Quarterly Report • Nov 30, 2018
Quarterly Report
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| 1. | HIGHLIGHTS 3rd QUARTER 2018 | 2 |
|---|---|---|
| 2. | LEADING INDICATORS | 3 |
| 3. | ANALYSIS OF RESULTS | 4 |
| 4. | OPERATING INDICATORS | 9 |
| 5. | STRATEGIC DEVELOPMENT | 10 |
| 6. | CAPITAL MARKETS | 10 |
| 7. | OUTLOOK FOR 2018 | 11 |
| 8. | CONSOLIDATED FINANCIAL STATEMENTS AND NOTES | 13 |
| 9 months | 9 months | % Change (8) | |
|---|---|---|---|
| in million euros | 2018 | 2017 | 9M 2018 / 9M 2017 |
| Total sales | 1 252.3 | 1 209.8 | 3.5% |
| EBITDA (1) | 340.6 | 300.1 | 13.5% |
| Recurring EBITDA(2) | 338.1 | 300.1 | 12.7% |
| Operating profits | 244.6 | 185.5 | 31.9% |
| Financial results | - 16.5 | - 6.5 | 154.9% |
| Net earnings | 171.8 | 145.8 | 17.8% |
| Cash flow | 267.8 | 260.4 | 7.4 |
| Free Cash Flow (3) | 161.1 | 148.7 | 12.4 |
| Capex | 148.4 | 75.7 | 72.7 |
| Net debt (4) | 731.6 | 742.0 | -10.4 |
| EBITDA/Sales (%) | 27.2% | 24.8% | 2.4 pp |
| ROS | 13.7% | 12.1% | 1.7 pp |
| ROE (5) | 19.6% | 16.4% | 3.2 pp |
| ROCE (6) | 17.3% | 13.2% | 4.2 pp |
| Equity ratio | 47.0% | 46.7% | 0.4 pp |
| Net Debt/EBITDA (7) | 1.65 | 1.87 | -0.23 |
| Q3 | Q2 | % Change (8) | Q3 | % Change (8) | |
|---|---|---|---|---|---|
| in million euros | 2018 | 2018 | Q3 18/Q2 18 | 2017 | Q3 18/Q3 17 |
| Total sales | 435.4 | 432.0 | 0.8% | 397.2 | 9.6% |
| EBITDA (1) | 114.6 | 115.0 | -0.3% | 101.7 | 12.8% |
| Recurring EBITDA(2) | |||||
| Operating profits | 83.8 | 82.9 | 1.1% | 62.0 | 35.0% |
| Financial results | - 5.2 | - 5.9 | -11.8% | 1.8 | -384.3% |
| Net earnings | 52.3 | 66.2 | -21.0% | 49.8 | 5.2% |
| Cash flow | 83.2 | 98.4 | -15.2 | 89.4 | -6.2 |
| Free Cash Flow (3) | 8.5 | 18.6 | -10.1 | 75.9 | -67.4 |
| Capex | 71.2 | 48.6 | 22.5 | 40.5 | 30.7 |
| Net debt (4) | 731.6 | 740.1 | -8.5 | 742.0 | -10.4 |
| EBITDA/Sales (%) | 26.3% | 26.6% | -0.3 pp | 25.6% | 0.7 pp |
| ROS | 12.0% | 15.3% | -3.3 pp | 14.4% | -2.4 pp |
| ROE (5) | 17.9% | 23.3% | -5.4 pp | 20.5% | -2.6 pp |
| ROCE (6) | 18.5% | 17.9% | 0.6 pp | 15.4% | 3.1 pp |
| Equity ratio | 47.0% | 46.8% | 0.2 pp | 44.9% | 2.1 pp |
| Net Debt/EBITDA (7) | 1.65 | 1.62 | 0.03 | 1.84 | -0.20 |
(1) Operating profits + depreciation + provisions;
(2) Recurrent EBITDA excludes effect of sale of pellets business + anti-dumping duty
(3) Variation net debt + dividends + purchase of own shares
(4) Interest-bearing net debt – liquid assets
(5) ROE = Annualised net profit / Average Shareholders' Funds last 12 months
(6) ROCE = Annualised operating profit / Average Capital Employed last 12 months
(7) EBITDA corresponding to last 12 months
(8) Variation in figures not rounded up/down
In the first nine months of 2018, The Navigator Company recorded a turnover of € 1 252 million, representing an increase of 3.5% in relation to the first half of 2017. With sales of € 926 million, the paper sector accounted for 74% of turnover, energy for 10% (€ 127 million), pulp 9% (€ 115 million), and tissue business 5% (€ 65 million). Prices evolved positively over the period for UWF paper, BEKP pulp and Tissue, at the same time as the volumes available for sale were down, due essentially to production stoppages occurring during this period.
Pulp business was affected by two major shutdowns over the year, the first for maintenance at the Setúbal mill during the first quarter and another, during the second quarter, at the Figueira da Foz mill, also for maintenance, which was extended to allow for the project of increasing production capacity to be completed. The length of these stoppages and the need to build up stocks in the previous months had a strong limiting effect on the quantities of pulp available for sale by the Group during the first nine months of 2018. As a result, Navigator's sales totalled 177 thousand tons, down by 30% on the figure recorded in the first nine months of 2017 (a period that benefitted from some destocking, which was not possible in 2018 due to very low inventories at the beginning of the year). This reduction in volume was partially offset by the increase in sales prices, and sales in value showed a reduction of 11%, standing at approximately € 115 million.
Global conditions in the pulp market remained positive over the first nine months, with the benchmark index – FOEX BHKP – up by an average of 24% (868 €/ton vs. 703 €/ton). According to figures from PPPC, global demand for BEKP grew by 4.7% YTD August, in particular in China (up 10.2%), whilst a number of constraints were experienced on the supply side (planned and unplanned shutdowns), causing an estimated reduction in the volume of hardwood pulp on the market of more than 1.4 million tons.
In paper business, UWF sales totalled 1 137 thousand tons, down by 2% on the same period in 2017, due essentially to production deviations caused by a number of
unplanned stoppages, as well as the need to replenish stocks to guarantee an adequate customer service level. The upward evolution in prices partially offset the reduction in sales volume, resulting in an increase of sales in value by 5.8% to € 926 million. Navigator implemented several price rises over the year, in Europe and other geographical regions, resulting in an increase of approximately 7.8% in its average sales price when compared with the same period in 2017. This increase outperformed the European benchmark index, FOEX A4 B-copy, and was positively influenced by a significant improvement in the product mix in terms of quality (55% premium sales, up from 49%) and in the proportion of mill brand products (69%, up from 62%). On the negative side, this was countered by the evolution of the EUR/USD exchange rate (the average exchange rate for the period was 1.1942, as compared to 1.113 in the same period in 2017).
In tissue business, there was an upwards adjustment in the average sales price in relation to the same period in 2017 (up 7%), as a result of an improved product mix, with reels representing a smaller proportion of sales, and finished products a larger proportion; and also due to price rises implemented. The sales volume stood at 45 thousand tons, growing by 9.2% comparing to the same period last year, and includes the sale of finished products from the new Cacia plant. Higher average tissues prices were not however enough to absorb an increase of around 30% in production costs, in particular the price of pulp (hardwood and softwood) and of chemicals.
In the energy sector, power sales recovered in the 3rd quarter, leading to an increase of approximately 2.9%, in relation to the first nine months of the previous year (€ 127 million), benefiting from the rise in the indexes to which sales prices are linked, in particular Brent prices on the international market. The reference Brent price rose by 26.7% in relation to the same period in the previous year, influencing essentially the sale price for power from the combined cycle natural gas power stations. The value of power sales includes sales to the grid of surplus electricity from cogeneration at the pulp and paper units (€ 110.8 million) and the stand-alone sales from BPSs (Biomass Power Stations), worth € 16.6 million.
Despite the increase in the value of sales, total gross power generation was down by 1.7% comparing with the same period in 2017, especially due to the stoppages in the pulp mills. Even so, total output stood at 1.63 TWh.
In this context, EBITDA stood at € 341 million, as compared with € 300 million recorded in the first nine months of 2017, representing an increase of 13.5% and an EBITDA / Sales margin of 27.2% (vs. 24.8%). EBITDA for this period includes the positive impact of the sale of the pellets business in the USA (which net of costs and adjustments stood at approximately € 12.4 million) and was brought down by anti-dumping duties (approximately € 10 million). Without these impacts, EBITDA for the first nine months would have been € 338 million up 12.7%) and the EBITDA/sales margin would have been 27%.
The impact on the accounts of the anti-dumping duty brought EBITDA down by € 10 million. This amount includes recognition of € 3.6 million relating to retroactive application of the rate of 1.75% on sales for the first period of review, from August 2015 to February 2017, as well as an additional amount of around € 6 million relating to registration of the duty for the second and third periods of review.
In terms of financial impact, proceedings have been initiated to obtain a refund of approximately € 22 million, corresponding to the difference between the amounts deposited up to February 2017 and the amount now determined.
In August, Navigator was notified by the U.S. Department of Commerce that the final rate to be applied on sales made during the first period of review would be 37.34%, although in March 2018 the Company had been notified by the same authority that, in accordance with its preliminary assessment, the anti-dumping duty to be applied would be 0%. The 37.34% duty has been applied to sales to the U.S. since August 13, 2018, replacing the duty of 7.8% applicable up to that date. The Company reacted immediately against the decision, pointing to administrative errors in the ruling, and has taken all the legal measures at its disposal to demonstrate that the new rate for the period in question was wholly unfounded. The Department of Commerce has consequently re-examined the calculations, in strict compliance with applicable laws and regulations, and decided on the new final rate of 1.75%, which will apply to all exports made by the Company to the USA after the date of publication of the corresponding decision.
Production costs have again been pushed up by negative trends in chemicals, impacting on variable unit production costs of pulp, paper and tissue (in a global estimated amount of € 8.3 million). Also, fibre costs increased approximately € 9.1 million, essentially due to the acquisition of hardwood fibre for the tissue operations at Vila Velha de Ródão, as well as the purchase of softwood pulp. Logistic costs also increased by € 2.1 million, largely due to higher Brent prices. In fixed costs, payroll costs registered the most significant increase (+€14.4 million) as a result of workforce expansion due to the new Tissue project in Cacia, the rejuvenation programme under way and an increase in the estimate of performance bonuses reflecting the Group's healthy results.
Navigator has actively pressed ahead with its M2 cost-reduction and operational excellence programme, resulting in a positive YoY impact of € 17.2 million in EBITDA. Roughly 143 new initiatives have been launched since the beginning of the year to cut costs, with around 85 of these achieving a positive impact. These have included projects such as improving efficiency at PM4 in Setúbal, representing the outcome of an array of continuous improvement initiatives, with a YTD saving of €1 million, optimisation of chemicals consumption in chlorine dioxide production in Cacia, by upgrading sulphates filtering, with a YTD impact of € 995 thousand, and reduction in consumption of bleaching agents at the Figueira da Foz industrial complex, with a YTD impact of € 716 thousand. In addition to these initiatives, the renegotiation of power and natural gas contracts resulted in estimated avoided costs of around € 27.8 million in relation to market prices.
Financial results showed a loss of € 16.5 million, as compared to a loss of € 6.5 million in 2017. Despite a positive evolution in the cost of funding operations, a combination of other factors had a negative effect on financial results. The most important of these were (i) a drop of € 5 million in gains on currency hedges taken out by the company, in a rising dollar scenario with a positive impact on operating results, (ii) recognition at the end of the 1st quarter of a negative amount of approximately € 3.3 million resulting from the difference between the nominal value and the current value of the amount to be received for the sale of the pellets business (USD 45 million) and (iii) a reduction of € 1.5 million in yields from applications of surplus liquidity, in relation to extremely positive performance in 2017.
At the end of September, the Group's net debt stood at € 731.6 million, up by € 38.9
million from year-end 2017 (€ 692.7 million), reflecting payment of dividends of € 200 million in June and capital expenditure of €148 million during the period.
A generated free cash flow of € 161.1 million (vs. € 148.7 million) was supported by sound operational performance, but also by the inflow from the sale of the pellets business in the first quarter (€ 67.6 million). On the negative side, it was limited by the high level of Capex, which totalled € 148.4 million (vs. € 75.7 million), largely associated with the construction of the new Tissue mill in Cacia and expansion of capacity at the Figueira pulp mill. In the 3rd quarter, generation of free cash flow (€ 8.5 million) was significantly constrained by the concentration of Capex disbursals in the period (€ 71.2 million), combined with sizeable corporation tax (IRC) prepayments (€ 23.7 million) in the period.
Pre-tax profits totalled € 228 million (up from € 179 million), and the tax amount for the period was negatively affected by the constitution of a number of tax provisions, an increase in the state surtax rate and, obviously, by the increase in pre-tax profits.
As a result, the Group achieved a net income for the first nine months of 2018 of € 172 million, up by 18% on the first nine months of 2017 (€145.8 million).
The third quarter was marked by a positive evolution in prices in relation to the previous quarter (+4.3% for paper, + 3.4% for pulp and 0.4% in tissue), and especially when compared with the 3rd quarter of 2017 (+12.4% in paper, +23.7% in pulp and +6.2% in tissue).
The sales volume for pulp was up on the preceding quarter by around 3.5%, due to greater market pulp availability, although still falling short of the figure recorded in the same quarter in 2017. In paper, sales in volume were also slightly lower than in previous periods. Tissue sales grew very positively over the quarter, up by around 29% in relation to the previous quarter and 25% YoY, with the inclusion of sales of finished products from the new lines in Cacia.
However, the price effect offset the volume effect, and turnover grew by 1% in the quarter to € 435 million. EBITDA stood at € 115 million, in line with the preceding quarter and approximately 13% up on the 3rd quarter of 2017.
It should be noted that this quarter's EBITDA includes the negative impact of the antidumping duty for the first period of review, as well as adjustments relating to previous periods. Excluding the negative impact of anti-dumping duty, EBITDA for the quarter would have been € 123 million and EBITDA /Sales of 28.3%.
| (in 000 tons) | Q3 2017 | Q4 2017 | Q1 2018 | Q2 2018 | Q3 2018 |
|---|---|---|---|---|---|
| BEKP Output | 357.3 | 371.9 | 346.1 | 335.4 | 392.7 |
| BEKP Sales | 68.8 | 59.7 | 53.1 | 60.9 | 63.1 |
| UWF Output | 406.1 | 406.7 | 385.8 | 392.9 | 393.9 |
| UWF Sales | 386.4 | 419.9 | 361.2 | 395.1 | 380.7 |
| FOEX – BHKP Euros/ton | 747 | 805 | 824 | 878 | 903 |
| FOEX – BHKP USD/ton | 877 | 948 | 1013 | 1046 | 1050 |
| FOEX – A4- BCopy Euros/ton | 819 | 831 | 845 | 864 | 882 |
| (in 000 tons) | Q3 2017 | Q4 2017 | Q1 2018 | Q2 2018 | Q3 2018 |
|---|---|---|---|---|---|
| Reels Output | 13.0 | 14.8 | 14.1 | 14.4 | 17.8 |
| Output of finished products | 12.2 | 12.4 | 13.6 | 14.7 | 18.6 |
| Sales of reels and goods | 1.1 | 1.8 | 0.6 | 0.1 | 0.0 |
| Sales of finished products | 12.3 | 12.2 | 12.8 | 14.9 | 16.7 |
| Total sales of tissue | 13.3 | 14.0 | 13.4 | 15.0 | 16.7 |
| Q3 2017 | Q4 2017 | Q1 2018 | Q2 2018 | Q3 2018 | |
|---|---|---|---|---|---|
| Production (GWh) | 535.9 | 573.7 | 553.5 | 536.1 | 536.2 |
| Sales (GWh) | 426.0 | 462.8 | 444.7 | 435.8 | 428.5 |
Navigator recorded capex of € 148.4 million, significantly accelerating disbursements this quarter to € 71.2 million (vs. €48.6 in the 2nd Quarter). With a value of € 74.8 million, the Cacia tissue project represented around half of total investment, the capacity expansion in Figueira da Foz around 19% (€ 27.6 million) and investment in regular pulp and paper business totalled approximately € 46 million.
Completion of the project for the Group's new tissue mill in Cacia represents an important milestone for the Group and attainment of its strategic goal, mapped out in 2015. The Navigator Company is now the third largest tissue manufacturer in Iberia, with total production capacity of 130 thousand tons (reels) and converting capacity (finished products) of 120 thousand. The new mill, equipped with large scale, sophisticated industrial assets, is integrated upstream with pulp production, giving it competitive advantages in terms of production costs, use of the high quality eucalyptus pulp manufactured in Cacia, and an excellent location near the port of Aveiro, which will allow it to sell its products to more distant markets. The various converting lines started up over the second and third quarters, with the at-home line starting production in May followed by the paper napkin and industrial tissue lines in July. Reels production started up in September and is still at a ramp-up phase.
The third quarter of 2018 was characterized by some volatility in the financial markets, with the main worldwide stock indexes registering negative trends since the beginning of the year, however slightly recovering during this third quarter.
On the one hand, this recovery was supported by the favourable relationships between USA and North Korea after this year 12th of July Summit, as well as the positive forecast regarding macroeconomic indicators for USA, United Kingdom and Japan.
On the other hand, in opposition with what happened during the first half, oil prices dropped drastically and stock markets were affected by the increased commercial tension between the US and countries like China and Canada, with the threat of new duty taxes on imports.
The stock market was also negatively affected by the increase in long-term interest rates (which are estimated to continue to grow) and by the unstable situation in the emerging markets, in which Turkey and Argentina economic crises can be pointed out.
The PSI-20 closed the third quarter with a negative performance, as the Portuguese stock market continued to be influenced by the external momentum, characterized by a fragile economy and some pessimism from investors regarding emerging countries.
In this context, Navigator's share price was negatively impacted by two events that occurred during this period: the first one was the revision in August made by the U.S. Department of Commerce on the antidumping rate to be applied on Navigator's paper sales (which was only reverted in October), with this duty increasing from 0% to 37.34%. The second one was the notification received from BPI Pension Fund, informing the reduction of its shareholding position in Navigator, no longer holding a qualified participation in the Company.
Navigator closed the quarter with a price of 4.218 € per share, registering a downfall of - 3.4% since the beginning of the year and -17.3% on the third quarter. The average liquidity on the third quarter of the year was around 865 thousand shares traded on a daily basis.
Without any significant new increases in production capacity for market pulp being announced for the next three years, capacity utilization rates can be expected to increase and allow hardwood pulp prices to stay above 1000 USD/ton. In the short term, demand continues solid and supply disruptions, due to planned and unplanned stoppages, are cushioning the impact of the new capacity that started up last year.
In UWF paper, order books remain at a high level. After leading a series of price rises in Europe, and also increasing prices in the US and international markets during the first nine months of the year, The Navigator Company implemented a further price increase as from October in European markets.
In the tissue market, manufacturers have been under heavy pressure from increases in pulp prices and in the cost of chemicals and energy. Navigator announced new price
increases of between 8 and 12% for its products in November. At the same time, the Company's new tissue mill in Cacia started producing reels in September. A strong commercial performance in recent months allows to anticipate a successful placement of the new output with clients.
This positive context may however be affected by increases in certain costs, especially for energy, and there are continued concerns about the evolution of exchange rates, in particular the EUR/USD. Operations in the fourth quarter will be constrained by production stoppages programmed for November and December at the Setúbal Mill site, the most significant one related to the heavyweights project, which will imply a 10 day production stoppage at paper machine 3.
The Navigator Company continues to develop its business model successfully, acting proactively in relation to factors under its control, seeking to achieve continuous improvement in its performance and in reducing its cost structure. Furthermore, it has proven to be able to successfully overcome several adversities with which it has been confronted.
