Quarterly Report • Nov 30, 2018
Quarterly Report
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3
rd QUARTER 2018
CORTICEIRA AMORIM, SGPS, S.A. – CONSOLIDATED FINANCIAL STATEMENTS First nine months 2018 (9M18) (Non-audited) Third quarter 2018 (3Q18) (Non-audited)
Translation of consolidated financial statements originally issued in Portuguese. In case of discrepancy the Portuguese version prevails
Dear Shareholders,
In accordance with the law, CORTICEIRA AMORIM S.G.P.S., S.A., a public company, presents its consolidated management report:
In spite of increased economic and political instability, the world economy has grown at a relatively robust pace.
Despite increasingly difficult relations with trading partners and the placing of tariffs on trade with China, the US generated surprisingly positive growth supported by domestic consumption and production for stocks. In Europe, thirdquarter growth disappointed and business sentiment indicators worsened.
Corticeira Amorim ended the first nine months of 2018 with a net profit of €58.6 million, up 4% on the same period of 2017 (€56.4 million).
At September 30, 2018 (9M18) consolidated sales totalled €584 million, representing an increase of 9.8% on the first nine months of 2017.
The change in the consolidation perimeter resulting from the acquisition of Bourrassé Group (Bourrassé), whose activities were consolidated into Corticeira Amorim's accounts from June 30, 2017, had no impact in the third quarter. Over the first nine months of 2018, growth in business activities and the change in the consolidation perimeter more than compensated for the impact of the depreciation of the US dollar (USD) on the Group's sales (-€10.4 million). Excluding these two impacts, sales would have grown 4.9%.
It should be noted that in the third quarter the impact of fluctuations in the USD exchange rate was practically zero, in contrast to the first semester.
The best performing Business Units (BUs) in terms of sales growth were the Raw Material BU (+15.2%), the Cork Stopper BU (+12,8%) and the Insulation BU (+8.9%). In spite of recording lower sales growth (+3.8%) than the other BUs, the Composite Cork BU reversed the downward trend experienced since the first quarter by increasing sales by 15.5% in the third quarter. Floor and Wall Coverings BU sales maintained the first semester decrease (-7.7%).
EBITDA increased, but at a slower pace than sales, totalling €108.4. This was mainly due to the depreciation of the USD and to the start of consumption of raw materials acquired in the 2017 purchasing campaign. This situation was offset by improved cost control, operating efficiency gains and a reduction in impairments.
The EBITDA-sales ratio fell to 18.6%, down from the 19.8% registered in the same period of 2017. Excluding the change in the consolidation perimeter and the exchange rate effect, EBITDA would have increased 2.8% and the EBITDA margin would have been 19.4%. The increased profitability of Bourrassé was of particular note, having been supported by a previously established plan.
Net debt at the end of September stood at €104.7 million, an increase of €11.9 million compared with the end of 2017 (€92.8 million). Although interest rates remained low, the financial function increased slightly due to an increase in average debt, resulting mainly from the acquisitions (Bourassé, Sodiliège and Elfverson) and additional investment in working capital.
After profits attributable to minority interests, net profit totalled €58.59 million, an increase of 4% on the €56.364 million registered for the same period of the previous year.
The Raw Materials BU increased sales by 15.2%. Sales were predominantly within the Group, although sales to third parties also increased.
EBITDA totalled €24.2 million, significantly higher than in the same period of 2017 (€15.8 million). The improvement in the EBITDA margin (which increased from 13.5% to 18%) resulted mainly from an increase in the gross margin. This reflected the positive contribution from industrial operations including cork preparation, disc production and granulates. As expected, profitability decreased in the third quarter as the BU began to consume cork acquired at higher prices in the 2017 purchasing.
The 2018 cork purchasing campaign was completed at the end of the third quarter, meeting the quantity and quality objectives established for the period. The purchase price was about 17% higher than during the previous campaign (compared with an 11% price increase for the 2017 campaign), representing an important challenge to the development of Corticeira Amorim's business activities.
The acquisition of Cosabe – Companhia Silvo-Agrícola da Beira, S.A., announced in October 2018, was also noteworthy. As Corticeira Amorim's first investment in forest assets, it marks an important step towards implementing the Group's Forestry Intervention Project, which aims to increase the productivity of cork oak plantations and guarantee the production of high quality cork.
The Cork Stoppers BU recorded sales of €410.2 million, up 12.8% on the same period of 2017. Excluding the change in the consolidation perimeter, sales would have increased 2.8%; if the exchange rate effect were also discounted, sales would have grown 4.7%.
Sales increased across all market segments (still wines: 4%; sparkling wines: 3%; spirits: 14%). Sales growth was balanced in terms of geographical markets, the biggest increases being registered in the world's key wine markets: France, Italy, Spain and Portugal. Sales decreased in the US (due to USD depreciation) and Argentina. Sales of NDTech® cork stoppers increased to 36.7 million units over the first nine months of 2018 (9M17: 2.5 million units).
CORTICEIRA AMORIM, SGPS, S.A. – CONSOLIDATED FINANCIAL STATEMENTS 3 rd QUARTER 2018 The BU's EBITDA rose to €76.1 million (up 3% on the same period of 2017). The EBITDA margin fell by 1.8 percentage points to 18.5%. Depreciation of the USD and higher cork purchasing prices contributed to the drop. A more favourable product mix and increases in final consumer prices softened the impact of the decrease in sales. Excluding the changes in the consolidation perimeter and the exchange rate effect, EBITDA would have been almost equal to that of the first nine months of 2017 and the EBITDA margin would have been 19.4%.
