Annual Report • Mar 24, 2017
Annual Report
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2016 was a year of continued transformation towards higher performance at Bekaert. We achieved good organic volume growth and lifted our profit margins significantly. Our underlying EBIT increased by 32% to € 305 million, with a margin of more than 8%. This solid performance resulted in strong cash generation with an underlying EBITDA of more than half a billion euro.
We are very pleased with these results. We delivered double-digit growth rates in gross and operating profit, ROCE, share price and proposed dividend; and we keep moving forward along our transformation journey towards achieving the true potential of Bekaert.
Pursuing our Vision – to become the preferred supplier for our steel wire products and solutions, by continuously delivering superior value to our customers around the world – we have taken actions in 2016 that have made us stronger as a company.
The worldwide participation of our employees in these programs has added to the collective strength of our company. Together, we are shaping a growth and performance culture which is characterized by strong employee enthusiasm, engagement, and empowerment.
As a result we now leverage our scale and capability in a better way; our margins are improving; we have returned into a value creating position; and we are growing our leading position in target markets all over the world, both through organic and acquisitive growth. In 2016 we concluded the largest merger deal in the history of Bekaert and in the ropes market overall. The Bridon-Bekaert Ropes Group started business at the end of June and we are convinced that the combination of capability and scale will create value over time.
The results of 2016 are a reflection of what we are capable of and have made us more confident and more ambitious about our future. We believe we will repeat in 2017 our current strong performance and we want to build from what we have been achieving. While there will be cycles, and provided there will be no exceptional, unforeseeable circumstances, the improvements we are making within our business will move our underlying EBIT margin trend towards 10% over the next 5 years.
Based upon the financial performance of 2016 and the confidence in the set direction, the Board has decided to propose, to the General meeting of Shareholders in May of 2017, a gross dividend of € 1.10 per share, up 22% from last year. With the dividend increase, 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, energy and irrepressible drive to always improve our capability, as One Bekaert team.
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 currently has fifteen members. Their professional profiles cover different areas of expertise, such as law, business, industrial operations, banking & investment banking, marketing & sales, HR and consultancy.
Directors significantly changed: Emilie van de Walle de Ghelcke, Christophe Jacobs van Merlen and Henri Jean Velge became Director and Celia Baxter, Pamela Knapp and Martina Merz became independent Director. These appointments have added complementarity, independence, competence and diversity of professional experience on the Board.
Mr. Bert De Graeve, Chairman Mr. Matthew Taylor, CEO
(1) Independent Directors
Barbara Judge, François de Visscher, Bernard van de Walle de Ghelcke, Baudouin Velge, and Manfred Wennemer were not eligible for or did not seek re-election to the Board. Their term of office ended at the General Meeting of Shareholders of 11 May 2016.
The Bekaert Group Executive assumes the operational responsibility for the company's activities and acts under the supervision of the Board of Directors. The executive management team is chaired by Matthew Taylor, Chief Executive Officer.
On 29 June 2016 the Bridon Bekaert Ropes Group - a merger between Bekaert and Ontario Teachers', the previous owner of Bridon – began business. Bruno Humblet, former Chief Financial Officer and Executive Vice President Bekaert Latin America, was appointed Chief Executive Officer of the Bridon Bekaert Ropes Group. Bruno Humblet has stepped down as a member of the Bekaert Group Executive.
On 1 july 2016 Ms. Beatríz García-Cos Muntañola joined Bekaert as Chief Financial Officer. She has become a member of the Bekaert Group Executive and a member of the Board of Directors of Bridon-Bekaert Ropes Group.
Beatríz García-Cos Muntañola, Spanish national, has obtained a Master degree in Economics and Business Administration from the University of Barcelona in Spain. She started her career as auditor with Audigest SA in Barcelona and worked 13 years at PPG Industries Inc in Rubi, Spain, as Accounting, Tax and Finance Manager before she moved to Vestas Wind Systems in 2006 where she was Finance Director for EMEA and Latin America. Beatríz García-Cos was appointed Chief Financial Officer of the Mining business of Trafigura Pte Ltd in 2012.
Stijn Vanneste has been promoted to Executive Vice President Europe, South Asia and South East Asia and became a member of the Bekaert Group Executive in of April 2016. Stijn Vanneste joined Bekaert in 1995 and has taken up several international management positions in the Group before his most recent position as Senior Vice President Manufacturing Excellence.
The Bekaert Group Executive consists of 9 members and is composed as follows:
From left to right - 1st row: Matthew Taylor. 2nd row: Beatríz García-Cos Muntañola, Lieven Larmuseau, Curd Vandekerckhove, Geert Van Haver. 3rd row: Stijn Vanneste, Piet Van Riet, Frank Vromant, Bart Wille.
After having served Bekaert over the past 8 years, Bart Wille, Chief Human Resources Officer, has decided to leave the company to pursue new opportunities in his career. The nomination of his successor will be announced in due course.
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 almost 30 000 employees worldwide, headquarters in Belgium and € 4.4 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...
We seek to be the best in understanding the applications for which our customers use steel wire. Knowing how our steel wire products function within our customers' production processes and products, helps us to develop and deliver the solutions that best meet their requirements and – through that – we create value for our customers.
Transforming steel wire and applying unique coating technologies form our core business. Depending on our customers' requirements, we draw wire 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 within Bekaert and 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 the trust, integrity and irrepressibility that bring our employees worldwide together as one team, form the fundamentals of 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 vision and core strategies form the foundation of a transformation of our business towards higher level performance. They drive our focus over the coming years and have also been the basis of our priorities and actions in 2016. Five Must Win Battles have been launched to give our core strategies a much more immediate focus, with dedicated resources and close progress monitoring. This approach has been very successful in the past two years. Must Win Battles receive a special level of attention from throughout the entire organization, we prioritize resources and focus on them, and they feature heavily in individual and team objectives, which is key to their success.
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.
With this Vision statement, Bekaert has explicitly determined its 'field of play': it describes what we want to be, where we want to compete and invest in, and how we want to differentiate ourselves.
Our five core strategies form the basis of Bekaert's priorities and decision making process towards driving value and growth. These strategies put the company's vision into practice and reflect the direction and priorities:
Bekaert has always believed in customer collaboration and co-creation as drivers of sustainable partnerships and customer satisfaction. But we want to do better and become a truly customer-centric organization. This strategy is about gaining insights into what value means to our customers and acting upon it. It is about continuously prioritizing our customers in whatever we do, at all levels and wherever in the world.
The pilot programs launched in 2016 attest to the value creation capability of the program and its promising potential. In 2017, BCE will start evolving from a program into a new way-ofworking that takes commercial excellence to the next level.
Among others, BCE is driving changes in customer service models, so we can address customers' needs more effectively through better account planning tools. The pilot programs also enabled us to bring new product and service offerings to the market faster and through the right channels.
The European Customer week gave customers a face in our operations, so Bekaert employees understand better who they provide excellence to.
On 12 October 2016, Bert De Graeve, Chairman of Bekaert, and Mr Masaaki Tsuya, CEO and Chairman of Bridgestone Corporation, signed a long-term development partnership agreement. This agreement allows Bekaert and Bridgestone to continue to jointly develop product and process innovations to enable the design of new, high performing sustainable tires. The development partnership entails concrete research opportunities for Bekaert's technologists and illustrates the innovation power of our company, as a trusted partner of the largest innovator in the tire industry. The contract was signed in Tokyo during an official State visit to Japan by their Majesties the King and the Queen of the Belgians.
In implementing this strategy, Bekaert is making a clear prioritization of where we want to grow and how we can provide superior value to differentiate ourselves from the competition. In 2016 we have successfully boosted value creation in the product mix by launching more advanced products which lower the total cost in the value chain. This strategy envisages both organic and acquisitive growth. Moreover, it also drives divestment decisions for activities that do not have the potential to create value over time.
Our third core strategy is about accelerating Bekaert's technology leadership and speed in alignment with our strategy to drive value creating growth. Co-creation is one of the leading principles: we help our customers differentiate themselves in their markets. Our process and product development projects enable fast progress and effective results in all collaboration programs. Find out more in the Technology and Innovation chapter of the Annual Report.
This core strategy is designed to leverage our scale to greater effect, by reducing complexity and focusing on our opportunities and strengths with more standardization at best-in-class levels. We also want to ensure that in the process of providing the best valuecreating solutions to our customers, we organize ourselves in a very cost-effective way and provide a total cost reduction through effective process and product innovations.
People engagement and empowerment have been key success factors all along our transformation journey. We empower our teams with responsibility, authority and accountability and count on the engagement of every Bekaert employee in driving a higher-level performance.
The Bekaert annual target framework, which sets the objectives, goals, strategies and measures for the company and for every individual employee now clearly deploys the five core strategies into every employee's priorities for the year. As a result, the company's core strategies are translated into concrete actions and development measures for all Bekaert colleagues.
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, and in machines and offshore. If it drives, ascends, hoists, filters, reinforces, fences or fastens, there is a good chance Bekaert is inside.
| Combined sales: | € 1 148 million |
|---|---|
| Capital expenditures (PP&E): | € 52 million |
| Total assets: | € 881 million |
| Employees: | 7 297 |
Europe has seen a stable economic performance in 2016. While the overall GDP growth was about the same in comparison with 2015 – slightly below 2% - the increased economic, financial and political uncertainties did show in the significant discrepancies between countries.
Many countries saw a stabilization or deceleration of their GDP growth in 2016 from 2015's already weak reading. While the impact on economy from terrorist attacks, refugee migration, or political instability has not been proven, these developments have led to increased uncertainty, which dented growth in Turkey, Italy, Greece, France, and other countries in the region.
Eastern European countries generally achieved solid growth rates. Romania and Slovakia for instance, delivered 5% and 3.5% GDP growth respectively. In Russia, recession continued in 2016, although the pace of GDP decline has slowed down to less than -1%.
Amidst the various political and economic headwinds, the European automotive and construction markets sectors which are crucial for Europe's prosperity and highly relevant for Bekaert's activities - witnessed continued strong demand in 2016. Energy-related markets, however, were heavily affected by the downturn in the oil and gas sector.
Bekaert has a presence in both the Western and the Central & Eastern European markets. In Europe, we offer a quality portfolio of advanced steel wire products for sectors that are in search of innovative, high-end products and solutions.
Demand from European markets remained solid throughout 2016. This applied to automotive and construction markets in particular, while demand for profiled wires declined as a result of investment delays and cancellations in the oil and gas sector.
Bekaert's activities in EMEA delivered excellent results with record EBIT, EBITDA and ROCE performance. The strengthened business portfolio after recent acquisitions, divestments and business exits and the increased benefits from various transformation programs drove EMEA's solid, double-digit profit base to a record full-year underlying EBIT margin of 12.2% and € 141 million in absolute numbers, up 10% from last year.
Capital expenditure (PP&E) was € 52 million and included capacity expansions and equipment upgrades in all plants, particularly in Slovakia, Romania and Belgium.
The global transformational programs supporting Bekaert's vision and strategies are gaining impact in implementation scope and speed. Also in Europe:
Bekaert's global manufacturing excellence program aims to gain competitiveness by optimizing our safety, quality, delivery performance and productivity. In Europe, the program has been implemented in Zwevegem (Belgium), Hlohovec (Slovakia), Petrovice and Bohumín (Czechia), Izmit and Kartepe (Turkey) and Ubisa (Spain). It will be rolled out across the region in 2017 and the coming years.
Bekaert celebrated 15 years of manufacturing presence in Slovakia. Almost 4000 people participated in the celebration which took place at the Trnava City Arena. Bekaert is an important employer in Slovakia and wanted to celebrate the anniversary with all employees and their families.
Bekaert Combustion Technologies in Assen (Netherlands) and Bekaert Advanced Cords Aalter (Belgium) – now part of Bridon-Bekaert Ropes Group – both celebrated their 50th anniversary in 2016.
In June 2016, Matthew Taylor, CEO, several members of the Bekaert Group Executive and of the EMEA regional management, and the Bekaert Investor Relations team hosted the financial analysts who cover Bekaert in their research at a capital market event in Romania.
The program included a full business update, information on the Bekaert manufacturing excellence program, a status update on the establishment of Bridon-Bekaert Ropes group, and a presentation on tire market developments by a guest speaker of Continental AG. On the second day of the event, all participants traveled to Slatina to visit the Bekaert tire cord plant and the neighboring Pirelli tire plant.
The purpose of a capital market event is to help analysts understand Bekaert's strategy, markets, and performance – so they gain a more in-depth view of the business dynamics which should help them in their analyses and guidance.
In April 2016, Chairman Bert De Graeve and Mayor Marc Doutreluingne laid the first stone of Bekaert's new Headquarters. The ceremony took place on the construction site in Zwevegem. The new building will house 175 employees who are now located in 4 different office blocks in Zwevegem and Kortrijk. The adjacent neogotic building is being renovated. We project a finalization of the construction works by mid 2017 .
| Combined sales: | € 512 million |
|---|---|
| Capital expenditures (PP&E): | € 21 million |
| Total assets: | € 300 million |
| Employees: | 1 344 |
GDP growth of the US slowed in 2016, primarily due to lower investments stemming from low oil prices and to the declining competitiveness of US exports as a result of the strengthened US dollar.
Despite facing challenges at the domestic level along with a rapidly transforming global landscape, the US economy is still the largest in the world and an important player in industries such as automobiles, aerospace, machinery, telecommunications and chemicals.
Automotive markets performed well throughout the year and are projected to remain strong on the wave of growing demand for products 'made in America' – a development which is driving investments in domestic production capacity, among which in the automotive and energy-related sectors.
Bekaert's activities in North America recorded strong organic volume growth driven by the volume increase from the plant reconstruction in Rome, Georgia (US).
Underlying EBIT was almost doubled compared with last year as a result of better capacity utilization driven by higher volumes and the effects from actions put in place to raise our competitiveness in target markets. Profit margins have not yet reached the desired levels but the effects of the implemented measures are clearly visible. Cash generation (underlying EBITDA) was 60% better than in the previous year and ROCE rose to almost 12%.
Capital expenditure (PP&E) amounted to € 21 million and related mainly to investments in tire cord activities.
Over the past decade, the market, the customers, legislation and the competitors have changed significantly in the North American region. These changes made our business model less competitive than it had been in the past. Profitability declined to unacceptable levels and the Bekaert North American team started a program in 2016 to reverse this situation. Their ambition is to build the future for Bekaert in North America. Their approach is a synopsis of all other global 'must win battles' implemented in Bekaert. The team has a focused and ambitious growth agenda and is building a world-class organization underpinned by manufacturing excellence, customer excellence, partnering excellence, and a strong passion to win. The first successes of this approach are visible in the results of 2016, which gave a big boost to the team in continuing their challenging journey.
The Bekaert plant in Rogers (Arkansas) is implementing a major expansion plan to meet the projected growing demand from the tire manufacturers based in the US, driven by their expansion investments and preference to source domestically produced tire cord. In order to accommodate for the projected growth, Bekaert has decided to add an additional 50% tire cord production capacity to the Rogers plant. The expansion will be gradually implemented and will add over 100 new jobs.
In September 2016 Bekaert Orrville (Ohio) held a ground breaking ceremony for their expansion investment which aims for improved safety, reduction of waste, enhanced service and quality, and energy efficiencies.
BMS, the Bekaert Manufacturing System, has been rolled out in Van Buren (Arkansas), Orrville (Ohio) and Rome (Georgia) and will be implemented in the other North American plants in the near future. BCE, the Bekaert Customer Excellence program, is being implemented in regional as well as global business cells. Also the implementations of the newly launched Supply Chain Excellence program and of BeCare, the Safety Excellence program, include pilot implementations in the US.
| Combined sales: | € 1 320 million |
|---|---|
| Consolidated sales: | € 682 million |
| Capital expenditures (PP&E): | (*) € 14 million |
| Total assets: | (*) € 464 million |
| Employees: | 7 144 |
(*) consolidated entities
After five years of deceleration, economic growth in Latin America turned negative in 2016. Prolonged recessions in Brazil and Venezuela and weakened economies in Ecuador and Argentina largely explain the aggregate performance in the region. While these four countries contracted in 2016, the region suffered a generalized slowdown – not only due to its exposure to external shocks, such as the low oil and commodity prices and heightened exchange rate volatility, but also due to some structural weaknesses, which undermined the region's growth potential.
Venezuela's economic depression continues to drag on the region's growth. Political instability, lower oil output and prices, the total collapse of the bolivar, and a shortage of foreign currency are causing a variety of difficulties with little sign of an immediate upturn.
Peru, Colombia and Chile had stable or contracting GDP numbers at already low levels. While prices for copper and other commodities have surged in the last quarter of 2016, the full year averages were low and continued to affect the mining and public infrastructure markets across Latin America.
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.
Bekaert's activities in Latin America go back to 1950. Today, they represent 30% of combined sales.
Bekaert's consolidated sales in Latin America were down 4% as a result of negative currency effects and the volume losses in Venezuela caused by shutdown periods in the plants which fell short of raw materials.
Bekaert's activities outperformed the market in most countries.
EBIT and ROCE increased by about 50% and the EBITDA margin of 13% drove strong cash generation. These excellent figures were the result of:
Bekaert invested € 14 million in property, plant and equipment across the region, particularly in Ecuador and Chile.
Bekaert's combined sales declined slightly (-1%) as a result of the average currency impact of the Brazilian real, despite its steep climb in the second half of 2016. The results of our joint ventures in Brazil outperformed the weak economic conditions in the country and their contribution to Bekaert's net result was equal to 2015.
Bekaert's subsidiaries in Latin America are on the implementation radar of the global excellence programs that aim to drive value creation across all regions and platforms. The Bekaert manufacturing excellence program (Bekaert Manufacturing System or BMS) is in implemention in Ecuador, Peru, Chile and Brazil. The Bekaert Customer Excellence program (BCE) is being rolled out with specific attention for the particularities of the local markets and distribution models. Vicson of Venezuela is leading the pilot implementation of the global safety program BeCare in the region.
The success of BMS has not gone unnoticed to our partners and joint ventures. Bekaert's joint ventures with ArcelorMittal in Brazil have kicked off BBMS (Belgo-Bekaert Manufacturing System) to enable similar benefits in the plants within the partnership.
We are in discussions of bringing Bekaert's wholly-owned subsidiary in Sumaré (Brazil), a high-margin tire cord subsidiary acquired from Pirelli, into the BMB (Belgo-Mineira Bekaert) joint venture partnership with ArcelorMittal. Bekaert holds 44.5% of the shares in the joint venture and would – upon reaching an agreement and receiving regulatory approvals – no longer report the results of the Sumaré plant in its consolidated statements.
Ecuador was struck with a devastating earthquake in April 2016. It killed hundreds of people and affected about a quarter-million in total who faced the loss or material damage to their homes or work place.
The destruction in the region was so extensive due to the poor quality of buildings which could not withstand the power of this earthquake.
In Ecuador, there is a lot of informal building, including constructions without permits. People would for instance add on floors to a rather weak construction base.
In order to address this market segment with construction guidance and qualitative materials, IdealAlambrec-Bekaert developed more than 5 years ago a detailed 'Construction Manual' with architectural plans and detailed guidance for 15 standard social houses.
All specifications meet the strict earthquake resistance standards. IdealAlambrec-Bekaert also produces a wide range of the steel wire reinforcement products needed and has a broad network of customers and distributors offering the other construction materials.
The Ecuadorian Government decided to reconstruct social houses with tougher buildings codes and earthquake-resistant enforcement. They invited potential partners to help provide the materials and the technical guidance. IdealAlambrec-Bekaert was the only company who could provide an immediate solution with the readily available construction manual, the construction kits, the training services and a broad network of on-site technical help. Some 15 000 kits were supplied in 2016 for an equal number of houses and for 150 additional houses IdealAlambrec-Bekaert acted as the contractor.
The business opportunity was not the only focus. Bekaert donated 10 houses to heavily affected families. Read more in our Sustainability Chapter.
| Combined sales: | € 1 052 million |
|---|---|
| Capital expenditures (PP&E): | € 59 million |
| Total assets: | € 1 115 million |
| Employees: | 10 563 |
China's economic growth rate slightly decelerated from 2015 but fell within the government's target of between 6.5 and 7% and outpaced most other major economies. Other regional players such as India and Indonesia expanded their GDP rates on the wave of global growth and increased domestic demand.
Strong automotive markets boosted the growth across the region. Demand from solar markets was strong in the first half of the year, but contracted significantly in the third quarter due to changes in feed-in tariffs in China since July 2016.
India's economic reform resulted in an impressive 7.5% GDP-rate, despite of the demonetization program which temporarily shocked the economy at the end of 2016. Domestic industrial production output was strong throughout the year.
Bekaert is present in Asia with manufacturing and development centers in China, India, Indonesia, Malaysia and Japan.
Bekaert delivered 8.5% organic volume growth in Asia Pacific, compared with 2015. Our activities achieved strong margin growth across the region: underlying EBIT increased by 72% to € 119 million, reflecting a margin of 11.3%. Underlying EBITDA was € 222 million, 25% higher than last year and representing a margin of 21%. ROCE almost doubled to more than 12%.
This robust performance across the whole region was the result of high capacity utilization, M&A activity, an immediate return from capital investments, and significant benefits from various transformation programs. The growing share of high value-adding products in our sales portfolio and the effects of the divested low margin activities, added to the robust profit numbers.
The successful pilot of Bekaert's customer excellence program in China led to a better prioritization of the capacity available to serve growth accounts with a higher value adding product portfolio. Bekaert's operations in Indonesia and India performed strongly throughout the year. We have implemented actions to turn around the low performance of the Malaysian activities. At the same time, we are adding tire cord capacity across Asia to meet increased demand from automotive markets.
Bekaert invested significantly across the region and recorded a total of € 59 million investments in PP&E in 2016, including expansion investments in tire cord activities in China, India and Indonesia.
The Bekaert Manufacturing System (BMS) has been successfully implemented in Karawang (Indonesia) and in various manufacturing plants in China: Weihai, Jiangyin, Shenyang and Qingdao. The program continues and will be rolled out in the other Asian plants in the near future.
Transforming also includes restructuring measures for activities without profitable growth potential: we started to phase out the Shah Alam plant in Malaysia and moved certain product lines to the Ipoh facility, also in Malaysia.
We also decided to close the small tire cord plant in Huizhou, Guandong province (China). Investment restrictions in Huizhou had put a burden on the plant's potential to grow scale and improve cost effectiveness to the level of our other operations. Therefore the decision was taken to stop operations there, and invest in other existing locations in the country.
In March 2016, PT Bekaert Indonesia (PTBI), Bekaert's manufacturing plant in Indonesia, celebrated the inauguration of its Garuda 5 expansion program and the plant's 20th anniversary. The ceremony took place in the presence of HRH Princess Astrid of Belgium, who was presiding over the Belgian Economic Mission to Indonesia, and Bert De Graeve, Chairman of the Board of Directors of Bekaert. The celebration was attended by Belgian and Indonesian governmental, diplomatic and business association representatives, and by customers and other business partners of Bekaert in Indonesia.
Bekaert and Bridgestone signed a long-term development partnership agreement by which both parties will continue to jointly develop product and process innovations to enable the design of new, high performing sustainable tires. The development partnership entails concrete research opportunities for Bekaert's technologists and illustrates the innovation power of our company, as a trusted partner of the largest innovator in the tire industry. The contract was signed in Tokyo during an official ceremony organized at the occasion of the State Visit to Japan of their Majesties the King and the Queen of the Belgians.
Bekaert was awarded Bridgestone's first 'Development Contribution Award'. This award praises the development partner who has achieved major technical developments that create value for Bridgestone's product portfolio.
| Capital expenditures (PP&E): | € 14 million |
|---|---|
| Total assets: | € 613 million |
| Employees: | 2 514 |
Most ropes markets continued to be depressed in 2016. This applied to the oil & gas sector and to mining markets, although the latter started to show signs of demand pick-up at the end of 2016, supported by increased commodity prices.
Other markets relevant for the ropes business are – amongst others – the equipment sector (crane and hoisting), forestry and fishing, and construction markets.
Bekaert achieved 34% sales growth in the ropes and advanced cords segment as a result of the integration of the Bridon activities in the Bridon-Bekaert Ropes Group. Depressed market conditions in the oil & gas sector affected the sales volumes and the overall capacity utilization in most ropes plants. Ropes volumes picked up modestly in the fourth quarter and the advanced cords business performed well throughout the year.
The management of BBRG is implementing actions to strengthen its market position and gradually leverage the benefits of its increased scale through improvements in the manufacturing footprint and the global business portfolio.
This includes the closure of the Bridon-Bekaert ScanRope AS manufacturing plant in Tønsberg (Norway) and the realignment measures at the Belton facility in Texas (US).
Bekaert and Ontario Teachers', the previous owner of Bridon, successfully closed the definitive merger of their ropes and advanced cords businesses on 28 June 2016 and established a joint venture in which Bekaert holds 67% and Ontario Teachers' 33%. Bridon-Bekaert Ropes Group combines the ropes and advanced cords capabilities of approximately 2 500 employees, 18 manufacturing entities across 10 countries, marketfocused R&D, and a global sales and services network. The combination of the businesses will leverage the scale and complementary strengths of Bekaert and Bridon and will pursue value creation for customers and for the new group.
Despite the prevailing difficult market and business conditions for ropes, the Board of Directors and the Management team of BBRG strongly believe in the future potential of the merged business. BBRG is taking actions to leverage its competencies and scale, improve the profitability of the business, and serve its customers around the world with unmatched quality and service.
The success of the Bekaert Manufacturing System (BMS) has not gone unnoticed to the ropes business. Therefore BBRG will kick off BBMS (Bridon-Bekaert Manufacturing System) in early 2017 to enable similar benefits in the plants within the business.
Technology leadership and speed is a core strategy of Bekaert. 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 co-create with customers and suppliers around the globe to develop, implement, upgrade and protect both current and future technologies. We listen to our customers so we understand their innovation and processing needs. Knowing how our products function within their production processes 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. Through the combination of these competencies, we influence the properties of steel such as strength, ductility, fatigue, shape, adhesion, and corrosion resistance.
Even after more than 135 years of expertise, there is still much to be discovered in our search for the optimal bulk and surface properties of steel wire. By maximizing the synergies between the competencies of our technologists and those of our research and business partners, we can make a real difference and draw infinite possibilities.
Two of the most enduring wire and rope pioneers joined forces in 2016 to become the world's premier ropes and advanced cords supplier: Bridon-Bekaert, the Ropes Group. The Group's technology center invests in expertise, unique testing equipment and forensic laboratories to fast-track the development of innovative new technologies.
We continuously strive to renew our product portfolio with innovative products and solutions that add value to our customers by enhancing the quality performance or ease of installation; and by lowering the total cost and/or the environmental impact of our customers' products and production processes.
Some examples:
In 2016 Bekaert successfully launched Murfor® Compact, a new type of high-performance masonry reinforcement. It's a sturdy mesh of high tensile strength steel cords, supplied on a roll for thin joint masonry and glued brickwork. The strong structure of the reinforcement controls cracks and strengthens masonry. This lightweight product is easy to handle and install. Long lengths also speed up the installation and improve efficiency. Moreover, Murfor® Compact has environmental benefits too: as the reinforcement can be cut to size, there is very little material loss.
Murfor® Compact was used as masonry reinforcement for the new Bekaert headquarters in Zwevegem (Belgium).
Also for the construction market, Bekaert developed Fortifix®, an interlayer steel cord structure for non-structural road renovations. Fortifix® enables a quick and correct installation. The interlayer can be easily rolled out, either by hand or machine, on both rough and smooth surfaces. This solution not only provides a high service-life, it is also 100% recyclable.
Fortifix® benefits the sustainability of road repair projects. The interlayer can be ground with the asphalt and removed by using magnets. As a result, Fortifix® offers savings in both transport and disposal costs. It also results in major environmental benefits, as it reduces the use of energy and resources.
Together with a selected external partner, the potential of the Bekaert solution was further validated in a number of specific guardrail designs, focusing on minimizing the injury severity level during a crash, but also offering a more controlled containment of heavier vehicles like buses and trucks. Based on the promising results of these simulations, certified crash tests have been scheduled in 2017.
Bridon-Bekaert Ropes Group introduced a new range of polymer core ropes and extreme pressure-resistant lubricants NXG (next generation) ropes and Brilube® Extreme for deep water applications. In deep waters, lubricant components may break down due to high pressures, especially when the core of the steel ropes loosens. This all may lead to accelerated corrosion, a shorter rope life, environmental impact and increased operating costs. Bridon-Bekaert Ropes Group developed high pressure resistant low friction polymer grades that give improved support within the rope construction, limit water ingress into the rope core, and act as a medium to carry other property enhancers. This is in conjunction with Brilube® Extreme, a next generation lubricant. This lubricant was developed by Bridon-Bekaert Ropes Group and selected lubricant manufacturers to meet extreme deep water conditions, wider operating temperature range and ever increasing environmental regulations. The Brilube® lubricants are used both in rope manufacture, custom rope assembly and service dressing.
Endo Masato of Bekaert Japan (left) receives the award from Mr Mochizuki (right), Vice President and Officer of Bridgestone.
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.
There is an increasing trend in co-development projects with our strategic customers, suppliers and a network of academic research institutes and universities. We also consider corporate venturing: we scout companies with emerging technologies to potentially partner with. These partnerships can include investments, license agreements or joint development agreements. Our related investments are minority interests in young start-up companies with innovative technologies that could benefit from and add to Bekaert's core competencies. Additionally, we constantly search for new business opportunities.
In 2016, Bekaert evaluated options to develop superconductor wires and decided to invest in a start-up company so we could benefit from complementary strengths and realize progress faster in a true better together spirit.
The partnership aims to develop innovative wire solutions for existing large scale applications, such as superconductor wires for MRI scanners, or upcoming new applications in the energy sector.
Bekaert seeks international partnerships with universities and research institutes. In 2016, we continued to cooperate with academic institutions, technology clusters and research partners from different countries in order to have long and short term access to external expert capacity, to integrate external innovation and accelerate development projects. Cf map below.
Bekaert's in-house engineering department plays a key role in the optimization and standardization of our production processes and machinery. This department designs, manufactures, installs and services the critical equipment for our production plants worldwide.
Newly designed equipment will always combine performance improvements in various areas including product quality, production excellence and flexibility, and cost efficiency. Our main focus areas are machine safety, ergonomics and the environmental impact.
Our engineers and technicians use their broad experience to create the "Bekaert factory of the future", by working on high performing, innovative equipment at a low operational cost, machines that require minimal change-over time, and ensuring maximum automation and robotics. Spool handling logistic pilot projects are running in plants in the US, Slovakia and China. Strong efforts are taken to automate equipment, allowing machine operators to optimally use their expertise on tasks with added value. The new machines are intelligent and human centered, alerting operators on performance and product quality.
Factory automation and manufacturing execution system are enablers to optimize productivity. The interconnection and digitalization show in the increased use of sensors and robotics. 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 Engineering is systematically exploring new techniques such as additive manufacturing (e.g. 3D Printing), micro-EDM (electrical discharge machining) and modeling and simulation technologies. Modeling and simulation technology enables us to shorten the development time of our equipment drastically. Compared to systematic trial and error, it brings us much closer to a 'first time right' design and execution.
To us, sustainability is about economic success, the safety and development of employees, environmental stewardship, and social progress. This way, Bekaert translates sustainability into a benefit for all our stakeholders.
Bekaert's global sustainability strategy is centered on four main pillars: our responsibility in the workplace, in the marketplace, towards the environment and towards society. Our sustainability efforts and activities are therefore focused in such a way that balanced consideration is given to the interests of all respective stakeholders, including employees, customers, shareholders, partners, local governments and the communities in which we are active.
Bekaert's Sustainability Report 2016 was conducted according to the GRI G4 Guidelines of the GRI Sustainability Reporting Framework. The certification approval of the 2016 report was still pending on 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 2016 has also 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 2016, Bekaert was awarded a silver recognition level from Ecovadis, an independent sustainability rating agency whose methodology is built on international CSR standards. This places Bekaert among the top 30% of performers evaluated by Ecovadis. In response to growing interest throughout the supply chain to report on the carbon footprint of operations and logistics, Bekaert also participates in the Climate Change and Supply Chain questionnaires of the Carbon Disclosure Project (CDP).
The sustainability actions and respective indices and certificates cover the wholly and majority owned subsidiaries of NV Bekaert SA. This includes the subsidiaries of the Bridon-Bekaert Ropes Group, unless otherwise indicated.
We attach great importance to providing challenging career and personal development opportunities to our employees. Training 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.
In order to stimulate high performance, commitment, and continuous development of all employees, the 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. In 2016, we have further improved the performance management process including two-way personal development reviews, transparency, feedforward and leadership behavior.
(1) BBRG excluded
(2) Ex-Bekaert entities within BBRG included. Ex-Bridon entities are in the process of implementing similar reporting data by 2017.
In 2016 Bekaert started the implementation of a new global safety excellence program, BeCare. We want a no-harm, risk-free work environment for all our employees and for anyone working at or visiting our premises.
The BeCare program, which is partly integrated within the manufacturing excellence program, has been designed as a roadmap to realize our safety objectives. This roadmap helps us define and implement the safety practices that will benefit all employees, contractors and visitors in all Bekaert locations worldwide.
The program is working on several dimensions, such as safety practices and tools to reduce risk exposure and behavioral safety.
In the course of 2016, the BeCare program has been rolled out in 2 pilot plants. It will be further deployed in all regions in the current and coming years. To facilitate and speed up this further worldwide roll-out, a BeCare Academy has been established that will act as a center of excellence.
Because we attach great importance to a healthy working environment, we continued to invest in automated handling equipment and other workplace ergonomics in 2016. Spool handling logistic pilot projects are running in our plants in the USA, Slovakia and China.
Special attention is also given to of the handling and storage of chemicals. A central database records all chemicals used in our plants and provides strict health and safety guidelines for our employees.
Bekaert has a long tradition of organizing an annual Health & Safety event worldwide. The central theme for the 2016 edition was "No-harm to anyone @Bekaert". Bekaert plants worldwide were encouraged to share their best practices and learn from each other. A set of standard safety tools and techniques were deployed in all plants and we organized safety audits and Gemba walks (observation and feedback tours) in all locations. Moreover, all employees worldwide were invited to watch the video message from the CEO.
Bekaert has a group-wide OHSAS 18001 certificate. In 2016, 66% of all Bekaert employees were covered by this standard. Of the on average 37 hours of training per employee in 2016, 7 hours were safety-related.
(1) BBRG included (Ex-Bekaert entities full year 2016, ex- Bridon entities as of third quarter 2016).
Repeatability Index = Number of lost time accidents (LTA) per million worked hours.
(1) BBRG included (Ex-Bekaert entities full year 2016, ex- Bridon entities as of third quarter 2016).
Severity Index = Number of lost days due to occupational accidents per thousand worked hours. (1) BBRG included (Ex-Bekaert entities full year 2016, ex- Bridon entities as of third quarter 2016).
In 2016 both the repeatability and severity index increased, compared to 2015. The worse overall results are due to higher incident levels in certain plants. The BeCare roll-out schedule takes into account the incident history of the locations so that appropriate actions are taken to improve the safety performance overall.
In 2016 2 plants celebrated more than 6 years without recordable safety incidents. 3 others achieved more than 3 years without recordable safety incidents and 6 plants were more than 1 year incident-free.
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.
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 2015, Bekaert's purchasing department stepped up its engagement to enhance sustainability awareness and control with our suppliers. We reached a global spent coverage of 75% in 2016 (1). We evolved to 80% coverage of our global wire rod spent through key supplier agreements (1). Key supplier agreements are multi-year partnerships in which sustainability, supply chain integration and innovation are explicit building blocks. In 2016, we kick-started the signing of these key supplier agreements in other categories too. Shared targets and action plans for 2017 were further worked out with key suppliers, enabling us all to drive sustainability forward across the supply chain. (1)Excluding BBRG
Bekaert recognizes the importance of responsible sourcing, in 2016 all suppliers covered by the Conflict Free Sourcing Initiative (CFSI) signed the Bekaert Supplier Code of Conduct and completed the most recent template issued by the CFSI. This is an initiative of the Electronic Industry Citizenship Coalition (EICC) and the Global e-Sustainability Initiative (GeSi), that help companies from a range of industries address conflict mineral issues in their supply chain.
We actively cooperate with global customers in sustainability programs. We support their sustainability programs by implementing specific actions in our respective policies and we joined sustainability initiatives and standards to accommodate specific customer requests.
We continuously strive to use fewer materials, cut energy consumption and reduce waste.
Our concern for the environment is applied in 3 domains: our continuous efforts to develop new eco-friendlier production processes for our plants worldwide, prevention and risk management and the development of products that contribute to a cleaner environment.
In the first domain, our ambition is to develop eco-friendlier production processes for our plants worldwide. In 2016:
Secondly, prevention and risk management play an important role in Bekaert's environmental policy.
Lastly, we develop products that contribute to a cleaner environment. Ecology is an aspect that is already considered during 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.
Customized drying and heating systems based on gas and electrical infrared drying technologies that increase efficiency and reduce energy. These systems are used in various sectors and applications such as the paper and board industry or converting and metal processing applications.
Water-based coated low carbon wires as a substitute to solvent lacquered products.
Our funding and other community-building activities are focused on education projects. In addition, we support local activities and projects for social, cultural and economic development.
We believe that education and learning is 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.
Our joint ventures in Brazil have a long tradition of supporting educational projects. In 2016 a science education project was set up to create interest in science and awareness for the environment amongst students. A science exhibition where children could perform 50 experiments in physics, mathematics and biology and an environmental award that promotes ecological awareness are part of the project.
Since the devastating earthquake in the Manabí region of Ecuador in April 2016, the IdealAlambrec-Bekaert plant (Ecuador) supported the education program of 50 technical college students. In the first phase, our technicians gave 50 hours of construction training to 2 local professors, focusing on earthquake resistant construction methods in sensitive areas. In the second phase, the teachers passed on their knowledge with the help of our technicians to 50 students. About 1 200 training hours were given in total.
Bekaert continued the support to the National 4-H Council and became a silver sponsor. 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. In April 2016, 4-H launched its Grow True Leaders campaign to empower youth with the opportunity to share their voice and show how they are making a difference in their communities.
In China, Bekaert has continued building strong relationships with various schools. At Weihai Xiyuan Zhongxin Kindergarten, Bekaert funded a Science Discovery Playroom designed to help children develop their logical thinking. Bekaert has also continued its support of program for the Shanghai Pudong Lianying Primary School. The Lianying School Library Enrichment Project was initiated by volunteers of the Bekaert Management Co. Ltd in Shanghai in 2013. Bekaert has continued to support the project by volunteering and donating books. Bekaert also participates with the school in joint events centered around safety knowledge and learning English.
We support community initiatives that aim to improve societal conditions in the places where we are active.
When the Manabí region in Ecuador was struck with a devastating earthquake in April 2016, the Ideal Alambrec-Bekaert plant was contracted by the Government as the primary business partner in a major housing reconstruction program. The business opportunity wasn't the only focus of our local teams. Bekaert Latin America together with the Ideal Alambrec Bekaert plant in Quito (Ecuador) donated 10 houses to affected families in the area. The donated homes are compliant with the Ecuadorian construction regulations regarding earthquake resistance. Technical supervision was also present throughout the construction process in order to ensure standards were met. Representatives from the Ecuadorian Government assisted in ensuring the houses were provided to people who needed them the most.
Employees from our Ideal Alambrec Bekaert plant also volunteered in collecting relief supplies and donated cash contributions for a total amount of USD 30 000.