Setúbal, 30th October 2018
For the nine months period ended 30 September 2018 and 2017
| Amounts in Euro | Note | 9 months 30-09-2018 |
9 months 30-09-2017 |
3rd Quarter 2018 |
3rd Quarter 2017 |
|---|---|---|---|---|---|
| (unaudited) | (unaudited) | (unaudited) | (unaudited) | ||
| Revenue | 3 | ||||
| Sales | 1,248,540,736 | 1,206,126,730 | 434,216,968 | 395,951,561 | |
| Services rendered | 3,762,876 | 3,669,409 | 1,183,993 | 1,202,033 | |
| Other operating income | 4 | ||||
| Gains on the sale of non-current assets | 17,894,562 | 614,787 | 172,232 | 272,782 | |
| Other operating income | 13,055,758 | 12,340,191 | 5,682,331 | 6,201,192 | |
| Changes in the fair value of biological assets | 14 | 1,557,146 | 3,186,006 | 437,490 | (24,169) |
| Operating expenses | 5 | ||||
| C osts of inventories sold and consumed | (522,223,248) | (494,858,603) | (177,548,695) | (164,510,266) | |
| Variation in production | 31,144,857 | (1,409,554) | 11,040,893 | 3,778,604 | |
| C ost of materials and services consumed | (304,731,817) | (300,891,039) | (109,362,715) | (99,590,308) | |
| Payroll costs | (125,566,241) | (111,180,117) | (40,869,756) | (35,545,137) | |
| Other expenses and losses | (22,831,644) | (17,547,662) | (10,312,367) | (6,063,110) | |
| Provisions | 1,741,217 | (3,055,219) | 440,996 | (2,865,602) | |
| Depreciation, amortisation and impairment losses | 6 | (97,764,203) | (111,529,226) | (31,319,290) | (36,762,609) |
| Operating results | 244,579,999 | 185,465,703 | 83,762,082 | 62,044,970 | |
| Net financial results | 7 | (16,537,208) | (6,488,744) | (5,166,468) | 1,817,197 |
| Profit before tax | 228,042,791 | 178,976,959 | 78,595,614 | 63,862,166 | |
| Income tax | 8 | (56,277,787) | (33,175,866) | (26,273,634) | (14,107,167) |
| Net income | 171,765,004 | 145,801,093 | 52,321,980 | 49,754,999 | |
| Attributable to: | |||||
| Navigator C ompany's Shareholders | 171,766,977 | 145,794,646 | 52,322,972 | 49,745,923 | |
| Non-controlling interests | (1,973) | 6,447 | (992) | 9,076 | |
| Earnings per share | |||||
| Basic earnings per share, Eur | 9 | 0.240 | 0.203 | 0.073 | 0.069 |
| Diluted earnings per share, Eur | 9 | 0.240 | 0.203 | 0.073 | 0.069 |
As of 30 September 2018 and 31 December 2017
| Amounts in Euro | Notes | 30-09-2018 | 31-12-2017 |
|---|---|---|---|
| ASSETS | |||
| Non-current assets | |||
| Goodwill | 11 | 377,339,466 | 377,339,466 |
| Other intangible assets | 12 | 2,886,603 | 3,878,245 |
| Plant, property and equipment | 13 | 1,221,610,920 | 1,171,125,052 |
| Investment properties | 97,939 | 99,174 | |
| Biological assets | 14 | 130,954,082 | 129,396,936 |
| Other financial assets | 15 and 25 | 507,024 | 424,428 |
| Other assets | 15 | 32,498,663 | - |
| Deferred tax assets | 19 | 43,741,222 | 44,727,571 |
| 1,809,635,920 | 1,726,990,872 | ||
| Current assets | |||
| Inventories | 226,291,337 | 187,795,595 | |
| Receivables and other current assets | 16 | 267,865,743 | 237,704,322 |
| State and other public entities | 17 | 50,357,631 | 75,076,422 |
| Cash and cash equivalents | 22 | 92,868,746 | 125,331,036 |
| 637,383,458 | 625,907,375 | ||
| Non-current assets held for sale | |||
| Non-current assets held for sale | 23 | - | 86,237,049 |
| - | 86,237,049 | ||
| Total Assets | 2,447,019,378 | 2,439,135,296 | |
| EQUITY AND LIABILITIES | |||
| Capital and Reserves | |||
| Share capital | 18 | 500,000,000 | 500,000,000 |
| Treasury shares | 18 | (1,002,084) | (1,002,084) |
| Fair value reserves | (5,420,066) | (3,020,990) | |
| Legal reserve | 100,000,000 | 109,790,475 | |
| Free reserves | 197,292,250 | 217,500,000 | |
| Currency translation reserves | (16,704,344) | (13,966,898) | |
| Retained earnings | 204,887,863 | 167,388,264 | |
| Net profit for the period | 171,766,977 | 207,770,604 | |
| 1,150,820,596 | 1,184,459,371 | ||
| Non-controlling interests | 207,159 | 420,277 | |
| 1,151,027,755 | 1,184,879,648 | ||
| Non-current liabilities | |||
| Deferred tax liabilities | 19 | 65,017,473 | 83,023,517 |
| Pension liabilities | 20 | 9,314,665 | 5,090,242 |
| Provisions | 21 | 38,165,139 | 19,536,645 |
| Interest-bearing liabilities | 22 | 747,457,062 | 667,851,880 |
| Other liabilities | 22 | 22,118,375 | 25,466,139 |
| 882,072,714 | 800,968,424 | ||
| Current liabilities | |||
| Interest-bearing liabilities | 22 | 76,997,741 | 150,205,591 |
| Payables and other current liabilities | 24 | 264,245,844 | 259,509,848 |
| Sate and other public entities | 17 | 72,675,323 | 43,571,785 |
| 413,918,908 | 453,287,224 | ||
| Total Liabilities | 1,295,991,622 | 1,254,255,647 | |
| Total Equity and Liabilities | 2,447,019,378 | 2,439,135,296 |
For the nine months period ended at 30 September 2018 and 2017
| Amounts in Euro | 9 months 30-09-2018 |
9 months 30-09-2017 |
3rd Quarter 2018 |
3rd Quarter 2017 |
|---|---|---|---|---|
| (unaudited) | (unaudited) | (unaudited) | (unaudited) | |
| Net income | 171,765,004 | 145,801,093 | 52,321,978 | 49,754,999 |
| Items that can be reclassified subsequently to profit or loss | ||||
| Fair value in derivative financial instruments | (2,465,925) | 8,503,949 | 2,971,166 | 978,593 |
| Currency translation differences | (2,737,445) | (495,004) | 6,114,458 | 431,440 |
| Tax on items above when applicable | 66,849 | (2,078,711) | (1,428,351) | (269,113) |
| Income on share capital remuneration | - | 4,235,000 | - | 4,235,000 |
| (5,136,521) | 10,165,234 | 7,657,273 | 5,375,920 | |
| Items that cannot be reclassified subsequently to profit or loss | ||||
| Other changes in shareholders' equity of subsidiaries | 4,411,898 | 890,744 | 4,404,856 | 874,274 |
| Post-employment benefits (actuarial deviations) | (4,902,319) | 838,410 | (143,158) | 830,534 |
| Tax on items above when applicable | 12,822 | (1,996) | (6,153) | (17,257) |
| (477,599) | 1,727,159 | 4,255,544 | 1,687,551 | |
| (5,614,120) | 11,892,393 | 11,912,817 | 7,063,472 | |
| Total recognised income and expense for the period | 166,150,885 | 157,693,485 | 64,234,796 | 56,818,472 |
| Attributable to: | ||||
| The Navigator Company's Shareholders | 166,364,002 | 157,565,290 | 64,235,305 | 56,751,887 |
| Non-controlling interests | (213,118) | 128,195 | (510) | 66,583 |
| 166,150,884 | 157,693,485 | 64,234,795 | 56,818,470 |
| Amounts in Euro | 1 January 2018 | Gains and losses recognised in the period |
Dividends paid and reserves distributed |
Application of prior period's net profit |
Capital decrease |
Bonus to employees |
30 September 2018 |
|---|---|---|---|---|---|---|---|
| Share capital | 500,000,000 | - | - | - | - | - | 500,000,000 |
| Treasury shares | (1,002,084) | - | - | - | - | - | (1,002,084) |
| Fair value reserves | (3,020,990) | (2,399,076) | - | - | - | - | (5,420,066) |
| Legal reserve | 109,790,475 | - | (9,790,475) | - | - | 100,000,000 | |
| Free reserves | 217,500,000 | 1,475 | (29,999,700) | 9,790,475 | - | - | 197,292,250 |
| Currency translation reserve | (13,966,898) | (2,737,445) | - | - | (16,704,344) | ||
| Retained earnings | 167,388,264 | (267,929) | (170,003,077) | 214,770,604 | - | (7,000,000) | 204,887,863 |
| Net income | 207,770,604 | 171,766,977 | - | (207,770,604) | - | - | 171,766,977 |
| Prepaid dividends | - | - | - | - | - | - | - |
| Total | 1,184,459,370 | 166,364,002 | (200,002,777) | 7,000,000 | - | (7,000,000) | 1,150,820,596 |
| Non-controlling interests | 420,277 | (213,118) | - | - | - | - | 207,159 |
| Total | 1,184,879,648 | 166,150,884 | (200,002,777) | 7,000,000 | - | (7,000,000) | 1,151,027,755 |
| Gains and | |||||||
|---|---|---|---|---|---|---|---|
| Amounts in Euro | 1 January 2017 | losses recognised in the period |
Dividends paid and reserves distributed |
Application of prior period's net profit |
Capital decrease |
Bonus to employees |
30 September 2017 |
| Share capital | 717,500,000 | - | - | - | (217,500,000) | - | 500,000,000 |
| Treasury shares | (1,002,084) | - | - | - | - | - | (1,002,084) |
| Fair value reserves | (7,571,781) | 6,425,238 | - | - | - | - | (1,146,543) |
| Legal reserve | 99,709,036 | - | - | 10,081,439 | - | - | 109,790,475 |
| Free reserves | - | - | - | - | 217,500,000 | - | 217,500,000 |
| Currency translation reserve | (779,369) | (495,004) | - | - | - | (1,274,373) | |
| Retained earnings | 205,639,863 | 5,840,410 | (250,007,056) | 214,419,998 | (7,000,000) | 168,893,215 | |
| Net income | 217,501,437 | 145,794,646 | - | (217,501,437) | - | 145,794,646 | |
| Prepaid dividends | - | - | - | - | - | - | |
| Total | 1,230,997,102 | 157,565,290 | (250,007,056) | 7,000,000 | (7,000,000) | 1,138,555,336 | |
| Non-controlling interests | 2,272,606 | 128,195 | - | - | - | 2,400,801 | |
| Total | 1,233,269,708 | 157,693,485 | (250,007,056) | 7,000,000 | (7,000,000) | 1,140,956,137 |
For the nine months period ended at 30 September 2018 and 2017
| Amounts in Euro Notes |
9 months 30-09-2018 |
9 months 30-09-2017 |
3rd Quarter 2018 |
3rd Quarter 2017 |
|---|---|---|---|---|
| (unaudited) | (unaudited) | (unaudited) | (unaudited) | |
| OPERATING ACTIVITIES | ||||
| Receipts from customers | 1 203 421 625 | 1 276 004 762 | 372 050 470 | 426 907 601 |
| Payments to suppliers | 961,340,826 | 960,063,557 | 327,790,693 | 292,360,666 |
| Payments to employees | 98,214,725 | 88,307,790 | 30,386,336 | 26,301,905 |
| Cash flows from operations | 143,866,074 | 227,633,416 | 13,873,440 | 108,245,031 |
| Income tax receipts/ (payments) | (23,792,438) | (51,450,135) | (23,757,281) | (29,931,568) |
| Other receipts/ (payments) relating to operating activities | 134,333,751 | 48,877,390 | 97,787,025 | 21,246,700 |
| Cash flows from operating activities (1) | 254,407,387 | 225,060,671 | 87,903,184 | 99,560,163 |
| INVESTMENT ACTIVITIES | ||||
| Inflows: | ||||
| Other non-current assets | 69,026,158 | - | - | - |
| Interest and similar income | - | 1,872,784 | - | 355,915 |
| Inflows from investment activities (A) | 69,026,158 | 1,872,784 | - | 355,915 |
| Outflows: | ||||
| Property, plant and equipment | 155,644,200 | 63,805,782 | 75,589,618 | 21,220,219 |
| Outflows from investment activities (B) | 155,644,200 | 63,805,782 | 75,589,618 | 21,220,219 |
| Cash flows from invesment activities (2 = A - B) | (86,618,042) | (61,932,998) | (75,589,618) | (20,864,304) |
| FINANCING ACTIVITIES Inflows: |
||||
| Borrowings | 123,046,352 | 535,000,000 | (20,000,000) | 220,000,000 |
| Inflows from financing activities (C ) | 123,046,352 | 535,000,000 | (20,000,000) | 220,000,000 |
| Outflows: | ||||
| Borrowings | 111,262,788 | 394,851,190 | 595,900 | 190,000,000 |
| Interest and similar expense | 12,314,658 | 9,262,882 | 4,090,803 | 3,044,031 |
| Dividends paid and reserves distributed | 200,002,777 | 250,007,056 | - | 80,003,979 |
| Outflows from financing activities (D) | 323,580,222 | 654,121,128 | 4,686,704 | 273,048,010 |
| Cash flows from financing activities (3 = C - D) | (200,533,870) | (119,121,128) | (24,686,704) | (53,048,010) |
| CHANGES IN CASH AND CASH EQUIVALENTS (1)+(2)+(3) | (32,744,526) | 44,006,544 | (12,373,138) | 25,647,848 |
| CHANGES IN CASH AND CASH EQUIVALENTS FOR OTHER QUARTERS | - | - | (20,188,591) | 18,358,696 |
| EFFECT OF EXCHANGE RATE DIFFERENCES | 282,236 | - | 99,439 | - |
| CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD | 125,331,036 | 67,541,588 | 125,331,036 | 67,541,588 |
| CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD 22 |
92,868,746 | 111,548,132 | 92,868,746 | 111,548,132 |
As of 30 September 2018 and 2017
(In these notes, unless indicated otherwise, all amounts are expressed in Euro)
The Navigator group ("Group") comprises The Navigator Company, S.A. (formerly designated as Portucel, S.A.) and its subsidiaries.
The Navigator group was created in the mid 1950's, when a group of technicians from "Companhia Portuguesa de Celulose de Cacia" made this company the first in the world to produce bleached eucalyptus sulphate pulp.
In 1976 Portucel EP was created as a result of the nationalization of all of Portugal's cellulose industry. As such, Portucel – Empresa de Celulose e Papel de Portugal, E.P. resulted from the merger with CPC – Companhia de Celulose, S.A.R.L. (Cacia), Socel – Sociedade Industrial de Celulose, S.A.R.L. (Setúbal), Celtejo – Celulose do Tejo, S.A.R.L. (Vila Velha de Ródão), Celnorte – Celulose do Norte, S.A.R.L. (Viana do Castelo) and Celuloses do Guadiana, S.A.R.L. (Mourão), being converted into a mainly public anonymous society by Decree- Law No. 405/90, of 21 December.
Years after, as a result of the restructuring of Portucel – Empresa de Celulose e Papel de Portugal, S.A., which was redenominated to Portucel, SGPS, S.A., towards to its privatization, Portucel S.A. was created, on 31 May 1993, through Decree-law No. 39/93, with the former assets of the two main companies, based in Cacia and Setúbal.
In 1995, the company was reprivatized, and became a publicly traded company.
Aiming to restructure the paper industry in Portugal, Portucel, S.A. acquired Papeis Inapa, S.A. (Setúbal) in 2000 and Soporcel – Sociedade Portuguesa de Papel, S.A. (Figueira da Foz) in 2001. Those key strategic decisions resulted in the PortucelSoporcel Group (currently The Navigator Company Group), which is the largest European and one of the world's largest producers of bleached pulp. It is also the biggest European producer of uncoated wood-free paper.
In June 2004, the Portuguese State sold a 30% stake of Portucel's equity, which was acquired by Semapa Group. In September 2004, Semapa launched a public acquisition offer tending to assure the Group's control, which was accomplished by guaranteeing a 67.1% stake of Portucel's equity.
In November 2006, the Portuguese State concluded the third and final stage of the sale of Portucel, S.A., and Parpublica SGPS, S.A. (formerly Portucel SGPS, S.A.) sold the remaining 25.72% it still held.
From 2009 to July 2015, more than 75% of the company's share capital was held directly and indirectly by Semapa - Sociedade de Investimento e Gestão SGPS, S.A. (excluding treasury shares) having the percentage of voting rights been reduced to 70% following the conclusion of the offer for the acquisition, in the form of an exchange offer, of the ordinary shares of Semapa, SGPS, S.A., in July 2015.
In February 2015, the Group started its activity in the Tissue segment with the acquisition of AMS- BR Star Paper, SA (currently denominated Navigator Tissue Ródão, SA), a company that holds and explores a tissue paper mill, located in Vila Velha de Ródão. A new industrial facility is under construction in Cacia which will be operated by Navigator Tissue Cacia, S.A.
On 6 February 2016, the Portucel Group changed its corporate brand to The Navigator Company. This new corporate identity represents the union of companies with a history of more than 60 years, aiming to give the Group a more appealing and modern image.
Following this event, and after approval in the General Shareholder's Meeting, held on 19 April 2016, Portucel S.A. changed its designation to The Navigator Company, S.A.
In July 2016, the Navigator group expanded its activity to the pellets business with the construction of a plant in Greenwood, state of South Carolina, United States of America, a business sold in February 2018.
The Navigator group's main business is the production and sale of writing and printing thin paper and related products, and it is present in the whole value added chain, from research and development of forestry and agricultural production, to the purchase and sale of wood and the production and sale of bleached eucalyptus kraft pulp – BEKP and electric and thermal energy, as well as its commercialization.
The Navigator Company, S.A. (hereafter referred to as the Company or Navigator) is a publicly traded company, listed in Euronext Lisbon, with its share capital represented by nominal shares.
Head Office: Mitrena, 2901-861 Setúbal
Share Capital: Euros 500 000 000
Registration No.: 503 025 798
These consolidated financial statements were approved by the Board of Directors on 29 October 2018.
The Navigator group's senior management, who are also the members of the Board of Directors that sign this report, declare that, to the best of their knowledge, the information contained herein was prepared in conformity with the applicable accounting standards, providing a true and fair view of the assets and liabilities, the financial position and results of the companies included in the Navigator group's consolidation perimeter for the six-month period ended 30 September 2018.
1. Basis of preparation
The Group's consolidated interim financial statements for the nine-month period ended 30 September 2018 have been prepared in accordance with the International Accounting Standard no. 34 – Interim Financial Reporting.
The notes to the financial statements were prepared on a going concern basis from the books and accounting records of the companies included in the consolidation (Note 30), and based on historical cost, except for available-for-sale financial assets, financial instruments derivatives and biological assets, which are recorded at fair value (Notes 14, 23, 25.1 and 25.2).
The accounting policies used in the preparation of these consolidated interim financial statements are consistent with those used in the preparation of the financial statements for the period ended 31 December 2017 and are described below.
The interpretations and amendments to the existing standards identified below, are mandatory by the European Union, for the periods starting on or after 1 January 2019:
| Effective date * | |
|---|---|
| IFRS 9 (amended) – Financial instruments | 1 January 2019 |
| IFRS 16 - Leases | 1 January 2019 |
| * Periods beginning or or after |
Regarding the standards presented above, for which the mandatory entry into force has not yet occurred, the Navigator Group had not yet concluded the estimate of the effects of changes arising from the adoption of these standards, for which it decided not to early-adopt them. However, no material effect is expected in the financial statements as a result of their adoption.
Standards, amendments and interpretations issued but not yet effective for the Group (regardless of the effective date of application, have not yet been endorsed by the European Union), can be analysed as follows:
| Effective date * | |
|---|---|
| Annual improvements in the 2015-2017 cycle | 1 January 2019 |
| IAS 19 (amended) - Cut-offs / changes to the plan and settlements | 1 January 2019 |
| IAS 28 (amended) - Investments in associates and joint ventures | 1 January 2019 |
| IFRIC 23 – Uncertainty over income tax treatments | 1 January 2019 |
| Amendments to the conceptual framework in IFRS | 1 January 2020 |
| IFRS 17 - Insurance contracts | 1 January 2021 |
* Periods beginning or or after
In January 2016, the International Accounting Standards Board (IASB) issued IFRS 16 – Leases, which is effective for annual reporting periods beginning on or after 1 January 2019, with earlier application permitted (as long as IFRS 15 – Revenue from Contracts with Customers is also applied).
