Annual Report • Mar 26, 2021
Annual Report
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4 STRATEGY AND LEADERSHIP
13 Technology & Innovation
INDUSTRY OFFERINGS 15 Products and applications
2020 will be long remembered. The Covid-19 pandemic brought challenges and changes to the world of a magnitude that was impossible to foresee. As per the publication date of this report the pandemic is still taking a huge toll on economies and people's lives worldwide and has fundamentally changed long established certainties and priorities.
Despite the turmoil that Covid-19 has created in our markets and in our business, we remained focused on our priorities. This enabled us to secure the business continuity of our customers, the health and safety of our people, and—at the same time—offset the impact of the pandemic on our financial objectives.
As a result of all the efforts undertaken we improved profitability, reinforced the balance sheet and enhanced the strategic position of our businesses. Underlying EBIT for the fiscal year 2020 increased by 13% to € 272 million at a margin on sales of 7.2%, ahead of what we had set ourselves as a target. Driven by an improved margin performance and stringent working capital management, our healthy cash generation significantly strengthened the balance sheet. Net debt on underlying EBITDA decreased from 2.09 at the close of 2019 to 1.26 at the end of 2020.
We are very pleased with these results. They are a reflection of what we are capable of when we focus and deliver on our priorities despite adverse external factors, however challenging those may be.
Moving forward, our ambitions reach higher. The Board of Directors and the Bekaert Group Executive have recently established the company's strategy for the next five years with the ambition to transform the company's business portfolio toward higher value creation. Organic growth in core markets will be supported by extending our capabilities in the areas of innovation, digital and sustainability and complemented by selective acquisitions and new partnerships.
For 2021, barring unexpected events, we project consolidated sales to reach at least € 4 billion and intend to improve our underlying EBIT-margin by 40-60 bps over the previous year.
Oswald Schmid Chief Executive Officer
Jürgen Tinggren Chairman of the Board of Directors
Based upon the financial performance of 2020 and the confidence in the set direction, the Board has decided to propose, to the General Meeting of Shareholders in May of 2021, a gross dividend of € 1.00 per share, in line with the company's dividend policy.
The progress achieved in a very demanding year is evidence of the commitment, energy and irrepressible spirit of our employees. We would like to thank them as well as our customers, partners and shareholders for their continued trust and support.
Oswald Schmid Chief Executive Officer
Jürgen Tinggren Chairman of the Board of Directors
The main tasks of the Board of Directors are to determine the Group's strategy and general policy, and to monitor Bekaert's operations. The Board of Directors is the company's prime decision-making body with the exception of matters reserved by law or by the articles of association to the General Meeting of Shareholders. The Board of Directors currently consists of thirteen members. Their professional profiles cover different areas of expertise, such as law, business, industrial operations, finance & investment banking, HR and consultancy.
Henriette Fenger Ellekrog (1) Eriikka Söderström (1) Mei Ye (1) Charles de Liedekerke
Jürgen Tinggren, Chairman (1) Christophe Jacobs van Merlen Caroline Storme Oswald Schmid, CEO Hubert Jacobs van Merlen Emilie van de Walle de Ghelcke Gregory Dalle Colin Smith (1) Henri Jean Velge
(1) Independent Directors
The biographies of all members of the Board of Directors are available on the Bekaert website.
Oswald Schmid, Chief Operations Officer, succeeded Matthew Taylor as interim CEO when Matthew Taylor retired from his position as CEO and Director of Bekaert on 12 May 2020. On 13 May 2020, the Annual General Meeting of Shareholders confirmed the mandate of Oswald Schmid as Director.
The Annual General Meeting of Shareholders further approved the nominations of Henriette Fenger Ellekrog and Eriikka Söderström as independent Directors, replacing Celia Baxter and Pamela Knapp who did not seek re-appointment. Christophe Jacobs van Merlen, Emilie van de Walle de Ghelcke and Henri Jean Velge were re-elected as Director.
The Board of Directors of Bekaert has appointed Oswald Schmid as Chief Executive Officer, effective as of 2 March 2021.
The Bekaert Group Executive (BGE) assumes the operational responsibility for the Company's activities and acts under the supervision of the Board of Directors. The BGE is chaired by Oswald Schmid, Chief Executive Officer.
The composition of the Bekaert Group Executive reflects the organizational structure with four Business Units and four Global Functional Domains. At the end of 2020, the Business Units and Global Functions were led by the following Executives.
The Business Units have global P&L accountability for strategy and delivery in their distinct areas and therefore have dedicated production facilities and commercial and technology teams within their respective organization. This helps them develop a customer-centric approach aligned with the specific needs and dynamics of their markets.
The Functions take a role as strategic business partners, accountable for providing specific expertise and services across the Group, and for ensuring the business has the right capability to deliver on short- and long-term goals.
The Board of Directors of Bekaert has appointed Oswald Schmid as Chief Executive Officer, effective as of 2 March 2021. Oswald has been leading the Bekaert Group Executive as interim CEO since 12 May 2020, when he was appointed member of the Board of Directors.
On 8 February 2021, Kerstin Artenberg joined Bekaert as Chief Human Resources Officer and became a member of the Bekaert Group Executive, succeeding Rajita D'Souza who left the company at the end of 2020.
On 1 April 2021, Yves Kerstens will join Bekaert as Divisional CEO Specialty Businesses and Chief Operations Officer, and become a member of the BGE. Jun Liao will take up the role of China CEO and lead the China Transformation Office in addition to his current responsibilities as country manager for China.
The biographies of all Bekaert Group Executive members are available on the Bekaert website.
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, services 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 more than 27 000 employees worldwide, headquarters in Belgium and € 4.4 billion in combined revenue in 2020.
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. The coatings we apply 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 on all continents.
We believe in lasting relationships with our customers, suppliers and other stakeholders, and are committed to delivering long-term value to all of them. We are convinced that the trust, integrity and irrepressibility that bring our employees worldwide together as one team create the fundamentals of successful partnerships wherever we do business.
Our ambition is to create sustainable value for all our stakeholders: customers and other business partners, employees, shareholders, and the broader communities where we are active.
We have established, in the course of 2020, Bekaert's strategy for the next five years. We are determined to implement this new strategy with passion and focus and are convinced it will enable us to drive sustainable value creation.
A first set of actions was implemented with high priority. The Covid-19 pandemic did not delay but rather accelerated the progress we have made in all four pillars of our strategy:
In 2020, Bekaert has successfully implemented the first steps of its transformation toward higher performance and has delivered on the key priorities set forth to strategically improve the Group's business and technology position as well as the financial results.
For more information and details on our financial performance improvement during 2020, we refer to the segment reports and to the summary of the financial review in this annual report.
For more information and details on how Bekaert addressed the impact of the pandemic to keep our people safe and help the communities where we are active with personal protection equipment, please read our 2020 Sustainability Report.
Our research and innovation activities 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.
As part of our strategy toward sustainable value creation, we raise our ambitions, as a leading innovator in our industry, to spearhead new developments and adjacent technologies that will benefit our customers.
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.
The Research and Innovation department is the center of expertise for Bekaert's core technology domains: physical metallurgy, fatigue & mechanical performance, corrosion & metallic coatings, and organic coatings. In addition, it also focuses on data modeling and sensor technologies in close cooperation with the engineering and IT departments.
Bekaert actively seeks opportunities for cooperation with strategic customers, suppliers and academic research institutes and universities. We also consider investments in early-stage companies and venture capital funds that may create new attractive business models adjacent to Bekaert's current field-of-play. Read more about our partnerships in the segment reports and in the 2020 Sustainability Report.
The Intellectual Property department of Bekaert takes care of patents, designs, trademarks, domain names and trade secrets for the whole Bekaert Group, including the joint ventures in Brazil. It also advises on IP clauses in various agreements such as joint development agreements and licenses. At the end of 2020, the Bekaert Group had a portfolio of more than 1800 patents and patent applications, including 28 first patent filings in 2020, and more than 1 700 trademark registrations.
Bekaert's in-house engineering department plays a key role in the optimization and standardization of our production processes and machinery. Newly designed equipment always combines innovative solutions for performance improvements in various areas, including product quality, production excellence and flexibility, cost efficiency, energy consumption, machine safety, ergonomics and the environmental impact. Currently, we are implementing a new and sustainable operating model that allows us to concentrate on developing innovative equipment for new products, new processes and extended digital tools and features.
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 form 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.
More information about our steel wire products and solutions is available on our website.
Bekaert's Rubber Reinforcement business unit develops, manufactures and supplies tire cord and bead wire products and solutions for the tire sector. In serving the equipment market, the product portfolio includes hose reinforcement wire and conveyor belt reinforcement products.
To serve customers worldwide, the business unit has a global presence with manufacturing plants in EMEA, US, Brazil, India, Indonesia, and China. In 2020, Bekaert started the construction of a new manufacturing plant in Vietnam.
Tire and automotive markets were heavily impacted by the Covid-19 pandemic in the first half of the year, mainly due to a sharp drop in new vehicle production volumes globally. OEM vehicle demand is, however, not the main growth indicator for the tire and tire cord business.
The main growth drivers in tire markets are the total mileage driven (for passenger vehicle tires) and freight transport indicators (for truck tires). The increasing tire rim size and the environmentally driven shift to ever thinner and stronger tire cord constructions are additional growth drivers for Bekaert's steel cord products. The electrification trend of vehicles furthermore boosts demand for lightweight reinforcement solutions thanks to improved acoustics as a result of a lower rolling resistance.
Significantly affected by the impact of the Covid-19 pandemic in the first half of the year, Rubber Reinforcement reported a strong and fast rebound in the second half. The business unit reported a sales decrease of -17.3% for the full year, compared to 2019. The business unit implemented extensive measures to lower the cost structure in order to partly offset the severe impact of the Covid-19 pandemic on demand from tire markets in the first half of 2020. The benefits of those efforts delivered their full potential during the rebound in the second half, which resulted in a strong H2 underlying EBIT margin of 12.6%, far exceeding previous reporting periods.
The segment reported an underlying EBIT of € 144 million for the full year or 8.8% margin on sales, slightly above last year and the underlying EBITDA margin was 15.1%, up 0.3 ppt.
See summary of financial review on page 32 for more details on the segment's financial performance.
Throughout the Covid-19 crisis, be in the first half of the year with the unparalleled economic shock in our tire markets, or during the fast recovery all along the second half, Bekaert has benefited from its balanced presence globally. Moreover, thanks to close customer intimacy and flexible and continual delivery, we were able to strengthen our market position in most regions.
Running at full capacity in China, Indonesia, India, and EMEA, draws attention to future capacity needs. The construction of the new greenfield plant for rubber reinforcement production in Vietnam is in its finalization stage. Production will start in the course of 2022 and will be ramped up to full capacity in line with demand evolutions in the subsequent years.
Our Bekaert TAWI® patent was awarded the 21st China Patent Excellence Award. As the only national level award sponsored by the China IP Administration and World IP Organization, the China Patent Award is very prestigious.
TAWI® is a new generation coating for tire cord filaments developed by Bekaert. The coating, provides environmentally-friendly benefits as the coating excludes the need for tire makers to add cobalt to the rubber plie compounds.
Several Chinese tire manufacturers have awarded us with strategic supplier or partner awards. Prinx Chengshan gave us the award because of our excellent supply performance and technical co-development. Wuxi Hongdou praised Bekaert as sole tire cord supplier for great achievements made in 2020 for technical upgrade support, delivery and quality performance. Sailun awarded us as strategic supplier.
Bekaert's Steel Wire Solutions business unit develops, manufactures and supplies a very broad range of steel wire products and solutions for customers in agriculture, energy & utilities, mining, construction, consumer goods, and the industrial sector in general.
To serve customers worldwide, the business unit has a global presence with manufacturing plants in EMEA, US, Latin America and Asia and a sales and distribution network worldwide.
Steel Wire Solutions is active in a wide number of markets. When focusing on our main markets, the following indicators are key in understanding the business climate in 2020 and the growth drivers in the coming years:
The strong Covid-19 response actions enabled Bekaert to keep production plants open and running, except during some temporary, governmentmandated lockdowns. The Steel Wire Solutions business unit was alert and agile in keeping working conditions safe, anticipating and responding to customer needs, and securing raw materials supplies. This enabled us to increase market share in EMEA and Latin America in the course of 2020.
Bekaert's Steel Wire Solutions business, significantly affected by the impact of the Covid-19 pandemic in the second quarter of 2020, saw a turning point early in the third quarter and delivered robust organic sales growth in the last quarter.
The business unit reported a sales decrease of -7.9 % for the full year, compared to 2019.
Steel Wire Solutions delivered a solid underlying EBIT result of € 96 million and strong underlying EBIT margin on sales of 7.0%, doubling the margin of last year. The strong margin increase was the result of an improved business mix and footprint optimization (reduced impact of lower margin activities), stringent cost control, and the effectiveness of Covid-19 mitigation actions. Underlying EBITDA improved to a double-digit margin of 10.9%.
See summary of financial review on page 32 for more details on the segment's financial performance.
Bekaert and AGRO, a world leading manufacturer of high quality innersprings, started co-developing and producing high-end steel wire mattress spring systems in Colombia. AGRO-Bekaert Colombia SAS co-develops, manufacture and promote superior value solutions for mattress and upholstery manufacturers in Colombia, Central America and the Caribbean. Experience and expertise came together in a brand new production site in Barranquilla, Colombia, to make this ambition real.
Bekaert and Almasa agreed to merge Proalco SAS (a subsidiary of Bekaert) with the steel wire activities of Almasa SA, both located in Colombia. The partnership intends to create value by combining expertise and resources in offering existing and new steel wire products and solutions to the market. With manufacturing activities in the center and on the Atlantic coast of Colombia, the merger will promote employment, enable export opportunities and facilitate the supply of upholstery steel wire for Bekaert's recently established mattress spring systems joint venture, Agro-Bekaert Colombia SAS, also located along the Atlantic coast.
The US Federal Communications Commission plans considerable investments to bring high-speed fixed broadband service to rural homes and small businesses via the Rural Development Opportunity Fund (RDOF). The planned funding amounts to USD 20 billion spread over eight years. This opens opportunities for Bekaert as we have been supplying the energy and utilities markets with guy and messenger wire for strand & lash applications for a long time.
The business unit Specialty Businesses comprises three sub-segments that serve different markets. These sub-segments are Building Products; Fiber Technologies; and Combustion Technologies. The characteristics they all three have in common are their high-end product portfolio and advanced technologies, and their continuous search for lightweight solutions and environmentally-friendly applications.
Building Products develops and manufactures products that reinforce concrete, masonry, plaster and asphalt. Fiber Technologies offers high-end products for filtration, heat-resistant textiles, electroconductive textiles, the safe discharge of static energy, sensor technologies, and the semiconductor business. Combustion Technologies targets heating markets with environmentally-friendly gas and hydrogen burners and residential and commercial heat exchangers.
Building Products represents the largest part of the business unit's sales. Business conditions slowed down in 2020 due to temporarily suspended tenders for new public infrastructure projects in anticipation of government incentives and recovery programs, and due to global, pandemic-induced economic uncertainties. The growth potential of Bekaert's Dramix® steel fibers for concrete reinforcement remains robust and promising, seen the environmental, ergonomic, and total cost of ownership advantages versus traditional bar and rebar reinforcement.
The Fiber Technologies activities saw a demand drop in diesel particulate filter media due to the slowdown in automotive OEM, offset by increased business in other sectors. Both the Fiber Technologies and the Combustion Technologies are orienting their focus on existing and adjacent applications and markets with growth potential arising from megatrends including renewable energy, decarbonization, and sensor technologies.
The business unit Specialty Businesses reported a sales decrease of -5.9% for the full year 2020, compared to 2019.
Specialty Businesses delivered an underlying EBIT result of € 45 million, -13% below last year and reaching an underlying EBIT margin on sales of 11.4% (versus 12.2% last year). The reduction primarily resulted from inventory write-offs and other adjustments in Combustion Technologies (€ -5 million), a lower result in Fiber Technologies due to weaker demand for high-value adding products, and higher loss generation in (diamond) sawing wire versus last year. The profit contribution of Building Products remained strong. The underlying EBITDA margin of the Business Unit reached 15.5%, slightly below the margin of last year.
See summary of financial review on page 33 for more details on the segment's financial performance.
Bekaert is collaborating with CCL, a global specialist in post-tensioning for the building industry, to develop new concrete reinforcing systems that lower the total cost of ownership as well as the carbon footprint of concrete constructions. Both companies combine their expertise to create a solution that is unique in the industry of elevated slabs.
The advantages are clear: we reduce labor, transport and material while improving building performance. Moreover, this system enables easier installation which leads to a faster construction cycle and a higher quality assurance. As a result, the total cost of ownership and environmental impact are significantly reduced.
Along with other major investors, Bekaert has invested in Cargo Sous Terrain (CST), a complete logistics system for the flexible transport of goods in Switzerland. The project aims at bringing most of the cargo transportation underground through tunnels that connect production and logistics sites with urban centers. Overground, CST plans the distribution of goods to their final destination in environmentally-friendly vehicles. The system aims at a reduction of overground traffic and the related noise and exhaust emissions.
Bekaert supports this ambitious, innovative program by investing capital and by offering technical advice on the concrete reinforcement and elevator solutions that will help realize the project.
Bekaert produces micro cables with an extreme performance that are used as antenna booster in durable RFID tags, for example in industrial laundering. With this long-lasting antenna, the RFID tags can withstand the harshest industrial environments.
RFID tags are progressively used as a replacement for barcodes as they offer added benefits: they can be (bulk) read from a distance even when covered and they are less prone to wear and tear, resulting in a longer lifetime.
Building Products has successfully brought Murfor® Compact to more applications and territories in 2020.
Murfor® Compact, Bekaert's high-performance masonry reinforcement, is a sturdy mesh of high tensile strength steel cords, supplied on a roll for thin joint masonry and glued brickwork. This lightweight product is easy to handle and install. As the product can be cut to size on-site, scrap is reduced to an absolute minimum.
Mix of Dramix® and post-tensioning replace traditional passive reinforcement in on-grade applications
As a truly global ropes and advanced cords solution provider, Bridon-Bekaert Ropes Group is committed to be the leading innovator and supplier of the best performing ropes and A-Cords for its customers worldwide. The unique combination of technologies in steel wire ropes, synthetic ropes and advanced cords (A-Cords) enables strong differentiation in high-end markets.
BBRG-ropes has a leading position in a very wide range of sectors, including surface and underground mining, offshore and onshore oil & gas, crane & industrial, fishing & marine, and structures.
The A-Cords business of BBRG develops and supplies fine steel cords for elevator and timing belts used in construction and equipment markets respectively, and window regulator and heating cords for the automotive sector.
2020 saw continued challenging market dynamics in BBRG's core ropes sectors. Demand from the crane and industrial sector was strong in Asia but slowed down in the US. Growth drivers for the ropes business of BBRG are: the activity levels and investments in mining and oil & gas; the technology shift to high-performance and long-lifetime solutions; synthetic and hybrid ropes; and value creation to customers driven by a reduction in total cost of ownership and by extended service offerings.
Weak automotive OEM activity affected demand for regulator and heating cords in the A-Cords business in 2020, while demand from hoisting and timing belt markets held up well.
Bridon-Bekaert Ropes Group (BBRG) recorded a sales decline of -13% compared to last year, all of which was driven by lower volumes. Part of the volume decrease was a result of BBRG's strategy to reduce its presence in lower margin rope applications. The A-Cords (advanced cords) business saw decreased sales in automotive markets and solid demand from elevator and timing belt markets.
BBRG accelerated the implementation of the profit restoration program for the ropes activities and further boosted profitability with a stronger business mix and significant cost savings and Covid-19 mitigation actions. The A-Cords activities continued to deliver a solid margin performance.
The business unit delivered an underlying EBIT of € 34 million at a margin of 7.9% on sales, more than tripling the margin of the previous year. Underlying EBITDA reached a strong margin of 15.1%, compared with 9.0% in 2019. As anticipated, BBRG's sales and margins trended lower in the second half of the year, due to weaker business conditions in the Americas and less project business and seasonality effects in the second half of the year.
See summary of financial review on page 33 for more details on the segment's financial performance.
A key priority within Bridon-Bekaert Ropes Group's strategy was the profit restoration of the ropes activities. The actions implemented in 2020 to strengthen the business mix and reduce the cost level have proven to be very successful and are clearly visible in the results.
Another priority was to enhance benefits of scale and optimize the footprint, in order to further improve the operating model and profitability of the business.
As a total solution provider, Bridon-Bekaert Ropes Group offers Ropes 360 services to support and advise customers throughout the lifecycle of the ropes, maximizing the safety of their operations and the ropes' operational life and hence, reducing the cost.
Together with VisionTek, Bridon-Bekaert has developed the first mobile 3D rope measuring and visioning equipment. 360° miniature cameras first take high-resolution pictures of the rope, following which the equipment analyzes all data and detects defects through artificial intelligence and machine learning algorithms.
Another illustration of our dedication to bring value to our customers is our A-Tec test center in Aalter (Belgium) where we test elevator traction media, such as Flexisteel®, as well as our customers' elevator belts.
A-Tec is essential in our service toward customers: by performing thorough analysis on new and used elevator products, we lay the foundations for next generations of lifting applications. This field return inspection and co-development in new products is an essential part of the co-operation with our customers.
As a global mooring specialist, Bridon-Bekaert Ropes Group produces ropes for floating wind turbines and other offshore renewable applications. Floating wind platforms are an answer to further decarbonize the global energy mix and increase security of supply. Keeping multiple large offshore turbines on station in dynamic shallow water conditions brings along unique missioncritical requirements. Bridon-Bekaert meets those requirements.
Several partnerships were concluded in the course of 2020 to leverage capabilities and further raise our presence in offshore wind: read more about our partnerships in the 2020 Sustainability Report.
3D rope measuring equipment assess rope quality from all sides
The A-Tec center houses simulation equipment to test and improve the performance and lifetime of elevator traction media.
| Combined key figures | |||
|---|---|---|---|
| in millions of € | 2019 | 2020 | Delta |
| Sales | 5 132 | 4 438 | -13.5% |
| Capital expenditure (PP&E) | 135 | 120 | -11.1% |
| Employees as at 31 December | 28 411 | 27 455 | -3.4% |
| in millions of € | 2019 | 2020 | Delta |
|---|---|---|---|
| Income statement | |||
|---|---|---|---|
| Sales | 4 322 | 3 772 | -12.7% |
| EBIT | 155 | 257 | 65.5% |
| EBIT-underlying | 242 | 272 | 12.5% |
| Interests and other financial results | -85 | -86 | 1.9% |
| Income taxes | -51 | -57 | 10.6% |
| Group share joint ventures | 29 | 34 | 18.6% |
| Result for the period | 48 | 148 | 207.1% |
| attributable to equity holders of Bekaert | 41 | 135 | 225.9% |
| attributable to non-controlling interests | 7 | 13 | 94.3% |
| EBITDA-underlying | 468 | 479 | 2.3% |
| Depreciation PP&E | 212 | 185 | -12.6% |
| Amortization and impairment | 37 | 31 | -15.0% |
| Equity | 1 532 | 1 535 | 0.2% |
|---|---|---|---|
| Non-current assets | 2 048 | 1 823 | -11.0% |
| Capital expenditure (PP&E) | 98 | 100 | 1.8% |
| Balance sheet total | 4 305 | 4 288 | -0.4% |
| Net debt | 977 | 604 | -38.2% |
| Capital employed | 2 408 | 2 063 | -14.3% |
| Working capital | 699 | 535 | -23.5% |
| Employees as at 31 December | 25 090 | 23 939 | -4.6% |
| EBITDA on sales | 9.3% | 12.5% |
|---|---|---|
| Underlying EBITDA on sales | 10.8% | 12.7% |
| EBIT on sales | 3.6% | 6.8% |
| Underlying EBIT on sales | 5.6% | 7.2% |
| EBIT interest coverage | 2.5 | 4.8 |
| ROCE-underlying | 9.5% | 12.2% |
| ROE | 3.2% | 9.7% |
| Financial autonomy | 35.6% | 35.8% |
| Gearing (net debt on equity) | 63.8% | 39.4% |
| Net debt on EBITDA-underlying | 2.1 | 1.3 |
| in millions of € | 2019 | 2020 | Delta |
|---|---|---|---|
| Sales | 809 | 665 | -17.8% |
| Operating result | 90 | 109 | 20.0% |
| Net result | 73 | 84 | 15.8% |
| Capital expenditure (PP&E) | 37 | 20 | -45.5% |
| Depreciation | 18 | 12 | -31.3% |
| Employees as at 31 December | 3 321 | 3 516 | 5.9% |
| Group's share net result | 29 | 34 | 18.6% |
| Group's share equity | 161 | 124 | -22.8% |
in millions of €
(1) The dividend is subject to approval by the General Meeting of
| 2019 | 2020 | Delta |
|---|---|---|
| 60 408 441 | 60 414 841 | = |
| 1 601 | 1 641 | 2.5% |
| Per share | |||
|---|---|---|---|
| in € | 2019 | 2020 | Delta |
| EPS | 0.73 | 2.38 | 226% |
| Gross dividend* | 0.35 | 1.00 | 186% |
| Net dividend** | 0.245 | 0.70 | 186% |
| Share price |
| in € | 2019 | 2020 | Delta |
|---|---|---|---|
| Price as at 31 December | 26.50 | 27.16 | 2.5% |
| Price (average) | 23.96 | 19.92 | -16.9% |
* Subject to approval by the General Meeting of Shareholders 2021
** Subject to the applicable tax legislation
| Underlying | 2019 | 2020 |
|---|---|---|
| EBIT on sales | 8.7% | 8.8% |
| EBITDA on sales | 14.8% | 15.1% |
| ROCE | 13.2% | 12.4% |
| Combined Sales | 2 124 | 1 742 |
| % of total combined sales | 41% | 39% |
| Underlying | 2019 | 2020 |
|---|---|---|
| EBIT on sales | 3.4% | 7.0% |
| EBITDA on sales | 7.1% | 10.9% |
| ROCE | 7.9% | 17.6% |
| Combined Sales | 2 102 | 1 881 |
| % of total combined sales | 41% | 42% |
| Underlying | 2019 | 2020 |
|---|---|---|
| EBIT on sales | 12.2% | 11.4% |
| EBITDA on sales | 15.7% | 15.5% |
| ROCE | 22.4% | 20.0% |
| Combined Sales | 414 | 389 |
| % of total combined sales | 8% | 9% |
| Underlying | 2019 | 2020 |
|---|---|---|
| EBIT on sales | 2.4% | 7.9% |
| EBITDA on sales | 9.0% | 15.1% |
| ROCE | 2.5% | 7.4% |
| Combined Sales | 489 | 424 |
| % of total combined sales | 10% | 10% |
in millions of €
Consolidated companies Joint ventures and associates
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 one-off accounting impacts (see note 2.6 Alternative performance measures in the Financial Review).
Bekaert's underlying EBIT reached € 272 million in 2020, reflecting a margin of 7.2% and an increase of € 30 million or +13% compared with last year, despite a -13% sales decline. The agile response to the impact of Covid-19, the structural cost improvement actions, and significant business mix improvements more than offset the volume and cost impact of the health crisis.
Where the underlying EBIT bridge showed a negative year-on-year transition in the first half (€ -34 million), it turned highly positive in the second half (an increase of € +64 million or +56% compared with H2 2019, reaching € 181 million in underlying EBIT and reflecting a margin of 9.0%). The strong benefits from business mix improvements, the continued mitigation actions, and positive, non-cash inventory valuation effects from increased raw materials prices at year-end, contributed to the strong profitability improvement in the second half of 2020.
Bekaert achieved consolidated sales of € 3.8 billion in 2020, well below last year (-12.7%) due to the heavy impact of the Covid-19 pandemic in the first half of 2020. The organic sales decline (-9.7%) was driven by lower volumes (-8.3%) and passed-on wire rod price and other price-mix effects for the full year (-1.4%). The currency movements were -3.0% negative.
Combined sales totaled € 4.4 billion for the year, down -13.5% from 2019. The solid organic sales growth of Bekaert's joint ventures in Brazil (+6.8%) was more than offset by the strong devaluation (-33.4%) of the Brazilian real, resulting in a top-line decline of -18.0%.
The Board of Directors will propose to the Annual General Meeting of Shareholders of 12 May 2021, a gross dividend of € 1.00, in line with the company's pay-out policy. The dividend will, upon approval by the General Meeting of Shareholders, become payable as of 18 May 2021.
Bekaert achieved an operating result (EBIT-underlying) of € 272 million (versus € 242 million last year). This resulted in a margin on sales of 7.2% (5.6% in 2019).
The one-off items amounted to € -16 million (€ -87 million in 2019) and mainly included expenses and impairments related to footprint adjustments and other restructuring programs, largely offset by the gain on sale of land and building in Belgium and the related reversal of environmental provisions. Including the one-off items, EBIT was € 257 million, representing an EBIT margin on sales of 6.8% (versus € 155 million or 3.6% in 2019). Underlying EBITDA was € 479 million (12.7% margin) compared with € 468 million (10.8%) and EBITDA reached € 473 million, or a margin on sales of 12.5% (versus 9.3%).
Overhead expenses (underlying) decreased by € -29 million to 8.9% on sales (versus 8.4% in 2019). Selling and administrative expenses decreased by € -16 million due to a lower cost base from structural cost saving programs and the Covid-19 mitigation actions. Research and development expenses amounted to € 50 million, compared with € 62 million in 2019, a result of better focus and the savings impact from the 2019 restructuring. Underlying other operating revenues and expenses decreased from € 17 million last year to € 8 million in 2020 due to a reduction in royalties received and impairment losses in 2020 versus provision reversals in 2019. Reported other operating revenues and expenses (€ +51 million) were significantly higher than last year (€ +15 million) due to the gain on sale of real estate in Belgium.
Interest income and expenses amounted to € -56 million, down from € -66 million in 2019 and a result of lower interests on financial derivatives. Other financial income and expenses amounted to € -30 million (€ -18 million in 2019) mainly due to adverse realized and unrealized currency translation effects.
Income taxes increased from € -51 million to € -57 million. The overall effective tax rate dropped from 73% to 33% thanks to the rebound in profitability with less impact from loss generating entities, and the reversal of provisions on settled tax cases.
The share in the result of joint ventures and associated companies was € +34 million (versus € +29 million last year), reflecting the strong performance of the joint ventures in Brazil.
The result for the period thus totaled € +148 million, compared with € +48 million in 2019. The result attributable to non-controlling interests was € +13 million (versus € +7 million last year) due to the profit increase in entities with minority shareholders, particularly in Latin America. After non-controlling interests, the result for the period attributable to equity holders of Bekaert was € +135 million versus € +41 million last year. Earnings per share amounted to € +2.38, significantly up from € +0.73 in 2019.
As at 31 December 2020, equity represented 35.8% of total assets, slightly up from 35.6% at year-end 2019. The gearing ratio (net debt to equity) was 39.4%, significantly down from 63.8% at year-end 2019 due to strong deleveraging.
Net debt of € 604 million, down from € 977 million at the close of 2019, resulting in net debt on underlying EBITDA of 1.26, significantly down from 2.09 last year.
Cash flows from operating activities amounted to € +505 million, lower than the € +524 million in 2019, mainly as a result of a lower decrease in working capital (contributing € +124 million to cash from operating activities in 2020 versus € +169 million in 2019), partly offset by a higher EBITDA, lower cash-outs on income taxes and lower usage of provisions and employee benefit obligations.
Cash flows attributable to investing activities amounted to € -31 million (versus € -91 million in 2019) due to the proceeds from disposal of fixed assets, mainly the sale of land and buildings in Belgium. The cash-out from capital expenditure was about stable compared to last year.
Cash flows from financing activities totaled € -83 million, compared with € -269 million last year. 2019 included the proceeds from a new retail bond (€ +200 milion) and Schuldschein issue (€ +320 million), more than offset by the repayment of non-current interest-bearing debt instruments (€ -675 million), whereas 2020 included the proceeds of a new retail bond (€ +200 million) which was offset by the repayment of non-current interest-bearing debt instruments (for a total of € -248 million). In addition, 2020 included a lower amount of gross dividend payments (€ -26 million) versus the previous year (€ -53 million).
Investments in property, plant and equipment amounted to € 100 million in 2020, about stable compared to last year (€ 98 million).
Alongside the ongoing improvement programs toward higher level performance, Bekaert has determined a number of actions to address structural changes in the market environment. In addressing these, the Group is enhancing the effectiveness of its operating model and process efficiencies across the business, while continually evaluating the set-up and usage of its footprint in view of driving sustainable value creation.
As part of the global approach and measures:
On 28 September 2020, Bekaert and Almasa reached an agreement on the merger of Proalco SAS (subsidiary of Bekaert) with the steel wire activities of Almasa SA, both located in Colombia. The partnership intends to create value by combining expertise and resources in offering existing and new steel wire products and solutions to the market. The transaction, subject to customary closing conditions including regulatory approvals, is expected to close in the course of the first half of 2021.
On 31 December 2019, the Company held 3 873 075 treasury shares. Of these 3 873 075 treasury shares, 10 036 shares were transferred to non-executive Directors of Bekaert as remuneration for the performance of the duties as Chairman or member of the Board of Directors and 13 439 shares were transferred to members of the BGE pursuant to the Bekaert share-matching plan. A total of 10 766 own shares were sold to members of the BGE in the framework of the Bekaert personal shareholding requirement plan. In addition, 29 300 stock options were exercised under the Stock Option Plan 2010-2014 and 29 300 treasury shares were used for that purpose. The company did not purchase any shares in the course of 2020 and no treasury shares were cancelled. As a result, the Company held an aggregate 3 809 534 treasury shares as of 31 December 2020.
Bekaert's Rubber Reinforcement business has been significantly affected by the impact of the Covid-19 pandemic in the first half of the year, but reported a strong and fast rebound in the second half (sales up +28% from the first half). In the fourth quarter of 2020, sales volumes surged +7% higher than the same quarter last year, driven by very strong demand from tire markets in Asia and EMEA and recovering demand for hose reinforcement wire products.
The business unit reported a sales decrease of -17.3% for the full year, compared to 2019. This stemmed from lower volumes (-11.5%), unfavorable currency movements (-1.9%), and passed-on wire rod price changes and other price-mix effects (-3.9%).
The business unit implemented extensive measures to lower the cost structure in order to partly offset the severe impact of the Covid-19 pandemic on demand from tire markets in the first half of 2020. The benefits of those efforts delivered their full potential during the rebound in the second half, which resulted in a strong H2 underlying EBIT margin of 12.6%, far exceeding previous reporting periods.
The segment reported an underlying EBIT of € 144 million for the full year or 8.8% margin on sales, slightly above last year. Reported EBIT was € 136 million with a margin on sales of 8.3%. The one-off elements (€ -8 million) included restructuring costs, impairment losses and increased environmental provisions.
The underlying EBITDA margin was 15.1%, up 0.3 ppt from last year.
Capital expenditure (PP&E) amounted to € 37 million and included investments in all continents, particularly in Asia and in Central and Eastern Europe.
The Rubber Reinforcement joint venture in Brazil reported flat sales growth at constant exchange rates but the strong devaluation of the Brazilian real affected the top-line by -25%. Including joint ventures, the business unit's combined sales decreased by -18% versus last year.
The margin performance of the Rubber Reinforcement joint venture was strong. The results are accounted for in Bekaert's Income Statement under the equity method as part of the 'share in the results of joint ventures and associates'.
Bekaert's Steel Wire Solutions business, significantly affected by the impact of the Covid-19 pandemic in the second quarter of 2020, saw a turning point early in the third quarter and delivered robust organic sales growth in the last quarter (+10% compared to Q4 last year). This organic growth, driven by increased sales in EMEA, China and Latin America was, however, largely offset by adverse currency movements.
The business unit reported a sales decrease of -7.9% for the full year, compared to 2019. This stemmed from lower volumes (-3.4%) and unfavorable currency movements (-4.9%). The year-on-year effect of passed-on wire rod price changes and other price-mix effects was about neutral (+0.4%).
Overall, demand in most sectors and regions remained below pre-Covid levels until the end of 2020. However, Bekaert's agile response to customer needs, global access to raw materials, and effective safety measures in the plants, enabled the business unit to keep the operations running and to secure delivery to customers worldwide. This resulted in positive customer appreciation and increased market share.
Steel Wire Solutions delivered a robust underlying EBIT result of € 96 million and strong underlying EBIT margin on sales of 7.0%, doubling the margin of last year. Reported EBIT was € 88 million with a margin on sales of 6.4%. The one-off elements (€ -8 million) mainly related to restructuring costs. The strong margin increase was the result of an improved business mix and footprint optimization (reduced impact of lower margin activities), stringent cost control, and the effectiveness of Covid-19 mitigation actions.
Underlying EBITDA improved to a double-digit margin of 10.9%.
Capital expenditure (PP&E) amounted to € 21 million and mainly included investments in Central Europe, China, Chile and Colombia.
The Steel Wire Solutions joint venture in Brazil reported +8.5% sales growth at constant exchange rates but the strong devaluation of the Brazilian real affected the top-line by -16%. Including joint ventures, the business unit's combined sales decreased by -10.5% versus last year.
The margin performance of the Steel Wire Solutions joint venture was strong. The results are accounted for in Bekaert's Income Statement under the equity method as part of the 'share in the results of joint ventures and associates'.
The business unit Specialty Businesses reported a sales decrease of -5.9% for the full year 2020, compared to 2019. This stemmed from lower volumes (-8.7%) and adverse currency effects (-1.4%), partly tempered by positive mix effects (+4.1%).
Specialty Businesses delivered an underlying EBIT result of € 45 million, -13% below last year and reaching an underlying EBIT margin on sales of 11.4% (versus 12.2% last year). The reduction primarily resulted from inventory write-offs and other adjustments in Combustion Technologies (€ -5 million), a lower result in Fiber Technologies due to weaker demand for high-value adding products, and higher loss generation in (diamond) sawing wire versus last year. The profit contribution of Building Products remained strong.
Reported EBIT was € 36 million with a margin on sales of 9.2%, both exceeding last year's performance. The one-off elements in 2020 (€ -9 million) were mainly due to restructuring programs in (diamond) Sawing Wire and Combustion Technologies, implemented in China in December 2020. The respective business mix and footprint adjustments will positively influence the uEBIT performance as of the beginning of 2021.
The underlying EBITDA margin reached 15.5%, slightly below the margin of last year.
Capital expenditure (PP&E) amounted to € 29 million and mainly included investments in Building Products (Czech Republic and India) and to a lesser extent in Fiber and Combustion Technologies.
Bridon-Bekaert Ropes Group (BBRG) recorded a sales decline of -13% compared to last year, all of which was driven by lower volumes. Part of the volume decrease was a result of BBRG's strategy to reduce its presence in lower margin rope applications. The A-Cords (advanced cords) business saw decreased sales in automotive markets and solid demand from elevator and timing belt markets.
BBRG accelerated the implementation of the profit restoration program for the ropes activities and further boosted profitability with a stronger business mix and significant cost savings and Covid-19 mitigation actions. The A-Cords activities continued to deliver a solid margin performance.
The business unit delivered an underlying EBIT of € 34 million at a margin of 7.9% on sales, more than tripling the margin of the previous year. Underlying EBITDA reached a strong margin of 15.1%, compared with 9.0% in 2019. As anticipated, BBRG's sales and margins trended lower in the second half of the year, due to weaker business conditions in the Americas and less project business and seasonality effects in the second half of the year.
Reported EBIT was € 24 million and included € -10 million in one-offs, mainly due to impairments related to the planned plant closure in Pointe-Claire, Canada, and restructuring programs in EMEA. The benefits from these restructuring programs are expected to start to flow through from 2021 onwards.
