Annual Report • Mar 27, 2015
Annual Report
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29 Our responsibility towards society
30 Key figures
2014 was a year of solid organic growth for Bekaert. We have been defending our strategic positions in highly competitive markets and in spite of a weakening final quarter, our volumes increased by 3%, on the wave of increased demand in automotive markets.
Our revenues were about stable in comparison with 2013, reflecting the price erosion we have been dealing with in China, the adverse effects from currency movements, and the decline in raw material prices, which we pass on to our customers.
The operating result was € 171 million, up 25% from last year and the operational cash flow increased to almost 11% on sales. However, these figures reflected positive non-recurring effects in comparison with last year.
Overall, we achieved better results than in 2013, but so far, we have not been able to reach our long-term profitability goals. When looking ahead, neither the global market demand nor the price competition in China will be enablers in turning the tide.
We need to do better and we know we can do better. Therefore, we have started a plan that will ensure we do better.
Our goal is to consistently create value for our shareholders, and we firmly believe that starts with creating value for our customers.
That is why we have raised the bar and set ambitious goals for 2015 and for the years to come. We are determined to leverage our market and technology leadership, because we know through our history and experience that this will lead to sustainable profitable growth.
As we enter 2015, we are growing our leading position in tire markets, thanks to the integration of Pirelli's steel cord activities – Bekaert's largest acquisition in history. This will allow us to drive further economies of scale in our steel cord activities and improve our technology and service position in this sector. We also obtained a global leading position in mining ropes after the acquisition of a ropes plant in Australia.
Acquisitive growth is, of course, not our only strategy. Over the last year we have been refining the strategies which we will use to drive sales growth, margin growth and better return on invested capital. These are the core of how we will become a stronger business.
We have determined 5 key strategies that will make our company stronger and help us deliver our goals. They represent our direction and priorities for the company to deliver upon, as from now:
These five strategies will be transformational for us, as a company, and we are organizing ourselves to put them into reality, for the benefit of our customers and all our stakeholders.
We believe the strategy is clear, the goals are clear, and the entire Board of Directors and the management team are determined to succeed.
Based upon the financial performance of 2014 and the confidence in the set direction, the Board has decided to propose, to the General meeting of Shareholders in May of 2015, a gross dividend of € 0.85 per share. This way, we want to show our commitment in returning value to our shareholders, who provide us the capital to run and grow our business.
We want to thank our customers, partners and shareholders for their continued trust. And we want to thank our employees for their commitment and drive to take on the challenges to realize our goals.
Matthew Taylor, CEO - Bert De Graeve, Chairman
The main tasks of the Board of Directors are to determine the company's general policy, approve the strategy and supervise the activities. The Board of Directors is the company's supreme decision-making body in all matters other than those in respect of which decision-making powers are reserved to the General Meeting of Shareholders by law or the articles of association. The Board of Directors has fourteen members.
From left to right: François de Visscher - Bernard van de Walle de Gelcke - Baudouin Velge - Lady Barbara Thomas Judge - Alan Begg - Matthew Taylor, CEO - Bert De Graeve, Chairman - Ms Mei Ye - Roger Dalle - Maxime Jadot - Manfred Wennemer - Charles de Liedekerke - Hubert Jacobs van Merlen - Leon Bekaert
On 14 May 2014 Bert De Graeve became Chairman of the Board of Directors in succession of Paul Buysse who retired in line with the retirement age applied by Bekaert.
Matthew Taylor was appointed Chief Executive Officer and member of the Board of Directors, in succession of Bert De Graeve.
Also on 14 May 2014, Ms Mei Ye became independent member of the Board of Directors while Anthony Galsworthy stepped down from the Board, in line with the retirement age applied by Bekaert.
The leadership changes in the Board of Directors also led to various changes in the composition of the Committees of the Board.
In light of the retirement age applied by Bekaert, Count Buysse and Sir Anthony Galsworthy withdrew from the Board in May 2014.
Count Buysse retired after 14 years in the chair of the company's Board and was appointed Honorary Chairman by the General Meeting of Shareholders of 14 May 2014.
Sir Anthony Galsworthy retired on the same day, after having served 10 years on the Board of Directors.
Matthew Taylor was appointed CEO in succession of Bert De Graeve who became Chairman of the Board.
Composition as at 31 December 2014: Standing, left to right: Dominique Neerinck - Bart Wille - Lieven Larmuseau - Curd Vandekerckhove - Piet Van Riet. Seated, left to right: Geert Van Haver - Matthew Taylor - Bruno Humblet - Frank Vromant
The Bekaert Group Executive assumes the operational responsibility for the company's activities. The executive management – chaired by the Chief Executive Officer – consisted of nine members as at 31 December 2014. The Bekaert Group Executive acts under the supervision of the Board of Directors.
On 14 May 2014, Matthew Taylor became CEO of Bekaert in succession of Bert De Graeve, who became Chairman of the Board of Directors.
Note: The composition of the BGE will change in 2015. Information is available in the Chapter on Corporate Governance at page 38.
Bekaert is a world market and technology leader in steel wire transformation and coating technologies. We pursue to be the preferred supplier for our steel wire products and solutions by continuously delivering superior value to our customers worldwide. Bekaert (Euronext Brussels: BEKB) was established in 1880 and is a global company with 30 000 employees worldwide, headquarters in Belgium and € 4 billion in annual revenue.
Steel wire … We transform it, apply cutting-edge coating technologies, and specialize in continuously improving any properties of steel wire products. Explore the World of Bekaert…
Bekaert employs unique metal treatment technologies to deliver a quality portfolio of drawn steel wire products and coating solutions on a global scale. We purchase approximately 3 million tons of wire rod per year as our basic material. Depending on our customers' requirements, we draw wire from it in different diameters and strengths, even as thin as ultrafine fibers of one micron. We group the wires into cords, ropes and strands, weave or knit them into fabric or process them into an end product. Our products reduce friction, improve corrosion resistance, or enhance adhesion with other materials.
better together sums up the unique cooperation between Bekaert and its business partners. We create value for our customers by co-creating and delivering a quality portfolio of steel wire solutions and by offering customized services in all continents. We believe in lasting relationships with our customers, suppliers and other stakeholders and are committed to delivering long-term value to all of them. We are convinced that the resilience, trust and integrity that bring our 30 000 employees worldwide together as one team, form the fundamentals of sustainable and successful partnerships, wherever we do business.
Our strategy is aimed at consistently driving value creation for our shareholders by cost effectively creating superior value for customers.
Our newly defined vision and core strategies form the foundation of a transformation of our business toward higher level performance. They are the basis of the company's priorities and actions for the coming years.
Consistent with our better together aspiration, we relentlessly pursue to be the preferred supplier for our steel wire products and solutions, by continuously delivering superior value to our customers around the world.
Five core strategies form the basis of Bekaert's priorities and decision making process toward to drive value and growth. These strategies put the company's vision into practice and reflect the direction and priorities for the company:
Over the course of the past 12 months, the Bekaert management has been defining the blueprint of this strategic renewal and has integrated the transformation priorities into its planning processes. The company has set the course of direction toward a higher level of performance, and has already started actions in 2014 that are expected to come to their full potential in the coming years:
The purchase of the global Pirelli steel cord activities is the largest acquisition in the history of Bekaert. This acquisition strengthens Bekaert's status as a preferred supplier to the tire industry and increases our global market share in steel cord for tires to approximately 30%. The integration of the five Pirelli steel cord plants within the Bekaert group will positively impact the product mix as of the beginning of 2015.
Bekaert is implementing changes in the organization and in the activity processes in order to reduce complexity, create greater standardization of methodology, free up more capacity, and define a more focused portfolio of products.
We want to deliver superior value for our customers by co-creating the best solutions at the lowest total cost. We want to be the preferred supplier to our customers by understanding and delivering upon their expectations and needs. We do not just deliver products; we want to provide outstanding solutions and service. In 2015, Bekaert will increasingly engage its customers in co-development and value creation initiatives.
Our customers' business is what drives us. Therefore we engage our customers in co-creating the best solutions at the lowest total cost.
Bekaert has a strong presence in diverse sectors. This makes us less sensitive to sector-specific trends and it also benefits our customers, because solutions we develop for customers in one sector often from the basis of innovations in others.
Bekaert serves customers across a multitude of sectors with a unique portfolio of drawn steel wire products, coated to optimally suit the application needs. Bekaert steel wire is used in cars and trucks, in elevators and mines, in tunnels and bridges, at home and in the office, in machines and offshore. Whatever drives, ascends, hoists, filters, reinforces, fences or fastens, there is a good chance Bekaert is inside.
| Combined sales: | € 1 049 million |
|---|---|
| Capital expenditures (PP&E): | € 33 million |
| Total assets: | € 877 million |
| Employees: | 6 900 |
Europe saw its economic performance improve somewhat during 2014 with discrepancies across the EU member states. The political instability in Russia and Ukraine and their continued financial uncertainty have hampered a more cohesive growth trend across the EMEA region.
Automotive and construction markets, sectors which are highly relevant for Bekaert's activities, witnessed a rebound over the course of 2013. The industrial production index improved in most countries with solid growth rates in Central Europe in particular.
Bekaert has a presence in both the mature Western European markets as well as in the Central and Eastern European markets. The company offers a quality portfolio of advanced steel wire products for sectors that are constantly searching for stronger, safer and lighter materials. As a result, opportunities for innovationoriented technologies continue to exist.
Demand from European markets was quite strong for Bekaert in 2014. This applied to most sectors but was particularly apparent in the automotive sector, the energy-related markets and other industrial sectors. This led to robust volume growth for tire cord, flat and shaped specialty wires, advanced cords and industrial steel wires. Also, Bekaert's building products platform solidly delivered thanks to an innovation-driven product mix.
Bekaert has been present in Russia with manufacturing operations since the beginning of 2010, and has built a growing customer base in the region. Bekaert Lipetsk supplies steel cord to all tire makers in Russia and is the country's main producer of advanced rubber reinforcement products. From the start of its investment, Bekaert has been developing local wire rod suppliers to establish a qualitative domestic supply base for our raw materials needs. This approach has proven to be successful and is the reason why trade restrictions have not affected our business continuity and growth in Russia.
Bekaert in Russia: self-containing
Demand from European markets was strong throughout 2014 across most sectors. Automotive demand, in particular, boosted volume growth for tire cord and other steel wire applications in the region.
Our activities in EMEA delivered solid results driven through increased volumes, continued effects of the cost savings programs of the past years, and a favorable product mix. Bekaert realized a 30% REBIT increase in the region and lifted profit margins to a record high, making this segment the largest contributor to the Group's consolidated profit for the year 2014.
REBIT up 30% to record-high profit margins
Bekaert invested in future growth with capacity expansions mainly in Slovakia and Belgium. Europe will become an even bigger contributor to the Group's consolidated figures as a result of the integration of the steel cord entities acquired from Pirelli in Romania, Italy and Turkey.
Bekaert has acquired Pirelli's steel cord activities and will be the long-term, tire cord supplier to Pirelli on a global scale. In EMEA, the acquisition includes the steel cord manufacturing sites in Figline Valdarno (Italy), Slatina (Romania), and Izmit (Turkey). Outside of Europe, the deal adds production facilities in Brazil and China. The integration of the steel cord activities and our long-term supply agreement will further enhance Bekaert's status as a preferred supplier to the tire industry, and will grow the contribution of the EMEA region to Bekaert's consolidated figures even further.
Bekaert and Maccaferri have established a global sales and distribution joint venture (50/50) to provide total construction reinforcement solutions for underground infrastructure projects such as road, railway, metro, utility and mining tunnels, as well as hydro power stations.
The joint venture combines the sales and distribution of Bekaert's Dramix® steel fibers for the reinforcement of concrete in underground construction projects such as shotcrete and precast applications with Maccaferri's complementary underground solutions.
The joint venture, with headquarters in Belgium, serves underground construction markets on a worldwide basis, except in China and in several Latin American counties where we continue to operate independently.
"sales and distribution partnership for underground solutions"
Bekaert and Groz-Beckert have signed, after the balance sheet date, an agreement regarding the sale of Bekaert's Carding Solutions activities to Groz-Beckert, a global company with headquarters in Albstadt, Germany. The transaction covers the carding production facilities in Belgium, India, China and the US and the global sales and services network. The deal involves the employees and assets of the activity platform.
The divestment underpins Bekaert's strategic direction of building and selecting a value creating product and business portfolio which fully leverages the Group's core competences in steel wire transformation and coating technologies.
| Combined sales: | € 555 million |
|---|---|
| Capital expenditures (PP&E): | € 26 million |
| Total assets: | € 303 million |
| Employees: | 1 600 |
The economy took a slow start in the beginning of 2014 due to the long and harsh winter in the eastern half of the continent. The weather affected consumer spending and construction activity during the first months, as well as investments in the agricultural sector. The rebound started in the second quarter, and over the aggregate of the year, North America's economy improved compared to 2013. The US recorded GDP growth of about 2.5%, reflecting both an upswing in consumer and construction spending, as well as increased industrial activity in comparison with the previous year. Automotive demand, in particular, was strong throughout 2014. The North American steel sector continued to compete with imports, an increasing trend as a result of the strengthening US dollar after the second half of 2014.
The improved demand from automotive markets, and solid supply from our North American steel ropes activities, could not compensate for the declining demand for Bekaert's products in other North American industrial, construction and agriculture markets in 2014. The agricultural markets never recovered from the harsh winter, and the demand for cable armoring products remained at 2013's low level.
Bekaert's activities recorded higher volumes in 2014 in comparison with a weak 2013. The segment, however, continued to underperform, in terms of profitability, due to underutilized production capacity and price pressure from import flows. In November 2014, we were hit by a fire which caused structural damage to parts of the Rome (Georgia, US) production plant, specializing in bead wire for the tire industry and in rubber reinforcement products for hydraulic rubber hose markets.
Bekaert's capital expenditure (PP&E) in North-America amounted to € 26 million and related mainly to ropes, tire cord and bead wire activities.
In 2014, we invested in tire cord and bead wire manufacturing capacity at our Rogers (Arkansas, US) and Rome (Georgia, US) plants respectively. Holding a leading position in steel cord markets for tire reinforcement, these investments will increase the capacity and technical capability that Bekaert can ensure from local production sources to the tire manufacturers in the US.
Bekaert also invested in its other manufacturing sites in both the US and in Canada. Major investments were made in the Van Buren (Arkansas, US) plant which produces a wide range of industrial steel wire products, and, through the asset deal, in the ropes plant in Belton (Texas, US).
Through its affiliate Wire Rope Industries, Bekaert started manufacturing steel ropes in the US in March 2014. The company established a production facility in Belton (Texas, US) and will leverage its technological and manufacturing competences in steel ropes for the oil and gas sector under the operational management of Bekaert's Canadian Wire Rope Industries organization.
Fire at the Bekaert Rome (Georgia, US) plant
On 19 November, a fire caused structural damage to part of the Bekaert manufacturing plant in Rome, Georgia. All employees were evacuated on time and no one was injured. The bead wire lines and the adjacent draw area were damaged due to the fire and collapse of the roof. Bekaert immediately took actions to ensure that customers could rely on continuity of supply, either through product stocks available or through alternative sourcing. Bekaert Rome has been able to rapidly restore part of its operations, including all hose wire production activities.
In full support of our customers, and thanks to their continued trust in our capabilities, Bekaert has been able to ensure production continuity at all hydraulic hose manufacturers served in the US.
The damaged parts of the site are being rebuilt and re-equipped to restore bead wire production activities over the course of 2015. Bekaert also remains fully committed to the investment plans aimed at increasing the bead wire capacity of the Rome plant.
Bekaert has phased out its steel wire manufacturing activities in Surrey, Canada, and stopped all production there at the end of the first quarter of 2014.
| Combined sales: | € 1 422 million |
|---|---|
| Consolidated sales | € 631 million |
| Capital expenditures (PP&E): | (*) € 32 million |
| Total assets: | (*) € 620 million |
| Employees: | 8 300 |
(*) consolidated entities
Latin American markets have become very competitive due to increased Asian imports. Reduced government budgets and public spending, driven by the price declines for copper and other commodities, have led to a downturn in mining and public infrastructure markets. The weakening growth rate in China was at the origin of the declining commodity prices and illustrated the global reach of changes in China's economy. Fiscal reforms and elections added to the uncertainty in various Latin American countries and sectors. The economy in Venezuela came to a standstill in 2014 as a result of their political and monetary instability.
The headwinds that the region faced in 2014 are expected to persist in 2015. Commodity prices are expected to be lower on average in 2015 than in 2014, due to sluggish global demand and a strengthening US\$. Moreover, the collapse of oil prices is expected to take a toll on Latin America's largest oil producing countries.
The impact of currency movements was significant in 2014. While picking up toward year-end, the total average year-on-year effect on consolidated sales was about € -50 million, mainly due to the Chilean peso versus the euro.
The effect was even larger on the combined sales level (including the Brazilian joint ventures) due to the volatility of the Brazilian real which affected 2014 sales by circa € -70 million.
While the weak currencies had a positive effect on the competitiveness of domestic industrial activities versus imports, some countries installed trade barriers that negatively impacted the competitive power of our operations, such as the import duties imposed on raw materials in Colombia.
In Colombia, heavy import duties (21%) were imposed on imported raw materials such as wire rod. This measure which was installed as a protective measure against imports, had a major effect on the competitiveness of Bekaert's activities in the country since the import duties do not apply to finished products. Domestic wire rod supplies are no option as the local supply capacity is insufficient to serve all steel wire producers' needs. As a result, competition with imported finished goods has become extremely difficult. Bekaert has been forced to restructure its operations in Colombia in line with the changed market conditions.
In Latin America, Bekaert manufactures an extensive product portfolio to serve construction, mining, agriculture and a wide range of industrial and consumer markets across the region. Bekaert has wholly owned and majority owned subsidiaries in Costa Rica, Ecuador, Colombia, Venezuela, Peru, Chile and Brazil and also runs joint ventures in Brazil in a 45/55 partnership with ArcelorMittal.
Demand in the region slowed in the first half of 2014 in line with the GDP trend in most countries. Our activities maintained their solid market shares though, and saw demand pick up starting in the second half of the year in most countries. In Brazil, market conditions remained subdued throughout the year.
Excluding the impact of acquisitions and of Venezuela, where volumes dropped more than 40% as a result of forced shutdowns due to raw material shortages, Bekaert's activities in Latin America achieved stable volumes over last year. The segment's top line increased significantly in the second half of 2014 (+15% year-on-year) thanks to a better price-mix and a much lower impact of adverse currency effects as accounted for in the first half of 2014. Profit margins picked up slightly in the second half of 2014 but remained at a low level due to competition with imports and the integration and start-up costs in Costa Rica.
Bekaert invested € 32 million in property, plant and equipment, including the Dramix® greenfield in Costa Rica.
Inauguration of new Dramix® plant in Costa Rica Bekaert Costa Rica SA manufactures Dramix® steel fibers for the construction sector. Dramix® is a Bekaert designed and patented steel fiber for the reinforcement of concrete in industrial flooring and building projects, as well as in infrastructure applications such as tunnels and mine shafts. Bekaert took the decision to invest in a Dramix® manufacturing platform in Costa Rica to serve infrastructure and construction markets in the Americas.
President Luis Guillermo Solís of Costa Rica officially inaugurated the new Bekaert Dramix® plant in Orotina, Costa Rica
Bekaert acquired, through its Bekaert Ideal Holding, the majority of the shares (73%) of the ArcelorMittal steel wire plant in Costa Rica (renamed BIA Alambres Costa Rica SA) and established the same shareholding structure in the new Dramix® plant in Costa Rica (Bekaert Costa Rica SA) and in Bekaert's steel wire entity in Ecuador (Ideal Alambrec SA). Bekaert also acquired the remaining shares of the Cimaf ropes plant which was renamed Bekaert Cimaf Cabos.
The objective is to serve customers from various sectors in the region better with a broader steel wire product portfolio in the construction, mining, oil & gas, agricultural, fencing and industrial markets. The deal builds on Bekaert's existing partnerships in the region with ArcelorMittal and with the Kohn family.
Bekaert's activities in Latin America go back to 1950. Today, they represent 35% of combined sales. They include partnerships with ArcelorMittal, with the Ecuadorian partners (represented by members of the Kohn family) and those within the partnership in Chile and Peru (represented by members of the families Matetic, Conrads and Gallofré). At the end of 2014, Bekaert employed over 8000 people in the region.
The integration of the wholly owned steel cord entity acquired from Pirelli in Sumaré, Brazil will be added to Bekaert's financial statements as of 1 January 2015.
Bekaert Prodac, Peru, celebrated its 20th anniversary in the presence of Her Royal Highness Princess Astrid of Belgium.
Prodac, the Bekaert Group's leading steel wire company in Peru, celebrated today its 20th anniversary in the presence of HRH Princess Astrid of Belgium who presided over the Belgian Economic Mission to Peru and Colombia.
During its 20 years of history, Prodac has developed into a leading steel wire company serving domestic and export markets. Based in Callao, Peru, Bekaert Prodac employs 778 people. Prodac provides steel wire solutions to many sectors, including construction, agriculture, mining, infrastructure and industry, with a broad range of products such as gabions, welded mesh, barbed wire, nails and galvanized wire. The company was established in 1994 by Industrias Cassadó SA (Peru) and the Bekaert Group, via its Chilean and Ecuadorian partners.
Belgo Bekaert Arames provided complete fencing solutions for all stadiums of the 2014 FIFA World Cup. Securing the contracts for these stadiums presented a great challenge, since the construction involved unique and new demands. Belgo Bekaert Arames came out the winner after an extensive bidding process and succeeded in installing the security fences and gates of all sports stadiums on time.
| Combined sales: | € 1 014 million |
|---|---|
| Consolidated sales: | € 966 million |
| Capital expenditures (PP&E): | € 51 million |
| Total assets: | € 1 282 million |
| Employees: | 11 700 |
China's economy grew at its slowest pace in two decades in 2014 as property prices declined and companies and local governments struggled under debt burdens. GDP grew by 7.4%, a rate envied by most countries, but a cause for concern due to the significant production overcapacity, slower demand and hence, fierce competition in several industrial markets.
Demand from tire markets remained solid in the first nine months of 2014, but dropped significantly in the final quarter of the year. Prices further eroded in a market which was characterized by less export volumes for Chinese tire makers, structural domestic overcapacity and commoditization of truck tire reinforcement solutions.
Demand from solar markets in China picked up in 2014, and several other industrial markets, such as the elevator businesses and the automotive parts sector, performed well. Bekaert's activities in Shenyang and Jiangyin were able to answer the development and supply needs of customers in search of high-end steel wire solutions.
Economic growth in India moved up firmly from the sub 5% levels of the past two fiscal years. Domestic industrial demand picked up after the newly elected Government took office and implemented reforms to strengthen the economy. Bekaert's tire cord activities in India recorded solid growth by gaining market share in a rebounding market environment.
South East Asia continued its solid growth trend in most countries, although the region's largest economy, Indonesia, grew at a slower pace in 2014 with a downward trend for the third consecutive year. On the positive side, the manufacturing industry is one of the strongest contributors to the GDP of the country.
Bekaert is present in Asia Pacific with manufacturing and development centers in China, India, Indonesia, Malaysia and Japan. After the balance sheet date, we also completed the acquisition of the ropes business from Arrium in Newcastle, Australia.
Bekaert announced, at the beginning of 2015, the acquisition of the wire rope business of Arrium Ltd in Newcastle, Australia. The integration of the Australian ropes activities will enhance Bekaert's growth strategy in steel wire ropes in general and will enable the Group to take a leading global market position in mining ropes in particular. The transaction is estimated to add € 40 million to Bekaert's consolidated sales on an annual basis and will be integrated as of 1 March 2015.
Bekaert's activities in Asia Pacific achieved 6% volume growth year-on-year. This was the result of strong sales across Asia in the first nine months of the year, followed by a weak fourth quarter driven by the overall demand slowdown in Chinese tire markets. Price erosion, currency effects and passed-on lower wire rod prices tempered the top line growth rate in the region to 1.3% year-on-year.
Bekaert held on to stable price levels in China during the weak final quarter of 2014 and lost some market share in truck tire markets.
We retained our leadership position at a constant share in the growing solar markets in China and achieved promising results in some recent investments with high value adding products for, e.g., the automotive components sector.
Bekaert's tire cord activities in India recorded solid growth and managed to grow market share. Other platforms in India, such as the stainless activities in Lonand, continued to underperform in terms of profitability.
In South East Asia, Bekaert posted solid growth in its rubber reinforcement activities in Indonesia. The recently acquired entities in Malaysia had not yet achieved a turnaround in profitability and coped with increased competition.
Bekaert continued to invest significantly across the region and recorded a total of € 51 million investments in PP&E in 2014. Major investments took place in the advanced cords plant in Shenyang, the finalization of the Xinyu spring wire greenfield and in tire cord expansions in India and Indonesia.
Bekaert and Pirelli successfully closed the acquisition by Bekaert of the Pirelli steel cord plant in Yanzhou, Shandong Province, China on 27 March 2015.
The deal closing in China follows the ownership transfers of the steel cord plants in Figline (Italy), Slatina (Romania), Sumaré (Brazil) and Izmit (Turkey).
Bekaert holds 80% of the shares of Bekaert (JiNing) Steel Cord Co, Ltd. Hixih Rubber Industrial Group Co Ltd, Pirelli's partner in the Yanzhou entity, retains the remaining 20%.
After the balance sheet date, Bekaert announced the divestment of its Carding business. Bekaert and Groz-Beckert signed an agreement regarding the sale of Bekaert's Carding Solutions activities to Groz-Beckert, a global company with headquarters in Albstadt, Germany.
The transaction covered the carding production facilities in Belgium, India, China and the US and the global sales and services network. The deal involved the employees and assets of the activity platform.
As part of this transaction, the companies entered into a long-term supply agreement of Bekaert steel wire to Groz-Beckert.
The platform employs 350 people in its worldwide manufacturing, distribution and sales network. The largest manufacturing units are located in Wuxi, China and in Pune, India
We successfully launched our ternary Cu-Zn-Co coated tire cord that makes it possible for tire makers to create cobalt-free rubber compounds. As a result, the cobalt salt mixing step can be eliminated in the rubber compounding process and the amount of cobalt in the total supply chain of tire making can be reduced by 80%.
Tire Technology International nominated Bekaert for its TAWI invention in the prestigious Tire Technology of the Year category, competing against major international players in the industry - Michelin, Yokohama and Trelleborg for the award. No fewer than 13 tire manufacturers, among which several Chinese customers, are testing TAWI steel cord today either in lab tests, field tests or both. Their feedback confirms the revolutionary character of the TAWI innovation.
Guy buytaert (Bekaert Technology Center Deerlijk, Belgium) and Yiwen Luo (Bekaert Technology Center Jiangying, China) are the Bekaert patent filers for the TAWI invention.
Innovation is a key driver of Bekaert's technological leadership. Our activities in this field are aimed at creating value for our customers in order for our business, and all our stakeholders, to prosper in the long term. We partner with customers and suppliers around the globe to develop, implement, upgrade and protect both current and future technologies. Listening closely to our customers and understanding how our products function within their production lines and products is key to developing value creating solutions.
Transforming steel wire and applying unique coating technologies form our core business. To strengthen our technological leadership in these competencies, Bekaert invests intensively in research and development, and sees innovation as a constant, driving factor in all our activities and processes.
In order to sustain and strengthen our technological leadership, we continue to explore new possibilities in steel wire transformation and coating technologies. Even after 135 years of expertise, there is still much to be discovered in our search for the optimal bulk and surface properties of steel wire.
Through steel wire transformation, we influence the properties of steel such as strength, ductility, fatigue, and shape. In 2014, we have advanced our development efforts in applications that offer high added value and promising perspectives:
In 2014 Bekaert's R&D efforts also focused on disruptive technologies that aim at creating superior value for our customers: International tire manufacturers are participating in our newest generation of rubber reinforcement solutions which promises to create unmet value in tire innovation. This Bekaert tire reinforcement fabric represents a disruptive technology that eliminates the need for spool creels in the production of the tire ply on a calendar. Tire makers see great opportunities in this invention by Bekaert, especially in its development of new tire designs and when running non-continuous batches, since this solution eliminates production downtime due to set-up changes of spool creels and calendars.
With our unique coating technologies, we adjust the surface properties of steel wire to reduce friction, improve corrosion resistance, enhance adhesion, or improve aesthetics. Various development projects in 2014 spearheaded innovations in coating performance.
We pursue value creation for our customers, not only by delivering upon set specifications, but also by focusing our research on the continuous renewal of our product portfolio and on developing products that lower the complexity, the cost, and the environmental impact of our customers' production processes. Our preferred approach is to do this in co-creation with our customers.
In 2014, we developed heat-resistant coatings that eliminate the coating step in customers' manufacturing processes after transforming steel wire into springs. This coating technology also enables a perfect finish of compact springs.
Tire Technology International nominated Bekaert for its TAWI invention in the prestigious Tire Technology of the Year category, competing for the award against major international players in the industry - Michelin, Yokohama and Trelleborg. No fewer than 13 tire manufacturers are testing TAWI steel cord today, either in lab tests, field tests or both. Their feedback confirms the revolutionary character of the TAWI innovation.
Bekaert FastForward Award Event 2014
There is an increasing trend in co-development projects with our strategic customers and suppliers. We also consider corporate venturing by investing in companies and venture capital funds worldwide. Our related investments are minority interests in young start-up companies with innovative technologies that are in alignment with Bekaert's core competencies. In this perspective, Bekaert joined the i3 connection platform of Cleantech Group.
Bekaert seeks international partnerships with universities and research institutes. In 2014, we continued to cooperate with academic institutions, technology clusters and research partners from different countries in order to bring an outside-in approach.
We are appreciative to the Flemish government agency for Innovation by Science and Technology (IWT) as well as the Belgian federal government. Their subsidies and incentives for R&D projects involving highly educated scientific personnel and researchers in Flanders, are pivotal in securing a foothold for our R&D activities in Belgium.
Bekaert's in-house engineering department plays a key role in the optimization of our production processes and machinery. This department designs, manufactures, installs and services the critical equipment for our production plants worldwide. Bekaert's engineering activities are organized on a global scale with a network of 500 engineers and technicians in Belgium, China, India, Slovakia and Brazil. Newly designed equipment by Bekaert Engineering always combines performance improvements in various areas including: product quality, production excellence, cost efficiency, ergonomics, safety and environmental impact.
Bekaert Engineering works closely together with the company's R&D centers, the production plants, and the global manufacturing excellence team, in order to develop machine and equipment concepts that address the current and future needs in terms of flexibility, efficiency and precision performance.
The Bekaert Engineering team equipped the greenfield Dramix® plant in Costa Rica in record time with the most performant equipment.
Driven by a pursuit for high performing equipment at a low operational cost, the Bekaert Engineering team has been developing machines that require minimal change-over time and ensure maximum automatization and robotization capabilities.
In addition, advanced sensors and measuring tools are increasingly being integrated into Bekaert's manufacturing equipment, in order to control the specification tolerances during various production steps. This enhances Bekaert's product quality testing capability in all critical process stages.
Bekaert's capacity expansions in bead wire for tires are realized with Bekaert Engineering's newest robotized bead wire lines.
Bekaert's global Corporate Social Responsibility (CSR) strategy is centered on four main pillars: our responsibility in the workplace, in the marketplace, towards the environment and towards society. Our CSR efforts and activities are therefore focused in such a way that balanced consideration is given to the interests of all respective stakeholders, i.e. employees, customers, shareholders, partners, local governments and the communities in which we are active.
Bekaert's CSR report 2013 was conducted according to the GRI G3 Guidelines regarding the GRI Sustainability Reporting Framework. The certification process of the 2014 report was still pending at the date of the publication of this Annual Report. Global Reporting Initiative (GRI) is a non-profit organization that promotes economic sustainability. Bekaert's responsible performance in 2014 has been recognized by its inclusion in the Ethibel Excellence Index (ESI) Europe a reference benchmark for top performers in terms of corporate social responsibility based on Vigeo's research - as well as in Kempen SRI.
In order to encourage the continuous development of all employees, the company's group targets are deployed into team and personal targets for everyone. Bekaert's performance management system enables the evaluation of teams and individuals as they relate to the set targets, as well as their way of working.
Bekaert attaches great importance to offering continuous learning and development opportunities to its employees. Such programs not only include technical and function specific training, but also leadership modules that help our people develop and cooperate in a global business environment.
The Bekaert safety policy is deployed through the Safety Tree model and monitored via the Bekaert Safety Evaluation System (BEKSES). In 2014, BEKSES audits (based on OHSAS 18001) were carried out in a number of plants. In newly acquired plants and plants recently added to the consolidation perimeter, special efforts were made to align the local safety management to the worldwide Bekaert approach. To increase safety awareness even further, Bekaert
included all recordable incidents (versus lost-time accidents) in its 2014 internal safety reports.
Following the fatal accident in Slovakia in 2013, a thorough investigation was conducted on similar equipment across all plants worldwide.
Because we attach great importance to a healthy working environment, we continued to invest in automated handling equipment and other workplace ergonomics in 2014. To coincide with our International Health & Safety Week, we implemented a vitality program with the aim of letting teams move together in a healthy way.
Bekaert has a long tradition of organizing a Health & Safety Day worldwide every year in September. In 2014, Bekaert extended the duration of this event to a full week, giving all employees the opportunity to participate. The central theme for this year's edition was "Bekaert on the move for health & safety". The safety component focused on internal and external transportation and on handling equipment with moving parts. For the health part, a vitality challenge was set: the objective was to reach 80 000 km by moving together in a healthy way. With the active participation of all teams worldwide, the teller eventually reached 130 220 km! The vitality challenge set the tone for continued vitality activities throughout our entities.
By organizing the International Health and Safety Week each year, Bekaert's top management and all management teams reconfirm that the safety and health of all Bekaert employees around the world is, and remains, one of the company's main priorities.
Severity index = number of lost days due to occupational accidents per thousand worked hours
(Number of years without recordable incidents)
| >=7 years >=4 years >= 2 years >= 1 year | ||||
|---|---|---|---|---|
| N° of plants | 2 | 1 | 2 | 9 |
The plants that have been incident-free since at least more than one year represent 30% of the Bekaert population (number of employees of the above plants versus total number of employees from consolidated entities).
Repeatability Index = Number of lost time accidents (LTA) per million worked hours
Bekaert strives to be a loyal and responsible partner in the communities where we are active. We make a point of interacting with local governments in a transparent, constructive way, and we are firmly committed to complying with national legislations and collective labor agreements. Bekaert adheres to the Universal Declaration of Human Rights and the treaties and recommendations of
the International Labor Organization.
Also in acquisition deals, Bekaert attaches great importance to building open and constructive relationships with local government bodies and with social representatives as of the start. This was particularly the case in the communities we welcomed as part of the Pirelli deal.
Bekaert has production facilities and sales offices in 40 countries and builds lasting relationships with customers and suppliers wherever we do business.
We work closely with customers and suppliers by engaging in co-development projects, by conducting feedback initiatives and satisfaction surveys, and by performing industry analyses together.
In 2014, Bekaert's Purchasing department laid the groundwork for future sustainability targets related to the supply chain. Conversations began with selected suppliers to investigate how progress could be measured on certain sustainability KPI's via integrated value chains.
The first steps to roll out the Suppliers' Code of Conduct were taken towards the end of 2014, and the launch is foreseen in 2015. In close cooperation with key suppliers, shared targets were set for 2015 regarding driving sustainability forward.
We actively cooperate with global customers, especially from the automotive, construction and energy related markets, in supporting their CSR programs by implementing specific actions in our CSR policies. Acting as a socially responsible supplier helps our customers achieve their sustainability targets.
better together for a cleaner world: we continuously strive to use fewer materials, cut energy consumption and reduce waste.
Bekaert's concern for the environment is applied in various aspects: First, we seek to develop new, eco-friendlier production processes for our plants worldwide. In 2014, we finalized the 'New Environmental Technologies' project. The aim was to acquire knowledge and expertise in environmental technologies and thereby boost the environmental performance of plants worldwide. Cost-effective solutions were developed for all major waste aspects. Practical solutions include the recuperation of rinsing waters in the production process, and the conceptual design of a zero liquid discharge project. The purpose is to run the plants without the need to discharge industrial waste water to the city sewer systems.
Secondly, prevention and risk management play an important role in Bekaert's environmental policy. In 2014, we updated our procedures for the prevention of soil contamination. Through self-assessments, internal audits and best practice sharing between plants, an action plan was defined in 2014 and will be implemented in the course of 2015.
Responsible use of water is also a priority. Programs that aim to reduce water usage in the long term were established and focus on getting a clear view of our water balance.
In 2014, 95 % of our consolidated plants worldwide were ISO 14001 certified. Bekaert's full worldwide certification is an ongoing goal; it is an element in the integration process of newly acquired entities and of companies that are added to the consolidation perimeter. Bekaert also received a group-wide certification for ISO 14001 and ISO 9001.
Lastly, Bekaert develops products that contribute to a cleaner environment. Ecology is an aspect that is considered starting from the R&D phase of new products. In many cases, it is even a driving factor in product development. Newly developed products with ecological advantages are described in the chapter on Technology Leadership.
At an ongoing base, our Dramix® steel fibers used in the construction sector lead to less usage of steel compared to traditional concrete reinforcement products, less energy consumption and faster processing. And Bekaert's super-tensile and high-tensile steel cord types significantly lower the tire weight and the thickness of the rubber ply. That is why they eventually lead to lower rolling resistance and lower fuel consumption.
Education projects form the backbone of funding and other community-building activities. In addition, we support local activities and projects for social, cultural and economic development.
We believe that education and learning are the key to a sustainable future. Accordingly, we support initiatives worldwide that focus on helping the communities we are active in through education and learning.
In China, Bekaert has built strong relationships with various schools. Support for these institutions is not limited to donations of gifts, books and other materials. Bekaert employees also participate in voluntary work initiatives to improve the children's technical skills and awareness for the environment.
In Russia, Bekaert supports disabled children with both material donations and help organizing socio-cultural events adapted to the needs of these children.
Vicson, our subsidiary in Venezuela supports, a Youth Leadership program aimed at strengthening the personal development of youngsters, improving their teamwork abilities and learning study time optimization. The program is a co-operation between private companies, the Carabobo University and the Executive Association of the Carabobo state.
In Brazil, Bekaert continues to support the 'Digital Citizenship' program that offers students easier access to, and training in, information technology.
We support community initiatives that aim to improve societal conditions in the places where we are active.
In the Thiruvallur district in India, the health camp initiatives that were launched in 2012 to address the health care needs of the local people continue to be organized. More than 2000 people spread over 9 villages have participated in these health camps
Prodac, our subsidiary in Peru has continued the 'Sarita Colonia' Summer School program that was started in 2008 and that organizes local activities and projects for social, economic and cultural development of children during the summer holidays. Annually, 100 children participate in the program.
Bekaert Corporation (US) joined the National 4-H Council in 2014. 4-H is the largest youth development and empowerment organization in the US, reaching more than 7 million 4-H youth in urban neighborhoods, suburban schoolyards and rural farming communities. Fueled by university-backed curriculum, 4-H'ers engage in hands-on learning activities in the areas of science, healthy living, and food security. From June 1, 2014 till May 30, 2015, Bekaert Corporation will donate to 4-H 1% of retail sales on all Premium Gaucho® high strength barbed wire fencing. Bekaert herewith expresses its engagement in helping America's largest youth development organization to create a positive change and a better future for young people.
| in millions of € | 2013 | 2014 | Delta |
|---|---|---|---|
| Sales | 4 111 | 4 040 | -1.7% |
| Capital Expenditure (PP&E) | 108 | 160 | 48.7% |
| Personnel as at 31 December | 26 325 | 28 372 | 7.8% |
| in millions of € | 2013 | 2014 | Delta |
|---|---|---|---|
| Income statement Sales |
3 186 | 3 216 | 0.9% |
| Operating result before non-recurring items (REBIT) | 166 | 164 | -0.9% |
| Operating result (EBIT) | 137 | 171 | 24.8% |
| Non-recurring items | -29 | 7 | |
| Interests and other financial results | -84 | -67 | |
| Income taxes | -48 | -42 | |
| Group share joint ventures | 30 | 25 | -16.2% |
| Result for the period | 36 | 88 | 142.7% |
| attributable to the Group | 25 | 87 | 254.8% |
| attributable to non-controlling interests | 11 | 0 | -96.7% |
| EBITDA | 297 | 342 | 15.1% |
| Depreciation PP&E | 162 | 153 | -5.6% |
| Amortization and impairment | -2 | 29 | |
| Negative goodwill | - | -11 | |
| Balance sheet | |||
| Equity | 1 504 | 1 566 | 4.1% |
| Non-current assets | 1 609 | 1 851 | 15.1% |
| Capital expenditure (PP&E) | 95 | 133 | 40.3% |
| Balance sheet total | 3 380 | 3 958 | 17.1% |
| Net debt | 574 | 853 | 48.6% |
| Capital employed | 2 119 | 2 524 | 19.1% |
| Working capital | 793 | 975 | 22.9% |
| Employees as at 31 December (FTE)* | 21 790 | 24 127 | 10.7% |
| Ratios | |||
| EBITDA on sales | 9.3% | 10.6% | |
| REBIT on sales | 5.2% | 5.1% | |
EBIT on sales 4.3% 5.3% EBIT interest coverage 2.4 3.0 ROCE 6.1% 7.7% ROE 2.3% 5.7% Financial autonomy 44.5% 39.6% Gearing (Net debt on equity) 38.2% 54.5% Net debt on EBITDA 1.9 2.5
Group's share net result 30 25 -16.3% Group's share equity 151 151 -0.1%
| Key figures per share | |||
|---|---|---|---|
| NV Bekaert SA | 2013 | 2014 | Delta |
| Number of shares as at 31 December | 60 063 871 60 111 405 | 0.1% | |
| Market capitalization as at 31 December (in millions of €) | 1 545 | 1 584 | 2.5% |
| Per share | |
|---|---|
| in € | 2012 | 2013 | Delta |
|---|---|---|---|
| EPS | 0.42 | 1.51 | 259.5% |
| Gross dividend** | 0.85 | 0.85 | = |
| Net dividend** | 0.6375 | 0.6375 | = |
| in € | 2013 | 2014 | Delta |
|---|---|---|---|
| Price as at 31 December | 25.72 | 26.35 | 2.4% |
| Price (average) | 24.926 | 27.155 | 8.9% |
* Including limited effects of IAS19 restatement.
** The dividend is subject to approval by the General Meeting of Shareholders 2015
| 2013 | 2014 |
|---|---|
| 1 064 | |
| 116 | |
| 10.9% | |
| 165 | |
| 15.5% | |
| 1 049 | |
| 1 040 85 8.2% 133 12.8% 1 028 |
EMEAEMEA € 1 049 million Combined sales
| 2013 | 2014 |
|---|---|
| 555 | |
| 28 | |
| 5.0% | |
| 38 | |
| 6.8% | |
| 555 | |
| 548 8 1.5% 22 4.0% 548 |
| € 555 million Combined sales |
North America | 14% |
|---|---|---|
| --------------------------------- | --------------- | ----- |
| in millions of € | 2013 | 2014 |
|---|---|---|
| Consolidated sales | 645 | 631 |
| Operating result (EBIT) | 44 | 34 |
| EBIT on sales | 6.8% | 5.4% |
| EBITDA | 64 | 40 |
| EBITDA on sales | 9.9% | 6.3% |
| Combined sales | 1 543 | 1 422 |
| Latin America € 1 422 million Combined sales |
35% |
|---|---|
| in millions of € | 2013 | 2014 |
|---|---|---|
| Consolidated sales | 953 | 966 |
| Operating result (EBIT) | 73 | 54 |
| EBIT on sales | 7.7% | 5.6% |
| EBITDA | 153 | 159 |
| EBITDA on sales | 16.1% | 16.5% |
| Combined sales | 1 001 | 1 014 |
Sales Latin America
Consolidated companies
Bekaert achieved € 3.2 billion consolidated sales and € 4.0 billion combined sales in 2014, remaining stable over last year. The organic consolidated sales growth (+2.8%) was cancelled out in Bekaert's top line by the effect of adverse currency movements, the Chilean peso in particular.