A total of €1.5 million (net) was registered in non-recurring income. This included the reversal of €2 million in provisions relating to legal proceedings involving Amorim Argentina in cases concerning labour and customs issues and the Central Bank of Argentina. These provisions were created in 2016 during the liquidation of Amorim Argentina, which was concluded in the first half of 2018, without any significant payments having to be made. Non-recurring transaction expenses incurred during the acquisition of subsidiaries partly offset the income relating to Amorim Argentina.
Sales by the Composite Cork BU totalled €77.1 million, an increase of 3.8% in relation to the same period of 2017 (€74.3 million). Sales growth in the third quarter (+15.5%) comfortably reversed the downward sales trend of the first half. Sales at higher prices and in larger quantities, as well as a more favourable sales mix, supported this growth. Excluding the exchange rate effect, sales would have increased 6.8%.
In terms of segments, sales growth was strongest for Footwear, Sport Surfaces and Cork Specialists. As planned, the BU stopped supplying inlay for the Floor and Wall Coverings BU's Hydrocork® range. Sales decreased for Panels & Composites and Constructions Specialists.
In regard to destination markets, growth was positive across al segments in the Europe, Middle East and Africa (EMEA) region, but decreased in Asia (mainly in the Flooring Manufacturers segment) and in North America (at constant exchange rates sales would have grown 7.3%).
EBITDA for the first nine months totalled €8.2 million and the EBITDA margin fell to 10.7% (9M17: 15.8%). This resulted from the unfavourable exchange rate effect (discounting the exchange rate effect, the EBITDA margin would have been 12.4%), higher raw material prices (both cork and non-cork) and a reduction in earnings from grinding operations. These factors were partially offset by an increase in final product prices and a more favourable product mix.
Sales by the Floor and Wall Coverings BU totalled €84.1 million, down 7.7% on the same period of 2017.
There were no significant increases in sales to the three markets that have limited the BU's overall growth: the US, Russia and Germany. However, sales growth in Scandinavia and Portugal (especially in the hotel segment) softened the impact of this decrease.
The growth in sales of Hydrocork® products continued to outperform overall sales growth, albeit at a slower pace. Hydrocork® products account for more than 20% of the BU's total sales.
EBITDA dropped to €2.7 million due to lower levels of business of activity, higher raw material prices, lower production revenue, higher costs and impairments.
The BU's renewed management team is focused on launching innovative flooring solutions as well as increasing efficiency and service levels. This will enable a new generation of sustainable SUBERTECH products (waterproof and PVC-free with a negative carbon footprint) to be launched at the Domotex trade fair in January 2019.
Rationalisation of the BU's product portfolio together with measures to increase productivity and operating efficiency are expected to generate future improvements in the EBITDA margin.
A total of €0.85 million in non-recurring expenditures was recorded, reflecting new restructuring measures and changes in the management of the BU.
Sales by the Insulation BU totalled €8.9 million, an increase of 8.9% on the same period of 2017. The increase reflected higher levels of activity and higher prices. MDFachada sales were slightly below those in the first nine months of 2017, but are expected to recover by the end of 2018.
The depreciation of the USD had a negative impact on the BU's activities. At constant exchange rates, sales would have increased 10.3%.
In spite of measures taken to optimise cork use, EBITDA fell 34.9% to €0.9 million, due mainly to the exchange rate effect, higher raw material prices, increased costs and more impairments.
Sales growth resulted mainly from the change in the consolidation perimeter (+€36.5 million). However, the relative weight of this factor will tend to diminish over the course of the year, given that, as previously mentioned, Bourrassé began to be consolidated from July 2017. The negative impact of the unfavourable USD exchange rate was approximately €10.4 million. Excluding these two factors, sales would have grown 4.9%.
The change in the gross percentage margin (from to 53.3% to 49.2%) reflects not only the exchange rate effect, but also an increase in production costs mainly due to higher raw material prices.
In regard to operating costs, the increase of about €9.7 million in staff costs (+10.5%) in comparison with the first nine months of 2017 results mainly from the change in the consolidation perimeter (it would have been +2.1% without the perimeter change). The cost of supplies and external services rose 5.7%, and would have fallen 0.9% without the perimeter change, thanks to the expenditure containment measures the Group has undertaken. Impairments rose to €0.9 million, significantly lower than in the same period of the previous year.
Other operating income/cost items that impact EBITDA evolved favourably, increasing to about €1.7 million. The negative balance between the exchange rate differences relating to assets receivable and liabilities payable, as well as the respective hedging of foreign exchange risks, included under other operating income/gains rose to about -€0.7 million (9M17: -€0.5 million).
EBITDA rose 2.9% to €108.4 million. The EBITDA margin was 18.6% (9M17: 19.8%). Discounting the change in the consolidation perimeter and the exchange rate effect, the margin would have been 19.4%.
As previously mentioned, net non-recurring income reflects the reversal of provisions arising from the liquidation process for Amorim Argentina, the recognition of transaction costs of subsidiary companies and the restructuring of the Floor and Wall Coverings BU.
The increase in financial costs reflects the increase in financial debt relating to the acquisition of the remaining shares of Bourrassé and the increase of interest costs resulting from an increase in average debt.
Income from associate companies totalled €2.1 million. The increase in relation to the first nine months of 2017 (9M17: €1.0 million) was mainly due to the recognition as earnings of part of the contingent amount receivable from the sale of US Floors (€0.8 million) in 2017. The outstanding amount is expected to be settled by the end of 2018.