BBRG invested € 16 million in PP&E, mainly in ropes plants in the UK and the US and in the Belgian A-Cords plant.
Despite a fast and strong rebound in several markets in the past months, the global economic uncertainty remains high.
The structural improvement actions we have been implementing since the end of 2019 and our agile response to Covid-19 have demonstrated their effectiveness in strengthening Bekaert's overall performance.
Actions to further step up our performance should generate robust progress toward our long term goals:
The strong performance we delivered in the difficult year 2020 and our determination to stimulate value creation by further enhancing our business portfolio and seizing value growth in robust markets, have made us more confident about the future potential of Bekaert. We are therefore raising our ambitions for the coming years.
| Capital employed (CE) |
Working capital + net intangible assets + net goodwill + net property, plant and equipment + net RoU Property, plant and equipment. The weighted average CE is weighted by the number of periods that an entity has contributed to the consolidated result. |
Capital employed consists of the main balance sheet items that operating management can actively and effectively control to optimize its financial performance, and serves as the denominator of ROCE. |
|---|---|---|
| Capital ratio (financial autonomy) |
Equity relative to total assets. | This ratio provides a measure of the extent to which the Group is equity financed. |
| Current ratio | Current assets to Current liabilities. | This ratio provides a measure for the liquidity of the company. It measures whether a company has enough resources to meet it short-term obligations. |
| Combined figures | Sum of consolidated companies + 100% of joint ventures and associates after elimination of intercompany transactions (if any). Examples: sales, capital expenditure, number of employees. |
In addition to Consolidated figures, which only comprise controlled compa nies, combined figures provide useful insights of the actual size and perfor mance of the Group including its joint ventures and associates. |
| EBIT | Operating result (earnings before interest and taxation). | EBIT consists of the main income statement items that operating manage ment can actively and effectively control to optimize its profitability, and a.o. serves as the numerator of ROCE and EBIT interest coverage. |
| EBIT – underlying | EBIT before operating income and expenses that are related to restructuring programs, impairment losses, busi ness combinations, business disposals, environmental provisions or other events and transactions that have a material one-off effect that is not inherent to the business. |
EBIT – underlying is presented to enhance the reader's understanding of the operating profitability before one-off items, as it provides a better basis for comparison and extrapolation. |
| EBITDA | Operating result (EBIT) + depreciation, amortization and impairment of assets + negative goodwill. |
EBITDA provides a measure of operating profitability before non-cash effects of past investment decisions and working capital assets. |
| EBITDA – underlying |
EBITDA before operating income and expenses that are related to restructuring programs, impairment losses, busi ness combinations, business disposals, environmental provisions or other events and transactions that have a material one-off effect that is not inherent to the business. |
EBITDA – underlying is presented to enhance the reader's understanding of the operating profitability before one-off items and non-cash effects of past investment decisions and working capital assets, as it provides a better basis for comparison and extrapolation. |
| EBIT interest coverage |
Operating result (EBIT) divided by net interest expense. | The EBIT interest coverage provides a measure of the Group's capability to service its debt through its operating profitability. |
| Free Cash Flow (FCF) |
Cash flows from Operating activities - capex + dividends received - net interest paid |
Free cash flow (FCF) represents the cash available for the company to repay financial debt or pay dividends to investors. |
| Gearing | Net debt relative to equity. | Gearing is a measure of the Group's financial leverage and shows the extent to which its operations are funded by lenders versus shareholders. |
| Margin on sales | EBIT, EBIT-underlying, EBITDA and EBITDA-underlying on sales. |
Each of these ratios provides a specific measure of operating profitability expressed as a percentage on sales. |
| Net capitalization | Net debt + equity. | Net capitalization is a measure of the Group's total financing from both lenders and shareholders. |
| Net debt | Interest-bearing debt net of current loans, non-current financial receivables and cash guarantees, short-term deposits, cash and cash equivalents. |
Net debt is a measure of debt after deduction of financial assets that can be deployed to repay the gross debt. |
| Net debt on EBITDA |
Net debt divided by EBITDA. | Net debt on EBITDA provides a measure of the Group's capability (expressed as a number of years) to repay its debt through its operating profitability. |
| Operating free cash flow |
Cash flows from Operating activities - capex (net of disposals of fixed assets) |
Operating cash flow measures the net cash required to support the business (working capital and capital expenditure needs). |
| Return on capital employed (ROCE) |
Operating result (EBIT) relative to the weighted average capital employed. |
ROCE provides a measure of the Group's operating profitability relative to the capital resources deployed and managed by operating management. |
| Return on equity (ROE) |
Result for the period relative to average equity. | ROE provides a measure of the Group's net profitability relative to the capital resources provided by its shareholders. |
| WACC | Cost of debt and cost of equity weighted with a target gearing of 50% (net debt/equity structure) after tax. |
WACC is used to assess an investor's return on an investment in the Company. |
| Working capital (operating) |
Inventories + trade receivables + bills of exchange received + advanced paid - trade payables - advances received - remuneration and social security payables - employ ment-related taxes. |
Working capital includes all current assets and liabilities that operating management can actively and effectively control to optimize its financial performance. It represents the current component of capital employed. |
| in millions of € | Note annual report 2020 |
2019 | 2020 |
|---|---|---|---|
| Net debt | |||
| Non-current interest-bearing debt | 1 116 | 907 | |
| L/T Lease Liability - non-current | 69 | 61 | |
| Current interest-bearing debt | 404 | 622 | |
| L/T Lease Liability - current | 20 | 20 | |
| Total financial debt | 6.18 | 1 608 | 1610 |
| Non-current financial receivables and cash guarantees | (7) | (7) | |
| Current loans | (9) | (8) | |
| Short-term deposits | (50) | (50) | |
| Cash and cash equivalents | (566) | (940) | |
| Net debt | 6.18 | 977 | 604 |
| Weighted average capital employed | 2 540 | 2 235 | |
|---|---|---|---|
| Capital employed | 2 408 | 2 063 | |
| Working capital (operating) | 6.8 | 699 | 535 |
| RoU Property plant and equipment | 149 | 133 | |
| Property, plant and equipment | 1 350 | 1 192 | |
| Goodwill | 150 | 149 | |
| Intangible assets | 60 | 55 |
| Employment-related taxes | (9) | (9) |
|---|---|---|
| Remuneration and social security payables | (125) | (116) |
| Advances received | (19) | (16) |
| Trade payables | (652) | (668) |
| Advances paid | 16 19 |
|
| Bills of exchange received | 60 54 |
|
| Trade receivables | 645 | 588 |
| Inventories | 783 | 683 |
| in millions of € | Note annual report 2020 |
2019 | 2020 |
|---|---|---|---|
| EBIT | 155 | 257 |
|---|---|---|
| Amortization intangible assets | 10 | 10 |
| Depreciation property, plant & equipment | 186 | 161 |
| Depreciation RoU property, plant & equipment | 25 | 24 |
| Write-downs/(reversals of write-downs) on inventories and receivables | 7 | 7 |
| Impairment losses/ (reversals of depreciation and impairment losses) on fixed assets |
19 | 14 |
| EBITDA | 403 | 473 |
| EBIT - Underlying | 242 | 272 |
|---|---|---|
| Amortization intangible assets | 10 | 10 |
| Depreciation property, plant & equipment | 186 | 161 |
| Depreciation RoU property, plant & equipment | 25 | 24 |
| Write-downs/(reversals of write-downs) on inventories and receivables | 4 | 7 |
| Impairment losses/ (reversals of impairment losses) on fixed assets | 1 | 5 |
| EBITDA - Underlying | 468 | 479 |
| ROCE | 6.1% | 11.5% |
|---|---|---|
| Weighted average capital employed | 2 540 | 2 235 |
| EBIT | 155 | 257 |
| EBIT | 155 | 257 | |
|---|---|---|---|
| (Interest income) | 5.4 | (3) | (3) |
| Interest expense | 5.4 | 69 | 60 |
| (interest element of discounted provisions) | 5.4 | (4) | (3) |
| Net interest expense | 62 | 53 | |
| EBIT interest coverage | 2.5 | 4.8 |
| Average equity (period-weighted) 1 524 ROE 3.2% |
|||
|---|---|---|---|
| 9.7% | |||
| 1 533 | |||
| Result for the period | 48 | 148 |
| Capital ratio (Financial autonomy) | |||
|---|---|---|---|
| Equity | 1 532 | 1 535 | |
| Total assets | 4 305 | 4 288 | |
| Financial autonomy | 35.6% | 35.8% | |
| Gearing | |||
| Net debt | 977 | 604 | |
| Equity | 1 532 | 1 535 | |
| Gearing (net debt on equity) | 7.2 | 63.8% | 39.4% |
| Net debt on EBITDA Net debt |
977 | 604 | |
| EBITDA | 403 | 473 | |
| Net debt on EBITDA | 2.4 | 1.3 | |
| Net debt on EBITDA- Underlying | |||
| Net debt | 977 | 604 | |
| EBITDA-Underlying | 468 | 479 | |
| Net debt on EBITDA-underlying | 2.1 | 1.3 | |
| Current Ratio | |||
| Current Assets | 2 257 | 2 466 | |
| Current liabilities | 1 406 | 1 589 | |
| Current Ratio | 1.6 | 1.6 | |
| Operating free cash flow | |||
| Cash flows from operating activities | 524 | 505 | |
| Purchase of intangible assets | (4) | (3) | |
| Purchase of PP&E | (95) | (104) | |
| Purchase of RoU Land | (13) | - | |
| Proceeds from disposals of fixed assets | 1 | 52 | |
| Operating free cash flow | 414 | 449 | |
| Free Cash Flow (FCF) | |||
| Cash frows from operating activities | 524 | 505 | |
| Purchase of intangible assets | (4) | (3) | |
| Purchase of property, plant and equipment | (95) | (104) | |
| Purchase of RoU Land | (13) | - | |
| Dividends received | 19 | 25 | |
| Interest received | 3 | 3 | |
| Interest paid | (50) | (43) | |
| Free Cash Flow | 384 | 383 |
On 1 January 2020, the 2020 Belgian Code on Corporate Governance (the "Code 2020") and the new Belgian Code on Companies and Associations (the "BCCA") entered into force and became applicable to Bekaert. The Bekaert Corporate Governance Charter and the Articles of Association of the Company were amended to bring both of them in line with the Code 2020 and the BCCA.
Bekaert complies with the provisions of the Code 2020, except with provisions 7.3 and 7.6.
Contrary to provision 7.3 of the Code 2020 according to which the Board of Directors should submit the Company's remuneration policy for non-executive Directors and Executive Management to the General Meeting of Shareholders, the Company did not yet do so. Bekaert waited for the implementation of the European Shareholder Rights Directive II(1) into Belgian law and will submit its remuneration policy to the Annual General Meeting of 12 May 2021.
Contrary to provision 7.6 of the Code 2020 according to which non-executive Directors should receive part of their remuneration in the form of shares in the Company, non-executive Directors of Bekaert are recommended, but not required, to hold the value of one fixed annual fee in Bekaert shares during the period of their tenure. Despite the non-mandatory character of this shareholding principle, Bekaert believes that the long-term view of shareholders is fairly represented at the Board considering that the Chairman is partly remunerated in Bekaert shares subject to a three year lock-up and that the nonexecutive Directors who are appointed upon nomination by the reference shareholder already hold Bekaert shares (or certificates relating thereto).
The Bekaert Corporate Governance Charter is available at www.bekaert.com.
The Company has adopted the one-tier governance structure: the primary decision-making body is the Board of Directors. The Board of Directors is authorized to carry out all actions that are necessary or useful to achieve the Company's purpose, except for those for which the General Meeting of Shareholders is authorized by law or by the Articles of Association.
The Board of Directors consists of thirteen members, who are appointed by the General Meeting of Shareholders. Seven 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 7:87, §1 of the BCCA and provision 3.5 of the Code 2020: Henriette Fenger Ellekrog (first appointed in 2020), Colin Smith (first appointed in 2018), Eriikka Söderström (first appointed in 2020), Jürgen Tinggren (first appointed in 2019) and Mei Ye (first appointed in 2014).
The Board of Directors met on ten occasions in 2020: there were six regular meetings and four extraordinary meetings. In addition to its statutory powers and powers under the Articles of Association and the Bekaert Corporate Governance Charter, the Board of Directors discussed the following matters, among others, in 2020:
(1) Directive (EU) 2017/828 of the European Parliament and of the Council of 17 May 2017 amending Directive 2007/36/EC as regards the encouragement of long-term shareholder engagement.
| Name | First appointed |
Expiry of current Board term |
Principal occupation(2) | Number of regular/extraor dinary meetings attended |
|---|---|---|---|---|
| Chairman | ||||
| Jürgen Tinggren(1) | May 2019 | May 2023 | NV Bekaert SA | 10 |
| Chief Executive Officer | ||||
| Oswald Schmid | May 2020 | May 2022 | NV Bekaert SA | 7 |
| Matthew Taylor | May 2014 | May 2020 | NV Bekaert SA | 2 |
| Members nominated by the principal shareholder | ||||
| Gregory Dalle | May 2015 | May 2023 | Managing Director, Credit Suisse, division Investment Banking and Capital Markets (UK) |
10 |
| Charles de Liedekerke | May 1997 | May 2022 | Director of companies | 9 |
| Christophe Jacobs van Merlen | May 2016 | May 2024 | Managing Director, Bain Capital Private Equity (Europe), LLP (UK) |
9 |
| Hubert Jacobs van Merlen | May 2003 | May 2022 | Director of companies | 10 |
| Caroline Storme | May 2019 | May 2023 | R&D Finance Lead Neurology at UCB (Belgium) | 10 |
| Emilie van de Walle de Ghelcke | May 2016 | May 2024 | Senior Legal Counsel, Sofina (Belgium) | 10 |
| Henri Jean Velge | May 2016 | May 2024 | Director of Companies | 10 |
| Independent Directors | ||||
| Celia Baxter | May 2016 | May 2020 | Director of companies | 2 |
| Henriette Fenger Ellekrog | May 2020 | May 2021 | Chief Human Resources Officer, Ørsted | 6 |
| Pamela Knapp | May 2016 | May 2020 | Director of companies | 4 |
| Colin Smith | May 2018 | May 2022 | Independent director of and advisor to companies | 9 |
| Eriikka Söderström | May 2020 | May 2021 | Chief Financial Officer, F-Secure | 6 |
(1) Jürgen Tinggren is an independent Director.
(2) The detailed résumés of the Board members are available at www.bekaert.com
Matthew Taylor decided to resign from his position as Director of the Company with effect as of 12 May 2020. The Board of Directors co-opted Oswald Schmid as Director with effect as of 12 May 2020. His mandate as Director was confirmed by the Annual General Meeting of 13 May 2020.
Mei Ye May 2014 May 2022 Independent director of and advisor to companies 10
Since 1 January 2020, the Board of Directors has two advisory Committees.(*)
The Audit, Risk and Finance Committee is composed in accordance with Article 7:99 of the BCCA and provision 4.3 of the Code 2020: all of its four members are nonexecutive Directors and two of its members, Eriikka Söderström and Jürgen Tinggren, are independent. Eriikka Söderström's competence in accounting and auditing is demonstrated by her position as Chief Financial Officer of F-Secure and her former finance roles in Nokia Networks, Nokia Siemens Networks, Oy Nautor ab, Vacon Plc and Kone Corporation. The members of the Committee have a collective expertise relevant to the sector in which the Company is operating. Hubert Jacobs van Merlen has been appointed by the members of the Committee as the chairman.
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 the Executive Management.
| Name | Expiry of current board term |
Number of regular and extraordinary meetings attended |
|---|---|---|
| Hubert Jacobs van Merlen | 2022 | 5 |
| Charles de Liedekerke | 2022 | 5 |
| Eriikka Söderström(1) | 2021 | 3 |
| Jürgen Tinggren | 2023 | 5 |
| Pamela Knapp(2) | 2020 | 2 |
(1) As of the Annual General Meeting in May 2020.
(2) Until the Annual General Meeting in May 2020.
The Committee had four regular and one extraordinary meeting in 2020. The Statutory Auditor attended two meetings. In addition to its statutory powers and its powers under the Bekaert Corporate Governance Charter, the Committee discussed the following main subjects:
The Nomination and Remuneration Committee is composed as required by Article 7:100 of the BCCA: all of its three members are non-executive Directors and the majority of the members is independent. It is chaired by the Chairman of the Board. 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 |
|---|---|---|
| Jürgen Tinggren | 2023 | 4 |
| Henriette Fenger Ellekrog(1) | 2021 | 2 |
| Christophe Jacobs van Merlen | 2024 | 4 |
| Celia Baxter(2) | 2020 | 2 |
(1) As of the Annual General Meeting in May 2020.
(2) Until the Annual General Meeting in May 2020.
One of the Directors nominated by the principal shareholder and the Chief Executive Officer is invited to attend the Committee meetings as a guest, without being a member.
The Committee met four times in 2020. In addition to its statutory powers and its powers under the Bekaert Corporate Governance Charter, the Committee discussed the following main subjects:
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 Corporate Governance Charter. The Chairman is in charge of organizing periodic performance appraisals through an extensive questionnaire that addresses:
Mid-2020 a self-assessment was conducted of the Board of Directors, focusing on the role and responsibilities of the Board and the Board Committees, Board meetings, Board composition and teamwork, relationship with management, relationship with shareholders, and overall Board effectiveness.
The Board of Directors has delegated special operational powers to the Bekaert Group Executive (BGE), under the leadership of the Chief Executive Officer. The BGE has sub-delegated certain of these operational powers to individuals within their functional or operational responsibility.
The BGE is composed of members representing the global Business Units and the global functions.
Matthew Taylor retired from his position as Chief Executive Officer with effect as of 12 May 2020. As of 12 May 2020, Oswald Schmid acted as the interim Chief Executive Officer, pending the appointment of a new Chief Executive Officer. On 2 March 2021, the Board of Directors has appointed Oswald Schmid as Chief Executive Officer.
Rajita D'Souza left the Company per 31 December 2020. Kerstin Artenberg joined the Company as new Chief Human Resources Officer on 8 February 2021.
On 1 April 2021, Yves Kerstens will join Bekaert as Divisional CEO Specialty Businesses and Chief Operations Officer. Jun Liao will take up the role of China CEO and lead the China Transformation Office in addition to his current responsibilities as country manager for China.
| Name | Position | Appointed |
|---|---|---|
| Matthew Taylor(1) | Chief Executive Officer | 2013 |
| Oswald Schmid | Chief Executive Officer(2) and Chief Operations Officer |
2019 |
| Taoufiq Boussaid | Chief Financial Officer | 2019 |
| Rajita D'Souza(3) | Chief Human Resources Officer | 2017 |
| Kerstin Artenberg(4) | Chief Human Resources Officer | 2021 |
| Juan Carlos Alonso | Chief Strategy Officer | 2019 |
| Curd Vandekerckhove | Divisional CEO Bridon-Bekaert Ropes Group |
2012 |
| Arnaud Lesschaeve | Divisional CEO Rubber Reinforcement |
2019 |
| Jun Liao | Divisional CEO Specialty Businesses |
2018 |
| Stijn Vanneste | Divisional CEO Steel Wire Solutions |
2016 |
(1) Until 12 May 2020.
(2) Interim Chief Executive Officer as of 12 May 2020 and Chief Executive Officer as of 2 March 2021.
(3) Until 31 December 2020.
(4) As of 8 February 2021.
At Bekaert, we believe in working together to achieve better performance. As a truly global company, we embrace diversity across all levels in the organization, which is a major source of strength for our Company. This applies to diversity in terms of nationality, cultural background, age or gender, but also in terms of capabilities, business experience, insights and views.
Bekaert employs people of 68 different nationalities in 42 countries around the world. This diversity is mirrored in all levels of the organization, as well as in the composition of the Board of Directors and the BGE.
| # people |
# nationalities |
# non-native(1) |
% non-native |
|
|---|---|---|---|---|
| Board of Directors |
13 | 8 | 7 | 54% |
| BGE | 8 | 7 | 6 | 75% |
(1) Non-native = nationality other than the one of the Company, i.e. Belgium.
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.
Bekaert adopts a recruitment and promotion policy that aims to gradually generate more diversity, including gender diversity.
| # people | % male | % female | |
|---|---|---|---|
| Board of Directors |
13 | 62% | 38% |
| BGE | 8 | 87% | 13% |
By 2030, Bekaert aims to reach a gender diversity ratio of 33% at the Bekaert leadership level (BGE + Management functions B13 and above (Hay classification reference)).
| # people | 30-50 years old | over 50 years old | |
|---|---|---|---|
| Board of Directors |
13 | 31% | 69% |
| BGE | 8 | 50% | 50% |
More information on diversity is available in the separate Sustainability Report, issued on 26 March 2021.
In accordance with Article 7:96 of the BCCA, a member of the Board of Directors should give the other members prior notice of any agenda items in respect of which he/she 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 two occasions in 2020. The provisions of Article 7:96 of the BCCA were complied with.
On 3 March 2020, the Board discussed and had to vote on the short-term variable remuneration of the Chief Executive Officer on account of his 2019 performance (€ 623 102), his base salary and his individual targets for 2020.
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 approves the proposed short-term variable remuneration objectives for the CEO in respect of 2020.
On 19 November 2020, the Board of Directors discussed and had to vote on a discretionary bonus for the interim Chief Executive Officer.
Excerpt from the minutes:
Upon the recommendation of the Nomination and Remuneration Committee, the Board approves a discretionary bonus of € 155 000 to be paid to the interim CEO after one year of service as interim CEO (to be prorated if his role as interim CEO will actually be shorter or longer than one year).
The Board of Directors discussed the succession of the Chief Executive Officer at several occasions. The Chief Executive Officer and the interim Chief Executive Officer refrained from participating at these discussions.
The Bekaert Corporate Governance 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 7:96 of the BCCA. Those members are deemed to be related parties to Bekaert and have to report 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 2020 (cf. Note 7.4 to the consolidated financial statements).
The Board of Directors has approved the Bekaert Code of Conduct, which was first issued on 1 December 2004 and last updated in October 2020.
The Bekaert Code of Conduct describes how the Bekaert values (We act with integrity – We earn trust – We are irrepressible!) are put into practice. It provides principles to follow when confronted with ethical choices and compliance matters.
The Bekaert Code of Conduct is included in its entirety in the Bekaert Corporate Governance Charter as Appendix 3.
The Board of Directors has adopted the Bekaert Dealing Code on 28 July 2016, which became effective on 3 July 2016. The Bekaert Dealing Code is included in its entirety in the Bekaert Corporate Governance 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.
In accordance with article 7:89/1 of the BCCA, the Board of Directors will submit a remuneration policy for the members of the Board of Directors and the Executive Management (members of the BGE), applicable as from 1 January 2021, to the vote of its shareholders at the General Meeting of Shareholders on 12 May 2021.
The Company will publish its remuneration policy on its website after the vote, together with the results of the vote. Any material change to this policy will then have to be approved by the General Meeting of Shareholders, on the motion of the Board of Directors, acting upon proposal from the Nomination and Remuneration Committee ("NRC").
Therefore, any reference to "remuneration policy" in the text below is covering the description of the procedure used in 2020 for developing and setting the remuneration of the members of the Board of Directors and the BGE; and should not be seen as the formal implementation of the remuneration policy in accordance with article 7:89/1 of the BCCA.
The remuneration policy and the remuneration for the non-executive Directors has been determined by the General Meeting of Shareholders on the motion of the Board of Directors, acting upon proposals from the NRC. The policy was approved by the Annual General Meeting of 10 May 2006 and amended by the Annual General Meetings of 11 May 2011, 14 May 2014 and of 13 May 2020.
The remuneration policy and the remuneration for the Chief Executive Officer has been determined by the Board of Directors, acting upon proposals from the NRC. The Chief Executive Officer is absent from this process, and does not take part in the voting nor the deliberations in this regard. The NRC 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 and the remuneration for the members of the BGE other than the Chief Executive Officer has been determined by the Board of Directors acting upon proposals from the NRC. The Chief Executive Officer has an advisory role in this process. The NRC 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.
Remuneration is set at a level that is sufficient to attract non-executive Directors with competences required to match the Company's international ambition. They are set to reward non-executive Directors for their role as Board member and specific role as Chairman of the Board, or Chairman or member of the Board Committees, as well as their resulting responsibilities and commitments in time.
The remuneration of the Chairman and of the other non-executive Directors is regularly benchmarked with a selected panel of relevant publicly traded industrial Belgian and international companies of similar size and complexity.
Without prejudice to his remuneration in his capacity as Executive Manager, the Chief Executive Officer is not entitled to receive remuneration for his mandate as executive Director.
A modular fee structure is applied for non-executive Directors to ensure that the remuneration fairly reflects their role as Board member and specific role as Chairman of the Board of Directors, or Chairman or member of the Board Committees, as well as their resulting responsibilities and commitment in time.
The remuneration of the Chairman of the Board of Directors is set as follows:
The remuneration of each non-executive Director, except the Chairman, is set as follows:
The Chairman and the other non-executive Directors do not receive any performance-related remuneration that is directly related to the results of the Company. They are not entitled to participate in any of the Company's incentive plans and do not receive stock options or pension benefits.
Contrary to provision 7.6 of the Code 2020 according to which non-executive Directors should receive part of their remuneration in the form of shares in the Company, nonexecutive Directors are recommended, but not required, to hold the value of one fixed annual fee in Company shares during the period of their tenure.
Despite the non-mandatary character of this share-holding principle, the Company believes that the long-term view of shareholders is fairly represented at the Board considering that the Chairman is partly remunerated in Company shares subject to a three year lock-up; and seven of the twelve non-executive Directors are appointed upon nomination by the reference shareholder and already hold Company shares (or certificates relating thereto).
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 Company 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. Remuneration is set to reward Executive Managers for performance that creates positive short-term and long-term business results and value creation for the Company.
Executive remuneration consists out of fixed pay, benefits and allowance, short-term incentives and long-term incentives. In addition, Executive Managers are required to build and retain a minimum personal holding in Company shares.
The remuneration of the Executive Management is benchmarked periodically, but not annually, with a selected panel of relevant publicly traded industrial Belgian and international references.
Executive remuneration is aligned with the remuneration policy of the Group.
Executive remuneration consists out of fixed pay, benefits and allowance, short-term incentives and long-term incentives. In addition, Executive Managers are required to build and retain a minimum personal holding in Company shares.
The remuneration of both the Chief Executive Officer (in his capacity as Executive Manager) and the other BGE members is determined by the Board of Directors acting on a reasoned recommendation from the NRC.
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.
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 three years.
The Chief Executive Officer and the other members of the BGE are required to build a personal shareholding in Company shares within five years from the time of appointment, and to maintain this level for the full period of appointment.
In order to facilitate this, the Company offers a voluntary share-matching plan. The Company matches a personal investment in Company shares in a given year (up to a maximum 15% of actual gross STI) with a direct grant of Company shares in the third calendar year following this investment, provided the Executive Manager holds on the personal shares.
In case the BGE member leaves the Company before the end of the holding period, the Company will match 1/3rd per started calendar year. No matching occurs in case of resignation or termination for cause.
The retention period for matching shares expires three years after granting these shares in so far the minimum shareholding requirement has been met.
The amount of the remuneration granted directly or indirectly to the nonexecutive Directors, by the Company or its subsidiaries, in respect of 2020 is set forth on an individual basis below. The non-executive Directors only receive fixed remuneration, partially paid out in cash and partially in shares (cfr. section 4).
| in € | Period covering fixed amount |
Fixed amount for performance of duties as a member of the Board |
Fixed amount for Board Committee membership and/ or chairing |
Total |
|---|---|---|---|---|
| Jürgen Tinggren(1) | 01.01.2020 - 31.12.2020 | 450 000(2) | n.a. | 450 000 |
| Charles de Liedekerke(3) | 01.01.2020 - 31.12.2020 | 63 000 | 20 000 | 83 000 |
| Hubert Jacobs van Merlen(4) | 01.01.2020 - 31.12.2020 | 63 000 | 25 000 | 88 000 |
| Mei Ye | 01.01.2020 - 31.12.2020 | 63 000(2) | 63 000 | |
| Gregory Dalle | 01.01.2020 - 31.12.2020 | 63 000(2) | 63 000 | |
| Emilie van de Walle de Ghelcke | 01.01.2020 - 31.12.2020 | 63 000(2) | 63 000 | |
| Christophe Jacobs van Merlen(5) | 01.01.2020 - 31.12.2020 | 63 000(2) | 20 000 | 83 000 |
| Henri Jean Velge | 01.01.2020 - 31.12.2020 | 63 000(2) | 63 000 | |
| Colin Smith | 01.01.2020 - 31.12.2020 | 63 000 | 63 000 | |
| Caroline Storme | 01.01.2020 - 31.12.2020 | 63 000 | 63 000 | |
| Henriette Fenger Ellekrog(5) | 13.05.2020 - 31.12.2020 | 31 500 | 10 000 | 41 500 |
| Eriikka Söderström(3) | 13.05.2020 - 31.12.2020 | 31 500 | 10 000 | 41 500 |
| Celia Baxter(5) | 01.01.2020 - 13.05.2020 | 31 500 | 10 000 | 41 500 |
| Pamela Knapp(3) | 01.01.2020 - 13.05.2020 | 31 500 | 10 000 | 41 500 |
(1) Chairman, Chairman of the Nomination and Remuneration Committee, member of the Audit, Risk and Finance Committee.
(2) Combination of a cash payment and a share grant, reference is made to section 4 for more details
(3) Member of the Audit, Risk and Finance Committee
(4) Chairman of the Audit, Risk and Finance Committee
(5) Member of the Nomination and Remuneration Committee
Upon proposal of the Board of Directors, the fixed amount with respect to 2020 for performance of duties as a member of the Board was reduced with 10% in light of the possible impact of the Covid-19 pandemic, and in line with the salary reduction implemented for the Executive and Senior Management. Also for the Chairman the 10% reduction was applied in calendar year 2020. This reduction is already reflected in the table above.
The fixed fee of the Chairman is paid partly in cash and partly in Company shares, subject to a three-year holding period from grant date.
For the other non-executive Directors, the fixed fee for performance of duties as a member of the Board are paid in cash, but with the option each year to receive part (0%, 25% or 50%) in Company shares.
Set out below are the number of Company shares granted to non-executive Directors in 2020.
| Non-executive Director | Percentage shares |
Gross amount in € |
Number of shares after taxes |
End retention period |
|---|---|---|---|---|
| Chairman | ||||
| Jürgen Tinggren | 60% | 270 000 | 6 627 | 29/05/2023 |
| Non-executive Directors nominated by the principal shareholder | ||||
| Gregory Dalle | 50% | 31 500 | 943 | n.a. |
| Charles de Liedekerke | 0% | 0 | 0 | n.a. |
| Christophe Jacobs van Merlen | 50% | 31 500 | 912 | n.a. |
| Hubert Jacobs van Merlen | 0% | 0 | 0 | n.a. |
| Caroline Storme | 0% | 0 | 0 | n.a. |
| Emilie van de Walle de Ghelcke | 25% | 15 750 | 393 | n.a. |
| Henri Jean Velge | 50% | 31 500 | 786 | n.a. |
| Independent non-executive Directors | ||||
| Celia Baxter | Not applicable | |||
| Henriette Fenger Ellekrog | 0% | 0 | 0 | n.a. |
| Pamela Knapp | Not applicable | |||
| Collin Smith | 0% | 0 | 0 | n.a. |
| Eriikka Söderström | 0% | 0 | 0 | n.a. |
| Mei Ye | 25% | 15 750 | 375 | n.a. |
| Total | 396 000 | 10 036 |
Without prejudice to their remuneration in their capacity as Executive Manager, the Chief Executive Officer and the Interim Chief Executive Officer did not receive remuneration for their mandate as executive Director.
The amount of the remuneration and other benefits granted directly or indirectly to the Chief Executive Officer and the Interim Chief Executive Officer, by the Company or its subsidiaries, in respect of 2020 for his (Interim) Chief Executive Officer role is set forth below:
| Chief Executive Officer |
Interim Chief Executive Officer |
Total | Comments | |
|---|---|---|---|---|
| Matthew Taylor | Oswald Schmid | |||
| Period | 01.01.2020 12.05.2020 |
12.05.2020 31.12.2020 |
||
| Fixed pay | 316 538 | 353 026 | 669 564 | Includes base remuneration as well as foreign director fees and the extra responsibility premium for the Interim CEO |
| STI | 0 | 312 500 | 312 500 | Annual variable remuneration, based on 2020 performance |
| LTI | 0 | 0 | 0 | Value of vested performance share units (performance period 2017-2019) and vested stock options. |
| Pension | 70 088 | 49 212 | 119 300 | Defined Contribution and Cash Balance pension plans |
| Share matching |
83 829 | 0 | 83 829 | 2020 Company matching of 2018 personal investment in Company shares (4 634 units matched) |
| Other remuneration elements |
20 923 | 19 411 | 40 334 | Includes company car and risk insurances |
| Total remuneration |
491 378 | 734 149 | 1 225 527 | |
| Variable remuneration expressed as % of total |
17% | 43% | 32% | Sum of STI, LTI and Share-Matching |
| Fixed remuneration expressed as % of total |
83% | 57% | 68% | Sum of Fixed Pay, Pension and Other |
Fixed pay of Executive and Senior Management, including the Chief Executive Officer and the Interim Chief Executive Officer, was reduced with 10% in the context of Covid-19 as an act of solidarity with employees impacted by unemployment following the pandemic. This reduction is already reflected in the above table.
The evaluation of STI performance criteria over 2020 leads to a payout of 145% versus target for the Interim Chief Executive Officer. The underlying performance measures for 2020 were linked with financial targets (gross profit, underlying EBITDA, working capital), non-financial targets (improvement on engaged and empowered teams) combined with specific individualized objectives. The Company does not disclose the actual targets per criterion, as this would require the disclosure of commercially sensitive information. In accordance with the plan rules of the variable pay plan, no STI has been paid to the former Chief Executive Officer in relation to 2020.
The vesting criterion with regard to the performance share units issued in December 2017, in relation to the 2018-2020 performance horizon, did not meet the threshold level. As a consequence none of the performance share units granted in December 2017 vested in 2020. The underlying performance measures were linked with EBIDTA growth targets and a cumulative cash flow target. The Company does not disclose the actual targets per criterion, as this would require the disclosure of commercially sensitive information.
The exercise price of stock options in relation to the previous long-term incentive plans which vested in 2020 was lower than the closing price of a Company share upon vesting date.
The amount of the remuneration and other benefits granted directly or indirectly to the BGE members other than the Chief Executive Officer and the Interim Chief Executive Officer, by the Company or its subsidiaries, in respect of 2020 is set forth below on a global basis.
| Remuneration | Comments | |
|---|---|---|
| Fixed pay | 2 814 284 | Includes base remuneration as well as foreign director fees |
| STI | 2 224 981 | Annual variable remuneration, based on 2020 performance |
| LTI | 0 | Value vested performance share units (performance period 2017-2019) and vested stock options or stock appreciation rights |
| Pension | 626 099 | Defined Contribution, Defined Benefit and Cash Balance pension plans |
| Share-matching | 91 307 | 2020 Company matching of 2018 personal investment in Company shares (3 206 units matched ) |
| Other remuneration elements |
401 391 | Includes company car, risk insurances, school fees and housing allowance |
| Total remuneration | 6 158 062 | |
| Variable remuneration expressed as % of total |
38% | Sum of STI, LTI and Share-Matching |
| Fixed remuneration expressed as % of total |
62% | Sum of Fixed Pay, Pension and Other |
The remuneration of Oswald Schmid in his capacity of Chief Operations Officer up to 12 May 2020 is included in the above table, whilst his remuneration in his capacity as Chief Operations Officer and Interim Chief Executive Officer as of 12 May 2020 is included in section 6 above.
Fixed pay of Executive and Senior Management was reduced with 10% in the context of Covid-19 as an act of solidarity with employees impacted by unemployment following the pandemic. This reduction is already reflected in the above table.
The evaluation of STI performance criteria over 2020 leads to a payout of 125% (weighted average) versus target for the other members of the BGE. The underlying performance measures were linked with financial targets (gross profit, underlying EBITDA, working capital), non-financial targets (improvement on engaged and empowered teams) combined with specific individualized objectives. The Company does not disclose the actual targets per criterion, as this would require the disclosure of commercially sensitive information.
The vesting criterion with regard to the performance share units issued in December 2017, in relation to the 2018-2020 performance horizon, did not meet the threshold level. As a consequence, none of the performance share units granted in December 2017 vested in 2020. The underlying performance measure was linked with the increase of the share price. The Company does not disclose the actual targets per criterion, as this would require the disclosure of commercially sensitive information.
The exercise price of stock options in relation to the previous long-term incentive plans which vested in 2020 was lower than the closing price of a Company share upon vesting date.
The pension expense captures a combination of several pension arrangements in place in the different work locations of the BGE members; being Belgium, France and China. The amount mentioned in the above table represents the annual employer contribution for the relevant defined contributions plans, the accrued pay credit for the relevant cash balance plan, the employer contribution into the mandatory second pillar arrangements and IAS19 service cost for defined benefit plans with a collective funding basis.
As of 2018, the long-term incentives are delivered solely through performance share units granted under the 2018- 2020 Performance Share Plan proposed by the Board of Directors and approved by the Annual General Meeting on 9 May 2018.
Up to 2017 long-term incentives have been based on a combination of stock options (or, outside of Europe, stock appreciations rights) and performance share units.
The Chief Executive Officer and the other members of the BGE participate in a voluntary share-matching plan.
Performance share units related to the performance period 2020-2022 have been granted to the Executive Management on 21 January 2020. Company financials retained as performance targets covering the 2020-2022 performance period are EBITDA Underlying growth and elements of cumulative cash flow.
Because of the exceptional circumstances caused by Covid-19, the Board of Directors has amended the longterm incentive targets for the period 2020-2022 with respect to the performance share units that have been granted in January 2020.
