction rather than the form of the contract.
Tangible assets used by the Group under finance lease contracts as well as the corresponding liabilities are recorded on the Consolidated Statement of Financial Position for the lower of fair value of leased assets and the amount of minimum lease payments. In addition, interest included in rents, depreciation and impairment losses are recognized on the Consolidated Income Statement as expenses of the period they relate to. Depreciation and impairment losses are calculated and recognized as set out in note 2.3 for tangible fixed assets. Whenever there is no reasonable certainty as to the acquisition of leased assets upon end of contract, the depreciation period of leased assets will be the lower of estimated useful life and leasing period.
Lease payments under operating lease contracts are recognized as an expense on a straight line basis over the lease term.
Investment properties are recorded at acquisition cost net of depreciation and of accumulated impairment losses. These are registered as a result of land and buildings used in discontinued operations and that the Group had established lease contracts with third parties.
Useful lives and the depreciation method are the ones set out in note 2.3. for tangible assets.
Government grants are recorded at fair value when there is reasonable assurance that they will be received and that the Group will comply with the conditions attaching to them.
Grants received as compensation for expenses, namely grants for personnel training, are recognized as income in the same period as the relevant expense.
Grants related to depreciable assets are disclosed as Other non-current liabilities and are recognized as income on a straight line basis over the expected useful lives of those assets.
Assets are assessed for impairment at each balance sheet date whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
Assets are assessed for impairment individually. In case of tangible fixed assets that cannot autonomously produce cash flows, impairment is assessed for the cash generating unit to
which the asset is assigned. Whenever a cash generating unit includes intangibles assets without defined useful life, impairment is assessed irrespective of events that may indicate that the carrying amount of the cash generating unit may not be recoverable.
Whenever the carrying amount of an asset exceeds its recoverable amount, an impairment loss is recognized on the Consolidated Income Statement under Provisions and impairment losses.
For tangible fixed assets that were revalued, occurring impairment losses are recognized through other comprehensive income until the revaluation effect is offset. Any additional impairment is recognized on the Consolidated Income Statement under Provisions and impairment losses.
The recoverable amount is the higher of an asset's fair value less costs to sell and its value in use. Fair value less costs to sell is the amount obtainable from the sale of an asset in an arm's length transaction less the costs of disposal. Value in use is the present value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life.
Reversal of impairment losses recognized in prior years is only recorded when it is concluded that the impairment losses recognized for the asset no longer exist or have decreased. This analysis is performed whenever there is an indication that the impairment loss previously recognized has been reversed. The reversal is recorded on the Consolidated Income Statement as Other Operational income. However, the increased carrying amount of an asset due to a reversal of an impairment loss is recognized to the extent it does not exceed the carrying amount that would have been determined (net of depreciation) had no impairment loss been recognized for that asset in prior years.
Borrowing costs are normally recognized as an expense in the period in which they are incurred.
Borrowing costs directly attributable to the acquisition, construction or production of tangible and intangible assets are capitalized as part of the cost of the qualifying asset. Borrowing costs are capitalized from the time of preparation of the activities to construct or develop the asset up to the time the production or construction is complete or when asset development is interrupted. Any income earned on funds temporarily invested pending their expenditure on the qualifying asset, is deducted from the borrowing costs that qualify for capitalisation.
Consumer goods and raw materials are stated at the lower of cost and net realisable value. Cost is determined on a weighted average basis.
Finished goods and work in progress are stated at the lower of the weighted average production cost or net realisable value. Production cost includes cost of raw materials, labour costs and overheads (including depreciation of production equipment based on normal levels of activity).
Net realisable value is the estimated selling price less estimated costs of completion and estimated costs necessary to make the sale.
Differences between cost and net realisable value, if negative, are shown as operating expenses under Cost of sales or Changes in stocks of finished goods and work in progress, depending on whether they refer to consumer goods and raw materials or finished goods and work in progress, respectively.
Provisions are recognized when, and only when, the Group has an obligation (legal or constructive) resulting from a past event, it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate can be made of that obligation.
When a significant time delay occurs between the onset of the obligation and the related expenditure, related provision is recognized for its present value.
Provisions are reviewed and adjusted at the balance sheet date to reflect the best estimate as of that date.
Restructuring provisions are recorded by the Group whenever a formal and detailed restructuring plan exists and that plan has been communicated to the parties involved.
Increase and utilization of provisions are recognized under Provisions and Impairment losses on the Consolidated Income Statement.
Investments are classified into the following categories:
Investments measured at fair value through profit or loss include the investments held for trading acquired by the Group to be sold within a short period of time. They are classified as current assets on the consolidated balance sheet.
The Group classifies as available-for-sale the investments which cannot be regarded as investments measured at fair value through profit or loss or as held-to-maturity investments.
Available-for-sale investments are stated as non-current assets except if they are intended to be sold within the next 12 months as from the balance sheet date.
Held-to-maturity investments are classified as non-current assets unless they mature within 12 months of the balance sheet date. Investments classified as held to maturity have defined maturities and the Group has the intention and ability to hold them until the maturity date.
All purchases and sales of investments are recognized on the trade date, independently of the settlement date.
Investments are initially measured at cost, which is the fair value of the consideration paid for them.
Available-for-sale investments and investments measured at fair value through profit or loss are subsequently carried at fair value, without any deduction for transaction costs which may be incurred on sale, by reference to their quoted market price at the balance sheet date. Investments in equity instruments that do not have a quoted market price and whose fair value cannot be reliably measured, are stated at cost, less impairment losses.
Changes in the fair value of investments measured at fair value through profit or loss are included on the Consolidated Income Statement for the period.
Gains or losses arising from a change in fair value of available-for-sale investments are recognized directly in other comprehensive income, under Fair value reserve, included in Reserves and retained earnings until the investment is sold or otherwise disposed of, or until it is determined to be impaired, at which time the cumulative gain or loss previously recognized in equity is transferred to net profit or loss for the period.
Receivables are stated at net realisable value, corresponding to their nominal value less impairment losses, recorded under the caption Impairment losses in accounts receivable, and thereby reflect their net realisable value.
Impairment losses are recognized following objective evidence that part or the whole amount receivable will not be paid as long as the loss can be reliably estimated. For that, each group company takes into consideration market information showing that the customer is insolvent along with historical data of overdue and not paid amounts receivable.
Recognized impairment losses correspond to the difference between the carrying amount and the present value of the estimated cash flows, discounted at the original effective interest rate, which is nil whenever payment is expected to occur within less than twelve months.
Accounts receivable are stated in the consolidated balance sheet as current assets unless they mature after twelve months as from the balance sheet date, in which case they will be stated as non-current assets.
Financial liabilities and equity instruments are classified and accounted for based on their contractual substance, independently from the legal form they assume.
Loans are recorded as liabilities at their nominal value, net of up-front fees and commissions related to the issuance of those instruments. Financial expenses are
calculated based on the effective interest rate and are recorded on the Consolidated Income Statement on an accruals basis, in accordance with the accounting policy defined in note 2.9. The portion of the effective interest charge relating to up-front fees and commissions, if not paid in the period, is added to the book value of the loan.
Accounts payable are stated at their nominal value as no interest is paid and financial discount is deemed to be not relevant.
The Group uses derivatives in the management of its financial risks, only to hedge such risks. Derivatives are not used by the Group for trading purposes.
Derivatives classified as cash flow hedge instruments (Swaps) are used by the Group mainly to hedge interest risks on loans obtained. Conditions established for these cash flow hedge instruments are identical to those of the corresponding loans in terms of base rates, calculation rules, rate setting dates and repayment schedules of the loans and for these reasons they qualify as perfect hedges. Inefficiencies that may arise are recorded on the Consolidated Income Statement.
The Group's criteria for classifying a derivative instrument as a cash flow hedge instrument include:
Cash flow hedge instruments used by the Group are initially accounted for at cost and subsequently adjusted to their corresponding fair value. Changes in fair value of these cash flow hedge instruments are recorded in equity under the caption Hedging reserves, included in Other Accumulated Comprehensive Income on the Consolidated Statement of Financial Position, and then reclassified to financial results on the Consolidated Income Statement over the same period in which the hedged instrument affects Income Statement.
The fair value of these financial instruments is calculated with resource to derivative valuation software as described on note 27.
Hedge accounting of derivative instruments is discontinued when the instrument matures or is sold. Whenever a derivative instrument can no longer be qualified as a hedging instrument, the fair value differences recorded in equity under the caption Hedging reserve, which is included in Other Accumulated Comprehensive Income, are transferred to profit or loss of the period or to the carrying amount of the asset that resulted from the hedged forecast transaction. Subsequent changes in fair value are recorded in the Consolidated Income Statement.
In some cases derivative instruments were negotiated to hedge cash flows mainly related to exchange rate hedges (forwards) of loans and trade transactions which do not consist in perfect hedging relations therefore not qualifying for hedge accounting. Notwithstanding, they significantly mitigate the effect on loans and accounts receivable denominated in foreign currencies of changes in exchange rates which the Group intends to hedge.
These derivative instruments, over which no hedge accounting was applied, are initially stated at cost, if any, and then adjusted to their fair value. Changes in fair value, calculated with resource to specific software under the terms described on note 27, are accounted for as financial items on the Consolidated Income Statement.
When embedded derivatives exist, they are accounted for as separate derivatives when the risks and the characteristics are not closely related to economic risks and characteristics of the host contract, and this is not stated at fair value. Gains and losses are taken through the Consolidated Income Statement.
Additionally, the Group also negotiates, in specific situations, interest derivatives in order to hedge fair values. In these cases, derivatives are stated at fair value through profit or loss. When the hedged instrument is not measured at fair value (i.e. loans which are recorded at amortized cost) the book value is adjusted by the amount which is effectively hedged through profit or loss.
Derivative instruments are stated on the Consolidated Statement of Financial Position under Other non-current assets, Other current assets, Other non-current liabilities and Other current liabilities.
Equity instruments are those that represent a residual interest on the Group's net assets and are recorded at the amount received, net of costs incurred with their issuance.
Own shares are recorded at acquisition cost as a reduction to equity. Gains or losses arising from sales of own shares are recorded in Other Reserves, under Other Reserves and Accumulated Earnings.
Cash and cash equivalents include cash on hand, cash at banks, term deposits and other treasury applications which mature in less than three months and are subject to insignificant risk of change in value.
In the Consolidated Statement of Cash Flows, cash and cash equivalents also include bank overdrafts, which are included in Bank Loans on the Consolidated Statement of Financial Position.
As referred to in note 30, some of the Group companies are committed to provide benefits to their employees when they get retired. These commitments are considered as defined benefit plans, and autonomous pension funds have been established to this effect.
In order to estimate its obligations, the Group obtains, annually, actuarial valuations according to the "Projected Unit Credit Method".
Remeasurements (actuarial gains or losses) arising from experience adjustments and from changes in demographic and financial assumptions are recognized through other comprehensive income, under Net Shareholders' Funds.
Net interest results from the product of discount rates, which are derived from high quality bonds, and the amount of liabilities deducted by the fair value of plan assets.
Past service costs are recorded immediately through profit or loss for the period.
Obligations recorded at the closing balance sheet date reflect the present value of obligations for defined benefits adjusted for actuarial gains or losses and/or past service costs not recorded, net of the fair value of net assets of the pension fund.
Contingent liabilities are not recorded in the consolidated financial statements. Instead they are disclosed in the notes to the financial statements, unless the probability of a cash outflow is remote, in which case, no disclosure is made.
Contingent assets are not recorded in the consolidated financial statements but disclosed when future economic benefits are probable.
Income tax for the period is calculated based on the taxable income of companies included on consolidation and considers deferred taxation.
Current income tax is determined based on the taxable income of companies included on consolidation and includes deferred taxation, in accordance with the tax rules in force in the respective country of incorporation, considering the period profit and using the estimated effective average annual income tax rate.
Deferred taxes are calculated using the balance sheet liability method, reflecting the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Deferred tax assets and liabilities are calculated and annually remeasured using the tax rates that have been enacted or substantively enacted and therefore are expected to apply in the periods when the temporary differences are expected to reverse.
Deferred tax assets are recognized only when it is probable that sufficient taxable profits will be available against which the deferred tax assets can be used, or when taxable temporary differences are recognized and expected to reverse in the same period. At each balance sheet date a review is made of the deferred tax assets recognized, which are reduced whenever their future use is no longer probable.
Deferred tax assets and liabilities are recorded on the Consolidated Income Statement, except if they relate to items directly recorded in other comprehensive income, in which case the corresponding deferred tax is recorded therein.
Revenue from the sale of goods is recognized on the Consolidated Income Statement when the risks and benefits have been transferred to the buyer and the amount of the revenue can be measured reasonably. Sales are recognized net of sales taxes and discounts and other expenses arising from the sale, and are measured as the fair value of the amount received or receivable.
Revenue from services rendered is recognized on the Consolidated Income Statement taking into consideration the stage of completion of the transaction at the balance sheet date.
Dividends are recognized as income in the year they are attributed to the shareholders.
Income and expenses are recorded in the year to which they relate, independently of the date of the corresponding payment or receipt. Income and expenses for which their real amount is not known are estimated.
Other current assets and Other current liabilities include income and expenses of the reporting year which will only be invoiced in the future. Those captions also include receipts and payments that have already occurred but will only correspond to income or expenses of future years, when they will be recognized in the Consolidated Income Statement.
Capital gains and losses that result from the sale or write-off of tangible and intangible assets and of investments are presented on the Consolidated Income Statement as the difference between the sale price and the net book value at date of sale or write-off, under the caption Other Operating Profits and Losses.
Transactions in currencies other than the Euro, are translated to Euro using the exchange rate as at the transaction date.
At each balance sheet date, all monetary assets and liabilities expressed in foreign currencies are translated to the functional currency of each foreign company at the exchange rates as at that date. All non-monetary assets and liabilities recorded at fair value and stated in foreign currencies are converted to the functional currency of each company, using the exchange rate at the date the fair value was determined.
Exchange gains and losses arising from differences between historical exchange rates and those prevailing at the date of collection, payment or the date of the balance sheet, are recorded as income or expenses of the period, except for those related to non-monetary assets or liabilities, for which adjustments to fair value are directly recorded under equity.
When the Group wants to reduce currency exposure, it negotiates hedging currency derivatives (note 2.12.f).
Each year the Company and its subsidiaries grant their employees that belong to a functional group classified as Executive or above a compensation which is related to the value added in the previous period for the shareholders. This compensation consists in granting a number of the Company's shares, which may choose, on payment date, to deliver the shares or to pay the corresponding amount, taking into consideration the market price of the shares on payment date.
This liability is stated on the Consolidated Statement of Financial Position under Other reserves, and is stated on the Consolidated Income Statement under Staff expenses, on a straight line basis over the deferral period, taking into consideration the fair value of granted shares on grant date.
If the employee ceases functions during the period over which payment of previously recognized liabilities is deferred, liabilities will be derecognized from the Consolidated Statement of Financial Position against Staff expenses on Consolidated Income Statement.
Events after the balance sheet date that provide additional information about conditions that existed at the balance sheet date (adjusting events), are reflected in the consolidated financial statements. Events after the balance sheet date that are non-adjusting events are disclosed in the notes when material.
At the reporting date reportable segments are assessed on the basis of the internal reporting system of financial information (note 45).
The most significant estimations included in these consolidated financial statements refer to:
a) Useful lives of tangible and intangible assets (notes 11, 12 and 13);
b) Impairment tests on cash generating units to which goodwill was allocated (note 14);
c) Impairment analysis of accounts receivable (notes 19 and 20);
d) Adjustments to assets, namely fair value adjustments and, relating to inventories, write-down to net realizable value (note 9, 18 and 34);
e) Calculation of post-employment liabilities (notes 30);
f) Calculation of provisions and impairment losses on intangible assets and tangible fixed assets (note 34);
g) Calculation of income tax (note 42).
These estimations were based on the best available information at the date these consolidated financial statements were prepared and were based on the knowledge and experience of present and past events. Notwithstanding, some situations may occur in future periods which were not included in present estimations as they were not foreseeable. Changes to estimations after these financial statements date will be prospectively corrected through profit or loss in accordance with IAS 8.
Main estimations and assumptions relating to future events included in these consolidated financial statements are described in the correspondent notes.
The Group has industrial facilities located in several European countries, which are within the scope of the European Emission Trading Scheme.
The scheme consists of an allowance granted by the State where the facility is located, which is recognized in Other Intangible Assets and Deferred Gains, at the market value of the date it was granted. Deferred gains are transferred to Other Operating Revenues on a straight line basis over the period.
At 31 December 2014, an estimation of emissions produced in the period is recognized in Cost Accruals and Other Operating Costs.
On the following period, when emissions produced are definitely calculated, the amount previously recorded in Other Intangible Assets is written off against Cost Accruals for the rights delivered back to the State. When allowances are excessive and the remainder is sold, a gain or loss corresponding to the difference between cost and market value is recorded in Other Operating Revenues or Other Operating Costs.
The Group discloses non-underlying items included under operating captions, except under amortization, depreciation, provisions and impairment losses, but including impairment losses on trade debtors, aiming to assist the readers of its consolidated financial statements to better assess the trend of future results.
Underlying items include those events that are infrequent, unusual, exceptional, unique or residual, therefore not expected to occur regularly in the context of the Company's normal activity. In particular, the Group classify as non-underlying items reimbursements from insurance, expenditure related to fines and penalties and income or expenses related to or following the discontinuing of assets, including:
All items that are not classified as non-underlying are therefore classified as underlying.
If an active market is available, market price is used for determining asset and liability fair value. This corresponds to level 1 of fair value hierarchy, as defined in IFRS 13 – Fair Value measurement.
If an active market is not available, generally accepted valuation techniques are used, based on market assumptions. The resulting fair value corresponds to level 2 of fair value hierarchy, as defined in IFRS 13. When these techniques use mostly or exclusively unobservable information, the resulting fair value corresponds to level 3 or fair value hierarchy, as defined on the aforementioned standard.
Sonae Indústria Credit Risk derives mainly from its account receivables items related with its operating activity.
The main objective of Sonae Indústria Credit Risk Management is to guarantee the effective collection of its operating receivables according to the negotiated payment terms.
In order to mitigate Credit Risk related with potential Customers default on payment of outstanding receivables, Group companies exposed to this type of risk:
Have in place proactive, active and reactive credit management processes and procedures, backed by advanced information systems;
Have local commissions to analyse and follow up credit risk;
Have teams exclusively dedicated to credit risk and collection of payments from customers;
Establish and review credit limits for their Customers, monitoring effective exposure to their Customers;
Have protection tools in place, such as insurance policies, where viable;
In addition to its operating activities, Group companies have financial assets, related mainly with its activities involving Financial Institutions, such as cash deposits, financial investments and derivatives with positive market value. As a result, Credit Risk arises from the potential counterparty default from these Financial Institutions.
As a rule, Group companies preferably engage in financial operations with Investment Grade Financial Institutions. On the other hand, generally speaking, exposure related with this type of financial assets is widely spread and short lived.
b) Market Risk Management Policy
As a result of the relevant portion of floating rate debt on Sonae Indústria consolidated Balance Sheet and the consequent cash flows related to interest payments, the company is exposed to interest rate risk, and it is particularly exposed to the risk of variation of Euro interest rates, as most of its floating rate debt is denominated in Euro.
As a general rule, Sonae Indústria does not hedge its exposure to floating interest rates.
This approach is based on the principle of the existence of a positive correlation between the interest rate levels and the "operating cash flow before net interest charges", which creates a natural hedge on the "operating cash flow after net interest charges" for Sonae Indústria. The rationale behind this principle is as follows:
Sonae Indústria is mainly exposed to the Euro area on its operating activity and, as referred before, it is also mainly exposed to the Euro currency in what concerns to its floating rate debt.
Sonae Indústria operating activity is cyclical in the sense it is tied to business cycles of the overall economy and particularly of the construction sector (and also of the furniture sector on its own). This is mostly due to the nature of our products, and to the fact that they are commodity-like and durable goods, performing better when there are good economic conditions.
Under regular economic circumstances, when there is a strong level of economic activity and demand, inflation tends to increase. Since nominal interest rates are a function of inflation and also because the European Central Bank (ECB) has as its main mission keeping price stability, it normally acts in order to relieve inflationary tensions by increasing interest rates. Opposite effects occur when there is a weak level of activity and demand, with low pressure on prices.
When activity and demand are strong in the Euro Area, Sonae Indústria tends to have superior economic performance and operating cash flow generation. On the other hand, when economic conditions are strong, ECB tends to increase interest rates in order to refrain demand and avoid price increases, which is reflected on higher net interest charges for Sonae Indústria, creating a natural hedge on "operating cash flow after net interest charges". The same principle (with opposite signs) applies on economic downturn situations.
It is our understanding that, apart from the Euro interest rate, the same rationale applies to other interest rates to which Sonae Indústria is exposed such as the Pound Sterling, the Canadian Dollar or the South African Rand (while acknowledging that in emerging markets, interest rate behaviour is influenced by other effects not directly related with domestic economic conditions).
As an exception to its general rule, Sonae Indústria may engage into interest rates derivatives. If this is the case, the following is observed:
Derivatives are not used for trading, profit making, or speculative purposes;
Group companies preferably engage in derivative transactions with Investment Grade Financial Institutions;
Derivatives match exact periods, settlement dates and base interest rate of the underlying exposures;
Maximum financial charges on the aggregate of the derivative and the underlying exposures are always known and limited on the inception of the hedging period;
Quotes from at least two Financial Institutions are considered before closing any interest rate hedging deal.
As a geographically diversified Group with subsidiaries located in three different continents, Sonae Indústria is exposed to foreign exchange risk. Consolidated Balance Sheet and Profit and Loss are is exposed to foreign exchange translation risk and Sonae Indústria subsidiaries' are exposed to foreign exchange risk of both translation and transaction type.
Foreign exchange risk relates to the possibility of registering gains or losses resulting from the change in exchange rates.
Transaction risk arises when there is exchange risk related to a cash flow in other than a subsidiary local currency. Sonae Indústria subsidiaries cash flows are largely denominated in the subsidiary local currency. This is valid independently of the nature of the cash flows, i.e.: operating or financial, and provides a degree of natural currency hedging, reducing the Group's transaction risk. In line this rationale, as a principle, Sonae Indústria's subsidiaries financial debt is denominated in their local currency.
As a Group rule, whenever possible and economically viable, subsidiaries aim to offset assets and liabilities denominated in the same foreign currency.
Also as a rule, in situations where relevant exchange risk arises from trade in other than the subsidiary local currency, exchange risk should be mitigated through the use of short term forward exchange agreements performed by the subsidiary exposed to that risk.
Sonae Indústria subsidiaries do not engage in forward exchange rate agreements with trading, speculative or profit making purposes.
Translation risk arises from the fact that for each accounting period, the financial ftatements of the subsidiaries denominated in other than Euro local currencies, must be translated or converted into Euro in order to prepare the consolidated financial statements of the Group. As exchange rates vary between periodical financial statements and the referred subsidiaries assets' do not match their liabilities, volatility in the consolidated accounts arises as a result of conversion at different exchange rates.
As a policy, translation risk in connection with the conversion of the Equity investments on foreign non Euro subsidiaries is not hedged as these are considered long-term investments and it is assumed that hedging will not add value in the long term. Gains and losses related to the translation at different exchange rates of Equity investments in foreign non Euro subsidiaries are accounted under the Conversion Reserve, included in Other Reserves and Accumulated Earnings, on the Consolidated Balance Sheet.