In Colombia, Bekaert cooperated with Œuvre Belgo-Colombienne pour l'Enfance (OB-CE), a Belgian organization which is dedicated to supporting children in high risk areas throughout Colombia. In 2016, Proalco-Bekaert donated and installed fences to the Los Llanerito Kindergarten, located in Villavicencio.
In the Thiruvallur district in India we continued our yearly health camp initiative that was launched in 2012 to address the health care needs of the local people.
Consolidated financial statements
Income statement
Balance sheet
Ratios
| Combined key figures | |||
|---|---|---|---|
| in millions of € | 2015 | 2016 | Delta |
| Sales | 4 402 | 4 351 | -1.2% |
| Capital Expenditure (PP&E) | 194 | 170 | -12.4% |
| Personnel as at 31 December | 27 148 | 28 863 | 6.3% |
in millions of € € 2015 2016 Delta
Sales 3 671 3 715 1.2% EBIT 219 260 18.4% EBIT-underlying 231 305 31.7% Interests and other financial results -96 -111 15.3% Income taxes -36 -62 71.1% Group share joint ventures 18 25 38.9% Result for the period 105 112 6.6% attributable to the Group 102 105 3.4% attributable to non-controlling interests 4 7 93.9% EBITDA-underlying 436 513 17.7% Depreciation PP&E 190 192 0.8% Amortization and impairment 31 30 -4.3% Negative goodwill - - -
Equity 1 512 1 598 5.7% Non-current assets 1 922 2 137 11.2% Capital expenditure (PP&E) 171 159 -7.1% Balance sheet total 3 882 4 304 10.9% Net debt 837 1 068 27.6% Capital employed 2 448 2 650 8.2% Working capital 813 843 3.7% Employees as at 31 December 23 777 25 572 7.5%
EBITDA on sales 12.0% 13.0% Underlying EBITDA on sales 11.9% 13.8% EBIT on sales 6.0% 7.0% Underlying EBIT on sales 6.3% 8.2% EBIT interest coverage 4.0 3.9 ROCE 8.7% 10.0% ROE 6.9% 7.2% Financial autonomy 38.9% 37.1% Gearing (Net debt on equity) 55.4% 66.8% Net debt on EBITDA 1.9 2.2
in millions of €
in %
Joint ventures and associates
| in millions of € | 2015 | 2016 | Delta |
|---|---|---|---|
| Sales | 731 | 636 | -13.0% |
| Operating result | 75 | 75 | - |
| Net result | 55 | 64 | 16.4% |
| Capital expenditure (PP&E) | 23 | 12 | -47.8% |
| Depreciation | 17 | 16 | -5.9% |
| Employees as at 31 December | 3 371 | 3 291 | -2.4% |
| Group's share net result | 18 | 25 | 38.9% |
| Group's share equity | 111 | 142 | 27.9% |
| Key figures per share | |||
|---|---|---|---|
| NV Bekaert SA | 2015 | 2016 | Delta |
| Number of shares as at 31 December | 60 125 525 60 347 525 | 0.37% | |
| Market capitalization as at 31 December (in millions of €) | 1 107 | 2 322 | 36.1% |
| in € | 2015 | 2016 | Delta |
|---|---|---|---|
| EPS | 1.82 | 1.87 | 2.7% |
| Gross dividend* | 0.90 | 1.10 | 22.2% |
| Net dividend* | 0.66 | 0.77 | 17.2% |
| in € | 2015 | 2016 | Delta |
|---|---|---|---|
| Price as at 31 December | 28.39 | 38.49 | 35.6% |
| Price (average) | 26.12 | 37.07 | 41.9% |
* The dividend is subject to approval by the General Meeting of Shareholders 2017 ** FTE: Full time equivalent
BBRG
| EMEA | ||
|---|---|---|
| Underlying | 2015 | 2016 |
| EBIT on sales | 10.9% | 12.2% |
| EBITDA on sales ROCE |
15.6% 19.3% |
17.4% 22.1% |
| EMEAEMEA € 1 148 million Combined sales |
27% |
| Underlying | 2015 | 2016 |
|---|---|---|
| EBIT on sales | 2.6% | 5.1% |
| EBITDA on sales | 4.6% | 7.6% |
| ROCE | 7.0% | 11.7% |
| North America € 512 million Combined sales |
12% | |
| Underlying | 2015 | 2016 |
|---|---|---|
| EBIT on sales | 6.5% | 9.8% |
| EBITDA on sales | 9.6% | 13.0% |
| ROCE | 11.1% | 16.6% |
| Latin America € 1 320 million Combined sales |
30% |
| Underlying | 2015 | 2016 |
|---|---|---|
| EBIT on sales EBITDA on sales ROCE |
6.8% 17.5% 6.5% |
11.3% 21.1% 12.2% |
| Asia Pacific € 1 052 million Combined sales |
24% |
| Underlying | 2015 | 2016 |
|---|---|---|
| EBIT on sales | 12.3% | 4.1% |
| EBITDA on sales | 18.2% | 10.8% |
| ROCE | 12.6% | 3.4% |
| Bridon-Bekaert Ropes Group € 319 million Combined sales |
7% |
Joint ventures and associates (in millions of €) Consolidated companies (in millions of €)
Besides IFRS accounts, Bekaert also presents the key underlying business performance parameters of profitability and cash generation, to provide a more consistent and comparable view on the Group's financial performance. These underlying business performance indicators adjust the IFRS figures for the one-off accounting impacts of restructuring costs, provisions for environmental sanitization programs, asset impairments, M&A related fees, and other such non-recurring items that would distort the analysis of the Group's underlying Business performance. 'REBIT' and 'REBITDA' - reflecting the 'recurring' or 'underlying' business performance - are now named (1) EBIT-Underlying and EBITDA-Underlying respectively. EBIT and EBITDA according to IFRS are referred-to as such or as EBIT-reported and EBITDA-reported when specification adds clarity.
(1) Definitions of financial parameters are described in the Financial Review of this Annual Report.
The 2015 comparative information has been restated in line with IAS19 and ESMA guidelines which came into effect in 2016. The restatement elements and effects are summarized in the Financial Review of this Annual Report.
Bekaert's underlying EBIT increased by 32% to € 305 million, reflecting a margin of 8.2%. This was the result of solid volume growth, positive pricing and product-mix and inventory adjustments, and significant cost savings. These margin enhancing effects were partially offset by the integration of the Bridon activities in the Bridon-Bekaert Ropes Group, adverse currency effects, low margins in Venezuela due to volume losses and currency evolutions, and various other impacts.
Bekaert achieved consolidated sales of € 3.7 billion in 2016, an increase of 1% compared with last year. Volume growth drove up consolidated sales by 4%(1).This growth was largely offset in Bekaert's top line by the lower wire rod prices (-1%) and price-mix effects (-2%).The net effect of mergers, acquisitions and divestments was +2.5% while adverse currency movements accounted for -2.5%.
(1) 2.7% volume growth when including the -1.4% effect of the shutdown period of the Venezuelan operations due to raw material shortages. The latter impact was limited to -0.4% at the consolidated sales level and is included in 'currency movements'.
Fourth quarter sales were up 9% compared with the last quarter of 2015. Mergers and acquisitions accounted for 6% and the organic sales growth was 3%, driven by strong volume growth in Asia Pacific. Currency effects were almost neutral after a steep climb of the Brazilian real and the Chilean peso in recent months.
Combined sales(2) totaled € 4.4 billion for the year, slightly down (-1%) from 2015 due to flat organic growth, a limited net effect of mergers, acquisitions and divestments (+1%) and unfavorable exchange rate movements (-2%).
(2) Combined sales are sales of consolidated companies plus 100% of sales of joint ventures and associates after intercompany elimination.
The Board of Directors confirms its confidence in the strategy and future perspectives of the company and will propose that the General Meeting of Shareholders on 10 May 2017 approve the distribution of a gross dividend of € 1.10 per share, compared with € 0.90 per share last year. The dividend will, upon approval by the General Meeting of Shareholders, become payable as of 15 May 2017.
Bekaert achieved an operating result (EBIT-Underlying) of € 305 million (versus € 231 million in 2015(1)). This equates to a margin on sales of 8.2% (versus 6.3% in 2015). The one-off adjustments amounted to € -45 million (€ -12 million in 2015) and included restructuring costs in Turkey, Malaysia and Bridon-Bekaert Ropes Group (totaling € -27.1 million), impairment losses on PP&E Huizhou, China (€ -16.2 million), M&A related fees (€ -8.6 million) and various one-off gains (€ +7 million). Including these one-offs, EBIT was € 260 million, representing an EBIT margin on sales of 7.0% (versus € 219 million or 6.0%). Underlying EBITDA was € 513 million (13.8% margin) compared with € 436 million (11.9%) and EBITDA reached € 481 million, representing an EBITDA margin on sales of 13.0% (vs 12.0%).
Selling and administrative expenses increased by € 18 million to € 315 million due to the impact of mergers, acquisitions and divestments (€ 23 million) and costs related to the customer excellence program (€ 7.8 million), effects which were partly offset by overhead cost reductions such as the reduction of costs related to the manufacturing excellence program (€ -6.7 million savings compared with last year) and the positive impact from currency movements. Research and development expenses decreased from € 65 million to € 64 million. Other operating revenues and expenses mainly reflect the one-off elements referred-to above.
Interest income and expenses amounted to € -73 million, significantly higher than last year (€ -62 million) as a result of the gross debt increase (by € 320 million) related to the Bridon merger. Other financial income and expenses amounted to € -37.5 million (versus € -33.8 million) and was the result of an adverse non-cash impact of € -42.7 million related to the fair value adjustment of the conversion option of the previous bond in line with the evolution of the share price, and the fair value adjustment of the option under the new convertible bond which resulted in a positive impact of € +5.3 million. Other financial income and expenses reduced by € 16 million in the second half of 2016 due to the repayment of USD-loans in Vicson, Venezuela, which resulted in the release of a provision set up for this purpose.
Taxation on profit amounted to € 62 million, compared with € 36 million in 2015. The increase was due to higher profitability and to the significant share of non-deductible (non-cash) items, mainly from the convertible bond exchange which drove a higher effective tax rate.
The share in the result of joint ventures and associated companies increased from € 18 million to € 25 million. The results of the joint ventures in Brazil were stable while the loss-generating entities in Xinyu (China) were deconsolidated as per year-end 2015.
The result for the period thus totaled € 112 million, compared with € 105 million in 2015. The result attributable to non-controlling interests increased from € 4 million to € 7 million. After non-controlling interests, the result for the period attributable to the Group was € 105 million, compared with € 102 million last year. Earnings per share amounted to € 1.87, up from € 1.82 in 2015.
As at 31 December 2016, shareholders' equity represented 37.1% of total assets, down from 38.9% in 2015. The gearing ratio (net debt to equity) was 66.8% (versus 55.4%).
Net debt was € 1 068 million, down from € 1 148 million as at 30 June 2016 and up from € 837 million as at year-end 2015. The significant reduction since 30 June 2016 was primarily driven by strong cash generation. The increase versus 31 December 2015 includes the effect on net debt of the Bridon merger (€ 279 million). Net debt on underlying EBITDA was 2.1, compared with 1.9 on 31 December 2015 . Excluding the net debt effect of the Bridon merger, net debt on underlying EBITDA dropped to 1.5, reflecting strong cash generation.
Cash from operating activities amounted to € 400 million, a decrease from € 584 million in 2015. The improved cash generation was offset by higher taxation and the operating working capital reduction was less than in 2015.
Cash flow attributable to investing activities amounted to € -107 million (versus € -363 million): € -159 million related to capital expenditure (PP&E) and € +41 million to the net impact of acquisitions and divestments.
Cash flows from financing activities totaled € -302 million (versus € -268 million in 2015) and were driven by the repayment of interest-bearing debt, dividend payments and interest expenses.
Net debt increased to € 1 068 million, up from € 837 million as at year-end 2015 and down from € 1 148 million as at 30 June 2016. Net debt on underlying EBITDA was 2.1, compared with 1.9 on 31 December 2015. Excluding the net debt effect of the Bridon merger, net debt on underlying EBITDA dropped to 1.5, reflecting a significant underlying reduction primarily driven by strong cash generation.
Bekaert has announced today the decision to close the manufacturing plant in Huizhou, Guandong Province (China). Investment restrictions in Huizhou had put a burden on the plant's potential to grow its scale and cost effectiveness to the level of our other operations. Therefore the decision was taken to stop operations in Huizhou.
The Bridon-Bekaert ScanRope AS manufacturing plant in Tønsberg (Norway) has been closed. The plant's activity level had been heavily affected by the downturn in oil and gas markets which set in early 2015.
On 17 February 2017, the management of Bridon-Bekaert Ropes Group has announced to restructure the Bridon-Bekaert ropes plant in Belton, Texas (US). A workforce reduction combined with equipment upgrades will align the operations with future needs and opportunities.
We are in discussions of bringing Bekaert's wholly-owned subsidiary in Sumaré (Brazil), a high-margin tire cord subsidiary acquired from Pirelli, into the BMB (Belgo-Mineira Bekaert) joint venture partnership with ArcelorMittal. Bekaert holds 44.5% of the shares in the joint venture and would – upon reaching an agreement and receiving regulatory approvals – no longer report the results of the Sumaré plant in its consolidated statements.
In 2016, 392 049 treasury shares were disposed of in connection with the exercise of stock options and the sale to members of the Bekaert Group Executive in the context of the Personal Shareholding Requirement Plan. As a result, the company currently owns 3 885 446 treasury shares.
Bekaert's activities in EMEA delivered excellent results with record EBIT, EBITDA and ROCE performance.
Compared with a strong 2015, demand from European markets remained solid. This applied to automotive and construction markets in particular, while demand for profiled wires declined as a result of investment delays and cancellations in the oil and gas sector. Sales were lower in the second half of the year due to the usual seasonal effects.
The strengthened business portfolio after recent acquisitions, divestments and business exits and the increased benefits from various transformation programs drove EMEA's solid, double-digit profit base to a record full-year underlying EBIT margin of 12.2% and € 141 million in absolute numbers, up 10% from last year.
The one-off adjustments amounted to € -5 million and were mainly related to restructuring costs in Turkey.
Capital expenditure (PP&E) was € 52 million and included capacity expansions and equipment upgrades in all plants, particularly in Slovakia, Romania and Belgium.
Bekaert anticipates continued good demand from most markets except oil and gas. The European activities have made a strong start to the year but do project some temporary margin pressure due to the time needed to pass fast increasing raw material prices on to the market. Moreover, we remain cautious about the potential impact of growing uncertainty in Europe, following Britain's choice to leave the European Union.
Bekaert's activities in North America recorded an organic volume growth of 8%, driven by the volume increase from the plant reconstruction in Rome, Georgia (US).
This growth was more than offset on the sales level due to the lower wire rod prices (-4.4%) passed on to our customers; unfavorable mix effects (-5.2%) from firm growth in lower priced product groups; and the effect of business divestments (-1%). Automotive, agriculture and industrial steel wire markets performed well, while decreased demand from the oil and gas sector drove sales of profiled wires down.
Underlying EBIT was almost doubled compared with last year as a result of better capacity utilization driven by higher volumes and the effects from actions put in place to raise our competitiveness in target markets. Profit margins have not yet reached the desired levels but the effects of the implemented measures are clearly visible. Cash generation (underlying EBITDA) was 60% better than in the previous year and ROCE rose to almost 12%. In 2016 there were no one-off adjustments, as opposed to 2015 which included € +14 million impact from the final insurance settlement proceeds related to the Rome fire.
Capital expenditure (PP&E) amounted to € 21 million and related mainly to investments in tire cord activities.
Bekaert projects more effects from the transformation programs in the course of 2017. We also expect to see the first benefits from the ongoing capacity investments aimed at meeting a growing demand for products 'made in America'. We do remain cautious about the effects on margins of US trade policy and related tariff changes.
In Latin America, consolidated sales were down 4% as a result of the volume losses in Venezuela caused by shutdown periods due to raw material shortages (-2%) and unfavorable currency movements (-2%).
Fourth quarter sales were up 2.5% compared with the same period last year as a result of positive currency effects following the steep rise of the Brazilian real and the Chilean peso in recent months. Significant fluctuations of local currencies against the USD explain the counterbalancing effects of wire rod prices (+7%) and the price-mix from sales in local currency (-7%) in the fourth quarter, year-on-year.
Bekaert's activities in Latin America outperformed the market in most countries. EBIT and ROCE increased by about 50% as a result of: a strengthened business portfolio in the region, particularly in Ecuador and Brazil; strong demand in Chile throughout 2016; and better pricing and cost competitiveness in Peru. The EBITDA margin of 13% drove strong cash generation.
Bekaert invested € 14 million in property, plant and equipment across the region, particularly in Ecuador and Chile. We expect a continued weak economy in Brazil and general economic uncertainty across the region. We anticipate increasing pressure from Chinese imports as a result of stronger local currencies and perceive some difficulty in timely pushing increased wire rod prices into the market.
We are in discussions of bringing Bekaert's wholly-owned subsidiary in Sumaré (Brazil), a high-margin tire cord subsidiary acquired from Pirelli, into the BMB (Belgo-Mineira Bekaert) joint venture partnership with ArcelorMittal. Bekaert holds 44.5% of the shares in the joint venture and would – upon reaching an agreement and receiving regulatory approvals – no longer report the results of the Sumaré plant in its consolidated statements. This would affect the overall margin level of the segment as the entity's profitability is above average.
Notwithstanding the economic and ownership evolutions, we expect to maintain the benefits of our strong market positions, sustained cost savings and an increased impact from the implementation of our transformation programs.
Bekaert's combined sales decline (-1%) was mainly due to the average currency impact of the Brazilian real (-4% year-on-year), despite the steep climb of the currency in the second half of 2016. The results of our joint ventures in Brazil outperformed the weak economic conditions in the country and their contribution to Bekaert's net result was equal to 2015.
Bekaert achieved 8.5% organic volume growth in Asia Pacific, compared with 2015. Strong demand from automotive markets throughout the year boosted the growth. The wire rod price impact was limited in the aggregate (+1.5%) after significant price drops in the first half of the year, followed by a steep climb in the second half. Price erosion and currency movements totaled -4% each. The net effect of mergers, acquisitions and divestments was less than +1%.
Bekaert's activities in Asia Pacific achieved a robust performance in the last quarter of the year. The organic sales growth of 10% compared with the same period of 2015 stemmed from increased volumes (+5%) and sharp wire rod price increases (+10%), tempered by price erosion and mix effects (-5%). Demand from solar markets picked up as from the second half of November, after the sudden drop in the third quarter which was driven by changes to feed-in tariffs in China in July 2016. Sawing wire accounted for 12% of Bekaert's sales in Asia Pacific in 2016.
Our activities achieved strong margin growth across the region: underlying EBIT increased by 72% to € 119 million, reflecting a margin of 11.3%. Underlying EBITDA was € 222 million, 25% higher than last year
and representing a margin of 21%. ROCE almost doubled to more than 12%.
This robust performance across the whole region was the result of high capacity utilization, M&A activity, and significant benefits from various transformation programs. As announced before, Bekaert started to phase out the Shah Alam plant in Malaysia and the move of certain product lines to the Ipoh facility, also in Malaysia.
We also decided to close the small tire cord plant in Huizhou, Guandong province (China). Investment restrictions in Huizhou have put a burden on the plant's potential to grow scale and improve cost effectiveness to the level of our other operations. Therefore the decision was taken to stop operations in Huizhou, and invest in other existing locations in the country.
Bekaert invested significantly across the region and recorded a total of € 59 million investments in PP&E in 2016, including expansion investments in tire cord activities in China, India and Indonesia.
The one-off adjustments (€ -19 million) reflect the asset impairments of the Huizhou plant in China and the costs related to the closure of the Shah Alam plant in Malaysia.
We expect the high run rate in our tire markets to continue into 2017, and project solar markets to make a strong start to the year, in anticipation of new changes to feed-in tariffs, upon which we expect strong volatility in demand. We expect our transformation programs will enable us to sustain the higher revenue and profitability trends in 2017.
Bekaert achieved 34% sales growth in the ropes and advanced cords segment. The integration of the Bridon activities accounted for an increase of 37%. Unfavorable currency effects (-2%) and a slight organic sales decline (-1%) tempered the growth. Depressed market conditions in the oil & gas sector affected the sales volumes and the overall capacity utilization in most ropes plants. Ropes volumes picked up modestly in the fourth quarter and the advanced cords business performed well throughout the year.
We project continued difficult market circumstances in oil & gas markets in the near future. We do expect improved results from Bridon-Bekaert Ropes Group in the course of 2017. The management is implementing actions to strengthen its market position and gradually leverage the benefits of its increased scale through improvements in the manufacturing footprint and the global business portfolio. This includes the closure of the Bridon-Bekaert ScanRope AS manufacturing plant in Tønsberg (Norway) and the recent announcement of the realignment measures at the Belton facility in Texas (US).
The one-off adjustments accounted for € -22 million: € 9 million from M&A transaction fees and € 13 million related to asset impairments and restructuring costs, mainly regarding the closure of the ScanRope facility.
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. The Bekaert Corporate Governance Charter was further revised by the Board of Directors on 13 November 2014 and on 28 July 2016 (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 currently consists of fifteen members, who are appointed by the General Meeting of Shareholders. Eight of the Directors are appointed from among candidates nominated by the principal shareholder. 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.
Five 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: Celia Baxter (first appointed in 2016), Alan Begg (first appointed in 2008), Pamela Knapp (first appointed in 2016), Martina Merz (first appointed in 2016) and Mei Ye (first appointed in 2014).
The Board met on nine occasions in 2016: there were six regular meetings and three extraordinary meetings. 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 2016:
| Name | First appointed |
Expiry of current Board term |
Principal occupation (*) | Number of regular/ extraordinary meetings attended |
|---|---|---|---|---|
| Chairman | ||||
| Bert De Graeve(1) | 2006 | 2019 NV Bekaert SA | 6/3 | |
| Chief Executive Officer | ||||
| Matthew Taylor | 2014 | 2018 NV Bekaert SA | 6/2 | |
| Members nominated by the principal shareholder | ||||
| Leon Bekaert | 1994 | 2019 Director of companies | 6/2 | |
| Grégory Dalle | 2015 | 2019 Managing Director, Credit Suisse International, Investment Banking and Capital Markets |
6/2 | |
| Charles de Liedekerke | 1997 | 2019 Director of companies | 5/3 | |
| François de Visscher(3) | 1992 | 2016 President, de Visscher & Co. LLC (United States) | 2/1 | |
| Christophe Jacobs van Merlen(2) | 2016 | 2020 Managing Director, Bain Capital Private Equity (Europe), LLP (UK) |
4/2 | |
| Hubert Jacobs van Merlen | 2003 | 2019 Director of companies | 6/3 | |
| Maxime Jadot | 1994 | 2019 CEO and Chairman of the Executive Board, BNP Paribas Fortis (Belgium) |
6/2 | |
| Bernard van de Walle de Ghelcke(3) | 2004 | 2016 Of Counsel, Linklaters LLP (Belgium) | 2/1 | |
| Emilie van de Walle de Ghelcke(2) | 2016 | 2020 Legal Counsel, Sofina (Belgium) | 4/2 | |
| Baudouin Velge(3) | 1998 | 2016 Managing Partner, Interel (Belgium) | 2/1 | |
| Henri Jean Velge(2) | 2016 | 2020 Director of Companies | 4/2 | |
| Independent Directors | ||||
| Celia Baxter(2) | 2016 | 2020 Director of companies | 4/2 | |
| Alan Begg | 2008 | 2018 Director of companies | 6/2 | |
| Lady Barbara Judge CBE(3) | 2007 | 2016 Chairman of the UK Pension Protection Fund (United Kingdom) Chairman Emeritus of the UK Atomic Energy Authority (United Kingdom) |
2/1 | |
| Pamela Knapp(2) | 2016 | 2020 Director of Companies | 4/2 | |
| Martina Merz(2) | 2016 | 2020 Director of Companies | 4/2 | |
| Manfred Wennemer(3) | 2009 | 2016 Director of companies | 2/1 | |
| Mei Ye | 2014 | 2018 Independent director of and advisor to companies | 6/3 |
(1) Bert De Graeve was first appointed as Board Member in 2006. In 2014 he became Chairman of the Board.
(2) As of the Annual General Meeting in May 2016.
(3) Until the Annual General Meeting in May 2016.
(*) 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, Ms Pamela Knapp, is independent. Ms Knapp's competence in accounting and auditing is demonstrated by her former position as Chief Financial Officer of the Power Transmission and Distribution Division of Siemens (from 2004 to 2009) and her position as Chief Financial Officer of GfK SA (from 2009 to 2014). The Committee is chaired by Mr Hubert Jacobs van Merlen.
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 current Board term |
Number of regular and extraordinary meetings attended |
|---|---|---|
| Hubert Jacobs van Merlen | 2019 | 4/3 |
| Bert De Graeve | 2019 | 4/3 |
| Pamela Knapp(1) | 2020 | 2/3 |
| Christophe Jacobs van Merlen(1) | 2020 | 2/3 |
| Lady Barbara Judge CBE(2) | 2016 | 2/0 |
| Baudouin Velge(2) | 2016 | 2/0 |
(1) As of the Annual General Meeting in May 2016.
(2) Until the Annual General Meeting in May 2016.
The Committee had four regular meetings and three extraordinary meetings in 2016. 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, Ms Celia Baxter and Mr Alan Begg, are independent. The Committee's competence in the field of remuneration policy is demonstrated by the relevant experience of its members.
| Name | Expiry of current Board term |
Number of meetings attended |
|---|---|---|
| Bert De Graeve | 2019 | 2 |
| Celia Baxter(1) | 2020 | 1 |
| Alan Begg | 2018 | 2 |
| Lady Barbara Judge CBE(2) | 2016 | 1 |
(1) As of the Annual General Meeting in May 2016.
(2) Until the Annual General Meeting in May 2016.
One of the Directors nominated by the principal shareholder is invited to attend the Committee meetings without being a member.
The Committee met twice in 2016. 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 current Board term |
Number of meetings attended |
|---|---|---|
| Bert De Graeve | 2019 | 4 |
| Leon Bekaert | 2019 | 4 |
| Charles de Liedekerke | 2019 | 4 |
| Maxime Jadot | 2019 | 4 |
| Martina Merz(1) | 2020 | 2 |
| Matthew Taylor | 2018 | 4 |
| Manfred Wennemer(2) | 2016 | 2 |
(1) As of the Annual General Meeting in May 2016.
(2) Until the Annual General Meeting in May 2016.
The Committee met four times in 2016 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:
Since the Annual General Meeting of 11 May 2016, the Company is compliant with the legal requirement that at least one third of the members of the Board of Directors are of the opposite gender.
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:
Mr Stijn Vanneste joined the BGE effective 1 April 2016.
Ms Beatríz García-Cos joined Bekaert as Chief Financial Officer and became member of the BGE effective 1 July 2016. She succeeded Bruno Humblet who became Chief Executive Officer of Bridon-Bekaert Ropes Group.
| Name | Position | Appointed |
|---|---|---|
| Matthew Taylor | Chief Executive Officer | 2013 |
| Lieven Larmuseau |
Executive Vice President Rubber Reinforcement Business Platforms |
2014 |
| Piet Van Riet | Executive Vice President Industrial Products and Specialty Products Business Platforms |
2014 |
| Stijn Vanneste | Executive Vice President Europe, South Asia and South East Asia |
2016 |
| Frank Vromant | Executive Vice President Americas | 2011 |
| Curd Vandekerckhove |
Executive Vice President North Asia and Global Operations |
2012 |
| Beatríz García-Cos |
Chief Financial Officer | 2016 |
| Geert Van Haver | Chief Technology and Engineering Officer and Executive Vice President |
2014 |
| Bart Wille | Chief Human Resources Officer and Executive Vice President |
2013 |
The composition of the BGE will change in 2017. After having served Bekaert over the past 8 years, Bart Wille, Chief Human Resources Officer, has decided to leave the company. The name of his successor will be announced in due course.
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 interest of a financial nature with the Company, and should refrain from participating in the discussion of and voting on those items. A conflict of interest arose on three occasions in 2016, and the provisions of Article 523 were complied with on such occasions.
On 23 February 2016 the Board had to determine the remuneration of the Chief Executive Officer (amongst which the proposed short term variable remuneration of € 606 375 for the CEO on account of his 2015 performance). Excerpt from the minutes:
On the motion of the Nomination and Remuneration Committee, the Board:
On the motion of the Nomination and Remuneration Committee, the Board acknowledges that no mid-term variable remuneration is payable in respect of the period 2013-2015.
On the motion of the Nomination and Remuneration Committee, the Board approves the short term variable remuneration objectives for the CEO in respect of 2016.
On the motion of the Nomination and Remuneration Committee, the Board approves the Personal Shareholding Requirement Plan for the CEO and the other BGE members.
On 10 May 2016 the Board had to decide on the indemnification of the civil director's liability of Mr Grégory Dalle by the Company in accordance with paragraph II.7.2 of the Bekaert Charter. Excerpt from the minutes:
The Board resolves to fully indemnify Mr Grégory Dalle from and against any and all financial consequences of his civil liability as a Director of the Company, except if such liability results from fraudulent intent or wilful misconduct.
On 17 November 2016 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 resolves to:
On the motion of the Nomination and Remuneration Committee, the Board approves the offer of 30 000 options to the CEO.
RESOLUTION
On the motion of the Nomination and Remuneration Committee, the Board approves the proposed performance targets with respect to the performance share units that will be granted in December 2016.
The Bekaert Charter contains conduct guidelines with respect to direct and indirect conflicts of interest 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 interest concerning such transactions occurring in 2016 (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 Dealing Code. As a result of the EU Market Abuse Regulation, the Board of Directors has, on 28 July 2016, approved a new version of the Bekaert Dealing Code, effective 3 July 2016. The Bekaert Dealing Code is included in its entirety in the Bekaert Charter as Appendix 4. The Bekaert Dealing Code restricts transactions in Bekaert financial instruments 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 disclosure of executed transactions by leading managers and their closely associated persons through a notification to the Company and to the Belgian Financial Services and Markets Authority (FSMA). The Company Secretary is the Dealing Code Officer for purposes of the Bekaert 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 performance related 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 and a 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 long-term variable remuneration program aims at rewarding managers and executives for their contribution to the creation of enhanced shareholder value over time. This program is 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 and a 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 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.
The long-term variable remuneration component for the Chief Executive Officer and the other BGE members exists of the offer of a variable amount of stock options under a share option plan and the grant of a fixed amount of performance share units under a performance share plan.
In March 2016, the Company introduced a Personal Shareholding Requirement Plan for the Chief Executive Officer and the other members of the BGE, pursuant to which they are required to build and maintain a personal shareholding in Company shares and whereby the acquisition of the required number of Company shares is supported by a so-called Company matching mechanism. The Company matching mechanism originally provided that the Company would match the BGE member's investment in Company shares in year x, with a premium (to be paid out at the end of year x +2) which should then be used by the BGE member to invest in Company shares. On the motion of the Board of Directors and subject to the approval by the Extraordinary General Meeting of Shareholders of 29 March 2017, this Company matching mechanism will be amended (with retroactive effect as of the start of the Personal Shareholding Requirement Plan) in such a way that the Company will match the BGE member's investment in Company shares in year x, with a direct grant of a similar number of Company shares as acquired by the BGE member (such grant to be made at the end of year x + 2).
The amount of the remuneration and other benefits granted directly or indirectly to the Directors, by the Company or its subsidiaries, in respect of 2016 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 (with a maximum of € 25 200 for six meetings per year).
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 | |||||
| Bert De Graeve | 250 000 | 250 000 | |||
| Board members | |||||
| Celia Baxter | 21 000 | 16 800 | 3 000 | 40 800 | |
| Alan Begg | 42 000 | 25 200 | 6 000 | 73 200 | |
| Leon Bekaert | 42 000 | 25 200 | 12 000 | 79 200 | |
| Grégory Dalle | 42 000 | 25 200 | 0 | 67 200 | |
| Charles de Liedekerke | 42 000 | 25 200 | 12 000 | 79 200 | |
| François de Visscher | 21 000 | 8 400 | 0 | 29 400 | |
| Christophe Jacobs van Merlen | 21 000 | 16 800 | 12 000 | 49 800 | |
| Hubert Jacobs van Merlen | 42 000 | 25 200 | 22 000 | 89 200 | |
| Maxime Jadot | 42 000 | 25 200 | 12 000 | 79 200 | |
| Pamela Knapp | 21 000 | 16 800 | 12 000 | 49 800 | |
| Lady Barbara Judge CBE | 21 000 | 8 400 | 11 000 | 40 400 | |
| Martina Merz | 21 000 | 16 800 | 6 000 | 43 800 | |
| Mei Ye | 42 000 | 25 200 | 0 | 67 200 | |
| Matthew Taylor | 42 000 | 25 200 | 0 | 67 200 | |
| Bernard van de Walle de Ghelcke | 21 000 | 8 400 | 0 | 29 400 | |
| Emilie van de Walle de Ghelcke | 21 000 | 16 800 | 0 | 37 800 | |
| Baudouin Velge | 21 000 | 8 400 | 6 000 | 35 400 | |
| Henri Jean Velge | 21 000 | 16 800 | 0 | 37 800 | |
| Manfred Wennemer | 21 000 | 8 400 | 6 000 | 35 400 | |
| Total Directors' Remuneration 1 281 400 |
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 table in section 6 below.
The remuneration package of the Chief Executive Officer and the other members of the BGE comprises the following performance related elements:
Detailed information regarding the criteria, terms and method of performance evaluation for the long-term variable remuneration can be found in section 8 below.
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 half of this variable remuneration is based on criteria over a period of minimum three years.
The amount of the remuneration and other benefits granted directly or indirectly to the Chief Executive Officer, by the Company or its subsidiaries, in respect of 2016 for his Chief Executive Officer role is set forth below.
| Matthew Taylor | Remuneration(1) | Comments |
|---|---|---|
| Base remuneration | € 750 226 Includes Belgian base remuneration as well as Belgian and foreign director fees(2) |
|
| Short-term variable remuneration |
€ 636 694 Annual variable remuneration, based on 2016 performance(3) |
|
| Mid-term variable remuneration |
€ 181 913 Mid-term variable remuneration, based on 2014-2016 performance(4) |
|
| Long-term variable remuneration: |
||
| - Stock option grant | 25 000 options | Number of stock options granted |
| - Performance share units |
16 500 units | Number of performance share units granted |
| Pension | € 151 594 Defined Contribution Plan |
|
| Other remuneration elements | € 53 083 Includes: company car and risk insurances |
(1) In respect of 2016.
(2) The base remuneration includes the remuneration received by the Chief
Executive Officer in his capacity as a Director.
(3) This does include the deferred annual variable remuneration based on 2016 performance.
(4) The mid-term plan was replaced by the new long term incentive plans end of 2015.
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 2016 is set forth below on a global basis.
| Remuneration(1) | Comments | |
|---|---|---|
| Base remuneration | € 2 722 139 Includes Belgian base remuneration as well as Belgian and foreign director fees |
|
| Short-term variable remuneration |
€ 2 016 603 Annual variable remuneration, based on 2016 performance |
|
| Mid-term variable remuneration |
€ 459 333 | Mid-term variable remuneration, based on 2014-2016 performance(2) |
| Long-term variable remuneration: |
||
| - Stock option grant | 66 250 options | Number of stock options granted |
| - Performance share units |
22 500 units | Number of performance share units granted |
| Pension | € 441 401 Defined Contribution and Defined Benefit Plan |
|
| Other remuneration elements | € 153 264 Includes company car and risk insurances |
(1) In respect of 2016.
(2) The mid-term plan was replaced by the new long term incentive plans end of 2015.
The number of performance share units and the number of stock options granted to the Chief Executive Officer and the other members of the BGE in 2016, and the number of options exercised by them or forfeited in 2016 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 in 2016 are based on the SOP2015-2017 plan that was proposed by the Board of Directors and approved by a Special General Meeting in 2015. The plan offers options to acquire existing Company shares. There is one regular offer of options in December in each of the years 2015 through 2017, and the options are granted on the sixtieth 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 2015 and granted in February 2016 is € 26.375 per share.
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 year following the date of their offer.
The stock options that were exercisable in 2016 are based on the initial three grants of the SOP2010-2014 plan and on the predecessor plans to the SOP2010-2014 plan. The terms of the earlier plans are similar to those of the SOP2015-2017 plan, but the options that were granted to employees under the predecessor plans to the SOP2010-2014 plan 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 SOP2010-2014 plan.
The performance share units granted in 2016 to the Chief Executive Officer and the other members of the BGE are based on the Performance Share Plan 2015-2017 that was proposed by the Board of Directors and approved by a Special General Meeting in 2015. The plan offers rights with respect to Company shares to the members of the BGE, the senior management and a limited number of management staff members of the Company and a number of its subsidiaries (the rights, "performance share units" and the shares, "performance shares"). Each performance share unit entitles the beneficiary to acquire one performance share subject to the conditions of the Performance Share Plan 2015-2017. These performance share units will vest following a vesting period of three years, conditional to the achievement of a pre-set performance target. The performance target is set annually by the Board of Directors, in line with the Company strategy. The precise vesting level of the performance share units will depend upon the actual achievement level of the vesting criterion, with no vesting at all if the actual performance is below the defined minimum threshold.
Upon achievement of said threshold, there will be a minimum vesting of 50% of the granted performance share units; full achievement of the agreed vesting criterion will lead to a par vesting of 100% of the granted performance share units, whereas there will be a maximum vesting of 300% of the granted performance share units if the actual performance is at or above an agreed ceiling level.
In between these levels, the vesting will be proportionate. Upon vesting, the beneficiaries will also receive the value of the dividends relating to the previous three years with respect to such (amount of) performance shares to which the effectively vested performance share units relate. It is foreseen that there is one performance share unit grant in each of the years 2015 through 2017, and the aggregate number of performance share units to be offered is determined each year by the Board of Directors on the motion of the Nomination and Remuneration Committee. The performance share units are granted to the beneficiaries for free.
| Name | Number of perfomance share units granted in 2016 |
Number of stock options granted in February 2016 |
Number of stock options exercised in 2016 |
Number of stock options forfeited in 2016 |
|---|---|---|---|---|
| Matthew Taylor | 16 500 | 25 000 | - | - |
| Beatríz García-Cos |
5 000 | - | - | - |
| Lieven Larmuseau |
2 500 | 10 000 | 26 200 | - |
| Geert Van Haver |
2 500 | 10 000 | 17 000 | - |
| Piet Van Riet | 2 500 | 10 000 | 10 800 | - |
| Curd Vandekerckhove |
2 500 | 10 000 | 20 000 | - |
| Stijn Vanneste | 2 500 | 6 250 | 3 600 | - |
| Frank Vromant | 2 500 | 10 000 | 13 400 | - |
| Bart Wille | 2 500 | 10 000 | 10 000 | - |
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 twelve months.
No member of the Executive Management left the Group in 2016.