The tables below set forth the overview of share-based remuneration granted to BGE members, including the main characteristics of each plan.
| Plan Name | Performance Period |
Performance Measures |
Grant Date |
Vesting Date |
Number of PSU granted |
Number of unvested PSU start of year |
Granted | Forfeited/ Expired |
Delivered | Number of unvested PSU end of year |
|---|---|---|---|---|---|---|---|---|---|---|
| Matthew Taylor - Chief Executive Officer | ||||||||||
| PSP 2015-2017 | 2018-2020 | Share price | 21/12/2017 | 31/12/2020 | 6 500 | 6 500 | 0 | (6 500) | 0 | 0 |
| PSP 2018-2020 | 2019-2021 | EBITDA-U & Cum. CF | 15/02/2019 | 31/12/2021 | 32 671 | 32 671 | 0 | (10 890) | 0 | 21 781 |
| PSP 2018-2020 | 2020-2022 | EBITDA-U & Cum. CF | 21/01/2020 | 31/12/2022 | 27 683 | 0 | 27 683 | (18 455) | 0 | 9 228 |
| TOTAL | 39 171 | 27 283 | (35 846) | 0 | 31 008 | |||||
| Oswald Schmid - Interim Chief Executive Officer (as of 12 May 2020) and Chief Operations Officer | ||||||||||
| PSP 2018-2020 | 2020-2022 | EBITDA-U & Cum. CF | 21/01/2020 | 31/12/2022 | 10 957 | 0 | 10 957 | 0 | 0 | 10 957 |
| TOTAL | 0 | 10 957 | 0 | 0 | 10 957 | |||||
| Taoufiq Boussaid - Chief Financial Officer | ||||||||||
| PSP 2018-2020 | 2019-2021 | EBITDA-U & Cum. CF | 26/07/2019 | 31/12/2021 | 10 478 | 10 478 | 0 | 0 | 0 | 10 478 |
| PSP 2018-2020 | 2020-2022 | EBITDA-U & Cum. CF | 21/01/2020 | 31/12/2022 | 9 810 | 0 | 9 810 | 0 | 0 | 9 810 |
| TOTAL | 10 478 | 9 810 | 0 | 0 | 20 288 | |||||
| Rajita D'Souza - Chief Human Resources Officer | ||||||||||
| PSP 2015-2017 | 2018-2020 | Share price | 01/09/2017 | 31/12/2020 | 5 000 | 5 000 | 0 | (5 000) | 0 | 0 |
| PSP 2015-2017 | 2018-2020 | Share price | 21/12/2017 | 31/12/2020 | 2 500 | 2 500 | 0 | (2 500) | 0 | 0 |
| PSP 2018-2020 | 2019-2021 | EBITDA-U & Cum. CF | 15/02/2019 | 31/12/2021 | 11 897 | 11 897 | 0 | (11 897) | 0 | 0 |
| PSP 2018-2020 | 2020-2022 | EBITDA-U & Cum. CF | 21/01/2020 | 31/12/2022 | 10 271 | 0 | 10 271 | (10 271) | 0 | 0 |
| TOTAL | 19 397 | 10 271 | (29 668) | 0 | 0 | |||||
| Juan Carlos Alonso - Chief Strategy Officer | ||||||||||
| PSP 2018-2020 | 2019-2021 | EBITDA-U & Cum. CF | 26/07/2019 | 31/12/2021 | 9 391 | 9 391 | 0 | 0 | 9 391 | |
| PSP 2018-2020 | 2020-2022 | EBITDA-U & Cum. CF | 21/01/2020 | 31/12/2022 | 8 409 | 0 | 8 409 | 0 | 8 409 | |
| TOTAL | 9 391 | 8 409 | 0 | 0 | 17 800 | |||||
| Curd Vandekerckhove – Div. CEO BBRG | ||||||||||
| PSP 2015-2017 | 2018-2020 | Share price | 21/12/2017 | 31/12/2020 | 2 500 | 2 500 | 0 | (2 500) | 0 | 0 |
| PSP 2018-2020 | 2019-2021 | EBITDA-U & Cum. CF | 15/02/2019 | 31/12/2021 | 11 962 | 11 962 | 0 | 0 | 0 | 11 962 |
| PSP 2018-2020 | 2020-2022 | EBITDA-U & Cum. CF | 21/01/2020 | 31/12/2022 | 10 447 | 0 | 10 447 | 0 | 0 | 10 447 |
| TOTAL | 14 462 | 10 447 | (2 500) | 0 | 22 409 | |||||
| Stijn Vanneste – Div. CEO SWS | ||||||||||
| PSP 2015-2017 | 2018-2020 | Share price | 21/12/2017 | 31/12/2020 | 2 500 | 2 500 | 0 | (2 500) | 0 | 0 |
| PSP 2018-2020 | 2019-2021 | EBITDA-U & Cum. CF | 15/02/2019 | 31/12/2021 | 9 321 | 9 321 | 0 | 0 | 0 | 9 321 |
| PSP 2018-2020 | 2020-2022 | EBITDA-U & Cum. CF | 21/01/2020 | 31/12/2022 | 8 378 | 0 | 8 378 | 0 | 0 | 8 378 |
| TOTAL | 11 821 | 8 378 | (2 500) | 0 | 17 699 |
| Plan Name | Performance Period |
Performance Measures |
Grant Date |
Vesting Date |
Number of PSU granted |
Number of unvested PSU start of year |
Granted | Forfeited/ Expired |
Delivered | Number of unvested PSU end of year |
|---|---|---|---|---|---|---|---|---|---|---|
| Arnaud Lesschaeve – Div. CEO RR | ||||||||||
| PSP 2018-2020 | 2019-2021 | EBITDA-U & Cum. CF | 26/07/2019 | 31/12/2021 | 6 142 | 6 142 | 0 | 0 | 0 | 6 142 |
| PSP 2018-2020 | 2020-2022 | EBITDA-U & Cum. CF | 21/01/2020 | 31/12/2022 | 9 428 | 0 | 9 428 | 0 | 0 | 9 428 |
| TOTAL | 6 142 | 9 428 | 0 | 0 | 15 570 | |||||
| Jun Liao – Div. CEO SPB | ||||||||||
| PSP 2015-2017 | 2018-2020 | Share price | 21/12/2017 | 31/12/2020 | 1 250 | 1 250 | 0 | (1 250) | 0 | 0 |
| PSP 2018-2020 | 2019-2021 | EBITDA-U & Cum. CF | 15/02/2019 | 31/12/2021 | 12 663 | 12 663 | 0 | 0 | 0 | 12 663 |
| PSP 2018-2020 | 2020-2022 | EBITDA-U & Cum. CF | 21/01/2020 | 31/12/2022 | 10 997 | 0 | 10 997 | 0 | 0 | 10 997 |
| TOTAL | 13 913 | 10 997 | (1 250) | 0 | 23 660 |
Set out below are the number of stock options exercised or forfeited in 2020 in relation to the previous long-term incentive plans for BGE members. Where applicable, the table includes grants made prior to BGE appointment.
The options have been 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.
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 2020 are based on the grants of the Stock Option Plan 2015-2017 and on the predecessor plans to the Stock Option Plan 2015-2017.
The terms of the earlier plans are similar to those of the Stock Option Plan 2015-2017, but the options that were granted to employees under the predecessor plans to the Stock Option Plan 2010-2014 took the form of subscription rights entitling the holders to acquire newly issued Company shares, while self-employed beneficiaries were entitled to acquire existing shares.
| Main plan characteristics | Movement over 2020 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Plan Name | Offer date | Grant date | Vesting Date | End exercise period |
Number of options granted |
Exercise price (in €) |
Number of SOP start of year |
Forfeited/ Expired |
Exercised | Number of SOP end of year |
| Matthew Taylor – Chief Executive Officer | ||||||||||
| SOP 2010-2014 | 19/12/2013 | 17/02/2014 | 01/01/2017 | 18/12/2023 | 80 000 | 25.380 | 60 000 | 0 | 0 | 60 000 |
| SOP 2010-2014 | 18/12/2014 | 16/02/2015 | 01/01/2018 | 17/12/2024 | 86 000 | 26.055 | 86 000 | 0 | 0 | 86 000 |
| SOP 2015-2017 | 17/12/2015 | 15/02/2016 | 01/01/2019 | 16/12/2025 | 25 000 | 26.375 | 25 000 | 0 | 0 | 25 000 |
| SOP 2015-2017 | 15/12/2016 | 13/02/2017 | 01/01/2020 | 14/12/2026 | 30 000 | 39.426 | 30 000 | 0 | 0 | 30 000 |
| SOP 2015-2017 | 21/12/2017 | 20/02/2018 | 01/01/2021 | 20/12/2027 | 20 000 | 34.600 | 20 000 | 0 | 0 | 20 000 |
| TOTAL | 241 000 | 0 | 0 | 241 000 | ||||||
| Oswald Schmid – Interim Chief Executive Officer and Chief Operations Officer | ||||||||||
| None | ||||||||||
| Taoufiq Boussaid – Chief Financial Officer | ||||||||||
| None | ||||||||||
| Rajita D'Souza – Chief Human Resources Officer | ||||||||||
| SOP 2015-2017 | 21/12/2017 | 20/02/2018 | 01/01/2021 | 20/12/2027 | 20 000 | 34.600 | 10 000 | 0 | 0 | 10 000 |
| TOTAL | 10 000 | 0 | 0 | 10 000 | ||||||
| Juan Carlos Alonso – Chief Strategy Officer | ||||||||||
| None | ||||||||||
| Curd Vandekerckhove – Div. CEO BBRG | ||||||||||
| SOP 2010-2014 | 29/03/2013 | 28/05/2013 | 01/01/2017 | 28/03/2023 | 15 000 | 21.450 | 15 000 | 0 | 0 | 15 000 |
| SOP 2010-2014 | 19/12/2013 | 17/02/2014 | 01/01/2017 | 18/12/2023 | 14 000 | 25.380 | 14 000 | 0 | 0 | 14 000 |
| SOP 2010-2014 | 18/12/2014 | 16/02/2015 | 01/01/2018 | 17/12/2024 | 15 000 | 26.055 | 15 000 | 0 | 0 | 15 000 |
| SOP 2015-2017 | 17/12/2015 | 15/02/2016 | 01/01/2019 | 16/12/2025 | 10 000 | 26.375 | 10 000 | 0 | 0 | 10 000 |
| SOP 2015-2017 | 15/12/2016 | 13/02/2017 | 01/01/2020 | 14/12/2026 | 15 000 | 39.426 | 15 000 | 0 | 0 | 15 000 |
| SOP 2015-2017 | 21/12/2017 | 20/02/2018 | 01/01/2021 | 20/12/2027 | 9 000 | 34.600 | 9 000 | 0 | 0 | 9 000 |
| TOTAL | 78 000 | 0 | 0 | 78 000 | ||||||
| Stijn Vanneste – Div. CEO SWS | ||||||||||
| SOP 2010-2014 | 20/12/2012 | 18/02/2013 | 01/01/2016 | 20/12/2022 | 2 400 | 19.200 | 1 200 | 0 | 0 | 1 200 |
| SOP 2010-2014 | 19/12/2013 | 17/02/2014 | 01/01/2017 | 18/12/2023 | 3 200 | 25.380 | 3 200 | 0 | 0 | 3 200 |
| SOP 2010-2014 | 18/12/2014 | 16/02/2015 | 01/01/2018 | 17/12/2024 | 7 500 | 26.055 | 7 500 | 0 | 0 | 7 500 |
| SOP 2015-2017 | 17/12/2015 | 15/02/2016 | 01/01/2019 | 16/12/2025 | 6 250 | 26.375 | 6 250 | 0 | 0 | 6 250 |
| SOP 2015-2017 | 15/12/2016 | 13/02/2017 | 01/01/2020 | 14/12/2026 | 12 500 | 39.426 | 12 500 | 0 | 0 | 12 500 |
| SOP 2015-2017 | 21/12/2017 | 20/02/2018 | 01/01/2021 | 20/12/2027 | 10 000 | 34.600 | 10 000 | 0 | 0 | 10 000 |
| TOTAL | 40 650 | 0 | 0 | 40 650 | ||||||
| Arnaud Lesschaeve – Div. CEO RR | ||||||||||
| None | ||||||||||
| Jun Liao – Div. CEO SPB |
None, see overview stock appreciation rights
Set out below are the number of stock appreciation rights exercised or forfeited in 2020 in relation to the previous long-term incentive plans for BGE members outside Europe.
The stock appreciation rights (or "SARs") have been granted to the beneficiaries free of charge. Each SAR entitles the holder the right to receive an amount in cash equal to the excess of the closing price of one Company share on the date of exercise over 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 thirty days prior to the offer, and (ii) the last closing price preceding the date of the offer.
Subject to the closed and prohibited trading periods and to the plan rules, SARs 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.
SARs that were exercisable in 2020 are based on the grants of the SAR Plans 2015-2017 and on the predecessor plans to the SAR Plans 2015-2017. All grants mentioned below have been made prior to Jun Liao's BGE appointment.
| Main plan characteristics | Movement over 2020 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Plan Name | Grant date | Vesting Date | End exercise period |
Number SAR granted |
Exercise price (in €) |
Number of SAR start of year |
Forfeited/ Expired |
Exercised | Number of SAR end of year |
||
| Jun Liao – Div. CEO SPB | |||||||||||
| SAR Asia 2010-2014 | 18/12/2014 | 01/01/2018 | 17/12/2024 | 6 000 | 26.055 | 6 000 | 0 | 0 | 6 000 | ||
| SAR Asia & Latam 2015-2017 | 17/12/2015 | 01/01/2019 | 16/12/2025 | 5 000 | 26.375 | 5 000 | 0 | 0 | 5 000 | ||
| SAR Asia & Latam 2015-2017 | 15/12/2016 | 01/01/2020 | 14/12/2026 | 7 000 | 39.426 | 7 000 | 0 | 0 | 7 000 | ||
| SAR Asia & Latam 2015-2017 | 21/12/2017 | 01/01/2021 | 20/12/2027 | 6 250 | 34.600 | 6 250 | 0 | 0 | 6 250 | ||
| TOTAL | 24 250 | 0 | 0 | 24 250 |
The table below sets forth the number of shares matched by the Company in 2020 in relation to the personal investment in Company Shares in March 2018 for BGE members:
| Plan Name | Date personal investment |
End holding period |
Number of acquired shares |
Number of PSR start of year |
Acquired | Matched | Forfeited | Number of PSR end of year |
|---|---|---|---|---|---|---|---|---|
| Matthew Taylor – Chief Executive Officer | ||||||||
| PSR 2016 | 14/05/2018 | 31/12/2020 | 4 634 | 4 634 | 0 | (4 634) | 0 | 0 |
| Oswald Schmid – Interim Chief Executive Officer, Chief Operations Officer | ||||||||
| PSR 2016 | 31/03/2020 | 31/12/2022 | 210 | 0 | 210 | 0 | 0 | 210 |
| Taoufiq Boussaid – Chief Financial Officer | ||||||||
| PSR 2016 | 31/03/2020 | 31/12/2022 | 1 038 | 0 | 1 038 | 0 | 0 | 1 038 |
| Rajita D'Souza – Chief Human Resources Officer | ||||||||
| PSR 2016 | 14/05/2018 | 31/12/2020 | 441 | 441 | 0 | (441) | 0 | 0 |
| PSR 2016 | 31/03/2020 | 31/12/2022 | 1 000 | 0 | 1 000 | 0 | (1 000) | 0 |
| Juan Carlos Alonso – Chief Strategy Officer | ||||||||
| PSR 2016 | 31/03/2020 | 31/12/2022 | 971 | 0 | 971 | 0 | 0 | 971 |
| Curd Vandekerckhove – Div. CEO BBRG | ||||||||
| PSR 2016 | 14/05/2018 | 31/12/2020 | 1 588 | 1 588 | (1 588) | 0 | 0 | |
| PSR 2016 | 31/03/2020 | 31/12/2022 | 2 413 | 0 | 2 413 | 0 | 0 | 2 413 |
| Stijn Vanneste – Div. CEO SWS | ||||||||
| PSR 2016 | 14/05/2018 | 31/12/2020 | 1 177 | 1 177 | 0 | (1 177) | 0 | 0 |
| PSR 2016 | 31/03/2020 | 31/12/2022 | 1 608 | 0 | 1 608 | 0 | 0 | 1 608 |
| Arnaud Lesschaeve – Div. CEO RR | ||||||||
| PSR 2016 | 31/03/2020 | 31/12/2022 | 1 270 | 0 | 1 270 | 0 | 0 | 1 270 |
| Jun Liao – Div. CEO SPB | ||||||||
| PSR 2016 | 31/03/2020 | 31/12/2022 | 2 256 | 0 | 2 256 | 0 | 0 | 2 256 |
| TOTAL | 7 840 | 10 766 | (7 840) | (1 000) | 9 766 |
Matthew Taylor, former Chief Executive Officer, retired from the Company on 12 May 2020. In accordance with the contractual agreement, a payment in lieu of notice based on twelve months of remuneration has been paid by the Company whereby the remuneration basis includes fixed pay, final 2-year average of STI and the annual pension contribution.
Rajita D'Souza, former Chief Human Resources Officer, has decided to leave Bekaert as of 31 December 2020.
The Board of Directors has discretion to adjust (malus) or reclaim (claw back) some or all of the value of awards of performance related payments to the Executive Management in the event of
The Board did not make use of this right in 2020.
The main difference in remuneration policy between the Executive Management and employees in general, is the balance between fixed and performance-related remuneration such as short-term and long-term incentives. Overall, the percentage of performance related remuneration, in particular longer-term incentives, is greater for the Executive Management. This reflects that Executive Managers have greater freedom to act and the consequences of their decisions are likely to have a broader and more far-reaching time span of effect.
The remuneration for Executive Managers is however aligned with the remuneration structures of the broader group of employees:
The ratio of the highest remuneration of the members of the Board of Directors and the Executive Management to the lowest remuneration of the employees of NV Bekaert SA in Belgium (excluding BGE members) is 1:30.
The table below sets forth the average remuneration of the members of the Board of Directors and the Executive Management, the average remuneration of other employees (on a full-time equivalent basis) and some key financial Company metrics over the last 5 calendar years.
| 2016 | 2017 | 2018 | 2019 | 2020 | |
|---|---|---|---|---|---|
| Company remuneration | |||||
| Non-executive Directors(1) | |||||
| Average remuneration (€) | 88 844 | 86 671 | 95 768 | 121 629 | 104 000 |
| Year-on-year difference (%) | -4.9% | -2.4% | +10.5% | +27.0% | -14.5% |
| CEO | |||||
| Average remuneration (€) | 1 773 510 | 1 562 907 | 1 135 011 | 1 787 480 | 1 225 527 |
| Year-on-year difference (%) | +15.9% | -11.9% | -27.4% | +57.5% | -31.4% |
| Other BGE members | |||||
| Average remuneration (€) | 824 562 | 901 307 | 609 540 | 748 023 | 839 736 |
| Year-on-year difference (%) | +22.7% | +9.3% | -32.4% | +22.7% | +11.9% |
| Other employees(2) | |||||
| Average remuneration (€) | 70 471 | 72 406 | 76 067 | 77 757 | 79 859 |
| Year-on-year difference (%) | 0% | +2.7% | +5.1% | +2.2% | +2.7% |
| Key Company metrics | |||||
| EBITDA-underlying | |||||
| Amount in million € | 513 | 497 | 426 | 468 | 479 |
| Year-on-year difference (%) | +17.7% | -3.1% | -14.3% | +9.9% | +2.4% |
| Sales | |||||
| Amount in million € | 3 715 | 4 098 | 4 305 | 4 322 | 3 772 |
| Year-on-year difference (%) | +1.2% | +10.3% | +5.1% | +0.4% | -12.7% |
| Working Capital | |||||
| Amount in million € | 843 | 888 | 875 | 699 | 535 |
| Year-on-year difference (%) | +3.7% | +5.3% | -1.5% | -20.1% | -23.5% |
| Company share price (as at 31 Dec) | |||||
| Share price (€) | 38.48 | 36.45 | 21.06 | 26.50 | 27.16 |
| Year-on-year difference (%) | +35.6% | -5.3% | -42.2% | +25.8% | +2.5% |
(1) Through 2019, the remuneration of the Directors was based on the number of attended Board meetings
(2) Based on the average gross annual income of all employees of NV Bekaert SA in Belgium, excluding BGE members.
The average remuneration variations for BGE members are mainly driven by short-term, long-term and share programs, underlying fixed pay variation for BGE over a five-year period amounts to 1.1% per year.
Because of the exceptional circumstances caused by Covid-19, the Board of Directors derogated from the remuneration policy in 2020 on the following elements of remuneration:
Contrary to the plan rules of the Stock Option Plan 2015-2017 whereby unvested SOPs can only be exercised in the first 12 months after vesting date, the unvested SOP grant as of 21 December 2017 for the former Chief Executive Officer will remain fully exercisable until 20 December 2027.
The Bekaert share gained 2.5% in 2020 when comparing the year-end closing price of 2020 with 2019, 9% above the performance of the reference index, Euronext Brussels BEL Mid. The Bekaert share outperformed the market indices since the publication of the third quarter trading update on 20 November 2020, which included a positive outlook on the company's performance for the full fiscal year 2020.
indexed view Bekaert versus Bel Mid
The Bekaert share is listed on Euronext Brussels as ISIN BE0974258874 (BEKB) and was first listed in December 1972. The ICB sector code is 2727 Diversified Industrials.
| 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | |
|---|---|---|---|---|---|---|---|---|
| Price as at 31 December (in €) |
25.72 | 26.34 | 28.38 | 38.48 | 36.45 | 21.06 | 26.50 | 27.16 |
| Price high (in €) | 31.11 | 30.19 | 30.00 | 42.45 | 49.92 | 40.90 | 28.26 | 28.50 |
| Price low (in €) | 20.01 | 21.90 | 22.58 | 26.56 | 33.50 | 17.41 | 19.38 | 13.61 |
| Price average closing (in €) | 24.93 | 27.15 | 26.12 | 37.06 | 42.05 | 28.21 | 23.96 | 19.95 |
| Daily volume | 126 923 | 82 813 | 120 991 | 123 268 | 121 686 | 154 726 | 96 683 | 72 995 |
| Daily turnover (in millions of €) |
3.1 | 2.1 | 3.1 | 4.5 | 5.0 | 4.4 | 2.3 | 1.5 |
| Annual turnover (in millions of €) |
796 | 527 | 804 | 1 147 | 1 279 | 1 121 | 592 | 386 |
| Velocity (% annual) | 54 | 35 | 52 | 53 | 51 | 65 | 41 | 31 |
| Velocity (% adjusted free float) |
90 | 59 | 86 | 88 | 86 | 109 | 68 | 52 |
| Free float (%) | 59.9 | 55.7 | 56.7 | 59.2 | 59.6 | 59.3 | 59.3 | 59.5 |
The average daily trading volume was about 73 000 shares in 2020. The volume peaked on 20 November, when 531 100 shares were traded.
On 31 December 2020, Bekaert had a market capitalization of € 1.6 billion and a free float market capitalization of € 1 billion. The free float was 59.51% and the free float band 60%.
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 notifications of participations of 3% or more, if any, can be found in the Parent Company Information section of this Annual Report cf. page 182 (Interests in share capital).
Stichting Administratiekantoor Bekaert (principal shareholder) owns 34.19% of the shares, while institutional and non-identified shareholders hold 36.69% of the shares. Retail represents 10.45%, Private Banking 12.36% and treasury shares 6.31%.
On 8 December 2007, Stichting Administratiekantoor Bekaert disclosed in accordance with Article 74 of the Act of 1 April 2007 on public takeover bids that it was holding individually more than 30% of the securities with voting rights of the Company on 1 September 2007.
As of 31 December 2020, the capital of the Company amounts to € 177 812 000 and is represented by 60 414 841 shares without par value. The shares are in registered or non-material form. All shares have the same rights.
The Board of Directors has been authorized by the General Meeting of Shareholders of 13 May 2020 to increase the capital, in one or more times, with a maximum amount of € 177 793 000 (exclusive of the issue premium). The Board of Directors may use this authorization until 23 June 2025.
The Board of Directors is also expressly authorized to increase the capital, even after the date that the Company receives the notification from the Belgian Financial Services and Markets Authority (FSMA) that it has been informed of a public take-over bid for the Company's securities, within the limits authorized by the applicable legal provisions. This authorization shall be valid with regard to public takeover bids of which the Company receives the aforementioned communication at most three years after 13 May 2020.
The Board of Directors has made use of its powers under the authorized capital applicable at that time 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 "Convertible Bonds"). These Convertible Bonds carry a zero-coupon and their conversion price amounts to € 50.71 per share.
In connection with the issuance of the Convertible Bonds, the Board of Directors resolved to disapply the preference subscription right of existing shareholders set forth in Articles 596 and following of the Companies Code applicable at that time. 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 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 Convertible Bonds would then have no dilutive effect for existing shareholders.
Furthermore, the terms of the Convertible Bonds allow the Company to redeem the bonds at their principal amount together with accrued and unpaid interest in certain circumstances, 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 Stock Option Plan 2005-2009 and convertible into Bekaert shares is 63 820. A total of 6 400 subscription rights were exercised in 2020 under the Stock Option Plan 2005-2009, resulting in the issue of 6 400 new Company shares, and an increase of the capital by € 19 000 and of the share premium by € 133 288.
On 31 December 2019, the Company held 3 873 075 own
shares. Of these 3 873 075 own shares, 63 541 shares were transferred in the course of 2020 (see table below). The Company did not purchase any shares and no own shares were cancelled in 2020. As a result, the Company held an aggregate 3 809 534 own shares on 31 December 2020.
| Date | Number of treasury shares |
Purpose | Transferee | Price per share (€) |
|---|---|---|---|---|
| 31 March 2020 | 10 766 | Personal shareholding requirement | BGE members | 15.290 |
| 14 May 2020 | 5 948 | Share-matching plan | BGE members | 0 |
| 29 May 2020 | 10 036 | Remuneration non-executive Directors | Chairperson and other non-executive Directors |
0 |
| 4 December 2020 | 6 000 | Exercise options under SOP 2010-2014 | Employees | 26.055 |
| 4 December 2020 | 1 500 | Exercise options under SOP 2010-2014 | Employees | 21.450 |
| 15 December 2020 | 2 400 | Exercise options under SOP 2010-2014 | Employees | 26.055 |
| 17 December 2020 | 5 000 | Exercise options under SOP 2010-2014 | Employees | 21.450 |
| 18 December 2020 | 7 491 | Share-matching plan | BGE members | 0 |
| 21 December 2020 | 6 000 | Exercise options under SOP 2010-2014 | Employees | 26.055 |
| 23 December 2020 | 2 400 | Exercise options under SOP 2010-2014 | Employees | 26.055 |
| 29 December 2020 | 6 000 | Exercise options under SOP 2010-2014 | Employees | 26.055 |
A first grant of 182 900 equity settled performance share units under the Performance Share Plan 2018-2020 was made on 21 January 2020. In addition, a mid-year grant of 12 580 performance share units was made on 17 August 2020 under the Performance Share Plan 2018-2020. Each performance share unit entitles the beneficiary to acquire one performance share subject to the conditions of the Performance Share Plan 2018-2020.
These performance share units will vest following a vesting period of three years, conditional to the achievement of a preset 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.
Detailed information about capital, shares, stock option plans and performance share plans is given in the Financial Review (Note 6.13 to the consolidated financial statements).
The Board of Directors will propose that the Annual General Meeting to be held on 12 May 2021 approve the distribution of a gross dividend of € 1.00 per share.
The Board of Directors reconfirms the Dividend Policy which foresees, insofar as the profit permits, a stable or growing dividend while maintaining an adequate level of cash flow in the Company for investment and self-financing in support of growth. Over the longer term, the Company strives for a pay-out ratio of 40% of the result for the period attributable to equity holders of Bekaert.
| in € | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020(1) |
|---|---|---|---|---|---|---|---|
| Total gross dividend |
0.850 | 0.900 | 1.100 | 1.100 | 0.700 | 0.350 | 1.000 |
| Net dividend(2) |
0.638 | 0.657 | 0.770 | 0.770 | 0.490 | 0.245 | 0.700 |
| Coupon number |
6 | 7 | 8 | 9 | 10 | 11 | 12 |
(1) The dividend is subject to approval by the General Meeting of Shareholders 2021.
(2) Subject to the applicable tax legislation.
The Annual General Meeting was held on 13 May 2020. An Extraordinary General Meeting was held on the same day. The resolutions of the meetings are available at www.bekaert.com.
Bekaert is committed to providing transparent financial information to all shareholders.
All shareholders can count on access to information and on our commitment to share relevant updates on market evolutions, performance progress and other relevant information. All such updates can be found online in the investors section of the website of the Company and are presented live in meetings with analysts, shareholders, and investors. The calendar of investor relations conferences, roadshows and group visits to our premises is published on our website.
The Articles of Association contain no restrictions on the transfer of Company shares, except in the case of a change of control, for which the prior approval of the Board of Directors has to be requested in accordance with Article 9 of the Articles of Association.
Subject to the foregoing, the shares are freely transferable.
The Board of Directors is not aware of any restrictions imposed by law on the transfer of shares by any shareholder.
According to the Articles of Association, 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 that 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 BCCA and in the Articles of Association. Pursuant to the Articles of Association, the Company is entitled to suspend the exercise of rights attaching to securities belonging to several owners.
No person can vote at a General Meeting of Shareholders using voting rights attached to securities that had not been timely reported in accordance with the law.
The Board of Directors 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.
The Articles of Association and the Bekaert Corporate Governance 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 Nomination and Remuneration Committee, which submits a reasoned recommendation to the full Board of Directors. On the basis of such recommendation, the Board of Directors 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 30 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 BCCA. Each amendment to the Articles requires a quorum of at least 50% of the capital (if the quorum is not met, a second meeting with the same agenda should be called, for which no quorum requirement applies) and a qualified majority of 75% of the votes cast at the meeting (a majority of 80% applies for changes to the corporate purpose and the transformation of the legal form of the company).
The Board of Directors is authorized by Article 40 of the Articles of Association to increase the capital in one or more times with a maximum amount of € 177 793 000. The authority is valid for five years from 23 June 2020, but can be extended by the General Meeting.
The Board of Directors is expressly authorized by Article 40 of the Articles of Association to increase the capital, even after the date that the Company receives the notification from the FSMA that it has been informed of a public take-over bid for the Company's securities, within the limits authorized by the applicable legal provisions. This authorization is valid with regard to public takeover bids of which the Company receives the aforementioned communication at most three years after 13 May 2020.
The Company may acquire and accept in pledge its own shares or certificates relating thereto in compliance with the applicable conditions prescribed by law. The Board of Directors is authorized by Article 10 of the Articles of Association to acquire and accept in pledge its own shares or certificates relating thereto in compliance with the applicable conditions prescribed by law, without the total number of own shares or certificates relating thereto held or accepted in pledge by the Company pursuant to this authorization exceeding 20% of the total number of shares, at a price ranging between minimum € 1.00 and maximum 30% above the arithmetic average of the closing price of the Company's share during the last thirty trading days preceding the Board of Directors' resolution to acquire or to accept in pledge. This authorization is granted for a period of five years beginning on 23 June 2020.
The Board of Directors is also authorized by Article 10 of the Articles of Association to acquire and to accept in pledge own shares and certificates relating thereto, in compliance with the applicable conditions prescribed by law, when such acquisition or acceptance in pledge is necessary to prevent a threatened serious harm for the Company, including a public take-over bid for the Company's securities. This authorization is granted for a period of three years beginning on 23 June 2020.
The authorizations set forth above do not affect the possibilities, pursuant to the applicable legal provisions, for the Board of Directors to acquire or accept in pledge own shares and certificates relating thereto if no authorization in the Articles of Association or authorization of the General Meeting is required.
The Board of Directors is authorized by Article 10 of the Articles of Association to cancel all or part of the acquired own shares or certificates relating thereto.
The Company may transfer its own shares, profit-sharing bonds or certificates relating thereto only in compliance with the applicable conditions prescribed by law.
The Board of Directors is authorized by Article 11 of the Articles of Association to transfer own shares, profit-sharing bonds or certificates relating thereto to one or more specified persons other than personnel, in compliance with the applicable conditions prescribed by law.
The Board of Directors is authorized by Article 11 of the Articles of Association to transfer own shares, profit-sharing bonds or certificates relating thereto to prevent a threatened serious harm to the Company, including a public take-over bid for the Company's securities, in compliance with the applicable conditions prescribed by law. This authorization is granted for a period of three years beginning on 23 June 2020.
The authorizations set forth above do not affect the possibilities, pursuant to the applicable legal provisions, for the Board of Directors to transfer own shares, profit-sharing bonds and certificates relating thereto, if no authorization in the Articles of Association or authorization of the General Meeting is required.
The powers of the Board of Directors are more fully described in the applicable legal provisions, the Articles of Association and the Bekaert Corporate Governance 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 significantly affect the assets of the Company or that give rise to a significant debt or 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, 11 May 2016, 10 May 2017, 9 May 2018, 8 May 2019 and 13 May 2020 in accordance with Article 7:151 of the BCCA; 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, 18 May 2016, 2 June 2017, 7 February 2019, 23 May 2019 and 23 June 2020 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, retail investors or other 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 Board of Directors has approved a framework of internal control and risk management for the Company and the Group set up by the BGE, and monitors the implementation thereof. The Audit, Risk and Finance Committee monitors the effectiveness of the internal control and risk management systems, with a view to ensuring that the main risks are properly identified, managed and disclosed according to the framework adopted by the Board of Directors. The Audit, Risk and Finance Committee also makes recommendations to the Board of Directors in this respect.
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 Finance 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 Bekaert Accounting Manual, which is available on the Bekaert intranet to all employees involved in financial reporting. Such manual is regularly updated by Group Finance in the 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. E-learning modules on IFRS are also made available by Group Finance to accommodate individual training.
The vast majority of the Group companies use Bekaert's global enterprise resource planning ("ERP") system, and the accounting transactions are registered in a common operating chart of accounts, whereby accounting manuals describe the standard way of booking of the most relevant transactions. Such accounting manuals are explained to the users during training sessions, and are available on the Bekaert intranet.
All Group companies use the same software to report the financial data for consolidation and external reporting purposes. A reporting manual is available on the Bekaert intranet and trainings take place when deemed necessary or appropriate.
Appropriate measures are taken to assure a timely and qualitative reporting and to reduce the potential risks related to the financial reporting process, including: (i) proper coordination between the Corporate Communication Department and Group Finance, (ii) careful planning of all activities, including owners and timings, (iii) guidelines which are distributed by Group Finance 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 Finance, reviewed by the Statutory Auditor, reported to the Audit, Risk 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 Bekaert Accounting 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 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 mid-year 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, Risk 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, Risk and Finance Committee and approval by the Company's Board of Directors.
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, Risk 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, Risk and Finance Committee.
In addition, a periodic treasury update is submitted to the Audit, Risk 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 has approved the Bekaert Code of Conduct, which was first issued on 1 December 2004 and last updated in October 2020. The Code of Conduct sets forth the Bekaert mission and values as well as the basic principles of how Bekaert wants to do business.
Implementation of the Code of Conduct is mandatory for all subsidiaries of the Group and all managerial and salaried employees renew their commitment annually. The Raising Integrity Concern (whistleblowing) procedure enforces and underpins its implementation. The Code of Conduct is included in the Bekaert Corporate Governance 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, and 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.
The Internal Audit Department monitors the internal control performance based on the global framework and reports to the Audit, Risk and Finance Committee at each of its meetings. The Governance, Risk and Compliance Department reports to the Audit, Risk and Finance Committee at each of its meetings on risk and compliance matters.
The BGE regularly evaluates the Group's exposure to risk, the potential financial impact thereof and the actions to monitor, mitigate and control the exposure.
At the request of the Board of Directors and the Audit, Risk 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.
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 six risk categories: strategic, people/organization, operational, legal/compliance, financial and geopolitical/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 evaluated.