IFRS 16 defines the principles for recognising, measuring and presenting leases, replacing IAS 17 – Leases. The main objective is to ensure that lessors and lessees report useful information to the users of the financial statements, especially regarding the effect that leases have on financial positions, financial performance and cash flows.
The main aspects covered by IFRS 16 are:
Addition of some considerations in order to distinguish leases from service agreements, based on the existence of control over an asset at the time it becomes available for use; and
Introduction of a unique accounting model that requires the lessee to recognise the assets and liabilities for all leases with a duration longer than 12 months (except for leases of assets with a limited amount). The lessee shall recognise the right to use the respective asset and the liability associated with the payments to be made, and also recognise the financial costs and the depreciation separately.
At the date of publication of these consolidated financial statements, the Navigator Group has already performed the inventory of existing leases, and its technical analysis and framework is being assessed considering the provisions of IFRS 16. Additionally, the Group is also reviewing the existing information system in order to assess the extent to which it will need to be adapted to the requirements of the standard. At this stage it is not yet possible to estimate the magnitude of the impacts of IFRS 16 adoption.
The amendments to standards already issued and in force which the Group has applied in the preparation of its financial statements are as follows:
IFRS 9, adopted via Commission Regulation (EU) No. 2067/2016 of 22 November 2016, with an effective date of mandatory application for periods beginning on or after 1 January 2018, (early application is optional). Except for hedge accounting, retrospective application is mandatory, although without the need for disclosure of comparative information. For hedge accounting, requirements are generally applied prospectively, with some exceptions.
IFRS 9 includes three distinct areas: classification and measurement of financial instruments, impairment of financial assets and hedge accounting.
The Group adopted this standard on the date of mandatory application and did not restate comparative information, as provided for therein. With regard to hedge accounting, the Group has chosen to continue to apply the hedge accounting requirements in IAS 39 until there is increased visibility over the current Dynamic Risk Management (macro hedging) project.
The Group analysed the changes arising from the adoption of IFRS 9 in its financial assets and liabilities, in order to identify and evaluate the qualitative and quantitative impacts of the adoption of the Standard. Accordingly, qualitative changes are presented in accounting policies included in the Financial Statements and Notes to the Financial Statements for the first half of 2018, to which reference is made. No quantitative impacts were determined.
The International Accounting Standards Board (IASB) issued IFRS 15 - Revenue from contracts with customers on 28 May 2014 and was amended in April 2016 (endorsed by the European Commission Regulation No. 1905/2016 of 22 September 2016). This standard replaces the current requirements for revenue recognition and has an effective date of mandatory application for periods beginning on or after 1 January 2018, and its early adoption is permitted.
The Group adopted IFRS 15 using the modified retrospective approach, with impacts arising from the initial application of the standard recognised at the date of initial application (1 January 2018). Thus, the Group, as permitted by the standard, did not restate comparative information.
The Group analysed the changes resulting from the adoption of IFRS 15 in order to identify and assess the qualitative and quantitative impacts of this Standard. Accordingly, the qualitative changes are disclosed in the accounting policies included in the Financial Statements and Notes to the Financial Statements for the first half of 2018, to which reference is made. No quantitative impacts were determined.
In accordance to the approach defined in IFRS 8, operational segments should be identified based in the way internal financial information is organised and reported to the management. An operating segment is defined by IFRS 8 as a component of the Navigator group:
The Executive Committee is the ultimate operating decision maker, analyzing periodic reports with operational information on segments, using them to monitor the operating performance of its businesses, as well as to decide on the best allocation of resources.
Segment information is presented for business segments identified by the Navigator group, namely;
Revenues, assets and liabilities of each segment correspond to those directly allocated to them, as well as to those that can be reasonably attributed to those segments.
Financial data by operational segment for the periods ended 30 September 2018 and 2017 is presented as follows:
| 30-09-2018 | ||||||
|---|---|---|---|---|---|---|
| PULP MARKET | UWF PAPER | TISSUE PAPER | OTHERS | ELIMINATIONS/ UNALLOCATED |
TOTAL | |
| REVENUE | ||||||
| Sales and services - external | 128,248,631 | 1,023,707,727 | 63,676,168 | 36,671,085 | - | 1,252,303,611 |
| Sales and services - intersegment | 145,654,295 | - | - | 474,273,565 | (619,927,860) | - |
| Total Revenue | 273,902,926 | 1,023,707,727 | 63,676,168 | 510,944,650 | (619,927,860) | 1,252,303,611 |
| PROFIT/ (LOSS) | ||||||
| Segmental profit | 37,997,659 | 209,638,698 | (10,259,085) | 7,202,729 | - | 244,580,000 |
| Operating profit | 244,580,000 | |||||
| Financial results | (16,537,208) | |||||
| Income tax | (56,277,787) | |||||
| Profit after income tax | 171,765,005 | |||||
| Non-controlling interests | 1,973 | |||||
| Net profit | - | - | - | - | - | 171,766,977 |
| OTHER INFORMATION | ||||||
| Capital expenditure | 8,506,791 | 54,457,372 | 79,720,295 | 5,689,649 | - | 148,374,108 |
| Depreciation and impairment | (8,221,681) | (69,203,956) | (9,783,008) | (10,555,557) | - | (97,764,203) |
| Provisions ((increases) / reversal) | - | 847,470 | 546,717 | 347,030 | - | 1,741,217 |
| OTHER INFORMATION | ||||||
| SEGMENT ASSETS | ||||||
| Property, plant and equipment | 125,971,896 | 703,897,730 | 159,312,227 | 232,429,067 | - | 1,221,610,920 |
| Biological assets | - | - | - | 130,954,082 | - | 130,954,082 |
| Financial investments | - | 507,024 | - | - | 507,024 | |
| Inventories | 21,152,667 | 120,697,309 | 21,717,521 | 62,723,840 | - | 226,291,337 |
| Trade receivables | 21,936,854 | 149,688,367 | 26,252,253 | 3,030,507 | - | 200,907,981 |
| Other receivables | 1,484,466 | 52,103,222 | 160,879 | 13,209,195 | - | 66,957,762 |
| Other assets | 4,898,092 | 433,083,086 | 319,786 | 161,489,309 | - | 599,790,272 |
| Total assets | 175,443,975 | 1,459,976,738 | 207,762,665 | 603,836,000 | - | 2,447,019,378 |
| SEGMENT LIABILITIES | ||||||
| Interest-bearing liabilities | 2,805,080 | - | 3,070,370 | 818,579,353 | - | 824,454,803 |
| Trade payables | 30,461,555 | 57,002,733 | 21,390,377 | 43,659,034 | - | 152,513,700 |
| Other payables | 4,143,704 | 38,905,125 | 213,900 | 68,469,416 | - | 111,732,144 |
| Other liabilities | 27,388,569 | 92,313,211 | 7,189,604 | 80,399,591 | - | 207,290,975 |
| Total liabilities | 64,798,908 | 188,221,069 | 31,864,252 | 1,011,107,394 | - | 1,295,991,622 |
The Navigator group's energy sales are reported under different business segments. The amount corresponding to the total energy sales was Euro 127,425,378 in 2018 and Euro 123,953,926 in 2017. Energy sales originated in the cogeneration process, in the amount of Euro 110,783,001 are reported under the "Market Pulp" (Euro 12,798,200) and "UWF Paper" (Euro 97,984,801) segments. Sales of electricity exclusively produced in units dedicated to the production of electricity from biomass are reported under the segment "Other", in the amount of Euro 16,642,377.
The capital expense during the semester is related to the already announced investments in progress, namely the pulp capacity increase in Figueira da Foz (Euro 27,503,801), the building of the new tissue facility in Cacia (Euro 74,779,081) and other regular investments of pulp, paper and tissue production (Euro 46,091,226).
Property, plant and equipment reported under the segment "Other" include:
| Amounts in Euro | 30-09-2018 | 30-09-2017 |
|---|---|---|
| Forrestry lands | 74,424,524 | 78,092,349 |
| Real estate - manufacturing site of Setúbal | 57,948,734 | 58,707,453 |
| Real estate - manufacturing site of C acia | 11,710,815 | 12,554,340 |
| Real estate - manufacturing site of Figueira da Foz | 47,240,996 | 51,093,368 |
| Biomass thermal power plants | 27,981,619 | 34,131,831 |
| Pellets Project - USA | - | 96,999,546 |
| Others | 13,122,378 | 14,109,619 |
| 232,429,067 | 345,688,506 |
Forest land and industrial real estate in a total amount of Euro 191,325,070, consolidated amounts, are reported in the individual financial statements as investment properties. The real estate property of Vila Velha de Ródão, in the amount of Euro 8,553,630, is included in the segment "Tissue Paper".
The majority of the assets allocated to each of the individual segments, with the exception of receivables, is located in Portugal.
| 30-09-2017 | ||||||
|---|---|---|---|---|---|---|
| PULP MARKET | UWF PAPER | TISSUE PAPER | OTHERS | ELIMINATIONS/ UNALLOCATED |
TOTAL | |
| REVENUE | ||||||
| Sales and services - external | 141,536,396 | 970,894,256 | 55,284,103 | 42,081,385 | - | 1,209,796,139 |
| Sales and services - intersegment | 19,538,308 | - | - | 471,869,260 | (491,407,568) | - |
| Total Revenue | 161 074 704 | 970 894 256 | 55 284 103 | 513 950 645 | (491 407 568) | 1 209 796 139 |
| PROFIT/ (LOSS) | ||||||
| Segment profit | 27,368,518 | 203,423,357 | 1,469,977 | (46,796,149) | - | 185,465,703 |
| Operating profit | 185,465,703 | |||||
| Financial results | (6,488,744) | |||||
| Income tax | (33,175,866) | |||||
| Profit after income tax | 145,801,093 | |||||
| Non-controlling interests | (6,447) | |||||
| Net profit | - | - | - | - | - | 145 794 646 |
| OTHER INFORMATION | ||||||
| Capital expenditure | 5,829,046 | 45,944,860 | 18,527,596 | 8,229,130 | - | 78,530,633 |
| Depreciation and impairment | (8,147,311) | (63,972,113) | (6,795,876) | (32,613,925) | - | (111,529,226) |
| Provisions | ||||||
| Provisions ((increases) / reversal) | - | - | - | - | (3,055,219) | (3,055,219) |
| OTHER INFORMATION | ||||||
| SEGMENT ASSETS | ||||||
| Property, plant and equipment | 122,632,352 | 714,165,168 | 77,041,616 | 345,688,506 | - | 1,259,527,643 |
| Biological assets | - | - | - | 128,798,954 | - | 128,798,954 |
| Financial investments | - | 400,415 | - | - | - | 400,415 |
| Inventories | 23,937,496 | 122,134,284 | 10,005,017 | 67,698,346 | - | 223,775,143 |
| Trade receivables | 17,094,499 | 135,413,211 | 17,167,771 | 3,464,704 | - | 173,140,184 |
| Other receivables | 1,069,535 | 34,736,687 | 1,079,761 | 3,662,713 | - | 40,548,697 |
| Other assets | 4,175,422 | 436,557,744 | 423,958 | 158,341,842 | - | 599,498,966 |
| Total assets | 168,909,304 | 1,443,407,509 | 105,718,124 | 707,655,065 | - | 2,425,690,002 |
| SEGMENT LIABILITIES | ||||||
| Interest-bearing liabilities | 2,805,080 | - | 1,432,616 | 849,302,370 | - | 853,540,065 |
| Trade payables | 9,256,702 | 76,354,634 | 9,792,637 | 51,538,155 | - | 146,942,127 |
| Other payables | 3,952,460 | 25,617,123 | 1,775,667 | 68,068,294 | - | 99,413,544 |
| Other liabilities | 27,277,428 | 108,054,467 | 3,502,131 | 46,004,103 | - | 184,838,128 |
| Total liabilities | 43,291,670 | 210,026,224 | 16,503,050 | 1,014,912,921 | - | 1,284,733,865 |
| Amounts in Euro | 30-09-2018 | 30-09-2017 |
|---|---|---|
| PORTUGAL | ||
| UWF Paper | 151,724,752 | 141,966,015 |
| Pulp | 19,647,021 | 17,818,593 |
| Tissue | 32,056,203 | 35,065,094 |
| Others | 35,953,485 | 30,095,300 |
| 239,381,462 | 224,945,001 | |
| REST OF EUROPE | ||
| UWF Paper | 504,788,945 | 559,161,652 |
| Pulp | 99,965,214 | 101,474,168 |
| Tissue | 30,414,683 | 20,219,009 |
| Others | 717,599 | 11,986,085 |
| 635,886,441 | 692,840,914 | |
| NORTH AMERICA | ||
| UWF Paper | 97,146,422 | 83,025,190 |
| Pulp | 0 | 0 |
| 97,146,422 | 83,025,190 | |
| OTHER MARKETS | ||
| UWF Paper | 270,047,608 | 186,741,399 |
| Pulp | 8,636,396 | 22,243,635 |
| Tissue | 1,205,282 | 0 |
| 279,889,286 | 208,985,034 | |
| 1,252,303,611 | 1,209,796,139 |
The geographical distribution of Sales and Services rendered is presented according with the reporting segments shown above.
Other operating income is detailed as follows for the nine-month period ended 30 September 2018 and 2017:
| Amounts in Euro | 9 months 30-09-2018 |
9 months 30-09-2017 |
|---|---|---|
| Gains on disposal of non-current assets | 17,894,562 | 614,787 |
| Supplementary income | 4,041,011 | 1,063,553 |
| Grants - CO2 Emission allowances | 2,402,192 | 2,119,366 |
| Reversal of impairment losses in current assets | 157,399 | 5,909 |
| Gains on inventories | 341,755 | 1,217,143 |
| Government grants | 1,229,347 | 20,948 |
| Other work capitalised | 592,336 | 2,966,683 |
| Other operating income | 4,291,718 | 4,946,589 |
| 30,950,320 | 12,954,978 |
Gains with CO2 licenses correspond to the recognition of the free allocation of licenses for 287,688 tons of CO2, at the average price of Euro 8.35 (306,500 tons in 30 September 2017, at the average price of Euro 5.38).
Gains on disposals of non-current assets includes Euro 15,765,258 regarding the gain generated with the sale of the pellets business concluded in February 2018, as well as Euro 1,955,775 regarding the sale of forest lands.
On 30 September 2017, the "Other work capitalised" included Euro 2,868,315 relating the preparation of afforestation land in the Mozambique project.
Operating expenses are detailed as follows for the nine-month period ended 30 June 2018 and 2017:
| 9 months | 9 months | |
|---|---|---|
| Amounts in Euro | 30-09-2018 | 30-09-2017 |
| Cost of inventories sold and consumed | (522,223,248) | (494,858,603) |
| Variation in production | 31,144,857 | (1,409,554) |
| Cost of services and materials consumed | (304,731,817) | (300,891,039) |
| Payroll costs | ||
| Remunerations | ||
| Statutory bodies - fixed remunerations | (2,888,618) | (2,981,679) |
| Statutory bodies - variable remunerations | (2,921,075) | (2,991,169) |
| Other remunerations | (93,707,726) | (77,700,272) |
| (99,517,420) | (83,673,120) | |
| Social charges and other payroll costs | ||
| Costs with defined benefit plans | (1,569,705) | (1,300,850) |
| Costs with defined contribution plans | (1,031,818) | (959,592) |
| Contributions to social security | (16,894,959) | (15,441,563) |
| Other payroll costs | (6,552,339) | (9,804,992) |
| (26,048,821) | (27,506,997) | |
| (125,566,241) | (111,180,117) | |
| Other expenses and losses | ||
| Membership fees | (549,066) | (743,479) |
| Losses in inventories | (1,394,486) | (5,231,969) |
| Impairment losses in receivables | (536,463) | (511,080) |
| Impairment losses in inventories | (2,532,484) | (47,565) |
| Indirect taxes | (7,271,166) | (1,967,243) |
| Shipment costs | (500,567) | (3,562,940) |
| Water resources charges | (1,251,654) | (799,756) |
| Costs with CO2 emissions | (4,689,037) | (2,302,128) |
| Other operating expenses | (4,106,722) | (2,381,501) |
| (22,831,644) | (17,547,662) | |
| Provisions (Note 28) | 1,741,217 | (3,055,219) |
| Total | (942,466,876) | (928,942,194) |
The increase in Payroll costs recorded in 2018 is mainly explained by the increase of employees related with the new Tissue project in Cacia and by the increase in estimated bonuses to be paid to employees.
Costs with CO2 emissions correspond to the emission of 560,175 tons of CO2 (30 September 2017: 546,468 tons).
In 2017, inventory losses were due to the beginning of pellets production, whose initial plant start-up problems resulted in stock losses in 2017 in the amount of Euro 2,526,371, compared with the amount of Euro 246,716 registered in 2018, and also from the loss of plants in the Mozambique nursery in the amount of Euro 2,248,300. In 2018, inventory losses also include the amount of Euro 525,315 related to adjustments in Tissue paper wastes.
The impairment losses in inventories registered in the first half of 2018 are related to adjustments in the stock of UWF paper and Tissue paper.
The increase in Indirect taxes is due to the recognition of Euro 6,010,908 related to costs associated with the anti-dumping process, of which Euro 3,565,971 corresponding to the first review period, between August 2015 and February 2017, resulting from the
retroactive application of the 1.75% rate of paper sales to the US in that period. An additional amount of about Euro 2.4 million was also recognised for consideration of the same rate for the second review period.
For the nine-month period ended 30 September 2018 and 2017 the consumed and sold inventory was detailed as follows:
| Amounts in Euro | 9 months 30-09-2018 |
9 months 30-09-2017 |
|---|---|---|
| Wood / Biomass | 216,010,183 | 197,899,485 |
| Natural gas | 38,147,515 | 42,066,666 |
| Other fuels | 10,417,472 | 11,768,306 |
| Water | 1,540,242 | 1,521,318 |
| Chemicals | 110,575,643 | 104,531,465 |
| BEKP Pulp | 13,217,031 | 12,175,246 |
| Pine Pulp | 38,792,275 | 32,210,613 |
| Paper (heavy weight) | 5,866,190 | 5,172,609 |
| Tissue paper - subcontracts | 459,802 | 2,994,002 |
| Consumables / Wharehouse material | 30,970,528 | 31,274,585 |
| Packaging material | 54,919,322 | 51,901,191 |
| Other materials | 1,307,044 | 1,343,117 |
| 522,223,248 | 494,858,603 |
The cost of wood / biomass only relates to wood purchases to entities outside the Navigator group, either domestic or foreign.
During this period, there was an unfavorable evolution in the prices of some chemical products, namely caustic soda, whose unit price has considerably deteriorated.
For the nine-month period ended 30 September 2018 and 2017, the cost of Services and Material Consumed was detailed as follows:
| 9 months | 9 months | |
|---|---|---|
| Amounts in Euro | 30-09-2018 | 30-09-2017 |
| Communications | 1,571,463 | 1,559,250 |
| Maintenance and repair | 21,144,675 | 23,979,383 |
| Travel and accommodation | 4,730,537 | 3,751,160 |
| Energy and fluids | 89,902,368 | 84,706,134 |
| Fees | 4,961,346 | 4,663,261 |
| Materials | 2,189,146 | 3,265,254 |
| Advertising and marketing | 11,371,436 | 12,054,869 |
| Rentals | 12,672,823 | 12,604,459 |
| Insurance | 8,804,673 | 8,828,192 |
| Subcontracts | 2,785,952 | 2,927,323 |
| Specialised services | 55,144,398 | 53,687,481 |
| Transportation of goods | 84,455,025 | 83,130,930 |
| Others | 4,997,977 | 5,733,343 |
| 304,731,817 | 300,891,039 |
The increase in Energy and fluids is due to the replacement of fuel consumption for the consumption of natural gas, whose cost is indexed to Brent, and also due to an increase in the consumption of natural gas associated to the higher number of downtime days at the Figueira da Foz pulp plant for maintenance and completion of the project to increase installed capacity.
