Management Reports • Nov 30, 2017
Management Reports
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| 1. | HIGHLIGHTS | 2 |
|---|---|---|
| 2. | LEADING INDICATORS | 3 |
| 3. | ANALISYS OF RESULTS | 4 |
| 4. | OPERATING INDICATORS | 8 |
| 5. | STRATEGIC DEVELOPMENT | 9 |
| 6. | OUTLOOK | 10 |
| 7. | CONSOLIDATED FINANCIAL STATEMENTS AND NOTES | 12 |
(unaudited quarterly indicators)
| 9M | 9M | % Change (5) | ||||
|---|---|---|---|---|---|---|
| in million euros | 2017 | 2016 | 9M 17 / 9M 16 | |||
| Total sales | 1 209,8 | 1 155,4 | 4,7% | |||
| EBITDA (1) | 300,1 | 301,5 | -0,5% | |||
| Operating profits | 185,5 | 178,0 | 4,2% | |||
| Financial results | - 6,5 | - 16,6 | -61,0% | |||
| Net earnings | 145,8 | 134,3 | 8,6% | |||
| Cash flow | 260,4 | 257,8 | 2,6 | |||
| Free Cash Flow (2) | 148,7 | 101,1 | 47,7 | |||
| Capex | 75,7 | 100,6 | -24,9 | |||
| Net debt (3) | 742,0 | 723,4 | 18,6 | |||
| EBITDA / Sales (%) | 24,8% | 26,1% | -1,3 pp | |||
| ROS | 12,1% | 11,6% | 0,4 pp | |||
| ROE | 16,4% | 15,1% | 1,3 pp | |||
| ROCE | 13,2% | 12,7% | 0,5 pp | |||
| Equity ratio | 46,7% | 47,6% | -0,9 pp | |||
| Net Debt / EBITDA (4) | 1,87 | 1,82 | 0,05 | |||
| Q3 | Q3 | % Change | Q2 % Change |
|||
| in million euros | 2017 | 2016 | Q3 17/Q3 16 | 2017 | Q3 17/Q2 17 | |
| Total sales | 397,2 | 376,8 | 5,4% | 420,0 | -5,4% | |
| EBITDA (1) | 101,7 | 106,2 | -4,3% | 108,2 | -6,0% | |
| Operating profits | 62,0 | 70,1 | -11,5% | 71,4 | -13,1% | |
| Financial results | 1,8 | - 3,2 | -157,5% | - 4,4 | -141,6% | |
| Net earnings | 49,8 | 48,8 | 1,9% | 60,5 | -17,7% | |
| Cash flow | 89,4 | 84,9 | 4,4 | 97,3 | -7,9 | |
| Free Cash Flow (2) | 75,9 | 69,7 | 6,2 | 48,7 | 27,2 | |
| Capex | 40,5 | 25,3 | 15,2 | 20,9 | 19,6 | |
| Net debt (3) | 742,0 | 723,4 | 18,6 | 737,9 | 4,1 | |
ROS 12,5% 13,0% -0,4 pp 14,4% -1,9 pp ROE 16,8% 17,1% -0,3 pp 20,5% -3,8 pp ROCE 13,2% 14,8% -1,6 pp 15,4% -2,2 pp Equity ratio 46,7% 47,6% -0,9 pp 44,9% 1,7 pp Net Debt / EBITDA (4) 1,87 1,82 0,05 1,84 0,03
(1) Operating profits + depreciation + provisions
(2) Var. Net debt + dividends + purchase of own shares
(3) Interest-bearing net debt – liquid assets
(4) EBITDA corresponding to last 12 months
(5) Variation in figures not rounded up/down
EBITDA / Sales (%) 25,6% 28,2% -2,6 pp 25,8% -0,2 pp
Turnover for the first nine months of 2017 stood at € 1 210 million, up by 4.7%, sustained essentially by strong operating performance in sales of pulp, power and tissue.
Pulp sales grew by around 25%, to more than 250 thousand tons, driven by the strong demand experienced over the period, with prices continuing on the upward course recorded since late 2016. The benchmark PIX – BHKP index in euros recorded an average price of 703 €/ton, as compared to 636 €/ton in the same period in 2016 (up 10.6%). The Group's average price also followed an upward course, with pulp sales growing by 32% in value, to a total of € 129.5 million.
Conditions in the paper market also improved gradually over the year, with progressively stronger order books in Europe and in overseas markets. The Group recorded a healthy volume of paper sales, setting a new record of 1 158 tons sold, around 3 thousand tons more than in the first nine months of 2016.
In the period, the Navigator Group implemented three price rises up to July, and also announced a fourth increase from September onwards. These increases helped to offset the price reduction recorded in the final quarter of 2016, with the Group's average price in the first nine months of 2017 still lower than the average price in the same period last year.
Despite the improvement in the product mix sold, with premium and own-brand products accounting for a larger share of sales, the Group's average price in Europe was brought down by the evolution of the exchange rate and by the evolution of the market mix. In Europe, the main impact was the weakness of sterling which, combined with an increase in sales in markets outside Europe, mostly USDdenominated, and with exchange rate trends in recent months, had a negative effect on the Group's overall sales average price.
Tissue sales also recorded growth in volume, up by 11% to approximately 41 thousand tons, made possible by the expansion in production and converting capacity over the course of 2015. Portugal and Spain remained the Group's main geographical markets and away-from-home products represented a larger slice of sales. Overall, the product mix improved, with reels accounting for a smaller share of sales and, as a result, the average sales price was slightly higher than in the same period in 2016, with sales volume totaling € 55.3 million (up 11%).
At the end of the third quarter of 2017, power sales were up by 16% in value from the same reference date in 2016, reflecting successful operation of power generation assets, with especially strong performance from the renewable cogeneration plant and the combined-cycle natural gas power station at the Setúbal industrial complex. Of course, figures for power sales at the end of the 3rd quarter of 2016 had shown the negative impact of stoppages and breakdowns at the renewable cogeneration plants in Setúbal and Cacia. Due to these factors, Navigator's total gross power output at the end of the third quarter of 2017 was up by 6% year-on-year.
Power sales from the operation of the natural gas combined-cycle power stations also benefited from the sharp hike (roughly 20% year-on-year) in Brent prices, to which the sales price is indexed.
Having completed its new pellets mill in late 2016 in Greenwood, South Carolina, USA, the Group started up production and marketing of products in 2017. Sales up to the end of September totalled 91 thousand tons, and approximately € 12 million. The pellets business continues to contribute negatively to EBITDA, although the situation has improved in relation to the end of the 1st half.
In this general context, EBITDA totalled € 300.1 million, in line with the figure recorded in the previous year, and reflecting an EBITDA/Sales margin of 24.8%.
Concerning the impact of the forest fires up to the end of September in mainland Portugal (essentially in the central region of the country), estimates point to an area burned of roughly 216 thousand hectares, including 2700 hectares of Navigator's eucalyptus forests. As a result, biological assets have been written down by a total amount year to date of € 2.2 million (€1.4 million registered in Q3).
Over the course of the year, the Group has pressed ahead with its programme of cost optimisation and efficiency, M2, and results have continued to outperform targets. At the end of September, this programme's accumulated impact on EBITDA entailed an overall reduction in costs and an improvement in productivity adding up to around € 18 million, in relation to 2016.
Over this period, out of a total of 92 successfully launched initiatives, 24 projects achieved outstanding results, in particular in purchasing, where savings were recorded on energy (€ 2.6 million), product packaging (€ 2.3 million) and chemicals for pulp and paper (€ 1.0 million). Significant success has also been achieved in pulp and paper logistics (€ 1.1 million) and in manufacturing improvements and maintenance in industrial areas (€ 2.8 million). In product development and quality, higher competitiveness has been achieved through a more efficient product allocation and specification (€ 1.4 million) and strong performance was recorded in wood supplies, thanks to measures adopted to optimise logistical resources (€ 3.1 million).
Financial results through to the end of September improved in relation to the previous period, with a loss shrinking YoY from € 16.6 million to € 6.5 million euros. This was essentially due to a significant reduction in borrowing costs, thanks to the restructuring of the Group's debt concluded in 2016 as well as the commercial paper issue at very favourable rates. On a comparable basis, excluding the cost in 2016 of the decision to proceed with early repayment of a bond issue of € 6 million, interest expense fell by € 4.2 million, whilst financial results also benefited from gains of approximately € 3.2 million on forex hedges.
Net income totalled € 145.8 million, as compared to the figure of € 134.3 million recorded in the first nine months of 2016.
At the end of September, the Group's net debt stood at € 742 million, up by € 101.3 million from year-end 2016, reflecting essentially payment in June and July of dividends of € 250 million. Free cash flow generated over the period surged to € 148.7 million, as compared to € 101.1 million in the first nine months of 2016, whilst capex in the period totalled € 75 million, down by € 25 million on the accrued figure at the end of September 2016.
The Net Debt / EBITDA ratio is 1.87, slightly up from the figure of 1.61 recorded at year-end 2016.
Third quarter performance reflected improving market conditions over the course of the year. Turnover grew by 5.4% when compared with the figure recorded in the same quarter last year, due essentially to strong performance in pulp business, where the sales price rose by almost 22%, and to the growing volume of paper sales (up 1.7%). Figures were also positive for sales of tissue and power, and the new pellets business also added roughly € 5 million euros to total Group turnover.
EBITDA stood at € 101.7 million in the 3rd quarter of 2017, as compared to a figure of € 106.2 million in the same period last year, when earnings were positively impacted by a series of non-recurrent items with a net impact of around € 3 million, related essentially to the discount rate used in valuing biological assets. In 2017, EBITDA was negatively affected by the impact of forest fires, bringing down the total by € 1.4 million in the third quarter.
Financial results improved and the Group recorded a financial profit in the quarter by € 1.8 million, reflecting the gains recorded on forex hedges. As a result, net income totalled € 49.8 million, comparing positively with the figure of 48.8 million recorded in the third quarter of 2016.
| (in 000 tons) | Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 | ||||||
|---|---|---|---|---|---|---|---|
| BEKP Output | 370,2 | 373,4 | 367,8 | 359,0 | 382,4 | 377,4 | 357,3 |
| BEKP Sales | 64,6 | 65,1 | 71,2 | 89,8 | 90,4 | 92,0 | 68,8 |
| UWF Output | 397,7 | 397,0 | 399,9 | 392,4 | 396,4 | 383,4 | 406,1 |
| UWF Sales | 377,8 | 397,7 | 380,0 | 431,3 | 371,3 | 400,6 | 386,4 |
| FOEX – BHKP Euros/ton | 687 | 613 | 600 | 607 | 645 | 719 | 747 |
| FOEX – BHKP USD/ton | 757 | 694 | 670 | 654 | 686 | 792 | 877 |
| FOEX – A4- BCopy Euros/ton | 836 | 830 | 820 | 807 | 803 | 808 | 819 |
| (in 000 tons) | Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 | ||||||
|---|---|---|---|---|---|---|---|
| Reels Output | 11,2 | 7,9 | 13,1 | 14,7 | 14,7 | 13,6 | 13,0 |
| Output of finished products | 10,1 | 10,0 | 10,9 | 10,8 | 11,7 | 12,6 | 12,2 |
| Sales of reels and goods | 1,7 | 2,2 | 2,4 | 2,7 | 2,7 | 1,7 | 1,1 |
| Sales of finished products | 9,7 | 10,7 | 10,7 | 10,8 | 11,3 | 12,3 | 12,3 |
| Total sales of tissue | 11,4 | 12,9 | 13,2 | 13,5 | 14,0 | 14,0 | 13,3 |
| Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 | |||||||
|---|---|---|---|---|---|---|---|
| Production (GWh) | 508,1 | 519,7 | 537,2 | 549,4 | 561,3 | 556,4 | 535,9 |
| Sales (GWh) | 389,5 | 385,8 | 425,3 | 440,7 | 449,4 | 446,8 | 426,0 |
Over the past three months, Group investment has picked up speed in the two major development projects in progress in Portugal: construction of a tissue plant in Cacia (with reels production and converting capacity) and upgrading pulp production efficiency and environmental performance at the Figueira da Foz mill. These capex projects got under way in 2017 and will continue into 2018, involving total investment of approximately € 205 million (€ 120 million in Cacia and € 85 million in Figueira da Foz).
As a result, total capital expenditure in the first nine months of 2017 stood at € 75.7 million, divided between the capacity expansion project at Figueira da Foz (€ 34.3 million), recurrent pulp and paper business (€ 21.1 million), the new tissue mill in Cacia (17.3 million) and the existing tissue operation in Vila Velha de Rodão (€ 2.2 million).
As previously reported, the Group has decided to proceed with its capital project in Mozambique at a more moderate pace and to implement its plans in stages. At this moment, the project is essentially a forestry venture, with the option of industrial development involving construction of a large-scale pulp mill. The first phase includes developing a eucalyptus woodchip production and export operation, geared essentially to the Asian market. This is planned to be up and running by 2023, with phase two - if it goes ahead - being implemented up to 2030.
Operating through its subsidiary Portucel Moçambique, the Navigator Group is focused on resolving the outstanding issues, which include, among others, the legalization, regularization and demarcation of the DUAT (Direito de Utilização e Aproveitamento de Terra) areas, the revision of the access to land model, the confirmation of appropriate logistical conditions, the definition of a stable legal and fiscal framework and the project social acknowledgement. The Group expects that the bulk of these issues will be overcome by the coming months, which will allow forestry plans to proceed at the envisaged pace.
Over the first nine months of 2017, the short fibre pulp market continued to present the strong performance recorded since the end of last year: demand has grown sharply, stock levels are low and upward pressure on prices is strong. Most forecasts for pulp prices in 2017 have been revised upwards, and concerns about the impact of new capacity have been partially offset by the production shutdowns still planned for 2017. However, the pace of growth in demand over recent quarters will be hard to sustain and the price differential between short and long fibre pulp has been at all-time lows, which could lead to a degree of adjustment in the market in 2018.
Conditions in the paper market also improved gradually over the year, and by the end of September global demand for UWF had grown by around 0.9%, with a special focus on Asian markets, and China in particular. In Europe, apparent consumption edged down by 0.3% in the first nine months of the year, although demand for folio sizes grew by approximately 2% and demand for cut size held steady in relation to the same period last year. The Group has taken the lead in a series of price increases since the start of the year, the last of these in September. Order books remain comfortably full, and sound performance can be expected in the fourth quarter. Forex trends, in particular the EUR/USD rate, remain the main cause for concern.
The tissue market has seen an increase in competition in the Iberian Peninsula and a rise in production costs causes by higher pulp prices. Navigator announced a price increase for its tissue products in Portugal and Spain, for gradual implementation from October to January 2018.
Setúbal, 26 October 2017
In October, Portugal was again ravaged by a large number of fires, estimated to have raised the total area burned to around 520 thousand hectares across the country and approximately 6100 hectares related to the Group, whose financial impact is still being assessed. It is difficult to estimate the consequences of these fires for wood supplies in future years, but at this time no risks are anticipated to the supply of wood to the Group's industrial units.