Below are the main risks included in Bekaert's 2020 ERM report, which has been reported to the Audit, Risk and Finance Committee and the Board of Directors.
| Strategic risks | • Like many global companies, Bekaert is exposed to risks arising from economic trends. Strategically, Bekaert defends itself against economical and cyclical risks by being active in different regions and different sectors. Bekaert operates manufacturing sites and offices in 44 countries and its markets can be clustered in seven sectors. This sectorial spread is an advantage as it makes Bekaert less sensitive to sector-specific trends. Nevertheless, a crisis can impact the most important sectors in which Bekaert is active, i.e., tire and automotive, energy and utilities, and construction. For example, in tire and automotive and construction markets, a recession can lead to a significant demand decline driven by weak consumer confidence and postponed investments. The resulting upstream and downstream overcapacity can lead to price erosion across the supply chain. The tire and automotive and the constructions sector, were heavily affected by the Covid-19 pandemic in the first half of 2020 (for example, sales in the rubber reinforcement business were 30% lower compared to the first half of 2019). Further and lasting effects of the pandemic may continue to influence demand in certain markets. In oil and gas markets, the oil price level and trend has an influence on demand for Bekaert's products related to those markets. Most important for Bekaert's flat and shaped wire activity and for Bridon-Bekaert Ropes Group's offshore steel ropes activity are the actual investments in offshore oil extraction. Although Bekaert is in process of making its activities less oil-dependent and better aligned with the market reality and although Bekaert will be ready to seize opportunities from a reactivation of investments in oil extraction in the future, it cannot be excluded that the current oil price level will continue to have an influence on the demand for Bekaert's products and hence on its results. • Wire rod price volatility may result in further margin erosion Wire rod, Bekaert's main raw material, is purchased from steel mills from all over the world. Wire rod represents about 45% of the cost of sales. In principle, price movements are passed on in the selling prices as soon as possible, through contractually agreed pricing mechanisms or through individual negotiation. If Bekaert is unsuccessful in passing on cost increases to the customers in due time, this may negatively influence the profit margins of Bekaert. Also the opposite price trend entails profit risks: if raw materials prices drop significantly and Bekaert has higher priced material in stock, then the profitability may be hit by (non-cash) inventory valuation corrections at the balance sheet date of a reporting period. • Expansion projects are exposed to risks of delivery of the anticipated return Bekaert regularly carries out expansion projects. These projects are subject to risks of delay and cost overruns due to unforeseen roadblocks and as such the anticipated return of the project might not be reached. Also assumptions used for the business case (changed market conditions, competitor moves, ) may impact the achieved return of the project. |
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| People / Organization |
• Bekaert is exposed to certain labor market risks A competitive labor market can increase costs for Bekaert and as such decrease profitability. The success of Bekaert depends mainly on its capacity to hire and to retain talent at all levels. Bekaert competes with other companies on its markets for hiring people. A shortage of qualified people could force Bekaert to increase wages or other benefits in order to be effectively competitive when hiring or retaining qualified employees or retaining expensive temporary employees. An increasingly mobile, young population in emerging markets further enhances the people continuity risk. It is uncertain that higher labor cost can be compensated by efforts to increase effectiveness in other activity areas of Bekaert. |
| Operational risks | • Source dependency might impact Bekaert's business activities and profitability Bekaert is concerned about the continuous changes in trade policy as induced by the trade tensions between each of the US, Europe or India on the one side and China on the other. While Bekaert has now to a large extent been able to adapt to the every changing trade policies and duties through adjusted pricing measures (passing on higher, duty-affected, raw materials prices), alternative supply sources, alternative technologies enabling domestic sourcing, and effective lobbying to obtain exemptions, the change in trade policy has been affecting the results of Bekaert's North American operations in past reporting periods. Bekaert might in the future also be cut off from raw material supplies or become dependent on alternative suppliers for its raw material, which may charge higher prices for such raw material. This could be, for example, because of changes in trade policy, the insolvency of its existing suppliers or the Covid-19 pandemic. Increased source dependency might have an impact on Bekaert's business activities (because it would have to implement necessary supply chain changes) and on its profitability (because of the increased prices to be paid for its raw materials). Bekaert's pro-active supplier risk management approach should reduce the probability or impact of such situations. • Bekaert is subject to stringent environmental laws Bekaert is subject to environmental laws, regulations and decrees. Those laws, regulations and decrees (which are becoming more stringent all over the world) could force Bekaert to pay for cleaning up and for damages at sites where the soil is contaminated. Under the environmental laws, Bekaert can be liable for repairing the environmental damage and be subject to related costs in its production sites, warehouses and offices as well as the soil on which they are located, irrespective of the fact that Bekaert owns, rents or sublets those production sites, warehouses and offices and irrespective of whether the environmental damage was caused by Bekaert or by a previous owner or tenant. Costs for research, repair or removal of environmental damage can be substantial and adversely affect the Group's business, financial condition and results of operations. It is Bekaert's practice to recognize provisions (per entity) for known environmental liabilities. Prevention and risk management play an important role in Bekaert's environmental policy. This includes measures against soil and ground water contamination, responsible use of water and worldwide ISO14001 certification. Bekaert's global procedure to ensure precautionary measures against soil and ground water contamination (ProSoil) is continuously monitored in relation to regulations, best practices and actual implementation. |
| Responsible use of water is also an ongoing priority. Bekaert constantly monitors its water consumption and has implemented programs that aim to reduce water usage in the long term. 87% of the Bekaert plants worldwide are ISO 14001 certified. ISO 14001 is part of the ISO 14000 internationally recognized standards providing practical tools to companies who wish to manage their environmental responsibilities. ISO 14001 focuses on environmental systems. |
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| Operational risks | Bekaert's full worldwide certification is an ongoing goal; it is an element in the integration process of newly acquired entities and of companies that are added to the consolidation perimeter. Bekaert also received a group-wide certification for ISO 14001 and ISO 9001. The ISO 9000 family addresses various aspects of quality management. |
| • Bekaert is subject to cyber-security risks Many operational activities of Bekaert depend on IT systems, developed and maintained by internal and external experts. A cyber attack in one of these IT systems could interrupt Bekaert's activities, which could result in a negative influence on its sales and profitability. Bekaert is implementing a cyber-security roadmap to reduce the risk. |
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| • Bekaert is exposed to regulatory and compliance risks As a global company, Bekaert is subject to many laws and regulations across all of the countries where it is active. Such laws and regulations are becoming more complex, more stringent and change faster and more frequently than before. These numerous laws and regulations include, among others, data privacy requirements (such as the European General Data Protection Regulation and California Consumer Privacy Act), intellectual property laws, labor relation laws, tax laws, anti-competition regulations, import and trade restrictions (for example the trade policies in the US and the EU), exchange laws, anti-bribery and anti-corruption regulations, health and safety regulations. Compliance with those laws and regulations could lead to additional costs or capital expenditures, which could negatively impact the possibilities of Bekaert to develop its activities. In addition, given the high level of complexity of these laws, there is also the risk that Bekaert may inadvertently breach some provisions. Violations of these laws and regulations could result in fines, criminal sanctions against Bekaert, cessation of business activities in sanctioned countries, implementation of compliance programs and prohibitions on the conduct of Bekaert's business. |
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| Bekaert is also training the organization in legal awareness and a Compliance Committee monitors and steers the actions that are needed to ensure compliance. Bekaert has a Code of Conduct and Raising an Integrity Concern procedure in place. Management and white collars worldwide go through an annual mandatory acceptance process with the principles of the Code of Conduct. |
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| Legal / Compliance risks |
Bekaert could further also become subject to government investigations (including by tax authorities). Such investigations have in the recent years become much more regular in the emerging markets such as China and India and could require significant expenditures and result in liabilities or governmental orders that could have a material adverse effect on Bekaert's business, operating results and financial condition. |
| It is Bekaert's practice to recognize provisions (per entity) for certain identified regulatory and compliance risks. | |
| • Failure to adequately protect Bekaert's intellectual property could substantially harm its business and operating result Bekaert is a global technology leader in steel wire transformation and coatings and invests intensively in continued innovation. It considers its technological leadership as a differentiator versus the competition. Consequently, intellectual property protection is a key concern and risk. Intellectual property leakages can harm Bekaert and help the competition, both in terms of product development, process innovation and machine engineering. By the end of 2020, Bekaert (including Bridon-Bekaert Ropes Group) had a portfolio of 1 828 patent rights (i.e. patents, patent applications, utility models and applications for utility models). Bekaert also initiates patent infringement proceedings against competitors in the case infringements are observed. Bekaert cannot assure that its intellectual property will not be objected to, infringed upon or circumvented by third parties. Furthermore, Bekaert may fail to successfully obtain patent authorization, complete patent registration or protect such patents, which may materially and adversely affect our business, financial position, results of operations and prospects. |
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| • Bekaert is exposed to a currency exchange risk which could materially impact its results and financial position Bekaert's assets, income, earnings and cash flows are influenced by movements in exchange rates of several currencies. 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 and pound sterling. The Group is further exposed to transactional currency risks resulting from its investing (the acquisition and disposal of investments in foreign companies), financing (financial liabilities in foreign currencies) and operating (commercial activities with sales and purchases in foreign currencies). Bekaert has a hedging policy in place to limit the impact of currency exchange risks. |
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| Financial risks | • Bekaert is exposed to tax risks, in particular by virtue of the international nature of its activities in a rapidly changing international tax environment As an international group operating in multiple jurisdictions, Bekaert is subject to tax laws in many countries throughout the world. Bekaert structures and conducts its business globally in light of diverse regulatory requirements and Bekaert's commercial, financial and tax objectives. As a general rule, Bekaert seeks to structure its operations in a tax efficient manner, while complying with the applicable tax laws and regulations. Although it is anticipated that these are likely to achieve their desired effect, if any of them were successfully challenged by the relevant tax authorities, Bekaert and its subsidiaries could incur additional tax liabilities, which could adversely affect its effective tax rate, results of operations and financial condition. Furthermore, given that tax laws and regulations in the various jurisdictions in which Bekaert operates often do not provide clear-cut or definitive guidance, Bekaert and its subsidiaries' structure, business conduct and tax regime is based on Bekaert's interpretations of the tax laws and regulations in Belgium and the other jurisdictions in which Bekaert and its subsidiaries operate. Although supported by tax consultants and specialists, Bekaert cannot guarantee that such interpretations will not be questioned by the relevant tax authorities or that the relevant tax and export laws and regulations in some of these countries will not be subject to change (in particular in the context of the rapidly changing international tax environment), varying interpretations and inconsistent enforcement, which could adversely affect Bekaert's effective tax rate, results of operations and financial condition. It is Bekaert's practice to recognize provisions (per entity) for certain potential tax liabilities |
| Financial risks | Although supported by tax consultants and specialists, Bekaert cannot guarantee that such interpretations will not be questioned by the relevant tax authorities or that the relevant tax and export laws and regulations in some of these countries will not be subject to change (in particular in the context of the rapidly changing international tax environment), varying interpretations and inconsistent enforcement, which could adversely affect Bekaert's effective tax rate, results of operations and financial condition. It is Bekaert's practice to recognize provisions (per entity) for certain potential tax liabilities. • Bekaert is exposed to a credit risk on its contractual and trading counterparties Bekaert is subject to the risk that the counterparties with whom it conducts its business (including in particular its customers) and who have to make payments to Bekaert are unable to make such payment in a timely manner or at all. While Bekaert has determined a credit policy that takes into account the risk profiles of the customers and the markets to which they belong, this policy can only limit some of its credit risks. If amounts that are due to Bekaert are not paid or not paid in a timely manner, this may not only impact its current trading and cash-flow position but also its financial and commercial position. Bekaert has a credit insurance policy in place to limit such risks. The Covid-19 pandemic increased the likelihood of the materialization of such risk, as the liquidity position of certain customers has been affected by the consequences of the pandemic and the payment behavior of certain customers changed. Some of the top-10 customers of Bekaert had delayed payments in the months April and May, but overdue rates returned to normal from June onwards. In addition, credit insurance companies have lowered the credit limits or have excluded credit insurance on certain third parties. Due to this increased risk, Bekaert has implemented measures to early detect, avoid and cover the arising risks. At present, Bekaert has not been confronted with increased bad debt provisions or customer bankruptcies leading to write-offs of bad debts, but the risk could materialize if the impact of the pandemic leads to failure in collecting outstanding receivables from customers going into bankruptcy. • Bekaert is exposed to the political and economical instability in Venezuela In Venezuela, Bekaert's activities have been affected in the past years due to shortages of raw material, power supply, and the extreme devaluation of the currency. Bekaert has over the past years downsized the business in Venezuela and the assets on Venezuelan soil have been impaired since 2010 in order to minimize any outstanding risk. 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 2020, the cumulative translation adjustments amount to \$ 59,8 million, which - in the case of loss of control - would be recycled to income statement. • Adverse business performances or changes in underlying economic climate may result in impairment of assets In accordance with the International Accounting Standards regarding the impairment of assets (i.e. IAS36), an asset must not be carried in a company's financial statements at more than the highest recoverable amount (i.e. by selling or using the asset). In the event the carrying amount (i.e. book value) exceeds the recoverable amount, the asset is impaired. Bekaert regularly examines its groups of assets that do not generate cash flows individually (i.e. Cash Generating Units (CGUs)) and more specifically CGUs to which goodwill is allocated. Nevertheless, Bekaert may also be required to recognize impairment losses on other assets due to (external) unexpected adverse events that may have an impact on its expected performance. Although impairment charges do not have an impact on Bekaert's cash position, impairment losses are indicators of a potential shortfall in Bekaert's (expected) business plan, which might have an indirect impact on the expected profit generating capability of Bekaert. For further information on Bekaert's goodwill on the balance sheet (and impairment losses relating thereto), please refer to the note 6.2 (Goodwill) of this Report. More specifically, this note describes in more detail the impairment testing findings on goodwill arising from the Bridon-Bekaert Ropes Group business combination, which represents the majority of the goodwill amount carried at the balance sheet. A strict execution and implementation of the various initiatives included in the Bridon-Bekaert Ropes Group profit restoration plan is key to not incurring an impairment loss. |
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| Geopolitical/ Country risks |
• Bekaert faces asset and profit concentration risks in China While Bekaert is a truly global company with a global network of manufacturing platforms and sales and distribution offices, reducing the asset and profit concentration to a minimum, it still faces a risk of asset and profit concentration in certain locations (such as Jiangyin, China). In case another risk would materialize, such as a political, social, or an environmental risk with major damage, then the risk of asset and profit concentration could materialize. As part of a business continuity plan, Bekaert has measures in place to reduce this risk through back-up scenarios and delivery approvals from other locations. For example, in highly regulated sectors such as the automotive sector, Bekaert aims to have more than one production plant approved to supply the tire makers. • The Covid-19 pandemic impact on the longer term on Bekaert's business and profitability depends on a broad range of factors, including the duration and scope of the pandemic, the geographies impacted, social impact, its impact on economic activity (e.g. hardening insurance markets) and the nature and severity of measures adopted by governments to restrict the further spread of the virus, including restrictions on business operations and travelling, restrictions on large gatherings and orders to self-isolate. Bekaert implemented a crisis management plan and governance to manage the Covid-19 pandemic crisis focusing on safeguarding health & safety of our employees, protecting our customers and our business, ensuring financial strength, identifying and pursuing opportunities arising from the crisis and enabling the organization to deal with ambiguity and keeping engagement level up - better |
An effective internal control and ERM framework is necessary to reach a reasonable level of assurance related to Bekaert's financial reports and in order to prevent fraud. Internal control on financial reporting cannot prevent or trace all errors due to limits peculiar for control, such as possible human errors, misleading or circumventing controls, or fraud. That is why an effective internal control only generates reasonable assurance for the preparation and the fair presentation of the financial information. Failure to pick up an error due to human errors, misleading or circumventing controls, or fraud could negatively impact Bekaert's reputation and financial results.
This may also result in Bekaert failing to comply with its ongoing disclosure obligations.
Our ambition is to create sustainable value for all our stakeholders: our customers, employees, shareholders, and the communities where we are active.
better together sums up the unique cooperation within Bekaert and between Bekaert and its stakeholders. We are committed to delivering long-term value to all of them and as such, create sustainable business partnerships.
Our company values distinguish us and guide our actions. We conduct business in a socially responsible and ethical manner. To us, sustainability is about economic success, about the safety and development of our employees, about lasting relationships with our business partners, and about environmental stewardship and social progress. This way, Bekaert translates sustainability into a benefit for all stakeholders.
The interests of our customers, employees, shareholders, local governments and the communities where we are active are reflected in the way we drive our operations. We do this in a structured way: we have translated our ambitions for improvement into clear targets for the short term and are further developing our sustainability strategy for the coming years.
We are currently defining, under the supervision of the Board of Directors, Bekaert's sustainability strategy for the longer term. The strategy will include the company's ambitions that will enable us to:
Bekaert's Sustainability Report 2020 was conducted based on the GRI Sustainability Reporting Standards, in accordance 'Core option'. [Subject to GRI certification early March 2021] Global Reporting Initiative (GRI) is a non-profit organization that promotes economic, environmental and social sustainability. Bekaert's responsible performance in 2020 has been recognized by its inclusion in the Solactive ISS ESG Screened Europe Small Cap Index and the Solactive ISS ESG Screened Developed Markets Small Cap Index—a reference benchmark for top performers in terms of corporate social responsibility based on Vigeo Eiris' research—as well as in Kempen SRI.
In 2020-2021 respectively, rating agencies MSCI and ISS-ESG have analyzed the Environment, Social and Governance performance of our company, based on our publicly available information. Their reports are used by institutional investors and financial service companies.
For the fourth year in a row, Bekaert was awarded a gold recognition level from EcoVadis, an independent sustainability rating agency whose methodology is built on international CSR standards. The agency states that Bekaert forms part of the top 5% of all companies assessed in the same industry category.
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 CDP (formerly known as the Carbon Disclosure Project).
Bekaert has received a 'B-' score in CDP's Supplier Engagement Rating (SER), an improvement of 2 steps compared with previous ratings. Bekaert's rating for disclosing and engaging with customers has significantly improved, bringing us in a leading 'A' rating position.
As a company and as individuals, we act with integrity and commit to the highest standards of business ethics. We promote equal opportunity, foster diversity and we create a caring and safe working environment across our organization. Our values are ingrained in our culture and connect us all as One Bekaert team.
We act with integrity · We earn trust · We are irrepressible!
Our employees are the driving force behind our global success. The true strength of our company lies at the heart of every Bekaert employee's passion to go the extra mile for our customers, to care deeply for each other, and for the world around us. That's what being better together is all about.
Bekaert responded to the Covid-19 pandemic with global and local measures to safeguard the health and safety of all employees and their families, and of contractors and visitors on our sites. We rigorously complied with the regulations deployed in all countries that host Bekaert activities. Meanwhile, we closely communicated with customers and suppliers in order to secure business and supply continuity.
Our team members in China were the first to be confronted with the virus challenges and with tight methods to contain the spread. Their learnings have been tremendously valuable for us. Their measures and best practices were integrated in Bekaert's global Covid-19 Prevention Rules.
These measures, implemented early in China and adopted by our teams worldwide, included:
People engagement and empowerment have always been important at Bekaert. We empower our teams with responsibility, authority and accountability, and count on the engagement of every Bekaert employee in driving a higher-level performance.
It is our goal to create a no-harm-to-anyone working environment at Bekaert. We commit to do whatever is necessary to eliminate accidents in the workplace.
We set our ambitions high when it comes to diversity, safety, and compliance to our Code of Conduct. We refer to the Bekaert Sustainability Report to read more about our actions and about the 2020 employment and safety data.
We promote and apply responsible and sustainable business practices in all our business and community relationships. Our sourcing and innovation programs enhance sustainability throughout the value chain.
We deal openly and honestly with our business partners. We expect our business partners to adhere to business principles consistent with internationally accepted ethical standards.
In the beginning of 2020, (pre-Covid19), the Lipetsk plant in Russia invited their steel cord customers to discuss what we can do better in serving their needs and how we can collaborate in developing new steel cord types. The Bekaert Lipetsk Quality and Technology teams also visited the customer sites to well understand their processing needs.
Virtual communication sessions became the norm in all of our customer contacts in 2020. The continuously changing business dynamics all over the world required constant alignment and interaction. While being isolated and banned from personal, face-to-face contacts through live meetings, visits, trade fairs or conferences, the online meetings brought us closer together than before. They also brought together more teams and individuals than the regular sales-purchasing relationships.
We explored and extended the use of digital channels, integrated a live chat on our website, and shared information and expertise in virtual engagement campaigns.
Plant teams connected with customers and colleagues working from home via livestream to view pre-qualification tests. We organized customer training sessions online, while conventions and trade shows went digital with avatar networking and virtual booths. We also activated MyBekaert and My Rope, user-friendly customer portals on our website. These digital platforms have built interaction and trust in our commercial relationships.
We engage with suppliers to enhance sustainability awareness and control upstream in the value chain and we set our ambitions high by targeting distinct sustainable benefits through our Research & Innovation efforts. We refer to the Bekaert Sustainability Report to read more about how we work better together with our customers and suppliers.
We care for the climate and promote a circular economy: we develop and install manufacturing equipment that reduces energy consumption and optimizes recycling. We use renewable energy sources wherever possible and avoid the discharge of untreated effluents and waste.
We continuously strive to develop processes that use less material, cut energy consumption and reduce waste. We set our ambitions high to increase the green energy share in our energy sourcing and, consequently, reduce our GHG emissions.
Floating wind platforms are an answer to further decarbonize the global energy mix and increase security of supply. Our solutions for wind farms are testimony to our commitment to sustainability. We have several products in our portfolio that are used to build (floating) wind farms: Dramix® for concrete reinforcement, Bezinox® armoring wire to bring electricity ashore via subsea power cables, A-cords timing belts for blade pitch adjustment, superconductor wires for turbine generators and mooring lines so platforms stay put.
We not only raise our presence in wind energy markets with innovative products and solutions, we also gradually increase the share of renewable energy in the energy we consume, and we invest in green energy projects through VPPAs.
In December, ENGIE North America completed the construction of the King Plains windfarm in Oklahoma, US. Bekaert entered into a 35 MW Virtual Power Purchase Agreement (VPPA) with ENGIE North America in 2019 and is considering additional VPPAs as we work to achieve 100% renewable supply in the US. We are also looking into sourcing VPPAs in Europe as one of the measures to meet the company's global ambition of 55% renewables by 2025.
We refer to the Bekaert Sustainability Report for more examples of our extended product offering that contribute to a cleaner environment and for a full overview of the 2020 data related to energy usage, the green share in energy sourcing, GHG emissions, and water usage.
We support and develop initiatives that help improve the social conditions in the communities where we are active.
Education projects form the backbone of Bekaert's social funding and other community-building activities, because we believe that education and learning help create a sustainable future.
The Bekaert India team collected food, clothes and stationery for the annual 'Joy of giving' project. In February 2020, they donated the goods to a local organization that supports children through education and social well-being. The team in India also donated computers to schools in the neighborhood of Bekaert's operations.
Covid-19 brought another dimension to our responsible actions that help support society. From the outbreak of the pandemic onwards, we have engaged and supported the communities where we are active with protection awareness initiatives and with donations and voluntary help to medical and care centers around the world.
We refer to the Bekaert Sustainability Report to read more about the initiatives that Bekaert colleagues worldwide organized to support medical and care centers, and children and students.
| Consolidated income statement80 | |
|---|---|
| Consolidated statement of comprehensive income 81 | |
| Consolidated balance sheet82 | |
| Consolidated statement of changes in equity 84 | |
| Consolidated cash flow statement86 |
| 5.1. | Net sales101 | |
|---|---|---|
| 5.2. | Operating result (EBIT) by function 102 | |
| 5.3. | Operating result (EBIT) by nature106 | |
| 5.4. | Interest income and expense107 | |
| 5.5. | Other financial income and expenses107 | |
| 5.6. | Income taxes108 | |
| 5.7. | Share in the results of joint ventures and associates109 | |
| 5.8. | Earnings per share109 | |
| 6. Balance sheet items 111 | ||
| 6.1. | Intangible assets 111 | |
| 6.2. | Goodwill 112 | |
| 6.3. | Property, plant and equipment 116 | |
| 6.4. | Right-of-use (RoU) property, plant and equipment 118 | |
| 6.5. | Investments in joint ventures and associates120 | |
| 6.6. | Other non-current assets123 | |
| 6.7. | Deferred tax assets and liabilities124 | |
| 6.8. | Operating working capital127 | |
| 6.9. | Other receivables129 | |
| 6.10. Cash & cash equivalents and short-term deposits129 | ||
| 6.11. Other current assets 130 | ||
| 6.13. Ordinary shares, treasury shares and equity-settled share-based payments131 | ||
|---|---|---|
| 6.14. Retained earnings and other Group reserves138 | ||
| 6.15. Non-controlling interests140 | ||
| 6.16. Employee benefit obligations144 | ||
| 6.17. Provisions 153 | ||
| 6.18. Interest-bearing debt154 | ||
| 6.19. Other non-current liabilities157 | ||
| 6.20. Other current liabilities 157 | ||
| 6.21. Tax positions157 | ||
| 7. Miscellaneous items158 | ||
| 7.1. | Notes to the cash flow statement158 | |
| 7.2. | Financial risk management and financial derivatives161 | |
| 7.3. | Contingencies, commitments, secured liabilities and assets pledged as security173 | |
| 7.4. | Related parties 174 | |
| 7.5. | Events after the balance sheet date 175 | |
| 7.6. | Services provided by the statutory auditor and related persons175 | |
| 7.7. | Subsidiaries, joint ventures and associates 176 | |
| Annual report of the Board of Directors and financial statements | |
|---|---|
| of NV Bekaert SA180 | |
| Proposed appropriation of NV Bekaert SA 2020 result182 | |
| Appointments pursuant to the Articles of Association183 |
| in thousands of € - Year ended 31 December | Notes | 2019 | 2020 |
|---|---|---|---|
| Sales | 5.1. | 4 322 450 | 3 772 374 |
| Cost of sales | 5.2. | -3 795 320 | -3 214 056 |
| Gross profit | 5.2. | 527 131 | 558 318 |
| Selling expenses | 5.2. | -188 606 | -167 141 |
| Administrative expenses | 5.2. | -127 676 | -133 526 |
| Research and development expenses | 5.2. | -70 729 | -52 361 |
| Other operating revenues | 5.2. | 27 655 | 84 659 |
| Other operating expenses | 5.2. | -12 758 | -33 422 |
| Operating result (EBIT) | 5.2. | 155 017 | 256 527 |
| of which | |||
| EBIT - Underlying | 5.2. / 5.3. | 241 909 | 272 244 |
| One-off items | 5.2. | -86 891 | -15 717 |
| Interest income | 5.4. | 2 841 | 3 386 |
| Interest expense | 5.4. | -69 166 | -59 554 |
| Other financial income and expenses | 5.5. | -18 371 | -30 165 |
| Result before taxes | 70 322 | 170 194 | |
| Income taxes | 5.6. | -51 081 | -56 513 |
| Result after taxes (consolidated companies) | 19 241 | 113 682 | |
| Share in the results of joint ventures and associates | 5.7. | 28 959 | 34 355 |
| RESULT FOR THE PERIOD | 48 200 | 148 037 | |
| Attributable to | |||
| equity holders of Bekaert | 41 329 | 134 687 | |
| non-controlling interests | 6.15. | 6 871 | 13 350 |
| Earnings per share in € per share |
5.8. | 2019 | 2020 |
|---|---|---|---|
| Result for the period attributable to equity holders of Bekaert | |||
| Basic | 0.731 | 2.382 | |
| Diluted | 0.730 | 2.266 |
The accompanying notes are an integral part of this income statement.
| in thousands of € - Year ended 31 December | Notes | 2019 | 2020 |
|---|---|---|---|
| Result for the period | 48 200 | 148 037 | |
| Other comprehensive income (OCI) | 6.14. | ||
| Other comprehensive income reclassifiable to income statement | |||
| in subsequent periods | |||
| Exchange differences | |||
| Exchange differences arising during the year on subsidiaries | 16 563 | -80 879 | |
| Exchange differences arising during the year on joint ventures | |||
| and associates | -2 171 | -38 134 | |
| OCI reclassifiable to income statement in subsequent periods, after | |||
| tax | 14 392 | -119 013 | |
| Other comprehensive income non-reclassifiable to income statement | |||
| in subsequent periods | |||
| Remeasurement gains and losses on defined-benefit plans | -833 | 2 497 | |
| Net fair value gain (+) / loss (-) on investments in equity instruments | |||
| designated as at fair value through OCI | 2 372 | 250 | |
| Share of non-reclassifiable OCI of joint ventures and associates | 11 | 4 | |
| Deferred taxes relating to non-reclassifiable OCI | 6.7. | 1 822 | -1 024 |
| OCI non-reclassifiable to income statement in subsequent periods, | |||
| after tax | 3 372 | 1 727 | |
| Other comprehensive income for the period | 17 764 | -117 286 | |
| TOTAL COMPREHENSIVE INCOME FOR THE PERIOD | 65 964 | 30 751 | |
| Attributable to | |||
| equity holders of Bekaert | 62 506 | 23 233 | |
| non-controlling interests | 6.15. | 3 458 | 7 518 |
The accompanying notes are an integral part of this statement of comprehensive income.
| in thousands of € | Notes | 2019 | 2020 |
|---|---|---|---|
| Intangible assets | 6.1. | 60 266 | 54 664 |
| Goodwill | 6.2. | 149 784 | 149 398 |
| Property, plant and equipment | 6.3. | 1 349 657 | 1 191 781 |
| RoU Property, plant and equipment | 6.4. | 149 051 | 132 607 |
| Investments in joint ventures and associates | 6.5. | 160 665 | 123 981 |
| Other non-current assets | 6.6. | 36 281 | 45 830 |
| Deferred tax assets | 6.7. | 142 333 | 124 243 |
| Non-current assets | 2 048 037 | 1 822 503 | |
| Inventories | 6.8. | 783 030 | 683 477 |
| Bills of exchange received | 6.8. | 59 904 | 54 039 |
| Trade receivables | 6.8. | 644 908 | 587 619 |
| Other receivables | 6.9. / 6.21. | 111 615 | 101 330 |
| Short-term deposits | 6.10. | 50 039 | 50 077 |
| Cash and cash equivalents | 6.10. | 566 176 | 940 416 |
| Other current assets | 6.11. | 40 510 | 41 898 |
| Assets classified as held for sale | 6.12. | 466 | 6 740 |
| Current assets | 2 256 647 | 2 465 597 | |
| Total | 4 304 684 | 4 288 100 |
| in thousands of € | Notes | 2019 | 2020 |
|---|---|---|---|
| Share capital | 6.13. | 177 793 | 177 812 |
| Share premium | 37 751 | 37 884 | |
| Retained earnings | 6.14. | 1 492 028 | 1 614 781 |
| Treasury shares | 6.14. | -107 463 | -106 148 |
| Other Group reserves | 6.14. | -165 000 | -276 448 |
| Equity attributable to equity holders of Bekaert | 1 435 110 | 1 447 880 | |
| Non-controlling interests | 6.15. | 96 430 | 87 175 |
| Equity | 1 531 540 | 1 535 055 | |
| Employee benefit obligations | 6.16. | 123 409 | 130 948 |
| Provisions | 6.17. | 25 005 | 25 166 |
| Interest-bearing debt | 6.18. | 1 184 310 | 968 076 |
| Other non-current liabilities | 6.19. | 265 | 1 231 |
| Deferred tax liabilities | 6.7. | 34 182 | 38 337 |
| Non-current liabilities | 1 367 171 | 1 163 759 | |
| Interest-bearing debt | 6.18. | 424 184 | 641 655 |
| Trade payables | 6.8. | 652 384 | 668 422 |
| Employee benefit obligations | 6.8. / 6.16. | 148 784 | 149 793 |
| Provisions | 6.17. | 30 222 | 11 421 |
| Income taxes payable | 6.21. | 82 411 | 53 543 |
| Other current liabilities | 6.20. | 67 988 | 64 451 |
| Liabilities associated with assets classified as held for sale | 6.12. | - | - |
| Current liabilities | 1 405 973 | 1 589 286 | |
| Total | 4 304 684 | 4 288 100 |
The accompanying notes are an integral part of this balance sheet.
Attributable to equity holders of Bekaert 1 Attributable to equity holders of Bekaert 1
| Share capital | Share premium | Retained earnings | Treasury shares | Cumulative translation adjustments |
|
|---|---|---|---|---|---|
| in thousands of € | |||||
| Balance as at 1 January 2019 |
177 793 | 37 751 | 1 480 235 | -108 843 | -130 102 |
| Result for the period | - | - | 41 329 | - | - |
| Other comprehensive income | - | - | 11 | - | 16 138 |
| Capital contribution by non-controlling interests | - | - | - | - | - |
| Reclassifications | - | - | -18 | - | - |
| Effect of NCI purchase 3 | - | - | 6 973 | - | - |
| Effect of other changes in Group structure | - | - | - | - | - |
| Equity-settled share-based payment plans | - | - | 4 390 | - | - |
| Treasury shares transactions | - | - | -1 341 | 1 380 | - |
| Dividends | - | - | -39 557 | - | - |
| Balance as at | |||||
| 31 December 2019 | 177 793 | 37 751 | 1 492 022 | -107 463 | -113 964 |
| Balance as at | |||||
| 1 January 2020 | 177 793 | 37 751 | 1 492 022 | -107 463 | -113 964 |
| Result for the period | - | - | 134 687 | - | - |
| Other comprehensive income | - | - | - | - | -113 858 |
| Effect of NCI purchase 4 | - | - | -467 | - | - |
| Equity-settled share-based payment plans | - | - | 8 556 | - | - |
| Creation of new shares | 19 | 133 | - | - | - |
| Treasury shares transactions | - | - | -231 | 1 314 | - |
| Dividends | - | - | -19 787 | - | - |
| Balance as at | |||||
| 31 December 2020 | 177 812 | 37 884 | 1 614 780 | -106 149 | -227 822 |
1 See note 6.14. 'Retained earnings and other Group reserves'.
2 See note 6.15. 'Non-controlling interests'.
3 In December 2019, the Group acquired the remaining non-controlling interests in Bekaert Maccaferri Underground Solutions BVBA for a consideration of € 9.5 million. As part of the transaction, the put option held by Maccaferri was extinguished.
4 In February 2020, the buy-out of Continental in Bekaert Slatina SRL through the acquisition of Conti's 20% shareholding was closed. A consideration of € 9.0 million was paid.
| Total equity | Non-controlling interests 2 |
Total | NCI put option reserve |
Deferred tax reserve |
Remeasurement reserve for DB plans |
Revaluation reserve Cumulative for non translation consolidated equity adjustments investments |
|---|---|---|---|---|---|---|
| 1 511 637 | 119 071 | 1 392 566 | -8 206 | 26 694 | -68 267 | -130 102 -14 489 |
| 48 200 | 6 871 | 41 329 | - | - | - | - - |
| 17 765 | -3 413 | 21 178 | - | 1 413 | 1 244 | 16 138 2 372 |
| 652 | 652 | - | - | - | - | - - |
| - | - | 6 | -6 | 18 | - - |
|
| 1 533 | -13 632 | 15 165 | 8 200 | 3 | -11 | - - |
| 128 | 128 | - | - | - | - | - - |
| 4 390 | - | 4 390 | - | - | - | - - |
| - | 39 | - | - | - | - - |
|
| -52 804 | -13 247 | -39 557 | - | - | - | - - |
| 1 531 540 | 96 430 | 1 435 110 | - | 28 104 | -67 016 | -113 964 -12 117 |
| 1 531 540 | 96 430 | 1 435 110 | - | 28 104 | -67 016 | -113 964 -12 117 |
| 148 037 | 13 350 | 134 687 | - | - | - | - - |
| -117 286 | -5 832 | -111 454 | - | -1 319 | 3 473 | -113 858 250 |
| -8 970 | -8 503 | -467 | - | - | - | - - |
| 8 556 | - | 8 556 | - | - | - | - - |
| 152 | - | 152 | - | - | - | - - |
| 1 083 | - | 1 083 | - | - | - | - - |
| -28 057 | -8 270 | -19 787 | - | - | - | - - |
| 1 535 055 | 87 175 | 1 447 880 | - | 26 785 | -63 543 | -227 822 -11 867 |
Attributable to equity holders of Bekaert 1 Attributable to equity holders of Bekaert 1
The accompanying notes are an integral part of this statement of changes in equity.
| in thousands of € - Year ended 31 December | Notes | 2019 | 2020 |
|---|---|---|---|
| Operating activities | |||
| Operating result (EBIT) | 5.2. / 5.3. | 155 017 | 256 527 |
| Non-cash items included in operating result | 7.1. | 305 198 | 270 417 |
| Investing items included in operating result | 7.1. | 3 428 | -38 626 |
| Amounts used on provisions and employee benefit obligations | 7.1. | -61 299 | -50 756 |
| Income taxes paid | 5.6. / 7.1. | -60 624 | -56 504 |
| Gross cash flows from operating activities | 341 721 | 381 059 | |
| Change in operating working capital | 6.8. | 168 549 | 124 419 |
| Other operating cash flows | 7.1. | 14 056 | -556 |
| Cash flows from operating activities | 524 326 | 504 921 | |
| Investing activities | |||
| New business combinations | 7.2. | - | -978 |
| Proceeds from disposals of investments | 800 | - | |
| Dividends received | 6.5. | 18 750 | 25 324 |
| Purchase of intangible assets | 6.1. | -4 410 | -3 214 |
| Purchase of property, plant and equipment | 6.3. | -94 504 | -104 477 |
| Purchase of RoU Land | 6.4. | -13 074 | - |
| Proceeds from disposals of fixed assets | 7.1. | 1 349 | 52 136 |
| Cash flows from investing activities | -91 089 | -31 209 | |
| Financing activities | |||
| Interest received | 5.4. | 2 960 | 3 076 |
| Interest paid | 5.4. | -50 130 | -42 864 |
| Gross dividend paid to shareholders of NV Bekaert SA | -39 557 | -19 787 | |
| Gross dividend paid to non-controlling interests | -13 873 | -5 953 | |
| Proceeds from long-term interest-bearing debt | 6.18. | 585 696 | 201 309 |
| Repayment of long-term interest-bearing debt | 6.18. | -675 253 | -247 673 |
| Cash flows from / to (-) short-term interest-bearing debt | 6.18. | -76 715 | 41 358 |
| Treasury shares transactions | 6.13. | 39 | 1 084 |
| Sales and purchases of NCI | 7.1. | -9 500 | -8 970 |
| Other financing cash flows | 7.1. | 7 540 | -4 319 |
| Cash flows from financing activities | -268 793 | -82 741 | |
| Net increase or decrease (-) in cash and cash equivalents | 164 444 | 390 972 | |
| Cash and cash equivalents at the beginning of the period | 398 273 | 566 176 | |
| Effect of exchange rate fluctuations | 3 459 | -16 731 | |
| Cash and cash equivalents at the end of the period | 566 176 | 940 416 |
The accompanying notes are an integral part of this cash flow statement.
NV Bekaert SA (the 'Company') is a company domiciled in Belgium and a world market and technology leader in steel wire transformation and coating technologies. The Company's consolidated financial statements include those of the Company and its subsidiairies (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 24 March 2021.
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 practical expedient applies only to rent concessions occurring as a direct consequence of Covid-19 and only if all of the following conditions are met: (a) the change in lease payments results in revised consideration for the lease that is substantially the same as, or less than, the consideration for the lease immediately preceding the change; (b) Any reduction in lease payments affects only payments originally due on or before 30 June 2021 (a rent concession meets this condition if it results in reduced lease payments on or before 30 June 2021 and increased lease payments that extend beyond 30 June 2021); and; (c) There is no substantive change to other terms and conditions of the lease.
In the current financial year, the Group has applied the amendment to IFRS 16 to a minor amount of rent concessions received (€ 0.2 million).
» The Group has adopted the amendments to IFRS 3 'Definition of a business' for the first time in the current year. The amendments clarify that while businesses usually have outputs, outputs are not required for an integrated set of activities and assets to qualify as a business. To be considered a business an acquired set of activities and assets must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs.
The amendments remove the assessment of whether market participants are capable of replacing any missing inputs or processes and continuing to produce outputs. The amendments also introduce additional guidance that helps to determine whether a substantive process has been acquired.
The amendments introduce an optional concentration test that permits a simplified assessment of whether an acquired set of activities and assets is not a business. Under the optional concentration test, the acquired set of activities and assets is not a business if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar assets. The amendments are applied prospectively to all business combinations and asset acquisitions for which the acquisition date is on or after 1 January 2020.
» The Group has adopted the amendments to IAS 1 and IAS 8 'Definition of material' for the first time in the current year. The amendments make the definition of material in IAS 1 easier to understand and are not intended to alter the underlying concept of materiality in IFRS Standards. The concept of 'obscuring' material information with immaterial information has been included as part of the new definition.
The threshold for materiality influencing users has been changed from 'could influence' to 'could reasonably be expected to influence'. The definition of material in IAS 8 has been replaced by a reference to the definition of material in IAS 1. In addition, the IASB amended other Standards and the Conceptual Framework that contain a definition of 'material' or refer to the term 'material' to ensure consistency.
» The Group has adopted the amendments included in Amendments to References to the Conceptual Framework in IFRS Standards for the first time in the current year.
The Group did not elect for early application of the following new or amended standards:
» Amendments to IAS 1 'Classification of liabilities as current or non-current' affect only the presentation of liabilities as current or non-current in the statement of financial position and not the amount or timing of recognition of any asset, liability, income or expenses, or the information disclosed about those items. The amendments clarify that the classification of liabilities as current or non-current is based on rights that are in existence at the end of the reporting period, specify that classification is unaffected by expectations about whether an entity will exercise its right to defer settlement of a liability, explain that rights are in existence if covenants are complied with at the end of the reporting period, and introduce a definition of 'settlement' to make clear that settlement refers to the transfer to the counterparty of cash, equity instruments, other assets or services. The amendments are applied retrospectively for annual periods beginning on or after 1 January 2023, with early application permitted.
» Amendments to IAS 8 'Accounting policies, Changes in Accounting Estimates and Errors' issuing a definition of accounting estimates to help entites to distinguish between accounting policies and accounting estimates. The amendments are effective for annual periods beginning on or after 1 January 2023.
These new, and amendments to, standards and interpretations effective after 2020 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 derivatives, financial assets at FVTOCI and financial assets at FVTPL, 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 non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the noncontrolling interests are adjusted and the fair value of the consideration paid or received is recognized directly in equity. When the Group loses control of a subsidiary, the profit or loss on disposal is calculated as the difference between:
A joint arrangement exists when NV Bekaert SA has contractually agreed to share control with one or more other parties, which is the case only when decisions about the relevant activities require the unanimous consent of the parties sharing control. A joint arrangement can be treated as a joint operation (i.e. NV Bekaert SA has rights to the assets and obligations for the liabilities) or a joint venture (i.e. NV Bekaert SA only has rights to the net assets). Associates are companies in which NV Bekaert SA, directly or indirectly, has a significant influence and which are neither subsidiaries nor joint arrangements. This is presumed if the Group holds at least 20% of the voting rights attaching to the shares. The financial information included for these companies is prepared using the accounting policies of the Group. When the Group has acquired joint control in a joint venture or significant influence in an associate, the share in the acquired assets, liabilities and contingent liabilities is initially remeasured to fair value at the acquisition date and accounted for using the equity method. Any excess of the purchase price over the fair value of the share in the assets, liabilities and contingent liabilities acquired is recognized as goodwill. When the goodwill is negative, it is immediately recognized in profit or loss. Subsequently, the consolidated financial statements include the Group's share of the results of joint ventures and associates accounted for using the equity method until the date when joint control or significant influence ceases. If the Group's share of the losses of a joint venture or associate exceeds the carrying amount of the investment, the investment is carried at nil value and recognition of additional losses is limited to the extent of the Group's commitment. Unrealized gains arising from transactions with joint ventures and associates are set against the investment in the joint venture or associate concerned to the extent of the Group's interest. The carrying amounts of investments in joint ventures and associates are reassessed if there are indications that the asset has been impaired or that impairment losses recognized in prior years have ceased to apply. The investments in joint ventures and associates in the balance sheet include the carrying amount of any related goodwill.
Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates ('the functional currency'). The consolidated financial statements are presented in euro, which is the Company's functional and the Group's presentation currency. Financial statements of foreign entities are translated as follows:
Exchange differences arising from the translation of the net investment in foreign subsidiaries, joint ventures and associates at the closing exchange rate are included in shareholders' equity under 'cumulative translation adjustments'. On disposal of foreign entities, cumulative translation adjustments are recognized in the income statement as part of the gain or loss on the sale. In the financial statements of the parent company and its subsidiaries, monetary assets and liabilities denominated in foreign currency are translated at the exchange rate at the balance sheet date, thus giving rise to unrealized exchange results. Unrealized and realized foreign-exchange gains and losses are recognized in the income statement, except when deferred in equity as qualifying cash flow hedges and qualifying net investment hedges. Goodwill is treated as an asset of the acquiree and is accordingly accounted for in the acquiree's currency and translated at the closing rate.