As usual, it will only be possible to assess the value of investment tax benefits (RFAI and SIFIDE) at the end of the year. For this reason, any tax gains will be recorded only at the closing of accounts for 2018. The decrease in the effective tax rate is mainly due to the reversion of non-recurring expenditures that did not give rise to the recognition of deferred taxes.
After estimated tax and the allocation of profits to non-controlling interests, total net income attributable to CORTICEIRA AMORIM shareholders totalled €58.59 million, an increase of 4% compared with the €56.364 million for the first nine months of 2017.
Earnings per share were €0.441 (9M17: €0.424).
In regard to the financial position, it should be noted that the periods shown no longer reflect the main impact of the change in the consolidation perimeter resulting from the acquisition of Bourrassé, which began to be consolidated from July 1, 2017. In 2018, the only change in the perimeter resulted from the acquisition of Elfverson, which began to be consolidated from the beginning of 2018. The goodwill relating to Elfverson amounted to €4.1 million, representing the remaining value that it had not previously been possible to identify as part of the fair value of the acquired company's assets and liabilities.
In terms of asset changes in comparison with December 2017, the most noteworthy items were the increases in fixed tangible assets (+€17.2 million, reflecting increased investment), inventories (+€59.5 million, mainly reflecting increased raw material prices), the customer balance (+€11.8 million, reflecting increased sales) and in cash and cash equivalents (+€12.2 million).
The change in equity is the result of the earnings for the period (+€58.6 million) minus the dividends paid in April (-€24.6 million).
The increase in liabilities results mainly from an increase of €22.7 million to suppliers (offset by the increase in inventories), €22.8 million in corporation tax (the estimated amount payable) and €24.1 million in remunerated debt (to cover investments in tangible assets and working capital). At the end of September, net remunerated debt totalled €104.7 million, an increase of €11.9 million compared with the end of 2017.
At the end of September 2018, equity totalled 492.1 million. The financial autonomy ratio rose to 50.7%.
| 4. | KEY CONSOLIDATED INDICATORS | ||||
|---|---|---|---|---|---|
| ---- | -- | -- | -- | ----------------------------- | -- |
| 9M18 | 9M17 | yoy | 3Q18 | 3Q17 | yoy | ||
|---|---|---|---|---|---|---|---|
| Sales | 583,758 | 531,470 | 9.8% | 183,893 | 176,708 | 4.1% | |
| Gross Margin - Value | 297,666 | 284,432 | 4.7% | 90,689 | 92,311 | $-1.8%$ | |
| 1) | 49.2% | 53.3% | $-4.1 p.p.$ | 47.1% | 53.3% | $-6.21 p.p.$ | |
| Operating Costs - current | 212,857 | 200,827 | 6.0% | 66,823 | 63,538 | 5.2% | |
| EBITDA - current | 108,419 | 105,352 | 2.9% | 30,995 | 34,730 | $-10.8%$ | |
| EBITDA/Sales | 18.6% | 19.8% | $-1.3 p.p.$ | 16.9% | 19.7% | $-2.8 p.p.$ | |
| EBIT - current | 84,809 | 83,605 | 1.4% | 23,866 | 28,773 | $-17.1%$ | |
| Non-current results | 2) | 681 | 1,572 | N/A | $\mathbf{o}$ | 1,572 | N/A |
| Net Income | 58,590 | 56,363 | 4.0% | 17,375 | 18,605 | $-6.6%$ | |
| Earnings per share | 0.441 | 0.424 | 4.0% | 0.138 | 0.140 | $-1.1%$ | |
| Net Bank Debt | 104,702 | 75,779 | 28,923 | ||||
| Net Bank Debt/EBITDA (x) | 3) | 0.77 | 0.57 | 0.19x | |||
| EBITDA/Net Interest (x) | 4) | 123.5 | 173.3 | $-49.75x$ | 99.6 | 115.2 | $-15.62x$ |
| Equity/Net Assets | 50.7% | 51.1% | $-0.38 p.p.$ |
1) Related to Production
2) Figures refer to the reversal of provisions for Amorim Argentina, Amorim Revestimentos restructuring and transaction costs for subsidiaries acquisition (9M 18) and transaction costs of Bourrassé and Sodiliège and to Floor and Wall Coverings BU restructuring costs (9M 17)
3) Current EBITDA of the last four quarters
4) Net interest includes interest from loans deducted of interest from deposits (excludes stamp tax and commissions)
Considering that:
the Company's non-consolidated balance sheet for the nine months ending on September 30, 2018 shows free distributable reserves in the amount of €69,079,128.42 (sixty and nine million, seventy and nine thousand, one hundred and twenty and eight euros and forty and two cents), and statuary reserves in the amount of €21,494,753.20 (twenty-one million, four hundred and ninety-four thousand, seven hundred and fifty and three euros and twenty cents);
a distribution of free reserves is allowed as long as the Company's equity, as stated in the interim balance sheet set out above, is not less than the sum of the Company's share capital and reserves, whose distribution to shareholders is not permitted by law and the Company's articles of association;
solid growth in business and profitability over the past few years, and the good prospects for the current financial year have enabled Corticeira Amorim to generate increasing cash flows and, as a result, strengthen its total equity to total assets ratio. It has become possible to make a distribution of free reserves to the Company's shareholders without jeopardising the maintenance of an efficient capital structure of the Corticeira Amorim Group; therefore, the Board of Directors of Corticeira Amorim, S.G.P.S., S.A. proposes that
shareholders consider approving a distribution of free reserves in the amount of €11,305,000.00 (eleven million, three hundred and five thousand euros), equal to a gross value of €0.085 (eight and a half cents) per share, to be distributed to shareholders in proportion to their share ownership and to be paid within a maximum of 20 (twenty) days.