The Navigator Company's new app is now available for download on App Store and on Google Play, in an optimised version for iPhone and iPad. To use the app, just download it from the following links:
| Amounts in Euro | Notes | 9 months 30-09-2017 |
9 months 30-09-2016 |
3rd Quarter 2017 | 3rd Quarter 2016 |
|---|---|---|---|---|---|
| (unaudited) | (unaudited) | (unaudited) | (unaudited) | ||
| Revenue | 3 | ||||
| Sales | 1,206,126,730 | 1,152,396,501 | 395,951,561 | 375,754,247 | |
| Services rendered | 3,669,409 | 2,997,235 | 1,202,033 | 1,069,294 | |
| Other operating income | 4 | ||||
| Gains on the sale of non-current assets | 614,787 | 633,876 | 272,782 | 208,913 | |
| Other operating income | 12,340,191 | 22,408,503 | 6,201,192 | 6,325,017 | |
| Change in the fair value of biological assets | 14 | 3,186,006 | 10,579,146 | (24,169) | 3,640,900 |
| Costs | 5 | ||||
| Cost of inventories sold and consumed | (494,858,603) | (499,277,864) | (164,510,266) | (157,586,123) | |
| Variation in production | (1,409,554) | 14,991,558 | 3,778,604 | 12,721,716 | |
| Cost of materials and services consumed | (300,891,039) | (285,838,409) | (99,590,308) | (100,975,415) | |
| Payroll costs | (111,180,117) | (106,285,595) | (35,545,137) | (31,873,552) | |
| Other costs and losses | (17,547,662) | (11,096,953) | (6,063,110) | (3,051,561) | |
| Provisions | (3,055,219) | (2,961,513) | (2,865,602) | (1,563,089) | |
| Depreciation, amortization and impairment losses | 6 | (111,529,226) | (120,518,942) | (36,762,609) | (34,563,415) |
| Operating results | 185,465,703 | 178,027,543 | 62,044,970 | 70,106,930 | |
| Net financial results | 7 | (6,488,744) | (16,619,934) | 1,817,197 | (3,157,730) |
| Profit before tax | 178,976,959 | 161,407,610 | 63,862,166 | 66,949,201 | |
| Income tax | 8 | (33,175,866) | (27,142,575) | (14,107,167) | (17,933,185) |
| Net Income | 145,801,093 | 134,265,035 | 49,754,999 | 49,016,016 | |
| Attributable to: | |||||
| Navigator Company's Shareholders | 145,794,646 | 134,287,418 | 49,745,923 | 48,820,870 | |
| Non-controlling interests | 6,447 | (22,383) | 9,076 | 195,146 | |
| Earnings per share | |||||
| Basic earnings per share, Euro | 9 | 0.203 | 0.192 | 0.069 | 0.068 |
| Diluted earnings per share, Euro | 9 | 0.203 | 0.192 | 0.069 | 0.068 |
FOR THE NINE MONTH PERIOD ENDED 30 SEPTEMBER 2017 AND FOR THE YEAR ENDED 31 DECEMBER 2016
| Amounts in Euro | Notes | 30/09/2017 | 31/12/2016 |
|---|---|---|---|
| (unaudited) | |||
| ASSETS | |||
| Non-Current Assets | |||
| Goodw ill | 11 | 377,339,466 | 377,339,466 |
| Other intangible assets | 12 | 3,876,509 | 4,300,642 |
| Plant, property and equipment | 13 | 1,259,527,643 | 1,294,978,932 |
| Investment properties | 423,957 | 426,838 | |
| Biological assets | 14 | 128,798,954 | 125,612,948 |
| Other financial assets | 400,415 | 342,122 | |
| Deferred tax assets | 18 | 45,331,690 | 44,198,753 |
| 1,815,698,635 | 1,847,199,702 | ||
| Current Assets | |||
| Inventories | 223,775,143 | 208,888,472 | |
| Receivable and other current assets | 15 | 213,688,882 | 215,877,823 |
| State and other public entities | 16 | 60,979,210 | 69,619,349 |
| Cash and cash equivalents | 21 | 111,548,132 | 67,541,588 |
| 609,991,367 | 561,927,232 | ||
| Total Assets | 2,425,690,002 | 2,409,126,934 | |
| EQUITY AND LIABILITIES | |||
| Capital and Reserves | |||
| Share capital | 17 | 500,000,000 | 717,500,000 |
| Treasury shares | 17 | (1,002,084) | (1,002,084) |
| Fair value reserves | (1,146,543) | (7,571,781) | |
| Legal reserve | 109,790,475 | 99,709,036 | |
| Free reserves | 217,500,000 | - | |
| Currency translation reserves | (1,274,373) | (779,369) | |
| Retained earnings | 168,893,215 | 205,639,863 | |
| Net profit for the period | 145,794,646 | 217,501,437 | |
| Early earnings | - | - | |
| 1,138,555,336 | 1,230,997,102 | ||
| Non-controlling interests | 2,400,801 | 2,272,606 | |
| 1,140,956,137 | 1,233,269,708 | ||
| Non-current liabilities | |||
| Deferred taxes liabilities | 18 | 70,414,901 | 59,859,532 |
| Liability for defined benefits | 19 | 6,910,375 | 6,457,116 |
| Provisions | 20 | 22,246,853 | 31,048,808 |
| Interest-bearing liabilities | 21 | 777,628,841 | 638,558,905 |
| Other non-current liabilities | 21 | 27,618,158 | 33,301,140 |
| 904,819,128 | 769,225,503 | ||
| Current liabilities | |||
| Interest-bearing liabilities | 21 | 75,911,224 | 69,702,381 |
| Payables and other current liabilities | 22 | 246,355,672 | 255,831,284 |
| State and other public entities | 16 | 57,647,841 | 81,098,059 |
| 379,914,737 | 406,631,724 | ||
| Total liabilities | 1,284,733,865 | 1,175,857,227 | |
| Total equity and liabilities | 2,425,690,002 | 2,409,126,934 |
| Amounts in Euro | 9 months 30-09-2017 |
9 months 30-09-2016 |
3rd Quarter 2017 | 3rd Quarter 2016 |
|---|---|---|---|---|
| (unaudited) | (unaudited) | (unaudited) | (unaudited) | |
| Net profit for the period | 145,801,093 | 134,265,035 | 49,754,999 | 49,016,016 |
| Itens that can be reclassified subsequently to profit or loss | ||||
| Fair value in derivative financial instruments | 8,503,949 | (10,565,228) | 978,593 | (1,607,935) |
| Currency translation differences | (495,004) | (5,302,490) | 431,440 | (8,390,006) |
| Tax on items above w hen applicable | (2,078,711) | 2,905,438 | (269,113) | 442,181 |
| Tax on conventional capital remuneration | 4,235,000 | - | 4,235,000 | - |
| 10,165,234 | (12,962,280) | 5,375,920 | (9,555,760) | |
| Itens that will not be reclassified subsequently to profit or loss | ||||
| Share of other comprehensive income of associates | 890,744 | (2,194,734) | 874,274 | - |
| Actuarial gains / (losses) | 838,410 | (2,957,138) | 830,534 | 56,022 |
| Tax on items above w hen applicable | (1,996) | (424,768) | (17,257) | (266) |
| 1,727,159 | (5,576,640) | 1,687,551 | 55,756 | |
| 11,892,393 | (18,538,920) | 7,063,471 | (9,500,004) | |
| Total recognized income and expense for the period | 157,693,485 | 115,726,115 | 56,818,470 | 39,516,012 |
| Attributable to: | ||||
| Navigator Company's Shareholders | 157,565,290 | 117,669,716 | 56,751,887 | 41,736,208 |
| Non-controlling interests | 128,195 | (1,943,601) | 66,583 | (2,220,196) |
| 157,693,485 | 115,726,115 | 56,818,470 | 39,516,012 |
FOR THE NINE MONTH PERIODS ENDED 30 SEPTEMBER 2017 AND 2016
| Gains/losses recognized in the |
Dividends paid and reserves |
Acquisition of | Application of prior | Capital | Performance | 30 September | |||
|---|---|---|---|---|---|---|---|---|---|
| Amounts in Euro | 1 January 2017 | period | distributed | Early earnings | treasury shares | year's net profit | reduction | Bonus | 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 reserves | 99,709,036 | - | - | - | - | 10,081,439 | - | - | 109,790,475 |
| Free reserves | - | - | - | - | - | - | 217,500,000 | - | 217,500,000 |
| Currency translation reserves | (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 profit for the period | 217,501,437 | 145,794,646 | - | - | - | (217,501,437) | - | - | 145,794,646 |
| Early earnings | - | - | - | - | - | - | - | - | - |
| 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 |
| Amounts in Euro | 1 January 2016 | Gains/losses recognized in the period |
Dividends paid and reserves distributed |
Early earnings | Acquisition of treasury shares |
Application of prior year's net profit |
Capital reduction |
Performance Bonus |
30 September 2016 |
|---|---|---|---|---|---|---|---|---|---|
| Share capital | 767,500,000 | - | - | - | (50,000,000) | - | - | - | 717,500,000 |
| Treasury shares | (96,974,466) | - | - | - | 95,972,382 | - | - | - | (1,002,084) |
| Fair value reserves | (1,869,064) | (7,659,790) | - | - | - | - | - | - | (9,528,854) |
| Legal reserves | 91,781,112 | - | - | - | - | 7,927,924 | - | - | 99,709,036 |
| Currency translation reserves | 5,688,140 | (5,302,490) | - | - | - | - | - | - | 385,650 |
| Retained earnings | 273,081,975 | (3,655,422) | (170,004,594) | (29,971,019) | (45,972,382) | 194,476,296 | - | (6,000,000) | 211,954,855 |
| Net profit for the period | 196,404,220 | 134,287,418 | - | - | - | (196,404,220) | - | - | 134,287,418 |
| Early earnings | (29,971,019) | - | - | 29,971,019 | - | - | - | - | - |
| Total | 1,205,640,898 | 117,669,716 | (170,004,594) | - | - | 6,000,000 | - | (6,000,000) | 1,153,306,020 |
| Non-controlling interests | 8,622,303 | (1,943,601) | - | - | - | - | - | - | 6,678,702 |
| Total | 1,214,263,201 | 115,726,115 | (170,004,594) | - | - | 6,000,000 | - | (6,000,000) | 1,159,984,722 |
| Amounts in Euro | Notes | 9 months 30-09-2017 |
9 months 30-09-2016 |
3rd Quarter 2017 | 3rd Quarter 2016 |
|---|---|---|---|---|---|
| (unaudited) | (unaudited) | (unaudited) | (unaudited) | ||
| OPERATING ACTIVITIES | |||||
| Payments from customers | 1,276,004,762 | 1,221,459,101 | 426,907,601 | 394,891,541 | |
| Payments to suppliers | 960,063,557 | 996,918,018 | 292,360,666 | 312,143,177 | |
| Payments to employees | 88,307,790 | 81,477,236 | 26,301,905 | 23,942,845 | |
| Cash flow from operations | 227,633,416 | 143,063,847 | 108,245,031 | 58,805,518 | |
| Income tax received / (paid) | (51,450,135) | - | (29,931,568) | - | |
| Other receipts / (payments) relating to operating activities | 48,877,390 | 36,836,476 | 21,246,700 | 13,186,906 | |
| Cash flow from operating activities (1) | 225,060,671 | 179,900,324 | 99,560,163 | 71,992,424 | |
| INVESTMENT ACTIVITIES | |||||
| Inflows | |||||
| Financial Investments | - | 4,438,520 | - | - | |
| Government grants | - | - | - | - | |
| Interest and similar income | 1,872,784 | 3,390,889 | 355,915 | 2,009,917 | |
| Inflow s from investment activities (A) | 1,872,784 | 7,829,410 | 355,915 | 2,009,917 | |
| Outflows | |||||
| Financial investments | - | - | - | - | |
| Tangible assets | 63,805,782 | 63,066,594 | 21,220,219 | 14,851,874 | |
| Outflow s from investment activities (B) | 63,805,782 | 63,066,594 | 21,220,219 | 14,851,874 | |
| Cash flows from investment activities (2 = A - B) | (61,932,998) | (55,237,184) | (20,864,304) | (12,841,956) | |
| FINANCING ACTIVITIES | |||||
| Inflows | |||||
| Borrow ings | 535,000,000 | 1,047,500,000 | 220,000,000 | 440,000,000 | |
| Inflow s from financing activities (C) | 535,000,000 | 1,047,500,000 | 220,000,000 | 440,000,000 | |
| Outflows | |||||
| Borrow ings | 394,851,190 | 1,002,967,836 | 190,000,000 | 495,643,529 | |
| Interest and similar costs | 9,262,882 | 20,061,857 | 3,044,031 | 4,474,223 | |
| Acquisition of treasury shares | - | - | - | - | |
| Dividends paid and distibuted reserves | 10 | 250,007,056 | 170,004,583 | 80,003,979 | - |
| Outflow s from financing activities (D) | 654,121,128 | 1,193,034,276 | 273,048,010 | 500,117,753 | |
| Cash flows from financing activities (3 = C - D) | (119,121,128) | (145,534,276) | (53,048,010) | (60,117,753) | |
| CHANGES IN CASH AND CASH EQUIVALENTS (1)+(2)+(3) | 44,006,544 | (20,871,136) | 25,647,848 | (967,285) | |
| CHANGES IN CASH AND CASH EQUIVALENTS in the other quarters | - | - | 18,358,696 | (19,903,851) | |
| CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD | 67,541,588 | 72,657,585 | 67,541,588 | 72,657,585 | |
| CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD | 21 | 111,548,132 | 51,786,449 | 111,548,132 | 51,786,449 |
(In these notes, unless indicated otherwise, all amounts are expressed in Euro)
The Navigator group ("Group") comprises The Navigator Company, S.A. (previously 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 21st 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 31st May 1993, through Decree-law 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 2003, the Portuguese State sold a 30% stake of Portucel's equity, which was acquired by Semapa Group. In September 2003, 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., by moving Parpublica SGPS, S.A. (formerly Portucel SGPS, S.A.) sell the remaining 25.72% it still held.
From 2009 to July 2015, more than 75% of the company's share equity 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, Portucel group started its activity in the Tissue segment with the acquisition of AMS- BR Star Paper, SA, a company that holds and explores a tissue paper mill, located in Vila Velha de Ródão.
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.
The Navigator group's main business is the production and sale of writing and printing 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 of wood and the production and sale of bleached eucalyptus kraft pulp – BEKP and electric and thermal energy, as well as its commercialization.
On February 6th 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 April 19th 2016, Portucel S.A. changed its designation to The Navigator Company, S.A.
The Navigator Company, S.A. (hereafter referred to as the Company or Navigator) is a publicly traded company 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 25 October 2017.
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 scope.
The consolidated interim financial statements for the nine-month period ended September 30, 2017 were prepared in accordance with International Accounting Standard 34 - Interim Financial Reporting.
The accompanying consolidated financial statements were prepared on a going concern basis from the accounting books and records of the companies included in the consolidation (Note 28), and under the historic cost convention, except for biological assets, available for sale financial assets and derivative financial instruments, which are recorded at fair value (Notes 23 and 14).
The accounting policies applied in the preparation of these interim consolidated financial statements are consistent to those used in the preparation of the financial statements for the year ended December 31, 2016 and stated in the respective attached notes.
The interpretations and changes to existing standards identified below are mandatory for the European Union for the periods beginning on or after 1 January 2018:
| Standards and effective changes, on or after 1 January 2018, already endorsed by | |
|---|---|
| EU | Effective Date * |
| IFRS 9 – Financial Instruments | 1 January 2018 |
| IFRS 15 – Revenue from contracts w ith customers | 1 January 2018 |
* Periods beginning on or after
It is not expected that the introduction of these standards will have a material impact on the Navigator Group Financial Statements.