Intangible assets acquired in a business combination are initially measured at fair value; intangible assets acquired separately are initially measured at cost. After initial recognition, intangible assets are measured at cost or fair value less accumulated amortization and any accumulated impairment losses. Intangible assets are amortized on a straight-line basis over the best estimate of their useful lives. The amortization period and method are reviewed at each financial year-end. A change in the useful life of an intangible asset is accounted for prospectively as a change in estimate. Under the provisions of IAS 38 intangible assets may have indefinite useful lives. If the useful life of an intangible asset is deemed indefinite, no amortization is recognized and the asset is reviewed at least annually for impairment.
Expenditure on acquired licenses, patents, trademarks and similar rights is capitalized and amortized on a straight-line basis over the contractual period, if any, or the estimated useful life, which is normally considered not to be longer than ten years.
Generally, costs associated with the acquisition, development or maintenance of computer software are recognized as an expense when they are incurred, but external costs directly associated with the acquisition and implementation of acquired ERP software are recognized as intangible assets and amortized over five years on a straight-line basis.
Commercial assets mainly include customer lists, customer contracts and brand names, mostly acquired in a business combination, with useful lives ranging between 8 and 15 years.
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:
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.
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 was 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. Cashgenerating 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 cash-generating 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 | 20% |
The Group assesses whether a contract is or contains a lease, at inception of the contract. The Group recognizes a right-ofuse asset and a corresponding lease liability with respect to all lease arrangements in which it is the lessee, except for shortterm leases (defined as leases with a lease term of 12 months or less) and leases of low value assets (such as printers, copiers and small office equipment). For these leases, the Group recognizes the lease payments as an operating expense on a straight-line basis over the term of the lease.
The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or before the commencement day, less any lease incentives received and any initial direct costs.
They are subsequently measured at cost less accumulated depreciation and impairment losses. Whenever the Group incurs an obligation for costs to dismantle and remove a leased asset, restore the site on which it is located or restore the underlying asset to the condition required by the terms and conditions of the lease, a provision is recognized and measured under IAS 37. To the extent that the costs relate to a right-of-use asset, the costs are included in the related right-of-use asset, unless those costs are incurred to produce inventories.
Right-of-use assets are depreciated over the shorter period of the lease term and the useful life of the underying asset. If a lease transfers ownership of the underlying asset, or the cost of the right-of-use asset reflects that the Group expects to exercise a purchase option, the related right-of-use asset is depreciated over the useful life of the underlying asset. Rights to use land are amortized over the contractual period which can vary between 30 and 100 years, but is in most cases 50 years. The depreciation starts at the commencement date of the lease.
The right-of-use assets are presented as a separate line in the consolidated statement of financial position. The Group applies IAS 36 to determine whether a right-of-use asset is impaired.
Variable rents that do not depend on an index or rate are not included in the measurement of the lease liability and the right-of-use asset. The related payments are recognized as an expense in the period in which the event or condition that triggers those payments occurs. As a practical expedient, IFRS 16 permits a lessee not to separate non-lease components, and instead accounts for any lease and associated non-lease components as a single arrangement. The Group applies this practical expedient on contracts for company cars and industrial vehicles, where non-lease components such as maintenace and replacement of tires are not separated but included in the lease component.
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: measured at amortized cost, at fair value through profit or loss (FVTPL) or at fair value through other comprehensive income (FVTOCI). The classification depends on the contractual characteristics of the financial assets and the business model under which they are held. Management determines the classification of its financial assets at initial recognition.
Financial assets are classified at amortized cost when the contract has the characteristics of a basic lending arrangement and they are held with the intention of collecting the contractual cash flows until their maturity. The Group's financial assets at amortized cost comprises, unless stated otherwise, trade and other receivables, bills of exchange received, shortterm deposits and cash and cash equivalents in the balance sheet. They are measured at amortized cost using the effective interest method, less any impairment.
Other debt instruments and all equity investments are measured at fair value. Equity investments can either be carried at fair value through profit or loss (FVTPL) or at fair value through other comprehensive income (FVTOCI). This option can be elected on an investment by investment basis and cannot be reversed subsequently. In principle, Bekaert will carry its main non-consolidated strategic equity investments at FVTOCI. Derivatives are categorized as at FVTPL unless they are designated and effective as hedges.
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 short-term 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. Balances from cash pool facilities are reported as cash & cash equivalents. Bank overdrafts are not reported as a deduction from cash & cash equivalents but as interest-bearing debt.
Financial assets that are debt instruments, other than those measured at FVTPL, are tested for impairment using the expected credit loss model ('ECL'). The amount of expected credit losses is updated at each reporting date to reflect changes in credit risk since initial recognition of the respective financial instrument. When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECLs, Bekaert considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Group's historical experience and informed credit assessment and including forward-looking information. The Group always recognizes lifetime ECL for trade receivables.
At each reporting date, Bekaert measures the impairment loss for financial assets measured at amortized cost (e.g. trade receivables and bills of exchange received) as the present value of the expected cash shortfalls (discounted at the original effective interest rate). Amounts deemed uncollectible are written off against the corresponding allowance account at each balance sheet date. In assessing collective impairment, the Group uses historical information on the amount of loss incurred, and made an adjustment if current economic and credit conditions were such that the actual losses were likely to be greater or lesser than suggested by historical trends. Additions to and recoveries from the bad debt allowance account related to trade receivables 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 non-controlling 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 non-controlling interests even if this results in the non-controlling 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, definedcontribution pension plans in Belgium are subject to minimum guaranteed rates of return. Before 2015, the definedcontribution plans in Belgium were basically accounted for as defined-contribution 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 sharebased payments to certain employees. Equity-settled plans allow Group employees to acquire shares of NV Bekaert SA, and include stock option plans ('SOP'), performance share plans ('PSP'), personal shareholding requirement plans ('PSR') and stock grants, all of which are operated in Belgium. Cash-settled plans entitle Group employees to receive payment of cash bonuses based on the price of the Bekaert share on the Euronext stock exchange, and include share appreciation rights ('SAR') and performance share unit plans ('PSU'), all of which are operated outside Belgium.
Equity-settled share-based payments are recognized at fair value (excluding the effect of non-market-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 number of equity instruments granted that will eventually vest and adjusted for the effect of nonmarket-based vesting conditions.
Cash-settled share-based payments are recognized as liabilities over the vesting period 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 over the vesting period, taking into account the number of units or rights expected to vest.
The Group uses binomial models or Monte Carlo simulations to determine the fair value of the share-based payment plans.
Interest-bearing debt includes loans and borrowings which are initially recognized at the fair value of the consideration received net of transaction costs incurred. In subsequent periods, they are carried at amortized cost using the effective interest-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).
Interest-bearing debt also includes the lease liabilities recognized with respect to all lease arrangements in which the Group is the lessee, except for short-term leases and leases of low value assets. The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by using the rate implicit in the lease. If this rate cannot be readily determined, the Group uses its incremental borrowing rate. Lease payments included in the measurement of the lease liability comprise:
The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the effective interest method) and by reducing the carrying amount to reflect the lease payments made. The Group remeasures the lease liability (and makes a corresponding adjustment to the related right-of-use asset) whenever:
modified lease by discounting the revised lease payments using a revised discount rate at the effective date of the modification.
Trade payables and other current liabilities, except derivatives, are initially measured at cost, which is the fair value of the consideration payable, and subsequently carried at amortized cost.
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. In evaluating the potential income tax liabilities, the Group assumes that the tax authorities will examine amounts they have a right to examine and have full knowledge of all related information when making those examinations. The Group takes into account both the assessments, decisions and verdicts received from tax audits and other kinds of information sources as well as the potential sources of challenge from tax authorities. The Group recognizes a liability when the Group assesses it is not probable for the tax authorities to accept the position that the Group takes regarding the tax treatment in question. The Group measures the income tax liability according to the most likely amount of the potential economic outflow. However, Bekaert continues to believe that its positions on all these audits are robust.
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 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 may apply hedge accounting in accordance with IFRS 9 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 meet the qualifying criteria, hedge accounting is discontinued and the adjustment to the carrying amount of a hedged interestbearing 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 meet the qualifying criteria, 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 IFRS 9 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.
The Group uses derivatives that do not satisfy the hedge accounting criteria of IFRS 9 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 that are not financial assets 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 (if any) 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.
The Group recognizes revenue mainly from the sale of products. Revenue is measured based on the consideration to which the Group expects to be entitled in a contract with a customer and excludes amounts collected on behalf of third parties. The Group recognizes revenue from the sale of products when it transfers control over the corresponding product to a customer. Revenue from the sale of products is recognized at a point in time. Sales are recognized net of sales taxes and discounts. 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.
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 owner-related changes only.
To analyze the financial performance of the Group, Bekaert consistently uses various non-GAAP metrics or Alternative Performance Measures ('APMs') as defined in the European Securities and Markets Authority's ('ESMA') Guidelines on Alternative Performance Measures. In accordance with these ESMA Guidelines, the definition and reason for use of each of the APMs as well as reconciliation tables are provided in the 'Key Figures' section of the Report of the Board. The main APMs used in the Financial Review relate to underlying performance measures.
Operating income and expenses that are related to restructuring programs, impairment losses, the initial accounting for business combinations, business disposals, environmental provisions or other events and transactions that have a oneoff 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 from testing cash-generating units qualify as one-off effects.
One-off 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-off 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, joint ventures and associates.
Besides environmental provisions, other events or transactions that are not inherent to the business and have a one-off effect mainly include disasters and sales of investment property.
A non-current asset or disposal group is classified as held for sale if its carrying amount will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset (or disposal group) is available for immediate sale in its present condition. A discontinued operation is a component of an entity which the entity has disposed of or which is classified as held for sale, which represents a separate major line of business or geographical area of operations and which can be distinguished operationally and for financial reporting purposes.
For a sale to be highly probable, the entity should be committed to a plan to sell the asset (or disposal group), an active program to locate a buyer and complete the plan should be initiated, and the asset (or disposal group) should be actively marketed at a price which is reasonable in relation to its current fair value, and the sale should be expected to be completed within one year from the date of classification. Assets classified as held for sale are measured at the lower of their carrying amount and fair value less costs necessary to make the sale. Any excess of the carrying amount over the fair value less costs to sell is included as an impairment loss. Depreciation of such assets is discontinued as from their classification as held for sale. Comparative balance sheet information for prior periods is not restated to reflect the new classification in the balance sheet.
Contingent assets are not recognized in the financial statements. They are disclosed if the inflow of economic benefits is probable. Contingent liabilities are not recognized in the financial statements, except if they arise from a business combination. They are disclosed, unless the possibility of a loss is remote.
Events after the balance sheet date which provide additional information about the Company's position as at the balance sheet date (adjusting events) are reflected in the financial statements. Events after the balance sheet date which are not adjusting events are disclosed in the notes if material.
In the application of the Group's accounting policies, management is required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. These judgments, estimates and assumptions are reviewed on an ongoing basis.
The following are the critical judgments made by management, apart from those involving estimations (see note 3.2. 'Key sources of estimation uncertainty' below), that have a significant effect on the amounts reported in the consolidated financial statements.
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.
the next financial year. In 2020 a number of pending tax audits in different countries were finalized, leading to an additional tax expense on the one hand but also to the release of related provisions for uncertain tax positions on the other hand. At yearend 2020 uncertain tax positions recognized as income taxes payable amounted to € 31.6 million (2019: € 64.7 million). See note 6.21. 'Tax positions'.
Bekaert uses a business segmentation to evaluate the nature and financial performance of the business as a whole, in line with the way financial performance is reported to the chief operating decision maker. The Group's business units (BU) are characterized by BU-specific product and market profiles, industry trends, cost drivers, and technology needs tailored to specific industry requirements.
The following four business units are presented:
Capital employed elements (intangible assets, goodwill, property, plant and equipment, RoU 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' mainly consists of the functional unit technology and unallocated expenses for group management and services; it does not constitute a reportable segment in itself. Any sales between segments are transacted at prices which reflect the arm's length principle. Intersegment mainly includes eliminations of receivables and payables, of sales and of margin on transfers of inventory items and of PP&E and related adjustments to depreciation and amortization.
| 2019 | Rubber | Steel Wire | Specialty | ||||
|---|---|---|---|---|---|---|---|
| in thousands of € | Reinforcement | Solutions | Businesses | BBRG | Group | Intersegment | Consolidated |
| Consolidated third party sales | 1 952 881 | 1 447 804 | 413 915 | 488 658 | 19 193 | - | 4 322 450 |
| Consolidated sales | 1 985 551 | 1 491 303 | 425 906 | 491 065 | 90 667 | -162 042 | 4 322 450 |
| Operating result (EBIT) | 154 802 | 25 286 | 34 079 | 9 187 | -76 466 | 8 129 | 155 017 |
| EBIT - Underlying | 172 288 | 50 697 | 52 014 | 11 860 | -53 080 | 8 129 | 241 909 |
| Depreciation and amortization | 123 097 | 56 897 | 14 994 | 32 782 | 14 602 | -13 303 | 229 069 |
| Impairment losses | 8 446 | 10 709 | 2 293 | -2 247 | - | - | 19 202 |
| EBITDA | 286 345 | 92 891 | 51 366 | 39 723 | -61 864 | -5 174 | 403 288 |
| Segment assets | 1 525 870 | 878 533 | 302 231 | 588 025 | 37 850 | -120 089 | 3 212 419 |
| Unallocated assets | 1 092 265 | ||||||
| Total assets | 4 304 684 | ||||||
| Segment liabilities | 286 671 | 286 024 | 67 223 | 102 129 | 87 143 | -24 422 | 804 769 |
| Unallocated liabilities | 1 968 375 | ||||||
| Total liabilities | 2 773 144 | ||||||
| Capital employed | 1 239 198 | 592 509 | 235 008 | 485 896 | -49 293 | -95 668 | 2 407 651 |
| Weighted average capital employed |
1 305 979 | 643 316 | 232 702 | 478 220 | -19 528 | -100 472 | 2 540 217 |
| Return on weighted average capital employed (ROCE) |
11.9% | 3.9% | 14.6% | 1.9% | - | - | 6.1% |
| Capital expenditure – PP&E | 42 094 | 27 560 | 20 073 | 13 743 | 2 183 | -7 422 | 98 231 |
| Capital expenditure – intangible assets |
815 | 76 | - | 436 | 2 597 | -324 | 3 600 |
| Share in the results of joint ventures and associates |
5 751 | 23 207 | - | - | - | - | 28 959 |
| Investments in joint ventures and associates |
54 721 | 105 944 | - | - | - | - | 160 665 |
| Number of employees (year-end) 1 |
13 011 | 6 217 | 1 457 | 2 558 | 1 750 | - | 24 994 |
| 2020 | Rubber | Steel Wire | Specialty | ||||
|---|---|---|---|---|---|---|---|
| in thousands of € | Reinforcement | Solutions | Businesses | BBRG | Group | Intersegment | Consolidated |
| Consolidated third party sales | 1 614 077 | 1 333 513 | 389 434 | 424 359 | 10 991 | 3 772 374 | |
| Consolidated sales | 1 644 744 | 1 363 252 | 396 030 | 426 682 | 71 658 | -129 992 | 3 772 374 |
| Operating result (EBIT) | 136 126 | 87 921 | 36 244 | 23 805 | -33 772 | 6 203 | 256 527 |
| EBIT - Underlying | 144 305 | 96 093 | 45 285 | 33 763 | -53 585 | 6 384 | 272 244 |
| Depreciation and amortization | 102 706 | 49 433 | 16 469 | 30 757 | 13 145 | -10 407 | 202 103 |
| Impairment losses | 1 825 | 2 752 | 1 699 | 6 964 | 724 | - | 13 964 |
| EBITDA | 240 657 | 140 106 | 54 412 | 61 526 | -19 903 | -4 204 | 472 594 |
| Segment assets | 1 404 496 | 804 952 | 288 357 | 505 875 | -8 564 | -122 938 | 2 872 179 |
| Unallocated assets | 1 415 922 | ||||||
| Total assets | 4 288 100 | ||||||
| Segment liabilities | 310 268 | 307 519 | 71 377 | 82 838 | 84 133 | -46 917 | 809 219 |
| Unallocated liabilities | 1 943 826 | ||||||
| Total liabilities | 2 753 045 | ||||||
| Capital employed | 1 094 228 | 497 433 | 216 980 | 423 037 | -92 697 | -76 021 | 2 062 960 |
| Weighted average capital employed |
1 166 713 | 544 493 | 226 288 | 457 583 | -70 926 | -88 974 | 2 235 178 |
| Return on weighted average capital employed (ROCE) |
11.7% | 16.1% | 16.0% | 5.2% | - | - | 11.5% |
| Capital expenditure – PP&E | 37 425 | 20 596 | 29 183 | 16 452 | 848 | -4 510 | 99 993 |
| Capital expenditure – intangible assets |
460 | 141 | 14 | 443 | 2 435 | -279 | 3 214 |
| Share in the results of joint ventures and associates |
7 121 | 27 240 | - | - | -6 | - | 34 355 |
| Investments in joint ventures and associates |
43 287 | 80 674 | - | - | 19 | - | 123 981 |
| Number of employees (year-end) 1 |
12 540 | 6 028 | 1 373 | 2 320 | 1 578 | - | 23 839 |
1 Number of employees: full-time equivalents.
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 selected non-current assets (i.e. intangible assets; goodwill; property, plant and equipment; RoU property, plant and equipment; investments in joint ventures and associates).
| in thousands of € | 2019 | % of total | 2020 | % of total |
|---|---|---|---|---|
| Consolidated third party sales | ||||
| from Belgium | 341 696 | 8% | 272 187 | 7% |
| from Chile | 385 282 | 9% | 348 906 | 9% |
| from China | 921 153 | 21% | 841 825 | 22% |
| from USA | 703 660 | 16% | 553 461 | 15% |
| from Slovakia | 343 124 | 8% | 320 459 | 8% |
| from other countries | 1 627 535 | 38% | 1 435 535 | 39% |
| Total third party consolidated sales | 4 322 450 | 100% | 3 772 374 | 100% |
| Selected non-current assets | ||||
| in Belgium | 137 619 | 7% | 120 396 | 7% |
| in Chile | 90 051 | 5% | 84 340 | 5% |
| in China | 342 611 | 18% | 300 702 | 18% |
| in USA | 139 802 | 7% | 118 356 | 7% |
| in Slovakia | 141 388 | 8% | 129 278 | 8% |
| in other countries | 1 017 952 | 55% | 899 358 | 55% |
| Total selected non-current assets | 1 869 423 | 100% | 1 652 429 | 100% |
Bekaert's top 5 customers together represented 20% (2019: 21%) of the Group's total consolidated sales, while the next top 5 customers represented another 7% (2019: 8%) of the Group's total consolidated sales.
The Group recognizes revenue from the following sources: delivery of products and, to a limited extent, of services and projects. Bekaert assessed that the delivery of products represents the main performance obligation. The Group recognizes revenue at a point in time when it transfers control over a product to a customer. Customers obtain control when the products are delivered (based on the related inco terms in place). The amount of revenue recognized is adjusted for volume discounts. No adjustment is made for returns nor for warranty nor for variable compensation as the impact is deemed immaterial based on historical information.
Disaggregating revenue by timing of revenue recognition, i.e. at a point in time vs over time (as is customary for engineering activities) does not add much value, as sales of machines to third parties contribute very little to total sales.
| in thousands of € | 2019 | % of total | 2020 | % of total |
|---|---|---|---|---|
| Sales of products | 4 311 201 | 99.7% | 3 765 501 | 99.8% |
| Sales of machines by engineering | 10 814 | 0.3% | 6 519 | 0.2% |
| Other sales | 435 | 0.0% | 354 | 0.0% |
| Net sales | 4 322 450 | 100% | 3 772 374 | 100% |
In the following table, net sales is disaggregated by industry including a reconciliation of the net sales by industry with the Group's operating segments (see note 4.1. 'Key data by reporting segment'). This analysis is also often presented in press releases, shareholders' guides and other presentations.
| 2019 in thousands of € |
Reinforce ment |
Steel Wire Solutions |
Specialty Businesses |
BBRG | Group Consolidated | |
|---|---|---|---|---|---|---|
| Industry | ||||||
| Tire & Automotive | 1 843 534 | 163 620 | 39 134 | 7 842 | - | 2 054 130 |
| Energy & Utilities | 445 | 174 990 | 46 810 | 92 986 | - | 315 231 |
| Construction | 558 | 448 795 | 285 962 | 66 078 | - | 801 393 |
| Consumer Goods | 132 | 225 075 | 3 207 | - | - | 228 414 |
| Agriculture | - | 257 477 | - | 31 926 | - | 289 403 |
| Equipment | 93 884 | 54 919 | 3 715 | 140 783 | 19 193 | 312 494 |
| Basic Materials | 14 328 | 103 492 | 35 087 | 149 042 | - | 301 949 |
| Other | - | 19 436 | - | - | - | 19 436 |
| Total | 1 952 881 | 1 447 804 | 413 915 | 488 657 | 19 193 | 4 322 450 |
| 2020 in thousands of € |
Rubber Reinforce ment |
Steel Wire Solutions |
Specialty Businesses |
BBRG | Group Consolidated | |
|---|---|---|---|---|---|---|
| Industry | ||||||
| Tire & Automotive | 1 535 462 | 133 083 | 30 112 | 7 200 | - | 1 705 857 |
| Energy & Utilities | 85 | 183 525 | 22 118 | 78 296 | - | 284 024 |
| Construction | 7 | 378 062 | 293 574 | 60 367 | - | 732 010 |
| Consumer Goods | - | 99 798 | 3 754 | - | - | 103 552 |
| Agriculture | - | 261 174 | - | 38 126 | - | 299 300 |
| Equipment | 68 307 | 74 357 | 3 937 | 116 585 | 10 991 | 274 177 |
| Basic Materials | 10 215 | 203 513 | 35 940 | 123 785 | - | 373 453 |
| Total | 1 614 077 | 1 333 513 | 389 434 | 424 359 | 10 991 | 3 772 374 |
| Sales and gross profit | |||
|---|---|---|---|
| in thousands of € | 2019 | 2020 | variance (%) |
| Sales | 4 322 450 | 3 772 374 | -12.7% |
| Cost of sales | -3 795 320 | -3 214 056 | -15.3% |
| Gross profit | 527 131 | 558 318 | 5.9% |
| Gross profit in % of sales | 12.2% | 14.8% |
Bekaert achieved consolidated sales of € 3.8 billion in 2020, well below last year (-12.7%) due to the heavy impact of the Covid-19 pandemic in the first half of 2020. The organic sales decline (-9.7%) was driven by lower volumes (-8.3%) and passed-on wire rod price and other price-mix effects for the full year (-1.4%). The currency movements were -3.0% negative (mainly related to movements in US dollar, Chilean peso and Chinese renminbi).
The Group not only offset the impact on Gross profit from drop in sales, but even realized an increase of € 31.2 million (5.9%) in absolute terms, resulting in a margin of 14.8% (2019: 12.2%). This was realized due to positive mix effects from continued growth in good margin businesses, significant progress in the profit restoration in Steel Wire Solutions as well in BBRG, impact of mitigation actions in response to Covid-19 economic implications and unfavorable impact from exchange rates (€ -18.0 million).
| Overheads | |||
|---|---|---|---|
| in thousands of € | 2019 | 2020 | variance (%) |
| Selling expenses | -188 606 | -167 141 | -11.4% |
| Administrative expenses | -127 676 | -133 526 | 4.6% |
| Research and development expenses | -70 729 | -52 361 | -26.0% |
| Total | -387 011 | -353 027 | -8.8% |
The overhead expenses decreased by € 34.0 million (9.4% on sales, stable compared to 2019). The decrease in absolute value was mainly achieved due to the full year impact of cost-out actions taken during the previous year and the impact of mitigation actions taken in Covid-19 times. The one-off impact from the restructuring programs on overheads decreased by € 5.7 million and mainly related to lay-off costs and the impairment of assets. In 2020, selling expenses included bad debt allowances recognized for € -5.4 million (2019: € -6.4 million) and reversal of bad debt allowances for amounts used and not used for € 4.9 million (2019: € 5.9 million).
| Other operating revenues | |||
|---|---|---|---|
| in thousands of € | 2019 | 2020 | variance |
| Royalties received | 12 997 | 10 139 | -2 858 |
| Gains on disposal of PP&E and intangible assets | 553 | 3 410 | 2 858 |
| Realized exchange results on sales and purchases | -1 137 | -1 047 | 90 |
| Government grants | 5 017 | 3 411 | -1 606 |
| Compensations received for claims | 1 475 | 3 192 | 1 717 |
| Restructuring 1 | 559 | 41 254 | 40 695 |
| Environmental | - | 16 218 | 16 218 |
| Other revenues | 8 191 | 8 081 | -110 |
| Total | 27 655 | 84 659 | 57 003 |
1 2020: mainly relates to disposal of PP&E
The royalty income decreased with 22% due to lower sales related to Covid-19. Government grants mainly related 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.
The gain on the disposal of PP&E and intangible assets contained in 2020 the revenues from the sale of assets in Belgium.
The compensations received for claims contained in 2020 compensations for business interruption due to Covid-19 for an amount of € 1.6 million.
In 2020 'Restructuring - revenues' contained mainly the proceeds from the sale of land and buildings following the plant closures due to restructuring and 'Restructuring - expenses' part of the cost (lay-off costs and impairment) related to the restructuring programs and plant closures.
In 2019 'Restructuring - expenses' contained part of the cost related to the restructuring programs in 2019.
'Environmental' related mainly to reversal of provisions in Belgium linked to disposal of assets and a reimbursement of soil and groundwater remediation in Italy.
The impairment losses in 2020 are mainly for assets in Belgium and the United States as a result of the closure of plants.
The other section of other operating expenses included in 2020 a penalty for cancellation of an electricity contract for a lower tariff. The other section of other operating revenues included in 2019 one-time windfalls on the closure of some employee benefit plans.
The following tables reconcile reported and underlying results and present an analysis of one-off items by category (as defined in note 2.6. 'Alternative performance measures'), operating segment and income statement line item.
| 2019 | 2020 | |||||
|---|---|---|---|---|---|---|
| EBIT Reported and Underlying in thousands of € |
reported | of which underlying |
of which one-offs |
reported | of which underlying |
of which one-offs |
| Sales | 4 322 450 | 4 322 450 | - | 3 772 374 | 3 772 374 | - |
| Cost of sales | -3 795 320 | -3 734 464 | -60 856 | -3 214 056 | -3 173 517 | -40 539 |
| Gross profit | 527 131 | 587 986 | -60 856 | 558 318 | 598 857 | -40 539 |
| Selling expenses | -188 606 | -182 692 | -5 914 | -167 141 | -162 602 | -4 538 |
| Administrative expenses | -127 676 | -118 467 | -9 208 | -133 526 | -121 961 | -11 565 |
| Research and development expenses | -70 729 | -61 963 | -8 766 | -52 361 | -49 857 | -2 504 |
| Other operating revenues | 27 655 | 27 096 | 559 | 84 659 | 27 187 | 57 472 |
| Other operating expenses | -12 758 | -10 052 | -2 706 | -33 422 | -19 379 | -14 043 |
| Operating result (EBIT) | 155 017 | 241 909 | -86 891 | 256 527 | 272 244 | -15 717 |
| Admini | Other | Other | |||||
|---|---|---|---|---|---|---|---|
| One-off items 2019 | Cost of | Selling | strative | operating | operating | ||
| in thousands of € | Sales | expenses | expenses | R&D | revenues | expenses | Total |
| Restructuring programs by segment | |||||||
| Rubber Reinforcement 1 | -15 017 | -39 | -31 | - | 0 | -12 | -15 099 |
| Steel Wire Solutions 2 | -20 025 | -1 322 | -672 | - | 167 | -1 378 | -23 230 |
| Specialty Businesses 3 | -12 846 | -2 596 | -66 | -226 | 69 | -633 | -16 297 |
| Bridon-Bekaert Ropes Group | |||||||
| (BBRG) | -3 176 | -30 | -1 414 | - | - | -35 | -4 655 |
| Group 4 | -5 933 | -1 894 | -6 588 | -8 440 | 322 | -599 | -23 132 |
| Total restructuring programs | -56 997 | -5 881 | -8 771 | -8 666 | 559 | -2 657 | -82 413 |
| Impairment losses/ (reversals of | |||||||
| impairment losses) other than | |||||||
| restructuring | |||||||
| Bridon-Bekaert Ropes Group | |||||||
| (BBRG) | 2 247 | - | - | - | - | - | 2 247 |
| Total other impairment | |||||||
| losses/(reversals) | 2 247 | - | - | - | - | - | 2 247 |
| Environmental provisions/ | |||||||
| (reversals of provisions) | |||||||
| Steel Wire Solutions | 322 | - | - | - | - | - | 322 |
| Total environmental | |||||||
| provisions/(reversals) | 322 | - | - | - | - | - | 322 |
| Other events and transactions | |||||||
| Rubber Reinforcement 5 | -2 387 | - | - | - | - | - | -2 387 |
| Steel Wire Solutions 6 | -2 503 | - | - | - | - | - | -2 503 |
| Specialty Businesses 6 | -1 538 | - | - | -100 | - | - | -1 638 |
| Bridon-Bekaert Ropes Group | |||||||
| (BBRG) | - | - | -215 | - | - | -49 | -265 |
| Group | - | -32 | -222 | - | - | - | -254 |
| Total other events and | |||||||
| transactions | -6 428 | -32 | -437 | -100 | - | -49 | -7 046 |
| Total | -60 856 | -5 914 | -9 208 | -8 766 | 559 | -2 706 | -86 891 |
1 Related mainly to lay-off costs and impairment of assets due to the restructuring in North America.
2 Related mainly to lay-off costs and impairment of assets due to the restructuring in Malaysia, North America and Belgium.
3 Related mainly to lay-off costs and impairment of assets due to the closure of the plant in Moen (Belgium).
4 Related mainly to lay-off costs due to the restructuring in Belgium.
5 Related mainly to operational losses and expenses incurred during labor agreement negotiations in Bekaert Sardegna (Italy).
6 Related mainly to the impact of the go-slow actions in Belgium.
| Admini | Other | Other | |||||
|---|---|---|---|---|---|---|---|
| One-off items 2020 | Cost of | Selling | strative | operating | operating | ||
| in thousands of € | Sales | expenses | expenses | R&D | revenues | expenses | Total |
| Restructuring programs by segment | |||||||
| Rubber Reinforcement 1 | -3 427 | -1 335 | -402 | - | 283 | -1 105 | -5 986 |
| Steel Wire Solutions 2 | -7 754 | -992 | -985 | - | 2 609 | -850 | -7 972 |
| Specialty Businesses 3 | -7 869 | -560 | -23 | -130 | 751 | -1 039 | -8 870 |
| Bridon-Bekaert Ropes Group | |||||||
| (BBRG) 4 | -8 957 | 5 | -191 | - | 55 | -1 174 | -10 262 |
| Group 5 | -10 685 | -951 | -9 680 | -2 374 | 37 738 | -9 664 | 4 385 |
| Intersegment | - | - | - | - | -181 | - | -181 |
| Total restructuring programs | -38 692 | -3 833 | -11 280 | -2 504 | 41 254 | -13 832 | -28 887 |
| Business disposals | |||||||
| Group 6 | - | -705 | - | - | - | - | -705 |
| Total business disposals | - | -705 | - | - | - | - | -705 |
| Environmental provisions/ | |||||||
| (reversals of provisions) | |||||||
| Rubber Reinforcement | -2 192 | - | - | - | - | - | -2 192 |
| Group 7 | - | - | - | - | 16 218 | - | 16 218 |
| Total environmental | |||||||
| provisions/(reversals) | -2 192 | - | - | - | 16 218 | - | 14 026 |
| Other events and transactions | |||||||
| Steel Wire Solutions | - | - | -199 | - | - | - | -199 |
| Specialty Businesses | - | - | - | - | - | -171 | -171 |
| Bridon-Bekaert Ropes Group | |||||||
| (BBRG) | 345 | - | - | - | - | -41 | 304 |
| Group | - | - | -85 | - | - | -85 | |
| Total other events and | |||||||
| transactions | 345 | - | -284 | - | - | -212 | -151 |
| Total | -40 539 | -4 538 | -11 565 | -2 504 | 57 472 | -14 043 | -15 717 |
1 Related mainly to lay-off costs, the closure of Figline plant (Italy) and the restructuring in India.
2 Related mainly to lay-off costs and impairment of assets due to the restructuring in Belgium.
3 Related mainly to lay-off-costs and impairment of assets due to the restructuring in China, the closure of the plant in Moen (Belgium) and lay-off costs due to the restructuring in Belgium.
4 Related mainly to impairment of assets due the planned closure of the company in Canada and lay-off costs due to the restructuring in the UK.
5 Related mainly to lay-off costs due to the restructuring in Belgium and gain on disposal of land and buildings in Belgium.
6 Contractual liability indemnification related to previous divestments.
7 Related mainly to reversal of provisions in Belgium linked to disposal of assets and a reimbursement of soil and groundwater remediation in Italy.
The table below provides information on the major items contributing to the operating result (EBIT), categorized by nature.
| in thousands of € | 2019 | % on sales | 2020 | % on sales |
|---|---|---|---|---|
| Sales | 4 322 450 | 100% | 3 772 374 | 100% |
| Other operating revenues | 27 655 | - | 84 659 | - |
| Total operating revenues | 4 350 106 | - | 3 857 032 | - |
| Own construction of PP&E | 21 946 | 0.5% | 17 200 | 0.5% |
| Raw materials | -1 668 930 | -38.6% | -1 349 418 | -35.8% |
| Semi-finished products and goods for resale | -337 144 | -7.8% | -306 261 | -8.1% |
| Change in work-in-progress and finished goods | -81 658 | -1.9% | -43 634 | -1.2% |
| Staff costs | -861 117 | -19.9% | -796 051 | -21.1% |
| Depreciation and amortization | -229 069 | -5.3% | -202 103 | -5.4% |
| Impairment losses | -19 202 | -0.4% | -13 964 | -0.4% |
| Transport and handling of finished goods | -182 697 | -4.2% | -164 390 | -4.4% |
| Consumables and spare parts | -241 698 | -5.6% | -217 900 | -5.8% |
| Utilities | -259 727 | -6.0% | -224 534 | -6.0% |
| Maintenance and repairs | -65 435 | -1.5% | -57 147 | -1.5% |
| Lease and related expenses | -9 883 | -0.2% | -8 503 | -0.2% |
| Commissions in selling expenses | -8 120 | -0.2% | -6 315 | -0.2% |
| Export VAT and export customs duty | -11 928 | -0.3% | -2 432 | -0.1% |
| ICT costs | -39 363 | -0.9% | -39 208 | -1.0% |
| Advertising and sales promotion | -6 715 | -0.2% | -5 328 | -0.1% |
| Travel, restaurant & hotel | -24 005 | -0.6% | -8 181 | -0.2% |
| Consulting and other fees | -29 956 | -0.7% | -29 753 | -0.8% |
| Office supplies and equipment | -9 110 | -0.2% | -8 451 | -0.2% |
| Venture capital funds R&D | -1 974 | 0.0% | -1 973 | -0.1% |
| Temporary or external labor | -31 907 | -0.7% | -27 261 | -0.7% |
| Insurance expenses | -8 762 | -0.2% | -10 692 | -0.3% |
| Miscellaneous | -88 636 | -2.1% | -94 207 | -2.5% |
| Total operating expenses | -4 195 089 | -97.1% | -3 600 506 | -95.4% |
| Operating result (EBIT) | 155 017 | 3.6% | 256 527 | 6.8% |
The impairment losses of the current year mainly related to restructuring programs in China and Belgium and the closure of the company in Canada. The depreciation and amortization included write-downs / (reversals of write-downs) on inventories and trade receivables.
| in thousands of € | 2019 | 2020 |
|---|---|---|
| Interest income on financial assets not classified as at FVTPL | 2 841 | 3 386 |
| Interest income | 2 841 | 3 386 |
| Interest expense on interest-bearing debt not classified as at FVTPL | -56 072 | -51 159 |
| Other debt-related interest expense | -8 839 | -5 536 |
| Debt-related interest expense | -64 911 | -56 695 |
| Interest element of discounted provisions | -4 255 | -2 859 |
| Interest expense | -69 166 | -59 554 |
| Total | -66 324 | -56 168 |
The decrease in interest expense was mainly due to a strong decrease in the interest expense linked to derivatives. There was a strong reduction in intercompany loans and third party debt in foreign currency, causing an equal decrease in the volume of derivatives entered into to hedge the underlying interest risk (see note 7.2. 'Financial risk management and financial derivatives'). Secondly, the decrease in common interest expense is linked to a further decrease in interest rates.
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 interest-rate risk mitigating derivatives entered into as economic hedges.
Of the interest element of discounted provisions, € -2.8 million (2019: € -4.1 million) related to defined-benefit liabilities (see note 6.16. 'Employee benefit obligations') and € -0.1 million (2019: € -0.2 million) related to other provisions (see note 6.17. 'Provisions').
| in thousands of € | 2019 | 2020 |
|---|---|---|
| Value adjustments to derivatives | 1 241 | 567 |
| Exchange results on hedged items | -5 162 | -9 765 |
| Net impact of derivatives and hedged items | -3 921 | -9 198 |
| Other exchange results | -9 071 | -17 934 |
| Gains and losses on disposal of financial assets | -21 | - |
| Dividends from non-consolidated equity investments | 543 | 1 184 |
| Bank charges and taxes on financial transactions | -4 015 | -3 376 |
| Impairments of other receivables | -524 | - |
| Other | -1 362 | -842 |
| Total | -18 371 | -30 165 |
Value adjustments include changes in the fair value of all derivatives, other than those designated as cash flow hedges. Exchange results on hedged items also relate to economic hedges only. 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, see note 7.2. 'Financial risk management and financial derivatives'.
Value adjustments to derivatives included a fair value gain of € 1.1 million in 2020 (2019: gain of € 2.6 million), of which € 1.0 million related to a virtual power purchase agreement and € 0.1 million was linked to the conversion option relating to the convertible debt issued in June 2016 (see the 'Financial instruments by fair value measurement hierarchy' section in note 7.2. 'Financial risk management and financial derivatives').
Other exchange results amounted in 2020 to € -17.9 million. The increase is mainly due to the devaluation of the Turkish lira, the Brazilian real and the US dollar, resulting in unrealized an realized FX results on working capital items and intercompany loans. The bank charges and taxes on financial transactions included charges linked to the factoring programs.