Through its subsidiary AMORIM FLORESTAL, SA ("AMORIM FLORESTAL"), the subholding company of the Group's Raw Materials Business Unit, has agreed to acquire 100% of Cosabe - Companhia Silvo-Agrícola da Beira, SA, headquartered in Lisbon, whose main asset is the Herdade da Baliza, located in the Castelo Branco/International Tagus area, having a total area of 2,866 hectares, for a total amount €5.5 million.
Amorim Florestal is engaged in a forest intervention project aimed at ensuring the maintenance, preservation and improvement of cork oak forests and, consequently, the continuous production of quality cork. In this way, Amorim Florestal has accumulated extensive scientific and technical knowledge regarding new agricultural practices with a high potential for the development and increased productivity of cork oak cultivation.
As part of this project, the purpose is to develop an "Intensive Cork Oak Plantation", using intensive production methods and fertigation to increase the density of cork oaks per hectare and accelerate the growth rate of the trees, thus significantly reducing the time required for them to begin producing cork.
As of the date of issuance of this report, no other important events have occurred which might materially affect the financial position and future profit or loss of CORTICEIRA AMORIM and its subsidiaries included in the consolidated accounts of the company.
Mozelos, November 5, 2018
The Board of Directors of CORTICEIRA AMORIM, S.G.P.S., S.A.
| thousand euros | |
|---|---|
CORTICEIRA AMORIM, SGPS, S.A. – CONSOLIDATED FINANCIAL STATEMENTS 3 rd QUARTER 2018
thousand euros
| 3Q18 | 3Q17 | 9M18 | 9M17 | |
|---|---|---|---|---|
| (non audited) (non audited) | (non audited) | (non audited) | ||
| 183,892 | 176,708 | Sales | 583,758 | 531,470 |
| 93,988 | 80,911 | Costs of goods sold and materials consumed | 307,141 | 249,137 |
| 785 | $-3,487$ | Change in manufactured inventories | 21,050 | 2,100 |
| 29,394 | 29,667 | Third party supplies and services | 90,582 | 85,678 |
| 31,032 | 28,659 | Staffcosts | 101,995 | 92,277 |
| 563 | 1,167 | Impairments of assets | 912 | 3,639 |
| 3,175 | 2,752 | Other gains | 8,910 | 7,768 |
| 1,882 | 839 | Other costs | 4,668 | 5,254 |
| 30,994 | 34,731 | Current EBITDA | 108,418 | 105,352 |
| 7,129 | 5,957 | Depreciation | 23,609 | 21,747 |
| 23,866 | 28,773 | Current EBIT | 84,809 | 83,605 |
| $\circ$ | $-1,572$ | Non-current results | 681 | $-1,572$ |
| 459 | 337 | Financial costs | 2,215 | 916 |
| 17 | $-23$ | Financial income | 61 | 117 |
| 782 | 129 | Share of (loss)/profit of associates | 2130 | 958 |
| 24,206 | 26,970 | Profit before tax | 85,466 | 82,192 |
| 5,593 | 7,043 | Income tax | 21,895 | 22,919 |
| 18,613 | 19,927 | Profit after tax | 63,571 | 59,273 |
| 1,237 | 1,321 | Non-controlling Interest | 4,980 | 2,910 |
| 17,376 | 18,606 | Net Income attributable to the equity holders of Corticeira Amorim | 58,590 | 56,364 |
| 0.131 | 0.140 | Earnings per share - Basic e Diluted (euros per share) | 0.441 | 0.424 |
| thousand euros | ||
|---|---|---|
| (non audited) (non audited) | (non audited) | (non audited) |
| thousand euros | ||
|---|---|---|
| (non audited) (non audited) |
(non audited) | (non audited) |
| thousand euros | |||||
|---|---|---|---|---|---|
| XVIII e XIX | |||||
| XVIII e XIX | |||||
| XVIII e XIX | |||||
|---|---|---|---|---|---|
| XVIII e XIX | |||||
At the beginning of 1991, Corticeira Amorim, S.A. was transformed into CORTICEIRA AMORIM, S.G.P.S., S.A., the holding company for the cork business sector of the Amorim Group. In this report, CORTICEIRA AMORIM will be the designation of CORTICEIRA AMORIM, S.G.P.S., S.A., and in some cases the designation of CORTICEIRA AMORIM, S.G.P.S. together with all of its subsidiaries.
CORTICEIRA AMORIM, directly or indirectly, holds no interest in land properties used to grow and explore cork tree. Cork tree is the source of cork, the main raw material used by CORTICEIRA AMORIM production units. Cork acquisition is made in an open market, with multiple agents, both in the demand side as in the supply side.
CORTICEIRA AMORIM is mainly engaged in the acquisition and transformation of cork into a numerous set of cork and cork related products, which are distributed worldwide through its network of sales company.
CORTICEIRA AMORIM is a Portuguese company with a registered head office in Mozelos, Santa Maria da Feira. Its share capital amounts to 133 million euros, and is represented by 133 million shares, which are publicly traded in the Euronext Lisbon – Sociedade Gestora de Mercados Regulamentados, S.A.