Some Sonae Indústria subsidiaries concede or receive intercompany funding on currencies other than their local currency. Whenever this happens, intercompany funding is always denominated in the currency of the other Group counterparty. It is Sonae Indústria policy to hedge systematically the outstanding amount of this intercompany funding in order to reduce volatility on subsidiaries (and consolidated) financial statements. This volatility arises from the fact that, there is no offset of the Exchange Rate gain or loss registered in the profit and loss of the Group counterparty with the intercompany asset or liability denominated in other than its local currency (gain or loss registered as a result of the change in value of its foreign currency intercompany asset or liability), on the side of the other Group counterparty (and as a result, on the Consolidated accounts).
These intercompany loans hedges are done through forward exchange rate agreements, performed by the subsidiary exposed to the exchange rate risk and rolled over consistently on a semi-annual basis. Quotes from at least two Financial Institutions are considered before closing any of these foreign exchange hedging deals. These foreign exchange rate derivatives are also not used for trading, profit making, or speculative purposes.
Interest rate risk and exchange rate risk are analysed in note 28.
iii) Other Price Risks
At 31 December 2014, Sonae Indústria did not hold material investments classified as "available-for-sale".
c) Liquidity Risk Management Policy
Liquidity risk management in Sonae Indústria aims to ensure that the Company can obtain, on a timely basis, the financing required to properly carry on its business activities, implement its strategy and meet its payment obligations when due, under the most favourable terms and conditions.
For this purpose, Liquidity Management at the Group comprises:
Liquidity risk is analysed in note 28.
On these consolidated financial statements, investment in joint ventures is measured using equity method (EQ). Until 31 December 2013, joint ventures were included in consolidation using the proportionate consolidation method (PROP). As a consequence of this change to equity method, information for the comparative period was restated.
Effects on the Consolidated Statement of Financial Position for the comparative period arising from this change are as follows:
| ASSETS | 31.12.2013 | 31.12.2013 | Var. |
|---|---|---|---|
| PROP (a) | EQ (b) | (b) - (a) | |
| NON CURRENT ASSETS: | |||
| Tangible assets | 811 477 229 | 791 474 128 | - 20 003 101 |
| Goodwill | 81 840 163 | 81 840 163 | |
| Intangible assets | 7 491 577 | 7 398 158 | - 93 419 |
| Investment properties | 1 268 956 | 1 268 956 | |
| Investment in associates | 1 566 686 | 1 566 686 | |
| Investment in joint ventures | 5 638 909 | 5 638 909 | |
| Investment available for sale | 1 108 824 | 1 108 824 | |
| Deferred tax asset | 34 003 208 | 33 241 208 | - 762 000 |
| Other non current assets | 1 073 819 | 15 248 819 | 14 175 000 |
| Total non current assets | 939 830 462 | 938 785 851 | - 1 044 611 |
| CURRENT ASSETS: | |||
| Inventories | 123 468 707 | 118 045 777 | - 5 422 930 |
| Trade debtors | 121 013 543 | 117 503 156 | - 3 510 387 |
| Other current debtors | 5 565 730 | 5 561 605 | - 4 125 |
| State and other public entities | 10 182 506 | 10 013 586 | - 168 920 |
| Other current assets | 13 979 041 | 13 894 674 | - 84 367 |
| Cash and cash equivalents | 27 295 811 | 26 988 389 | - 307 422 |
| Total current assets | 301 505 338 | 292 007 187 | - 9 498 151 |
| Non-current assets available for sale | 4 318 092 | 4 318 092 | |
| TOTAL ASSETS | 1 245 653 892 | 1 235 111 130 | - 10 542 762 |
| SHAREHOLDERS`FUNDS AND LIABILITIES | |||
| SHAREHOLDERS`FUNDS: | |||
| Share capital | 700 000 000 | 700 000 000 | |
| Legal reserve | 3 131 757 | 3 131 757 | |
| Other reserves and accumulated earnings | - 647 867 883 | - 647 867 883 | |
| Accumulated other comprehensive income | 72 681 459 | 72 681 459 | |
| Total | 127 945 333 | 127 945 333 | |
| Non-controlling interests | - 795 247 | - 795 247 | |
| TOTAL SHAREHOLDERS`FUNDS | 127 150 086 | 127 150 086 | |
| LIABILITIES: | |||
| NON CURRENT LIABILITIES: | |||
| Long term bank loans - net of short-term portion | 123 145 528 | 123 145 528 | |
| Non convertible debentures | 118 908 927 | 118 908 927 | |
| Long term Finance Lease Creditors - net of short-term portion | 30 153 351 | 30 153 351 | |
| Other loans | 2 553 262 | 2 553 262 | |
| Post-retirement liabilities | 25 651 828 | 25 651 828 | |
| Other non current liabilities | 55 758 364 | 54 031 408 | - 1 726 956 |
| Deferred tax liabilities | 73 558 661 | 72 647 868 | - 910 793 |
| Provisions | 7 433 001 | 7 352 456 | - 80 545 |
| Total non current liabilities | 437 162 922 | 434 444 628 | - 2 718 294 |
| CURRENT LIABILITIES: | |||
| Short term portion of long term bank loans | 22 165 408 | 22 165 408 | |
| Short term bank loans | 201 693 837 | 198 547 978 | - 3 145 859 |
| Short term portion of long term non convertible debentures | 129 918 927 | 129 918 927 | |
| Short term portion of Finance Lease Creditors | 5 558 615 | 5 558 615 | |
| Other loans | 70 902 123 | 70 902 123 | |
| Trade creditors | 156 380 414 | 153 098 712 | - 3 281 702 |
| Taxes and Other Contributions Payable | 12 259 031 | 12 186 237 | - 72 794 |
| Other current liabilities | 81 137 986 | 79 813 873 | - 1 324 113 |
| Provisions Total current liabilities |
1 324 543 681 340 884 |
1 324 543 673 516 416 |
- 7 824 468 |
| TOTAL EQUITY AND LIABILITIES | 1 245 653 892 | 1 235 111 130 | - 10 542 762 |
| 01.01.2013 | 01.01.2013 | Var. | |
|---|---|---|---|
| PROP (a) | EQ (b) | (b) - (a) | |
| Total Assets | 1269 874 764 | 1255 862 783 | -14 011 981 |
| Total Net Shareholders' Funds | 131 945 011 | 131 945 011 | |
| Total Liabilities | 1137 929 753 | 1123 917 772 | -14 011 981 |
Effects on the Consolidated Income Statement for the comparative period arising from this change are as follows:
| 31.12.2013 | 31.12.2013 | Var. | |
|---|---|---|---|
| PROP (a) | EQ (b) | (b) - (a) | |
| Sales | 1 227 729 546 | 1 196 847 736 | - 30 881 810 |
| Services rendered | 3 826 375 | 4 182 506 | 356 131 |
| Other income and gains | 28 864 462 | 27 596 539 | - 1 267 923 |
| Cost of sales | 645 471 186 | 632 782 013 | - 12 689 173 |
| (Increase) / decrease in production | - 301 971 | - 396 267 | - 94 296 |
| External supplies and services | 337 068 213 | 324 652 314 | - 12 415 899 |
| Staff expenses | 196 220 543 | 190 222 278 | - 5 998 265 |
| Depreciation and amortisation | 74 743 609 | 71 405 303 | - 3 338 306 |
| Provisions and impairment losses (increase / reduction) | 31 883 425 | 27 866 971 | - 4 016 454 |
| Other expenses and losses | 14 370 407 | 14 181 681 | - 188 726 |
| Operational profit / (loss) | - 39 035 029 | - 32 087 512 | 6 947 517 |
| Financial income | 5 036 187 | 5 553 379 | 517 192 |
| Financial expenses | 63 610 032 | 66 026 501 | 2 416 469 |
| Gains and losses in associated companies | - 696 165 | - 696 165 | |
| Gains and losses in joint ventures | - 4 702 990 | - 4 702 990 | |
| Gains and losses in investments | |||
| Net profit / (loss) from continuing operations, before taxation | - 98 305 039 | - 97 959 790 | 345 249 |
| Taxation | - 19 388 908 | - 19 043 659 | 345 249 |
| Consolidated net profit / (loss) from continuing operations, after taxation | - 78 916 131 | - 78 916 131 | |
| Profit / (loss) from discontinued operations, after taxation | |||
| Consolidated net profit / (loss) for the period | - 78 916 131 | - 78 916 131 | |
| Attributable to: | |||
| Equity Holders of Sonae Industria | - 78 045 917 | - 78 045 917 | |
| Attributable to: | |||
|---|---|---|---|
| Non-controlling interests | - 870 214 | - 870 214 | |
Group companies included in the consolidated financial statements, their head offices and percentage of capital held by the Group as at 31 December 2014 and 31 December 2013 are as follows:
| COMPANY | HEAD OFFICE | PERCENTAGE OF CAPITAL HELD | TERMS FOR INCLUSION |
||||
|---|---|---|---|---|---|---|---|
| 31.12.2014 | 31.12.2013 | ||||||
| Direct | Total | Direct | Total | ||||
| Agepan Eiweiler Management, GmbH | Eiweiler (Germany) | 100,00% | 99,86% | 100,00% | 98,78% | a) | |
| Agloma Investimentos, SGPS, S. A. | Maia (Portugal) | 100,00% | 99,87% | 100,00% | 98,90% | a) | |
| Aserraderos de Cuellar, S.A. | Madrid (Spain) | 100,00% | 99,87% | 100,00% | 98,90% | a) | |
| BHW Beeskow Holzwerkstoffe GmbH | Meppen (Germany) | 100,00% | 99,86% | 100,00% | 98,78% | a) | |
| Darbo, SAS | Linxe (France) | 100,00% | 99,86% | 100,00% | 98,78% | a) | |
| Ecociclo, Energia e Ambiente, S. A. | Maia (Portugal) | 100,00% | 100,00% | 100,00% | 100,00% | a) | |
| Euroresinas - Indústrias Quimicas, S.A. | Maia (Portugal) | 100,00% | 100,00% | 100,00% | 100,00% | a) | |
| GHP Glunz Holzwerkstoffproduktions GmbH | Meppen (Germany) | 100,00% | 99,86% | 100,00% | 98,78% | a) | |
| Glunz AG | Meppen (Germany) | 100,00% | 99,86% | 100,00% | 98,78% | a) | |
| Glunz Service GmbH | Meppen (Germany) | 100,00% | 99,86% | 100,00% | 98,78% | a) | |
| Glunz UK Holdings, Ltd. | Knowsley (United Kingdom) | 100,00% | 99,86% | 100,00% | 98,78% | a) | |
| Glunz UkA GmbH | Meppen (Germany) | 100,00% | 99,86% | 100,00% | 98,78% | a) | |
| Impaper Europe GmbH | Meppen (Germany) | 100,00% | 99,86% | 100,00% | 98,78% | a) | |
| Imoplamac – Gestão de Imóveis, S. A. | Maia (Portugal) | 100,00% | 100,00% | 100,00% | 100,00% | a) | |
| Isoroy, SAS | Rungis (France) | 100,00% | 99,86% | 100,00% | 98,78% | a) | |
| Maiequipa - Gestão Florestal, S.A. | Maia (Portugal) | 100,00% | 100,00% | 100,00% | 100,00% | a) | |
| Megantic B.V. | Amsterdam (The Netherlands) | 100,00% | 99,86% | 100,00% | 98,78% | a) | |
| Movelpartes – Comp. para a Indústria do Mobiliário, S.A. | Paredes (Portugal) | 100,00% | 100,00% | 100,00% | 100,00% | a) | |
| Novodecor (Pty) | Woodmead (South Africa) | 100,00% | 100,00% | 100,00% | 100,00% | a) | |
| OSB Deustchland | Germany | 100,00% | 99,86% | 100,00% | 98,78% | a) | |
| Poliface North America | Baltimore (USA) | 100,00% | 99,86% | 100,00% | 98,78% | a) | |
| Racionalización y Manufacturas Florestales, S.A. | Madrid (Spain) | 100,00% | 99,86% | 100,00% | 98,78% | a) | |
| Sociedade de Iniciativa e Aproveit. Florestais – Energias, S.A. | Mangualde (Portugal) | 100,00% | 99,86% | 100,00% | 98,79% | a) | |
| Somit – Imobiliária, S.A. | Mangualde (Portugal) | 100,00% | 99,86% | 100,00% | 98,79% | a) | |
| Sonae Indústria – Management Services, S. A. | Maia (Portugal) | 100,00% | 100,00% | 100,00% | 100,00% | a) | |
| Sonae Indústria – Prod. e Comerc. Derivados Madeira, S. A. | Mangualde (Portugal) | 100,00% | 99,86% | 100,00% | 98,82% | a) | |
| Sonae Indústria – Soc. Gestora de Participações Sociais, S.A. | Maia (Portugal) | PARENT | PARENT | PARENT | PARENT | PARENT | |
| Sonae Indústria de Revestimentos, S.A. | Maia (Portugal) | 100,00% | 100,00% | 100,00% | 100,00% | a) | |
| Sonae Novobord (Pty) Ltd | Woodmead (South Africa) | 100,00% | 99,86% | 100,00% | 98,78% | a) | |
| Sonae Tafibra International, B. V. | Woerden (The Netherlands) | 100,00% | 99,86% | 100,00% | 98,78% | a) | |
| Sonae Industria (UK), Limited | Knowsley (United Kingdom) | 100,00% | 99,86% | 100,00% | 98,78% | a) | |
| Spanboard Products Ltd | Belfast (United Kingdom) | 100,00% | 99,86% | 100,00% | 98,78% | a) | |
| Tableros de Fibras, S.A. | Madrid (Spain) | 98,42% | 99,86% | 98,42% | 98,78% | a) | |
| Tableros Tradema, S.L. | Madrid (Spain) | 100,00% | 99,86% | 100,00% | 98,78% | a) | |
| Tafiber. Tableros de Fibras Ibéricas, S.L. | Madrid (Spain) | 100,00% | 99,86% | 100,00% | 98,78% | a) | |
| Tafibra South Africa, Limited | Woodmead (South Africa) | 100,00% | 99,86% | 100,00% | 98,78% | a) | |
| Tafisa Canadá Inc | Lac Mégantic (Canada) | 100,00% | 99,86% | 100,00% | 98,78% | a) | |
| Tafisa Développement | Rungis (França) | 100,00% | 99,86% | 100,00% | 98,78% | a) | |
| Tafisa France S.A.S. | Rungis (France) | 100,00% | 99,86% | 100,00% | 98,78% | a) | |
| 1) | Tafisa Investissement | Rungis (França) | 100,00% | 99,86% | 100,00% | 98,78% | a) |
| 1) | Tafisa Participation | Rungis (França) | 100,00% | 99,86% | 100,00% | 98,78% | a) |
| Tafisa U.K, Ltd. | Knowsley (United Kingdom) | 100,00% | 99,86% | 100,00% | 98,78% | a) | |
| Taiber, Tableros Aglomerados Ibéricos, S.L. | Madrid (Spain) | 100,00% | 99,86% | 100,00% | 98,78% | a) | |
| Tafibra Suisse, SA | Tavannes (Switzerland) | 100,00% | 99,86% | 100,00% | 98,78% | a) | |
| Tecnologias del Medio Ambiente, S.A. | Barcelona (Spain) | 100,00% | 99,86% | 100,00% | 98,78% | a) | |
| Tool, GmbH | Meppen (Germany) | 100,00% | 99,86% | 100,00% | 98,78% | a) | |
These group companies are consolidated using the full consolidation method as described in note 2.2.a).
The joint ventures, their head offices, percentage of share capital held on 31 December 2014 and 31 December 2013 are as follows:
| COMPANY | HEAD OFFICE | PERCENTAGE OF CAPITAL HELD | |||
|---|---|---|---|---|---|
| 31.12.2014 | 31.12.2013 | ||||
| Direct | Total | Direct | Total | ||
| Laminate Park GmbH & Co. KG | Eiweiler (Germany) | 50.00% | 49.93% | 50.00% | 49.39% |
| Tecmasa. Reciclados de Andalucia, S. L. | Alcalá de Guadaira (Spain) | 50.00% | 49.93% | 50.00% | 49.39% |
Laminate Park GmbH & Co. KG is a jointly-controlled company based in Germany, where it carries out its activity that consists in producing and selling wood derivative flooring.
Tecmasa, Reciclados de Andalucia, SL is a jointly-controlled company based in Spain. Its activity consists in trading wood for recycling.
Joint control of these companies is established by contract.
Level one fair value of investment in these companies is not available as shares representing their share capital are not listed.
Net assets and net profit/loss for these jointly-controlled companies, whose share was recognized on these consolidated financial statements under equity method, are detailed as follows:
| 31.12.2014 | 31.12.2013 | |||
|---|---|---|---|---|
| Tecmasa, | Tecmasa, | |||
| Laminate Park | Reciclados de | Laminate Park | Reciclados de | |
| Andalucia | Andalucia | |||
| Non-current assets | 53 445 843 | 221 063 | 57 751 822 | 250 141 |
| Current assets | 16 409 392 | 395 501 | 19 723 957 | 384 602 |
| Cash and cash equivalents | 691 112 | 168 886 | 362 056 | 93 393 |
| Other non-current liabilities | 6 921 403 | 36 086 914 | ||
| Current financial liabilities | 7 066 011 | 6 291 718 | ||
| Other current liabilities | 27 819 219 | 76 504 | 10 505 774 | 106 658 |
| Operating revenues | 78 369 514 | 534 737 | 82 050 724 | 510 900 |
| Operating expenses | 82 780 406 | 450 037 | 86 357 428 | 432 305 |
| Depreciation and amortization | 4 893 772 | 29 077 | 4 961 011 | 30 781 |
| Interest income | 524 | |||
| Interest expense | 1 292 837 | 22 | 1 312 536 | |
| Taxation | 22 095 | 22 686 | ||
| Net profit/(loss) from continuing operations | - 6 542 770 | 61 976 | - 8 503 419 | 55 210 |
| Adjustments to the Group's accounting policies | - 36 640 | - 16 951 | - 975 671 | 17 897 |
| Group's share on net profit/(loss) | - 3 289 705 | 22 513 | - 4 739 543 | 36 554 |
Associated companies, their head offices and the percentage of share capital held as at 31 December 2014 and 31 December 2013 are as follows:
| COMPANY | HEAD OFFICE | PERCENTAGE OF CAPITAL HELD | ||||
|---|---|---|---|---|---|---|
| 31.12.2014 | 31.12.2013 | |||||
| Direct | Total | Direct | Total | |||
| Serradora Boix | Barcelona (Spain) | 31.25% | 31.21% | 31.25% | 30.87% |
Associated companies are recognized on these consolidated financial statements using the equity method, as referred to in note 2.2.c).
The Statement of Financial Position and the Income Statement of the associated companies accounted for using the equity method on these consolidated financial statements, are detailed as follows:
| 31.12.2014 | 31.12.2013 | |
|---|---|---|
| Non-current assets | 6 494 033 | 7 558 147 |
| Current assets | 7 279 732 | 9 006 937 |
| Non-current liabilities | 3 481 145 | 3 702 297 |
| Current liabilities | 5 953 110 | 7 625 817 |
| Operating revenues | 22 396 806 | 22 703 660 |
| Operating expenses | 22 667 872 | 24 707 796 |
| Net profit/(loss) from continuing operations | - 719 457 | - 2 223 794 |
| Adjustments to the Group's accounting policies | - | - |
| Group's share on net profit/(loss) | - 224 516 | - 696 165 |
Assets, liabilities and results detailed on the previous table refer to the associated company's financial statements for the annual period preceding 31.12.2014 and 31.12.2013, respectively. The Company estimate that no significant effect arises from this time difference.
There are no incurred obligations regarding this associate company.
Changes to the consolidation perimeter during the period that were set out in notes 4, 5 and 6, did not produce any significant effect on these consolidated financial statements.
In the Consolidated Statements of Financial Position at 31 December 2014 and 31 December 2013, the following financial instruments are included:
| 31.12.2014 | Loans and receivables |
Assets at fair value through profit or loss |
Hedge derivatives |
Available-for-sale assets |
Sub-total | Assets out of scope of IFRS 7 |
Total |
|---|---|---|---|---|---|---|---|
| Non current assets | |||||||
| Available for sale investments | 1 128 608 | 1 128 608 | 1 128 608 | ||||
| Other non current assets | 970 542 | 970 542 | 1 696 | 972 238 | |||
| Current assets | |||||||
| Customers | 98 523 551 | 98 523 551 | 98 523 551 | ||||
| Other current debtors | 12 509 118 | 12 509 118 | 1 342 236 | 13 851 354 | |||
| Other current assets | 99 079 | 99 079 | 9 965 017 | 10 064 096 | |||
| Cash and cash equivalents | 11 948 475 | 11 948 475 | 11 948 475 | ||||
| Total | 123 951 686 | 99 079 | 1 128 608 125 179 373 | 11 308 949 136 488 322 |
| Restated | |||||||
|---|---|---|---|---|---|---|---|
| Assets at | Assets | ||||||
| Loans | fair value | out of scope | |||||
| and | through | Hedge | Available-for-sale | of | |||
| 31.12.2013 | receivables | profit or loss | derivatives | assets | Sub-total | IFRS 7 | Total |
| Non current assets | |||||||
| Available for sale investments | 1 108 824 | 1 108 824 | 1 108 824 | ||||
| Other non current assets | 15 247 123 | 15 247 123 | 1 696 | 15 248 819 | |||
| Current assets | |||||||
| Customers | 117 503 156 | 117 503 156 | 117 503 156 | ||||
| Other current debtors | 4 307 362 | 4 307 362 | 1 254 243 | 5 561 605 | |||
| Other current assets | 77 618 | 77 618 | 13 817 056 | 13 894 674 | |||
| Cash and cash equivalents | 26 988 389 | 26 988 389 | 26 988 389 | ||||
| Total | 164 046 030 | 77 618 | 1 108 824 165 232 472 | 15 072 995 180 305 467 |
| Liabilities at | Liabilities | |||||
|---|---|---|---|---|---|---|
| fair value | Liabilities | out of scope | ||||
| through | Hedge | at amortized | of | |||
| 31.12.2014 | profit or loss | derivatives | cost | Sub-total | IFRS 7 | Total |
| Non current liabilities | ||||||
| Bank loans - net of current portion | 231 403 466 | 231 403 466 | 231 403 466 | |||
| Debentures - net of currentportion | 147 604 120 | 147 604 120 | 147 604 120 | |||
| Finance lease creditors - net of current portion | 23 440 018 | 23 440 018 | 23 440 018 | |||
| Other loans | 54 951 368 | 54 951 368 | 54 951 368 | |||
| Other non current liabilities | 241 495 | 241 495 | 41 758 831 | 42 000 326 | ||
| Current liabilities | ||||||
| Bank loans | 106 774 893 | 106 774 893 | 106 774 893 | |||
| Debentures | ||||||
| Finance lease creditors | 5 829 498 | 5 829 498 | 5 829 498 | |||
| Other loans | 6 186 912 | 6 186 912 | 6 186 912 | |||
| Trade creditors | 156 378 992 | 156 378 992 | 156 378 992 | |||
| Other current liabilities | 35 529 | 9 998 575 | 10 034 104 | 67 901 902 | 77 936 006 | |
| Total | 35 529 | 742 809 337 | 742 844 866 109 660 733 | 852 505 599 | ||
| Restated | ||||||
| Liabilities at | Liabilities | |||||
| fair value | Liabilities | out of scope | ||||
| through | Hedge | at amortized | of | |||
| 31.12.2013 | profit or loss | derivatives | cost | Sub-total | IFRS 7 | Total |
| Non current liabilities | ||||||
| Bank loans - net of current portion | 123 145 528 | 123 145 528 | 123 145 528 | |||
| Debentures - net of current portion | 118 908 927 | 118 908 927 | 118 908 927 | |||
| Finance lease creditors - net of current portion | 30 153 351 | 30 153 351 | 30 153 351 | |||
| Other loans | 2 553 262 | 2 553 262 | 2 553 262 | |||
| Other non current liabilities | 242 179 | 242 179 | 53 789 229 | 54 031 408 | ||
| Current liabilities | ||||||
| Bank loans | 220 713 386 | 220 713 386 | 220 713 386 | |||
| Debentures | 129 918 927 | 129 918 927 | 129 918 927 | |||
| Finance lease creditors | 5 558 615 | 5 558 615 | 5 558 615 | |||
| Other loans | 70 902 123 | 70 902 123 | 70 902 123 | |||
| Trade creditors | 153 098 712 | 153 098 712 | 153 098 712 | |||
| Other current liabilities | 8 654 653 | 8 654 653 | 71 159 220 | 79 813 873 | ||
| Total | 863 849 663 | 863 849 663 124 948 449 | 988 798 112 |
Assets and liabilities out of the scope of IFRS 7 consist essentially of accounts receivable from and payable to the State and the Group's employees and items of accruals and deferrals.