At the combined sales level, currency effects were highly negative due to the average depreciation of the Brazilian real for the full year 2014.
The Board of Directors will propose that the General Meeting of Shareholders on 13 May 2015 approve the distribution of a gross dividend of € 0.85 per share. The dividend will, upon approval by the General Meeting of Shareholders, become payable as of 19 May 2015.
Bekaert achieved an operating result before non-recurring items (REBIT) of € 164 million (versus € 166 million in 2013). This equates to a REBIT margin on sales of 5.1%. Non-recurring items amounted to € 7 million (compared with € -29 million last year), mainly related to the recognition of a negative goodwill on business combinations and the gains on the sale of property. Including non-recurring items, EBIT was € 171 million, representing an EBIT margin on sales of 5.3% (versus 4.3%). EBITDA reached € 342 million, representing an EBITDA margin on sales of 10.6% (versus 9.3%).
Selling and administrative expenses increased by € 12 million to € 265 million as a result of the significant reversal of bad debt provisions in 2013 and expenses incurred in 2014 in relation to the acquisition transactions. Research and development expenses decreased by € 3 million to € 59 million as a result of efficiency gains.
Interest income and expenses amounted to € -63 million (versus € -64 million) due to an average lower interest rate on the gross debt. Other financial income and expenses amounted to € -4 million (versus € -20 million), mainly due to currency movements.
Taxation on profit was € 42 million versus € 48 million last year.
The share in the result of joint ventures and associated companies decreased from € 30 million to € 25 million due to a difficult economic environment in Brazil.
The result for the period thus totaled € 88 million, compared with € 36 million in 2013. The result attributable to non-controlling interests was limited to € 0.4 million due to the losses and impairments on businesses in South East Asia. After non-controlling interests, the result for the period attributable to the Group was € 87 million, compared with € 25 million last year. Earnings per share amounted to € 1.51, up from € 0.42 in 2013.
As at 31 December 2014, shareholders' equity represented 39.6% of total assets. The gearing ratio (net debt to equity) was 54.5% (versus 38.2%).
Cash from operating activities amounted to € 187 million (2013: € 306 million). Operating working capital increased by € 55 million. Cash flow attributable to investing activities amounted to € -225 million, of which € -133 million related to capital expenditure (PP&E) and € -110 million on new business combinations. Cash flows from financing activities totaled € 88 million (versus € -192 million in 2013) and were, among other elements, driven by € 194 million spent on interests, dividend and treasury shares and the issuance of the convertible bond (€ 300 million).
On 6 February 2015, Bekaert and Pirelli successfully closed the acquisition by Bekaert of the Pirelli steel cord plant in Izmit, Turkey. The deal closing in Turkey followed the ownership transfer of the steel cord plants in Figline (Italy), Slatina (Romania), and Sumaré (Brazil) as announced on 18 December 2014. The agreement between Bekaert and Pirelli also includes Pirelli's steel cord activities in Yanzhou (China). The closing of the acquisition of the steel cord entity in Yanzhou, China, will occur when the respective regulatory approvals are obtained. The financial results of the entities in Italy, Romania and Brazil are included in the consolidated statements of Bekaert as from 1 January 2015. The results of the plant in Turkey will be integrated as from 1 February 2015.
Bekaert announced, on 5 February 2015, the acquisition of the wire rope business of Arrium Ltd in Newcastle, Australia. The integration of the Australian ropes activities will enhance Bekaert's growth strategy in steel wire ropes in general and will enable the Group to take a leading global market position in mining ropes in particular. The transaction is estimated to add € 40 million to Bekaert's consolidated sales on an annual basis and has an enterprise value of approximately € 60 million. Bekaert and Arrium anticipate a deal closing in the course of the first quarter of 2015. Upon deal closure, the Australian ropes activities will be integrated in the Bekaert Rope Group. In this newly established Group, Bekaert and their Chilean partners, through Matco Cables SpA, now hold 65% and 35% respectively of all ropes entities in Canada, Chile, Peru, Brazil and the US.
In addition to the 1 652 677 treasury shares held as of 31 December 2013, Bekaert purchased 2 622 333 own shares in the course of 2014. None of those shares were disposed of in connection with stock option plans or cancelled in 2014. As a result, the company held an aggregate 4 275 010 treasury shares at the end of 2014.
Net debt increased from € 574 million to € 853 million as a result of capital expenditure and acquisitions. The acquisition impact of the Pirelli steel cord plants accounted for € 207 million of the increase. Net debt on EBITDA was 2.5. Excluding the Pirelli impact, net debt on EBITDA was 1.9, unchanged from last year.
Demand from European markets was strong throughout 2014 across most sectors. Automotive demand, in particular, boosted volume growth for tire cord and other steel wire applications in the region.
Our activities in EMEA delivered solid results driven through increased volumes and a favorable product mix. Bekaert realized 30% REBIT increase in the region and lifted profit margins to a record high, making this segment the largest contributor to the Group's consolidated profit for the year 2014.
Non-recurring items amounted to € +2 million and mainly related to the gain on the sale of property in Belgium, partly offset by impairments.
Capital expenditure (PP&E) amounted to € 33 million and mainly related to capacity expansions in Slovakia and Belgium.
Bekaert anticipates continued solid demand and performance in most European markets. Europe will become even a bigger contributor to the Group's consolidated figures as a result of the integration of the steel cord entities acquired from Pirelli in Romania, Italy and Turkey.
Improved demand from automotive markets could not compensate for our demand decline in other North American industrial, construction and agriculture markets in 2014.
Bekaert's activities recorded higher volumes in comparison with a weak 2013. The segment, however, continued to underperform in terms of profitability due to underutilized production capacity and price pressure from import flows. On top of the usual seasonality effects at year-end, Bekaert was hit by a fire which caused structural damage to parts of the Rome (Georgia) production plant.
Non-recurring items amounted to € +8 million and mainly related to a recognition of the insurance revenue related to the Rome fire, while further expenses associated with the plant reconstruction will be incurred in 2015.
Capital expenditure (PP&E) amounted to € 26 million and related mainly to ropes, tire cord and bead wire activities.
Bekaert anticipates a slight improvement in most markets in 2015, but does not project a major turnaround in profitability due to persistent price pressure and increased transportation expenses as well as partial volume losses caused by the fire in Rome.
Latin American markets have become very competitive due to increased Asian imports. Reduced government budgets and public spending, driven by the price declines for copper, oil and other commodities have led to a downturn in mining and public infrastructure markets. Fiscal reforms and elections added to the uncertainty in various countries and sectors. The economy in Venezuela came to a standstill as a result of the political and monetary instability.
Excluding the impact of acquisitions and of Venezuela where volumes dropped more than 40% as a result of forced shutdowns due to raw material shortages, Bekaert's activities in Latin America achieved stable volumes over last year. The segment's top line increased significantly in the second half of 2014 (+15% year-on-year), thanks to a better price-mix and a much lower impact of adverse currency effects as accounted for in the first half of 2014. Profit margins picked up slightly in the second half of 2014 but remained at a low level due to competition with imports and the integration and start-up costs in Costa Rica.
The non-recurring items mainly related to pension plan adjustments, the acquisition in Costa Rica, and the purchase of the remaining shares of the ropes activity in Brazil.
Bekaert invested € 32 million in property, plant and equipment, including the Dramix® greenfield in Costa Rica.
The significant impact of currency movements on combined sales was due to the volatility of the Brazilian real. While picking up toward year-end the total average year-on-year effect of the real was € -71 million on sales.
Bekaert anticipates a relatively stable demand for its consolidated businesses in the first quarter of 2015. The integration of the steel cord entity acquired from Pirelli in Brazil will add to Bekaert's financial statements as of 1 January 2015.
Bekaert projects weakening business conditions in Brazil, in line with the evolutions impacting the Brazilian economy.
Bekaert's activities in Asia Pacific achieved 6% volume growth year-on-year. This was the result of strong sales across Asia in the first nine months of the year, followed by a weak fourth quarter driven by the overall demand slowdown in Chinese tire markets. Price erosion, currency effects and passed-on lower wire rod prices tempered the top line growth rate in the region to 1.3% year-on-year.
Bekaert held on to stable price levels in China during the weak final quarter of 2014, and lost some market share in truck tire markets.
Bekaert's tire cord activities in India recorded solid growth. The company also retained its leadership position at a constant share in the growing solar markets in China. The resulting positive effects were, however, compensated by continued weak performance in the recently acquired entities in South-East Asia. The non-recurring items mainly related to asset impairments on activities in South-East Asia.
Bekaert continued to invest significantly across the region and recorded a total of € 51 million investments in PP&E in 2014.
Bekaert projects continued difficult market conditions in China in the first quarter of 2015. The company is implementing actions to improve the cost-efficiency of operations and to turn around the underperformance of the Malaysian businesses.
In accordance with the original Belgian Code on Corporate Governance published in 2004, the Board of Directors has, on 16 December 2005, adopted the Bekaert Corporate Governance Charter. Following the publication of the 2009 Belgian Code on Corporate Governance, the Board of Directors has, on 22 December 2009, adopted the 2009 Code as the reference code for Bekaert and revised the Bekaert Corporate Governance Charter. On 13 November 2014 the Board of Directors has further revised the Bekaert Corporate Governance Charter (the 'Bekaert Charter'). Bekaert complies in principle with the Belgian Corporate Governance Code and explains in the Bekaert Charter and in this Corporate Governance Statement why it departs from some of its provisions.
The Belgian Corporate Governance Code is available at www.corporategovernancecommittee.be.
The Bekaert Corporate Governance Charter is available at www.bekaert.com.
The Board of Directors consists of fourteen members, who are appointed by the General Meeting of Shareholders. Eight of the Directors are appointed from among candidates nominated by the principal shareholders. The Chairman and the Chief Executive Officer are never the same individual. The Chief Executive Officer is the only Board member with an executive function. All other members are non-executive Directors.
Four of the Directors are independent in accordance with the criteria of Article 526ter of the Belgian Companies Code and provision 2.3 of the Belgian Corporate Governance Code: Mr Alan Begg (first appointed in 2008), Lady Barbara Judge (first appointed in 2007), Mr Manfred Wennemer (first appointed in 2009, independent since 1 January 2010) and Ms Mei Ye (first appointed in 2014).
The Board met on seven occasions in 2014: there were six regular meetings and one extraordinary meeting. In addition to its statutory powers and powers under the Articles of Association and the Bekaert Charter, the Board of Directors discussed the following matters, among others, in 2014:
| Name | First appointed |
Expiry of current Board term |
Principal occupation (*) | Number of regular/ extraordinary meetings attended |
|---|---|---|---|---|
| Chairman | ||||
| Bert De Graeve(1)(3) | 2006 | 2015 NV Bekaert SA | 3/1 | |
| Paul Buysse(2) | 2000 | 2014 NV Bekaert SA | 3 | |
| Chief Executive Officer | ||||
| Matthew Taylor(1) | 2014 | 2018 NV Bekaert SA | 3/0 | |
| Bert De Graeve(2)(3) | 2006 | 2015 NV Bekaert SA | 3 | |
| Members nominated by the principal shareholders | ||||
| Leon Bekaert | 1994 | 2015 Director of companies | 6/1 | |
| Roger Dalle | 1998 | 2015 Director of companies | 6/0 | |
| Charles de Liedekerke | 1997 | 2015 Director of companies | 6/0 | |
| François de Visscher | 1992 | 2016 President, de Visscher & Co. LLC (United States) | 5/0 | |
| Hubert Jacobs van Merlen | 2003 | 2015 Director of companies | 6/0 | |
| Maxime Jadot | 1994 | 2015 CEO and Chairman of the Executive Board, BNP Paribas Fortis (Belgium) |
6/0 | |
| Bernard van de Walle de Ghelcke | 2004 | 2016 Of Counsel, Linklaters LLP (Belgium) | 6/0 | |
| Baudouin Velge | 1998 | 2016 Managing Partner, Interel (Belgium) | 6/0 | |
| Independent Directors | ||||
| Alan Begg | 2008 | 2018 Director of companies | 6/0 | |
| Lady Barbara Judge CBE | 2007 | 2016 Chairman of the UK Pension Protection Fund (United Kingdom) Chairman Emeritus of the UK Atomic Energy Authority (United Kingdom) |
6/0 | |
| Manfred Wennemer | 2009 | 2015 Director of companies | 6/0 | |
| Mei Ye(1) | 2014 | 2018 Independent director of and advisor to companies | 3/0 | |
| Other Directors | ||||
| Anthony Galsworthy(2) | 2004 | 2014 Advisor to Standard Chartered Bank (United Kingdom) | 3 |
(1) As of the Annual General Meeting in May 2014
(2) Until the Annual General Meeting in May 2014
(3) Bert De Graeve was first appointed as Board Member in 2006. In 2014 he became Chairman of the Board.
(*) the detailed résumés of the Board members are available at www.bekaert.com
The Board of Directors has established three advisory Committees.
The Audit and Finance Committee is composed as required by Article 526bis §2 of the Companies Code: all of its four members are non-executive Directors and one member, Lady Barbara Judge, is independent. The Committee is chaired by its independent Director, Lady Barbara Judge. Her competence in accounting and auditing is demonstrated by her position as vice chairman of the Financial Reporting Council, the British accounting and corporate governance regulator, which she held until the end of 2007.
Contrary to provision 5.2/4 of the Belgian Corporate Governance Code, according to which at least a majority of the members should be independent, Bekaert takes the view that the Audit and Finance Committee should reflect the balanced composition of the full Board.
The Chief Executive Officer and the Chief Financial Officer are not members of the Committee, but are invited to attend its meetings. This arrangement guarantees the essential interaction between the Board of Directors and Executive Management.
| Name | Expiry of Board term |
Number of regular and extraordinary meetings attended |
|---|---|---|
| Lady Barbara Judge CBE | 2016 | 4/1 |
| Bert De Graeve(1) | 2015 | 2 |
| Hubert Jacobs van Merlen(1) | 2015 | 2 |
| Baudouin Velge | 2016 | 4/1 |
| Paul Buysse(2) | 2014 | 2/1 |
| François de Visscher(2) | 2016 | 1/1 |
(1) As from the Annual General Meeting in May 2014
(2) Until the Annual General Meeting in May 2014
The Committee had four regular meetings and one extraordinary meeting in 2014. In addition to its statutory powers and its powers under the Bekaert Charter, the Committee discussed the following main subjects:
The Nomination and Remuneration Committee is composed as required by Article 526quater §2 of the Companies Code: all of its three members are non-executive Directors. It is chaired by the Chairman of the Board and its two other members, Mr Begg and Lady Barbara Judge, are independent. The Committee's competence in the field of remuneration policy is demonstrated by the relevant experience of its members.
| Name | Expiry of Board term |
Meetings attended |
|---|---|---|
| Bert De Graeve(1) | 2015 | 3 |
| Alan Begg | 2018 | 4 |
| Lady Barbara Judge CBE | 2016 | 4 |
| Paul Buysse(2) | 2014 | 1 |
(1) As from the Annual General Meeting in May 2014 (2) Until the Annual General Meeting in May 2014
Two of the Directors nominated by the principal shareholders are invited to attend the Committee meetings without being members.
The Committee met four times in 2014. In addition to its statutory powers and its powers under the Bekaert Charter, the Committee discussed the following main subjects:
The Strategic Committee has six members, five of whom are non-executive Directors. It is chaired by the Chairman of the Board and further consists of the Chief Executive Officer and four Directors.
| Name | Expiry of Board term | Meetings attended |
|---|---|---|
| Bert De Graeve | 2015 | 3 |
| Leon Bekaert | 2015 | 3 |
| Charles de Liedekerke | 2015 | 3 |
| Maxime Jadot | 2015 | 2 |
| Matthew Taylor(1) | 2018 | 2 |
| Manfred Wennemer(1) | 2015 | 2 |
| Paul Buysse(2) | 2014 | 1 |
| Anthony Galsworthy(2) | 2014 | 1 |
(1) As from the Annual General Meeting in May 2014
(2) Until the Annual General Meeting in May 2014
The Committee met three times in 2014 and discussed the Bekaert strategy as well as various strategic projects.
The main features of the process for evaluating the Board of Directors, its Committees and the individual Directors are described in this section and in paragraph II.3.4 of the Bekaert Charter. The Chairman is in charge of organizing periodic performance appraisals through an extensive questionnaire that addresses:
A consultant supported the Chairman in 2014 in conducting an exercise to assess the Board's way of working and its interaction with the Executive Management. The consultant distributed an online survey to all Directors and interviewed all Directors. The Board of Directors discussed the key findings and how to move forward.
In the framework of the action plan to ensure compliance with the legal requirement that one third of the members of the Board of Directors are of the opposite gender as from 1 January 2017, Ms Mei Ye became an independent Director on 14 May 2014. The search for additional female candidates continues.
The Bekaert Group Executive (BGE) has the collective responsibility to deliver the long-term and short- term objectives of the Group. It is chaired by the Chief Executive Officer and has the following balanced composition:
Dominique Neerinck, Chief Technology Officer, is stepping down from the BGE effective 31 March 2015, after 9 years as a member of the BGE.
As from 1 April 2015 the BGE will have the following members:
| Name | Position | Appointed |
|---|---|---|
| Matthew Taylor | Chief Executive Officer | 2013 |
| Lieven Larmuseau |
Executive Vice President Rubber Reinforcement Platform |
2014 |
| Piet Van Riet | Executive Vice President Industrial Products and Specialty Products Platforms |
2014 |
| Frank Vromant | Executive Vice President Regional Operations Europe, North America and South Asia |
2011 |
| Curd Vandekerckhove |
Executive Vice President Regional Operations North Asia and South East Asia |
2012 |
| Bruno Humblet | Chief Financial Officer and Executive Vice President Regional Operations Latin America |
2006 |
| Geert Van Haver | Chief Technology Officer and Executive Vice President |
2014 |
| Bart Wille | Chief Human Resources Officer and Executive Vice President |
2013 |
In accordance with Article 523 of the Companies Code, a member of the Board of Directors should give the other members prior notice of any agenda items in respect of which he has a direct or indirect conflict of interests of a financial nature with the Company, and should refrain from participating in the discussion of and voting on those items. A conflict of interests arose on two occasions in 2014, and the provisions of Article 523 were complied with on such occasions.
On 27 February 2014 the Board had to determine the remuneration of the Chief Executive Officer. Excerpt from the minutes:
On the motion of the Nomination and Remuneration Committee the Board:
On 13 November 2014 the Board had to determine the 2015 grant of options to the Chief Executive Officer under the Stock Option Plan 2010-2014. Excerpt from the minutes:
On the motion of the Nomination and Remuneration Committee the Board approves:
the offer of 36 000 options to the Chief Executive Officer, in addition to the simultaneous contractual second sign-on offer of 50 000 options.
The Bekaert Charter contains conduct guidelines with respect to direct and indirect conflicts of interests of the members of the Board of Directors and the BGE that fall outside the scope of Article 523 of the Companies Code. Those members are deemed to be related parties to Bekaert and have to report, on an annual basis, their direct or indirect transactions with Bekaert or its subsidiaries. Bekaert is not aware of any potential conflict of interests concerning such transactions occurring in 2014 (cf. Note 7.5 to the consolidated financial statements).
In accordance with provision 3.7 of the Belgian Corporate Governance Code, the Board of Directors has, on 27 July 2006, promulgated the Bekaert Insider Dealing Code, which is included in its entirety in the Bekaert Charter as Appendix 4. On 13 November 2014 the Board of Directors has revised the Bekaert Insider Dealing Code to reflect a number of organizational changes, effective 1 January 2015. The Bekaert Insider Dealing Code restricts transactions in Bekaert securities by members of the Board of Directors, the BGE, senior management and certain other persons during closed and prohibited periods. The Code also contains rules concerning the mandatory internal notification of intended transactions, as well as the disclosure of executed transactions through a notification to the Belgian Financial Services and Markets Authority (FSMA). The Chairman of the Board is the Compliance Officer for purposes of the Bekaert Insider Dealing Code.
The remuneration policy for non-executive Directors is determined by the General Meeting of Shareholders on the motion of the Board of Directors, acting upon proposals from the Nomination and Remuneration Committee. The policy was approved by the Annual General Meeting of 10 May 2006 and amended by the Annual General Meetings of 11 May 2011 and of 14 May 2014.
The remuneration policy for the Chief Executive Officer is determined by the Board of Directors, acting upon proposals from the Nomination and Remuneration Committee. The Chief Executive Officer is absent from this process. The Committee ensures that the Chief Executive Officer's contract with the Company reflects the remuneration policy. A copy of the Chief Executive Officer's contract is available to any Director upon request to the Chairman.
The remuneration policy for the members of the BGE other than the Chief Executive Officer is determined by the Board of Directors acting upon proposals from the Nomination and Remuneration Committee. The Chief Executive Officer has an advisory role in this process. The Committee ensures that the contract of each BGE member with the Company reflects the remuneration policy. A copy of each such contract is available to any Director upon request to the Chairman.
The remuneration of the non-executive Directors is determined on the basis of six regular meetings of the full Board of Directors per year. A portion of the remuneration is paid on the basis of the number of regular meetings attended in person by the non-executive Director.
Non-executive Directors who are members of a Board Committee receive a fee for each Committee meeting attended in person. As an executive Director the Chief Executive Officer does not receive such attendance fee.
If the Board of Directors requests the assistance of a Director in a specific matter on account of his or her independence and/or competence, such Director will be entitled, in respect of each session warranting specific travel and time, to a remuneration equal to the applicable amount payable in respect of a Board Committee meeting attended in person.
The actual amount of the remuneration of the Directors is determined by the Annual General Meeting for the running financial year.
The remuneration of the Directors is regularly benchmarked with a selected panel of relevant publicly traded industrial Belgian and international references, in order to ensure that persons with competences matching the Group's international ambitions can be attracted.
Non-executive Directors are not entitled to performancerelated remuneration such as bonuses, stock related long-term incentive schemes, fringe benefits or pension benefits, nor to any other type of variable remuneration except for the attendance fees in respect of Board or Committee meetings.
Expenses that are reasonably incurred in the performance of their duties are reimbursed to Directors, upon submission of suitable justification. In making such expenses, the Directors should take into account the Board Member Expense Policy.
The remuneration of the Chairman of the Board of Directors is determined at the beginning of his term of office, and is set for the duration of such term. On the motion of the Nomination and Remuneration Committee, it is determined by the Board subject to approval by the Annual General Meeting.
In making its proposal, the Committee should consider a clear description of the duties of the Chairman, the professional profile that has been attracted, the time expected to be effectively available for the Group, and an adequate remuneration corresponding to the formulated expectations and regularly benchmarked with a selected panel of relevant publicly traded industrial Belgian and international references. The Chairman, when attending or chairing the meetings of a Board Committee, will not be entitled to any additional remuneration as this is deemed to be included in his global remuneration package.
The main elements of the Group's executive remuneration policy are a base remuneration, a short-term, mid-term and long-term variable remuneration, a pension contribution and various other components. The Group offers competitive total remuneration packages with the objective to attract and retain the best executive and management talent in every part of the world in which the Group is operating. The remuneration of the executive managers is regularly benchmarked with a selected panel of relevant publicly traded industrial Belgian and international references.
A strong focus on performance and achievements at Group and individual level is reflected in the short-term variable remuneration program, which is directly linked to the annual business objectives.
The Group's mid-term and long-term variable remuneration programs aim at rewarding managers and executives for their contribution to the creation of enhanced shareholder value over time. Those programs are typically linked to the Company's longer term performance and to the future appreciation of the Company's shares.
The remuneration package of the Chief Executive Officer consists of a base remuneration, a short-term, mid-term and long-term variable remuneration, a pension contribution and various other components. The remuneration package aims to be competitive and is aligned with the responsibilities of a Chief Executive Officer leading a globally operating industrial group with various business platforms.
The Nomination and Remuneration Committee recommends each year a set of objectives directly derived from the business plan and from any other priorities to be assigned to the Chief Executive Officer. These objectives include both Group and individual financial and non-financial targets and are measured over a predetermined time period (up to three years). Those objectives, and the year-end evaluation of the achievements, are documented and submitted by the Committee to the full Board.
The final evaluation leads to an assessment, based on measured results, by the Board of Directors of all performance related elements of the remuneration package of the Chief Executive Officer.
The remuneration package of the BGE members other than the Chief Executive Officer consists of a base remuneration, a short-term, mid-term and long-term variable remuneration, a pension contribution and various other components. The remuneration package aims to be competitive and is aligned with the role and responsibilities of each BGE member, being a member of a team leading a globally operating industrial group with various business platforms.
The Chief Executive Officer evaluates the performance of each of the other members of the BGE and submits his assessment to the Nomination and Remuneration Committee. This evaluation is done annually based on documented objectives directly derived from the business plan and taking into account the specific responsibilities of each BGE member.
The achievements measured against those objectives will determine all performance-related elements of the remuneration package of each BGE member other than the Chief Executive Officer. The objectives include both Group and individual financial and non-financial targets and are measured over a predetermined time period (up to three years).
The actual amount of the remuneration of the Chief Executive Officer and the other members of the BGE is determined by the Board of Directors acting on a reasoned recommendation from the Nomination and Remuneration Committee.
Bekaert regularly evaluates its overall remuneration policies, in order to ensure alignment with the business environment as well as with legislative requirements. The mid-term and long-term variable remuneration policies for the Chief Executive Officer and for the other members of the Executive Management are currently under review, in order to optimize their alignment with the interests of the Company and its shareholders.
The amount of the remuneration and other benefits granted directly or indirectly to the Directors, by the Company or its subsidiaries, in respect of 2014 is set forth on an individual basis in the table below.
The remuneration of the Chairman for the performance of all his duties in the Company was a set gross amount of € 250 000.
The remuneration of each Director, except the Chair, for the performance of the duties as a member of the Board was a set amount of € 42 000, and an amount of € 4 200 for each meeting of the Board attended in person.
The remuneration of the Chair of the Audit and Finance Committee, in the capacity as Chair and member of such a Committee, was an amount of € 4 000 for each Committee meeting attended in person.
The remuneration of each Director, except the Chairman and the Chief Executive Officer, for the performance of his duties as a member of a Board Committee was an amount of € 3 000 for each Committee meeting attended in person.
| in € Set amount | Amount for Board attendance |
Amount for Committee attendance |
Total | |
|---|---|---|---|---|
| Chairman | ||||
| Paul Buysse | 208 350 | 208 350 | ||
| Bert De Graeve | 145 833 | 145 833 | ||
| Board members | ||||
| Alan Begg | 42 000 | 25 200 | 12 000 | 79 200 |
| Leon Bekaert | 42 000 | 25 200 | 9 000 | 76 200 |
| Roger Dalle | 42 000 | 25 200 | 0 | 67 200 |
| Bert De Graeve | 21 000 | 12 600 | 0 | 33 600 |
| Charles de Liedekerke | 42 000 | 25 200 | 9 000 | 76 200 |
| François de Visscher | 42 000 | 21 000 | 6 000 | 69 000 |
| Anthony Galsworthy | 21 000 | 12 600 | 3 000 | 36 600 |
| Hubert Jacobs van Merlen | 42 000 | 25 200 | 6 000 | 73 200 |
| Maxime Jadot | 42 000 | 25 200 | 6 000 | 73 200 |
| Lady Barbara Judge CBE | 42 000 | 25 200 | 29 000 | 96 200 |
| Mei Ye | 21 000 | 25 200 | 0 | 46 200 |
| Matthew Taylor | 21 000 | 12 600 | 0 | 33 600 |
| Bernard van de Walle de Ghelcke | 42 000 | 25 200 | 0 | 67 200 |
| Baudouin Velge | 42 000 | 25 200 | 15 000 | 82 200 |
| Manfred Wennemer | 42 000 | 25 200 | 6 000 | 73 200 |
| Total Directors' Remuneration 1 337 183 |
In his capacity as a Director, the Chief Executive Officer is entitled to the same remuneration as the non-executive Directors, except the remuneration for attending Board Committee meetings for which he receives no compensation (cf. the table above). The remuneration received by the Chief Executive Officer as a Director is included in the base remuneration mentioned in the next table.
The remuneration package of the Chief Executive Officer and the other members of the BGE comprises three performance related elements:
At par level, the value of the variable remuneration elements of the Chief Executive Officer and the other members of the BGE exceeds 25% of their total remuneration. More than a quarter of the total pay-out of this variable remuneration is deferred with at least 24 months, whilst another quarter of the total pay-out does only vest after a period of 3 years.
In line with the leadership changes announced in 2013, Bert De Graeve was Chief Executive Officer until 14 May 2014, after which he became Chairman of the Board of Directors.
As planned, Matthew Taylor, Chief Executive Officer Designate during the first months of the year, was appointed Chief Executive Officer on 14 May 2014.
The amount of the remuneration and other benefits granted directly or indirectly to the Chief Executive Officers, by the Company or its subsidiaries, in respect of 2014 for their Chief Executive Officer role is set forth below.
| Bert De Graeve | Remuneration(1) | Comments |
|---|---|---|
| Base remuneration | 337 415 Includes Belgian base remuneration as well as Belgian and foreign director fees (2) |
|
| Short-term variable remuneration |
125 000 Annual variable remuneration, based on 2014 performance, paid in 2015 |
|
| Mid-term variable remuneration |
0 Mid-term variable remuneration, based on 2012-2014 performance |
|
| Long-term variable remuneration: Normal stock option grant |
0 Number of stock options granted in 2014 |
|
| Pension | 228 986 Defined Contribution Plan | |
| Other remuneration elements |
45 631 Includes: company car and risk insurances |
|
(1) In respect of 2014 (January-May), in €
(2) The base remuneration includes the remuneration received by the Chief
Executive Officer in his capacity as a Director.
| Matthew Taylor | Remuneration(1) | Comments |
|---|---|---|
| Base remuneration | 409 474 Includes Belgian base remuneration as well as Belgian and foreign director fees(2) |
|
| Short-term variable remuneration |
330 208 Annual variable remuneration, based on 2014 performance, paid in 2015(3), as well as a contractual sign-on award |
|
| Mid-term variable remuneration |
0 Mid-term variable remuneration, based on 2012-2014 performance |
|
| Long-term variable remuneration: Normal stock option grant |
80 000 Number of stock options granted in 2014 |
|
| Pension | 80 208 Defined Contribution Plan | |
| Other remuneration elements |
19 907 Includes: company car and risk insurances |
(1) In respect of 2014 (June - December), in €
(2) The base remuneration includes the remuneration received by the Chief
Executive Officer in his capacity as a Director.
(3) This does not include the deferred annual variable remuneration based on 2014 performance
The amount of the remuneration and other benefits granted directly or indirectly to the BGE members other than the Chief Executive Officer, by the Company or its subsidiaries, in respect of 2014 is set forth below on a global basis. This table includes the remuneration and other benefits granted to the Chief Executive Officer Designate until his appointment as Chief Executive Officer on 14 May 2014.
| Remuneration(1) | Comments | |
|---|---|---|
| Base remuneration | 2 917 993 | Includes Belgian base remuneration as well as Belgian and foreign director fees |
| Short-term variable remuneration |
738 790 | Annual variable remuneration, based on 2013 performance, paid in March 2015 |
| Mid-term variable remuneration |
0 | Mid term variable remuneration, based on 2012-2014 performance |
| Pension | 434 230 | Defined Contribution and Defined Benefit Plan |
| Other remuneration elements |
158 549 | Includes : company car and risk insurances |
(1) In respect of 2014, in €
The number of stock options granted to the Chief Executive Officer and the other members of the BGE in 2014, and the number of options exercised by them or forfeited in 2014 are set forth on an individual basis in the table below.
The stock options granted to the Chief Executive Officer and the other BGE members are based on the SOP 2010-2014 plan that was proposed by the Board of Directors and approved by a Special General Meeting in 2010. The plan offers options to acquire existing Company shares. There is one regular offer of options in December in each of the years 2010 through 2014, and the options are granted on the 60th day following the date of their offer (i.e. in February of the following year).
The aggregate number of options to be offered is determined each year by the Board of Directors on the motion of the Nomination and Remuneration Committee. The number of options to be offered to each individual beneficiary is variable in part, based on an assessment of such person's long-term contribution to the success of the Company. The options are offered to the beneficiaries free of charge. Each accepted option entitles the holder to acquire one existing share of the Company against payment of the exercise price, which is conclusively determined at the time of the offer and which is equal to the lower of: (i) the average closing price of the Company shares during the thirty days preceding the date of the offer, and (ii) the last closing price preceding the date of the offer.
The exercise price of the regular stock options offered in December 2013 and granted in February 2014 is € 25.38.
Subject to the closed and prohibited trading periods and to the plan rules, the options can be exercised as from the beginning of the fourth calendar year following the date of their offer until the end of the tenth calendar year following the date of their offer.
The stock options that were exercisable in 2014 are based on the predecessor plans to the SOP 2010-2014 plan. The terms of such earlier plans are similar to those of the SOP 2010-2014 plan, but the options that were granted to employees took the form of subscription rights entitling the holders to acquire newly issued Company shares, while self-employed beneficiaries are entitled to acquire existing shares as in the SOP 2010-2014 plan.
| Name | Number of stock options granted in 2014 |
Number of stock options exercised in 2014 |
Number of stock options forfeited in 2014 |
|---|---|---|---|
| Matthew Taylor | 80 000 | - | - |
| Bruno Humblet | 21 000 | - | - |
| Lieven Larmuseau |
7 500 | - | - |
| Dominique Neerinck |
12 000 | - | - |
| Geert Van Haver | 9 000 | - | - |
| Piet Van Riet | 3 200 | - | - |
| Curd Vandekerckhove |
14 000 | - | - |
| Frank Vromant | 14 000 | - | - |
| Bart Wille | 14 000 | - | - |
Other than the stock options referred to above, no shares or rights to acquire shares are granted to the Chief Executive Officer or to any other member of the BGE.
Belgian law and normal practice are the basis for the severance arrangements with the executive managers, except for the Chief Executive Officer, the Chief Financial Officer and the Chief Human Resources Officer, whose contractual arrangements, entered into at the time of their appointment, provide for a notice period of 12 months.
No member of the Executive Management has left the Group in 2014.
There are no provisions allowing the Company to reclaim any variable remuneration paid to Executive Management based on incorrect financial information.
Bekaert is committed to providing transparent financial information to its shareholders. It is Bekaert's intention to engage constantly in an open dialogue with its shareholders. Bekaert has always chosen to respond promptly to new international standards. The consolidated financial statements are prepared in accordance with the International Financial Reporting Standards (IFRS), which have been adopted by the European Union. Both private and institutional investors can count on our sustained commitment to transparent reporting, be it at shareholders' or analyst meetings.
The Bekaert share is listed on NYSE Euronext Brussels as ISIN BE0974258874 (BEKB) and was first listed in December 1972. The ICB sector code is 2727 Diversified Industrials.
2014 started off with a short period of uncertainty in the markets until a clear growth trend started to emerge thanks to reassuring statements on interest rates from the European Central Bank.
The announcement of Bekaert's full year 2013 results, and of the acquisition of the Pirelli steel cord plants on 28 February 2014, were well received by the markets. The share gained 6.5% on the day of the announcement and continued its positive trend over the subsequent months. This trend was reversed mid-May with the announcement of Bekaert's first quarter trading update and the dividend payment. June through August was a period of ups and downs due to the political uncertainty in Ukraine and Scotland on the one hand, and reassuring statements from FED and ECB on the other hand. The Bekaert share held relatively strong during the summer months.
From September till mid-October, the Bekaert share lost up to 20% on the wave of the Auto Index drop. The markets were concerned by an accumulation of negative news on several economic fronts and on a global level.
On 14 November, Bekaert released its third quarter trading update. The update was well received by the markets and the share price gained approximately 10% in the three days following the announcement, despite of the company's cautious outlook for the fourth quarter of 2014.
Most financial markets declined during the month of December, driven by uncertainties in many areas. Also, the Bekaert share dropped due to concerns following a profit warning by one of Bekaert's tire cord competitors in China.
Share listing*
| in € | 2010 | 2011 | 2012 | 2013 | 2014 |
|---|---|---|---|---|---|
| Price as at 31 December | 85.900 | 24.785 | 21.875 | 25.720 26.345 | |
| Price high | 86.960 | 87.980 | 33.500 | 31.110 30.195 | |
| Price low | 32.867 | 23.500 | 17.210 | 20.010 21.900 | |
| Price average closing | 53.819 | 54.694 | 22.592 | 24.926 27.155 | |
| Daily volume | 195 856 284 289 218 850 126 923 82 813 | ||||
| Daily turnover (in millions of €) | 10.9 | 14.5 | 5.0 | 3.1 | 2.1 |
| Annual turnover (in millions of €) |
2 833 | 3 774 | 1 313 | 796 | 527 |
| Velocity (%. annual) | 85 | 122 | 93 | 54 | 35 |
| Velocity (%. adjusted free float) | 130 | 188 | 144 | 83 | 54 |
| Free float (%) | 61.9 | 61.7 | 61.9 | 62.6 | 61.8 |
* All indicators per share before 2010 are stock split-adjusted
The average daily trading volume was about 83 000 shares in 2014, a decrease by 35%. The volume peaked on 28 February, 451 899 shares were handled.
In the BEL20, Bekaert is ranked as number 18, with a market capitalization of € 1.58 billion, a free float market capitalization of € 1.03 billion (61.80% and within the free float band of 65%), band adjusted velocity at 54% and a weight of 1.08 %.
Bekaert versus NEXT100 and NEXT150
The shareholder structure shows a quite strong internationalization.
In connection with the entry into force of the Act of 2 May 2007 on the disclosure of significant participations (the Transparency Act) Bekaert has, in its Articles of Association, set the thresholds of 3% and 7.50% in addition to the legal thresholds of 5% and each multiple of 5%. An overview of the current notifications of participations of 3% or more can be found in the Parent Company Information section (Interests in share capital).
The principal shareholders own 38.2% of the shares, while the identified institutional shareholders own 30.36% of the shares. Retail represents 13.31% while Private Banking is 6.63% and 4.39% is unidentified. Of the total number of Bekaert shares, 2.87% is in registered form.
As of 31 December 2014 the registered capital of the Company amounts to € 176 914 000, and is represented by 60 111 405 shares without par value. The shares are in registered or dematerialized form.
The Board of Directors has been authorized by the General Meeting of Shareholders held on 9 May 2012 to increase the Company's registered capital in one or more times by an aggregate maximum amount of € 176 000 000 (before any issue premium). The authority is valid for five years from 5 June 2012 and can be renewed in accordance with the applicable statutory provisions. Pursuant to this authorization, the Board of Directors may, among others, effect a capital increase under the authorized capital by means of issuing ordinary shares, subscription rights or convertible bonds and may limit or disapply the preferential subscription right of the Company's shareholders. Furthermore, the Board of Directors has been authorized, for a period of three years from 26 June 2014, to make use of the authorized capital upon receipt by the Company of a notice from the FSMA of a public takeover bid for the Company's securities.
The Board of Directors has made use of its powers under the authorized capital when it on 21 May 2014 resolved to issue senior unsecured convertible bonds due 18 June 2018 for an aggregate amount of approximately € 300 000 000. These convertible bonds carry a coupon of 0.75% per annum and their conversion price amounts to € 37.06 per share.
In connection with the issuance of the convertible bonds, the Board of Directors resolved to disapply the preference subscription right of existing shareholders set forth in Articles 596 and following of the Companies Code. The terms of the convertible bonds allow the Company, upon the conversion of the bonds, to either deliver new shares or existing shares or pay a cash alternative amount.
The total number of outstanding subscription rights under the SOP1 and SOP2005-2009 stock option plans and convertible into Bekaert shares is 490 106.
A total of 47 534 subscription rights were exercised in 2014 under the SOP1 and SOP2005-2009 employee stock option plans, resulting in the issue of 47 534 new Company shares, and an increase of the registered capital by € 141 000 and of the share premium by € 637 914,29.
In addition to the 1 652 677 treasury shares held by it as of 31 December 2013, the Company purchased 2 622 333 own shares in the course of 2014. None of those shares were disposed of in connection with any stock option plans or cancelled in 2014. As a result, the Company held an aggregate 4 275 010 treasury shares as of 31 December 2014.
The fourth regular grant of options under the SOP2010-2014 plan took place on 17 February 2014, when 373 450 options were granted. Each such option will be convertible into one existing Company share at an exercise price of € 25.38.
A fifth and last regular offer of 364 700 options under the SOP2010-2014 plan was made on 18 December 2014, and 349 810 of those options were accepted and were granted on 16 February 2015. Each option of the fifth regular series will be convertible into one existing Company share at an exercise price of € 26.055.
The SOP2010-2014 plan and its predecessor plans comply with the relevant provisions of the Act of 26 March 1999 and with Articles 520ter and 525, last paragraph, of the Companies Code. Detailed information about capital, shares and stock option plans is given in the Financial Review (Note 6.12 to the consolidated financial statements).
In order to mitigate dilution for existing shareholders upon conversion of the convertible bonds, the Board of Directors intends where possible, to repay the principal amount of the convertible bonds in cash and, if the then prevailing share price is above the conversion price, pay the upside in existing shares of the Company. The Board of Directors has initiated a share buy-back program in order to purchase shares, in a number which may or may not equal the maximum number of existing shares which could be required in order to pay the difference between the conversion price and the prevailing share price upon conversion of the bonds. The conversion of the convertible bonds would then have no dilutive effect for existing shareholders.
Furthermore, the terms of the convertible bonds allow the Company to redeem the bonds at their principal amount together with accrued interest in certain circumstances, for example if the Company's shares trade at a price higher than 130% of the conversion price during a certain period after 9 July 2016.
It is the policy of the Board of Directors to propose a profit appropriation to the Annual General Meeting which, insofar as the profit permits, provides a stable or growing dividend while maintaining an adequate level of cash flow for investment and self-financing in order to support future growth. In practice, this means that the Company seeks to maintain a pay-out ratio of around 40% of the result for the period attributable to the Group over the longer term.
Per share*
| in € | 2010 | 2011 | 2012 | 2013 | 2014** |
|---|---|---|---|---|---|
| Intermediate/interim dividend | 0.667 | 0.670 | |||
| Dividend without intermediate/interim | 1.000 | 0.500 | 0.850 | 0.850 | 0.850 |
| Total gross dividend | 1.667 | 1.170 | 0.850 | 0.850 | 0.850 |
| Net dividend*** | 1.250 | 0.878 | 0.638 | 0.638 | 0.638 |
| Coupon number | 12-13 14-15 | 16 | 17 | 18 |
* All indicators per share before 2010 are stock split-adjusted.
** The dividend is subject to approval by the General Meeting of Shareholders 2015.
*** Subject to the applicable taks legislation
The Board of Directors will propose that the Annual General Meeting to be held on 13 May 2015 approve the distribution of a gross dividend € 0.85 per share.
The Annual General Meeting was held on 14 May 2014. An Extraordinary General Meeting was held on the same day. The resolutions of the meetings are available at www.bekaert.com.
More detailed information is available in the Bekaert Shareholders Guide 2014 and at www.bekaert.com.
The Articles of Association contain no restrictions on the transfer of Company shares, except in case of a change of control, for which the prior approval of the Board of Directors has to be requested in accordance with Article 11 of the Articles of Association.
Subject to the foregoing the shares are freely transferable. The Board is not aware of any restrictions imposed by law on the transfer of shares by any shareholder.
Each share entitles the holder to one vote. The Articles of Association contain no restrictions on the voting rights, and each shareholder can exercise his voting rights provided he was validly admitted to the General Meeting and his rights had not been suspended. The admission rules to the General Meeting are laid down in the Companies Code and in Articles 31 and 32 of the Articles of Association. Pursuant to Article 10 the Company is entitled to suspend the exercise of rights attaching to securities belonging to several owners.
No person can vote at General Meetings using voting rights attaching to securities that had not been timely reported in accordance with the law.
The Board is not aware of any other restrictions imposed by law on the exercise of voting rights.