There are new standards, amendments and interpretations made to existing standards, which despite having already been published, have not yet been endorsed by the European Union, and its only mandatory application in future financial years:
| Standards and effective changes, on or after 1 January 2017, not yet endorsed by | |
|---|---|
| EU | Effective Date * |
| IAS 7 - Statement of Cash Flow s | 1 January 2017 |
| IAS 12 - Income Taxes | 1 January 2017 |
| IAS 40 - Investment Property | 1 January 2018 |
| IFRS 2 – Share-based Payment | 1 January 2018 |
| IFRS 4 - Insurance Contracts | 1 January 2018 |
| Amendments to IFRS 15 – Revenue from contracts w ith customers | 1 January 2018 |
| IFRS 16 - Leases | 1 January 2019 |
| IFRS 17 - Insurance Contracts | 1 January 2021 |
| Annual improvements to IFRSs 2014 - 2016 | 1 January 2017 |
| or 1 January 2018 | |
| IFRIC 22 – Foreign Currency Transactions and Advanced Consideration | 1 January 2018 |
| IFRIC 23 – Uncertainty over income tax treatments | 1 January 2019 |
* Periods beginning on or after
With respect to the standards presented above, which are not yet applied, the Navigator Group has not yet concluded the calculation of all the impacts arising from its application and has opted for its non-adoption in advance. However, it does not expect them to have materially relevant effects on their equity position and results.
In accordance with the criteria defined in IFRS 8, operational segments should be identified based in the way the internal financial information is organized and reported to management. An operating segment is defined by IFRS 8 as a component of the 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 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.
The group's financial information by operational segment for the nine months period ended 30 September 2017 and 2016 is shown as follows:
| 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) | ||||||
| Segmental Profit | 27,368,518 | 203,423,357 | 1,469,977 | (46,796,149) | - | 185,465,703 |
| Operating Profit | 185,465,703 | |||||
| Financial costs- net | (6,488,744) | |||||
| Income tax | (33,175,866) | |||||
| Net profit before non-controling interest | 145,801,093 | |||||
| Non-controling interest | (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 | - | - | - | - | (3,055,219) | (3,055,219) |
| Other Informations | ||||||
| Segment assets | ||||||
| Plant, property 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 |
| Available-for-sale financial assets | - | 400,415 | - | - | - | 400,415 |
| Inventories | 23,937,496 | 122,134,284 | 10,005,017 | 67,698,346 | - | 223,775,143 |
| Receivable and other current assets | 17,094,499 | 135,413,211 | 17,167,771 | 3,464,704 | - | 173,140,184 |
| Other accounts receivable | 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 |
| Accounts Payable | 9,256,702 | 76,354,634 | 9,792,637 | 51,538,155 | - | 146,942,127 |
| Other accounts payable | 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 |
The Group's energy sales are reported under different business segments. The amount corresponding to the total energy sales was Euros 123,953,926 in 2017 and Euros 107,251,602 in 2016. Energy sales originated in the cogeneration process, in the amount of Euros 107,933,679 (30 september 2016: Euros 92,865,276) are reported under the "Market Pulp" (30 september 2017: Euros 12,091,814, 30 september 2016: 9,432,455) and "UWF Paper" (30 de september 2017: Euros 95,841,865, 30 de September 2016: Euros 83,432,821). 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 Euros 16,020,246 (30 de september 2016: Euros 14,386,326). The segment "Other" also includes sales of wood (Euros 7,266,566) and pellets (Euros 11,986,085).
During the first half of 2017, the Navigator group entered in the auto invoicing system from EDP – Serviço Universal, S.A.. Since, at the balance sheet date no invoices related to the auto invoicing system where received, the amount to be invoiced was accrued under the caption of "Receivables and other current assets" as Accrued income.
The capital expenditure in the first nine months of 2017 refers to the development projects already disclosed, namely the increase in the Figueira da Foz pulp mill capacity, the construction of the new tissue factory in Cacia and the actual tissue operation in Vila Velha de Ródão.
Property, plant and equipment reported under the segment "Other" includes:
| Amounts in Euro | 30-09-2017 | 30-09-2016 | |
|---|---|---|---|
| Forestry Lands | 78,092,349 | 78,850,330 | |
| Real estate - manufacturing site of Setúbal | 58,707,453 | 59,051,014 | |
| Real estate - manufacturing site of Cacia | 12,554,340 | 12,329,593 | |
| Real estate - manufacturing site of Figueira da Foz | 51,093,368 | 54,702,417 | |
| Thermoelectric plant biomass | 34,131,831 | 40,356,646 | |
| Pellets project - EUA | 96,999,546 | 102,205,861 | |
| Mozambique project | 5,998,886 | 37,659,510 | |
| Others | 8,110,732 | 18,185,501 | |
| 345,688,506 | 403,340,873 |
Forest land (Euros 78,092,349) and industrial real estate (Euros 122,355,161), in the total amount of Euros 200,447,510 (Euros 204,933,354 in 2016), are reported in the individual financial statements as investment properties. The real estate property of Vila Velha de Ródão, in the amount of 9,153,634 (Euros 9,749,910 in 2016), 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. "Other" includes US and Mozambique, besides Portugal.
| 30-09-2016 | ||||||
|---|---|---|---|---|---|---|
| PULP MARKET | UWF PAPER | TISSUE PAPER | OTHERS | ELIMINATIONS/ UNALLOCATED |
TOTAL | |
| REVENUE | ||||||
| Sales and services - external | 107,185,601 | 973,057,681 | 49,895,528 | 25,254,926 | 1,155,393,736 | |
| Sales and services - intersegment | 22,149,467 | - | - | 511,565,110 | (533,714,577) | - |
| Total revenue | 129,335,068 | 973,057,681 | 49,895,528 | 536,820,036 | (533,714,577) | 1,155,393,736 |
| Profit/(loss) | ||||||
| Segmental Profit | 22,387,700 | 158,248,296 | (3,528,682) | 920,230 | - | 178,027,543 |
| Operating Profit | - | - | - | - | - | 178,027,543 |
| Financial costs- net | - | - | - | - | (16,619,934) | (16,619,934) |
| Income tax | - | - | - | - | (27,142,575) | (27,142,575) |
| - | - | - | - | - | ||
| Net profit before non-controling interest Non-controling interest |
- | - | - | - | 22,383 | 134,265,035 22,383 |
| Net profit | - | - | - | - | - | 134,287,418 |
| Other Information | ||||||
| Capital expenditure | 3,611,363 | 13,299,373 | 381,244 | 83,266,541 | - | 100,558,521 |
| Depreciation and impairment | (6,600,338) | (77,931,434) | (8,816,861) | (27,170,309) | - | (120,518,942) |
| Provisions | - | - | - | (2,961,513) | (2,961,513) | |
| Other Informations | ||||||
| Segment assets | ||||||
| Plant, property and equipment | 127,489,855 | 721,081,233 | 64,645,563 | 403,340,873 | - | 1,316,557,524 |
| Biological assets | - | - | - | 127,576,074 | - | 127,576,074 |
| Available-for-sale financial assets | - | 260,486 | - | - | - | 260,486 |
| Inventories | 19,380,498 | 153,100,990 | 9,631,127 | 59,212,035 | - | 241,324,650 |
| Receivable and other current assets | 14,454,184 | 118,737,938 | 17,649,924 | 33,050,699 | - | 183,892,745 |
| Other accounts receivable | 3,347,431 | 8,637,811 | - | 14,840,442 | - | 26,825,684 |
| Other assets | 3,875,902 | 491,702,891 | 7,895,184 | 37,544,329 | - | 541,018,306 |
| Total assets | 168,547,870 | 1,493,521,349 | 99,821,798 | 675,564,451 | - | 2,437,455,468 |
| SEGMENT LIABILITIES | ||||||
| Interest-bearing liabilities | 2,805,080 | - | 27,150,881 | 745,255,419 | - | 775,211,379 |
| Accounts Payable | 8,163,875 | 90,668,763 | 9,503,332 | 30,291,213 | - | 138,627,182 |
| Other accounts payable | 8,067,270 | 21,624,599 | 777,709 | 51,115,014 | - | 81,584,592 |
| Other liabilities | 25,305,922 | 103,629,403 | 3,757,653 | 149,354,613 | - | 282,047,590 |
| Total liabilities | 44,342,146 | 215,922,765 | 41,189,575 | 976,016,258 | - | 1,277,470,744 |
| Amounts in Euro | 30-09-2017 | 30-09-2016 |
|---|---|---|
| PORTUGAL | ||
| UWF Paper * | 141,966,015 | 131,814,056 |
| Pulp * | 17,818,593 | 14,031,731 |
| Tissue | 35,065,094 | 32,314,875 |
| Others * | 30,095,300 | 25,254,926 |
| 224,945,001 | 203,415,588 | |
| Rest of Europe | ||
| UWF Paper | 559,161,652 | 574,304,324 |
| Pulp | 101,474,168 | 89,561,151 |
| Tissue | 20,219,009 | 17,360,229 |
| Pellets | 11,986,085 | - |
| 692,840,914 | 681,225,703 | |
| North America | ||
| UWF Paper | 83,025,190 | 102,887,752 |
| Pulp | - | - |
| 83,025,190 | 102,887,752 | |
| Other Markets | ||
| UWF Paper | 186,741,399 | 164,051,548 |
| Pulp | 22,243,635 | 3,592,720 |
| Tissue | - | 220,425 |
| 208,985,034 | 167,864,693 | |
| 1,209,796,139 | 1,155,393,736 |
The market information above is presented according with the reporting segments shown above.
Other operating income is detailed as follows for the nine months periods ended 30 September 2017 and 2016:
| Amounts in Euro | 9 months 30-09-2017 |
9 months 30-09-2016 |
|---|---|---|
| Supplementary income | 1,063,553 | 2,537,316 |
| Grants - CO2 Emission allow ances | 2,119,366 | 2,335,448 |
| Reversal of impairment losses in current assets | 5,909 | 430,588 |
| Gains on disposals of non-current assets | 614,787 | 633,876 |
| Gains on inventories | 1,217,143 | 2,208,184 |
| Government grants | 20,948 | 299,957 |
| Ow n w ork capitalised | 2,966,683 | 10,735,731 |
| Other operating income | 4,946,589 | 3,861,279 |
| 12,954,978 | 23,042,379 |
The decrease in "Supplementary income" is mainly due to the reduction on the tissue reels for transformation due to the increase in the internal production capacity in the Vila Velha de Ródão site.
As of 30 September 2017, "Own work capitalized" comprises Euros 2,868,315 (30 September 2016: Euros 10,605,907) of expenditure with land preparation for forestation in Mozambique.
The "Other operating income" includes the insurance compensation received, for Euros 2,819,551, as a result of the breakdown of a turbo-generator in Setubal site.
Operating expenses are detailed as follows for the nine months periods ended 30 September 2017 and 2016:
| Amounts in Euro | 9 months 30-09-2017 |
9 months 30-09-2016 |
|---|---|---|
| Cost of inventories sold and consumed | (494,858,603) | (499,277,864) |
| Variation in production | (1,409,554) | 14,991,558 |
| Cost of services and materials consumed | (300,891,039) | (285,838,409) |
| Payroll costs | ||
| Remunerations | ||
| Statutory bodies - fixed | (4,559,329) | (3,613,641) |
| Statutory bodies - variable | (3,378,987) | (3,454,470) |
| Other remunerations | (75,734,803) | (73,436,642) |
| (83,673,120) | (80,504,753) | |
| Social charges and other payroll cost | ||
| Pension and retirement bonus - defined benefit plans | (1,300,850) | (1,128,547) |
| Pension costs - defined contribution plans | (959,592) | (918,762) |
| Contributions to social security | (15,441,563) | (15,182,100) |
| Insurances | (3,141,619) | (2,428,382) |
| Other payroll costs | (6,663,373) | (6,123,051) |
| (27,506,997) | (25,780,842) | |
| (111,180,117) | (106,285,595) | |
| Other costs and losses | ||
| Membership fees | (743,479) | (318,864) |
| Losses in inventories | (5,231,969) | (2,105,484) |
| Impairment losses in receivables | (511,080) | (304,536) |
| Impairment losses in inventories | (47,565) | - |
| Indirect taxes | (1,967,243) | (769,457) |
| Shipment costs | (3,562,940) | (3,486,125) |
| Water resources charges | (799,756) | (1,139,199) |
| Cost w ith CO2 emissions | (2,302,128) | (1,383,344) |
| Other operating costs | (2,381,501) | (1,589,944) |
| (17,547,662) | (11,096,953) | |
| Provisions | (3,055,219) | (2,961,513) |
| Total | (928,942,193) | (890,468,776) |
The increase in Personnel expenses recorded in 2017 is mainly explained by the beginning of the activity of the Pellets in the United States.
On 3 May 2016 a fire broke out in the premises of Navigator Tissue Ródão, S.A., which resulted in the destruction of a group of assets. The ignition took place in the reception of raw materials and spread to the adjacent buildings, including to the parts warehouse and to the mechanical and electrical workshops, resulting in losses in inventories in the amount of Euro 2,350,454.
In 2017, the inventory losses are related with the beginning of pellets production, in which the initial starting problems generate an inventory loss of Euro 2,275,969. Additionally there was an inventory loss of Euro 2,248,300 related to the Mozambique plants.
For the nine month periods ended 30 September 2017 and 2016 the consumed and sold inventory was detailed as follows:
| 9 months | 9 months | |
|---|---|---|
| Amounts in Euro | 30-09-2017 | 30-09-2016 |
| Wood / Biomass | 197 899 485 | 194 307 636 |
| Natural gas | 42 066 666 | 40 465 488 |
| Other fuels | 11 768 306 | 13 181 616 |
| Water | 1 521 318 | 1 114 198 |
| Chemicals | 104 531 465 | 106 806 125 |
| BEKP pulp | 12 175 246 | 12 061 927 |
| Pine Pulp | 32 210 613 | 33 483 692 |
| UWF paper - subcontracts | 5 172 609 | 5 062 475 |
| Tissue Paper - subcontracts | 2 994 002 | 2 949 751 |
| Warehouse material | 31 274 585 | 33 205 341 |
| Packaging material | 51 901 191 | 55 145 795 |
| Other materials | 1 343 117 | 1 493 821 |
| 494,858,603 | 499,277,863 |
The cost of wood/biomass only relates to wood purchases to entities outside the Group, either domestic or foreign.
The reduction recorded in relation to the same period of the previous year is related to the reduction costs program M2.
For the nine months periods ended 30 September 2017 and 2016 the cost of Services and Material Consumed was detailed as follows:
| 9 months | 9 months | |
|---|---|---|
| Amounts in Euro | 30-09-2017 | 30-09-2016 |
| Comunications | 1,559,250 | 1,050,978 |
| Maintenance and repair | 23,979,383 | 19,195,228 |
| Travel and accommodation | 3,751,160 | 3,577,412 |
| Energy and fluids | 84,706,134 | 76,020,396 |
| Fees | 4,663,261 | 3,570,925 |
| Materials | 3,265,254 | 2,213,589 |
| Advertising and marketing | 12,054,869 | 10,929,345 |
| Rentals | 12,604,459 | 8,637,504 |
| Insurance | 8,828,192 | 7,496,641 |
| Subcontrats | 2,927,323 | 2,688,396 |
| Specialized services | 53,687,481 | 53,821,510 |
| Transportation of goods | 83,130,930 | 89,126,235 |
| Other | 5,733,343 | 7,510,250 |
| 300,891,039 | 285,838,409 |
The increase in costs in 2017 was generally driven by the continuous production of the Pellets in the United States since the last quarter of 2016.
The increase in energy and fluids results from replacing fuel with natural gas and is also due to the scheduled maintenances of the natural gas cogeneration plants.