There are no financial assets off set against financial liabilities.
Use of fair value in the preparation of these consolidated financial statements may be summarized as follows:
| Financial assets | ||||||
|---|---|---|---|---|---|---|
| Not measured at fair value Measured at fair value |
Total | Description of used valuation |
||||
| Level of fair value |
Amount | Fair value quantified |
Fair value not quantified* |
techniques | ||
| 31.12.2014 | ||||||
| Non current assets | ||||||
| Available for sale investments Other non current assets |
1 - |
799 594 | 329 014 970 542 |
1 128 608 970 542 |
note 10 - |
|
| Current assets Customers |
- | 98 523 551 | 98 523 551 | - | ||
| Other current debtors | - | 12 509 118 | 12 509 118 | - | ||
| Other current assets Cash and cash equivalents |
2 | 99 079 | 11 948 475 | 99 079 11 948 475 |
note 27 - |
|
| - | ||||||
| Total | 898 673 | 124 280 700 | 125 179 373 | |||
| 31.12.2013 | ||||||
| Non current assets | ||||||
| Available for sale investments Other non current assets |
1 - |
782 077 | 326 747 15 247 123 |
1 108 824 15 247 123 |
note 10 - |
|
| Current assets Customers |
- | 117 503 156 | 117 503 156 | - | ||
| Other current debtors | - | 4 307 362 | 4 307 362 | - | ||
| Other current assets | 2 | 77 618 | 77 618 | note 27 | ||
| Cash and cash equivalents | - | 26 988 389 | 26 988 389 | - | ||
| 859 695 | 164 372 777 | 165 232 472 | ||||
| * as it is estimated to not materially differ from carrying amount. | ||||||
| Financial liabilities | ||||||
| Measured at fair value | Not measured at fair value | Description of | ||||
| Level of fair value |
Amount | Fair value quantified |
Fair value not quantified* |
Total | used valuation techniques |
|
| 31.12.2014 | ||||||
| Non current liabilities Bank loans - net of current portion |
231 403 466 | 231 403 466 | - | |||
| Debentures - net of currentportion | - - |
147 604 120 | 147 604 120 | - | ||
| Finance lease creditors - net of current portion | 2 | 19 660 333 | 3 779 685 | 23 440 018 | note 26 | |
| Other loans | - | 54 951 368 | 54 951 368 | - | ||
| Other non current liabilities | - | 241 495 | 241 495 | - | ||
| Current liabilities | ||||||
| Bank loans Debentures |
- - |
106 774 893 | 106 774 893 | - - |
||
| Finance lease creditors | 2 | |||||
| 3 176 022 | 2 653 476 | 5 829 498 | note 26 | |||
| Other loans | - | 6 186 912 | 6 186 912 | - | ||
| Trade creditors | - | 156 378 992 | 156 378 992 | - | ||
| Other current liabilities | 2 | 35 529 | 9 998 575 | 10 034 104 | note 27 | |
| Total | 35 529 | 22 836 355 | 719 972 982 | 742 844 866 | ||
| 31.12.2013 | ||||||
| Non current liabilities | ||||||
| Bank loans - net of current portion | - | 123 145 528 | 123 145 528 | - | ||
| Debentures - net of current portion Finance lease creditors - net of current portion |
- | 23 166 989 | 118 908 927 6 986 362 |
118 908 927 30 153 351 |
- note 26 |
|
| Other loans | 2 - |
2 553 262 | 2 553 262 | - | ||
| Other non current liabilities | - | 242 179 | 242 179 | - | ||
| Current liabilities | ||||||
| Bank loans | - | 220 713 386 | 220 713 386 | - | ||
| Debentures | - | 129 918 927 | 129 918 927 | - | ||
| Finance lease creditors Other loans |
2 - |
2 815 388 | 2 743 227 70 902 123 |
5 558 615 70 902 123 |
note 26 - |
|
| Trade creditors | - | 153 098 712 | 153 098 712 | - | ||
| Other current liabilities | 2 | 8 654 653 | 8 654 653 | note 27 |
Several assets, for which there is indication of impairment, had their fair value less estimated costs to sell determined, as detailed on notes 11 e 34.
These assets are valued at fair value less estimated costs to sell, as described on notes 17 and 34.
At 31 December 2014 and 31 December 2013 details of Investments are as follows:
| 31.12.2014 | 31.12.2013 | |
|---|---|---|
| Non current | Non current | |
| Investment in group companies excluded from consolidation | ||
| Opening balance | 36 969 914 | 36 969 914 |
| Closing balance | 36 969 914 | 36 969 914 |
| Accumulated impairment losses (Note 34) | 36 969 914 | 36 969 914 |
| Net investment in group companies excluded from consolidation |
| 31.12.2014 | 31.12.2013 | |
|---|---|---|
| Restated | ||
| Non current | Non current | |
| Investment in joint ventures | ||
| Opening balance | 5 638 909 | 9 008 848 |
| Increase in share capital | 5 000 000 | |
| Effect of equity method application | -3 312 194 | -3 369 939 |
| Closing balance | 7 326 715 | 5 638 909 |
| 31.12.2014 | 31.12.2013 | ||
|---|---|---|---|
| Non current | Non current | ||
| Investment in associated companies | |||
| Opening balance | 1 566 686 | 2 262 846 | |
| Effect of equity method application | - 212 612 | - 696 160 | |
| Closing balance | 1 354 074 | 1 566 686 |
| 31.12.2014 | 31.12.2013 | |
|---|---|---|
| Non current | Non current | |
| Available-for-sale investment | ||
| Opening balance | 1 124 785 | 1 107 501 |
| Acquisition | 2 267 | 94 |
| Change in fair value | 17 517 | 17 190 |
| Closing balance | 1 144 569 | 1 124 785 |
| Accumulated impairment losses (Note 34) | 15 961 | 15 961 |
| Net available-for-sale investment | 1 128 608 | 1 108 824 |
The amount included under Investment in group companies excluded from consolidation refers to the former subsidiary Tarnaise des Panneaux, held indirectly by Sonae Industria, SGPS, SA for 100% of its share capital. In 2001, this company filed for bankruptcy, which is still pending conclusion. Consequently control was lost and the company has been excluded from consolidation. The Consolidated Statement of Financial Position includes an impairment loss for the full amount of the investment.
Available-for-sale investment consists of financial undertakings which do not fulfil the criteria to be stated as investment in subsidiaries or associates. They are recognized at cost as no relevant difference to their fair value is estimated. In addition, it includes an application in an investment fund that is recognized for its market fair value of EUR 799 594, which was calculated based on market information. This fair value is included in the first level of fair value hierarchy.
| 31.12.2014 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Land and Buildings |
Plant and Machinery |
Vehicles | Tools | Fixtures and Fittings |
Other Tangible Fixed Assets |
Tangible Fixed Assets under construction |
Total Tangible Assets |
|
| Gross cost: | ||||||||
| Opening balance | 745 854 200 | 1 591 424 688 | 14 169 683 | 15 808 030 | 31 972 407 15 335 630 | 22 880 953 2 437 445 591 | ||
| Capital expenditure | 10 759 | 2 412 580 | 188 392 | 11 046 | 13 339 | 3 198 | 40 871 783 | 43 511 097 |
| Disposals | 19 341 432 | 123 356 617 | 1 218 232 | 1 715 236 | 808 441 | 174 974 | 232 619 | 146 847 551 |
| Revaluation | ||||||||
| Transfers and reclassifications | - 35 846 513 | - 105 882 148 | - 1 495 709 | - 811 717 | - 3 335 769 | - 5 270 372 | - 21 813 186 | - 174 455 414 |
| Exchange rate effect | 3 937 021 | 12 517 953 | 97 682 | 21 896 | 100 373 | 1 875 | 465 594 | 17 142 394 |
| Closing balance | 694 614 035 | 1 377 116 456 | 11 741 816 | 13 314 019 | 27 941 909 | 9 895 357 | 42 172 525 2 176 796 117 | |
| Accumulated depreciation and impairment losses | ||||||||
| Opening balance | 404 180 832 | 1 170 290 718 | 12 951 897 | 14 092 480 | 30 332 701 14 055 323 | 67 512 1 645 971 463 | ||
| Depreciations for the period | 13 208 396 | 53 694 066 | 660 535 | 368 669 | 506 641 | 446 900 | 68 885 207 | |
| Impairment losses for the period - on results | 20 234 962 | 23 360 416 | 497 746 | 56 783 | 33 559 | 328 330 | 3 389 134 | 47 900 930 |
| Impairment losses for the period - on Other Comprehensive Income | 8 326 533 | 11 346 297 | 19 672 830 | |||||
| Disposals | 15 424 400 | 116 091 472 | 1 149 271 | 1 198 482 | 783 820 | 93 110 | 7 449 | 134 748 004 |
| Revaluation | ||||||||
| Reversion of impairment losses for the period | 5 787 132 | 74 | 562 | 392 | 67 512 | 5 855 672 | ||
| Transfers and reclassifications | - 32 137 306 | - 128 132 208 | - 2 274 718 | - 903 562 | - 3 575 085 | - 5 869 296 | - 1 076 727 | - 173 968 902 |
| Exchange rate effect | 1 123 218 | 7 538 679 | 77 997 | 21 748 | 86 448 | 754 | 8 848 844 | |
| Closing balance | 399 512 235 | 1 016 219 364 | 10 764 186 | 12 437 562 | 26 599 882 | 8 868 509 | 2 304 958 1 476 706 696 | |
| Carrying amount | 295 101 800 | 360 897 092 | 977 630 | 876 457 | 1 342 027 | 1 026 848 | 39 867 567 | 700 089 421 |
| 31.12.2013 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Land and Buildings |
Plant and Machinery |
Vehicles | Tools | Fixtures and Fittings |
Other Tangible Fixed Assets |
Tangible Fixed Assets under construction |
Total Tangible Assets |
|
| Restated | ||||||||
| Gross cost: | ||||||||
| Opening balance | 408 112 636 | 1 627 808 217 | 16 160 549 | 15 816 625 | 33 814 398 | 14 717 667 | 21 548 634 | 2 137 978 726 |
| Capital expenditure | 26 573 | 2 297 412 | 40 760 | 58 000 | 2 290 | 6 985 | 19 696 731 | 22 128 751 |
| Disposals | 15 504 063 | 8 501 020 | 1 899 987 | 172 134 | 1 857 481 | 73 117 | 28 007 802 | |
| Revaluation | 364 778 067 | 364 778 067 | ||||||
| Transfers and reclassifications | 603 478 | 15 691 038 | 150 534 | 280 368 | 366 116 | 686 261 | - 17 556 130 | 221 665 |
| Exchange rate effect | - 12 162 491 | - 45 870 959 | - 282 173 | - 174 829 | - 352 916 | - 2 166 | - 808 282 | - 59 653 816 |
| Closing balance | 745 854 200 | 1 591 424 688 | 14 169 683 | 15 808 030 | 31 972 407 | 15 335 630 | 22 880 953 | 2 437 445 591 |
| Accumulated depreciation and impairment losses | ||||||||
| Opening balance | 155 934 274 | 1 127 952 461 | 14 151 920 | 13 868 191 | 31 660 565 | 13 576 246 | 1 357 143 657 | |
| Depreciations for the period | 9 210 909 | 57 100 833 | 878 654 | 564 346 | 767 850 | 552 902 | 69 075 494 | |
| Impairment losses for the period - on results | 14 205 052 | 23 468 936 | 67 512 | 37 741 500 | ||||
| Impairment losses for the period - on Other Comprehensive Income | ||||||||
| Disposals | 8 990 698 | 7 158 017 | 1 874 622 | 172 133 | 1 807 491 | 73 117 | 20 076 078 | |
| Revaluation | 236 815 659 | 236 815 659 | ||||||
| Reversion of impairment losses for the period | 6 734 874 | 95 | 721 | 502 | 6 736 192 | |||
| Transfers and reclassifications | - 1 393 | 1 321 | 72 | |||||
| Exchange rate effect | - 2 994 364 | - 24 337 228 | - 204 055 | - 167 829 | - 288 823 | - 278 | - 27 992 577 | |
| Closing balance | 404 180 832 | 1 170 290 718 | 12 951 897 | 14 092 480 | 30 332 701 | 14 055 323 | 67 512 | 1 645 971 463 |
| Carrying amount | 341 673 368 | 421 133 970 | 1 217 786 | 1 715 550 | 1 639 706 | 1 280 307 | 22 813 441 | 791 474 128 |
At 31 December 2013, the Group carried out a revaluation of land and buildings, included under Tangible Fixed Assets, on the Consolidated Statement of Financial Position. Depreciation charge for the period ended 31 December 2013 was not affected by revaluation. If tangible fixed assets included under Buildings had been kept for their cost, depreciation charge for the period ended 31 December 2014 would have been reduced by EUR 4 822 355.
In the period ended 31 December 2014, the Group recognized impairment losses on tangible fixed assets for EUR 67 573 760, of which EUR 19 672 830 were taken through Other
comprehensive income, in accord with policy stated on note 2.8. and detail included on note 34. Impairment losses on tangible fixed assets that were reclassified as Non-current assets classified as available for sale (note 17), on the Consolidated Statement of Financial position, amounted to EUR 54.4 million, of which EUR 17.4 million were taken through Other comprehensive income.
Net tangible fixed assets reclassified as Non-current assets classified as available for sale, on the Consolidated Statement of Financial Position, amounted to EUR 1 049 435 (note 17).
Disposals in the period ended 31 December 2014 refer mostly to tangible fixed assets of Auxerre and Le Creusot industrial plants, which were sold April 2014.
During 2014 and 2013 no interest paid or any other financial charges were capitalized, in accordance with conditions defined on note 2.9.
At 31 December 2014, mortgaged Land and buildings amounted to EUR 276 475 044 (EUR 167 568 888 at 31 December 2013) as guarantee for loans amounting to EUR 125 436 696 (EUR 38 799 617 at 31 December 2013).
On the same date, there were no commitments to the acquisition of tangible fixed assets.
At 31 December 2014 and 2013 details of assets bought through financial leases were as follows:
| 31.12.2013 | |||||
|---|---|---|---|---|---|
| Opening balance |
Increases | Other changes | Closing balance | Closing balance |
|
| Gross cost: | |||||
| Land and Buildings | 34 771 500 | - 3 456 715 | 31 314 785 | 34 771 500 | |
| Plant and Machinery | 45 005 041 | - 4 246 926 | 40 758 116 | 45 005 041 | |
| Vehicles | 3 410 318 | - 1 367 912 | 1 473 420 | 3 410 318 | |
| Tools | 58 000 | - 58 000 | 58 000 | ||
| Fixtures and Fittings | 323 270 | 13 977 | 337 247 | 323 270 | |
| Closing balance | 83 568 129 | - 9 115 576 | 73 883 567 | 83 568 129 | |
| Accumulated depreciation and impairment losses |
|||||
| Land and Buildings | 12 089 878 | 4 015 191 | - 5 831 603 | 6 258 275 | 12 089 878 |
| Plant and Machinery | 24 458 992 | 2 809 845 | - 676 994 | 23 781 998 | 24 458 992 |
| Vehicles | 2 286 071 | 455 079 | - 486 110 | 1 230 975 | 2 286 071 |
| Tools | 6 767 | 48 512 | - 6 767 | 6 767 | |
| Fixtures and Fittings | 268 547 | 39 656 | 52 933 | 321 480 | 268 547 |
| Closing balance | 39 110 255 | 7 368 283 | - 6 948 541 | 31 592 728 | 39 110 255 |
| Carrying amount | 44 457 874 | - 7 368 283 | - 2 167 035 | 42 290 839 | 44 457 874 |
Minimum payments of finance lease are stated in note 26.4.
During 2014 and 2013, movements in intangible assets, accumulated amortization and impairment losses were as follows:
| 31.12.2014 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Development Costs |
Patents, Royalties And Other Rights |
Software | Other Intangible Assets | Assets Under Development | Total intangible assets | Total | |||||
| Non internally generated |
Non internally generated |
Internally generated |
Non internally generated |
Internally generated |
Non internally generated |
Internally generated |
Non internally generated |
Internally generated |
Non internally generated |
||
| Gross cost: | |||||||||||
| Opening balance | 188 804 | 3 519 871 17 143 071 | 2 542 928 | 63 454 | 3 758 936 | 783 077 | 17 206 525 | 10 793 616 | 28 000 141 | ||
| Capital expenditure | 3 884 095 | 852 873 | 4 736 968 | 4 736 968 | |||||||
| Disposals | 4 003 | 1 081 773 | 8 225 | 731 530 | 1 081 773 | 743 758 | 1 825 531 | ||||
| Revaluation | |||||||||||
| Transfers and reclassifications | - 672 497 | 84 179 | - 1 499 314 | - 255 335 | - 672 497 | - 1 670 470 | - 2 342 967 | ||||
| Exchange rate effect | 47 | 1 054 | 140 810 | 391 | 140 810 | 1 492 | 142 302 | ||||
| Closing balance | 184 848 | 3 520 925 15 529 611 | 2 619 273 | 63 454 | 5 412 187 | 1 380 615 | 15 593 065 | 13 117 848 | 28 710 913 | ||
| Accumulated depreciation and impairment losses |
|||||||||||
| Opening balance | 136 684 | 3 026 127 14 359 052 | 1 988 754 | 63 454 | 1 027 912 | 14 422 506 | 6 179 477 | 20 601 983 | |||
| Amortization for the period | 22 738 | 123 302 | 1 476 662 | 325 798 | 140 390 | 1 476 662 | 612 228 | 2 088 890 | |||
| Impairment losses for the period | 16 246 | 1 111 | 16 246 | 1 111 | 17 357 | ||||||
| Disposals | 4 003 | 1 081 737 | 4 112 | 1 081 737 | 8 115 | 1 089 852 | |||||
| Reversion of impairment losses for the period | |||||||||||
| Transfers and reclassifications | 6 644 | - 828 678 | - 2 721 | - 828 678 | 3 923 | - 824 755 | |||||
| Exchange rate effect | 47 | 598 | 108 624 | 88 | 108 624 | 733 | 109 357 | ||||
| Closing balance | 162 110 | 3 150 027 14 050 169 | 2 308 918 | 63 454 | 1 168 302 | 14 113 623 | 6 789 357 | 20 902 980 | |||
| Carrying amount | 22 738 | 370 898 | 1 479 442 | 310 355 | 4 243 885 | 1 380 615 | 1 479 442 | 6 328 491 | 7 807 933 |
| 31.12.2013 | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Development Costs |
Patents, Royalties And Other Rights |
Patents, Royalties And Other Rights |
Software | Other Intangible Assets | Assets Under Development | Total intangible assets | Total | |||||
| Non internally generated |
Internally generated |
Non internally generated |
Internally generated |
Non internally generated |
Internally generated |
Non internally generated |
Internally generated |
Non internally generated |
Internally generated |
Non internally generated |
||
| Restated | ||||||||||||
| Gross cost: | ||||||||||||
| Opening balance | 190 006 | 3 553 260 17 589 242 | 2 385 473 | 63 454 | 1 120 230 | 55 172 | 1 328 156 17 707 868 | 8 577 125 | 26 284 993 | |||
| Capital expenditure | 2 240 849 | 675 351 | 2 916 200 | 2 916 200 | ||||||||
| Disposals Revaluation |
418 230 | 30 031 | 418 230 | 30 031 | 448 261 | |||||||
| Transfers and reclassifications | 525 521 | 187 657 | 397 857 | - 55 172 | - 1 220 430 | 470 349 | - 634 916 | - 164 567 | ||||
| Exchange rate effect | - 1 202 | - 8 449 | - 553 462 | - 171 | - 553 462 | - 9 822 | - 563 284 | |||||
| Closing balance | 188 804 | 3 519 871 17 143 071 | 2 542 928 | 63 454 | 3 758 936 | 783 077 17 206 525 10 793 616 | 28 000 141 | |||||
| Accumulated depreciation and impairment losses |
||||||||||||
| Opening balance | 98 253 | 2 919 687 13 565 026 | 1 684 724 | 63 454 | 891 321 | 13 628 480 | 5 593 985 | 19 222 465 | ||||
| Amortization for the period | 39 633 | 134 098 | 1 646 598 | 328 630 | 136 591 | 1 646 598 | 638 952 | 2 285 550 | ||||
| Impairment losses for the period Disposals Reversion of impairment losses for the period |
415 079 | 24 609 | 415 079 | 24 609 | 439 688 | |||||||
| Transfers and reclassifications | ||||||||||||
| Exchange rate effect | - 1 202 | - 2 718 | - 437 493 | 9 | - 437 493 | - 3 911 | - 441 404 | |||||
| Closing balance | 136 684 | 3 026 127 14 359 052 | 1 988 754 | 63 454 | 1 027 912 | 14 422 506 | 6 179 477 | 20 601 983 | ||||
| Carrying amount | 52 120 | 493 744 | 2 784 019 | 554 174 | 2 731 024 | 783 077 | 2 784 019 | 4 614 139 | 7 398 158 |
During 2014 and 2013 movements in investment properties, accumulated depreciation and impairment losses were as follows:
| 31.12.2014 | 31.12.2013 | ||||
|---|---|---|---|---|---|
| Cost | Total | Cost | Total | ||
| Gross cost: | |||||
| Opening balance | 1 667 281 | 1 667 281 | 1 667 281 | 1 667 281 | |
| Closing balance | 1 667 281 | 1 667 281 | 1 667 281 | 1 667 281 | |
| Accumulated depreciations and impairment losses: |
|||||
| Opening balance | 398 325 | 398 325 | 354 067 | 354 067 | |
| Charge for the period | 44 258 | 44 258 | 44 258 | 44 258 | |
| Closing balance | 442 583 | 442 583 | 398 325 | 398 325 | |
| Carrying amount | 1 224 698 | 1 224 698 | 1 268 956 | 1 268 956 | |
| 31.12.2014 | 31.12.2013 | ||||
| Rents from investment properties | |||||
| Direct operating costs | 76 651 | 92 165 |
Assets stated as investment properties consist of a portion of land and buildings from the former Göttingen industrial plant, in Germany, which was closed down in 2002. At 31 December 2014, the fair value of these assets was determined to be EUR 1.3 million, on the basis of market information.