Amorim Capital, S.A. held, as of September 30, 2017, 67,830,000 shares of CORTICEIRA AMORIM, corresponding to 51.00% of the capital stock. As a result of the merger of this company with Amorim - Investimentos e Participações, S.G.P.S, S.A. occurred in the fourth quarter of 2017, these shares are now held by this company. Accordingly, the company Amorim - Investimentos e Participações, S.G.P.S, S.A. held, on September 30, 2018, 67,830,000 shares of CORTICEIRA AMORIM corresponding to 51.00 % of its share capital. Corticeira Amorim, Sociedade Gestora de Participações Sociais, S.A., is included in the consolidation perimeter of Amorim – Investimentos e Participações, S.G.P.S., S.A., this being its controlling parent company. Amorim – Investimentos e Participações, S.G.P.S. is fully owned by Amorim family.
These financial statements were approved in the Board Meeting of November 5, 2018. Shareholders have the capacity to modify these financial statements even after their release.
Except when mentioned, all monetary values are stated in thousand euros (Thousand euros = K euros = K€ = € K).
The consolidated financial statements as of June 30, 2018 were prepared using accounting policies consistent with International Financial Reporting Standards (IFRS) and in accordance with International Accounting Standard 34 - Interim Financial Reporting, and include the statement of financial position, the income statement, the income statement and other comprehensive income, the statement of changes in equity and the condensed statement of cash flows, as well as the selected explanatory notes.
The accounting policies adopted in the preparation of the consolidated financial statements of CORTICEIRA AMORIM are consistent with those used in the preparation of the financial statements presented for the year ended December 31, 2017, except for the adoption of the new standards whose application became effective on December 1, January 2018 and the application of IFRS 9 and IFRS 15 had no significant impact on these financial statements.
| Company | Head Office | Country 9M18 2017 | |||
|---|---|---|---|---|---|
| Raw Materials | |||||
| Amorim Natural Cork, S.A. | Vale de Cortiças - Abrantes | PORTUGAL 100% | 100% | ||
| Amorim Florestal, S.A. | Ponte de Sôr | PORTUGAL 100% | 100% | ||
| Amorim Florestal España, SL | San Vicente Alcántara | SPAIN 100% | 100% | ||
| Amorim Florestal Mediterrâneo, SL | Cádiz | SPAIN 100% | 100% | ||
| Amorim Tunisie, S.A.R.L. | Tabarka | TUNISIA 100% | 100% | ||
| Augusta Cork, S.L. | (f) | San Vicente Alcántara | SPAIN | $\overline{\phantom{a}}$ | 100% |
| Comatral - C. de Maroc. de Transf. du Liège, S.A. | Skhirat | MOROCCO 100% | 100% | ||
| SIBL - Société Industrielle Bois Liége | Jijel | ALGERIA | 51% | 51% | |
| Société Nouvelle du Liège, S.A. (SNL) | Tabarka | TUNISIA 100% | 100% | ||
| Société Tunisienne d'Industrie Bouchonnière | (c) | Tabarka | TUNISIA | 55% | 55% |
| Vatrya - Serviços de Consultadoria, Lda | Funchal - Madeira | PORTUGAL 100% | 100% | ||
| Cork Stoppers | |||||
| Amorim & Irmãos, SGPS, S.A. | Santa Maria Lamas | PORTUGAL 100% | 100% | ||
| ACI Chile Corchos, S.A. | Santiago | CHILE 100% | 100% | ||
| ACIC USA, LLC | California | U.S. AMERICA 100% | 100% | ||
| Agglotap, S.A. | Girona | SPAIN | 91% | 91% | |
| All Closures In, S.A. | Paços de Brandão | PORTUGAL | 75% | 75% | |
| Amorim & Irmãos, S.A. | Santa Maria Lamas | PORTUGAL 100% | 100% | ||
| Amorim Argentina, S.A. | Buenos Aires | ARGENTINA 100% | 100% | ||
| Amorim Australasia Pty Ltd | Adelaide | AUSTRALIA 100% | 100% | ||
| Amorim Bartop, S.A. | Vergada | PORTUGAL | 75% | 75% | |
| Amorim Cork América, Inc. | California | U.S. AMERICA 100% | 100% | ||
| Amorim Cork Beijing Ltd. | Beijing | CHINA 100% | 100% | ||
| Amorim Cork Bulgaria EOOD | Plovdiv | BULGARIA 100% | 100% | ||
| Amorim Cork Deutschland GmbH & Co KG | Mainzer | GERMANY 100% | 100% | ||
| Amorim Cork España, S.L. | San Vicente Alcántara | SPAIN 100% | 100% | ||
| Amorim Cork Itália, SPA | Conegliano | ITALY | 100% | 100% | |
| Amorim Cork South Africa (Pty) Ltd | Cape Town SOUTH AFRICA 100% | 100% | |||
| Amorim France, S.A.S. | Champfleury | FRANCE 100% | 100% | ||
| Amorim Top Series France, S.A.S. | Gensac La Pallue | FRANCE 100% | 100% | ||
| Amorim Top Series, S.A. | Vergada | PORTUGAL | 75% | 75% | |