For the nine months periods ended 30 September 2017 and 2016, depreciation, amortization and impairment losses, net of the effect of investment grants recognized in the period were as follows:
| Amounts in Euro | 9 months 30-09-2017 |
9 months 30-09-2016 |
|---|---|---|
| Depreciation of property, plant and equipment | ||
| Land | - | - |
| Buildings | (8,807,721) | (8,038,378) |
| Equipments | (98,040,963) | (97,406,462) |
| Other tangible assets | (3,842,258) | (3,803,730) |
| (110,690,942) | (109,248,570) | |
| Investment grants | 4,166,244 | 4,737,050 |
| (106,524,698) | (104,511,520) | |
| Impairments | ||
| CO2 Emission allow ances | - | (1,528,587) |
| Impairments | (5,004,528) | (14,478,835) |
| (5,004,528) | (16,007,422) | |
| (111,529,226) | (120,518,942) |
Financial results are detailed as follows for the nine month periods ended 30 September 2017 and 2016:
| 9 months | 9 months | |
|---|---|---|
| Amounts in Euro | 30-09-2017 | 30-09-2016 |
| Interest paid on borrow ings | (8,276,493) | (17,870,449) |
| Interest earned on investments | 1,446,264 | 2,281,090 |
| Exchange rate differences | (3,233,678) | (13,594) |
| Gains / (losses) on financial instruments - trading | 3,977,870 | 462,002 |
| Gains / (losses) on financial instruments - hedging | 518,880 | (1,919,204) |
| Guarantees and bank charges | (2,417,432) | (2,145,099) |
| Compensatory interest | 1,536,831 | 2,520,197 |
| Other financial income / (expenses) | (40,985) | 65,123 |
| (6,488,744) | (16,619,934) |
During 2017, The Navigator Company proceeded with the restructuring of its debt, engaging in new lines of financing and renegotiating the terms and conditions of the existing debt. In 2016 the amount of interest paid includes the premium paid for the early repayment of the High Yield loan in the amount of Euro 6,046,500.
In the third quarter of 2017, as result of the Euro devaluation above 1.1188 (which started in June 2017), there was a positive result in exchange hedges.
Income tax is detailed as follows for the nine month periods ended 30 September 2017 and 2016:
| 9 months | 9 months | |
|---|---|---|
| Amounts in Euro | 30-09-2017 | 30-09-2016 |
| Current tax (Note 16) | 41,804,017 | 30,621,093 |
| Provision / (reversal) for current tax | (20,296,470) | (3,150,506) |
| Deferred tax (Note 18) | 11,668,319 | (328,012) |
| 33,175,866 | 27,142,575 |
As of 30 September 2017, current tax includes Euros 39,019,465 (30 September 2016: Euros 26,604,833) regarding the liability created under the aggregated income tax regime of The Navigator Company S.A.
In addition to the provisions presented in Note 20, the income tax provision also includes the excess of the corporate income tax provision, of Euro 7,501.727, related to 31 December 2016.
In the nine month periods ended 30 September 2017 and 2016, the reconciliation of the effective income tax rate was as follows:
| Amounts in Euro | 9 months 30-09-2017 |
9 months 30-09-2016 |
|||
|---|---|---|---|---|---|
| Profit before tax | 178,976,959 | 161,407,610 | |||
| Expected tax | 21.00% | 37,585,161 | 21.00% | 33,895,598 | |
| Municipal surcharge | 1.37% | 2,450,514 | 1.54% | 2,760,819 | |
| State surcharge | 3.91% | 6,990,406 | 4.34% | 7,760,468 | |
| Differences (a) | (6.34%) | (11,353,016) | (11.55%) | (20,665,910) | |
| Impairment and reversal of provisions | 2.80% | 5,004,528 | 9.87% | 17,667,066 | |
| Excess tax estimate | (4.19%) | (7,501,727) | (0.07%) | (125,994) | |
| Tax benefits | 0.00% | - | (7.91%) | (14,149,472) | |
| 18.54% | 33,175,866 | 15.17% | 27,142,575 |
(a) This amount is made up essentially of:
| 9 months | 9 months | ||
|---|---|---|---|
| 30-09-2017 | 30-09-2016 | ||
| Capital gains / (losses) for tax purposes | - | (31,133,778) | |
| Capital gains / (losses) for accounting purposes | - | (9,112,972) | |
| Taxable provisions | (31,193,601) | (13,575,209) | |
| Tax benefits | (2,918,569) | (1,550,332) | |
| Effect of pension funds | 1,277,445 | (4,195,542) | |
| Other | (8,448,970) | (15,580,930) | |
| (41,283,695) | (75,148,763) | ||
| Tax Effect (27,5%) | (11,353,016) | (20,665,910) |
On 1 July 2015, a new taxation group led by The Navigator Company, S.A. arose, comprising all the companies located in Portugal in which the Group holds an interest or voting right of at least 75%, for more than a year.
The State budget law for 2017 (Lei nº 42/2016, of 28 December) stipulate the obligation of the accounting and fiscal periods being coincident.
The Income Tax Services, in response to the informational request submitted by The Navigator Company, S.A., authorized that Navigator and its subsidiaries proceed to the change of fiscal period to be coincident with the accounting period, although the five year obligation that are stated in the law.
Consequently the Navigator group changed its fiscal period with effect of 1st of January 2017, to the period between 1 of January and 31 of December.
Earnings per share were determined as follows:
| 9 months | 9 months | |
|---|---|---|
| Amounts in Euro | 30-09-2017 | 30-09-2016 |
| Profit attributable to the Company's shareholders | 145,794,646 | 134,287,418 |
| Total number of issued shares | 717,500,000 | 717,500,000 |
| Treasury shares - period average | (489,973) | (17,156,640) |
| 717,010,027 | 700,343,360 | |
| Basic earnings per share | 0.203 | 0.192 |
| Diluted earnings per share | 0.203 | 0.192 |
Since there is no financial instruments convertible in Group shares, its earnings are undiluted.
The changes on the average number of treasury shares were as follows:
| 2017 | 2016 | ||||
|---|---|---|---|---|---|
| Quantity | Quantity | ||||
| Quantity | Accumulated | Quantity | Accumulated | ||
| Treasury shares held on January | 489,973 | 50,489,973 | |||
| Acquisitions | |||||
| January | - 489,973 |
- | 50,489,973 | ||
| February | - 489,973 |
- | 50,489,973 | ||
| March | - 489,973 |
- | 50,489,973 | ||
| April | - 489,973 |
(50,000,000) | 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 | |||
| Remaining quarters | - | ||||
| Treasury shares held on 31 December | 489,973 | ||||
| Average trasury shares held for the period | 489,973 | 12,989,973 |
Appropriations made in 2016 and 2015 were as follows:
| Amounts in Euro | 2016 | 2015 |
|---|---|---|
| Distribution of dividends (excluding treasury shares) | 170,003,077 | 173,946,632 |
| Legal reserves | 10,081,439 | 7,927,924 |
| Balance Bonus | 7,000,000 | 6,000,000 |
| Net income from prior years | 30,416,921 | 8,529,664 |
| 217,501,437 | 196,404,220 |
The resolution for the appropriation of the 2016 net profit approved at The Navigator Company's General Meeting held on 24 May 2017, was based on the net profit for the year as defined by the accounting principles generally accepted in Portugal (Portuguese GAAP). The difference in the net profit between the two standards, totaling Euro 15,872,662 (2016: Euro 37,845,737), was transferred to retained earnings.
As a complement of the proposed net income distribution at The Navigator Company's General Meeting, it was approved the distribution of reserves in the amount of euro 0.11158 per share, in the total amount of Euro 80,003,979, distributed in 5 July 2017.
Goodwill amounting to Euro 428,132,254 was determined following the acquisition of 100% of the share capital of Navigator Paper Figueira, S.A., for Euro 1,154,842,000, representing 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 at 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.
On 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.
On 31 December 2013, real estate assets were split and transferred to Navigator Parques Industriais, S.A (previously named 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 amortized up to 31 December 2003 (transition date). As of that date, the accumulated depreciation amounted to Euro 51,375,870. From that date on, depreciation ceased and was replaced by annual impairment tests. If this amortization had not been interrupted, as of 30 September 2017 the net book value of the Goodwill would amount to Euro 145,564,963 (31 December 2016: Euro 154,127,609).
Every year, the 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:
| 2017 | 2016 | |
|---|---|---|
| Inflation Rate | 1.0% | 1.0% |
| Discount rate(post-tax) | 7.0% | 6.8% |
| Production grow th | 0.0% | 0.0% |
| Perpetuity grow th rate | -1.0% | -1.0% |
The discount rate presented above is a post-tax rate equivalent to a pre-tax discount rate of 9.6% (31 December 2016: 9,60%) and has been calculated in accordance with the WACC (Weighted Average Cost of Capital) methodology, based in the following assumptions:
| 2017 | 2016 | |
|---|---|---|
| Risk free interest rate | 3.26% | 2.59% |
| Equity risk premium (market and entity) | 5.00% | 5.00% |
| Tax rate | 29.50% | 29.50% |
| Debt risk premium | 2.05% | 3.22% |
On 6 February 2015 the procedures and contracts for the acquisition of Navigator Tissue Ródão, S.A. (previously named AMS BR Star Paper, SA) 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 Group proceeded to the initial consolidation of AMS, acquired by Euro 40,949,794 and presenting an Equity at the acquisition date of Euro 17,284,378 plus additional paid-in capital of Euro 2,327,500, with a total of Euro 19,611,878.
The initial acquisition difference, of Euro 21,337,916, was deduced at the government grants from AICEP and the fair value of fixed assets acquired, generating a Goodwill of Euro 583,083.
Over the nine months periods ended 30 September 2017 and year ended 31 December 2016, the changes in other intangible assets were as follows:
| Amounts in Euro | Industrial property and other rights |
CO2 emission licenses |
Total |
|---|---|---|---|
| Acquisition costs | |||
| Amount as of 1 January 2016 | 1,100 | 4,957,007 | 4,958,107 |
| Acquisitions | 3,300 | 960,685 | 963,985 |
| Adjustments, transfers and w rite-off's | - | (2,157,043) | (2,157,043) |
| Amount as of 30 September 2016 | 4,400 | 3,760,649 | 3,765,049 |
| Acquisitions | - | 539,000 | 539,000 |
| Adjustments, transfers and w rite-off's | - | - | - |
| Amount as of 31 December 2016 | 4,400 | 4,299,650 | 4,304,048 |
| Acquisitions | - | 4,131,256 | 4,131,256 |
| Adjustments, transfers and w rite-off's | - | (4,555,080) | (4,555,080) |
| Amount as of 30 September 2017 | 4,400 | 3,875,826 | 3,880,225 |
| Accumulated depreciation and impairment losses Amount as of 1 January 2016 |
(1,100) | (25,500) | (26,600) |
| Amortizations and impairment losses Adjustments, transfers and w rite-off's |
(2,204) - |
(1,528,278) - |
(1,530,482) - |
| Amount as of 30 September 2016 | (3,304) | (1,553,778) | (1,557,082) |
| Amortizations and impairment losses | (103) | 1,555,603 | 1,555,500 |
| Adjustments, transfers and w rite-off's | - | (1,825) | (1,825) |
| Amount as of 31 December 2016 | (3,407) | - | (3,407) |
| Amortizations and impairment losses | (309) | - | (309) |
| Adjustments, transfers and w rite-off's | - | - | - |
| Amount as of 30 September 2017 | (3,716) | - | (3,716) |
| Net book value as of 1 January 2016 | - | 4,931,507 | 4,931,507 |
| Net book value as of 30 September 2016 | 1,096 | 2,206,871 | 2,207,967 |
| Net book value as of 31 December 2016 | 993 | 4,299,650 | 4,300,642 |
| Net book value as of 30 September 2017 | 684 | 3,875,826 | 3,876,509 |
On 30 September 2017, the Group held 694,514 licenses with a market value as of that date of Euro 4,910,214 (31 December 2016: 596,516 licenses with a market value of Euro 3,847,526) – Euros 7.07 per ton of CO2.
To this amount should be added acquisition contracts over 500,000 licenses that were signed in 2015, 2016 and 2017, amounting to Euro 3,535,000 as of 30 September 2017 (31 December 2016: 400,000 licenses with a value of Euro 2,778,500).
The changes in Property, plant and equipment, as well as in the respective accumulated depreciation and impairment losses, were as follows:
| Amounts in Euro | Land | Building and other constructions |
Equipments and other tangibles |
Assets under construction |
Total |
|---|---|---|---|---|---|
| Acquisition costs | |||||
| Amount as of 1 January 2016 | 120,573,226 | 521,186,890 | 3,403,601,831 | 77,831,582 | 4,123,193,529 |
| Acquisitions | 6,446,933 | - | - | 100,558,521 | 107,005,454 |
| Amortizations and impairment losses | (14,478,835) | (14,478,835) | |||
| Disposals | - | - | (4,045,227) | - | (4,045,227) |
| Adjustments, transfers and w rite-off's | 147,184 | (15,231,797) | 132,915,616 | (107,891,908) | 9,939,095 |
| Amount as of 30 September 2016 | 127,167,343 | 505,955,093 | 3,532,472,220 | 56,019,360 | 4,221,614,016 |
| Acquisitions | (5,427,789) | 1,364,431 | 11,207,177 | 28,881,038 | 36,024,857 |
| Amortizations and impairment losses | (2,960,025) | - | - | (28,346,303) | (31,306,328) |
| Disposals | - | (1,975,256) | (2,281,307) | - | (4,256,563) |
| Adjustments, transfers and w rite-off's | 3,320,582 | 33,972,659 | (16,411,896) | (27,592,527) | (6,711,182) |
| Amount as of 31 December 2016 | 122,100,111 | 539,316,927 | 3,524,986,194 | 28,961,567 | 4,215,364,798 |
| Acquisitions | 2,868,315 | - | - | 78,530,633 | 81,398,948 |
| Amortizations and impairment losses | (5,004,528) | - | - | (5,004,528) | |
| Disposals | - | (5,957) | (552,627) | - | (558,584) |
| Adjustments, transfers and w rite-off's | 591,014 | 1,795,181 | 22,934,109 | (25,261,630) | 58,673 |
| Amount as of 30 September 2017 | 120,554,911 | 541,106,151 | 3,547,367,676 | 82,230,570 | 4,291,259,307 |
| Accumulated depreciation and impairment losses | |||||
| Amount as of 1 January 2016 | (170,652) | (345,311,469) | (2,456,912,321) | - | (2,802,394,442) |
| Amortizations and impairment losses | - | (8,038,378) | (101,210,192) | - | (109,248,570) |
| Disposals | - | - | 3,641,774 | - | 3,641,774 |
| Adjustments, transfers and w rite-off's | - | 4,496,559 | (1,551,813) | - | 2,944,746 |
| Amount as of 30 September 2016 | (170,652) | (348,853,288) | (2,556,032,552) | - | (2,905,056,491) |
| Amortizations and impairment losses | - | (2,870,811) | (15,118,340) | - | (17,989,151) |
| Disposals | - | - | 304,358 | - | 304,358 |
| Adjustments, transfers and w rite-off's | - | 376,769 | 1,978,650 | - | 2,355,419 |
| Amount as of 31 December 2016 | (170,652) | (351,347,330) | (2,568,867,884) | - | (2,920,385,866) |
| Amortizations and impairment losses | - | (8,806,486) | (101,884,456) | - | (110,690,942) |
| Disposals | - | 1,278 | 318,888 | - | 320,166 |
| Adjustments, transfers and w rite-off's | - | - | (975,023) | - | (975,023) |
| Amount as of 30 September 2017 | (170,652) | (360,152,538) | (2,671,408,473) | - | (3,031,731,664) |
| 1,259,527,643 | Net book value as of 30 September 2016 126,996,691 157,101,805 976,439,667 56,019,360 Net book value as of 31 December 2016 121,929,458 187,969,597 956,118,310 28,961,568 Net book value as of 30 September 2017 120,384,259 180,953,613 875,959,202 82,230,570 |
1,316,557,524 1,294,978,932 |
|---|---|---|
| --------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | -------------------------------- |
As of 30 September 2017 "Assets under construction" included Euro 21,422,451 (of which Euro 18,527,596 were realized in 2017) related to the investments in the tissue segment, namely the construction of the new factory in Cacia (Euro 17,772,507) and the actual tissue operation at Vila Velha de Ródão (Euro 3,649,944).