During 2014 and 2013, movements in goodwill arising on consolidation, accumulated depreciation and impairment losses were as follows:
| 31.12.2014 | 31.12.2013 | |
|---|---|---|
| Gross value: | ||
| Opening balance | 89 567 912 | 92 496 051 |
| Decreases | 6 027 749 | 852 508 |
| Currency translation | 256 554 | -2 075 631 |
| Closing balance | 83 796 717 | 89 567 912 |
| Accumulated impairment losses: | ||
| Opening balance | 7 727 749 | |
| Increases | 7 727 749 | |
| Decreases | 6 027 749 | |
| Closing balance | 1 700 000 | 7 727 749 |
| Carrying amount | 82 096 717 | 81 840 163 |
Amounts recognized under decreases relate to goodwill allocated to Linxe cash generating unit, which was reclassified as Non-current assets classified as available for sale, for a net amount of zero.
Impairment tests to Goodwill carried out at 31 December 2014 mainly consisted in determining the recoverable amount of each cash generating unit using the discounted cash flow method. In some cases, fair value less estimated costs to sell was determined by independent appraisal.
Goodwill was allocated through cash generating units, which were aggregated according to synergies generated by the respective business combinations.
Recoverable amounts are compared to the net assets of each cash generating unit, including allocated goodwill and impairment losses detailed on note 34.
Calculation of recoverable amounts consisted in projecting operating cash flows over an eightyear period, thereafter extrapolated using perpetuity and discounted to 31 December 2014. Weighted Average Cost of Capital, before tax, calculated using CAPM (Capital Asset Pricing Model) methodology for each cash generating unit, was used as discount rate. These rates include specific market features and include different risk factors as well as risk-free interest rates of ten-year bonds of each country to which cash generating units belong.
The use of an eight-year period for projecting cash flows has taken into consideration the extension and intensity of economic cycles to which the Group's activity is subject to.
Projected cash flows are based on the Group's business plan and are updated annually so as to include changes in the economic outlook of each market where the Group is conducting business.
| Cash generating units | |||||||
|---|---|---|---|---|---|---|---|
| Iberian Peninsula | Germany | South Africa | |||||
| Goodwill | 71 460 679 | 3 588 414 | 7 047 624 | ||||
| Discount rate (pre-tax) | 9.54% | 7.44% | 17.14% | ||||
| Growth rate on perpetuity | 1.00% | 1.00% | 1.00% | ||||
| Growth rate (CAGR 2014 - 2022): | |||||||
| Total net income | 1.31% | 1.24% | 2.49% | ||||
| Cost of goods sold and materials consumed | 1.20% | 1.51% | 2.08% | ||||
| Fixed costs | 0.72% | 0.71% | 2.45% | ||||
| Cash flows projected over | 8-year period | 8-year period | 8-year period | ||||
| Testing conslusions | No impairment | No impairment | No impairment | ||||
CAGR - Compoud Average Growth Rate.
| Iberian Peninsula | Germany | France | South Africa | |
|---|---|---|---|---|
| Goodwill | 71 461 306 | 3 588 414 | 6 790 443 | |
| Discount rate (pre-tax) | 12.65% | 9.37% | 9.62% | 18.86% |
| Growth rate on perpetuity | 1.00% | 1.00% | 1.00% | 1.00% |
| Growth rate (CAGR 2013-2021): | ||||
| Total income | 1.59% | 2.12% | 4.24% | 3.57% |
| Cost of goods sold and materials consumed | 1.04% | 1.67% | 2.45% | 3.57% |
| Fixed costs | 0.51% | 0.27% | 2.61% | 3.15% |
| Period | 8 years | 8 years | 8 years | 8 years |
| Test conclusions | Impairment | No Impairment | Impairment | No Impairment |
CAGR Weighted average growth rate
CAGR Germany excludes the raw particleboard production component of Horn plant.
These impairment tests did not show any impairment loss to be recognized under Goodwill, at 31 December 2014.
The Group carried out a sensitivity analysis to the recoverable amount of cash generating units, which consisted in testing the sensitivity of recoverable amount to changes in key assumptions that most affect the present value of discounted cash flows.
Sensitivity test carried out on Iberian Peninsula cash generating unit, whose goodwill accounts for 87% of goodwill recognized on the Consolidated Statement of Financial Position at 31 December 2014, is detailed as follows:
| Cash Generating Unit Iberian Peninsula |
Increase in WACC by 1.0 p.p. |
Annual increase in turnover by 1.0% (1) |
Reduction in EBITDA/Turnover magin by 0.5 p.p. (2) |
|
|---|---|---|---|---|
| Weighted average cost of capital rate (WACC) | 9.54% | 10.54% | 9.54% | 9.54% |
| Turnover CAGR [2014 ; 2022] (3) | 1.49% | 1.49% | 1.00% | 1.49% |
| Average EBITA/Turnover margin [2014 ; 2022] | 8.84% | 8.84% | 8.84% | 8.39% |
| Present value of discounted cash flows | 275 326 578 | 247 827 367 | 244 423 020 | 254 147 429 |
| Fair value less estimated costs to sell (4) | 3 498 000 | 3 498 000 | 3 498 000 | 3 498 000 |
| Total recoverable amount | 278 824 578 | 251 325 367 | 247 921 020 | 257 645 429 |
| Conslusões da análise de sensibilidade | No impairment | No impairment | No impairment | No impairment |
(1) Annual increase in turnover by 1% (2014=100), considering that EBITDA/Turnover margins on the business plan remain static;
(2) Reduction in EBITDA/Turnover margin in each year by 0.5 p.p., considering that turnover remains static on the business plan;
(3) CAGR - Compoud Average Growth Rate;
(4) Tangible fixed assets whose fair value less estimated costs to sell were determined by independent appraisal.
No impairment was identified as a result of this sensitivity test on Iberian Peninsula cash generating unit.
Sensitivity test on Germany cash generating unit, whose goodwill accounts for 4.3% of goodwill recognized on the Consolidated Statement of Financial Position, at 31 December 2014, used the same methodology and inputs that were used on the test carried out on Iberian Peninsula cash generating unit. No impairment was identified as a result of this sensitivity test.
Sensitivity test on South Africa cash generating unit, whose goodwill accounts for 8.7% of goodwill recognized on the Consolidated Statement of Financial Position, at closing date of these financial statements, used the same methodology and inputs that were used on the test carried out on Iberian Peninsula cash generating unit, except for annual increase in turnover, which was subject to a change by 2.5% in order to better reflect economic outlook for South African economy. Sensitivity to this variable resulted in an impairment loss of about EUR 1 million. Sensitivity to the remaining variables showed no impairment loss.
At 31 December 2014 and 31 December 2013, deferred tax assets and liabilities were detailed according to underlying temporary differences as follows:
| Deferred Tax Assets | Deferred Tax Liabilities | ||||
|---|---|---|---|---|---|
| 31.12.2014 | 31.12.2013 | 31.12.2014 | 31.12.2013 | ||
| Restated | Restated | ||||
| Derecognized Deferred Costs | |||||
| Harmonisation Adjustments | 43 297 564 | 46 908 256 | |||
| Provisions not Allowed for Tax Purposes | 1 061 768 | 1 046 495 | |||
| Impairment of Assets | 3 413 280 | 3 851 888 | |||
| Tax Losses Carried Forward | 14 913 534 | 20 982 099 | |||
| Derecognized Tangible Fixed Assets | 37 448 | 47 567 | |||
| Revaluation of Tangible Fixed Assets | 17 515 958 | 23 166 829 | |||
| Other Temporary Differences | 8 328 712 | 7 313 159 | 2 477 729 | 2 572 783 | |
| 27 754 742 | 33 241 208 | 63 291 251 | 72 647 868 |
Amounts recognized under deferred tax assets which arise from other temporary differences relate to, namely, deferred income on investment subventions (EUR 3.3 million) and defined benefit liabilities (EUR 2.3 million).
| Deferred tax assets | Deferred tax liabilities | |||
|---|---|---|---|---|
| 2014 | 2013 Restated |
2014 | 2013 Restated |
|
| Opening balance | 33 241 208 | 24 096 895 | 72 647 868 | 59 123 409 |
| Effect on profit or loss of continuing operation: | ||||
| Changes in temporary differences affecting profit or loss: | ||||
| Harmonisation adjusments | - 4 279 912 | - 3 374 359 | ||
| Provisions not allowed for tax purposes | - 376 570 | - 401 641 | ||
| Impairment of Assets Derecognized tangible assets |
- 438 608 - 10 119 |
1 947 474 - 2 976 |
||
| Derecognized deferred costs | - 102 650 | |||
| Revaluation of tangible assets | - 1 055 418 | 3 188 336 | ||
| Tax losses carried forward | - 5 942 012 | 18 773 020 | ||
| Others | 582 222 | 3 277 278 | 1 403 852 | 694 656 |
| - 6 185 087 | 23 490 505 | - 3 931 478 | 508 633 | |
| Change in tax rate affecting profit or loss | - 536 458 | - 1 594 741 | - 29 530 | |
| Subtotal | - 6 721 545 | 23 490 505 | - 5 526 219 | 479 103 |
| Effect on profit or loss of discontinued operations: Changes in temporary differences affecting profit or loss: Revaluation of tangible assets Tax losses carried forward |
141 467 | 3 066 980 | - 3 264 087 | |
| Subtotal | 141 467 | 3 066 980 | - 3 264 087 | |
| Effect on other comprehensive income: Changes in temporary differences affecting other comprehensive income: |
||||
| Revalorização de ativos fixos tangíveis | - 6 539 414 | 36 683 247 | ||
| Remensurações de planos de benefícios definidos | 700 000 | - 185 237 | ||
| 700 000 | - 185 237 | - 6 539 414 | 36 683 247 | |
| Change in tax rate affecting other comprehensice income | - 1 928 496 | |||
| Subtotal | 700 000 | - 185 237 | - 8 467 910 | 36 683 247 |
| Currency translation effect | 393 612 | - 363 013 | 1 570 532 | - 6 575 862 |
| Reclassification | - 13 797 942 | - 13 797 942 | ||
| Closing balance | 27 754 742 | 33 241 208 | 63 291 251 | 72 647 868 |
Changes in deferred tax liability resulting from revaluation of tangible fixed assets, which were recognized through other comprehensive income, refer to impairment losses on revalued tangible fixed assets that were recognized through other comprehensive income for 2014 (notes 2.8, 11 and 34).
At the closing date of these consolidated financial statements, reduction in tax rate had been enacted in Portugal and Spain, which caused existing deferred tax to be recalculated. In addition, time constraints to carry tax losses forward had been eliminated in Spain and the period for carrying tax losses forward had been extended to 12 years, in Portugal, with no retroactive effects.
In accordance with International Financial Reporting Standards, the Group annually assesses deferred tax asset related to tax losses carried forward on the basis of cash flows projected over a five-year period.
According to the estimation of taxable profit or deductible loss for the fiscal year 2014 and according to the tax returns for the fiscal year 2013, tax losses carried forward and the corresponding deferred tax asset are detailed as follows:
| Restated | ||||
|---|---|---|---|---|
| Limit date to be | Tax loss carried | Deferred tax | Tax loss carried | Deferred tax |
| used | forward | asset | forward | asset |
| 2014 | 3 375 000 | 843 750 | ||
| 2017 | 3 162 176 | 948 653 | ||
| 2018 | 13 163 195 | 2 764 271 | 12 048 431 | 2 361 053 |
| 2019 | 632 230 | 189 669 | ||
| 2020 | 12 032 581 | 3 631 374 | ||
| 2021 | 2 042 580 | 612 774 | ||
| 2022 | 584 146 | 175 244 | ||
| 2023 | 15 397 | 4 619 | ||
| 2024 | 1 101 121 | 330 336 | ||
| 2025 | 15 397 | 4 619 | ||
| 2026 | 1 063 331 | 318 999 | ||
| 2027 | 15 397 | 4 619 | ||
| 2028 | 996 450 | 298 935 | ||
| 2029 | 523 923 | 157 177 | ||
| 2030 | 402 330 | 120 699 | ||
| 2031 | 375 013 | 112 504 | ||
| 13 163 195 | 2 764 271 | 38 385 503 | 10 115 024 | |
| Without time limit | 54 986 088 | 12 149 263 | 86 157 767 | 24 665 017 |
| Sub-total | 68 149 283 | 14 913 534 | 124 543 270 | 34 780 041 |
| Deferred tax off set |
- 13 797 942 | |||
| Total | 68 149 283 | 14 913 534 | 124 543 270 | 20 982 099 |
| 31.12.2014 | 31.12.2013 | |||
|---|---|---|---|---|
| Restated | ||||
| Limit date to be used |
Tax loss carried forward |
Tax credit | Tax loss carried forward |
Tax credit |
| 2014 | 2 320 773 | 577 990 | ||
| 2015 | 40 573 | 8 115 | 61 813 | 14 487 |
| 2016 | 208 307 | 41 661 | 223 477 | 46 628 |
| 2017 | 117 849 | 23 570 | 9 189 526 | 2 774 535 |
| 2018 | 83 512 | 16 702 | 120 238 | 48 598 |
| 2019 | 119 987 | 23 997 | 88 891 087 | 26 685 324 |
| 2020 | 125 844 | 25 169 | 58 520 943 | 17 564 360 |
| 2021 | 121 939 | 24 388 | 100 429 541 | 30 147 124 |
| 2022 | 1 216 494 | 243 299 | 8 690 189 | 2 536 232 |
| 2023 | 446 763 | 89 353 | 1 067 531 | 320 259 |
| 2024 | 18 315 068 | 5 494 521 | ||
| 2025 | 731 428 | 219 428 | ||
| 2026 | 46 655 781 | 13 996 735 | ||
| 2027 | 1 557 668 | 467 301 | ||
| 2028 | 22 962 888 | 6 888 867 | ||
| 2029 | 18 845 874 | 5 653 763 | ||
| 2030 | 28 400 046 | 8 520 015 | ||
| 2031 | 9 382 661 | 2 814 798 | ||
| 2 481 268 | 496 254 | 416 366 532 | 124 770 965 | |
| Without time limit | 1 772 854 049 | 522 571 786 | 1 222 094 458 | 350 072 713 |
| Total | 1 775 335 317 | 523 068 040 | 1 638 460 990 | 474 843 678 |
Furthermore, at 31 December 2014 and 31 December 2013, tax losses for which no deferred tax asset was recognized are detailed as follows:
Deferred tax asset is offset against deferred tax liability in situations where:
(i) The company which generates the respective temporary differences is legally entitled to offset current tax assets and liabilities; or
ii) Calculated deferred tax assets and liabilities are related with income tax payable to the same tax authority:
At 31 December 2014 and 31 December 2013, details of Other non-current assets on the Consolidated Statements of Financial Position were as follows:
| 31.12.2014 | 31.12.2013 | ||||||
|---|---|---|---|---|---|---|---|
| Gross Value | Impairment | Net Value | Gross Value | Impairment | Net Value | ||
| Restated | |||||||
| Trade debtors and other debtors | 970 542 | 970 542 | 1 072 123 | 1 072 123 | |||
| Loans to related parties | 10 931 182 | 10 931 182 | 25 106 182 | 10 931 182 | 14 175 000 | ||
| Financial Instruments | 11 901 724 | 10 931 182 | 970 542 | 26 178 305 | 10 931 182 | 15 247 123 | |
| State and other public entities | |||||||
| Others | 1 696 | 1 696 | 1 696 | 1 696 | |||
| Assets out of scope of IFRS 7 | 1 696 | 1 696 | 1 696 | 1 696 | |||
| Total | 11 903 420 | 10 931 182 | 972 238 | 26 180 001 | 10 931 182 | 15 248 819 |
| AGEING OF NON CURRENT TRADE DEBTORS AND OTHER DEBTORS AND OF LOANS TO RELATED PARTIES |
||
|---|---|---|
| 31.12.2014 | 31.12.2013 Restated |
|
| Not due | 970 542 | 15 247 123 |
| Total | 970 542 | 15 247 123 |
At 31 December 2013, loans to related parties consisted of a loan to the jointly-controlled company Laminate Park Gmbh & Co. KG for EUR 14 175 000. As this loan matures 30 June 2015, it was reclassified to Other current debtors on the consolidated financial statements ended 31 December 2014.
Following the decision of the Board of Directors from December 2014 to discontinue the operations of Betanzos industrial plant, located in Spain, and of Ussel and Linxe industrial plants, in France, the relating assets were recognized under Non-current assets classified as available for sale, as the Group estimates that a sale transaction of these plants will take place within a twelve-month period. Liabilities of Linxe industrial plant were recognized under Liabilities directly associated with non-current assets classified as available for sale, on the Consolidated Statement of Financial Position.
These assets were measured at fair value less estimated costs to sell on the basis of information gathered from surveys which allowed the Group to estimate that a sale transaction will take place within a twelve-month period, including analysis of similar transactions and contacts with possible buyers, in the case of Ussel and Betanzos. This fair value is within level two of the fair value hierarchy.
Impairment losses recognized on tangible fixed assets before reclassification as Non-current assets classified as available for sale are detailed on note 34 and were determined on the basis of fair value less estimated costs to sell.
During the period ended 31 December 2014, the Group sold the remaining assets of Knowsley industrial plant, England, which were recognized as Non-current assets classified as available for sale at 31 December 2013.
At 31 December 2014 and 2013, assets recognized under Non-current assets classified as available for sale and the corresponding liabilities, classified as Liabilities directly associated with non-current assets classified as available for sale were detailed as follows:
| 31.12.2014 | 31.12.2013 | |
|---|---|---|
| Tangible fixed assets | 1 049 435 | 4 318 092 |
| Intangible assets | 576 352 | |
| Inventories | 9 206 410 | |
| Trade debtors | 62 256 | |
| Other current assets | 945 255 | |
| Cash and cash equivalents | 70 298 | |
| Non-current assets classified as available for sale | 11 910 006 | 4 318 092 |
| Non-current loans | 328 961 | |
| Other non-current liabilities | 823 815 | |
| Current loans | 216 308 | |
| Trade creditors | 6 121 321 | |
| Other non-current liabilities | 2 083 337 | |
| Liabilities directly associated to non-current assets classified as | ||
| available for sale | 9 573 742 |
At 31 December 2014 and 31 December 2013, details of Inventories on the Consolidated Statements of Financial Position were as follows:
| 31.12.2014 | 31.12.2013 | |
|---|---|---|
| Restated | ||
| Merchandise | 7 351 265 | 7 747 004 |
| Finished and intermediate products | 35 315 543 | 45 446 853 |
| Products and working in progress | 661 223 | 1 844 774 |
| Raw Materials and Consumables | 60 108 995 | 69 715 307 |
| 103 437 026 | 124 753 938 | |
| Accumulated losses on inventories (Note 34) | 4 165 268 | 6 708 161 |
| 99 271 758 | 118 045 777 |
Inventories consist mainly of wood, raw boards, faced boards and chemical products.
At 31 December 2014 and 31 December 2013, details of Trade debtors on the Consolidated Statements of Financial Position were as follows:
| 31.12.2014 | 31.12.2013 | |||||
|---|---|---|---|---|---|---|
| Gross Value | Impairment Net Value |
Gross Value | Impairment | Net Value | ||
| Restated | ||||||
| Trade Debtors | 124 751 624 | 26 228 073 | 98 523 551 | 142 027 776 | 24 524 620 | 117 503 156 |
| 31.12.2014 | 31.12.2013 Restated |
|||||
| Not due Due and not impaired |
82 993 157 | 94 947 043 | ||||
| 0 - 30 days | 7 926 753 | 13 245 690 | ||||
| 30 - 90 days | 3 765 896 | 3 426 443 | ||||
| ' + 90 days | 993 317 | 2 839 799 | ||||
| 12 685 966 | 19 511 932 | |||||
| Due and impaired | ||||||
| 0 - 90 days | ||||||
| 90 - 180 days | 2 632 829 | 2 221 726 | ||||
| 180 - 360 days | 533 957 | 1 458 722 | ||||
| + 360 days | 25 905 715 | 23 888 353 | ||||
| 29 072 501 | 27 568 801 | |||||
| Total | 124 751 624 | 142 027 776 |
At 31 December 2014 and 31 December 2013, details of Other current debtors on the Consolidated Statements of Financial Position were as follows:
| 31.12.2014 | 31.12.2013 | |||||
|---|---|---|---|---|---|---|
| Gross Value | Impairment | Net Value | Gross Value | Impairment | Net Value | |
| Restated | ||||||
| Other debtors | 3 205 616 | 3 502 | 3 202 114 | 4 135 339 | 3 502 | 4 131 837 |
| Related parties | 9 307 004 | 9 307 004 | 175 525 | 175 525 | ||
| Financial Instruments | 12 512 620 | 3 502 | 12 509 118 | 4 310 864 | 3 502 | 4 307 362 |
| Other debtors | 1 342 236 | 1 342 236 | 1 254 243 | 1 254 243 | ||
| Assets out of scope of IFRS 7 | 1 342 236 | 1 342 236 | 1 254 243 | 1 254 243 | ||
| Total | 13 854 856 | 3 502 | 13 851 354 | 5 565 107 | 3 502 | 5 561 605 |
| AGEING OF OTHER DEBTORS |
|||
|---|---|---|---|
| 31.12.2014 | 31.12.2013 Restated |
||
| Not due | 9 293 655 | 168 904 | |
| Due and not impaired | |||
| 0 - 30 days | 1 186 323 | 1 667 959 | |
| 30 - 90 days | 305 515 | 1 378 773 | |
| + 90 days | 1 727 127 | 1 095 228 | |
| 3 218 965 | 4 141 960 | ||
| Total | 12 512 620 | 4 310 864 |
Other debtors include amounts receivable from Trade creditors for EUR 1 893 114.
Related parties consist of a loan to the jointly-controlled company Laminate Park GmbH & Co. KG amounting to EUR 9 293 655, which matures in June 2015 and pays interest at a market rate.
At 31 December 2014 and 31 December 2013, details of Other current assets on the Consolidated Statements of Financial Position were as follows:
| 31.12.2014 | ||||||
|---|---|---|---|---|---|---|
| Gross Value Impairment | Net Value | Gross Value | Impairment | Net Value | ||
| Restated | Restated | Restated | ||||
| Derivatives instruments Financial Instruments |
99 079 99 079 |
99 079 99 079 |
77 618 77 618 |
77 618 77 618 |
||
| Accrued income | 5 174 694 | 5 174 694 | 6 252 674 | 6 252 674 | ||
| Deferred expenses | 4 790 323 | 4 790 323 | 7 564 382 | 7 564 382 | ||
| Assets out of scope of IFRS 7 | 9 965 017 | 9 965 017 | 13 817 056 | 13 817 056 | ||
| Total | 10 064 096 | 10 064 096 | 13 894 674 | 13 894 674 |
At the closing date of these consolidated financial statements, the Group did not hold any cash flow hedging derivative financial instruments. The amounts included in the previous table relate to derivative financial instruments recognized at fair value through profit or loss (note 27).
Accrued income includes EUR 2.5 million of estimated sales of electrical power.
Deferred expenses include EUR 3.4 million related to insurance expenses.