| Biocape - Importação e Exportação de Cápsulas, Ld | (d) | Mozelos | PORTUGAL | 60% | $\overline{\phantom{a}}$ |
| Bouchons Prioux | Epernay | FRANCE | 91% | 91% | |
| Chapuis, S.L. | Girona | SPAIN 100% | 100% | ||
| Corchera Gomez Barris | (c) | Santiago | CHILE | 50% | 50% |
| Corchos de Argentina, S.A. | (b) | Mendoza | ARGENTINA | 50% | 50% |
| Corpack Bourrasse, S.A. | Santiago | CHILE | 60% | 60% | |
| Elfverson & Co. AB | (d) | Parid | SWEDEN | 53% | |
| Equipar, Participações Integradas, Lda. | Coruche | PORTUGAL 100% | 100% | ||
| S.A.S. Ets Christian Bourassé | Tosse | FRANCE | 60% | 60% | |
| FP Cork, Inc. | California | U.S. AMERICA 100% | 100% | ||
| Francisco Oller, S.A. | Girona | SPAIN | 92% | 92% | |
| Hungarocork, Amorim, RT | Budapeste | HUNGARY 100% | 100% | ||
| Indústria Corchera, S.A. | (c) | Santiago | CHILE | 50% | 50% |
| Korken Schiesser Ges.M.B.H. | Viena | AUSTRIA | 69% | 69% | |
| Olimpiadas Barcelona 92, S.L. | Girona | SPAIN | 100% | ||
| 100% | |||||
| Portocork América, Inc. | California | U.S. AMERICA 100% | 100% | ||
| Portocork France, S.A.S. | Bordéus | FRANCE | 100% | 100% | |
| Portocork Internacional, S.A. | Santa Maria Lamas | PORTUGAL 100% | 100% | ||
| Portocork Itália, s.r.l | Milão | ITALY | 100% | 100% | |
| Sagrera et Cie | Reims | FRANCE | 91% | 91% | |
| S.A. Oller et Cie | Reims | FRANCE | 92% | 92% | |
| S.C.I. Friedland | Céret | FRANCE | 100% | 100% | |
| S.C.I. Prioux | Epernay | FRANCE | 91% | 91% | |
| Socori, S.A. | Rio Meão | PORTUGAL | 60% | 60% | |
| Sodiliège | Cognac | FRANCE | 75% | 75% | |
| Société Nouvelle des Bouchons Trescases | (b) | Perpignan | FRANCE | 50% | 50% |
| Trefinos Australia | Adelaide | AUSTRALIA | 91% | 91% | |
| Trefinos Italia, s.r.l | Treviso | ITALY | 91% | 91% | |
| Trefinos USA, LLC | Fairfield, CA | U.S. AMERICA | 91% | 91% | |
| Trefinos, S.L | Girona | SPAIN | 91% | 91% | |
| Victory Amorim, Sl | (c) | Navarrete - La Rioja | SPAIN | 50% | 50% |
| Wine Packaging & Logistic, S.A. | (b) | Santiago | CHILE | 50% | 50% |
| Company | Head Office | Country 9M18 2017 | |||
|---|---|---|---|---|---|
| Floor & Wall Coverings | |||||
| Amorim Revestimentos, S.A. | S. Paio de Oleiros | PORTUGAL 100% | 100% | ||
| Amorim Benelux, BV | Tholen | NETHERLANDS | 100% | 100% | |
| Amorim Deutschland, GmbH - AR | (a) | Delmenhorts | GERMANY 100% | 100% | |
| Amorim Flooring, SA | S. Paio de Oleiros | PORTUGAL 100% | 100% | ||
| Amorim Flooring (Switzerland) AG | Zug | SWITZERLAND 100% | 100% | ||
| Amorim Flooring Austria GesmbH | Viena | AUSTRIA 100% | 100% | ||
| Amorim Flooring Investments, Inc. | Hanover - Maryland | U.S. AMERICA 100% | 100% | ||
| Amorim Flooring North America Inc. | Hanover - Maryland | U.S. AMERICA 100% | 100% | ||
| Amorim Flooring Rus, LLC | Moscovo | RUSSIA 100% | 100% | ||
| Amorim Flooring Sweden AB | Mölndal | SWEDEN 100% | 100% | ||
| Amorim Flooring UK, Ltd | Manchester | U.KINGDOM 100% | 100% | ||
| Amorim Japan Corporation | Tóguio | JAPAN 100% | 100% | ||
| Amorim Revestimientos, S.A. | Barcelona | SPAIN 100% | 100% | ||
| Cortex Korkvertriebs GmbH | Fürth | GERMANY | 100% | 100% | |
| Dom KorKowy, Sp. Zo. O. | (c) | Kraków | POLAND | 50% | 50% |
| Timberman Denmark A/S | (e) | Hadsund | DENMARK 100% | 51% | |
| Composite Cork | |||||
| Amorim Cork Composites, S.A. | Mozelos | PORTUGAL 100% | 100% | ||
| Amorim (UK) Ltd. | Horsham West Sussex | U.KINGDOM 100% | 100% | ||
| Amorim Compcork, Lda | Mozelos | PORTUGAL 100% | 100% | ||
| Amorim Cork Composites LLC | São Petersburgo | RUSSIA 100% | 100% | ||
| Amorim Cork Composites Inc. | Trevor - Wisconsin | U.S. AMERICA 100% | 100% | ||
| Amorim Deutschland, GmbH - ACC | (a) | Delmenhorts | GERMANY 100% | 100% | |
| Amorim Industrial Solutions - Imobiliária, S.A. | Corroios | PORTUGAL 100% | 100% | ||
| Amosealtex Cork Co., Ltd | (b) | Xangai | CHINA | 50% | 50% |
| Chinamate (Shaanxi) Natural Products Co. Ltd | Shaanxi | CHINA 100% | 100% | ||
| Chinamate Development Co. Ltd | Hong Kong | CHINA 100% | 100% | ||
| Compruss - Investimentos e Participações Lda | Mozelos | PORTUGAL 100% | 100% | ||
| Corticeira Amorim - France SAS | Lavardac | FRANCE 100% | 100% | ||
| Florconsult - Consultoria e Gestão, Lda | Mozelos | PORTUGAL 100% | 100% | ||
| Postya - Serviços de Consultadoria, Lda. | Funchal - Madeira | PORTUGAL 100% | 100% | ||
| Insulation Cork | |||||