The Board of Directors is not aware of any agreements among shareholders that may result in restrictions on the transfer of securities or the exercise of voting rights, except those disclosed in the notifications referred to in the Parent Company Information section (Interests in share capital).
The Articles of Association (Articles 15 and following) and the Bekaert Charter contain specific rules concerning the (re)appointment, induction and evaluation of Directors.
Directors are appointed for a term not exceeding four years by the General Meeting of Shareholders, which can also dismiss them at any time. An appointment or dismissal requires a simple majority of votes. The candidates for the office of Director who have not previously held that position in the Company must inform the Board of Directors of their candidacy at least two months before the Annual General Meeting.
Only if and when a position of Director prematurely becomes vacant can the remaining Directors appoint (co-opt) a new Director. In such a case the next General Meeting will make the definitive appointment.
The appointment process for Directors is led by the Chairman of the Board. The Nomination and Remuneration Committee submits a reasoned recommendation to the full Board which, on that basis, decides which candidates will be nominated to the General Meeting for appointment. Directors can, as a rule, be reappointed for an indefinite number of terms, provided they are at least 35 and at most 66 years of age at the moment of their initial appointment and they have to resign in the year in which they reach the age of 69.
The Articles of Association can be amended by an Extraordinary General Meeting in accordance with the Companies Code. Each amendment to the Articles requires a qualified majority of votes.
The Board of Directors is authorized by Article 44 of the Articles of Association to increase the registered capital in one or more times by a maximum amount of € 176 000 000. The authority is valid for five years from 5 June 2012, but can be extended by the General Meeting.
Within the framework of that authority the Board can also, during a period of three years from 26 June 2014, increase the registered capital, upon receipt by the Company of a notice from the FSMA of a public takeover bid, and provided that:
This authority can also be extended by the General Meeting.
The Board of Directors is authorized by Article 12 of the Articles of Association to acquire a maximum number of own shares that, in the aggregate, represent no more than 20% of the issued capital, during a period of five years from 5 June 2012 (that can be extended by the General Meeting), at a price ranging between minimum € 1.00 and maximum 30% above the arithmetic average of the closing price of the Bekaert share during the last 30 trading days preceding the Board's resolution to acquire.
The Board is authorized to cancel all or part of the purchased shares during such five-year period. The Board is also authorized to acquire own shares, if required to prevent a threatened serious harm to the Company, including a public takeover bid. Such authority is granted for a period of three years from 5 June 2012, but can be extended by the General Meeting.
Articles 12bis and 12ter of the Articles of Association provide rules for the disposal of purchased shares and for the acquisition and disposal of Company shares by subsidiaries.
The powers of the Board of Directors are more fully described in the applicable legal provisions, the Articles of Association and the Bekaert Charter.
The Company is a party to a number of significant agreements that take effect, alter or terminate upon a change of control of the Company following a public takeover bid or otherwise. To the extent that those agreements grant rights to third parties that affect the assets of the Company or that give rise to a debt or an obligation of the Company, those rights were granted by the Special General Meetings held on 13 April 2006, 16 April 2008, 15 April 2009, 14 April 2010 and 7 April 2011 and by the Annual General Meetings held on 9 May 2012, 8 May 2013 and 14 May 2014 in accordance with Article 556 of the Companies Code: the minutes of those meetings were filed with the Registry of the Commercial Court of Kortrijk on 14 April 2006, 18 April 2008, 17 April 2009, 16 April 2010, 15 April 2011, 30 May 2012, 23 May 2013 and 20 June 2014 respectively and are available at www.bekaert.com.
Most agreements are joint venture contracts (describing the relationship between the parties in the context of a joint venture company), contracts whereby financial institutions or retail investors commit funds to the Company or one of its subsidiaries, and contracts for the supply of products or services by or to the Company. Each of those contracts contains clauses that, in the case of a change of control of the Company, entitle the other party, in certain cases and under certain conditions, to terminate the contract prematurely and, in the case of financial contracts, also to demand early repayment of the loan funds. The joint venture contracts provide that, in the case of a change of control of the Company, the other party can acquire the Company's shareholding in the joint venture (except for the Chinese joint ventures, where the parties have to agree whether one of them will continue the joint venture on its own, whereupon that party has to purchase the other party's shareholding), whereby the value for the transfer of the shareholding is determined in accordance with contractual formulas that aim to ensure a transfer at an arm's length price.
The following description of Bekaert's internal control and risk management systems is based on the Internal Control Integrated Framework (1992) and the Enterprise Risk Management Framework (2004) published by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO").
The accounting and control organization consists of three levels: (i) the accounting team in the different legal entities or shared service centers, responsible for the preparation and reporting of the financial information, (ii) the controllers at the different levels in the organization (such as plant and region), responsible inter alia for the review of the financial information in their area of responsibility, and (iii) the Group Control Department, responsible for the final review of the financial information of the different legal entities and for the preparation of the consolidated financial statements.
Next to the structured controls outlined above, the Internal Audit Department conducts a risk based audit program to validate the internal control effectiveness in the different processes at legal entity level to assure a reliable financial reporting.
Bekaert's consolidated financial statements are prepared in accordance with the International Financial Reporting Standards (IFRS) which have been endorsed by the European Union. These financial statements are also in compliance with the IFRS as issued by the International Accounting Standards Board.
All IFRS accounting principles, guidelines and interpretations, to be applied by all legal entities, are grouped in the IFRS manual, which is available on the Bekaert intranet to all employees involved in financial reporting. Such manual is regularly updated by Group Control in case of relevant changes in IFRS, or interpretations thereof, and the users are informed of any such changes. IFRS trainings take place in the different regions when deemed necessary or appropriate.
The vast majority of the Group companies use Bekaert's global enterprise resource planning ("ERP") system, and the accounting transactions are registered in a common operating chart of accounts, whereby accounting manuals describe the standard way of booking of the most relevant transactions. Such accounting manuals are explained to the users during training sessions, and are available on the Bekaert intranet.
All Group companies use the same software to report the financial data for consolidation and external reporting purposes. A reporting manual is available on the Bekaert intranet and trainings take place when deemed necessary or appropriate.
Appropriate measures are taken to assure a timely and qualitative reporting and to reduce the potential risks related to the financial reporting process, including: (i) proper coordination between the Corporate Communication Department and Group Control, (ii) careful planning of all activities, including owners and timings, (iii) guidelines which are distributed by Group Control to the owners prior to the quarterly reporting, including relevant points of attention, and (iv) follow-up and feedback of the timeliness, quality and lessons learned in order to strive for continuous improvement.
A quarterly review takes place of the financial results, findings by the Internal Audit Department, and other important control events, the results of which are discussed with the Statutory Auditor.
Material changes to the IFRS accounting principles are coordinated by Group Control, reviewed by the Statutory Auditor, reported to the Audit and Finance Committee, and acknowledged by the Board of Directors of the Company.
Material changes to the statutory accounting principles of a Group company are approved by its Board of Directors.
The proper application by the legal entities of the accounting principles as described in the IFRS manual, as well as the accuracy, consistency and completeness of the reported information, is reviewed on an ongoing basis by the control organization (as described above). In addition, all relevant entities are controlled by the Internal Audit Department on a periodic basis. Policies and procedures are in place for the most important underlying processes (sales, procurement, investments, treasury, etc.), and are subject to (i) an evaluation by the respective management teams using a self-assessment tool, and (ii) control by the Internal Audit Department on a rotating basis.
A close monitoring of potential segregation of duties conflicts in the ERP system is carried out.
Bekaert has deployed in the majority of the Group companies a global ERP system platform to support the efficient processing of business transactions and provide its management with transparent and reliable management information to monitor, control and direct its business operations.
The provision of information technology services to run, maintain and develop those systems is to a large extent outsourced to professional IT service delivery organizations which are directed and controlled through appropriate IT governance structures and monitored on their delivery performance through comprehensive service level agreements.
Together with its IT providers, Bekaert has implemented adequate management processes to assure that appropriate measures are taken on a daily basis to sustain the performance, availability and integrity of its IT systems. At regular intervals the adequacy of those procedures is reviewed and audited and where needed further optimized.
Proper assignment of responsibilities, and coordination between the pertinent departments, assures an efficient and timely communication process of periodic financial information to the market. In the first and third quarters a trading update is released, whereas at midyear and yearend all relevant financial information is disclosed. Prior to the external reporting, the sales and financial information is subject to (i) the appropriate controls by the above-mentioned control organization, (ii) review by the Audit and Finance Committee , and (iii) approval by the Board of Directors of the Company.
Any significant change of the IFRS accounting principles as applied by Bekaert is subject to review by the Audit and Finance Committee and approval by the Company's Board of Directors, including the first-time adoption of IFRS in 2000.
On a periodic basis, the members of the Board of Directors are updated on the evolution and important changes in the underlying IFRS standards. All relevant financial information is presented to the Audit and Finance Committee and the Board of Directors to enable them to analyze the financial statements. All related press releases are approved prior to communication to the market.
Relevant findings by the Internal Audit Department and/or the Statutory Auditor on the application of the accounting principles, as well as the adequacy of the policies and procedures, and segregation of duties, are reported to the Audit and Finance Committee.
Also a periodic treasury update is submitted to the Audit and Finance Committee.
A procedure is in place to convene the appropriate governing body of the Company on short notice if and when circumstances so dictate.
General internal control and ERMThe Board of Directors and the BGE have approved the Bekaert Code of Conduct, which was first issued on 1 December 2004 and updated on 1 March 2009. The Code of Conduct sets forth the Bekaert mission and beliefs as well as the basic principles of how Bekaert wants to do business. Implementation of the Code of Conduct is mandatory for all companies of the Group. The Code of Conduct is included in the Bekaert Charter as Appendix 3 and available at www.bekaert.com.
More detailed policies and guidelines are developed as considered necessary to ensure consistent implementation of the Code of Conduct throughout the Group.
Bekaert's internal control framework consists of a set of group policies for the main business processes, which applies Group-wide. Bekaert has different tools in place to constantly monitor the effectiveness and efficiency of the design and the operation of the internal control framework. A mandatory training on internal control is organized for all new employees and a self-assessment tool is in place allowing management teams to evaluate themselves on the internal control status. The Internal Audit Department monitors the internal control situation based on the global framework and reports to the Audit and Finance Committee at each of its meetings.
The BGE regularly evaluates the Group's exposure to risk, its potential financial impact and the actions required to monitor and control the exposure.
At the request of the Board of Directors and the Audit and Finance Committee management has developed a permanent global enterprise risk management ("ERM") framework to assist the Group in managing uncertainty in Bekaert's value creation process on an explicit basis. The framework consists of the identification, assessment and prioritization of the major risks confronting Bekaert, and of the continuous reporting and monitoring of those major risks (including the development and implementation of risk mitigation plans).
The risks are identified in five risk categories: business, operational, financial, corporate and country risks. The identified risks are classified on two axes: probability and impact or consequence. Decisions are made and action plans defined to mitigate the identified risks. Also the risk sensitivity evolution (decrease, increase, stable) is measured to address the effectiveness of the action implementation and potential risk context changes.
Bekaert's 2014 ERM report includes among others, the following potential risks:
The overview of the development and the results of the business and of the position of the whole of the companies included in the consolidation is included in the Financial Review, starting at page 4 of the 2014 Annual Report 1.
A description of the principal risks and uncertainties is included in the Corporate Governance Statement, page 52 of the first part of the 2014 Annual Report. In addition, reference is made to Notes 3 and 7.3 to the consolidated financial statements, pages 74-88 of the Financial Review in the 2014 Annual Report.
| Consolidated financial statements 4 | |
|---|---|
| Consolidated income statement 4 | |
| Consolidated statement of comprehensive income 5 | |
| Consolidated balance sheet 6 | |
| Consolidated statement of changes in equity 7 | |
| Consolidated cash flow statement 8 |
| 1. | General information 9 | |
|---|---|---|
| 2. | Summary of principal accounting policies 9 | |
| 2.1. | Statement of compliance 9 | |
| - New and amended standards and interpretations 9 |
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| 2.2. | General principles 11 | |
| - Basis of preparation 11 |
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| - Principles of consolidation 11 |
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| - Foreign currency translation 11 |
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| 2.3. | Balance sheet items 12 | |
| - Intangible assets 12 |
||
| - Goodwill and business combinations 13 |
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| - Property, plant and equipment 13 - Leases 13 |
||
| - Government grants 14 |
||
| - Financial assets 14 |
||
| - Inventories 15 |
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| - Share capital 15 |
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| - Non-controlling interests 15 |
||
| - Provisions 15 |
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| - Employee benefit obligations 15 |
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| - Interest-bearing debt 16 |
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| - Trade payables and other current liabilities 16 |
||
| - Income taxes 16 |
||
| - Derivatives, hedging and hedging reserves 17 - Impairment of assets 17 |
||
| 2.4. | Income statement items 18 | |
| - Revenue recognition 18 |
||
| - Non-recurring items 18 |
||
| 2.5. | Statement of comprehensive income and statement of changes in equity 18 | |
| 2.6. | Miscellaneous 18 | |
| - Non-current assets held for sale and discontinued operations 18 |
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| - Contingencies 19 |
||
| - Events after the balance sheet date 19 |
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| 3. | Critical accounting judgments and key sources of estimation uncertainty 20 | |
| 3.1. | Critical judgments in applying the entity's accounting policies 20 | |
| 3.2. | Key sources of estimation uncertainty 21 | |
| 4. | Segment reporting 22 | |
| 5. | Income statement items and other comprehensive income 26 | |
| 5.1. | Operating result (EBIT) by function 26 | |
| 5.2. | Operating result (EBIT) by nature 28 | |
| 5.3. | Interest income and expense 29 |
| 5.4. | Other financial income and expenses 29 | |
|---|---|---|
| 5.5. | Income taxes 30 | |
| 5.6. | Share in the results of joint ventures and associates 31 | |
| 5.7. | Earnings per share 31 | |
| 6. | Balance sheet items 33 | |
| 6.1. | Intangible assets 33 | |
| 6.2. | Goodwill 34 | |
| 6.3. | Property, plant and equipment 36 | |
| 6.4. | Investments in joint ventures and associates 38 | |
| 6.5. | Other non-current assets 41 | |
| 6.6. | Deferred tax assets and liabilities 42 | |
| 6.7. | Operating working capital 45 | |
| 6.8. | Other receivables 46 | |
| 6.9. | Cash & cash equivalents and short-term deposits 46 | |
| 6.10. Other current assets 47 | ||
| 6.11. Assets classified as held for sale and liabilities associated with those assets 47 | ||
| 6.12. Ordinary shares, treasury shares, subscription rights and share options 48 | ||
| 6.13. Retained earnings and other Group reserves 52 | ||
| 6.14. Non-controlling interests 55 | ||
| 6.15. Employee benefit obligations 57 | ||
| 6.16. | Provisions 63 | |
| 6.17. Interest-bearing debt 64 | ||
| 6.18. Other non-current liabilities 65 | ||
| 6.19. Other current liabilities 65 | ||
| 7. | Miscellaneous items 66 | |
| 7.1. | Notes to the cash flow statement 66 | |
| 7.2. | Effect of business combinations 68 | |
| 7.3. | Financial risk management and financial derivatives 74 | |
| 7.4. | Off-balance-sheet commitments 89 | |
| 7.5. | Related parties 90 | |
| 7.6. | Events after the balance sheet date 91 | |
| 7.7. | Services provided by the statutory auditor and related persons 91 | |
| 7.8. | Subsidiaries, joint ventures and associates 92 |
| Parent company information 96 | |
|---|---|
| Annual report of the Board of Directors and financial statements of NV Bekaert SA 96 Proposed appropriation of NV Bekaert SA 2014 result 98 Appointments pursuant to the Articles of Association 99 |
| Auditor's report 100 |
|---|
| in thousands of € - Year ended 31 December | Notes | 2013 | 2014 |
|---|---|---|---|
| Sales | 5.1. | 3 185 628 | 3 215 714 |
| Cost of sales | 5.1. | -2 703 316 | -2 729 995 |
| Gross profit | 5.1. | 482 312 | 485 719 |
| Selling expenses | 5.1. | -128 207 | -138 126 |
| Administrative expenses | 5.1. | -124 924 | -126 894 |
| Research and development expenses | 5.1. | -62 429 | -59 261 |
| Other operating revenues | 5.1. | 12 502 | 21 978 |
| Other operating expenses | 5.1. | -13 337 | -19 009 |
| Operating result before non-recurring items (REBIT) | 5.1. | 165 917 | 164 407 |
| Non-recurring items | 5.1. | -28 647 | 6 847 |
| Operating result (EBIT) | 5.1. / 5.2. | 137 270 | 171 254 |
| Interest income | 5.3. | 6 449 | 5 291 |
| Interest expense | 5.3. | -70 154 | -68 215 |
| Other financial income and expenses | 5.4. | -19 822 | -3 730 |
| Result before taxes | 53 743 | 104 600 | |
| Income taxes | 5.5. | -47 916 | -42 376 |
| Result after taxes (consolidated companies) | 5 827 | 62 224 | |
| Share in the results of joint ventures and associates | 5.6. | 30 244 | 25 330 |
| RESULT FOR THE PERIOD | 36 071 | 87 554 | |
| Attributable to | |||
| the Group | 24 574 | 87 176 | |
| non-controlling interests | 6.14. | 11 497 | 378 |
| Earnings per share in € per share |
5.7. | 2013 | 2014 |
| Result for the period attributable to the Group | |||
| Basic | 0.420 | 1.513 | |
| Diluted | 0.419 | 1.333 |
The accompanying notes are an integral part of this income statement.
| in thousands of € - Year ended 31 December | Notes | 2013 | 2014 |
|---|---|---|---|
| Result for the period | 36 071 | 87 554 | |
| Other comprehensive income (OCI) | 6.13. | ||
| Other comprehensive income reclassifiable to income statement | |||
| in subsequent periods | |||
| Exchange differences | |||
| Exchange differences arising during the year | -85 642 | 91 826 | |
| Reclassification adjustments relating to entity disposals | |||
| or step acquisitions | -463 | 1 042 | |
| Inflation adjustments | 758 | 1 574 | |
| Cash flow hedges | |||
| Fair value changes to hedging instruments | 3 889 | -7 896 | |
| Reclassification adjustments for amounts | |||
| recognized in income statement | -3 035 | 8 651 | |
| Available-for-sale investments | |||
| Net fair value gain on available-for-sale investments during the year | 783 | 1 248 | |
| Reclassification adjustments relating to impairments or disposals | -10 | 157 | |
| Deferred taxes relating to reclassifiable OCI | 6.6. | -2 201 | 1 066 |
| OCI reclassifiable to income statement in subsequent periods, after | |||
| tax | -85 921 | 97 668 | |
| Other comprehensive income non-reclassifiable to income statement | |||
| in subsequent periods | |||
| Remeasurement gains and losses on defined-benefit plans | 21 734 | -28 418 | |
| Share of non-reclassifiable OCI of joint ventures and associates | - | -219 | |
| Deferred taxes relating to non-reclassifiable OCI | 6.6. | 826 | 1 021 |
| OCI non-reclassifiable to income statement in subsequent periods, | |||
| after tax | 22 560 | -27 616 | |
| Other comprehensive income for the period | -63 361 | 70 052 | |
| TOTAL COMPREHENSIVE INCOME FOR THE PERIOD | -27 290 | 157 606 | |
| Attributable to | |||
| the Group | -23 472 | 141 948 | |
| non-controlling interests | 6.14. | -3 818 | 15 658 |
The accompanying notes are an integral part of this statement of comprehensive income.
| in thousands of € | Notes | 2013 | 2014 |
|---|---|---|---|
| Non-current assets | 1 608 640 | 1 850 842 | |
| Intangible assets | 6.1. | 71 043 | 98 087 |
| Goodwill | 6.2. | 16 369 | 18 483 |
| Property, plant and equipment | 6.3. | 1 239 058 | 1 432 803 |
| Investments in joint ventures and associates | 6.4. | 155 838 | 155 734 |
| Other non-current assets | 6.5. | 48 781 | 44 468 |
| Deferred tax assets | 6.6. | 77 551 | 101 267 |
| Current assets | 1 771 817 | 2 106 873 | |
| Inventories | 6.7. | 539 265 | 640 807 |
| Bills of exchange received | 6.7. | 110 218 | 114 118 |
| Trade receivables | 6.7. | 583 215 | 707 569 |
| Other receivables | 6.8. | 83 781 | 106 627 |
| Short-term deposits | 6.9. | 10 172 | 14 160 |
| Cash and cash equivalents | 6.9. | 391 857 | 458 542 |
| Other current assets | 6.10. | 51 213 | 65 050 |
| Assets classified as held for sale | 6.11. | 2 096 | - |
| Total | 3 380 457 | 3 957 715 |
| in thousands of € | Notes | 2013 | 2014 |
|---|---|---|---|
| Equity | 1 503 876 | 1 566 212 | |
| Share capital | 6.12. | 176 773 | 176 914 |
| Share premium | 31 055 | 31 693 | |
| Retained earnings | 6.13. | 1 307 618 | 1 352 197 |
| Other Group reserves | 6.13. | -169 170 | -194 013 |
| Equity attributable to the Group | 1 346 276 | 1 366 791 | |
| Non-controlling interests | 6.14. | 157 600 | 199 421 |
| Non-current liabilities | 904 966 | 1 204 581 | |
| Employee benefit obligations | 6.15. | 136 602 | 175 774 |
| Provisions | 6.16. | 40 510 | 55 744 |
| Interest-bearing debt | 6.17. | 688 244 | 910 074 |
| Other non-current liabilities | 6.18. | 2 587 | 8 736 |
| Deferred tax liabilities | 6.6. | 37 023 | 54 253 |
| Current liabilities | 971 615 | 1 186 922 | |
| Interest-bearing debt | 6.17. | 321 907 | 441 552 |
| Trade payables | 6.7. | 338 864 | 390 943 |
| Employee benefit obligations | 6.7. / 6.15. | 121 117 | 121 934 |
| Provisions | 6.16. | 23 912 | 20 493 |
| Income taxes payable | 83 329 | 97 424 | |
| Other current liabilities | 6.19. | 82 486 | 114 576 |
| Liabilities associated with assets classified as held for sale | 6.11. | - | - |
| Total | 3 380 457 | 3 957 715 |
The accompanying notes are an integral part of this balance sheet.
| Other Group reserves1 | ||||||||
|---|---|---|---|---|---|---|---|---|
| in thousands of € | Share capital | Share premium |
Retained earnings |
Other reserves |
Cumulative translation adjust ments |
Equity attributable to the Group |
Non controlling interests2 |
Total |
| Balance as at | ||||||||
| 1 January 2013 | 176 586 | 30 194 | 1 325 410 | -94 133 | -16 087 | 1 421 970 | 181 623 | 1 603 593 |
| Total comprehensive | ||||||||
| income for the period | - | - | 27 551 | 20 658 | -71 681 | -23 472 | -3 818 | -27 290 |
| Reclassifications | - | - | 4 179 | - | 2 992 | 7 171 | -7 171 | - |
| Effect of changes in group | ||||||||
| structure | - | - | 74 | - | - | 74 | -74 | - |
| Equity-settled share-based payment plans |
- | - | - | 4 356 | - | 4 356 | - | 4 356 |
| Creation of new shares | 187 | 861 | - | - | - | 1 048 | - | 1 048 |
| Treasury shares transactions |
- | - | - | -15 275 | - | -15 275 | - | -15 275 |
| Dividends | - | - | -49 596 | - | - | -49 596 | -12 960 | -62 556 |
| Balance as at | ||||||||
| 31 December 2013 | 176 773 | 31 055 | 1 307 618 | -84 394 | -84 776 | 1 346 276 | 157 600 | 1 503 876 |
| Balance as at | ||||||||
| 1 January 2014 | 176 773 | 31 055 | 1 307 618 | -84 394 | -84 776 | 1 346 276 | 157 600 | 1 503 876 |
| Total comprehensive income for the period |
- | - | 89 003 | -23 916 | 76 861 | 141 948 | 15 658 | 157 606 |
| Capital contribution by non controlling interests |
- | - | - | - | - | - | 53 399 | 53 399 |
| Effect of changes in group structure |
- | - | 5 226 | -10 297 | 1 766 | -3 305 | 25 988 | 22 683 |
| Equity-settled share-based payment plans |
- | - | - | 2 845 | - | 2 845 | - | 2 845 |
| Creation of new shares | 141 | 638 | - | - | - | 779 | - | 779 |
| Treasury shares | ||||||||
| transactions | - | - | - | -72 102 | - | -72 102 | - | -72 102 |
| Dividends | - | - | -49 650 | - | - | -49 650 | -53 224 | -102 874 |
| Balance as at | ||||||||
| 31 December 2014 | 176 914 | 31 693 | 1 352 197 | -187 864 | -6 149 | 1 366 791 | 199 421 | 1 566 212 |
1 See note 6.13. 'Retained earnings and other Group reserves'.
2 See note 6.14. 'Non-controlling interests'.
The accompanying notes are an integral part of this statement.
| in thousands of € - Year ended 31 December | Notes | 2013 | 2014 |
|---|---|---|---|
| Operating activities | |||
| Operating result (EBIT) | 5.1. / 5.2. | 137 270 | 171 254 |
| Non-cash items included in operating result | 7.1. | 192 884 | 187 847 |
| Investing items included in operating result | 7.1. | 480 | -8 057 |
| Amounts used on provisions and employee benefit obligations | 7.1. | -45 329 | -44 452 |
| Income taxes paid | 5.5. / 7.1. | -51 507 | -45 827 |
| Gross cash flows from operating activities | 233 798 | 260 765 | |
| Change in operating working capital | 6.7. | 78 491 | -54 623 |
| Other operating cash flows | 7.1. | -6 526 | -19 193 |
| Cash flows from operating activities | 305 763 | 186 949 | |
| Investing activities | |||
| New business combinations | 7.2. | - | -108 512 |
| Other portfolio investments | - | -1 973 | |
| Proceeds from disposals of investments | 6 668 | 3 103 | |
| Dividends received | 6.4. | 13 705 | 20 724 |
| Purchase of intangible assets | 6.1. / 7.2. | -2 176 | -21 752 |
| Purchase of property, plant and equipment | 6.3. | -94 637 | -132 784 |
| Other investing cash flows | 7.1. | 4 474 | 15 847 |
| Cash flows from investing activities | -71 966 | -225 347 | |
| Financing activities | |||
| Interest received | 5.3. | 9 989 | 5 338 |
| Interest paid | 5.3. | -75 291 | -61 069 |
| Gross dividend paid to shareholders of NV Bekaert SA | -49 596 | -49 650 | |
| Gross dividend paid to non-controlling interests | -8 745 | -16 746 | |
| Proceeds from non-current interest-bearing debt | 6.17. | 80 036 | 343 960 |
| Repayment of non-current interest-bearing debt | 6.17. | -202 201 | -191 172 |
| Cash flows from / to (-) current interest-bearing debt | 6.17. | -34 338 | 147 605 |
| Treasury shares transactions | 6.13. | -15 275 | -72 102 |
| Other financing cash flows | 7.1. | 103 005 | -18 219 |
| Cash flows from financing activities | -192 416 | 87 945 | |
| Net increase or decrease (-) in cash and cash equivalents | 41 381 | 49 547 | |
| Cash and cash equivalents at the beginning of the period | 352 312 | 391 857 | |
| Effect of exchange rate fluctuations | -1 836 | 17 138 | |
| Cash and cash equivalents at the end of the period | 391 857 | 458 542 |
The accompanying notes are an integral part of this statement.
NV Bekaert SA (the 'Company') is a company domiciled in Belgium. The Company's consolidated financial statements include those of the Company and its subsidiaries (together referred to as the 'Group' or 'Bekaert') and the Group's interest in joint ventures and associates accounted for using the equity method. The consolidated financial statements were authorized for issue by the Board of Directors of the Company on 25 March 2015.
The consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRSs) which have been endorsed by the European Union. These financial statements are also in compliance with the IFRSs as issued by the IASB.
The following new interpretation and revised standards have been adopted in the current period. Their adoption has not had any impact on the amounts reported in these financial statements, but may impact the accounting for future transactions or arrangements.
May 2013. These amendments relate to recoverable amount disclosures for non-financial assets.
The Group did not elect for early application of the following new or amended standards, which could have an impact when applied:
IFRS 9 'Financial instruments' (effective 1 January 2018). All recognized financial assets that are within the scope of IAS 39 are required to be subsequently measured at amortized cost or fair value. Only debt investments acquired with the intention of collecting the contractual cash flows until their maturity are measured at amortized cost. Other debt investments and all equity investments are measured at fair value. With regard to the measurement of financial liabilities designated at fair value through profit or loss, IFRS 9 requires that the change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is presented in other comprehensive income, except if such treatment would create or enlarge an accounting mismatch in profit or loss. IFRS 9 also modifies the requirements with respect to hedge accounting and introduces the expected loss model for impairment of financial assets.
IFRS 15 'Revenue from Contracts with Customers' (effective 1 January 2017), establishing a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. The new standard introduces a 5-step approach to revenue recognition and measurement: (1) identify the contract with the customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; (5) recognize revenue when (or as) the entity satisfies a performance obligation. It also requires extensive disclosures.
there is no deep market in high quality corporate bonds, the discount rate to be used for postemployment benefit obligations should be based on market yields on government bonds denominated in that currency. It also requires the application of this principle from the beginning of the earliest comparative period presented in the first financial statements in which the entity applies the amendment. Bekaert expects an initial adjustment of about € 7.5 million (based on yearend 2014 data) to be charged against retained earnings at first application of the amendment, which would mainly affect the defined-benefit obligations in Ecuador.
At this stage, the Group does not expect first adoption of any other amendments to standards and new interpretations to have a material impact on the financial statements, such as:
The consolidated financial statements are presented in thousands of euros, under the historical cost convention, except for investments held for trading and available for sale, which are stated at their fair value. Financial assets which do not have a quoted price in an active market and the fair value of which cannot be reliably measured are carried at cost. Unless explicitly stated, the accounting policies are applied consistently with the previous year.
Subsidiaries are entities over which NV Bekaert SA exercises control, which is the case when the Company is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect these returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date when the Group acquires control until the date when control is relinquished. All intercompany transactions, balances with and unrealized gains on transactions between Group companies are eliminated; unrealized losses are also eliminated unless the impairment is permanent. Equity and net result attributable to non-controlling shareholders are shown separately in the balance sheet and income statement, respectively. Changes in the Group's ownership interests in subsidiaries that do not result in the Group losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the Group's interests and the noncontrolling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognized directly in equity. When the Group loses control of a subsidiary, the profit or loss on disposal is calculated as the difference between:
A joint arrangement exists when NV Bekaert SA has contractually agreed to share control with one or more other parties, which is the case only when decisions about the relevant activities require the unanimous consent of the parties sharing control. A joint arrangement can be treated as a joint operation (i.e. NV Bekaert SA has rights to the assets and obligations for the liabilities) or a joint venture (i.e. NV Bekaert SA only has rights to the net assets). Associates are companies in which
NV Bekaert SA, directly or indirectly, has a significant influence and which are neither subsidiaries nor joint arrangements. This is presumed if the Group holds at least 20% of the voting rights attaching to the shares. The financial information included for these companies is prepared using the accounting policies of the Group. When the Group has acquired joint control in a joint venture or significant influence in an associate, the share in the acquired assets, liabilities and contingent liabilities is initially remeasured to fair value at the acquisition date and accounted for using the equity method. Any excess of the purchase price over the fair value of the share in the assets, liabilities and contingent liabilities acquired is recognized as goodwill. When the goodwill is negative, it is immediately recognized in profit or loss. Subsequently, the consolidated financial statements include the Group's share of the results of joint ventures and associates accounted for using the equity method until the date when joint control or significant influence ceases. If the Group's share of the losses of a joint venture or associate exceeds the carrying amount of the investment, the investment is carried at nil value and recognition of additional losses is limited to the extent of the Group's commitment. Unrealized gains arising from transactions with joint ventures and associates are set against the investment in the joint venture or associate concerned to the extent of the Group's interest. The carrying amounts of investments in joint ventures and associates are reassessed if there are indications that the asset has been impaired or that impairment losses recognized in prior years have ceased to apply. The investments in joint ventures and associates in the balance sheet include the carrying amount of any related goodwill.
Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates ('the functional currency'). The consolidated financial statements are presented in euro, which is the Company's functional and the Group's presentation currency. Financial statements of foreign entities are translated as follows:
Exchange differences arising from the translation of the net investment in foreign subsidiaries, joint ventures and associates at the closing exchange rate are included in shareholders' equity under 'cumulative translation adjustments'. On disposal of foreign entities, cumulative translation adjustments are recognized in the income statement as part of the gain or loss on the sale. In the financial statements of the parent company and its subsidiaries, monetary assets and liabilities denominated in foreign currency are translated at the exchange rate at the balance sheet date, thus giving rise to unrealized exchange results. Unrealized and realized foreign-exchange gains and losses are recognized in the income statement, except when deferred in equity as qualifying cash flow hedges and qualifying net investment hedges. Goodwill is treated as an asset of the acquiree and is accordingly accounted for in the acquiree's currency and translated at the closing rate.
Intangible assets acquired in a business combination are initially measured at fair value; intangible assets acquired separately are initially measured at cost. After initial recognition, intangible assets are measured at cost or fair value less accumulated amortization and any accumulated impairment losses. Intangible assets are amortized on a straight-line basis over the best estimate of their useful lives. The amortization period and method are reviewed at each financial year-end. A change in the useful life of an intangible asset is accounted for prospectively as a change in estimate. Under the provisions of IAS 38 'Intangible Assets' may have indefinite useful lives. If the useful life of an intangible asset is deemed indefinite, no amortization is recognized and the asset is reviewed at least annually for impairment.
Expenditure on acquired licenses, patents, trademarks and similar rights is capitalized and amortized on a straight-line basis over the contractual period, if any, or the estimated useful life, which is normally considered not to be longer than ten years.
Generally, costs associated with the acquisition, development or maintenance of computer software are recognized as an expense when they are incurred, but external costs directly associated with the acquisition and implementation of acquired ERP software are recognized as intangible assets and amortized over five years on a straight-line basis.
Rights to use land are recognized as intangible assets and are amortized over the contractual period on a straight-line basis.
Expenditure on research activities undertaken with the prospect of gaining new scientific or technological knowledge and understanding is recognized in the income statement as an expense when it is incurred.
Expenditure on development activities where research findings are applied to a plan or design for the production of new or substantially improved products and processes prior to commercial production or use is capitalized if, and only if, all of the recognition criteria set out below are met:
Capitalized development costs are amortized from the commencement of commercial production of the product on a straight-line basis over the period during which benefits are expected to accrue. The period of amortization normally does not exceed ten years. An in-process research and development project acquired in a business combination is recognized as an asset separately from goodwill if its fair value can be measured reliably.
In the absence of any IASB standard or interpretation regulating the accounting treatment of CO2 emission rights, the Group has applied the 'net approach', according to which:
Other intangible assets mainly include customer lists and other intangible commercial assets, such as brand names, acquired separately or in a business combination. These are amortized on a straight-line basis over their estimated useful life.
Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and the equity interests issued by the Group in exchange for control of the acquiree. Acquisition-related costs are recognized in profit or loss as incurred. The identifiable assets acquired and the liabilities assumed are recognized at their fair value at the acquisition date. Goodwill is measured as the difference between:
(i) the sum of the following elements:
(ii) the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If, after reassessment, this difference is negative ("negative goodwill"), it is recognized immediately in profit or loss as a bargain purchase gain.
Non-controlling interests are initially measured either at fair value or at theirOf proportionate share of the recognized amounts of the acquiree's identifiable net assets. The choice of measurement basis is made on a transaction-by-transaction basis.
When the consideration transferred by the Group in a business combination includes assets or liabilities resulting from a contingent consideration arrangement, the contingent consideration is measured at its acquisition-date fair value and included as part of the consideration transferred in a business combination. Subsequent changes in the fair value of the contingent consideration are recognized in profit or loss.
When a business combination is achieved in stages, the Group's previously held equity interest in the acquiree is remeasured to fair value at the acquisition date (i.e. the date when the Group obtains control) and any resulting gain or loss is recognized in profit or loss. Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognized in other comprehensive income are reclassified to profit or loss where such treatment would be appropriate if that interest were disposed of.
For the purpose of impairment testing, goodwill is allocated to each of the Group's cash-generating units that are expected to benefit from the synergies of the combination. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit's value may be impaired. If the recoverable amount of the cashgenerating unit is less than the carrying amount of
the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit in proportion to the carrying amount of each asset in the unit. An impairment loss recognized for goodwill is not reversed in a subsequent period.
The Group has opted for the historical cost model and not for the revaluation model. Property, plant and equipment separately acquired is initially measured at cost. Property, plant and equipment acquired in a business combination is initially measured at fair value, which thus becomes its deemed cost. After initial recognition, property, plant and equipment is measured at cost less accumulated depreciation and accumulated impairment losses. Cost includes all direct costs and all expenditure incurred to bring the asset to its working condition and location for its intended use. Borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset are capitalized as part of the cost of that asset. Depreciation is provided over the estimated useful lives of the various classes of property, plant and equipment on a straight-line basis.
The useful life and depreciation method are reviewed at least at each financial year-end. Unless revised due to specific changes in the estimated economic useful life, annual depreciation rates are as follows:
| - land | 0% |
|---|---|
| - buildings | 5% |
| - plant, machinery | |
| and equipment | 8%-25% |
| - R&D testing equipment | 16.7%-25% |
| - furniture and vehicles | 20% |
| - computer hardware | 25% |
Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or, where shorter, the term of the relevant lease. Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount (see section on 'Impairment of assets'). Gains and losses on disposal are included in the operating result.
Leases under which the Group assumes substantially all the risks and rewards of ownership are classified as finance leases. Items of property, plant and equipment acquired by way of finance lease are stated at the lower of their fair value and the present value of the minimum lease payments at inception of the lease, less accumulated depreciation and impairment losses. In calculating the present value of the minimum lease payments, the discount factor used is the interest rate implicit
in the lease, when it is practicable to determine it; otherwise the Company's incremental borrowing rate is used. Initial direct costs are included as part of the asset. Lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge is allocated to periods during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. A finance lease gives rise to a depreciation expense for the asset as well as a finance expense for each accounting period. The depreciation policy for leased assets is consistent with that for owned depreciable assets.
Leases under which substantially all the risks and rewards of ownership are effectively retained by the lessor are classified as operating leases. Lease payments under an operating lease are recognized as an expense on a straight-line basis over the lease term. The aggregate benefit of incentives provided by the lessor is recognized, on a straightline basis, as a reduction of rental expense over the lease term. Improvements to buildings held under operating leases are depreciated over their expected useful lives, or, where shorter, the term of the relevant lease.
Government grants relating to the purchase of property, plant and equipment are deducted from the cost of these assets. They are recognized in the balance sheet at their expected value at the time of initial government approval and corrected, if necessary, after final approval. The grant is amortized over the depreciation period of the underlying assets.
The Group classifies its financial assets in the following categories: at fair value through profit or loss, loans and receivables and available for sale. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition.
Financial assets are classified as at fair value through profit or loss if they are held for trading. Financial assets at FVTPL are stated at fair value, with any resultant gains or losses recognized in profit or loss. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term. Derivatives are also categorized as at FVTPL unless they are designated and effective as hedges.
Loans and receivables are non-derivative financial assets with fixed or determinable payments which are not quoted in an active market. The Group's loans and receivables category comprises, unless stated otherwise, trade and other receivables, bills of exchange received, short-term deposits and cash and cash equivalents in the balance sheet. Loans and receivables are measured at amortized cost using the effective interest method, less any impairment.
Payment by means of bills of exchange (bank acceptance drafts) is a widespread practice in China. Bills of exchange received are either settled at maturity date, discounted before the maturity date or transferred to a creditor to settle a liability. Discounting is done either with or without recourse. With recourse means that the discounting bank can claim reimbursement of the amount paid in case the issuer defaults. When a bill is discounted with recourse, the amount received is not deducted from the outstanding bills of exchange received, but a liability is recognized in 'current interest-bearing debt' until the maturity date of that bill.
Cash equivalents and short-term deposits are shortterm investments that are readily convertible to known amounts of cash. They are subject to insignificant risk of change in value. Cash equivalents are highly liquid and have original maturities of three months or less, while short-term deposits have original maturities of more than three months and less than one year.
Non-current available-for-sale assets include investments in entities which were not acquired principally for the purpose of selling in the short term, and which are neither consolidated nor accounted for using the equity method. Assets classified in this category are stated at fair value, with any resultant gains or losses recognized directly in equity. In case of an impairment loss, the accumulated loss is recycled from equity to the income statement. However, they are stated at cost if they do not have a quoted price in an active market and their fair value cannot be reliably measured by alternative valuation methods.
Financial assets, other than those at FVTPL, are tested for impairment when there is objective evidence that they could be impaired. A significant or prolonged decline in the fair value of an investment in an equity instrument below its cost provides objective evidence of impairment. The Group defines a significant decline as exceeding 30% of the cost and a prolonged decline as continuing for more than one year. When a decline in the fair value of an available-for-sale financial asset has been recognized in other comprehensive income and there is objective evidence that the asset is impaired, the cumulative loss that had been recognized in other comprehensive income is reclassified from equity to the income statement as an impairment loss. For trade receivables and bills of exchange received, amounts deemed uncollectible are written off against the corresponding allowance account at each balance sheet date. Additions to and recoveries from this allowance account are reported under 'selling expenses' in the income statement.
Inventories are valued at the lower of cost and net realizable value. Cost is determined by the first-in, first-out (FIFO) method. For processed inventories, cost means full cost including all direct and indirect production costs required to bring the inventory items to the stage of completion at the balance sheet date. Net realizable value is the estimated selling price in the ordinary course of business, less the costs of completion and costs necessary to make the sale.
When shares are repurchased, the amount of the consideration paid, including directly attributable costs, is recognized as a change in equity. Repurchased shares (treasury shares) are presented in the balance sheet as a deduction from equity. The result on the disposal of treasury shares sold or cancelled is recognized in retained earnings.
Non-controlling interests represent the shares of minority or non-controlling shareholders in the equity of subsidiaries which are not fully owned by the Group. At the acquisition date, the item is either measured at its fair value or at the non-controlling shareholders' proportion of the fair values of net assets recognized on acquisition of a subsidiary (business combination). Subsequently, it is adjusted for the appropriate proportion of subsequent profits and losses. The losses attributable to noncontrolling shareholders in a consolidated subsidiary may exceed their interest in the equity of the subsidiary. A proportional share of total comprehensive income is attributed to the noncontrolling interests even if this results in the noncontrolling interests having a deficit balance.
Provisions are recognized in the balance sheet when the Group has a present obligation (legal or constructive) as a result of a past event, which is expected to result in an outflow of resources embodying economic benefits which can be reliably estimated. Each provision is based on the best
estimate of the expenditure required to settle the present obligation at the balance sheet date. When appropriate, provisions are measured on a discounted basis.
A provision for restructuring is only recognized when the Group has approved a detailed and formal restructuring plan, and the restructuring has either commenced or has been announced publicly before the balance sheet date. Restructuring provisions only include the direct expenditure arising from the restructuring which is necessarily incurred on the restructuring and is not associated with the ongoing activities of the entity.
A provision for site remediation in respect of contaminated land is recognized in accordance with the Group's published environmental policy and applicable legal requirements.
The parent company and several of its subsidiaries have pension, death benefit and health care benefit plans covering a substantial part of their workforce.