At 31 December 2014 and 31 December 2013, details of State and Other Public Entities on the Consolidated Statements of Financial Position were as follows:
| 31.12.2014 | 31.12.2013 | |
|---|---|---|
| Restated | ||
| State and other public entities: | ||
| Income Tax | 3 312 542 | 2 306 281 |
| Value Added Tax | 4 419 272 | 5 220 708 |
| Social Security Contribution | 54 854 | 50 682 |
| Others | 2 822 255 | 2 435 915 |
| 10 608 923 | 10 013 586 |
At 31 December 2014 and 31 December 2013, the detail of Cash and Cash Equivalents was as follows:
| 31.12.2014 | 31.12.2013 | |
|---|---|---|
| Restated | ||
| Cash at Hand | 51 539 | 53 319 |
| Bank Deposits and Other Treasury Applications | 11 896 936 | 26 935 070 |
| Cash and Cash Equivalents on the Consolidated Statement of Financial Position |
11 948 475 | 26 988 389 |
| Bank Overdrafts | 1 447 665 | 6 047 978 |
| Cash and Cash Equivalents on the Statement of Cash Flows | 10 500 810 | 20 940 411 |
Bank overdrafts include credit balances on current accounts and are included in Bank loans under current liabilities on the Consolidated Statement of Financial Position (note 26.1).
Consolidated net shareholders' funds consist of the following items:
In November 2014, the Company carried out a public offer of until 15 000 000 000 shares. Under this public offer and the subsequent institutional placement, 11 210 757 417 shares were subscribed for, resulting in a cash inflow amounting to EUR 112 107 574.17, recognized under Share Capital, on the Consolidated Statement of Financial Position.
Expenses related to this public offer amounted to an estimated EUR 1.47 million and were recognized under Other Reserves and Accumulated Earnings, on the Consolidated Statement of Financial Position.
As a consequence, at the closing date of these consolidated financial statements, share capital, which was fully underwritten and paid, amounted to EUR 812 107 574.17 (EUR 700 000 000 at 31 December 2013), and was comprised of 11 350 757 417 common shares,
without face value (140 000 000 common shares, with a face value of EUR 5 per share at 31 December 2013).
At 31 December 2014 and 2013, shares are not entitled to any fixed income.
At the same date, neither the Company nor any of its affiliates held any shares in the Company.
The caption Legal reserve includes the parent company's reserve set up in accordance with articles 295 and 296 of the Company Law. This reserve cannot be distributed to shareholders as it can only be used to increase share capital or against accumulated losses.
This caption includes:
Reserves set up by the parent company and the Group's share of reserves set up by subsidiaries included in consolidation in accordance with statutory rules or by proposition of the respective Board of Directors, approved in the General Shareholders' Meeting;
The parent company's net profits or losses of previous years and the subsidiaries' share thereon whose application was not carried out;
The parent company's net profit or loss of the current period and the subsidiaries' share thereon;
Consolidation adjustments to any of the aforementioned components.
This caption includes:
Currency translation reserves resulting from the conversion to Euros of subsidiaries' financial statements which are expressed in a different functional currency;
Change in fair value of available-for-sale assets (note 10);
Hedging derivative instruments (note 27);
Remeasurement of defined benefit obligations (note 30)
| Accumulated other comprehensive income Atributable to the parent's shareholders |
||||||||
|---|---|---|---|---|---|---|---|---|
| Currency translation |
Available for-sale financial assets |
Revaluation Reserve |
Remeasurements on defined benefit plans |
Share of Other Comprehensive Income of Joint Ventures and Associates |
Income tax related to components of other comprehensive income |
Total | ||
| Balance as at 1 January 2014 | - 16 496 846 | 88 950 | 126 516 277 | - 3 198 741 | 1 371 956 | 35 600 137 | 72 681 459 | |
| Other consolidated comprehensive income for the period | 4 034 431 | - 1 836 | -19 645 347 | -3 288 627 | -9 155 678 | -9 745 701 | ||
| Change in ownership interest | 100 464 | 969 | 1 280 049 | - 32 966 | 14 956 | 363 896 | 999 576 | |
| Outros | - 767 053 | - 197 012 | - 570 041 | |||||
| Balance as at 31 December 2014 | -12 361 951 | 88 083 | 107 383 926 | -6 520 334 | 1 386 912 | 26 611 343 | 63 365 293 |
| Accumulated other comprehensive income Atributable to the parent's shareholders |
||||||||
|---|---|---|---|---|---|---|---|---|
| Currency translation |
Available for-sale financial assets |
Revaluation Reserve |
Remeasurements on defined benefit plans |
Share of Other Comprehensive Income of Joint Ventures and Associates |
Income tax related to components of other comprehensive income |
Total | ||
| Balance as at 1 January 2013 - restated | 2 699 144 | 93 816 | -4 019 786 | - 846 808 | - 380 018 | |||
| Other consolidated comprehensive income for the period - restated | -19 195 990 | - 4 866 | 126 516 277 | 821 045 | 1 371 956 | 36 446 945 | 73 061 477 | |
| Balance as at 31 December 2013 - restated | -16 496 846 | 88 950 | 126 516 277 | -3 198 741 | 1 371 956 | 35 600 137 | 72 681 459 |
Currency translation reserve refers mostly to the subsidiaries Tafisa Canada, Sonae Industria (UK) and Sonae Novobord.
Accumulated other comprehensive income directly associated with non-current assets classified as available for sale consists of remeasurements of defined benefit plans of Linxe and Ussel industrial plants (note 17).
Changes to this item during 2014 and 2013 were as follows:
| 31.12.2014 | 31.12.2013 | |
|---|---|---|
| Restated | ||
| Opening balance | - 795 247 | - 939 705 |
| Net profit for the period attributed to non-controling interests | - 159 144 | - 870 214 |
| Other comprehensive income | 5 788 | 818 422 |
| Change in ownership percentage | 551 462 | |
| Others | 135 042 | 196 250 |
| Closing balance | - 262 099 | - 795 247 |
As at 31 December 2014 and 31 December 2013 Sonae Indústria had the following outstanding loans:
| 31.12.2014 | 31.12.2013 | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Amortised cost | Nominal value | Amortised cost | Nominal value | ||||||
| Current | Non current | Current | Non current | Current | Non current | Current | Non current | adjustment - 2014 |
|
| Restated | Restated | Restated | Restated | ||||||
| Bank loans | 106 774 893 | 231 403 466 | 107 264 090 | 232 322 901 | 220 713 386 | 123 145 528 | 221 706 044 | 123 649 568 | |
| Debentures | 147 604 120 | 150 000 000 | 129 918 927 | 118 908 927 | 130 000 000 | 120 000 000 | |||
| Obligations under finance leases | 5 829 498 | 23 440 018 | 5 829 498 | 23 440 018 | 5 558 615 | 30 153 351 | 5 558 615 | 30 153 351 | -2 125 961 |
| Other loans | 6 186 912 | 54 951 368 | 6 186 912 | 55 555 350 | 70 902 123 | 2 553 262 | 71 656 925 | 2 553 261 | |
| Gross debt | 118 791 303 | 457 398 972 | 119 280 500 | 461 318 269 | 427 093 051 | 274 761 068 | 428 921 584 | 276 356 180 | -2 125 961 |
| Cash and cash equivalent in balance sheet | 11 948 475 | 11 948 475 | 26 988 389 | 26 988 389 | |||||
| Net debt | 106 842 828 | 457 398 972 | 107 332 025 | 461 318 269 | 400 104 662 | 274 761 068 | 401 933 195 | 276 356 180 | - 2 125 961 |
| Total net debt | 564 241 800 | 568 650 294 | 674 865 730 | 678 289 375 |
The average interest rates of each class of debt stated in the previous table were as follows:
| 2014 | 2013 | |
|---|---|---|
| Bank loans | 6.08% | 6.87% |
| Debentures | 5.81% | 4.06% |
| Finance leases | 11.01% | 10.76% |
| Others | 4.49% | 4.76% |
Bank overdrafts were not taken into consideration for the calculation of these average interest rates as the amounts were irrelevant.
Column "Fair value adjustment" includes the adjustments which would have to be made in the period if the corresponding items were stated at fair value. Its calculation consisted in determining the lease rent that would be applicable if the leasehold were subject to a market interest rate (second level of fair value hierarchy).
The maturity schedule of these loans is detailed on note 28.
Bank loans (nominal value) presented in the table in note 26. include "Non-current Bank Loans – net of the current portion". "Current portion of Non-current Bank Loans". and "Current Bank Loans" on the Consolidated Statement of Financial Position and their composition as at 31 December 2014 is detailed in the following table:
| 31.12.2014 | |||||
|---|---|---|---|---|---|
| Non current | Current | ||||
| Company | Short term portion |
Short term | Bank overdrafts |
Total | |
| Sonae Indústria-SGPS,SA | 114 194 444 | 7 270 202 | 39 964 427 | 5 123 | 161 434 196 |
| Taiber, Tableros Aglomerados Ibéricos,SL | 39 000 000 | 39 000 000 | |||
| Tafisa Canada Inc. | 47 754 266 | 1 219 633 | 48 973 899 | ||
| Sonae Novobord (Pty) Ltd | 4 413 225 | 10 280 306 | 1 362 732 | 16 056 263 | |
| Tafisa-Tableros de Fibras, SA | 65 000 000 | 4 800 000 | 69 800 000 | ||
| Imoplamac - Gestão de Imóveis, S. A. | 960 966 | 3 281 857 | 4 242 823 | ||
| Others | 79 810 | 79 810 | |||
| 232 322 901 | 22 051 998 | 83 764 427 | 1 447 665 | 339 586 991 | |
| 31.12.2013 | |||||
| Restated | |||||
| Current | |||||
| Company | Non current | Short term portion |
Short term | Bank overdrafts |
Total |
| Sonae Indústria-SGPS,SA | 83 409 091 | 6 969 697 | 150 500 000 | 177 247 | 241 056 035 |
| Taiber, Tableros Aglomerados Ibéricos,SL | 35 000 000 | 35 000 000 | |||
| Tafisa Canada Inc. | 25 266 797 | 6 853 124 | 32 119 921 | ||
| Sonae Novobord (Pty) Ltd | 10 724 846 | 6 472 665 | 1 273 702 | 18 471 213 | |
| Tafisa-Tableros de Fibras, SA | 7 000 000 | 362 403 | 7 362 403 | ||
| Imoplamac - Gestão de Imóveis, S. A. | 4 248 834 | 2 862 580 | 7 111 414 | ||
| Sonae Ind., Prod. e Com.Deriv.Madeira,SA | 4 009 046 | 4 009 046 | |||
| Others | 225 580 | 225 580 | |||
| 123 649 568 | 23 158 066 | 192 500 000 | 6 047 978 | 345 355 612 |
Non-current bank loans and the related short term portion and current bank loans are detailed as follows:
a) In January 2006 Sonae Indústria SGPS. S. A. contracted commercial paper with several financial institutions. In November 2014, Sonae Indústria, SGPS, SA repurchased commercial paper amounting to EUR 26 650 000, of which EUR 10 000 000 were refinanced under the contact detailed on u). At 31 December 2014 commercial paper issued amounted to EUR 5 000 000;
b) During the first half of 2007 Sonae Novobord (Pty) together with Sonae Indústria, SGPS, S. A. contracted a loan with the European Investment Bank, denominated in ZAR, for a maximum amount of ZAR 247 170 000 . The loan pays interest at a market rate and will be redeemed in 14 consecutive and equal semi-annual instalments, the first of which was made in September 2010. At 31 December 2014 outstanding principal was ZAR 88 275 000 (EUR 6 289 594);
c) During first half 2007 Sonae Novobord (Pty) together with Sonae Indústria, SGPS, S. A. contracted a loan with International Finance Corporation (IFC) of ZAR 71 800 000. The loan pays interest at a market rate and will be redeemed in 16 consecutive and equal semi-annual instalments, the first of which was made in June 2009. At 31 December 2014, outstanding principal was ZAR 17 950 000 (EUR 1 278 938).
d) In February 2009 Sonae Indústria, SGPS, SA contracted a loan with a Portuguese financial institution for EUR 20 000 000. This loan pays interest at a variable rate and will be redeemed from October 2009 to March 2015. At 31 December 2014, outstanding principal amounted to EUR 909 091.
e) In July 2010 Tableros de Fibras SA contracted a commercial paper programme. Presently, the programme matures December 2016 unless it is annually revoked by any of the parts (which had not occurred at the closing that of these financial statements). Maximum nominal amount of EUR 7 000 000 has been reducing since January 2014 and will keep reducing monthly until December 2016. At 31 December 2014, there was commercial paper issued for the programme's total amount of EUR 4 800 000.
f) In August 2010 Sonae Indústria, SGPS, SA contracted a loan for EUR 10 000 000 with a Portuguese financial institution, which pays interest at a variable rate and was set to be quarterly repaid from November 2012 to November 2015. In August 2014, both parts agreed upon extending maturity to August 2017. At 31 December 2014, outstanding principal amounted to EUR 3 055 556;
g) In September 2010, Sonae Indústria, SGPS, S. A. contracted a commercial paper programme with a Portuguese financial institution with a maximum nominal amount of EUR 2 500 000. In March 2014, maximum amount was extended to EUR 12 500 000, effective April 2014. Presently, the programme matures in September 2015. At 31 December 2014, there was commercial paper issued for the programme's full amount;
h) In March 2011 Sonae Indústria, SGPS, SA contacted a commercial paper programme with a maximum nominal amount of EUR 50 000 000 and maturity in March 2015. In November 2014, both parts agreed upon revoking the contract, having Sonae Indústria, SGPS, S. A. repurchased all commercial paper issued (EUR 50 000 000). This amount was refinanced under the contract detailed on u);
i) In July 2011 Tafisa Canada Inc. contracted a loan for CAD 81 000 000 with a syndicate of financial institutions from North America. In July 2014, this contract was refinanced by means of a new loan with a maximum amount of CAD 90 000 000 (revolving) and maturity in July 2019 (maximum amount available will be reduced quarterly until maturity date). At 31 December 2014, this loan had a maximum amount of CAD 80 750 000, of which CAD 66 201 389 (EUR 47 075 146) were used. This loan includes two financial ratios calculated on the basis of the company's individual financial statements: "Financial Liabilities / (Net Shareholders' Funds + Financial Liabilities)" and "Free Cash Flow/Debt Service". These ratios are tested quarterly until debt matures and in case of breach, repayment may be required;
j) In July 2011 Tafisa Canada Inc. contracted a loan for CAD 5 000 000 with a Canadian financial institution. In July 2014, both parts agreed upon repaying CAD 1 126 255. Presently, this contract will mature April 2016. At 31 December 2014, the outstanding principal amounted to CAD 2 020 208 (EUR 1 436 550). This loan includes one ratio calculated on the basis of the company's individual financial statements: "Non-current Financial Liabilities/Net Shareholders' Funds". This ratio is tested annually based on the company's end year accounts and in case of breach, repayment may be required.
k) In November 2012 Imoplamac, S. A. contracted a loan with a Portuguese financial institution for EUR 8 680 000. This loan pays interest quarterly at variable rate and will be repaid in quarterly instalments from March 2013 to March 2016. At 31 December 2014, outstanding amount was EUR 4 242 822.
l) In December 2012, Sonae Indústria, SGPS, SA contracted a loan with a Portuguese financial institution for EUR 25 000 000, which was made available in March 2013. This loan pays interest at a variable rate and was set to be redeemed from September 2015 to March 2018. In November 2014, Sonae Indústria, SGPS, S. A. anticipated total repayment of this loan;
m) In December 2012, Sonae Novobord (Pty) contracted a loan with a South African financial institution for 150 000 000 South African Rands (ZAR). This loan pays interest at market rate and will be repaid in three successive and equal annual instalments, beginning 2013. Both parts agreed upon extending payment of second instalment to 27 February 2015. At 31 December 2014, outstanding principal amounted to ZAR 100 000 000 (EUR 7 125 000). This loan includes tree ratios calculated on the basis of the company's individual financial statements: "Net Financial Liabilities/EBITDA", "EBITDA/Interest" and "Free Cash Flow/Debt Service". These ratios are tested quarterly until debt matures and in case of breach, repayment may be required.
n) In June 2013, Sonae Indústria, SGPS, SA entered into a new agency agreement with a Portuguese financial institution to issue commercial paper with maturity ranging from 7 to 364 days. The programme had a maximum nominal amount of EUR 50 000 000 which was increased to EUR 100 000 000 in December 2013, and matures in June 2018. On 21 November 2014, Sonae Indústria, SGPS, S. A. repurchased commercial paper amounting to EUR 30 000 000. On the same date, Sonae Indústria, SGPS, S. A. issued bonds as described on d) of the following section. At 31 December 2014, there was commercial paper issued under this programme for EUR 17 500 000;
o) In June 2013 Sonae Indústria, SGPS, SA contracted a new commercial paper programme with a Portuguese financial institution, with a maximum nominal amount of EUR 25 000 000. On 4th quarter 2014 both parts agreed upon revoking this contract;
p) In November 2013, Sonae Indústria, SGPS, SA and Taiber, Tableros Aglomerados Ibéricos, S. L. contracted a loan with a Portuguese financial institution for a maximum amount of EUR 50 000 000, which could be withdrawn by either entity over a period up to six months. Shares of the subsidiary Sonae Novobord are pledged as a guarantee for this loan. Presently, this loan matures 30 October 2015. At the date of these consolidated financial statements, outstanding principal amounted to EUR 39 000 000, totally withdrawn by Taiber, Tableros Aglomerados Ibéricos, S. L. This loan pays interest at a variable rate;
q) In November 2013, Sonae Indústria, SGPS, S. A. contracted a loan with a Spanish financial institution for EUR 13 000 000. Maturity date, which originally was October 2014, was extended to March 2015, with repayments on November 2014, December 2014, January 2015, February 2015 and March 2015. At 31 December 2014, outstanding principal amounted to EUR 4 964 427. This contract pays interest at a variable rate;
r) In December 2013, Sonae Indústria, SGPS, S. A. contracted a commercial paper programme with a Portuguese financial institution for a maximum nominal amount of EUR 65 000 000. In November 2014, the contract, which was then set to mature 30 December 2014, was revoked by both parts. Sonae Indústria, SGPS, S. A. fully repurchased commercial paper issued (EUR 65 000 000). This amount was refinanced by the contract described on v);
s) In July 2014, a commercial paper programme was contracted with a maximum nominal amount of EUR 10 000 000, which was made available November 2014. This programme will be repaid semi-annually from December 2015 to June 2018. At 31 December 2014, there was commercial paper issued for the programme's total amount;
t) In August 2014, Sonae Indústria, SGPS, S. A. contracted a commercial paper programme with a Portuguese financial institution for a maximum nominal amount of EUR 50 000 000. In November 2014, both parts agreed upon revoking the contract, which was originally set to mature 4 December 2014. Sonae Indústria, SGPS, S. A. fully repurchased issued commercial paper (EUR 50 000 000). This amount was partly refinanced by the contract described on u);
u) In August 2014, Sonae Indústria, SGPS, S. A. contracted a commercial paper programme with a Portuguese financial institution. In November 2014, first issue was carried out under this programme. Present maximum nominal amount of EUR 103 900 000 will be reduced semiannually from May 2018. At 31 December 2014, there was commercial paper issued for the programme's full amount. The programme pays interest at variable rate and will mature in November 2020. This programme includes one ratio - "Total Net Shareholders' Funds / Total Assets" - to be tested annually from 31 December 2015 until maturity, on the basis of the Company's consolidated financial statements, and in case of breach, repayment may be required;
v) In October 2014, Sonae Indústria, SGPS, S. A. and Tableros de Fibras, S. A. contracted a loan with a Portuguese financial institution for EUR 65 000 000, which was made available in November 2014. The shares of the subsidiary Glunz AG were pledged as a guarantee for this loan. At 31 December 2014, Tableros de Fibras, S. A. had withdrawn EUR 65 000 000 (Sonae Indústria, SGPS, S. A. did not withdrawn any amount). This loan pays interest at a variable rate, will mature in November 2022 and will be repaid in four equal semi-annual consecutive instalments, the first of which will take place May 2021. This contract includes one ratio - "Total Net Shareholders' Funds / Total Assets" - to be tested annually from 31 December 2015 until maturity, on the basis of the Company's consolidated financial statements, and in case of breach, repayment may be required;
w) In November 2014, Sonae Indústria, SGPS, S. A. fully repaid in anticipation loan from related parties from March 2014, for EUR 16 666 667.
As set out in point 1.3. – Voting and Exercising Voting Rights, of the Corporate Governance Report, at 31 December 2014 there were loans amounting to EUR 392 million (representing 69.4% of consolidated net debt) whose repayment may be required by creditors in case of change in shareholder control of Sonae Indústria, SGPS, S. A..
At 31 December 2014 ratios included in the aforementioned contracts complied with contracted conditions.
At the same date, there were other assets amounting to EUR 52 808 593 which were pledged as guarantee of the Group's liabilities.
This contract included one ratio - - "Total Net Shareholders' Funds / Total Assets" - to be tested annually from 31 December 2015 until maturity, on the basis of the Company's consolidated financial statements, and in case of breach, repayment may be required.
The aforementioned bond loans pay interest at variable rate composed of 6 month Euribor plus a spread.
Other loans, as detailed in the table in note 26, are included in the Consolidated Statement of Financial Position, in "Other Loans" in Current Liabilities and Non-Current Liabilities, and had the following composition on 31 December 2014 and 31 December 2013:
| 31.12.2014 | |||
|---|---|---|---|
| Company | Non current | Current | |
| Securitization | Others | Others | |
| Glunz AG | 18,869,853 | 78 950 | |
| Sonae Ind., Prod. e Com.Deriv.Madeira,SA | 11,617,604 | 2 058 425 | 5 608 211 |
| Isoroy SAS | 5,223,534 | ||
| Tableros Tradema,S.L. | 10,910,505 | 151 546 | 6 131 |
| Sonae Tafibra International, BV | 5,485,197 | ||
| Sonae Industria (UK), Ltd. | 1,135,908 | ||
| Tafiber, Tableros de Fibras Ibéricas,SL | 102 778 | 102 793 | |
| Euroresinas-Indústrias Quimicas,SA | 390,827 | ||
| 53 242 601 | 2 312 749 | 6 186 912 |
| 31.12.2013 | |||
|---|---|---|---|
| Company | Non current | Current | |
| Others | Securitization | Others | |
| Glunz AG | 25 284 859 | 78 950 | |
| Sonae Ind., Prod. e Com.Deriv.Madeira,SA | 2 020 723 | 8 469 207 | 5 917 577 |
| Isoroy SAS | 11 629 875 | ||
| Tableros Tradema,S.L. | 328 203 | 11 785 008 | 163 687 |
| Sonae Tafibra International, BV | 7 285 746 | ||
| Sonae Industria (UK), Ltd. | 939 846 | ||
| Tafiber, Tableros de Fibras Ibéricas,SL | 204 335 | 102 170 | |
| 2 553 261 | 65 394 541 | 6 262 384 |
a) At 31 December 2014, the securitization facility of trade receivables had an outstanding principal amounting to EUR 53 242 601. This facility was contracted August 2012 by Sonae Indústria, SGPS, SA together with its subsidiaries Sonae Indústria – Produção e Comercialização de Derivados de Madeira, S. A., Tableros Tradema, S. L., Isoroy S. A. S., Glunz AG, Sonae Tafibra International, B. V. and Sonae Industria (UK) Limited with ING Belgium SA/NV and Finacity Corporation. Presently, this facility will mature September 2018 and is renewable for periods to be agreed upon with the Bank. Next renewal date will be September 2016. On February 2014, maximum nominal amount under this facility was reduced from EUR 100 000 000 to EUR 85 000 000.
Trade receivables securitized amounting to EUR 71 024 505 were kept on the Consolidated Statement of Financial Position at 31 December 2014 as the criteria set out on IAS 39 for their derecognition were not fully met, namely the whole credit risk related to the securitized assets was not completely transferred.
b) In September 2012 Sonae Indústria – Produção e Comercialização de Derivados de Madeira, S. A. contracted a factoring facility of trade receivables for a maximum amount of EUR 5 000 000. This contract may be revoked at any time at a ninety-day notice (which have not happened until the date of these consolidated financial statements). At 31 December 2014, the outstanding principal amounted to EUR 4 445 945.