| Amorim Isolamentos, S.A. | Vendas Novas | PORTUGAL | 100% | 100% | |
| Holding | |||||
| Corticeira Amorim, SGPS, S.A. | Mozelos | PORTUGAL 100% | 100% | ||
| Ginpar, S.A. (Générale d'Invest. et Participation) | Skhirat | MOROCCO 100% | 100% | ||
| Amorim Cork Research, Lda. | Mozelos | PORTUGAL 100% | 100% | ||
| Amorim Cork Services, Lda. | Mozelos | PORTUGAL 100% | 100% | ||
| Amorim Cork Ventures, Lda | Mozelos | PORTUGAL 100% | 100% | ||
| Ecochic portuguesas - footwear and fashion products, Lda |
Mozelos | PORTUGAL | 12% | 12% | |
| Corecochic - Corking Shoes Investments, Lda | (b) | Mozelos | PORTUGAL | 50% | 50% |
| Gröwancork - Estruturas isoladas com cortica, Lda | (b) | Mozelos | PORTUGAL | 25% | 25% |
| PrimaLynx - Sustainable Solutions, Lda. | (b) | Mozelos | PORTUGAL | 24% | 24% |
| TDCork - Tapetes Decorativos com Cortiça, Lda | (b) | Mozelos | PORTUGAL | 25% | 25% |
| Soc. Portuguesa de Aglomerados de Cortiça, Lda | Montijo | PORTUGAL 100% | 100% | ||
| Supplier Portal Limited | Hong Kong | CHINA 100% | 100% |
(a) One single company: Amorim Deutschland, GmbH & Co. KG.
(b) Equity method consolidation.
(c) CORTICEIRA AMORIM controls the operations of the company – line-by-line consolidation method.
(d) Company acquired in 2018
(e) Increase in the percentage of interest
(f) Company merged in Amorim Florestal España
For entities consolidated by the full consolidation method, the percentage of voting rights held by "Non-Controlling Interests" is equal to the percentage of share capital held.
In early 2018, CORTICEIRA AMORIM acquired 70% of Elfverson (for SEK 50.5 million), which has been consolidated since January 1 of this year. This company has a portfolio of premium products and a portfolio of outstanding customers, allowing the reinforcement of sources of supply of wooden tops of recognized quality, which will allow to keep up with the growth of the needs of the customers in the segment of capped caps.
The group chose to measure the non-controlling interest at the proportionate share of the acquiree's net assets and liabilities.
The fair values of the assets and liabilities identified under this transaction are shown in the table below:
| m illions euros |
|---|
No significant differences were identified between the fair value and the respective carrying amount. Goodwill represents the remaining amount that could not be identified in the acquiree. Goodwill recognized in the accounts is not expected to be deductible for tax purposes.
The fair value of the non-controlling interest results from the participation being acquired by a subsidiary that is not 100% owned.
Transaction costs of 139 thousand euros were recorded as non-recurring expense For the first quarter financial statements, an adjustment was made to the acquisition price effective for Goodwill.
| Exchange rates | September 30, 2018 |
Average 9M18 |
December 31, 2017 |
Average 2017 |
|
|---|---|---|---|---|---|
| Argentine Peso | ARS | 47.9178 | 29.7310 | 22.3054 | 18.7356 |
| Australian Dollar | AUD | 1.6048 | 1.5761 | 1.5346 | 1.4732 |
| Lev | BGN | 1.9557 | 1.9557 | 1.9557 | 1.9557 |
| Brazilian Real | BRL | 4.6535 | 4.2966 | 3.9729 | 3.6054 |
| Canadian Dollar | CAD | 1.5064 | 1.5372 | 1.5039 | 1.4647 |
| Swiss Franc | CHF | 1.1316 | 1.1611 | 1.1702 | 1.1117 |
| Chilean Peso | CLP | 763.210 | 750.279 | 737.330 | 732.134 |
| Yuan Renminbi | CNY | 7.9662 | 7.7789 | 7.8044 | 7.6290 |
| Danish Krona | DKK | 7.4564 | 7.4503 | 7.4449 | 7.4386 |
| Algerian Dinar | DZD | 136.884 | 138.127 | 137.539 | 125.091 |
| Euro | EUR | 1.0000 | 1.0000 | 1.0000 | 1.0000 |
| Pound Sterling | GBP | 0.8873 | 0.8841 | 0.8872 | 0.8767 |
| Hong Kong Dollar | HKD | 9.0866 | 9.3629 | 9.3720 | 8.8048 |
| Forint | HUF | 324.370 | 317.514 | 310.330 | 309.193 |
| Yen | JPY | 131.230 | 130.925 | 135.010 | 126.711 |
| Moroccan Dirham | MAD | 10.9417 | 11.1556 | 11.2091 | 10.9494 |
| Zloty | PLN | 4.2774 | 4.2488 | 4.1770 | 4.2570 |
| Ruble | RUB | 76.1422 | 73.4164 | 69.3920 | 65.9383 |
| Tunisian Dinar | TND | 3.2520 | 3.0377 | 2.9444 | 2.7198 |
| Turkish Lira | TRL | 6.9650 | 5.5098 | 4.5464 | 4.1206 |
| US Dollar | USD | 1.1576 | 1.1942 | 1.1993 | 1.1297 |
| Rand | ZAR | 16.4447 | 15.3920 | 14.8054 | 15.0490 |
CORTICEIRA AMORIM is organized in the following Business Units (BU): Raw Materials, Cork Stoppers, Floor and Wall Coverings, Composite Cork and Insulation Cork.