Most pension plans are defined-benefit plans with benefits based on years of service and level of remuneration. For defined-benefit plans, the amount recognized in the balance sheet (net liability or asset) is the present value of the defined-benefit obligation less the fair value of any plan assets. The present value of the defined-benefit obligation is the present value, without deducting any plan assets, of expected future payments required to settle the obligation resulting from employee service in the current and prior periods. The present value of the defined-benefit obligation and the related current and past service costs are calculated using the projected unit credit method. The discount rate used is the yield at balance sheet date on high-quality corporate bonds with remaining terms to maturity approximating those of the Group's obligations. In case the fair value of plan assets exceeds the present value of the defined-benefit obligations, the net asset is limited to the asset ceiling. The asset ceiling is the present value of any economic benefits available in the form of refunds from the plan or reductions in future contributions to the plan. The net interest on the net defined-benefit liability/asset is based on the same discount rate. Actuarial gains and losses comprise experience adjustments (the effects of differences between the previous actuarial assumptions and what has actually occurred) and the effects of changes in actuarial assumptions. Past service cost is the change in the present value of the defined-benefit obligation for employee service in prior periods and resulting in the current period from a plan amendment or a curtailment. Past service cost are recognized immediately through profit or loss. Remeasurements of the net
defined-benefit liability (asset) comprise (a) actuarial gains and losses, (b) the return on plan assets, after deduction of the amounts included in net interest on the net defined-benefit liability (asset) and (c) any change in the effect of the asset ceiling, after deduction of any amounts included in net interest on the net defined-benefit liability (asset). Remeasurements are recognized immediately through equity. A settlement is a transaction that eliminates all further legal or constructive obligations for part or all of the benefits provided under a defined-benefit plan, other than a payment of benefits to, or on behalf of, employees that is set out in the terms of the plan and included in the actuarial
In the income statement, current and past service cost, including gains or losses from settlements are included in the operating result (EBIT), and the net interest on the net defined-benefit liability (asset) is included in interest expense, under interest on interest-bearing provisions. Pre-retirement pensions in Belgium and plans for medical care in the United States are also treated as defined-benefit plans.
assumptions.
Obligations in respect of contributions to definedcontribution pension plans are recognized as an expense in the income statement as they fall due. By law, defined-contribution pension plans in Belgium are subject to minimum guaranteed rates of return. Hence, those plans classify as definedbenefit plans. The IASB recognized that the accounting for such so-called 'contribution-based plans' in accordance with the currently applicable defined-benefit methodology is problematic. Considering also the uncertainty with respect to the future evolution of the minimum guaranteed rates of return in Belgium, the Company adopted a retrospective approach whereby the net liability recognized in the balance sheet is based on the sum of the positive differences, determined by individual plan participant, between the minimum guaranteed reserves and the accumulated contributions based on the actual rates of return at the closing date (i.e. the net liability is based on the deficit measured at intrinsic value, if any).
Other long-term employee benefits, such as service awards, are accounted for using the projected unit credit method. However, the accounting method differs from the method applied for post-employment benefits, as actuarial gains and losses are recognized immediately through profit or loss.
The Group issues equity-settled and cash-settled share-based payments to certain employees. Stock option plans which allow Group employees to acquire shares of NV Bekaert SA are of the equitysettled type.
Share appreciation rights plans are of the cashsettled type, as they entitle Group employees to receive payment of cash bonuses, the amount of which is based on the price of the Bekaert share on the Euronext stock exchange.
Equity-settled share-based payments are recognized at fair value (excluding the effect of nonmarket-based vesting conditions) at the date of grant. The fair value determined at the grant date of the equity-settled share-based payments is expensed, with a corresponding increase in equity, on a straight-line basis over the vesting period, based on the Group's estimate of the stock options that will eventually vest and adjusted for the effect of non-market-based vesting conditions.
Cash-settled share-based payments are recognized as liabilities at fair value, which is remeasured at each reporting date and at the date of settlement. Changes in fair value are recognized in the income statement. The Group uses a binomial model to determine the fair value of the share-based payment plans.
Interest-bearing debt includes loans and borrowings which are initially recognized at the fair value of the consideration received net of transaction costs incurred. In subsequent periods, they are carried at amortized cost using the effective interest-rate method, any difference between the proceeds (net of transaction costs) and the redemption value being recognized in the income statement over the period of the liability. If financial liabilities are hedged using derivatives qualifying as a fair value hedge, the hedging instruments are carried at fair value and the hedged items are remeasured for fair value changes due to the hedged risk (see accounting policies for derivatives and hedging).
Trade payables and other current liabilities, except derivatives, are stated at cost, which is the fair value of the consideration payable.
Income taxes are classified as either current or deferred taxes. Current income taxes include expected tax charges based on the accounting profit for the current year and adjustments to tax charges of prior years. Deferred taxes are calculated, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts. The principal temporary differences arise from depreciation of property, plant and equipment, provisions for pensions, prepensions and other postretirement benefits, undistributed earnings and tax deductible losses carried forward. Deferred taxes are measured using the tax rates expected to apply to taxable income in
Bekaert Annual Report 2014 Financial Review 17
the years in which those temporary differences are expected to be realized or settled, based on tax rates enacted or substantively enacted at the balance sheet date. Deferred tax assets are recognized to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized; this criterion is reassessed at each balance sheet date. Deferred tax on temporary differences arising on investments in subsidiaries, associates and joint ventures is provided for, except where the Group is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not be reversed in the foreseeable future.
The Group uses derivatives to hedge its exposure to foreign-exchange and interest-rate risks arising from operating, financing and investing activities. The net exposure of all subsidiaries is managed on a centralized basis by Group Treasury in accordance with the aims and principles laid down by general management. As a policy, the Group does not engage in speculative or leveraged transactions.
Derivatives are initially and subsequently measured and carried at fair value. The fair value of traded derivatives is equal to their market value. If no market value is available, the fair value is calculated using standard financial valuation models, based upon the relevant market rates at the reporting date.
The Group applies hedge accounting in accordance with IAS 39 to reduce income statement volatility. Depending on the nature of the hedged risk, a distinction is made between fair value hedges, cash flow hedges and hedges of a net investment in a foreign entity.
Fair value hedges are hedges of the exposure to variability in the fair value of recognized assets and liabilities. The derivatives classified as fair value hedges are carried at fair value and the related hedged items (assets or liabilities) are remeasured for fair value changes due to the hedged risk. The corresponding changes in fair value are recognized in the income statement. When a hedge ceases to be highly effective, hedge accounting is discontinued and the adjustment to the carrying amount of a hedged interest-bearing financial instrument is recognized as income or expense and will be fully amortized over the remaining period to maturity of the hedged item.
Cash flow hedges are hedges of the exposure to variability in future cash flows related to recognized assets or liabilities, highly probable forecast transactions or currency risk on unrecognized firm commitments. Changes in the fair value of a hedging instrument that qualifies as a highly effective cash flow hedge are recognized directly in shareholders' equity (hedging reserve). The ineffective portion is recognized immediately in the income statement. If the hedged cash flow results in the recognition of a non-financial asset or liability, all gains and losses previously recognized directly in equity are transferred from equity and included in the initial measurement of the cost or carrying amount of the asset or liability. For all other cash flow hedges, gains and losses initially recognized in equity are transferred from the hedging reserve to the income statement when the hedged firm commitment or forecast transaction results in the recognition of a profit or loss. When the hedge ceases to be highly effective, hedge accounting is discontinued prospectively and the accumulated gain or loss is retained in equity until the committed or forecast transaction occurs. If the forecast transaction is no longer expected to occur, any net cumulative gain or loss previously reported in equity is transferred to the income statement.
If a net investment in a foreign entity is hedged, all gains or losses on the effective portion of the hedging instrument, together with any gains or losses on the foreign-currency translation of the hedged investment, are taken directly to equity. Any gains or losses on the ineffective portion are recognized immediately in the income statement. The cumulative remeasurement gains and losses on the hedging instrument, that had previously been recognized directly in equity, and the gains and losses on the currency translation of the hedged item are recognized in the income statement only on disposal of the investment.
In order to comply with the requirements of IAS 39 regarding the use of hedge accounting, the strategy and purpose of the hedge, the relationship between the financial instrument used as the hedging instrument and the hedged item and the estimated (prospective) effectiveness are documented by the Group at the inception of the hedge. The effectiveness of existing hedges is monitored on a quarterly basis. Hedge accounting for ineffective hedges is discontinued immediately.
The Group also uses derivatives that do not satisfy the hedge accounting criteria of IAS 39 but provide effective economic hedges under the Group's risk management policies. Changes in the fair value of any such derivatives are recognized immediately in the income statement.
Goodwill and intangible assets with an indefinite useful life or not yet available for use are reviewed for impairment at least annually; other tangible and intangible fixed assets are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. An impairment loss is recognized in the income statement as and when the carrying amount of an asset exceeds its recoverable amount (being the higher of its fair value less costs of disposal and its value in use). The fair value less costs of disposal is the amount obtainable from the sale of an asset in an arm's length transaction less the costs of disposal, while value in use is the present
value of the future cash flows expected to be derived from an asset. Recoverable amounts are estimated for individual assets or, if this is not possible, for the smallest cash-generating unit to which the assets belong. Reversal of impairment losses recognized in prior years is included as income when there is an indication that the impairment losses recognized for the asset are no longer needed or the need has decreased, except for impairment losses on goodwill, which are never reversed.
Revenue is recognized when it is probable that the economic benefits associated with a transaction will flow to the entity and the amount of the revenue can be measured reliably. Sales are recognized net of sales taxes and discounts. Revenue from the sale of goods is recognized when delivery takes place and the transfer of risks and rewards is completed. When it can be measured reliably, revenue from construction contracts is recognized by reference to the stage of completion. When the outcome of a construction contract cannot be estimated reliably, contract revenue is recognized only to the extent of the contract costs incurred that are likely to be recoverable. In the period in which it is determined that a loss will result from the performance of a contract, the entire amount of the estimated ultimate loss is charged against income. No revenue is recognized on barter transactions involving the exchange of similar goods or services. Interest is recognized on a time-proportional basis that reflects the effective yield on the asset. Royalties are recognized on an accrual basis in accordance with the terms of agreements. Dividends are recognized when the shareholder's right to receive payment is established.
Operating income and expenses that are related to restructuring programs, impairment losses, business combinations, business disposals, environmental provisions or other events and transactions that have a one-time effect are presented on the face of the income statement as non-recurring items. Restructuring programs mainly include lay-off costs, gains and losses on disposal, and impairment losses of assets involved in a shut-down, major reorganization or relocation of operations. When not related to restructuring programs, only impairment losses resulting either from testing Cash-Generating Units or from intragroup transfers qualify as nonrecurring items. Non-recurring items from business combinations mainly include: negative goodwill, gains and losses on step acquisition, and recycling of CTA on the interest previously held. Nonrecurring items from business disposals include gains and losses on the sale of businesses that do not qualify as discontinued operations. These
disposed businesses may consist of integral, or parts (disposal groups) of, subsidiaries, jointventures and associates. Besides environmental provisions, other events or transactions that have a one-time effect mainly include disasters, sales of investment property and significant litigations. Bekaert believes that the separate presentation of non-recurring items is essential for the readers of its financial statements who want to analyze comparable figures.
The statement of comprehensive income presents an overview of all income and expenses recognized both in the income statement and in equity. In accordance with IAS 1, 'Presentation of Financial Statements', an entity can elect to present either a single statement of comprehensive income or two statements, i.e. an income statement immediately followed by a comprehensive income statement. The Group elected to do the latter. A further consequence of presenting a statement of comprehensive income is that the content of the statement of changes in equity is confined to ownerrelated changes only.
A non-current asset or disposal group is classified as held for sale if its carrying amount will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset (or disposal group) is available for immediate sale in its present condition. A discontinued operation is a component of an entity which the entity has disposed of or which is classified as held for sale, which represents a separate major line of business or geographical area of operations and which can be distinguished operationally and for financial reporting purposes.
For a sale to be highly probable, the entity should be committed to a plan to sell the asset (or disposal group), an active program to locate a buyer and complete the plan should be initiated, and the asset (or disposal group) should be actively marketed at a price which is reasonable in relation to its current fair value, and the sale should be expected to be completed within one year from the date of classification. Assets classified as held for sale are measured at the lower of their carrying amount and fair value less costs necessary to make the sale. Any excess of the carrying amount over the fair
value less costs to sell is included as an impairment loss. Depreciation of such assets is discontinued as from their classification as held for sale. Comparative balance sheet information for prior periods is not restated to reflect the new classification in the balance sheet.
Contingent assets are not recognized in the financial statements. They are disclosed if the inflow of economic benefits is probable. Contingent liabilities are not recognized in the financial statements, except if they arise from a business combination. They are disclosed, unless the possibility of a loss is remote.
Events after the balance sheet date which provide additional information about the company's position as at the balance sheet date (adjusting events) are reflected in the financial statements. Events after the balance sheet date which are not adjusting events are disclosed in the notes if material.
In the application of the Group's accounting policies, management is required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. These judgments, estimates and assumptions are reviewed on an ongoing basis.
The following are the critical judgments made by management, apart from those involving estimations (see note 3.2. below), that have a significant effect on the amounts reported in the consolidated financial statements.
Due to the ever increasing complexity of foreign exchange regulations in Venezuela, Vicson SA uses four rates to account for its foreign currency transactions, depending on the foreign exchange system under which US dollar applications have
been filed or are expected to be settled : (1) the official CADIVI or CENCOEX rate (6.3 VEF/USD), (2) the SICAD I rate (11.30 VEF/USD at year-end 2014), (3) the SICAD II rate (50 VEF/USD at yearend 2014) and (4) the economic exchange rate for all other transactions (89 VEF/USD at yearend 2014). In spite of the political and monetary instability, management concluded that there is no reason to deconsolidate its Venezuelan entities. At year-end 2014, the cumulative translation adjustments amount to € -38.3 million, which - in case of loss of control - would be recycled to income statement.
the deficit measured at intrinsic value, if any). The main difference between this retrospective approach and the prospective Projected Unit Credit method is that benefit obligations are not calculated as the discounted value of the estimated projected future benefits attributed to past years of service.
The following are the key assumptions concerning the future, and the other key sources of estimation uncertainty at the end of the reporting period that have a risk of causing material adjustments to the carrying amounts of assets and liabilities within the next financial year.
recoverable amount. This analysis is based upon assumptions such as market evolution, market share, margin evolution and discount rates (see note 6.2. 'Goodwill').
The Group uses a geographical segmentation since this is the best enabler to evaluate the nature and financial effects of the business and to make stakeholders understand our business as a whole in a transparent way. The segmentation reflects the importance of the regions following the company's global growth strategy.
The Company's regional businesses are typically characterized by common cost drivers, a product portfolio that is tailored to regional industry requirements, and specific distribution channels. They distinguish themselves in terms of political, economic and currency risks and in terms of geographic market trends and growth patterns. Adding to the relevance of the segmentation is the fact that the company sells the vast majority of its production volumes in the region where they are manufactured. According to IFRS 8, four reporting segments have been defined, reflecting the company's presence in four main regions:
Only capital employed elements (intangible assets, goodwill, property, plant and equipment and the elements of the operating working capital) are allocated to the various segments. All other assets and liabilities are reported as unallocated assets or liabilities. 'Group & Business support' mainly consists of the functional unit technology and unallocated expenses for group management and services; it does not constitute a reportable segment in itself. The geographical segmentation is based on the location of the Bekaert entities rather than on the location of its customers. Since it is Bekaert's strategy to produce as close as possible to the customers, most customers are serviced by Bekaert entities in their own region. Any sales between segments are transacted at prices which reflect the arm's length principle.
| Group & | |||||||
|---|---|---|---|---|---|---|---|
| 2014 | North | Latin | Asia | Business | Reconcilia | Consoli | |
| in thousands of € | EMEA | America | America | Pacific | support | tions | dated |
| Net sales | 1 063 846 | 554 698 | 631 287 | 965 883 | - | - | 3 215 714 |
| Operating result before non | |||||||
| recurring items (REBIT) | 114 418 | 20 045 | 26 069 | 63 005 | -60 987 | 1 857 | 164 407 |
| Non-recurring items | 1 816 | 7 882 | 7 944 | -9 320 | -1 475 | - | 6 847 |
| Operating result (EBIT) | 116 234 | 27 927 | 34 013 | 53 685 | -62 462 | 1 857 | 171 254 |
| Depreciation and amortization | 43 883 | 9 476 | 16 739 | 93 906 | 14 545 | -13 938 | 164 611 |
| Impairment losses | 4 974 | 226 | - | 11 762 | - | - | 16 962 |
| Negative goodwill | - | - | -10 893 | - | - | - | -10 893 |
| EBITDA | 165 091 | 37 629 | 39 859 | 159 353 | -47 917 | -12 081 | 341 934 |
| Segment assets | 876 913 | 302 759 | 620 126 | 1 282 277 | 159 738 | -205 050 | 3 036 763 |
| Unallocated assets | - | - | - | - | - | 920 952 | 920 952 |
| Total assets | 876 913 | 302 759 | 620 126 | 1 282 277 | 159 738 | 715 902 | 3 957 715 |
| Segment liabilities | 210 683 | 68 607 | 111 746 | 143 744 | 76 165 | -98 166 | 512 779 |
| Unallocated liabilities | - | - | - | - | - | 1 878 724 | 1 878 724 |
| Total liabilities | 210 683 | 68 607 | 111 746 | 143 744 | 76 165 | 1 780 558 | 2 391 503 |
| Capital employed | 666 230 | 234 152 | 508 380 | 1 138 533 | 83 573 | -106 884 | 2 523 984 |
| Average capital employed | 545 080 | 210 761 | 388 466 | 1 112 720 | 80 623 | -99 180 | 2 238 470 |
| Return on average capital | |||||||
| employed (ROCE)1 | 21.3% | 13.3% | 8.8% | 4.8% | - | - | 7.7% |
| Capital expenditure – PP&E | 33 421 | 26 196 | 31 779 | 51 190 | 3 987 | -13 789 | 132 784 |
| Capital expenditure – | |||||||
| intangible assets | 33 237 | - | 1 987 | 1 882 | 846 | -16 200 | 21 752 |
| Share in the results of joint | |||||||
| ventures and associates | - | - | 26 386 | -1 056 | - | - | 25 330 |
| Investments in joint ventures | |||||||
| and associates | - | - | 144 697 | 11 037 | - | - | 155 734 |
| Number of employees | |||||||
| (year-end)2 | 6 162 | 1 606 | 4 739 | 9 849 | 1 771 | - | 24 127 |
| Group & | |||||||
|---|---|---|---|---|---|---|---|
| 2013 | North | Latin | Asia | Business | Reconcilia | Consoli | |
| in thousands of € | EMEA | America | America | Pacific | support | tions | dated |
| Net sales | 1 040 171 | 547 700 | 644 619 | 953 138 | - | - | 3 185 628 |
| Operating result before non | |||||||
| recurring items (REBIT) | 87 930 | 18 603 | 44 045 | 77 303 | -71 422 | 9 458 | 165 917 |
| Non-recurring items | -3 166 | -10 896 | -40 | -4 091 | -10 454 | - | -28 647 |
| Operating result (EBIT) | 84 764 | 7 707 | 44 005 | 73 212 | -81 876 | 9 458 | 137 270 |
| Depreciation and amortization | 46 730 | 12 190 | 19 413 | 75 154 | 11 188 | -13 604 | 151 071 |
| Impairment losses | 1 370 | 2 153 | 182 | 4 945 | - | - | 8 650 |
| EBITDA | 132 864 | 22 050 | 63 600 | 153 311 | -70 688 | -4 146 | 296 991 |
| Segment assets | 716 289 | 244 956 | 407 301 | 1 220 697 | 156 452 | -164 351 | 2 581 344 |
| Unallocated assets | - | - | - | - | - | 799 113 | 799 113 |
| Total assets | 716 289 | 244 956 | 407 301 | 1 220 697 | 156 452 | 634 762 | 3 380 457 |
| Segment liabilities | 188 219 | 57 586 | 76 162 | 133 792 | 79 155 | -72 876 | 462 038 |
| Unallocated liabilities | - | - | - | - | - | 1 414 543 | 1 414 543 |
| Total liabilities | 188 219 | 57 586 | 76 162 | 133 792 | 79 155 | 1 341 667 | 1 876 581 |
| Capital employed | 528 070 | 187 370 | 331 139 | 1 086 905 | 77 297 | -91 475 | 2 119 306 |
| Average capital employed | 554 379 | 202 847 | 356 900 | 1 151 915 | 76 522 | -95 366 | 2 247 196 |
| Return on average capital | |||||||
| employed (ROCE)1 | 15.3% | 3.8% | 12.3% | 6.4% | - | - | 6.1% |
| Capital expenditure – PP&E | 25 699 | 8 567 | 18 157 | 46 531 | 22 471 | -26 788 | 94 637 |
| Capital expenditure – | |||||||
| intangible assets | 1 114 | - | 464 | 214 | 484 | -100 | 2 176 |
| Share in the results of joint | |||||||
| ventures and associates | 15 | - | 30 041 | 188 | - | - | 30 244 |
| Investments in joint ventures | |||||||
| and associates | 102 | - | 144 534 | 11 202 | - | - | 155 838 |
| Number of employees | |||||||
| (year-end)2 | 5 146 | 1 547 | 3 998 | 9 389 | 1 710 | - | 21 790 |
1 ROCE: Operating result (EBIT) relative to average capital employed.
2 Number of employees: full-time equivalents. Following table provides more information on the amounts presented as 'Reconciliations' in the previous table:
| Reconciliations | ||
|---|---|---|
| in thousands of € | 2013 | 2014 |
| Operating result (EBIT) | ||
| Intangible assets | -10 | - |
| PP&E | -6 808 | -11 873 |
| Inventories | 2 672 | -208 |
| Intersegment margin eliminations | -4 146 | -12 081 |
| Intangible assets | -4 | -6 |
| PP&E | -13 600 | -13 932 |
| Depreciation and amortization relating to intersegment margin eliminations | -13 604 | -13 938 |
| Intangible assets | -6 | 6 |
| PP&E | 6 792 | 2 059 |
| Inventories | 2 672 | -208 |
| EBIT: intersegment elimination minus related depreciation & amortization | 9 458 | 1 857 |
| Segment assets | ||
| Intangible assets | -346 | -16 540 |
| PP&E | -86 876 | -82 962 |
| Inventories | -4 253 | -6 336 |
| Trade receivables | -72 863 | -99 204 |
| Advances paid | -13 | -8 |
| Intersegment eliminations on capital employed assets | -164 351 | -205 050 |
| Unallocated assets | ||
| Other assets than capital employed elements | 799 113 | 920 952 |
| Segment liabilities | ||
| Trade payables | -72 863 | -98 158 |
| Advances received | -13 | -8 |
| Intersegment eliminations on capital employed liabilities | -72 876 | -98 166 |
| Unallocated liabilities | ||
| Other liabilities than capital employed elements | 1 414 543 | 1 878 724 |
| Capital employed | ||
| Segment assets eliminations | -164 351 | -205 050 |
| - Segment liabilities eliminations | 72 876 | 98 166 |
| Intersegment eliminations on capital employed elements | -91 475 | -106 884 |
| Capex PP&E | ||
| Intersegment margin eliminations on PP&E | -26 788 | -13 789 |
| Capex PP&E adjustments | -26 788 | -13 789 |
| Capex intangible assets | ||
| Intersegment margin eliminations on intangible assets | -100 | -16 200 |
| Capex intangible assets adjustments | -100 | -16 200 |
| Variance | |||
|---|---|---|---|
| in thousands of € | 2013 | 2014 | (%) |
| Net sales | |||
| Rubber reinforcement products | 1 206 510 | 1 205 565 | -0.1% |
| Other steel wire products | 1 788 174 | 1 851 473 | 3.5% |
| Stainless products | 180 634 | 143 494 | -20.6% |
| Other | 10 310 | 15 182 | 47.3% |
| Total | 3 185 628 | 3 215 714 | 0.9% |
Rubber reinforcement products include tire cord, bead wire, hose reinforcement wire, belt cord and steel cord fabric. Other steel wire products include industrial steel wires, specialty steel wires (inclusive stainless wires), building products, ropes and sawing wire. Stainless products include fibers and combustion products for heating and drying. In 2014, stainless wires were moved from Stainless products to specialty steel wires.
All product groups are sold in all segments. The product mix is very similar in EMEA and North America, while in Asia Pacific rubber reinforcement products are predominant, whereas in Latin America other steel wire products make up the largest part of the business.
The table below shows the relative importance of Belgium (i.e. the country of domicile), Chile, China and the USA for Bekaert in terms of revenues and non-current assets (i.e. intangible assets, goodwill, property, plant and equipment).
| in thousands of € | 2013 | % of total | 2014 | % of total |
|---|---|---|---|---|
| Net sales from Belgium | 275 287 | 9% | 290 236 | 9% |
| Net sales from Chile | 307 099 | 10% | 282 441 | 9% |
| Net sales from China | 685 564 | 22% | 680 904 | 21% |
| Net sales from USA | 465 395 | 15% | 495 412 | 15% |
| Net sales from other countries | 1 452 283 | 46% | 1 466 721 | 46% |
| Total net sales | 3 185 628 | 100% | 3 215 714 | 100% |
| Non-current assets located in Belgium | 90 371 | 7% | 108 678 | 7% |
| Non-current assets located in Chile | 97 603 | 7% | 100 852 | 7% |
| Non-current assets located in China | 565 266 | 43% | 581 896 | 38% |
| Non-current assets located in USA | 66 684 | 5% | 91 876 | 6% |
| Non-current assets located in other countries | 506 546 | 38% | 666 071 | 42% |
| Total non-current assets | 1 326 470 | 100% | 1 549 373 | 100% |
| in thousands of € | 2013 | 2014 | variance |
|---|---|---|---|
| Sales | 3 185 628 | 3 215 714 | 30 086 |
| Cost of sales | -2 703 316 | -2 729 995 | -26 679 |
| Gross profit | 482 312 | 485 719 | 3 407 |
| Selling expenses | -128 207 | -138 126 | -9 919 |
| Administrative expenses | -124 924 | -126 894 | -1 970 |
| Research and development expenses | -62 429 | -59 261 | 3 168 |
| Other operating revenues | 12 502 | 21 978 | 9 476 |
| Other operating expenses | -13 337 | -19 009 | -5 672 |
| Operating result before non-recurring items (REBIT) | 165 917 | 164 407 | -1 510 |
| Non-recurring items | -28 647 | 6 847 | 35 494 |
| Operating result (EBIT) | 137 270 | 171 254 | 33 984 |
| Sales and gross profit | |||
| in thousands of € | 2013 | 2014 | variance (%) |
| Sales | 3 185 628 | 3 215 714 | 0.9% |
| Cost of sales | -2 703 316 | -2 729 995 | 1.0% |
| Gross profit | 482 312 | 485 719 | 0.7% |
| Gross profit in % of sales | 15.1% | 15.1% |
Bekaert's consolidated sales increased by almost 0.9% versus last year. The net impact of this year's acquisitions (integration of ropes activities in Brazil and wire activities in Costa Rica) and prior year's divestment (advanced filtration activities) explained 0.5% of the sales increase. The organic growth of sales by 2.8% was mainly realized in EMEA and in Asia Pacific. However, unfavorable currency movements (especially related to CLP) almost entirely offset the organic increase (-2.4%).
Gross profit was almost stable in nominal terms. Compared to last year, the organic business in EMEA and to a lesser degree also North America contributed positively to gross profit. The gain from organic growth was offset by negative currency movements (€ -12.0 million).
| Overheads | |||
|---|---|---|---|
| in thousands of € | 2013 | 2014 | variance (%) |
| Selling expenses | -128 207 | -138 126 | 7.7% |
| Administrative expenses | -124 924 | -126 894 | 1.6% |
| Research and development expenses | -62 429 | -59 261 | -5.1% |
| Total | -315 560 | -324 281 | 2.8% |
Apart from the impact of currency movements, the increase in selling expenses mainly relates to the significant reversal of bad debt provisions in 2013, while this was not the case in 2014. Administrative expenses increased due to the incurred expenses related to the acquisition transactions. Research and development expenses decreased following more cost effective project initiatives.
| Other operating revenues | |||
|---|---|---|---|
| in thousands of € | 2013 | 2014 | variance |
| Royalties received | 11 225 | 10 189 | -1 036 |
| Gains on disposal of PP&E and intangible assets | 457 | 478 | 21 |
| Realized exchange results on sales and purchases | -6 131 | 2 146 | 8 277 |
| Government grants | 2 286 | 5 084 | 2 798 |
| Miscellaneous | 4 665 | 4 081 | -584 |
| Total | 12 502 | 21 978 | 9 476 |
Government grants mainly relate to subsidies in China. There are no indications that the conditions attached to those grants will not be complied with in the future and therefore it is not expected that subsidies may have to be refunded.
| Other operating expenses | |||
|---|---|---|---|
| in thousands of € | 2013 | 2014 | variance |
| Losses on disposal of PP&E and intangible assets | -991 | -1 597 | -606 |
| Amortization of intangible assets | -340 | -474 | -134 |
| Bank charges | -2 456 | -2 475 | -19 |
| Tax related expenses (other than income taxes) | -1 465 | -3 112 | -1 647 |
| Miscellaneous | -8 085 | -11 351 | -3 266 |
| Total -13 337 |
-19 009 | -5 672 |
The increase of Miscellaneous mainly relates to impairment losses of individual PP&E items.
| Non-recurring items | ||||
|---|---|---|---|---|
| in thousands of € | 2013 | 2014 | variance | |
| Restructuring - impairment losses | (a) | -1 027 | -6 971 | -5 944 |
| Restructuring - other revenues | (b) | 3 225 | 3 673 | 448 |
| Restructuring - other expenses | (b) | -15 125 | -6 289 | 8 836 |
| Other impairment losses | (a) | -6 621 | -6 853 | -232 |
| Gains on business disposals | 1 231 | 310 | -921 | |
| Losses on business disposals | (c) | -50 | -1 474 | -1 424 |
| Gains on step acquisitions | (c) | - | 1 804 | 1 804 |
| Negative goodwill on business combinations | (c) | - | 10 893 | 10 893 |
| Other revenues | (d) | 1 481 | 30 815 | 29 334 |
| Other expenses | (d) | -11 761 | -19 061 | -7 300 |
| Total | -28 647 | 6 847 | 35 494 |
Non-recurring items amounted to € +6.8 million compared with € -28.6 million last year.
The table below provides information on the major items contributing to the operating result (EBIT), categorized by nature.
| in thousands of € | 2013 | 2014 | ||
|---|---|---|---|---|
| Sales | 3 185 628 | 100% | 3 215 714 | 100% |
| Non-recurring revenues | 5 937 | - | 47 495 | - |
| Other operating revenues | 12 502 | - | 21 978 | - |
| Total operating revenues | 3 204 067 | - | 3 285 187 | - |
| Own construction of PP&E | 31 636 | 1.0% | 48 800 | 1.5% |
| Raw materials | -1 209 885 | -38.0% | -1 242 818 | -38.6% |
| Semi-finished products and goods for resale | -218 430 | -6.9% | -246 866 | -7.7% |
| Change in work-in-progress and finished goods | 9 757 | 0.3% | 38 795 | 1.2% |
| Staff costs | -603 619 | -18.9% | -610 121 | -19.0% |
| Depreciation and amortization | -151 071 | -4.7% | -164 610 | -5.1% |
| Impairment losses | -8 650 | -0.3% | -16 962 | -0.5% |
| Transport and handling of finished goods | -136 104 | -4.3% | -151 649 | -4.7% |
| Consumables and spare parts | -204 889 | -6.4% | -219 200 | -6.8% |
| Utilities | -211 686 | -6.6% | -219 001 | -6.8% |
| Maintenance and repairs | -42 460 | -1.3% | -52 430 | -1.6% |
| Expenses operating leases | -20 124 | -0.6% | -20 406 | -0.6% |
| Commissions in selling expenses | -4 718 | -0.1% | -3 414 | -0.1% |
| Export VAT and export customs duty | -26 852 | -0.8% | -28 842 | -0.9% |
| ICT costs | -23 890 | -0.7% | -25 074 | -0.8% |
| Advertising and sales promotion | -6 085 | -0.2% | -6 792 | -0.2% |
| Travel, restaurant & hotel | -31 427 | -1.0% | -33 760 | -1.0% |
| Consulting and other fees | -20 078 | -0.6% | -25 725 | -0.8% |
| Office supplies and equipment | -11 327 | -0.4% | -11 425 | -0.4% |
| Venture capital funds R&D | -1 422 | 0.0% | -982 | 0.0% |
| Temporary or external labor | -18 160 | -0.6% | -20 696 | -0.6% |
| Insurance expenses | -4 349 | -0.1% | -6 459 | -0.2% |
| Miscellaneous | -152 962 | -4.8% | -94 296 | -2.9% |
| Total operating expenses | -3 066 797 | -96.3% | -3 113 933 | -96.8% |
| Operating result (EBIT) | 137 270 | 4.3% | 171 254 | 5.3% |
| in thousands of € | 2013 | 2014 |
|---|---|---|
| Interest income on financial assets not classified as at FVTPL | 6 449 | 5 291 |
| Interest income | 6 449 | 5 291 |
| Interest expense on interest-bearing debt not classified as at FVTPL | -55 770 | -54 801 |
| Other debt-related interest expense | -8 645 | -7 336 |
| Interest expense | -64 415 | -62 137 |
| Interest element of interest-bearing provisions | -5 739 | -6 078 |
| Interest expense | -70 154 | -68 215 |
| Total | -63 705 | -62 924 |
Although gross debt increased with € 355 million, interest expense remained at the same level due to an average lower interest rate on the gross debt. Interest expense on interest-bearing debt not classified as at fair value through profit or loss (FVTPL) relates to all debt instruments of the Group, other than hedging instruments, hedged items and interest-rate risk mitigating derivatives designated as economic hedges.
The interest element of interest-bearing provisions mainly relates to the defined-benefit liability (see note 6.15. 'Employee benefit obligations') and to provisions recognized on the business combinations with ArcelorMittal (€ 0.6 million) and Maccaferri (€ 0.1 million).
| in thousands of € | 2013 | 2014 |
|---|---|---|
| Value adjustments to derivatives | -1 550 | -18 991 |
| Value adjustments to hedged items | -494 | 4 829 |
| Exchange results on hedged items | -2 479 | 23 749 |
| Net impact of derivatives and hedged items | -4 523 | 9 587 |
| Other exchange results | -12 249 | -6 213 |
| Impairment losses on available-for-sale financial assets | -1 284 | -157 |
| Inflation accounting effects | 1 814 | 2 655 |
| Dividends from non-consolidated equity investments | 254 | 147 |
| Bank charges and taxes on financial transactions | -990 | -2 877 |
| Impairments and impairment reversals of loans and receivables | -1 374 | -6 039 |
| Other | -1 470 | -833 |
| Total | -19 822 | -3 730 |
Value adjustments include changes in the fair value of all derivatives, other than those designated as cash flow hedges, and of all debt hedged by fair value hedges. A fair value gain of € 13.4 million has been recognized in 2014 on the conversion option relating to the convertible debt issued in June 2014 (refer to the 'Financial instruments by fair value measurement hierarchy' section in note 7.3. 'Financial risk management and financial derivatives'). The net impact of derivatives and hedged items presented here does not include any impacts recognized in other income statement elements, such as interest expense, cost of sales or other operating revenues and expenses. For more details on the impact of derivatives and hedged items, refer to note 7.3. 'Financial risk management and financial derivatives'.
Inflation accounting effects relate to the Venezuelan operations. Bank charges and taxes on financial transactions increased mainly in China, Brazil and Belgium. An impairment loss of € 5.7 million was recognized on receivables from the Venezuelan authorities. After an impairment loss of € 1.3 million was recognized on the Group's investment in Shougang Concord Century Holdings Ltd in 2013, a further impairment loss of € 0.2 million was recognized at 30 June 2014, as the share price had declined again on the Hong Kong Stock Exchange. By the end of the year, the share price had risen again, which resulted in a fair value gain of € 1.4 million being recognized through equity (see note 6.5. 'Other non-current assets').
| in thousands of € | 2013 | 2014 |
|---|---|---|
| Current income taxes - current year | -60 491 | -57 142 |
| Current income taxes - prior periods | -3 890 | -135 |
| Deferred taxes - due to changes in temporary differences | 16 532 | 15 570 |
| Deferred taxes - due to changes in tax rates | -67 | -669 |
| Total tax expense | -47 916 | -42 376 |
In the table below, accounting profit is defined as the result before taxes.
| in thousands of € | 2013 | 2014 |
|---|---|---|
| Accounting profit | 53 743 | 104 600 |
| Tax expense at the theoretical domestic rates applicable to results of taxable entities in | ||
| the countries concerned1 | -2 676 | -28 857 |
| Tax expense related to distribution of retained earnings | -11 018 | -2 171 |
| Total theoretical tax expense | -13 694 | -31 028 |
| Theoretical tax rate | -25.5% | -29.7% |
| Tax effect of: | ||
| Non-deductible items | -16 635 | -10 991 |
| Other tax rates and special tax regimes | 4 845 | 4 766 |
| Non-recognition of deferred tax assets 2 | -14 057 | -12 205 |
| Utilization of deferred tax assets not previously recognized | 14 342 | 8 566 |
| Tax relating to prior periods | -18 650 | -8 687 |
| Exempted income | 2 552 | 4 589 |
| Other | -6 619 | 2 614 |
| Total tax expense | -47 916 | -42 376 |
| Effective tax rate | -89.2% | -40.5% |
1 The expense for 2013 is low since the value disclosed is an aggregation of positive accounting results in countries with lower tax rates and
negative accounting results in countries with higher tax rates which are offsetting each other. 2 Non-recognition of deferred tax assets mainly relates to losses in China, Malaysia and India.
Other tax rates and special tax regimes reflect temporary tax holidays and notional interest deduction.
The operating results of the Brazilian joint ventures were adversely affected by the ailing Brazilian economy. Additional financials relating to the Brazilian joint ventures are provided under note 6.4. 'Investments in joint ventures and associates'. The Chinese joint venture with Xinyu Steel is still struggling to realize a turnaround, and took a hit on deferred tax assets.
| in thousands of € | 2013 | 2014 | |
|---|---|---|---|
| Joint ventures | |||
| BOSFA Pty Ltd | Australia | 688 | 183 |
| Belgo Bekaert Arames Ltda | Brazil | 28 515 | 26 754 |
| BMB-Belgo Mineira Bekaert Artefatos de Arame Ltda | Brazil | 1 526 | -368 |
| Bekaert Faser Vertriebs GmbH | Germany | 15 | - |
| Bekaert Xinyu Metal Products Co Ltd | China | -500 | -1 240 |
| Total | 30 244 | 25 329 |
| 2014 | Number |
|---|---|
| Weighted average number of ordinary shares (basic) | 57 599 873 |
| Dilution effect of subscription rights and options | 274 966 |
| Dilution effect of convertible bond issued in 2014 | 1 001 473 |
| Weighted average number of ordinary shares (diluted) | 58 876 312 |
| in thousands of € | Basic | Diluted |
|---|---|---|
| Result for the period attributable to the Group and to ordinary shareholders | 87 176 | 87 176 |
| Effect on earnings of convertible bond issued in 20141 | - | -8 668 |
| Earnings | 87 176 | 78 508 |
| Earnings per share (in €) | 1.513 | 1.333 |
1 Not to be reported if the effect of the convertible bond is anti-dilutive, i.e. if its effect is such that it would improve the EPS (see below).
Earnings per share ('EPS') is the amount of post-tax profit attributable to each share. Basic EPS is calculated as the result for the period attributable to the Group divided by the weighted average number of shares outstanding during the year. Diluted EPS reflects any commitments the Group has to issue shares in the future. In 2014, these comprised subscription rights, options and the convertible bond issued in June 2014. Subscription rights and options are only dilutive to the extent that their exercise price is lower than the average closing price of the period. The dilution effect of subscription rights and options is limited to the weighted average number of shares to be used in the denominator of the EPS ratio; there is no effect on the earnings to be used in the numerator of the EPS ratio. The convertible bond tends to affect both the denominator and the numerator of the EPS ratio. The dilution effect of the convertible bond on the earnings (to be used in the numerator of the EPS ratio) consists of a reversal of all income and expenses directly related to the convertible bond and having affected the 'basic' earnings for the period. Following income statement items were affected by the convertible bond:
The convertible bond is anti-dilutive if it causes the diluted EPS ratio to improve, i.e. if the diluted profit per share goes up or the diluted loss per share goes down. To calculate the impact, it is assumed that all dilutive subscription rights and options are exercised and that the conversion option of the convertible bond is exercised in its entirety at the beginning of the period, or, if the instruments were issued during the period, at the issue date. The features of the conversion option are such that only the share price increase over and above the conversion price is convertible into shares, and that Bekaert has a call option on the conversion option when the share price exceeds the conversion price by 32.5%. The amount of shares to be converted has thus been capped at 1 868 033. Consequently, management decided to buy back as many shares (1 868 033) as could possibly be converted to counter any dilution effect resulting from the convertible bond issuance. The buy-back program started in June and was finalized by the end of September, resulting in a reduction of the basic weighted average number of shares by 780 102 and an increase in both basic and diluted earnings per share of € 0.02.
| Number |
|---|
| 58 519 782 |
| 179 647 |
| 58 699 429 |
| in thousands of € | Basic | Diluted |
|---|---|---|
| Result for the period attributable to the Group and to ordinary shareholders | ||
| (in thousands €) | 24 574 | 24 574 |
| Earnings | 24 574 | 24 574 |
| Earnings per share (in €) | 0.420 | 0.419 |
The weighted average closing price during 2014 was € 27.15 per share (2013: € 24.93 per share). The following options and subscription rights were out of the money, and therefore antidilutive, for the period presented:
| Exercise price | Number | Number | ||
|---|---|---|---|---|
| Antidilutive instruments | Date granted | (in €) | granted | outstanding |
| SOP2 - options | 19.02.2007 | 30.175 | 37 500 | 10 000 |
| SOP2 - options | 18.02.2008 | 28.335 | 43 500 | 19 500 |
| SOP2 - options | 15.02.2010 | 33.990 | 49 500 | 49 500 |
| SOP 2005-2009 - subscription rights | 19.02.2007 | 30.175 | 182 010 | 10 270 |
| SOP 2005-2009 - subscription rights | 18.02.2008 | 28.335 | 229 200 | 118 850 |
| SOP 2005-2009 - subscription rights | 15.02.2010 | 33.990 | 225 450 | 191 850 |
| SOP 2010-2014 - options | 14.02.2011 | 77.000 | 360 925 | 314 925 |
For more information about subscription rights and options, please refer to 6.12. 'Ordinary shares, treasury shares, subscription rights and share options'.
| in thousands of € | Licenses, | |||||
|---|---|---|---|---|---|---|
| patents & | ||||||
| Cost | similar rights |
Computer software |
Rights to use land |
Develop ment costs |
Other | Total |
| As at 1 January 2013 | 8 817 | 62 717 | 71 041 | 1 001 | 19 494 | 163 070 |
| Expenditure | 309 | 1 667 | - | - | 200 | 2 176 |
| Disposals and retirements | -500 | -6 | -3 763 | -982 | - | -5 251 |
| Transfers1 | 130 | 1 673 | - | - | 33 | 1 836 |
| Deconsolidations | - | -111 | - | - | -3 150 | -3 261 |
| Exchange gains and losses (-) | -65 | -1 149 | -2 594 | - | -520 | -4 328 |
| As at 31 December 2013 | 8 691 | 64 791 | 64 684 | 19 | 16 057 | 154 242 |
| As at 1 January 2014 | 8 691 | 64 791 | 64 684 | 19 | 16 057 | 154 242 |
| Expenditure | 15 021 | 5 138 | 1 149 | - | 443 | 21 752 |
| Disposals and retirements | - | -420 | - | - | -86 | -506 |
| Transfers1 | -284 | 272 | - | - | - | -12 |
| New consolidations | - | 2 | - | - | 6 010 | 6 012 |
| Exchange gains and losses (-) | 54 | 1 900 | 7 023 | - | 1 657 | 10 634 |
| As at 31 December 2014 | 23 483 | 71 683 | 72 856 | 19 | 24 081 | 192 121 |
| As at 1 January 2013 | 7 462 | 48 453 | 7 888 | 1 001 | 16 006 | 80 810 |
|---|---|---|---|---|---|---|
| Charge for the year | 1 079 | 5 242 | 1 377 | - | 764 | 8 462 |
| Impairment losses | 125 | - | - | - | - | 125 |
| Disposals and retirements | -500 | -6 | -303 | -982 | - | -1 791 |
| Deconsolidations | - | -111 | - | - | -2 951 | -3 062 |
| Exchange gains (-) and losses | -28 | -724 | -174 | - | -420 | -1 346 |
| As at 31 December 2013 | 8 138 | 52 854 | 8 788 | 19 | 13 399 | 83 198 |
| As at 1 January 2014 | 8 138 | 52 854 | 8 788 | 19 | 13 399 | 83 198 |
| Charge for the year | 168 | 4 827 | 1 330 | - | 955 | 7 280 |
| Impairment losses | - | 116 | - | - | - | 116 |
| Disposals and retirements | - | -420 | - | - | -86 | -506 |
| Exchange gains (-) and losses | 44 | 1 501 | 1 039 | - | 1 363 | 3 947 |
| As at 31 December 2014 | 8 350 | 58 878 | 11 157 | 19 | 15 631 | 94 034 |
| Carrying amount | ||||||
| as at 31 December 2013 | 553 | 11 936 | 55 896 | - | 2 658 | 71 043 |
| Carrying amount | ||||||
| as at 31 December 2014 | 15 133 | 12 805 | 61 699 | - | 8 450 | 98 087 |
1Total transfers equal zero when aggregating the balances of 'Intangible assets' and 'Property, plant and equipment' (see note 6.3.).