In the market pulp segment, the "Assets under construction" in the amount of Euro 6.955.626 (of which Euro 4,626,346 were realized in 2017) are related to improvements in the productive process.
The "Assets under construction" in the Paper segment, in the amount of Euro 48,823,539 (of which Euro 33,425645 were realized in 2017) are mainly related to the increase in the pulp production capacity in Figueira da Foz site (Euro 43,121,940) as well other improvements in the productive process (Euro 5,701,599).
The remaining (Euro 5,028,954) it is expected to be fully realized by the end of the year.
Land includes Euro 117,108,055, classified in the individual financial statements as investment properties, from which Euro 78,672,291 relate to forest land and Euro 38,435,764 to land allocated to industrial sites leased to the Group. It also includes Euro 1,609,030 of land in which the new pellets plant in the USA is located.
During 2017 and 2016, changes in biological assets were as follows:
| Amounts in Euro | 2017 | 2016 |
|---|---|---|
| Amount as of 1 January | 125,612,948 | 116,996,927 |
| Logging in the period | (16,646,099) | (17,705,307) |
| Grow th | 8,797,146 | 5,678,323 |
| New planted areas and replanting ( at cost ) | 1,579,148 | 1,228,926 |
| Other changes in fair value | 9,455,810 | 21,377,205 |
| 3,186,006 | 10,579,147 | |
| Amount as of September | 128,798,954 | 127,576,074 |
| Remaining quarters | (1,963,126) | |
| Amount as of December | 125,612,948 |
The amounts shown as other changes in fair value correspond to planned and actual costs of asset management, changes in main assumptions (price and average cost of capital) and changes in expectations:
| Amounts in Euro | 30-09-2017 | 30-09-2016 |
|---|---|---|
| Costs os assets mangement | ||
| Forestry | 2,216,356 | 2,319,191 |
| Structure | 3,915,187 | 3,336,749 |
| Fixed and variable rents | 7,725,604 | 7,497,485 |
| Mozambique impairment project | - | (3,188,231) |
| 13,857,146 | 9,965,194 | |
| Exchanges on assumptions | ||
| Wood price | (750,000) | - |
| WACC | 5,060,000 | 11,412,011 |
| Variations in other species | 3,003,499 | - |
| 2017 Forest fires | (2,231,861) | - |
| Other expected changes | (9,482,974) | - |
| (4,401,336) | 11,412,011 | |
| 9,455,810 | 21,377,205 |
As of 30 September 2017 and 31 December 2016, biological assets were detailed as follows:
| Amounts in Euro | 30-09-2017 | 31-12-2016 |
|---|---|---|
| Eucalyptus (Portugal) | 117,464,259 | 116,413,499 |
| Other Species (Portugal) | 4,824,306 | 1,820,807 |
| Eucalyptus (Mozambique) | 6,510,389 | 7,378,642 |
| 128,798,954 | 125,612,948 |
These amounts correspond to management's expectation of the volumes to be extracted from its woodlands as follows
| Amounts in Euro | 30-09-2017 | 30-09-2016 |
|---|---|---|
| Eucalyptus - m3 ssc'000 | 10,052 | 11,690 |
| Pine - w ood - Ton'000 - Potencial Future of w ood extraction k ton | 455 | 481 |
| Pine - cones - Ton'000 | n/a | n/a |
| Coark Oak - @'000 | 615.0 | 626.0 |
| Eucalyptus - m3 ssc'000 (Mozambique) (1) | 2,326 | 1,988 |
(1) Only for areas assessed with one year or more
Concerning Eucalyptus in Portugal, the most relevant biological asset, for the nine months periods ended 30 September 2017 and 2016 the Group extracted 443,264 m3ssc and 477,233 m3ssc of wood from its owned and explored forests, respectively.
As at 30 September 2017 and 31 December 2016, receivables and other current assets were detailed as follows:
| Amounts in Euro | 30-09-2017 | 31-12-2016 |
|---|---|---|
| Accounts receivable | 149,170,969 | 181,828,460 |
| Accounts receivale - group companies (Note 24) | 151,781 | 77,226 |
| Other receivables | 33,495,194 | 28,295,847 |
| Derivative financial instruments (Note 23) | 7,769,486 | 901,050 |
| Accrued income | 16,686,318 | 1,087,929 |
| Deferred costs | 6,415,134 | 3,687,311 |
| 213,688,882 | 215,877,823 |
The receivables shown above are net of impairment losses.
During the first half of 2017, the Navigator group entered in the auto invoicing system from EDP – Serviço Universal, S.A.. Since, at the balance sheet date no invoices related to the auto invoicing system where received, the amount to be invoiced was accrued under the caption of " Receivables and other current assets" as Accrued income, explaining the decrease in the accounts receivable balance.
As at 30 September 2017 and 31 December 2016, other receivables were detailed as follows:
| Amounts in Euro | 30-09-2017 | 31-12-2016 |
|---|---|---|
| Advances to employees | 525,115 | 654,170 |
| Advances to suppliers | 1,166,447 | 263,153 |
| Financial incentives receivable | 42,005 | 58,870 |
| Department of Commerce (EUA) | 29,440,180 | 26,369,181 |
| Other | 2,321,448 | 950,472 |
| 33,495,194 | 28,295,846 |
In 2015 the Group was subject to an investigation of alleged dumping practices in UWF imports 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%. Although the actual rate is substantially lower than the initially determined margin, The Navigator Company fully disagrees with any anti-dumping margin because, in view of the calculation algorithm used by the US authorities and validated by the Navigator group's US lawyers, the Navigator group does not determine any price difference between the domestic (Portugal) and destination (US) markets in the period between August 2015 and February 2017. In view of this understanding, the Navigator group recorded an amount receivable of Euro 29,440,180 relating to all amounts settled as of this date.
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 Navigator 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 performed.
The evolution of financial incentives to receive is detailed as follows:
| Amounts in Euro | 2017 | 2016 |
|---|---|---|
| Amount as per 1 January | 58,870 | - |
| Increase/(decrease) | - | - |
| Assignments | - | 646,157 |
| Received in year | (16,865) | (587,287) |
| Amount as of 30 September | 42,005 | 58,870 |
| Remaining Quarters | - | |
| Amount as of 31 December 2016 | 58,870 |
As at 30 September 2017 and 31 December 2016, accrued income and deferred costs were detailed as follows:
| Amounts in Euro | 30-09-2017 | 31-12-2016 |
|---|---|---|
| Accrued income | ||
| Interest receivable | 1,355,284 | - |
| Energy sales | 12,198,286 | - |
| Other | 3,132,748 | 1,087,929 |
| 16,686,318 | 1,087,929 | |
| Deferred costs | ||
| Pensions and other post-employments (Note 19) | - | - |
| Rents | 3,121,140 | 3,157,699 |
| Insurance | 3,002,307 | 483,582 |
| Other | 291,687 | 46,030 |
| 6,415,134 | 3,687,311 | |
| 23,101,452 | 4,775,240 |
As at 30 September 2017 and 31 December 2016, there were no overdue debts to the State and other public entities.
Balances related with these entities were as follows:
| Amounts in Euro | 30-09-2017 | 31-12-2016 |
|---|---|---|
| State and other public entities | ||
| Value added tax - refunds requested | 46,255,295 | 49,556,436 |
| Value added tax - to recover | 6,219,832 | 9,824,442 |
| Amounts pending repayment (tax proceedings decided in favor of the group) | 8,504,084 | 10,238,472 |
| 60,979,210 | 69,619,349 |
As at 30 September 2017, the outstanding VAT refunds requested comprised the following, by month and by company:
| Amounts in Euro | Aug/2017 | Sep/2017 | Total |
|---|---|---|---|
| The Navigator Company, S.A. | 21,616,121 | 20,124,346 | 41,740,468 |
| Bosques do Atlântico, S.L. | - | 4,514,827 | 4,514,827 |
| 21 616 121 | 24 639 173 | 46 255 295 |
Until the date of issuing this report, Euro 21,616,121of the amounts to be received as of 30 September 2017, had already been received.
As at 31 December 2016, the outstanding VAT refunds requested comprised the following, by month and by company:
| Amounts in Euro | Nov/2016 | Dec/2016 | Total |
|---|---|---|---|
| Navigator Fine Paper, S.A. | 19,897,644 | 24,075,341 | 43,972,985 |
| Bosques do Atlântico, S.L. | - | 5,583,451 | 5,583,451 |
| 19,897,644 | 29,658,792 | 49,556,436 |
All these amounts were received during the first half of 2017.
| Amounts in Euro | 30-09-2017 | 31-12-2016 |
|---|---|---|
| State and other public entities Corporate income tax |
22,618,060 | 42,155,907 |
| Personal income tax - w itheld on salaries | 2,084,088 | 3,072,408 |
| Value added tax | 28,305,518 | 31,794,573 |
| Social security | 2,480,075 | 2,447,250 |
| Additional liabilities | 1,463,127 | 1,465,022 |
| Others | 696,972 | 162,901 |
| 57,647,841 | 81,098,059 |
As previously mentioned, from July 1, 2015, the subsidiaries of Navigator Group failed to integrate the tax group Semapa and have joined the tax group The Navigator Company. Therefore, although each group company calculates its income taxes as if it was taxed independently, the determined liabilities are recognized as due to the leader of the taxation group, The Navigator Company, S.A., who will proceed with the overall computation and the settlement of the income tax.
Corporate income tax is detailed as follows:
| Amounts in Euro | 30-09-2017 | 31-12-2016 |
|---|---|---|
| Corporate income tax (Note 8) | 41,804,017 | 41,728,178 |
| Payments on account of corporate income tax | (30,103,238) | (950,333) |
| Withholding Tax | (890,057) | (6,895) |
| Corporate Income Tax to pay from 1 January 2016 to 30 June 2016 | - | (11,058,747) |
| Corporate income tax - Decreee law n.º 66/2016 (Reavaluation Regime) | 10,471,202 | 10,471,202 |
| Other receivables / payables | 1,336,136 | 1,972,502 |
| Final Balance | 22,618,060 | 42,155,907 |
The "Other receivable / payables" relates to the amount of income tax payable by the subsidiary Navigator group located in Belgium.
The changes in the provision for additional tax liabilities during the nine month period ended 30 September 2017 and the year ended 31 December 2016 were as follows:
| Amounts in Euro | 2017 | 2016 |
|---|---|---|
| As of 1 January | 1,465,022 | 8,044,968 |
| Increase | - | 1 750 498 |
| Transfers | - | 2 676 054 |
| Decrease | (1,895) | (6,298,928) |
| As of 30 September | 1,463,127 | 6,172,592 |
| Remaning quarters | (4,707,570) | |
| As of 31 December | 1,465,022 |
On 30 September 2017 and 31 December 2016 the additional tax liabilities include interest on deferred payments and are detailed as follows:
| Amounts in Euro | 30-09-2017 | 31-12-2016 |
|---|---|---|
| Tax consolidation group | - | - |
| Others | 1,463,127 | 1,465,022 |
| 1,463,127 | 1,465,022 |
The Navigator Company is a public company with its shares quoted on the Euronext Lisbon.
As at 30 September 2017, The Navigator Company's share capital is Euro 500,000,000 and is fully subscribed and paid for, it is represented by Euro 717,500,000 shares with no nominal value.
At the General Meeting held on September 21, 2017, a capital reduction of 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 capital released.
These shares were mainly acquired during 2008 and 2012, and the changes in the period were as follows:
| 2017 | 2016 | |||
|---|---|---|---|---|
| Amounts in Euro | Quant | Value | Quant | Value |
| Treasury shares held in January | 489,973 | 1,002,084 | 50,489,973 | 96,974,466 |
| Acquisitions | ||||
| January | - | - | - | - |
| February | - | - | - | - |
| March | - | - | - | - |
| April | - | - | (50,000,000) | (95,972,382) |
| May | - | - | - | - |
| June | - | - | - | - |
| July | - | - | - | - |
| August | - | - | - | - |
| September | - | - | - | - |
| - | - | (50,000,000) | (95,972,382) | |
| Treasury shares held in September | 489,973 | 1,002,084 | 489,973 | 1,002,084 |
| Remaning quarters | - | - | ||
| Treasury shares held in December | 489,973 | 1,002,084 |
At the General Meeting held on 19 April 2016, a reduction of the Company's share capital from Euro 767,500,000 to Euro 717,500,000 was approved, through the cancellation of 50,000,000 treasury shares held by the Company, amounting to Euro 50,000,000. The acquisition premium, in the amount of Euro 52,259,101 was deducted to reserves.
The market value of the treasury shares held on 30 September 2017 amounted to Euro 2,020,649 (31 December 2016: Euro 1,599,762), corresponding to a unit value of Euro 4,124 (31 December 2016: Euro 3,265) and the market capitalization amounted to Euro 2,958,970,000 compared to an equity, net of non-controlling interests, of Euro 1,138,555,336.