There are no differences between the measurement of profit and loss and assets and liabilities of the reportable segments, associated to differences in accounting policies or centrally allocated cost allocation policies or jointly used assets and liabilities.
For purposes of this Report, the Business approach was selected as the primary segment. This is consistent with the formal organization and evaluation of business. Business Units correspond to the operating segments of the company and the segment report is presented the same way they are analysed for management purposes by the board of CORTICEIRA AMORIM.
The following table shows the main indicators of the said units, and, whenever possible, the reconciliation with the consolidated indicators:
| thousand euros | ||||
|---|---|---|---|---|
| 9M2017 | Raw Materials |
Cork Stoppers |
Floor & Wall Coverings |
Cork | Composite Insulation Cork |
Holding | Adjustm. | Consolidated |
|---|---|---|---|---|---|---|---|---|
| Trade Sales | 7,754 | 359,920 | 88,578 | 67,745 | 7,453 | 21 | 531,470 | |
| Other BU Sales | 109,261 | 3,742 | 2,559 | 6,510 | 700 | 1,647 | $-124,420$ | |
| Total Sales | 117,015 | 363,662 | 91,138 | 74,255 | 8,153 | 1,668 -124,420 | 531,470 | |
| EBITDA (current) | 15,831 | 73,888 | 6,518 | 11,696 | 1,453 | -4,522 | 489 | 105,353 |
| Assets (non-current) | 21,146 | 125,801 | 34,894 | 31,064 | 3,945 | 990 | 48,274 | 266,113 |
| Assets (current) | 155,800 | 246,989 | 66,821 | 38,358 | 7,649 | 44,655 | 60,733 | 621,004 |
| Liabilities | 48,319 | 137,917 | 38,766 | 27,791 | 2.360 | 24,605 | 154,368 | 434,127 |
| Capex | 4,205 | 14,237 | 5,033 | 3,211 | 284 | 255 | o | 27,224 |
| Depreciation | -3,583 | -12,536 | -3,204 | -1,977 | -379 | -67 | $\mathbf{o}$ | $-21,747$ |
| Gains/Losses in associated | 0 | 1,579 | $\mathbf o$ | -182 | $\mathbf o$ | $-439$ | 0 | 958 |
Adjustments = eliminations inter-BU and amounts not allocated to BU.
EBITDA = Profit before interests, depreciation, equity method, non-controlling interests and income tax.
Provisions and asset impairments were considered the only relevant non-cash material cost.
Segments assets do not include DTA (deferred tax asset) and non-trade group balances.
Segments liabilities do not include DTL (deferred tax liabilities), bank loans and non-trade group balances.
The decision to report EBITDA figures allows a better comparison of the different BU performances, disregarding the different financial situations of each BU. This is also coherent with the existing Corporate Departments, as the Financial Department is responsible for the bank negotiations, being the tax function the responsibility of the Holding Company.
Cork Stoppers BU main product is the different kinds of existing cork stoppers. The main markets are the bottling countries, from the traditional ones like France, Italy, Germany, Spain and Portugal, to the new markets like USA, Australia, Chile, South Africa and Argentina.
Raw Materials BU is, by far, the most integrated in the production cycle of CORTICEIRA AMORIM, with 95% of its sales to others BU, specially to Cork Stoppers BU. Main products are bark and discs.
The remaining BU produce and sell a vast number of cork products made from cork stoppers waste. Main products are cork floor tiles, cork rubber for the automotive industry and antivibratic systems, expanded agglomerates for insulation and acoustic purposes, technical agglomerates for civil construction and shoe industry, as well as granulates for agglomerated, technical and champagne cork stoppers.
Major markets for flooring and insulation products are in Europe and for composites products the USA. Major production sites are in Portugal, where most of the invested capital is located. Products are distributed in practically all major markets through a fully owned network of sales companies. About 70% of total consolidated sales are achieved through these companies.
CORTICEIRA AMORIM business are spread through a large basket of products, throughout the five continents and more than a hundred countries; so, it is not considered that its activity is subjected to any particular form of seasonality. Anyway it has been registered a higher first half activity, mainly during the second quarter; third and fourth usually exchange as the weakest quarter.
Mozelos, November 5, 2018
The Board of CORTICEIRA AMORIM, S.G.P.S., S.A.
Tracing its roots back to the 19th century, Amorim has become the world's largest cork and corkderived company in the world, generating more than Euro 700 million in sales to more than 100 countries through a network of dozens of fully owned subsidiaries.
With a multi-million Euro R&D investment per year, Amorim has applied its specialist knowledge to this centuries-old traditional culture, developing a vast portfolio of 100% sustainable products that are used by blue-chip clients in industries as diverse and demanding as wines & spirits, aerospace, automotive, construction, sports, interior and fashion design.
Amorim's responsible approach to raw materials and sustainable production illustrates the remarkable interdependence between industry and a vital ecosystem - one of the world's most balanced examples of social, economic and environmental development.
Corticeira Amorim, SGPS, S.A. Sociedade Aberta Edifício Amorim I Rua de Meladas, n.º 380 4536-902 Mozelos VFR Portugal
[email protected] www.corticeiraamorim.com Instagram: @Amorimcork
Share Capital: EUR 133 000 000,00 A company incorporated in Santa Maria da Feira Registration and Corporate Tax ID No: PT 500 077 797
For additional information: Ana Negrais de Matos, CFA IRO tel.: +351 227 475 423 [email protected]
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