The expenditure on licenses, patents and similar rights mainly relates to IP rights acquired from Pirelli (€ 15.0 million). The software expenditure mainly relates to the Satellite project (sales and outbound logistics) and ERP software (SAP). As for the rights to use land, the 2014 increase relates to the purchase of land rights by Bekaert (Qingdao) Wire Products Co Ltd. As for the new consolidations in other intangible assets, this relates to the synergies from the transfer of production volumes (€ 4.8 million) and the customer portfolio (€ 1.2 million) acquired in the context of the business combination with Maccaferri (see note 7.2. 'Effect of business combinations').
No intangible assets have been identified as having an indefinite useful life at the balance sheet date.
This note relates only to goodwill on acquisition of subsidiaries. Goodwill in respect of joint ventures and associates is disclosed in note 6.4. 'Investments in joint ventures and associates'.
| Cost | ||
|---|---|---|
| in thousands of € | 2013 | 2014 |
| As at 1 January | 41 569 | 35 566 |
| Increases | - | 784 |
| Deconsolidation | -4 844 | - |
| Exchange gains and losses (-) | -1 159 | 1 668 |
| As at 31 December | 35 566 | 38 018 |
| Impairment losses | ||
| in thousands of € | 2013 | 2014 |
| As at 1 January | 24 628 | 19 197 |
| Deconsolidation | -4 844 | - |
| Exchange gains (-) and losses | -587 | 338 |
| As at 31 December | 19 197 | 19 535 |
In 2014, the increase of goodwill was a consequence of new business combinations which relate to the commercial partnership with Maccaferri for underground solutions (€ 0.1 million) and the acquisition of Pirelli's steel cord plants (€ 0.7 million – provisional amount). The business combination re the ArcelorMittal deal in Costa Rica, Brazil and Ecuador results in a negative goodwill of € 10.9 million which is recognized through income statement. More information about the goodwill calculation is provided in note 7.2. 'Effect of business combinations'.
In 2013, there were no new business combinations. The net effect of deconsolidation in 2013 is zero, as the related goodwill of the Advanced Filtration business and the Flaring business was already fully impaired at the time of disposal of these cash-generating units.
Goodwill acquired in a business combination is allocated on acquisition to the cash-generating units (CGU) that are expected to benefit from that business combination.
The carrying amount of goodwill and related impairment have been allocated as follows:
| Segment in thousands of € |
Group of cash-generating units |
Carrying amount 31 Dec 2012 |
Impairment 2013 |
Carrying amount 31 Dec 2013 |
Impairment 2014 |
Carrying amount 31 Dec 2014 |
|---|---|---|---|---|---|---|
| Subsidiaries | ||||||
| EMEA | Cold Drawn Products Ltd | 2 743 | - | 2 685 | - | 2 874 |
| EMEA | Combustion - heating | 3 027 | - | 3 027 | - | 3 027 |
| EMEA | Building Products | - | - | - | - | 71 |
| EMEA | Rubber Reinforcement | - | - | - | - | 713 |
| North America | Orrville plant (USA) | 8 890 | - | 8 505 | - | 9 662 |
| Latin America | Inchalam group | 1 005 | - | 876 | - | 860 |
| Latin America | Bekaert Ideal SL companies | 844 | - | 844 | - | 844 |
| Asia Pacific | Bekaert (Qingdao) Wire | |||||
| Products Co Ltd | 385 | - | 385 | - | 385 | |
| Asia Pacific | Bekaert-Jiangyin Wire | |||||
| Products Co Ltd | 47 | - | 47 | - | 47 | |
| Subtotal | 16 941 | - | 16 369 | - | 18 483 | |
| Joint ventures and associates | ||||||
| Latin America | Belgo Bekaert Arames Ltda | 5 559 | - | 4 614 | - | 4 667 |
| Subtotal | 5 559 | - | 4 614 | - | 4 667 | |
| Total | 22 500 | - | 20 983 | - | 23 150 |
Cash-generating units to which goodwill has been allocated are tested for impairment at least annually on the basis of their value in use, applying the following assumptions:
| Discount rates for impairment testing | Euro region | USD region | CNY region | ||
|---|---|---|---|---|---|
| Group target ratio's | |||||
| Gearing: net debt/equity | 50% | ||||
| % debt | 33% | ||||
| % equity | 67% | ||||
| % LT debt | 75% | ||||
| % ST debt | 25% | ||||
| Cost of Bekaert debt | 2.3% | 2.5% | 6.3% | ||
| Long term interest rate | 2.7% | 3.0% | 6.5% | ||
| Short term interest rate | 1.2% | 1.0% | 5.6% | ||
| Cost of Bekaert equity | = Rf + β . Em | 7.6% | 8.9% | 12.7% | |
| Risk free rate= Rf | 1.0% | 2.3% | 6.2% | ||
| Beta = β | 1.31 | ||||
| Market equity risk premium= Em | 5% | ||||
| Corporate tax rate | 27% | ||||
| Cost of equity before tax | 7.6% | 8.9% | 12.7% | ||
| WACC - nominal | 5.8% | 6.7% | 10.5% | ||
| Expected inflation | 1.6% | 2.2% | 2.8% | ||
| WACC in real terms | 4.2% | 4.5% | 7.7% |
Based on current knowledge, reasonable changes in key assumptions (including discount rate, sales and margin evolution) would not generate impairments for any of the cash-generating units for which goodwill has been allocated.
| in thousands of € | Plant, machinery |
Furniture | Assets under |
||||
|---|---|---|---|---|---|---|---|
| Cost | Land and buildings |
and equipment |
and vehicles |
Finance leases |
Other PP&E |
construc tion |
Total |
| As at 1 January 2013 | 934 199 | 2 261 204 | 92 811 | 9 800 | 4 351 | 62 150 | 3 364 516 |
| Expenditure | 23 955 | 53 448 | 6 492 | 73 | 1 269 | 11 472 | 96 709 |
| Disposals and retirements | -1 711 | -19 104 | -4 630 | -323 | -393 | -54 | -26 215 |
| Deconsolidations | -3 740 | -3 167 | -516 | - | - | -5 | -7 428 |
| Transfers1 | - | - | - | - | - | -1 836 | -1 836 |
| Reclassification to (-) / from held for sale |
-21 752 | - | - | - | - | - | -21 752 |
| Exchange gains and losses (-) | -35 306 | -69 915 | -3 863 | -1 125 | -157 | -4 210 | -114 576 |
| Inflation effects on opening | |||||||
| balances | 1 224 | 1 373 | 151 | - | - | 54 | 2 802 |
| Other inflation effects | - | - | - | - | - | 18 | 18 |
| As at 31 December 2013 | 896 869 | 2 223 839 | 90 445 | 8 425 | 5 070 | 67 589 | 3 292 238 |
| As at 1 January 2014 | 896 869 | 2 223 839 | 90 445 | 8 425 | 5 070 | 67 589 | 3 292 238 |
| Expenditure | 21 871 | 89 433 | 5 347 | 1 373 | 833 | 16 390 | 135 247 |
| Disposals and retirements | -3 144 | -146 445 | -7 055 | - | - | -1 588 | -158 232 |
| New consolidations | 80 544 | 78 597 | 707 | - | 157 | 2 535 | 162 540 |
| Transfers1 | - | - | - | - | - | 12 | 12 |
| Exchange gains and losses (-) | 52 051 | 147 716 | 4 769 | -61 | 70 | 5 263 | 209 809 |
| Inflation effects on opening | |||||||
| balances | 1 659 | 1 921 | 206 | - | - | 116 | 3 901 |
| Other inflation effects | - | - | - | - | - | 22 | 22 |
| As at 31 December 2014 | 1 049 850 | 2 395 062 | 94 419 | 9 738 | 6 129 | 90 340 | 3 645 537 |
| Accumulated depreciation and impairment | |||||||
| As at 1 January 2013 | 389 022 | 1 512 618 | 72 561 | 1 434 | 2 315 | - | 1 977 949 |
| Charge for the year | 34 570 | 119 625 | 8 519 | 274 | 667 | - | 163 655 |
| Impairment losses | 339 | 8 450 | 39 | - | 182 | - | 9 010 |
| Reversal impairment losses and | |||||||
| depreciations | - | -471 | -35 | - | - | - | -506 |
| Disposals and retirements | -1 538 | -17 684 | -4 239 | -202 | -206 | - | -23 869 |
| Deconsolidations Reclassification to (-) / from |
-1 976 | -3 084 | -488 | - | - | - | -5 548 |
| held for sale | -19 656 | - | - | - | - | - | -19 656 |
| Exchange gains (-) and losses | -12 301 | -43 346 | -2 621 | -85 | -103 | - | -58 456 |
| Inflation effects on opening | |||||||
| balances | 254 | 584 | 99 | - | - | - | 937 |
| As at 31 December 2013 | 388 714 | 1 576 692 | 73 835 | 1 421 | 2 855 | - | 2 043 516 |
| As at 1 January 2014 | 388 714 | 1 576 692 | 73 835 | 1 421 | 2 855 | - | 2 043 516 |
| Charge for the year | 34 308 | 111 077 | 7 823 | 227 | 499 | - | 153 934 |
| Impairment losses | 290 | 17 803 | 176 | - | - | - | 18 270 |
| Reversal impairment losses and | |||||||
| depreciations | -9 | -1 383 | -32 | - | - | - | -1 423 |
| Disposals and retirements | -2 353 | -143 332 | -6 797 | - | - | - | -152 482 |
| Transfers1 | 2 | -1 | - | - | - | - | - |
| Exchange gains (-) and losses | 24 334 | 101 683 | 3 994 | 38 | - | - | 130 049 |
| Inflation effects on opening balances |
405 | 931 | 157 | - | - | - | 1 493 |
| As at 31 December 2014 | 445 691 | 1 663 470 | 79 156 | 1 686 | 3 354 | - | 2 193 357 |
1Total transfers equal zero when aggregating the balances of 'Intangible assets '(see note 6.1.) and 'Property, plant and equipment'.
| in thousands of € | Plant, machinery |
Furniture | Assets under |
||||
|---|---|---|---|---|---|---|---|
| Land and buildings |
and equipment |
and vehicles |
Finance leases |
Other PP&E |
construc tion |
Total | |
| Carrying amount | |||||||
| as at 31 December 2013 | |||||||
| before investment grants and | |||||||
| reclassification of leases | 508 155 | 647 147 | 16 611 | 7 004 | 2 215 | 67 589 | 1 248 721 |
| Net investment grants | -6 271 | -3 392 | - | - | - | - | -9 663 |
| Finance leases by asset | |||||||
| category | 6 794 | 17 | 193 | -7 004 | - | - | - |
| Carrying amount | |||||||
| as at 31 December 2013 | 508 678 | 643 772 | 16 804 | - | 2 215 | 67 589 | 1 239 058 |
| Carrying amount | |||||||
| as at 31 December 2014 | |||||||
| before investment grants and | |||||||
| reclassification of leases | 604 158 | 731 592 | 15 263 | 8 052 | 2 775 | 90 340 | 1 452 181 |
| Net investment grants | -7 676 | -11 701 | - | - | - | - | -19 377 |
| Finance leases by asset | |||||||
| category | 7 891 | 15 | 146 | -8 052 | - | - | - |
| Carrying amount | |||||||
| as at 31 December 2014 | 604 373 | 719 907 | 15 409 | - | 2 775 | 90 340 | 1 432 804 |
The investment programs in Belgium, Chile, China, Costa Rica, Slovakia, and United States accounted for most of the expenditure. The net exchange gain for the year (€ 79.8 million) mainly relates to assets denominated in Chinese renminbis (€ 56.9 million), US dollars (€ 30.6 million), Indian rupees (€ 4.7 million), Russian rubles (€ -10.4 million), Chilean pesos (€ -1.5 million) and Venezuelan bolivars (€ -1.2 million).
The methodology for impairment testing is consistent with the one presented in note 6.2. 'Goodwill'. For reclassifications to or from assets held for sale, please refer to note 6.11. 'Assets classified as held for sale and liabilities associated with those assets'. For new consolidations, please refer to note 7.2. 'Effect of business combinations'. It mainly relates to the acquisition of the Pirelli steel cord plants (€ 114.2 million). Inflation effects relate to the application of inflation accounting in Venezuela.
No items of PP&E are pledged as securities.
The Group has no investments in entities qualified as associates.
| Carrying amount | ||
|---|---|---|
| in thousands of € | 2013 | 2014 |
| As at 1 January | 162 036 | 151 224 |
| Result for the year | 30 244 | 25 330 |
| Dividends | -12 509 | -20 577 |
| Exchange gains and losses | -28 547 | 3 339 |
| Deconsolidations | - | -8 030 |
| Other comprehensive income | - | -219 |
| As at 31 December | 151 224 | 151 067 |
For an analysis of the result for the year, please refer to note 5.6. 'Share in the results of joint ventures and associates'. Deconsolidations relate to the carve-out of Bekaert Cimaf Cabos from Belgo Bekaert Arames Ltda in view of the business combination with ArcelorMittal in Costa Rica and Brazil (cf. note 7.2 'Effect of business combinations') and to the liquidation of Bekaert Faser Vertriebs GmbH.
| Cost | ||
|---|---|---|
| in thousands of € | 2013 | 2014 |
| As at 1 January | 5 559 | 4 614 |
| Exchange gains and losses | -945 | 53 |
| As at 31 December | 4 614 | 4 667 |
| Carrying amount of related goodwill as at 31 December | 4 614 | 4 667 |
| Total carrying amount of investments in joint ventures as at 31 December | 155 838 | 155 734 |
The Group's share in the equity of joint ventures is analysed as follows:
| in thousands of € | 2013 | 2014 | |
|---|---|---|---|
| Joint ventures | |||
| BOSFA Pty Ltd | Australia | 3 087 | 3 393 |
| Bekaert Faser Vertriebs GmbH | Germany | 102 | - |
| Belgo Bekaert Arames Ltda | Brazil | 125 538 | 125 806 |
| BMB-Belgo Mineira Bekaert Artefatos de Arame Ltda | Brazil | 14 382 | 14 224 |
| Bekaert Xinyu Metal Products Co Ltd | China | 8 115 | 7 644 |
| Total for joint ventures excluding related goodwill | 151 224 | 151 067 | |
| Carrying amount of related goodwill | 4 614 | 4 667 | |
| Total for joint ventures including related goodwill | 155 838 | 155 734 |
No major contingent assets relating to joint ventures have been identified at the balance sheet date. The main contingent liabilities identified at the balance sheet date relate to taxes at Belgo Bekaert Arames Ltda and BMB-Belgo Mineira Bekaert Artefatos de Arame Ltda. These Brazilian joint ventures have been trying to compensate ICMS tax receivables with a total carrying amount of € 9.3 million (2013: € 10.9 million). They also have been facing claims relating to ICMS credits totaling € 13.4 million (2013: € 11.0 million), ICMS incentives totaling € 1.7 million (2013: € 1.5 million) and several other tax claims, most of which date back several years, for a total nominal amount of € 12.3 million (2013: € 9.8 million). Evidently, any potential losses resulting from the abovementioned contingencies would only affect the Group to the extent of their interest in the joint ventures involved (i.e. 45%).
In accordance with IFRS 12, 'Disclosures of Interests in Other Entities', following information is provided on material joint ventures. The two Brazilian joint ventures have been aggregated in order to emphasize the predominance of the partnership with ArcelorMittal when analyzing the relative importance of the joint ventures.
| Name of joint venture in thousands of € |
Country | 2013 | 2014 |
|---|---|---|---|
| Belgo Bekaert Arames Ltda | Brazil | 45.0% (50.0%) | 45.0% (50.0%) |
| BMB-Belgo Mineira Bekaert Artefatos de Arame Ltda | Brazil | 44.5% (50.0%) | 44.5% (50.0%) |
Belgo Bekaert Arames Ltda manufactures and sells a wide variety of wire products mostly for industrial customers, and BMB manufactures and sells mainly wires and cables for rubber reinforcement in tires.
| in thousands of € | 2013 | 2014 |
|---|---|---|
| Sales | 904 143 | 820 208 |
| Operating result (EBIT) | 95 025 | 79 084 |
| Interest income | 7 484 | 2 780 |
| Interest expense | -8 959 | -5 752 |
| Other financial income and expenses | -5 745 | -2 405 |
| Income taxes | -11 821 | -6 801 |
| Result for the period | 75 984 | 66 906 |
| Other comprehensive income for the period | - | -486 |
| Total comprehensive income for the period | 75 984 | 66 420 |
| Depreciation and amortization | 22 170 | 20 498 |
| EBITDA | 117 195 | 99 582 |
| Dividends received from the entity | 12 494 | 20 577 |
| in thousands of € | 2013 | 2014 |
|---|---|---|
| Current assets | 245 809 | 252 426 |
| Non-current assets | 231 043 | 237 101 |
| Current liabilities | -115 254 | -126 689 |
| Non-current liabilities | -51 073 | -52 644 |
| Net assets | 310 525 | 310 194 |
| in thousands of € | 2013 | 2014 |
|---|---|---|
| Non-current interest-bearing debt | 292 | 47 |
| Current interest-bearing debt | 10 804 | 14 773 |
| Total financial debt | 11 096 | 14 820 |
| Non-current financial receivables and cash guarantees | -23 130 | -24 262 |
| Cash and cash equivalents | -15 158 | -16 508 |
| Net debt | -27 192 | -25 950 |
| Brazilian joint ventures: reconciliation with carrying amount | ||
|---|---|---|
| in thousands of € | 2013 | 2014 |
| Net assets of Belgo Bekaert Arames Ltda | 278 548 | 278 802 |
| Proportion of the Group's ownership interest | 45.0% | 45.0% |
| Proportionate net assets | 125 347 | 125 461 |
| Consolidation adjustments | 191 | 345 |
| Carrying amount of the Group's interest in Belgo Bekaert Arames Ltda | 125 538 | 125 806 |
| Net assets of BMB-Belgo Mineira Bekaert Artefatos de Arame Ltda | 31 977 | 31 392 |
| Proportion of the Group's ownership interest | 44.5% | 44.5% |
| Proportionate net assets | 14 230 | 13 969 |
| Consolidation adjustments | 152 | 255 |
| Carrying amount of the Group's interest in | ||
| BMB-Belgo Mineira Bekaert Artefatos de Arame Ltda | 14 382 | 14 224 |
| Carrying amount of the Group's interest in the Brazilian joint ventures | 139 920 | 140 030 |
| Aggregate information of the other joint ventures in thousands of € |
2013 | 2014 |
|---|---|---|
| The Group's share in the result from continuing operations | 203 | -1 057 |
| The Group's share of total comprehensive income | 203 | -1 057 |
| Aggregate carrying amount of the Group's interests in these joint ventures | 11 304 | 11 037 |
| in thousands of € | 2013 | 2014 |
|---|---|---|
| Non-current financial receivables and cash guarantees | 21 421 | 19 551 |
| Reimbursement rights and other non-current amounts receivable | 3 887 | 8 973 |
| Derivatives (cf. note 7.3.) | 14 760 | 5 944 |
| Overfunded employee benefit plans - non-current | - | 21 |
| Available-for-sale financial assets | 8 713 | 9 979 |
| Total other non-current assets | 48 781 | 44 468 |
The non-current financial receivables are mainly due to the deferred proceeds on the sale of the Industrial Coating activity in 2012, which will be fully settled in 2017.
| Carrying amount | ||
|---|---|---|
| in thousands of € | 2013 | 2014 |
| As at 1 January | 11 305 | 8 713 |
| Expenditure | 14 | 21 |
| Disposals | -1 916 | - |
| Fair value changes | 773 | 1 405 |
| Impairment losses | -1 284 | -157 |
| New consolidations | - | 5 |
| Exchange gains and losses | -179 | -8 |
| As at 31 December | 8 713 | 9 979 |
The available-for-sale financial assets mainly consist of the investment in Shougang Concord Century Holdings Ltd, a Hong Kong Stock Exchange listed company. On this investment, an impairment loss of € 0.2 million has been recognized through profit or loss in June 2014. On the same investment, an increase in fair value (€ 1.4 million) since that moment has been recognized through equity in accordance with IAS 39, 'Financial Instruments: Recognition and Measurement'. The amount reported as expenditure mainly relates to Transportes Puelche Ltda, an investment held by Acma SA (Chile).
| Carrying amount | Assets | Liabilities | |||
|---|---|---|---|---|---|
| in thousands of € | 2013 | 2014 | 2013 | 2014 | |
| As at 1 January | 58 563 | 77 551 | 31 988 | 37 023 | |
| Increase or decrease via income statement | -18 511 | 26 554 | -34 976 | 11 653 | |
| Increase or decrease via equity | 500 | 732 | 1 875 | -1 355 | |
| New consolidations | - | 10 487 | - | 24 580 | |
| Deconsolidations | -1 467 | - | -37 | - | |
| Exchange gains and losses | -3 808 | 5 745 | -4 101 | 2 154 | |
| Change in set-off of assets and liabilities | 42 274 | -19 802 | 42 274 | -19 802 | |
| As at 31 December | 77 551 | 101 267 | 37 023 | 54 253 |
Deferred tax assets and liabilities are attributable to the following items:
| Assets | Liabilities | Net assets | ||||
|---|---|---|---|---|---|---|
| in thousands of € | 2013 | 2014 | 2013 | 2014 | 2013 | 2014 |
| Intangible assets | 143 | 7 581 | 5 174 | 6 038 | -5 031 | 1 543 |
| Property, plant and equipment | 35 454 | 39 346 | 22 037 | 47 330 | 13 417 | -7 984 |
| Financial assets | 1 532 | 1 | 22 293 | 16 065 | -20 761 | -16 064 |
| Inventories | 7 139 | 10 116 | 3 589 | 4 534 | 3 550 | 5 582 |
| Receivables | 8 299 | 8 072 | 73 | 261 | 8 226 | 7 811 |
| Other current assets | 284 | 258 | 1 605 | 8 292 | -1 321 | -8 034 |
| Employee benefit obligations | 20 367 | 29 286 | 92 | 104 | 20 275 | 29 182 |
| Other provisions | 1 541 | 4 274 | 1 187 | 2 474 | 354 | 1 800 |
| Other liabilities | 10 416 | 20 744 | 1 380 | 9 436 | 9 036 | 11 308 |
| Tax deductible losses carried | ||||||
| forward, tax credits and recoverable | ||||||
| income taxes | 12 783 | 21 870 | - | - | 12 783 | 21 870 |
| Tax assets / liabilities | 97 958 | 141 548 | 57 430 | 94 534 | 40 528 | 47 014 |
| Set-off of assets and liabilities | -20 407 | -40 281 | -20 407 | -40 281 | - | - |
| Net tax assets / liabilities | 77 551 | 101 267 | 37 023 | 54 253 | 40 528 | 47 014 |
The deferred taxes on property, plant and equipment mainly relate to temporary differences due to differences in useful lives between IFRS and tax books. The deferred tax liabilities on financial assets mainly relate to temporary differences arising from undistributed profits from subsidiaries and joint ventures.
| 2013 in thousands of € |
As at 1 January |
Recognized via income statement |
Recognized via equity |
Acquisitions and disposals1 |
Exchange gains and losses |
As at 31 December |
|---|---|---|---|---|---|---|
| Temporary differences | ||||||
| Intangible assets | -7 065 | 1 812 | - | - | 222 | -5 031 |
| Property, plant and equipment | -19 085 | 30 684 | - | 27 | 1 791 | 13 417 |
| Financial assets | -18 335 | -497 | -2 231 | - | 302 | -20 761 |
| Inventories | 6 047 | -2 481 | - | -59 | 43 | 3 550 |
| Receivables | 11 085 | -2 661 | - | -3 | -195 | 8 226 |
| Other current assets | -5 085 | 3 711 | 30 | - | 23 | -1 321 |
| Employee benefit obligations | 23 207 | -2 745 | 826 | -130 | -883 | 20 275 |
| Other provisions | 611 | -195 | - | -3 | -59 | 354 |
| Other liabilities | 5 446 | 3 925 | - | - | -335 | 9 036 |
| Tax deductible losses carried forward, tax credits and recoverable |
||||||
| income taxes | 29 749 | -15 088 | - | -1 262 | -616 | 12 783 |
| Total | 26 575 | 16 465 | -1 375 | -1 430 | 293 | 40 528 |
| Recognized | Acquisitions | Exchange |
| Recognized | Acquisitions | Exchange | ||||
|---|---|---|---|---|---|---|
| 2014 | As at | via income | Recognized | and | gains and | As at |
| in thousands of € | 1 January | statement | via equity | disposals1 | losses | 31 December |
| Temporary differences | ||||||
| Intangible assets | -5 031 | 1 679 | - | 5 510 | -615 | 1 543 |
| Property, plant and equipment | 13 417 | 2 200 | - | -24 487 | 886 | -7 984 |
| Financial assets | -20 761 | 3 833 | 1 066 | - | -202 | -16 064 |
| Inventories | 3 550 | 1 433 | - | 1 101 | -502 | 5 582 |
| Receivables | 8 226 | -1 088 | - | 2 | 671 | 7 811 |
| Other current assets | -1 321 | -6 628 | - | - | -85 | -8 034 |
| Employee benefit obligations | 20 275 | 5 344 | 1 021 | 1 027 | 1 515 | 29 182 |
| Other provisions | 354 | -1 549 | - | 2 641 | 354 | 1 800 |
| Other liabilities | 9 036 | 1 594 | - | 113 | 565 | 11 308 |
| Tax deductible losses carried | ||||||
| forward, tax credits and recoverable | ||||||
| income taxes | 12 783 | 8 083 | - | - | 1 004 | 21 870 |
| Total | 40 528 | 14 901 | 2 087 | -14 093 | 3 591 | 47 014 |
1 Relates to the disposal of the Advanced Filtration activities in 2013 and to business combinations in 2014 (see note 7.2. 'Effect of business combinations).
| 2013 | |||
|---|---|---|---|
| in thousands of € | Before tax | Tax impact | After tax |
| Exchange differences | -86 105 | -1 904 | -88 009 |
| Inflation adjustments | 758 | - | 758 |
| Cash flow hedges | 854 | 30 | 884 |
| Available-for-sale investments | 773 | -327 | 446 |
| Remeasurement gains and losses on defined-benefit plans | 21 734 | 826 | 22 560 |
| Total | -61 986 | -1 375 | -63 361 |
| 2014 | |||
|---|---|---|---|
| in thousands of € | Before tax | Tax impact | After tax |
| Exchange differences | 92 868 | 1 355 | 94 223 |
| Inflation adjustments | 1 574 | - | 1 574 |
| Cash flow hedges | 755 | - | 755 |
| Available-for-sale investments | 1 405 | -289 | 1 116 |
| Remeasurement gains and losses on defined-benefit plans | -28 418 | 1 021 | -27 397 |
| Share of OCI of joint ventures and associates | -219 | - | -219 |
| Total | 67 965 | 2 087 | 70 052 |
Deferred tax assets have not been recognized in respect of the following deductible items (gross amounts):
| in thousands of € | 2013 | 2014 | Variance 2014 vs 2013 |
|---|---|---|---|
| Deductible temporary differences | 236 728 | 270 086 | 33 358 |
| Capital losses | 34 254 | 14 781 | -19 473 |
| Trade losses and tax credits | 717 923 | 829 911 | 111 988 |
| Total | 988 905 | 1 114 778 | 125 873 |
| in thousands of € | Expiring within 1 year |
Expiring between 1 and 5 years |
Expiring after more than 5 years |
Not expiring | Total |
|---|---|---|---|---|---|
| Capital losses | - | - | - | 14 781 | 14 781 |
| Trade losses | 23 501 | 194 696 | 103 823 | 509 839 | 831 859 |
| Tax credits | - | 65 978 | - | 10 779 | 76 757 |
| Total | 23 501 | 260 674 | 103 823 | 535 399 | 923 397 |
| in thousands of € | 2013 | 2014 |
|---|---|---|
| Raw materials, consumables and spare parts | 192 818 | 223 367 |
| Work in progress and finished goods | 257 233 | 312 423 |
| Goods purchased for resale | 89 214 | 105 017 |
| Inventories | 539 265 | 640 807 |
| Trade receivables | 583 215 | 707 569 |
| Bills of exchange received | 110 218 | 114 117 |
| Advances paid | 22 176 | 24 897 |
| Trade payables | -338 864 | -390 943 |
| Advances received | -8 717 | -5 106 |
| Remuneration and social security payables | -101 111 | -107 432 |
| Employment-related taxes | -13 346 | -9 298 |
| Operating working capital | 792 836 | 974 611 |
| Carrying amount 2013 in thousands of € |
2014 |
|---|---|
| As at 1 January 898 344 |
792 836 |
| Organic increase or decrease (-) -78 491 |
54 623 |
| Write-downs and write-down reversals 19 338 |
-4 364 |
| New consolidations - |
71 900 |
| Deconsolidations -1 140 |
- |
| Impact inflation accounting 109 |
647 |
| Exchange gains and losses (-) -45 324 |
58 969 |
| As at 31 December 792 836 |
974 611 |
Average operating working capital represented 26.7% of sales (2013: 26.5%).
Additional information is as follows:
The cost of sales includes expenses related to transport and handling of finished goods amounting to € 151.6 million (2013: € 136.1 million), which have never been capitalized in inventories. Movements in inventories include net write-downs in 2014 of € 5.0 million (2013: net reversals of write-downs of € 7.1 million). No inventories were pledged as security for liabilities (2013: none).
The following table presents the movements in the allowance for bad debt:
| Allowance for bad debt | ||
|---|---|---|
| in thousands of € | 2013 | 2014 |
| As at 1 January | -52 820 | -39 371 |
| Losses recognized in current year | -3 426 | -3 128 |
| Losses recognized in prior years - amounts used | 1 406 | 807 |
| Losses recognized in prior years - reversal of amounts not used | 14 123 | 2 933 |
| New consolidations | - | -8 |
| Deconsolidations | 55 | - |
| Exchange gains and losses (-) | 1 291 | -3 000 |
| As at 31 December | -39 371 | -41 767 |
In 2013, the losses reversed mainly relate to receivables from sawing wire customers in Asia Pacific initially allowed for in 2012.
More information about allowances and past-due receivables is provided in the following table:
| Trade receivables and bills of exchange received | ||
|---|---|---|
| in thousands of € | 2013 | 2014 |
| Gross amount | 732 804 | 863 453 |
| Allowance for bad debts (impaired) | -39 371 | -41 767 |
| Net carrying amount | 693 433 | 821 686 |
| of which past due but not impaired | ||
| amount | 110 422 | 97 669 |
| average number of days outstanding | 90 | 98 |
Regarding trade receivables that are neither impaired nor past due, there are no indications that the debtors will not meet their payment obligations. For more information on credit enhancement techniques, refer to note 7.3. 'Financial risk management and financial derivatives'.
| in thousands of € | 2013 | 2014 |
|---|---|---|
| As at 1 January | 84 325 | 83 781 |
| Increase or decrease | 8 337 | 10 517 |
| Write-downs and write-down reversals | -746 | -158 |
| New consolidations | - | 6 134 |
| Deconsolidations | -299 | - |
| Reclassifications | -313 | - |
| Exchange gains and losses | -7 523 | 6 353 |
| As at 31 December | 83 781 | 106 627 |
Other receivables mainly relates to taxes (€ 78.4 million (2013: € 67.6 million)). Furthermore, it includes a preliminary estimate of insurance compensations relating to the fire in the Rome plant (USA) in 2014 (€ 15.9 million) and social loans to employees (€ 3.2 million (2013: € 5.4 million)).
| Carrying amount in thousands of € |
2013 | 2014 |
|---|---|---|
| Cash & cash equivalents | 391 857 | 458 542 |
| Short-term deposits | 10 172 | 14 160 |
For the changes in cash & cash equivalents, please refer to the consolidated cash flow statement and to note 7.1. 'Notes to the cash flow statement'. Short-term deposits have been converted to cash equivalents in view of the repayment of a bond of € 100 million in March 2015 and of the payment for the acquisition of the Pirelli steel cord plants. Cash equivalents and short-term deposits do not include any listed securities or equity instruments at the balance sheet date and are all classified as loans and receivables.
| Carrying amount | ||
|---|---|---|
| in thousands of € | 2013 | 2014 |
| Current loans and receivables | 6 440 | 13 998 |
| Advances paid | 22 176 | 24 897 |
| Derivatives (cf. note 7.3.) | 13 565 | 18 213 |
| Deferred charges and accrued revenues | 9 032 | 7 942 |
| As at 31 December | 51 213 | 65 050 |
The current loans and receivables mainly relate to loans to joint ventures in China (€ 1.0 million) and Australia (€ 0.7 million), to the current portion of the receivable on the disposal of the Industrial Coating activity in 2012 (€ 2.9 million) and to various cash guarantees (€ 8.4 million). The derivatives relate to CCIRS agreements (€ 15.6 million) and forward exchange contracts (€ 2.6 million).
| Carrying amount | ||
|---|---|---|
| in thousands of € | 2013 | 2014 |
| As at 1 January | - | 2 096 |
| Increases and decreases (-) | 2 096 | -2 096 |
| As at 31 December | 2 096 | - |
| in thousands of € | 2013 | 2014 |
| Individual items of property, plant and equipment | 2 096 | - |
| Total assets classified as held for sale | 2 096 | - |
|---|---|---|
| Disposal groups | - | |
| Total liabilities associated with assets classified as held for sale | - | - |
In 2014 no disposal groups are classified as held for sale at the balance sheet date.
The individual items of property, plant and equipment in 2013 relating to land and buildings in Belgium were sold during 2014.
| Issued capital | 2013 | 2014 | ||||
|---|---|---|---|---|---|---|
| Number of | Number of | |||||
| in thousands of € | Nominal value | shares | Nominal value | shares | ||
| 1 | As at 1 January | 176 586 | 60 000 942 | 176 773 | 60 063 871 | |
| Movements in the year | ||||||
| Issue of new shares | 187 | 62 929 | 141 | 47 534 | ||
| As at 31 December | 176 773 | 60 063 871 | 176 914 | 60 111 405 | ||
| 2 | Structure | |||||
| 2.1 | Classes of ordinary shares | |||||
| Ordinary shares without par value | 176 773 | 60 063 871 | 176 914 | 60 111 405 | ||
| 2.2 | Registered shares | 1 721 925 | 1 722 615 | |||
| Non-material shares | 58 302 193 | 58 353 432 | ||||
| Shares to be dematerialized | 39 753 | 35 358 | ||||
| Authorized capital not issued | 175 739 | 152 176 |
A total of 47 534 subscription rights were exercised under the Company's SOP1 and SOP 2005-2009 stock option plans in 2014, requiring the issue of a total of 47 534 new shares of the Company.
In addition to the 1 652 677 treasury shares held as of 31 December 2013, the Company purchased 2 622 333 own shares in the course of 2014. None of those shares were disposed of in connection with any stock option plans or cancelled in 2014. As a result, the Company held an aggregate 4 275 010 treasury shares as of 31 December 2014.
Details of the stock option plans which showed an outstanding balance either at the balance sheet date or at the previous balance sheet date, are as follows:
| Number of subscription rights | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Date offered |
Date granted | Date of issue of subscription rights |
Exercise price (in €) |
Granted | Exercised | Forfeited | Out standing |
First exercise period |
Last exercise period |
| 14.07.2000 | 12.09.2000 | 26.09.2000 | 18.000 | 319 941 | 317 481 | 2 460 | - | 01.06 - 15.06.2004 |
22.05 - 15.06.2013 |
| 13.07.2001 | 11.09.2001 | 26.09.2001 | 13.980 | 418 917 | 416 499 | 2 418 | - | 22.05 - 30.06.2005 |
22.05 - 15.06.2014 |
| 22.05 - | 22.05 - | ||||||||
| 12.07.2002 | 10.09.2002 | 25.09.2002 | 15.825 | 106 152 | 104 712 | 720 | 720 | 30.06.2006 | 15.06.2015 |
| 11.07.2003 | 09.09.2003 | 06.10.2003 | 13.630 | 100 740 | 100 740 | - | - | 22.05 - 30.06.2007 |
22.05 - 15.06.2013 |
| 22.05 - | 22.05 - | ||||||||
| 09.07.2004 | 07.09.2004 | 30.09.2004 | 15.765 | 502 182 | 502 179 | 3 | - | 30.06.2008 | 15.06.2014 |
| 1 447 932 | 1 441 611 | 5 601 | 720 |
| Number of options | ||||||||
|---|---|---|---|---|---|---|---|---|
| Date offered | Date granted | Exercise price (in €) |
Granted | Exercised | Forfeited | Out standing |
First exercise period |
Last exercise period |
| 21.12.2006 | 19.02.2007 | 30.175 | 37 500 | 27 500 | - | 10 000 | 22.05 - 30.06.2010 |
15.11 - 15.12.2021 |
| 20.12.2007 | 18.02.2008 | 28.335 | 12 870 | 12 690 | - | 180 | 22.05 - 30.06.2011 |
15.11 - 15.12.2017 |
| 20.12.2007 | 18.02.2008 | 28.335 | 30 630 | 11 310 | - | 19 320 | 22.05 - 30.06.2011 |
15.11 - 15.12.2022 |
| 18.12.2008 | 16.02.2009 | 16.660 | 64 500 | - | - | 64 500 | 22.05 - 30.06.2012 |
15.11 - 15.12.2018 |
| 17.12.2009 | 15.02.2010 | 33.990 | 49 500 | - | - | 49 500 | 22.05 - 30.06.2013 |
15.11 - 15.12.2019 |
| 195 000 | 51 500 | - | 143 500 |
| Date | offered Date granted | Date of issue of subscription rights |
Exercise price (in €) |
Granted | Exercised | Forfeited | Out standing |
First exercise period |
Last exercise period |
|---|---|---|---|---|---|---|---|---|---|
| 22.05 - 30.06.2009 |
15.11 - 15.12.2020 |
||||||||
| 22.12.2005 | 20.02.2006 | 22.03.2006 | 23.795 | 190 698 | 180 567 | 15 | 10 116 | ||
| 21.12.2006 | 19.02.2007 | 22.03.2007 | 30.175 | 153 810 | 143 540 | - | 10 270 | 22.05 - 30.06.2010 |
15.11 - 15.12.2021 |
| 22.05 - | 15.11 - | ||||||||
| 20.12.2007 | 18.02.2008 | 22.04.2008 | 28.335 | 14 100 | 2 100 | 9 900 | 2 100 | 30.06.2011 | 15.12.2017 |
| 22.05 - | 15.11 - | ||||||||
| 20.12.2007 | 18.02.2008 | 22.04.2008 | 28.335 | 215 100 | 85 650 | 12 700 | 116 750 | 30.06.2011 | 15.12.2022 |
| 22.05 - | 15.11 - | ||||||||
| 18.12.2008 | 16.02.2009 | 20.10.2009 | 16.660 | 288 150 | 110 350 | 19 500 | 158 300 | 30.06.2012 | 15.12.2018 |
| 22.05 - | 15.11 - | ||||||||
| 17.12.2009 | 15.02.2010 | 08.09.2010 | 33.990 | 225 450 | - | 33 600 | 191 850 | 30.06.2013 | 15.12.2019 |
| 1 087 308 | 522 207 | 75 715 | 489 386 |
Number of subscription rights
| Number of options | ||||||||
|---|---|---|---|---|---|---|---|---|
| Date offered | Date granted | Exercise price (in €) |
Granted | Exercised | Forfeited | Out standing |
First exercise period |
Last exercise period |
| 16.12.2010 | 14.02.2011 | 77.000 | 360 925 | - | 46 000 | 314 925 | 28.02 - 13.04.2014 |
Mid Nov.- 15.12.2020 |
| 22.12.2011 | 20.02.2012 | 25.140 | 287 800 | - | 2 600 | 285 200 | 27.02 - 12.04.2015 |
Mid Nov. - 21.12.2021 |
| 20.12.2012 | 18.02.2013 | 19.200 | 267 200 | - | 2 700 | 264 500 | End Feb. - 10.04.2016 |
Mid Nov. - 19.12.2022 |
| 29.03.2013 | 28.05.2013 | 21.450 | 260 000 | - | - | 260 000 | End Feb. - 09.04.2017 |
End Feb. - 28.03.2023 |
| 19.12.2013 | 17.02.2014 | 25.380 | 373 450 | - | - | 373 450 | End Feb. - 09.04.2017 |
Mid Nov. - 18.12.2023 |
| 1 549 375 | - | 51 300 | 1 498 075 |
| 2013 2014 |
||||
|---|---|---|---|---|
| SOP1 Stock Option Plan | Number of subscription rights |
Weighted average exercise price (in €) |
Number of subscription rights |
Weighted average exercise price (in €) |
| Outstanding as at 1 January | 21 749 | 15.977 | 14 254 | 15.664 |
| Exercised during the year | -7 495 | 16.573 | -13 534 | 15.655 |
| Outstanding as at 31 December | 14 254 | 15.664 | 720 | 15.825 |
| Weighted average exercise price |
Weighted average exercise price |
|||
|---|---|---|---|---|
| SOP2 Stock Option Plan | Number of options | (in €) Number of options | (in €) | |
| Outstanding as at 1 January | 143 500 | 25.166 | 143 500 | 25.166 |
| Outstanding as at 31 December | 143 500 | 25.166 | 143 500 | 25.166 |
2013 2014
| SOP 2005-2009 Stock Option Plan | Number of subscription rights |
Weighted average exercise price (in €) |
Number of subscription rights |
Weighted average exercise price (in €) |
|---|---|---|---|---|
| Outstanding as at 1 January | 597 435 | 25.441 | 523 401 | 26.068 |
| Forfeited during the year | -18 600 | 33.990 | -15 | 23.795 |
| Exercised during the year | -55 434 | 16.660 | -34 000 | 16.678 |
| Outstanding as at 31 December | 523 401 | 26.068 | 489 386 | 26.720 |
| 2013 | 2014 | ||||
|---|---|---|---|---|---|
| SOP 2010-2014 Stock Option Plan | Number of options | Weighted average exercise price |
(in €) Number of options | Weighted average exercise price (in €) |
|
| Outstanding as at 1 January | 638 725 | 53.633 | 1 160 625 | 38.640 | |
| Granted during the year | 527 200 | 20.310 | 373 450 | 25.380 | |
| Forfeited during the year | -5 300 | 22.114 | -36 000 | 77.000 | |
| Outstanding as at 31 December | 1 160 625 | 38.640 | 1 498 075 | 34.413 |
| Weighted average remaining contractual life | ||
|---|---|---|
| in years | 2013 | 2014 |
| SOP1 | 0.5 | 0.5 |
| SOP2 | 5.7 | 4.7 |
| SOP 2005-2009 | 6.3 | 5.4 |
| SOP 2010-2014 | 8.2 | 7.7 |
The weighted average share price at the date of exercise in 2014 was € 27.82 for the SOP1 subscription rights (2013: € 23.49), not applicable for the SOP2 options (2013: not applicable) and € 27.45 for the SOP 2005-2009 subscription rights (2013: € 27.23). The exercise price of the subscription rights and options is equal to the lower of (i) the average closing price of the Company's share during the thirty days preceding the date of the offer, and (ii) the last closing price preceding the date of the offer. When subscription rights are exercised under the SOP1 or SOP 2005-2009 plan, equity is increased by the amount of the proceeds received. Under the terms of the SOP1 and SOP2 plans any subscription rights or options granted through 2004 were vested immediately.