As at 30 September 2017 and 31 December 2016, the shareholders with significant positions in the Company's capital were as follows:
| 30-09-2017 | 31-12-2016 | ||||
|---|---|---|---|---|---|
| Entity | Nr. of shares | % Entity | % Entity | ||
| 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 Semapa´s Group companies | 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 | 0.00% | |
| Post-employment benefits - BPI Bank | 30,412,133 | 4.24% | 30,412,133 | 4.24% | |
| Norges Bank (the Central Bank of Norw ay) | 15,498,902 | 2.16% | 15,498,902 | 2.16% | |
| Other Shareholders | 158,131,721 | 22.04% | 158,131,721 | 22.04% | |
| Total | 717,500,000 | 100.00% | 717,500,000 | 100.00% |
As at 2017 and 2016, the changes in assets and liabilities as a result of deferred taxes were as follows:
| Income Statement | 30 September | ||||
|---|---|---|---|---|---|
| Amounts in Euro | 1 January 2017 | Increases | Decreases | Equity | 2017 |
| Temporary differences originating deferred tax assets | |||||
| Taxed provisions | - | - | - | 15,400,000 | 15,400,000 |
| Adjustments in fixed assets | 1,328,771 | - | (3,598) | - | 1,325,174 |
| Financial instruments | 110,794,106 | - | (8,982,886) | - | 101,811,220 |
| Deferred accounting gains on inter-group transactions | 8,859,457 | - | - | (7,558,949) | 1,300,508 |
| Valuation of biological assets | 30,432,333 | 9,655,603 | (3,296,340) | - | 36,791,596 |
| Government grants - Investment incentives | 9,308,071 | - | (1,094,057) | - | 8,214,014 |
| 160,722,738 | 9,655,603 | (13,376,880) | 7,841,051 | 164,842,512 | |
| Temporary differences originating deferred tax liabilities | |||||
| Revaluation of fixed assets | (37,905) | - | - | - | (37,905) |
| Retirement benefits | (16,361) | (246) | - | (354) | (16,960) |
| Derivative Financial Instruments at fair value | (144,728) | - | - | - | (144,728) |
| Valuation of biological assets | (3,979,927) | (6,082,127) | - | - | (10,062,054) |
| Deferred accounting losses on inter-group transactions | (1,270,679) | (8,499,617) | 221,696 | 326,164 | (9,222,437) |
| Government grants | (209,580,756) | (18,772,858) | 1,255,419 | - | (227,098,195) |
| Extension of useful lives of tangible fixed assets | (2,640,661) | (9,654,313) | 2,823,074 | - | (9,471,900) |
| (217,671,019) | (43,009,161) | 4,300,188 | 325,810 | (256,054,179) | |
| Amounts recognised in balance sheet | |||||
| Deferred tax assets | 44,198,753 | 2,655,291 | (3,678,642) | 2,156,289 | 45,331,690 |
| 44,198,753 | 2,655,291 | (3,678,642) | 2,156,289 | 45,331,690 | |
| Deferred tax liabilities | (59,859,532) | (11,827,519) | 1,182,552 | 89,598 | (70,414,901) |
| (59,859,532) | (11,827,519) | 1,182,552 | 89,598 | (70,414,901) |
| Income Statement | |||||
|---|---|---|---|---|---|
| Amounts in Euro | 1 January 2016 | Increases | Decreases | Equity | 31 December 2016 |
| Temporary differences originating deferred tax assets | |||||
| Taxed provisions | 257,908 | 1,118,830 | (47,967) | - | 1,328,771 |
| Adjustments in fixed assets | 99,675,505 | 32,178,197 | (21,059,596) | - | 110,794,106 |
| Financial instruments | 2,263,058 | - | - | 6,596,399 | 8,859,457 |
| Deferred accounting gains on inter-group transactions | 25,439,698 | 5,078,787 | (86,153) | - | 30,432,332 |
| Valuation of biological assets | 1,275,824 | - | (1,275,824) | - | - |
| Government grants - Investment incentives | 10,766,964 | - | (1,458,893) | - | 9,308,071 |
| 139,678,958 | 38,375,814 | (23,928,433) | 6,596,399 | 160,722,738 | |
| Temporary differences originating deferred tax liabilities | |||||
| Revaluation of fixed assets | (6,748,157) | - | 6,710,252 | - | (37,905) |
| Retirement benefits | (2,137,958) | (394) | 8,949,104 | (6,827,114) | (16,362) |
| Derivative Financial Instruments at fair value | (234,446) | - | - | 89,718 | (144,728) |
| Valuation of biological assets | - | (3,979,927) | - | - | (3,979,927) |
| Deferred accounting losses on inter-group transactions | - | (2,652,963) | 12,301 | - | (2,640,662) |
| Government grants | (11,991,792) | (319,179) | 10,535,135 | 505,157 | (1,270,679) |
| Extension of useful lives of tangible fixed assets | (299,964,933) | (9,290,037) | 99,674,214 | - | (209,580,756) |
| (321,077,287) | (16,242,500) | 125,881,006 | (6,232,239) | (217,671,021) | |
| Amounts recognised in balance sheet | |||||
| Deferred tax assets | 38,411,713 | 10,553,349 | (6,580,319) | 1,814,010 | 44,198,753 |
| Tax Incentives for Investment | 12,522,612 | - | (12,522,612) | - | - |
| 50,934,325 | 10,553,349 | (19,102,931) | 1,814,010 | 44,198,753 | |
| Deferred tax liabilities | (88,296,253) | (4,466,687) | 34,617,277 | (1,713,868) | (59,859,532) |
| (88,296,253) | (4,466,687) | 34,617,277 | (1,713,868) | (59,859,532) |
In the measurement of the deferred taxes as at 30 September 2017 and 31 December 2016, the corporate income tax rate used was 27.5%.
Until 2013, several retirement and survivor plans together with retirement bonus, coexisted within the 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.
Under the prevailing Social Benefits Regulation, 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, Navigator Forest Portugal, RAIZ, Empremédia and Navigator Lusa, are entitled, after retirement 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, and the funds' assets are apportioned between each of the companies.
In 2010 and 2013, the 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.Não obstante, na sequência de um processo negocial com os seus Colaboradores, fruto das referidas alterações ao fundo de pensões, a Navigator Paper Figueira permitiu que, até ao dia 16 de janeiro de 2015 os Colaboradores no ativo a 1 de janeiro de 2014 optassem por uma das seguintes alternativas:
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.
Alternative A – Benefit safeguard 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:
(i) Account 1: which includes an initial contribution corresponding to the amounts delivered to the pension fund under the previous defined benefit plan, in the amount of the liabilities for past services computed as of 31 December 2013, together with the monthly contributions made by the Company during 2014 to the defined contribution plan; and,
(ii) Account 2: including the future monthly contributions to be made by the Company until the employees complete 25 years of service in Navigator Paper Figueira, amounting to 2% of the pensionable salary..
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.
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 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, together with former employees, retirees or, when applicable, with granted rights – 13 employees this current year and the previous.
As at 30 September 2017 and 31 December 2016 the coverage of the companies' liabilities by the assets of the funds was as follows:
| Amounts in Euro | 30-09-2017 | 31-12-2016 |
|---|---|---|
| Past service liabilities | ||
| - Active Employees | 60,301,543 | 62,591,075 |
| - Former Employees | 19,652,421 | 17,035,183 |
| - Retired Employees | 69,805,552 | 69,251,641 |
| Market value of the pension funds | (142,849,141) | (142,420,782) |
| 6,910,375 | 6,457,116 | |
| Insufficient funds/ overfunding | 6,910,375 | 6,457,116 |
The number of active employees that benefit from pension funds as at 30 September 2017 is 548 (31 December 2016: 570) in a universe of 3,165 employees (2016: 3,111 employees), considering that in 2017 was negotiated the creation of new benefit plans which liability is already booked in the balance sheet.
The actuarial studies carried out by an independent entity for the purpose of determining the accumulated liabilities as at 30 September 2017 and 31 December 2016 were based on the following assumptions:
| Real outcome | ||||
|---|---|---|---|---|
| 30-09-2017 | 31-12-2016 | 2017 | 2016 | |
| Disability Table | EKV 80 | EKV 80 | - | - |
| Mortality Table | TV 88/90 | TV 88/90 | - | - |
| Wage grow th rate | 1.00% | 1.00% | 1.00% | 1.00% |
| Technical interest rate | 2.00% | 2.00% | - | - |
| Return rate on plan assets | 2.00% | 2.00% | 2.66% | 3.74% |
| Pensions grow th rate | 0.75% | 0.75% | 0.75% | 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 2012 to 2017 was as follows:
| Amounts in Euro | 2012 | 2013 | 2014 | 2015 | 2016 | 09-2017 |
|---|---|---|---|---|---|---|
| Present value of liabilities | 122,365,002 | 65,657,042 | 70,188,472 | 139,312,363 | 148,877,898 | 149,759,516 |
| Fair value of plan assets | 117,050,324 | 69,558,535 | 71,666,181 | 143,067,688 | 142,420,782 | 142,849,141 |
| Surplus/(deficit) | (5,314,678) | 3,901,493 | 1,477,709 | 3,755,326 | (6,457,116) | (6,910,375) |
The movements in liabilities with retirement and pensions plans in 2017 and 2016 were as follows:
| Amounts in Euro | 2017 | 2016 |
|---|---|---|
| Opening Balance | 148,877,898 | 139,312,363 |
| Actuarial gains/(losses) (difference betw een actual and expected returns) | 398,658 | 776,047 |
| Costs recognised in the Income Statement | 3,738,305 | 4,099,256 |
| Pensions paid | (3,255,344) | (3,111,633) |
| As of 30 September | 149,759,516 | 141,076,031 |
| Remaining quarters | 7,801,867 | |
| As of 31 December | 148,877,898 |
The funds set up to cover the above mentioned liabilities had the following movement in 2017 and 2016:
| Amounts in Euro | 2017 | 2016 |
|---|---|---|
| Opening balance | 142,420,782 | 143,067,688 |
| Expected return in the period | 2,136,269 | 2,645,227 |
| Actuarial gains/(losses) | 1,547,435 | (2,432,706) |
| Pensions paid | (3,255,344) | (3,111,633) |
| As of 30 September | 142,849,141 | 140,168,576 |
| Remaining quarters | 2,252,206 | |
| As of 31 December | 142,420,782 |
Also considering assets allocated to defined contribution of Euro 52,330,252, pension fund assets are managed by Schroders (25%), BlackRock (23%), Credit Suisse (24%) and BMO (28%), as detailed below:
| Amounts in Euro | 2017 | 2016 |
|---|---|---|
| Defined Benefit: | ||
| Ocidental - Pensions | 138,156 | 509,857 |
| Schroders | 50,156,863 | 48,380,746 |
| BlackRock | 45,393,031 | 45,254,916 |
| Account 1 - Credit Suisse | 47,161,091 | 48,275,263 |
| Total Defined Benefit | 142,849,141 | 142,420,782 |
| Defined Contribution: | ||
| Defensive Sub-Fund | 8,608,041 | 9,592,386 |
| Conservative Sub-Fund | 25,184,327 | 26,890,076 |
| Dynamic Sub-Fund | 14,111,252 | 14,673,272 |
| Agressive Sub-Fund | 4,647,559 | 4,739,254 |
| Total Defined Contribution | 52,551,179 | 55,894,988 |
| 195,400,321 | 198,315,770 |
The detail of the fund's assets as at 30 September 2017 and 31 December 2016 was as follows:
| Amounts in Euro | 30-09-2017 | 31-12-2016 |
|---|---|---|
| Bonds | 99,170,384 | 91,637,090 |
| Shares | 42,066,625 | 31,060,558 |
| Liquidity | 1,473,977 | 19,213,277 |
| Other short-term applications | 123,235 | 495,530 |
| Real Estate | 14,921 | 14,327 |
| 142,849,141 | 142,420,782 |
From the assets composing the fund, all the shares and obligations presented are listed in regulated markets.
As at 30 September 2017 and 2016, the effect in the income statement of these plans was as follows:
| 9 months | 9 months | |
|---|---|---|
| Amounts in Euro | 30-09-2017 | 30-09-2016 |
| Defined Benefit Plans | ||
| Current services | 1,603,539 | 1,576,204 |
| Interest expenses | 2,134,766 | 2,523,052 |
| Return of the plan assets | (2,136,269) | (2,645,227) |
| Other | (301,186) | (324,912) |
| 1,300,850 | 1,129,116 | |
| Defined Contribution Plans | ||
| Contribution to the plan | 959,592 | 918,762 |
| 959,592 | 918,762 | |
| Costs for the period | 2,260,442 | 2,047,878 |
At 2017 and 2016, changes in provisions were as follows:
| Amounts in Euro | Legal Claims | Tax Claims | Other | Total |
|---|---|---|---|---|
| Amount as of 1 January 2016 | 2,626,049 | 56,214,594 | 364,951 | 59,205,593 |
| Increases | 1,627,448 | - | 1,334,065 | 2,961,513 |
| Reversals | - | - | - | - |
| Transfers | - | (5,843,914) | - | (5,843,914) |
| Amount as of 30 September 2016 | 4,253,497 | 50,370,680 | 1,699,016 | 56,323,192 |
| Increases | 225,612 | 1,118,830 | (1,334,065) | 10,377 |
| Reversals | (2,551,114) | - | - | (2,551,114) |
| Transfers | 372,350 | (22,741,046) | (364,951) | (22,733,647) |
| Amount as of 31 December 2016 | 2,300,344 | 28,748,464 | - | 31,048,808 |
| Increases | 1,192,681 | 1,008,083 | 1,877,151 | 4,077,915 |
| Reversals | - | (1,022,696) | - | (1,022,696) |
| Transfers | - | (11,857,174) | - | (11,857,174) |
| Amount as of 30 June 2017 | 3,493,025 | 16,876,677 | 1,877,151 | 22,246,853 |
The amount of provisions stated as "Tax claims" results from the Group's judgement at the date, about the potential disagreement with tax authorities, considering most recent updates about this events.
As at 30 September 2017 and 31 December 2016, non-current interest-bearing debt comprised the following:
| 30-09-2017 | ||||||
|---|---|---|---|---|---|---|
| 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 | May 2021 | Flat rate | - | 100,000,000 |
| Portucel 2016-2021 | 45,000,000 | 45,000,000 | August 2021 | Variable rate indexed to euribor | - | 45,000,000 |
| Commissions | (1,714,828) | (1,714,828) | ||||
| European Bank of Investment | ||||||
| Loan BEI Ambiente A | 13,928,571 | 13,928,571 | December 2018 | Variable rate indexed to euribor | 9,285,714 | 4,642,857 |
| Loan BEI Ambiente B | 13,333,336 | 13,333,336 | June 2021 | Variable rate indexed to euribor | 3,333,333 | 10,000,003 |
| Loan BEI Energia | 53,125,000 | 53,125,000 | December 2024 | Variable rate indexed to euribor | 7,083,333 | 46,041,667 |
| Loan BEI Cacia | 25,000,000 | 25,000,000 | May 2028 | Flat rate | - | 25,000,000 |
| Commercial Paper Program | ||||||
| Commercial Paper 125M | 125,000,000 | 125,000,000 | May 2020 | Variable rate indexed to euribor | - | 125,000,000 |
| Commercial Paper 70M | 70,000,000 | 70,000,000 | May 2021 | Flat rate | - | 70,000,000 |
| Commercial Paper 50M | 50,000,000 | 50,000,000 | November 2017 | Variable rate indexed to euribor | 50,000,000 | - |
| Commercial Paper 75M | 75,000,000 | 75,000,000 | July 2020 | Variable rate indexed to euribor | - | 75,000,000 |
| Commercial Paper 50M | 50,000,000 | 50,000,000 | July 2020 | Variable rate indexed to euribor | - | 50,000,000 |
| Commercial Paper 100M | 100,000,000 | 25,000,000 | March 2020 | Variable rate indexed to euribor | - | 25,000,000 |
| Comissions | (578,549) | (578,549) | ||||
| Bank lines | ||||||
| Short term line 20M | 20,450,714 | - | - | - | ||
| Short term line Usd | 8,530,748 | 6,208,843 | Variable rate indexed to euribor | 6,208,843 | - | |
| Reimbursable grants | ||||||
| Reimbursable grants | - | 4,237,695 | 4,237,695 | |||
| 853,540,066 | 75,911,224 | 777,628,841 |
| 31-12-2016 | ||||||
|---|---|---|---|---|---|---|
| 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 | May 2021 | Flat rate | - | 100,000,000 |
| Portucel 2016-2021 | 45,000,000 | 45,000,000 | August 2021 | Variable rate indexed to euribor | - | 45,000,000 |
| Commissions | (2,109,198) | (2,109,198) | ||||
| European Bank of Investment | ||||||
| Loan BEI Ambiente A | 18,571,429 | 18,571,429 | December 2018 | Variable rate indexed to euribor | 9,285,714 | 9,285,714 |
| Loan BEI Ambiente B | 15,000,000 | 15,000,000 | June 2021 | Variable rate indexed to euribor | 3,333,333 | 11,666,667 |
| Loan BEI Energia | 56,666,667 | 56,666,667 | December 2024 | Variable rate indexed to euribor | 7,083,333 | 49,583,333 |
| Loan BEI Cacia | 25,000,000 | 25,000,000 | May 2028 | Flat 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 | May 2021 | Flat rate | - | 70,000,000 |
| Commercial Paper Program 50M | 50,000,000 | 50,000,000 | November 2017 | Variable rate indexed to euribor | 50,000,000 | - |
| Commercial Paper Program 75M | 75,000,000 | - | July 2020 | Variable rate indexed to euribor | - | - |
| Commercial Paper Program 50M | 50,000,000 | - | July 2020 | Variable rate indexed to euribor | - | - |
| Commercial Paper Program 100M | 100,000,000 | - | March 2020 | Variable rate indexed to euribor | - | - |
| Commissions | (560,476) | (560,476) | ||||
| Bank Lines | ||||||
| Short term line 20M | 20,450,714 | - | - | - | ||
| Reimbursable grants | ||||||
| Reimbursable grants | - | 5,692,866 | 5,692,866 | |||
| 708,261,286 | 69,702,381 | 638,558,905 |
On 13 May 2016, The Navigator Company paid out the remaining Portucel Senior Notes 5.375% bonds, anticipating its maturity from 2020, and amounting to Euro 150,000,000, in addition to the Euro 200,000,000 already repaid in September 2015. Simultaneously, the company contracted new financing lines, namely a bond loan of Euro 100,000,000 and a commercial paper of Euro 70,000,000, both with a maturity of five years, and contracted a loan with the European Investment Bank amounting to Euro 25,000,000, which matures in 2028. In the second half of the year 2016, the company completed two additional financing operations. A new Euro 45 million bond loan was contracted and disbursed for a period of 5 years and a new short-term Commercial Paper Program in the amount of Euro 50 million.