Other payroll costs are detailed as follows for the nine-month period ended 30 September 2018 and 2017:
| 9 months | 9 months | |
|---|---|---|
| Amounts in Euro | 30-09-2018 | 30-09-2017 |
| Training | 901,620 | 1,043,066 |
| Social action | 746,287 | 716,477 |
| Insurance | 2,460,391 | 3,141,619 |
| Others | 2,444,041 | 4,903,830 |
| 6,552,339 | 9,804,992 |
For the nine-month period ended 30 September 2018 and 2017, "Depreciation, amortization and impairment losses", net of the effect of investment grants recognised in the period were as follows:
| 9 months | 9 months | |
|---|---|---|
| Amounts in Euro | 30-09-2018 | 30-09-2017 |
| Depreciation of property, plant and equipment | ||
| Land | - | - |
| Buildings | (8,286,722) | (8,807,721) |
| Equipments | (90,836,974) | (98,040,963) |
| Other tangible assets | (3,032,359) | (3,842,258) |
| (102,156,055) | (110,690,942) | |
| Investment grants | 4,392,467 | 4,166,244 |
| (97,763,588) | (106,524,698) | |
| Impairment losses | ||
| Amortization of intangible assets | (615) | - |
| Mozambique land's impairment | - | (5,004,528) |
| (615) | (5,004,528) | |
| (97,764,203) | (111,529,226) |
The decrease in depreciation, amortization and impairment losses is due to the disposal of assets related to the production of pellets in the USA, not offset by the increase in depreciations resulting from the new investments.
Financial results are detailed as follows for the nine-month period ended 30 September 2018 and 2017:
| Amounts in Euro | 9 months 30-09-2018 |
9 months 30-09-2017 |
|---|---|---|
| Interest paid on borrowings | (6,421,248) | (8,276,493) |
| Interest earned on financial investments | 610,098 | 1,446,264 |
| Exchange rate differences | 1,231,922 | (3,233,678) |
| Gains/ (losses) on financial instruments - trading (Note 25) | (1,871,149) | 3,977,870 |
| Gains/ (losses) on financial instruments - hedging (Note 25) | (3,591,043) | 518,880 |
| Guarantees and bank charges | (2,570,415) | (2,417,432) |
| Gains/ (losses) on compensatory interest | (1,232,486) | 1,536,831 |
| Other expenses and financial losses | (2,692,888) | (40,985) |
| (16,537,208) | (6,488,744) |
Other expenses and financial losses include Euro 2,693,057 regarding the recognition of the difference between the nominal amount and the present amount to be received in respect of the sale of the pellets business (USD 45 million). Over the nominal amount yet to be received will be calculated interests at a 2.5% rate.
Income tax is detailed as follows for the nine-month period ended 30 September 2018 and 2017:
| Amounts in Euro | 9 months 30-09-2018 |
9 months 30-09-2017 |
|---|---|---|
| Current tax | 64,287,296 | 41,804,017 |
| Provision/ (reversal) for current tax | 8,035,975 | (20,296,470) |
| Deferred tax (Note 15) | (16,045,484) | 11,668,319 |
| 56,277,787 | 33,175,866 |
As at 30 September 2018, current tax includes Euro 59,659,541 (30 September 2017: Euro 39,019,465) regarding the liability created under the aggregated income tax regime of The Navigator Company S.A., related to the interim tax estimate.
For the nine-month period ended 30 September 2018 and 2017, the reconciliation of the effective income tax rate was as follows:
| Amounts in Euro | 9 months 30-09-2018 |
9 months 30-09-2017 |
||
|---|---|---|---|---|
| Profit before tax | 228,042,791 | 178,976,959 | ||
| Expected tax | 21.00% | 47,888,986 | 21.00% | 37,585,161 |
| Municipal surcharge | 1.75% | 3,987,078 | 1.37% | 2,450,514 |
| State surcharge | 6.79% | 15,476,622 | 3.91% | 6,990,406 |
| Differences (a) | 2.74% | 6,237,134 | (6.34%) | (11,353,016) |
| Provisions - impairment and reversal | 0.00% | - | 2.80% | 5,004,528 |
| Excess of income tax estimate | (4.31%) | (9,834,125) | (4.19%) | (7,501,727) |
| Tax benefits | (3.28%) | (7,477,908) | 0.00% | - |
| 24.68% | 56,277,787 | 18.54% | 33,175,866 |
(a) This amount includes essentially:
| 9 months | 9 months | |
|---|---|---|
| 30-09-2018 | 30-09-2017 | |
| Gains/ (losses) for tax purposes | 38,308,839 | - |
| Gains/ (losses) for accounting purposes | (81,477,741) | - |
| Taxable provisions | 62,635,121 | (31,193,601) |
| Tax benefits | (3,076,273) | (2,918,569) |
| Employee benefits | (429,472) | 1,277,445 |
| Others | 6,720,012 | (8,448,970) |
| 22,680,487 | (41,283,695) | |
| Tax effect (27.5%) | 6,237,134 | (11,353,016) |
| 6,237,134 | (11,353,016) |
On 1 July 2015, a new taxation group led by The Navigator Company, S.A. was set up, comprising all the companies located in Portugal in which the Group holds an interest or voting rights of at least 75%, for more than one year.
Earnings per share were determined as follows:
| Amounts in Euro | 9 months 30-09-2018 |
9 months 30-09-2017 |
|---|---|---|
| Profit attributable to the C ompany's shareholders | 171,766,977 | 145,794,646 |
| Total number of issued shares Treasury shares - period average |
717,500,000 (489,973) |
717,500,000 (489,973) |
| 717,010,027 | 717,010,027 | |
| Basic earnings per share | 0.24 | 0.20 |
| Diluted earnings per share | 0.24 | 0.20 |
Since there are no financial instruments convertible in Navigator Group shares, its earnings are undiluted.
The changes in the average number of treasury shares were as follows:
| 2018 | 2017 | |||
|---|---|---|---|---|
| Quantity | Accumulated Quantity |
Quantity | Accumulated Quantity |
|
| Treasury shares held on January | 489,973 | 489,973 | ||
| Acquisitions | ||||
| January | - | 489,973 | - | 489,973 |
| February | - | 489,973 | - | 489,973 |
| March | - | 489,973 | - | 489,973 |
| April | - | 489,973 | - | 489,973 |
| May | - | 489,973 | - | 489,973 |
| June | - | 489,973 | - | 489,973 |
| July | - | 489,973 | - | 489,973 |
| August | - | 489,973 | - | 489,973 |
| September | - | 489,973 | - | 489,973 |
| Treasury shares held on 30 September | 489,973 | 489,973 | ||
| Remaning quarters | - | |||
| Treasury shares held on 31 December | 489,973 | |||
| Average treasury shares held for the period | 489,973 | 489,973 |
The movement in Non-controlling interests for the 2017 and 2018 periods is as follows:
| Amounts in Euro | 2017 | 2016 |
|---|---|---|
| Distribution of dividends (excluding treasury shares) | 170,003,077 | 170,003,077 |
| Legal reserve | - | 10,081,439 |
| Bonus to employees (balance bonus) | 7,000,000 | 7,000,000 |
| Retained earnings | 30,767,527 | 30,416,921 |
| 207,770,604 | 217,501,437 |
The resolution for the appropriation of the net profit for the period ended 31 December 2017, approved at the Navigator Company's General Meeting held on 23 May 2018, was based on the net profit for the year as defined by the IFRS. The difference in the net
profit (individual and consolidated), in the amount of Euro 3,354,501, was transferred to Retained earnings.
As a complement of the proposed 2017 net income distribution at the Navigator Company's General Meeting, it was also approved the distribution of free reserves in the amount of Euro 0.04184 per share, in the total amount of Euro 29,999,700, distributed in 19 June 2018.
It was also approved the release of the legal reserve surplus, in the amount of Euro 9,790,475, and its transfer to free reserves.
Following the acquisition of 100% of the Navigator Paper Figueira, S.A. (former Soporcel – Sociedade Portuguesa de Papel, S.A.), for Euro 1,154,842,000, Goodwill amounting to Euro 428,132,254 was determined which represents the difference between the acquisition cost of the shares and the respective shareholders' equity as of the date of the first consolidation, on 1 January 2001, adjusted by the effect of the of allocation fair value to Navigator Paper Figueira's tangible assets.
The goodwill generated on the acquisition of Navigator Paper Figueira was deemed to be allocable to the integrated paper production in Figueira da Foz Industrial Complex cash generating unit.
As at 31 December 2010, assets and liabilities related to pulp production were transferred to another Group company, as a result of a split, reducing the acquisition historical cost to Euro 492,585,012.
As at 31 December 2013, real estate assets were split and transferred to Navigator Parques Industriais, S.A (former PortucelSoporcel Parques Industriais, S.A.) thus reducing the acquisition historical cost to Euro 385,764,077.
The book value of goodwill amounts to Euro 376,756,383, as it was amortised up to 31 December 2003 (date of transition to IFRS: 1 January 2004). As of that date, the accumulated depreciation amounted to Euro 51,375,871. From that date on, depreciation ceased and was replaced by annual impairment tests. If this amortisation had not been interrupted, the net book value of the Goodwill as at 30 September 2018 would amount to Euro 124,158,348 (31 December 2017: Euro 137,002,317).
Every year, the Navigator Company Group calculates the recoverable amount of Navigator Paper Figueira's assets (to which the goodwill recorded in the consolidated financial statements is associated), based on value-in-use calculations, in accordance with the Discounted Cash Flow method. The calculations are based on past performance and business expectations with the actual production structure, using the budget for next year and projected cash flows for the following 4 years, based on a constant sales volume. As a result of the calculations, up to this date no impairment losses have been identified.
The main assumptions for the above-mentioned calculation were as follows:
| 2018 | 2017 | |
|---|---|---|
| Inflation rate | 2.00% | 2.00% |
| Discount rate (post-tax) | 6.84% | 6.84% |
| Production growth | 0.00% | 0.00% |
| Perpetuity growth rate | -1.00% | -1.00% |
The discount rate presented above is a post-tax rate equivalent to a pre-tax discount rate of 9.60% (31 December 2017: 9.60%) and has been calculated in accordance with the WACC (Weighted Average Cost of Capital) methodology, based in the following assumptions:
| 2018 | 2017 | |
|---|---|---|
| Risk free interest rate | 2.39% | 2.39% |
| Equity risk premium (market and Equity) | 5.00% | 5.00% |
| Tax rate | 29.50% | 29.50% |
| Debt risk premium | 2.89% | 2.89% |
On 6 February 2015 the procedures and contracts for the acquisition of Navigator Tissue Ródão, S.A. (previously named AMS-BR Star Paper, S.A.) were concluded, and the approval by the competition authorities for the acquisition was obtained on 17 April 2015.
Therefore, for the purpose of preparing the consolidated financial statements for the year ended 31 December 2015, the Navigator Company Group proceeded to the initial consolidation of Navigator Tissue Ródão, S.A., acquired by Euro 4,949,794, which at acquisition date, had equity amounting Euro 17,284,378, plus the acquisition of additional paid-in capital for Euro 2,327,500, totaling Euro 19,611,878.
To the initial acquisition difference, of Euro 21,337,916, was deducted the AICEP's investment subsidy and the fair value of the acquired tangible assets, with a goodwill amounting to Euro 583,083.
For the purpose of goodwill allocation, it was deemed allocable to the tissue paper production cash-generating unit in Vila Velha de Ródão Industrial Complex.
Every year, the Navigator Company Group calculates the recoverable amount of Navigator Tissue Ródão assets (to which the goodwill recorded in the consolidated financial statements is associated), based on value-in-use calculations, in accordance with the Discounted Cash Flow method. The calculations are based on past performance and business expectations with the actual production structure, using the budget for next year and projected cash flows for the following 4 years, based on a constant sales volume. As a result of the calculations, up to this date no impairment losses have been identified in goodwill.
During 2018 and 2017, the movement occurred in other intangible assets is detailed as follows:
| Amounts in Euro | Industrial property and other rights |
CO2 emission licences |
Total |
|---|---|---|---|
| Acquisition cost | |||
| Amounts as of 1 January 2017 | 4,400 | 4,299,650 | 4,304,049 |
| Acquisitions | - | 4,131,256 | 4,131,256 |
| Adjustments, transfers and write-offs | - | (4,555,080) | (4,555,080) |
| Amounts as of 30 September 2017 | 4,400 | 3,875,826 | 3,880,225 |
| Acquisitions | 1,870 | - | 1,870 |
| Adjustments, transfers and write-offs | - | - | - |
| Amounts as of 31 December 2017 | 6,270 | 3,875,826 | 3,882,095 |
| Acquisitions | 165 | 3,984,111 | 3,984,276 |
| Adjustments, transfers and write-offs | - | (4,975,303) | (4,975,303) |
| Amounts as of 30 September 2018 | 6,435 | 2,884,633 | 2,891,068 |
| Accumulated depreciation and impairment losses | |||
| Amounts as of 1 January 2017 | (3,407) | - | (3,407) |
| Amortisations and impairment losses Disposals |
(309) - |
- - |
(309) - |
| Amounts as of 30 September 2017 | (3,716) | - | (3,716) |
| Amortisations and impairment losses | (134) | - | (134) |
| Disposals | - | - | - |
| Amounts as of 31 December 2017 | (3,850) | - | (3,850) |
| Amortisations and impairment losses | (615) | - | (615) |
| Disposals | - | - | - |
| Amounts as of 30 September 2018 | (4,465) | - | (4,465) |
| Net book value as of 1 January 2017 | 993 | 4,299,650 | 4,300,642 |
| Net book value as of 30 September 2017 | 684 | 3,875,826 | 3,876,509 |
| Net book value as of 31 December 2017 | 2,420 | 3,875,826 | 3,878,245 |
| Net book value as of 30 September 2018 | 1,970 | 2,884,633 | 2,886,603 |
As at 30 September 2018, the Group held 442,145 CO2 emission licenses with a market value as of that date of Euro 9,377,895 (31 December 2017: 561,148 licenses with a market value of Euro 3,366,888).
This amount includes forwards related to 250,000 emission licenses, acquired in 2016 and 2017, amounting to Euro 1,397,500 as at 30 September 2018 (31 December 2017: 500,000 emission licenses with an amount of Euro 3,328,500) (Note 25.1).
During 2018 and 2017, changes in Property, plant and equipment, as well as the respective depreciation and impairment losses, were as follows:
| Amounts in Euro | Land | Buildings and other constructions |
Equipments and other tangibles |
Assets under construction |
Total |
|---|---|---|---|---|---|
| Acquisition cost | |||||
| Amounts as of 1 January 2017 | 122,100,111 | 539,316,927 | 3,524,986,193 | 28,961,567 | 4,215,364,798 |
| Acquisitions | 2,868,315 | - | - | 78,530,633 | 81,398,948 |
| Impairment losses | (5,004,528) | - | - | (5,004,528) | |
| Disposals | - | (5,957) | (552,627) | - | (558,584) |
| Adjustments, transfers and write-offs | 591,014 | 1,795,181 | 22,934,109 | (25,261,630) | 58,673 |
| Amounts as of 30 September 2017 | 120,554,911 | 541,106,151 | 3,547,367,676 | 82,230,570 | 4,291,259,307 |
| Acquisitions | - | - | - | 33,315,746 | 33,315,746 |
| Impairment losses | - | - | - | (1,034,921) | (1,034,921) |
| Disposals | (2,547,432) | (482,778) | (1,015,823) | - | (4,046,034) |
| Adjustments, transfers and write-offs | (360,712) | 6,427,563 | 5,374,624 | (9,450,247) | 1,991,228 |
| Assets available for sale (Note 23) | (1,609,029) | (32,887,566) | (77,847,177) | (924,392) | (113,268,164) |
| Amounts as of 31 December 2017 | 116,037,738 | 514,163,369 | 3,473,879,299 | 104,136,754 | 4,208,217,161 |
| Acquisitions | - | - | - | 148,374,108 | 148,374,108 |
| Impairment losses | - | - | - | - | - |
| Disposals | (2,359,565) | - | (4,416,637) | - | (6,776,202) |
| Adjustments, transfers and write-offs | 1,754,881 | 116,389,940 | (108,332,768) | 9,812,053 | |
| Amounts as of 30 September 2018 | 113,678,173 | 515,918,250 | 3,585,852,602 | 144,178,094 | 4,359,627,119 |
| Accumulated depreciation and impairment losses | |||||
| Amounts as of 1 January 2017 | (170,652) | (351,347,330) | (2,568,867,884) | - | (2,920,385,866) |
| Depreciation and impairment losses | - | (8,806,486) | (101,884,456) | - | (110,690,942) |
| Disposals | - | 1,278 | 318,888 | - | 320,166 |
| Adjustments, transfers and write-offs | - | - | (975,023) | - | (975,023) |
| Amounts as of 30 September 2017 | (170,652) | (360,152,538) | (2,671,408,473) | - | (3,031,731,664) |
| Depreciation and impairment losses | - | (3,042,982) | (30,839,808) | - | (33,882,790) |
| Disposals | - | 2 | 737,156 | - | 737,158 |
| Adjustments, transfers and write-offs | - | (87,004) | 37,933 | - | (49,071) |
| Assets available for sale (Note 23) | - | 2,055,473 | 25,778,785 | - | 27,834,258 |
| Amounts as of 31 December 2017 | (170,652) | (361,227,049) | (2,675,694,408) | - | (3,037,092,109) |
| Depreciation and impairment losses | - | (8,286,722) | (93,869,333) | - | (102,156,055) |
| Disposals | - | - | 1,231,964 | - | 1,231,964 |
| Adjustments, transfers and write-offs | - | - | - | - | - |
| Amounts as of 30 September 2018 | (170,652) | (369,513,771) | (2,768,331,778) | - | (3,138,016,200) |
| Net book value as of 1 January 2017 | 121,929,459 | 187,969,598 | 956,118,308 | 28,961,567 | 1,294,978,932 |
| Net book value as of 30 September 2017 | 120,384,259 | 180,953,613 | 875,959,203 | 82,230,570 | 1,259,527,645 |
| Net book value as of 31 December 2017 Net book value as of 30 September 2018 |
115,867,086 113,507,522 |
152,936,320 146,404,480 |
798,184,891 817,520,824 |
104,136,754 144,178,094 |
1,171,125,052 1,221,610,920 |
As at 30 September 2018, "Assets under construction" includes investments in projects under development already announced, in particular related with the tissue business segment, in the amount of Euro 113,468,743, with the highlight of the construction, in Cacia, of a Tissue mill (Euro 106,637,217) and also the tissue operation in Vila Velha de Ródão (Euro 6,831,526).
In the pulp business segment, assets under construction amount to Euro 13,409,596 associated with improvements in the productive process.
Assets under construction associated with the paper segment amount to Euro 15,796,293 and are mainly related with investments in productive process improvements.
In "Others" segment are included investments under development in the amount of Euro 1,503,462 which are expected to be fulfilled until the end of the year.