Under the terms of the SOP 2010-2014 stock option plan, options to acquire existing Company shares have been offered to the members of the Bekaert Group Executive, the Senior Vice Presidents and senior executive personnel during the period 2010-2014. The dates of grant of each offering are scheduled in the period 2011- 2015. The exercise price of the SOP 2010-2014 options is determined in the same manner as in the previous plans. The vesting conditions of the SOP 2010-2014 grants, as well as of the SOP 2005-2009 grants and of the SOP2 grants beginning in 2006, are such that the subscription rights or options will be fully vested on 1 January of the fourth year after the date of the offer. In accordance with the Economic Recovery Act of 27 March 2009, the exercise period of the SOP2 options and SOP 2005-2009 subscription rights granted in 2006, 2007 and 2008 was extended by five years in favor of the persons who were plan beneficiaries and subject to Belgian income tax at the time such extension was offered. The incremental fair value granted as a result of this amounts to € 0.3 million.
The options granted under SOP2 and SOP 2010-2014 and the subscription rights granted under SOP 2005-2009 are recognized at fair value at grant date in accordance with IFRS 2 (see note 6.13. 'Retained earnings and other Group reserves'). The fair value of the options is determined using a binomial pricing model. Inputs and outcome of this option pricing model are detailed below:
| Granted in February 2013 |
Granted in May 2013 |
Granted in February 2014 |
Granted in February 20151 |
|---|---|---|---|
| 22.02 | 23.45 | 27.32 | 25.65 |
| 19.20 | 21.45 | 25.38 | 26.06 |
| 39% | 39% | 39% | 39% |
| 3.0% | 3.0% | 3.0% | 3.0% |
| 3 | 3 | 3 | 3 |
| 10 | 10 | 10 | 10 |
| 3% | 3% | 3% | 3% |
| 0.9% | 1.7% | 1.0% | 0.05% |
| 1.40 | 1.40 | 1.40 | 1.40 |
| 6.76 | 7.96 | 7.96 | 6.71 |
1 See note 7.6. 'Events after the balance sheet date'.
The model allows for the effects of early exercise through an exercise factor. An exercise factor of 1.40 stands for the assumption that the beneficiaries exercise the options and the subscription rights after the vesting date when the share price exceeds the exercise price by 40% (on average).
During 2014, 373 450 options (2013: 527 200) were granted under SOP 2010-2014 at a fair value per unit of € 7.96 (2013: at a weighted average fair value per unit of € 7.35). The Group has recorded an expense against equity of € 2.8 million (2013: € 4.4 million) based on a straight-line amortization over the vesting period of the fair value of options and subscription rights granted over the past three years.
| Carrying amount | ||
|---|---|---|
| in thousands of € | 2013 | 2014 |
| Hedging reserve | -623 | 132 |
| Revaluation reserve for available-for-sale investments | 693 | 2 098 |
| Remeasurements on defined-benefit plans | -52 076 | -79 146 |
| Other revaluation reserves | -5 894 | -16 905 |
| Deferred taxes booked in equity | 28 014 | 29 722 |
| Equity-settled share-based payment plans | 19 343 | 22 188 |
| Treasury shares | -73 851 | -145 953 |
| Other reserves | -84 394 | -187 864 |
| Cumulative translation adjustments | -84 776 | -6 149 |
| Total other Group reserves | -169 170 | -194 013 |
| Retained earnings | 1 307 618 | 1 352 197 |
The movements in the items of other reserves were as follows:
| Hedging reserve | |
|---|---|
| 2013 in thousands of € |
2014 |
| As at 1 January -1 477 |
-623 |
| Recycled to income statement -3 035 |
8 651 |
| Fair value changes to hedging instruments 3 889 |
-7 896 |
| As at 31 December -623 |
132 |
| Of which | |
| Cross-currency interest-rate swaps (on Eurobonds) -623 |
132 |
Changes in the fair value of hedging instruments designated as effective cash flow hedges are calculated and recognized directly in equity on a quarterly basis. In accordance with IFRS hedge accounting policies for cash flow hedges, exchange gains or losses arising from translating the underlying debt at the closing rate are offset by recycling the equivalent amounts to the income statement on a quarterly basis.
| in thousands of € | 2013 | 2014 |
|---|---|---|
| As at 1 January | 10 | 693 |
| Recycled to income statement | -10 | 157 |
| Fair value changes | 693 | 1 248 |
| As at 31 December | 693 | 2 098 |
| Of which | ||
| Investment in Shougang Concord Century Holdings Ltd | 596 | 2 001 |
| Other | 97 | 97 |
The revaluation of the investment in Shougang Concord Century Holdings Ltd is based on the closing price of the share on the Hong Kong Stock Exchange. In 2014, an amount of € 0.2 million was recycled to income statement as a result of an impairment loss.
| Remeasurements on defined-benefit plans | |
|---|---|
| 2013 in thousands of € |
2014 |
| As at 1 January -72 599 |
-52 076 |
| Remeasurements of the period 20 747 |
-27 742 |
| Inflation effects -224 |
-269 |
| Changes in ownership - |
941 |
| As at 31 December -52 076 |
-79 146 |
The remeasurements originate from using different actuarial assumptions in calculating the defined-benefit obligation and from differences with actual returns on plan assets at the balance sheet date (see note 6.15. 'Employee benefit obligations').
| Other revaluation reserves | |
|---|---|
| in thousands of € 2013 |
2014 |
| As at 1 January -5 894 |
-5 894 |
| Changes in ownership - |
-2 811 |
| Put option on purchase of non-controlling interests - |
-8 200 |
| As at 31 December -5 894 |
-16 905 |
The changes in ownership incurred in 2014 relate to the sale of non-controlling interests in Ideal Alambrec SA (Ecuador) to ArcelorMittal.
As part of the initial accounting for the business combination with Maccaferri (see note 7.2 'Effect of business combinations'), a liability of € 8.2 million has been set up versus equity, which represents the initial fair value of the liability resulting from the put option granted to Maccaferri on its remaining non-controlling interests in Bekaert Maccaferri Underground Solutions BVBA.
| Deferred taxes booked in equity | ||
|---|---|---|
| in thousands of € | 2013 | 2014 |
| As at 1 January | 29 417 | 28 014 |
| Deferred taxes relating to other comprehensive income | -1 479 | 1 844 |
| Inflation effects | 76 | 92 |
| Changes in ownership | - | -228 |
| As at 31 December | 28 014 | 29 722 |
Deferred taxes relating to other comprehensive income are also recognized directly in equity (see note 6.6. 'Deferred tax assets and liabilities').
| Equity-settled share-based payment plans | ||
|---|---|---|
| in thousands of € | 2013 | 2014 |
| As at 1 January | 14 987 | 19 343 |
| Equity instruments granted | 4 356 | 2 845 |
| As at 31 December | 19 343 | 22 188 |
Options granted under the SOP2 and SOP 2010-2014 stock option plans and subscription rights granted under the SOP 2005-2009 stock option plan (see note 6.12. 'Ordinary shares, treasury shares, subscription rights and share options') are accounted for as equity-settled share-based payments in accordance with IFRS 2, 'Sharebased Payment'.
| Treasury shares in thousands of € |
2013 | 2014 |
|---|---|---|
| As at 1 January | -58 577 | -73 851 |
| Shares purchased | -15 274 | -72 102 |
| As at 31 December | -73 851 | -145 953 |
In 2014, the Company launched two share buy-back programs on the stock exchange (1) 1 868 033 of its own shares were purchased between June and September to anticipate any dilution resulting from the convertible bond issued in June; (2) 754 300 of its own shares were purchased in November and December to anticipate the exercise of options granted under its option plans (see note 6.12. 'Ordinary shares, treasury shares, subscription rights and share options').
| Cumulative translation adjustments | ||
|---|---|---|
| in thousands of € | 2013 | 2014 |
| As at 1 January | -16 087 | -84 776 |
| Exchange differences on dividends declared | -21 153 | -5 606 |
| Recycled to income statement - relating to disposed entities or step acquisitions | -463 | 1 042 |
| Movements arising from exchange rate fluctuations | -47 073 | 83 191 |
| As at 31 December | -84 776 | -6 149 |
| Of which relating to entities with following functional currencies | ||
| Chinese renminbi | 72 086 | 123 304 |
| US dollar | -6 707 | 15 994 |
| Brazilian real | -109 414 | -107 398 |
| Chilean peso | -311 | -1 677 |
| Venezuelan bolivar | -37 342 | -38 307 |
| Indian rupee | -9 141 | -5 620 |
| Czech koruna | 6 950 | 6 587 |
| Other currencies | -897 | 968 |
The swings in CTA reflect both the exchange rate evolution and the relative importance of the net assets denominated in the presented currencies.
| Carrying amount | ||
|---|---|---|
| in thousands of € | 2013 | 2014 |
| As at 1 January | 181 623 | 157 600 |
| Changes in Group structure | -74 | 25 988 |
| Share of the result for the period | 11 498 | 378 |
| Share of other comprehensive income excluding CTA | -604 | -338 |
| Dividend pay-out | -12 960 | -54 663 |
| Capital increases | - | 53 399 |
| Reclassifications | -7 171 | - |
| Exchange gains and losses (-) | -14 712 | 17 057 |
| As at 31 December | 157 600 | 199 421 |
In 2014, the changes in Group structure mainly originated from the business combination with ArcelorMittal (€ 11.2 million), due to non-controlling interests of 42% arising in the new entities in Costa Rica and to an increase in non-controlling interests from 20% to 42% in the existing entity in Ecuador. Substantial increases also resulted from the business combinations with Pirelli (€ 9.2 million) and Maccaferri (€ 2.8 million). The share of the result for the period was adversely affected by impairment losses in Malaysia and start-up losses
in Costa Rica, while lower profits were booked in Latin America in general. Dividends paid out by Inchalam SA and Prodalam SA have been used by the Chilean partners to fund capital increases totaling € 40.5 million in Acma Inversiones SA, Prodinsa SA and Procables Wire Ropes SA. These capital increases are part of a portfolio restructuring initiated in 2014, through which Bekaert was to raise its interest in the ropes activities in Chile, Peru and Canada from 52% to 65% early 2015 (see note 7.6 'Events after the balance sheet date').
In accordance with IFRS 12, 'Disclosures of Interests in Other Entities', following information is provided on subsidiaries that have non-controlling interests that are material to the Group. The objective of IFRS 12 is to require an entity to disclose information that enables users of its financial statements to evaluate (a) the nature and risks associated with its interests in other entities, and (b) the effects of those interests on its financial position, financial performance and cash flows. In order to meet this objective, the Group has opted to aggregate all of its not wholly-owned subsidiaries in Latin America. The main reason for this aggregation is that the Group has many partnerships in Latin America, through a large number of legal entities, many of which may not be individually material enough to disclose, but which in total represent over 60% of the Group's accumulated non-controlling interests. In aggregating this information, only intercompany effects between the listed Latin American subsidiaries have been eliminated, while all other entities of the Group have been treated as third parties.
| Proportion of NCI at year-end |
|||
|---|---|---|---|
| Non-wholly owned subsidiaries in Latin America | Country | 2013 | 2014 |
| Acma Inversiones SA | Chile | 48.0% | 48.0% |
| Acma SA | Chile | 48.0% | 48.0% |
| Acmanet SA | Chile | 48.0% | 48.0% |
| Industrias Acmanet limitada | Chile | 48.0% | 48.0% |
| Industrias Chilenas de Alambre - Inchalam SA | Chile | 48.0% | 48.0% |
| Procables Wire Ropes SA | Chile | - | 48.0% |
| Procercos SA | Chile | - | 48.0% |
| Prodalam SA | Chile | 48.0% | 48.0% |
| Prodinsa SA | Chile | 48.0% | 48.0% |
| Productora de Alambres Colombianos - Proalco SAS | Colombia | 20.0% | 20.0% |
| Bekaert Costa Rica SA | Costa Rica | 19.8% | 41.6% |
| BIA Alambres Costa Rica SA | Costa Rica | - | 41.6% |
| Ideal Alambrec SA | Ecuador | 20.0% | 41.6% |
| Impala SA | Panama | 48.0% | 48.0% |
| Productos de Acero Cassadó SA | Peru | 62.5% | 62.5% |
| Prodac Contrata SAC | Peru | 62.5% | 62.5% |
| Prodac Selva SAC | Peru | 62.5% | 62.5% |
| Procables SA | Peru | 50.0% | 50.0% |
| InverVicson SA | Venezuela | 20.0% | 20.0% |
| Vicson SA | Venezuela | 20.0% | 20.0% |
Vicson SA (Venezuela) is exposed to restrictions on the repatriation of cash due to foreign exchange regulations in Venezuela.
The principal activity of the main entities listed above is manufacturing and selling wire, ropes and other wire products, mainly for the local market. Following entities are essentially holdings, having interests in one or more of the other entities listed above: Acma Inversiones SA, Industrias Acmanet limitada, Procables Wire Ropes SA, Procercos SA and Impala SA.
| Result attributable to NCI | Equity attributable to NCI | |||
|---|---|---|---|---|
| in thousands of € | 2013 | 2014 | 2013 | 2014 |
| Non-wholly owned subsidiaries in Latin America | 11 045 | 5 989 | 106 124 | 124 940 |
| Non-wholly owned subsidiaries in Latin America in thousands of € |
2013 | 2014 | ||
| Current assets | 264 583 | 334 908 | ||
| Non-current assets | 193 319 | 238 381 | ||
| Current liabilities | 178 745 | 256 115 | ||
| Non-current liabilities | 51 222 | 60 234 | ||
| Equity attributable to the Group | 121 811 | 132 000 | ||
| Equity attributable to NCI | 106 124 | 124 940 | ||
| Non-wholly owned subsidiaries in Latin America in thousands of € |
2013 | 2014 | ||
| Sales | 637 563 | 605 042 | ||
| Expenses | -615 373 | -594 997 | ||
| Result for the period | 22 190 | 10 045 | ||
| Result for the period attributable to the Group | 11 145 | 4 056 | ||
| Result for the period attributable to NCI | 11 045 | 5 989 | ||
| Other comprehensive income for the period | -9 258 | 20 631 | ||
| OCI attributable to the Group | -344 | 10 098 | ||
| OCI attributable to NCI | -8 914 | 10 533 | ||
| Total comprehensive income for the period | 12 932 | 30 676 | ||
| Total comprehensive income attributable to the Group | 10 801 | 14 154 | ||
| Total comprehensive income attributable to NCI | 2 131 | 16 522 | ||
| Dividends paid to NCI | -17 068 | -54 191 | ||
| Net cash inflow (outflow) from operating activities | 49 451 | 15 237 | ||
| Net cash inflow (outflow) from investing activities | -16 073 | -30 979 | ||
| Net cash inflow (outflow) from financing activities | -37 790 | 22 647 | ||
| Net cash inflow (outflow) | -4 412 | 6 905 |
The total net liabilities for employee benefit obligations, which amounted to € 297.7 million as at 31 December 2014 (€ 257.7 million as at year-end 2013), are as follows:
| in thousands of € | 2013 | 2014 |
|---|---|---|
| Liabilities for | ||
| Post-employment defined-benefit plans | 134 089 | 169 651 |
| Other long-term employee benefits | 2 418 | 2 779 |
| Cash-settled share-based payment employee benefits | 1 333 | 1 675 |
| Short-term employee benefits | 101 111 | 107 432 |
| Termination benefits | 18 768 | 16 170 |
| Total liabilities in the balance sheet | 257 719 | 297 707 |
| of which | ||
| Non-current liabilities | 136 602 | 175 774 |
| Current liabilities | 121 117 | 121 933 |
| Assets for | ||
| Defined-benefit pension plans | - | -21 |
| Total assets in the balance sheet | - | -21 |
| Total net liabilities | 257 719 | 297 686 |
In accordance with IAS 19, 'Employee benefits', post-employment benefit plans are classified as either definedcontribution plans or defined-benefit plans.
For defined-contribution plans, Bekaert pays contributions to publicly or privately administered pension funds or insurance companies. Once the contributions have been paid, the Group has no further payment obligation. These contributions constitute an expense for the year in which they are due.
The Belgian defined-contribution pension plans are by law subject to minimum guaranteed rates of return, currently 3.25 % on employer contributions (after costs) and 3.75 % on employee contributions. The latter, which apply as an average over the employee's entire career, may be modified by Royal Decree in which case the new rates apply to both the accumulated past contributions and the future contributions as from the date of modification onwards. These plans, which are funded through group insurances, were basically accounted for as defined contribution plans under IAS 19. However, at 31 December 2014, a net liability of € 0.01 million was recognized in the balance sheet to reflect the positive difference between the minimum guaranteed reserves and the actual accumulated reserves. The open group insurance plans for which future contributions will be paid, consist of € 51.9 million individual insurance reserves at 31 December 2014. These plan assets at 31 December 2014 benefit from a weighted average guaranteed interest rate of 3.42 %.
For the Netherlands: Bekaert participates in a multi-employer defined-benefit plan in the Netherlands funded through the Pensioenfonds Metaal & Techniek. This plan is treated as a defined-contribution plan because no information is available with respect to the plan assets attributable to Bekaert; contributions for this plan amounted to € 0.8 million (2013: € 0.7 million).
| Defined-contribution plans | ||
|---|---|---|
| in thousands of € | 2013 | 2014 |
| Expenses recognized | 13 476 | 12 304 |
Of which for Belgian pension plans: € 4.7 million (2013: € 5.9 million).
Several Bekaert companies operate retirement benefit and other post-employment benefit plans. These plans generally cover all employees and provide benefits which are related to salary and length of service.
The latest actuarial valuations under IAS 19 were carried out as of 31 December 2014 for all significant postemployment defined-benefit plans by independent actuaries. The Group's largest defined-benefit obligations are in Belgium and the United States. They account for 83.6 % (2013: 85.7 %) of the Group's defined-benefit obligations and 99.7 % (2013: 99.8 %) of the Group's plan assets.
The funded plans in Belgium mainly relate to retirement plans representing a defined-benefit obligation of € 114.2 million (2013: € 98.2 million) and € 93.1 million assets (2013: € 84.4 million). They foresee in a lump sum payment upon retirement and in risk benefits in case of death or disability prior to retirement. The plans are externally funded through two self-administrated institutions for occupational retirement provision (IORP). On a regular basis, an Asset Liability Matching (ALM) study is performed in which the consequences of strategic investment policies are analyzed in terms of risk-and-return profiles. Statement of investment principles and funding policy are derived from this study. The purpose is to have a well-diversified asset allocation to control the risk. Investment risk and liability risk are monitored on a quarterly basis. Funding policy targets to be at least fully funded in terms of the technical provision (this is a prudent estimate of the pension liabilities).
Other plans mainly relate to pre-retirement pensions (defined-benefit obligation € 28.8 million (2013: € 32.4 million)) which are not externally funded. An amount of € 8.6 million (2013: € 8.3 million) relates to employees in active service who have not yet entered into any pre-retirement agreement.
Pension plans represent a defined-benefit obligation of € 134.7 million (2013: € 97.9 million) and assets of € 84.5 million (2013: € 64.7 million) and are externally funded. The plans provide for benefits for the life of the plan members but have been closed for new entrants. Plan assets are invested, in fixed-income funds and in equities. Based on an Asset Liability Matching study the strategic asset allocation has been shifted more towards long duration fixed income funds. Funding policy targets to be sufficiently funded in terms of Pension Protection Act requirements and thus to avoid benefit restrictions or at-risk status of the plans.
Other plans mainly relate to medical care (defined-benefit obligation € 5.2 million (2013: € 4.8 million)) and are not externally funded.
The amounts recognized in the balance sheet are as follows:
| in thousands of € | 2013 | 2014 |
|---|---|---|
| Belgium | ||
| Present value of funded obligations | 98 199 | 114 166 |
| Fair value of plan assets | -84 448 | -93 145 |
| Deficit / surplus (-) of funded obligations | 13 751 | 21 021 |
| Present value of unfunded obligations | 38 874 | 32 154 |
| Total deficit / surplus (-) of obligations | 52 625 | 53 175 |
| United States | ||
| Present value of funded obligations | 97 901 | 134 726 |
| Fair value of plan assets | -64 655 | -84 489 |
| Deficit / surplus (-) of funded obligations | 33 246 | 50 237 |
| Present value of unfunded obligations | 7 902 | 9 611 |
| Total deficit / surplus (-) of obligations | 41 148 | 59 848 |
| Other | ||
| Present value of funded obligations | 437 | 868 |
| Fair value of plan assets | -225 | -512 |
| Deficit / surplus (-) of funded obligations | 212 | 356 |
| Present value of unfunded obligations | 40 104 | 56 251 |
| Total deficit / surplus (-) of obligations | 40 316 | 56 607 |
| Total | ||
| Present value of funded obligations | 196 537 | 249 760 |
| Fair value of plan assets | -149 328 | -178 146 |
| Deficit / surplus (-) of funded obligations | 47 209 | 71 614 |
| Present value of unfunded obligations | 86 880 | 98 016 |
| Total deficit / surplus (-) of obligations | 134 089 | 169 630 |
The movement in the defined-benefit obligation, plan assets, net liability and asset over the year is as follows:
| Defined-benefit | Plan | Net liability / asset (-) | |
|---|---|---|---|
| in thousands of € | obligation | assets | |
| As at 1 January 2013 | 328 008 | -160 113 | 167 896 |
| Current service cost | 10 812 | 10 812 | |
| Past service cost | -16 | -16 | |
| Gains (-) / losses from settlements | 1 094 | 1 094 | |
| Interest expense / income (-) | 11 054 | -5 309 | 5 746 |
| Net benefit expense / income (-) recognized in profit | |||
| and loss | 22 943 | -5 309 | 17 635 |
| Components recognized in EBIT | 11 889 | ||
| Components recognized in financial result | 5 746 | ||
| Remeasurements | |||
| Return on plan assets, excluding amounts included in | |||
| interest expense / income (-) | -5 518 | -5 518 | |
| Gain (-) / loss from change in demographic assumptions |
|||
| Gain (-) / loss from change in financial assumptions | 205 | 205 | |
| -15 680 | -15 680 | ||
| Experience gains (-) / losses | -741 | -741 | |
| Changes recognized in equity | -16 216 | -5 518 | -21 734 |
| Contributions | - | ||
| Employer contributions / direct benefit payments | -22 752 | -22 752 | |
| Employee contributions | 135 | -135 | - |
| Payments from plans | |||
| Benefit payments | -26 461 | 26 461 | - |
| Settlement payments | -14 361 | 14 361 | - |
| Disposals | -1 062 | 623 | -439 |
| Foreign-currency translation effect | -9 567 | 3 051 | -6 516 |
| As at 31 December 2013 | 283 419 | -149 330 | 134 089 |
| As at 1 January 2014 | 283 419 | -149 330 | 134 089 |
| Current service cost | 10 777 | 10 777 | |
| Past service cost | 2 203 | 2 203 | |
| Interest expense / income (-) | 11 130 | -5 856 | 5 274 |
| Net benefit expense / income (-) recognized in profit | |||
| and loss | 24 110 | -5 856 | 18 254 |
| Components recognized in EBIT | 12 980 | ||
| Components recognized in financial result | 5 274 | ||
| Remeasurements | |||
| Return on plan assets, excluding amounts included in | |||
| interest expense / income (-) | -10 288 | -10 288 | |
| Gain (-) / loss from change in demographic | |||
| assumptions | 7 699 | 7 699 | |
| Gain (-) / loss from change in financial assumptions | 30 134 | 30 134 | |
| Experience gains (-) / losses | 873 | 873 | |
| Changes recognized in equity | 38 706 | -10 288 | 28 418 |
| Contributions | |||
| Employer contributions / direct benefit payments | -28 482 | -28 482 | |
| Employee contributions | 132 | -132 | - |
| Payments from plans | |||
| Benefit payments | -25 722 | 25 722 | - |
| Acquisitions | 8 991 | 8 991 | |
| Foreign-currency translation effect | 18 140 | -9 779 | 8 360 |
| As at 31 December 2014 | 347 776 | -178 146 | 169 630 |
The past service cost mainly relates to the post-retirement medical care plan in Ecuador. In the income statement, current and past service cost, including gains or losses from settlements are included in the operating result (EBIT), and interest expense or income is included in interest expense, under interest element of interest-bearing provisions.
Reimbursement rights arising from reinsurance contracts covering retirement pensions, death and disability benefits in Germany amount to € 0.3 million (2013: € 0.3 million).
Estimated contributions and direct benefit plans for 2015 are as follows:
| Estimated contributions and direct benefit payments | |
|---|---|
| in thousands of € | 2015 |
| Pension plans | 25 955 |
| Total | 25 955 |
Fair values of plan assets at 31 December were as follows:
| in thousands of € | 2013 | 2014 |
|---|---|---|
| Belgium | ||
| Bonds | ||
| Euro Government Bonds | 20 421 | 15 093 |
| Euro Corporate Bonds | 18 145 | 27 576 |
| Equity | ||
| Euro Equity | 26 907 | 28 204 |
| Non-Euro Equity | 15 322 | 17 877 |
| Cash | 3 653 | 4 395 |
| Total Belgium | 84 448 | 93 145 |
| United States | ||
| Bonds | ||
| USD Long Duration Bonds | 34 432 | 45 711 |
| USD Fixed Income | 4 326 | 8 367 |
| USD Guaranteed Deposit | 5 270 | 5 445 |
| Equity | ||
| USD Equity | 14 575 | 17 726 |
| Non-USD Equity | 6 052 | 7 241 |
| Total United States | 64 655 | 84 489 |
| Other | ||
| Bonds | 225 | 512 |
| Total Other | 225 | 512 |
| Total | 149 328 | 178 146 |
In the US, investments are primarily made through mutual fund investments and insurance company separate accounts, in quoted equity and debt instruments. In Belgium, investments are made through mutual fund investments in quoted equity and debt instruments. Investments are well-diversified so that the failure of any single investment would not have a material impact on the overall level of assets. The Group's plan assets include no direct positions in Bekaert shares or bonds, nor do they include any property used by a Bekaert entity.
The principal actuarial assumptions on the balance sheet date (weighted averages based on outstanding DBO) were:
| 2013 Actuarial assumptions |
2014 |
|---|---|
| Discount rate 4.0% |
3.1% |
| Future salary increases 3.4% |
3.3% |
| Underlying inflation rate 2.5% |
2.5% |
| Health care cost increases (initial) 6.8% |
6.5% |
| Health care cost increases (ultimate) 5.0% |
5.0% |
| Health care (years to ultimate rate) 7 |
6 |
The discount rate for the USA and Belgium is reflective both of the current interest rate environment and the plan's distinct liability characteristics. The plan's projected cash flows are matched to spot rates, after which an associated present value is developed. A single equivalent discount rate is then determined that produces that same present value. The underlying yield curve for deriving spot rates is based on high quality AA-credit rated corporate bonds issues denominated in the currency of the applicable regional market. This resulted into the following discount rates:
| Discount rates | 2013 | 2014 |
|---|---|---|
| Belgium | 3.1% | 1.8% |
| United States | 4.7% | 3.9% |
| Other | 5.3% | 4.7% |
Assumptions regarding future mortality are set based on actuarial advice in accordance with published statistics and experience in each territory. These assumptions translate into an average life expectancy in years for a pensioner retiring at age 65:
| 2013 | 2014 | |
|---|---|---|
| Life expectancy of a man aged 65 (years) at balance sheet date | 19.3 | 21.5 |
| Life expectancy of a woman aged 65 (years) at balance sheet date | 21.3 | 23.9 |
| Life expectancy of a man aged 65 (years) ten years after balance sheet date | 20.0 | 22.4 |
| Life expectancy of a woman aged 65 (years) ten years after balance sheet date | 21.9 | 24.8 |
Healthy mortality for the US plans was updated for disclosure as at 31 December 2014 to the sex distinct RP 2014 (with blue collar adjustments if relevant) and projected generationally with scale MP 2014.
Sensitivity analyses show the following effects:
| Sensitivity analysis in thousands of € |
Change in assumption |
Impact on defined-benefit obligation | ||
|---|---|---|---|---|
| Discount rate | -0.50% | Increase by | 19 505 | 5.9% |
| Salary growth rate | 0.50% | Increase by | 9 514 | 2.9% |
| Health care cost | 0.50% | Increase by | 291 | 0.1% |
| Life expectancy | Increase by 1 year |
Increase by | 3 627 | 1.1% |
The above analyses were done on a mutually exclusive basis, and holding all other assumptions constant.
Through its defined-benefit plans, the Group is exposed to a number of risks, the most significant of which are detailed below:
| Asset volatility | The plan liabilities are calculated using a discount rate set with reference to corporate bond yields; if plan assets underperform this yield, this will create a deficit. |
|---|---|
| Changes in bond yields | A decrease in corporate bond yields will increase plan liabilities, although this will be partially offset by an increase in the value of the plans' bond holdings. |
| Salary risk | The majority of the plans' benefit obligations are calculated by reference to the future salaries of plan members. As such, a salary increase of plan members higher than expected will lead to higher liabilities. |
| Longevity risk | Belgian pension plans provide for lump sum payments upon retirement. As such there is limited or no longevity risk. Pension plans in the USA provide for benefits for the life of the plan members, so increases in life expectancy will result in an increase in the plans' liabilities. |
The weighted average durations of the defined-benefit obligations are as follows:
| Belgium | 11.03 |
|---|---|
| United States | 13.54 |
| Other | 9.18 |
| Total | 11.92 |
The other long-term employee benefits relate to service awards.
The Group issues stock appreciation rights (SARs) to certain management employees, granting them the right to receive the intrinsic value of the SARs at the date of exercise. These SARs are accounted for as cash-settled share-based payments in accordance with IFRS 2. The fair value of each grant is recalculated at balance sheet date, using the same binomial pricing model as for the equity-settled share-based payments (see note 6.12. 'Ordinary shares, treasury shares, subscription rights and share options'). Based on local regulations, the exercise price for any grant under the USA SAR plan is equal to the average closing price of the Company's share during the thirty days following the date of the offer. The exercise price for the other SAR plans is determined in the same way as for the equity-settled stock option plans: it is equal to the lower of (i) the average closing price of the Company's share during the thirty days preceding the date of the offer, and (ii) the last closing price preceding the date of the offer.
Following inputs to the model are used for all grants: share price at balance sheet date: € 26.35 (2013: € 25.72), expected volatility of 39% (2013: 39%), expected dividend yield of 3.0% (2013: 3.0%), vesting period of 3 years, contractual life of 10 years, employee exit rate of 4% in Asia (2013: 6%) and 3% in other countries (2013: 3%), and an exercise factor of 1.40 (2013: 1.40). Inputs for risk-free interest rates vary by grant and are based on the return of Belgian OLO1 's with a term equal to the maturity of the SAR grant under consideration.
Exercise prices and fair values of outstanding SARs by grant are shown below:
| USA SAR Plan details by grant in € |
Exercise price | Fair value as at 31 Dec 2013 |
Fair value as at 31 Dec 2014 |
|---|---|---|---|
| Grant 2007 | 25.03 | 2.91 | - |
| Grant 2008 | 28.76 | 3.54 | 2.66 |
| Grant 2009 | 16.58 | 9.25 | 9.60 |
| Grant 2010 | 37.05 | 3.31 | 2.83 |
| Grant 2011 | 83.43 | 1.60 | 1.21 |
| Grant 2012 | 27.63 | 6.22 | 5.73 |
| Grant 2013 | 22.09 | 8.24 | 7.88 |
| Exceptional grant 2013 | 22.51 | 9.22 | 8.80 |
| Grant 2014 | 25.66 | - | 7.18 |
| Grant 20152 | 25.45 | - | 7.46 |
| Other SAR Plans details by grant in € |
Exercise price | Fair value as at 31 Dec 2013 |
Fair value as at 31 Dec 2014 |
|---|---|---|---|
| Grant 2007 | 30.17 | 3.87 | 3.37 |
| Grant 2008 | 28.33 | 4.80 | 4.52 |
| Grant 2009 | 16.66 | 9.37 | 9.73 |
| Grant 2010 | 33.99 | 4.37 | 4.17 |
| Grant 2011 | 77.00 | 1.73 | 1.34 |
| Grant 2012 | 25.14 | 6.68 | 6.23 |
| Grant 2013 | 19.20 | 9.05 | 9.02 |
| Exceptional grant 2013 | 21.45 | 9.56 | 9.11 |
| Grant 2014 | 25.38 | - | 7.08 |
| Grant 20152 | 26.06 | - | 7.05 |
At 31 December 2014, the total liability for the USA SAR plan amounted to € 0.8 million (2013: € 0.8 million), while the total liability for the other SAR plans amounted to € 0.9 million (2013: € 0.5 million).
The Group recorded a total loss of € 0.2 million (2013: loss of € 0.7 million) during the year in respect of SARs.
Short-term employee benefit obligations relate to liabilities for remuneration and social security that are due within twelve months after the end of the period in which the employees render the related service.
1 Obligation Linéaire / Lineaire Obligatie
2 The fair value of this grant has been determined at grant date. See note 7.6. 'Events after the balance sheet date'.
| Restruc | Environ | |||||
|---|---|---|---|---|---|---|
| in thousands of € | turing | Claims | ment | Investments | Other | Total |
| As at 1 January 2014 | 13 008 | 5 386 | 42 698 | - | 3 330 | 64 422 |
| Additional provisions | 1 246 | 3 741 | 505 | - | 7 253 | 12 745 |
| Unutilized amounts released | -2 662 | -1 919 | -8 043 | - | -1 277 | -13 901 |
| Increase in present value | - | - | - | 72 | 641 | 713 |
| Charged to the income statement | -1 416 | 1 822 | -7 538 | 72 | 6 617 | -443 |
| New consolidations | - | - | - | 8 200 | 12 738 | 20 938 |
| Amounts utilized during the year | -5 939 | -2 114 | -2 192 | - | -30 | -10 275 |
| Exchange gains (-) and losses | 136 | 122 | 121 | - | 1 216 | 1 595 |
| As at 31 December 2014 | 5 789 | 5 216 | 33 089 | 8 272 | 23 871 | 76 237 |
| Of which | ||||||
| current | 5 656 | 2 935 | 3 776 | - | 8 126 | 20 493 |
| non-current | 133 | 2 281 | 29 313 | 8 272 | 15 745 | 55 744 |
The decrease of provisions for restructuring mainly relates to the shutdown of a plant in Surrey, Canada and to previously announced programs in EMEA. Most of the restructuring programs are expected to be finalized in the course of 2015.
Provisions for claims mainly relate to various product quality claims and product warranties in several entities. Most of the pending claim cases are expected to be settled in the coming year.
The environmental provisions mainly relate to sites in EMEA. The expected soil sanitation costs are reviewed at each balance sheet date, based on an external expert assessment. Timing of settlement is uncertain as it is often triggered by decisions on the destination of the premises. As part of real estate transactions the environmental clean-up requirements have been transferred to the buyer. The corresponding provisions have been released as unutilized amounts. Further reductions were following the reassessment of risks recognized in prior years.
The provision for investments relates to a put option for a non-controlling interest in an investment (see notes 6.13. 'Retained earnings and other Group reserves' and 7.2. 'Effect of business combinations').
The new consolidations in other provisions mainly relate to the effects of the long-term secured wire rod supply contract (expiring in 2022) that is part of the deal between Bekaert and ArcelorMittal (€ 8.3 million) and a tax provision following the acquisition of the Pirelli steel cord plant in Sumaré (Brazil).
Information concerning the contractual maturities of the Group's interest-bearing loans and borrowings (current and non-current) is given below:
| 2014 | Due within | Due between 1 | Due after | |
|---|---|---|---|---|
| in thousands of € | 1 year | and 5 years | 5 years | Total |
| Interest-bearing debt | ||||
| Finance leases | 76 | 513 | 959 | 1 548 |
| Credit institutions | 341 293 | 84 353 | 508 | 426 154 |
| Bonds | 100 183 | 500 000 | 45 614 | 645 797 |
| Convertible bonds | - | 278 127 | - | 278 127 |
| Carrying amount | 441 552 | 862 993 | 47 081 | 1 351 626 |
| Value adjustments | 7 584 | - | - | 7 584 |
| Total financial debt | 449 136 | 862 993 | 47 081 | 1 359 210 |
| 2013 | Due within | Due between 1 | Due after | |
| in thousands of € | 1 year | and 5 years | 5 years | Total |
| Interest-bearing debt | ||||
| Finance leases | 69 | 127 | - | 196 |
| Credit institutions | 217 452 | 41 385 | - | 258 837 |
| Bonds | 104 386 | 601 118 | 45 614 | 751 118 |
| Carrying amount | 321 907 | 642 630 | 45 614 | 1 010 151 |
| Value adjustments | - | -6 245 | - | -6 245 |
| Total financial debt | 321 907 | 636 385 | 45 614 | 1 003 906 |
Total financial debt has increased, mainly because of the convertible bond of € 300 million issued in June 2014 for the financing of the Pirelli deal. The characteristics of this bond are such that, in accordance with IAS 39, 'Financial Instruments: Recognition and Measurement', it is broken down into two components in the balance sheet: (1) the host contract or plain vanilla debt (i.e. without the conversion option), which is measured at amortized cost and (2) the embedded derivative, i.e. the conversion option, which is measured at fair value through profit or loss.
As a general principle, loans are entered into by Group companies in their local currency to avoid currency risk. If funding is in another currency without an offsetting position on the balance sheet, the companies hedge the currency risk through derivatives (cross-currency interest-rate swaps or forward exchange contracts). Some of these hedging relations are designated as fair value hedges or cash flow hedges. Bonds, commercial paper and debt towards credit institutions are unsecured, except for a new factoring program that has been set up with KBC and BNP Paribas Fortis for NV Bekaert SA.
For further information on financial risk management, we refer to note 7.3. 'Financial risk management and financial derivatives'.
The debt calculation of the Group reflects the amount to be repaid as a result of hedging with a derivative, rather than the amount presented as a financial liability in the balance sheet. The Eurobond issued by Bekaert Corporation (US) in 2005 has been swapped to a USD debt by means of CCIRSs, which are either designated as fair value hedges or as cash flow hedges. The Bekaert debt calculation therefore eliminates 'value adjustments' included in the carrying amount of this bond as a result of the spot revaluation, for the part designated as a cash flow hedge, and of the fair value adjustment, for the part designated as a fair value hedge. The derivative representing the conversion option (€ 7.9 million) embedded in the convertible bond is not included in the net debt. The table below summarizes the calculation of the net debt.
| 2013 in thousands of € |
2014 |
|---|---|
| 688 244 Non-current interest-bearing debt |
910 074 |
| Value adjustments -6 245 |
7 584 |
| Current interest-bearing debt 321 907 |
441 552 |
| Total financial debt 1 003 906 |
1 359 210 |
| -21 421 Non-current financial receivables and cash guarantees |
-19 551 |
| Current loans -6 440 |
-13 998 |
| Short-term deposits -10 172 |
-14 160 |
| Cash and cash equivalents -391 857 |
-458 542 |
| Net debt 574 016 |
852 959 |
| Carrying amount in thousands of € |
2013 | 2014 |
|---|---|---|
| Other non-current amounts payable | 187 | 815 |
| Derivatives (cf. note 7.3.) | 2 400 | 7 921 |
| Total | 2 587 | 8 736 |
The derivatives relate to the embedded financial instrument of the convertible bond which was issued in the course of 2014 (cf. notes 6.17. and 7.3.).
| Carrying amount | ||
|---|---|---|
| in thousands of € | 2013 | 2014 |
| Other amounts payable | 8 229 | 5 849 |
| Derivatives (cf. note 7.3.) | 9 964 | 49 240 |
| Advances received | 8 717 | 5 106 |
| Other taxes | 34 979 | 34 303 |
| Accruals and deferred income | 20 597 | 20 078 |
| Total | 82 486 | 114 576 |
The derivatives include mainly forward exchange contracts (€ 7.6 million (2013: € 7.9 million)) and CCIRSs (€ 41.4 million (2013: € 2.0 million)). Other taxes mainly relate to VAT payable, employment-related taxes withheld and other non-income taxes payable. The accrued interest on outstanding interest-bearing debt is the most significant item of the accruals (€ 13.1 million (2013: € 14.2 million)).
| Summary | ||
|---|---|---|
| in thousands of € | 2013 | 2014 |
| Cash from operating activities | 305 763 | 186 949 |
| Cash from investing activities | -71 966 | -225 347 |
| Cash from financing activities | -192 416 | 87 945 |
| Net increase or decrease in cash and cash equivalents | 41 381 | 49 547 |
The cash flow statement is presented using the indirect method, as opposed to the direct method. The latter method focuses on classifying gross cash receipts and gross cash payments by category.
Gross cash flows from operating activities increased by € 27.0 million, mainly due to better operating performance and lower income taxes paid. The evolution of non-cash items reflects increases in depreciation and amortization, higher impairment losses and lower additions to provisions. Information about movements in provisions can be found in note 6.15. 'Employee benefit obligations' and note 6.16. 'Provisions'. Negative goodwill relates to the business combination with ArcelorMittal in Costa Rica, Brazil and Ecuador.
Investing items mainly include gains on disposals of land and buildings in Belgium and machinery in Canada, which are presented as part of the proceeds from disposal of property, plant and equipment under 'other investing cash flows'. The 'Movements in other current assets and liabilities' are largely due to the accrued insurance indemnification for the fire in Rome (Georgia, USA).
The following table presents more details about selected operating items:
| Details of selected operating items | ||
|---|---|---|
| in thousands of € | 2013 | 2014 |
| Non-cash items included in operating result | ||
| Depreciation and amortization | 151 071 | 164 610 |
| Impairment losses on assets | 8 650 | 16 962 |
| Gains (-) and losses on step acquisitions | - | -1 804 |
| Employee benefits: set-up / reversal (-) of amounts not used | 13 499 | 16 242 |
| Provisions: set-up / reversal (-) of amounts not used | 15 771 | -1 156 |
| Negative goodwill | - | -10 893 |
| CTA recycled on business disposals | -463 | 1 041 |
| Equity-settled share-based payments | 4 356 | 2 845 |
| Total | 192 884 | 187 847 |
| Investing items included in operating result | ||
| Gains (-) and losses on business disposals | -718 | 122 |
| Gains (-) and losses on disposals of intangible assets | 295 | - |
| Gains (-) and losses on disposals of PP&E | 903 | -8 179 |
| Total | 480 | -8 057 |
| Amounts used on provisions and employee benefit obligations | ||
| Employee benefits: amounts used | -33 230 | -34 177 |
| Provisions: amounts used | -12 099 | -10 275 |
| Total | -45 329 | -44 452 |
| Income taxes paid | ||
| Current income taxes | -64 381 | -57 276 |
| Increase or decrease (-) in net income taxes payable | 12 874 | 11 449 |
| Total | -51 507 | -45 827 |
| Other operating cash flows | ||
| Movements in other current assets and liabilities | -9 382 | -20 228 |
| Other | 2 856 | 1 034 |
| Total | -6 526 | -19 194 |
The cash-outs on new business combinations were almost exclusively due to the acquisition of the Pirelli steel cord activities (see note 7.2. 'Effect of business combinations'). The Brazilian joint ventures generated higher dividend income than in 2013. Bekaert acquired intellectual property from Pirelli for an amount of € 15 million. After a temporary slow-down in 2013, capital expenditure programs for PP&E were stepped up again in all regions.
The proceeds from disposal of property, plant and equipment in 2014 mainly relate to the sale of land and buildings in Aalter (Belgium), and plant, machinery and equipment in Surrey (Canada).