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.
| in € | 2012 | 2013 | 2014 | 2015 | 2016 |
|---|---|---|---|---|---|
| Price as at 31 December | 21.875 | 25.720 26.345 | 28.385 | 38.485 | |
| Price high | 33.500 | 31.110 30.195 | 30.000 | 42.450 | |
| Price low | 17.210 | 20.010 21.900 | 22.580 | 26.560 | |
| Price average closing | 22.592 | 24.926 27.155 | 26.124 | 37.065 | |
| Daily volume | 218 850 126 923 82 813 120 991 123 268 | ||||
| Daily turnover (in millions of €) | 5.0 | 3.1 | 2.1 | 3.1 | 4.5 |
| Annual turnover (in millions of €) | 1 313 | 796 | 527 | 804 | 1 147 |
| Velocity (% annual) | 93 | 54 | 35 | 52 | 53 |
| Velocity (% adjusted free float) | 144 | 90 | 59 | 86 | 88 |
| Free float (%) | 61 | 59.9 | 55.7 | 56.7 | 59.2 |
The average daily trading volume was about 123 000 shares in 2016, an increase by 2% compared to 2015. The volume peaked on 26 February, when 578 329 shares were traded.
Effective 20 March 2017 Bekaert is ranked 20th in the BEL20® index based upon a market capitalization of € 2.52 billion and a free float market capitalization of € 1.51 billion (59.27%* and within the free float band of 60%), and with an annual velocity at 47% and a weight of 1.24%.
* Denominator excluding treasury shares and shares held by the principal shareholder.
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).
Stichting Administratiekantoor Bekaert (principal shareholder) owns 34.41 % of the shares, while the identified institutional shareholders own 33.25% of the shares. Retail represents 11.33% while Private Banking 6.69% and treasury shares 6.44%. 7.88% is unidentified. Of the total number of Bekaert shares, 0.34% is in registered form.
As of 31 December 2016 the registered capital of the Company amounts to € 177 612 000, and is represented by 60 347 525 shares without par value. The shares are in registered or dematerialized form.
The authority granted to the Board of Directors by the resolution of the General Meeting of Shareholders of 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) continued in effect until 20 June 2016.
The General Meeting of Shareholders held on 11 May 2016 renewed the authorization and authorized the Board of Directors 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 20 June 2016 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 in accordance with Article 596 and following of the Companies Code. Furthermore, the Board of Directors has been authorized, for a period of three years from 20 June 2016, 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 granted by the General Meeting of Shareholders of 9 May 2012 in connection with the issuance of convertible bonds.
The Board of Directors resolved on 21 May 2014 to issue senior unsecured convertible bonds due 18 June 2018 for an aggregate amount of approximately € 300 000 000 (the "2014 Convertible Bonds"). These convertible bonds carried a coupon of 0.75% per annum and their conversion price amounted to € 37.06 per share.
The Board of Directors has again made use of its powers under the authorized capital when it resolved on 18 May 2016 to issue senior unsecured convertible bonds due June 2021 for an aggregate amount of € 380 000 000 (the "2016 Convertible Bonds"). These convertible bonds carry a zero-coupon and their conversion price amounts to € 51.25 per share. Concurrently with the issuance of the 2016 Convertible Bonds, the Company repurchased through a reverse bookbuilding process or redeemed all outstanding 2014 Convertible Bonds. All repurchased or redeemed 2014 Convertible Bonds were cancelled after settlement by the Company and on 31 December 2016 no 2014 Convertible Bonds were outstanding.
In connection with the issuance of the 2016 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.
In order to mitigate dilution for existing shareholders upon conversion of the 2016 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 conversion of the 2016 Convertible Bonds would then have no dilutive effect for existing shareholders.
Furthermore, the terms of the 2016 Convertible Bonds allow the Company to redeem the bonds at their principal amount together with accrued and unpaid interest in certain circumstances, for example on or after 30 June 2019, if the Company's shares trade at a price higher than 130% of the conversion price during a certain period.
The total number of outstanding subscription rights under the SOP2005-2009 stock option plan and convertible into Bekaert shares is 234 486. A total of 222 000 subscription rights were exercised in 2016 under the SOP2005-2009 employee stock option plan, resulting in the issue of 222 000 new Company shares, and an increase of the registered capital by € 655 000 and of the share premium by € 4 709 489.
In addition to the 4 248 710 treasury shares held by it as of 31 December 2015, the Company purchased 28 785 own shares in the course of 2016. A total of 316 042 stock options were exercised in 2016 under the SOP2010-2014 stock option plan and a total of 55 680 stock options were exercised under the SOP2 stock option plan. 371 722 treasury shares were used for that purpose. 20 327 treasury shares were sold to members of Executive Management in the context of the Personal Shareholding Requirement Plan (at a price equal to the closing price at Euronext on the day of the transfer). No treasury shares were cancelled in 2016. As a result, the Company held an aggregate 3 885 446 treasury shares as of 31 December 2016.
The first grant of options under the SOP2015-2017 plan took place on 15 February 2016, when 227 250 options were granted. Each such option will be convertible into one existing Company share at an exercise price of € 26.375.
A second offer of 285 750 options under the SOP2015-2017 plan was made on 15 December 2016, and 273 325 of those options were accepted and were granted on 13 February 2017.
Each option of the second series will be convertible into one existing Company share at an exercise price of €39.426.
A second regular grant of 52 450 performance share units under the Performance Share Plan 2015-2017 was made on 15 December 2016. In addition, an exceptional grant of 10 000 performance share units for the Chief Executive Officer was made on 29 February 2016 and an exceptional grant of 2 500 performance share units for the newly hired Chief Financial Officer was made on 1 July 2016. Each performance share unit entitles the beneficiary to acquire one performance share subject to the conditions of the Performance Share Plan 2015-2017. These performance share units will vest following a vesting period of three years, conditional to the achievement of a pre-set performance target. The precise vesting level of the performance share units will depend upon the actual achievement level of the vesting criterion, with no vesting at all if the actual performance is below the defined minimum threshold. Upon achievement of said threshold, there will be a minimum vesting of 50% of the granted performance share units; full achievement of the agreed vesting criterion will lead to a par vesting of 100% of the granted performance share units, whereas there will be a maximum vesting of 300% of the granted performance share units if the actual performance is at or above an agreed ceiling level. In between these levels, the vesting will be proportionate.
The SOP2015-2017 plan and its predecessor SOP 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).
Per share
| in € | 2012 | 2013 | 2014 | 2015 | 2016* | |
|---|---|---|---|---|---|---|
| Total gross dividend | 0.850 | 0.850 | 0.850 | 0.900 | 1.100 | |
| Net dividend** | 0.638 | 0.638 | 0.638 | 0.657 | 0.770 | |
| Coupon number | 4 | 5 | 6 | 7 | 8 |
* The dividend is subject to approval by the General Meeting of Shareholders 2017.
** Subject to the applicable tax legislation.
The Board of Directors will propose that the Annual General Meeting to be held on 10 May 2017 approve the distribution of a gross dividend € 1.10 per share.
The Annual General Meeting was held on 11 May 2016. An Extraordinary General Meeting was held on the same day. The resolutions of the meetings are available 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 20 June 2016, 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 20 June 2016, 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 20 June 2016 (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 thirty 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 24 April 2015, 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, 14 May 2014, 13 May 2015 and 11 May 2016 in accordance with Article 556 of the Companies Code; the minutes of those meetings were filed with the Registry of the Commercial Court of Gent, division Kortrijk on 14 April 2006, 18 April 2008, 17 April 2009, 16 April 2010, 15 April 2011, 30 May 2012, 23 May 2013, 20 June 2014, 19 May 2015 and 18 May
2016 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.
The recently acquired companies of the Bridon Group are using different systems which are in the process of being aligned to and harmonized in the way of working to the existing Bekaert practices.
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 year end 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.
The 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 2016 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 of the 2016 Annual Report, starting at page 4 1.
A description of the principal risks and uncertainties is included in the Corporate Governance Statement, page 60 of the first part of the 2016 Annual Report. In addition, reference is made to Notes 3 page 23-24 and 7.3 to the consolidated financial statements, pages 83-95 of the Financial Review in the 2016 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 | ||
| Notes to the consolidated financial statements 9 | ||
| 1. | General information 9 | |
| 2. | Summary of principal accounting policies 9 | |
| 2.1. | Statement of compliance9 | |
| - New and amended standards and interpretations 9 | ||
| 2.2. | General principles 11 | |
| - Basis of preparation 11 | ||
| - Principles of consolidation 11 | ||
| - Foreign currency translation 11 | ||
| 2.3. | Balance sheet items 12 | |
| - Intangible assets 12 | ||
| - Goodwill and business combinations 13 | ||
| - Property, plant and equipment 13 | ||
| - Leases 13 | ||
| - Government grants 14 | ||
| - Financial assets 14 | ||
| - Inventories 15 | ||
| - Share capital 15 | ||
| - Non-controlling interests 15 | ||
| - Provisions 15 - Employee benefit obligations 15 |
||
| - Interest-bearing debt 16 | ||
| - 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 | ||
| - Underlying performance measures 18 | ||
| 2.5. | Statement of comprehensive income and statement of changes in equity18 | |
| 2.6. | Miscellaneous18 | |
| - Non-current assets held for sale and discontinued operations 18 | ||
| - Contingencies 19 | ||
| - Events after the balance sheet date 19 | ||
| 2.7. | Restatement and reclassification effects 20 | |
| 3. | Critical accounting judgments and key sources of estimation uncertainty 23 | |
| 3.1. | Critical judgments in applying the entity's accounting policies 23 | |
| 3.2. | Key sources of estimation uncertainty24 | |
| 4. | Segment reporting 25 | |
| 5. | Income statement items and other comprehensive income 29 | |
| 5.1. | Operating result (EBIT) by function 29 | |
| 5.2. | Operating result (EBIT) by nature31 | |
| 5.3. | Interest income and expense 32 | |
|---|---|---|
| 5.4. | Other financial income and expenses 32 | |
| 5.5. | Income taxes33 | |
| 5.6. | Share in the results of joint ventures and associates 34 | |
| 5.7. | Earnings per share34 | |
| 6. | Balance sheet items36 | |
| 6.1. | Intangible assets 36 | |
| 6.2. | Goodwill 37 | |
| 6.3. | Property, plant and equipment 40 | |
| 6.4. | Investments in joint ventures and associates 42 | |
| 6.5. | Other non-current assets45 | |
| 6.6. | Deferred tax assets and liabilities46 | |
| 6.7. | Operating working capital49 | |
| 6.8. | Other receivables 50 | |
| 6.9. | Cash & cash equivalents and short-term deposits 50 | |
| 6.10. Other current assets50 | ||
| 6.11. Assets classified as held for sale and liabilities associated with those assets51 | ||
| 6.12. Ordinary shares, treasury shares and equity settled share based payments 52 | ||
| 6.13. Retained earnings and other Group reserves 57 | ||
| 6.14. Non-controlling interests60 | ||
| 6.15. Employee benefit obligations 65 | ||
| 6.16. | Provisions74 | |
| 6.17. Interest-bearing debt 75 | ||
| 6.18. Other non-current liabilities 76 | ||
| 6.19. Other current liabilities76 | ||
| 7. | Miscellaneous items 77 | |
| 7.1. | Notes to the cash flow statement 77 | |
| 7.2. | Effect of business combinations 80 | |
| 7.3. | Financial risk management and financial derivatives 83 | |
| 7.4. | Contingencies and commitments 96 | |
| 7.5. | Related parties 97 | |
| 7.6. | Events after the balance sheet date98 | |
| 7.7. | Services provided by the statutory auditor and related persons98 | |
| 7.8. | Subsidiaries, joint ventures and associates99 | |
| Parent company information 104 | |
|---|---|
| Annual report of the Board of Directors and financial statements of NV Bekaert SA 104 Proposed appropriation of NV Bekaert SA 2016 result 106 Appointments pursuant to the Articles of Association 106 |
| Auditor's report 107 | |||
|---|---|---|---|
| ---------------------- | -- | -- | -- |
| in thousands of € - Year ended 31 December | Notes | 2015 | 2016 |
|---|---|---|---|
| Sales | 5.1. | 3 671 081 | 3 715 217 |
| Cost of sales | 5.1. | -3 073 407 | -3 025 225 |
| Gross profit | 5.1. | 597 674 | 689 992 |
| Selling expenses | 5.1. | -156 106 | -175 340 |
| Administrative expenses | 5.1. | -140 679 | -139 558 |
| Research and development expenses | 5.1. | -64 597 | -63 590 |
| Other operating revenues | 5.1. | 85 516 | 24 376 |
| Other operating expenses | 5.1. | -102 422 | -76 226 |
| Operating result (EBIT) | 5.1. | 219 386 | 259 654 |
| EBIT - Underlying | 5.1. / 5.2. | 231 482 | 304 952 |
| Interest income | 5.3. | 8 585 | 6 325 |
| Interest expense | 5.3. | -70 758 | -79 493 |
| Other financial income and expenses | 5.4. | -33 810 | -37 458 |
| Result before taxes | 123 403 | 149 028 | |
| Income taxes | 5.5. | -36 259 | -62 052 |
| Result after taxes (consolidated companies) | 87 144 | 86 976 | |
| Share in the results of joint ventures and associates | 5.6. | 18 320 | 25 445 |
| RESULT FOR THE PERIOD | 105 464 | 112 421 | |
| Attributable to | |||
| the Group | 101 722 | 105 166 | |
| non-controlling interests | 6.14. | 3 742 | 7 255 |
| Earnings per share | |||
| in € per share | 5.7. | 2015 | 2016 |
| Result for the period attributable to the Group | |||
| Basic | 1.822 | 1.869 | |
| Diluted | 1.814 | 1.849 |
The accompanying notes are an integral part of this income statement. 2015 amounts have been affected by minor restatements (see note 2.7. 'Restatement and reclassification effects').
| in thousands of € - Year ended 31 December | Notes | 2015 | 2016 |
|---|---|---|---|
| Result for the period | 105 464 | 112 421 | |
| Other comprehensive income (OCI) | 6.13. | ||
| Other comprehensive income reclassifiable to income statement | |||
| in subsequent periods | |||
| Exchange differences | |||
| Exchange differences arising during the year on subsidiaries | 9 056 | 15 717 | |
| Exchange differences arising during the year on joint ventures and | |||
| associates | -26 131 | 21 120 | |
| Reclassification adjustments relating to entity disposals | |||
| or step acquisitions | 393 | - | |
| Inflation adjustments | 1 208 | 1 483 | |
| Cash flow hedges | |||
| Fair value changes to hedging instruments | 6 034 | 1 284 | |
| Reclassification adjustments for amounts | |||
| recognized in income statement | -5 859 | -542 | |
| Available-for-sale investments | |||
| Net fair value gain on available-for-sale investments during the year | - | 1 758 | |
| Reclassification adjustments relating to impairments or disposals | -2 001 | 591 | |
| Deferred taxes relating to reclassifiable OCI | 6.6. | -67 | -135 |
| OCI reclassifiable to income statement in subsequent periods, after | |||
| tax | -17 367 | 41 276 | |
| Other comprehensive income non-reclassifiable to income statement in subsequent periods |
|||
| Remeasurement gains and losses on defined-benefit plans | 14 473 | -9 978 | |
| Share of non-reclassifiable OCI of joint ventures and associates | -30 | 40 | |
| Deferred taxes relating to non-reclassifiable OCI | 6.6. | -603 | -602 |
| OCI non-reclassifiable to income statement in subsequent periods, | |||
| after tax | 13 840 | -10 540 | |
| Other comprehensive income for the period | -3 527 | 30 736 | |
| TOTAL COMPREHENSIVE INCOME FOR THE PERIOD | 101 937 | 143 157 | |
| Attributable to | |||
| the Group | 91 993 | 134 687 | |
| non-controlling interests | 6.14. | 9 944 | 8 470 |
The accompanying notes are an integral part of this statement of comprehensive income. 2015 amounts have been affected by minor restatements (see note 2.7. 'Restatement and reclassification effects').
| Assets as at 31 December | |||
|---|---|---|---|
| in thousands of € | Notes | 2015 | 2016 |
| Non-current assets | 1 921 987 | 2 136 528 | |
| Intangible assets | 6.1. | 109 448 | 140 377 |
| Goodwill | 6.2. | 35 699 | 152 345 |
| Property, plant and equipment | 6.3. | 1 490 454 | 1 514 714 |
| Investments in joint ventures and associates | 6.4. | 114 119 | 146 582 |
| Other non-current assets | 6.5. | 39 773 | 32 142 |
| Deferred tax assets | 6.6. | 132 494 | 150 368 |
| Current assets | 1 960 422 | 2 167 785 | |
| Inventories | 6.7. | 628 731 | 724 500 |
| Bills of exchange received | 6.7. | 68 005 | 60 182 |
| Trade receivables | 6.7. | 686 364 | 739 145 |
| Other receivables | 6.8. | 99 286 | 108 484 |
| Short-term deposits | 6.9. | 10 216 | 5 342 |
| Cash and cash equivalents | 6.9. | 401 771 | 365 546 |
| Other current assets | 6.10. | 66 049 | 52 225 |
| Assets classified as held for sale | 6.11. | - | 112 361 |
| Total | 3 882 409 | 4 304 313 |
| Equity and liabilities as at 31 December | |||
|---|---|---|---|
| in thousands of € | Notes | 2015 | 2016 |
| Equity | 1 511 651 | 1 597 893 | |
| Share capital | 6.12. | 176 957 | 177 612 |
| Share premium | 31 884 | 36 594 | |
| Retained earnings | 6.13. | 1 397 110 | 1 432 394 |
| Treasury shares | 6.13. | -144 747 | -127 974 |
| Other Group reserves | 6.13. | -78 993 | -51 534 |
| Equity attributable to the Group | 1 382 211 | 1 467 092 | |
| Non-controlling interests | 6.14. | 129 440 | 130 801 |
| Non-current liabilities | 1 083 412 | 1 504 487 | |
| Employee benefit obligations | 6.15. | 172 681 | 182 641 |
| Provisions | 6.16. | 50 198 | 63 107 |
| Interest-bearing debt | 6.17. | 792 116 | 1 161 310 |
| Other non-current liabilities | 6.18. | 15 204 | 44 873 |
| Deferred tax liabilities | 6.6. | 53 213 | 52 556 |
| Current liabilities | 1 287 346 | 1 201 933 | |
| Interest-bearing debt | 6.17. | 501 224 | 297 916 |
| Trade payables | 6.7. | 456 783 | 556 361 |
| Employee benefit obligations | 6.7. / 6.15. | 131 281 | 132 913 |
| Provisions | 6.16. | 26 973 | 17 720 |
| Income taxes payable | 105 832 | 101 683 | |
| Other current liabilities | 6.19. | 65 253 | 61 840 |
| Liabilities associated with assets classified as held for sale | 6.11. | - | 33 500 |
| Total | 3 882 409 | 4 304 313 |
The accompanying notes are an integral part of this balance sheet. 2015 amounts have been affected by minor restatements (see note 2.7. 'Restatement and reclassification effects').
| Other Group reserves 1 | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| in thousands of € | Share capital | Share premium |
Retained earnings |
Treasury shares |
Cumulative translation adjust ments |
Other reserves |
Equity attributable to the Group |
Non controlling interests 2 |
Total |
| Balance as at | |||||||||
| 1 January 2015 (as | |||||||||
| previously reported) | 176 914 | 31 693 | 1 352 197 | -145 953 | -6 149 | -41 911 | 1 366 791 | 199 421 | 1 566 212 |
| Restatements | - | - | - | - | - | -3 297 | -3 297 | -2 348 | -5 645 |
| Balance as at | |||||||||
| 1 January 2015 (restated) | 176 914 | 31 693 | 1 352 197 | -145 953 | -6 149 | -45 208 | 1 363 494 | 197 073 | 1 560 567 |
| Total comprehensive | |||||||||
| income for the period | - | - | 103 421 | - | -22 300 | 10 872 | 91 993 | 9 944 | 101 937 |
| Capital contribution by non | |||||||||
| controlling interests | - | - | - | - | - | - | - | 14 967 | 14 967 |
| Reclassifications | - | - | 16 407 | - | - | -16 407 | - | - | - |
| Effect of business | |||||||||
| combination with Pirelli | - | - | 227 | - | - | -227 | - | 1 732 | 1 732 |
| Effect of business | |||||||||
| combination with Arrium | - | - | - | - | - | - | - | -7 086 | -7 086 |
| Effect of Ropes portfolio realignment with Chilean |
|||||||||
| partners | - | - | -16 972 | - | -1 364 | -126 | -18 462 | -71 223 | -89 685 |
| Effect of purchasing non | |||||||||
| controlling interests | - | - | -10 712 | - | -654 | 4 | -11 362 | -6 609 | -17 971 |
| Effect of other changes in | |||||||||
| Group structure | - | - | 548 | - | -341 | 1 | 208 | -1 967 | -1 759 |
| Equity-settled share-based | |||||||||
| payment plans | - | - | - | - | - | 2 906 | 2 906 | - | 2 906 |
| Creation of new shares | 43 | 191 | - | - | - | - | 234 | - | 234 |
| Treasury shares | |||||||||
| transactions | - | - | - | 1 206 | - | - | 1 206 | - | 1 206 |
| Dividends | - | - | -48 006 | - | - | - | -48 006 | -7 391 | -55 397 |
| Balance as at | |||||||||
| 31 December 2015 | 176 957 | 31 884 | 1 397 110 | -144 747 | -30 808 | -48 185 | 1 382 211 | 129 440 | 1 511 651 |
| Balance as at | |||||||||
| 1 January 2016 | 176 957 | 31 884 | 1 397 110 | -144 747 | -30 808 | -48 185 | 1 382 211 | 129 440 | 1 511 651 |
| Total comprehensive | |||||||||
| income for the period | - | - | 107 166 | - | 35 130 | -7 609 | 134 687 | 8 470 | 143 157 |
| Effect of BBRG merger | - | - | -16 389 | - | -126 | -20 | -16 535 | 10 548 | -5 987 |
| Effect of other changes in | |||||||||
| Group structure | - | - | -173 | - | 90 | -6 | -89 | 72 | -17 |
| Equity-settled share-based payment plans |
- | - | 4 387 | - | - | - | 4 387 | 62 | 4 449 |
| Creation of new shares | 655 | 4 710 | - | - | - | - | 5 365 | - | 5 365 |
| Treasury shares | |||||||||
| transactions | - | - | -9 235 | 16 773 | - | - | 7 538 | - | 7 538 |
| Dividends | - | - | -50 472 | - | - | - | -50 472 | -17 791 | -68 263 |
| Balance as at | |||||||||
| 31 December 2016 | 177 612 | 36 594 | 1 432 394 | -127 974 | 4 286 | -55 820 | 1 467 092 | 130 801 | 1 597 893 |
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. 2015 amounts have been affected by minor restatements (see note 2.7. 'Restatement and reclassification effects').
| in thousands of € - Year ended 31 December | Notes | 2015 | 2016 | |
|---|---|---|---|---|
| Operating activities | ||||
| Operating result (EBIT) | 5.1. / 5.2. | 219 386 | 259 654 | |
| Non-cash items included in operating result | 7.1. | 246 973 | 256 227 | |
| Investing items included in operating result | 7.1. | -13 551 | 1 034 | |
| Amounts used on provisions and employee benefit obligations | 7.1. | -40 807 | -44 864 | |
| Income taxes paid | 5.5. / 7.1. | -56 657 | -96 388 | |
| Gross cash flows from operating activities | 355 344 | 375 663 | ||
| Change in operating working capital | 6.7. | 212 266 | 16 336 | |
| Other operating cash flows | 7.1. | 15 952 | 7 553 | |
| Cash flows from operating activities | 583 562 | 399 552 | ||
| Investing activities | ||||
| New business combinations | 7.2. | -129 833 | 40 917 | |
| Other portfolio investments | 7.1. | -109 559 | -41 | |
| Proceeds from disposals of investments | 7.2. | 30 761 | 13 | |
| Dividends received | 6.4. | 18 411 | 22 422 | |
| Purchase of intangible assets | 6.1. / 7.2. | -5 868 | -5 955 | |
| Purchase of property, plant and equipment | 6.3. | -170 702 | -158 529 | |
| Other investing cash flows | 7.1. | 3 806 | 1 187 | |
| Cash flows from investing activities | -362 984 | -99 986 | ||
| Financing activities Interest received |
5.3. | 7 320 | 7 338 | |
| Interest paid | 5.3. | -64 302 | -63 397 | |
| Gross dividend paid to shareholders of NV Bekaert SA | -48 006 | -50 472 | ||
| Gross dividend paid to non-controlling interests | -7 560 | -17 505 | ||
| Proceeds from non-current interest-bearing debt | 6.17. | 145 151 | 172 072 | |
| Repayment of non-current interest-bearing debt | 6.17. | -127 945 | -375 255 | |
| Cash flows from / to (-) current interest-bearing debt | 6.17. | -184 093 | -5 567 | |
| Treasury shares transactions | 6.13. | 1 206 | 7 538 | |
| Other financing cash flows | 7.1. | 10 421 | 23 193 | |
| Cash flows from financing activities | -267 808 | -302 055 | ||
| Net increase or decrease (-) in cash and cash equivalents | -47 230 | -2 489 | ||
| Cash and cash equivalents at the beginning of the period | 458 542 | 401 771 | ||
| Effect of exchange rate fluctuations | -9 541 | -25 495 | ||
| Cash and cash equivalents reclassified as held for sale | 6.11. | - | -8 241 | |
| Cash and cash equivalents at the end of the period | 401 771 | 365 546 |
The accompanying notes are an integral part of this statement. 2015 amounts have been affected by minor restatements (see note 2.7. 'Restatement and reclassification effects').
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 22 March 2017.
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 main impact from newly adopted IFRS policies relates to the amended IAS 19 'Employee Benefits' included in Annual Improvements to IFRSs (2012- 2014 Cycle) (effective 1 January 2016) published in September 2014. This amendment clarifies that, for currencies for which there is no deep market in high quality corporate bonds, the discount rate to be used for post-employment 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. The amendment affects the discount rate to be applied to the defined-benefit plans at Ideal Alambrec SA (Ecuador), a subsidiary with US dollar functional currency, and has an effect of € -5.6 million on equity at 1 January 2015.
The following amended standards have been adopted in the current period but 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.
Discontinued Operations', elaborating on changes in methods of disposal; IFRS 7 'Financial Instruments: Disclosures', clarifying continuing involvement in transferred financial assets through servicing contracts and the applicability of the amendments to IFRS 7 to condensed interim financial statements; and IAS 34 'Interim Financial Reporting', regulating disclosure of information elsewhere in the interim financial report.
The Group did not elect for early application of the following new or amended standards, which could have an impact when applied:
The Group does not anticipate that the application of the IFRS 9 requirements neither for the expected loss model nor for hedge accounting will have a material impact on the Group's consolidated financial statements. Bekaert very rarely applies hedge accounting. Since the merger with Bridon, the Group currently has a very limited number of cash flow hedges. As facts and circumstances may change during the period leading up to the initial date of application of IFRS 9, which is expected to be 1 January 2018 as the Group does not intend to early apply the standard, the assessment of the potential impact is subject to change.
The Group recognizes revenue from the following sources: delivery of products and to a limited extent of services, and construction contracts. During 2016, Bekaert preliminarily assessed that the delivery of goods and services represent two separate performance obligations. Revenue will be recognized for each of these performance obligations when control over the corresponding goods and services is transferred to the customer. This is similar to the current identification of separate revenue components under IAS 18. Furthermore, we do not expect the allocation of revenue to be significantly different from that currently determined. The timing of revenue recognition of each of these performance
obligations are also expected to be consistent with current practice. As regards the construction contracts, the Group has specifically considered IFRS 15 guidance on contract combinations, variable consideration, and the assessment of whether there is a significant financing component in the contracts. The Group has preliminarily assessed that revenue from these construction contracts should be recognized over time as the customer controls the machinery during the course of construction by the Group. Furthermore, the Group considers that the input method currently used to measure progress towards complete satisfaction of these performance obligations will continue to be appropriate under IFRS 15.
The Group is still in the process of assessing the full impact of the application of IFRS 15 on the Group's financial statements and it is not practicable to provide a reasonable financial estimate of the effect until there is a complete detailed review. As a result, the above preliminary assessment is subject to change. Bekaert does not intend to early apply the standard and intends to use the cumulative effect method upon adoption.
IAS 17 does not require the recognition of any right-of-use asset or liability for future payments for these leases; instead, certain information is disclosed as operating lease commitments in 7.4. 'Contingencies and commitments'. As at 31 December 2016, the Group has operating lease commitments for a nominal amount of € 100.5 million. A preliminary assessment indicates that these arrangements will meet the definition of a lease under IFRS 16, and hence the Group will recognize a right-of-use asset and a corresponding liability in respect of all these leases unless they qualify for low value or shortterm leases upon the application of IFRS 16. The new requirement to recognize a right-of-use asset and a related lease liability is expected to have a significant impact on the amounts recognized in the Group's consolidated financial statements and the Group is currently assessing its potential impact. It is not practicable to provide a reasonable estimate of the financial effect until the review is complete.
Other new and amendments to standards and interpretations effective after 2016 are not expected to have a material impact on the financial statements.
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, the income statement and the comprehensive income statement. 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:
IAS 21, 'The Effects of Changes in Foreign Exchange Rates';
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:
(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 their 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 & 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. When 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. Impairment losses on availablefor-sale financial assets are never reversed through income statement. 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 costs 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 assumptions.
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.
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. Before 2015 the defined-contribution plans in Belgium were basically accounted for as definedcontribution plans. New legislation dated December 2015 however triggered the qualification. As a consequence, the defined-contribution plans are reported as defined-benefit obligations, whereby as from year end 2016 an actuarial valuation was performed.
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, performance share plan and personal shareholding requirement plan which allow Group employees to acquire shares of NV Bekaert SA are of the equity-settled type.
Share appreciation rights and Performance Share Units are of the cash-settled 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 binomial models or Monte Carlo simulations to determine the fair value of the sharebased 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- 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. Deferred taxes are measured using the tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be realized or Bekaert Annual Report 2016 Financial Review 17
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.
Derivatives embedded in non-derivative host contracts are treated as separate derivatives when they meet the definition of a derivative, their risks and characteristics are not closely related to those of the host contract and the host contract is not measured at fair value through profit or loss.
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.
In order to comply with ESMA guidelines, the term 'non-recurring' is no longer used. The amounts previously reported under 'non-recurring' are reported as part of the other operating expenses and revenues. The 'EBIT' and 'EBITDA' terms have been retained as such, while 'REBIT' and 'REBITDA' have been replaced with 'EBIT-Underlying' and 'EBITDA-Underlying'.
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 excluded from Underlying EBIT(DA) measures. 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 one-time effects. One-time effects from business combinations mainly include: acquisition-related expenses, negative goodwill, gains and losses on step acquisition, and recycling of CTA on the interest previously held. One-time effects 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 these 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.
The 2015 comparative information has been restated due to:
(a) The application of the amendment to IAS 19 'Employee benefits' coming into effect in 2016.
The appropriate discount factor in accounting for employee benefit obligations should be currency based and no longer country based. Moreover this principle should be applied retrospectively, requiring a restatement of the comparative period. The amended standard affects the defined-benefit plans in Ecuador, where a reference is made to USD bonds, both on defined-benefit obligation (€ 5.6 million) and on benefit expense level.
The 2015 comparative information has been reclassified due to:
(b) The ESMA guidelines on alternative performance measures.
The term 'non-recurring' is no longer used. The amounts previously reported under 'non-recurring' are reported as part of the other operating expenses and revenues. Terms as 'EBIT' and 'EBITDA' have been retained as such, while 'REBIT' and 'REBITDA' have been replaced with 'EBIT-Underlying' and 'EBITDA-Underlying'.
(c) Acquisition-related external professional fees.
Similar to the treatment of professional fees in relation to the divestment of a business, fees for acquisitionrelated professional services rendered by third parties are presented as other operating expenses and excluded from Underlying EBIT(DA). This does not apply to services rendered for integration programs related to acquired companies. The accounts have been reclassified in this respect for an amount of € 9.3 million (decrease of administrative expenses).
(d) Accrued interest income and accrued interest charges.
In accordance with IFRS, financial assets and liabilities, except for specific categories which are carried at fair value, are carried at amortized cost using the effective interest method, which basically means that accrued interests are included. Therefore, in order to enhance presentation consistency and compliance, accrued interest income (2015: € 1.6 million) is reclassified (within other current assets) from accrued income to current financial receivables, while accrued interest charges (2015: € 6.5 million) are reclassified from other current liabilities to current interest-bearing debt. Both of these reclassifications also affect the net debt.
The IAS 19 restatements effects in the statement of changes in equity have been presented as adjustments of the opening balances. For the purpose of this annual report, the reclassifications and restatement effects are not presented on the face of the other financial statements. They are summarized below in a concise format and referenced to one of the above restatement elements (a, b, c or d) where appropriate.
| Consolidated income statement | 2015 as | 2015 | 2015 |
|---|---|---|---|
| in thousands of € - Year ended 31 December | published | restatement | as restated |
| Cost of sales (a) | -3 072 673 | -733 | -3 073 407 |
| Gross profit | 598 408 | -733 | 597 674 |
| Administrative expenses (c) | -150 005 | 9 326 | -140 679 |
| Other operating revenues (b) | 17 120 | 68 396 | 85 516 |
| Other operating expenses (b) + (c) | -21 931 | -80 491 | -102 422 |
| Operating result (EBIT) | 220 120 | -733 | 219 386 |
| Non-recurring items (b) | -2 769 | 2 769 | - |
| EBIT - Underlying (b) | 222 889 | 8 593 | 231 482 |
| Interest expenses (a) | -70 941 | 183 | -70 758 |
| Result before taxes | 123 953 | -550 | 123 403 |
| Income taxes (a) | -36 387 | 128 | -36 259 |
| Result after taxes (consolidated companies) | 105 886 | -422 | 105 464 |
| RESULT FOR THE PERIOD | 105 886 | -422 | 105 464 |
| Attributable to | |||
| the Group | 101 969 | -247 | 101 722 |
| non-controlling interests | 3 917 | -176 | 3 742 |
| Earnings per share | 2015 as | 2015 | 2015 |
| in € per share | published | restatement | as restated |
| Result for the period attributable to the Group | |||
| Basic | 1.826 | -0.004 | 1.822 |
| Diluted | 1.819 | -0.004 | 1.814 |
| Consolidated statement of comprehensive income | 2015 as | 2015 | 2015 |
|---|---|---|---|
| in thousands of € - Year ended 31 December | published | restatement | as restated |
| Result for the period | 105 886 | -422 | 105 464 |
| Other comprehensive income (OCI) | |||
| Other comprehensive income reclassifiable to income statement in subsequent periods |
|||
| Exchange differences | |||
| Exchange differences arising during the year (a) | -16 463 | -612 | -17 075 |
| OCI reclassifiable to income statement in subsequent | |||
| periods, after tax | -16 755 | -612 | -17 367 |
| Other comprehensive income non-reclassifiable to income statement in subsequent periods |
|||
| Remeasurement gains and losses on defined-benefit plans (a) | 11 321 | 3 152 | 14 473 |
| Deferred taxes relating to non-reclassifiable OCI (a) | 130 | -733 | -603 |
| OCI non-reclassifiable to income statement in subsequent periods, after tax |
11 421 | 2 419 | 13 840 |
| Other comprehensive income for the period | -5 334 | 1 808 | -3 527 |
| TOTAL COMPREHENSIVE INCOME FOR THE PERIOD | 100 552 | 1 385 | 101 937 |
| Attributable to | |||
| the Group | 91 184 | 809 | 91 993 |
| non-controlling interests | 9 368 | 576 | 9 944 |
| Assets as at 31 December in thousands of € |
2015 as published |
2015 restatement |
2015 as restated |
|---|---|---|---|
| Non-current assets | |||
| Deferred tax assets (a) | 131 204 | 1 290 | 132 494 |
| Total | 3 881 119 | 1 290 | 3 882 409 |
| Equity and liabilities as at 31 December in thousands of € |
2015 as published |
2015 restatement |
2015 as restated |
| Retained earnings (a) | 1 397 356 | -247 | 1 397 110 |
| Other Group reserves (a) | -76 751 | -2 241 | -78 993 |
| Equity attributable to the Group | 1 384 699 | -2 488 | 1 382 211 |
| Non-controlling interests (a) | 131 212 | -1 772 | 129 440 |
| Non-current liabilities | 1 077 862 | 5 550 | 1 083 412 |
| Employee benefit obligations (a) | 167 131 | 5 550 | 172 681 |
| Current liabilities | 1 287 346 | - | 1 287 346 |
| Interest-bearing debt (d) | 494 714 | 6 510 | 501 224 |
| Other current liabilities (d) | 71 763 | -6 510 | 65 253 |
| Total | 3 881 119 | 1 290 | 3 882 409 |
| Consolidated cash flow statement in thousands of € - Year ended 31 December |
2015 as published |
2015 restatement |
2015 as restated |
|---|---|---|---|
| Operating activities | |||
| Operating result (EBIT) | 220 120 | -733 | 219 386 |
| Non-cash items included in operating result (a) | 246 239 | 733 | 246 973 |
| Gross cash flows from operating activities | 355 344 | - | 355 344 |
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. 'Key sources of estimation uncertainty' below), that have a significant effect on the amounts reported in the consolidated financial statements.
In spite of the political and monetary instability, management was able to keep the company operational and hence concluded that it is still in control. At year-end 2016, the cumulative translation adjustments amount to € -54.7 million, which - in case of loss of control - would be recycled to income statement.
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.
Impairment: the Group performs annual impairment tests on goodwill and on cashgenerating units for which there are indicators that the carrying amount might be higher than the recoverable amount. This analysis is based upon assumptions such as market evolution, market share, margin evolution and discount rates (see note 6.2. 'Goodwill').
According to Chinese tax legislation and regulation, certain entities of the Group which enjoy preferential treatment in the form of a reduced income tax rate are granted a gradual transition to the statutory tax rate over a five year period. Based on current practice, management judges that the investments comply with the conditions for this tax incentive. Should the tax regulation or practice change in this area, the Company may be required to update its tax liabilities or provisions.
The Group basically uses a geographical segmentation since this is the best way to evaluate the nature and financial performance of the business as a whole. The segmentation reflects the importance of the regions for the Group's global growth strategy. The Group'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 Group sells the vast majority of its production volumes in the region where they are manufactured.
In addition to the four regional segments, the newly established Bridon-Bekaert Ropes Group ('BBRG') has been identified as a separate reportable segment in accordance with IFRS 8 'Operating Segments', since its financial information is regularly reviewed by the Group's chief operating decision maker in order to allocate resources and assess its performance.
As from 2016 onwards, the following five reporting segments are presented:
As the merger was finalized on June 28, 2016, the newly merged Bridon business only contributed to the 2016 operating results for half a year.
Previous year's figures have been restated and all elements relating to Bekaert's existing advanced cords and global ropes businesses have been taken out of their respective regional segments and are now presented under BBRG.