During 2018 and 2017, changes in biological assets were as follows:
| Amounts in Euro | 2018 | 2017 |
|---|---|---|
| Amounts as of 1 January | 129,396,936 | 125,612,949 |
| Logging in the period | (14,315,029) | (16,646,099) |
| Growth | 4,522,924 | 8,797,146 |
| New planted areas and replanting (at cost) | 1,899,505 | 1,579,148 |
| Other changes in fair value | 9,449,746 | 9,455,810 |
| 1,557,146 | 3,186,005 | |
| Amount as of 30 September | 130,954,082 | 128,798,954 |
| Remaining quarters | 597,982 | |
| Amounts as of 31 December | 129,396,936 |
The amounts shown as "Other changes in fair value" correspond to actual costs of forest asset management foreseen and incurred in the period, changes in the general assessment assumptions (price of wood and cost of capital) and changes in expectations in relation to the annual model:
| Amounts in Euro | 30-09-2018 | 31-12-2017 |
|---|---|---|
| Costs of assets management | ||
| Forestry | 2,357,565 | 2,216,356 |
| Structure | 4,363,286 | 3,915,187 |
| Fixed and variable rents | 8,870,339 | 7,725,603 |
| 15,591,190 | 13,857,146 | |
| Changes in expectations | ||
| Price of wood | - | (750,000) |
| Cost-of-capital rate | - | 5,060,000 |
| Variations in other species | (1,018,839) | 3,003,499 |
| Impact of forest fires in the period | (1,793,848) | (2,231,861) |
| Other changes in expectations (costs of structure, asset rationalization) | (3,328,757) | (9,482,974) |
| (6 141 444) | (4 401 336) | |
| 9,449,746 | 9,455,810 |
As at 30 September 2018 and 31 December 2017, biological assets, by species, were detailed as follows:
| Amounts in Euro | 30-09-2018 | 31-12-2017 |
|---|---|---|
| Eucalyptus (Portugal) | 117,473,340 | 115,198,626 |
| Pine (Portugal) | 5,559,054 | 5,136,610 |
| Cork oak (Portugal) | 736,229 | 2,167,541 |
| Other species (Portugal) | 215,968 | 225,939 |
| Eucalyptus (Mozambique) | 6,969,492 | 6,668,220 |
| 130,954,082 | 129,396,936 |
These amounts correspond to management's expectation of the volumes to be extracted from its woodlands, as follows:
| 30-09-2018 | 31-12-2017 |
|---|---|
| 9,978 | 10,052 |
| 412 | 455 |
| n/a | n/a |
| 611 | 615 |
| 2,057 | 2,326 |
(1) Only for areas assessed with one year or more
Concerning Eucalyptus in Portugal, the most relevant biological asset for the nine-month period ended 30 September 2018 and 2017, the Group extracted 455,840 m3 ssc and 453,264 m3 ssc of wood from its owned and explored forests, respectively.
This caption includes the percentage held by the Group in Liaison Technologies, originally acquired in 2005, through the exchange of shares of Express Paper. Until 2012, the Group held 1.52% of the capital of this subsidiary and, in 2013, sold shares representing 0.85% of the share capital, generating a capital gain of Euro 182,911. The Group wants to sell the remaining shares of Liaison.
This caption includes the amount of Euro 32,262,359 regarding the current amount to be received for the sale of the pellets business (USD 45 million, of which USD 42,5 are noncurrent). The nominal interest receivable shall bear interest at the rate of 2.5%.
As at 30 September 2018 and 31 December 2017, receivables and other current assets were detailed as follows:
| Amounts in Euro | 30-09-2018 | 31-12-2017 |
|---|---|---|
| Trade receivables | 200,698,237 | 175,579,498 |
| Trade receivables - Group companies (Note 26) | 209,744 | 82,306 |
| Other receivables | 44,628,965 | 34,334,922 |
| Derivative financial instruments (Note 25) | 617,513 | 3,644,395 |
| Accrued income | 14,655,150 | 19,198,044 |
| Deferred costs | 7,056,131 | 4,865,157 |
| 267,865,743 | 237,704,322 |
The amounts receivable shown above are net of adjustments/impairment losses.
As at 30 September 2018 and 31 December 2017, other receivables were detailed as follows:
| Amounts in Euro | 30-09-2018 | 31-12-2017 |
|---|---|---|
| Advances to employees | 689,971 | 513,293 |
| Advances to suppliers | 2,046,314 | 172,466 |
| Financial incentives receivable | 7,380,649 | 42,105 |
| Department of C ommerce (USA) | 31,186,887 | 29,846,612 |
| Other debtors | 3,325,144 | 3,760,446 |
| 44,628,965 | 34,334,922 |
In 2015 the Group was subject to an investigation of alleged dumping practices in UWF exports to the United States of America, and an anti-dumping provisional tax rate was imposed over those sales, of 29.53%. On 11 January 2016, the US Department of Commerce settled the final duty rate at 7.8%. In August 2018, Navigator was notified by the US Department of Commerce that the final rate to be applied on sales during the first
review period (from August 2015 to February 2017) would be 37.34%, although in March 2018 the Company had been notified by the same authority that, according to its preliminary assessment, the anti-dumping rate to be applied would be 0%.
The Group reacted immediately to the decision, claiming that there were administrative errors in the decision and used all measures available to prove that the abovementioned rate for the period concerned was completely unjustified. As a result, the US Department of Commerce has reconsidered, with strict compliance with the applicable rules, the calculations made having concluded by the final granting of the 1.75% rate, which shall be applicable to all exports to the US by the Company after the date of publication of the relevant decision.
Subsequently, a request for the reimbursement of approximately 22 million Euros will be initiated, corresponding to the difference between the amounts deposited up to February 2017 and the amount calculated based on the final rate established.
The amount shown as "Advances to suppliers" refers to advanced payments made to wood suppliers. As a way of ensuring the sustainability of the forest value chain to the industry, the Group advances payments to its suppliers upon presentation of guarantees, for the wood to be bought throughout the year. Those advances are settled as supplies are delivered.
The evolution of financial incentives to be received is detailed as follows:
| Amounts in Euro | 2018 | 2017 |
|---|---|---|
| Amount as of 1 January | 42,105 | 58,870 |
| Increase / (decrease) | 3,098,070 | - |
| Assignments | 7,380,649 | - |
| Receipts | (3,140,174) | (16,765) |
| Amount as of 30 September | 7,380,649 | 42,105 |
| Remaining quarters | - | |
| Amount as of 31 December | 42,105 |
The balance as at 30 September 2018 refers to the financial incentives granted within several research and development projects, namely the Inpactus project (Euro 5,585,300), the PT-Lyptus project (Euro 980,220) and others, whose expectation of the Group is that all the conditions precedent to its receipt are guaranteed.
As at 30 September 2018 and 31 December 2017, accrued income and deferred costs were detailed as follows:
| Amounts in Euro | 30-09-2018 | 31-12-2017 |
|---|---|---|
| Accrued income | ||
| Interest receivable | 305,706 | 1,288,638 |
| Energy sales | 13,678,905 | 15,320,310 |
| Other | 670,539 | 2,589,096 |
| 14,655,150 | 19,198,044 | |
| Deferred costs | ||
| Rents | 3,558,181 | 3,604,994 |
| Insurance | 3,311,368 | 1,061,073 |
| Other | 186,582 | 199,090 |
| 7,056,131 | 4,865,157 | |
| 21,711,281 | 24,063,201 |
As at 30 September and 31 December 2017, there were no overdue debts to the State and other public entities.
The balances with these entities were as follows:
| Amounts in Euro | 30-09-2018 | 31-12-2017 |
|---|---|---|
| State and other public entities | ||
| Value added tax - reimbursement requests | 41,329,898 | 59,020,670 |
| Value added tax - recoverable | 697,033 | 3,335,694 |
| Amounts pending repayment (legal proceedings in favor of the | 8,330,700 | 12,720,057 |
| 50,357,631 | 75,076,422 |
As at 30 September 2018, the amount of reimbursement requests comprised the following, by month and by company:
| Amounts in Euro | Aug/2018 | Sep/2018 | Total |
|---|---|---|---|
| The Navigator Company, S.A. | - | 23,814,944 | 23,814,944 |
| Navigator Abastecimento de Madeira, ACE | 2,656,396 | 1,531,530 | 4,187,926 |
| Navigator Paper Setúbal, S.A. | - | 1,217,950 | 1,217,950 |
| Bosques do Atlântico, S.L. | - | 4,735,423 | 4,735,423 |
| Navigator Tissue Cacia, S.A. | - | 7,373,656 | 7,373,656 |
| 2,656,396 | 38,673,502 | 41,329,898 |
As at 31 December 2017, the amount of reimbursement requests comprised the following, by month and by company:
| Amounts in Euro | Sep/2017 | Oct/2017 | Nov/2017 | Dec/2017 | Total |
|---|---|---|---|---|---|
| The Navigator Company, S.A. | - | 9,138,486 | 21,047,339 | 20,558,615 | 50,744,439 |
| Navigator Abastecimento de Madeira, ACE | 1,779,313 | - | - | - | 1,779,313 |
| Navigator Tissue Cacia, S.A. | 1,909,225 | - | - | - | 1,909,225 |
| Bosques do Atlântico, S.L. | - | - | - | 4,587,693 | 4,587,693 |
| 3,688,537 | 9,138,486 | 21,047,339 | 25,146,308 | 59,020,670 |
All these amounts were received during the first half of 2018.
| Amounts in Euro | 30-09-2018 | 31-12-2017 | |
|---|---|---|---|
| State and other public entities | |||
| Corporate income tax - C IT | 33,634,782 | 7,120,857 | |
| Personal income tax - PIT | 2,089,361 | 2,158,253 | |
| Value added tax - VAT | 32,384,565 | 30,150,781 | |
| Social security contributions | 2,314,554 | 2,525,854 | |
| Additional tax liabilities | 1,463,127 | 1,463,127 | |
| Other | 788,933 | 152,913 | |
| 72,675,323 | 43,571,785 |
As previously mentioned, since 1 July 2015, The Navigator Company and its subsidiaries were part of the taxation group led by The Navigator Company, S.A. Therefore, although each group company calculated its income taxes as if it was taxed independently, the determined liabilities were recognised as due to the leader of the taxation group who proceeded with the overall computation and the settlement of the income tax.
Corporate income tax is detailed as follows:
| Amounts in Euro | 30-09-2018 | 31-12-2017 |
|---|---|---|
| Corporate income tax (Note 8) | 64,287,296 | 47,755,492 |
| Payments on account | (24,124,209) | (45,087,168) |
| Withholding tax | (18,566) | (895,346) |
| C IT - Decree-Law No. 66/2016 (Revaluation Regime) | 5,235,601 | 5,235,601 |
| Outros amounts receivable/ (payable) | (11,745,340) | 112,278 |
| Closing balance | 33,634,782 | 7,120,857 |
"Other receivable/payables" relates, essentially, to the income tax receivable by the Group's for the 2017 period.
The changes in additional tax liabilities as at 30 September 2018 and 31 December 2017 were as follows:
| Amounts in Euro | 2018 | 2017 |
|---|---|---|
| As of 1 January | 1,463,127 | 1,465,022 |
| Increases | - | - |
| Transfers | - | - |
| Decreases | - | - |
| As of 30 June | 1,463,127 | 1,465,022 |
| Remaining quarters | (1,895) | |
| As of 31 December | 1,463,127 |
As at 30 September 2018 and 31 December 2017, the additional tax liabilities are detailed as follows:
| Amounts in Euro | 30-09-2018 | 31-12-2017 |
|---|---|---|
| Bosques do Atlântico | 1,463,127 | 1,463,127 |
| 1,463,127 | 1,463,127 |
The Navigator Company is a public company with its shares quoted on the Euronext Lisbon.
As at 30 September 2018, The Navigator Company's share capital of Euro 500,000,000 was fully subscribed and paid for being represented by 717,500 000 shares without nominal value.
At the General Meeting held on 22 September 2017, a reduction of the Company's share capital from Euro 717,500,000 to Euro 500,000,000 was approved, maintaining the number of shares representing the company's share capital and for the purpose of releasing excess capital, transferring to free reserves the amount of the capital released.
These shares were mainly acquired during 2008 and 2012, and the changes in the period were as follows:
| 2018 | 2017 | ||||
|---|---|---|---|---|---|
| Amounts in Euro | Quantity Amount |
Quantity | Amount | ||
| Treasury shares held in January | 489,973 | 1,002,084 | 489,973 | 1,002,084 | |
| Acquisitions | |||||
| January | - | - | - | - | |
| February | - | - | - | - | |
| March | - | - | - | - | |
| April | - | - | - | - | |
| May | - | - | - | - | |
| June | - | - | - | - | |
| July | - | - | - | - | |
| August | - | - | - | - | |
| September | - | - | - | - | |
| - | - | - | - | ||
| Treasury shares held in September | 489,973 | 1,002,084 | 489,973 | 1,002,084 | |
| Remaining quarters | - | - | |||
| Treasury shares held in December | 489,973 | 1,002,084 |
Treasury shares are stated at acquisition cost.
The market value of the treasury shares held on 30 September 2018 amounted to Euro 2,066,706 (31 December 2017: Euro 2,083,365), corresponding to a unit value of Euro 4.218 (31 December 2017: Euro 4,252) and the market capitalization amounted to Euro 3,026,415,000 (2017: Euros 2,958,970,000) compared to an equity, net of noncontrolling interests, of Euro 1,150,820,596.
As at 30 September 2018 and 31 December 2017, the shareholders with significant positions in the Company's capital were as follows:
| 30-09-2018 | 31-12-2017 | |||
|---|---|---|---|---|
| Entity | No. of shares | % Capital | No. of shares | % Capital |
| Seinpar Investments, BV | 241,583,015 | 33.67% | 241,583,015 | 33.67% |
| Semapa, SGPS, S.A. | 256,033,284 | 35.68% | 256,033,284 | 35.68% |
| Other entities from Semapa's Group | 1,000 | 0.00% | 1,000 | 0.00% |
| Zoom Lux S.A.L.R. | 15,349,972 | 2.14% | 15,349,972 | 2.14% |
| Treasury shares | 489,973 | 0.07% | 489,973 | 0.07% |
| Pension Fund of Banco BPI | - | 0.00% | 30,412,133 | 4.24% |
| Norges Bank (The C entral Bank of Norway) | - | 0.00% | 15,498,902 | 2.16% |
| Remaining shareholders | 204,042,756 | 28.44% | 158,131,721 | 22.04% |
| Total shares | 717,500,000 | 100.00% | 717,500,000 | 100.00% |
During 2018 and 2017, the changes in assets and liabilities as a result of deferred taxes were as follows:
1 January
Income Statement 30 September
(59,859,532) (24,447,334) 1,225,127 58,220 (83,023,517)
| Amounts in Euro | 2018 | Increases | Decreases | Share capital | 2018 |
|---|---|---|---|---|---|
| Temporary differences originating | |||||
| deferred tax assets | |||||
| Conventional capital remuneration | 12,320,000 | - | - | - | 12,320,000 |
| Taxed provisions | 1,336,534 | - | (1,219) | - | 1,335,315 |
| Adjustments in property, plant and equipment | 100,829,491 | - | (13,667,298) | - | 87,162,193 |
| Financial instruments | 3,885,952 | - | - | 3,309,071 | 7,195,023 |
| Deferred accounting gains on inter-group transactions | 36,424,408 | 9,469,161 | (1,602,385) | - | 44,291,184 |
| Government grants | 7,849,328 | - | (1,094,054) | - | 6,755,274 |
| 162,645,714 | 9,469,161 | (16,364,956) | 3,309,071 | 159,058,989 | |
| Temporary differences originating | |||||
| deferred tax liabilities | |||||
| Retirement benefits | (117,966) | (823) | - | 46,626 | (72,163) |
| Derivative financial instruments at fair value | (144,728) | - | - | - | (144,728) |
| Valuation of biological assets | (10,246,504) | (8,897,078) | - | - | (19,143,582) |
| Deferred accounting losses on inter-group transactions | (49,497,874) | (10,191,596) | 49,694,961 | - | (9,994,509) |
| Government grants | (8,903,132) | - | 932,590 | 186,889 | (7,783,653) |
| Extension of useful lives of property, plant and equipment | (232,993,493) | (23,580) | 33,728,535 | - | (199,288,539) |
| (301,903,697) | (19,113,077) | 84,356,086 | 233,515 | (236,427,173) | |
| Amounts recognised in balance sheet | |||||
| Deferred tax assets | 44,727,571 | 2,604,019 | (4,500,363) | 909,994 | 43,741,222 |
| 44,727,571 | 2,604,019 | (4,500,363) | 909,994 | 43,741,222 | |
| Deferred tax liabilities | (83,023,517) | (5,256,096) | 23,197,924 | 64,217 | (65,017,473) |
| (83,023,517) | (5,256,096) | 23,197,924 | 64,217 | (65,017,473) | |
| 1 January | Income Statement | 31 December | |||
| Amounts in Euro | 2017 | Increases | Decreases | Share capital | 2017 |
| Temporary differences originating | |||||
| deferred tax assets | |||||
| Conventional capital remuneration | - | - | (3,080,000) | 15,400,000 | 12,320,000 |
| Taxed provisions | 1,328,771 | - | 7,763 | - | 1,336,534 |
| Adjustments in property, plant and equipment | 110,794,106 | - | (9,964,615) | - | 100,829,491 |
| Financial instruments | 8,859,457 | - | - | (4,973,505) | 3,885,952 |
| Deferred accounting gains on inter-group transactions | 30,432,332 | 10,064,988 | (4,072,912) | - | 36,424,408 |
| Government grants | 9,308,071 | - | (1,458,743) | - | 7,849,328 |
| 160,722,737 | 10,064,988 | (18,568,507) | 10,426,495 | 162,645,714 | |
| Temporary differences originating | |||||
| deferred tax liabilities | |||||
| Revaluation of property, plant and equipment | (37,905) | - | 37,905 | - | (0) |
| Retirement benefits | (16,361) | (63,649) | (428) | (37,527) | (117,966) |
| Derivative financial instruments at fair value | (144,728) | - | - | - | (144,728) |
| Valuation of biological assets | (3,979,927) | (6,266,577) | - | - | (10,246,504) |
| Deferred accounting losses on inter-group transactions | (2,640,661) | (49,680,286) | 2,823,074 | - | (49,497,874) |
| Government grants | (1,270,679) | (7,881,690) | - | 249,237 | (8,903,132) |
| Extension of useful lives of property, plant and equipment | (209 580 756) | (25 007 195) | 1 594 457 | - | (232,993,494) |
| (217,671,018) | (88,899,397) | 4,455,008 | 211,710 | (301,903,698) | |
| Amounts recognised in balance sheet | |||||
| Deferred tax assets | 44,198,753 | 2,767,872 | (5,106,340) | 2,867,286 | 44,727,571 |
| 44,198,753 | 2,767,872 | (5,106,340) | 2,867,286 | 44,727,571 |
In the measurement of the deferred taxes as at 30 September 2018 and 31 December 2017, the corporate income tax rate used was 27.50%.
Until 2013, several retirement and survivor plans together with retirement bonus, coexisted within the Navigator Company Group. For certain categories of active employees, in addition to the plans described below, additional plans also existed, financed through independent funds assigned to cover those additional responsibilities.
In accordance with the Social Benefits Regulations in force, permanent employees of The Navigator Company that chose not to move to the defined contribution plan, together with the retired employees as of the transition date (1 January 2009) and from 1 January 2014, the former employees of Navigator Paper Figueira (former Soporcel), Navigator Forest Portugal (former PortucelSoporcel Florestal), RAIZ, Empremédia and Navigator Lusa (incorporated by merger in 2017 in-Navigator Paper Figueira), are entitled, after retirement or in case of disability, to a monthly retirement pension or disability
supplement. This is calculated according to a formula, which considers the beneficiary's gross monthly remuneration updated to the work category at the date of retirement and the number of years of service, up to a limit of 30 (limit of 25 to Navigator Paper Figueira, Navigator Forest Portugal, Empremédia, Navigator Lusa and RAIZ), including a survivor pension to the spouse and direct descendants.
To cover this liability, externally managed pension funds were set up. The funds' assets are apportioned between each of the companies.
In 2010 and 2013, the Navigator Company Group completed the necessary procedures to convert the defined benefit plans of its subsidiaries The Navigator Company, Navigator Paper Figueira, Navigator Forest Portugal, Empremédia, S.A., RAIZ and Navigator Lusa, to defined contribution plans for the current employees, keeping the acquired benefits of former employees as defined benefit plans. The acquired rights attributable to former employees and retirees in case they leave the company or in case of a job change or retirement remains unchanged.
Notwithstanding, following a negotiation process with its employees as a result of the aforementioned changes to the pension plans, Navigator Paper Figueira allowed its active employees as of 1 January 2014 to choose, until 16 January 2015, to choose between the following alternatives:
This possibility to choose between these two alternatives was granted to the employees in early 2015, with reference to the situation as of 31 December 2013, aiming to bypass the changes that had been made to the Navigator Paper Figueira pension plan, by simulating that the option had been granted as of 1 January 2014, by the time of the conversion of the defined benefit plan into a defined contribution plan.