The following table presents more details on selected investing cash flows:
| Details of selected investing items 2013 in thousands of € |
2014 |
|---|---|
| Other investing cash flows | |
| Proceeds from disposal of intangible assets 3 166 |
- |
| Proceeds from disposal of property, plant and equipment 1 308 |
15 846 |
| Total 4 474 |
15 846 |
The main event in the financing activities was the issuance of a € 300 million convertible bond in June 2014, in order to finance the acquisition of the Pirelli steel cord activities. The Company launched a share buy-back program totaling € 52 million to anticipate the potential dilution that could arise upon conversion of all bonds; another € 20 million worth of shares were bought back mainly in view of the stock option plans. Dividends were paid out to minority partners in China, Ecuador, Peru and Chile. Since dividends paid to the Chilean partners were largely ploughed back as capital contributions into the ropes activities, both were netted in the cash flow statement presentation. A portfolio restructuring was initiated in 2014 through which Bekaert raised its interest in the ropes activities co-owned with the Chilean partners from 52% to 65% early 2015 (see note 7.6. 'Events after the balance sheet date'). The following table presents more details about selected financing items:
| Details of selected financing items | |
|---|---|
| 2013 in thousands of € |
2014 |
| Other financing cash flows | |
| New shares issued following exercise of subscription rights 1 048 |
779 |
| Capital paid in by minority interests - |
4 222 |
| Increase (-) or decrease in current and non-current loans and receivables 5 484 |
-8 776 |
| Increase (-) or decrease in current financial assets 94 455 |
-2 896 |
| Other financial income and expenses 2 018 |
-11 548 |
| Total 103 005 |
-18 219 |
On 10 December 2013, Bekaert announced the signing of an agreement with ArcelorMittal including the start-up of a Dramix® plant in Costa Rica, the acquisition of the majority of the shares of the ArcelorMittal steel wire plant in Costa Rica, and raising its share from 45% to 100% in the Cimaf ropes plant in Brazil. The deal was finalized on 30 April 2014 when Bekaert and ArcelorMittal signed the Closing Memoranda which confirm:
By this strategic transaction, Bekaert intends to better serve customers from various sectors in the region with a broader steel wire product portfolio in the construction, mining, oil & gas, agricultural, fencing and industrial markets. The deal builds on existing partnerships in the region with ArcelorMittal and the Kohn family. In accordance with IFRS 3 (revised 2008), when a business combination is achieved in stages, also known as a step acquisition, the Group's previously held equity interest in the acquiree is remeasured to fair value at the acquisition date, and any resulting gain or loss is recognized in profit or loss. In this case, the fair value of the Group's previously held 45% interest in the Cimaf Ropes plant was extrapolated from the equity valuation agreed between the partners. This extrapolation established the fair value at € 9.7 million. The carrying amount of the Group's interest in the Cimaf Ropes plant at the acquisition date amounted to € 7.9 million. This resulted in a gain on step acquisition of € 1.8 million, which is presented in 'non-recurring items' in the income statement.
In accordance with IFRS 3, any amounts arising from interests in the acquiree prior to the acquisition date that have been recognized in the Group's other comprehensive income are reclassified to profit or loss, where such treatment would be appropriate if the interests were disposed of. This resulted in a loss of € 1.4 million from a reclassification of cumulative translation adjustments, which is also presented in 'non-recurring items' in the income statement.
Goodwill is measured as the difference between:
(b) the net balance of the fair value of the identifiable assets acquired and the liabilities assumed.
Since the purchase consideration consisted of the Ideal Alambrec shares, it is measured at the fair value of the non-controlling interest disposed.
The accounting for the business combination resulted in a negative goodwill (€ -10.9 million), which was recognized as a gain in 'non-recurring items' of the income statement. The negative goodwill reflects the future efforts that will be needed to regain market leadership.
The non-controlling interest arising on the acquirees have been measured at their share in the fair value of the net assets acquired.
The table below presents the net assets acquired by balance sheet caption, showing the effect of fair value adjustments applied in accordance with IFRS 3, 'Business Combinations', and the goodwill calculation. It also clarifies the amount shown in the consolidated cash flow statement as 'new business combinations', i.e. nil, since no cash was exchanged between the parties in this deal.
| Acquiree's carrying | |||
|---|---|---|---|
| Total | amount before | Fair value | |
| in thousands of € | combination | adjustments | Fair value |
| Property, plant and equipment | 15 053 | 24 205 | 39 258 |
| Deferred tax assets | 615 | 2 531 | 3 146 |
| Inventories | 15 504 | -131 | 15 373 |
| Trade receivables | 1 596 | - | 1 596 |
| Provisions | - | -8 293 | -8 293 |
| Deferred tax liabilities | -1 261 | -7 817 | -9 078 |
| Current employee benefit obligations | -554 | - | -554 |
| Other current liabilities | -22 | - | -22 |
| Total net assets acquired in a business | |||
| combination | 30 944 | 10 482 | 41 426 |
| Equity method investment held prior to business | |||
| combination | -7 927 | -1 804 | -9 731 |
| Non-controlling interests arising on the acquirees | -5 544 | 1 637 | -3 907 |
| Non-controlling interests disposed | -4 981 | -11 914 | -16 895 |
| Goodwill | -10 893 | ||
| Consideration paid in cash | - | ||
| Cash acquired | - | ||
| New business combinations | - | - | - |
The positive fair value adjustments on property, plant and equipment mainly relate to the land and buildings held by Bekaert Cimaf Cabos Ltda and BIA Alambres Costa Rica SA. The fair value adjustments on inventories mainly consist of write-downs of slow moving and obsolete inventories to net realizable value. A provision has been recognized for the effects of the long-term secured wire rod supply contract that is part of the deal between Bekaert and ArcelorMittal.
The effect on consolidated sales and on the result for the period is shown below:
| Net sales for the | |||
|---|---|---|---|
| in thousands of € | Date of acquisition | period Result for the period | |
| Total for the acquired companies | 30 April 2014 | 27 016 | 9 330 |
The result for the period includes € 11.3 million non-recurring income relating to the business combination accounting. The acquisition-related costs amounted to € 0.025 million, mainly fees for legal advice, and were included in administrative expenses.
The pro forma revenue and profit or loss as if the acquisition took place on 1 January 2014 cannot be estimated reliably without undue effort.
On 17 June 2014, Bekaert announced the signing of an agreement with Maccaferri, a global supplier of advanced solutions to the civil, geotechnical and environmental construction markets, to establish a 50/50 sales and distribution company for underground construction reinforcement solutions. It is the intention of both parties to promote on a global basis the use of advanced reinforcement solutions for underground projects such as road, railway, metro, utility and mining tunnels, as well as hydro power stations. The company will combine the sales and distribution of Bekaert's Dramix® steel fibers for the reinforcement of concrete in underground construction projects such as shotcrete and precast applications, with Maccaferri's complementary underground solutions, such as steel arches, concrete chemicals and glass fiber soil consolidation elements. Through the company, which was established on 1 October 2014, Bekaert mainly acquired two valuable intangible assets: (1) the customer relations and trademarks of Maccaferri with a fair value established at € 1.2 million and (2) the synergies from the transfer of production volumes with a fair value established at € 4.8 million. The valuation of both intangibles was done by independent experts, who used a DCF (Discounted Cash Flow) approach to determine an equity value (EV) which was then cross-checked with a market approach on the basis of comparable EV/EBIT multiples. The agreement includes the closing down of Maccaferri's steel fibers plant in Spain. Furthermore, production equipment and spare parts were acquired with a fair value of € 0.4 million. The purchase consideration for Bekaert consisted of a contribution in kind, i.e. its customer portfolio, and a deferred consideration mainly depending on commercial targets to be achieved in each of the three years after the business combination date. The initial accounting for the business combination shows a minor goodwill of € 0.1 million.
The table below presents the net assets acquired by balance sheet caption, showing the effect of fair value adjustments applied in accordance with IFRS 3, 'Business Combinations', and the goodwill calculation. It also clarifies the amount shown in the consolidated cash flow statement as 'new business combinations'. The cash acquired results from the partner's capital contribution and from the net proceeds from assets exchanged with the partner.
The non-controlling interest arising on the acquirees have been measured at their share in the fair value of the net assets acquired.
| Acquiree's carrying | |||
|---|---|---|---|
| Total | amount before | Fair value | |
| in thousands of € | combination | adjustments | Fair value |
| Intangible assets | 22 210 | -16 200 | 6 010 |
| Property, plant and equipment | 2 148 | -2 015 | 133 |
| Deferred tax assets | - | 5 506 | 5 506 |
| Inventories | 277 | - | 277 |
| Cash and cash equivalents | 966 | - | 966 |
| Total net assets acquired in a business | |||
| combination | 25 601 | -12 709 | 12 892 |
| Non-controlling interests arising on the acquirees | -9 400 | -2 753 | -12 153 |
| Deferred consideration | -810 | ||
| Goodwill | 71 | ||
| Consideration paid in cash | - | ||
| Cash acquired | 966 | 966 | |
| New business combinations | 966 |
In addition to this, a liability of € 8.2 million has been recognized in consolidation in respect of the put option granted to Maccaferri to sell all its shares to Bekaert as from 1 January 2023 at fair value. In accordance with IAS 32, 'Financial Instruments: Presentation', the liability is initially recognized through equity, whereas subsequent changes in fair value are recognized through income statement.
The fair value measurement of this liability is classified as level 3, considering that unobservable inputs are used in the valuation method, which is a discounted cash flow model. The two main inputs in the valuation model are:
The contribution of the newly established company to the consolidated sales and the result for the period is shown below:
| Net sales | Result | ||
|---|---|---|---|
| in thousands of € | Date of acquisition | for the period | for the period |
| Bekaert Maccaferri Underground Solutions BVBA | 1 October 2014 | 6 343 | -43 |
The effects of the business combination on the consolidated sales and on the result for the period generated in other Group entities, mainly the manufacturing entities supplying goods to the new commercial joint venture, cannot be estimated reliably without undue effort. The pro forma revenue and profit or loss as if the acquisition took place on 1 January 2014 cannot be estimated reliably without undue effort.
The acquisition-related costs amounted to € 0.1 million, mainly consisting of professional fees for valuation experts and legal services, and were included in administrative expenses.
On 28 February 2014, Bekaert announced the signing of an agreement with Pirelli, the global tire manufacturer, for the acquisition of Pirelli's steel cord activities for a total enterprise value of € 255 million. As part of this transaction, Bekaert and Pirelli will enter into a long-term supply agreement of tire cord to Pirelli. The acquisition agreement includes Pirelli's manufacturing sites in Figline Valdarno (Italy), Slatina (Romania), Izmit (Turkey), Yanzhou (China) and Sumaré (Brazil). The transaction is estimated to add approximately € 300 million to Bekaert's consolidated sales on an annual basis.
On 18 December 2014, Bekaert and Pirelli successfully closed the acquisition by Bekaert of the Pirelli steel cord plants in Figline Valdarno (Italy), Slatina (Romania) and Sumaré (Brazil). Due to delays in regulatory approvals, the acquisition of the Pirelli plants in Izmit (Turkey) and Yanzhou (China) could not be closed before year-end 2014. On 6 February 2015, Bekaert completed the acquisition of the Pirelli steel cord plant in Izmit (Turkey) – see note 7.6. 'Events after the balance sheet date'. The closing of the acquisition of the Pirelli tire cord plant in Yanzhou (China) will occur when the respective regulatory approvals have been obtained.
The initial accounting for the business combination presented in these financial statements is evidently partial and provisional. It is partial, since it only covers the acquisition of three out of the five plants included in the deal. It is also provisional, as time was too short to finalize the fair value assessment of the identifiable assets acquired and the liabilities assumed in the Pirelli plants in Italy, Romania and Brazil.
The fair value adjustments on property, plant and equipment are based on external appraisals for land and buildings and on internal appraisals for plant, machinery and equipment. The deferred tax liabilities arising from these adjustments have been recognized at the applicable tax rates in the respective jurisdictions. No fair value assessments have been made yet for any other assets acquired and liabilities assumed. Non-controlling interests are arising on the 20% interests held by Continental AG in the Romanian company, i.e. – by its new name – Bekaert Slatina SRL. The total purchase consideration for all shares held by Pirelli in the steel cord entities in Italy, Romania and Brazil amounted to € 110.6 million and was paid in cash. After cash acquired, the net cash-out amounted to € 109.5 million. The initial accounting resulted in a preliminary goodwill of € 0.7 million.
Bekaert also paid € 15.0 million to Pirelli for the acquisition of intellectual property, mainly manufacturing knowhow and patents, all of which have been capitalized as intangible assets and will be amortized over 10 years.
Since the acquisition was closed shortly before the year-end (i.e. at the start of the Christmas close-down), Bekaert has not recognized any subsequent transactions, the effect of which was deemed immaterial, through profit or loss in 2014.
The non-controlling interest arising on the acquirees have been measured at their share in the fair value of the net assets acquired.
| Acquiree's carrying | |||
|---|---|---|---|
| Total | amount before | Fair value | |
| in thousands of € | combination | adjustments | Fair value |
| Intangible assets | 2 | - | 2 |
| Property, plant and equipment | 75 870 | 38 303 | 114 173 |
| Deferred tax assets | 1 835 | - | 1 835 |
| Other non-current assets | 634 | - | 634 |
| Inventories | 19 611 | - | 19 611 |
| Trade receivables | 78 290 | - | 78 290 |
| Advances paid | 1 981 | - | 1 981 |
| Other receivables | 6 134 | - | 6 134 |
| Short-term deposits | 550 | - | 550 |
| Cash and cash equivalents | 1 103 | - | 1 103 |
| Other current assets | 4 603 | - | 4 603 |
| Non-current employee benefit obligations | -9 099 | - | -9 099 |
| Non-current provisions | -4 421 | - | -4 421 |
| Non-current interest-bearing debt | -2 383 | - | -2 383 |
| Deferred tax liabilities | -3 420 | -12 082 | -15 502 |
| Current interest-bearing debt | -29 115 | - | -29 115 |
| Trade payables | -38 808 | - | -38 808 |
| Current employee benefit obligations | -4 320 | - | -4 320 |
| Current provisions | -24 | - | -24 |
| Income taxes payable | -1 466 | - | -1 466 |
| Other current liabilities | -4 712 | - | -4 712 |
| Total net assets acquired in a business | |||
| combination | 92 845 | 26 221 | 119 066 |
| Non-controlling interests arising on the acquirees | -8 630 | -567 | -9 197 |
| Goodwill | 713 | ||
| Consideration paid in cash | -110 582 | ||
| Cash acquired | 1 103 | - | 1 103 |
| New business combinations | - | - | -109 479 |
The acquisition-related costs amounted to € 3.2 million, mainly consultancy fees, and were included in administrative expenses.
The Group is exposed to risks from movements in exchange rates, interest rates and market prices that affect its assets and liabilities. Financial risk management within the Group aims at reducing the impact of these market risks through ongoing operational and financing activities. Selected derivative hedging instruments are used depending on the assessment of risk involved. The Group mainly hedges the risks that affect the Group's cash flows. Derivatives are used exclusively as hedging instruments and not for trading or other speculative purposes. To reduce the credit risk, hedging transactions are generally only concluded with financial institutions whose credit rating is at least A.
The guidelines and principles of the Bekaert financial risk policy are defined by the Audit and Finance Committee and overseen by the Board of the Group. Group Treasury is responsible for implementing the financial risk policy. This encompasses defining appropriate policies and setting up effective control and reporting procedures. The Audit and Finance Committee is regularly kept informed as to the currency and interest-rate exposure.
The Group's currency risk can be split into two categories: translational and transactional currency risk.
A translational currency risk arises when the financial data of foreign subsidiaries are converted into the Group's presentation currency, the euro. The main currencies are Chinese renminbi, US dollar, Czech koruna, Brazilian real, Chilean peso, Indian rupee and Venezuelan bolivar (cf. cumulative translation adjustments in note 6.13. 'Retained earnings and other Group reserves'). Since there is no impact on the cash flows, the Group usually does not hedge against such risk.
The Group is exposed to transactional currency risks resulting from its investing, financing and operating activities.
Foreign currency risk in the area of investment results from the acquisition and disposal of investments in foreign companies, but also from dividends receivable from foreign investments. Transactional currency risks typically arise from administrative delay in the settlement of dividend payments from Chinese subsidiaries. The Group generally enters into non-deliverable forward contracts (NDFs) with various financial institutions to hedge these risks. These NDFs typically are not elected for hedge accounting.
Foreign currency risk in the financing area results from financial liabilities in foreign currencies. In line with its policy, Group Treasury hedges these risks using cross-currency interest-rate swaps and forward exchange contracts to convert financial obligations denominated in foreign currencies into the entity's functional currency. At the reporting date, the foreign currency liabilities for which currency risks were hedged mainly consisted of Eurobonds and intercompany loans mainly in euro and US dollar.
Foreign currency risk in the area of operating activities arises from commercial activities with sales and purchases in foreign currencies, as well as payments and receipts of royalties. The Group uses forward exchange contracts to hedge the forecasted cash inflows and outflows for the coming three months. Significant exposures and firm commitments beyond that time frame may also be covered.
The following table summarizes the Group's net foreign currency positions of trade receivables and trade payables at the reporting date for the most important currency pairs. The net currency positions are presented before intercompany eliminations. Positive amounts indicate that the Group has a net future cash inflow in the first currency. In the table, the 'Total exposure' column represents the position on the balance sheet, while the 'Total derivatives' column includes all financial derivatives hedging those balance sheet positions as well as forecasted transactions. The annualized volatility is based on the daily movement of the exchange rate of the reported year, with a 95% confidence interval.
| Currency pair - 2014 | Annualized | |||
|---|---|---|---|---|
| in thousands of € | volatility in % | Total exposure | Total derivatives | Open position |
| AUD/USD | 14.30% | 2 887 | -2 494 | 393 |
| CAD/USD | 10.45% | 2 559 | - | 2 559 |
| CNY/EUR | 10.11% | 5 284 | - | 5 284 |
| CZK/EUR | 3.37% | -6 376 | 1 478 | -4 899 |
| EUR/CNY | 10.11% | -16 649 | -1 084 | -17 733 |
| EUR/GBP | 8.89% | -683 | - | -683 |
| EUR/INR | 11.70% | 352 | - | 352 |
| EUR/RUB | 50.88% | -1 541 | - | -1 541 |
| GBP/CZK | 9.04% | 1 528 | - | 1 528 |
| GBP/EUR | 8.89% | 4 494 | -870 | 3 624 |
| IDR/USD | 13.97% | -1 493 | - | -1 493 |
| JPY/CNY | 12.83% | 4 675 | -2 575 | 2 099 |
| JPY/EUR | 12.30% | -64 | -213 | -277 |
| NZD/USD | 15.47% | 595 | -658 | -64 |
| USD/CAD | 10.45% | 7 669 | - | 7 669 |
| USD/CLP | 15.01% | 3 685 | - | 3 685 |
| USD/CNY | 3.30% | 35 314 | -15 167 | 20 147 |
| USD/COP | 18.02% | -4 557 | - | -4 557 |
| USD/EUR | 9.79% | 31 650 | -13 727 | 17 923 |
| USD/INR | 10.79% | -6 761 | - | -6 761 |
| USD/MYR | 12.03% | -1 626 | - | -1 626 |
| USD/MXN | 9.81% | -765 | - | -765 |
| Currency pair - 2013 | Annualized | |||
| in thousands of € | volatility in % | Total exposure | Total derivatives | Open position |
| AUD/USD | 16.34% | 4 328 | -2 505 | 1 823 |
| CAD/USD | 10.00% | 1 332 | - | 1 332 |
| CNY/EUR | 12.38% | 3 514 | - | 3 514 |
| CZK/EUR | 9.67% | -269 | 611 | 342 |
| EUR/CNY | 12.38% | -8 560 | -1 847 | -10 407 |
| EUR/GBP | 12.03% | 654 | - | 654 |
| EUR/INR | 20.64% | -1 363 | - | -1 363 |
| EUR/RUB | 11.44% | -1 016 | - | -1 016 |
|---|---|---|---|---|
| GBP/CZK | 16.15% | 1 074 | - | 1 074 |
| GBP/EUR | 12.03% | 2 169 | -2 533 | -364 |
| IDR/USD | 19.62% | -1 985 | - | -1 985 |
| JPY/CNY | 20.38% | 5 359 | -696 | 4 663 |
| JPY/EUR | 22.82% | 52 | -195 | -143 |
| NZD/USD | 18.28% | 802 | -314 | 488 |
| USD/CAD | 10.00% | 1 920 | - | 1 920 |
| USD/CLP | 14.38% | 3 751 | - | 3 751 |
| USD/CNY | 2.10% | 27 216 | -48 824 | -21 608 |
| USD/COP | 12.38% | -2 545 | - | -2 545 |
| USD/EUR | 12.69% | 18 496 | -17 332 | 1 164 |
| USD/INR | 21.22% | -4 864 | - | -4 864 |
| USD/MYR | 18.80% | -2 314 | - | -2 314 |
| USD/MXN | 12.47% | -830 | - | -830 |
If rates had weakened/strengthened by the above estimated possible changes with all other variables constant, the result for the period before taxes would have been € 0.5 million lower/higher (2013: € 1.4 million).
Some derivatives are also part of effective cash flow hedges to hedge the currency risk relating to the Eurobond issued in 2005. Exchange rate fluctuations in the currencies involved (US dollar and euro) affect the hedging reserve in shareholders' equity and the fair value of these hedging instruments. If the euro had weakened/strengthened by the above estimated possible changes, with all other variables constant, the hedging reserve in shareholders' equity would have been € 0.04 million higher/lower (2013: € 0.3 million).
The Group is exposed to interest-rate risk, mainly on debt denominated in US dollar, Chinese renminbi and euro. To minimize the effects of interest-rate fluctuations in these regions, the Group manages the interest-rate risk for net debt denominated in the respective currencies of these countries separately. General guidelines are applied to cover interest-rate risk:
Group Treasury uses interest-rate swaps and cross-currency interest-rate swaps to ensure that the floating and fixed portions of the long-term debt remain within the defined limits. The Group also may purchase forward starting interest-rate options to convert fixed and floating-rate long-term debt to capped long-term debt. By such interest-rate options, the Group intends to protect itself against adverse fluctuations in interest rates while still having the ability to benefit from decreasing interest rates.
The following table summarizes the weighted average interest rates at the balance sheet date.
| Long-term | |||||
|---|---|---|---|---|---|
| 2014 | Fixed rate | Floating rate | Total | Short-term | Total |
| US dollar | 5.24% | - | 5.24% | 1.11% | 1.88% |
| Chinese renminbi | 5.76% | - | 5.76% | 4.73% | 5.33% |
| Euro | 3.16% | - | 3.16% | 0.33% | 3.06% |
| Other | 8.41% | 3.00% | 8.05% | 5.53% | 6.09% |
| Total | 3.67% | 3.00% | 3.67% | 2.01% | 3.01% |
| Long-term | |||||
|---|---|---|---|---|---|
| 2013 | Fixed rate | Floating rate | Total | Short-term | Total |
| US dollar | 5.27% | - | 5.27% | 1.10% | 1.91% |
| Chinese renminbi | 5.86% | 5.73% | 5.84% | 5.14% | 5.69% |
| Euro | 4.84% | - | 4.84% | 0.51% | 4.65% |
| Other | 7.58% | 3.00% | 7.33% | 4.79% | 5.66% |
| Total | 5.13% | 5.30% | 5.14% | 1.84% | 3.81% |
As disclosed in note 6.17. 'Interest-bearing debt', the total financial debt of the Group as of 31 December 2014 amounted to € 1 359.2 million (2013: € 1 003.9 million). The following table shows the currency and interest rate profile, i.e. the percentage distribution of the total financial debt by currency and by type of interest rate (fixed, floating, capped).
| Currency and interest rate profile | Long-term | Short-term | |||
|---|---|---|---|---|---|
| 2014 | Fixed rate | Floating rate | Capped rate | Floating rate | Total |
| US dollar | 6.70% | - | - | 29.70% | 36.40% |
| Chinese renminbi | 2.80% | - | - | 2.00% | 4.80% |
| Euro | 48.40% | - | - | 1.70% | 50.10% |
| Other | 1.80% | 0.20% | - | 6.70% | 8.70% |
| Total | 59.70% | 0.20% | - | 40.10% | 100.00% |
| Currency and interest rate profile | Long-term | Short-term | |||
|---|---|---|---|---|---|
| 2013 | Fixed rate | Floating rate | Capped rate | Floating rate | Total |
| US dollar | 7.20% | - | - | 30.00% | 37.20% |
| Chinese renminbi | 4.60% | 1.00% | - | 1.20% | 6.80% |
| Euro | 43.30% | - | - | - | 43.30% |
| Other | 3.30% | 0.20% | - | 9.20% | 12.70% |
| Total | 58.40% | 1.20% | - | 40.40% | 100.00% |
On the basis of the annualized daily volatility of the 3-month Interbank Offered Rate in 2014 and 2013, the reasonable estimates of possible interest rate changes, with a 95% confidence interval, are set out in the table below for the main currencies.
| Currency | Interest rate at 31 Dec 2014 |
Annualized volatility in % |
Range interest rate |
|---|---|---|---|
| Chinese renminbi1 | 3.75% | 16.45% | 3.13%-4.37% |
| Euro | 0.08% | 80.17% | 0.02%-0.14% |
| US dollar | 0.26% | 15.15% | 0.22%-0.30% |
| Currency | Interest rate at 31 Dec 2013 |
Annualized volatility in % |
Range interest rate |
| Chinese renminbi1 | 5.38% | 16.45% | 4.50%-6.27% |
| Euro | 0.29% | 29.87% | 0.20%-0.37% |
| US dollar | 0.25% | 11.83% | 0.22%-0.28% |
1For the Chinese renminbi, the interest rate is the PBOC benchmark interest rate for lending up to six months.
Applying the estimated possible changes in the interest rates to the floating rated debt, with all other variables constant, the result for the period before tax would have been € 0.7 million higher/lower (2013: € 0.5 million higher/lower).
Changes in market interest rates in relation to derivatives that are part of effective cash flow hedges to hedge interest movements affect the hedging reserve in shareholders' equity and the fair value of these hedging instruments. Applying the estimated possible increases of the interest rates to these hedging transactions, with all other variables constant, the hedging reserve in shareholders' equity would not have been changed (2013: € 0.03 million higher). Applying the estimated possible decreases of the interest rates to these hedging transactions, with all other variables constant, the hedging reserve in shareholders' equity would not have been changed (2013: € 0.03 million lower).
The Group is exposed to credit risk from its operating activities and certain financing activities. In respect of its operating activities, the Group has a credit policy in place, which takes into account the risk profiles of the customers in terms of the market segment to which they belong. Based on activity platform, product sector and geographical area, a credit risk analysis is made of customers and a decision is taken regarding the covering of the credit risk. The exposure to credit risk is monitored on an ongoing basis and credit evaluations are made of all customers. In terms of the characteristics of some steel wire activities with a limited number of global customers, the concentration risk is closely monitored and, in combination with the existing credit policy, appropriate action is taken when needed. In accordance with IFRS 8 §34, none of the specified disclosures on individual customers (or groups of customers under common control) are required, since none of the Group's customers accounts for more than 10% of its revenues. At 31 December 2014, 64.8 % (2013: 64.4 %) of the credit risk exposure was covered by credit insurance policies and by trade finance techniques. In respect of financing activities, transactions are normally concluded with counterparties that have at least an A credit rating. There are also limits allocated to each counterparty which depend on their rating. Due to this approach, the Group considers the risk of counterparty default to be limited in both operating and financing activities.
Liquidity risk is the risk that the Group will be unable to meet its obligations as they come due because of an inability to liquidate assets or obtain adequate funding. To ensure liquidity and financial flexibility at all times, the Group, in addition to its available cash, has several uncommitted short-term credit lines at its disposal in the major currencies and in amounts considered adequate for current and near-future financing needs. These facilities are generally of the mixed type and may be utilized, for example, for advances, overdrafts, acceptances and discounting. The Group also has committed credit facilities at its disposal up to a maximum equivalent of € 70.6 million (2013: € 68.1 million) at floating interest rates with fixed margins. A credit facility of € 50 million matures in 2016 and a credit facility of USD 25 million matures in 2015. At year-end, nothing was outstanding under these facilities (2013: nil). In addition, the Group has a commercial paper and medium-term note program available for a maximum of € 123.9 million (2013: € 123.9 million). At the end of 2014, no commercial paper notes were outstanding (2013: none). At year-end, none of the Group's outstanding debt was subject to debt covenants (2013: none). In 2014, the Group entered into a factoring agreement and has the possibility to borrow up to € 40 million for two months withdrawals, but no withdrawals were done before year-end.
The following table shows the Group's contractually agreed (undiscounted) outflows in relation to financial liabilities. Only net interest payments and principal repayments are included.
| 2014 | 2020 and | |||
|---|---|---|---|---|
| in thousands of € | 2015 | 2016 | 2017-2019 | thereafter |
| Financial liabilities - principal | ||||
| Trade payables | -389 254 | - | - | - |
| Other payables | -179 433 | -815 | - | - |
| Interest-bearing debt | -449 136 | -282 823 | -580 170 | -47 081 |
| Derivatives - gross settled | -607 477 | -12 988 | - | - |
| Financial liabilities - interests | ||||
| Interest-bearing debt | -38 855 | -30 604 | -49 726 | -2 168 |
| Derivatives - net settled | -1 796 | - | - | - |
| Derivatives - gross settled | -9 453 | -1 279 | - | - |
| Total undiscounted cash flow | -1 675 404 | -328 509 | -629 896 | -49 249 |
| 2013 in thousands of € |
2014 | 2015 | 2016-2018 | 2019 and thereafter |
| Financial liabilities - principal | ||||
| Trade payables | -338 864 | - | - | - |
| Other payables | -135 255 | -186 | - | - |
| Interest-bearing debt | -321 907 | -101 787 | -534 598 | -45 614 |
| Derivatives - gross settled | -461 093 | -102 929 | -11 667 | - |
| Financial liabilities - interests | ||||
| Interest-bearing debt | -45 147 | -32 065 | -59 728 | -14 100 |
| Derivatives - net settled | -2 003 | -1 602 | - | - |
| Derivatives - gross settled | -8 945 | -4 967 | -1 149 | - |
| Total undiscounted cash flow | -1 313 214 | -243 536 | -607 142 | -59 714 |
All instruments held at the reporting date and for which payments had been contractually agreed are included. Forecasted data relating to future, new liabilities has not been included. Amounts in foreign currencies have been translated at the closing rate at the reporting date. The variable interest payments arising from the financial instruments were calculated using the applicable forward interest rates.
All financial derivatives the Group enters into, relate to an underlying transaction or forecasted exposure. In function of the expected impact on the income statement and if the stringent IAS 39 criteria are met, the Group decides on a case-by-case basis whether hedge accounting will be applied. The following sections describe the transactions whereby hedge accounting is applied and transactions which do not qualify for hedge accounting but constitute an economic hedge.
Depending on the nature of the hedged exposure, IAS 39 makes a distinction between fair value hedges, cash flow hedges and hedges of a net investment. Fair value hedges are hedges of the exposure to variability in the fair value of recognized assets and liabilities or unrecognized firm commitments. Cash flow hedges are hedges of the exposure to variability in future cash flows related to recognized assets or liabilities, highly probable forecasted transactions or, when the hedge relates to currency risk, unrecognized firm commitments. Hedges of a net investment are hedges of the exposure to variability of the net investment in the assets of an entity with a different functional currency.
In 2005, Bekaert Corporation, a USA based entity, issued a fixed rated 100.0 million Eurobond. Simultaneously, the entity also entered into two € 50.0 million cross-currency interest-rate swaps to convert half of the fixed euro payments into floating US dollar payments and the other half of the fixed euro payments into fixed US dollar payments. During 2005, the entity reduced its floating US dollar exposure from € 50.0 million to € 30.9 million.
The Group has designated the portion of € 30.9 million from the 2005 Eurobond as a hedged item in a fair value hedge (the remaining € 69.1 million is treated as a hedged item in a cash flow hedge – see next section). The changes in fair values of the hedged items resulting from changes in the spot rate USD/EUR are offset against the changes in fair value of the cross-currency interest-rate swaps. Credit risks are not addressed or covered by this hedging.
The Group has designated cross-currency interest-rate swaps with an aggregate notional amount of € 33.3 million (2013: € 29.3 million) as fair value hedges as at 31 December 2014, and an aggregate fair value of € - 2.2 million (2013: € 2.7 million). The change in fair value of the hedging instruments during 2014 resulted in a loss of € 4.8 million (2013: € 0.5 million gain) which was recognized in other financial income and expenses. The remeasurement of the hedged items resulted in a gain of € 4.8 million (2013: € 0.5 million loss), which was also recognized in other financial income and expenses. Interest expense adjustments arising from fair value hedges amounted to a gain of € 0.9 million (2013: gain of € 0.8 million).
The currency and interest-rate risk resulting from the remaining € 69.1 million of the 2005 Eurobond (see previous section on fair value hedges) has been hedged using a cross-currency interest-rate swap for € 50.0 million and a combination of a cross-currency interest-rate swap and an interest-rate swap for € 19.1 million. These financial derivatives convert fixed euro payments into fixed US dollar payments. The Group has designated the related portion of the Eurobond as a hedged item. The objective of the hedge is to eliminate the risk from payment fluctuations as a result of changes in the exchange and interest rates. Credit risks are not addressed or covered by this hedging.
As at 31 December 2014, the Group has designated cross-currency interest-rate swaps and interest-rate swaps with an aggregate notional amount of € 74.5 million (2013: € 83.7 million) as cash flow hedges, and an aggregate fair value of to € -5.5 million (2013: € 2.8 million). During 2014, losses totaling € 7.9 million (2013: € 4.0 million gains) resulting from the change in fair values of cross-currency and interest-rate swaps were taken directly to equity (hedging reserve). These changes represent the effective portion of the hedge relationship. A total amount of € 8.6 million was credited to equity (hedging reserve) against other financial income and expenses to offset the unrealized exchange gains (2013: losses of € 3.1 million) recognized on the remeasurement of the Eurobond at closing rate. Interest expense adjustments arising from cash flow hedges amounted to a loss of € 0.8 million (2013: a loss of € 0.8 million).
Throughout 2014 and 2013, the Group has not concluded or settled any net investment hedges.
The Group also uses financial instruments that represent an economic hedge but for which no hedge accounting is applied, either because the criteria to qualify for hedge accounting defined in IAS 39 'Financial Instruments: Recognition and Measurement' are not met or because the Group has elected not to apply hedge accounting. These derivatives are treated as free-standing instruments held for trading.
To manage its interest-rate exposure, the Group uses interest-rate swaps, forward rate agreements and interest-rate options to convert its floating-rate debt to a fixed and/or capped rate debt. Except for an interestrate swap for USD 25.0 million, none of these interest-rate derivatives were designated as hedges as defined in IAS 39. As at 31 December 2014, the interest-rate exposure of debt was hedged using interest-rate swaps for a total gross amount of € 32.9 million (2013: € 29.0 million). No forward rate agreements and no interest rate options were outstanding at 31 December 2014 (2013: none). At year-end, the fair value of the interest-rate swaps amounted to € -0.2 million (2013: € -1.5 million). During 2014, a gain of € 1.4 million (2013: € 1.3 million gain) resulting from the changes in fair values was recognized under other financial income and expenses. Interest expense adjustments arising from interest-rate swaps used as economic hedges amounted to a loss of € 1.4 million (2013: € 1.4 million loss).
The Group uses forward exchange contracts to limit currency risks on its various operating and financing activities. Since the Group has not designated its forward exchange contracts as cash flow hedges, the fair value change is recorded immediately under other financial income and expenses. As at 31 December 2014, the notional amount of the forward exchange contracts relating to commercial transactions was € 44 million (2013: € 41.8 million). The fair value at year-end amounted to € -0.4 million (2013: € 0.4 million), with a loss of € 0.6 million (2013: € 0.4 million gain). A gain of € 0.04 million (2013: € 7.5 million loss) was incurred from unrealized exchange losses on receivables and payables. It should be noted that the forward exchange contracts also relate to forecasted commercial transactions, for which there is no offsetting position on the balance sheet. Realized exchange results on hedged operating and financial payables and receivables amounted to a gain of € 0.8 million (2013: € 4.0 million gain).
The following table analyzes the notional amounts of the derivatives according to their maturity date:
| 2014 in thousands of € |
Due within one year |
Due between one and 5 years |
Due after more than 5 years |
|---|---|---|---|
| Interest-rate swaps | 53 537 | - | - |
| Forward exchange contracts | 429 921 | - | - |
| Cross-currency interest-rate swaps | 491 685 | 32 256 | - |
| Conversion derivative | - | 300 000 | - |
| Total | 975 143 | 332 256 | - |
| 2013 in thousands of € |
Due within one year |
Due between one and 5 years |
Due after more than 5 years |
|---|---|---|---|
| Interest-rate swaps | - | 47 132 | - |
| Forward exchange contracts | 352 403 | - | - |
| Cross-currency interest-rate swaps | 461 093 | 114 596 | - |
| Total | 813 496 | 161 728 | - |
The following table summarizes the fair values of the various derivatives carried. A distinction is made depending on whether these are part of a hedging relationship as set out in IAS 39 (fair value hedge or cash flow hedge).
| Fair value of current and non-current derivatives | Assets | Liabilities | ||
|---|---|---|---|---|
| in thousands of € | 2013 | 2014 | 2013 | 2014 |
| Financial instruments | ||||
| Forward exchange contracts | ||||
| Held for trading | 543 | 2 637 | 7 931 | 7 625 |
| Interest-rate swaps | ||||
| Held for trading | - | - | 1 515 | 235 |
| In connection with cash flow hedges | - | - | 885 | 141 |
| Cross-currency interest-rate swaps | ||||
| Held for trading | 21 473 | 21 521 | 2 033 | 33 631 |
| In connection with fair value hedges | 2 671 | - | - | 2 235 |
| In connection with cash flow hedges | 3 638 | - | - | 5 373 |
| Conversion derivative | ||||
| Held for trading | - | - | - | 7 921 |
| Total | 28 325 | 24 158 | 12 364 | 57 161 |
| Non-current | 14 760 | 5 944 | 2 022 | 7 921 |
| Current | 13 565 | 18 214 | 10 342 | 49 240 |
| Total | 28 325 | 24 158 | 12 364 | 57 161 |
The Group has no financial assets and financial liabilities that are presented net in the balance sheet due to setoff in accordance with IAS 32. The Group enters into ISDA master agreements with its counterparties for all of its derivatives, allowing the counterparties to net derivative assets with derivative liabilities when settling in case of default. Under these agreements, no collateral is being exchanged, neither in cash nor in securities.
The potential effect of the netting of derivative contracts is shown below:
| Effect of enforceable netting agreements | Assets | Liabilities | ||
|---|---|---|---|---|
| in thousands of € | 2013 | 2014 | 2013 | 2014 |
| Total derivatives recognized in balance sheet | 28 325 | 24 158 | 12 364 | 57 161 |
| Enforceable netting | -5 372 | -15 576 | -5 372 | -15 576 |
| Net amounts | 22 953 | 8 582 | 6 992 | 41 585 |
The table below shows how the use of derivatives mitigated the impact of the underlying risks on the income statement:
| 2014 | Hedging | Recognized in | ||
|---|---|---|---|---|
| in thousands of € | Hedged item | instrument | Other | profit or loss |
| Interest | ||||
| Fair value | Fair value | expense | ||
| Fair value hedges | changes | changes | adjustments | |
| Currency and interest-rate risk on financing cash flows | 4 829 | -4 815 | 909 | 923 |
| Cash flow hedges | ||||
| Interest expense adjustments and amortization of | ||||
| discontinued hedges (recycled from equity) | - | - | -797 | -797 |
| Underlying | Financial | |||
| risk | derivative | |||
| Unrealized | Realized | |||
| exchange | Fair value | exchange | ||
| Held for trading | results | changes | results | |
| Currency risk on financing cash flows | 41 152 | -28 305 | -16 626 | -3 779 |
| Currency risk on operating and investing cash flows | 40 | -608 | 796 | 228 |
| Interest | ||||
| expense | ||||
| adjustments | ||||
| Interest-rate risk | - | 1 358 | -6 243 | -4 885 |
| Conversion derivative | - | 13 379 | -3 215 | 10 164 |
| Total | 46 021 | -18 991 | -25 176 | 1 854 |
Of the total income statement effect in 2014, € 9.6 million is recognized in other financial income and expenses, € 1.6 million in other operating revenues and expenses (i.e. realized exchange results on operating cash flows) and € -9.3 million in interest expense.
| 2013 in thousands of € |
Hedged item | Hedging instrument |
Other | Recognized in profit or loss |
|---|---|---|---|---|
| Interest | ||||
| Fair value | Fair value | expense | ||
| Fair value hedges | changes | changes | adjustments | |
| Currency and interest-rate risk on financing cash flows | -494 | 512 | 842 | 860 |
| Cash flow hedges | ||||
| Interest expense adjustments and amortization of | ||||
| discontinued hedges (recycled from equity) | - | - | -803 | -803 |
| Underlying | Financial | |||
| risk | derivative | |||
| Unrealized | Realized | |||
| exchange | Fair value | exchange | ||
| Held for trading | results | changes | results | |
| Currency risk on financing cash flows | -4 162 | -3 737 | 687 | -7 212 |
| Currency risk on operating and investing cash flows | -7 519 | 387 | 3 956 | -3 176 |
| Interest | ||||
| expense | ||||
| adjustments | ||||
| Interest-rate risk | - | 1 288 | -7 481 | -6 193 |
| Total | -12 175 | -1 550 | -2 799 | -16 524 |
Of the total income statement effect in 2013, € -4.5 million is recognized in other financial income and expenses, € -4.6 million in other operating revenues and expenses (i.e. realized exchange results on operating cash flows) and € -7.4 million in interest expense.
Cash flow hedges also directly affect equity via other comprehensive income, as shown below:
| 2014 in thousands of € |
Hedged item | Hedging instrument |
Other | Recognized in equity (OCI) |
|---|---|---|---|---|
| Spot price | Fair value | |||
| Cash flow hedges | changes | changes | ||
| Currency and interest-rate risk on financing cash flows | 8 582 | -7 896 | - | 686 |
| Amortization of discontinued hedges | ||||
| (recycled to profit or loss) | - | - | 69 | 69 |
| 2013 | Hedging | Recognized in | ||
|---|---|---|---|---|
| in thousands of € | Hedged item | instrument | Other | equity (OCI) |
| Spot price | Fair value | |||
| Cash flow hedges | changes | changes | ||
| Currency and interest-rate risk on financing cash flows | -3 107 | 3 889 | - | 782 |
| Amortization of discontinued hedges | ||||
| (recycled to profit or loss) | - | - | 72 | 72 |
The following tables list the different classes of financial assets and liabilities with their carrying amounts in the balance sheet and their respective fair value, analyzed by their measurement category in accordance with IAS 39, 'Financial Instruments: Recognition and Measurement' or IAS 17, 'Leases'.
Cash and cash equivalents, short-term deposits, trade and other receivables, bills of exchange received, loans and receivables primarily have short terms to maturity; hence, their carrying amounts at the reporting date approximate the fair values. Trade and other payables also generally have short terms to maturity and, hence, their carrying amounts also approximate their fair values. The Group has no exposure to collateralized debt obligations (CDOs).