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. Intersegment eliminations mainly include eliminations of receivables and payables, and margin eliminations on transfers of fixed assets and goods and related adjustments to depreciation and amortization.
| 2016 in thousands of € |
EMEA | North America |
Latin America |
Asia Pacific |
Group & Business support |
BBRG | Intersegment | eliminations Consolidated |
|---|---|---|---|---|---|---|---|---|
| Net sales | 1 148 308 | 512 331 | 681 834 | 1 052 364 | - | 320 380 | - | 3 715 217 |
| Operating result (EBIT) | 135 527 | 26 043 | 66 599 | 100 431 | -63 438 | -8 699 | 3 191 | 259 654 |
| EBIT - Underlying | 140 660 | 26 009 | 66 851 | 119 204 | -64 209 | 13 247 | 3 190 | 304 952 |
| Depreciation and amortization | 57 863 | 12 903 | 21 839 | 101 598 | 3 142 | 21 103 | -14 531 | 203 917 |
| Impairment losses | 390 | 20 | -236 | 17 247 | -40 | 481 | - | 17 862 |
| EBITDA | 193 780 | 38 966 | 88 202 | 219 276 | -60 336 | 12 885 | -11 340 | 481 433 |
| Segment assets | 881 478 | 299 775 | 464 210 | 1 114 595 | 175 997 | 613 364 | -198 624 | 3 350 795 |
| Unallocated assets | 953 518 | |||||||
| Total assets | 4 304 313 | |||||||
| Segment liabilities | 239 944 | 62 482 | 117 657 | 179 051 | 115 450 | 91 507 | -105 240 | 700 851 |
| Unallocated liabilities | 2 005 569 | |||||||
| Total liabilities | 2 706 420 | |||||||
| Capital employed | 641 534 | 237 293 | 346 553 | 935 544 | 60 547 | 521 857 | -93 384 | 2 649 944 |
| Weighted average capital employed | 637 681 | 222 428 | 402 515 | 976 001 | 57 042 | 384 935 | -94 896 | 2 585 706 |
| Return on weighted average capital employed (ROCE) 1 |
21.3% | 11.7% | 16.5% | 10.3% | - | -2.3% | - | 10.0% |
| Capital expenditure – PP&E | 51 745 | 20 848 | 14 349 | 58 814 | 10 028 | 13 944 | -11 199 | 158 529 |
| Capital expenditure – intangible assets |
1 779 | - | 1 315 | 850 | 2 053 | 48 | -90 | 5 955 |
| Share in the results of joint ventures and associates |
- | - | 25 445 | - | - | - | - | 25 445 |
| Investments in joint ventures and associates |
- | - | 146 582 | - | - | - | - | 146 582 |
| Number of employees (year-end) 2 |
6 552 | 1 293 | 3 827 | 9 494 | 1 800 | 2 494 | - | 25 460 |
| 2015 redefined 3 in thousands of € |
EMEA | North America |
Latin America |
Asia Pacific |
Group & Business support |
BBRG | Intersegment | eliminations Consolidated |
|---|---|---|---|---|---|---|---|---|
| Net sales | 1 173 786 | 527 567 | 711 617 | 1 018 896 | - | 239 215 | - | 3 671 081 |
| Operating result (EBIT) | 134 987 | 27 367 | 45 372 | 57 876 | -79 170 | 28 736 | 4 218 | 219 386 |
| EBIT - Underlying | 128 440 | 13 706 | 45 965 | 69 240 | -59 444 | 29 357 | 4 218 | 231 482 |
| Depreciation and amortization | 55 105 | 10 460 | 23 588 | 109 164 | 10 700 | 13 831 | -14 447 | 208 401 |
| Impairment losses | 72 | - | 426 | 12 487 | -62 | 339 | - | 13 262 |
| Negative goodwill | - | - | - | -340 | - | - | - | -340 |
| EBITDA | 190 164 | 37 827 | 69 386 | 179 187 | -68 532 | 42 906 | -10 229 | 440 709 |
| Segment assets | 847 842 | 269 556 | 508 513 | 1 167 900 | 147 901 | 278 351 | -186 236 | 3 033 827 |
| Unallocated assets | 848 582 | |||||||
| Total assets | 3 882 409 | |||||||
| Segment liabilities | 214 016 | 61 926 | 110 076 | 160 434 | 94 560 | 34 308 | -89 852 | 585 468 |
| Unallocated liabilities | 1 785 290 | |||||||
| Total liabilities | 2 370 758 | |||||||
| Capital employed | 633 826 | 207 630 | 398 437 | 1 007 466 | 53 341 | 244 043 | -96 384 | 2 448 359 |
| Weighted average capital employed | 665 260 | 195 323 | 413 848 | 1 063 938 | 68 484 | 233 562 | -108 139 | 2 532 276 |
| Return on weighted average capital employed (ROCE) 1 |
20.3% | 14.0% | 11.0% | 5.4% | - | 12.3% | - | 8.7% |
| Capital expenditure – PP&E | 44 698 | 46 425 | 18 288 | 42 584 | 4 770 | 26 290 | -12 353 | 170 702 |
| Capital expenditure – intangible assets |
3 783 | - | 439 | 439 | 1 145 | 62 | - | 5 868 |
| Share in the results of joint ventures and associates |
- | - | 24 268 | -5 948 | - | - | - | 18 320 |
| Investments in joint ventures and associates |
- | - | 114 119 | - | - | - | - | 114 119 |
| Number of employees (year-end) 2 |
6 459 | 1 276 | 3 995 | 8 954 | 1 731 | 1 251 | - | 23 666 |
1 ROCE: Operating result (EBIT) relative to weighted average capital employed.
2Number of employees: full-time equivalents.
3See note 2.7. 'Restatement and reclassification effects'.
| 2015 as reported | North | Latin | Asia | Group & Business |
Intersegment | ||
|---|---|---|---|---|---|---|---|
| in thousands of € | EMEA | America | America | Pacific | support | eliminations Consolidated | |
| Net sales | 1 227 350 | 593 013 | 764 464 | 1 086 254 | - | - | 3 671 081 |
| Operating result (EBIT) | 144 937 | 33 216 | 45 206 | 70 912 | -79 169 | 5 018 | 220 120 |
| EBIT - Underlying | 138 963 | 19 604 | 45 799 | 82 275 | -68 770 | 5 018 | 222 889 |
| Depreciation and amortization | 56 389 | 12 745 | 26 474 | 116 538 | 10 701 | -14 446 | 208 401 |
| Impairment losses | 89 | - | 426 | 12 809 | -62 | - | 13 262 |
| Negative goodwill | - | - | - | -340 | - | - | -340 |
| EBITDA | 201 415 | 45 961 | 72 106 | 199 919 | -68 530 | -9 428 | 441 443 |
| Segment assets | 883 520 | 334 539 | 582 091 | 1 269 072 | 148 149 | -183 544 | 3 033 827 |
| Unallocated assets | 847 292 | ||||||
| Total assets | 3 881 119 | ||||||
| Segment liabilities | 223 960 | 68 157 | 113 251 | 172 526 | 94 808 | -87 234 | 585 468 |
| Unallocated liabilities | 1 779 740 | ||||||
| Total liabilities | 2 365 208 | ||||||
| Capital employed | 659 560 | 266 382 | 468 840 | 1 096 546 | 53 341 | -96 310 | 2 448 359 |
| Weighted average capital employed | 687 933 | 248 822 | 486 344 | 1 149 190 | 68 523 | -108 536 | 2 532 276 |
| Return on weighted average capital employed (ROCE) 1 |
21.1% | 13.3% | 9.3% | 6.2% | - | - | 8.7% |
| Capital expenditure – PP&E | 47 677 | 55 387 | 24 261 | 50 185 | 4 770 | -11 578 | 170 702 |
| Capital expenditure – intangible assets |
3 783 | 22 | 478 | 440 | 1 145 | - | 5 868 |
| Share in the results of joint ventures and associates |
- | - | 24 268 | -5 948 | - | - | 18 320 |
| Investments in joint ventures and associates |
- | - | 114 119 | - | - | - | 114 119 |
| Number of employees | |||||||
| (year-end) 2 | 6 584 | 1 496 | 4 452 | 9 403 | 1 731 | - | 23 666 |
1 ROCE: Operating result (EBIT) relative to weighted average capital employed.
2 Number of employees: full-time equivalents.
| in thousands of € | 2015 | 2016 | Variance (%) |
|---|---|---|---|
| Net sales | |||
| Rubber reinforcement products | 1 503 081 | 1 582 363 | 5.3% |
| Other steel wire products | 1 765 544 | 1 649 297 | -6.6% |
| Stainless products | 153 257 | 154 881 | 1.1% |
| Steel and synthetic ropes, advanced cords (BBRG) | 239 215 | 320 380 | 33.9% |
| Other | 9 984 | 8 296 | -16.9% |
| Total | 3 671 081 | 3 715 217 | 1.2% |
Rubber reinforcement products include tire cord, bead wire and hose reinforcement wire. Other steel wire products include industrial steel wires, specialty steel wires (including stainless wires), building products and sawing wire. Stainless products include fibers and combustion products for heating and drying.
BBRG products are presented separately. The other product groups are sold in all regional 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, the USA and Slovakia for Bekaert in terms of revenues and non-current assets (i.e. intangible assets, goodwill, property, plant and equipment).
| in thousands of € | 2015 | % of total | 2016 | % of total |
|---|---|---|---|---|
| Net sales from Belgium | 326 590 | 9% | 324 179 | 9% |
| Net sales from Chile | 312 832 | 9% | 318 082 | 9% |
| Net sales from China | 746 433 | 20% | 774 198 | 21% |
| Net sales from USA | 536 905 | 15% | 551 703 | 15% |
| Net sales from Slovakia | 276 089 | 8% | 297 834 | 8% |
| Net sales from other countries | 1 472 232 | 39% | 1 449 221 | 38% |
| Total net sales | 3 671 081 | 100% | 3 715 217 | 100% |
| Non-current assets located in Belgium | 114 319 | 7% | 123 312 | 7% |
| Non-current assets located in Chile | 96 475 | 6% | 103 216 | 6% |
| Non-current assets located in China | 568 863 | 35% | 466 890 | 26% |
| Non-current assets located in USA | 137 566 | 8% | 163 200 | 9% |
| Non-current assets located in Slovakia | 151 732 | 9% | 142 917 | 8% |
| Non-current assets located in other countries | 566 646 | 35% | 807 901 | 44% |
| Total non-current assets | 1 635 601 | 100% | 1 807 436 | 100% |
| in thousands of € | 2015 | 2016 | variance |
|---|---|---|---|
| Sales | 3 671 081 | 3 715 217 | 44 136 |
| Cost of sales 1 | -3 073 407 | -3 025 225 | 48 182 |
| Gross profit | 597 674 | 689 992 | 92 318 |
| Selling expenses | -156 106 | -175 340 | -19 234 |
| Administrative expenses 1 | -140 679 | -139 558 | 1 121 |
| Research and development expenses | -64 597 | -63 590 | 1 007 |
| Other operating revenues 1 | 85 516 | 24 376 | -61 140 |
| Other operating expenses 1 | -102 422 | -76 226 | 26 196 |
| Operating result (EBIT) | 219 386 | 259 654 | 40 268 |
| EBIT - Underlying | 231 482 | 304 952 | 73 470 |
1 See note 2.7. 'Restatement and reclassification effects'.
| Sales and gross profit in thousands of € |
2015 | 2016 | variance (%) |
|---|---|---|---|
| Sales | 3 671 081 | 3 715 217 | 1.2% |
| Cost of sales 1 | -3 073 407 | -3 025 225 | -1.6% |
| Gross profit | 597 674 | 689 992 | 15.4% |
| Gross profit in % of sales | 16.3% | 18.6% |
1 See note 2.7. 'Restatement and reclassification effects'.
Bekaert's consolidated sales increased by 1.2% versus last year. The organic volume growth of 4.1% over the year (net of Vicson) stemmed from firm demand in global automotive markets and steadily increasing sales volumes in industrial steel wire and construction markets. This growth was largely offset in Bekaert's top line by the lower wire rod prices and price-mix effects (-3.4%). The net impact of this year's acquisitions (integration of Bridon ropes plants) and divestments (stainless steel activities) explained 2.6% of the sales increase. Unfavorable currency movements (-2.2%) (mainly related to Chinese renminbi, Chilean and Colombian peso) weakened this evolution.
Gross profit increased by 15.4% compared to 2015, resulting in a margin of 18.6%, mainly reflecting the success of the transformation programs which are driving excellence, cost savings and value creating growth. The newly acquired businesses contributed for 2.4% and there is also a small impact of negative currency movements (-0.3%).
| Overheads in thousands of € |
2015 | 2016 | variance (%) |
|---|---|---|---|
| Selling expenses | -156 106 | -175 340 | 12.3% |
| Administrative expenses 1 | -140 679 | -139 558 | -0.8% |
| Research and development expenses | -64 597 | -63 590 | -1.6% |
| Total | -361 382 | -378 488 | 4.7% |
1 See note 2.7. 'Restatement and reclassification effects'.
The overheads slightly increased to 10.2% of sales. The increase in selling expenses (€ 19.2 million) reflects to a large extent the impact of acquisitions/divestments (€ 9.6 million) and consultancy costs related to the 'Customer Excellence program' (€ 7.8 million); partly offset by a positive impact from currency movements (€ 2.8 million). Administrative expenses slightly decreased (€ 1.1 million). The impact of acquisitions/divestments (€ 13.7 million) was more than offset by overhead cost reductions. Among others, consultancy costs related to the Manufacturing Excellence program were reduced to a minimum (€ 6.7 million savings). R&D expenses (€ 1.0 million) decreased as a result of better project management.
| in thousands of € | 2015 | 2016 | variance |
|---|---|---|---|
| Royalties received | 9 227 | 8 996 | -231 |
| Gains on disposal of PP&E and intangible assets | 610 | 565 | -45 |
| Realized exchange results on sales and purchases | -950 | -1 258 | -308 |
| Government grants | 415 | 915 | 500 |
| Reversal impairment losses (restructuring and other) | 1 469 | 2 146 | 677 |
| Restructuring - other revenues | 5 005 | 3 975 | -1 030 |
| Reversal write-down inventories/trade receivables | - | 1 077 | 1 077 |
| Gains on business disposals | 16 553 | - | -16 553 |
| Negative goodwill on business combinations | 340 | - | -340 |
| Other revenues | 52 847 | 7 960 | -44 887 |
| Total | 85 516 | 24 376 | -61 140 |
1 See note 2.7. 'Restatement and reclassification effects'.
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 revenues' in 2015 mainly report the outcome of the final assessment on the compensations from the insurance company following the fire in the Rome plant (USA) in 2014.
| in thousands of € | 2015 | 2016 | variance |
|---|---|---|---|
| Royalties paid | -2 762 | 53 | 2 815 |
| Losses on disposal of PP&E and intangible assets | -1 970 | -1 490 | 480 |
| Amortization of intangible assets | -2 970 | -2 849 | 121 |
| Bank charges | -3 019 | -2 933 | 86 |
| Tax related expenses (other than income taxes) | -2 705 | -2 360 | 345 |
| Impairment losses (restructuring and other) | -12 595 | -17 886 | -5 291 |
| Restructuring - other expenses | -24 863 | -27 487 | -2 624 |
| Losses on business disposals | -3 292 | - | 3 292 |
| Losses on step acquisitions | -1 098 | - | 1 098 |
| Acquisition-related expenses 1 | -9 326 | -8 639 | 687 |
| Other expenses | -37 822 | -12 635 | 25 187 |
| Total | -102 422 | -76 226 | 26 196 |
1 See note 2.7. 'Restatement and reclassification effects'.
Other operating expenses mainly related to restructuring expenses in Turkey, Malaysia and Bridon-Bekaert Ropes Group (€ -27.1 million), impairment losses on PP&E in Huizhou, China (€ -16.2 million) and M&A transaction fees (€ -8.6 million).
'Other expenses' in 2015 mainly relate to business interruption losses due to the fire in the Rome plant (USA) in 2014.
| Reconciliation Underlying EBIT | |||
|---|---|---|---|
| in thousands of € | 2015 | 2016 | variance |
| Operating result (EBIT) | 219 386 | 259 654 | 40 268 |
| Reversal impairment losses (restructuring and other) | 1 469 | 2 146 | 677 |
| Restructuring - other revenues | 5 005 | 3 975 | -1 030 |
| Reversal write-down inventories/trade receivables | - | 1 077 | 1 077 |
| Gains on business disposals | 16 553 | - | -16 553 |
| Negative goodwill on business combinations | 340 | - | -340 |
| Other revenues | 45 029 | 4 697 | -40 332 |
| Impairment losses (restructuring and other) | -12 595 | -17 886 | -5 291 |
| Restructuring - other expenses | -24 863 | -27 487 | -2 624 |
| Losses on business disposals | -3 292 | - | 3 292 |
| Losses on step acquisitions | -1 098 | - | 1 098 |
| Acquisition-related expenses | -9 326 | -8 639 | 687 |
| Other expenses | -29 318 | -3 181 | 26 137 |
| EBIT - Underlying | 231 482 | 304 952 | 73 470 |
The table below provides information on the major items contributing to the operating result (EBIT), categorized by nature.
| in thousands of € | 2015 | 2016 | ||
|---|---|---|---|---|
| Sales | 3 671 081 | 100% | 3 715 217 | 100% |
| Other operating revenues | 84 047 | - | 22 230 | - |
| Total operating revenues | 3 755 128 | - | 3 737 447 | - |
| Own construction of PP&E | 53 014 | 1.4% | 53 859 | 1.4% |
| Raw materials | -1 279 035 | -34.8% | -1 182 873 | -31.8% |
| Semi-finished products and goods for resale | -256 000 | -7.0% | -282 910 | -7.6% |
| Change in work-in-progress and finished goods | -15 031 | -0.4% | 5 657 | 0.2% |
| Staff costs 1 | -743 590 | -20.3% | -772 547 | -20.8% |
| Depreciation and amortization | -208 401 | -5.7% | -203 917 | -5.5% |
| Impairment losses | -13 262 | -0.4% | -17 862 | -0.5% |
| Transport and handling of finished goods | -165 922 | -4.5% | -159 342 | -4.3% |
| Consumables and spare parts | -260 683 | -7.1% | -266 388 | -7.2% |
| Utilities | -264 203 | -7.2% | -255 285 | -6.9% |
| Maintenance and repairs | -60 260 | -1.6% | -60 975 | -1.6% |
| Expenses operating leases | -23 286 | -0.6% | -26 955 | -0.7% |
| Commissions in selling expenses | -3 690 | -0.1% | -6 170 | -0.2% |
| Export VAT and export customs duty | -30 428 | -0.8% | -30 271 | -0.8% |
| ICT costs | -29 595 | -0.8% | -32 728 | -0.9% |
| Advertising and sales promotion | -7 203 | -0.2% | -7 191 | -0.2% |
| Travel, restaurant & hotel | -25 239 | -0.7% | -28 150 | -0.8% |
| Consulting and other fees | -40 456 | -1.1% | -41 799 | -1.1% |
| Office supplies and equipment | -12 863 | -0.4% | -13 071 | -0.4% |
| Venture capital funds R&D | -1 819 | 0.0% | -2 180 | -0.1% |
| Temporary or external labor | -25 619 | -0.7% | -27 031 | -0.7% |
| Insurance expenses | -8 768 | -0.2% | -6 989 | -0.2% |
| Miscellaneous | -113 402 | -3.1% | -112 675 | -3.0% |
| Total operating expenses | -3 535 742 | -96.3% | -3 477 793 | -93.6% |
| Operating result (EBIT) | 219 386 | 6.0% | 259 654 | 7.0% |
1 See note 2.7. 'Restatement and reclassification effects'.
| in thousands of € | 2015 | 2016 |
|---|---|---|
| Interest income on financial assets not classified as at FVTPL | 8 585 | 6 325 |
| Interest income | 8 585 | 6 325 |
| Interest expense on interest-bearing debt not classified as at FVTPL | -55 864 | -64 581 |
| Other debt-related interest expense | -8 123 | -7 673 |
| Interest expense | -63 987 | -72 254 |
| Interest element of interest-bearing provisions 1 | -6 771 | -7 239 |
| Interest expense | -70 758 | -79 493 |
| Total | -62 173 | -73 168 |
1 See note 2.7. 'Restatement and reclassification effects'.
The higher gross debt in the second half of 2016 (Bridon-Bekaert Ropes Group) and a higher average interest rate explains the increase in interest expense. 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 and interest-rate risk mitigating derivatives designated as economic hedges.
The interest element of interest-bearing provisions mainly relates to the defined-benefit liabilities (see note 6.15. 'Employee benefit obligations') and other provisions (see note 6.16 'Provisions').
| in thousands of € | 2015 | 2016 |
|---|---|---|
| Value adjustments to derivatives | 14 973 | -30 916 |
| Value adjustments to hedged items | -2 424 | - |
| Exchange results on hedged items | -29 784 | -14 556 |
| Net impact of derivatives and hedged items | -17 235 | -45 472 |
| Other exchange results | -7 172 | -8 088 |
| Impairment losses on available-for-sale financial assets | -302 | -591 |
| Inflation accounting effects | 5 280 | 5 818 |
| Gains and losses on disposal of financial assets | -76 | 1 |
| Gains and losses on settlement of financial liabilities | - | -2 467 |
| Dividends from non-consolidated equity investments | 742 | 374 |
| Bank charges and taxes on financial transactions | -5 388 | -2 540 |
| Impairments of loans and receivables | -9 235 | 12 |
| Reversal of impairments of loans and receivables | - | 16 326 |
| Other | -424 | -831 |
| Total | -33 810 | -37 458 |
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. 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'.
A fair value loss of € 42.7 million has been recognized in 2016 (2015: gain of € 2.1 million) on the conversion option relating to the convertible debt settled in June 2016 (refer to the 'Financial instruments by fair value measurement hierarchy' section in note 7.3. 'Financial risk management and financial derivatives'), while the conversion option on the new convertible debt generated a fair value gain of € 5.3 million. In addition to that, a loss on the settlement of financial liabilities of € 2.5 million was incurred on the repurchase of old convertible bonds not exchanged for new ones.
Inflation accounting effects relate to the Venezuelan operations. During 2016, a provision for a corporate guarantee of € 16.3 million relating to Vicson SA (Venezuela) has been reversed (2015: € -9.2 million). In addition, exchange losses of € -9.8 million were incurred on intercompany receivables on Vicson SA. Last year, bank charges and taxes on financial transactions included a stamp duty of € 3.2 million on the business combination with Arrium.
| in thousands of € | 2015 | 2016 |
|---|---|---|
| Current income taxes - current year | -55 725 | -91 970 |
| Current income taxes - prior periods | 2 473 | -1 034 |
| Deferred taxes - due to changes in temporary differences | 16 518 | 43 628 |
| Deferred taxes - due to changes in tax rates | 347 | -395 |
| Deferred taxes - adjustments to tax losses of prior periods | 128 | -12 281 |
| Total tax expense | -36 259 | -62 052 |
In the table below, accounting profit is defined as the result before taxes.
| in thousands of € | 2015 | 2016 |
|---|---|---|
| Result before taxes 1 | 123 403 | 149 028 |
| Tax expense at the theoretical domestic rates applicable to results of taxable entities in | ||
| the countries concerned 1 | -26 958 | -37 302 |
| Tax expense related to distribution of retained earnings | -1 965 | -5 240 |
| Total theoretical tax expense 1 | -28 923 | -42 542 |
| Theoretical tax rate 2 | -23.4% | -28.5% |
| Tax effect of: | ||
| Non-deductible items | -16 903 | -14 722 |
| Other tax rates and special tax regimes 3 | 139 | 7 837 |
| Non-recognition of deferred tax assets 4 | -21 849 | -11 913 |
| Utilization of deferred tax assets not previously recognized 5 | 34 684 | 18 135 |
| Tax relating to prior periods | 2 473 | -13 315 |
| Exempted income 6 | 2 432 | 68 |
| Other 7 | -8 312 | -5 600 |
| Total tax expense | -36 259 | -62 052 |
| Effective tax rate | -29.4% | -41.6% |
1 See note 2.7. 'Restatement and reclassification effects'.
2 The theoretical tax rate is computed as a weighted average. The increase in 2016 vs 2015 is mainly generated by higher profit before tax in countries with higher tax rates.
3 In 2016, the special tax regimes mainly relate to tax incentives in Belgium, the Netherlands, Slovakia and Peru.
4 In 2016, the non-recognition of deferred tax assets mainly relates to impairment of assets in China, losses in the United States and a restructuring provision in Norway while in 2015 it mainly relates to losses in China, Malaysia and India.
5 In 2016, the utilization of deferred tax assets not previously recognized mainly relates to losses carried forward in entities becoming profitable and from an expected transaction in 2017. In 2015, it includes an effect of € 20.1 million of a reorganization in anticipation of the Bridon-Bekaert Ropes Group transaction generating taxable profits in the foreseeable future.
6 Relates in 2015 mainly to the disposal of the Carding Solutions activities and the deconsolidation of Bekaert (Xinyu) New Materials Co Ltd and Bekaert Xinyu Metal Products Co Ltd.
7 Relates in 2016 as well as in 2015 mainly to withholding taxes on royalties, interests, services and dividends. Furthermore, it includes in 2015 € -5.0 million taxes related to a gain on an intercompany share transfer in Chile.
Additional information relating to the Brazilian joint ventures is provided under note 6.4. 'Investments in joint ventures and associates'.
| in thousands of € | 2015 | 2016 | |
|---|---|---|---|
| Joint ventures | |||
| BOSFA Pty Ltd 1 | Australia | 43 | - |
| Belgo Bekaert Arames Ltda | Brazil | 21 725 | 20 574 |
| BMB-Belgo Mineira Bekaert Artefatos de Arame Ltda | Brazil | 2 543 | 4 871 |
| Bekaert (Xinyu) New Materials Co Ltd 2 | China | -4 404 | - |
| Bekaert Xinyu Metal Products Co Ltd 2 | China | -1 587 | - |
| Total | 18 320 | 25 445 |
1 As from 12 June 2015, Bekaert acquired control in BOSFA Pty Ltd (Australia).
2 As from year-end 2015, Bekaert lost significant influence in Bekaert (Xinyu) New Materials Co Ltd and Bekaert Xinyu Metal Products Co Ltd.
| 2016 | Number | |
|---|---|---|
| Weighted average number of ordinary shares (basic) | 56 263 172 | |
| Dilution effect of subscription rights and options | 623 410 | |
| Dilution effect of convertible bonds | - | |
| Weighted average number of ordinary shares (diluted) | 56 886 582 | |
| in thousands of € | Basic | Diluted |
| Result for the period attributable to the Group and to ordinary shareholders | 105 166 | 105 166 |
|---|---|---|
| Effect on earnings of convertible bonds 1 | - | - |
| Earnings | 105 166 | 105 166 |
| Earnings per share (in €) | 1.869 | 1.849 |
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. These comprise subscription rights, options and the convertible bonds. 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 bonds tend to affect both the denominator and the numerator of the EPS ratio. The dilution effect of the convertible bonds 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 bonds and having affected the 'basic' earnings for the period. Following income statement items were affected by the convertible bonds:
The convertible bonds were anti-dilutive in 2016, since their effect caused the diluted EPS ratio to improve. To calculate the impact, it is assumed that all dilutive subscription rights and options are exercised and that the conversion option of the convertible bonds 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 30.0%. The amount of shares to be converted has thus been capped at 1 711 069. Management already bought back as many shares as could possibly be converted under the old convertible bond (1 868 033) to limit potential cash-outs resulting from the convertible bond issuance. Therefore no extra buy-back program needed to be started.
| 2015 | Number | |
|---|---|---|
| Weighted average number of ordinary shares (basic) | 55 841 843 | |
| Dilution effect of subscription rights and options | 218 834 | |
| Dilution effect of convertible bond | - | |
| Weighted average number of ordinary shares (diluted) | 56 060 677 | |
| in thousands of € | Basic | Diluted |
| Result for the period attributable to the Group and to ordinary shareholders | 101 722 | 101 722 |
| Effect on earnings of convertible bond 1 | - | - |
| Earnings | 101 722 | 101 722 |
| Earnings per share (in €) | 1.822 | 1.814 |
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).
The average closing price during 2016 was € 37.07 per share (2015: € 26.12 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 |
| SOP 2010-2014 - options | 14.02.2011 | 77.000 | 360 925 | 295 725 |
For more information about subscription rights and options, please refer to 6.12. 'Ordinary shares, treasury shares and equity settled share based payments'.
| Licenses, | ||||||
|---|---|---|---|---|---|---|
| Cost | patents & similar |
Computer | Rights to | Develop | ||
| in thousands of € | rights | software | use land | ment costs | Other | Total |
| As at 1 January 2015 | 23 483 | 71 683 | 72 856 | 19 | 24 081 | 192 121 |
| Expenditure | 26 | 5 389 | 194 | - | 259 | 5 868 |
| Disposals and retirements | -23 | -601 | -16 | - | -79 | -719 |
| Transfers 1 | - | 119 | 7 738 | - | - | 7 857 |
| New consolidations | 674 | 258 | 5 843 | - | 919 | 7 694 |
| Deconsolidations | -425 | -20 | -2 703 | - | -353 | -3 501 |
| Exchange gains and losses (-) | 9 | 1 533 | 3 850 | - | 1 497 | 6 889 |
| As at 31 December 2015 | 23 744 | 78 360 | 87 762 | 19 | 26 324 | 216 208 |
| As at 1 January 2016 | 23 744 | 78 360 | 87 762 | 19 | 26 324 | 216 208 |
| Expenditure | - | 5 629 | 325 | - | - | 5 954 |
| Disposals and retirements | -130 | -439 | - | - | - | -569 |
| Transfers 1 | - | -28 | - | - | 29 | 1 |
| Reclassification to (-) / from | ||||||
| held for sale | - | -894 | -10 218 | - | - | -11 112 |
| New consolidations | - | 955 | - | - | 50 714 | 51 669 |
| Exchange gains and losses (-) | 21 | 532 | -2 250 | - | -2 939 | -4 636 |
| As at 31 December 2016 | 23 635 | 84 115 | 75 619 | 19 | 74 128 | 257 515 |
| Accumulated amortization and impairment | ||||||
|---|---|---|---|---|---|---|
| As at 1 January 2015 | 8 350 | 58 878 | 11 157 | 19 | 15 631 | 94 034 |
| Charge for the year | 1 647 | 4 160 | 1 751 | - | 2 154 | 9 712 |
| Impairment losses | - | 11 | 1 534 | - | 241 | 1 786 |
| Disposals and retirements | -23 | -601 | - | - | -79 | -703 |
| Deconsolidations | -425 | -18 | -537 | - | -352 | -1 332 |
| Exchange gains (-) and losses | 33 | 1 240 | 719 | - | 1 271 | 3 263 |
| As at 31 December 2015 | 9 582 | 63 670 | 14 624 | 19 | 18 866 | 106 760 |
| As at 1 January 2016 | 9 582 | 63 670 | 14 624 | 19 | 18 866 | 106 760 |
| Charge for the year | 1 585 | 4 698 | 1 665 | - | 5 227 | 13 175 |
| Impairment losses | - | 484 | 73 | - | - | 557 |
| Reversal impairment losses and depreciations |
- | 5 | - | - | - | 5 |
| Disposals and retirements | -130 | -414 | - | - | - | -544 |
| Transfers | 68 | - | - | - | -68 | - |
| Reclassification to (-) / from held for sale |
- | -1 | -1 589 | - | - | -1 590 |
| Exchange gains (-) and losses | 10 | 435 | -375 | - | -1 295 | -1 225 |
| As at 31 December 2016 | 11 115 | 68 877 | 14 398 | 19 | 22 730 | 117 138 |
| Carrying amount | ||||||
| as at 31 December 2015 | 14 162 | 14 690 | 73 138 | - | 7 458 | 109 448 |
| Carrying amount as at 31 December 2016 |
12 520 | 15 238 | 61 221 | - | 51 398 | 140 377 |
1Total transfers equal zero when aggregating the balances of 'Intangible assets' and 'Property, plant and equipment' (see note 6.3.).
The software expenditure mainly relates to the Satellite project (sales and outbound logistics), the MES project (Manufacturing Excellence System) and ERP software (SAP).
New consolidations in 2016 relate to the merger with Bridon (see note 7.2. 'Effect of business combinations'), these include the brand name(s) (€ 45.5 million), the customer relationships (€ 4.8 million) and the order book (€ 0.4 million). The useful economic life of the brand name is estimated at 15 years while the customer relationships are amortized over 12 years.
The reclassification to held for sale mainly related to Bekaert (Huizhou) Steel Cord Co Ltd. Additional information relating to the reclassification to held for sale is provided under note 6.11. 'Assets classified as held for sale and liabilities associated with those assets'.
No intangible assets have been identified as having an indefinite useful life at the balance sheet date.
This note mainly relates only to goodwill on acquisition of subsidiaries. Goodwill in respect of joint ventures and associates is also disclosed in note 6.4. 'Investments in joint ventures and associates'.
| Cost | ||
|---|---|---|
| in thousands of € | 2015 | 2016 |
| As at 1 January | 38 018 | 53 977 |
| Increases | 16 701 | 116 245 |
| Deconsolidation | -1 010 | - |
| Exchange gains and losses (-) | 268 | 701 |
| As at 31 December | 53 977 | 170 923 |
| Impairment losses in thousands of € |
2015 | 2016 |
| As at 1 January | 19 535 | 18 278 |
| Deconsolidation | -1 010 | - |
| Exchange gains (-) and losses | -247 | 300 |
| As at 31 December | 18 278 | 18 578 |
The increase in the goodwill in 2016 relates to the BBRG business combination. More information about the goodwill calculation is provided in note 7.2. 'Effect of business combinations'. In 2015, the increases resulted from the business combination with Pirelli (€ 3.5 million) and the acquisition of Arrium's ropes business in Australia (€ 13.2 million).
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 any related movements of the period have been allocated as follows:
| Segment in thousands of € |
Group of cash-generating units |
Carrying amount 1 Jan 2015 |
Increases | Impairments | Exchange differences |
Carrying amount 31 Dec 2015 |
|---|---|---|---|---|---|---|
| Subsidiaries | ||||||
| EMEA | Cold Drawn Products Ltd | 2 874 | - | - | 176 | 3 050 |
| EMEA | Combustion - heating | 3 027 | - | - | - | 3 027 |
| EMEA | Building Products | 71 | - | - | - | 71 |
| EMEA | Rubber Reinforcement | 713 | 3 542 | - | - | 4 255 |
| North America | Orrville plant (USA) | 9 662 | - | - | 1 112 | 10 774 |
| Latin America | Inchalam group | 860 | - | - | -40 | 820 |
| Latin America | Bekaert Ideal SL companies | 844 | - | - | - | 844 |
| Asia Pacific | Bekaert (Qingdao) Wire Products Co Ltd |
385 | - | - | - | 385 |
| Asia Pacific | Bekaert-Jiangyin Wire Products Co Ltd |
47 | - | - | - | 47 |
| BBRG | BBRG | - | 13 160 | - | -734 | 12 426 |
| Subtotal | 18 483 | 16 702 | - | 514 | 35 699 | |
| Joint ventures and associates | ||||||
| Latin America | Belgo Bekaert Arames Ltda | 4 667 | - | - | -1 181 | 3 486 |
| Subtotal | 4 667 | - | - | -1 181 | 3 486 | |
| Total | 23 150 | 16 702 | - | -667 | 39 185 |
| Segment in thousands of € |
Group of cash-generating units |
Carrying amount 1 Jan 2016 |
Increases | Impairments | Exchange differences |
Carrying amount 31 Dec 2016 |
|---|---|---|---|---|---|---|
| Subsidiaries | ||||||
| EMEA | Cold Drawn Products Ltd | 3 050 | - | - | -435 | 2 615 |
| EMEA | Combustion - heating | 3 027 | - | - | - | 3 027 |
| EMEA | Building Products | 71 | - | - | - | 71 |
| EMEA | Rubber Reinforcement | 4 255 | - | - | - | 4 255 |
| North America | Orrville plant (USA) | 10 774 | - | - | 354 | 11 128 |
| Latin America | Inchalam group | 820 | - | - | 79 | 899 |
| Latin America | Bekaert Ideal SL companies | 844 | - | - | - | 844 |
| Asia Pacific | Bekaert (Qingdao) Wire | |||||
| Products Co Ltd | 385 | - | - | - | 385 | |
| Asia Pacific | Bekaert-Jiangyin Wire | |||||
| Products Co Ltd | 47 | - | - | - | 47 | |
| BBRG | BBRG | 12 426 | 116 245 | - | 403 | 129 074 |
| Subtotal | 35 699 | 116 245 | - | 401 | 152 345 | |
| Joint ventures and associates | ||||||
| Latin America | Belgo Bekaert Arames Ltda | 3 486 | - | - | 895 | 4 381 |
| Subtotal | 3 486 | - | - | 895 | 4 381 | |
| Total | 39 185 | 116 245 | - | 1 296 | 156 726 |
In relation to the impairment testing of goodwill arising from the BBRG business combination, the following model characteristics have been used:
For the testing of goodwill arising from earlier transactions, the model as used in previous years has been maintained and updated to the latest business insights. The main differences to the model used in the BBRG case, are:
The latter model tends to be more conservative and is less commonly used. The use of the model was continued given the fact that the amount of goodwill being tested was rather immaterial in the various cases. For uniformity reasons, the same model as used for the BBRG case will be used in future for all goodwill impairment tests.
The discount factor for all tests is based on a (long-term) pre-tax cost of capital, the risks being implicit in the cash flows. A weighted average cost of capital (WACC) is determined for euro, US dollar and Chinese renminbi regions. For countries or businesses with a higher perceived risk, the WACC is raised with a country or business specific risk factor. In the case of BBRG, a specific equity risk premium of 1% has been considered as appropriately reflecting the specific business context compared to the general Group business context. The WACC is pre-tax based, since relevant cash flows are also pre-tax based. In determining the weight of the cost of debt vs. the cost of equity, a target gearing (net debt relative to equity) of 50% is used. For cash flow models stated in real terms (without inflation), the nominal WACC is adjusted for the expected inflation rate. For cash flow models in nominal terms, the nominal WACC is used. All parameters used for the calculation of the discount factors are reviewed at least annually.
| Discount rates for impairment testing | EUR 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 | 2.4% | 3.3% | 6.0% | |
| Long term interest rate | 2.8% | 3.9% | 6.2% | |
| Short term interest rate | 1.2% | 1.7% | 5.4% | |
| Cost of Bekaert equity (post tax) | + b . Em = Rf |
8.2% | 9.7% | 12.4% |
| Risk free rate= Rf | 0.7% | 2.1% | 4.9% | |
| Beta = b | 1.2 | |||
| Market equity risk premium= Em | 6.3% | |||
| Corporate tax rate | 27% | |||
| Cost of Bekaert equity before tax | 11.3% | 13.2% | 17.1% | |
| Bekaert WACC - nominal | 8.3% | 9.9% | 13.4% | |
| Expected inflation | 1.6% | 1.8% | 2.0% | |
| Bekaert WACC in real terms | 6.8% | 8.1% | 11.3% |
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.