All dividends from non-consolidated equity investments related to investments still held at reporting date as no shares were sold during the year.
| in thousands of € 2019 |
2020 |
|---|---|
| Current income taxes - current year -56 828 |
-58 130 |
| Current income taxes - prior periods 377 |
21 386 |
| Deferred taxes - due to changes in temporary differences -7 630 |
-32 159 |
| Deferred taxes - due to changes in tax rates -1 203 |
-2 214 |
| Deferred taxes - adjustments to tax losses of prior periods -3 950 |
6 990 |
| Deferred taxes - utilization of deferred tax assets not previously recognized 18 153 |
7 614 |
| Total tax expense -51 081 |
-56 513 |
In the table below, accounting profit is defined as the result before taxes.
| in thousands of € | 2019 | 2020 |
|---|---|---|
| Result before taxes | 70 322 | 170 194 |
| Tax expense at the theoretical domestic rates applicable to results of taxable entities in | ||
| the countries concerned | -20 654 | -46 943 |
| Theoretical tax rate 1 | -29.4% | -27.6% |
| Tax effect of: | ||
| Non-deductible items | -11 684 | -8 528 |
| Disallowed interest expense (thin cap) 2 | -4 214 | -31 |
| Other tax rates, tax credits and special tax regimes 3 | 16 381 | 13 334 |
| Non-recognition of deferred tax assets 4 | -35 287 | -33 855 |
| Utilization or recognition of deferred tax assets not previously recognized 5 | 18 153 | 7 614 |
| Deferred tax due to change in tax rates | -1 203 | -2 214 |
| Tax relating to prior periods 6 | -3 573 | 28 376 |
| Exempted income | 10 | 129 |
| Withholding taxes on dividends, royalties, interests & services | -14 085 | -15 864 |
| Other | 5 075 | 1 469 |
| Total tax expense | -51 081 | -56 513 |
| Effective tax rate | -72.6% | -33.2% |
1 The theoretical tax rate is computed as a weighted average taking into account the results before taxes in different countries at different rates.
2 The disallowed interest expenses decreased significantly in 2020 as a consequence of better results before taxes leading to higher deductability of interests, and an intercompany loan restructuring with respect to BBRG.
3 In 2020, the special tax regimes and tax credits mainly related to tax incentives in Belgium whereas in 2019 mainly Belgium and the Netherlands contributed.
4 In 2020, the non-recognition of deferred tax assets mainly related to losses carried forward in Brazil, Canada, China, Chile, Germany, Italy and the USA, and to impaired assets of the Sawing Wire business in China while in 2019, it mainly related to losses carried forward in Belgium, Canada, China, Costa Rica, Germany, Malaysia and the USA.
5 In 2020, the movement was mainly triggered by usage of losses carried forward and recognition of deferred tax assets previously not recognized, similar as in 2019.
6 In 2020 a number of pending tax audits in different countries were finalized, leading to an additional tax expense on the one hand but also to the release of related provisions for uncertain tax positions on the other hand. In 2019, this item mainly related to the outcome of tax audits.
In 2020, the share in the result of joint ventures and associates reflected the better performance of both Steel Wire Solutions and Rubber Reinforcement businesses. The increase in performance was more than offsetting the significant impact from currency movements between the Brazilian real and the euro (average rate decreased by 33.4% from 2019 to 2020).
Additional information relating to the Brazilian joint ventures is provided under note 6.5. 'Investments in joint ventures and associates'.
| in thousands of € | 2019 | 2020 | |
|---|---|---|---|
| Joint ventures | |||
| Agro-Bekaert Colombia SAS | Colombia | - | -244 |
| Agro - Bekaert Springs, SL | Spain | - | -6 |
| Belgo Bekaert Arames Ltda | Brazil | 23 326 | 27 631 |
| BMB-Belgo Mineira Bekaert Artefatos de Arame Ltda | Brazil | 5 751 | 7 121 |
| Servicios Ideal AGF Inttegra Cía Ltda | Ecuador | -119 | -147 |
| Total | 28 959 | 34 355 |
| 2019 | Number | |
|---|---|---|
| Weighted average number of ordinary shares (basic) | 56 514 831 | |
| Dilution effect of share-based payment arrangements | 72 433 | |
| Dilution effect of convertible bond 1 | - | |
| Weighted average number of ordinary shares (diluted) | 56 587 264 | |
| in thousands of € | Basic | Diluted |
| Result for the period attributable to ordinary shareholders | 41 329 | 41 329 |
| Effect on earnings of convertible bond 1 | - | - |
|---|---|---|
| Earnings | 41 329 | 41 329 |
| Earnings per share (in €) | 0.731 | 0.730 |
| 2020 | Number | |
|---|---|---|
| Weighted average number of ordinary shares (basic) | 56 554 555 | |
| Dilution effect of share-based payment arrangements | 85 471 | |
| Dilution effect of convertible bond 1 | 7 493 591 | |
| Weighted average number of ordinary shares (diluted) | 64 133 617 | |
| in thousands of € | Basic | Diluted |
| Result for the period attributable to ordinary shareholders | 134 687 | 134 687 |
| Effect on earnings of convertible bonds 1 | 10 613 | |
| Earnings | 134 687 | 145 300 |
| Earnings per share (in €) | 2.382 | 2.266 |
1 Not to be reported if the effect of the convertible bond is anti-dilutive, i.e.if its effect is such that if 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 equity holders of Bekaert divided by the weighted average number of shares outstanding during the year. Diluted EPS reflects any commitments of the Group to issue shares in the future. These comprise shares to be issued for equity-settled share-based payment plans (subscription rights, options, performance shares and matching shares, see note 6.13. 'Ordinary shares, treasury shares and equity-settled share-based payments') and potentially for the settlement of the convertible bond. Subscription rights, options and other share-based payment arrangements are only dilutive to the extent that their issue price is lower than the average closing price of the period, in which the issue price includes the fair value of any services to be rendered during the remainder of the vesting period. Contingently issuable shares (e.g. performance shares) are only dilutive if the conditions are satisfied at the balance sheet date. The dilution effect of share-based payment arrangements is limited to the weighted average number of shares to be used in the denominator of the EPS ratio; there is no effect on the earnings to be used in the numerator of the EPS ratio. The convertible bond tends to affect both the denominator and the numerator of the EPS ratio. The dilution effect of the convertible bond on the earnings (to be used in the numerator of the EPS ratio) consists of a reversal of all income and expenses directly related to the convertible bonds and having affected the 'basic' earnings for the period. Following income statement items were affected by the convertible bond:
To calculate the dilution impact, it is assumed that all dilutive potential shares are issued at the beginning of the period, or, if the instruments were granted during the period, at the grant date. Bekaert has the option to settle the notional amount of the bond in ordinary shares or in cash, but any share price increase over and above the conversion price should be settled in shares. Bekaert has a call option on the conversion option when the share price exceeds the conversion price by 30.0%, which caps the amount of shares to be converted at 1.7 million. Management does not intend to settle the notional amount in shares and has already bought back enough shares to cover the call option. Nevertheless, in accordance with IAS 33 'Earnings per share', the number to be added to the denominator equates to the 7.5 million potential shares corresponding with the notional amount of the bond divided by the conversion price. This resulted in a total dilution effect of € -0.116 per share (2019: € -0.001), of which € -0.004 related to the share-based payment arrangements (2019: € -0.001) and of which € -0.112 related to the convertible bond (2019: anti-dilutive).
The average closing price during 2020 was € 19.92 per share (2019: € 23.96 per share). The following table presents all antidilutive instruments for the period presented. Options and subscription rights were out of the money because their issue price exceeded the average closing price, while performance shares were antidilutive because the performance condition was not fulfilled.
| Issue price | Number | Number | ||
|---|---|---|---|---|
| Antidilutive instruments | Date granted | (in €) | granted | outstanding |
| SOP2 - options | 19.02.2007 | 30.175 | 37 500 | 10 000 |
| SOP2 - options | 18.02.2008 | 28.335 | 30 630 | 19 320 |
| SOP 2005-2009 - subscription rights | 19.02.2007 | 30.175 | 153 810 | 8 970 |
| SOP 2005-2009 - subscription rights | 18.02.2008 | 28.335 | 215 100 | 54 850 |
| SOP 2010-2014 - options | 20.02.2012 | 25.140 | 287 800 | 54 100 |
| SOP 2010-2014 - options | 28.05.2013 | 21.450 | 260 000 | 127 500 |
| SOP 2010-2014 - options | 17.02.2014 | 25.380 | 373 450 | 182 800 |
| SOP 2010-2014 - options | 16.02.2015 | 26.055 | 349 810 | 286 500 |
| SOP 2015-2017 - options | 15.02.2016 | 26.375 | 227 250 | 197 500 |
| SOP 2015-2017 - options | 13.02.2017 | 39.430 | 273 325 | 226 200 |
| SOP 2015-2017 - options | 20.02.2018 | 34.600 | 225 475 | 217 100 |
| Licenses, patents & |
||||||
|---|---|---|---|---|---|---|
| Cost | similar | Computer | Rights to | Commercial | ||
| in thousands of € | rights | software | use land | assets | Other | Total |
| As at 1 January 2019 | 23 587 | 87 787 | 65 246 | 55 053 | 14 466 | 246 138 |
| Expenditure | 30 | 4 331 | - | - | - | 4 361 |
| Disposals and retirements | -963 | -15 | - | - | -91 | -1 069 |
| Transfers 1 | 782 | -655 | -65 246 | -1 183 | 1 230 | -65 072 |
| Exchange gains and losses (-) | 338 | 200 | - | 2 539 | 603 | 3 680 |
| As at 31 December 2019 | 23 773 | 91 649 | - | 56 408 | 16 208 | 188 037 |
| As at 1 January 2020 | 23 773 | 91 649 | - | 56 408 | 16 208 | 188 037 |
| Expenditure | - | 3 214 | - | - | - | 3 214 |
| New consolidations | - | 7 | - | - | - | 7 |
| Disposals and retirements | - | -2 048 | - | - | - | -2 048 |
| Transfers 1 | 2 601 | 216 | - | -37 | - | 2 779 |
| Exchange gains and losses (-) | -34 | -1 566 | - | -2 081 | -642 | -4 323 |
| As at 31 December 2020 | 26 340 | 91 472 | - | 54 290 | 15 566 | 187 667 |
| 131 636 | |||||
|---|---|---|---|---|---|
| 1 622 | 4 511 | - | 3 584 | 800 | 10 517 |
| - | -223 | - | - | - | -223 |
| -337 | -12 | - | - | -91 | -440 |
| - | -15 309 | -466 | 466 | -15 309 | |
| 334 | 136 | - | 641 | 480 | 1 591 |
| 15 859 | 77 730 | - | 18 487 | 15 696 | 127 772 |
| 15 859 | 77 730 | - | 18 487 | 15 696 | 127 772 |
| 1 655 | 4 815 | - | 3 311 | 108 | 9 890 |
| - | 103 | - | - | - | 103 |
| - | -2 039 | - | - | - | -2 039 |
| -3 | -1 498 | - | -604 | -616 | -2 722 |
| 17 510 | 79 111 | - | 21 194 | 15 188 | 133 003 |
| 7 914 | 13 919 | - | 37 921 | 512 | 60 266 |
| 8 830 | 12 361 | - | 33 096 | 378 | 54 664 |
| 14 239 | 73 318 | 15 309 | 14 729 | 14 041 |
1 Total transfers equal zero when aggregating the balances of 'Intangible assets' and 'Property, plant and equipment' (see note 6.3. 'Property, plant and equipment' and 6.4. 'Right-of-use (RoU) property, plant and equipment').
The software expenditure mainly related to additional licenses for and implementations of the MES project (Manufacturing Excellence System), digitalization projects and ERP software (SAP) in general.
Following the adoption of IFRS 16 'Leases' in 2019, any rights to use land acquired in the past have been reclassified to the balance sheet caption 'Right-of-use property, plant and equipment' (see note 6.4. 'Right-of-use (RoU) property, plant and equipment').
No intangible assets have been identified as having an indefinite useful life at the balance sheet date.
This note mainly relates to goodwill on acquisition of subsidiaries. Goodwill in respect of joint ventures and associates is disclosed in note 6.5. 'Investments in joint ventures and associates'.
| Cost | ||
|---|---|---|
| in thousands of € | 2019 | 2020 |
| As at 1 January | 154 192 | 155 024 |
| New consolidations | - | 598 |
| Exchange gains and losses (-) | 832 | -1 342 |
| As at 31 December | 155 024 | 154 280 |
| Impairment losses | ||
| in thousands of € | 2019 | 2020 |
| As at 1 January | 4 937 | 5 240 |
| Exchange gains (-) and losses | 303 | -358 |
| As at 31 December | 5 240 | 4 883 |
Carrying amount as at 31 December 149 784 149 398
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:
| 2019 in thousands of € |
Group of cash-generating units |
Carrying amount 1 January |
Increases Impairments | Exchange differences |
Carrying amount 31 December |
|
|---|---|---|---|---|---|---|
| Subsidiaries | ||||||
| SWS | Bekaert Bradford UK Ltd | 2 502 | - | - | 129 | 2 631 |
| SB | Combustion - heating EMEA | 3 027 | - | - | - | 3 027 |
| SB | Building Products | 71 | - | - | - | 71 |
| RR | Rubber Reinforcement | 4 255 | - | - | - | 4 255 |
| SWS | Orrville plant (USA) | 10 245 | - | - | 197 | 10 442 |
| SWS | Inchalam group | 799 | - | - | -49 | 750 |
| SWS | Bekaert Ideal SL companies | 844 | - | - | - | 844 |
| SWS | Bekaert (Qingdao) Wire Products Co Ltd |
385 | - | - | - | 385 |
| SWS | Bekaert Jiangyin Wire Products Co Ltd |
47 | - | - | - | 47 |
| BBRG | BBRG | 127 080 | 252 | 127 332 | ||
| Subtotal | 149 255 | - | - | 529 | 149 784 | |
| Joint ventures and associates | ||||||
| SWS | Belgo Bekaert Arames Ltda | 3 382 | - | - | -54 | 3 328 |
| RR | BMB-Belgo Mineira Bekaert Artefatos de Arame Ltda |
2 068 | - | - | -33 | 2 035 |
| Subtotal | 5 450 | - | - | -87 | 5 363 | |
| Total | 154 705 | - | - | 443 | 155 148 |
| 2020 in thousands of € |
Group of cash-generating units |
Carrying amount 1 January |
Increases Impairments | Exchange differences |
Carrying amount 31 December |
|
|---|---|---|---|---|---|---|
| Subsidiaries | ||||||
| SWS | Bekaert Bradford UK Ltd | 2 631 | - | - | -141 | 2 490 |
| SB | Combustion - heating EMEA | 3 027 | - | - | - | 3 027 |
| SB | Building Products | 71 | - | - | - | 71 |
| RR | Rubber Reinforcement | 4 255 | - | - | - | 4 255 |
| SWS | Orrville plant (USA) | 10 442 | - | - | -882 | 9 560 |
| SWS | Inchalam group | 750 | - | - | -23 | 727 |
| SWS | Bekaert Ideal SL companies | 844 | - | - | - | 844 |
| SWS | Bekaert (Qingdao) Wire | |||||
| Products Co Ltd | 385 | - | - | - | 385 | |
| SWS | Bekaert Jiangyin Wire Products | |||||
| Co Ltd | 47 | - | - | - | 47 | |
| SWS | Grating Peru SAC | - | 598 | - | -51 | 547 |
| BBRG | BBRG | 127 332 | - | - | 113 | 127 445 |
| Subtotal | 149 784 | 598 | - | -984 | 149 398 | |
| Joint ventures and associates | ||||||
| SWS | Belgo Bekaert Arames Ltda | 3 328 | - | - | -970 | 2 358 |
| RR | BMB-Belgo Mineira Bekaert | |||||
| Artefatos de Arame Ltda | 2 035 | - | - | -593 | 1 442 | |
| Subtotal | 5 363 | - | - | -1 563 | 3 800 | |
| Total | 155 148 | 598 | - | -2 547 | 153 198 |
In relation to the impairment testing of goodwill arising from the BBRG business combination, the following model characteristics have been used:
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. 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.
The headroom for impairment, ie the excess of the recoverable amount over the carrying amount of the BBRG CGU is estimated at € 218.7 million (2019: € 76.9 million). The increase is the combined result of the updated business plan (€ +78.9 million) and a decrease of the capital employed of the business (€ -62.9 million). The headroom increased by € 114.2 million compared to half year at which time an impairment testing was done based upon a conservative update of the last year's business plan. Compared to this situation, the increase of the headroom at year-end is a combined result of the new business plan (€ 115.7 million, mainly coming from an improvement of EBITDA margin with 100 bps and from a higher compound annual growth rate (CAGR) over the explicit forecasted period with 155 bps), a decrease of the capital employed (impact of € 39.2 million), offset by an increase of the implied discount rate (€ -50.7 million).
The following scenario's illustrate the sensitivity of this headroom to changes in the key assumptions of the business plan:
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.
Furthermore, as a result of the changes in the current economic environment related to the Covid-19 pandemic, management performed impairment tests for all its Cash Generating Units (CGU's), also for the ones to which no goodwill is allocated. Based on these tests, management concluded no impairment losses are to be recognized at this point in time:
EUR region USD region CNY region
| Group target ratios | |||||
|---|---|---|---|---|---|
| Gearing: net debt / equity | 50% | ||||
| % debt | 33% | ||||
| % equity | 67% | ||||
| % LT debt | 75% | ||||
| % ST debt | 25% | ||||
| Cost of Bekaert debt | 1.4% | 3.5% | 5.0% | ||
| Long term interest rate | 1.7% | 3.9% | 5.1% | ||
| Short term interest rate | 0.5% | 2.3% | 4.6% | ||
| Cost of Bekaert equity (post tax) | = Rf + β . Em | 7.7% | 9.5% | 12.8% | |
| Risk free rate = Rf | -0.2% | 1.6% | 4.9% | ||
| Beta = β | 1.2 | ||||
| Market equity risk premium = Em | 6.6% | ||||
| Corporate tax rate | 27% | ||||
| Cost of Bekaert equity before tax | 10.6% | 13.1% | 17.6% | ||
| Bekaert WACC - nominal | 7.5% | 9.9% | 13.4% | ||
| Expected inflation | 1.7% | 1.8% | 2.9% | ||
| Bekaert WACC in real terms | 5.8% | 8.1% | 10.5% | ||
| Discount rates for impairment testing 2020 |
EUR region | USD region | CNY region | ||
| Group target ratios | |||||
| Gearing: net debt / equity | 50% | ||||
| % debt | 33% | ||||
| % equity | 67% | ||||
| % LT debt % ST debt |
75% 25% |
||||
| Cost of Bekaert debt | 1.2% | 3.8% | 4.8% | ||
| Long term interest rate | 1.5% | 4.2% | 4.9% | ||
| Short term interest rate | 0.4% | 2.7% | 4.4% | ||
| Cost of Bekaert equity (post tax) | |||||
| Risk free rate = Rf | = Rf + β . Em | 7.9% | 9.0% | 13.1% | |
| Beta = β | -0.3% | 0.8% | 4.9% | ||
| 1.3 | |||||
| Market equity risk premium = Em | 6.3% | ||||
| Corporate tax rate | 27% | ||||
| Cost of Bekaert equity before tax | 10.8% | 12.4% | 18.0% | ||
| Bekaert WACC - nominal | 7.6% | 9.5% | 13.6% | ||
| Expected inflation | 1.4% | 2.0% | 2.8% |
| Plant, | Furniture | Assets under |
|||||
|---|---|---|---|---|---|---|---|
| Cost | Land and | machinery and | and | Finance | Other | construc | |
| in thousands of € | buildings | equipment | vehicles | leases | PP&E | tion | Total |
| As at 1 January 2019 | 1 154 803 | 2 825 271 | 107 931 | 10 645 | 19 178 | 132 554 | 4 250 382 |
| Expenditure | 42 820 | 98 511 | 6 958 | - | 1 017 | -50 871 | 98 434 |
| Disposals and retirements | -1 635 | -25 254 | -3 517 | - | -412 | -19 | -30 838 |
| Transfers 1 | 1 417 | 1 250 | 61 | -10 645 | -2 658 | -173 | -10 748 |
| Exchange gains and losses (-) | 5 647 | 21 729 | 318 | - | 141 | 1 718 | 29 554 |
| As at 31 December 2019 | 1 203 052 | 2 921 507 | 111 751 | - | 17 266 | 83 209 | 4 336 784 |
| As at 1 January 2020 | 1 203 052 | 2 921 507 | 111 751 | - | 17 266 | 83 209 | 4 336 784 |
| Expenditure | 30 526 | 56 434 | 4 638 | - | 366 | 8 140 | 100 104 |
| Disposals and retirements | -23 901 | -94 052 | -5 109 | - | -1 014 | -195 | -124 271 |
| New consolidations | - | 250 | 19 | - | - | - | 268 |
| Transfers 1 | - | 2 254 | 39 | - | - | -2 817 | -524 |
| Reclassification to (-) / from | |||||||
| held for sale 2 | -8 482 | - | - | - | - | - | -8 482 |
| Exchange gains and losses (-) | -48 096 | -110 778 | -3 225 | - | -320 | -4 313 | -166 732 |
| As at 31 December 2020 | 1 153 100 | 2 775 614 | 108 112 | - | 16 298 | 84 023 | 4 137 147 |
| As at 1 January 2019 585 428 2 105 560 85 045 1 993 5 714 - Charge for the year 42 998 134 269 9 113 - 813 - Impairment losses - 23 127 37 - - - Reversal impairment losses and depreciations -410 -3 352 - - - - Disposals and retirements -470 -21 890 -3 263 - -442 - Transfers 1 727 - - -1 993 -727 - 3 647 14 057 303 - 98 - Exchange gains (-) and losses As at 31 December 2019 631 920 2 251 771 91 236 - 5 457 - As at 1 January 2020 631 920 2 251 771 91 236 - 5 457 - Charge for the year 41 434 111 237 8 236 - 760 - Impairment losses 1 931 14 779 210 - - - Reversal impairment losses and depreciations - -3 125 -16 - - - Disposals and retirements -15 797 -93 637 -4 913 - -784 - Transfers 1 - 788 - - - - Reclassification to (-) / from held for sale 2 -2 115 - - - - - -22 617 -74 523 -2 667 - -187 - Exchange gains (-) and losses As at 31 December 2020 634 755 2 207 291 92 087 - 5 246 - |
||||
|---|---|---|---|---|
| 2 783 740 | ||||
| 187 193 | ||||
| 23 164 | ||||
| -3 762 | ||||
| -26 064 | ||||
| -1 993 | ||||
| 18 106 | ||||
| 2 980 384 | ||||
| 2 980 384 | ||||
| 161 667 | ||||
| 16 920 | ||||
| -3 141 | ||||
| -115 131 | ||||
| 788 | ||||
| -2 115 | ||||
| -99 994 | ||||
| 2 939 379 |
1 Total transfers equal zero when aggregating the balances of 'Intangible assets' (see note 6.1. 'Intangible assets') and 'Right-of-use property, plant and equipment' (see note 6.4. 'Rights-of-use (RoU) property, plant and equipment) and 'Property, plant and equipment'.
2 In 2020, the reclassification to held for sale mainly relates to the buildings in Canada (see note 6.12. 'Assets classified as held for sale and liabilities associated with those assets').
| Assets | |||||||
|---|---|---|---|---|---|---|---|
| Plant, | Furniture | under | |||||
| Land and | machinery and | and | Finance | Other | construc | ||
| in thousands of € | buildings | equipment | vehicles | leases | PP&E | tion | Total |
| Carrying amount | |||||||
| as at 31 December 2019 | |||||||
| before investment grants | 571 132 | 669 736 | 20 515 | - | 11 809 | 83 209 | 1 356 401 |
| Net investment grants | -5 313 | -1 432 | - | - | - | - | -6 744 |
| Carrying amount | |||||||
| as at 31 December 2019 | 565 820 | 668 304 | 20 515 | - | 11 809 | 83 209 | 1 349 656 |
| Carrying amount | |||||||
| as at 31 December 2020 | |||||||
| before investment grants | 518 345 | 568 325 | 16 026 | - | 11 050 | 84 023 | 1 197 769 |
| Net investment grants | -4 704 | -1 284 | - | - | - | - | -5 988 |
| Carrying amount | |||||||
| as at 31 December 2020 | 513 641 | 567 041 | 16 026 | - | 11 050 | 84 023 | 1 191 781 |
Capital expenditure included capacity expansions and equipment upgrades across the group, but particularly in Rubber Reinforcement (in its plants in EMEA and China, as well as the start-up of its green field in Vietnam). Capital expenditure in the Steel Wire Solutions business was mainly in Central Europe and Latin America. In the Specialty Businesses segment, expansion capital expenditure was in Central Europe and India (Building Products), in Belgium (Fiber Technologies), and in the European plants of Combustion Technologies. Finally, capital expenditure in BBRG was mainly in its UK-based Ropes entity and in Advanced Cords plants.
As part of the announced closure of plants, impairment losses have been recorded in BBRG (Canada), Specialty Businesses (Combustion Technologies China) and Steel Wire Solutions (EMEA). In 2019, impairment losses have been recorded as part of the closure of plants in Steel Wire Solutions (North America and Malaysia) and in Specialty Businesses (Belgium).
From 2019 onwards, as per adoption of IFRS 16 'Leases', property, plant and equipment under finance leases are reported as right-of-use assets (see note 6.4. 'Right-of-use (RoU) property, plant and equipment').
No items of PP&E were pledged as securities.
This note provides information for leases where the group is a lessee. In principal, the Group does not act as a lessor. The balance sheet showed the following roll-forward during the year relating to right-of-use assets:
| RoU plant, machinery |
RoU | RoU | ||||||
|---|---|---|---|---|---|---|---|---|
| Cost | RoU | and | industrial | company | RoU office | RoU other | ||
| in thousands of € | RoU land | buildings | equipment | vehicles | cars | equipment | PP&E | Total |
| As at 1 January 2019 | - | - | - | - | - | - | - | - |
| RoU asset at transition date | - | 56 370 | 2 171 | 8 307 | 15 868 | 508 | 315 | 83 540 |
| New leases / extensions | 13 074 | 12 827 | 98 | 10 715 | 5 660 | 1 065 | 62 | 43 502 |
| Ending contracts / reductions in | ||||||||
| contract term | - | -5 147 | -300 | -3 596 | -1 363 | -28 | -4 | -10 438 |
| Transfers 1 | 65 246 | 7 712 | 2 364 | - | 500 | - | - | 75 821 |
| Exchange gains and losses (-) | 469 | 1 102 | 47 | -14 | 143 | 1 | - | 1 748 |
| As at 31 December 2019 | 78 789 | 72 863 | 4 381 | 15 411 | 20 808 | 1 547 | 373 | 194 173 |
| As at 1 January 2020 | 78 789 | 72 863 | 4 381 | 15 411 | 20 808 | 1 547 | 373 | 194 173 |
| New leases / extensions | - | 11 809 | 1 500 | 5 026 | 5 334 | 406 | 235 | 24 309 |
| Ending contracts / reductions in contract term |
-3 978 | -7 710 | -285 | -2 399 | -3 122 | -135 | -12 | -17 641 |
| Transfers 1 | - | - | -2 255 | - | - | - | - | -2 255 |
| Exchange gains and losses (-) | -3 434 | -3 276 | -135 | -545 | -396 | -87 | -8 | -7 881 |
| As at 31 December 2020 | 71 376 | 73 686 | 3 206 | 17 494 | 22 624 | 1 730 | 589 | 190 704 |
| Accumulated depreciation | ||||||||
| and impairment | ||||||||
| As at 1 January 2019 | - | - | - | - | - | - | - | - |
| Charge for the year | 1 384 | 10 844 | 973 | 4 959 | 6 676 | 304 | 72 | 25 212 |
| Ending contracts Transfers 1 |
- | -2 219 | -293 | -1 161 | -854 | -8 | - | -4 536 |
| 15 309 | 1 178 | 643 | - | 173 | - | - | 17 302 | |
| Change in accounting policy | - | 7 032 | - | - | - | - | - | 7 032 |
| Exchange gains (-) and losses | 117 | -16 | 9 | -17 | 20 | -1 | -1 | 111 |
| As at 31 December 2019 | 16 809 | 16 818 | 1 331 | 3 781 | 6 015 | 296 | 71 | 45 121 |
| As at 1 January 2020 | 16 809 | 16 818 | 1 331 | 3 781 | 6 015 | 296 | 71 | 45 121 |
| Charge for the year | 1 419 | 9 987 | 832 | 4 949 | 6 301 | 353 | 88 | 23 930 |
| Impairment losses | - | 59 | - | - | - | - | - | 59 |
| Ending contracts Transfers 1 |
-400 - |
-3 792 - |
-285 -788 |
-1 542 - |
-2 318 - |
-34 - |
-1 - |
-8 372 -788 |
| -627 | -853 | -36 | -163 | -147 | -25 | -3 | -1 853 | |
| Exchange gains (-) and losses | ||||||||
| As at 31 December 2020 | 17 201 | 22 219 | 1 055 | 7 026 | 9 852 | 590 | 155 | 58 097 |
| Carrying amount as at 31 December 2019 |
61 980 | 56 045 | 3 049 | 11 630 | 14 793 | 1 251 | 302 | 149 051 |
| Carrying amount as at 31 December 2020 |
54 175 | 51 467 | 2 151 | 10 468 | 12 773 | 1 141 | 433 | 132 607 |
1 Total transfers equal zero when aggregating the balances of 'Intangible assets' (see note 6.1. 'Intangible assets') and 'Property, plant and equipment' (see note 6.3. 'Property, plant and equipment') and 'Right-of-use property, plant and equipment'.
The Group leases various plants, offices, warehouses, equipment, industrial vehicles, company cars, servers and small office equipment like printers. Contracts may contain both lease and non-lease components. The Group allocates the consideration in the contract to the lease and non-lease components based on their relative stand-alone prices. However, for leases of company cars and industrial vehicles for which the Group is a lessee, it has elected not to separate lease and non-lease components and instead account for these as a single lease component. The main non-lease components included in the lease component relate to costs for maintenance and for replacement of tires. The Group applied the practical expedient for low value assets to leases of printers and small office equipment. The Group applied the practical expedient for short term leases (defined as leases with a lease term of 12 months or less). There were no contracts with dismantling costs, residual value guarantees or initial direct costs, nor contracts with variable lease expenses other then those linked to an index or rate.
Due to the Covid-19 pandemic, Bekaert entities received a small amount of rent concessions (€ 0.2 million). Bekaert has chosen to use the practical expedient and not to treat these as a contract modification under IFRS 16 'Leases'.
The average lease term for the RoU assets (excluding the RoU land) was 9.8 years (2019: 10.3 years). RoU buildings had an average lease term of 13 years (2019: 14 years) and the other categories of PP&E (excluding land) had an average lease term between 4 and 6 years.
RoU land relates to land use rights that were paid in advance and had an average useful live of 54 years.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is generally the case for leases in the Group, the lessee's incremental borrowing rate is used to discount the future lease payments. The incremental borrowing rate is the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions.
The incremental borrowing rate is determined by Group Treasury, taking into account the market rate per currency for different relevant time buckets and the credit margin for each individual company based on its credit rating. The incremental borrowing rate is calculated as the total of both elements. The weighted average discount rate at the end of 2020 was 4.09% (2019: 3.71%).
The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. For further information on the lease liability, we refer to note 6.18. 'Interest-bearing debt'.
The Group is exposed to potential future increases in variable lease payments, based on an index or rate, which are not included in the lease liability until they take effect. When adjustments to lease payments based on an index or rate take effect, the lease liability is reassessed and adjusted against the right-of-use asset.
Right-of-use assets were generally depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis.
The income statement showed the following amounts relating to leases:
| RoU plant, | ||||||||
|---|---|---|---|---|---|---|---|---|
| 2019 in thousands of € |
RoU land | RoU buildings |
machinery and equipment |
RoU office equipment |
RoU industrial vehicles |
RoU company cars |
RoU other PP&E |
Total |
| Depreciation charge of right-of | ||||||||
| use assets | -1 384 | -10 844 | -973 | -4 959 | -6 676 | -304 | -72 | -25 212 |
| Interest expense (included in finance cost) |
-3 689 | |||||||
| Expense relating to short-term | ||||||||
| leases | -695 | |||||||
| Expense relating to low-value | ||||||||
| leases | -669 | |||||||
| Total | -30 264 |
| 2020 | RoU | RoU plant, machinery and |
RoU office | RoU industrial |
RoU company |
RoU other | ||
|---|---|---|---|---|---|---|---|---|
| in thousands of € | RoU land | buildings | equipment | equipment | vehicles | cars | PP&E | Total |
| Depreciation charge of right-of | ||||||||
| use assets | -1 419 | -9 987 | -832 | -4 949 | -6 301 | -353 | -88 | -23 930 |
| Interest expense (included in | ||||||||
| finance cost) | -3 593 | |||||||
| Expense relating to short-term | ||||||||
| leases | -1 121 | |||||||
| Expense relating to low-value | ||||||||
| leases | -888 | |||||||
| Total | -29 532 |
The remaining operating lease expenses in the operating result mainly related to costs linked to leased assets such as fuel for company cars, non-deductible VAT on company car contracts and property taxes on buildings.
The total cash outflow for leases in 2020 was € 27.8 million (2019: € 29.1 million).
In 2020 and 2019, the Group had no investments in entities qualified as associates.
| Carrying amount | ||
|---|---|---|
| in thousands of € | 2019 | 2020 |
| As at 1 January | 148 221 | 155 302 |
| Capital increases and decreases | 128 | 872 |
| Result for the year | 28 959 | 34 355 |
| Dividends | -19 506 | -24 908 |
| Exchange gains and losses | -2 511 | -45 443 |
| Other comprehensive income | 11 | 3 |
| As at 31 December | 155 302 | 120 181 |
For an analysis of the result for the year, please refer to note 5.7. 'Share in the results of joint ventures and associates'.
Exchange gains and losses related mainly to the evolution of the Brazilian real versus the euro which declined in value significantly in 2020 (6.4 BRL/EUR end 2020 vs 4.5 BRL/EUR end 2019) while it remained stable in 2019.
Capital increases related to Agro - Bekaert Springs, SL and Agro-Bekaert Colombia SAS, new 50/50 joint ventures in Spain and Colombia, and to a lesser extent to Servicios Ideal AGF Inttegra Cía Ltda in Ecuador.
| Cost | ||
|---|---|---|
| in thousands of € | 2019 | 2020 |
| As at 1 January | 5 450 | 5 363 |
| Exchange gains and losses | -87 | -1 563 |
| As at 31 December | 5 363 | 3 800 |
| Carrying amount of related goodwill as at 31 December | 5 363 | 3 800 |
| Total carrying amount of investments in joint ventures as at 31 December | 160 665 | 123 981 |
The Group's share in the equity of joint ventures is analysed as follows:
| in thousands of € | 2019 | 2020 | |
|---|---|---|---|
| Joint ventures | |||
| Agro-Bekaert Colombia SAS | Colombia | - | 473 |
| Agro - Bekaert Springs, SL | Spain | - | 20 |
| Belgo Bekaert Arames Ltda | Brazil | 102 421 | 77 679 |
| BMB-Belgo Mineira Bekaert Artefatos de Arame Ltda | Brazil | 52 686 | 41 845 |
| Servicios Ideal AGF Inttegra Cía Ltda | Ecuador | 195 | 164 |
| Total for joint ventures excluding related goodwill | 155 302 | 120 181 | |
| Carrying amount of related goodwill | 5 363 | 3 800 | |
| Total for joint ventures including related goodwill | 160 665 | 123 981 |
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 Arcelor-Mittal when analyzing the relative importance of the joint ventures.
| Name of joint venture | ||||||
|---|---|---|---|---|---|---|
| in thousands of € | Country | 2019 | 2020 | |||
| 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.
| 2019 in thousands of € |
2020 |
|---|---|
| Sales 850 227 |
694 366 |
| Operating result (EBIT) 91 292 |
109 680 |
| Interest income 11 873 |
8 524 |
| Interest expense -10 440 |
-4 397 |
| Other financial income and expenses -1 807 |
-2 062 |
| Income taxes -16 366 |
-25 656 |
| Result for the period 74 552 |
86 089 |
| Other comprehensive income for the period 25 |
6 |
| Total comprehensive income for the period 74 577 |
86 095 |
| 24 050 Depreciation and amortization |
16 214 |
| EBITDA 115 342 |
125 894 |
| Dividends received from the entity 19 506 |
24 908 |
| in thousands of € | 2019 | 2020 |
|---|---|---|
| Current assets | 256 465 | 217 429 |
| Non-current assets | 254 482 | 189 957 |
| Current liabilities | -127 800 | -109 817 |
| Non-current liabilities | -39 493 | -33 600 |
| Net assets | 343 654 | 263 969 |
| in thousands of € | 2019 | 2020 |
|---|---|---|
| Non-current interest-bearing debt | 1 541 | 8 247 |
| Current interest-bearing debt | 19 900 | 17 252 |
| Total financial debt | 21 441 | 25 499 |
| Non-current financial receivables and cash guarantees | -18 955 | -18 862 |
| Cash and cash equivalents | -21 263 | -19 393 |
| Net debt | -18 777 | -12 756 |
In 2019, the ICMS tax rate decreased which enabled the Brazilian joint ventures to fully compensate the ICMS tax receivables in the course of 2020. At year-end 2019, a total carrying amount of € 2.7 million was outstanding. They have also been facing claims relating to ICMS credits totaling € 6.0 million (2019: € 8.9 million). Several other tax claims, most of which date back several years, were filed for a total nominal amount of € 11.6 million (2019: € 14.3 million). Evidently, any potential gains and 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%).
Unrecognized commitments to acquire property, plant and equipment amounted to € 4.6 million (2019: € 11.1 million), including € 2.7 million (2019: € 9.8 million) from other Bekaert companies. Furthermore, the Brazilian joint ventures have unrecognized commitments to purchase electricity over the next five years for an aggregate amount of € 25.2 million (2019: € 45.6 million).