Trade receivables factored amounting to EUR 5 036 646 were kept on the Consolidated Statement of Financial Position at 31 December 2014 as the criteria set out on IAS 39 for their derecognition were not fully met, namely the whole credit risk related to the factored assets was not completely transferred.
The estimated fair value of transferred asset and of related liabilities is not significantly different from their respective carrying amounts.
Details of finance leases creditors at 31 December 2014 and at 31 December 2013 are as follows:
| Minimum | Present value | |||
|---|---|---|---|---|
| lease payments | of minimum lease payments | |||
| 31.12.2014 | 31.12.2013 | 31.12.2014 | 31.12.2013 | |
| 2014 | 9 334 634 | 5 919 249 | ||
| 2015 | 8 702 976 | 9 344 678 | 5 829 498 | 6 440 158 |
| 2016 | 8 795 008 | 8 610 305 | 6 485 136 | 6 285 401 |
| 2017 | 6 853 803 | 6 925 132 | 5 044 058 | 5 111 645 |
| 2018 | 12 425 684 | 12 429 887 | 11 150 419 | 11 154 117 |
| 2019 | 505 765 | 476 274 | ||
| after 2019 (2018) | 293 345 | 841 878 | 284 131 | 801 396 |
| 37 576 581 | 47 486 514 | 29 269 516 | 35 711 966 | |
| Lease creditors - current | 5 829 498 | 5 558 615 | ||
| Lease creditors - non current | 23 440 018 | 30 153 351 |
Assets recognized under finance lease arrangements are stated on note 11.
The amounts stated under cash receipts arising from loans obtained and cash payment arising from loans obtained, on financing activities of the Consolidated Statement of Cash Flows include the rollover of commercial paper programmes detailed on note 26.1.
The fair value of derivative instruments is stated as follows:
| Other current assets | Other current liabilities | ||||
|---|---|---|---|---|---|
| 31.12.2014 | 31.12.2013 | 31.12.2014 | 31.12.2013 | ||
| Derivatives at fair value through profit or loss: Exchange rate forwards |
99 079 | 77 618 | 35 529 | ||
| 99 079 | 77 618 | 35 529 |
They consist of exchange rate derivatives (forwards) over which no hedge accounting was applied.
The fair value of exchange rate forwards was determined using derivative valuation software and external appraisals when software do not allow some derivatives to be valued, and consisted in updating the receivable/payable amount at maturity date to the balance sheet date (level 2 of fair value hierarchy). Receivable/payable amount, which was used for valuing, corresponds to the amount denominated in foreign currency multiplied by the difference between the contracted exchange rate and the market exchange rate at the maturity date that was determined at valuation date (forward exchange rate determined between valuation and maturity date. using market information).
Gains and losses resulting from changes in fair value are stated under the item Adjustments to fair value of financial instruments at fair value through profit or loss (note 41), which corresponds to a net loss of EUR 82 330 (net gain of EUR 354 362 at 31 December 2013).
Derivative instruments recognized at fair value through profit or loss held by the Group at 31 December 2014 fully mature in 2015.
In 2014 and 2013 no derivative financial instruments at fair value through reserves were contracted.
Liquidity risk described in note 2.26, c) related to gross debt referred to in note 26, can be analysed as follows:
| 31.12.2014 | |||
|---|---|---|---|
| Maturity of gross debt (note 26) |
Interest | Total | |
| 2015 | 119 280 500 | 26 447 965 | 145 728 465 |
| 2016 | 74 669 801 | 20 859 607 | 95 529 408 |
| 2017 | 16 944 096 | 18 147 286 | 35 091 382 |
| 2018 | 104 034 410 | 16 200 031 | 120 234 442 |
| 2019 | 115 113 170 | 10 452 811 | 125 565 980 |
| 2020 | 85 105 647 | 6 015 469 | 91 121 116 |
| After 2020 | 65 451 145 | 3 851 115 | 69 302 260 |
| 580 598 769 | 101 974 284 | 682 573 053 |
| 31.12.2013 | |||
|---|---|---|---|
| Maturity of gross debt (note 26) |
Interest | Total | |
| Restated | |||
| 2014 | 428 921 584 | 24 496 632 | 453 418 216 |
| 2015 | 115 967 016 | 16 669 220 | 132 636 236 |
| 2016 | 65 581 309 | 9 434 045 | 75 015 354 |
| 2017 | 77 604 446 | 4 557 111 | 82 161 557 |
| 2018 | 16 297 804 | 1 450 677 | 17 748 481 |
| 2019 | 491 111 | 36 145 | 527 256 |
| After 2019 | 414 494 | 14 090 | 428 584 |
| 705 277 764 | 56 657 920 | 761 935 684 |
The calculation of interest in the previous table was based on interest rates at 31 December 2014 and 2013 applicable to each item of debt. Gross debt maturing in 2015 (2014) includes scheduled repayment of debt along with the repayment of debt as at end 2014 (2013) which is maturing within less than one year.
Maturities for the remaining financial instruments are stated on the respective notes.
Taking into consideration the level of overall debt and, in particular, debt matured in 2014 and maturing in 2015, which amounts to a total EUR 551 million, since third quarter 2013 Sonae Indústria has been focusing on identifying alternative long-term financing solutions that could
provide the necessary time to implement the Company's strategic plan, by accomplishing a considerable reduction in debt amounts falling due in 2014 and 2015, while, at the same time, allowing it to receive support from its stakeholders, namely its shareholders and main fund providers.
As a result of this analysis, the Company entered into negotiations with its two main creditor banks, which represented about 55% of its consolidated debt, at 30 June 2014. Under the terms of these negotiations, the Company obtained from these two banks the refinancing of an amount of EUR 319 million, with extension of the respective final maturities by between 6 to 8 years, including a minimum grace period for principal repayment of 3 years and a reduction of the respective spreads. Still in 2014, a securitization facility of trade receivables was refinanced, with an extension of renewal date until 30 September 2016. In third quarter 2014, share capital was increased by EUR 112 million, which was a condition for the aforementioned agreements to become effective and which produced a reduction in consolidated debt, an extension in maturities and a reduction in financial charges.
For several years now the Group has maintained a series of bank and commercial paper credit facilities to meet treasury needs, for terms typically of up to 1 year, renewable with the agreement of the respective credit entities. At 31 December 2014, the total limit contracted under these short-term lines of credit and commercial paper, with guaranteed subscription, not subject of renegotiation or extended maturities during the negotiations with the two main creditor banks, amounted to EUR 56.5 million. In addition, in 2013 Sonae Indústria contracted a Commercial Paper Programme with no underwriting guarantee by any bank for the placement of issues with institutional investors for terms of 7 up to 364 days. At 31 December 2014, the amount contracted under this programme was EUR 100 million, of which EUR 17.5 million was placed with investors (with maturity until April 2015).
Notwithstanding this capital increase and the agreement with the two leading fund providers, the banks participating in these short-term credit lines have a contractual right to not renew the credit operations in question at maturity. In a similar manner, the Company cannot foresee the level of subscription of its Commercial Paper under this programme that has no underwriting guarantee. In the event of these operations not being renewed, in order to service its debt Sonae Indústria would have to find alternative sources of short-term financing. We believe, however, that the benefits arising from the agreements reached in 2014 with the main fund providers along with the capital increase will have positive effects on the probability of further renewals of these credit lines, as well as on the possibility of obtaining new short-term credit lines from other banks. On that sense, the Company has been contacting new banks aiming to contracting new credit lines, which has raised expectations for new financing operations during first quarter 2015.
The analysis of interest rate risk described on note 2.26, b), i), consisted in calculating the way net profit before tax for 2014 and 2013 would have been impacted if there would have been a change of +0.75 or -0.75 percentage points in actual interest rates of the corresponding periods:
| Sensitivity Analysis | ||||||
|---|---|---|---|---|---|---|
| 2014 | 2013 | |||||
| "Notional" (Euros) | Effect in Profit and Loss (Euros) |
"Notional" (Euros) | Effect in Profit and Loss (Euros) |
|||
| 0.75% | -0.75% | 0.75% | -0.75% | |||
| Gross Debt | ||||||
| EUR | 508 770 700 | -3 744 320 | 3 744 320 | 644 988 066 | -3 590 896 | 3 590 896 |
| GBP | 1 136 581 | - 8 317 | 8 317 | 873 037 | - 9 893 | 9 893 |
| CAD | 48 914 974 | - 152 838 | 152 838 | 32 110 269 | - 274 683 | 274 683 |
| ZAR | 14 693 309 | - 90 936 | 90 936 | 17 198 270 | - 134 698 | 134 698 |
| 573 515 564 | -3 996 411 | 3 996 411 | 695 169 642 | -4 010 170 | 4 010 170 | |
| Bank deposits and other treasury applications |
||||||
| EUR | 1 428 027 | 5 727 | - 5 727 | 1 428 027 | 11 497 | - 11 497 |
| 1 428 027 | 5 727 | - 5 727 | 1 428 027 | 11 497 | - 11 497 | |
| -3 990 684 | 3 990 684 | 696 597 669 | -3 998 673 | 3 998 673 |
Gross debt on the table above excludes bank overdrafts and borrowings which are not subject to change in interest rate. Bank deposits and other treasury applications in the table above exclude demand deposits.
Considering Euribor 6 months as a reference indicator for Euro interest rates, a change of 0.75 percentage points corresponds to 7.7 times the standard deviation of that variable in 2014 (35.7 times in 2013).
With respect to exchange rate risk, described in note 2.26., b), ii), the following calculations were performed:
a) Sensitivity analysis of amounts denominated in a currency other than the functional currency of each company included in the consolidation, by considering a change of +1% and -1% in actual 2014 and 2013 exchange rates.
| Amount denominated in foreign currency |
Eur equivalent | Sensitivity analysis | ||||||
|---|---|---|---|---|---|---|---|---|
| 31.12.2014 | 31.12.2013 | 31.12.2014 | 31.12.2013 | 2014 | 2013 | |||
| -1% | 1% | -1% | 1% | |||||
| GBP | 16 522 408 | 17 795 110 | 21 212 459 | 21 344 700 | - 212 125 | 212 125 | - 213 447 | 213 447 |
Sensitivity refers to the effect that -1% and 1% changes in closing exchange rates for 2014 and 2013 would have on net exchange differences disclosed on note 41.
ii) The remaining financial assets and liabilities do not include any amounts denominated in currencies other than the functional currency of the respective subsidiary which may represent any relevant exchange rate risks.
b) Sensitivity analysis of existing derivatives to hedge the exchange rate risk set out in the previous point:
At the closing date of these consolidated financial statements, existing derivative instruments to hedge the exchange rate risk amounted to irrelevant values (note 27).
Credit risk described in note 2.26, a) is mostly reflected through the amount stated in Trade Debtors (note 19). No relevant differences between the amounts recognized and the corresponding estimated fair value were identified.
At 31 December 2014 and 31 December 2013 details of Other non-current liabilities were as follows:
| 31.12.2014 | 31.12.2013 | |
|---|---|---|
| Restated | ||
| Other creditors | 241 495 | 242 179 |
| Financial instruments | 241 495 | 242 179 |
| Other creditors | 41 758 831 | 53 789 229 |
| Liabilities out of scope of IFRS 7 | 41 758 831 | 53 789 229 |
| Total | 42 000 326 | 54 031 408 |
Other creditors include EUR 28 648 958 (EUR 35 727 688 at 31 December 2014) related to deferred investment subventions and EUR 12 377 600 (EUR 18 561 400 at 31 December 2013) related to the fine imposed by the German Competition Authority, to be paid until 2017.
Various Group companies assumed the liability of giving their employees cash contributions to pension plans for old age, incapacity, early retirement and survival. These contributions are determined as a percentage that increases as a result of the number of years that the employee has worked at the company, and which is applied to a salary table that is negotiated on a yearly basis. Furthermore, some subsidiaries have the legal obligation to pay their employees some lump sum amounts when they get retired.
Current liabilities associated with past years of service are evaluated every year through actuarial studies and based on the "Projected Unit Credit" methodology. Actuarial assumptions employed on the last report prepared at 31 December 2014 and 2013 were:
| Germany | ||||||||
|---|---|---|---|---|---|---|---|---|
| Glunz AG | GHP GmbH | Tool GmbH | Impaper | |||||
| 31.12.2014 31.12.2013 | 31.12.201431.12.2013 31.12.2014 31.12.2013 |
31.12.201431.12.2013 | ||||||
| Richttafeln | Richttafeln | Richttafeln | Richttafeln | Richttafeln | Richttafeln | Richttafeln | Richttafeln | |
| Mortality table | 2005 G | 2005 G | 2005 G | 2005 G | 2005 G | 2005 G | 2005 G | 2005 G |
| Salary growth rate | 2,0% | 2,0% | 0,0% | 0,0% | 0,0% | 0,0% | 2,0% | 2,0% |
| Return on fund | 2,45% | 3,5% | 2,45% | 3,5% | 2,45% | 3,5% | 2,45% | 3,5% |
| Actuarial tecnical rate | 2,45% | 3,5% | 2,45% | 3,5% | 2,45% | 3,5% | 2,45% | 3,5% |
| Pension growth rate | 1,70% | 1,75% | 1,70% | 1,75% | 1,70% | 1,75% | 1,70% | 1,75% |
| South Africa | France | Portugal | ||||
|---|---|---|---|---|---|---|
| 31.12.2014 31.12.2013 | 31.12.2014 31.12.2013 | 31.12.2014 31.12.2013 | ||||
| Mortality table | PA(90)-2 | PA(90) | INSEE 2007-2009 |
INSEE 2006-2008 |
TV 88/90 | TV 88/90 |
| Salary growth rate | 8,1% | 8,0% | 2,0% | 2,0% | 3,0% | 3,0% |
| Return on fund | 11,95% | 9,5% | - | - | 2,7% | 3,3% |
| Actuarial tecnical rate | 9,0% | 9,5% | 2,0% | 3,0% | 3,0% | 4,0% |
| Pension growth rate | 5,3% | 5,3% | - | - | 0,0% | 0,0% |
| Trend rate of medical aid | ||||||
| obligation | 0.7% | 1,2% |
Benefit plans set up in previous periods by several Group companies are as follows:
The employees of Sonae Novobord (PTY) have the following benefit scheme:
Defined contribution plan composed of a number of assets that are managed by a third party. The Company is obliged to deliver the defined contributions. The amount of EUR 477 484 was included in the item Staff expenses, on the Consolidated Income Statement, during the period. At 31 December 2014, no contributions were outstanding or unpaid.
Defined Benefit plan with a fund managed by a third party under South African pension fund law. Present value of the defined benefit liability is calculated in accordance with International Accounting Standard 19, taking into consideration applicable law, and based on actuarial reports performed by an independent party. This plan comprises obligations for retirement pensions and survivor's pensions.
Post-Retirement Health Benefit scheme under which the Company will provide for 50% of eligible health expenses incurred after the employee's retirement.
The actuarial discount rate of 9.0%, which was used for calculating the defined benefit liability of Sonae Novobord (Pty) Ltd, corresponds to the rate of return of zero coupon South African government bonds with maturity corresponding to the average duration of the defined benefit liability. This rate of return was calculated based on the yield curve of South African zero coupon government bonds published by the Bond Exchange of South Africa, taking into consideration that corporate bond market is not developed in this country.
The estimated average duration of the defined benefit obligation recognized by Sonae Novobord is 18.4 years.
In the actuarial report carried out on 31 December 2014, the defined benefit liability amounted to EUR 860 985.
Glunz AG, GHP GmbH, Too GmbH and Impaper Europe GmbH & Co. KG have funded defined benefit plans. The plan is calculated according to International Accounting Standard 19, and based on actuarial reports carried out by an independent party.
The actuarial discount rate of 2.45% used for calculating defined benefit liabilities of German subsidiaries corresponds to the weighted average rate obtained by applying the yield curve of high quality corporate bonds, which is calculated based on information published by Bloomberg of corporate bonds rated at least AA by at least one of the main international rating agencies.
The average duration of the recognized defined benefit obligation is:
In accordance with the actuarial reports carried out at 31 December 2014, these companies' defined benefit liabilities amounted to EUR 23 535 014.
Upon retirement of their employees, Isoroy SAS and Darbo SAS are obliged to pay a lump sum defined under the terms of the sector's collective labour agreement.
The actuarial discount rate of 2%, which was used for calculating the defined benefit liability of French subsidiaries, is based on the rate of return of AA-rated corporate bonds maturing within more than ten years, from Markit iBoxx index.
The average duration of the recognized defined benefit obligation is:
An actuarial report calculated the liabilities of the two companies at 31 December 2014 to amount to EUR 729 578. These liabilities were reclassified as Liabilities directly associated to non-current assets classified as available for sale.
Various Group companies have a defined benefit plan and funds managed by third parties, calculated in accordance with International Accounting Standard 19 and based on actuarial studies carried out by independent parties. Employees of eight companies hired until 31 December 1994 are covered by this plan under which they will receive as from retirement, a life-long monthly payment equivalent to 20% of their salary at their retirement date. Employees may choose to be paid a lump sum instead of a monthly amount.
The actuarial discount rate of 3.0% used for calculating the defined benefit liability of Portuguese subsidiaries was obtained from the yield curves of high quality zero coupon government bonds from the Euro Zone, plus a spread, determined based on iTaxx Europe Main index.
The average duration of the defined benefit obligation recognized by the Portuguese subsidiaries is 22 years.
An actuarial report calculated the liabilities of these companies on 31 December 2014 to be EUR 2 883 501.
The main risk to which these defined benefit plans expose the Group is the liquidity risk. At 31 December 2014 assets funding the plans represented 21.1% (21.9% at 31 December 2013) of the defined benefit obligation. However, this risk is mitigated by the long average duration of the Group's defined benefit liabilities and by the fact that employees do not retain any right to benefits if they terminate work.
The main changes, during the periods ending 31 December 2014 and 31 December 2013, to the present value of the defined benefit obligations are presented as follows:
| 31.12.2014 | 31.12.2013 | |||||
|---|---|---|---|---|---|---|
| Plan without fund |
Plan with fund |
Total | Plan without fund |
Plan with fund |
Total | |
| (+) Opening balance of defined benefit obligations' present value | 2 131 333 | 30 045 452 | 32 176 785 | 2 405 594 | 32 623 748 | 35 029 342 |
| (+) Interest cost | 96 408 | 1 255 331 | 1 351 739 | 113 978 | 1 375 759 | 1 489 737 |
| (+) Current service cost | 52 882 | 370 828 | 423 710 | 85 942 | 435 792 | 521 734 |
| (+) Remeasurements: | ||||||
| Due to change in financial assumptions | 152 629 | 4 076 172 | 4 228 801 | - 193 883 | 252 855 | 58 972 |
| Due to change in demographic assumptions | 95 239 | - 385 180 | - 289 941 | 74 141 | 191 341 | 265 482 |
| Due to experience adjustements | - 205 198 | - 247 482 | - 452 680 | 47 309 | -1 401 486 | -1 354 177 |
| (+) Recognised past service cost | - 682 112 | - 682 112 | - 21 070 | - 290 906 | - 311 976 | |
| (-) Paid pensions | 82 297 | 2 094 203 | 2 176 500 | 120 640 | 1 939 680 | 2 060 320 |
| (+) Exchange rate effect | 31 677 | 136 197 | 167 874 | - 260 038 | -1 201 971 | -1 462 009 |
| (-) Amount reclassified as Liability directly associated to non-current assets | ||||||
| classified as available for sale | 729 578 | 729 578 | ||||
| (=) Closing balance of defined benefit obligations' present value | 860 983 | 33 157 115 | 34 018 098 | 2 131 333 | 30 045 452 | 32 176 785 |
During 2014 and 2013 the fair value of the plan assets changed as follows:
| 31.12.2014 | 31.12.2013 | |
|---|---|---|
| (+) Opening balance of plan assets | 7 060 840 | 7 349 940 |
| (+) Contribution to plan assets: | ||
| Employees | 22 547 | 24 583 |
| Employer | 169 398 | 672 293 |
| Interest income | 492 296 | 422 820 |
| (+) Remeasurements | 65 269 | 388 682 |
| (-) Paid pensions | 799 739 | 629 855 |
| (+) Exchange rate effect | 153 201 | - 1 167 623 |
| (=) Closing balance of plan assets | 7 163 812 | 7 060 840 |
Funding assets do not include any assets occupied or used by the Group and include approximately EUR 12 000 of securities issued by the Company or its subsidiaries.
At 31 December 2014 and 31 December 2013, the amount of liabilities for defined benefits recognized in the Consolidated Statements of Financial Position is detailed as follows:
| 31.12.2014 | 31.12.2013 | |
|---|---|---|
| (+) Present value of defined benefit obligations | 34 018 098 | 32 176 785 |
| (-) Fair value of plan assets | 7 163 813 | 7 060 839 |
| (+)Asset ceiling | 425 215 | 535 882 |
| (=) Defined benefit liability | 27 279 500 | 25 651 828 |
Movements occurred in defined benefit liability during 2014 and 2013 are as follows:
| 31.12.2014 | 31.12.2013 | |
|---|---|---|
| (+) Opening balance of defined benefit liability's present value | 25 651 828 | 27 679 403 |
| (+) Interest cost | 1 351 739 | 1 489 737 |
| (-) Interest income | 492 295 | 422 819 |
| (+) Current service cost | 423 710 | 521 734 |
| Remeasurements, of which: | ||
| Due to change in financial assumptions | 4 228 801 | 58 972 |
| Due to change in demographic assumptions | - 289 941 | 265 482 |
| Due to experience adjustements | - 452 680 | -1 354 177 |
| Remeasurements of plan assets | 65 269 | 388 682 |
| Contribution to plan assets | ||
| (-) Employees | 22 547 | 24 583 |
| (-) Employer | 169 398 | 672 293 |
| (+) Recognised past service cost | - 682 112 | - 311 976 |
| (-) Paid pensions | 1 376 761 | 1 430 466 |
| (+) Exchange rate effect | 14 672 | - 294 386 |
| (+)Asset ceiling | - 110 669 | 535 882 |
| (-) Amount reclassified as Liability directly associated to non | ||
| current assets classified as available for sale | 729 578 | |
| (=) Closing balance of defined benefit liability's present value | 27 279 500 | 25 651 828 |
Sensitivity of the Health Benefit scheme's obligations can be analysed as follows:
| 2014 | ||||||
|---|---|---|---|---|---|---|
| - 1,0 pp | Valuation basis |
+ 1,0 pp | - 1,0 pp | Valuation basis |
+ 1,0 pp | |
| -1,0% | 0,0% | +1,0% | -1,0% | 0,0% | +1,0% | |
| Defined benefit obligation | 1 005 338 | 860 985 | 746 629 | 971 329 | 851 466 | 752 129 |
The valuation basis refers to the real growth rate of health expenses, which was included in the actuarial assumptions disclosed herewith.
Sensitivity of the defined benefit obligation, excluding the health benefit scheme, is as follows:
| 2014 | 2013 | |||||
|---|---|---|---|---|---|---|
| Valuation | Valuation | |||||
| -0,5 pp | basis | +0,5 p | -0,5 pp | basis | +0,5 p | |
| Defined benefit obligation | 36 615 768 | 33 886 691 | 31 547 504 | 33 628 220 | 31 325 319 29 233 630 |
The valuation basis refers to the actuarial discount rate that was included in the actuarial assumptions disclosed herewith.