Current headroom for impairment of the BBRG goodwill, i.e. the excess of the recoverable amount over the carrying amount of the BBRG CGU, is estimated at € 335 million. Sensitivity analyses performed for reasonable changes in the key assumptions pointed out that the headroom for impairment would be consumed if:
| Plant, | Assets | ||||||
|---|---|---|---|---|---|---|---|
| machinery | Furniture | under | |||||
| Cost | Land and | and | and | Finance | Other | construc | |
| in thousands of € | buildings | equipment | vehicles | leases | PP&E | tion | Total |
| As at 1 January 2015 | 1 049 850 | 2 395 062 | 94 418 | 9 738 | 6 129 | 90 339 | 3 645 537 |
| Expenditure | 31 088 | 125 478 | 7 584 | 2 319 | 2 156 | 4 606 | 173 231 |
| Disposals and retirements | -15 242 | -16 486 | -8 389 | - | -434 | -2 | -40 553 |
| New consolidations | 48 939 | 30 210 | 1 573 | - | - | 343 | 81 065 |
| Deconsolidations | -18 299 | -30 680 | -1 513 | - | -750 | -5 638 | -56 880 |
| Transfers 1 | - | - | - | - | - | -7 857 | -7 857 |
| Exchange gains and losses (-) | 27 546 | 108 619 | 3 250 | -356 | 108 | 3 510 | 142 677 |
| Inflation effects on opening | |||||||
| balances | 1 952 | 2 326 | 237 | - | - | 7 | 4 522 |
| Other inflation effects | - | - | - | - | - | 45 | 45 |
| As at 31 December 2015 | 1 125 834 | 2 614 529 | 97 160 | 11 701 | 7 209 | 85 354 | 3 941 787 |
| As at 1 January 2016 | 1 125 834 | 2 614 529 | 97 160 | 11 701 | 7 209 | 85 354 | 3 941 787 |
| Expenditure | 18 176 | 80 984 | 8 728 | 47 | 1 994 | 50 226 | 160 155 |
| Disposals and retirements | -853 | -31 706 | -3 806 | -35 | -56 | - | -36 456 |
| New consolidations | 22 652 | 69 286 | 483 | 33 | - | 1 788 | 94 242 |
| Transfers 1 | - | - | - | - | - | -1 | -1 |
| Reclassification to (-) / from | |||||||
| held for sale | -44 775 | -11 032 | -412 | - | - | -969 | -57 188 |
| Exchange gains and losses (-) | 8 405 | -13 398 | -198 | 737 | -98 | 3 376 | -1 176 |
| Inflation effects on opening | |||||||
| balances | 1 996 | 2 388 | 255 | - | - | 55 | 4 694 |
| Other inflation effects | - | - | - | - | - | -6 | -6 |
| As at 31 December 2016 | 1 131 435 | 2 711 051 | 102 210 | 12 483 | 9 049 | 139 823 | 4 106 051 |
| Accumulated depreciation and impairment | |||||||
| As at 1 January 2015 | 445 691 | 1 663 470 | 79 156 | 1 686 | 3 354 | - | 2 193 357 |
| Charge for the year | 42 002 | 141 470 | 7 531 | 340 | 433 | - | 191 776 |
| Impairment losses | 2 064 | 10 750 | 132 | - | - | - | 12 946 |
| Reversal impairment losses and | |||||||
| depreciations | -29 | -1 520 | -99 | - | - | - | -1 648 |
| Disposals and retirements | -13 556 | -16 855 | -7 800 | - | -64 | - | -38 275 |
| Transfers | 47 | -60 | 16 | - | -2 | - | - |
| Deconsolidations | -3 708 | -14 738 | -1 229 | - | -145 | - | -19 820 |
| Exchange gains (-) and losses | 19 591 | 78 299 | 2 800 | -23 | 69 | - | 100 736 |
| Inflation effects on opening | |||||||
| balances | 539 | 1 243 | 207 | - | - | - | 1 989 |
| As at 31 December 2015 | 492 641 | 1 862 059 | 80 714 | 2 003 | 3 645 | - | 2 441 061 |
| As at 1 January 2016 | 492 641 | 1 862 059 | 80 714 | 2 003 | 3 645 | - | 2 441 061 |
| Charge for the year | 43 120 | 141 781 | 7 129 | 451 | 450 | - | 192 931 |
| Impairment losses | 11 906 | 7 412 | 133 | - | - | - | 19 451 |
| Reversal impairment losses and | |||||||
| depreciations | 5 | -2 067 | 59 | -27 | - | - | -2 030 |
| Disposals and retirements | -448 | -30 107 | -3 659 | -35 | -10 | - | -34 259 |
| Reclassification to (-) / from | |||||||
| held for sale | -20 808 | -3 331 | -169 | - | - | - | -24 308 |
| Exchange gains (-) and losses | -187 | -13 381 | -503 | -37 | -84 | - | -14 192 |
| Inflation effects on opening | |||||||
| balances | 626 | 1 452 | 220 | - | - | - | 2 298 |
| As at 31 December 2016 | 526 855 | 1 963 818 | 83 924 | 2 355 | 4 001 | - | 2 580 952 |
1 Total transfers equal zero when aggregating the balances of 'Intangible assets' (see note 6.1.) and 'Property, plant and equipment'.
| in thousands of € | Land and buildings |
Plant, machinery and equipment |
Furniture and vehicles |
Finance leases |
Other PP&E |
Assets under construc tion |
Total |
|---|---|---|---|---|---|---|---|
| Carrying amount as at 31 December 2015 before investment grants and reclassification of leases |
633 193 | 752 470 | 16 447 | 9 698 | 3 564 | 85 354 | 1 500 726 |
| Net investment grants | -7 739 | -2 535 | - | - | - | - | -10 274 |
| Finance leases by asset category Carrying amount as at 31 December 2015 |
7 314 632 768 |
2 308 752 243 |
76 16 523 |
-9 698 - |
- 3 564 |
- 85 354 |
- 1 490 452 |
| Carrying amount as at 31 December 2016 before investment grants and reclassification of leases |
604 580 | 747 233 | 18 287 | 10 128 | 5 048 | 139 823 | 1 525 099 |
| Net investment grants | -7 050 | -2 201 | - | - | - | -1 134 | -10 385 |
| Finance leases by asset category |
7 822 | 2 185 | 120 | -10 128 | - | - | - |
| Carrying amount as at 31 December 2016 |
605 352 | 747 217 | 18 407 | - | 5 048 | 138 689 | 1 514 714 |
The investment programs in Belgium, Chile, China, Indonesia, Romania, Slovakia and United States accounted for most of the expenditure. The net exchange gain for the year mainly relates to assets denominated in Chinese renminbi (€ -19.3 million), Chilean pesos (€ 9.1 million), US dollar (€ 12.3 million) and Brazilian real (€ 9.9 million).
The methodology for impairment testing is consistent with the one presented in note 6.2. 'Goodwill'. For new consolidations and deconsolidations, please refer to note 7.2. 'Effect of business combinations'. The new consolidations mainly relate to the merger with Bridon.
Additional information relating to the reclassification to held for sale is provided under note 6.11. 'Assets classified as held for sale and liabilities associated with those assets'. 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 € | 2015 | 2016 |
| As at 1 January | 151 067 | 110 633 |
| Result for the year | 18 320 | 25 445 |
| Dividends | -18 682 | -22 732 |
| Exchange gains and losses | -34 660 | 28 814 |
| Deconsolidations | -5 382 | - |
| Other comprehensive income | -30 | 41 |
| As at 31 December | 110 633 | 142 201 |
In comparison with 2015, the better results for 2016 are mainly driven by the deconsolidation of the loss-making Xinyu entities. For an analysis of the result for the year, please refer to note 5.6. 'Share in the results of joint ventures and associates'.
Exchange gains and losses relate mainly to the substantial swing in closing rates of the Brazilian real (3.4 in 2016 vs 4.3 in 2015).
Deconsolidations in 2015 relate to the loss of significant influence in Bekaert (Xinyu) New Materials Co Ltd and Bekaert Xinyu Metal Products Co Ltd and to the step acquisition of BOSFA Pty Ltd.
| Cost | ||
|---|---|---|
| in thousands of € | 2015 | 2016 |
| As at 1 January | 4 667 | 3 486 |
| Exchange gains and losses | -1 181 | 895 |
| As at 31 December | 3 486 | 4 381 |
| Carrying amount of related goodwill as at 31 December | 3 486 | 4 381 |
| Total carrying amount of investments in joint ventures as at 31 December | 114 119 | 146 582 |
The Group's share in the equity of joint ventures is analysed as follows:
| in thousands of € | 2015 | 2016 | |
|---|---|---|---|
| Joint ventures | |||
| Belgo Bekaert Arames Ltda | Brazil | 98 621 | 125 228 |
| BMB-Belgo Mineira Bekaert Artefatos de Arame Ltda | Brazil | 12 012 | 16 973 |
| Total for joint ventures excluding related goodwill | 110 633 | 142 201 | |
| Carrying amount of related goodwill | 3 486 | 4 381 | |
| Total for joint ventures including related goodwill | 114 119 | 146 582 |
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 € 4.7 million (2015: € 6.6 million). They also have been facing claims relating to ICMS credits totaling € 22.1 million (2015: € 9.0 million) and several other tax claims, most of which date back several years, for a total nominal amount of € 15.3 million (2015: € 12.9 million). Evidently, any potential losses resulting from the above-mentioned contingencies would only affect the Group to the extent of their interest in the joint ventures involved (i.e. 45%). At the balance sheet date, the Group has no unrecognized commitments for any of its joint ventures (2015: none) that might give rise to a future outflow of cash or other resources.
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.
| Group at year-end | |||
|---|---|---|---|
| Name of joint venture | |||
| in thousands of € | Country | 2015 | 2016 |
| 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.
| Brazilian joint ventures: income statement | ||
|---|---|---|
| in thousands of € | 2015 | 2016 |
| Sales | 709 597 | 661 718 |
| Operating result (EBIT) | 79 665 | 74 541 |
| Interest income | 3 998 | 4 107 |
| Interest expense | -6 447 | -3 560 |
| Other financial income and expenses | -5 899 | -961 |
| Income taxes | -9 391 | -10 449 |
| Result for the period | 61 926 | 63 678 |
| Other comprehensive income for the period | -73 | 89 |
| Total comprehensive income for the period | 61 853 | 63 767 |
| Depreciation and amortization | 18 084 | 20 280 |
| EBITDA | 97 749 | 94 821 |
| Dividends received from the entity | 18 682 | 22 732 |
| Brazilian joint ventures: balance sheet | |||
|---|---|---|---|
| in thousands of € | 2015 | 2016 | |
| Current assets | 184 355 | 243 364 | |
| Non-current assets | 172 056 | 209 986 | |
| Current liabilities | -84 319 | -104 001 | |
| Non-current liabilities | -27 363 | -34 400 | |
| Net assets | 244 729 | 314 949 |
| Brazilian joint ventures: net debt elements | ||
|---|---|---|
| in thousands of € | 2015 | 2016 |
| Non-current interest-bearing debt | - | - |
| Current interest-bearing debt 1 | 14 930 | 11 726 |
| Total financial debt | 14 930 | 11 726 |
| Non-current financial receivables and cash guarantees | -83 | -23 521 |
| Current loans | - | -2 |
| Cash and cash equivalents | -13 700 | -14 809 |
| Net debt | 1 147 | -26 606 |
1 See note 2.7. 'Restatement and reclassification effects'.
| Brazilian joint ventures: reconciliation with carrying amount in thousands of € |
2015 | 2016 |
|---|---|---|
| Net assets of Belgo Bekaert Arames Ltda | 218 323 | 277 404 |
| Proportion of the Group's ownership interest | 45.0% | 45.0% |
| Proportionate net assets | 98 245 | 124 832 |
| Consolidation adjustments | 377 | 397 |
| Carrying amount of the Group's interest in Belgo Bekaert Arames Ltda | 98 622 | 125 229 |
| Net assets of BMB-Belgo Mineira Bekaert Artefatos de Arame Ltda | 26 406 | 37 544 |
| Proportion of the Group's ownership interest | 44.5% | 44.5% |
| Proportionate net assets | 11 751 | 16 707 |
| Consolidation adjustments | 261 | 265 |
| Carrying amount of the Group's interest in | ||
| BMB-Belgo Mineira Bekaert Artefatos de Arame Ltda | 12 012 | 16 972 |
| Carrying amount of the Group's interest in the Brazilian joint ventures | 110 634 | 142 201 |
| Aggregate information of the other joint ventures | ||
|---|---|---|
| in thousands of € | 2015 | 2016 |
| The Group's share in the result from continuing operations | -5 948 | - |
| The Group's share of total comprehensive income | -5 948 | - |
| Aggregate carrying amount of the Group's interests in these joint ventures | - | - |
| 9 694 8 549 |
6 664 7 937 |
|---|---|
| 5 897 | - |
| 7 | 42 |
| 15 626 | 17 499 |
| 32 142 | |
| 39 773 |
| Carrying amount | ||
|---|---|---|
| in thousands of € | 2015 | 2016 |
| As at 1 January | 9 979 | 15 626 |
| Expenditure | 100 | 41 |
| Disposals | -123 | -3 |
| Fair value changes | -2 001 | 2 349 |
| Impairment losses | -302 | -591 |
| New consolidations | - | 3 |
| Reclassifications | 8 007 | - |
| Exchange gains and losses | -34 | 74 |
| As at 31 December | 15 626 | 17 499 |
The available-for-sale financial assets mainly consist of the investments in:
The amount reported as expenditure mainly relates to Transportes Puelche Ltda.
1
| Carrying amount | Assets | Liabilities | |||
|---|---|---|---|---|---|
| in thousands of € | 2015 | 2016 | 2015 | 2016 | |
| As at 1 January 1 | 102 977 | 132 494 | 54 253 | 53 213 | |
| Increase or decrease via income statement 1 | 27 010 | 18 436 | 10 017 | -12 516 | |
| Increase or decrease via OCI 1 | -670 | -737 | - | - | |
| New consolidations | 8 174 | 9 480 | 292 | 22 861 | |
| Deconsolidations | -291 | - | - | - | |
| Reclassification as held for sale | - | -449 | - | -4 486 | |
| Exchange gains and losses 1 | 2 723 | 1 010 | -3 920 | 3 350 | |
| Change in set-off of assets and liabilities | -7 429 | -9 866 | -7 429 | -9 866 | |
| As at 31 December | 132 494 | 150 368 | 53 213 | 52 556 |
See note 2.7. 'Restatement and reclassification effects':
- Opening balance: € 1.7 million
- Increase via income statement: € 0.1 million
- Decrease via OCI: € -0.7 million
- Exchange gains and losses: € 0.2 million
- Closing balance: € 1.3 million
Deferred tax assets and liabilities are attributable to the following items:
| Assets | Liabilities | Net assets | |||||
|---|---|---|---|---|---|---|---|
| in thousands of € | 2015 | 2016 | 2015 | 2016 | 2015 | 2016 | |
| Intangible assets | 7 550 | 45 407 | 6 845 | 11 718 | 705 | 33 689 | |
| Property, plant and equipment | 45 486 | 45 349 | 44 638 | 51 385 | 848 | -6 036 | |
| Financial assets | 7 | 11 | 24 804 | 16 484 | -24 797 | -16 473 | |
| Inventories | 10 726 | 10 517 | 2 980 | 4 003 | 7 746 | 6 514 | |
| Receivables | 9 296 | 10 470 | 3 769 | 264 | 5 527 | 10 206 | |
| Other current assets | 977 | 267 | 3 428 | 3 623 | -2 451 | -3 356 | |
| Employee benefit obligations 1 | 26 975 | 29 582 | 105 | 144 | 26 870 | 29 438 | |
| Other provisions | 5 921 | 7 160 | 5 959 | 677 | -38 | 6 483 | |
| Other liabilities | 14 180 | 13 137 | 8 395 | 21 835 | 5 785 | -8 698 | |
| Tax deductible losses carried forward, tax credits and recoverable |
|||||||
| income taxes | 59 086 | 46 045 | - | - | 59 086 | 46 045 | |
| Tax assets / liabilities | 180 204 | 207 945 | 100 923 | 110 133 | 79 281 | 97 812 | |
| Set-off of assets and liabilities | -47 710 | -57 577 | -47 710 | -57 577 | - | - | |
| Net tax assets / liabilities | 132 494 | 150 368 | 53 213 | 52 556 | 79 281 | 97 812 |
1 See note 2.7. 'Restatement and reclassification effects'.
The deferred taxes on property, plant and equipment mainly relate to differences in useful lives between IFRS and tax books, whereas the deferred taxes on intangible assets are mainly generated by intercompany gains which have been eliminated in the consolidated statements. The deferred tax liabilities on financial assets mainly relate to temporary differences arising from undistributed profits from subsidiaries and joint ventures.
| 2015 | As at | Recognized via income |
Recognized | Acquisitions and |
Reclassifi | Exchange gains and |
As at |
|---|---|---|---|---|---|---|---|
| in thousands of € | 1 January | statement | via OCI | disposals 2 | cations | losses | 31 December |
| Temporary differences | |||||||
| Intangible assets | 1 543 | -178 | - | -3 | - | -657 | 705 |
| Property, plant and | |||||||
| equipment | -7 984 | -3 173 | - | 6 485 | - | 5 520 | 848 |
| Financial assets | -16 064 | -9 149 | -67 | - | - | 483 | -24 797 |
| Inventories | 5 582 | 4 429 | - | -1 666 | - | -599 | 7 746 |
| Receivables | 7 811 | -2 627 | - | -3 | - | 346 | 5 527 |
| Other current assets | -8 034 | 5 663 | - | 31 | - | -111 | -2 451 |
| Employee benefit | |||||||
| obligations 1 | 30 892 | -6 250 | -603 | 1 496 | - | 1 335 | 26 870 |
| Other provisions | 1 800 | -2 631 | - | 553 | - | 240 | -38 |
| Other liabilities | 11 308 | -5 750 | - | 351 | - | -124 | 5 785 |
| Tax deductible losses carried forward, tax credits and recoverable income taxes |
21 870 | 36 659 | - | 347 | - | 210 | 59 086 |
| Total | 48 724 | 16 993 | -670 | 7 591 | - | 6 643 | 79 281 |
| 2016 | As at | Recognized via income |
Recognized | Acquisitions and disposals 2 |
Reclassifi cations 3 |
Exchange gains and |
As at |
| in thousands of € | 1 January | statement | via OCI | losses | 31 December | ||
| Temporary differences | |||||||
| Intangible assets | 705 | 41 579 | - | -9 255 | - | 660 | 33 689 |
| Property, plant and | |||||||
| equipment | 848 | 3 319 | - | -10 793 | 4 393 | -3 803 | -6 036 |
| Financial assets | -24 797 | 9 019 | - | -523 | 87 | -259 | -16 473 |
| Inventories | 7 746 | 311 | - | -1 347 | - | -196 | 6 514 |
| Receivables | 5 527 | 4 756 | - | 41 | - | -118 | 10 206 |
| Other current assets | -2 451 | -905 | - | -20 | - | 20 | -3 356 |
| Employee benefit | |||||||
| obligations | 26 870 | 93 | -601 | 2 534 | - | 542 | 29 438 |
| Other provisions | -38 | 4 735 | - | 1 626 | - | 160 | 6 483 |
| Other liabilities | 5 785 | -14 265 | -136 | 390 | -443 | -29 | -8 698 |
Tax deductible losses carried forward, tax credits
and recoverable income taxes 59 086 -17 690 - 3 966 - 683 46 045 Total 79 281 30 952 -737 -13 381 4 037 -2 340 97 812
1 See note 2.7. 'Restatement and reclassification effects'.
2 Relates in 2016 to the business combinations as disclosed in note 7.2. 'Effect of business combinations'. In 2015, it relates to the acquisition of Pirelli's steel cord plants, the acquisition of Arrium's ropes business in Australia, the step acquisition of BOSFA Pty Ltd in Australia and the disposal of the Carding Solutions activities to Groz-Beckert.
3 See note 6.11. 'Assets classified as held for sale and liabilities associated with those assets'.
| 2015 in thousands of € |
Before tax | Tax impact | After tax |
|---|---|---|---|
| Exchange differences 1 | -16 682 | - | -16 682 |
| Inflation adjustments | 1 208 | - | 1 208 |
| Cash flow hedges | 175 | -67 | 108 |
| Available-for-sale investments | -2 001 | - | -2 001 |
| Remeasurement gains and losses on defined-benefit plans 1 | 14 473 | -603 | 13 870 |
| Share of OCI of joint ventures and associates | -30 | - | -30 |
| Total | -2 857 | -670 | -3 527 |
| 2016 in thousands of € |
Before tax | Tax impact | After tax |
|---|---|---|---|
| Exchange differences | 36 837 | - | 36 837 |
| Inflation adjustments | 1 483 | - | 1 483 |
| Cash flow hedges | 742 | -136 | 606 |
| Available-for-sale investments | 2 349 | - | 2 349 |
| Remeasurement gains and losses on defined-benefit plans | -9 978 | -601 | -10 579 |
| Share of OCI of joint ventures and associates | 40 | - | 40 |
| Total | 31 473 | -737 | 30 736 |
1 See note 2.7. 'Restatement and reclassification effects'.
| in thousands of € | 2015 | 2016 | Variance |
|---|---|---|---|
| Deductible temporary differences | 298 863 | 295 937 | -2 926 |
| Capital losses | 26 627 | 23 534 | -3 093 |
| Trade losses | 658 063 | 714 552 | 56 489 |
| Tax credits | 50 866 | 47 551 | -3 315 |
| Total | 1 034 419 | 1 081 574 | 47 155 |
The below table shows expiry date for all items (recognized and unrecognized).
| 2015 in thousands of € |
Expiring within 1 year |
Expiring between 1 and 5 years |
Expiring after more than 5 years |
Not expiring | Total |
|---|---|---|---|---|---|
| Capital losses | - | - | - | 26 627 | 26 627 |
| Trade losses | 13 673 | 154 015 | 71 946 | 604 398 | 844 032 |
| Tax credits | - | 57 052 | - | 35 942 | 92 994 |
| Total | 13 673 | 211 067 | 71 946 | 666 967 | 963 653 |
| 2016 in thousands of € |
Expiring within 1 year |
Expiring between 1 and 5 years |
Expiring after more than 5 years |
Not expiring | Total |
|---|---|---|---|---|---|
| Capital losses | - | - | - | 23 534 | 23 534 |
| Trade losses | 45 281 | 100 416 | 50 864 | 692 349 | 888 910 |
| Tax credits | - | 56 856 | - | 10 781 | 67 637 |
| Total | 45 281 | 157 272 | 50 864 | 726 664 | 980 081 |
| in thousands of € | 2015 | 2016 |
|---|---|---|
| Raw materials, consumables and spare parts | 199 091 | 229 894 |
| Work in progress and finished goods | 323 451 | 384 359 |
| Goods purchased for resale | 106 189 | 110 247 |
| Inventories | 628 731 | 724 500 |
| Trade receivables | 686 364 | 739 145 |
| Bills of exchange received | 68 005 | 60 182 |
| Advances paid | 15 126 | 19 531 |
| Trade payables | -456 783 | -556 361 |
| Advances received | -3 137 | -12 732 |
| Remuneration and social security payables | -117 532 | -123 559 |
| Employment-related taxes | -8 016 | -8 198 |
| Operating working capital | 812 758 | 842 508 |
| Carrying amount | ||
|---|---|---|
| in thousands of € | 2015 | 2016 |
| As at 1 January | 974 611 | 812 758 |
| Organic increase or decrease | -212 266 | -16 336 |
| Write-downs and write-down reversals | -8 281 | 1 175 |
| New consolidations | 58 899 | 52 003 |
| Deconsolidations | -8 465 | - |
| Impact inflation accounting | 1 241 | 2 361 |
| Reclassification to (-) / from assets held for sale | - | -26 347 |
| Exchange gains and losses (-) | 7 019 | 16 894 |
| As at 31 December | 812 758 | 842 508 |
Weighted average operating working capital represented 22.6% of sales (2015: 24.8%).
Additional information is as follows:
The cost of sales includes expenses related to transport and handling of finished goods amounting to € 159.3 million (2015: € 165.9 million), which have never been capitalized in inventories. Movements in inventories include net reversals of write-downs in 2016 of € 5.1 million (2015: net write-downs of € 6.8 million). Similar as in 2015, in 2016 no inventories were pledged as security for liabilities.
The following table presents the movements in the allowance for bad debt:
| in thousands of € | 2015 | 2016 |
|---|---|---|
| As at 1 January -41 767 |
-45 076 | |
| Losses recognized in current year | -8 614 | -8 287 |
| Losses recognized in prior years - amounts used | 4 140 | 1 787 |
| Losses recognized in prior years - reversal of amounts not used | 3 013 | 2 391 |
| Deconsolidations | 52 | - |
| Reclassification to / from (-) assets held for sale | - | 849 |
| Exchange gains and losses (-) | -1 900 | 534 |
| As at 31 December -45 076 |
-47 802 |
More information about allowances and past-due receivables is provided in the following table:
| Trade receivables and bills of exchange received | ||
|---|---|---|
| in thousands of € | 2015 | 2016 |
| Gross amount | 799 445 | 847 129 |
| Allowance for bad debts (impaired) | -45 076 | -47 802 |
| Net carrying amount | 754 369 | 799 327 |
| of which past due but not impaired | ||
| amount | 93 097 | 95 844 |
| average number of days outstanding | 106 | 78 |
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'.
| Carrying amount in thousands of € |
2015 | 2016 |
|---|---|---|
| As at 1 January | 106 627 | 99 286 |
| Increase or decrease | -12 483 | 14 072 |
| Write-downs and write-down reversals | 1 556 | 8 |
| New consolidations | 3 219 | 4 261 |
| Deconsolidations | -3 165 | - |
| Reclassifications | - | -11 613 |
| Exchange gains and losses | 3 532 | 2 470 |
| As at 31 December | 99 286 | 108 484 |
Other receivables mainly relates to income taxes (€ 40.1 million (2015: € 40.3 million)), VAT and other nonincome taxes (€ 55.5 million (2015: € 49.7 million)) and social loans to employees (€ 2.2 million (2015: € 3.0 million)).
| Carrying amount in thousands of € |
2015 | 2016 |
|---|---|---|
| Cash & cash equivalents | 401 771 | 365 546 |
| Short-term deposits | 10 216 | 5 342 |
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'. 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 € |
2015 | 2016 |
|---|---|---|
| Current loans and receivables 1 | 34 773 | 13 991 |
| Advances paid | 15 126 | 19 531 |
| Derivatives (cf. note 7.3.) | 9 747 | 7 037 |
| Deferred charges and accrued income 1 | 6 403 | 11 665 |
| As at 31 December | 66 049 | 52 225 |
1 See note 2.7. 'Restatement and reclassification effects'.
The current loans and receivables mainly relate to loans to partners in China (€ 10.4 million) and to various cash guarantees (€ 3.0 million).
| Carrying amount | ||
|---|---|---|
| in thousands of € | 2015 | 2016 |
| As at 1 January | - | - |
| Increases and decreases (-) | - | 100 848 |
| Exchange gains and losses | - | 11 513 |
| As at 31 December | - | 112 361 |
| in thousands of € | 2015 | 2016 |
| Intangible assets | - | 9 939 |
| Property, plant and equipment | - | 36 674 |
| Other non-current assets | - | 5 651 |
| Deferred tax assets | - | 505 |
| Inventories | - | 10 140 |
| Trade receivables | - | 27 880 |
| Other receivables | - | 13 326 |
| Cash and cash equivalents | - | 8 241 |
| Other current assets | - | 5 |
| Total assets classified as held for sale | - | 112 361 |
| Employee benefit obligations - non-current | - | 33 |
| Provisions non-current | - | 6 444 |
| Interest-bearing debt non-current | - | 551 |
| Deferred tax liabilities | - | 5 045 |
| Interest-bearing debt current | - | 662 |
| Trade payables | - | 7 117 |
| Employee benefit obligations - current | - | 1 240 |
| Income taxes payables | - | 10 705 |
| Other current liabilities | - | 1 703 |
Total liabilities associated with assets classified as held for sale - 33 500
Bekaert is in ongoing discussions with ArcelorMittal to bring the Sumaré plant into a similar joint venture structure as the rest of the operations in Brazil. Negotiations are expected to be finalized in 2017. Other movements mainly relate to rights to use land of Bekaert (Huizhou) Steel Cord Co Ltd.
The cumulative translation adjustments relating to Bekaert Sumaré Ltda amount to € -0.3 million at the balance sheet date.
| 2015 | 2016 | ||||
|---|---|---|---|---|---|
| Issued capital in thousands of € |
Nominal value | Number of shares |
Nominal value | Number of shares |
|
| 1 | As at 1 January | 176 914 | 60 111 405 | 176 957 | 60 125 525 |
| Movements in the year | |||||
| Issue of new shares | 43 | 14 120 | 655 | 222 000 | |
| As at 31 December | 176 957 | 60 125 525 | 177 612 | 60 347 525 | |
| 2 | Structure | ||||
| 2.1 | Classes of ordinary shares | ||||
| Ordinary shares without par value | 176 957 | 60 125 525 | 177 612 | 60 347 525 | |
| 2.2 | Registered shares | 148 202 | 207 619 | ||
| Non-material shares | 59 977 323 | 60 139 906 | |||
| Authorized capital not issued | 152 175 | 176 000 |
A total of 222 000 subscription rights were exercised under the Company's SOP 2005-2009 stock option plan in 2016, requiring the issue of a total of 222 000 new shares of the Company.
From the 4 248 710 treasury shares held as of 31 December 2015, the Company disposed of 392 049 shares in connection with share-based payment plans. A total of 28 785 of treasury shares were purchased. No treasury shares were cancelled in 2016. As a result, the Company held an aggregate 3 885 446 treasury shares as of 31 December 2016.
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:
Overview of SOP1 Stock Option Plan
Overview of SOP2 Stock Option Plan
| 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 |
| 22.05 - | 22.05 - | ||||||||
| 12.07.2002 | 10.09.2002 | 25.09.2002 | 15.825 | 106 152 | 105 432 | 720 | - | 30.06.2006 | 15.06.2015 |
| 106 152 | 105 432 | 720 | - | ||||||
| Exercise | ||
|---|---|---|
| price | ||
| Number of options | ||||||||
|---|---|---|---|---|---|---|---|---|
| Date offered Date granted | Exercise price (in €) |
Granted | Exercised | Forfeited | Out standing |
First exercise period |
Last exercise period |
|
| 22.05 - | 15.11 - | |||||||
| 21.12.2006 | 19.02.2007 | 30.175 | 37 500 | 27 500 | - | 10 000 | 30.06.2010 | 15.12.2021 |
| 22.05 - | 15.11 - | |||||||
| 20.12.2007 | 18.02.2008 | 28.335 | 12 870 | 12 870 | - | - | 30.06.2011 | 15.12.2017 |
| 22.05 - | 15.11 - | |||||||
| 20.12.2007 | 18.02.2008 | 28.335 | 30 630 | 11 310 | - | 19 320 | 30.06.2011 | 15.12.2022 |
| 22.05 - | 15.11 - | |||||||
| 18.12.2008 | 16.02.2009 | 16.660 | 64 500 | 50 500 | - | 14 000 | 30.06.2012 | 15.12.2018 |
| 22.05 - | 15.11 - | |||||||
| 17.12.2009 | 15.02.2010 | 33.990 | 49 500 | 5 000 | - | 44 500 | 30.06.2013 | 15.12.2019 |
| 195 000 | 107 180 | - | 87 820 |
| 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 |
| 22.05 - | 15.11 - | ||||||||
| 22.12.2005 | 20.02.2006 | 22.03.2006 | 23.795 | 190 698 | 182 967 | 15 | 7 716 | 30.06.2009 | 15.12.2020 |
| 22.05 - | 15.11 - | ||||||||
| 21.12.2006 | 19.02.2007 | 22.03.2007 | 30.175 | 153 810 | 144 240 | 600 | 8 970 | 30.06.2010 | 15.12.2021 |
| 22.05 - | 15.11 - | ||||||||
| 20.12.2007 | 18.02.2008 | 22.04.2008 | 28.335 | 14 100 | 3 200 | 9 900 | 1 000 | 30.06.2011 | 15.12.2017 |
| 22.05 - | 15.11 - | ||||||||
| 20.12.2007 | 18.02.2008 | 22.04.2008 | 28.335 | 215 100 | 141 250 | 12 700 | 61 150 | 30.06.2011 | 15.12.2022 |
| 22.05 - | 15.11 - | ||||||||
| 18.12.2008 | 16.02.2009 | 20.10.2009 | 16.660 | 288 150 | 229 550 | 19 500 | 39 100 | 30.06.2012 | 15.12.2018 |
| 22.05 - | 15.11 - | ||||||||
| 17.12.2009 | 15.02.2010 | 08.09.2010 | 33.990 | 225 450 | 56 400 | 52 500 | 116 550 | 30.06.2013 | 15.12.2019 |
| 1 087 308 | 757 607 | 95 215 | 234 486 |
| Number of options | ||||||||
|---|---|---|---|---|---|---|---|---|
| Date offered | Date granted | Exercise price (in €) |
Granted | Exercised | Forfeited | Out standing |
First exercise period |
Last exercise period |
| 28.02 - | Mid Nov.- | |||||||
| 16.12.2010 | 14.02.2011 | 77.000 | 360 925 | - | 65 200 | 295 725 | 13.04.2014 | 15.12.2020 |
| 27.02 - | Mid Nov. - | |||||||
| 22.12.2011 | 20.02.2012 | 25.140 | 287 800 | 166 900 | 2 600 | 118 300 | 12.04.2015 | 21.12.2021 |
| End Feb. - | Mid Nov. - | |||||||
| 20.12.2012 | 18.02.2013 | 19.200 | 267 200 | 175 442 | 2 700 | 89 058 | 10.04.2016 | 19.12.2022 |
| End Feb. - | End Feb. - | |||||||
| 29.03.2013 | 28.05.2013 | 21.450 | 260 000 | - | - | 260 000 | 09.04.2017 | 28.03.2023 |
| End Feb. - | Mid Nov. - | |||||||
| 19.12.2013 | 17.02.2014 | 25.380 | 373 450 | - | 2 400 | 371 050 | 09.04.2017 | 18.12.2023 |
| End Feb. - | Mid Nov. - | |||||||
| 18.12.2014 | 16.02.2015 | 26.055 | 349 810 | - | 2 100 | 347 710 | 08.04.2018 | 17.12.2024 |
| 1 899 185 | 342 342 | 75 000 | 1 481 843 | |||||
| Number of options | ||||||||
|---|---|---|---|---|---|---|---|---|
| Date offered Date granted | Exercise price (in €) |
Granted | Exercised | Forfeited | Out standing |
First exercise period |
Last exercise period |
|
| End Feb. - | Mid Nov. - | |||||||
| 17.12.2015 | 15.02.2016 | 26.375 | 227 250 | - | - | 227 250 | 07.04.2019 | 16.12.2025 |
| 227 250 | - | - | 227 250 | |||||
| 2015 | 2016 | ||||
|---|---|---|---|---|---|
| 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 | 720 | 15.825 | - | - | |
| Exercised during the year | -720 | 15.825 | - | - | |
| Outstanding as at 31 December | - | - | - | - |
| 2015 | 2016 | ||||
|---|---|---|---|---|---|
| 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 | |
| Exercised during the year | - | - | -55 680 | 18.254 | |
| Outstanding as at 31 December | 143 500 | 25.166 | 87 820 | 29.549 |
| 2015 | 2016 | |||
|---|---|---|---|---|
| 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 | 489 386 | 26.720 | 456 486 | 26.710 |
| Forfeited during the year | -19 500 | 33.873 | - | - |
| Exercised during the year | -13 400 | 16.660 | -222 000 | 24.164 |
| Outstanding as at 31 December | 456 486 | 26.710 | 234 486 | 29.120 |
2015 2016
| Weighted average exercise price |
Weighted average exercise price |
|||
|---|---|---|---|---|
| SOP 2010-2014 Stock Option Plan | Number of options | (in €) Number of options | (in €) | |
| Outstanding as at 1 January | 1 498 075 | 34.413 | 1 821 585 | 32.942 |
| Granted during the year | 349 810 | 26.055 | - | - |
| Exercised during the year | -26 300 | 25.140 | -316 042 | 21.843 |
| Forfeited during the year | - | - | -23 700 | 67.259 |
| Outstanding as at 31 December | 1 821 585 | 32.942 | 1 481 843 | 34.760 |
| 2015 | 2016 | ||||||
|---|---|---|---|---|---|---|---|
| SOP 2015-2017 Stock Option Plan | Number of options | Weighted average exercise price |
(in €) Number of options | Weighted average exercise price (in €) |
|||
| Granted during the year | - | - | 227 250 | 26.375 | |||
| Outstanding as at 31 December | - | - | 227 250 | 26.375 | |||
| Weighted average remaining contractual life in years 2015 2016 |
|||||||
| SOP2 | 3.7 | 3.2 | |||||
| SOP 2005-2009 | 4.5 | 3.7 |
SOP 2010-2014 7.1 6.3 SOP 2015-2017 - 9.0
The weighted average share price at the date of exercise in 2016 was not applicable for the SOP1 subscription rights (2015: € 26.22), € 40.69 for the SOP2 options (2015: not applicable), € 39.45 for the SOP 2005-2009 subscription rights (2015: € 26.36) and € 35.42 for the SOP 2010-2014 options (2015: € 27.09). 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 grant dates of each offering were scheduled in the period 2011-2015. The exercise price of the SOP 2010-2014 options was 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 pricing model are detailed below:
| Pricing model details Stock option plan |
Granted in February 2015 |
Granted in February 2016 |
Granted in February 2017 1 |
|---|---|---|---|
| Inputs to the model | |||
| Share price at grant date (in €) | 25.65 | 27.25 | 39.39 |
| Exercise price (in €) | 26.06 | 26.38 | 39.43 |
| Expected volatility | 39% | 39% | 39% |
| Expected dividend yield | 3% | 3% | 3% |
| Vesting period (years) | 3 | 3 | 3 |
| Contractual life (years) | 10 | 10 | 10 |
| Employee exit rate | 3% | 3% | 3% |
| Risk-free interest rate | 0.05% | 0.05% | 0.05% |
| Exercise factor | 1.40 | 1.40 | 1.40 |
| Outcome of the model | |||
| Fair value (in €) | 6.71 | 7.44 | 10.32 |
| Granted options | 349 810 | 227 250 | 273 325 |
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 2016, 227 250 options (2015: 349 810) were granted under SOP 2015-2017 at a fair value per unit of € 7.44 (2015: € 6.71). The Group has recorded an expense against equity of € 3.3 million (2015: € 2.9 million) based on a straight-line amortization over the vesting period of the fair value of options and subscription rights granted.
The members of the Bekaert Group Executive, the senior management and a limited number of management staff members of the Company and a number of its subsidiaries received during 2015 and 2016 Performance Share Units entitling the beneficiary to acquire Performance Shares subject to the conditions of the Performance Share Plan 2015-2017. These Performance Share Units will vest following a vesting period of three years, conditional to the achievement of a pre-set performance target. The performance target was set by the Board of Directors, in line with the Company strategy.
The Performance Share Units granted under the Performance Shares Plan 2015-2017 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 pricing model are detailed below:
| Granted in | |||||||
|---|---|---|---|---|---|---|---|
| Pricing model details Performance Share Plan |
December 2015 |
February 2016 |
July 2016 |
December 2016 1 |
March 2017 2 |
||
| Inputs to the model | |||||||
| Share price at grant date (in €) | 27,25 | 32,00 | 38,38 | 39,49 | 46,90 | ||
| Expected volatility | 39% | 39% | 39% | 39% | 39% | ||
| Expected dividend yield | 3% | 3% | 3% | 3% | 3% | ||
| Vesting period (years) | 3 | 2,83 | 3 | 3 | 2,83 | ||
| Employee exit rate | 3% | 3% | 3% | 3% | 0% | ||
| Risk-free interest rate | -0,20% | -0,41% | -0,56% | -0,53% | -0,53% | ||
| Outcome of the model | |||||||
| Fair value (in €) | 36,08 | 46,89 | 50,30 | 52,15 | 46,90 | ||
| Granted Performance Share Units | 50 850 | 10 000 | 2 500 | 52 450 | 10 000 |
1 Expense recorded as from 1 January 2017.
2 See note 7.6. 'Events after the balance sheet date'.
In 2016 an offer of 52 450 Performance Share Units (2015: 50 850) was made under the terms of the Performance Share Plan 2015-2017. The granted units represent a fair value of € 2.7 million (2015: € 1.8 million). In addition, an exceptional grant of 10 000 Performance Share Units for the Chief Executive Officer was made on 29 February 2016 and an exceptional grant of 2 500 Performance Share Units for the newly hired Chief Financial Officer was made on 1 July 2016. The Group has recorded an expense against equity of € 0.8 million based on a straight-line amortization over the vesting period of the fair value of Performance Share Units granted.