There were no restrictions to transfer funds in the form of cash and dividends. Bekaert had no commitments or contingent liabilities versus its Brazilian joint ventures.
| in thousands of € | 2019 | 2020 |
|---|---|---|
| Net assets of Belgo Bekaert Arames Ltda | 226 735 | 171 882 |
| Proportion of the Group's ownership interest | 45.0% | 45.0% |
| Proportionate net assets | 102 031 | 77 347 |
| Consolidation adjustments | 390 | 332 |
| Carrying amount of the Group's interest in Belgo Bekaert Arames Ltda | 102 421 | 77 679 |
| Net assets of BMB-Belgo Mineira Bekaert Artefatos de Arame Ltda | 116 919 | 92 088 |
| Proportion of the Group's ownership interest | 44.5% | 44.5% |
| Proportionate net assets | 52 029 | 40 979 |
| Consolidation adjustments | 657 | 866 |
| Carrying amount of the Group's interest in | ||
| BMB-Belgo Mineira Bekaert Artefatos de Arame Ltda | 52 686 | 41 845 |
| Carrying amount of the Group's interest in the Brazilian joint ventures | 155 107 | 119 524 |
The following table reflects aggregate information for the other joint ventures which were not deemed material in this context.
| Aggregate information of the other joint ventures | ||
|---|---|---|
| in thousands of € | 2019 | 2020 |
| The Group's share in the result from continuing operations | -119 | -397 |
| The Group's share of other comprehensive income | 6 | -14 |
| The Group's share of total comprehensive income | -113 | -411 |
| Aggregate carrying amount of the Group's interests in these joint ventures | 196 | 657 |
| in thousands of € | 2019 | 2020 |
|---|---|---|
| Non-current financial receivables and cash guarantees | 6 518 | 7 451 |
| Reimbursement rights and other non-current amounts receivable | 2 767 | 3 164 |
| Derivatives (cf. note 7.2.) | 3 374 | 3 762 |
| Overfunded employee benefit plans - non-current | 10 470 | 18 082 |
| Equity investments at FVTOCI | 13 152 | 13 372 |
| Total other non-current assets | 36 281 | 45 830 |
The overfunded employee benefit plans related to the UK pension plans (see note 6.16. 'Employee benefit obligations').
| Carrying amount | ||
|---|---|---|
| in thousands of € | 2019 | 2020 |
| As at 1 January | 11 153 | 13 152 |
| Fair value changes | 2 372 | 220 |
| Other movements | -328 | - |
| Exchange gains and losses | -45 | - |
| As at 31 December | 13 152 | 13 372 |
The equity investments designated as at fair value through OCI (FVTOCI) in accordance with IFRS 9 'Financial Instruments' mainly consisted of:
For more information on the revaluation reserve for investments designated as at fair value through equity, see note 6.14. 'Retained earnings and other Group reserves'.
| Carrying amount | Assets | Liabilities | ||
|---|---|---|---|---|
| in thousands of € | 2019 | 2020 | 2019 | 2020 |
| As at 1 January | 138 403 | 142 333 | 37 892 | 34 182 |
| Increase or decrease via income statement | -5 981 | -9 302 | -11 351 | 10 467 |
| Increase or decrease via OCI | 1 552 | 557 | -270 | 1 580 |
| Change in accounting policies | 15 891 | - | 15 891 | - |
| Exchange gains and losses | 1 158 | -6 372 | 710 | -4 919 |
| Change in set-off of assets and liabilities | -8 690 | -2 973 | -8 690 | -2 973 |
| As at 31 December | 142 333 | 124 243 | 34 182 | 38 337 |
Deferred tax assets and liabilities were attributable to the following items:
| Assets | Liabilities | Net assets | ||||
|---|---|---|---|---|---|---|
| in thousands of € | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 |
| Intangible assets | 23 178 | 19 553 | 11 159 | 12 051 | 12 019 | 7 502 |
| Property, plant and equipment | 52 680 | 44 130 | 50 334 | 52 401 | 2 346 | -8 271 |
| Financial assets | 8 | 111 | 16 140 | 20 961 | -16 132 | -20 850 |
| Inventories | 9 915 | 9 565 | 3 238 | 2 103 | 6 677 | 7 462 |
| Receivables | 4 049 | 4 614 | 189 | 57 | 3 860 | 4 557 |
| Other current assets | 1 084 | 831 | 1 926 | 2 598 | -842 | -1 767 |
| Employee benefit obligations | 21 074 | 23 494 | 132 | 119 | 20 942 | 23 375 |
| Other provisions | 3 956 | 3 477 | 483 | 177 | 3 473 | 3 300 |
| Other liabilities | 27 561 | 27 967 | 8 036 | 8 299 | 19 525 | 19 668 |
| Tax deductible losses carried | ||||||
| forward, tax credits and | ||||||
| recoverable | ||||||
| income taxes | 56 283 | 50 930 | - | - | 56 283 | 50 930 |
| Tax assets / liabilities | 199 788 | 184 672 | 91 637 | 98 766 | 108 151 | 85 906 |
| Set-off of assets and liabilities | -57 455 | -60 429 | -57 455 | -60 429 | - | - |
| Net tax assets / liabilities | 142 333 | 124 243 | 34 182 | 38 337 | 108 151 | 85 906 |
The deferred taxes on property, plant and equipment mainly related to differences in depreciation method between IFRS and tax books, whereas the deferred taxes on intangible assets were mainly generated by intercompany gains which have been eliminated in the consolidated statements. The deferred taxes on employee benefit obligations were mainly generated by temporary differences arising from recognition of liabilities in accordance with IAS 19 'Employee Benefits'. The deferred tax liabilities on financial assets mainly related to temporary differences arising from undistributed profits from subsidiaries and joint ventures. Movements in deferred tax assets and liabilities arose from the following:
| 2019 in thousands of € |
As at 1 January |
Recognized via income statement |
Recognized via OCI |
Change in accounting policies 1 |
Exchange gains and losses |
As at 31 December |
|---|---|---|---|---|---|---|
| Temporary differences | ||||||
| Intangible assets | 20 796 | -8 461 | - | - | -316 | 12 019 |
| Property, plant and | ||||||
| equipment | 14 820 | 1 628 | - | -14 203 | 101 | 2 346 |
| Financial assets | -15 794 | -670 | 427 | - | -95 | -16 132 |
| Inventories | 5 463 | 1 327 | - | - | -113 | 6 677 |
| Receivables | 3 687 | 264 | - | - | -91 | 3 860 |
| Other current assets | -4 252 | 3 455 | - | - | -45 | -842 |
| Employee benefit obligations | 19 676 | -284 | 1 570 | - | -20 | 20 942 |
| Other provisions | 3 709 | 1 612 | -175 | -1 688 | 15 | 3 473 |
| Other liabilities | 1 871 | 1 401 | - | 15 891 | 362 | 19 525 |
| Tax deductible losses carried | ||||||
| forward, tax credits and | ||||||
| recoverable income taxes | 50 535 | 5 098 | - | - | 650 | 56 283 |
| Total | 100 511 | 5 370 | 1 822 | - | 448 | 108 151 |
| 2020 in thousands of € |
As at 1 January |
Recognized via income statement |
Recognized via OCI |
Change in accounting policies |
Exchange gains and losses |
As at 31 December |
|---|---|---|---|---|---|---|
| Temporary differences | ||||||
| Intangible assets | 12 019 | -4 805 | - | - | 288 | 7 502 |
| Property, plant and | ||||||
| equipment | 2 346 | -13 535 | - | - | 2 918 | -8 271 |
| Financial assets | -16 132 | -3 136 | -1 770 | - | 188 | -20 850 |
| Inventories | 6 677 | 646 | - | - | 139 | 7 462 |
| Receivables | 3 860 | 840 | - | - | -143 | 4 557 |
| Other current assets | -842 | -933 | - | - | 8 | -1 767 |
| Employee benefit obligations | 20 942 | 2 812 | 580 | - | -959 | 23 375 |
| Other provisions | 3 473 | -300 | 167 | - | -40 | 3 300 |
| Other liabilities | 19 525 | 853 | - | - | -710 | 19 668 |
| Tax deductible losses carried | ||||||
| forward, tax credits and | ||||||
| recoverable income taxes | 56 283 | -2 211 | - | - | -3 142 | 50 930 |
| Total | 108 151 | -19 769 | -1 023 | - | -1 453 | 85 906 |
1 Related to the initial application of IFRS 16 'Leases'. See note 6.4. 'Right-of-use (RoU) property, plant and equipment'.
| in thousands of € | Before tax | Tax impact | After tax |
|---|---|---|---|
| Exchange differences | 14 392 | - | 14 392 |
| Net fair value gain (+) / loss (-) on investments in equity | |||
| instruments | 2 372 | - | 2 372 |
| Remeasurement gains and losses on defined-benefit plans | -833 | 1 822 | 989 |
| Share of OCI of joint ventures and associates | 11 | - | 11 |
| Total | 15 942 | 1 822 | 17 764 |
| in thousands of € | Before tax | Tax impact | After tax |
|---|---|---|---|
| Exchange differences | -119 013 | - | -119 013 |
| Net fair value gain (+) / loss (-) on investments in equity | |||
| instruments | 250 | - | 250 |
| Remeasurement gains and losses on defined-benefit plans | 2 497 | -1 023 | 1 474 |
| Share of OCI of joint ventures and associates | 4 | - | 4 |
| Total | -116 262 | -1 023 | -117 285 |
Deferred tax assets, related to deductible temporary differences, have not been recognized for a gross amount of € 235.5 million (2019: € 239.8 million). The unrecognized deferred tax assets in respect of tax losses and tax credits are presented in the table by expiry date below.
The following table presents the gross amounts of the tax losses and tax credits generating deferred tax assets of which some were unrecognized.
| 2019 | Expiring | Expiring between 1 |
Expiring after more |
|||
|---|---|---|---|---|---|---|
| in thousands of € | within 1 year | and 5 years | than 5 years | Not expiring | Total | |
| Capital losses | Gross value | - | - | 574 | 35 524 | 36 098 |
| Allowance | - | - | -574 | -35 524 | -36 098 | |
| Net balance | - | - | - | - | - | |
| Trade losses | Gross value | 24 698 | 86 514 | 155 343 | 645 801 | 912 356 |
| Allowance | -15 857 | -51 380 | -132 007 | -508 934 | -708 178 | |
| Net balance | 8 841 | 35 134 | 23 336 | 136 867 | 204 178 | |
| Tax credits | Gross value | 2 756 | 22 695 | 35 958 | 19 899 | 81 308 |
| Allowance | - | -22 695 | -13 496 | -17 096 | -53 287 | |
| Net balance | 2 756 | - | 22 462 | 2 803 | 28 021 | |
| Total | Gross value | 27 454 | 109 209 | 191 875 | 701 224 | 1 029 762 |
| Allowance | -15 857 | -74 075 | -146 077 | -561 554 | -797 563 | |
| Net balance | 11 597 | 35 134 | 45 798 | 139 670 | 232 199 |
| 2020 in thousands of € |
Expiring within 1 year |
Expiring between 1 and 5 years |
Expiring after more than 5 years |
Not expiring | Total | |
|---|---|---|---|---|---|---|
| Capital losses | Gross value | - | - | 536 | 43 072 | 43 608 |
| Allowance | - | - | - | -36 872 | -36 872 | |
| Net balance | - | - | 536 | 6 200 | 6 736 | |
| Trade losses | Gross value | 11 649 | 94 489 | 123 900 | 780 467 | 1 010 505 |
| Allowance | -11 583 | -73 063 | -110 464 | -656 033 | -851 143 | |
| Net balance | 66 | 21 426 | 13 436 | 124 434 | 159 362 | |
| Tax credits | Gross value | 4 106 | - | 35 884 | 35 752 | 75 742 |
| Allowance | - | - | -17 775 | -10 284 | -28 059 | |
| Net balance | 4 106 | - | 18 109 | 25 468 | 47 683 | |
| Total | Gross value | 15 755 | 94 489 | 160 320 | 859 291 | 1 129 855 |
| Allowance | -11 583 | -73 063 | -128 239 | -703 189 | -916 074 | |
| Net balance | 4 172 | 21 426 | 32 081 | 156 102 | 213 781 |
The upper table represents the base amounts generating the net deferred tax assets (2020: € 50.9 million (2019: € 56.3 million)).
Deferred tax assets were recognized only to the extent that it was probable that future taxable profits would be available, taking into account all evidence, both positive and negative. This assessment was done using prudent estimates based on the business plan for the entity concerned, typically using a five year time horizon.
In some countries, deferred tax assets on capital losses, trade losses and tax credits were recognized to the extent of uncertain tax provisions recognized, in order to reflect that some tax audit adjustments would result in an adjustment of the amount of tax losses rather than in a cash tax out for the entity concerned.
| in thousands of € | 2019 | 2020 |
|---|---|---|
| Raw materials | 139 985 | 120 139 |
| Consumables and spare parts | 91 125 | 78 711 |
| Work in progress | 136 425 | 125 676 |
| Finished goods | 282 018 | 234 858 |
| Goods purchased for resale | 133 477 | 124 093 |
| Inventories | 783 030 | 683 477 |
| Trade receivables | 644 908 | 587 619 |
| Bills of exchange received | 59 904 | 54 039 |
| Advances paid | 15 820 | 18 594 |
| Trade payables | -652 384 | -668 422 |
| Advances received | -18 791 | -15 682 |
| Remuneration and social security payables | -125 051 | -116 014 |
| Employment-related taxes | -8 543 | -9 101 |
| Operating working capital | 698 893 | 534 510 |
| Carrying amount | |
|---|---|
| 2019 in thousands of € |
2020 |
| As at 1 January 874 657 |
698 893 |
| Organic increase or decrease -171 466 |
-119 935 |
| Write-downs and write-down reversals -7 072 |
-7 304 |
| New consolidations | - 329 |
| Exchange gains and losses (-) 2 774 |
-38 258 |
| Other | - 785 |
| As at 31 December 698 893 |
534 510 |
Weighted average operating working capital represented 16.4% of sales (2019: 18.2%).
Additional information is as follows:
» Inventories
The cost of sales included expenses related to transport and handling of finished goods amounting to € 164.4 million (2019: € 182.7 million), which have never been capitalized in inventories. Movements in inventories in 2020 included write-downs of € -34.6 million (2019: € -38.1 million) and reversals of write-downs of € 27.7 million (2019: € 31.5 million). Similar as in 2019, in 2020 no inventories were pledged as security for liabilities.
» Trade receivables and bills of exchange received
At year-end 2020, the carrying amount of the trade receivables involved in the factoring program amounted to € 152.3 million (2019: 121.1 million).
The following table presents the movements in the allowance for bad debt on trade receivables. No allowance was posted for bills of exchange received.
| Trade receivables and bills of exchange received | |
|---|---|
| in thousands of € 2019 |
2020 |
| 746 499 Gross amount |
682 152 |
| -41 687 Allowance for bad debts (impaired) |
-40 494 |
| specific allowance for bad debts 1 -35 993 |
-35 097 |
| general allowance for bad debts 1 -5 694 |
-5 397 |
| 704 812 Net carrying amount |
641 658 |
1 The split of the allowance for bad debt in 2019 has been adjusted (reclass of € 5.6 million from the general to the specific allowance).
More information about allowances and past-due receivables is provided in the following table:
| 2019 in thousands of € |
2020 |
|---|---|
| As at 1 January -40 818 |
-41 687 |
| Losses recognized in current year -6 417 |
-5 350 |
| Losses recognized in prior years - amounts used 626 |
1 596 |
| Losses recognized in prior years - reversal of amounts not used 5 345 |
3 354 |
| New consolidations - |
-81 |
| Exchange gains and losses (-) 69 |
1 550 |
| Other -492 |
124 |
| As at 31 December -41 687 |
-40 494 |
In accordance with the IFRS 9 'expected credit loss' model for financial assets, a general bad debt allowance is made for trade receivables to cover the unknown bad debt risk at each reporting date. This general allowance constitutes of a percentage on outstanding trade receivables at each reporting date. The percentages are taking into account historical information on losses on trade receivables and are reviewed year-on-year. For more information on credit enhancement techniques, see note 7.2. 'Financial risk management and financial derivatives'.
| Carrying amount | ||
|---|---|---|
| in thousands of € | 2019 | 2020 |
| As at 1 January | 130 379 | 111 615 |
| Increase or decrease | -21 786 | -4 792 |
| Write-downs (-) and write-down reversals | -2 | - |
| New consolidations | - | 192 |
| Exchange gains and losses | 3 024 | -5 685 |
| As at 31 December | 111 615 | 101 330 |
Other receivables mainly related to income taxes (€ 35.1 million (2019: € 43.3 million)), VAT and other taxes (€ 52.1 million (2019: € 53.0 million)), social loans to employees (€ 3.7 million (2019: € 4.3 million)) and dividends from joint ventures (€ 2.1 million (2019: € 1.6 million)). See also note 6.21. 'Tax positions'. Write-downs of other receivables are included in note 5.5. 'Other financial income and expense'.
| Carrying amount | ||
|---|---|---|
| in thousands of € | 2019 | 2020 |
| Cash & cash equivalents | 566 176 | 940 416 |
| Short-term deposits | 50 039 | 50 077 |
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 did not include any listed securities or equity instruments at the balance sheet date.
| Carrying amount | ||
|---|---|---|
| in thousands of € | 2019 | 2020 |
| Financial receivables and cash guarantees | 8 779 | 7 707 |
| Advances paid | 15 820 | 18 594 |
| Derivatives (cf. note 7.2.) | 4 623 | 5 250 |
| Deferred charges and accrued income | 11 289 | 10 346 |
| As at 31 December | 40 510 | 41 898 |
The financial receivables and cash guarantees mainly related to receivables from the disposal of the majority stake in the rubber reinforcement plant Sumaré (Brazil) in 2017 (€ 4.6 million, same amount as in 2019) and various cash guarantees (€ 1.0 million (2019: € 2.5 million)).
| Carrying amount (net) | ||
|---|---|---|
| in thousands of € | 2019 | 2020 |
| As at 1 January | 546 | 466 |
| Increases and decreases (-) | -86 | 6 468 |
| Exchange gains and losses | 6 | -193 |
| As at 31 December | 466 | 6 740 |
| in thousands of € | 2019 | 2020 |
|---|---|---|
| Property, plant and equipment | 466 | 6 740 |
| Total assets classified as held for sale | 466 | 6 740 |
| Total liabilities associated with assets classified as held for sale | - | - |
The increase in assets classified as held for sale almost entirely related to buildings in Canada following the announcement to close the manufacturing plant in Pointe-Claire (€ 6.1 million).
| 2019 | 2020 | ||||
|---|---|---|---|---|---|
| Issued capital | Number of | Number of | |||
| in thousands of € | Nominal value | shares | Nominal value | shares | |
| 1 | As at 1 January | 177 793 | 60 408 441 | 177 793 | 60 408 441 |
| Movements in the year | |||||
| Issue of new shares | - | - | 19 | 6 400 | |
| As at 31 December | 177 793 | 60 408 441 | 177 812 | 60 414 841 | |
| 2 | Structure | ||||
| 2.1 | Classes of ordinary shares | ||||
| Ordinary shares without par value | 177 793 | 60 408 441 | 177 812 | 60 414 841 | |
| 2.2 | Registered shares | 21 834 895 | 22 502 452 | ||
| Non-material shares | 38 573 546 | 37 912 389 | |||
| Authorized capital not issued | 176 000 | 176 000 |
A total of 6 400 subscription rights were exercised under the Company's SOP 2005-2009 stock option plan in 2020, requiring the issue of a total of 6 400 new shares of the Company.
On 31 December 2019, the Company held 3 873 075 treasury shares. Of these 3 873 075 treasury shares, 10 036 shares were transferred to non-executive Directors of Bekaert as remuneration for the performance of the duties as Chairman or member of the Board of Directors and 13 439 shares were transferred to members of the BGE pursuant to the Bekaert share-matching plan. A total of 10 766 own shares were sold to members of the BGE in the framework of the Bekaert personal shareholding requirement plan. In addition, 29 300 stock options were exercised under the Stock Option Plan 2010-2014 and 29 300 treasury shares were used for that purpose. The Company did not purchase any shares in the course of 2020 and no treasury shares were cancelled. As a result, the Company held an aggregate 3 809 534 treasury shares as of 31 December 2020.
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: 6.13 Shares part2
| Number of options | ||||||||
|---|---|---|---|---|---|---|---|---|
| Date offered |
Date granted |
Exercise price (in €) |
Granted | Exercised | Forfeited | Out standing |
First exercise period |
Last exercise period |
| 21.12.2006 | 19.02.2007 | 30.175 | 37 500 | 27 500 | - | 10 000 | 22.05 - 30.06.2010 |
15.11 - 15.12.2021 |
| 20.12.2007 | 18.02.2008 | 28.335 | 30 630 | 11 310 | - | 19 320 | 22.05 - 30.06.2011 |
15.11 - 15.12.2022 |
| 17.12.2009 | 15.02.2010 | 33.990 | 49 500 | 5 000 | 44 500 | - | 22.05 - 30.06.2013 |
15.11 - 15.12.2019 |
| 117 630 | 43 810 | 44 500 | 29 320 |
| 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 | 190 683 | 15 | - | 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 | 215 100 | 147 550 | 12 700 | 54 850 | 30.06.2011 | 15.12.2022 |
| 22.05 - | 15.11 - | ||||||||
| 17.12.2009 | 15.02.2010 | 08.09.2010 | 33.990 | 225 450 | 69 600 | 155 850 | - | 30.06.2013 | 15.12.2019 |
| 785 058 | 552 073 | 169 165 | 63 820 |
Number of subscription rights
| Last exercise period |
First exercise period |
Number of options | ||||||
|---|---|---|---|---|---|---|---|---|
| Out standing |
Forfeited | Exercised | Granted | Exercise price (in €) |
Date granted |
Date offered |
||
| Mid Nov.- 15.12.2020 |
28.02 - 13.04.2014 |
- | 360 925 | - | 360 925 | 77.000 | 14.02.2011 | 16.12.2010 |
| Mid Nov. - 21.12.2021 |
27.02 - 12.04.2015 |
54 100 | 2 600 | 231 100 | 287 800 | 25.140 | 20.02.2012 | 22.12.2011 |
| Mid Nov. - 19.12.2022 |
End Feb. - 10.04.2016 |
49 158 | 2 700 | 215 342 | 267 200 | 19.200 | 18.02.2013 | 20.12.2012 |
| End Feb. - 28.03.2023 |
End Feb. - 09.04.2017 |
127 500 | - | 132 500 | 260 000 | 21.450 | 28.05.2013 | 29.03.2013 |
| Mid Nov. - 18.12.2023 |
End Feb. - 09.04.2017 |
182 800 | 2 400 | 188 250 | 373 450 | 25.380 | 17.02.2014 | 19.12.2013 |
| Mid Nov. - 17.12.2024 |
End Feb. - 08.04.2018 |
286 500 | 18 510 | 44 800 | 349 810 | 26.055 | 16.02.2015 | 18.12.2014 |
| 700 058 | 387 135 | 811 992 | 1 899 185 |
| Number of options | ||||||||
|---|---|---|---|---|---|---|---|---|
| Date 6.13 Shares part2 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 | 1 500 | 28 250 | 197 500 | 07.04.2019 | 16.12.2025 |
| End Feb. - | Mid Nov. - | |||||||
| 15.12.2016 | 13.02.2017 | 39.426 | 273 325 | - | 47 125 | 226 200 | 12.04.2020 | 14.12.2026 |
| End Feb. - | Mid Nov. - | |||||||
| 21.12.2017 | 20.02.2018 | 34.600 | 225 475 | - | 8 375 | 217 100 | 11.04.2021 | 20.12.2027 |
| 726 050 | 1 500 | 83 750 | 640 800 | |||||
| 2019 | 2020 | ||||
|---|---|---|---|---|---|
| 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 | 73 820 | 31.993 | 29 320 | 28.963 | |
| Forfeited during the year | -44 500 | 33.990 | - | - | |
| Exercised during the year | - | - | - | - | |
| Outstanding as at 31 December | 29 320 | 28.963 | 29 320 | 28.963 |
| 2019 | 2020 | ||||
|---|---|---|---|---|---|
| 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 | 173 570 | 31.630 | 70 220 | 28.156 | |
| Forfeited during the year | -103 350 | 33.990 | - | - | |
| Exercised during the year | - | - | -6 400 | 23.795 | |
| Outstanding as at 31 December | 70 220 | 28.156 | 63 820 | 28.594 |
| 2019 | 2020 | |||
|---|---|---|---|---|
| SOP 2010-2014 Stock Option Plan | Number of options | Weighted average exercise price |
(in €) Number of options | Weighted average exercise price (in €) |
| Outstanding as at 1 January | 1 025 083 | 39.653 | 1 025 083 | 39.653 |
| Forfeited during the year | - | - | -295 725 | 77.000 |
| Exercised during the year | - | - | -29 300 | 25.033 |
| Outstanding as at 31 December | 1 025 083 | 39.653 | 700 058 | 24.488 |
| 2019 | 2020 | ||||
|---|---|---|---|---|---|
| SOP 2015-2017 Stock Option Plan | Number of options | Weighted average exercise price |
(in €) Number of options | Weighted average exercise price (in €) |
|
| Outstanding as at 1 January | 718 550 | 33.866 | 711 675 | 33.863 | |
| Forfeited during the year | -5 375 | 36.283 | -70 875 | 34.721 | |
| Exercised during the year | -1 500 | 26.375 | - | - | |
| Outstanding as at 31 December | 711 675 | 33.863 | 640 800 | 33.769 |
| Weighted average remaining contractual life | |
|---|---|
| in years 2019 |
2020 |
| SOP2 2.6 |
1.6 |
| SOP 2005-2009 2.6 |
1.8 |
| SOP 2010-2014 3.2 |
3.0 |
| SOP 2015-2017 7.0 |
6.0 |
As there were no options exercised in 2020, there was no weighted average share price for the SOP2 options (2019: n/a) and for the SOP 2015-2017 options (2019: € 26.38). The weighted average share price at the date of exercise in 2020 was € 25.03 for the SOP 2010-2014 options (2019: n/a) and € 23.80 for the SOP 2005-2009 subscription rights (2019: n/a). 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 SOP 2005-2009 plan, equity is increased by the amount of the proceeds received. Under the terms of the SOP2 plan 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 options granted under SOP2, SOP 2010-2014 and SOP 2015-2017 and the subscription rights granted under SOP 2005- 2009 are recognized at fair value at grant date in accordance with IFRS 2 (see note 6.14. 'Retained earnings and other Group reserves'). The fair value of the options is determined using a binomial pricing model. For the tranches that entailed an expense in the current or prior period, inputs and outcome of this pricing model are detailed below:
| Pricing model details Stock option plan 2015-2017 |
Granted in February 2016 |
Granted in February 2017 |
Granted in February 2018 |
|---|---|---|---|
| Inputs to the model | |||
| Share price at grant date (in €) | 27.25 | 39.39 | 37.40 |
| Exercise price (in €) | 26.38 | 39.43 | 34.60 |
| Expected volatility | 39% | 39% | 39% |
| Expected dividend yield | 3% | 3% | 3% |
| Vesting period (years) | 3.00 | 3.00 | 3.00 |
| Contractual life (years) | 10 | 10 | 10 |
| Employee exit rate | 3% | 3% | 3% |
| Risk-free interest rate | 0.05% | -0.18% | 0.08% |
| Exercise factor | 1.40 | 1.40 | 1.40 |
| Outcome of the model | |||
| Fair value (in €) | 7.44 | 10.32 | 10.61 |
| Outstanding options | 197 500 | 226 200 | 217 100 |
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 2020, no options (2019: no options) were granted under SOP 2015-2017. The Group has recorded an expense against equity of € 0.7 million (2019: € 1.8 million) for the options granted, based on their fair value and vesting period.
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 Performance Share Units entitling the beneficiary to acquire Performance Shares: during 2015, 2016 and 2017 subject to the conditions of the Performance Share Plan 2015-2017 and in 2019 and 2020 under the conditions of the Performance Share Plan 2018-2020. 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. For more information we refer to the 'Remuneration Report' in the 'Report of the Board of Directors'. 6.13 Shares part2
| Number of units | |||||||
|---|---|---|---|---|---|---|---|
| Out | |||||||
| Date granted | Granted | Delivered | Forfeited | Expired | standing | Expiry date | |
| PSP 2015-2017 | 15.12.2016 | 52 450 | - | 4 217 | 48 233 | - | 31.12.2019 |
| PSP 2015-2017 | 06.03.2017 | 10 000 | - | - | 10 000 | - | 31.12.2019 |
| PSP 2015-2017 | 01.09.2017 | 5 000 | - | - | 5 000 | - | 31.12.2019 |
| PSP 2015-2017 | 21.12.2017 | 55 250 | - | 4 900 | 50 350 | - | 31.12.2020 |
| PSP 2018-2020 | 15.02.2019 | 178 233 | - | 11 427 | - | 166 806 | 31.12.2021 |
| PSP 2018-2020 | 26.07.2019 | 35 663 | - | 2 837 | - | 32 826 | 31.12.2021 |
| PSP 2018-2020 | 21.01.2020 | 182 900 | - | 4 481 | - | 178 419 | 31.12.2022 |
| PSP 2018-2020 | 17.08.2020 | 12 580 | - | - | - | 12 580 | 31.12.2022 |
| 532 076 | - | 27 862 | 113 583 | 390 631 |
The Performance Share Units granted under these plans are recognized at fair value at grant date in accordance with IFRS 2 (see note 6.14. 'Retained earnings and other Group reserves'). The fair value of the Performance Share Units under the PSP 2015-2017 is determined using a binomial pricing model. Inputs and outcome of the pricing model are detailed below:
| Granted in | ||||||
|---|---|---|---|---|---|---|
| Pricing model details Performance Share Plan |
February 2016 |
July 2016 |
December 2016 |
March 2017 |
September 2017 |
December 2017 |
| Inputs to the model | ||||||
| Share price at grant date (in €) | 32.00 | 38.38 | 39.49 | 46.90 | 40.58 | 34.60 |
| Expected volatility | 39% | 39% | 39% | 39% | 39% | 39% |
| Expected dividend yield | 3% | 3% | 3% | 3% | 3% | 3% |
| Vesting period (years) | 2.83 | 2.50 | 3.00 | 2.83 | 2.25 | 3.00 |
| Employee exit rate | 3% | 3% | 3% | 0% | 3% | 3% |
| Risk-free interest rate | -0.41% | -0.56% | -0.53% | -0.53% | -0.55% | -0.46% |
| Outcome of the model | ||||||
| Fair value (in €) | 46.89 | 50.30 | 52.15 | 46.90 | 54.34 | 40.19 |
| Outstanding PSP Units | - | - | - | - | - | - |
Under the PSP 2015-2017, the Group has recorded an expense against equity of € 0.6 million (2019: € 1.9 million) for the Performance Share Units granted, based on their fair value and vesting period.
6.13 Shares part2 In 2020, on 21 January an offer of 182 900 equity settled performance share units and on 17 August an offer of 12 580 equity settled performance share units were made under the terms of the PSP 2018-2020 (2019: on 15 February an offer of 178 233 equity settled performance share units and on 26 July an offer of 35 663). The fair value of the Performance Share Units under the terms of the PSP 2018-2020 plan is equal to the share price at grant date (21 January 2020: € 25.14 and 17 August 2020: € 16.92 (15 February 2019: € 23.76 and 26 July 2019: € 23.94)), since the performance conditions are nonmarket conditions (Underlying EBITDA and operational cash flow). The grant in 2020 represented a fair value of € 4.8 million (2019: € 5.1 million). The Group has recorded an expense against equity of € 4.7 million in 2020 (2019: € 2.2 million).
| 2019 Weighted average exercise price |
2020 | Weighted average exercise price |
||
|---|---|---|---|---|
| PSP 2015-2017 | Number of units | (in €) | Number of units | (in €) |
| Outstanding as at 1 January | 121 168 | 46.035 | 50 950 | 40.190 |
| Forfeited during the year | -2 318 | 41.655 | -600 | 40.190 |
| Expired during the year | -67 900 | 50.571 | -50 350 | 40.190 |
| Outstanding as at 31 December | 50 950 | 40.190 | - | - |
| 2019 | Weighted average exercise price |
2020 | Weighted average exercise price |
|
|---|---|---|---|---|
| PSP 2018-2020 | Number of units | (in €) | Number of units | (in €) |
| Outstanding as at 1 January | - | - | 206 621 | 23.791 |
| Granted during the year | 213 896 | 23.790 | 195 480 | 24.058 |
| Forfeited during the year | -7 275 | 23.760 | -11 470 | 24.344 |
| Outstanding as at 31 December | 206 621 | 23.791 | 390 631 | 24.185 |
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 can build and maintain a personal shareholding in Company shares and whereby the acquisition of the number of Company shares is supported by a so-called Company matching mechanism. The Company matching mechanism provides 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). These PSR units will vest following a vesting period of three years, conditional to a service condition subject to bad or good leaver conditions. For more information we refer to the 'Remuneration Report' in the 'Report of the Board of Directors'. 6.13 Shares part2
| Number of units | ||||||
|---|---|---|---|---|---|---|
| Date acquired |
Acquired | Matched | Forfeited | Out standing |
Expiry date | |
| PSR 2016 | 31.03.2017 | 14 668 | 13 428 | 1 240 | - | 31.12.2019 |
| PSR 2016 | 01.09.2017 | 2 523 | 2 523 | - | - | 31.12.2019 |
| PSR 2016 | 14.05.2018 | 15 251 | 14 191 | 1 060 | - | 31.12.2020 |
| PSR 2016 | 31.03.2020 | 10 766 | - | - | 10 766 | 31.12.2022 |
| 43 208 | 30 142 | 2 300 | 10 766 |
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 6.14. '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 Personal Shareholding Requirement plan |
To be matched in December 2018 |
To be matched in December 2019 |
To be matched in December 2020 |
To be matched in December 2022 |
||
|---|---|---|---|---|---|---|
| Start date March 2016 |
Start date June 2016 |
Start date March 2017 |
Start date Sep 2017 |
Start date May 2018 |
Start date March 2020 |
|
| Inputs to the model | ||||||
| Share price at start date (in €) | 35.71 | 38.97 | 45.87 | 40.04 | 34.00 | 14.98 |
| Expected volatility | 39% | 39% | 39% | 39% | 39% | 36% |
| Expected dividend yield | 3% | 3% | 3% | 3% | 3% | 3% |
| Vesting period (years) | 2.75 | 2.50 | 2.75 | 2.33 | 2.60 | 2.75 |
| Employee exit rate | 4% | 4% | 4% | 4% | 4% | 0% |
| Risk-free interest rate | -0.40% | -0.01% | -0.51% | -0.54% | -0.39% | -0.47% |
| Outcome of the model | ||||||
| Fair value (in €) | 29.27 | 32.16 | 37.60 | 33.20 | 27.95 | 13.81 |
| Outstanding PSR Units | - | - | - | - | - | 10 766 |
The matching shares to be granted represented a fair value of € 0.1 million (2019: € 0.4 million). The Group has recorded an expense against equity of € 0.2 million (2019: € 0.4 million) for the matching shares to be granted, based on their fair value and vesting period.
| Number of units | ||
|---|---|---|
| PSR 2016 | 2019 | 2020 |
| Outstanding as at 1 January | 28 600 | 13 661 |
| Matched during the year | -14 939 | -13 661 |
| Acquired during the year | - | 10 766 |
| Outstanding as at 31 December | 13 661 | 10 766 |
The fixed fee of the Chairperson is paid partly in cash and partly in Company shares, subject to a three-year holding period from grant date. For the other non-executive Directors, the fixed fee for performance of duties as a member of the Board are paid in cash, but with the option each year to receive part (0%, 25% or 50%) in Company shares.In accordance with IFRS 2 this is treated as a share based payment award with a cash alternative. The fair value of the stock grant are equal to the share price at grant date (29 May 2020: € 18.43). This stock grant vested immediately. The stock grant represented a fair value of € 0.2 million. The Group has recorded an expense against equity of € 0.2 million.
| 2019 in thousands of € |
2020 |
|---|---|
| -12 117 Revaluation reserve for non-consolidated equity investments |
-11 867 |
| -67 017 Remeasurement reserve for defined-benefit plans |
-63 543 |
| -6 Other revaluation reserve |
- |
| 28 104 Deferred tax reserve |
26 785 |
| Other reserves -51 036 |
-48 626 |
| Cumulative translation adjustments -113 964 |
-227 823 |
| Total other Group reserves -165 000 |
-276 448 |
| Treasury shares -107 463 |
-106 148 |
| Retained earnings 1 492 028 |
1 614 781 |
In the following sections of this disclosure, the movements in the Group reserves and in retained earnings are presented and commented.
| in thousands of € 2019 |
2020 |
|---|---|
| As at 1 January -14 489 |
-12 117 |
| Fair value changes 2 372 |
250 |
| As at 31 December -12 117 |
-11 867 |
| Of which | |
| Investment in Xinyu Xinsteel Metal Products Co Ltd -2 112 |
-1 951 |
| Investment in Shougang Concord Century Holdings Ltd -10 097 |
-10 009 |
| Other investments 92 |
92 |
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. The fair value of the investment in Xinyu Xinsteel Metal Products Co Ltd is determined using a discounted cash flow model based on the company's most recent business plan for 2021-2025. See also note 6.6. 'Other non-current assets'.
| Remeasurement reserve for defined-benefit plans | ||
|---|---|---|
| in thousands of € | 2019 | 2020 |
| As at 1 January | -68 267 | -67 017 |
| Remeasurements of the period | 1 261 | 3 474 |
| Changes in Group structure | -11 | - |
| As at 31 December | -67 017 | -63 543 |
The remeasurements originate from using different actuarial assumptions in calculating the defined-benefit obligation, from differences with actual returns on plan assets at the balance sheet date and any changes in unrecognized assets due to the asset ceiling principle (see note 6.16. 'Employee benefit obligations').
| Deferred tax reserve | ||
|---|---|---|
| in thousands of € | 2019 | 2020 |
| As at 1 January | 26 694 | 28 104 |
| Deferred taxes relating to other comprehensive income | 1 407 | -1 319 |
| Changes in Group structure | 3 | - |
| As at 31 December | 28 104 | 26 785 |
Deferred taxes relating to other comprehensive income are also recognized in OCI (see note 6.7. 'Deferred tax assets and liabilities').
| Treasury shares in thousands of € |
2019 | 2020 |
|---|---|---|
| As at 1 January | -108 843 | -107 463 |
| Shares sold | 1 380 | 1 314 |
| As at 31 December | -107 463 | -106 148 |
The number of shares on hand were sufficient, both to anticipate any dilution and to hedge the cash flow risk on share-based payment plans. No additional shares were bought back in 2020 (2019: nil). 63 541 treasury shares were sold to the beneficiaries of the share-based payment plans of the Group (2019: 28 957). Treasury shares are accounted for using the FIFO principle (first-in, first-out). Gains and losses on disposals of treasury shares are directly recognized through retained earnings (see movements in retained earnings below). See also note 6.13. 'Ordinary shares, treasury shares and equity-settled share-based payments'.
| Cumulative translation adjustments | ||
|---|---|---|
| in thousands of € | 2019 | 2020 |
| As at 1 January | -130 102 | -113 964 |
| Exchange differences on dividends declared | -1 601 | -2 244 |
| Movements arising from exchange rate fluctuations | 17 739 | -111 615 |
| As at 31 December | -113 964 | -227 823 |
| Of which relating to entities with following functional currencies | ||
| Chinese renminbi | 100 394 | 88 513 |
| US dollar | 29 945 | 12 453 |
| Brazilian real | -169 744 | -220 231 |
| Chilean peso | -17 347 | -21 028 |
| Venezuelan bolivar soberano 1 | -59 691 | -59 691 |
| Indian rupee | -6 756 | -10 319 |
| Czech koruna | 9 738 | 8 616 |
| British pound | 3 200 | -13 974 |
| Russian ruble | -2 742 | -7 984 |
| Romenian leu | -2 573 | -3 296 |
| Other currencies | 1 611 | -881 |
1 As a consequence of the functional currency switch to the US dollar on 1 January 2019, the value related to Venezuelan bolivar soberano remains frozen.
The swings in CTA reflected both the exchange rate evolution and the relative importance of the net assets denominated in the presented currencies.
| Retained earnings | |||
|---|---|---|---|
| in thousands of € | Notes | 2019 | 2020 |
| As at 1 January | 1 480 234 | 1 492 028 | |
| Equity-settled share-based payments | 6.13. | 4 390 | 8 556 |
| Result for the period attributable to equity holders of Bekaert | 41 329 | 134 687 | |
| Dividends | -39 557 | -19 787 | |
| Equity reclassification | - | -6 | |
| Treasury shares transactions | 6.13. | -1 341 | -231 |
| Changes in Group structure | 6 973 | -467 | |
| As at 31 December | 1 492 028 | 1 614 781 |
Treasury shares transactions (€ -0.2 million vs € -1.3 million in 2019) represented the difference between the proceeds and the FIFO book value of the shares that were sold. Changes in Group structure in 2020 related to the purchase of non-controlling interests (NCI) in Bekaert Slatina SRL, while in 2019 this related to the purchase of NCI in Bekaert Maccaferri Underground Solutions BVBA.
| Carrying amount | ||
|---|---|---|
| in thousands of € | 2019 | 2020 |
| As at 1 January | 119 071 | 96 430 |
| Changes in Group structure | -13 504 | -8 503 |
| Share of the result for the period | 6 871 | 13 350 |
| Share of other comprehensive income excluding CTA | -1 667 | -677 |
| Dividend pay-out | -13 247 | -8 270 |
| Capital increases | 652 | - |
| Exchange gains and losses (-) | -1 746 | -5 155 |
| As at 31 December | 96 430 | 87 175 |
The changes in Group structure in 2020 mainly related to the purchase of the non-controlling interests ('NCI') in Bekaert Slatina SRL, the carrying amount of which amounted to € +8.5 million at the transaction date. The changes in 2019 almost exclusively related to the purchase of the non-controlling interests ('NCI') in Bekaert Maccaferri Underground Solutions BVBA.