In general terms, employees that chose alternative A retain the option, as of the retirement date, of the defined benefit plan in force until 31 December 2013 based on the employee's seniority as of that date. They also benefit from a defined contribution plan until they reach 25 year seniority in the Company.
From a practical point of view, this alternative allows the employees to benefit from two autonomous accounts:
The balance of the Account 1 will be assigned to cover the liabilities associated to a defined benefit (resulting in receiving a pension corresponding to the existing liabilities in the previous defined benefit plan computed as of 31 December 2013), as the employees that chose Alternative A trigger the Safeguard Clause.
When triggering the Safeguard Clause employees will be guaranteeing the payment of a pension in accordance with the provisions laid down on the Defined Benefit Plan previously in force, and the pensionable salary at the retirement date. In practical terms, if the Safeguard Clause is triggered, the accumulated balance in Account 1 is transferred to the Defined Benefit Plan, assuming responsibility for paying the retirement pension to the employee.
Employees that choose to trigger the Safeguard Clause also benefit from a life rent, acquired from an insurance company with the funds accumulated in Account 2.
Employees that do not trigger the Safeguard Clause will benefit from the life rent acquired from the insurance company with the funds accumulated in Accounts 1 and 2.
This means that the benefits awarded by the employees that chose not to trigger the Safeguard Clause will correspond to those that would result in a defined contribution plan, with the corresponding contributions being computed as the sum of the "deposited" contributions in Accounts 1 and 2 (without any adjustment/actuarial update).
Employees that chose Alternative B will have access to a defined contribution plan, under which the Company will perform monthly contributions corresponding to 4% of their pensionable salary until the date of retirement or termination of employment contract, with no limitations.
Thus, under this alternative, employees benefit from a single account, which will be composed by the accumulated balance of the following contributions:
The benefit to be awarded by employees who, until 16 January 2015, had chosen this alternative, will correspond to the value of the life rent that can be acquired from an insurance company with the total accumulated contributions of each employee as of the date of retirement.
The Navigator Company Group also holds liabilities related to post-employment defined benefit plans regarding The Navigator Company employees that chose not to accept the conversion to defined contribution plan 13 employees (31 December 2017: 13 employees), together with former employees, retirees or, when applicable, with granted rights.
As at 30 September 2018 and 31 December 2017, the coverage of the companies' liabilities by the assets of the funds was as follows:
| Amounts in Euro | No. of Beneficiaries |
30-09-2018 | No. of Beneficiaries |
31-12-2017 |
|---|---|---|---|---|
| Past service liabilities | ||||
| - Active employees, including individual accounts | 516 | 58,567,960 | 529 | 57,986,022 |
| - Former employees | 123 | 20,679,122 | 125 | 20,527,177 |
| - Retired employees | 500 | 74,479,477 | 492 | 72,686,537 |
| Market value of the pension funds | (144,411,894) | (146,109,493) | ||
| 1,139 | 9,314,665 | 1,146 | 5,090,242 | |
| Insufficient funds / overfunding | 9,314,665 | 5,090,242 |
As at 30 September 2018, the amount of liabilities related to the post-employment benefit plans of two non-executive Directors of the Navigator Group amounted to Euro 1,601,876 (31 December 2017: Euro 1,701,096).
The actuarial studies developed by an independent entity for determine the accumulated liabilities as at 30 September 2018 and 31 December 2017 were based on the following assumptions:
| Real outcome | ||||
|---|---|---|---|---|
| 30-09-2018 | 31-12-2017 | 30-09-2018 | 31-12-2017 | |
| Disability table | EKV 80 | EKV 80 | - | - |
| Mortality table | TV 88/90 | TV 88/90 | - | - |
| Wage growth rate | 1.00% | 1.00% | 1.50% | 1.00% |
| Technical interest rate | 2.00% | 2.00% | - | - |
| Return rate on plan assets | 2.00% | 2.00% | 0.19% | 4.31% |
| Pension growth rate | 0.75% | 0.75% | 1.13% | 0.75% |
The discount rates used in this study were selected over the return rates of a bonds' portfolio, namely Markit iBoxx Eur Corporates AA 10+. From the portfolio, bonds with adequate maturity and rating were selected according to the amount and period cash outflows that will occur in regard to the payment of the benefits to employees.
The following table presents the five-year historical information on the present value of liabilities, the market value of the funds, non-financed liabilities and net actuarial gains/ (losses). This information from 2014 to 2018 is as follows:
| Amounts in Euro | 2014 | 2015 | 2016 | 2017 | 09-2018 |
|---|---|---|---|---|---|
| Present value of liabilities | 70,188,472 | 139,312,363 | 148,877,898 | 151,199,735 | 153,726,559 |
| Fair value of plan assets | 71,666,181 | 143,067,688 | 142,420,782 | 146,109,493 | 144,411,894 |
| Surplus/ (deficit) | 1,477,709 | 3,755,326 | (6,457,116) | (5,090,242) | (9,314,665) |
The movements in liabilities with retirement and pension plans in 2018 and 2017 were as follows:
| Amounts in Euro | 2018 | 2017 |
|---|---|---|
| Liabilities at the beginning of the period | 151,199,735 | 148,877,898 |
| Remeasurement (actuarial deviations) | 1,829,897 | 398,658 |
| Accrued liabilities with unplanned withdrawls | 637,577 | - |
| Costs recognised in the Income Statement | 2,395,283 | 3,738,305 |
| Pensions paid | (2,335,933) | (3,255,344) |
| Amount as of 30 September | 153,726,559 | 149,759,517 |
| Remaining quarters | 1,440,218 | |
| Amount as of 31 December | 151,199,735 |
The funds set up to cover the above mentioned liabilities presented the following movements in 2018 and 2017:
| Amounts in Euro | 2018 | 2017 |
|---|---|---|
| Opening balance | 146,109,493 | 142,420,782 |
| Charge for the period | 2,000,000 | - |
| Expected income for the period | 1,463,154 | 2,136,269 |
| Remeasurement (actuarial deviations) | (3,072,422) | 1,547,435 |
| Pensions paid | (2,335,933) | (3,255,344) |
| Other | 247,602 | - |
| Amount as of 30 September | 144,411,894 | 142,849,143 |
| Remaining quarters | 3,260,350 | |
| Amount as of 31 December | 146,109,493 |
Assuming assets under the defined contribution in the amount of Euro 50,348 million, pension fund assets are managed by Schroders (26%), BlackRock (25%), Credit Suisse (23%) and BMO (26%), as detailed below:
| Amounts in Euro | 2018 | 2017 |
|---|---|---|
| Defined Contribution and Conta 1 : | ||
| Ocidental - Pensions | 97,075 | 2,485,748 |
| Schroders | 50,628,447 | 51,431,292 |
| BlackRock | 48,017,105 | 46,377,470 |
| Conta 1 - C redit Suisse | 45,669,268 | 45,814,983 |
| Total Defined Contribution and Conta 1 | 144,411,894 | 146,109,493 |
| Defined Contribution (BMO): | ||
| Defensive sub-fund | 9,556,416 | 8,681,076 |
| C onservative sub-fund | 21,542,558 | 25,263,764 |
| Dynamic sub-fund | 14,301,307 | 14,498,707 |
| Aggressive sub-fund | 4,692,978 | 4,835,586 |
| Total Defined Contribution | 50,093,259 | 53,279,133 |
| 194,505,153 | 199,388,626 |
The detail of the fund's assets as at 30 September 2018 and 31 December 2017 was as follows:
| Amounts in Euro | 30-09-2018 | 31-12-2017 |
|---|---|---|
| Bonds | 100,768,915 | 97,117,383 |
| Shares | 38,678,047 | 40,107,415 |
| Liquidity | 4,867,856 | 6,799,931 |
| Other short-term investments | 97,075 | 2,074,821 |
| Real Estate | - | 9,943 |
| 144,411,894 | 146,109,493 |
Of the assets that compose the fund, all the shares and obligations presented are quoted on the regulated market.
The effect of these plans in the income statement of the nine-month period ended 30 September 2018 and 2017 was as follows:
| 9 months | 9 months | |
|---|---|---|
| Amounts in Euro | 30-09-2018 | 30-09-2017 |
| Defined Benefit Plans | ||
| Current services | 979,273 | 1,603,539 |
| Interest expenses | 1,416,010 | 2,134,766 |
| Accrued liability with unplanned withdrawals | 637,577 | - |
| Expected return of plan assets | (1,463,154) | (2,136,269) |
| Other | - | (301,186) |
| 1,569,706 | 1,300,850 | |
| Defined Contribution Plan | ||
| Contributions for the period | 1,031,818 | 959,592 |
| 1,031,818 | 959,592 | |
| Costs for the period | 2,601,524 | 2,260,442 |
Current services includes the amount of Euro 23,137 from 2 non-executive Directors (2017: Euro 35,689).
In 2018 and 2017, changes in provisions were as follows:
| Legal | Tax | Other | Total | |
|---|---|---|---|---|
| Amounts in Euro | Claims | Claims | ||
| Amount as of 1 January 2017 | 2,300,344 | 28,748,464 | - | 31,048,808 |
| Increases (Note 6) | 1,192,681 | 1,008,083 | 1,877,151 | 4,077,915 |
| Reversals (Note 6) | - | (1,022,696) | - | (1,022,696) |
| Transfers/ Adjustments | - | (11,857,174) | - | (11,857,174) |
| Amount as of 30 September 2017 | 3,493,025 | 16,876,677 | 1,877,151 | 22,246,853 |
| Increases (Note 6) | 706,383 | (358,819) | (329,850) | 17,714 |
| Reversals (Note 6) | (11,074) | 1,022,696 | - | 1,011,622 |
| Transfers/ Adjustments | (29,177) | (3,710,366) | - | (3,739,543) |
| Amount as of 31 December 2017 | 4,159,157 | 13,830,187 | 1,547,301 | 19,536,645 |
| Increases (Note 6) | 1,050,467 | - | - | 1,050,467 |
| Reversals (Note 6) | (595,119) | (649,264) | (1,547,301) | (2,791,684) |
| Transfers/ Adjustments | 34,257 | 20,335,455 | - | 20,369,712 |
| Amount as of 30 September 2018 | 4,648,762 | 33,516,377 | - | 38,165,139 |
The outcome of provisions for legal proceedings depends on court decisions.
The amount of provisions stated as "Tax claims" results from the Navigator Group's judgment at the Statement of financial position date, about the potential disagreement with tax authorities, considering most recent updates about this events.
The amounts included in the item Transfers/Adjustments include approximately Euro 11,3 million related to the establishment of provisions in 2018 and approximately Euro 8,3 million of amounts that were recognised in deferred tax liabilities.
As at 30 September 2018 and 31 December 2017, interest-bearing liabilities comprised the following:
30-09-2018
| Available | Outstanding | Interest | ||||
|---|---|---|---|---|---|---|
| Amounts in Euro | amount | amount | Maturity | rate | Current | Non-current |
| Bond loans | ||||||
| Portucel 2015-2023 | 200,000,000 | 200,000,000 | September 2023 | Variable rate indexed to Euribor | - | 200,000,000 |
| Portucel 2016-2021 | 100,000,000 | 100,000,000 | April 2021 | Fixed rate | - | 100,000,000 |
| Portucel 2016-2021 | 45,000,000 | 45,000,000 | August 2021 | Variable rate indexed to Euribor | - | 45,000,000 |
| Commissions | (2,105,171) | (2,105,171) | ||||
| European Bank Investment | ||||||
| Loan EBI Ambiente A | 4,642,857 | 4,642,857 | December 2018 | Variable rate indexed to Euribor | 4,642,857 | - |
| Loan EBI Ambiente B | 10,000,000 | 10,000,000 | June 2021 | Variable rate indexed to Euribor | 3,333,333 | 6,666,667 |
| Loan EBI Energia | 46,041,667 | 46,041,667 | December 2024 | Variable rate indexed to Euribor | 7,083,333 | 38,958,333 |
| Loan EBI Cacia | 25,000,000 | 25,000,000 | May 2028 | Fixed rate | - | 25,000,000 |
| Commercial Paper Program | ||||||
| Commercial Paper Program 125M | 125,000,000 | 125,000,000 | May 2020 | Variable rate indexed to Euribor | - | 125,000,000 |
| Commercial Paper Program 70M | 70,000,000 | 70,000,000 | April 2021 | Fixed rate | - | 70,000,000 |
| Commercial Paper Program 50M | 50,000,000 | 50,000,000 | July 2020 | Variable rate indexed to Euribor | - | 50,000,000 |
| Commercial Paper Program 25M | 25,000,000 | 25,000,000 | December 2018 | Variable rate indexed to Euribor | 25,000,000 | - |
| Commercial Paper Program 75M | 75,000,000 | - | July 2020 | Variable rate indexed to Euribor | - | - |
| Commercial Paper Program 100M | 100,000,000 | - | March 2020 | Variable rate indexed to Euribor | - | - |
| Commercial Paper Program 100M | 35,000,000 | 35,000,000 | March 2020 | Variable rate indexed to Euribor | - | 35,000,000 |
| Commercial Paper Program 100M | 50,000,000 | 50,000,000 | March 2020 | Variable rate indexed to Euribor | - | 50,000,000 |
| Commercial Paper Program 100M | 35,000,000 | 35,000,000 | February 2019 | Variable rate indexed to Euribor | 35,000,000 | - |
| Commissions | - | - | ||||
| Bank lines | ||||||
| Short-term line 20M | 20,450,714 | - | - | - | ||
| Reimbursable grants | ||||||
| Reimbursable grants | - | 5,875,450 | 1,938,217 | 3,937,233 | ||
| 824,454,803 | 76,997,741 | 747,457,062 |
31-12-2017 Amounts in Euro Available amount Outstanding amount Maturity Interest rate Current Non-current Bond loans Portucel 2015-2023 200,000,000 200,000,000 September 2023 Variable rate indexed to Euribor - 200,000,000 Portucel 2016-2021 100,000,000 100,000,000 April 2021 Fixed rate - 100,000,000 Portucel 2016-2021 45,000,000 45,000,000 August 2021 Variable rate indexed to Euribor - 45,000,000 Commissions (1,703,383) (1,703,383) European Bank Investment Loan EBI Ambiente A 9,285,714 9,285,714 December 2018 Variable rate indexed to Euribor 9,285,714 - Loan EBI Ambiente B 11,666,666 11,666,666 June 2021 Variable rate indexed to Euribor 3,333,333 8,333,333 Loan EBI Energia 49,583,333 49,583,333 December 2024 Variable rate indexed to Euribor 7,083,333 42,500,000 Loan EBI Cacia 25,000,000 25,000,000 May 2028 Fixed rate - 25,000,000 Commercial Paper Program Commercial Paper Program 125M 125,000,000 125,000,000 May 2020 Variable rate indexed to Euribor - 125,000,000 Commercial Paper Program 70M 70,000,000 70,000,000 April 2021 Fixed rate - 70,000,000 Commercial Paper Program 50M 50,000,000 50,000,000 July 2020 Variable rate indexed to Euribor - 50,000,000 Commercial Paper Program 25M 25,000,000 25,000,000 December 2018 Variable rate indexed to Euribor 25,000,000 - Commercial Paper Program 75M 75,000,000 - July 2020 Variable rate indexed to Euribor - - Commercial Paper Program 100M 100,000,000 - March 2020 Variable rate indexed to Euribor - - Commissions (515,766) (515,766) Financing Short-term financing 50M 50,000,000 50,000,000 February 2018 Variable rate indexed to Euribor 50,000,000 - Short-term financing 50M 50,000,000 50,000,000 April 2018 Variable rate indexed to Euribor 50,000,000 - Bank lines Short-term line 20M 20,450,714 - - - Short-term line Usd 10,000,000 5,503,210 5,503,210 Reimbursable grants Reimbursable grants - 4,237,695 4,237,695 818,057,471 150,205,591 667,851,880
Like 2017, in 2018 The Navigator Company has continued to place short-term commercial paper issues on an auction basis.
In July 2018, the Group contracted a loan in the amount of Euro 40 million with EIB, still unused, associated with the investment to increase capacity in Figueira da Foz, thus continuing the increasing effort to optimise its financial structure.
As at 30 September 2018, the average cost of debt, considering interest rate, the annual fees and hedging operations, was 1.5% (31 December 2017: 1.6%).
The repayment terms for the loans recorded as non-current are detailed as follows:
| Amounts in Euro | 30-09-2018 | 31-12-2017 |
|---|---|---|
| Non-current | ||
| 1 to 2 years | 225,992,927 | 12,337,297 |
| 2 to 3 years | 234,333,196 | 191,421,157 |
| 3 to 4 years | 54,861,111 | 227,007,018 |
| 4 to 5 years | 9,861,111 | 9,861,111 |
| Above 5 years | 224,513,886 | 229,444,444 |
| 749,562,232 | 670,071,028 | |
| C ommissions | (2,105,170) | (2,219,148) |
| 747,457,062 | 667,851,880 |
As at 30 September 2018, the Group had commercial paper programs and credit lines available, but not used, in the amount of Euro 195,450,714 (31 December 2017: Euro 195,450,714).
As at 30 September 2018 and 31 December 2017, the Group's current interest-bearing debt was as follows:
| Amounts in Euro | 30-09-2018 | 31-12-2017 |
|---|---|---|
| Interest-bearing liabilities | ||
| Non-current | 747,457,062 | 667,851,880 |
| Current | 76,997,741 | 150,205,591 |
| 824,454,803 | 818,057,471 | |
| Cash and cash equivalents | ||
| Cash | 81,550 | 81,795 |
| Short-term bank deposits | 39,359,937 | 71,125,699 |
| Other short-term instruments | 53,427,260 | 54,123,542 |
| 92,868,746 | 125,331,036 | |
| Interest-bearing net debt | 731,586,057 | 692,726,434 |
The reconciliation of the current interest-bearing liabilities to the statement of cash flows is as follows:
| Amounts in Euro | 30-09-2018 | 31-12-2017 |
|---|---|---|
| As of 1 January | 818,057,471 | 708,261,286 |
| Borrowings - outflows | (111,262,788) | (44,702,381) |
| Borrowings - inflows | 120,030,000 | 155,503,210 |
| Reimbursable grants | (2,483,858) | (1,455,171) |
| Variation of charges on the issuance of loans | 113,978 | 450,527 |
| Variation of interest-bearing liabilities | 6,397,332 | 109,796,185 |
| Interest-bearing liabilities as of 31 December | 824,454,803 | 818,057,471 |
The difference between the amount of Euro 6,397,332 and the amount of Euro 38,859,621 is due to the changes in cash and cash equivalents effect.
The Navigator Company Group has a strict policy of approval of its financial counterparts, limiting their exposure according to an individual risk analysis and previously approved ceilings. Beyond these limits, there is also a diversification policy applied to the number of the Navigator Company Group's counterparties. At 30 September 2018, "Other" included an amount of Euro 53,426,052 related with an investment in a portfolio of bonds.
The fair value of the bond loans, considering the date and respective contractual conditions, determined according to level 2 of the fair value hierarchy, does not differ substantially from its book value.