In March 2016, the Company introduced a Personal Shareholding Requirement Plan for the Chief Executive Officer and the other members of the Bekaert Group Executive ('BGE'), pursuant to which they are required to build and maintain a personal shareholding in Company shares and whereby the acquisition of the required number of Company shares is supported by a so-called Company matching mechanism. The Company matching mechanism originally provided that the Company would match the BGE member's investment in Company shares in year x, with a premium (to be paid out at the end of year x +2) which should then be used by the BGE member to invest in Company shares. On the motion of the Board of Directors and subject to the approval by the Extraordinary General Meeting of Shareholders of 29 March 2017, this Company matching mechanism will be amended (with retroactive effect as of the start of the Personal Shareholding Requirement Plan) in such a way that the Company will match the BGE member's investment in Company shares in year x, with a direct grant of a similar number of Company shares as acquired by the BGE member (such grant to be made at the end of year x + 2).
The matching shares to be granted under the Personal Shareholding Requirement Plan 2016 are recognized at fair value at start date in accordance with IFRS 2 (see note 6.13. 'Retained earnings and other Group reserves'). The fair value of the matching shares is determined using a binomial pricing model. Inputs and outcome of this pricing model are detailed below:
| Pricing model details Matching share |
To be granted in December 2018 |
|---|---|
| Inputs to the model | |
| Share price at start date (in €) Expected volatility |
35.71 39% |
| Expected dividend yield | 3% |
| Vesting period (years) | 2.8 |
| Employee exit rate | 4% |
| Risk-free interest rate | -0.40% |
| Outcome of the model | |
| Fair value (in €) | 29.27 |
| Matching shares to be granted | 20 327 |
A grant of 20 327 matching shares will be made in 2018 under the terms of the Personal Shareholding Requirement Plan 2016. The matching shares to be granted represent a fair value of € 0.6 million. The Group has recorded an expense against equity of € 0.2 million based on a straight-line amortization over the vesting period of the fair value of matching shares to be granted.
| 2015 | 2016 |
|---|---|
| - | -148 |
| 97 | 2 446 |
| -70 771 | -80 743 |
| -8 200 | -8 206 |
| 30 689 | 30 831 |
| -55 820 | |
| 4 286 | |
| -51 534 | |
| -144 747 | -127 974 |
| 1 397 110 | 1 432 394 |
| -48 185 -30 808 -78 993 |
1 See note 2.7. 'Restatement and reclassification effects'.
The movements in the Group reserves and retained earnings were as follows:
| Hedging reserve | ||
|---|---|---|
| in thousands of € | 2015 | 2016 |
| As at 1 January | 132 | - |
| Changes in ownership | - | -594 |
| New instruments added | - | -213 |
| Existing instruments settled | - | 1 099 |
| Recycled to income statement | -6 166 | -325 |
| Fair value changes to hedging instruments | 6 034 | -115 |
| As at 31 December | - | -148 |
| Of which | ||
| FX contracts (in Bridon International Ltd) | - | -148 |
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 IFRSs hedge accounting policies for cash flow hedges, exchange gains or losses arising from translating the hedged items at the closing rate are offset by recycling the equivalent amounts to the income statement on a quarterly basis.
| in thousands of € | 2015 | 2016 |
|---|---|---|
| As at 1 January | 2 098 | 97 |
| Recycled to income statement | 302 | 591 |
| Fair value changes | -2 303 | 1 758 |
| As at 31 December | 97 | 2 446 |
| Of which | ||
| Investment in Shougang Concord Century Holdings Ltd | 97 | 2 446 |
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. At midyear 2016, an amount of € 0.6 million was recycled to income statement as a result of an impairment loss (€ 0.3 million at year-end 2015). The share price recovered substantially in the second semester 2016, which is reflected in the positive fair value changes.
| Remeasurements on defined-benefit plans in thousands of € |
2015 | 2016 |
|---|---|---|
| As at 1 January (as reported) | -79 146 | -70 771 |
| Restatement 1 | -4 295 | - |
| As at 1 January (restated) | -83 441 | -70 771 |
| Remeasurements of the period 1 | 13 808 | -9 615 |
| Inflation effects | -430 | -538 |
| Changes in ownership | -708 | 181 |
| As at 31 December | -70 771 | -80 743 |
1 See note 2.7. 'Restatement and reclassification effects'. 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'). The opening balance of 2015 was restated for our Ecuadorian subsidiary as a result of the new IAS 19 requirement to use a currency based discount rate rather than a country based one. This reserve does not include any remeasurements attributable to non-controlling interests.
As for the 'other revaluation reserve', no substantial movements were recognized. These reserves predominantly consist of a liability of € 8.2 million that has initially been set up at fair value versus equity, which represents the put option granted to Maccaferri on its remaining non-controlling interests in Bekaert Maccaferri Underground Solutions BVBA. Any subsequent changes in fair value of this financial liability are recognized through income statement in accordance with IFRS.
| Deferred taxes booked in equity in thousands of € |
2015 | 2016 |
|---|---|---|
| As at 1 January | 29 722 | 30 689 |
| Restatement 1 | 999 | - |
| As at 1 January (restated) | 30 721 | 30 689 |
| Deferred taxes relating to other comprehensive income 1 | -520 | -433 |
| Inflation effects | 146 | 183 |
| Changes in ownership | 342 | 393 |
| As at 31 December | 30 689 | 30 832 |
1 See note 2.7. 'Restatement and reclassification effects'.
Deferred taxes relating to other comprehensive income are also recognized in OCI (see note 6.6. 'Deferred tax assets and liabilities'). The opening balance restatement of 2015 reflects the deferred tax effect of the IAS 19 restatement effected on the Ecuadorian defined-benefit plans.
| Treasury shares in thousands of € |
2015 | 2016 |
|---|---|---|
| As at 1 January | -145 953 | -144 747 |
| Shares purchased | - | -1 114 |
| Shares sold | 1 206 | 17 887 |
| As at 31 December | -144 747 | -127 974 |
28 785 shares were bought back in 2016 both to anticipate any dilution and to hedge the cash flow risk on sharebased payment plans, while 392 049 treasury shares were sold to the beneficiaries of the share-based payment plans of the Group. In 2015 the only treasury shares transactions related to 26 300 options being exercised (see note 6.12. 'Ordinary shares, treasury shares and equity settled share based payments'). Treasury shares sold are accounted for using FIFO.
| Cumulative translation adjustments | ||
|---|---|---|
| in thousands of € | 2015 | 2016 |
| As at 1 January | -6 149 | -30 808 |
| Exchange differences on dividends declared | -5 296 | -352 |
| Recycled to income statement - relating to disposed entities or step acquisitions | 393 | - |
| Changes in ownership | -2 359 | -37 |
| Movements arising from exchange rate fluctuations 1 | -17 397 | 35 483 |
| As at 31 December | -30 808 | 4 286 |
| Of which relating to entities with following functional currencies | ||
| Chinese renminbi | 158 720 | 138 100 |
| US dollar 1 | 35 554 | 43 121 |
| Brazilian real | -170 636 | -118 483 |
| Chilean peso | -9 370 | -1 128 |
| Venezuelan bolivar | -42 344 | -54 682 |
| Indian rupee | -3 183 | -2 720 |
| Czech koruna | 7 557 | 7 511 |
| British pound | 783 | -8 201 |
| Russian ruble | -5 433 | -1 728 |
| Other currencies | -2 456 | 2 496 |
1 See note 2.7. 'Restatement and reclassification effects'. The swings in CTA reflect both the exchange rate evolution and the relative importance of the net assets denominated in the presented currencies.
| Retained earnings | |||
|---|---|---|---|
| in thousands of € | 2015 | 2016 | |
| As at 1 January | 1 352 197 | 1 397 110 | |
| Reclassifications from other reserves | 16 407 | - | |
| Equity instruments granted | - | 4 387 | |
| Result for the period attributable to the Group | 101 722 | 105 166 | |
| Dividends | -48 006 | -50 472 | |
| Inflation adjustments | 1 698 | 2 000 | |
| Treasury shares transactions | - | -9 235 | |
| Changes in ownership | -26 908 | -16 562 | |
| As at 31 December | 1 397 110 | 1 432 394 |
Reclassifications in retained earnings in 2015 related to historical fair value adjustments relating to business combinations before 2011 (€ 8.7 million) and equity-settled share-based payment plans (€ -25.1 million) which will no longer be accounted for using a dedicated reserve as from 2016. The latter is illustrated by the equity instruments granted (€ 4.4 million) which are posted directly to retained earnings as from 2016. Inflation adjustments reflect the use of inflation accounting in Venezuela, as required under IFRS in a hyperinflationary economy. Treasury shares transactions (€ -9.2 million) represents the difference between the proceeds and the FIFO book value of the shares that were sold. Changes in ownership in 2015 (€ -26.9 million) mainly related to purchases of non-controlling interests (€ -27.7 million) and to business combinations and business disposals (€ 0.8 million), while in 2016 these predominantly related to the BBRG business combination (€ -16.4 million).
| Carrying amount | ||
|---|---|---|
| in thousands of € | 2015 | 2016 |
| As at 1 January (as reported) | 199 421 | 129 440 |
| Restatement 1 | -2 348 | - |
| As at 1 January (restated) | 197 073 | 129 440 |
| Changes in Group structure | -85 152 | 10 620 |
| Share of the result for the period 1 | 3 742 | 7 255 |
| Share of other comprehensive income excluding CTA 1 | 655 | 29 |
| Dividend pay-out | -7 391 | -17 037 |
| Capital increases | 14 967 | - |
| Exchange gains and losses (-) 1 | 5 546 | 494 |
| As at 31 December | 129 440 | 130 801 |
1 See note 2.7. 'Restatement and reclassification effects'.
The changes in Group structure in 2016 mainly relate to the merger with Bridon. In 2015, the changes in Group structure mainly relate to Bekaert acquiring the remaining non-controlling interests held by the Chilean partners in the Ropes entities in December. Other changes in Group structure originated from the business combination with Pirelli, the acquisition of the remaining non-controlling interests in two Chinese companies and in the Malaysian and Indonesian 'Southern Wire' companies from Southern Steel, and the loss of control in Bekaert (Xinyu) New Materials Co Ltd.
In 2016, the share of the result for the period mainly improved due to the positive contribution from the Wire companies, while the BBRG entities were hit by the sagging demand from the oil and gas sector.
In accordance with IFRS 12, 'Disclosures of Interests in Other Entities', following information is provided on subsidiaries that have non-controlling interests ('NCI') 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 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. Bekaert has many partnerships across the world, most of which would not individually meet any reasonable materiality criterion. Therefore, the Group has identified three nonwholly owned groups of entities which are interconnected through their line of business and shareholder structure: (1) the BBRG entities, a global business in which Bekaert has recently expanded its worldwide footprint; (2) the Wire entities in Chile and Peru, where the non-controlling interests are mainly held by the Chilean partners, and (3) the Wire entities in the Andina region, where the non-controlling interests are mainly held by the Ecuadorian Kohn family and ArcelorMittal. In presenting aggregated information for these entity groups, only intercompany effects within each entity group have been eliminated, while all other entities of the Group have been treated as third parties.
| Proportion of NCI | |||
|---|---|---|---|
| Entities included in material NCI disclosure | Country | at year-end 2015 |
2016 |
| BBRG entities | |||
| Acma Inversiones SA | Chile | 0.0% | 40.0% |
| BBRG (Purchaser) Ltd | United Kingdom | 0.0% | 40.0% |
| BBRG (Subsidiary) Ltd | United Kingdom | 0.0% | 40.0% |
| BBRG Finance (UK) Ltd | United Kingdom | 0.0% | 40.0% |
| BBRG Holding (UK) Ltd | United Kingdom | 0.0% | 40.0% |
| BBRG Operations (UK) Ltd | United Kingdom | 0.0% | 40.0% |
| BBRG Production (UK) Ltd | United Kingdom | 0.0% | 40.0% |
| Bekaert (Shenyang) Advanced Cords Co, Ltd | China | 0.0% | 40.0% |
| Bekaert Advanced Cords Aalter NV | Belgium | 0.0% | 40.0% |
| Bekaert Cimaf Cabos | Brazil | 0.0% | 40.0% |
| Bekaert Wire Rope Industry NV | Belgium | 0.0% | 40.0% |
| Bekaert Wire Ropes Pty Ltd | Australia | 0.0% | 40.0% |
| Bridge Finco LLC | United States | 0.0% | 40.0% |
| Bridon (Hangzhou) Ropes Co Ltd | China | 0.0% | 40.1% |
| Bridon (South East Asia) Ltd | China | 0.0% | 40.1% |
| 0.0% | 40.1% | ||
| Bridon Australia Pty Ltd | Australia | ||
| Bridon Coatbridge Limited | United Kingdom | 0.0% | 40.0% |
| Bridon do Brasil Representaçŏes Comércio e Indústria de Cabos Ltda | Brazil | 0.0% | 40.1% |
| Bridon Holdings Ltd | United Kingdom | 0.0% | 40.1% |
| Bridon Hong Kong Limited | China | 0.0% | 40.1% |
| Bridon International GmbH | Germany | 0.0% | 40.0% |
| Bridon International Limited | United Kingdom | 0.0% | 40.0% |
| Bridon Ltd | United Kingdom | 0.0% | 40.0% |
| Bridon New Zealand Limited | New Zealand | 0.0% | 40.1% |
| Bridon Pension Trust (No Two) Limited | United Kingdom | 0.0% | 40.0% |
| Bridon Scanrope AS | Norway | 0.0% | 40.1% |
| Bridon Scheme Trustees Ltd | United Kingdom | 0.0% | 40.0% |
| Bridon Singapore (Pte) Ltd | Singapore | 0.0% | 40.1% |
| Bridon-American Corporation | United States | 0.0% | 40.0% |
| Bridon-Bekaert Ropes Group (UK) Ltd | United Kingdom | 0.0% | 40.0% |
| Bridon-Bekaert Ropes Group Ltd | United Kingdom | 0.0% | 40.0% |
| British Ropes Limited | United Kingdom | 0.0% | 40.0% |
| Gloucester Rope & Tackle Company Limited | United Kingdom | 0.0% | 40.0% |
| NV Bridon Ropes SA | Belgium | 0.0% | 40.1% |
| Procables SA | Peru | 3.9% | 42.3% |
| Procables Wire Ropes SA | Chile | 0.0% | 40.0% |
| Prodinsa SA | Chile | 0.0% | 40.0% |
| PT Bridon | Indonesia | 0.0% | 40.1% |
| Wire Rope Industries Ltd/Industries de Câbles d'Acier Ltée | Canada | 0.0% | 40.0% |
| Wire Rope Industries USA, Inc | United States | 0.0% | 40.0% |
| Wire entities Chile and Peru | |||
| Acma SA | Chile | 48.0% | 48.0% |
| Acmanet SA | Chile | 48.0% | 48.0% |
| Industrias Acmanet Ltda | Chile | 48.0% | 48.0% |
| Industrias Chilenas de Alambre - Inchalam SA | Chile | 48.0% | 48.0% |
| Procercos SA | Chile | 48.0% | 48.0% |
| Prodalam SA | Chile | 48.0% | 48.0% |
| 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% |
| Wire entities Andina region | |||
| Bekaert Ideal SL | Spain | 20.0% | 20.0% |
| Productora de Alambres Colombianos - Proalco SAS | Colombia | 20.0% | 20.0% |
| Bekaert Costa Rica SA | Costa Rica | 41.6% | 41.6% |
| BIA Alambres Costa Rica SA | Costa Rica | 41.6% | 41.6% |
| Ideal Alambrec SA | Ecuador | 41.6% | 41.6% |
| InverVicson SA | Venezuela | 20.0% | 20.0% |
| Vicson SA | Venezuela | 20.0% | 20.0% |
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, Procables Wire Ropes SA, Bekaert Wire Rope Industry NV, BBRG (Purchaser) Ltd, BBRG (Subsidiary) Ltd, BBRG Finance (UK) Ltd, BBRG Holding (UK) Ltd, BBRG Operations (UK) Ltd, BBRG Production (UK) Ltd, Bridon Holdings Ltd, Bridon-Bekaert Ropes Group (UK) Ltd, Bridon-Bekaert Ropes Group Ltd, Industrias Acmanet Ltda, Procercos SA, Impala SA and Bekaert Ideal SL. The following table shows the relative importance of the entity groups with material NCI in terms of results and equity attributable to NCI.
| Material and other NCI | Result attributable to NCI | Equity attributable to NCI | ||
|---|---|---|---|---|
| in thousands of € | 2015 | 2016 | 2015 | 2016 |
| BBRG entities | 957 | -14 492 | 250 | -9 506 |
| Wire entities Chile and Peru | 6 295 | 10 622 | 83 886 | 86 918 |
| Wire entities Andina region 1 | -1 919 | 2 677 | 18 571 | 17 731 |
| Consolidation adjustments on material NCI 1 | -1 612 | 3 014 | -31 998 | -24 327 |
| Contribution of material NCI to consolidated NCI | 3 721 | 1 821 | 70 709 | 70 816 |
| Other NCI | 21 | 5 434 | 58 731 | 59 985 |
| Total consolidated NCI | 3 742 | 7 255 | 129 440 | 130 801 |
1 See note 2.7. 'Restatement and reclassification effects'.
The substantial consolidation adjustments to the equity attributable to material NCI in 2016 are largely due to the BBRG entities, more specifically the merger with Bridon.
The following tables show concise basic statements of the non-wholly owned groups of entities.
| BBRG entities in thousands of € |
2015 | 2016 |
|---|---|---|
| Current assets | 89 233 | 271 084 |
| Non-current assets | 125 131 | 356 840 |
| Current liabilities | 184 034 | 152 743 |
| Non-current liabilities | 41 618 | 499 908 |
| Equity attributable to the Group | -11 538 | -15 221 |
| Equity attributable to NCI | 250 | -9 506 |
The Bridon-Bekaert Ropes Group entered into a Senior Facilities Agreement in order to refinance the newly created company.
As part of this Senior Facilities Agreement the following significant restrictions on the borrower's ability to access or use its assets or settle its liabilities exist:
whereby a threshold amount equal to USD 5.0 million can be retained from the amount to be paid.
| BBRG entities in thousands of € |
2015 | 2016 |
|---|---|---|
| Sales | 144 732 | 303 158 |
| Expenses | -150 105 | -339 795 |
| Result for the period | -5 373 | -36 637 |
| Result for the period attributable to the Group | -6 330 | -22 145 |
| Result for the period attributable to NCI | 957 | -14 492 |
| Other comprehensive income for the period | -16 531 | 3 748 |
| OCI attributable to the Group | -11 907 | 2 246 |
| OCI attributable to NCI | -4 624 | 1 502 |
| Total comprehensive income for the period | -21 904 | -32 889 |
| Total comprehensive income attributable to the Group | -18 237 | -19 899 |
| Total comprehensive income attributable to NCI | -3 667 | -12 990 |
| Dividends paid to NCI | - | - |
| Net cash inflow (outflow) from operating activities | 6 398 | -44 254 |
| Net cash inflow (outflow) from investing activities | -189 666 | -89 958 |
| Net cash inflow (outflow) from financing activities | 184 465 | 179 691 |
| Net cash inflow (outflow) | 1 197 | 45 479 |
The result for the period of the BBRG entities, both in 2015 and 2016 was adversely affected by the weak economic situation in the oil and gas sector.
| Wire entities Chile and Peru | ||
|---|---|---|
| in thousands of € | 2015 | 2016 |
| Current assets | 181 799 | 201 110 |
| Non-current assets | 140 010 | 146 329 |
| Current liabilities | 112 300 | 136 513 |
| Non-current liabilities | 51 123 | 46 651 |
| Equity attributable to the Group | 74 500 | 77 357 |
| Equity attributable to NCI | 83 886 | 86 918 |
| Wire entities Chile and Peru in thousands of € |
2015 | 2016 |
|---|---|---|
| Sales | 434 933 | 422 946 |
| Expenses | -422 039 | -402 663 |
| Result for the period | 12 894 | 20 283 |
| Result for the period attributable to the Group | 6 599 | 9 662 |
| Result for the period attributable to NCI | 6 295 | 10 622 |
| Other comprehensive income for the period | -1 273 | 11 059 |
| OCI attributable to the Group | -1 428 | 5 636 |
| OCI attributable to NCI | 155 | 5 423 |
| Total comprehensive income for the period | 11 621 | 31 342 |
| Total comprehensive income attributable to the Group | 5 171 | 15 298 |
| Total comprehensive income attributable to NCI | 6 450 | 16 045 |
| Dividends paid to NCI | -5 532 | -12 264 |
| Net cash inflow (outflow) from operating activities | 52 954 | 45 281 |
| Net cash inflow (outflow) from investing activities | -9 502 | -8 321 |
| Net cash inflow (outflow) from financing activities | -36 885 | -35 103 |
| Net cash inflow (outflow) | 6 567 | 1 857 |
The increase in current and non-current assets was mainly due to investments and working capital, whereas the increase in liabilities was mainly driven by accounts payables and current debt.
The sales decrease in Prodac and Inchalam was offset by sales increase in Prodalam and Acma. Operating results improved in all the companies. Other comprehensive income mainly includes exchange differences that are affected by the weakened Chilean peso.
Operating cash flows decreased due to the increase of working capital.
| Wire entities Andina region in thousands of € |
2015 | 2016 |
|---|---|---|
| Current assets | 110 021 | 102 623 |
| Non-current assets 1 | 73 875 | 72 892 |
| Current liabilities | 101 758 | 103 960 |
| Non-current liabilities 1 | 29 994 | 28 753 |
| Equity attributable to the Group | 33 573 | 25 071 |
| Equity attributable to NCI | 18 571 | 17 731 |
1 See note 2.7. 'Restatement and reclassification effects'.
| Wire entities Andina region in thousands of € |
2015 | 2016 |
|---|---|---|
| Sales | 204 551 | 184 668 |
| Expenses 1 | -208 333 | -179 714 |
| Result for the period | -3 783 | 4 953 |
| Result for the period attributable to the Group 1 | -1 864 | 2 276 |
| Result for the period attributable to NCI 1 | -1 919 | 2 677 |
| Other comprehensive income for the period | 3 464 | -11 185 |
| OCI attributable to the Group 1 | 1 007 | -9 293 |
| OCI attributable to NCI 1 | 2 457 | -1 892 |
| Total comprehensive income for the period | -319 | -6 232 |
| Total comprehensive income attributable to the Group 1 | -857 | -7 017 |
| Total comprehensive income attributable to NCI 1 | 538 | 785 |
| Dividends paid to NCI | -850 | -1 651 |
| Net cash inflow (outflow) from operating activities | 11 221 | 31 230 |
| Net cash inflow (outflow) from investing activities | -6 901 | -4 626 |
| Net cash inflow (outflow) from financing activities | 7 679 | -6 980 |
| Net cash inflow (outflow) | 11 999 | 19 624 |
1 See note 2.7. 'Restatement and reclassification effects'.
The major balance sheet subtotals remained fairly constant, although net assets of Venezuela dwindled further as a result of the spectacular depreciation of the bolivar. Current liabilities in Venezuela decreased due to the repayment of foreign currency debt.
Sales increased in all countries except Venezuela and Ecuador. Ecuador and Costa Rica recorded important improvements in operating results.
Vicson SA (Venezuela) remains exposed to restrictions on the repatriation of cash due to foreign exchange regulations in Venezuela.
The total net liabilities for employee benefit obligations, which amounted to € 316.8 million as at 31 December 2016 (€ 304.0 million as at year-end 2015), are as follows:
| in thousands of € | 2015 | 2016 |
|---|---|---|
| Liabilities for | ||
| Post-employment defined-benefit plans 1 | 165 491 | 172 213 |
| Other long-term employee benefits | 6 077 | 6 333 |
| Cash-settled share-based payment employee benefits | 1 946 | 3 594 |
| Short-term employee benefits | 117 532 | 124 799 |
| Termination benefits | 12 915 | 9 888 |
| Total liabilities in the balance sheet | 303 961 | 316 827 |
| of which | ||
| Non-current liabilities 1 | 172 680 | 182 641 |
| Current liabilities | 131 281 | 132 913 |
| Liabilities associated with assets held for sale 2 | - | 1 273 |
| Assets for | ||
| Defined-benefit pension plans | -7 | -42 |
| Total assets in the balance sheet | -7 | -42 |
| Total net liabilities | 303 954 | 316 785 |
1 See note 2.7. 'Restatement and reclassification effects'.
2 See note 6.11. 'Assets classified as held for sale and liabilities associated with those assets'.
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. Pension legislation was amended at the end of 2015 and defines the minimum guaranteed rate of return as a variable percentage linked to government bond yields observed in the market as from 1 January 2016 onwards. For 2016 the minimum guaranteed rate of return becomes 1.75% on employer contributions and employee contributions. The old rates (3.25% on employer contributions and 3.75% on employee contributions) continue to apply to the accumulated past contributions in the group insurance as at 31 December 2015. As a consequence, the defined-contribution plans are reported as defined-benefit obligations at year end, whereby an actuarial valuation was performed.
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 € 0.9 million (2015: € 0.8 million).
| Defined-contribution plans | ||
|---|---|---|
| in thousands of € | 2015 | 2016 |
| Expenses recognized | 18 545 | 14 169 |
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 2016 for all significant postemployment defined-benefit plans by independent actuaries. The Group's largest defined-benefit obligations are in Belgium, the United States and the United Kingdom (new since 2016). They account for 87.1% (2015: 84.3%) of the Group's defined-benefit obligations and 99.8% (2015: 99.8%) of the Group's plan assets.
The funded plans in Belgium mainly relate to retirement plans representing a defined-benefit obligation of € 189.4 million (2015: € 164.1 million) and € 168.5 million assets (2015: € 147.3 million). This is including the defined-contribution plans funded through a group insurance.
The traditional defined-benefit plans 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 € 20.7 million (2015: € 23.2 million)) which are not externally funded. An amount of € 8.9 million (2015: € 8.5 million) relates to employees in active service who have not yet entered into any pre-retirement agreement.
The funded plans in the United States mainly relate to pension plans representing a defined-benefit obligation of € 146.3 million (2015: € 142.2 million) and assets of € 99.7 million (2015: € 92.4 million). The plans provide for benefits for the life of the plan members but have been closed for new entrants. During 2016 the largest plan was also closed for future accruals. 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.
Unfunded plans mainly relate to medical care (defined-benefit obligation € 5.0 million (2015: € 5.5 million)) and are not externally funded.
The legal entity in UK sponsors the Bridon Group (2013) Pension Scheme, a funded defined-benefit pension scheme for qualifying UK employees. The scheme is administrated by a separate Board of Trustees which is legally separate from the company. The Board of Trustees consists of representatives of both employer and employees. The trustees are required by law to act in the interest of all relevant beneficiaries and are responsible for the investment policy with regard to the assets plus the day to day administration of the benefits.
The latest actuarial valuation under IAS 19 was carried out as of 31 December 2016 by independent actuaries and resulted into a defined-benefit obligation of € 98.3 million and assets of € 96.1 million. The defined-benefit obligation includes benefits for deferred pensioners and current pensioners. Broadly, about 95% of the liabilities are attributable to non-pensioners and 5% to current pensioners.
UK legislation requires that pension schemes are funded prudently, i.e. using prudent assumptions as opposed to best estimate assumptions under IAS 19. The last funding valuation was carried out by a qualified actuary as at 31 December 2013 and showed a funding deficit of GBP 12.4 million. The company has agreed to pay deficit contributions. These company contributions were expected to make good this shortfall by 31 December 2017. The next funding valuation is due on 31 December 2016 – to be submitted with the Pension Regulator by March 2018 - at which progress towards full-funding will be reviewed.
The amounts recognized in the balance sheet are as follows:
| in thousands of € | 2015 | 2016 |
|---|---|---|
| Belgium | ||
| Present value of funded obligations | 164 091 | 189 422 |
| Fair value of plan assets | -147 325 | -168 520 |
| Deficit / surplus (-) of funded obligations | 16 766 | 20 902 |
| Present value of unfunded obligations | 25 618 | 23 286 |
| Total deficit / surplus (-) of obligations | 42 384 | 44 188 |
| United States | ||
| Present value of funded obligations | 142 225 | 146 289 |
| Fair value of plan assets | -92 386 | -99 704 |
| Deficit / surplus (-) of funded obligations | 49 839 | 46 585 |
| Present value of unfunded obligations | 9 884 | 10 762 |
| Total deficit / surplus (-) of obligations | 59 723 | 57 347 |
| United Kingdom | ||
| Present value of funded obligations | - | 98 336 |
| Fair value of plan assets | - | -96 087 |
| Deficit / surplus (-) of funded obligations | - | 2 249 |
| Present value of unfunded obligations | - | - |
| Total deficit / surplus (-) of obligations | - | 2 249 |
| Other | ||
| Present value of funded obligations | 666 | 874 |
| Fair value of plan assets | -458 | -782 |
| Deficit / surplus (-) of funded obligations | 208 | 92 |
| Present value of unfunded obligations 1 | 63 169 | 68 294 |
| Total deficit / surplus (-) of obligations | 63 377 | 68 386 |
| Total | ||
| Present value of funded obligations | 306 982 | 434 921 |
| Fair value of plan assets | -240 169 | -365 093 |
| Deficit / surplus (-) of funded obligations | 66 813 | 69 828 |
| Present value of unfunded obligations 1 | 98 671 | 102 342 |
| Total deficit / surplus (-) of obligations | 165 484 | 172 170 |
1 See note 2.7. 'Restatement and reclassification effects'. The movement in the defined-benefit obligation, plan assets, net liability and asset over the year is as follows:
| in thousands of € | Defined-benefit obligation |
Plan assets |
Amount not recognized as an asset |
Net liability / asset (-) |
|---|---|---|---|---|
| As at 1 January 2015 1 | 355 978 | -178 146 | 169 630 | |
| Current service cost 1 | 14 190 | - | 14 190 | |
| Past service cost | 2 787 | - | 2 787 | |
| Gains (-) / losses from settlements | 169 | - | 169 | |
| Interest expense / income (-) 1 | 11 087 | -5 299 | 5 788 | |
| Net benefit expense / income (-) recognized in profit | ||||
| and loss | 28 233 | -5 299 | 22 934 | |
| Components recognized in EBIT | - | - | 17 146 | |
| Components recognized in financial result | - | - | 5 788 | |
| Remeasurements | ||||
| Return on plan assets, excluding amounts included in | ||||
| interest expense / income (-) | - | 3 025 | 3 025 | |
| Gain (-) / loss from change in demographic | ||||
| assumptions | -6 660 | - | -6 660 | |
| Gain (-) / loss from change in financial assumptions 1 | -13 185 | - | -13 185 | |
| Experience gains (-) / losses 1 | 2 347 | - | 2 347 | |
| Changes recognized in equity | -17 498 | 3 025 | -14 473 | |
| Contributions | ||||
| Employer contributions / direct benefit payments | - | -30 053 | -30 053 | |
| Employee contributions | 162 | -162 | - | |
| Payments from plans | ||||
| Benefit payments | -30 438 | 30 438 | - | |
| Reclassifications | 48 861 | -50 321 | -1 460 | |
| Acquisitions | 3 446 | - | 3 446 | |
| Disposals | -164 | 81 | -83 | |
| Foreign-currency translation effect 1 | 17 073 | -9 731 | 7 342 | |
| As at 31 December 2015 | 405 653 | -240 168 | 165 485 | |
| As at 1 January 2016 | 405 653 | -240 168 | 165 485 | |
| Current service cost | 17 990 | - | 17 990 | |
| Past service cost | -6 070 | - | -6 070 | |
| Gains (-) / losses from settlements | -1 905 | 3 075 | 1 170 | |
| Interest expense / income (-) | 13 533 | -8 093 | 87 | 5 527 |
| Net benefit expense / income (-) recognized in profit | ||||
| and loss | 23 549 | -5 018 | 87 | 18 618 |
| Components recognized in EBIT | - | - | 13 090 | |
| Components recognized in financial result | - | - | 5 527 | |
| Remeasurements | ||||
| Return on plan assets, excluding amounts included in | ||||
| interest expense / income (-) | - | -17 476 | -17 476 | |
| Gain (-) / loss from change in demographic | ||||
| assumptions | -2 286 | - | -2 286 | |
| Gain (-) / loss from change in financial assumptions | 26 716 | - | 26 716 | |
| Experience gains (-) / losses | 9 340 | - | 9 340 | |
| Change in irrecoverable surplus other than interest | - | - | -6 318 | -6 318 |
| Changes recognized in equity | 33 769 | -17 476 | -6 318 | 9 975 |
| Contributions | ||||
| Employer contributions / direct benefit payments | - | -32 268 | -32 268 | |
| Employee contributions | 145 | -145 | - | |
| Payments from plans | ||||
| Benefit payments | -25 149 | 25 149 | - | |
| Acquisitions | 96 222 | -95 202 | 6 477 | 7 497 |
| Foreign-currency translation effect | 3 074 | 36 | -246 | 2 863 |
| As at 31 December 2016 | 537 263 | -365 093 | - | 172 170 |
1 See note 2.7. 'Restatement and reclassification effects'. The past service cost mainly relates to the pension plan freeze in the USA, the restructuring in Malaysia and a change in the retirement gratuity plan in Peru. Settlement costs mainly relate to the restructuring in Turkey. The change in asset ceiling relates to the UK whereby the initial asset ceiling upon acquisition during the year was cancelled by the evolution in assets and liabilities. 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 (2015: € 0.3 million).
Estimated contributions and direct benefit payments for 2017 are as follows:
| Estimated contributions and direct benefit payments | |||
|---|---|---|---|
| ----------------------------------------------------- | -- | -- | -- |
| in thousands of € | 2017 |
|---|---|
| Pension plans | 27 174 |
| Total | 27 174 |
Fair values of plan assets at 31 December were as follows:
| in thousands of € | 2015 | 2016 |
|---|---|---|
| Belgium | ||
| Bonds | 33 032 | 34 120 |
| Equity | 55 165 | 62 290 |
| Cash | 8 807 | 9 404 |
| Insurance contract | 50 321 | 62 706 |
| Total Belgium | 147 325 | 168 520 |
| United States | ||
| Bonds | ||
| USD Long Duration Bonds | 49 132 | 53 532 |
| USD Fixed Income | 9 358 | 9 956 |
| USD Guaranteed Deposit | 5 937 | 5 522 |
| Equity | ||
| USD Equity | 20 084 | 22 251 |
| Non-USD Equity | 7 875 | 8 443 |
| Total United States | 92 386 | 99 704 |
| United Kingdom | ||
| Bonds | - | 9 911 |
| Derivatives | - | 45 738 |
| Equity | - | 39 695 |
| Cash | - | 743 |
| Total United States | - | 96 087 |
| Other | ||
| Bonds | 458 | 782 |
| Total Other | 458 | 782 |
| Total | 240 169 | 365 093 |
In the USA, investments are primarily made through mutual fund investments and insurance company separate accounts, in quoted equity and debt instruments. In Belgium, the 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:
| 2015 Actuarial assumptions |
2016 |
|---|---|
| Discount rate 1 3.1% |
2.7% |
| Future salary increases 3.4% |
3.1% |
| Underlying inflation rate 2.8% |
2.6% |
| Health care cost increases (initial) 6.3% |
6.6% |
| Health care cost increases (ultimate) 4.5% |
4.8% |
| Health care (years to ultimate rate) 8 |
7 |
1 See note 2.7. 'Restatement and reclassification effects'.
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.
As a consequence of the Annual Improvements to IFRS 2012-2014 the rate used to discount post-employment benefit obligations was determined by reference to market yields on bonds denominated in the currency used, which is the US dollar in Ecuador. This has triggered a restatement of the 2015 disclosures.
This resulted into the following discount rates:
| Discount rates | 2015 | 2016 |
|---|---|---|
| Belgium | 2.0% | 1.5% |
| United States | 4.2% | 4.0% |
| United Kingdom | - | 2.6% |
| Other 1 | 4.2% | 3.4% |
1 See note 2.7. 'Restatement and reclassification effects'.
Assumptions regarding future mortality are based on actuarial advice in accordance with published statistics and experience in each territory. These assumptions translate into the following average life expectancy in years for a pensioner retiring at age 65:
| 2015 | 2016 | |
|---|---|---|
| Life expectancy of a man aged 65 (years) at balance sheet date | 20.9 | 20.7 |
| Life expectancy of a woman aged 65 (years) at balance sheet date | 23.1 | 23.3 |
| Life expectancy of a man aged 65 (years) ten years after balance sheet date | 21.7 | 21.7 |
| Life expectancy of a woman aged 65 (years) ten years after balance sheet date | 24.0 | 24.4 |
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 | 34 657 | 6.5% |
| Salary growth rate | 0.50% | Increase by | 11 347 | 2.1% |
| Health care cost | 0.50% | Increase by | 192 | 0.04% |
| Increase by | ||||
| Life expectancy | 1 year | Increase by | 7 185 | 1.3% |
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. |
| Weighted average durations of the DBO in years |
2016 |
|---|---|
| Belgium | 12.5 |
| United States | 12.6 |
| United Kingdom | 23.5 |
| Other | 10.8 |
| Total | 14.4 |
1 See note 2.7. 'Restatement and reclassification effects'.
The other long-term employee benefits relate to service awards. The increase of the liabilities is due to acquisitions and a reclassification of one plan in Italy.
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 and equity settled share based payments'). 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: € 38.49 (2015: € 28.39), expected volatility of 39% (2015: 39%), expected dividend yield of 3.0% (2015: 3.0%), vesting period of 3 years, contractual life of 10 years, employee exit rate of 4% in Asia (2015: 4%) and 3% in other countries (2015: 3%), and an exercise factor of 1.40 (2015: 1.40). Inputs for risk-free interest rates vary by grant and are based on the return of Belgian OLO's (Obligation Linéaire / Lineaire Obligatie) 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 2015 |
Fair value as at 31 Dec 2016 |
|---|---|---|---|
| Grant 2009 | 16.58 | 11.20 | - |
| Grant 2010 | 37.05 | 2.69 | 5.62 |
| Grant 2011 | 83.43 | 1.16 | 2.15 |
| Grant 2012 | 27.63 | 6.44 | 12.23 |
| Grant 2013 | 22.09 | 8.36 | 16.52 |
| Exceptional grant 2013 | 22.51 | 9.45 | 16.13 |
| Grant 2014 | 25.66 | 7.85 | 13.59 |
| Grant 2015 | 25.45 | 8.39 | 14.54 |
| Grant 2016 | 28.38 | 7.80 | 13.40 |
| Grant 2017 1 | 38.86 | - | 10.36 |
| Other SAR Plans details by grant | Fair value as at 31 | Fair value as at 31 | |
|---|---|---|---|
| in € | Exercise price | Dec 2015 | Dec 2016 |
| Grant 2007 | 30.17 | 3.06 | - |
| Grant 2008 | 28.33 | 4.83 | 10.47 |
| Grant 2009 | 16.66 | 11.37 | 20.71 |
| Grant 2010 | 33.99 | 4.56 | 8.89 |
| Grant 2011 | 77.00 | 1.31 | 2.48 |
| Grant 2012 | 25.14 | 7.08 | 13.85 |
| Grant 2013 | 19.20 | 9.84 | 19.29 |
| Exceptional grant 2013 | 21.45 | 9.93 | 17.11 |
| Grant 2014 | 25.38 | 7.84 | 13.68 |
| Grant 2015 | 26.06 | 7.96 | 14.05 |
| Grant 2016 | 26.38 | 8.01 | 13.93 |
| Grant 2017 1 | 39.43 | - | 9.84 |
1 The fair value of this grant has been determined at grant date. See note 7.6. 'Events after the balance sheet date'.
At 31 December 2016, the total liability for the USA SAR plan amounted to € 1.4 million (2015: € 0.9 million), while the total liability for the other SAR plans amounted to € 2.0 million (2015: € 1.1 million).