The following abbreviations are used for IAS 39 categories:
| Category in accordance with IAS 39 |
|---|
| Loans & Receivables |
| Available for Sale |
| Financial Assets at Fair Value Through Profit or Loss |
| Financial Liabilities Measured at Amortized Cost |
| Hedge accounting |
| Financial Liabilities at Fair Value Through Profit or Loss |
| Not applicable |
| Carrying amount |
Amounts recognized in accordance with IAS 39 at |
||||||
|---|---|---|---|---|---|---|---|
| 2014 in thousands of € |
Category in accordance with IAS 39 |
2014 | Amortized cost |
Fair value through equity |
Fair value through profit or loss |
Amounts recognized in accordance with IAS 17 |
Fair value 2014 |
| Assets | |||||||
| Cash and cash | |||||||
| equivalents | L&R | 458 542 | 458 542 | - | - | - | 458 542 |
| Short-term deposits | L&R | 14 160 | 14 160 | - | - | - | 14 160 |
| Trade receivables | L&R | 707 569 | 707 569 | - | - | - | 707 569 |
| Bills of exchange received |
L&R | 114 118 | 114 118 | - | - | - | 114 118 |
| Other receivables | L&R | 106 627 | 106 627 | - | - | - | 106 627 |
| Loans and receivables |
L&R | 42 523 | 42 523 | - | - | - | 42 523 |
| Available-for-sale financial assets |
AfS | 9 979 | 981 | 8 998 | - | - | 9 979 |
| Derivative financial assets |
|||||||
| - without a hedging relationship |
FAFVTPL | 24 157 | - | - | 24 158 | - | 24 157 |
| - with a hedging relationship |
Hedge accounting |
- | - | - | - | - | - |
| Liabilities | |||||||
| Interest-bearing debt | |||||||
| - finance leases | n.a. | 1 548 | - | - | - | 1 548 | 1 548 |
| - credit institutions | FLMaAC | 426 154 | 426 154 | - | - | - | 426 154 |
| - bonds | Hedge accounting |
100 184 | 69 107 | - | 31 076 | - | 100 594 |
| - bonds | FLMaAC | 823 740 | 823 740 | - | - | - | 868 376 |
| Trade payables | FLMaAC | 390 943 | 390 943 | - | - | - | 390 943 |
| Other payables | FLMaAC | 143 497 | 143 497 | - | - | - | 143 497 |
| Derivative financial liabilities |
|||||||
| - without a hedging relationship |
FLFVTPL | 49 411 | - | - | 49 411 | - | 49 411 |
| - with a hedging | Hedge | ||||||
| relationship | accounting | 7 750 | - | 5 515 | 2 235 | - | 7 750 |
| Aggregated by category in accordance with IAS 39 | |||||||
| Loans and receivables |
L&R | 1 443 539 | 1 443 539 | - | - | - | 1 443 539 |
| Available-for-sale financial assets |
AfS | 9 979 | 981 | 8 998 | - | - | 9 979 |
| Financial assets - hedge accounting |
Hedge accounting |
- | - | - | - | - | - |
| Financial assets at fair value through |
|||||||
| profit or loss | FAFVTPL | 24 157 | - | - | 24 158 | - | 24 157 |
| Financial liabilities measured at |
|||||||
| amortized cost | FLMaAC | 1 784 334 | 1 784 334 | - | - | - | 1 828 970 |
| Financial liabilities - hedge accounting |
Hedge accounting |
107 934 | 69 107 | 5 515 | 33 311 | - | 108 344 |
| Financial liabilities at fair value through |
|||||||
| profit or loss | FLFVTPL | 49 411 | - | - | 49 411 | - | 49 411 |
| Carrying amount |
Amounts recognized in accordance with IAS 39 at |
||||||
|---|---|---|---|---|---|---|---|
| 2013 in thousands of € |
Category in accordance with IAS 39 |
2013 | Amortized cost |
Fair value through equity |
Fair value through profit or loss |
Amounts recognized in accordance with IAS 17 |
Fair value 2013 |
| Assets | |||||||
| Cash and cash | |||||||
| equivalents | L&R | 391 857 | 391 857 | - | - | - | 391 857 |
| Short-term deposits | L&R | 10 172 | 10 172 | - | - | - | 10 172 |
| Trade receivables | L&R | 584 455 | 584 455 | - | - | - | 584 455 |
| Bills of exchange | |||||||
| received | L&R | 110 218 | 110 218 | - | - | - | 110 218 |
| Other receivables | L&R | 83 781 | 83 781 | - | - | - | 83 781 |
| Loans and | |||||||
| receivables | L&R | 31 748 | 31 748 | - | - | - | 31 748 |
| Available-for-sale | |||||||
| financial assets | AfS | 8 713 | 975 | 7 738 | - | - | 8 713 |
| Derivative financial assets |
|||||||
| - without a hedging | |||||||
| relationship | FAFVTPL | 22 016 | - | - | 22 016 | - | 22 016 |
| - with a hedging | Hedge | ||||||
| relationship | accounting | 6 309 | - | 3 638 | 2 671 | - | 6 309 |
| Liabilities | |||||||
| Interest-bearing debt | |||||||
| - finance leases | n.a. | 196 | - | - | - | 196 | 196 |
| - credit institutions | FLMaAC | 258 837 | 258 837 | - | - | - | 258 837 |
| Hedge | |||||||
| - bonds | accounting | 101 118 | 69 107 | - | 32 011 | - | 103 619 |
| - bonds | FLMaAC | 650 000 | 650 000 | - | - | - | 676 637 |
| Trade payables | FLMaAC | 338 864 | 338 864 | - | - | - | 338 864 |
| Other payables | FLMaAC | 135 441 | 135 441 | - | - | - | 135 441 |
| Derivative financial liabilities - without a hedging |
|||||||
| relationship | FLFVTPL | 11 479 | - | - | 11 479 | - | 11 479 |
| - with a hedging | Hedge | ||||||
| relationship | accounting | 885 | - | 885 | - | - | 885 |
| Aggregated by category in accordance with IAS 39 Loans and |
|||||||
| receivables | L&R | 1 212 231 | 1 212 231 | - | - | - | 1 212 231 |
| Available-for-sale financial assets |
AfS | 8 713 | 975 | 7 738 | - | - | 8 713 |
| Financial assets - | Hedge | ||||||
| hedge accounting | accounting | 6 309 | - | 3 638 | 2 671 | - | 6 309 |
| Financial assets at fair value through profit or loss |
FAFVTPL | 22 016 | - | - | 22 016 | - | 22 016 |
| Financial liabilities measured at |
|||||||
| amortized cost | FLMaAC | 1 383 142 | 1 383 142 | - | - | - | 1 409 779 |
| Financial liabilities - | Hedge | ||||||
| hedge accounting | accounting | 102 003 | 69 107 | 885 | 32 011 | - | 104 504 |
| Financial liabilities at fair value through |
|||||||
| profit or loss | FLFVTPL | 11 479 | - | - | 11 479 | - | 11 479 |
The fair value measurement of financial assets and financial liabilities can be characterized in one of the following ways:
| Contractual provisions | ||
|---|---|---|
| Issue size (in thousands of €) | 300 000 | |
| Issue price | 100% | |
| Initial conversion premium | 32.5% | |
| Coupon | 0.75% |
| At issue date | At 31 Dec 2014 | |
|---|---|---|
| Level 1 inputs | ||
| Share price | € 27.97 | € 26.35 |
| Level 2 inputs | ||
| Reference swap rate | 0.54% | 0.25% |
| Credit spread | 210 bps | 200 bps |
| Level 3 inputs | ||
| Volatility | 25.40% | 22.00% |
| in thousands of € | ||
|---|---|---|
| Fair value of the convertible debt | 300 000 | 286 379 |
| Fair value of the plain vanilla debt | 278 700 | 278 458 |
| Fair value of the conversion option | 21 300 | 7 921 |
The carrying amount (i.e. the fair value) of the conversion derivative has evolved as follows:
| in thousands of € | |
|---|---|
| At issue of the convertible debt (10 June 2014) | 21 300 |
| (Gain) /loss in fair value | -13 379 |
| At 31 December 2014 | 7 921 |
The following table shows the sensitivity of the fair value calculation to the most significant level-3 input.
| Sensitivity analysis | ||
|---|---|---|
| in thousands of € | Change Impact on derivative liability |
|
| Volatility | 3.5% increase by | 3 900 |
| -3.5% decrease by | -3 900 |
The fair value of all financial instruments measured at amortized cost in the balance sheet, either in accordance with IAS 39 or with IAS 17, has been determined using level-2 fair value measurement techniques. The following table provides an analysis of financial instruments measured at fair value in the balance sheet, in accordance with the fair value measurement hierarchy described above:
| 2014 in thousands of € |
Level 1 | Level 2 | Level 3 | Total |
|---|---|---|---|---|
| Financial assets - hedge accounting | ||||
| Derivative financial assets | - | - | - | - |
| Financial assets at fair value through profit or loss Derivative financial assets |
- | 24 157 | - | 24 157 |
| Available-for-sale financial assets | ||||
| Equity investments | 8 495 | 503 | - | 8 998 |
| Total assets | 8 495 | 24 660 | - | 33 155 |
| Financial liabilities - hedge accounting | ||||
| Interest-bearing debt | - | 31 076 | - | 31 076 |
| Derivative financial liabilities | - | 7 750 | - | 7 750 |
| Financial liabilities at fair value through profit or loss | ||||
| Derivative financial liabilities | - | 41 490 | 7 921 | 49 411 |
| Total liabilities | - | 80 316 | 7 921 | 88 237 |
| 2013 | ||||
| in thousands of € | Level 1 | Level 2 | Level 3 | Total |
| Financial assets - hedge accounting | ||||
| Derivative financial assets | - | 6 309 | - | 6 309 |
| Financial assets at fair value through profit or loss | ||||
| Derivative financial assets | - | 22 016 | - | 22 016 |
| Available-for-sale financial assets | ||||
| Equity investments | 7 248 | 490 | - | 7 738 |
| Total assets | 7 248 | 28 815 | - | 36 063 |
| Financial liabilities - hedge accounting | ||||
| Interest-bearing debt | - | 32 011 | - | 32 011 |
| Derivative financial liabilities | - | 885 | - | 885 |
| Financial liabilities at fair value through profit or loss | ||||
| Derivative financial liabilities | - | 11 479 | - | 11 479 |
| Total liabilities | - | 44 375 | - | 44 375 |
There were no transfers between level 1 and 2 in the period.
The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximizing the return to shareholders through the optimization of the net debt and equity balance. The Group's overall strategy remains unchanged from 2013.
The capital structure of the Group consists of net debt, which includes the elements disclosed in note 6.17. 'Interest-bearing debt', and equity (both attributable to the Group and to non-controlling interests).
The Group's Audit and Finance Committee reviews the capital structure on a semi-annual basis. As part of this review, the committee considers the cost of capital and the risks associated with each class of capital. The Group has a target gearing ratio of 50% determined as the proportion of net debt to equity.
| Gearing in thousands of € |
2013 | 2014 |
|---|---|---|
| Net debt | 574 016 | 852 959 |
| Equity | 1 503 876 | 1 566 212 |
| Net debt to equity ratio | 38.2% | 54.5% |
As at 31 December, the important contingencies and commitments were:
| in thousands of € | 2013 | 2014 |
|---|---|---|
| Contingent liabilities | 14 264 | 22 548 |
| Commitments to purchase fixed assets | 12 718 | 19 129 |
| Commitments to invest in venture capital funds | 6 669 | 5 038 |
The contingent liabilities mainly relate to environmental obligations. Most of them are covered by bank guarantees.
The entities of the Group are subjected to regular tax audits in their jurisdictions. While the ultimate outcome of tax audits is not certain, Bekaert has considered the merits of its filing positions in an overall evaluation of potential tax liabilities and concludes that the Group has adequate liabilities recorded in its consolidated financial statements for exposures on these matters. Accordingly, Bekaert also considers it unlikely that potential tax exposures over and above the amounts currently recorded as liabilities in the consolidated financial statements will be material to its financial condition (see note 6.4. 'Investments in joint ventures and associates' for tax contingencies relating to the Brazilian joint ventures).
The Group has entered into several rental contracts classified as operating leases mainly with respect to vehicles and buildings, predominantly in Europe. A large portion of the contracts contain a renewal clause, except those relating to most of the vehicles and the equipment. The assets are not subleased to a third party.
| Future payments | ||
|---|---|---|
| in thousands of € | 2013 | 2014 |
| Within one year | 12 338 | 13 871 |
| Between one and five years | 22 899 | 26 016 |
| More than five years | 4 024 | 1 018 |
| Total | 39 261 | 40 905 |
| Expenses | ||
| in thousands of € | 2013 | 2014 |
| Vehicles | 9 498 | 9 850 |
| Industrial buildings | 2 854 | 3 063 |
| Equipment | 2 385 | 2 770 |
| Offices | 4 135 | 3 394 |
|---|---|---|
| Land | 387 | 377 |
| Other | 832 | 952 |
| Total | 20 091 | 20 406 |
| 2014 in years |
Weighted average lease term |
|---|---|
| Vehicles | 4 |
| Industrial buildings | 2 |
| Equipment | 3 |
| Offices | 4 |
| Land | 1 |
| Other | 1 |
| 2013 in years |
Weighted average lease term |
|---|---|
| Vehicles | 4 |
| Industrial buildings | 3 |
| Equipment | 4 |
| Offices | 4 |
| Land | 5 |
| Other | 1 |
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated in the consolidation and are accordingly not disclosed in this note. Transactions with other related parties are disclosed below.
| Transactions with joint ventures | ||
|---|---|---|
| in thousands of € | 2013 | 2014 |
| Sales of goods | 26 863 | 36 930 |
| Purchases of goods | 11 264 | 19 654 |
| Royalties and management fees received | 10 891 | 10 125 |
| Interest and similar income | 152 | 169 |
| Dividends received | 12 509 | 19 881 |
| Outstanding balances with joint ventures | ||
| in thousands of € | 2013 | 2014 |
| Trade receivables | 12 446 | 11 251 |
| Other current receivables | - | 443 |
| Trade payables | 2 315 | 3 892 |
None of the related parties have entered into any other transactions with the Group that meet the requirements of IAS 24, 'Related Party Disclosures'.
Other current payables - 185
Key Management includes the Board of Directors, the CEO, the members of the Bekaert Group Executive and the Senior Vice Presidents (see last page of the Financial Review).
| Key Management remuneration | ||
|---|---|---|
| in thousands of € | 2013 | 2014 |
| Number of persons | 33 | 40 |
| Short-term employee benefits | ||
| Basic remuneration | 6 284 | 7 043 |
| Variable remuneration | 249 | 4 227 |
| Remuneration as directors of subsidiaries | 989 | 936 |
| Post-employment benefits | ||
| Defined-benefit pension plans | 609 | 712 |
| Defined-contribution pension plans | 541 | 967 |
| Share-based payment benefits | 2 913 | 2 376 |
| Total gross remuneration | 11 585 | 16 261 |
| Average gross remuneration per person | 351 | 407 |
| 1 Number of options and stock appreciation rights granted |
442 000 | 251 500 |
1 The number for 2013 includes an exceptional grant of options and stock appreciation rights.
The disclosures relating to the Belgian Corporate Governance Code are included in the Corporate Governance Statement of this annual report.
During 2014, the statutory auditor and persons professionally related to him performed additional services for fees amounting to € 1 040 924.
These fees essentially relate to further assurance services (€ 46 375), tax advisory services (€ 872 647) and other non-audit services (€ 121 902).
The additional services were approved by the Audit and Finance Committee.
The audit fees for NV Bekaert SA and its subsidiaries amounted to € 1 693 989.
Subsidiaries
| Industrial companies | Address | % |
|---|---|---|
| EMEA | ||
| Bekaert Bohumín sro | Bohumín, Czech Republic | 100 |
| Bekaert Carding Solutions NV | Deerlijk, Belgium | 100 |
| Bekaert Combustion Technology BV | Assen, Netherlands | 100 |
| Bekaert Figline Srl | Milano, Italy | 100 |
| Bekaert Hlohovec as | Hlohovec, Slovakia | 100 |
| Bekaert Izmit Celik Kord Sanayi ve Ticaret AS | Izmit, Turkey | 100 |
| Bekaert Petrovice sro | Petrovice, Czech Republic | 100 |
| Bekaert Sardegna SpA | Assemini, Italy | 100 |
| Bekaert Slatina SRL | Slatina, Romania | 80 |
| Bekaert Slovakia sro | Sládkovičovo, Slovakia | 100 |
| Bekintex NV | Wetteren, Belgium | 100 |
| Cold Drawn Products Ltd | Bradford, United Kingdom | 100 |
| Industrias del Ubierna SA | Burgos, Spain | 100 |
| OOO Bekaert Lipetsk | Gryazi, Russian Federation | 100 |
| Solaronics SA | Armentières, France | 100 |
| North America | ||
| Bekaert Canada Ltd | Surrey, Canada | 100 |
| Bekaert Corporation | Wilmington (Delaware), United States | 100 |
| Wire Rope Industries Ltd | Pointe-Claire, Canada | 52 |
| Wire Rope Industries USA Inc | Wilmington (Delaware), United States | 100 |
| Latin America | ||
| Acma SA | Santiago, Chile | 52 |
| Acmanet SA | Talcahuano, Chile | 52 |
| Bekaert Cimaf Cabos Ltda | São Paulo, Brazil | 100 |
| Bekaert Costa Rica SA | San José-Santa Ana, Costa Rica | 58 |
| Bekaert Sumaré Ltda BIA Alambres Costa Rica SA |
Sumaré, Brazil San José-Santa Ana, Costa Rica |
100 58 |
| Ideal Alambrec SA | Quito, Ecuador | 58 |
| Industrias Chilenas de Alambre - Inchalam SA | Talcahuano, Chile | 52 |
| Procables SA | Callao, Peru | 50 |
| Prodinsa SA | Maipú, Chile | 52 |
| Productora de Alambres Colombianos Proalco SAS | Bogotá, Colombia | 80 |
| Productos de Acero Cassadó SA | Callao, Peru | 38 |
| Vicson SA | Valencia, Venezuela | 80 |
| Asia Pacific | ||
| Bekaert Ansteel Tire Cord (Chongqing) Co Ltd | Chongqing, China | 50 |
| Bekaert Binjiang Advanced Products Co Ltd | Jiangyin (Jiangsu province), China | 90 |
| Bekaert Binjiang Steel Cord Co Ltd | Jiangyin (Jiangsu province), China | 90 |
| Bekaert Carding Solutions Pvt Ltd | Pune, India | 100 |
| Bekaert (China) Technology Research and Development Co Ltd Bekaert (Huizhou) Steel Cord Co Ltd |
Jiangyin (Jiangsu province), China Huizhou (Guangdong province), China |
100 100 |
| Bekaert Industries Pvt Ltd | Taluka Shirur, District Pune, India | 100 |
| Bekaert-Jiangyin Wire Products Co Ltd | Jiangyin (Jiangsu province), China | 82 |
| Bekaert Mukand Wire Industries Pvt Ltd | Pune, India | 100 |
| Bekaert New Materials (Suzhou) Co Ltd | Suzhou (Jiangsu province), China | 100 |
| Bekaert (Qingdao) Wire Products Co Ltd | Qingdao (Shandong province), China | 100 |
| Bekaert (Shandong) Tire Cord Co Ltd | Weihai (Shandong province), China | 100 |
| Bekaert Shenyang Advanced Products Co Ltd | Shenyang (Liaoning province), China | 100 |
| Bekaert Southern Speciality Wire Sdn Bhd Bekaert Southern Wire Sdn Bhd |
Kuala Lumpur, Malaysia Kuala Lumpur, Malaysia |
55 55 |
| Bekaert Toko Metal Fiber Co Ltd | Tokyo, Japan | 70 |
| Bekaert (Xinyu) New Materials Co Ltd | Xinyu City (Jiangxi province), China | 75 |
| China Bekaert Steel Cord Co Ltd | Jiangyin (Jiangsu province), China | 90 |
| PT Bekaert Indonesia | Karawang, Indonesia | 100 |
| PT Bekaert Southern Wire | Karawang, Indonesia | 55 |
| Shanghai Bekaert-Ergang Co Ltd | Shanghai, China | 70 |
| Wuxi Bekaert Textile Machinery and Accessories Co Ltd | Wuxi (Jiangsu province), China | 100 |
| Barnards Unlimited | Bradford, United Kingdom | 100 |
|---|---|---|
| Bekaert AS | Vejle, Denmark | 100 |
| Bekaert Carding Solutions Ltd | Bradford, United Kingdom | 100 |
| Bekaert Carding Solutions SAS | Armentières, France | 100 |
| Bekaert Emirates LLC | Dubai, United Arab Emirates | 49 |
| Bekaert France SAS | Antony, France | 100 |
| Bekaert Ges mbH | Vienna, Austria | 100 |
| Bekaert GmbH | Neu-Anspach, Germany | 100 |
| Bekaert Ltd | Bradford, United Kingdom | 100 |
| Bekaert Maccaferri Underground Solutions BVBA | Aalst (Erembodegem), Belgium | 50 |
| Bekaert Middle East LLC | Dubai, United Arab Emirates | 49 |
| Bekaert Norge AS | Frogner, Norway | 100 |
| Bekaert Poland Sp z oo | Warsaw, Poland | 100 |
| Bekaert (Schweiz) AG | Baden, Switzerland | 100 |
| Bekaert Svenska AB | Gothenburg, Sweden | 100 |
| Bekaert Tarak Aksesuarlari ve Makineleri Ticaret AS | Istanbul, Turkey | 100 |
| Lane Brothers Engineering Industries | Bradford, United Kingdom | 100 |
| Leon Bekaert SpA | Trezzano Sul Naviglio, Italy | 100 |
| OOO Bekaert Wire | Moscow, Russian Federation | 100 |
| Rylands-Whitecross Ltd | Bradford, United Kingdom | 100 |
| Scheldestroom NV | Zwevegem, Belgium | 100 |
| Sentinel Garden Products Ltd | Bradford, United Kingdom | 100 |
| Sentinel Wire Fencing Ltd | Bradford, United Kingdom | 100 |
| Sentinel (Wire Products) Ltd | Bradford, United Kingdom | 100 |
| Solaronics GmbH | Achim, Germany | 100 |
| Tinsley Wire Ltd | Bradford, United Kingdom | 100 |
| Twil Company | Bradford, United Kingdom | 100 |
| North America | ||
| Bekaert Carding Solutions Inc / Bekaert Solutions de Cardage Inc | Saint John, Canada | 100 |
| Bekaert Specialty Films de Mexico SA de CV | Monterrey, Mexico | 100 |
| Bekaert Trade Mexico S de RL de CV | Mexico City, Mexico | 100 |
| Specialty Films de Services Company SA de CV | Monterrey, Mexico | 100 |
| Latin America | ||
| Bekaert Guatemala SA | Ciudad de Guatemala, Guatemala | 100 |
| Bekaert Trade Latin America NV | Curaçao, Netherlands Antilles | 100 |
| Prodac Contrata SAC | Callao, Peru | 38 |
| Prodac Selva SAC | Ucayali, Peru | 38 |
| Prodalam SA | Santiago, Chile | 52 |
| Prodinsa Ingeniería y Proyectos SA | Santiago, Chile | 52 |
| Asia Pacific | ||
| Bekaert Advanced Products (Shanghai) Co Ltd | Shanghai, China | 100 |
| Bekaert Japan Co Ltd | Tokyo, Japan | 100 |
| Bekaert Korea Ltd | Seoul, Korea | 100 |
| Bekaert Management (Shanghai) Co Ltd | Shanghai, China | 100 |
| Bekaert Singapore Pte Ltd | Singapore | 100 |
| Bekaert Taiwan Co Ltd | Taipei, Taiwan | 100 |
| Cempaka Raya Sdn Bhd | Kuala Lumpur, Malaysia | 55 |
| PT Bekaert Trade Indonesia | Karawang, Indonesia | 100 |
| Financial companies | Address | % |
|---|---|---|
| Acma Inversiones Canada SA | Talcahuano, Chile | 52 |
| Acma Inversiones SA | Talcahuano, Chile | 52 |
| Becare Ltd | Dublin, Ireland | 100 |
| Bekaert Building Products Hong Kong Ltd | Hong Kong, China | 100 |
| Bekaert Carding Solutions Hong Kong Ltd | Hong Kong, China | 100 |
| Bekaert Coördinatiecentrum NV | Zwevegem, Belgium | 100 |
| Bekaert do Brasil Ltda | Contagem, Brazil | 100 |
| Bekaert Holding Hong Kong Ltd | Hong Kong, China | 100 |
| Bekaert Ibérica Holding SL | Burgos, Spain | 100 |
| Bekaert Ideal SL | Burgos, Spain | 80 |
| Bekaert Investments NV | Zwevegem, Belgium | 100 |
| Bekaert Investments Italia SpA | Trezzano Sul Naviglio, Italy | 100 |
| Bekaert North America Management Corporation | Wilmington (Delaware), United States | 100 |
| Bekaert Sàrl | Luxemburg, Luxemburg | 100 |
| Bekaert Services Hong Kong Ltd | Hong Kong, China | 100 |
| Bekaert Southern Wire Pte Ltd | Singapore | 55 |
| Bekaert Specialty Wire Products Hong Kong Ltd | Hong Kong, China | 100 |
| Bekaert Stainless Products Hong Kong Ltd | Hong Kong, China | 100 |
| Bekaert Steel Cord Products Hong Kong Ltd | Hong Kong, China | 100 |
| Bekaert Strategic Partnerships Hong Kong Ltd | Hong Kong, China | 100 |
| Bekaert Wire Products Hong Kong Ltd | Hong Kong, China | 100 |
| Bekaert Wire Rope Industry NV | Zwevegem, Belgium | 100 |
| Bekaert Xinyu Hong Kong Ltd | Hong Kong, China | 100 |
| Impala SA | Panama, Panama | 52 |
| Industrias Acmanet Ltda | Talcahuano, Chile | 52 |
| Inversiones Bekaert Andean Ropes Ltda | Santiago, Chile | 100 |
| InverVicson SA | Valencia, Venezuela | 80 |
| Procables Wire Ropes SA | Maipú, Chile | 52 |
| Procercos SA | Talcahuano, Chile | 52 |
| Industrial companies | Address | % |
|---|---|---|
| Latin America | ||
| Belgo Bekaert Arames Ltda BMB-Belgo Mineira Bekaert Artefatos de Arame Ltda |
Contagem, Brazil Vespasiano, Brazil |
45 45 |
| Asia Pacific | ||
| Bekaert Xinyu Metal Products Co Ltd | Xinyu City (Jiangxi province), China | 50 |
| Sales offices, warehouses and others | Address | % |
| EMEA | ||
| Netlon Sentinel Ltd | Blackburn, United Kingdom | 50 |
| Asia Pacific | ||
| Bekaert Engineering (India) Pvt Ltd BOSFA Pty Ltd |
New Delhi, India | 40 |
| Subsidiaries | Address | % |
|---|---|---|
| Acma Inversiones Canada SA | Talcahuano, Chile | 52 |
| Bekaert Wire Rope Industry NV | Zwevegem, Belgium | 100 |
| Inversiones Bekaert Andean Ropes Ltda | Santiago, Chile | 100 |
| Procables Wire Ropes SA | Maipú, Chile | 52 |
| Procercos SA | Talcahuano, Chile | 52 |
| Prodinsa SA | Maipú, Chile | 52 |
| Subsidiaries | Address | |
|---|---|---|
| Bekaert Cimaf Cabos Ltda | São Paulo, Brazil | From 45% to 100% |
| Bekaert Figline Srl | Milano, Italy | From 0% to 100% |
| Bekaert Maccaferri Underground Solutions BVBA | Aalst (Erembodegem), Belgium | From 0% to 50% |
| Bekaert Slatina SRL | Slatina, Romania | From 0% to 80% |
| Bekaert Sumaré Ltda | Sumaré, Brazil | From 0% to 100% |
| BIA Alambres Costa Rica SA | San José-Santa Ana, Costa Rica | From 0% to 58% |
| Subsidiaries | Address | |
|---|---|---|
| Bekaert Costa Rica SA | San José-Santa Ana, Costa Rica | From 80% to 58% |
| Bekaert Mukand Wire Industries Pvt Ltd | Pune, India | From 94% to 100% |
| Ideal Alambrec SA | Quito, Ecuador | From 80% to 58% |
| Wire Rope Industries USA Inc | Wilmington (Delaware), United States | From 52% to 100% |
| Wuxi Bekaert Textile Machinery and Accessories Co Ltd | Wuxi (Jiangsu province), China | From 75% to 100% |
| 4. Mergers / conversions | ||
| Subsidiaries | Merged into | |
| Productos de Acero SA Prodinsa | Prodinsa S.A. | |
| New name | Former name |
|---|---|
| Wire Rope Industries USA Inc | Wire Rope Industries Inc |
| Companies | Address |
|---|---|
| Bekaert Combustion Technology Ltd | Solihull, United Kingdom |
| Bekaert Faser Vertriebs GmbH | Idstein, Germany |
| Bekaert Specialty Films Hong Kong | Hong Kong, China |
In accordance with Belgian legislation, the table below lists the registered numbers of the Belgian companies.
| Companies | Company number |
|---|---|
| Bekaert Carding Solutions NV | BTW BE 0405.443.271 RPR Kortrijk |
| Bekaert Coördinatiecentrum NV | BTW BE 0426.824.150 RPR Kortrijk |
| Bekaert Investments NV | BTW BE 0406.207.096 RPR Kortrijk |
| Bekaert Maccaferri Underground Solutions BVBA | BTW BE 0561.750.457 RPR Dendermonde |
| Bekaert Wire Rope Industry NV | BTW BE 0550 983 358 RPR Kortrijk |
| Bekintex NV | BTW BE 0452.746.609 RPR Dendermonde |
| NV Bekaert SA | BTW BE 0405.388.536 RPR Kortrijk |
| Scheldestroom NV | BTW BE 0403.676.188 RPR Kortrijk |
The report of the Board of Directors and the financial statements of the parent company, NV Bekaert SA (the 'Company'), are presented below in a condensed form.
The report of the Board of Directors ex Article 96 of the Belgian Companies Code is not included in full in the report ex Article 119.
Copies of the full directors' report and of the full financial statements of the Company are available free of charge upon request from:
NV Bekaert SA President Kennedypark 18 BE-8500 Kortrijk Belgium www.bekaert.com
The statutory auditor has issued an unqualified report on the financial statements of the Company.
The directors' report and financial statements of the Company, together with the statutory auditor's report, will be deposited with the National Bank of Belgium as provided by law.
| in thousands of € - Year ended 31 December 2013 |
2014 |
|---|---|
| Sales 386 339 |
413 834 |
| Operating profit or loss -4 122 |
44 843 |
| Financial result 5 644 |
7 062 |
| Extraordinary result 61 009 |
18 046 |
| Current and deferred income taxes 1 013 |
1 303 |
| Result for the period 63 544 |
71 254 |
| in thousands of € - 31 December | 2013 | 2014 |
|---|---|---|
| Fixed assets | 2 156 880 | 2 369 972 |
| Formation expenses, intangible fixed assets | 28 327 | 77 307 |
| Tangible fixed assets | 33 298 | 30 894 |
| Financial fixed assets | 2 095 255 | 2 261 771 |
| Current assets | 282 046 | 376 039 |
| Total assets | 2 438 926 | 2 746 011 |
| Shareholders' equity | 505 637 | 530 209 |
| Share capital | 176 773 | 176 914 |
| Share premium | 31 055 | 31 693 |
| Revaluation surplus | 1 995 | 1 995 |
| Statutory reserve | 17 677 | 17 691 |
| Unavailable reserve | 42 507 | 145 940 |
| Reserves available for distribution, retained earnings | 235 630 | 155 976 |
| Provisions and deferred taxes | 77 635 | 69 421 |
| Creditors | 1 855 654 | 2 146 381 |
| Amounts payable after one year | 1 145 764 | 1 045 764 |
| Amounts payable within one year | 709 890 | 1 100 617 |
| Total equity and liabilities | 2 438 926 | 2 746 011 |
Valuation and foreign currency translation principles applied in the parent company's financial statements are based on Belgian accounting legislation.
The Belgium-based entity's sales amounted to € 413.8 million, an increase of 7 % compared to 2013.
The operating profit was € 44.8 million, compared with a loss of € -4.1 million last year. An increase of the margin, resulting from the application of the extended scope of capitalization of R&D project costs and reversal of provisions, are the main reasons for the increase of the operational profit.
The financial result increased to € 7.1 million compared to a profit of € 5.6 million in 2013, due to a higher dividend income (2014: € 62.6 million compared to 2013: € 48.7 million), the revaluation of treasury shares (2014: € 2.2 million compared to 2013: € 6.7 million) and other financial expenses.
The extraordinary result amounts to € 18.0 million, mainly related to the gain on the disposal of intangible and tangible fixed assets and extraordinary depreciations. Last year's extraordinary result of € 61.0 million mainly related to the gain on the disposal of tangible fixed assets and the depreciation of financial fixed assets.
The combination of the operating profit, the financial and the extraordinary result explain the net profit for the year ended 31 December 2014: € 71.3 million compared with € 63.5 million in 2013.
The provision for environmental programs decreased to € 23.2 million (2013: € 30.3 million).
Information on the company's research and development activities can be found in the 'Technology and Innovation' section in the 'Report of the Board of Directors'.
In connection with the entry into force of the Act of 2 May 2007 on the disclosure of significant participations (the Transparency Act), the Company has in its Articles of Association set the thresholds of 3% and 7.50% in addition to the legal thresholds of 5% and each multiple of 5%. An overview of the current notifications of participations of 3% or more is presented hereafter. On 31 December 2014, the total number of securities conferring voting rights was 60 111 405.
| Holders of voting rights | Number of voting rights |
Percentage of voting rights |
|---|---|---|
| Stichting Administratiekantoor Bekaert | 22 370 001 | 37.22% |
| Velge International NV | 57 000 | 0.09% |
| Berfin SA | 108 470 | 0.18% |
| Gedecor SA | 75 000 | 0.12% |
| Millenium 3 SA | 130 200 | 0.22% |
| Zweve (société de droit commun) | 220 000 | 0.37% |
| Total | 22 960 671 | 38.21% |
The notifying persons are acting in concert in that they have concluded an agreement (a) aimed either at acquiring control, at frustrating the successful outcome of a bid or at maintaining control, and (b) to adopt, by concerted exercise of the voting rights they hold, a lasting common policy.
Stichting Administratiekantoor Bekaert is not controlled. Velge International NV is controlled by an individual, through Noral SA and its fully owned subsidiary Triplex SA. Berfin SA is controlled by an individual. Gedecor SA is jointly controlled by two individuals. Millenium 3 SA is controlled by an individual, through Charisa SA. Zweve (société de droit commun) is jointly owned by seven individuals.
| Holders of voting rights | Number of voting rights |
Percentage of voting rights |
|---|---|---|
| Stichting Administratiekantoor Bekaert | 22 370 001 | 37.23% |
| NV Bekaert SA | 3 005 875 | 5.00% |
| Total | 25 375 876 | 42.23% |
Stichting Administratiekantoor Bekaert is the controlling person of the Company.
On 8 December 2007 Stichting Administratiekantoor Bekaert disclosed in accordance with Article 74 of the Act of 1 April 2007 on public takeover bids that it was holding individually more than 30% of the securities with voting rights of the Company on 1 September 2007.
The after-tax result for the year was € 71 254 650, compared with € 63 544 449 for the previous year.
The Board of Directors has proposed that the Annual General Meeting to be held on 13 May 2015 appropriate the above result as follows:
| in € | |
|---|---|
| Result of the year 2014 to be appropriated | 71 254 650 |
| Profit brought forward from previous year | 13 868 834 |
| Transfer to statutory reserves | -14 100 |
| Profit carried forward | -37 648 448 |
| Profit for distribution | 47 460 936 |
The Board of Directors has proposed that the Annual General Meeting approve the distribution of a gross dividend of € 0.85 per share (2013: € 0.85 per share).
The dividend will be payable in euros on 19 May 2015 by the following banks:
The term of office of the Directors Messrs Bert De Graeve, Leon Bekaert, Roger Dalle, Charles de Liedekerke, Hubert Jacobs van Merlen and Maxime Jadot, and of the independent Director Mr Manfred Wennemer will expire at the close of the Annual General Meeting of 13 May 2015. In light of the retirement age set by the Bekaert Corporate Governance Charter Mr Roger Dalle does not seek re-appointment. The Board of Directors has nominated Mr Gregory Dalle for Board membership.
The Board of Directors has proposed that the General Meeting:
Bedrijfsrevisoren / Reviseurs d'Entreprises Berkenlaan 8b B-1831 Diegem
Tel.: +32 2 800 20 00 Fax: +32 2 800 20 01 http://www.deloitte.be
As required by law, we report to you in the context of our appointment as the company's statutory auditor. This report includes our report on the consolidated financial statements together with our report on other legal and regulatory requirements. These consolidated financial statements comprise the consolidated balance sheet as at 31 December 2014, the consolidated income statement, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, as well as the summary of significant accounting policies and other explanatory notes.
We have audited the consolidated financial statements of NV Bekaert SA ("the company") and its subsidiaries (jointly "the group"), prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union and with the legal and regulatory requirements applicable in Belgium. The consolidated balance sheet shows total assets of 3.957.715 (000) EUR and the consolidated income statement shows a consolidated profit (group share) for the year then ended of 87.176 (000) EUR.
The board of directors is responsible for the preparation and fair presentation of consolidated financial statements in accordance with International Financial Reporting Standards as adopted by the European Union and with the legal and regulatory requirements applicable in Belgium, and for such internal control as the board of directors determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing (ISA). Those standards require that we comply withethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the statutory auditor's judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the statutory auditor considers internal control relevant to the group's preparation and fair presentation of consolidated financial statements in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the group's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the board of directors, as well as evaluating the overall presentation of the consolidated financial statements. We have obtained from the group's officials and the board of directors the explanations and information necessary for performing our audit.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
In our opinion, the consolidated financial statements of NV Bekaert SA give a true and fair view of the group's net equity and financial position as of 31 December 2014, and of its results and its cash flows for the year then ended, in accordance with International Financial Reporting Standards as adopted by the European Union and with the legal and regulatory requirements applicable in Belgium.
The board of directors is responsible for the preparation and the content of the directors' report on the consolidated financial statements.
As part of our mandate and in accordance with the Belgian standard complementary to the International Standards on Auditing applicable in Belgium, our responsibility is to verify, in all material respects, compliance with certain legal and regulatory requirements. On this basis, we make the following additional statement, which does not modify the scope of our opinion on the consolidated financial statements:
• The directors' report on the consolidated financial statements includes the information required by law, is consistent with the consolidated financial statements and is free from material inconsistencies with the information that we became aware of during the performance of our mandate.
Diegem, 25 March 2015
DELOITTE Bedrijfsrevisoren / Reviseurs d'Entreprises BV o.v.v.e. CVBA / SC s.f.d. SCRL Represented by
Joël Brehmen
| Chief Executive Officer |
|---|
| Chief Financial Officer & Executive Vice President Latin America Region |
| Executive Vice President Rubber Reinforcement Platform |
| Executive Vice President North Asia and South East Asia Regions |
| Chief Technology & Engineering Officer |
| Executive Vice President Industrial and Specialty Products Platform |
| Executive Vice President Europe, North America & South Asia Regions |
| Chief Human Resources Officer |
| Senior Vice President Bekaert South East Asia | |
|---|---|
| Senior Vice President Rubber Reinforcement ERMEA | |
| Senior Vice President Group Business Development | |
| Senior Vice President Technology, Rubber Reinforcement Platform | |
| Senior Vice President Bekaert Stainless Technologies | |
| Chief Purchasing Officer | |
| Senior Vice President Rubber Reinforcement North Asia | |
| Senior Vice President Bekaert Brazil | |
| Senior Vice President - President Rubber Reinforcement North America & President of Bekaert Corporation |
|
| Senior Vice President Latin America | |
| Chief Marketing Officer | |
| Senior Vice President Special Steel Wire | |
| Senior Vice President Manufacturing Excellence | |
| Senior Advisor to the CEO | |
| Senior Vice President Global Ropes Platform | |
Isabelle Vander Vekens
Deloitte Bedrijfsrevisoren
T +32 56 23 05 71 [email protected] F +32 56 23 05 48 [email protected] [email protected]
Katelijn Bohez www.bekaert.com
The annual report for the 2014 financial year is available in English and Dutch on annualreport.bekaert.com
Editor & Coordination: Katelijn Bohez, Chief Communications & Investor Relations Officer
| Added value | Operating result (EBIT) + remuneration, social security and pension charges + depreciation, amortization, impairment of assets and negative goodwill. |
|
|---|---|---|
| Associates | Companies in which Bekaert has a significant influence, generally reflected by an interest of at least 20%. Associates are accounted for using the equity method. |
|
| Book value per share | Equity attributable to the Group divided by number of shares outstanding at balance sheet date. |
|
| Capital employed (CE) | Working capital + net intangible assets + net goodwill + net property, plant and equipment. The average CE is weighted by the number of periods that an entity has contributed to the consolidated result. |
|
| Capital ratio | Equity relative to total assets. | |
| Combined figures | Sum of consolidated companies + 100% of joint ventures and associated companies after elimination of intercompany transactions (if any). Examples: sales, capital expenditure, number of employees. |
|
| Dividend yield | Gross dividend as a percentage of the share price on 31 December. | |
| EBIT | Operating result (earnings before interest and taxation). | |
| EBIT interest coverage | Operating result divided by net interest expense. | |
| EBITDA | Operating result (EBIT) + depreciation, amortization, impairment of assets and negative goodwill. |
|
| Equity method | Method of accounting whereby an investment (in a joint venture or an associate) is initially recognized at cost and subsequently adjusted for any changes in the investor's share of the joint venture's or associate's net assets (i.e. equity). The income statement reflects the investor's share in the net result of the investee. |
|
| Gearing | Net debt relative to equity. | |
| Joint ventures | Companies under joint control in which Bekaert generally has an interest of approximately 50%. Joint ventures are accounted for using the equity method. |
|
| Net capitalization | Net debt + equity. | |
| Net debt | Interest-bearing debt net of current loans, non-current financial receivables and cash guarantees, short-term deposits, cash and cash equivalents. For the purpose of debt calculation only, interest bearing debt is remeasured to reflect the effect of any cross-currency interest-rate swaps (or similar instruments), which convert this debt to the entity's functional currency. |
|
| Non-recurring items | Operating income and expenses that are related to restructuring programs, impairment losses, business combinations, business disposals, environmental provisions or other events and transactions that have a one-time effect. |
|
| REBIT | EBIT before non-recurring items. | |
| Return on capital employed (ROCE) |
Operating result (EBIT) relative to average capital employed. | |
| Return on equity (ROE) | Result for the period relative to average equity. | |
| Subsidiaries | Companies in which Bekaert exercises control and generally has an interest of more than 50%. |
|
| Working capital (operating) | Inventories + trade receivables + bills of exchange received + advanced paid - trade payables - advances received - remuneration and social security payables - employment-related taxes. |
The undersigned persons state that, to the best of their knowledge:
On behalf of the Board of Directors:
Matthew Taylor Bert De Graeve Chief Executive Officer Chairman of the Board of Directors
This report may contain forward-looking statements. Such statements reflect the current views of management regarding future events, and involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Bekaert is providing the information in this report as of this date and does not undertake any obligation to update any forwardlooking statements contained in this report in light of new information, future events or otherwise. Bekaert disclaims any liability for statements made or published by third parties and does not undertake any obligation to correct inaccurate data, information, conclusions or opinions published by third parties in relation to this or any other report or press release issued by Bekaert.
| First quarter trading update 2015 | 13 May 2015 |
|---|---|
| General meeting of shareholders | 13 May 2015 |
| Dividend ex-date | 15 May 2015 |
| Dividend payable | 19 May 2015 |
| 2015 half year results | 31 July 2015 |
| Third quarter trading update 2015 | 13 November 2015 |
| 2015 results | 26 February 2016 |
| 2015 annual report available on the Net | 25 March 2016 |
| First quarter trading update 2016 | 11 May 2016 |
| General meeting of shareholders | 11 May 2016 |
| Dividend ex-date | 12 May 2016 |
| Dividend payable | 16 May 2016 |
| 2016 half year results | 29 July 2016 |
| Third quarter trading update 2016 | 18 November 2016 |
www.bekaert.com
Shareholders' Guide 2014: investor's data center on bekaert.com
NV Bekaert SA President Kennedypark 18 BE-8500 Kortrijk België T +32 56 23 05 11 F +32 56 23 05 43 [email protected] www.bekaert.com
© Bekaert 2015
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