The evolution of the Group´s interest bearing net debt for the nine-month period ended 30th September 2018 and 2017 was as follows:
| Amounts in Euro | 9 months 30-09-2018 |
9 months 30-09-2017 |
Remaining quarters |
31-12-2017 |
|---|---|---|---|---|
| As of 1 January | 692,726,435 | 640,719,698 | - | 640,719,698 |
| Payments with debt issuance | 2,105,171 | 2,293,378 | (74,230) | 2,219,148 |
| Interest paid | 13,038,152 | 9,262,882 | 2,911,493 | 12,174,374 |
| Interest received | 723,494 | (1,872,784) | (258,732) | (2,131,516) |
| Dividends paid and reserves distributed | 200,002,777 | 250,007,056 | - | 250,007,056 |
| Acquisition of treasury shares | - | - | - | - |
| Receipts related to investment activities | (69,026,158) | - | - | - |
| Payments related to financial investments | - | - | - | - |
| Payments related to property, plant and equipment | 155,644,200 | 63,805,782 | 35,057,613 | 98,863,395 |
| Accumulated exchange rate differences | (9,220,628) | 2,836,592 | (57,174) | 2,779,418 |
| Receipt of dividends | - | - | - | - |
| Net receipts from operating activities | (254,407,387) | (225,060,671) | (86,844,468) | (311,905,139) |
| C hange in net debt | 38,859,621 | 101,272,236 | (49,265,498) | 52,006,737 |
| As of 30 September | 731,586,057 | 741,991,934 | (49,265,498) | 692,726,435 |
Also, the movements in the Navigator Group's interest bearing net debt for the ninemonth period ended 30 September 2018 and 2017 was as follows:
| Amounts in Euro | 9 months 30-09-2018 |
9 months 30-09-2017 |
Remaining quarters |
31-12-2017 |
|---|---|---|---|---|
| Net profit for the period | 171,765,004 | 145,801,093 | 61,968,044 | 207,769,137 |
| Depreciation, amortisation and impairment losses | 97,764,203 | 111,529,226 | 33,174,673 | 144,703,899 |
| Net changes in provisions | (1,741,217) | 3,055,219 | 1,029,336 | 4,084,555 |
| 267,787,990 | 260,385,538 | 96,172,053 | 356,557,592 | |
| Changes in working capital | 10,098,838 | 36,983,422 | (77,824,971) | (40,841,549) |
| Changes in the consolidation perimeter | (152,640,688) | (76,077,628) | (30,205,853) | (106,283,481) |
| Dividends and reserves distributed | (200,002,777) | (250,007,056) | - | (250,007,056) |
| Acquisition of treasury shares | - | - | - | - |
| Net changes in post-employment benefits | (4,224,423) | (453,259) | 1,820,133 | 1,366,874 |
| Other changes in equity | 17,506,512 | 11,892,393 | (23,081,794) | (11,189,401) |
| Expenses with the issue of bond loans | 113,978 | 954,846 | (504,320) | 450,526 |
| Other changes in non-current assets and liabilities | 22,500,949 | (84,950,491) | 82,890,249 | (2,060,242) |
| Change in net debt (Free Cash Flow) | (38,859,621) | (101,272,236) | 49,265,500 | (52,006,737) |
As at 30 September 2018 and 31 December 2017, other non-current liabilities were as follows:
| Amounts in Euro | 30-09-2018 | 31-12-2017 |
|---|---|---|
| Non-current | ||
| Grants | 22,118,375 | 25,466,139 |
| 22,118,375 | 25,466,139 |
The amount of grants corresponds to the non-current component of the investment grants received to support the investment projects assumed by the Group in the past.
Finance leases – IFRIC 4
As at 30 September 2018 and 31 December 2017, the Group used the following equipment under finance lease plans recognised under IFRIC 4 in the statement of financial position:
| 30-09-2018 | |||
|---|---|---|---|
| Acquisition | Accumulated | Net book | |
| Amounts in Euro | value | depreciation | value |
| Equipaments - Omya | 14,000,000 | (13,621,622) | 378,378 |
| 14,000,000 | (13,621,622) | 378,378 | |
| 31-12-2017 | |||
| Acquisition | Accumulated | Net book | |
| Amounts in Euro | value | depreciation | value |
| Equipments - Omya | 14,000,000 | (12,486,487) | 1,513,513 |
| 14,000,000 | (12,486,487) | 1,513,513 | |
The non-current and current liabilities related to those equipment are recorded under "Other liabilities" and "Payables and other current liabilities" and are detailed as follows:
| Amounts in Euro | 30-09-2018 | 31-12-2017 |
|---|---|---|
| Non-current | ||
| Equipment | - | - |
| Current (Note 22) | 1,334,232 | 2,213,644 |
| 1,334,232 | 2,213,644 |
In 2009, with the launch of the new paper mill in Setubal, the Navigator Group recognised as a finance lease the cost of the Precipitated Calcium Carbonate production unit, installed by Omya, S.A. at the industry site in Setúbal for the exclusive use of the new mill. This contract foresees the transfer of the assets' ownership to About The Future, S.A., upon its termination, in 2019.
On December 2017, The Navigator Company celebrated a sale agreement related with its pellets business in the United States of America with a joint venture managed and operated by an associate of Enviva Holdings, LP, in the amount of USD 135 million.
As a result, in the consolidated statement of financial position at 31 December 2017, the referred assets were identified as "Non-current assets held for sale" and are composed as follows:
| Amounts in Euro | 31-12-2017 |
|---|---|
| Property, plant and equipment | 85,433,905 |
| Inventories | 803,143 |
| 86,237,048 |
This operation was concluded on February 2018.
As at 30 September 2018 and 31 December 2017, "Payables and other current liabilities" were detailed as follows:
| Amounts in Euro | 30-09-2018 | 31-12-2017 |
|---|---|---|
| Suppliers | 86,573,188 | 88,917,184 |
| Suppliers invoice pending - Logistics | 7,282,626 | 13,346,881 |
| Suppliers invoice pending - Other | 58,657,886 | 54,953,985 |
| Fixed asset suppliers | 2,362,681 | 5,115,782 |
| Finance leases (Note 21) | 1,334,232 | 2,213,644 |
| Suppliers - Related parties (Note 26) | (24,079) | 71,753 |
| Derivative financial instruments (Note 25) | 4,787,038 | 3,256,492 |
| Other creditors - CO2 emission licenses | 4,350,698 | 4,420,178 |
| Sales commissions | 152,937 | 138,682 |
| Tax consolidation (Semapa) (Note 26) | 7,429,319 | 7,429,319 |
| Other creditors | 2,129,406 | 2,475,273 |
| Accrued costs | 71,504,343 | 65,934,375 |
| Deferred income | 17,705,568 | 11,236,298 |
| 264,245,844 | 259,509,848 |
As at 30 September 2018 and 31 December 2017, accrued costs and deferred income were detailed as follows:
| Amounts in Euro | 30-09-2018 | 31-12-2017 |
|---|---|---|
| Accrued costs | ||
| Payroll expenses - Performance Bonus | 22,085,632 | 17,414,930 |
| Payroll expenses - Other costs | 23,609,673 | 22,670,683 |
| Interest payable | 3,198,689 | 2,687,393 |
| Wood suppliers bonus | 6,503,270 | 7,761,518 |
| Water resource rate | 2,036,555 | 2,011,427 |
| Rents liability | 8,561,601 | 6,716,206 |
| Other | 5,508,922 | 6,672,218 |
| 71,504,342 | 65,934,375 | |
| Deferred income | ||
| Government grants | 5,700,476 | 5,859,834 |
| Grants - CO2 emission licenses | 1,581,921 | 261,097 |
| Other grants | 6,498,369 | 1,190,564 |
| Other deferred income - ISP | 3,924,802 | 3,924,802 |
| 17,705,568 | 11,236,298 |
As at 30 September 2018 and 31 December 2017, deferred income on government grants, by company, was detailed as follows:
| Amounts in Euro | 30-09-2018 | 31-12-2017 |
|---|---|---|
| AICEP investment contracts | ||
| The Navigator Company, S.A. | - | 10,132 |
| Enerpulp, S.A. | 6,059,984 | 7,197,936 |
| Navigator Pulp C acia, S.A. | 11,073,939 | 12,798,599 |
| Navigator Pulp Setúbal, S.A. | 559,143 | 694,637 |
| Navigator Pulp Figueira, S.A. | 6,755,654 | 7,849,708 |
| Navigator Parques Industriais, S.A. | 2,062,549 | 2,107,066 |
| Navigator Paper Figueira, S.A. | 693,717 | 137,250 |
| Navigator Tissue C acia, S.A. | - | - |
| 27,204,985 | 30,795,328 | |
| Other | ||
| Raiz | 293,948 | 60,506 |
| Viveiros Aliança, SA | 319,918 | 470,139 |
| 613 866 | 530 645 | |
| 27,818,851 | 31,325,972 |
During 2018 and 2017, the movements in Grants - CO2 emission licenses were as follows:
| Amounts in Euro | 2018 | 2017 |
|---|---|---|
| Grants - CO2 emission licenses | ||
| Opening balance | - | - |
| Increase | 3,984,110 | 2,738,778 |
| Charge-off | (2,402,189) | (2,202,466) |
| Amount as of 30 September | 1,581,921 | 536,312 |
| Remaining quarters | (536,312) | |
| Amount as of 31 December | - |
These amounts correspond to the CO2 emission allowances granted for free to several Group companies (2018: Euro 477,139 and 2017: Euro 495,037).
As at 30 September 2018 and 31 December 2017, the fair value of derivative financial instruments was as follows:
| 31-12-2017 | ||||||
|---|---|---|---|---|---|---|
| Amounts in Euro | Currency | Notional | Positive | Negative | Net | Net |
| Trading | ||||||
| Forwards - CO2 emission licenses | EUR | 1,397,500 | - | - | - | - |
| Anti-Dumping forward | USD | - | - | - | - | 1,149,981 |
| Foreign exchange forwards | USD | 81,000,000 | - | (722,144) | (722,144) | 669,733 |
| Foreign exchange forwards | GBP | 6,850,000 | - | (23,452) | (23,452) | 8,407 |
| 89,247,500 | - | (745,596) | (745,596) | 1,828,121 |
The Navigator Group has a currency exposure on sales invoiced in foreign currencies, namely US dollars (USD) and pounds sterling (GBP). As the Navigator Group's financial statements are translated into Euro, it runs an economic risk on the conversion of these currency flows to the Euro. The Navigator Group is also obliged, albeit to a lesser degree, to make certain payments in those same currencies which, for currency exposure purposes, act as a natural hedge. Thus, the hedge is aimed at safeguarding the net value of items in the statement of financial position denominated in foreign currencies against the respective currency fluctuations.
The hedging instruments used in this operation are foreign exchange forward contracts covering the net exposure to the foreign currencies at the time the invoices are issued, for the same maturity dates and the same amounts of these documents in such a way as
to fix the exchange rate associated with the sales. The nature of the risk hedged is change in the carrying amount of on sales and purchases expressed in foreign currencies due to foreign currency fluctuations. At the end of each month, customer and suppliers' balances expressed in foreign currency are updated, with the gain or loss offset against the fair value change of the forwards negotiated.
The net fair value of trading instruments – forwards – as at 30 September 2018 amounts to Euro (745,596) (31 December 2017: Euro 1,828,121).
In addition to the purchases made in 2015 and 2016 of 400,000 CO2 emission licenses, for delivery in 2018-2019 and 100,000 CO2 licenses acquired in 2017, for delivery in 2020, in the current year, no further acquisitions were made.
As at 30 September 2018 and 31 December 2017, the fair value of derivative financial instruments designated as hedging instruments was as follows:
| 30-09-2018 | 31-12-2017 | |||||
|---|---|---|---|---|---|---|
| Amounts in Euro | Currency | Notional | Positive | Negative | Net | Net |
| Hedging | ||||||
| Hedging (net investment) | USD | - | 19,100 | - | 19,100 | 114,914 |
| Hedging (future sales) | USD | 169,666,667 | - | (1,419,220) | (1,419,220) | 1,701,360 |
| Hedging (future sales) | GBP | 49,016,667 | 598,413 | - | 598,413 | - |
| Interest rate swap for commercial paper issued | EUR | 125,000,000 | - | (630,028) | (630,028) | (746,982) |
| Interest rate swap for bond loans | EUR | 200,000,000 | - | (1,992,193) | (1,992,193) | (2,509,510) |
| 617,513 | (4,041,441) | (3,423,927) | (1,440,218) |
The Navigator Group hedges the economic risk associated with exposure to the exchange rate of its participation in Navigator North America. To this purpose, the Group has entered into a foreign exchange forward maturing in September 2018, with a notional outstanding of USD 25,050,000.
Considering the nature of the hedged asset, it was decided not to renew the product.
The Navigator Company Group makes use of derivative financial instruments in order to limit the net exchange risk associated with sales and future purchases estimated at USD.
In this context, during the last quarter of 2017, the Group contracted several financial structures to cover a portion of the net foreign exchange exposure of estimated sales in USD for 2018. The derivative financial instruments in force at 1 January 2017 are Opções and Zero Cost Collar, in a total amount of USD 120,000,000, of which USD 30,000,000 remain in force, reaching maturity on 31 December 2018. In 2018, the financial instruments were strengthened through the additional contracting of USD 176,000,000 of Opções and Zero Cost Collar (of which USD 58,666,667 remains in force) and GBP 92,000,000, through Options maturing in the first quarter of 2019, of which GBP 42,166,667 shall remain in force as of the date thereof.
The Navigator Group hedges future interest payments associated with commercial paper issues by hiring an interest rate swap, which pays a fixed rate and receives a floating
rate. This instrument is designated as hedges of cash flows from the commercial paper program and the bond loan. The credit risk is not part of the hedging relationship.
This hedge is designated for the entire life of the hedging instruments.
These amounts are initially recognised at fair value, and subsequently measured at amortised cost less any impairment losses identified during the course of the credit risk analysis of the credit portfolios held.
These items are recognised at their amortised cost, corresponding to the value of the respective cash flows discounted at the effective interest rate associated with each of the liabilities.
The effect in net income of the period of the financial assets and liabilities held is detailed as follows:
| Amounts in Euro | 30-09-2018 | 30-09-2017 |
|---|---|---|
| Foreign exchange gains/ (losses) on loans and receivables | 1,231,922 | (3,233,678) |
| Gains/ (losses) on financial instruments - hedging (Note 10) | (3,591,043) | 518,880 |
| Gains/ (losses) on financial instruments - trading (Note 10) | (1,871,149) | 3,977,870 |
| Interest income: | ||
| From deposits and other receivables (Note 10) | 610,098 | 1,446,264 |
| Interest expense: | ||
| From financial liabilities measured at amortised cost (Note 10) | (6,421,248) | (8,276,493) |
| Other | (6,495,789) | (921,587) |
| (16,537,208) | (6,488,744) |
The fair value of derivative financial instruments is included in "Receivables and other current assets" (Note 15) and "Payables and other current liabilities" (Note 22).
The movement in the balances recognised in the statement of financial position (Notes 15 and 22) related with financial instruments was as follows:
| Change in fair value (Trading) |
Change in fair value (Hedging) |
Total | |
|---|---|---|---|
| Amount as of 1 January 2017 | (1,943,402) | (4,881,689) | (6,825,091) |
| Maturity (Note 10) | 3,977,870 | 518,880 | 4,496,750 |
| Increases/ decreases in fair value | - | 6,681,108 | 6,681,108 |
| Amount as of 30 September 2017 | 2,034,468 | 2,318,299 | 4,352,767 |
| Maturity (Note 10) | (206,347) | 2,291,165 | 2,084,817 |
| Increases/ decreases in fair value | - | (6,049,682) | (6,049,683) |
| Amount as of 31 December 2017 | 1,828,121 | (1,440,218) | 387,901 |
| Maturity (Note 10) | (1,871,149) | (3,591,043) | (5,462,192) |
| Increases/ decreases in fair value | (702,568) | 1,607,334 | 904,766 |
| Amount as of 30 September 2018 | (745,596) | (3,423,928) | (4,169,525) |
As at 30 September 2018 and 31 December 2017, the derivative financial instruments had the following maturities:
| 30-09-2018 | 31-12-2017 | |||||
|---|---|---|---|---|---|---|
| Nominal amount |
Maturity | Type | Fair value | Fair value | ||
| Exchange rate forwards | USD | 81,000,000 | 31-Dec-2018 | Held for trading | (722,144) | 669,733 |
| GBP | 6,850,000 | 11-Feb-2019 | Held for trading | (23,452) | 8,407 | |
| Future purchase of CO2 Licences | EUR | 1,397,500 | 16-Mar-2020 | Held for trading | - | - |
| Foreign exchange hedging - C ash Anti-Dumping | USD | - | 31-Oct-2018 | Held for trading | - | 1,149,981 |
| (745,596) | 1,828,121 | |||||
| Foreign exchange hedging - Investment in subsidiary | USD | - | 30-Nov-2018 | Hedging | 19,100 | 114,914 |
| Hedging for future sales | USD | 169,666,667 | 31-Jan-2019 | Hedging | (1,419,220) | 1,701,360 |
| Hedging for future sales | GBP | 49,016,667 | 31-Mar-2019 | Hedging | 598,413 | - |
| Interest rate swap for commercial paper issued | EUR | 125,000,000 | 26-May-2020 | Hedging | (630,028) | (746,982) |
| Interest rate swap for bond loans | EUR | 200,000,000 | 22-Sep-2023 | Hedging | (1,992,193) | (2,509,510) |
| (3,423,928) | (1,440,218) | |||||
| (4,169,524) | 387,902 |
As at 30 September 2018 and 31 December 2017, the balances with group companies and associated companies is presented as follows:
| 30-09-2018 | 31-12-2017 | ||||||
|---|---|---|---|---|---|---|---|
| Assets | Liabilities | Assets | Liabilities | ||||
| Other creditors (tax |
Other creditors (tax |
||||||
| Amounts in Euro | Customers | Suppliers | consolidation) | Customers | Suppliers | consolidation) | |
| Semapa - Soc. De Investimento e Gestão, SGPS, S.A. Secil - Companhia Geral C al e Cimento, S.A. Secil Britas, S.A. |
- 148,797 - |
- 226 2,787 |
7,429,319 - - |
- 27,650 - |
(33) 298 10,125 |
7,429,319 - - |
|
| Enermontijo, S.A. Enerpar, SGPS, Lda. |
60,947 - |
18,338 - |
- - |
54,656 - |
12,551 21,598 |
- - |
|
| Cimilonga - Imobiliária, S.A. Refundos - Soc. Gestora de Fundos de Inv. Imobiliário, S.A. |
- - |
- (45,430) |
- - |
- - |
27,216 - |
- - |
|
| 209,744 | (24,079) | 7,429,319 | 82,306 | 71,753 | 7,429,319 |
The transactions with group companies and associated companies for the nine-month period ended 30 September 2018 and 2017 were as follows:
| 30-09-2018 | 30-09-2017 | |||||
|---|---|---|---|---|---|---|
| Amounts in Euro | Sales and services rendered |
Consumed materials and services |
Sales and services rendered |
Purchases | Consumed materials and services |
|
| Semapa - Soc. De Investimento e Gestão, SGPS, S.A. | - | 6,897,808 | - | - | 6,329,254 | |
| Secil - Companhia Geral Cal e Cimento, S.A. | 162,973 | 954 | 54,927 | 301,000 | 993 | |
| Secil Britas, S.A. | - | 24,644 | - | - | 27,586 | |
| Enermontijo, S.A. | 292,269 | 416,031 | 187,474 | - | 85,049 | |
| Enerpar, SGPS, Lda. | - | 17,401 | - | - | 169,029 | |
| Cimilonga - Imobiliária, S.A. | - | 157,976 | - | - | 200,085 | |
| Refundos - Soc. Gestora de Fundos de Inv. Imobiliário, S.A. | - | 381,653 | - | - | 140,145 | |
| 455,241 | 7,896,467 | 242,401 | 301,000 | 6,952,141 |
On 1 February 2013, a contract to render administrative and management services was signed between Semapa - Sociedade de Investimentos e Gestão, SGPS, S.A. (currently owner of 69.4% of the Group´s share capital) and Navigator Group, establishing a remuneration system based in equal criteria for both parties in the continuous cooperation and assistance relationships, that meets the rules applicable to commercial relationships between group companies.
In March 2015, The Navigator Company celebrated an agreement with Enerpar SGPS, Lda. under which paid a fee related to the promotion of its pellets project located in the United States of America, in particular for having defined and deepened several studies and initiatives including, amongst others, market analysis, real estate prospection, public entities negotiation, tax and corporate planning, projection of manufacturing facilities, equipment commissioning and customer acquisition, coordinating all these aspects in a single project.
Under the same agreement, Enerpar SGPS, Lda. will also render technical advisory services for the same project, during three years, including engineering project support, coordination of work, equipment commissioning, factory ramp up, guaranteeing quality in the final product, supporting commercial contract management and training to be provided to the sales team that will be responsible to manage the customers they obtained.