During the first half of 2017, the Navigator group contracted a new financing line (in the USA) amounting USD 10 million and maturity date in February 2018.
On 30 September 2017, the average cost of debt, considering interest rate, annual fees and hedging operations, was 1.6% (31 December 2016: 1.7%).
The repayment terms for the loans recorded as non-current are detailed as follows:
| Amounts in Euro | 30-09-2017 | 31-12-2016 |
|---|---|---|
| Non-current | ||
| 1 to 2 yeas | 19,297,216 | 19,702,382 |
| 2 to 3 years | 288,194,444 | 11,805,556 |
| 3 to 4 years | 228,194,444 | 138,194,445 |
| 4 to 5 years | 9,861,111 | 232,220,643 |
| More than 5 years | 234,375,000 | 239,305,554 |
| 779,922,216 | 641,228,580 | |
| Charges | (2,293,375) | (2,669,675) |
| 777,628,841 | 638,558,905 |
On 30 September 2017 the Group had commercial paper programs and credit lines available but not used of Euro 98.351.168 (31 December 2016: Euro 245,450,714).
As at 30 September 2017 and 31 December 2016, current interest-bearing debt was as follows:
| Amounts in Euro | 30-09-2017 | 31-12-2016 |
|---|---|---|
| Interest-bearing liabilities | ||
| Non-current | 777,628,841 | 638,558,905 |
| Current | 75,911,224 | 69,702,381 |
| 853,540,066 | 708,261,286 | |
| Cash and cash equivalents | ||
| Cash | 112,573 | 82,184 |
| Short term bank deposits | 70,070,749 | 15,536,694 |
| Other | 41,364,810 | 51,922,710 |
| 111,548,132 | 67,541,588 | |
| Interest-bearing net debt | 741,991,934 | 640,719,698 |
The Navigator 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 group's counterparties. On 30 September 2017, the amount of Euros 41,364,810 is applied on a bound's portfolio with an appropriate rate (31 December 2016: 39,992,719). This caption also includes as of 31 December 2016, a term deposit applied to three months with a financial institution. As of 30 September 2017, the Group had no term deposits.
The evolution of the Navigator group's net debt in the periods ended 30 September 2017 and 2016 was as follows:
| Amounts in Euro | 9 months 30-09-2017 |
9 months 30-09-2016 |
Remaining quarters |
31-12-2016 |
|---|---|---|---|---|
| As of 1 January | 640,719,698 | 654,491,758 | - | 654,491,758 |
| Expenses w ith the issue of bond loans | 2,293,378 | 2,811,486 | (141,811) | 2,669,675 |
| Interest paid | 9,262,882 | 20,061,857 | 4,454,024 | 24,515,881 |
| Interest received | (1,872,784) | (3,390,889) | (1,515,323) | (4,906,212) |
| Dividens paid and reserves distributed | 250,007,056 | 170,004,583 | - | 170,004,583 |
| Receipts related to investment activities | - | (4,438,520) | - | (4,438,520) |
| Payments related to investment activities | 63,805,782 | 63,066,594 | 18,118,683 | 81,185,277 |
| Accumulated exchange rate diferences | 2,836,592 | 718,386 | 10,042,909 | 10,761,295 |
| Net receipts of operating activities | (225,060,671) | (179,900,323) | (113,663,716) | (293,564,039) |
| Liquid debt variation | 101,272,236 | 68,933,173 | (82,705,233) | (13,772,060) |
| As of 30 September | 741,991,934 | 723,424,931 | (82,705,233) | 640,719,698 |
Also, the movements in the Group's net debt in 30 September 2017 and 2016 were as follows:
| 9 months | 9 months | Remaining | ||
|---|---|---|---|---|
| Amounts in Euro | 30-09-2017 | 30-09-2016 | quarters | 31-12-2016 |
| Net profit for the year | 145 801 093 | 134,265,035 | 82,564,744 | 216,829,779 |
| Depreciation, amortization and impairment losses | 111,529,226 | 120,518,942 | 46,142,181 | 166,661,123 |
| Net changes in provisions | 3,055,219 | 2,961,513 | (2,540,737) | 420,776 |
| 260,385,538 | 257,745,490 | 126,166,188 | 383,911,678 | |
| Change in w orking capital | 36 983 422 | (8,355,748) | (17,326,196) | (25,681,944) |
| Acquisitions of tangible fixed assets | (76,077,628) | (114,748,793) | (26,117,264) | (140,866,057) |
| Dividens paid and reserves distributed | (250,007,056) | (170,004,583) | (0) | (170,004,583) |
| Net changes in post-employment benefits | (453,259) | (4,150,360) | (5,549,660) | (9,700,020) |
| Other changes in equity | 11,892,393 | (18,538,920) | (3,601,731) | (22,140,651) |
| Expenses w ith the issue of bond loans | 954,846 | 1,984,008 | 141,811 | 2,125,819 |
| Other | (84,950,491) | (12,864,266) | 8,992,084 | (3,872,182) |
| Change in net debt (Free Cash Flow) | (101,272,236) | (68,933,173) | 82,705,232 | 13,772,060 |
As at 30 September 2017 and 31 December 2016, the other non-current liabilities were as follows:
| Amounts in Euro | 30-09-2017 | 31-12-2016 |
|---|---|---|
| Non-current | ||
| Grants | 27,141,578 | 31,202,382 |
| Equipment | 476,580 | 2,098,759 |
| 27,618,158 | 33,301,140 |
Non-current grants correspond to investment grants to support investment projects carried out.
As at 30 September 2017 and 31 December 2016, the Group showed the following equipment under finance lease plans recognized under IFRIC 4:
| 30-09-2017 | |||
|---|---|---|---|
| Acquisition | Accumulated | Net book | |
| Amounts in Euro | Value | depreciation | value |
| Equipment - Omya | 14,000,000 | (12,108,108) | 1,891,892 |
| 14,000,000 | (12,108,108) | 1,891,892 | |
| 31-12-2016 | |||
| Acquisition | Accumulated | Net book | |
| Amounts in Euro | Value | depreciation | value |
| Equipment - Omya | 14,000,000 | (10,972,973) | 3,027,027 |
| 14,000,000 | (10,972,973) | 3,027,027 |
The non-current and current liabilities related to that equipment are recorded under "Other liabilities" and "Payables and other current liabilities", respectively, and are detailed as follows:
| Amounts in Euro | 30-09-2017 | 31-12-2016 | |
|---|---|---|---|
| Non-current | |||
| Equipment | 476,580 | 2,098,759 | |
| Current | 3,035,878 | 1,771,221 | |
| 3,512,458 | 3,869,980 |
In 2009, with the launch of the new paper mill in Setubal, the Group recognized 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.
As at 30 September 2017 and 31 December 2016, "Payables and other current liabilities" were detailed as follows:
| Amounts in Euro | 30-09-2017 | 31-12-2016 |
|---|---|---|
| Accounts payable to suppliers | 146,848,698 | 145,702,873 |
| Accounts payable to fixed assets suppliers | 13,929,242 | 13,929,955 |
| Accounts payable to fixed assets suppliers - leases (Note 21) | 3,035,878 | 1,771,221 |
| Accounts payable - Related parties (Note 24) | 971,882 | 1,281,101 |
| Derivative financial instruments (Note 23) | 3,416,719 | 7,726,140 |
| Other creditors - CO2 emissions | 3,419,405 | 4,816,632 |
| Sales Commissions | 114,632 | 245,291 |
| Tax Consolidation (Semapa) | 7,429,319 | 7,296,382 |
| Other creditors | 1,728,568 | 1,268,749 |
| Accrued costs | 58,706,253 | 65,409,507 |
| Deferred income | 6,755,075 | 6,383,433 |
| 246,355,671 | 255,831,284 |
On 30 September 2017 and 31 December 2016, accrued costs and deferred income were detailed as follow:
| Amounts in Euro | 30-09-2017 | 31-12-2016 |
|---|---|---|
| Accrued costs | ||
| Payroll expenses - Annual Performance Bonus | 15,016,461 | 14,884,168 |
| Payroll expenses - Other | 20,401,488 | 22,125,937 |
| Supplier bonus | 8,223,595 | 9,938,927 |
| Interest Payable | 2,985,877 | 3,308,196 |
| Water resources rate | 1,619,215 | 1,442,101 |
| Others | 10,459,617 | 13,710,176 |
| 58,706,253 | 65,409,506 | |
| Deferred income | ||
| Government grants | 5,641,807 | 5,926,517 |
| Grants - CO2 emission licenses | 536,312 | (28,650) |
| Other | 576,956 | 485,566 |
| 6,755,075 | 6,383,433 |
As at 30 September 2017 and 31 December 2016, deferred income on government grants was detailed as follows:
| Amounts in Euro | 30-09-2017 | 31-12-2016 |
|---|---|---|
| AICEP investment contracts | ||
| The Navigator Company, S.A. | - | - |
| Enerpulp, S.A. | 7,584,993 | 8,746,163 |
| Navigator Pulp Cacia, S.A. | 13,374,550 | 15,102,403 |
| Navigator Pulp Setúbal, S.A. | 802,389 | 897,543 |
| Navigator Pulp Figueira da Foz, S.A. | 8,214,394 | 9,308,451 |
| Navigator Parques Industriais, S.A. | 2,121,905 | 2,166,423 |
| Navigator Paper Figueira da Foz, S.A. | 171,968 | 276,120 |
| 32,270,199 | 36,497,102 | |
| Other | ||
| Raiz | 5,116 | 9 933 |
| Viveiros Aliança, S.A. | 508,070 | 621 863 |
| 513,186 | 631,796 | |
| 32,783,385 | 37,128,899 |
During 2017 and 2016, the movements in Grants – CO2 emissions were as follows:
| Amounts in Euro | 2017 | 2016 |
|---|---|---|
| Grants - CO2 emissions | ||
| Opening balance | - | - |
| Increase | 2,738,778 | 2 849 117 |
| Utilization | (2,202,466) | (2 246 637) |
| Closing balance September | 536,312 | 602,480 |
| Remaining quarters | (602,480) | |
| Closing balance December | - |
This amount regards the C02 emission allowances granted for free to several group companies (2017: 495,037 and 2016: 504,595).
As at 30 September 2017 and 31 December 2016, the fair value of derivative financial instruments was as follows:
| 30-09-2017 | ||||||
|---|---|---|---|---|---|---|
| Amounts in Euro | Notional | Positive | Negative | Net | Net | |
| Trading | ||||||
| Forw ard Anti-Dumping | 18,211,079 | 928,290 | - | 928,290 | - | |
| Foreign Exchange Forw ards | 51,010,615 | 1,122,970 | (16,792) | 1,106,178 | (1,943,402) | |
| 69,221,694 | 2,051,260 | (16,792) | 2,034,468 | (1,943,402) |
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 2017 is Euro 2,2034,468 (31 December 2016: Euro (1,943,402)).
In addition to the acquisitions made in 2015 and 2016 of 400 000 CO2 emission licenses for delivery in 2017-2019, a supplementary acquisition of 100 000 CO2 licenses was also made in 2017, also for delivery in 2020.
As at 30 September 2017 and 31 December 2016, the fair value of derivative financial instruments designated as hedging instruments was as follows:
| 30-09-2017 | 31-12-2016 | |||||
|---|---|---|---|---|---|---|
| Amounts in Euro | Moeda | Notional | Positive | Negative | Net | Net |
| Hedging | ||||||
| Foreign Exchange Forw ards (net investment) | USD | 25,050,000 | 1,066,515 | - | 1,066,515 | (249,275) |
| Foreign Exchange Forw ards (future sales) | GBP | 20,000,000 | 50,732 | - | 50,732 | - |
| Foreign Exchange Forw ards (future sales) | USD | 99,000,000 | 4,617,771 | - | 4,617,771 | 901,050 |
| Interest rate sw ap for comercial Paper issued | EUR | 125,000,000 | - | (947,667) | (947,667) | (976,674) |
| Sw aps used to hedge the exposure to changes in the interest rate | EUR | 200,000,000 | - | (2,469,052) | (2,469,052) | (4,556,790) |
| 5,735,018 | (3,416,719) | 2,318,299 | (4,881,689) |
The Navigator group hedges the economic risk associated with exposure to the exchange rate of its participation in PortucelSoporcel North America. To this end, the Navigator group has entered into a foreign exchange forward maturing in November 2017, with a notional outstanding of USD 25,050,000.
This instrument is designated as a hedging of the investment in the North America subsidiary of the Navigator group, with fair value changes recognized in comprehensive income. As at 30 September 2017, the fair value reserve associated with this coverage was Euro (2,691,676) (31 December 2016: Euro (4,354,058).
The Navigator group makes use of derivative financial instruments in order to limit the net exchange risk associated with sales and future purchases estimated at USD and GBP.
In this context, during the last quarter of 2016, the Navigator group contracted a number of financial structures to cover a portion of the net foreign exchange exposure of estimated sales in USD for 2017. The derivative financial instruments contracted were Options and Zero Cost Collar, in a total amount of USD 200,000,000, which matured on 31 December 2017. As of 2017, the financial instrument was reinforced through the additional contracting of USD 147,000,000 through Options and Zero Cost Collar and GBP 53,333,333. The Navigator Group have also Options and Zero Cost Collar amounting USD 99,000,000 and GBP 20,000,000 with maturity until January 2018 and December 2017, respectively.
The Navigator group hedges of 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 recognized at fair value, and subsequently measured at amortized cost less any impairment losses identified during the course of the credit risk analysis of the credit portfolios held.