At 31 December 2014 and 31 December 2013, Trade creditors stated on the Consolidated Statements of Financial Position had the following maturities:
| MATURITY OF TRADE CREDITORS | ||
|---|---|---|
| 31.12.2014 | 31.12.2013 Restated |
|
| To be paid | ||
| < 90 days | 151 284 832 | 149 617 779 |
| 90 - 180 days | 4 381 508 | 2 069 288 |
| > 180 days | 712 652 | 1 411 645 |
| 156 378 992 | 153 098 712 |
At 31 December 2014 and 31 December 2013 State and other public entities had the following composition:
| 31.12.2014 | 31.12.2013 | |
|---|---|---|
| Restated | ||
| State and other public entities | ||
| Income Tax | 2 614 128 | 2 995 079 |
| Value Added Tax | 3 072 800 | 2 799 857 |
| Social Security Contribution | 2 193 538 | 4 347 472 |
| Others | 1 739 203 | 2 043 829 |
| 9 619 669 | 12 186 237 |
| 31.12.2014 | 31.12.2013 | |
|---|---|---|
| Restated | ||
| Derivatives | 35 529 | |
| Tangible fixed assets suppliers | 6 064 556 | 4 132 686 |
| Other creditors | 3 934 020 | 4 521 968 |
| Financial instruments | 10 034 105 | 8 654 654 |
| Other creditors | 9 181 367 | 4 299 026 |
| Accrued expenses: | ||
| Insurances | 1 227 009 | 194 182 |
| Personnel expenses | 14 320 967 | 16 289 224 |
| Accrued financial expenses | 5 656 004 | 7 048 783 |
| Rebates | 15 322 111 | 17 140 989 |
| External supplies and services | 9 570 495 | 10 076 761 |
| Other accrued expenses | 6 147 430 | 8 039 729 |
| Deferred income: | ||
| Investment subventions | 6 327 581 | 7 286 044 |
| Other deferred income | 148 937 | 784 481 |
| Liabilities out of scope of IFRS 7 | 67 901 901 | 71 159 219 |
| Total | 77 936 006 | 79 813 873 |
| 31.12.2014 | < 90 days | 90 - 180 days | > 180 days | Total |
|---|---|---|---|---|
| Maturity of current fixed assets' suppliers | 5 588 768 | 128 893 | 346 895 | 6 064 556 |
| Maturity of Other current creditors | 3 372 401 | 181 246 | 380 373 | 3 934 020 |
| 8 961 169 | 310 139 | 727 268 | 9 998 576 | |
| Restated | |||||||
|---|---|---|---|---|---|---|---|
| 31.12.2013 | < 90 days | 90 - 180 days | > 180 days | Total | |||
| Maturity of current fixed assets' suppliers | 3 464 087 | 242 345 | 426 254 | 4 132 686 | |||
| Maturity of Other current creditors | 4 303 477 | 21 447 | 197 044 | 4 521 968 | |||
| 7 767 564 | 263 792 | 623 298 | 8 654 654 |
Movements occurred in provisions and accumulated impairment losses during the periods ended 31 December 2014 and 31 December 2013 were as follows:
| 31.12.2014 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Description | Opening balance |
Exchange rate effect |
Increase | Utilization | Reversion | Other changes |
Closing balance |
|
| Impairment losses: | ||||||||
| Tangible fixed assets | 65 372 467 | 47 900 930 | 5 855 672 | - 59 373 293 48 044 432 | ||||
| Goodwill | 7 727 749 | 51 172 | 7 778 921 | |||||
| Intangible assets | 19 242 | 17 357 | - 5 766 | 30 833 | ||||
| Other non-current assets | 10 931 182 | 10 931 182 | ||||||
| Trade debtors | 24 524 620 | 96 028 | 3 912 039 | 1 510 989 | - 793 625 26 228 073 | |||
| Other debtors | 3 502 | 3 502 | ||||||
| Subtotal impairment losses | 108 578 762 | 147 200 | 51 830 326 | 7 366 661 | - 60 172 684 93 016 943 | |||
| Provisions: | ||||||||
| Litigations in course | 2 063 278 | 4 518 | 559 735 | - 3 517 | 1 504 544 | |||
| Warranties to customers | 631 797 | 454 | 90 700 | 541 547 | ||||
| Restructuring | 562 548 | 21 005 | 16 903 793 | 11 432 274 | 6 055 072 | |||
| Other | 5 419 376 | 823 028 | 1 458 432 | - 89 237 | 4 694 739 | |||
| Subtotal provisions | 8 676 999 | 21 459 | 17 731 339 | 13 541 141 | - 92 754 12 795 901 | |||
| Subtotal impairment losses and provisions | 117 255 761 | 168 659 | 69 561 665 | 13 541 141 | 7 366 661 | - 60 265 438 105 812 845 | ||
| Other losses: | ||||||||
| Investments | 36 985 875 | 36 985 875 | ||||||
| Write-down to net realizable value of | ||||||||
| inventories | 6 708 161 | 15 377 | 4 986 548 | 4 343 293 | - 3 201 524 | 4 165 268 | ||
| Total | 160 949 797 | 184 036 | 74 548 213 | 13 541 141 | 11 709 954 | - 63 466 962 146 963 988 |
| 31.12.2013 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Restated | ||||||||||
| Opening | Exchange | Changes to | Other | |||||||
| Description | balance | rate effect | perimeter | Increase | Utilization | Reversion | changes | Closing balance | ||
| Impairment losses: | ||||||||||
| Tangible fixed assets | 32 922 834 | 37 741 500 | 6 736 192 | 1 444 325 | 65 372 467 | |||||
| Goodwill | 7 727 749 | 7 727 749 | ||||||||
| Intangible assets | 19 242 | 19 242 | ||||||||
| Other non-current assets | 10 931 182 | 10 931 182 | ||||||||
| Trade debtors | 25 156 732 | - 767 287 | 4 540 387 | 2 204 158 | - 2 201 054 | 24 524 620 | ||||
| Other debtors | 16 111 | - 12 609 | 3 502 | |||||||
| Subtotal impairment losses | 69 046 101 | - 767 287 | 50 009 636 | 8 940 350 | - 769 338 | 108 578 762 | ||||
| Provisions: | ||||||||||
| Litigations in course | 2 150 693 | 126 114 | 187 000 | - 26 529 | 2 063 278 | |||||
| Warranties to customers | 674 770 | - 362 | 42 611 | 631 797 | ||||||
| Restructuring | 10 911 412 | - 85 774 | 86 800 | 8 464 460 | 1 885 430 | 562 548 | ||||
| Other | 5 638 746 | - 6 025 | 88 069 | 4 234 448 | 3 933 034 | 5 419 376 | ||||
| Subtotal provisions | 19 375 621 | - 92 161 | 300 983 | 12 928 519 | 1 885 430 | 3 906 505 | 8 676 999 | |||
| Subtotal impairment losses and provisions | 88 421 722 | - 859 448 | 50 310 619 | 12 928 519 | 10 825 780 | 3 137 167 | 117 255 761 | |||
| Other losses: | ||||||||||
| Investments | 36 985 875 | 36 985 875 | ||||||||
| Write-down to net realizable value of | ||||||||||
| inventories | 8 748 354 | - 77 864 | 4 817 972 | 5 886 981 | - 893 320 | 6 708 161 | ||||
| Total | 134 155 951 | - 937 312 | 55 128 591 | 12 928 519 | 16 712 761 | 2 243 847 | 160 949 797 |
Impairment losses are offset against the corresponding asset on the Consolidated Statement of Financial Position.
Increase and utilization of provisions and impairment losses are stated on the Consolidated Income Statement as follows:
| 2014 | 2013 | |||||
|---|---|---|---|---|---|---|
| Restated | ||||||
| Losses | Gains | Total | Losses | Gains | Total | |
| Cost of sales | 1 285 254 | 1 085 079 | 200 175 | 1 126 915 | 1 778 604 | - 651 689 |
| (Increase) / decrease in production | 1 383 720 | 1 910 759 | - 527 039 | 3 124 773 | 3 515 299 | - 390 526 |
| Provisions and impairment losses | 22 446 298 | 12 160 481 | 10 285 817 | 21 353 383 | 20 885 952 | 467 431 |
| Staf expenses | 190 552 | 872 593 | - 682 041 | 39 222 | 1 349 873 | - 1 310 651 |
| Profit / (loss) from discontinued operations | 49 242 389 | 9 222 183 | 40 020 206 | 29 484 298 | 2 111 552 | 27 372 746 |
| Total (Consolidated Income Statement) | 74 548 213 | 25 251 095 | 49 297 118 | 55 128 591 | 29 641 280 | 25 487 311 |
Provisions and impairment losses recognized under Profit or loss from discontinued operations, on the Consolidated Income statement, are included under the following items detailed on note 43:
| 31.12.2014 | 31.12.2013 | ||||||
|---|---|---|---|---|---|---|---|
| Losses | Gains | Total | Losses | Gains | Total | ||
| Cost of sales (discontinued operations-note 43) | 1 858 290 | 1 092 057 | 766 233 | 255 459 | 281 073 | - 25 614 | |
| Change in production (discontinued operations-note 43) | 459 284 | 255 398 | 203 886 | 310 826 | 312 005 | - 1 179 | |
| Provisions and impairment losses (discontinued operations-note 43) | 46 914 382 | 7 748 358 | 39 166 024 | 28 918 013 | 1 518 474 27 399 539 | ||
| Staff expenses (discontinued operations-note 43) | 10 433 | 126 370 | - 115 937 | ||||
| Profit/(loss) from discontinued operations, after taxation | 49 242 389 | 9 222 183 | 40 020 206 | 29 484 298 | 2 111 552 27 372 746 |
Movements occurred in impairment losses during the period ended 31 December 2014 were as follows:
| Impairment loss accounted for through: |
Recoverable amounte determined on the basis of: |
|||
|---|---|---|---|---|
| Cash generating unit | Profit or loss for 2014 |
Other comprehensible income for 2014 |
Value in use | Fair value less estimated costs to sell |
| France | 34 210 702 | 16 842 589 | ||
| Linxe | 29 755 738 | 7 582 676 | x | |
| Ussel | 4 454 964 | 9 259 913 | x | |
| Germany | 7 636 506 | |||
| Horn | 4 400 403 | x | ||
| Nettgau | 2 304 958 | x | ||
| Kaisersesch | 931 145 | x | ||
| Iberian Peninsula | 6 053 722 | 2 830 241 | ||
| Betanzos | 2 806 797 | 2 830 241 | x | |
| Pontecaldelas | 1 140 323 | x | ||
| Solsona | 2 106 602 | x | ||
| 47 900 930 | 19 672 830 |
| Impairment loss reversed trough: |
Recoverable amounte determined on the basis of: |
|||
|---|---|---|---|---|
| Cash generating unit | Profit or loss for 2014 |
Other comprehensible income for 2014 |
Value in use | Fair value less estimated costs to sell |
| France | 67 512 | |||
| Ussel | 67 512 | x | ||
| Iberian Peninsula | 5 788 160 | |||
| Linares | 5 008 160 | x | x | |
| Souselas | 780 000 | x | ||
| 5 855 672 | - |
Impairment losses recognized as other comprehensive income for 2014 are included in the item "Revaluation of tangible fixed assets" on the Consolidated Statement of Comprehensive Income, as referred to on note 2.8.
Cash generating units consist of industrial plants whose activity is described on note 45. These plants do not include intangible assets with indefinite useful lives as it is not possible to allocate goodwill recognized on the Consolidated Statement of Financial Position and disclosed on note 14, on a non-arbitrary basis.
Fair value of Pontecaldelas, Solsona, Horn, Kaisersesch and Linxe cash generating units.was determined by independent appraisal on the point of view of continued use. This point of view combines cost method, sales comparison method and extraction method. Cost method consists in determining the cost of replacing each item of tangible fixed assets for a new one, with similar functionality, thereafter adjusted by depreciation that the replaced item was subject to. Sales comparison method consists in identifying market transactions that most resemble the item under valuation. Extraction method consists in extracting the value of land from a similar recently built industrial plant, by identifying all expenditure incurred while building the
plant, which are deducted from the total cost, thereby allowing the extraction of the value of land. This fair value is within the second level of fair value hierarchy.
Ussel and Betanzos cash generating units were not subject to independent appraisal as being units whose tangible assets were reclassified as Non-current assets classified as available for sale, fair value was determined using information gathered from surveys which allowed the Group to estimate that a sale transaction will take place within a twelve-month period, including analysis of similar transactions and contacts with possible buyers. This fair value is within level two of the fair value hierarchy.
Value in use, which was utilized for determining fair value of Nettgau and Linares cash generating units, was calculated in accordance with methodology and drivers disclosed on note 14.
At 31 December 2014, the amount of provisions could be detailed as follows:
During the period, the recognition of provisions for the present value of estimated liabilities did not include any significant amounts.
Provisions and impairment losses on the Consolidated Income Statements are detailed into geographical segment on note 45.
At 31 December 2014 and 31 December 2013 the Group held irrevocable operating leases with the following lease payments:
| Minimun operating | ||||
|---|---|---|---|---|
| lease payments | ||||
| 31.12.2014 | 31.12.2013 | |||
| Restated | ||||
| 2014 | 4 487 949 | |||
| 2015 | 3 547 938 | 2 133 994 | ||
| 2016 | 2 234 468 | 1 218 041 | ||
| 2017 | 1 274 509 | 423 306 | ||
| 2018 | 641 820 | 75 601 | ||
| 2019 | 277 595 | |||
| After 2019 (2018) | 16 366 | |||
| 7 976 330 | 8 355 257 |
During the period, the Group recognized under External Suppliers and Services, on the Consolidated Income Statement, rents related to operating leases for EUR 7 495 000 (EUR 7 956 000 at 31 December 2013).
36.1. Balances and transactions with related parties may be summarized as follows:
| Balances | Accounts receivable | Accounts payable | ||
|---|---|---|---|---|
| 31.12.2014 | 31.12.2013 | 31.12.2014 | 31.12.2013 | |
| Restated | Restated | |||
| Other subsidiaries of the parent company | 355 536 | 275 718 | 3 849 032 | 1 483 156 |
| Joint ventures | 9 585 557 | 14 584 446 | 1 106 626 | 755 080 |
| Transactions | Income | Expenditure | |||
|---|---|---|---|---|---|
| 31.12.2014 | 31.12.2013 | 31.12.2014 | 31.12.2013 | ||
| Restated | Restated | ||||
| Other subsidiaries of the parent company | 1 195 116 | 1 184 445 | 7 407 182 | 7 187 538 | |
| Joint ventures | 6 030 160 | 8 035 037 | 15 530 970 | 11 603 965 |
36.2. Remuneration of the Board of Directors of the Company is detailed as follows:
| 31.12.2014 | 31.12.2013 | |
|---|---|---|
| Short term benefits Medium term benefits |
1 315 777 59 185 |
1 398 573 42 400 |
| 1 374 962 | 1 440 973 |
The amount included under Medium term benefits for 2014, on the previous table, refers to amounts recognized under Staff expenses that relate to members of the Board of Directors.
At 31 December 2014 there were no post retirement liabilities attributed to the members of the board of directors.
36.3. During the period ended 31 December 2014 the Group recognized on these consolidated financial statements the following fees paid to the audit company PricewaterhouseCoopers & Associados, SROC, Lda and respective international network:
| 31.12.2014 | 31.12.2013 | |
|---|---|---|
| Total fees related to audit of end year accounts | 388 413 | 400 124 |
| Total fees related to other realiability assurance services | 217 486 | 35 840 |
| Total fees related to other services | 4 500 | |
| 610 399 | 435 964 |
Details of Other operating income on the Consolidated Income Statement for the periods ended 31 December 2014 and 31 December 2013 are as follows:
| 31.12.2014 | 31.12.2013 | |
|---|---|---|
| Restated | ||
| Gains on disposals of non current investments | 17 400 | |
| Gains on disp. and write off of invest. prop., tang. and intang. assets | 2 300 760 | 1 754 975 |
| Supplementary revenue | 6 243 593 | 9 588 803 |
| Investment subventions | 7 171 219 | 6 768 043 |
| Tax received | 5 796 048 | 4 524 664 |
| Positive exchange gains | 2 328 916 | 1 788 432 |
| Others | 16 033 899 | 1 205 025 |
| 39 874 435 | 25 647 342 |
Tax received includes EUR 4.5 million relating to tax paid upon consumption of gas and electrical power (recognized under External services and suppliers), which were reimbursed in accordance with attained energetic efficiency levels.
Gains on disposal of tangible fixed assets and intangible assets include EUR 1.9 million relating to sale of tangible fixed assets from inactive industrial plants.
An insurance compensation amounting to EUR 13.2 million is included under Others. It was paid by the insurers in the scope of the accident occurred in 2011 in subsidiary Sonae Industria (UK), Ltd and consists of compensation whose payment was dependent on additional investment which was carried out in industrial plants located in Germany and Portugal. This amount was included under Cash receipts arising from Tangible Fixed Assets and Intangible Assets, on the Consolidated Statement of Cash Flows.
Details of Other operating expenses on the Consolidated Income Statement for 2014 and 2013 are as follows:
| 31.12.2014 | 31.12.2013 | |
|---|---|---|
| Restated | ||
| Taxes | 3 783 192 | 4 982 188 |
| Losses on disposals of non current investments | 852 507 | |
| Losses on disp. and write off of invest. prop., tang. and intang. assets | 507 681 | 1 495 536 |
| Negative exchange gains | 2 109 160 | 2 654 815 |
| Others | 2 912 161 | 1 653 032 |
| 9 312 194 | 11 638 078 |
During the period, the Group recognized in several items of the Consolidated Income Statement research and development expenses amounting to EUR 711 000 (EUR 1 048 000 in 2013).
Underlying and non-underlying operating items on the Consolidated Income Statement are detailed as follows:
| Restated | ||||||
|---|---|---|---|---|---|---|
| 31.12.2014 Recurring |
31.12.2014 Non-recurring |
31.12.2014 Total |
31.12.2013 Recurring |
31.12.2013 Non-recurring |
31.12.2013 Total |
|
| Sales | 1 009 035 477 | 515 652 1 009 551 129 | 1 045 562 636 | 748 506 | 1 046 311 142 | |
| Services rendered | 4 980 692 | 4 980 692 | 4 189 876 | 4 189 876 | ||
| Other income and gains | 27 303 237 | 12 571 198 | 39 874 435 | 22 922 214 | 2 725 128 | 25 647 342 |
| Cost of sales | 549 645 551 | - 8 664 207 | 540 981 344 | 560 956 301 | - 99 216 | 560 857 085 |
| (Increase) / decrease in production | 3 377 674 | 427 940 | 3 805 614 | - 436 151 | 751 267 | 315 116 |
| External supplies and services | 248 800 596 | 7 753 248 | 256 553 844 | 263 278 125 | 3 324 781 | 266 602 906 |
| Staff expenses | 133 481 862 | 18 019 279 | 151 501 141 | 150 965 020 | 10 029 980 | 160 995 000 |
| Impairment losses in trade debtors (increase/reduction) | 2 389 143 | - 1 035 | 2 388 108 | 2 334 890 | 2 334 890 | |
| Other expenses and losses | 7 988 925 | 1 323 269 | 9 312 194 | 8 867 088 | 2 770 990 | 11 638 078 |
| Operating profit/(loss) before amortization, depreciation, provisions and impairment losses (except trade debtors) |
95 635 655 | - 5 771 644 | 89 864 011 | 86 709 453 | - 13 304 168 | 73 405 285 |
Non-recurring items include insurance compensation described on note 37 as well as the results of Horn industrial plant, which is undergoing a restructuring process.
Financial results for the periods ended 31 December 2014 and 2013 were as follows:
| 31.12.2014 | 31.12.2013 Restated |
|
|---|---|---|
| Financial expenses: | ||
| Interest expenses | ||
| related to bank loans and overdrafts | 24 369 569 | 18 897 570 |
| related to non convertible debentures | 9 283 684 | 11 144 110 |
| related to finance leases | 3 350 948 | 3 777 034 |
| others | 2 205 537 | 2 724 356 |
| 39 209 738 | 36 543 070 | |
| Losses in currency translation | ||
| related to loans | 1 509 656 | 3 723 022 |
| 1 509 657 | 3 723 022 | |
| Cash discounts granted | 14 212 870 | 15 047 405 |
| Adjustment to fair value of financial instruments at fair value through profit or loss | 629 667 | 240 986 |
| Other finance losses | 6 728 777 | 9 394 263 |
| 62 290 708 | 64 948 746 |
| 31.12.2014 | 31.12.2013 | |
|---|---|---|
| Financial income: | Restated | |
| Interest income | ||
| related to bank loans | 25 331 | 33 761 |
| related to loans to related parties | 8 456 643 | 6 973 117 |
| Others | 70 978 | 118 060 |
| 8 552 952 | 7 124 938 | |
| Gains in currency translation | ||
| related to loans | 2 399 609 | 3 368 425 |
| 2 399 609 | 3 368 425 | |
| Cash discounts obtained | 986 911 | 800 800 |
| Adjustment to fair value of financial instruments at fair value through profit or loss | 547 337 | 595 348 |
| Other finance gains | 62 735 | 87 958 |
| 12 549 544 | 11 977 469 | |
| Finance profit / (loss) | - 49 741 164 | - 52 971 277 |
Corporate income tax accounted for in 2014 and 2013 is detailed as follows:
| 31.12.2014 | 31.12.2013 | |
|---|---|---|
| Restated | ||
| Current tax | 5 810 468 | 6 892 269 |
| Deferred tax | 1 195 326 | - 23 011 402 |
| 7 005 794 | - 16 119 133 |
Reconciliation of consolidated Net profit/(loss) from continuing operations, before tax, with taxation for the year may be detailed as follows:
| 31.12.2014 | 31.12.2013 Restated |
||
|---|---|---|---|
| Consolidated net profit before tax | -35 366 264 | -46 419 606 | |
| Tax rate | 23.00% | 25.00% | |
| Expectable tax | -8 134 241 | -11 604 901 | |
| Differences to foreign tax rates | (+) | -4 851 128 | -3 108 316 |
| Effect of provincial/municipal taxes | (+) | 1 266 555 | 868 034 |
| Consolidation adjustments | (-) | 756 612 | 552 158 |
| Permanent differences | |||
| Non deductible costs | (+) | 6 728 522 | 3 844 561 |
| Non taxed profits | (-) | 3 292 137 | 1 018 423 |
| Tax losses carried forward | |||
| Deferred tax asset recognized on tax losses of previous years | (+) | -2 560 711 | -4 123 937 |
| Deferred tax asset not recognized in complience with IAS 12 | (-) | -12 624 444 | -3 488 068 |
| Utilization of tax losses carried forward whose deferred tax was not recognized in prior periods | (+) | - 142 706 | - 621 598 |
| Reverted deferred tax asset | (+) | 7 586 087 | 1 474 000 |
| Effect of offsetting deferred tax liabilities related to depreciation | (-) | - 833 480 | - 94 567 |
| Effect of change in tax rates | (+) | -1 058 283 | - 29 530 |
| Others | (+) | -1 237 476 | -4 829 500 |
| Consolidated corporate income tax | 7 005 794 | -16 119 133 |
At 31 December 2014, the Group classified as discontinued operations the results of Auxerre and Le Creusot industrial plants, in France, which were sold in April 2014, the results of Pontecaldelas industrial plant, in Spain, whose activity was closed down in first half 2014, and the results of Ussel and Linxe industrial plants, in France, and of Betanzos industrial plant, in Spain, whose assets were reclassified at 31 December 2014 as Non-current assets classified as available for sale (note 17).