Enerpar SGPS, Lda. is a company that manages holdings in the renewable energy sector, holding the full equity capital of Enermontijo, SA, which has been dedicated to the productions of forest-based wood pellets since 2008, annually producing 80,000 tons and to whom the Group sells biomass. Enerpar SGPS, Lda. is a related party as its shareholders have family relations with a non-executive Board Member of the Group.
It was also celebrated a lease agreement between Navigator Paper Figueira, S.A. and Cimilonga – Imobiliária, S.A. under which an office was leased in Semapa SGPS, SA headquarters' building, in Lisbon.
The Navigator Company, SA and Refundos - Sociedade Gestora de Investimentos Imobiliário, SA, entered into a lease agreement beginning on 1 June 2017, regarding the lease of an office building located in Lisbon, Avenida Fontes Pereira de Melo.
As at 30 September 2018, the average number of employees working for the Navigator Group Companies was 3,267 (31 December 2017: 3,197) and were distributed by business segment as follows:
| As of 30 September 2018 | MARKET PULP |
UWF PAPER |
TISSUE PAPER |
OTHER | TOTAL |
|---|---|---|---|---|---|
| Industrial / Forest site | |||||
| Setúbal | - | 947 | - | 236 | 1,183 |
| Cacia | 275 | - | 140 | 82 | 497 |
| Figueira da Foz | - | 869 | - | 137 | 1,006 |
| Vila Velha de Ródão | - | - | 217 | - | 217 |
| Lisboa | - | - | - | 105 | 105 |
| Greenwood | - | - | - | - | - |
| Mozambique | - | - | - | 153 | 153 |
| 275 | 1,816 | 357 | 713 | 3,161 | |
| Commercial companies | |||||
| Europe | 9 | 73 | 10 | - | 92 |
| America | - | 9 | - | - | 9 |
| Overseas | - | 5 | - | - | 5 |
| 9 | 87 | 10 | - | 106 | |
| 284 | 1,903 | 367 | 713 | 3,267 |
| As of 31 December 2017 | MARKET PULP |
UWF PAPER |
TISSUE PAPER |
OTHER | TOTAL |
|---|---|---|---|---|---|
| Industrial / Forest site | |||||
| Setúbal | - | 925 | - | 248 | 1,173 |
| Cacia | 269 | - | 19 | 85 | 373 |
| Figueira da Foz | - | 865 | - | 131 | 996 |
| Vila Velha de Ródão | - | - | 206 | - | 206 |
| Lisboa | - | - | - | 112 | 112 |
| Greenwood | - | - | - | 77 | 77 |
| Mozambique | - | - | - | 163 | 163 |
| 269 | 1,790 | 225 | 816 | 3,100 | |
| Commercial companies | |||||
| Europe | 7 | 68 | 9 | - | 84 |
| America | - | 9 | - | - | 9 |
| Overseas | - | 4 | - | - | 4 |
| 7 | 81 | 9 | - | 97 | |
| 276 | 1,871 | 234 | 816 | 3,197 |
As at 30 September 2018 and 31 December 2017, the guarantees provided by the Group are as follows:
| Amounts in Euro | 30-09-2018 | 31-12-2018 |
|---|---|---|
| 2013 C orporate income tax | 24,053,434 | 26,022,893 |
| Spanish state tax agency | 1,033,204 | 1,033,204 |
| Customs clearance | 1,835,250 | 1,835,250 |
| IAPMEI | 2,438,132 | 5,209,320 |
| Simria | 338,829 | 338,829 |
| Other | 881,268 | 781,139 |
| 30,580,117 | 35,220,636 |
The guarantees provided by IAPMEI were provided under the investment contracts celebrated between the Portuguese State and Navigator Pulp Cacia, S.A. (Euro 2,438,132) and Navigator Tissue Ródão, S.A. (Euro 2,771,188), in accordance with the terms and conditions defined in the Payment Standard applicable to projects approved under QREN Incentive Systems. In 2018, the guarantee provided by Navigator Tissue Ródão, S.A. was sold.
As part of the final tax authority inspection report to the 2013 period, the Navigator Company was notified on 4 September 2017 with an additional tax payment of Euro 20,556,589. In the 2013 tax return, the Navigator Group deducted a significant amount of credits related to fiscal benefits related to RFAI generated in previous years and which according to Navigator's understanding, should be reported. The tax authorities didn't have the same understanding, having corrected the amounts of tax benefits used by the Navigator group. The Navigator group will guaranteed this debt and will contest its settlement.
The purchase commitments assumed with suppliers at 30 September 2018 amounted to Euro 57,617,180 and referred to capital expenditure on Property, plant and equipment. At 31 December 2017 these commitments amounted to Euro 106,987,184.
As at 30 September 2018 and 31 December 2017, the commitments relating to operating lease contracts were as follows:
| Amounts in Euro | 30-09-2018 | 31-12-2017 |
|---|---|---|
| Settlement date | ||
| 2018 | 2,040,849 | 1,928,848 |
| 2019 | 1,575,947 | 1,603,868 |
| 2020 | 1,078,644 | 1,077,787 |
| 2021 | 552,329 | 603,254 |
| 2022 | 108,664 | 138,413 |
| Later date | 48,527 | 50,077 |
| 5,404,958 | 5,402,246 |
As at 30 September 2018 and 31 December 2017, the undiscounted commitments relating to external group forestry land rents were as follows:
| Amounts in Euro | 30-09-2018 | 31-12-2017 |
|---|---|---|
| 2018 | 1,287,247 | 3,965,857 |
| 2019 | 3,958,402 | 3,818,115 |
| 2020 | 3,646,917 | 3,502,754 |
| 2021 | 3,474,123 | 3,318,277 |
| 2022 | 3,267,822 | 3,119,248 |
| Later date | 38,319,830 | 35,774,462 |
| 53,954,340 | 53,498,715 |
According to Decree-Law No. 36/93 of 13 February, the tax debts of privatised companies relating to periods prior to the privatization date (in the case of The Navigator Company, 25 November 2006) are the responsibility of the Public Debt Settlement Fund. The Navigator Company submitted an application to the Public Debt Settlement Fund on 16 April 2008 requesting the payment by the State of the tax debts raised by the tax authorities for periods before that date. On 13 December 2010, The Navigator Company presented a new application requesting the payment of debts settled by the tax authorities regarding 2006 and 2003. This application was supplemented on 13 October 2011, with the amounts already paid and uncontested regarding these debts, as well as with expenses directly related to them, pursuant to court ruling dated 24 May 2011 (Case No. 0993A/02), which confirmed the company's position regarding the enforceability of such expenses.
On 13 December 2017, The Navigator Company, S.A. has made an extra-judicial agreement with Tax authorities, in which was recognised the responsibility by FRDP for reimbursing the amount of Euro 5,725,771 corresponding to the amount of Corporate
Income Tax improperly paid, resulting from the alleged qualification / incorrect consideration, by the tax administration, of the tax loss computed as a result of the operations carried out by Soporcel, S.A. in 2003, as well as to promote restitution to Navigator of the mentioned amount.
In this context, the aforementioned Fund is liable for Euro 24,649,956, detailed as follows:
| Period | Requested amounts |
1st Refund | Decrease due to RERD |
Proceedings in favor of the Group |
Extrajudicial agreement of 13 December |
Outstanding amount |
|
|---|---|---|---|---|---|---|---|
| Amounts in Euro | 2017 | ||||||
| Proceedings confirmed in court | |||||||
| VAT - Germany | 1998-2004 | 5,850,000 | (5,850,000) | - | - | - | - |
| Corporate income tax | 2001 | 314,340 | - | - | (314,340) | - | - |
| Corporate income tax | 2002 | 625,033 | (625,033) | - | - | - | - |
| Corporate income tax | 2002 | 18,923 | - | - | - | - | 18,923 |
| VAT | 2002 | 2,697 | (2,697) | - | - | - | - |
| Corporate income tax | 2003 | 1,573,165 | (1,573,165) | - | - | - | - |
| Corporate income tax | 2003 | 182,230 | (157,915) | - | (24,315) | - | - |
| Corporate income tax | 2003 | 5,725,771 | - | 5,725,771 | - | (5,725,771) | - |
| C orporate income tax | 2004 | ||||||
| (Withheld) | 3,324 | - | - | - | - | 3,324 | |
| Corporate income tax | 2004 | 766,395 | - | - | (139,023) | - | 627,372 |
| Stamp duty | 2004 | 497,669 | - | - | (497,669) | - | - |
| C orporate income tax | 2005 | ||||||
| (Withheld) | 1,736 | (1,736) | - | - | - | - | |
| Expenses | 314,957 | - | - | - | - | 314,957 | |
| 15,876,240 | (8,210,546) | 5,725,771 | (975,347) | (5,725,771) | 964,576 | ||
| Proceedings not confirmed in court | |||||||
| VAT | 2003 | 2,509,101 | - | - | - | - | 2,509,101 |
| Corporate income tax | 2005 | 11,754,680 | - | (1,360,294) | - | - | 10,394,386 |
| Corporate income tax | 2006 | 11,890,071 | - | (1,108,178) | - | - | 10,781,893 |
| 26,153,852 | - | (2,468,472) | - | - | 23,685,380 | ||
| 42,030,092 | (8,210,546) | 3,257,299 | (975,347) | (5,725,771) | 24,649,956 |
As at 30 September 2018 and 31 December 2017, the additional tax assessments that are paid and disputed by the Navigator Group, not recognized in the company's assets, are summarized as follows:
| Amounts in Euro | 30-09-2018 | 31-12-2017 |
|---|---|---|
| 2003 VAT | 2,509,101 | 2,509,101 |
| 2005 Aggregate corporate income tax | 10,394,386 | 10,394,386 |
| 2006 Aggregate corporate income tax | 8,150,146 | 8,150,146 |
| 21,053,633 | 21,053,633 |
In addition to the tax matters described above, a second request to the Public Debt Settlement Fund was submitted on 2 June 2010, which called for the reimbursement of various amounts, totaling Euro 136,243,939. These amounts regard adjustments in the financial statements of the Navigator Company Group after its privatization that had not been considered in formulating the price of its privatization as they were not included in the documentation made available for consultation by the bidders.
On 24 May 2014 the Court denied the Navigator Company Group's proposal to present testimony evidence, alternatively proposing written submissions. On 30 June 2014 Navigator Company Group appealed against this decision, but continuously presented written evidence. The Court subsequently confirmed the Navigator Company Group's views on this matter, both parts appointed experts and the partial expert report was
issued on July 2017, being required either by The Navigator Company, S.A. either by the Finance Ministry, the attendance of both designated experts in court hearing, in order to provide oral explanations on the expert report. The date of the court hearing is still to be appointed.
Under the licensing process No. 408/04 related to the new Setubal´s paper mill project, the Setubal City Council issued a settlement note to The Navigator Company regarding an infrastructure enhancement and maintenance fee ("TMUE ") amounting to Euro 1,199,560, with which the company disagrees.
This situation regards the amount collected under this levy in the licensing process mentioned above, for the construction of a new paper mill in the industrial site of Mitrena, Setúbal. The Navigator Company disagrees with the amount charged and filled an administrative claim against it on 25 February 2008 (request 2485/08), followed by an appeal to Court against the rejection of the claim on 28 October 2008. At 3 October 2012 this claim had an adverse decision, and in 13 November 2012, The Navigator Company appealed. This lawsuit is awaiting the decision of TCA since 4 July 2013.
The Group applied for tax and financial incentives related to investments in progress in Cacia and Figueira da Foz. The commitments obtained are tax benefits, respectively of Euro 11,5 million and Euro 14,2 million, a repayable loan with zero interest rate of Euro 42,2 million for Cacia and a loan of Euro 5,8 million, with a non-repayable maximum paid-in prize of Euro 3,5 million for Figueira da Foz.
Regarding Cacia, the contracts are already signed and dated 13 December 2017 and 20 April 2018, for the financial and fiscal nature, respectively, awaiting approval by the European Community authorities.
| Share equity owned | ||||
|---|---|---|---|---|
| Company | Head Office | Directly | Indirectly | Total |
| Parent-C ompany | ||||
| The Navigator Company, S. A. | Setúbal | - | - | - |
| Subsidiaries: | ||||
| Navigator Paper Figueira, S.A. | Figueira da Foz | 100.00 | - | 100.00 |
| Navigator Parques Industriais, S.A. | Setúbal | 100.00 | - | 100.00 |
| Navigator Products & Tecnology, S.A. | Setúbal | 100.00 | - | 100.00 |
| Enerpulp – Cogeração Energética de Pasta, S.A. | Setúbal | 100.00 | - | 100.00 |
| Navigator Pulp Figueira, S.A. | Figueira da Foz | 100.00 | - | 100.00 |
| Navigator Pulp Setúbal, S.A. | Setúbal | 100.00 | - | 100.00 |
| Navigator Pulp Cacia, S.A. | Aveiro | 100.00 | - | 100.00 |
| Navigator International GmbH | Germany | 100.00 | - | 100.00 |
| About Balance - SGPS, S.A. | Lisboa | 100.00 | - | 100.00 |
| Navigator Tissue C acia, S.A. | Aveiro | - | 100.00 | 100.00 |
| Navigator Tissue Ródão , S.A. | Vila Velha de Ródão | - | 100.00 | 100.00 |
| Navigator Tissue Iberica , S.A. | Spain | - | 100.00 | 100.00 |
| Navigator Internacional Holding SGPS, S.A. | Setúbal | 100.00 | - | 100.00 |
| Portucel Moçambique - Sociedade de Desenvolvimento Florestal e Industrial, Lda | Mozambique | 20.05 | 60.15 | 80.20 |
| Magellan Holdings Inc. | USA | 25.00 | 75.00 | 100.00 |
| Navigator Financial Services Sp. Z o.o. | Poland | 25.00 | 75.00 | 100.00 |
| Navigator Floresta, SGPS, S.A. | Setúbal | 100.00 | - | 100.00 |
| Raiz - Instituto de Investigação da Floresta e Papel | Aveiro | - | 97.00 | 97.00 |
| Navigator Forest Portugal, S.A. | Setúbal | 100.00 | - | 100.00 |
| Sociedade de Vinhos da Herdade de Espirra - Produção e C omercialização de Vinhos, S.A. | Setúbal | - | 100.00 | 100.00 |
| Gavião - Sociedade de C aça e Turismo, S.A. | Setúbal | 100.00 | 100.00 | |
| Afocelca - Agrupamento complementar de empresas para protecção contra incêndios, ACE | Portugal | - | 64.80 | 64.80 |
| Viveiros Aliança - Empresa Produtora de Plantas, S.A. | Palmela | - | 100.00 | 100.00 |
| Atlantic Forests, S.A. | Setúbal | - | 100.00 | 100.00 |
| Bosques do Atlantico, SL | Spain | - | 100.00 | 100.00 |
| Navigator Paper Holding ,SGPS, S.A. | Setúbal | 100.00 | - | 100.00 |
| Navigator Fine Paper , S.A. | Setúbal | - | 100.00 | 100.00 |
| About the Future - Empresa Produtora de Papel, S.A. | Setúbal | - | 100.00 | 100.00 |
| Navigator Paper Setúbal, S.A. | Setúbal | - | 100.00 | 100.00 |
| Navigator North America Inc. | USA | - | 100.00 | 100.00 |
| Navigator Sales & Marketing, S.A. | Belgium | 25.00 | 75.00 | 100.00 |
| Navigator Africa, SRL | Italy | - | 100.00 | 100.00 |
| Navigator Participações Holding ,SGPS, S.A. | Setúbal | 100.00 | - | 100.00 |
| Portucel Florestal, S.A. | Setúbal | - | 100.00 | 100.00 |
| Arboser – Serviços Agro-Industriais, S.A. | Setúbal | - | 100.00 | 100.00 |
| EMA21 - Engenharia e Manutenção Industrial Século XXI, S.A. | Setúbal | - | 100.00 | 100.00 |
| Ema C acia - Engenharia e Manutenção Industrial, ACE | Aveiro | - | 95.00 | 95.00 |
| Ema Setúbal - Engenharia e Manutenção Industrial, ACE | Setúbal | - | 89.91 | 89.91 |
| Ema Figueira da Foz- Engenharia e Manutenção Industrial, ACE | Figueira da Foz | - | 90.72 | 90.72 |
| Empremédia - Corretores de Seguros, S.A. | Lisboa | - | 100.00 | 100.00 |
| EucaliptusLand, S.A. | Setúbal | - | 100.00 | 100.00 |
| Headbox - Operação e Contolo Industrial, S.A. | Setúbal | - | 100.00 | 100.00 |
| Navigator Added Value, S.A. | Setúbal | - | 100.00 | 100.00 |
| Navigator Switzerland Ltd. | Switzerland | 25.00 | 75.00 | 100.00 |
| Navigator Afrique du Nord | Morocco | - | 100.00 | 100.00 |
| Navigator España, S.A. | Spain | - | 100.00 | 100.00 |
| Navigator Netherlands, BV | Netherlands | - | 100.00 | 100.00 |
| Navigator France, EURL | France | - | 100.00 | 100.00 |
| Navigator Paper Company UK, Ltd | United Kingdom | - | 100.00 | 100.00 |
| Navigator Italia, SRL | Italy | - | 100.00 | 100.00 |
| Navigator Deutschland, GmbH | Germany | - | 100.00 | 100.00 |
| Navigator Paper Austria, GmbH | Austria | - | 100.00 | 100.00 |
| Navigator Paper Poland SP Z o o | Poland | - | 100.00 | 100.00 |
| Navigator Eurasia | Turkey | - | 100.00 | 100.00 |
| Navigator Rus C ompany, LLC | Russia | - | 100.00 | 100.00 |
| Navigator Paper Mexico | Mexico | - | 100.00 | 100.00 |
| Navigator Abastecimento de Madeira, ACE | Setúbal | 97.00 | 3.00 | 100.00 |
Recently, after the closing of the period, the Hurricane Leslie in Portugal on 13 October caused damage in the Figueira da Foz plant center, which was without electricity, water and telecommunications and forced to suspend work. The effort and outstanding performance of the local teams, as well as the support and involvement of several multidisciplinary teams of the Group, allowed to start immediately all the work necessary to repair the damages caused and to minimise downtime, placing the pulp line and the paper machines 1 and 2 quickly into operation. However, this downtime caused a loss of
production estimated at about 9 thousand tons of pulp and 10 thousand tons of paper, which will limit the volumes available for sale in the last quarter.
On 11 June 2018, Navigator was notified of the Constitutional Court judgment regarding Case No. 486/15 (Appeal), in which that court considers Article No. 92 (1) of the Portuguese Corporate Income Tax Code to be unconstitutional in the interpretation according to which it decreases to 10% the mark-up rate of the Corporate Income Tax that can be used to deduct tax benefits related to RFAI, when, at the time the benefit was calculated, that margin was 25%.
This decision will have a very positive impact on the 2013 Corporate Income Tax process and it is expected to bring a reduction in the bank guarantee for this process (Note 37), as well as to reimburse the Group for the costs incurred with it.
These financial statements are a free translation of the financial statements originally issued in Portuguese in accordance with International Financial Reporting Standards as adopted by the European Union. In the event of discrepancies, the Portuguese language version prevails.
João Nuno de Sottomayor Pinto de Castello Branco Chairman
Diogo António Rodrigues da Silveira Executive Vice Chairman
Luis Alberto Caldeira Deslandes Vice Chairman
António José Pereira Redondo Executive Board Member
José Fernando Morais Carreira de Araújo Executive Board Member
Nuno Miguel Moreira de Araújo Santos Executive Board Member
João Paulo Araújo Oliveira Executive Board Member
Adriano Augusto da Silva Silveira Board Member
José Miguel Pereira Gens Paredes Board Member
Manuel Soares Ferreira Regalado Board Member
Paulo Miguel Garcês Ventura Board Member
Ricardo Miguel dos Santos Pacheco Pires Board Member
Vitor Manuel Galvão Rocha Novais Gonçalves Board Member
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