These items are recognized at their amortized 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 | 30-09-2017 | 30-09-2016 |
|---|---|---|
| Gain/ (loss) on loans and receivables | (3,233,678) | (13,594) |
| Gains / (losses) on financial instruments - hedging | 518,880 | (1,919,204) |
| Gains / (losses) on financial instruments - trading | 3,977,870 | 462,002 |
| Interest Income: | ||
| From deposits and other receivables | 1,446,264 | 2,281,090 |
| Interest expense: | ||
| Financial liabilities measured at amortized cost | (8,276,493) | (17,870,449) |
| Other | (921,587) | 440,221 |
| (6,488,744) | (16,619,934) |
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 recognized 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 2016 | (359,770) | 1,414,365 | 1,054,595 |
| Maturity | 462,002 | (1,919,204) | (1,457,202) |
| Increase/decrease in fair value | (732,744) | (9,692,279) | (10,425,023) |
| Amount as of 30 September 2016 | (630,512) | (10,197,118) | (10,827,630) |
| Maturity | (1,987,967) | (772,133) | (2,760,100) |
| Increase/decrease in fair value | 675,077 | 6,087,562 | 6,762,639 |
| Amount as of 1 January 2017 | (1,943,402) | (4,881,689) | (6,825,091) |
| Maturity | 3,977,870 | 518,880 | 4,496,750 |
| Increase/decrease in fair value | - | 6,681,108 | 6,681,108 |
| Amount as of 30 September 2017 | 2,034,468 | 2,318,299 | 4,352,767 |
As at 30 September 2017 and 31 December 2016, the derivative financial instruments previously summarized had the following maturities:
| 30-09-2017 | 31-12-2016 | ||||
|---|---|---|---|---|---|
| Nominal value | Maturity | Type | Fair Value | Fair Value | |
| Exchange rate forw ards USD |
46,600,000 | 29-dez-17 | Held for trading | 1,122,970 | (1,778,650) |
| GBP | 10,175,000 | 12-fev-18 | Held for trading | (16,792) | (164,752) |
| Future purchase of C02 emission licences EUR |
2,778,500 | 16-mar-20 | Held for trading | - | - |
| Anti-dumping operation USD |
21,500,000 | 31-out-18 | Held for trading | 928,290 | - |
| 2,034,468 | (1,943,402) | ||||
| Foreign Exchange forw ards - Net Equity USD |
25,050,000 | 28-nov-17 | Hedging Instruments | 1,066,515 | (249,275) |
| Hedging for future sales GBP |
20,000,000 | 31-dez-17 | Hedging Instruments | 50,732 | - |
| Hedging for future sales USD |
99,000,000 | 31-jan-18 | Hedging Instruments | 4,617,771 | 901,050 |
| Interest rate sw ap for comercial paper issued EUR |
125,000,000 | 26-mai-20 | Hedging Instruments | (947,667) | (976,674) |
| Interest rate sw ap for loans EUR |
200,000,000 | 22-set-23 | Hedging Instruments | (2,469,052) | (4,556,790) |
| 2,318,299 | (4,881,689) | ||||
| 4,352,767 | (6,825,091) |
The following is a breakdown of related parties' balances as at 30 September 2017 and 31 December 2016:
| 30-09-2017 | 31-12-2016 | |||||
|---|---|---|---|---|---|---|
| Assets | Liabilities | Assets | Liabilities | |||
| Other creditors | Other creditors | |||||
| Amounts in Euro | Customers | Payables | (fiscal consolidation) | Customers | Payables | (fiscal consolidation) |
| Semapa - Soc. De Investimento e Gestão, SGPS, S.A. | - | 862,982 | 7,429,319 | - | 909,341 | 7,294,350 |
| Secil - Companhia Geral Cal e Cimento, S.A. | 14,760 | 204 | - | 10,455 | 370,019 | - |
| Secil Britas, S.A. | - | 7,519 | - | - | 8,731 | - |
| Enermontijo, S.A. | 137,021 | - | - | 66,771 | 6,708 | - |
| Enerpar, SGPS, Lda. | - | 21,448 | - | - | - | - |
| Cimilonga - Imobiliária, S.A. | - | (13,700) | - | - | (13,700) | - |
| Refundos - Soc. Gestora de Fundos de Inv. Imobiliário, S.A. | - | 93,430 | - | - | - | - |
| 151,781 | 971,882 | 7,429,319 | 77,226 | 1,281,099 | 7,294,350 |
On the nine months period ended 30 September 2017 and 2016, transactions with related parties were as follows:
| 30-09-2017 | 30-09-2016 | ||||
|---|---|---|---|---|---|
| Amounts in Euro | Sales and services rendered |
Purchases | Consumed materials and services |
Sales and services rendered |
Consumed materials and services |
| Semapa - Soc. De Investimento e Gestão, SGPS, S.A. | - | - | 6,329,254 | 571 | 5,962,341 |
| Secil - Companhia Geral Cal e Cimento, S.A. | 54,927 | 301,000 | 993 | 54,000 | 1,119 |
| Secil Britas, S.A. | - | - | 27,586 | - | 39,597 |
| Enermontijo, S.A. | 187,474 | - | 85,049 | 609,093 | 211,101 |
| Enerpar, SGPS, Lda. | - | - | 169,029 | - | 223,748 |
| Cimilonga - Imobiliária, S.A. | - | - | 200,085 | - | 205,988 |
| Refundos - Soc. Gestora de Fundos de Inv. Imobiliário, S.A. | - | - | 140,145 | - | - |
| 242,401 | 301,000 | 6,952,141 | 663,664 | 6,643,893 |
On 1 February 2013, a contract to render administrative and management services was signed between Semapa - Sociedade de Investimentos e Gestão, SGPS, SA 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 Navigator group companies.
On 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 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 for about seven years, annually producing Tons 80,000 and to whom the Navigator group sells biomass. Enerpar SGPS, Lda. is a related party as its shareholders have family relations with a non-executive Board Member of the Navigator group.
It was also celebrated a lease agreement between Navigator Paper Figueira, S.A. and Cimilonga - Houses, SA under which an office was leased in Semapa 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 2017 the number of employees working for the Group Companies was 3,165 (31 December 2016: 3,111), and were distributed by business segment as follows:
| As of 30 September 2017 | MARKET PULP | UWF PAPER | TISSUE PAPER | OTHER | TOTAL |
|---|---|---|---|---|---|
| Industrial / Forest site | |||||
| Setúbal | - | 949 | - | 207 | 1,156 |
| Cacia | 242 | - | 7 | 105 | 354 |
| Figueira da Foz | - | 875 | - | 81 | 956 |
| Vila Velha de Ródão | - | - | 199 | - | 199 |
| Lisboa | 3 | 41 | 6 | 56 | 106 |
| Greenw ood | - | - | - | 79 | 79 |
| Mozambique | - | - | - | 180 | 180 |
| 245 | 1,865 | 212 | 708 | 3,030 | |
| Commercial companies | |||||
| Europe | 7 | 107 | 9 | - | 123 |
| America | - | 9 | - | - | 9 |
| Overseas | - | 3 | - | - | 3 |
| 7 | 119 | 9 | - | 135 | |
| 252 | 1,984 | 221 | 708 | 3,165 | |
| As of 31 December 2016 | MARKET PULP | UWF PAPER | TISSUE PAPER | OTHER | TOTAL |
| Industrial / Forest site | |||||
| Setúbal | - | 973 | - | 235 | 1,208 |
| Cacia | 232 | - | 2 | 62 | 296 |
| Figueira da Foz | - | 883 | - | 79 | 962 |
| Vila Velha de Ródão | - | - | 190 | - | 190 |
| Greenw ood | - | - | - | 67 | 67 |
| Mozambique | - | - | - | 258 | 258 |
| 232 | 1,856 | 192 | 701 | 2,981 | |
| Commercial companies | |||||
| Europe | 5 | 115 | - | - | 120 |
| America | - | 9 | - | - | 9 |
| Overseas | - | 1 | - | - | 1 |
| 5 | 125 | - | - | 130 | |
| 237 | 1,981 | 192 | 701 | 3,111 |
As at 30 September 2017 and 31 December 2016, the Group had presented the following bank guarantees to the following entities:
| Amounts in Euro | 30-09-2017 | 31-12-2016 |
|---|---|---|
| Customs clearence | 1,835,250 | 1,835,250 |
| Simria | 338,829 | 338,829 |
| IAPMEI | 5,209,320 | 5,209,320 |
| Spanish state tax agency | 1,033,204 | 1,033,204 |
| Other | 869,131 | 677,601 |
| 9,285,735 | 9,094,204 |
The guarantees in favor of 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), as per the terms and conditions defined in the Payment Standard applicable to projects approved under QREN Incentive Systems
In the current quarter, The Navigator Company, S.A. assumed to BP Portugal, the responsibility of ensuring compliance with the obligations arising from the BP protocol for fuel supply card to be used by the employees associated to Navigator Clube Setúbal. The liability calculated with reference to 30 September 2017 is estimated at Euro 20,000.
As part of the final tax authority inspection report, the Navigator Company was notified (on September 4, 2017) with an additional tax payment of Euro 20,556,589. In the 2013 tax declaration, the Navigator Group deducted a significant amount of credits related to fiscal benefits related to RFAI generated in previous years and, with regards to Navigator understanding, could be reported. The Tax authority does not have the same understanding, having corrected the amounts of tax benefits used by the Navigator group. The Navigator group will ensure the debt and contest the settlement.
In addition to the commitments described in the preceding Note, purchase commitments assumed with suppliers at 30 September 2017 amounted to Euro 176,410,863 and referred to capital expenditure on Property, plant and equipment. In 31 December 2016 these commitments amounted to Euro 75,321,090.
On 30 September 2017 and 31 December 2016, the commitments relating to operating lease contracts comprised the following:
| Amounts in Euro | 30-09-2017 | 31-12-2016 | ||
|---|---|---|---|---|
| 2017 | 479,786 | 1,676,818 | ||
| 2018 | 1,687,556 | 1,296,734 | ||
| 2019 | 1,324,736 | 911,759 | ||
| 2020 | 796,740 | 431,452 | ||
| 2021 | 363,759 | 59,830 | ||
| Later | 99,635 | 7,543 | ||
| 4,752,212 | 4,384,136 |
As at 30 September 2017 and 31 December 2016, the undiscounted commitments relating to external group forestry land rents comprised the following:
| Amounts in Euro | 30-09-2017 | 31-12-2016 | |
|---|---|---|---|
| 2017 | 1,342,779 | 4,068,372 | |
| 2018 | 3,965,857 | 3,757,512 | |
| 2019 | 3,818,115 | 3,600,680 | |
| 2020 | 3,502,754 | 3,282,701 | |
| 2021 | 3,318,277 | 3,112,802 | |
| Later | 38,893,711 | 35,720,215 | |
| 54,841,494 | 53,542,282 |
According to Decree-Law no. 36/93 of 13 February, the tax debts of privatized 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. In this context, the aforementioned Fund is liable for Euro 30,375,727, detailed as follows:
| Requested | 1st Refund | Decrease due to | Processes decided in favour |
Outstanding | ||
|---|---|---|---|---|---|---|
| Amounts in Euro | Period | amounts | RERD | of the Group | ||
| The Navigator Company, S.A. | ||||||
| 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) | - | - | - |
| 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 (Withheld) | 2004 | 3,324 | - | - | - | 3,324 |
| Corporate Income Tax | 2004 | 766,395 | - | - | (139,023) | 627,372 |
| Corporate Income Tax (Withheld) | 2005 | 1,736 | (1,736) | - | - | - |
| 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 |
| Expenses | 314,957 | - | - | - | 314,957 | |
| 33,278,628 | (8,210,546) | (2,468,472) | (477,678) | 22,121,932 | ||
| Navigator Paper Figueira, S.A. | ||||||
| Corporate Income Tax | 2002 | 18,923 | - | - | - | 18,923 |
| Corporate Income Tax | 2003 | 5,725,771 | - | - | - | 5,725,771 |
| VAT | 2003 | 2,509,101 | - | - | - | 2,509,101 |
| Stamp duty | 2004 | 497,669 | - | - | (497,669) | - |
| 8,751,464 | - | - | (497,669) | 8,253,795 | ||
| 42,030,092 | (8,210,546) | (2,468,472) | (975,347) | 30,375,727 |
At 30 September 2017, the additional tax assessments that are paid and disputed by the group are summarized as follows:
| Valores em Euros | ||
|---|---|---|
| IVA 2003 | 2,509,101 | |
| IRC agregado 2005 | 10,394,386 | |
| IRC agregado 2006 | 8,150,146 | |
| IRC agregado 2012 | 4,422,958 | |
| IRC agregado 2013 | 20,556,589 | |
| 46,033,180 | ||
| 52 / 56 |
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 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 group's proposal to present testimony evidence, alternatively proposing written submissions. On 30 June 2014 Navigator group appealed against this decision, but continuously presented written evidence. The Court subsequently confirmed the Navigator group's views on this matter.
Under the licensing process nº 408/04 related to the new 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 the ongoing investments in Cacia and Figueira da Foz. The commitments obtained are tax benefits, respectively Euro 11.5 million and Euro 14.2 million, a fully repayable loan at zero rate of Euro 42.2 million for Cacia and a loan of Euro 5.8 million, with maximum realization premium of Euro 3.5 million for Figueira da Foz. It is expected that the signature of the respective contracts will be made by the end of the year.
| Share equity owned | ||||
|---|---|---|---|---|
| Company | Head office | Directly | Indirectly | Total |
| Parent-Company: | ||||
| The Navigator Company, S. A. | Setúbal | - | - | - |
| Subsidiaries: | ||||
| Navigator Paper Figueira, S.A. | Figueira da Foz | 100.00 | - | 100.00 |
| Navigator Lusa, Lda | 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 |
| About Balance - SGPS, S.A. | Lisboa | 100.00 | - | 100.00 |
| Navigator Tissue Cacia, S.A. | Aveiro | - | 100.00 | 100.00 |
| Navigator Tissue Ródão , S.A. | Vila Velha de Ródão | - | 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 |
| Colombo Energy Inc. | EUA | 25.00 | 75.00 | 100.00 |
| Portucel Finance, Zoo | Poland | 25.00 | 75.00 | 100.00 |
| Navigator Africa, SRL | Italy | - | 100.00 | 100.00 |
| Navigator Floresta, SGPS, S.A. | Setúbal | 100.00 | - | 100.00 |
| Sociedade de Vinhos da Herdade de Espirra - Produção e Comercialização de Vinhos, S.A. | Setúbal | - | 100.00 | 100.00 |
| Gavião - Sociedade de Caça e Turismo, S.A. | Setúbal | 100.00 | 100.00 | |
| Navigator Forest Portugal, 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 |
| Raiz - Instituto de Investigação da Floresta e Papel | Aveiro | - | 94.00 | 94.00 |
| Bosques do Atlantico, SL | Sapain | - | 100.00 | 100.00 |
| Navigator Pulp Holding ,SGPS, 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 | 99.93 | 0.07 | 100.00 |
| Navigator International GmbH | Germany | - | 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 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 Cacia - Engenharia e Manutenção Industrial, ACE | Aveiro | - | 92.60 | 92.60 |
| Ema Setúbal - Engenharia e Manutenção Industrial, ACE | Setúbal | - | 91.30 | 91.30 |
| Ema Figueira da Foz- Engenharia e Manutenção Industrial, ACE | Figueira da Foz | - | 88.70 | 88.70 |
| 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 Sw itzerland Ltd. | Sw itzerland | 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 Company, LLC | Russia | - | 100.00 | 100.00 |
| Navigator Abastecimento de Madeira, ACE | Setúbal | - | 100.00 | 100.00 |
As of the date of this report, there were no subsequent events that could be disclosed in these financial statements.
Pedro Mendonça de Queiroz Pereira President
Diogo António Rodrigues da Silveira Executive Vice President
Luis Alberto Caldeira Deslandes Vice President
João Nuno de Sottomayor Pinto de Castello Branco Vice President
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
Manuel Soares Ferreira Regalado Board Member
Paulo Miguel Garcês Ventura Board Member
José Miguel Pereira Gens Paredes Board Member
Ricardo Miguel dos Santos Pacheco Pires Board Member
Vitor Manuel Galvão Rocha Novais Gonçalves Board Member
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