The Group recorded a total expense of € 1.4 million (2015: expense of € 0.3 million) during the year in respect of SARs.
Certain management employees received cash-settled Performance Share Units (PSUs) during 2016 entitling the beneficiary to receive the value of Performance Share Units subject to the conditions of the Performance Share Plan 2015-2017. These Performance Share Units will vest following a vesting period of three years, conditional to the achievement of a pre-set performance target. The performance target was set by the Board of Directors, in line with the Company strategy.
Under the terms of the cash-settled Performance Share Plan, a regular offer of 13 100 Performance Share Units was made on 15 December 2016. The granted units represent a fair value of € 0.6 million.
These Performance Share Units 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 and equity settled share based payments').
Following inputs to the model are used for all grants: share price at balance sheet date: € 38.49 (2015: € 28.39), expected volatility of 39% (2015: 39%), expected dividend yield of 3.0% (2015: 3.0%), vesting period of 3 years and an employee exit rate of 4% (2015: 4%). Inputs for risk-free interest rates vary by grant and are based on the return of Belgian OLO's with a term equal to the maturity of the PSU grant under consideration.
The fair value of outstanding Performance Share Units by grant is shown below:
| Performance Share Units details by grant in € |
Fair value as at 31 Dec 2015 |
Fair value as at 31 Dec 2016 |
|---|---|---|
| Grant 2015 | 38.29 | 73.63 |
| Grant 2016 1 | - | 47.93 |
1 The fair value of this grant has been determined at grant date. See note 7.6. 'Events after the balance sheet date'.
At 31 December 2016, the total liability for the USA PSUs amounted to € 0.1 million, while the total liability for the other PSUs amounted to € 0.2 million.
The Group recorded a total expense of € 0.3 million during the year in respect of PSUs.
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.
| in thousands of € | Restructuring | Claims | Environment | Other | Total |
|---|---|---|---|---|---|
| As at 1 January 2016 | 5 266 | 5 907 | 29 929 | 36 069 | 77 171 |
| Additional provisions | 6 544 | 4 277 | - | 8 110 | 18 931 |
| Unutilized amounts released | -1 603 | -1 357 | -48 | -17 857 | -20 865 |
| Increase in present value | - | 121 | 44 | 1 517 | 1 682 |
| Charged to the income statement | 4 941 | 3 041 | -4 | -8 230 | -252 |
| New consolidations | 833 | 7 511 | 662 | 7 534 | 16 540 |
| Reclassification to (-) / from held for | |||||
| sale | - | -2 755 | - | -2 975 | -5 730 |
| Amounts utilized during the year | -2 109 | -1 542 | -471 | -3 500 | -7 622 |
| Exchange gains (-) and losses | -78 | -55 | 132 | 721 | 720 |
| As at 31 December 2016 | 8 853 | 12 107 | 30 248 | 29 619 | 80 827 |
| Of which | |||||
| current | 7 520 | 3 792 | 3 478 | 2 930 | 17 720 |
| non-current - between 2 and 5 | |||||
| years | 1 333 | 8 284 | 9 688 | 23 028 | 42 333 |
| non-current - more than 5 years | - | 31 | 17 082 | 3 661 | 20 774 |
New restructuring provisions have been recorded in relation to the manufacturing footprint adjustment in Malaysia as well for the closure of the Scanrope operations in Norway. Some actions were already taken, and together with the continued implementation of previously announced programs in other plants, give rise to the reversed amounts of these provisions.
Provisions for claims mainly relate to product warranty programs and various product quality claims in several entities. As part of the opening balance on the merger with Bridon, a contingent liability has been recognized (see note 7.2. 'Effect of business combinations').
The environmental provisions mainly relate to sites in EMEA. The expected soil sanitation costs are reviewed at each balance sheet date, based on external expert assessments. Timing of settlement is uncertain as it is often triggered by decisions on the destination of the premises.
The decrease of other provisions include the reversal of corporate guarantees for a subsidiary in Venezuela (€ -16.3 million). New consolidations and additional provisions include an onerous lease provision for the Scanrope plant in Norway.
Information concerning the contractual maturities of the Group's interest-bearing loans and borrowings (current and non-current) is given below:
| 2016 | Due within | Due between 1 | Due after | |
|---|---|---|---|---|
| in thousands of € | 1 year | and 5 years | 5 years | Total |
| Interest-bearing debt | ||||
| Finance leases | 635 | 3 220 | - | 3 855 |
| Credit institutions | 295 390 | 257 184 | 229 341 | 781 915 |
| Bonds | 1 890 | 340 614 | - | 342 504 |
| Convertible bonds | - | 330 951 | - | 330 951 |
| Total financial debt | 297 915 | 931 969 | 229 341 | 1 459 225 |
| 2015 | Due within | Due between 1 | Due after | |
| in thousands of € | 1 year | and 5 years | 5 years | Total |
| Interest-bearing debt | ||||
| Finance leases | 219 | 3 545 | - | 3 764 |
| Credit institutions 1 | 294 799 | 163 737 | - | 458 536 |
| 340 614 | - | 545 614 | ||
| Bonds Convertible bonds |
205 000 1 206 |
284 220 | - | 285 426 |
1 See note 2.7. 'Restatement and reclassification effects'.
Total financial debt increase is mainly due to Bridon-Bekaert Ropes Group. The Group repaid a Eurobond of € 205 million in December 2016. End of 2016, the Group has more actively used its short-term credit facilities (commercial program and uncommitted credit facilities).
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). Bonds, commercial paper and debt towards credit institutions are unsecured, except for the factoring program that has been set up with KBC and BNP Paribas Fortis.
For further information on financial risk management, we refer to note 7.3. 'Financial risk management and financial derivatives'.
The derivative representing the conversion option (€ 35.2 million vs € 5.8 million in 2015) embedded in the convertible bond is not included in the net debt. The table below summarizes the calculation of the net debt.
| in thousands of € | 2015 | 2016 |
|---|---|---|
| Non-current interest-bearing debt | 792 116 | 1 161 310 |
| Current interest-bearing debt 1 | 501 224 | 297 915 |
| Total financial debt | 1 293 340 | 1 459 225 |
| Non-current financial receivables and cash guarantees | -9 694 | -6 664 |
| Current loans 1 | -34 773 | -13 991 |
| Short-term deposits | -10 216 | -5 342 |
| Cash and cash equivalents | -401 771 | -365 546 |
| Net debt | 836 886 | 1 067 683 |
1 See note 2.7. 'Restatement and reclassification effects'.
| Carrying amount in thousands of € |
2015 | 2016 |
|---|---|---|
| Other non-current amounts payable | 820 | 518 |
| Derivatives (cf. note 7.3.) | 14 384 | 44 355 |
| Total | 15 204 | 44 873 |
The derivatives relate to the embedded financial instrument (€ 35.2 million (2015: € 5.8 million)) of the convertible bond (cf. notes 6.17. and 7.3.) and the put option (€ 8.8 million (2015: € 8.6 million)) for a non-controlling interest in an investment.
| Carrying amount | |
|---|---|
| in thousands of € 2015 |
2016 |
| Other amounts payable 4 453 |
7 322 |
| Derivatives (cf. note 7.3.) 22 236 |
7 767 |
| Advances received 3 137 |
12 733 |
| Other taxes 28 117 |
26 862 |
| Accruals and deferred income 1 7 310 |
7 156 |
| Total 65 253 |
61 840 |
1 See note 2.7. 'Restatement and reclassification effects'.
The derivatives include mainly CCIRSs (€ 6.3 million (2015: € 17.7 million)) and forward exchange contracts (€ 1.5 million (2015: € 4.5 million)). Other taxes mainly relate to VAT payable, employment-related taxes withheld and other non-income taxes payable. The accrued interest on interest-bearing debt of € 6.3 million (2015: € 6.5 million) has been reclassified to interest bearing debt (see 2.7. 'Restatement and reclassification effects').
| Summary | ||
|---|---|---|
| in thousands of € | 2015 | 2016 |
| EBIT | 219 386 | 259 654 |
| Non-cash items added back to EBIT | 221 323 | 221 779 |
| EBITDA | 440 709 | 481 433 |
| Other gross cash flows from operating activities | -85 365 | -105 770 |
| Gross cash flows from operating activities | 355 344 | 375 663 |
| Changes in operating working capital | 212 266 | 16 336 |
| Other operating cash flows | 15 952 | 7 553 |
| Cash from operating activities | 583 562 | 399 552 |
| Cash from investing activities | -362 984 | -99 986 |
| Cash from financing activities | -267 808 | -302 055 |
| Net increase or decrease in cash and cash equivalents | -47 230 | -2 489 |
The cash flow from operating activities is presented using the indirect method, whereas the direct method is used for the cash flows from other activities. The direct method focuses on classifying gross cash receipts and gross cash payments by category.
Gross cash flows from operating activities increased by € 20.3 million thanks to better operating performance (€ +40.7 million EBITDA), higher add-backs for other non-cash items (€ +8.8 million, mainly provisions and equitysettled share-based payments) and favorable effects on investing items (€ +14.6 million), offset by higher usage of provisions (€ -4.1 million) and substantially higher cash-outs on income taxes (€-39.7 million). The gain on step acquisition and negative goodwill in 2015 relates to the step acquisition of BOSFA Pty Ltd.
Investing items included in operating result played a modest role in 2016, contrary to the previous year, when the main items consisted of gains on business disposals (net of CTA recycled) with respect to Carding Solutions and the Xinyu entities.
Further efforts to reduce working capital generated cash-ins amounting to € 16.3 million in 2016 (see organic increase in note 6.7. 'Operating working capital'). In 2015, drastic reductions in operating working capital contributed a spectacular € 212.3 million to the cash flows from operating activities. As for the 'other operating cash flows', the higher movements in other current assets and liabilities in 2015 were largely due to insurance indemnifications for the fire in Rome accrued in 2014 and received in 2015.
Income taxes paid were € 39.7 million higher than in 2015, of which € 13.5 million in Belgium, € 7.6 million in China, € 6.6 million in Chile, € 4.9 million in Indonesia and € 4.7 million in Slovakia.
The following table presents more details about selected operating items:
| Details of selected operating items | |
|---|---|
| in thousands of € 2015 |
2016 |
| Non-cash items included in operating result | |
| Depreciation and amortization 1 208 401 |
203 917 |
| Impairment losses on assets 13 262 |
17 862 |
| Negative goodwill -340 |
- |
| Non-cash items added back to EBIT 221 323 |
221 779 |
| Gains (-) and losses on step acquisitions 1 098 |
- |
| Employee benefits: set-up / reversal (-) of amounts not used 2 17 500 |
15 606 |
| Provisions: set-up / reversal (-) of amounts not used 3 752 |
14 393 |
| CTA recycled on business disposals 393 |
- |
| Equity-settled share-based payments 2 906 |
4 449 |
| Other non-cash items included in operating result 25 649 |
34 448 |
| Total 246 972 |
256 227 |
| Investing items included in operating result | |
| Gains (-) and losses on business disposals -13 653 |
- |
| Gains (-) and losses on disposals of intangible assets + PP&E 102 |
1 034 |
| Total -13 551 |
1 034 |
| Amounts used on provisions and employee benefit obligations | |
| Employee benefits: amounts used -33 493 |
-37 242 |
| Provisions: amounts used -7 314 |
-7 622 |
| Total -40 807 |
-44 864 |
| Income taxes paid | |
| Current income tax expense -53 251 |
-93 004 |
| Increase or decrease (-) in net income taxes payable -3 406 |
-3 384 |
| Total -56 657 |
-96 388 |
| Other operating cash flows | |
| Movements in other current assets and liabilities 12 748 |
6 321 |
| Other 3 203 |
1 232 |
| Total 15 951 |
7 553 |
1 Including € -1.2 million (2015: € 8.3 million) write-downs / (reversals of write-downs) on inventories and trade receivables (see note 6.7. 'Operating working capital').
2 See note 2.7. 'Restatement and reclassification effects'.
The amount shown as 'new business combinations' in 2016 relates to the cash acquired in the establishment of the Bridon-Bekaert Ropes Group (cf. note 7.2. 'Effect of business combinations'). In 2015 new business combinations generated a net cash-out of € -129.8 million, mainly relating to the final acquisition phase of the Pirelli steel cord plants and Arrium's ropes business. Other portfolio investments in 2015 mainly consisted of Bekaert acquiring non-controlling interests in certain entities in order to pursue its own strategic course.. In 2015, proceeds from disposals of investments (€ 30.8 million) mainly related to the Carding business disposal and deferred consideration received for the Industrial Coatings business disposed in 2012. Capital expenditure for property, plant and equipment remained quite high (€ -158.5 million), although slightly below its record level of 2015 (€ -170.7 million) that was boosted by the rebuilding of the bead wire plant in Rome (Georgia, USA) destroyed by a fire in 2014.
The following table presents more details on selected investing cash flows:
| Details of selected investing items 2015 in thousands of € |
2016 |
|---|---|
| Other portfolio investments | |
| Purchase of non-controlling interests in Ropes entities -91 488 |
- |
| Purchase of non-controlling interests in Southern Wire entities -5 270 |
- |
| Purchase of non-controlling interests in Chinese entities -12 700 |
- |
| Other investments -101 |
-41 |
| Total -109 559 |
-41 |
| Other investing cash flows | |
| Proceeds from disposal of intangible assets 17 |
14 |
| Proceeds from disposal of property, plant and equipment 3 789 |
1 172 |
| Total 3 806 |
1 186 |
Other investing cash flows such as proceeds from sales of property, plant and equipment were rather immaterial in both 2015 and 2016.
New long-term debt issued (€ 172.1 million) mainly related to financing transactions in Belgium, China and Australia. From the proceeds of the € 380 million convertible bond, a net amount of € 114.6 million represents new debt, while the remainder relates to the exchange of the existing convertible bond. Repayments of long-term debt (€ -375.3 million) mainly related to a maturing € 205.0 million Eurobond and an amount of € 84.3 million for the settlement of the existing convertible bond by NV Bekaert SA, and other repayments in China (€ -66.8 million) and Latin America (€ -12.9 million). There was a slight decrease (€ -5.6 million) in current interest-bearing debt in 2016. Treasury shares transactions in 2016 (€ 7.5 million) consisted of share buy-backs (€ -1.1 million) and proceeds from options being exercised (€ 8.6 million).
The following table presents more details about selected financing items:
| in thousands of € | 2015 | 2016 |
|---|---|---|
| Other financing cash flows | ||
| New shares issued following exercise of subscription rights | 234 | 5 365 |
| Capital paid in by minority interests | 14 967 | - |
| Increase (-) or decrease in current and non-current loans and receivables | 2 041 | 17 138 |
| Increase (-) or decrease in current financial assets | 9 616 | 4 148 |
| Other financial income and expenses | -16 437 | -3 458 |
| Total | 10 421 | 23 193 |
As for other financing cash flows, cash-ins resulted from capital increases (€ 5.4 million) and net receipts from loans and receivables (€ 17.1 million) and from short-term deposits (€ 4.1 million). The main movement in loans and receivables relates to the settlement of loans by the Xinyu entities, in which Bekaert no longer has a significant influence since 2015. Other financial income and expenses mainly relates to taxes and bank charges on financial transactions (€ -2.5 million).
On 7 December 2015, Bekaert announced the signing of an agreement with Ontario Teachers' Pension Plan (Ontario Teachers'), the owner of Bridon, to establish Bridon-Bekaert Ropes Group, a new joint venture in which Bekaert and Ontario Teachers' planned to hold respectively 67% and 33%. The new group combines the ropes and advanced cords businesses including 19 manufacturing entities across 11 countries, market-focused R&D, and a global sales and service network.
On 28 June 2016, Bekaert and Ontario Teachers' successfully closed the definitive merger of the ropes and advanced cords businesses of Bekaert and Bridon. Bekaert is contributing its advanced cords business and a well-established ropes presence in Latin America, Canada and Australia. Bridon holds strong positions in Europe and the USA with a portfolio of rope wire, strand and steel and synthetic ropes. The merger will allow for both operational and commercial synergies. The complementary geographic and sector profiles should enable growth ahead of the market; the combination of rope technology strength and wire technology strength will provide a platform for strong differentiation in the high-end rope markets. The merger creates the leading ropes group in the world with approximately USD 650 million in sales (current equivalent of € 580 million) on an annual basis in a normalized business context. This ambition explains why Bekaert was willing to pay a substantial purchase consideration, which resulted in a goodwill of € 116.2 million.
The group is estimated to add approximately USD 350 million (€ 315 million at current rates) to Bekaert's consolidated sales on an annual basis in a normalized business context. The Group projects a lower run rate over the first two years due to the current demand instability in oil and gas and mining markets.
The initial accounting for the business combination presented in the June 2016 interim financial statements was evidently provisional, since the acquisition had only been closed at the end of the first semester. During the second semester, Bekaert has performed an extensive analysis to identify, and to assess the fair value of, the net assets acquired and the liabilities assumed.
The intangible assets acquired were identified and assessed by an external expert. The fair value assessments on property, plant and equipment are based on recent external appraisals for land and buildings and on internal appraisals for plant, machinery and equipment. Deferred tax assets and liabilities arising from any of these adjustments have been recognized at the applicable tax rates in the respective jurisdictions.
The purchase price allocation reflected negative net assets totaling € -114.6 million. The main reason for this lies with Bridon's highly leveraged financing structure, the acquired net debt amounting to € 278.7 million. The non-controlling interests arising on the acquirees have been measured at their share in the fair value of the net assets acquired. Since the purchase consideration consisted of a 33% stake in Bekaert's advanced cords and global ropes businesses, it is measured at the fair value of the non-controlling interests disposed, which is based on the valuation of the shares in the deal, and adjusted for any additional funding arrangements that were agreed between the partners.
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 for the transaction. It also clarifies the contribution of the business combination to the amount shown in the consolidated cash flow statement as 'new business combinations'.
| Acquiree's carrying | |||
|---|---|---|---|
| Total | amount before | Fair value | |
| in thousands of € | combination | adjustments | Fair value |
| Intangible assets | 46 637 | 5 032 | 51 669 |
| Property, plant and equipment | 116 783 | -22 542 | 94 241 |
| Deferred tax assets | 1 571 | 7 909 | 9 480 |
| Non-current loans and receivables | 1 319 | - | 1 319 |
| Other non-current assets | 4 | - | 4 |
| Inventories | 56 892 | 3 189 | 60 081 |
| Trade receivables | 36 583 | - | 36 583 |
| Advances paid | 887 | - | 887 |
| Other receivables | 4 261 | - | 4 261 |
| Cash and cash equivalents | 40 918 | - | 40 918 |
| Other current assets | 2 629 | - | 2 629 |
| Non-current employee benefit obligations | -7 722 | - | -7 722 |
| Non-current provisions | -9 435 | -4 940 | -14 375 |
| Non-current interest-bearing debt | -293 111 | 8 546 | -284 565 |
| Deferred tax liabilities | -20 703 | -2 158 | -22 861 |
| Other non-current liabilities | -16 | - | -16 |
| Current interest-bearing debt | -35 672 | - | -35 672 |
| Trade payables | -39 243 | - | -39 243 |
| Current employee benefit obligations | -4 156 | - | -4 156 |
| Current provisions | -2 165 | - | -2 165 |
| Income taxes payable | -407 | - | -407 |
| Advances received | -1 486 | - | -1 486 |
| Other current liabilities | -4 004 | - | -4 004 |
| Total net assets acquired in a business | |||
|---|---|---|---|
| combination | -109 636 | -4 964 | -114 600 |
| Purchase consideration (NCI disposed) | -39 807 | ||
| Non-controlling interests arising on the acquirees | 38 162 | ||
| Goodwill | 116 245 | ||
| Consideration paid in cash | - | ||
| Cash acquired | 40 918 | ||
| New business combinations | 40 918 |
The main intangible assets include the brand name(s) (€ 45.5 million), the customer relationships (€ 4.8 million) and the order book (€ 0.4 million). As a result of the prior acquisition of Bridon by OTPP, the brand name and customer relationships were already carried on the books of Bridon. The current appraisal resulted in an increase of € 5.0 million.
The negative fair value adjustments on property, plant and equipment mainly relate to the plant, machinery and equipment in the UK (€ -7.3 million), the US (€ -12.6 million) and China (€ -4.9 million). The positive fair value adjustments on inventories mainly reflect the gross profit to be generated on work in process and finished goods upon their subsequent sales. The bad debt allowance of € -0.4 million included in the carrying amount of the trade receivables on the books of the acquiree was deemed adequate in view of the perceived credit risks.
Contingent liabilities for customer claims amounting to € 4.9 million have been identified at Bridon International Ltd.
Following table shows the effect of the business combination on consolidated sales and comprehensive income (after acquisition-related expenses):
| Total | Net sales for the | Comprehensive | |
|---|---|---|---|
| in thousands of € | Date of acquisition | period | income |
| Bridon entities | 28 June 2016 | 109 168 | -58 136 |
| of which | |||
| Operating result (EBIT) acquired entities | -23 209 | ||
| Acquisition-related expenses | -8 639 | ||
| Total operating result (EBIT) | -31 848 | ||
| Interest income and expenses | -23 401 | ||
| Other financial income and expenses | 2 790 | ||
| Result before taxes | -52 459 | ||
| Income taxes | 1 571 | ||
| Result for the period | -50 888 | ||
| OCI | -7 248 |
The acquisition-related expenses, which consisted mainly of consultancy fees, amounted to € 16.7 million (of which € 8.1 million incurred in 2015) and were included in other operating expenses. If all of the Bridon entities had been acquired as from 1 January 2016, the Group would have additionally recognized € 122.7 million of net sales and a result for the period (i.e. the first semester) of € 80.3 million, including one-time debt refinancing gains amounting to € 89.7 million.
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, Russian ruble, Indian rupee, Pound sterling 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, and sometimes also from dividends receivable from foreign investments. If material, these risks are hedged by means of forward exchange contracts.
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 intercompany loans 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 limit the currency risk on 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 operating, investing and financing receivables and 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.
| Currency pair - 2016 in thousands of € |
Total exposure | Total derivatives | Open position |
|---|---|---|---|
| AUD/USD | 3 716 | -3 634 | 81 |
| EUR/BRL | -13 670 | - | -13 670 |
| EUR/CAD | -14 223 | - | -14 223 |
| EUR/CNY | -103 187 | 34 138 | -69 049 |
| EUR/GBP | 25 170 | -2 150 | 23 020 |
| EUR/USD | -7 488 | - | -7 488 |
| IDR/USD | 8 616 | - | 8 616 |
| JPY/CNY | 5 076 | -4 449 | 627 |
| NZD/GBP | -9 605 | - | -9 605 |
| RUB/EUR | 21 649 | -21 650 | -1 |
| TRY/EUR | 14 256 | - | 14 256 |
| USD/CAD | 14 923 | - | 14 923 |
| USD/CLP | 8 510 | - | 8 510 |
| USD/CNY | -163 998 | 149 531 | -14 467 |
| USD/COP | -9 854 | 14 153 | 4 299 |
| USD/EUR | 236 431 | -314 559 | -78 128 |
| USD/GBP | 94 265 | -11 861 | 82 404 |
| USD/INR | -46 915 | 33 522 | -13 393 |
| USD/SGD | -25 675 | - | -25 675 |
| USD/SGD | -25 675 | - | -25 675 |
|---|---|---|---|
| Currency pair - 2015 in thousands of € |
Total exposure | Total derivatives | Open position |
| CNY/EUR | 15 702 | -4 249 | 11 453 |
| CZK/EUR | -12 100 | 4 165 | -7 935 |
| EUR/CNY | -66 349 | 65 723 | -626 |
| EUR/USD | 28 305 | -30 000 | -1 695 |
| IDR/USD | 9 222 | - | 9 222 |
| USD/BRL | -8 120 | - | -8 120 |
| USD/CAD | 12 680 | -3 572 | 9 108 |
| USD/CLP | 74 670 | - | 74 670 |
| USD/CNY | -244 088 | 215 519 | -28 569 |
| USD/EUR | 461 769 | -485 210 | -23 441 |
| USD/INR | -63 897 | 47 511 | -16 386 |
| USD/SGD | -24 298 | - | -24 298 |
If rates had weakened/strengthened by reasonably possible changes with all other variables constant, the result for the period before taxes would have been € 2.7 million lower/higher (2015: € 1.6 million). The reasonably possible changes used in this calculation were based on annualized volatility relating to the daily movement of the exchange rate of the reported year, with a 95% confidence interval.
At 31 December 2016 the Group only applies hedge accounting in a very limited number of cases, notably in Bridon International Ltd (UK) which hedges its currency risk on operating cash flows through foreign-exchange contracts designated as cash flow hedges. The major currency risk exposures being hedged are EUR/GBP and USD/GBP. If the GBP had weakened/strengthened by reasonably possible changes, with all other variables constant, the hedging reserve would have been € 2.5 million higher/lower at year-end 2016. No hedge accounting was applied at previous year-end.
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 following table summarizes the weighted average interest rates at the balance sheet date.
The convertible bond and the loans linked to the Bridon merger are carried at amortized cost using the effective interest method, which results in spreading the recognition of transaction fees over time via interest charges. Consequently, effective interest charges will exceed the nominal interest charges.
| Long-term | ||||||
|---|---|---|---|---|---|---|
| 2016 | Fixed rate | Floating rate | Total | Short-term | Total | |
| US dollar | 10.60% | 4.45% | 5.54% | 1.81% | 2.65% | |
| Chinese renminbi | 6.00% | - | 6.00% | 3.38% | 5.38% | |
| Euro | 2.78% | 6.20% | 3.42% | 0.43% | 3.27% | |
| Other | 7.74% | - | 7.74% | 5.14% | 5.82% | |
| Total | 3.21% | 5.61% | 3.79% | 2.28% | 3.30% |
| Long-term | |||||
|---|---|---|---|---|---|
| 2015 | Fixed rate | Floating rate | Total | Short-term | Total |
| US dollar | 4.63% | - | 4.63% | 1.27% | 1.35% |
| Chinese renminbi | 5.81% | - | 5.81% | 3.24% | 5.65% |
| Euro | 2.99% | - | 2.99% | 0.53% | 2.90% |
| Other | 7.34% | 3.00% | 7.16% | 4.75% | 5.58% |
| Total | 3.41% | 3.00% | 3.41% | 1.82% | 2.80% |
As disclosed in note 6.17. 'Interest-bearing debt', the total financial debt of the Group as of 31 December 2016 amounted to € 1 459.2 million (2015: € 1 293.3 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).
| Currency and interest rate profile | Long-term | Short-term | ||
|---|---|---|---|---|
| 2016 | Fixed rate | Floating rate | Floating rate | Total |
| US dollar | 1.20% | 5.50% | 23.20% | 29.90% |
| Chinese renminbi | 0.70% | - | 0.20% | 0.90% |
| Euro | 47.40% | 10.90% | 3.10% | 61.40% |
| Other | 2.00% | - | 5.80% | 7.80% |
| Total | 51.30% | 16.40% | 32.30% | 100.00% |
| Currency and interest rate profile | Long-term | Short-term | ||
|---|---|---|---|---|
| 2015 | Fixed rate | Floating rate | Floating rate | Total |
| US dollar | 0.80% | - | 29.70% | 30.50% |
| Chinese renminbi | 3.80% | - | 0.20% | 4.00% |
| Euro | 53.90% | - | 2.00% | 55.90% |
| Other | 3.20% | 0.10% | 6.30% | 9.60% |
| Total | 61.70% | 0.10% | 38.20% | 100.00% |
On the basis of the annualized daily volatility of the 3-month Interbank Offered Rate in 2016 and 2015, 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 December |
Reasonably possible changes (+/-) |
|---|---|---|
| Chinese renminbi 1 | 2016 3.09% | 0.51% |
| Euro | 0.00% | 0.00% |
| US dollar | 1.00% | 0.18% |
Interest rate at Reasonably possible changes (+/-)
| Currency | 31 December | |
|---|---|---|
| Chinese renminbi 1 | 2015 2.41% | 0.40% |
| Euro | 0.00% | 0.03% |
| US dollar | 0.61% | 0.19% |
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 € 1.8 million higher/lower (2015: € 0.8 million higher/lower).
At 31 December 2016, the Group does not apply hedge accounting and no sensitivity analysis was done.
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 2016, 57.8% (2015: 65.4%) 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 € 50 million (2015: € 50 million) at floating interest rates with fixed margins. At year-end, nothing was outstanding under these facilities (2015: nil). In addition, the Group has a commercial paper and medium-term note program available for a maximum of € 123.9 million (2015: € 123.9 million). At the end of 2016, € 50 million commercial paper notes were outstanding (2015: none). At year-end, the external bank debt related to Bridon-Bekaert Ropes Group for € 316 million was subject to debt covenants (2015: none). The Group (except for BBRG) has a joint factoring agreement with BNP Paribas Fortis and KBC and has the possibility to borrow up to € 77 million (2015: € 90 million) for two months withdrawals, but no withdrawals were done before year-end (2015: none).
BBRG is financed by a banking syndicate of 11 lenders. The loan structure consists of senior debt (A and B tranche), a pre-merger existing debt in Belgium and Australia (BNP debt) and a revolving credit facility (RCF) in addition to some debt with existing facilities (Other debt). The financing arrangement was put in place on June 29, 2016. For financing purposes, BBRG is ring-fenced, which implies (i) it cannot get any support (such as intercompany loans, corporate guarantees, asset-pledges, any form of collateral) from other Bekaert entities outside its consolidation perimeter to finance its activities, (ii) its banking syndicate will not have any recourse to the Bekaert Group. Consequently, BBRG acts as an independent group for financing purposes. BBRG has entered into a separate factoring agreement with BNP Paribas Fortis in the UK and Germany and has the possibility to borrow up to € 15 million (2015: nil), of which € 6 million withdrawals were taken up before year-end (2015: none).
| Total debt BBRG in millions of USD |
31 December 2016 |
|---|---|
| Loan A | 73.0 |
| Loan B | 193.3 |
| BNP debt | 33.9 |
| RCF | 24.6 |
| Other debt | 6.3 |
| Total debt | 331.2 |
The main requirements towards the banking syndicate are monthly, quarterly and annual reporting, communication on budget as well as the obligation to comply with two covenants.
The first one is the leverage covenant which measures the relation between the adjusted Underlying EBITDA and Net Debt. Underlying EBITDA is increased with the difference of the annualized impact of identified savings and the realized saving in any period on a last twelve month rolling basis, which is redefined as adjusted Underlying EBITDA. The second covenant measures the relation between the adjusted Underlying EBITDA and the interest cost of BBRG.
The covenants as per end of December 2016 are as follows:
| 2016 in millions of USD |
31 December 2016 |
Covenant | Breach | ||||
|---|---|---|---|---|---|---|---|
| Leverage Covenant: | Net Debt Adj Underlying EBITDA |
= | 274.9 59.8 |
= | 4.60 | 5.95 | NO |
| Interest Covenant: | Adj Underlying EBITDA Interest cost |
= | 59.8 20.6 |
= | 2.90 | 2.50 | NO |
BBRG passed the covenant tests with sufficient headroom. The adjusted Underlying EBITDA headroom at the end of December 2016 is USD 13.8 million. Based on the current trading performance, BBRG expects to have sufficient headroom going forward.
The following table shows the Group's contractually agreed (undiscounted) outflows in relation to financial liabilities (including financial liabilities reclassified as liabilities associated with assets held for sale). Only net interest payments and principal repayments are included.
| 2016 | 2022 and | |||
|---|---|---|---|---|
| in thousands of € | 2017 | 2018 | 2019-2021 | thereafter |
| Financial liabilities - principal | ||||
| Trade payables | -563 479 | - | - | - |
| Other payables | -20 060 | -518 | - | - |
| Interest-bearing debt | -312 864 | -144 752 | -830 018 | -247 111 |
| Derivatives - gross settled | -325 736 | -11 943 | -5 086 | - |
| Financial liabilities - interests | ||||
| Interest-bearing debt | -47 148 | -42 023 | -83 147 | -37 679 |
| Derivatives - net settled | -346 | -346 | -173 | - |
| Derivatives - gross settled | -5 858 | -1 717 | -557 | - |
| Total undiscounted cash flow | -1 275 491 | -201 299 | -918 981 | -284 790 |
| 2015 | 2021 and | |||
| in thousands of € | 2016 | 2017 | 2018-2020 | thereafter |
| Financial liabilities - principal | ||||
| Trade payables | -456 783 | - | - | - |
| -820 | - | - | ||
| Other payables | -7 590 | |||
| Interest-bearing debt | ||||
| -494 714 | -13 343 | -778 773 | - | |
| Derivatives - gross settled | -512 735 | - | -11 872 | - |
| Interest-bearing debt | ||||
| Derivatives - net settled | -36 401 | -22 744 | -39 025 | - |
| Financial liabilities - interests Derivatives - gross settled |
- -7 240 |
- -1 153 |
- -1 153 |
- - |
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.
At 31 December 2016, the Group only applies hedge accounting in a very limited number of cases, notably in Bridon International Ltd which hedges its currency risk on operating cash flows through foreign-exchange contracts designated as cash flow hedges. Until March 2015, some derivatives were still part of effective cash flow hedges and fair value hedges relating to the € 100.0 million Eurobond issued in 2005 and expired in March 2015.
There are no fair value hedges in 2016.
During 2005, the entity reduced its floating US dollar exposure from € 50.0 million to € 30.9 million. The Group 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 being 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 were offset against the changes in fair value of the cross-currency interest-rate swaps. Credit risks were not addressed or covered by this hedging. Fair value hedges affected the income statement of 2015 as shown below:
| 2015 in thousands of € |
Hedged item | Hedging instrument |
Recognized in income statement |
|---|---|---|---|
| Fair value | Fair value | ||
| Fair value hedges | changes | changes | |
| Currency and interest-rate risk on financing cash flows | -2 424 | 2 445 | 21 |
| Interest expense adjustments | - | - | 144 |
| Total | -2 424 | 2 445 | 165 |
| Recognized in | ||||
|---|---|---|---|---|
| 2016 in thousands of € |
Hedged item | Hedging instrument |
income statement |
Recognized in equity (OCI) |
| Cash flow hedges | Spot price changes |
Fair value changes |
||
| Currency risk on operating cash flows | -542 | 1 284 | - | 742 |
| Total | -542 | 1 284 | - | 742 |
Cash flow hedges in 2016 relate to Bridon International Ltd. which hedges its foreign currency risk on operating cash flows through foreign-exchange contracts.
| Hedged item Spot price |
Hedging instrument Fair value |
income statement |
Recognized in equity (OCI) |
|---|---|---|---|
| changes | changes | ||
| 6 034 | 161 | - | |
| - | - | -326 | - |
| - | - | -14 | 14 |
| 14 | |||
| -5 873 -5 873 |
6 034 | -179 |
Cash flow hedges in 2015 relate to the discontinued hedge linked to the Eurobond issued in 2005 which expired in 2015, any related amounts previously kept in the hedging reserve have then been fully recycled to the income statement.
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.
The following table analyzes the notional amounts of the derivatives according to their maturity date. For derivatives designated for hedge accounting as set out in IAS 39, a distinction is made depending on whether these are part of a fair value hedge (FVH) or cash flow hedge (CFH):
| 2016 | Due within | Due between one and 5 |
Due after more than |
|---|---|---|---|
| in thousands of € | one year | years | 5 years |
| Hedge accounting | |||
| Forward exchange contracts (CFH) | 18 487 | - | - |
| Held for trading | |||
| Forward exchange contracts | 278 239 | - | - |
| Interest-rate swaps | - | 69 253 | - |
| Cross-currency interest-rate swaps | 355 810 | 5 086 | - |
| Conversion derivative | - | 380 000 | - |
| Total | 652 536 | 454 339 | - |
| 2015 in thousands of € |
Due within one year |
Due between one and 5 years |
Due after more than 5 years |
|---|---|---|---|
| Held for trading | |||
| Forward exchange contracts | 370 847 | - | - |
| Cross-currency interest-rate swaps | 561 109 | 11 872 | - |
| Conversion derivative | - | 300 000 | - |
| Total | 931 956 | 311 872 | - |
The following table summarizes the fair values of the various derivatives carried. For derivatives designated for hedge accounting as set out in IAS 39, a distinction is made depending on whether these are part of a fair value hedge (FVH) or cash flow hedge (CFH):
| Fair value of current and non-current derivatives Assets |
Liabilities | ||||
|---|---|---|---|---|---|
| in thousands of € | 2015 | 2016 | 2015 | 2016 | |
| Financial instruments | |||||
| Hedge accounting | |||||
| Forward exchange contracts (CFH) | - | - | - | 595 | |
| Held for trading | |||||
| Forward exchange contracts | 3 900 | 5 712 | 4 525 | 865 | |
| Interest-rate swaps | - | 436 | - | - | |
| Interest-rate caps | - | - | - | 19 | |
| Cross-currency interest-rate swaps | 11 744 | 889 | 17 711 | 6 591 | |
| Put options relating to non-controlling interests 1 | - | - | 8 559 | 8 845 | |
| Conversion derivative | - | - | 5 825 | 35 207 | |
| Total | 15 644 | 7 037 | 36 620 | 52 122 | |
| Non-current | 5 897 | 436 | 14 384 | 44 374 | |
| Current | 9 747 | 6 601 | 22 236 | 7 748 | |
| Total | 15 644 | 7 037 | 36 620 | 52 122 |
1Liability relating to the commercial partnership with Maccaferri for underground solutions announced in June 2014.
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 € | 2015 | 2016 | 2015 | 2016 |
| Total derivatives recognized in balance sheet | 15 644 | 7 037 | 36 620 | 52 122 |
| Enforceable netting | -5 847 | -889 | -5 847 | -889 |
| Net amounts | 9 797 | 6 148 | 30 773 | 51 233 |
The following tables list the different classes of financial assets and liabilities with their carrying amounts and their respective fair values, analyzed by their measurement category in accordance with IAS 39, 'Financial Instruments: Recognition and Measurement'.