As a consequence, net profit or loss of these plants were included under Results of discontinued operations, on the Consolidated Income Statements for the periods ended 31 December 2014 and 2013, and can de detailed as follows:
| 31.12.2014 | 31.12.2013 | |
|---|---|---|
| Sales | 103 172 472 | 150 534 189 |
| Services rendered | 94 482 | 192 172 |
| Other income and gains | 9 967 809 | 1 986 066 |
| Cost of sales | 59 728 792 | 72 348 584 |
| (Increase) / decrease in production | 4 457 979 | - 711 384 |
| External supplies and services | 37 716 936 | 57 858 749 |
| Staff expenses | 24 639 893 | 29 228 285 |
| Depreciation and amortisation | 6 923 441 | 8 083 386 |
| Provisions and impairment losses (increase / reduction) | 39 166 023 | 27 399 539 |
| Other expenses and losses | 2 272 498 | 2 543 607 |
| Operating profit / (loss) | - 61 670 799 | - 44 038 339 |
| Financial expenses | 8 795 516 | 7 505 567 |
| Financial income | 87 447 | 3 715 |
| Net profit/(loss) from descontinued operations, before tax | - 70 378 868 | - 51 540 191 |
| Taxation | 3 128 403 | - 2 924 533 |
| Net profit / (loss) from descontinued operations | - 73 507 271 | - 48 615 658 |
Cash flows arising from discontinued operations, which were included line by line on the Consolidated Statement of Cash Flows, are detailed as follows:
| 31.12.2014 | 31.12.2013 | |
|---|---|---|
| Operating activities | -8 773 424 | -21 595 134 |
| Investment activities | 11 116 134 | 7 521 803 |
| Financing activitues | -6 571 251 | 10 527 336 |
| 31.12.2014 | 31.12.2013 | |||||
|---|---|---|---|---|---|---|
| Net profit/(loss) | Net profit/(loss) | |||||
| from continuing operations |
from discontinued operations |
total | from continuing operations |
from discontinued operations |
total | |
| Net loss | ||||||
| Net loss considered to calculate base earnings per share (Net loss attributable to equity holders of Sonae Indústria) |
- 42 315 604 | - 73 404 581 | - 115 720 185 | - 30 021 717 | - 48 024 200 | - 78 045 917 |
| Effect of potential shares Interest related to convertible bonds (net of tax) |
||||||
| Net loss considered to calculate diluted earnings per share | - 42 315 604 | - 73 404 581 | - 115 720 185 | - 30 021 717 | - 48 024 200 | - 78 045 917 |
| Number of shares | ||||||
| Weighted average number of shares used to calculate basic earnings per share |
1 245 718 540 | 1 245 718 540 | 1 245 718 540 | 140 000 000 | 140 000 000 | 140 000 000 |
| Effect of potential ordinary shares from convertible bonds | ||||||
| Weighted average number of shares used to calculate diluted earnings per share |
1 245 718 540 | 1 245 718 540 | 1 245 718 540 | 140 000 000 | 140 000 000 | 140 000 000 |
| Basic earnings per share | -0.0340 | -0.0589 | -0.0929 | -0.2144 | -0.3430 | -0.5575 |
| Diluted earnings per share | -0.0340 | -0.0589 | -0.0929 | -0.2144 | -0.3430 | -0.5575 |
The main activity of the Group is the production of wood based panels and derivative products through industrial plants and commercial facilities located in Portugal, Spain, France, Germany, United Kingdom, Switzerland, The Netherlands, Canada and South Africa.
At 31 December 2014, the following reportable segments were identified:
Each segment's revenue results mainly from the production and sale of particle board products and derivatives products.
Segmental information related to the Consolidated Income Statement is as follows:
| Turnover | ||||
|---|---|---|---|---|
| External | Intersegment | |||
| 31.12.2014 | 31.12.2013 | 31.12.2014 | 31.12.2013 | |
| Restated | Restated | |||
| Northern Europe | 433 376 580 | 474 645 756 | 25 662 975 | 35 816 828 |
| Southern Europe | 313 423 503 | 310 932 888 | 16 690 436 | 24 432 450 |
| Rest of the world | 267 731 738 | 264 922 374 | ||
| Total segments | 1014 531 821 | 1050 501 018 | 42 353 411 | 60 249 278 |
| Southern Europe | ||||
| Discontinued operations | 103 172 472 | 150 534 189 | ||
Turnover consists of items Sales and Services rendered from the Consolidated Income Statement.
| Cost of sales | |||
|---|---|---|---|
| 31.12.2014 | 31.12.2013 | ||
| Restated | |||
| Northern Europe | 249 846 642 | 280 560 156 | |
| Southern Europe | 156 369 384 | 143 451 687 | |
| Rest of the world | 134 765 318 | 136 845 242 | |
| Total segments | 540 981 344 | 560 857 085 | |
| Southern Europe Discontinued operations |
59 728 792 | 72 348 584 |
| External supplies and services | |||
|---|---|---|---|
| 31.12.2014 | 31.12.2013 | ||
| Restated | |||
| Northern Europe | 108 240 311 | 115 284 481 | |
| Southern Europe | 89 320 882 | 93 246 110 | |
| Rest of the world | 58 992 651 | 58 072 315 | |
| Total segments | 256 553 844 | 266 602 906 | |
| Southern Europe Discontinued operations |
37 716 936 | 57 858 749 |
| Amortization and depreciation | |||
|---|---|---|---|
| 31.12.2014 | 31.12.2013 | ||
| Restated | |||
| Northern Europe | 25 583 062 | 24 906 093 | |
| Southern Europe | 21 685 079 | 20 781 421 | |
| Rest of the world | 16 831 552 | 17 634 403 | |
| Total segments | 64 099 693 | 63 321 917 | |
| Southern Europe Discontinued operations |
6 923 441 | 8 083 386 |
| Provisions and impairment losses | |||
|---|---|---|---|
| 31.12.2014 31.12.2013 |
|||
| Restated | |||
| Northern Europe | 11 926 865 | 2 352 182 | |
| Southern Europe | -2 193 927 | -1 668 002 | |
| Rest of the world | 552 879 | - 216 748 | |
| Total segments | 10 285 817 | 467 432 | |
| Southern Europe Discontinued operations |
39 166 023 | 27 399 539 |
| Operating net profit (loss) | |||
|---|---|---|---|
| 31.12.2014 | 31.12.2013 | ||
| Restated | |||
| Northern Europe | -8 854 323 | - 924 046 | |
| Southern Europe | 7 789 059 | -7 128 428 | |
| Rest of the world | 18 931 873 | 20 003 300 | |
| Total segments | 17 866 609 | 11 950 826 | |
| Southern Europe | |||
| Discontinued operations | -61 670 799 | -44 038 339 |
Finance income and finance charges are not included in the internal system of financial reporting to the chief operating decision maker.
Sales and Services rendered in 2014 and 2013, based on geographic location of the external customers, were the following:
| 2014 | ||
|---|---|---|
| Location of customers | '000 eur | |
| Germany | 261 243 627 | 26% |
| North America | 181 800 795 | 18% |
| Portugal | 115 651 666 | 11% |
| Spain | 118 822 578 | 12% |
| France | 14 602 864 | 1% |
| South Africa | 83 765 277 | 8% |
| United Kingdom | 28 100 717 | 3% |
| Other | 210 544 296 | 21% |
| Total | 1 014 531 821 | 100% |
| 2013 | ||
|---|---|---|
| Location of customers | '000 eur | |
| Restated | ||
| Germany | 271 733 626 | 26% |
| North America | 176 939 923 | 17% |
| Portugal | 110 213 293 | 10% |
| Spain | 113 928 595 | 11% |
| France | 23 651 866 | 2% |
| South Africa | 90 019 244 | 9% |
| United Kingdom | 24 339 691 | 2% |
| Other | 239 674 780 | 23% |
| Total | 1 050 501 018 | 100% |
The internal system of financial reporting does not include information on segmental assets and liabilities. Segmental non-current assets, included under Tangible Fixed Assets, Intangible Assets, Goodwill, Investment Properties and Other Non-current Assets, on the Consolidated Statement of Financial Position, are as follows:
| 31.12.2014 | 31.12.2013 |
|---|---|
| 286 474 665 | 282 987 949 |
| 300 921 917 | 405 387 358 |
| 204 794 425 | 208 854 917 |
| 792 191 007 | 897 230 224 |
| 897 230 224 | |
| 792 191 007 |
Inter-segment transactions were executed at market prices and under identical conditions to those applied to third parties.
The Group has a medium term incentive plan with the characteristics disclosed on note 2.19.
The fair value of services received was determined by reference to the fair value of granted shares, which corresponds to the average price of the Company's shares over the thirty-day period before the Shareholders' General Meeting.
Expenditure recognized under Staff expenses, on the Consolidated Income Statement, was accounted for in accordance with the recognition provisions for Equity-settled share-based payment transactions.
| 31.12.2014 | 31.12.2013 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Opening balance |
Granted | Cancelled | Paid | Closing balance |
Opening balance |
Granted | Cancelled | Closing balance |
|||
| Nr. of shares | 787 612 | 314 669 | 65 605 50 452 | 986 224 | 529 338 | 385 046 | 126 772 | 787 612 | |||
| Fair value | 491 947 | 239 969 | 44 421 21 952 | 665 543 | 358 415 | 219 370 | 85 838 | 491 947 | |||
| Year of payment | 2 017 | 2 016 | |||||||||
| Staff expenses | 208 847 | 130 904 | 21 459 |
In October 2010 Sonae Indústria, SGPS, S. A. received a notice of assessment from tax authorities according to which the loss resulting from the dissolution of its subsidiary Socelpac, SGPS, S.A. in 2006, amounting to EUR 74 million, should be considered at 50% for tax calculation purposes. The company filed a lawsuit challenging this interpretation. According to the information available on this date, the Board of Directors considers that the probability of a negative outcome is low, thus no adjustment was done to current tax and deferred tax asset recognized in these consolidated financial statements.
By the end of 2010 an accident occurred at the subsidiary Sonae Industria (UK) Ltd resulting in two fatalities involving external workers that were carrying out maintenance works in this plant. At the closing date of these consolidated financial statements, it was not possible to estimate the amount of a responsibility not covered by insurance which the company may possibly incur into, although it is the company expectation that it will not significantly affect the consolidated financial statements.
Following the accident occurred in June 2011 in the subsidiary Sonae Industria (UK) Ltd, about 16 000 individuals filed a lawsuit against the company claiming to have suffered as a result of inhalation of smoke caused by the fire. It is the Company's opinion that any liability which it may possibly incur into, whose quantification is not possible at the closing date of these consolidated financial statements, will be totally covered by the insurance policy.
The subsidiary Sonae Industria PCDM provided guarantees amounting to EUR 10 060 360 in favour of tax authorities for suspension of tax enforcement procedures against which this company has filed a lawsuit
The subsidiary Sonae Industria PCDM provided guarantees amounting to EUR 1 663 459 in favour of tax authorities for suspension of tax enforcement procedures against which the subsidiary Agloma Investimentos SGPS has filed a lawsuit.
There were no significant subsequent events (note 2.20).
These consolidated financial statements were approved by the Board of Directors and authorized for issuance on 26 February 2015.
(Free translation from the original in Portuguese)
1 As required by law, we present the Audit Report for Statutory and Stock Exchange Regulatory Purposes on the financial information included in the Directors' Report and in the attached financial statements of Sonae Indústria, SGPS, S.A., comprising the statement of financial position as at 31 December 2014 (which shows total assets of Euro 942,554,387 and total shareholder's equity of Euro 615,981,407 including a net loss of Euro 132,057,822), the statement of income by nature, the statement of comprehensive income, the statement of changes in equity and the statement of cash flows for the year then ended, and the corresponding notes to the accounts.
2 It is the responsibility of the Company's Board of Directors (i) to prepare the Directors' Report and the financial statements which present fairly, in all material respects, the financial position of the Company, the results and the comprehensive income of its operations, the changes in equity and the cash flows; (ii) to prepare historic financial information in accordance with International Financial Reporting Standards as adopted by the European Union and which is complete, true, up-to-date, clear, objective and lawful, as required by the Portuguese Securities Market Code; (iii) to adopt appropriate accounting policies and criteria; (iv) to maintain an appropriate system of internal control; and (v) to disclose any significant matters which have influenced the activity, financial position or results of the Company.
3 Our responsibility is to verify the financial information included in the financial statements referred to above, namely as to whether it is complete, true, up-to-date, clear, objective and lawful, as required by the Portuguese Securities Market Code, for the purpose of issuing an independent and professional report based on our audit.
4 We conducted our audit in accordance with the Standards and Technical Recommendations issued by the Institute of Statutory Auditors which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. Accordingly, our audit included: (i) verification, on a sample basis, of the evidence supporting the amounts and disclosures in the financial statements, and assessing the reasonableness of the estimates, based on the judgments and criteria of the Board of Directors used in the preparation of the financial statements; (ii) assessing the appropriateness of the accounting principles used and their disclosure, as applicable; (iii) assessing the applicability of the going concern basis of accounting; (iv) assessing the overall presentation of the financial statements; and (v) assessing the completeness, truthfulness, accuracy, clarity, objectivity and lawfulness of the financial information.
PricewaterhouseCoopers & Associados - Sociedade de Revisores Oficiais de Contas, Lda. o′Porto Bessa Leite Complex, Rua António Bessa Leite, 1430 - 5º, 4150-074 Porto, Portugal Tel +351 225 433 000 Fax +351 225 433 499, www.pwc.pt Matriculada na CRC sob o NUPC 506 628 752, Capital Social Euros 314.000 Inscrita na lista das Sociedades de Revisores Oficiais de Contas sob o nº 183 e na CMVM sob o nº 9077
PricewaterhouseCoopers & Associados - Sociedade de Revisores Oficiais de Contas, Lda. pertence à rede de entidades que são membros da PricewaterhouseCoopers International Limited, cada uma das quais é uma entidade legal autónoma e independente. Sede: Palácio Sottomayor, Rua Sousa Martins, 1 - 3º, 1069-316 Lisboa, Portugal
5 Our audit also covered the verification that the information included in the Directors' Report is consistent with the financial statements as well as the verification set forth in paragraphs 4 and 5 of Article 451º of the Companies Code.
6 We believe that our audit provides a reasonable basis for our opinion.
7 In our opinion, the financial statements referred to above, present fairly in all material respects, the financial position of Sonae Indústria, SGPS, S.A. as at 31 December 2014, the results and the comprehensive income of its operations, the changes in equity and the cash flows for the year then ended, in accordance with International Financial Reporting Standards as adopted by the European Union and the information included is complete, true, up-to-date, clear, objective and lawful.
8 It is also our opinion that the information included in the Directors' Report is consistent with the financial statements for the year and that the Corporate Governance Report includes the information required under Article 245º-A of the Portuguese Securities Market Code.
9 Without qualifying our opinion expressed in paragraph nº 7 above, we highlight the fact that, as referred to in the note 19 of the notes to the separate financial statements, the company has significantly improved its consolidated working capital, resulting from the share capital increase of circa 112 million euros and the refinancing of circa 254 million euros of debt. The company is currently in negotiation with the financial institutions for the remaining 60 million euros of debt, 47 million euros of capital and 13 million euros of maturing interest and it is expected that part of it still occurs during the first quarter of 2015.
26 February 2015
PricewaterhouseCoopers & Associados – Sociedade de Revisores Oficiais de Contas, Lda. Represented by:
Hermínio António Paulos Afonso, R.O.C.
1 As required by law, we present the Audit Report for Statutory and Stock Exchange Regulatory Purposes on the financial information included in the Directors' Report and in the attached consolidated financial statements of Sonae Indústria, SGPS, S.A , comprising the consolidated statement of financial position as at 31 December 2014 (which shows total assets of Euro 1,085,933,309 and total shareholder's equity of Euro 110,867,647 including negative non-controlling interests of Euro 262,099 and a net loss of Euro 115,720,185), the consolidated statement of income by nature, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and the corresponding notes to the accounts.
2 It is the responsibility of the Company's Board of Directors (i) to prepare the Directors' Report and the consolidated financial statements which present fairly, in all material respects, the financial position of the Company and its subsidiaries, the consolidated results and the consolidated comprehensive income of their operations, the changes in consolidated equity and the consolidated cash flows; (ii) to prepare historic financial information in accordance with International Financial Reporting Standards as adopted by the European Union and which is complete, true, up-to-date, clear, objective and lawful, as required by the Portuguese Securities Market Code; (iii) to adopt appropriate accounting policies and criteria; (iv) to maintain appropriate systems of internal control; and (v) to disclose any significant matters which have influenced the activity, financial position or results of the Company and its subsidiaries.
3 Our responsibility is to verify the financial information included in the financial statements referred to above, namely as to whether it is complete, true, up-to-date, clear, objective and lawful, as required by the Portuguese Securities Market Code, for the purpose of issuing an independent and professional report based on our audit.
4 We conducted our audit in accordance with the Standards and Technical Recommendations issued by the Institute of Statutory Auditors which require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. Accordingly, our audit included: (i) verification that the Company and its subsidiaries' financial statements have been appropriately examined and, for the cases where such an audit was not carried out, verification, on a sample basis, of the evidence supporting the amounts and disclosures in the consolidated financial statements and assessing the reasonableness of the estimates, based on the judgements and criteria of the Board of Directors used in the preparation of the consolidated financial statements; (ii) verification of the consolidation operations and the utilization of
PricewaterhouseCoopers & Associados - Sociedade de Revisores Oficiais de Contas, Lda. o′Porto Bessa Leite Complex, Rua António Bessa Leite, 1430 - 5º, 4150-074 Porto, Portugal Tel +351 225 433 000 Fax +351 225 433 499, www.pwc.pt Matriculada na CRC sob o NUPC 506 628 752, Capital Social Euros 314.000 Inscrita na lista das Sociedades de Revisores Oficiais de Contas sob o nº 183 e na CMVM sob o nº 9077
PricewaterhouseCoopers & Associados - Sociedade de Revisores Oficiais de Contas, Lda. pertence à rede de entidades que são membros da PricewaterhouseCoopers International Limited, cada uma das quais é uma entidade legal autónoma e independente. Sede: Palácio Sottomayor, Rua Sousa Martins, 1 - 3º, 1069-316 Lisboa, Portugal
the equity method; (iii) assessing the appropriateness of the accounting principles used and their disclosure, as applicable; (iv) assessing the applicability of the going concern basis of accounting; (v) assessing the overall presentation of the consolidated financial statements; and (vi) assessing the completeness, truthfulness, accuracy, clarity, objectivity and lawfulness of the consolidated financial information.
5 Our audit also covered the verification that the information included in the [consolidated] Directors' Report is consistent with the financial statements as well as the verification set forth in paragraphs 4 and 5 of Article 451º of the Companies Code.
6 We believe that our audit provides a reasonable basis for our opinion.
7 In our opinion, the consolidated financial statements referred to above, present fairly in all material respects, the consolidated financial position of Sonae Indústria, SGPS, S.A. as at 31 December 2014, the consolidated results and the consolidated comprehensive income of its operations, the changes in consolidated equity and the consolidated cash flows for the year then ended, in accordance with International Financial Reporting Standards as adopted by the European Union and the information included is complete, true, up-to-date, clear, objective and lawful.
8 It is also our opinion that the information included in the Directors' Report is consistent with the consolidated financial statements for the year and that the Corporate Governance Report includes the information required under Article 245º-A of the Portuguese Securities Market Code.
9 Without qualifying our opinion expressed in paragraph nº 7 above, we highlight the fact that, as referred to in the note 28 of the notes to the consolidated financial statements, the group has significantly improved its consolidated working capital, resulting from the share capital increase of circa 112 million euros and the refinancing of circa 319 million euros of debt. The group is currently in negotiation with the financial institutions for the remaining 145 million euros of debt, 119 million euros of capital and 26 million euros of maturing interest and it is expected that part of it still occurs during the first quarter of 2015.
26 February2015
PricewaterhouseCoopers & Associados – Sociedade de Revisores Oficiais de Contas, Lda. Represented by:
Hermínio António Paulos Afonso, R.O.C
(Free translation from the original in Portuguese)
To the Shareholders of Sonae Indústria, SGPS, S.A.
In accordance with current law, statutory norms and the mandate we have been conferred, the Statutory Audit Board presents this report and opinion regarding the management report of Sonae Indústria, S. G. P.S, .S. A. as at 31 December 2014 and further related separate and consolidated financial statements, which are the Board of Directors' responsibility.
During the period the Statutory Audit Board has accompanied the Company's management, the evolution of its activities together with the subsidiaries within the consolidation perimeter and convened meetings with the frequency and extent deemed appropriate. These meetings were attended by the financial area's operational managers, especially the CFO, the internal audit manager and the risk management manager. We kept a close connection with the Statutory External Auditor that kept us informed about the nature and conclusions of performed audit work. The Statutory Audit Board was given by the Board of Directors, the company's services, the subsidiaries included in the consolidation perimeter and the Statutory External Auditor all information and clarifications requested for gaining a greater insight into understanding and assessing the evolution of businesses, performance and financial position as well as the risk management and internal control systems.
The Statutory Audit Board has monitored the process of preparing and disclosing financial information as well as the audit of separate and consolidated financial statements, for which it received from the Statutory External Auditor all requested information and clarifications. Furthermore, within the scope of its competence the Statutory Audit Board has verified the separate and consolidated statements of financial position as at 31 December 2014, the separate and consolidated income statements, the separate and consolidated statements of comprehensive income, the separate and consolidated statements of changes in net shareholders' funds and the separate and consolidated statements of cash flows and corresponding appendices for the period ended on the aforementioned date. It has also verified the management report for the fiscal year ended 31 December 2014 issued by the Board of Directors, and the Statutory External Auditor's Report on the financial statements issued by the Statutory External Auditor, with which the Statutory Audit Board agrees.
In light of the above, the Statutory Audit Board is of the opinion that the information relating to the financial statements in question has been prepared in accordance with the accounting, legal and statutory norms, reflecting a true and appropriate image of the assets and liabilities, the financial position and results of Sonae Indústria, S.G.P.S., S. A. and the subsidiaries included in the consolidation perimeter. The management report duly states the evolution of the businesses, performance and financial position of the company and subsidiaries included in its consolidation perimeter and contains a description of the main risks and uncertainties they are confronted with. Furthermore, the Statutory Audit Board informs that the corporate governance report complies with the provisions of article 245-A of the Portuguese Securities Code.
The Statutory Audit Board expresses its appreciation to the Board of Directors and other departments for their cooperation.
Arising from the above, the Statutory Audit Board is of the opinion that the Shareholders' General Meeting approves the:
In accordance with the provisions of article 245, nr. 1, c) of the Securities Code ("Código dos Valores Mobiliários"), the Statutory Audit Board's members state to the best of their knowledge that the information included in the management report and the other financial statements was prepared in compliance with the applicable accounting standards and provides a true and appropriate image of the assets, liabilities, financial position and results of the company and subsidiaries included in its consolidation perimeter.
Furthermore, the Statutory Audit Board is of the opinion that the management report duly states the evolution of businesses, performance and position of the company and subsidiaries included in its consolidation perimeter, and contains a description of the main risks and uncertainties they are confronted with.
Maia, 27 February 2015
Statutory Audit Board,
Manuel Heleno Sismeiro
____________________________ Armando Luís Vieira de Magalhães
____________________________
___________________________
Jorge Manuel Felizes Morgado
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