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:
| Abbreviation | Category in accordance with IAS 39 |
|---|---|
| L&R | Loans & Receivables |
| AfS | Available for Sale |
| FAFVTPL | Financial Assets at Fair Value Through Profit or Loss |
| FLMaAC | Financial Liabilities Measured at Amortized Cost |
| Hedge accounting | Hedge accounting |
| FLFVTPL | Financial Liabilities at Fair Value Through Profit or Loss |
| n.a. | Not applicable |
| 2016 in thousands of € |
Category in accordance with IAS 39 |
Carrying amount 2016 |
Fair value 2016 |
|---|---|---|---|
| Assets | |||
| Cash and cash equivalents | L&R | 365 546 | 365 546 |
| Short-term deposits | L&R | 5 342 | 5 342 |
| Trade receivables | L&R | 739 145 | 739 145 |
| Bills of exchange received | L&R | 60 182 | 60 182 |
| Other receivables | L&R | 38 239 | 38 239 |
| Loans and receivables | L&R | 28 020 | 28 020 |
| Available-for-sale financial assets | AfS | 17 499 | 17 499 |
| Derivative financial assets | |||
| - without a hedging relationship | FAFVTPL | 7 037 | 7 037 |
| - with a hedging relationship | Hedge accounting | - | - |
| Liabilities | |||
| Interest-bearing debt | |||
| - finance leases | n.a. | 3 855 | 3 855 |
| - credit institutions | FLMaAC | 781 915 | 781 915 |
| - bonds | FLMaAC | 673 455 | 715 186 |
| Trade payables | FLMaAC | 556 361 | 556 361 |
| Other payables | FLMaAC | 20 572 | 20 572 |
| Derivative financial liabilities | |||
| - without a hedging relationship | FLFVTPL | 51 528 | 51 528 |
| - with a hedging relationship | Hedge accounting | 595 | 595 |
| Aggregated by category in accordance with IAS 39 | |||
| Loans and receivables | L&R | 1 236 474 | 1 236 474 |
| Available-for-sale financial assets | AfS | 17 499 | 17 499 |
| Financial assets at fair value through profit or loss | FAFVTPL | 7 037 | 7 037 |
| Financial liabilities measured at amortized cost | FLMaAC | 2 032 303 | 2 074 034 |
| Financial liabilities - hedge accounting | Hedge accounting | 595 | 595 |
| Financial liabilities at fair value through profit or loss | FLFVTPL | 51 528 | 51 528 |
| Category in accordance with | Carrying | Fair value | |
| IAS 39 | amount 2015 | 2015 | |
| Cash and cash equivalents | L&R | 401 771 | 401 771 |
| Short-term deposits | L&R | 10 216 | 10 216 |
| Trade receivables | L&R | 686 364 | 686 364 |
| Bills of exchange received | L&R | 68 005 | 68 005 |
| Other receivables | L&R | 28 418 | 28 418 |
| Loans and receivables | L&R | 51 428 | 51 428 |
| Available-for-sale financial assets | AfS | 15 626 | 15 626 |
| Derivative financial assets | |||
| - without a hedging relationship | FAFVTPL | 15 644 | 15 644 |
| Interest-bearing debt | |||
| - finance leases | |||
| n.a. | 3 764 | 3 764 | |
| - credit institutions | FLMaAC | 458 536 | 458 536 |
| - bonds | FLMaAC | 831 040 | 869 422 |
| Trade payables Other payables |
FLMaAC | 456 783 | 456 783 |
| FLMaAC | 8 411 | 8 411 | |
| Derivative financial liabilities | |||
| - without a hedging relationship | FLFVTPL | 36 620 | 36 620 |
| Loans and receivables | L&R | 1 246 202 | 1 246 202 |
| Available-for-sale financial assets | AfS | 15 626 | 15 626 |
| Financial assets at fair value through profit or loss | FAFVTPL | 15 644 | 15 644 |
| 2015 in thousands of € Assets Liabilities Aggregated by category in accordance with IAS 39 Financial liabilities measured at amortized cost Financial liabilities at fair value through profit or loss |
FLMaAC FLFVTPL |
1 754 770 36 620 |
1 793 152 36 620 |
The fair value measurement of financial assets and financial liabilities can be characterized in one of the following ways:
| Convertible bond issued in 2014 | At issue date | At 31 Dec 2015 |
At 19 May 20161 |
|---|---|---|---|
| Level 1 inputs | |||
| Share price | € 27.97 | € 28.39 | € 37.97 |
| Level 2 inputs | |||
| Reference swap rate | 0.54% | 0.01% | -0.15% |
| Level 3 inputs | |||
| Volatility | 25.40% | 20.00% | 30.00% |
| Credit spread | 210 bps | 200 bps | 175 bps |
| in thousands of € | |||
|---|---|---|---|
| Fair value of the convertible debt | 300 000 | 298 014 | 345 281 |
| Fair value of the plain vanilla debt | 278 700 | 292 189 | 296 730 |
| Fair value of the conversion option | 21 300 | 5 825 | 48 551 |
1Announcement date of early - settlement offer.
| Convertible bond issued in 2016 | At issue date | At 31 Dec 2016 |
|---|---|---|
| Level 1 inputs | ||
| Share price | € 37.97 | € 38.49 |
| Level 2 inputs | ||
| Reference swap rate | 0.03% | 0.02% |
| Level 3 inputs | ||
| Volatility | 29.00% | 29.15% |
| Credit spread | 225 bps | 175 bps |
in thousands of €
| Fair value of the convertible debt | 380 000 | 386 734 |
|---|---|---|
| Fair value of the plain vanilla debt | 339 509 | 351 527 |
| Fair value of the conversion option | 40 491 | 35 207 |
The carrying amount (i.e. the fair value) of the level-3 liabilities has evolved as follows:
| Level-3 Financial liabilities in thousands of € |
2015 | 2016 |
|---|---|---|
| At 1 January | 7 921 | 14 384 |
| Reclassifications | 8 272 | - |
| At issue of the convertible debt (14 June 2016) | - | 40 491 |
| (Gain) /loss in fair value | -1 809 | -10 823 |
| At 31 December | 14 384 | 44 052 |
The following table shows the sensitivity of the fair value calculation to the most significant level-3 inputs for the conversion option.
| in thousands of € | Change Impact on derivative liability |
|
|---|---|---|
| Volatility | 3.5% increase by | 13 292 |
| -3.5% decrease by | -13 308 | |
| Credit spread | 25 bps increase by | 3 810 |
| -25 bps decrease by | -3 861 |
The fair value of all financial instruments measured at amortized cost in the balance sheet 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:
| 2016 | ||||
|---|---|---|---|---|
| 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 | - | 7 037 | - | 7 037 |
| Available-for-sale financial assets | ||||
| Equity investments | 7 951 | 8 514 | - | 16 465 |
| Total assets | 7 951 | 15 551 | - | 23 502 |
| Financial liabilities - hedge accounting | ||||
| Interest-bearing debt | - | - | - | - |
| Derivative financial liabilities | - | 595 | - | 595 |
| Financial liabilities at fair value through profit or loss | ||||
| Put option relating to non-controlling interests | - | - | 8 845 | 8 845 |
| Derivative financial liabilities | - | 7 476 | 35 207 | 42 683 |
| Total liabilities | - | 8 071 | 44 052 | 52 123 |
| 2015 | ||||
|---|---|---|---|---|
| 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 | - | 15 644 | - | 15 644 |
| Available-for-sale financial assets | ||||
| Equity investments | 6 193 | 8 514 | - | 14 707 |
| Total assets | 6 193 | 24 158 | - | 30 351 |
| Financial liabilities - hedge accounting | ||||
| Interest-bearing debt | - | - | - | - |
| Derivative financial liabilities | - | - | - | - |
| Financial liabilities at fair value through profit or loss | ||||
| Put option relating to non-controlling interests | - | - | 8 559 | 8 559 |
| Derivative financial liabilities | - | 22 236 | 5 825 | 28 061 |
| Total liabilities | - | 22 236 | 14 384 | 36 620 |
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 2015.
The capital structure of the Group consists of net debt, as defined 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 assesses 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 € | 2015 | 2016 |
| Net debt 1 | 836 886 | 1 067 683 |
| Equity 1 | 1 511 651 | 1 597 893 |
| Net debt to equity ratio | 55,4% | 66,8% |
1 See note 2.7. 'Restatement and reclassification effects'.
As at 31 December, the important contingencies and commitments were:
| in thousands of € | 2015 | 2016 |
|---|---|---|
| Contingent liabilities | 29 031 | 27 659 |
| Commitments to purchase fixed assets | 13 796 | 30 177 |
| Commitments to invest in venture capital funds | 3 644 | 2 051 |
The contingent liabilities mainly relate to environmental obligations. Most of them are covered by corporate 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.
Lease commitments increased sharply as a consequence of the Bridon entities being included for the first time (€ 54.6 million).
| Future payments in thousands of € |
2015 | 2016 |
|---|---|---|
| Within one year | 17 101 | 22 498 |
| Between one and five years | 30 488 | 42 796 |
| More than five years | 749 | 35 161 |
| Total | 48 338 | 100 455 |
| Expenses | ||
|---|---|---|
| in thousands of € | 2015 | 2016 |
| Vehicles | 10 369 | 10 103 |
| Industrial buildings | 4 228 | 8 463 |
| Equipment | 3 809 | 5 114 |
| Offices | 3 528 | 4 722 |
| Land | 18 | 132 |
| Other | 1 306 | 1 562 |
| Total | 23 258 | 30 096 |
| 2016 in years |
Weighted average lease term |
|---|---|
| Vehicles | 4 |
| Industrial buildings | 16 |
| Equipment | 3 |
| Offices | 3 |
| Land | 1 |
| Other | 1 |
| 2015 in years |
Weighted average lease term |
| Vehicles | |
| Industrial buildings | 4 5 |
| Equipment | 3 |
| Offices | 4 |
| Land | 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.
| 2015 | 2016 |
|---|---|
| 15 224 | 5 527 |
| 17 916 | 19 885 |
| 237 | 263 |
| 8 956 | 8 957 |
| 690 | - |
| 17 674 | 22 491 |
| in thousands of € | 2015 | 2016 |
|---|---|---|
| Trade receivables | 2 542 | 3 795 |
| Other current receivables | 869 | 1 861 |
| Trade payables | 2 411 | 4 633 |
| Other current payables | - | 51 |
None of the related parties have entered into any other transactions with the Group that meet the requirements of IAS 24, 'Related Party Disclosures'.
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 € |
2015 | 2016 |
|---|---|---|
| Number of persons | 41 | 35 |
| Short-term employee benefits | ||
| Basic remuneration | 6 887 | 7 156 |
| Variable remuneration | 2 349 | 4 422 |
| Remuneration as directors of subsidiaries | 679 | 624 |
| Post-employment benefits | ||
| Defined-benefit pension plans | 518 | 533 |
| Defined-contribution pension plans | 608 | 687 |
| Share-based payment benefits | 2 376 | 3 783 |
| Total gross remuneration | 13 417 | 17 205 |
| Average gross remuneration per person | 327 | 492 |
| Number of options and stock appreciation rights granted | 267 000 | 163 750 |
| Number of cash and equity settled performance share units granted | - | 55 250 |
| Number of matching shares granted | - | 20 327 |
The disclosures relating to the Belgian Corporate Governance Code are included in the Corporate Governance Statement of this annual report.
During 2016, the statutory auditor and persons professionally related to him performed additional services for fees amounting to € 1 111 447.
These fees essentially relate to further assurance services (€ 71 500), tax advisory services (€ 997 624) and other non-audit services (€ 42 323).The additional services were approved by the Audit and Finance Committee.
The audit fees for NV Bekaert SA and its subsidiaries amounted to € 2 482 464.
| Subsidiaries | |||
|---|---|---|---|
| Industrial companies | Address | FC1 | % |
| EMEA | |||
| Bekaert Advanced Cords Aalter NV | Aalter, Belgium | EUR | 60 |
| Bekaert Bohumín sro | Bohumín, Czech Republic | CZK | 100 |
| Bekaert Combustion Technology BV | Assen, Netherlands | EUR | 100 |
| Bekaert Figline SpA | Milano, Italy | EUR | 100 |
| Bekaert Hlohovec as | Hlohovec, Slovakia | EUR | 100 |
| Bekaert Izmit Çelik Kord Sanayi ve Ticaret AS | Izmit, Turkey | EUR | 100 |
| Bekaert Kartepe Çelik Kord Sanayi ve Ticaret AS | Kartepe, Turkey | EUR | 100 |
| Bekaert Petrovice sro | Petrovice, Czech Republic | CZK | 100 |
| Bekaert Sardegna SpA | Assemini, Italy | EUR | 100 |
| Bekaert Slatina SRL | Slatina, Romania | RON | 80 |
| Bekaert Slovakia sro | Sládkovičovo, Slovakia | EUR | 100 |
| Bekintex NV | Wetteren, Belgium | EUR | 100 |
| Bridon International GmbH | Gelsenkirchen, Germany | EUR | 60 |
| Bridon International Ltd | Doncaster, United Kingdom | GBP | 60 |
| Bridon Scanrope AS | Tonsberg, Norway | NOK | 60 |
| Cold Drawn Products Ltd | Bradford, United Kingdom | GBP | 100 |
| Industrias del Ubierna SA | Burgos, Spain | EUR | 100 |
| OOO Bekaert Lipetsk Solaronics SA |
Gryazi, Russian Federation Armentières, France |
RUB EUR |
100 100 |
| North America | |||
| Bekaert Corporation | Wilmington (Delaware), United States | USD | 100 |
| Bridon-American Corporation | New York, United States | USD | 60 |
| Wire Rope Industries Ltd/Industries de Câbles d'Acier Ltée | Pointe-Claire, Canada | CAD | 60 |
| Wire Rope Industries USA Inc | Wilmington (Delaware), United States | USD | 60 |
| Latin America | |||
| Acma SA Acmanet SA |
Santiago, Chile Talcahuano, Chile |
CLP CLP |
52 52 |
| Bekaert Cimaf Cabos Ltda | São Paulo, Brazil | BRL | 60 |
| Bekaert Costa Rica SA | San José-Santa Ana, Costa Rica | USD | 58 |
| Bekaert Sumaré Ltda | Sumaré, Brazil | BRL | 100 |
| BIA Alambres Costa Rica SA | San José-Santa Ana, Costa Rica | USD | 58 |
| Ideal Alambrec SA | Quito, Ecuador | USD | 58 |
| Industrias Chilenas de Alambre - Inchalam SA | Talcahuano, Chile | CLP | 52 |
| Procables SA | Callao, Peru | PEN | 58 |
| Prodinsa SA | Maipú, Chile | CLP | 60 |
| Productora de Alambres Colombianos Proalco SAS Productos de Acero Cassadó SA |
Bogotá, Colombia Callao, Peru |
COP USD |
80 38 |
| Vicson SA | Valencia, Venezuela | VEF | 80 |
| Asia Pacific | |||
| Bekaert Ansteel Tire Cord (Chongqing) Co Ltd | Chongqing, China | CNY | 50 |
| Bekaert Applied Material Technology (Shanghai) Co Ltd | Shanghai, China | CNY | 100 |
| Bekaert Binjiang Steel Cord Co Ltd | Jiangyin (Jiangsu province), China | CNY | 90 |
| Bekaert (China) Technology Research and Development Co | Jiangyin (Jiangsu province), China | CNY | 100 |
| Ltd | |||
| Bekaert (Huizhou) Steel Cord Co Ltd Bekaert Industries Pvt Ltd |
Huizhou (Guangdong province), China Taluka Shirur, District Pune, India |
CNY INR |
100 100 |
| Bekaert Ipoh Sdn Bhd | Kuala Lumpur, Malaysia | MYR | 100 |
| Bekaert (Jining) Steel Cord Co Ltd | Jining City, Yanzhou district (Shandong Province), | CNY | 80 |
| China | |||
| Bekaert Jiangyin Wire Products Co Ltd | Jiangyin (Jiangsu province), China | CNY | 100 |
| Bekaert Mukand Wire Industries Pvt Ltd | Pune, India | INR | 100 |
| Bekaert New Materials (Suzhou) Co Ltd | Suzhou (Jiangsu province), China | CNY | 100 |
1 Functional currency
| Bekaert (Qingdao) Wire Products Co Ltd | Qingdao (Shandong province), China | CNY | 100 |
|---|---|---|---|
| Bekaert Shah Alam Sdn Bhd | Kuala Lumpur, Malaysia | MYR | 100 |
| Bekaert (Shandong) Tire Cord Co Ltd | Weihai (Shandong province), China | CNY | 100 |
| Bekaert (Shenyang) Advanced Cords Co Ltd | Shenyang (Liaoning province), China | CNY | 60 |
| Bekaert Shenyang Advanced Products Co Ltd | Shenyang (Liaoning province), China | CNY | 100 |
| Bekaert Toko Metal Fiber Co Ltd | Tokyo, Japan | JPY | 70 |
| Bekaert Wire Ropes Pty Ltd | Mayfield East, Australia | AUD | 60 |
| Bridon (Hangzhou) Ropes Co Ltd | Hangzhou (Zhejiang province), China | CNY | 60 |
| China Bekaert Steel Cord Co Ltd | Jiangyin (Jiangsu province), China | CNY | 90 |
| PT Bekaert Indonesia | Karawang, Indonesia | USD | 100 |
| PT Bekaert Southern Wire | Karawang, Indonesia | USD | 100 |
| PT Bridon | Bekasi, West Java, Indonesia | USD | 60 |
| Sales offices, warehouses and others | Address | FC1 | % |
|---|---|---|---|
| EMEA | |||
| Bekaert AS | Vejle, Denmark | DKK | 100 |
| Bekaert Emirates LLC | Dubai, United Arab Emirates | AED | 49 |
| Bekaert France SAS | Armentières, France | EUR | 100 |
| Bekaert Ges mbH | Vienna, Austria | EUR | 100 |
| Bekaert GmbH | Neu-Anspach, Germany | EUR | 100 |
| Bekaert Ltd | Bradford, United Kingdom | GBP | 100 |
| Bekaert Maccaferri Underground Solutions BVBA | Aalst (Erembodegem), Belgium | EUR | 50 |
| Bekaert Maccaferri Underground Solutions Srl | Zola Predosa, Bologna, Italy | EUR | 50 |
| Bekaert Middle East LLC | Dubai, United Arab Emirates | AED | 49 |
| Bekaert Norge AS | Oslo, Norway | NOK | 100 |
| Bekaert Poland Sp z oo | Warsaw, Poland | PLN | 100 |
| Bekaert (Schweiz) AG | Baden, Switzerland | CHF | 100 |
| Bekaert Svenska AB | Gothenburg, Sweden | SEK | 100 |
| Bridon Coatbridge Ltd | Doncaster, United Kingdom | GBP | 60 |
| Bridon Pension Trust (No Two) Ltd | Doncaster, United Kingdom | GBP | 60 |
| Bridon Scheme Trustees Ltd | Doncaster, United Kingdom | GBP | 60 |
| British Ropes Ltd | Doncaster, United Kingdom | GBP | 60 |
| Gloucester Rope & Tackle Company Ltd | Doncaster, United Kingdom | GBP | 60 |
| Leon Bekaert SpA | Milano, Italy | EUR | 100 |
| NV Bridon Ropes SA | Brussels, Belgium | EUR | 60 |
| OOO Bekaert Wire | Moscow, Russian Federation | RUB | 100 |
| Rylands-Whitecross Ltd | Bradford, United Kingdom | GBP | 100 |
| Scheldestroom NV | Zwevegem, Belgium | EUR | 100 |
| Twil Company | Bradford, United Kingdom | GBP | 100 |
| North America Bekaert Carding Solutions Inc / Bekaert Solutions de Cardage |
Saint John, Canada | CAD | 100 |
| Inc | |||
| Bekaert Specialty Films de Mexico SA de CV | Monterrey, Mexico | MXN | 100 |
| Mexico City, Mexico | MXN | 100 | |
| Monterrey, Mexico | MXN | 100 | |
| Bekaert Trade Mexico S de RL de CV Specialty Films de Services Company SA de CV Latin America |
|||
| Bekaert Guatemala SA | Ciudad de Guatemala, Guatemala | GTQ | 100 |
| Bekaert Trade Latin America NV | Curaçao, Netherlands Antilles | USD | 100 |
| Bridon do Brasil Representaçŏes Comércio e Indústria de | Rio de Janeiro, Brazil | BRL | 60 |
| Cabos Ltda | |||
| Prodac Contrata SAC | Callao, Peru | USD | 38 |
| Prodac Selva SAC | Ucayali, Peru | USD | 38 |
| Prodalam SA Prodinsa Ingeniería y Proyectos SA |
Santiago, Chile Santiago, Chile |
CLP CLP |
52 60 |
| Asia Pacific | |||
| Bekaert Advanced Products (Shanghai) Co Ltd | Shanghai, China | CNY | 100 |
| Bekaert Japan Co Ltd | Tokyo, Japan | JPY | 100 |
| Bekaert Korea Ltd | Seoul, Korea | KRW | 100 |
| Bekaert Management (Shanghai) Co Ltd | Shanghai, China | CNY | 100 |
| Bekaert Singapore Pte Ltd Bekaert Taiwan Co Ltd |
Singapore Taipei, Taiwan |
SGD TWD |
100 100 |
1 Functional currency
Bekaert Annual Report 2016 Financial Review 101
| BOSFA Pty Ltd Bridon Australia Pty Ltd Bridon Hong Kong Ltd Bridon New Zealand Ltd Bridon Singapore (Pte) Ltd PT Bekaert Trade Indonesia |
Port Melbourne, Australia Sydney, Australia Hong Kong, China Aukland, New Zealand Singapore Karawang, Indonesia |
AUD AUD HKD NZD SGD USD |
100 60 60 60 60 100 |
|---|---|---|---|
| Financial companies | Address | FC1 | % |
| Acma Inversiones SA | Maipú, Chile | CLP | 60 |
| BBRG Finance (UK) Ltd | Doncaster, United Kingdom | EUR | 60 |
| BBRG Holding (UK) Ltd | Doncaster, United Kingdom | EUR | 60 |
| BBRG Operations (UK) Ltd | Doncaster, United Kingdom | EUR | 60 |
| BBRG Production (UK) Ltd | Doncaster, United Kingdom | EUR | 60 |
| BBRG (Purchaser) Ltd | Doncaster, United Kingdom | EUR | 60 |
| BBRG (Subsidiary) Ltd | Doncaster, United Kingdom | EUR | 60 |
| Becare DAC | Dublin, Ireland | EUR | 100 |
| Bekaert Building Products Hong Kong Ltd | Hong Kong, China | EUR | 100 |
| Bekaert Carding Solutions Hong Kong Ltd | Hong Kong, China | EUR | 100 |
| Bekaert Coördinatiecentrum NV | Zwevegem, Belgium | EUR | 100 |
| Bekaert do Brasil Ltda | Contagem, Brazil | BRL | 100 |
| Bekaert Holding Hong Kong Ltd | Hong Kong, China | EUR | 100 |
| Bekaert Ibérica Holding SL | Burgos, Spain | EUR | 100 |
| Bekaert Ideal SL | Burgos, Spain | EUR | 80 |
| Bekaert Investments NV | Zwevegem, Belgium | EUR | 100 |
| Bekaert Investments Italia SpA | Milano, Italy | EUR | 100 |
| Bekaert North America Management Corporation | Wilmington (Delaware), United States | USD | 100 |
| Bekaert Services Hong Kong Ltd | Hong Kong, China | EUR | 100 |
| Bekaert Singapore Holding Pte Ltd | Singapore | SGD | 100 |
| Bekaert Specialty Wire Products Hong Kong Ltd | Hong Kong, China | EUR | 100 |
| Bekaert Stainless Products Hong Kong Ltd | Hong Kong, China | EUR | 100 |
| Bekaert Steel Cord Products Hong Kong Ltd | Hong Kong, China | EUR | 100 |
| Bekaert Strategic Partnerships Hong Kong Ltd | Hong Kong, China | EUR | 100 |
| Bekaert Wire Products Hong Kong Ltd | Hong Kong, China | EUR | 100 |
| Bekaert Wire Rope Industry NV | Aalst (Erembodegem), Belgium | EUR | 60 |
| Bekaert Xinyu Hong Kong Ltd | Hong Kong, China | EUR | 100 |
| Bridge Finco LLC | Wilmington (Delaware), United States | USD | 60 |
| Bridon-Bekaert Ropes Group Ltd | Doncaster, United Kingdom | EUR | 60 |
| Bridon-Bekaert Ropes Group (UK) Ltd Bridon Holdings Ltd |
Doncaster, United Kingdom Doncaster, United Kingdom |
EUR GBP |
60 60 |
| Bridon Ltd | Doncaster, United Kingdom | GBP | 60 |
| Bridon (South East Asia) Ltd | Hong Kong, China | HKD | 60 |
| Impala SA | Panama, Panama | USD | 52 |
| Industrias Acmanet Ltda | Talcahuano, Chile | CLP | 52 |
| Inversiones Bekaert Andean Ropes SA | Santiago, Chile | CLP | 100 |
| InverVicson SA | Valencia, Venezuela | VEF | 80 |
| Procables Wire Ropes SA | Maipú, Chile | CLP | 60 |
| Procercos SA | Talcahuano, Chile | CLP | 52 |
| Industrial companies | Address | FC1 | % |
|---|---|---|---|
| Latin America | |||
| Belgo Bekaert Arames Ltda BMB-Belgo Mineira Bekaert Artefatos de Arame Ltda |
Contagem, Brazil Vespasiano, Brazil |
BRL BRL |
45 45 |
| Sales offices, warehouses and others | Address | FC1 | % |
| EMEA | |||
| Netlon Sentinel Ltd | Blackburn, United Kingdom | GBP | 50 |
| Asia Pacific | |||
| Bekaert Engineering (India) Pvt Ltd | New Delhi, India | INR | 40 |
| Subsidiaries | Address | % |
|---|---|---|
| BBRG (Purchaser) Ltd | Doncaster, United Kingdom | 60 |
| Bekaert Advanced Cords Aalter NV | Aalter, Belgium | 60 |
| Bekaert (Shenyang) Advanced Cords Co Ltd | Shenyang (Liaoning province), China | 60 |
| Subsidiaries | Address | % |
|---|---|---|
| BBRG Finance (UK) Ltd | Doncaster, United Kingdom | From 0% to 60% |
| BBRG Operations (UK) Ltd | Doncaster, United Kingdom | From 0% to 60% |
| BBRG Production (UK) Ltd | Doncaster, United Kingdom | From 0% to 60% |
| Bridge Finco LLC | Wilmington (Delaware), United States | From 0% to 60% |
| Bridon-American Corporation | New York, United States | From 0% to 60% |
| Bridon Australia Pty Ltd | Sydney, Australia | From 0% to 60% |
| Bridon-Bekaert Ropes Group Ltd | Doncaster, United Kingdom | From 0% to 60% |
| Bridon-Bekaert Ropes Group (UK) Ltd | Doncaster, United Kingdom | From 0% to 60% |
| Bridon Coatbridge Ltd | Doncaster, United Kingdom | From 0% to 60% |
| Bridon do Brasil Representaçŏes Comércio e Indústria de | Rio de Janeiro, Brazil | From 0% to 60% |
| Cabos Ltda | ||
| Bridon (Hangzhou) Ropes Co Ltd | Hangzhou (Zhejiang province), China | From 0% to 60% |
| Bridon Holdings Ltd | Doncaster, United Kingdom | From 0% to 60% |
| Bridon Hong Kong Ltd | Hong Kong, China | From 0% to 60% |
| Bridon International GmbH | Gelsenkirchen, Germany | From 0% to 60% |
| Bridon International Ltd | Doncaster, United Kingdom | From 0% to 60% |
| Bridon Ltd | Doncaster, United Kingdom | From 0% to 60% |
| Bridon New Zealand Ltd | Aukland, New Zealand | From 0% to 60% |
| Bridon Pension Trust (No Two) Ltd | Doncaster, United Kingdom | From 0% to 60% |
| Bridon Scanrope AS | Tonsberg, Norway | From 0% to 60% |
| Bridon Scheme Trustees Ltd | Doncaster, United Kingdom | From 0% to 60% |
| Bridon Singapore (Pte) Ltd | Singapore | From 0% to 60% |
| Bridon (South East Asia) Ltd | Hong Kong, China | From 0% to 60% |
| British Ropes Ltd | Doncaster, United Kingdom | From 0% to 60% |
| Gloucester Rope & Tackle Company Ltd | Doncaster, United Kingdom | From 0% to 60% |
| NV Bridon Ropes SA | Brussels, Belgium | From 0% to 60% |
| PT Bridon | Bekasi, West Java, Indonesia | From 0% to 60% |
| Subsidiaries | Address | % |
|---|---|---|
| Acma Inversiones SA | Maipú, Chile | From 100% to 60% |
| BBRG Holding (UK) Ltd | Doncaster, United Kingdom | From 100% to 60% |
| BBRG (Subsidiary) Ltd | Doncaster, United Kingdom | From 100% to 60% |
| Bekaert Canada Ltd | Vancouver, Canada | From 100% to 60% |
| Bekaert Cimaf Cabos Ltda | São Paulo, Brazil | From 100% to 60% |
| Bekaert Wire Rope Industry NV | Aalst (Erembodegem), Belgium | From 100% to 60% |
| Bekaert Wire Ropes Pty Ltd | Mayfield East, Australia | From 100% to 60% |
| Procables SA | Callao, Peru | From 96% to 58% |
| Procables Wire Ropes SA | Maipú, Chile | From 100% to 60% |
| Prodinsa Ingeniería y Proyectos SA | Santiago, Chile | From 100% to 60% |
| Prodinsa SA | Maipú, Chile | From 100% to 60% |
| Wire Rope Industries Ltd/Industries de Câbles d'Acier Ltée | Pointe-Claire, Canada | From 100% to 60% |
| Wire Rope Industries USA Inc | Wilmington (Delaware), United States | From 100% to 60% |
| Subsidiaries | Merged into |
|---|---|
| Bekaert Binjiang Advanced Products Co Ltd | Bekaert Binjiang Steel Cord Co Ltd |
| Bekaert Canada Ltd | Wire Rope Industries Ltd/Industries de Câbles d'Acier Ltée |
BBRG Holding (UK) Ltd Blue Topco Ltd BBRG (Subsidiary) Ltd Blue Subsidiary Ltd Becare DAC Becare Ltd Bekaert Jiangyin Wire Products Co Ltd Bekaert-Jiangyin Wire Products Co Ltd
Companies Address Cempaka Raya Sdn Bhd Kuala Lumpur, Malaysia
In accordance with Belgian legislation, the table below lists the registered numbers of the Belgian companies.
| Companies | Company number |
|---|---|
| Bekaert Advanced Cords Aalter NV | BTW BE 0645 654 071 RPR Gent |
| 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 Dendermonde |
| Bekintex NV | BTW BE 0452.746.609 RPR Dendermonde |
| NV Bekaert SA | BTW BE 0405.388.536 RPR Kortrijk |
| NV Bridon Ropes SA | BTW BE 0401 637 507 RPR Brussels |
| 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 Bekaertstraat 2 BE-8550 Zwevegem 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 | 20151 | 2016 |
|---|---|---|
| Sales | 419 945 | 358 292 |
| Operating result before non-recurring items | 17 454 | -8 131 |
| Non-recurring operational items | -5 229 | -3 898 |
| Operating result after non-recurring items | 12 225 | -12 029 |
| Financial result before non-recurring items | 343 872 | 33 121 |
| Non-recurring financial items | -3 429 | -49 098 |
| Financial result after non-recurring items | 340 443 | -15 977 |
| Profit before income taxes | 352 668 | -28 006 |
| Income taxes | 2 472 | 3 691 |
| Result for the period | 355 140 | -24 315 |
1 Restated figures: extraordinary result no longer used, one-off elements now presented in operating or financial result.
| in thousands of € - 31 December | 2015 | 2016 |
|---|---|---|
| Fixed assets | 1 768 547 | 1 964 152 |
| Formation expenses, intangible fixed assets | 97 148 | 91 490 |
| Tangible fixed assets | 38 694 | 41 916 |
| Financial fixed assets | 1 632 705 | 1 830 746 |
| Current assets | 379 409 | 382 388 |
| Total assets | 2 147 956 | 2 346 540 |
| Shareholders' equity | 835 111 | 753 719 |
| Share capital | 176 957 | 177 612 |
| Share premium | 31 884 | 36 594 |
| Revaluation surplus | 1 995 | 1 995 |
| Statutory reserve | 17 696 | 17 696 |
| Unavailable reserve | 120 621 | 127 947 |
| Reserves available for distribution, retained earnings | 485 958 | 391 875 |
| Provisions and deferred taxes | 73 328 | 64 881 |
| Creditors | 1 239 517 | 1 527 940 |
| Amounts payable after one year | 715 764 | 795 764 |
| Amounts payable within one year | 523 753 | 732 176 |
| Total equity and liabilities | 2 147 956 | 2 346 540 |
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 € 358.3 million, a decrease of 15% compared to 2015.
The operating loss before non-recurring items was € -8.1 million, compared with a profit of € 17.5 million last year. The operating loss was mainly due to the discontinuation of the sales of stainless steel wires to external customers and to higher depreciations resulting from the capitalization of research and development costs. Nonrecurring items included in the operating result amounted to € -3.9 million in 2016, compared to € -5.2 million last year.
The financial result was € -16.0 million (€ 340.4 million in 2015) mainly driven by a net non-recurring impact of the BBRG set-up of € -49.1 million in 2016 and by a timing impact of dividend income in 2015.
This led to a result for the period of € -24.3 million compared with € +355.1 million in 2015.
The provisions for environmental programs decreased to € 22.2 million (2015: € 22.6 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 relevant notifications is presented hereafter. On 31 December 2016, the total number of securities conferring voting rights was 60 347 525.
Detailed information can be found on: http://www.bekaert.com/other-regulated-information.
| Notification of | Holders of voting rights | Denominator | Number of voting rights |
Percentage of voting rights |
|---|---|---|---|---|
| 16 February 2016 | Stichting Administratiekantoor Bekaert | 60 125 525 | 21 773 265 | 36.21% |
| 23 March 2016 | Kiltearn Partners LLP | 60 125 525 | 1 714 240 | 2.85% |
| 18 October 2016 | Norges Bank | 60 315 513 | 1 822 211 | 3.02% |
| 1 November 2016 | Norges Bank | 60 315 513 | 1 755 553 | 2.91% |
| 10 November 2016 | Norges Bank | 60 315 513 | 1 810 260 | 3.00% |
| Norges Bank | 1 775 759 | 2.94% | ||
| 22 November 2016 | Norges Bank | 60 315 513 | 1 864 660 | 3.09% |
| 25 November 2016 | Norges Bank | 60 315 513 | 1 718 780 | 2.85% |
| 13 March 2017 | Norges Bank | 60 347 525 | 1 812 832 | 3.00% |
The after-tax result for the year was € -24 314 992, compared with € 355 139 604 for the previous year.
The Board of Directors has proposed that the Annual General Meeting to be held on 10 May 2017 appropriate the above result as follows:
| in € | |
|---|---|
| Result of the year 2016 to be appropriated | -24 314 992 |
| Profit brought forward from previous year | - |
| Transfer to statutory reserves | - |
| Transfer from reserves | 86 756 428 |
| Profit for distribution | 62 441 436 |
The Board of Directors has proposed that the Annual General Meeting approve the distribution of a gross dividend of € 1.10 per share (2015: € 0.90 per share).
The dividend will be payable in euros on 15 May 2017 by the following banks:
None of the Directors' term of office will expire in 2017.
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 2O76, 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 as adopted by the European Union and with the legal and regulatory requirements applicable in Belgium, The consolidated balance sheet shows total assets of 4,304,313 (000) EUR and the consolidated income statement shows a consolidated profit (group share) for the year then ended of 105,166 (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 (IFRS) 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 accounts based on our audit. We conducted our audit in accordance with International Standards on Auditing (ISA) as adopted in Belgium. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated accounts are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated accounts. The procedures selected depend on the statutory auditor's judgment, including the assessment of the risks of material misstatement of the consolidated accounts, 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 the 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 accounts. 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.
Deloitte Bedrijfsrevisoren / Reviseurs d'Entreprises
Burgerlijke vennootschap onder de vorm van een coöperatieve vennootschap met beperkte aansprakelijkheid / Société civile sous forme d'une société coopérative à responsabilité limitée Registered Office: Gateway bu¡lding, Luchthaven Nationaal 1 J, B-1930 Zaventem VAT BE 0429.053.863 - RPR Brussel/RPM Bruxelles - IBAN BE 17 2300 0465 6121 - BIC GEBABEBB
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 2016, 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 accounts.
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 accounts:
. The directors' report on the consolidated accounts 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.
Gent, 22 March 2017
DELOITTE Bedrijfsrevisoren / Reviseurs d'Entreprises BV o.v.v.e. CVBA / SC s.f.d, SCRL Represented by Charlotte Vanrobaeys
| Matthew Taylor | Chief Executive Officer |
|---|---|
| Beatríz García-Cos Muntañola | Chief Financial Officer |
| Platforms |
Lieven Larmuseau Executive Vice President Rubber Reinforcement Business Platforms Geert Van Haver Chief Technology & Engineering Officer Piet Van Riet Executive Vice President Industrial and Specialty Products Business Platforms Curd Vandekerckhove Executive Vice President North Asia and Global Operations Stijn Vanneste Executive Vice President Europe, South Asia and South East Asia Frank Vromant Executive Vice President Americas Bart Wille Chief Human Resources Officer
| Axel Ampolini | Senior Vice President Industrial Steel Wire Global |
|---|---|
| Marco Cipparrone | Senior Vice President Rubber Reinforcement Europe |
| Bruno Cluydts | Chief Operations Officer BBRG |
| Philip Eyskens | Senior Vice President Legal, IT and Mergers & Acquisitions |
| Oliver Forberich | Senior Vice President Stainless Technologies Global |
| Ton Geurts | Chief Purchasing Officer & Senior Vice President Supply Chain Excellence |
| Bruno Humblet | Chief Executive Officer BBRG |
| Jun Liao | Senior Vice President Rubber Reinforcement North Asia |
| Patrick Louwagie | Senior Vice President Brazil |
| Dirk Moyson | Senior Vice President Manufacturing Excellence |
| Alejandro Sananez | Senior Vice President Latin America |
| Demet Tunç | Chief Marketing Officer & Senior Vice President Customer Excellence |
| Luc Vankemmelbeke | Senior Vice President Industrial Products & Specialty Steel Wire Europe |
| Geert Voet | Chief Strategy Officer BBRG & EVP Southern Hemisphere BBRG |
| Zhigao Yu | Senior Vice President Technology & Engineering China |
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 2016 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 - Underlying | EBIT before 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. |
| EBIT interest coverage | Operating result divided by net interest expense. |
| EBITDA | Operating result (EBIT) + depreciation, amortization, impairment of assets and negative goodwill. |
| EBITDA – Underlying | EBITDA before 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. |
| 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. |
| Return on capital employed (ROCE) |
Operating result (EBIT) relative to the weighted average capital employed. |
| Return on equity (ROE) | Result for the period relative to average equity. |
| Return on invested capital (ROIC) |
NOPLAT on invested capital. NOPLAT is EBIT after tax (using a target tax rate of 27%), and includes the Group's share in the NOPLAT of its joint ventures and associates. Invested capital is the aggregate of total equity, net debt, non-current employee benefit obligations and non-current other provisions, and includes the Group's share in the net debt of its joint ventures and associates. |
| Subsidiaries | Companies in which Bekaert exercises control and generally has an interest of more than 50%. |
| Weighted average cost of capital (WACC) |
Cost of debt and cost of equity weighted with a target gearing of 50% (net debt/equity structure) after tax (using a target tax rate of 27%). Bekaert calculates a WACC for its three main currency environments: EUR, USD and CNY, the average of which (7.6%) has been rounded to 8% to set a long-term target. |
| 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.
visit: http://www.bekaert.com/financialcalendar
www.bekaert.com
Shareholders' Guide 2016: investor's data center on bekaert.com
Bekaertstraat 2 BE-8550 Zwevegem Belgium T +32 56 23 05 11
[email protected] www.bekaert.com
© Bekaert 2017
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