The share in the result of the period for entities in which NCI are held, improved significantly, mainly due to the much better contribution of entities which were in a loss position last year. However, also here the Covid-19 pandemic depressed to a certain degree this improvement.
In accordance with IFRS 12 'Disclosures of Interests in Other Entities', following information is provided on subsidiaries that have non-controlling interests that are material to the Group. The objective of IFRS 12 is to require an entity to disclose information that enables users of its financial statements to evaluate (a) the nature and risks associated with its interests in other entities, and (b) the effects of those interests on its financial position, financial performance and cash flows. Bekaert has many partnerships across the world, most entities of which would not individually meet any reasonable materiality criterion. Therefore, the Group has identified two non-wholly owned groups of entities which are interconnected through their line of business and shareholder structure: (1) the Wire entities in Chile and Peru, where the non-controlling interests are mainly held by the Chilean partners, and (2) 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 at year-end | |||
|---|---|---|---|
| Entities included in material NCI disclosure | Country | 2019 | 2020 |
| 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% |
| Grating Peru SAC | Peru | - | 62.5% |
| Procercos SA | Chile | 48.0% | 48.0% |
| Prodalam SA | Chile | 48.0% | 48.0% |
| Prodicom Selva SAC | Peru | 62.5% | 62.5% |
| Prodimin SAC | Peru | 62.5% | 62.5% |
| Prodac Contrata SAC | Peru | 62.5% | 62.5% |
| Productos de Acero Cassadó SA | Peru | 62.5% | 62.5% |
| Wire entities Andina region | |||
| Agro-Bekaert Colombia SAS | Colombia | - | 60.0% |
| Agro - Bekaert Springs, SL | Spain | - | 60.0% |
| Bekaert Ideal SL | Spain | 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% |
| Productora de Alambres Colombianos Proalco SAS | Colombia | 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 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: Industrias Acmanet Ltda, Procercos SA, Bekaert Ideal SL and Agro - Bekaert Springs 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 € | 2019 | 2020 | 2019 | 2020 |
| Wire entities Chile and Peru | 5 248 | 9 602 | 71 643 | 72 282 |
| Wire entities Andina region | 1 489 | 2 156 | 12 017 | 11 474 |
| Consolidation adjustments on material NCI | 659 | 181 | -28 031 | -28 184 |
| Contribution of material NCI to consolidated NCI | 7 396 | 11 939 | 55 630 | 55 572 |
| Other NCI | -525 | 1 411 | 40 800 | 31 603 |
| Total consolidated NCI | 6 871 | 13 350 | 96 430 | 87 175 |
The following tables show concise basic statements of the non-wholly owned groups of entities.
| in thousands of € | 2019 | 2020 |
|---|---|---|
| Current assets | 206 915 | 218 034 |
| Non-current assets | 134 516 | 121 990 |
| Current liabilities | 133 503 | 140 264 |
| Non-current liabilities | 72 797 | 62 648 |
| Equity attributable to equity holders of Bekaert | 63 488 | 64 830 |
| Equity attributable to NCI | 71 643 | 72 282 |
| in thousands of € 2019 |
2020 |
|---|---|
| Sales 495 350 |
433 751 |
| Expenses -483 891 |
-414 334 |
| Result for the period 11 459 |
19 417 |
| 6 211 Result for the period attributable to equity holders of Bekaert |
9 815 |
| Result for the period attributable to NCI 5 248 |
9 602 |
| Other comprehensive income for the period -5 946 |
-7 360 |
| OCI attributable to equity holders of Bekaert -3 338 |
-3 270 |
| OCI attributable to NCI -2 608 |
-4 090 |
| 5 513 Total comprehensive income for the period |
12 057 |
| 2 873 Total comprehensive income attributable to equity holders of Bekaert |
6 545 |
| 2 640 Total comprehensive income attributable to NCI |
5 512 |
| Dividends paid to NCI -6 720 |
-5 340 |
| Net cash inflow (outflow) from operating activities 56 707 |
60 491 |
| Net cash inflow (outflow) from investing activities -8 956 |
-4 228 |
| Net cash inflow (outflow) from financing activities -40 962 |
-28 441 |
| Net cash inflow (outflow) 6 788 |
27 822 |
Strong cash generation coupled to tight working capital control efforts (lower working capital assets and higher working capital liabilities) resulting in a significant lower Net Debt position. Non-current assets decreased due to depreciation charge exceeding capital expenditure.
Demand remained below pre-Covid-19 levels throughout the year, resulting in a drop of sales of 12.4%. However, a significant improvement in underlying EBIT margin on sales was realized (7.7% compared to 5.1% last year). The strong margin increase was the result of an improved business mix, stringent cost control and effectiveness of Covid-19 mitigating actions.
| in thousands of € 2019 |
2020 |
|---|---|
| Current assets 78 647 |
75 125 |
| Non-current assets 46 229 |
40 417 |
| Current liabilities 82 759 |
74 998 |
| Non-current liabilities 9 014 |
7 553 |
| Equity attributable to equity holders of Bekaert 21 086 |
21 517 |
| Equity attributable to NCI 12 017 |
11 474 |
| in thousands of € 2019 |
2020 |
|---|---|
| Sales 182 162 |
157 487 |
| Expenses -177 069 |
-152 300 |
| Result for the period 5 093 |
5 188 |
| 3 604 Result for the period attributable to equity holders of Bekaert |
3 032 |
| Result for the period attributable to NCI 1 489 |
2 156 |
| Other comprehensive income for the period -1 220 |
-3 325 |
| OCI attributable to equity holders of Bekaert -560 |
-2 270 |
| OCI attributable to NCI -660 |
-1 047 |
| 3 873 Total comprehensive income for the period |
1 863 |
| 3 044 Total comprehensive income attributable to equity holders of Bekaert |
761 |
| 829 Total comprehensive income attributable to NCI |
1 109 |
| Dividends paid to NCI -5 691 |
-2 060 |
| Net cash inflow (outflow) from operating activities 16 288 |
14 148 |
| Net cash inflow (outflow) from investing activities -1 801 |
-3 635 |
| Net cash inflow (outflow) from financing activities -20 161 |
-5 295 |
| Net cash inflow (outflow) -5 674 |
5 218 |
Working capital was more or less stable, with a reduction in both working capital assets and liabilities. The net debt position improved mainly resulting from a lower dividend pay-out in 2020.
Sales in 2020 were 13.5% lower mainly due to the Covid-19 pandemic. However, a significant improvement in underlying EBIT margin on sales was realized (8.6% compared to 5.6% last year). Also here the strong margin improvement resulted from changes in business mix, stringent cost control and effectiveness of Covid-19 mitigating actions.
The situation for Vicson SA (Venezuela) remains under control. The company manages to source an adequate amount of wire rod to keep its operations going, albeit at a subdued level. Furthermore, the access to US dollars has become more flexible in the country to a point that now invoicing to many customers is made in that currency. Its cash & cash equivalents and short-term deposits amounted to € 0.9 million at 31 December 2020 (vs € 1.3 million at 31 December 2019), mainly following the pre-payment for wire rod to avoid any shortage.
The total net liabilities for employee benefit obligations, which amounted to € 262.7 million as at 31 December 2020 (€ 261.7 million as at year-end 2019), are as follows:
| in thousands of € | 2019 | 2020 |
|---|---|---|
| Liabilities for | ||
| Post-employment defined-benefit plans | 120 248 | 118 892 |
| Other long-term employee benefits | 4 437 | 4 700 |
| Cash-settled share-based payment employee benefits | 1 662 | 2 556 |
| Short-term employee benefits | 125 051 | 116 014 |
| Termination benefits | 20 794 | 38 580 |
| Total liabilities in the balance sheet | 272 193 | 280 742 |
| of which | ||
| Non-current liabilities | 123 409 | 130 948 |
| Current liabilities | 148 784 | 149 793 |
| Assets for | ||
| Defined-benefit pension plans | -10 470 | -18 082 |
| Total assets in the balance sheet | -10 470 | -18 082 |
| Total net liabilities | 261 722 | 262 660 |
In accordance with IAS 19, 'Employee benefits', plans are classified as either defined-contribution 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 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. As of 2016 the minimum guaranteed rate of return became 1.75% on both 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 ('PMT'). 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 the plan amounted to € 1.9 million (2019: € 1.9 million). Employer contributions are set every five years by PMT, they are equal for all participating companies and are expressed as a percentage of pensionable salary. Bekaert's total contribution represents less than 0.1% of the overall PMT contribution. The financing rules specify that an employer is not obliged to pay any further contributions in respect of previously accrued benefits. The funded status of PMT was 95.4% at 31 December 2020 (2019: 98.8%). During the period 2015 to 2022 there is no obligation for participating companies to fund any deficit of PMT (nor to receive any surplus).
| Defined-contribution plans | ||
|---|---|---|
| in thousands of € | 2019 | 2020 |
| Expenses recognized | 16 601 | 15 534 |
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 2020 for all significant post-employment defined-benefit plans by independent actuaries. The Group's largest defined-benefit obligations were in Belgium, the United States and the United Kingdom. They accounted for 89.1% (2019: 89.2%) of the Group's defined-benefit obligations and 99.7% (2019: 99.6%) of the Group's plan assets.
The funded plans in Belgium mainly related to retirement plans representing a defined-benefit obligation of € 229.4 million (2019: € 216.3 million) and € 205.7 million assets (2019: € 202.0 million). This is including the related 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 related to pre-retirement pensions (defined-benefit obligation € 8.4 million (2019: € 10.4 million)) which are not externally funded. An amount of € 3.4 million (2019: € 4.4 million) related to employees in active service who have not yet entered into any pre-retirement agreement.
The funded plans in the United States mainly related to pension plans representing a defined-benefit obligation of € 127.4 million (2019: € 130.9 million) and assets of € 104.8 million (2019: € 99.5 million). The plans provide for benefits for the life of the plan members but have been closed for new entrants. Plan assets are invested, in fixed-income funds and in equities. Based on an ALM 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 included medical care plans (defined-benefit obligation € 3.8 million (2019: € 4.0 million)).
The funded plan in the United Kingdom related to a pension scheme closed for new entrants and further accrual representing a defined-benefit obligation of € 92.0 million (2019: 95.4 million) and assets of € 110.1 million (2019: 105.8 million). The scheme is administrated by a separate board of Trustees which is legally separate from the company. The Trustees are composed 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 defined benefit obligation solely includes benefits for deferred pensioners and current pensioners. Broadly, about 70% of the liabilities are attributable to non-pensioners and 30% to current pensioners (2019: 20% pensioners).
UK legislation requires that pension schemes are funded prudently. The funding valuation of the scheme carried out as at 31 December 2019 by a qualified actuary showed a surplus of € 7.4 million. As a consequence, the company was able to stop earlier than foreseen, as of 1 July 2020, paying recovery plan contributions resulting from the 2016 funding valuation (set at € 0.8 million p.a. up to 31 August 2021). The above contributions are excluding administration costs which are reported separately from IAS 19.
The amounts recognized in the balance sheet are as follows:
| in thousands of € | 2019 | 2020 |
|---|---|---|
| Belgium | ||
| Present value of funded obligations | 216 335 | 229 377 |
| Fair value of plan assets | -201 965 | -205 728 |
| Deficit / surplus (-) of funded obligations | 14 369 | 23 649 |
| Present value of unfunded obligations | 10 449 | 8 365 |
| Total deficit / surplus (-) of obligations | 24 818 | 32 014 |
| United States | ||
| Present value of funded obligations | 130 913 | 127 361 |
| Fair value of plan assets | -99 463 | -104 847 |
| Deficit / surplus (-) of funded obligations | 31 450 | 22 514 |
| Present value of unfunded obligations | 9 612 | 8 975 |
| Total deficit / surplus (-) of obligations | 41 062 | 31 489 |
| United Kingdom | ||
| Present value of funded obligations | 95 353 | 91 997 |
| Fair value of plan assets | -105 823 | -110 079 |
| Deficit / surplus (-) of funded obligations | -10 470 | -18 082 |
| Present value of unfunded obligations | - | - |
| Total deficit / surplus (-) of obligations | -10 470 | -18 082 |
| Other | ||
| Present value of funded obligations | 1 377 | 1 633 |
| Fair value of plan assets | -1 570 | -1 425 |
| Deficit / surplus (-) of funded obligations | -193 | 208 |
| Present value of unfunded obligations | 54 561 | 55 181 |
| Total deficit / surplus (-) of obligations | 54 368 | 55 389 |
| Total | ||
| Present value of funded obligations | 443 977 | 450 368 |
| Fair value of plan assets | -408 821 | -422 079 |
| Deficit / surplus (-) of funded obligations | 35 156 | 28 289 |
| Present value of unfunded obligations | 74 622 | 72 521 |
| Total deficit / surplus (-) of obligations | 109 778 | 100 810 |
The movement in the defined-benefit obligation, plan assets, net liability and asset over the year were as follows:
| in thousands of € | Defined-benefit obligation |
Plan assets |
Net liability / asset (-) |
|---|---|---|---|
| As at 1 January 2019 | 475 011 | -350 350 | 124 661 |
| Current service cost | 16 483 | - | 16 483 |
| Past service cost | -3 624 | - | -3 624 |
| Gains (-) / losses from settlements | -3 047 | 574 | -2 474 |
| Interest expense / income (-) | 13 008 | -9 099 | 3 909 |
| Net benefit expense / income (-) recognized in profit and loss | 22 819 | -8 525 | 14 294 |
| Components recognized in EBIT | 10 385 | ||
| Components recognized in financial result | 3 909 | ||
| Remeasurements | |||
| Return on plan assets, excluding amounts included in interest expense / income (-) |
- | -53 233 | -53 233 |
| Gain (-) / loss from change in demographic assumptions | -2 993 | - | -2 993 |
| Gain (-) / loss from change in financial assumptions | 57 575 | - | 57 575 |
| Experience gains (-) / losses | -517 | - | -517 |
| Changes recognized in equity | 54 066 | -53 233 | 833 |
| Contributions | |||
| Employer contributions / direct benefit payments | - | -29 551 | -29 551 |
| Employee contributions | 169 | -169 | - |
| Payments from plans | |||
| Benefit payments | -39 489 | 39 489 | - |
| Foreign-currency translation effect | 6 024 | -6 482 | -458 |
| As at 31 December 2019 | 518 600 | -408 821 | 109 778 |
| As at 1 January 2020 | 518 600 | -408 821 | 109 778 |
| Current service cost | 16 035 | - | 16 035 |
| Past service cost | 937 | - | 936 |
| Gains (-) / losses from settlements | -3 816 | - | -3 816 |
| Interest expense / income (-) | 9 402 | -6 860 | 2 541 |
| Net benefit expense / income (-) recognized in profit and loss | 22 557 | -6 860 | 15 697 |
| Components recognized in EBIT | 13 155 | ||
| Components recognized in financial result | 2 541 | ||
| Remeasurements | |||
| Return on plan assets, excluding amounts included in interest expense / income (-) |
- | -33 773 | -33 773 |
| Gain (-) / loss from change in demographic assumptions | -1 753 | - | -1 753 |
| Gain (-) / loss from change in financial assumptions | 34 728 | - | 34 728 |
| Experience gains (-) / losses | -2 | -1 697 | -1 699 |
| Changes recognized in equity | 32 973 | -35 470 | -2 497 |
| Contributions | |||
| Employer contributions / direct benefit payments | - | -17 052 | -17 052 |
| Employee contributions | 170 | -170 | - |
| Payments from plans | |||
| Benefit payments | -30 914 | 30 914 | - |
| Foreign-currency translation effect | -20 497 | 15 380 | -5 116 |
| As at 31 December 2020 | 522 889 | -422 079 | 100 810 |
The past service cost mainly related to the restructuring in Belgium and the impact of the High Court judgement released in November 2020 on GMP equalization on past transfers towards other schemes in UK. Gains from settlements mainly related to plan changes in post-employment plans in Ecuador and the restructuring in Belgium. 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 amounted to € 0.2 million (2019: € 0.2 million).
Estimated contributions and direct benefit payments for 2021 are as follows:
| in thousands of € | 2021 |
|---|---|
| Pension plans | 17 879 |
| Total | 17 879 |
Fair values of plan assets at 31 December were as follows:
| 2019 in thousands of € |
2020 |
|---|---|
| Belgium | |
| Bonds 53 875 |
54 808 |
| Equity 78 740 |
80 076 |
| Cash 5 570 |
920 |
| Insurance contracts 63 782 |
69 923 |
| Total Belgium 201 965 |
205 728 |
| United States | |
| Bonds | |
| USD Long Duration Bonds 31 608 |
29 765 |
| USD Fixed Income 4 765 |
4 944 |
| USD Guaranteed Deposit 3 749 |
3 191 |
| Equity | |
| USD Equity 37 665 |
42 610 |
| Non-USD Equity 16 671 |
19 026 |
| Real estate 5 006 |
5 310 |
| Total United States 99 463 |
104 847 |
| United Kingdom | |
| Bonds 45 457 |
27 929 |
| Derivatives 50 246 |
60 967 |
| Equity 8 029 |
14 576 |
| Cash 2 091 |
6 607 |
| Total United Kingdom 105 823 |
110 079 |
| Other | |
| 1 569 Bonds |
1 425 |
| Total Other 1 569 |
1 425 |
| Total 408 821 |
422 079 |
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. In UK a large proportion of assets is invested in liability driven investments and bonds.
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:
| Actuarial assumptions | 2019 | 2020 |
|---|---|---|
| Discount rate | 1.9% | 1.4% |
| Future salary increases | 3.0% | 3.0% |
| Underlying inflation rate | 1.9% | 1.4% |
| Health care cost increases (initial) | 7.0% | 6.8% |
| Health care cost increases (ultimate) | 5.0% | 5.0% |
| Health care (years to ultimate rate) | 8 | 7 |
The discount rate for the UK, USA and Belgium is reflective both of the current interest rate environment and the plan's distinct liability characteristics. The plan's projected cash flows are matched to spot rates, after which an associated present value is developed. A single equivalent discount rate is then determined that produces that same present value. The underlying yield curve for deriving spot rates is based on high quality AA-credit rated corporate bonds issues denominated in the currency of the applicable regional market.
This resulted into the following discount rates:
| Discount rates | 2019 | 2020 |
|---|---|---|
| Belgium | 0.8% | 0.6% |
| United States | 3.2% | 2.4% |
| United Kingdom | 2.1% | 1.5% |
| Other | 2.6% | 2.9% |
This resulted into the following inflation rates:
| Inflation rates | 2019 | 2020 |
|---|---|---|
| Belgium | 1.5% | 1.5% |
| United States | - | - |
| United Kingdom | 2.8% | 2.9% |
| Other | 2.1% | 1.9% |
| Total | 1.9% | 1.4% |
Assumptions regarding future mortality are based on actuarial advice in accordance with published statistics and experience in each territory. These assumptions translated into the following average life expectancy in years for a pensioner retiring at age 65.
| 2019 | 2020 | |
|---|---|---|
| Life expectancy of a man aged 65 (years) at balance sheet date | 19.7 | 20.2 |
| Life expectancy of a woman aged 65 (years) at balance sheet date | 22.9 | 22.6 |
| Life expectancy of a man aged 65 (years) ten years after balance sheet date | 20.5 | 20.9 |
| Life expectancy of a woman aged 65 (years) ten years after balance sheet date | 23.7 | 23.4 |
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 | 31 561 | 6.0% |
| Salary growth rate | 0.50% | Increase by | 10 667 | 2.0% |
| Health care cost | 0.50% | Increase by | 197 | 0.10% |
| Life expectancy | 1 year | Increase by | 7 937 | 1.5% |
The above analyses were done on a mutually exclusive basis, while 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 and UK provide for benefits for the life of the plan members, so increases in life expectancy will result in an increase in the plans' liabilities. |
The weighted average durations of the defined-benefit obligations were as follows:
| Weighted average durations of the DBO | ||
|---|---|---|
| in years | 2019 | 2020 |
| Belgium | 13.7 | 13.5 |
| United States | 12.1 | 12.1 |
| United Kingdom | 23.0 | 19.9 |
| Other | 9.9 | 11.9 |
| Total | 14.7 | 14.1 |
Termination benefits are cash and other services paid to employees when their employment has been terminated. The net increase in 2020 mainly related to the setup for the restructuring program in Belgium, offset by the usage of these termination benefits.
The other long-term employee benefits related to service awards.
The Group issues stock appreciation rights (SARs) for 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 6.13. '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: € 27.16 (2019: € 26.50), expected volatility of 36% (2019: 35%), expected dividend yield of 3.0% (2019: 3.0%), vesting period of 3 years, contractual life of 10 years and an exercise factor of 1.40 (2019: 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 € |
Granted | Exercise price | Fair value as at 31 December 2019 |
Fair value as at 31 December 2020 |
|---|---|---|---|---|
| Grant 2012 | 21 200 | 27.63 | 3.80 | 3.20 |
| Grant 2013 | 20 900 | 22.09 | 6.43 | 6.58 |
| Grant 2014 | 36 800 | 25.66 | 5.36 | 5.41 |
| Grant 2015 | 40 200 | 25.45 | 5.73 | 5.86 |
| Grant 2016 | 20 250 | 28.38 | 5.23 | 5.34 |
| Grant 2017 | 26 375 | 38.86 | 3.76 | 3.79 |
| Grant 2018 | 16 875 | 37.06 | 4.31 | 4.33 |
| Other SAR Plans details by grant | Fair value as at | Fair value as at | ||
|---|---|---|---|---|
| in € | Granted | Exercise price | 31 December 2019 | 31 December 2020 |
| Grant 2012 | 19 500 | 25.14 | 4.69 | 4.25 |
| Grant 2013 | 24 500 | 19.20 | 8.03 | 8.43 |
| Exceptional grant 2013 | 10 000 | 21.45 | 6.89 | 7.17 |
| Grant 2014 | 54 800 | 25.38 | 5.50 | 5.57 |
| Grant 2015 | 44 700 | 26.06 | 5.61 | 5.73 |
| Grant 2016 | 38 500 | 26.38 | 5.69 | 5.85 |
| Grant 2017 | 53 000 | 39.43 | 3.70 | 3.68 |
| Grant 2018 | 37 500 | 34.60 | 4.68 | 4.68 |
At 31 December 2020, the total liability for the USA SAR plan amounted to € 0.2 million (2019: € 0.3 million), while the total liability for the other SAR plans amounted to € 0.7 million (2019: € 0.7 million).
The Group recorded a total income of € 0.1 million (2019: cost of € 0.4 million) during the year in respect of SARs.
Certain management employees received cash-settled Performance Share Units (PSUs) entitling the beneficiary to receive the value of Performance Share Units: during 2015, 2016 and 2017 subject to the conditions of the Performance Share Plan 2015- 2017 and in 2019 and 2020 under the conditions of the Performance Share Plan 2018-2020. 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.
These Performance Share Units are accounted for as cash-settled share-based payments in accordance with IFRS 2. The fair value of each grant under PSU 2015-2017 is recalculated at balance sheet date, using the same binomial pricing model as for the equity-settled share-based payments (see note 6.13. 'Ordinary shares, treasury shares and equity-settled share-based payments'). Following inputs to the model are used: share price at balance sheet date: € 27.16 (2019: € 26.50), expected volatility of 36% (2019: 35%), expected dividend yield of 3.0% (2019: 3.0%), vesting period of 3 years. 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 each grant under PSU 2018-2020 is equal to the share price at balance sheet date, since the performance conditions are non-market conditions (Underlying EBITDA and operational cash flow).
The fair value of outstanding Performance Share Units by grant is shown below:
| Performance Share Units details by grant in € |
Granted | Fair value as at 31 December 2019 |
Fair value as at 31 December 2020 |
|
|---|---|---|---|---|
| PSU 2015-2017 | Grant 2017 | 13 500 | 5.51 | - |
| PSU 2018-2020 | Grant 2019 | 51 995 | 26.50 | 27.16 |
| PSU 2018-2020 | Grant 2020 | 45 141 | - | 27.16 |
| PSU 2018-2020 | Grant 2020 | 444 | - | 27.16 |
At 31 December 2020, the total liability for the USA PSUs amounted to € 0.3 million (2019: € 0.1 million), while the total liability for the other PSUs amounted to € 1.3 million (2019: € 0.5 million).
The Group recorded a total cost of € 0.8 million (2019: cost of € 0.6 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 2019 | 16 205 | 6 792 | 33 290 | 9 937 | 66 224 |
| Additional provisions | 4 904 | 9 620 | 403 | 224 | 15 152 |
| Unutilized amounts released | -60 | -5 134 | -654 | -406 | -6 254 |
| Increase in present value | - | - | - | 202 | 202 |
| Charged to the income statement | 4 844 | 4 486 | -250 | 20 | 9 100 |
| Amounts utilized during the year | -8 885 | -2 950 | -577 | -831 | -13 243 |
| Change in accounting policy | - | - | - | -7 032 | -7 032 |
| Exchange gains (-) and losses | -10 | 130 | 25 | 32 | 177 |
| As at 31 December 2019 | 12 155 | 8 458 | 32 488 | 2 127 | 55 227 |
| Of which | |||||
| current | 11 104 | 4 246 | 14 574 | 298 | 30 222 |
| non-current - between 1 and 5 years | 1 051 | 3 813 | 1 973 | 1 518 | 8 355 |
| non-current - more than 5 years | - | 399 | 15 941 | 311 | 16 651 |
| in thousands of € | Restructuring | Claims | Environment | Other | Total |
|---|---|---|---|---|---|
| As at 1 January 2020 | 12 155 | 8 458 | 32 488 | 2 127 | 55 227 |
| Additional provisions | 755 | 2 391 | 2 090 | 935 | 6 170 |
| Unutilized amounts released | -1 542 | -2 596 | -5 789 | -153 | -10 080 |
| Increase in present value | - | - | - | 43 | 43 |
| Charged to the income statement | -787 | -205 | -3 699 | 825 | -3 867 |
| Amounts utilized during the year | -4 148 | -1 077 | -8 766 | -169 | -14 160 |
| Transfers | -390 | -369 | 24 | 734 | - |
| Exchange gains (-) and losses | -305 | -208 | -31 | -69 | -613 |
| As at 31 December 2020 | 6 525 | 6 600 | 20 015 | 3 448 | 36 588 |
| Of which | |||||
| current | 6 467 | 3 389 | 737 | 828 | 11 421 |
| non-current - between 1 and 5 years | 58 | 3 211 | 3 988 | 2 364 | 9 621 |
| non-current - more than 5 years | - | - | 15 290 | 256 | 15 546 |
The decrease of the restructuring programs mainly related to the utilization of the provision for the rubber reinforcement plant in Figline (Italy) and the steel wire solutions plant in Shelbyville (North America) and a release of the restructuring provision in Malaysia.
Provisions for claims mainly related to product warranty programs and various product quality claims in several entities.
The environmental provisions mainly related 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 in the environmental provisions mainly related to the disposal of the Hemiksem site (Belgium) due to which part of the provisions was utilized and released, partially offset by the setup of a new environmental provision in Bekaert Sardegna.
The increase of other provisions mainly related to reclassifications and some additional provisions for law suits.
An analysis of the carrying amount of the Group's interest-bearing debt by contractual maturity is presented below:
| 2019 in thousands of € |
Due within 1 year |
Due between 1 and 5 years |
Due after 5 years |
Total |
|---|---|---|---|---|
| Interest-bearing debt | ||||
| Lease liability | 19 728 | 42 689 | 25 835 | 88 253 |
| Credit institutions | 358 843 | 182 019 | 50 000 | 590 862 |
| Schuldschein loans | - | 188 349 | 131 019 | 319 368 |
| Bonds | 45 614 | - | 200 000 | 245 614 |
| Convertible bonds | - | 364 399 | - | 364 399 |
| Total financial debt | 424 184 | 777 456 | 406 854 | 1 608 495 |
| 2020 in thousands of € |
Due within 1 year |
Due between 1 and 5 years |
Due after 5 years |
Total |
|---|---|---|---|---|
| Interest-bearing debt | ||||
| Lease liability | 19 746 | 39 603 | 21 157 | 80 505 |
| Cash guarantees received | - | 51 | 120 | 171 |
| Credit institutions | 246 817 | 187 511 | - | 434 328 |
| Schuldschein loans | - | 298 702 | 20 933 | 319 635 |
| Bonds | - | - | 400 000 | 400 000 |
| Convertible bonds | 375 092 | - | - | 375 092 |
| Total financial debt | 641 655 | 525 867 | 442 210 | 1 609 732 |
An analysis of the undiscounted outflows relating to the Group's financial liabilities by contractual maturity is presented in note 7.2. 'Financial risk management and financial derivatives'. The financial debt due within one year increased with € 217.5 million due to the fact that the convertible bond will mature in June 2021 (€ 375.1 million), offset by a decrease in credit institutions (€ -112.0 million) and a matured retail bond (€ -45.6 million).
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 programs.
For further information on financial risk management, we refer to note 7.2. 'Financial risk management and financial derivatives'.
Similar to all financial derivative assets and liabilities, the conversion option (€ 0.03 million vs € 0.1 million in 2019) embedded in the convertible bond is not included in the net debt (see note 6.19. 'Other non-current liabilities'). The table below summarizes the calculation of the net debt.
| in thousands of € | 2019 | 2020 |
|---|---|---|
| Non-current interest-bearing debt | 1 184 310 | 968 076 |
| Current interest-bearing debt | 424 184 | 641 655 |
| Total financial debt | 1 608 495 | 1 609 732 |
| Non-current financial receivables and cash guarantees | -6 518 | -7 451 |
| Current loans | -8 779 | -7 707 |
| Short-term deposits | -50 039 | -50 077 |
| Cash and cash equivalents | -566 176 | -940 416 |
| Net debt | 976 984 | 604 081 |
In accordance with the disclosure requirements of IAS 7 'Statement of Cash Flows', this section presents an overview of the changes in liabilities arising from financing activities. The qualification as long-term vs short-term debt is based on the initial maturity of the debt. In the consolidated cash flow statement, the cash flows from long-term interest-bearing debt are analyzed between proceeds and repayments. Acquisitions and disposals in 2020 related to the acquisition of Grating Peru SAC. In 2020, other changes in financial debt mainly related to the non-cash movements on the lease liability (€ 22.0 million) (see also note 6.4. 'Right-of-use (RoU) property, plant and equipment'), and interest accruals from amortizations on liabilities using the effective interest method (€ 11.0 million). Derivatives held to hedge financial debt included swaps and options that provide (economic) hedges for interest-rate risk, see note 7.2. 'Financial risk management and financial derivatives'. Acquisitions and disposals in 2019 related to the extinguishement of the put option as part of the transaction in which the Group purchased the non-controlling interest from Maccaferri. Other changes in 2019 mainly related to the non-cash movements on the lease liability in adopting and applying IFRS 16 'Leases' (€ 108.0 million) (see also note 6.4. 'Right-of-use (RoU) property, plant and equipment'), and interest accruals from amortizations on liabilities using the effective interest method (€ 14.2 million).
| Non-cash changes | |||||||
|---|---|---|---|---|---|---|---|
| 2019 in thousands of € |
As at 1 January |
Cash flows | Acquisitions & disposals |
Cumulative translation adjust ments |
Fair value | changes Other changes | As at 31 December |
| Financial debt | |||||||
| Long-term interest | |||||||
| bearing debt 1 | 1 372 759 | -89 560 | - | -1 594 | - | 122 199 | 1 403 804 |
| Finance leases | 2 664 | - | - | - | - | -2 664 | - |
| Lease liability | - | -27 866 | - | 1 784 | - | 114 335 | 88 253 |
| Credit institutions | 775 461 | -385 912 | - | -3 378 | - | - | 386 171 |
| Schuldschein | |||||||
| loans | - | 319 218 | - | - | - | 150 | 319 368 |
| Bonds | 240 614 | 5 000 | - | - | - | - | 245 614 |
| Convertible bonds | 354 021 | - | - | - | - | 10 378 | 364 398 |
| Short-term interest | |||||||
| bearing debt | 255 946 | -76 715 | - | 25 460 | - | - | 204 691 |
| Total financial debt | 1 628 705 | -166 275 | - | 23 866 | - | 122 199 | 1 608 495 |
| Derivatives held to | |||||||
| hedge financial debt | |||||||
| Interest-rate swaps | - | - | - | - | 496 | - | 496 |
| Cross-currency | |||||||
| interest-rate swaps | 522 | - | - | - | -4 227 | - | -3 705 |
| Other liabilities from | |||||||
| financing activities | |||||||
| Put options of NCI | 11 033 | - | -11 033 | - | - | - | - |
| Conversion | |||||||
| derivative | 220 | - | - | - | -105 | - | 115 |
| Total liabilities from | |||||||
| financing activities | 1 640 480 | -166 275 | -11 033 | 23 866 | -3 837 | 122 199 | 1 605 400 |
1 Including the current portion of non-current interest-bearing debt of € 686.1 million as at 1 January and € 219.5 million as at 31 December.
| Non-cash changes | |||||||
|---|---|---|---|---|---|---|---|
| 2020 in thousands of € |
As at 1 January |
Cash flows | Acquisitions & disposals |
Cumulative translation adjust ments |
Fair value | changes Other changes | As at 31 December |
| Financial debt | |||||||
| Long-term interest | |||||||
| bearing debt 1 | 1 403 804 | -46 364 | - | -9 486 | - | 32 912 | 1 380 866 |
| Cash guarantees | |||||||
| received | - | 175 | - | -3 | - | - | 171 |
| Lease liability | 88 253 | -25 785 | - | -3 914 | - | 21 952 | 80 505 |
| Credit institutions | 386 171 | -175 139 | - | -5 569 | - | - | 205 463 |
| Schuldschein | |||||||
| loans | 319 368 | - | - | - | - | 267 | 319 635 |
| Bonds | 245 614 | 154 386 | - | - | - | - | 400 000 |
| Convertible bonds | 364 398 | - | - | - | - | 10 694 | 375 092 |
| Short-term interest | |||||||
| bearing debt | 204 691 | 41 358 | 1 237 | -18 420 | - | - | 228 865 |
| Total financial debt | 1 608 495 | -5 006 | 1 237 | -27 906 | - | 32 912 | 1 609 732 |
| Derivatives held to | |||||||
| hedge financial debt | |||||||
| Interest-rate swaps | 496 | - | - | - | 585 | - | 1 081 |
| Cross-currency | |||||||
| interest-rate swaps | -3 705 | - | - | - | -1 325 | - | -5 030 |
| Other liabilities from | |||||||
| financing activities | |||||||
| Conversion | |||||||
| derivative | 115 | - | - | - | -81 | - | 34 |
| Total liabilities from | |||||||
| financing activities | 1 605 400 | -5 006 | 1 237 | -27 906 | -820 | 32 912 | 1 605 817 |
1 Including the current portion of non-current interest-bearing debt of € 219.5 million as at 1 January and € 412.8 million as at 31 December.
| Carrying amount in thousands of € |
2019 | 2020 |
|---|---|---|
| Other non-current amounts payable | 150 | 150 |
| Derivatives (cf. note 7.2.) | 115 | 1 081 |
| Total | 265 | 1 231 |
The derivatives related to an interest-rate swap to hedge the variable interest in some of the Schuldschein loans (€ 1.1 million) (see notes 6.18. 'Interest-bearing debt' and 7.2. 'Financial risk management and financial derivatives').
| Carrying amount | ||
|---|---|---|
| in thousands of € | 2019 | 2020 |
| Other amounts payable | 7 375 | 9 939 |
| Derivatives (cf. note 7.2.) | 2 116 | 1 885 |
| Advances received | 18 791 | 15 682 |
| Other taxes | 30 307 | 27 073 |
| Accruals and deferred income | 9 399 | 9 872 |
| Total | 67 988 | 64 451 |
The derivatives included forward-exchange contracts (€ 1.6 million (2019: € 1.4 million)) and CCIRSs (€ 0.2 million (2019: € 0.7 million)). Other taxes predominantly related to VAT payable, employment-related taxes withheld and other non-income taxes payable.
The table below provides an overview of the tax receivables, tax payables and uncertain tax positions recognized at balance sheet closing date. The tax receivables and payables include both current income taxes, VAT and other taxes.
| in thousands of € | 2019 | 2020 |
|---|---|---|
| Tax receivables 1 | 93 150 | 83 487 |
| Certain tax liabilities 2 | 47 990 | 48 976 |
| Uncertain tax positions 3 | 64 728 | 31 639 |
1 The balance of 2019 is adjusted by including the other non-income taxes receivable (€ 2.5 million).
2 The balance of 2019 is adjusted by including the other non-income taxes payable (€ 10.4 million) and employment-related taxes withheld (€ 8.5 million).
3 In 2020 a number of pending tax audits in different countries were finalized, leading to an additional tax expense on the one hand but also to the release of some provisions for uncertain tax positions on the other hand.
| Summary | ||
|---|---|---|
| in thousands of € | 2019 | 2020 |
| Operating result (EBIT) | 155 017 | 256 527 |
| Non-cash items added back to operating result (EBIT) | 248 271 | 216 067 |
| EBITDA | 403 288 | 472 594 |
| Other gross cash flows from operating activities | -61 567 | -91 535 |
| Gross cash flows from operating activities | 341 721 | 381 059 |
| Changes in operating working capital 1 | 168 549 | 124 419 |
| Other operating cash flows | 14 056 | -556 |
| Cash from operating activities | 524 326 | 504 921 |
| Cash from investing activities | -91 089 | -31 209 |
| Cash from financing activities | -268 793 | -82 741 |
| Net increase or decrease in cash and cash equivalents | 164 444 | 390 972 |
1 The value differs from the organic decrease reported in note 6.8. 'Operating working capital' due to a reclassification of € -16.1 million for capex related to trade payables balances at year-end (2019: € -20.6 million).
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.
| Details of selected operating items | ||
|---|---|---|
| in thousands of € | 2019 | 2020 |
| Non-cash items included in operating result (EBIT) | ||
| Depreciation and amortization 1 | 229 069 | 202 103 |
| Impairment losses on assets | 19 202 | 13 964 |
| Non-cash items added back to operating result (EBIT) | 248 271 | 216 067 |
| Employee benefits: set-up / reversal (-) of amounts not used | 41 385 | 49 703 |
| Provisions: set-up / reversal (-) of amounts not used | 11 152 | -3 909 |
| Equity-settled share-based payments | 4 390 | 8 556 |
| Other non-cash items included in operating result (EBIT) | 56 928 | 54 350 |
| Total | 305 198 | 270 417 |
| Investing items included in operating result (EBIT) | ||
| Gains (-) and losses on business disposals (portion sold) | - | 705 |
| Gains (-) and losses on disposals of intangible assets + PP&E | 3 428 | -39 331 |
| Total | 3 428 | -38 626 |
| Amounts used on provisions and employee benefit obligations | ||
| Employee benefits: amounts used | -45 801 | -36 596 |
| Provisions: amounts used | -15 498 | -14 160 |
| Total | -61 299 | -50 756 |
| Income taxes paid | ||
| Current income tax expense | -56 451 | -36 744 |
| Increase or decrease (-) in net income taxes payable | -4 173 | -19 760 |
| Total | -60 624 | -56 504 |
| Other operating cash flows | ||
| Movements in other receivables and payables | 10 610 | -1 225 |
| Other | 3 446 | 669 |
| Total | 14 056 | -556 |
1 Including € -7.3 million (2019: € -7.1 million) write-downs / (reversals of write-downs) on inventories and trade receivables (see note 6.8. 'Operating working capital').
Gross cash flows from operating activities increased by € +39.3 million as a result of higher EBITDA (€ +69.3 million), lower usage of provisions and employee benefit obligations (€ 10.5 million) and the adjustment for the accounting profit on investing items was € 42.1 million higher, reflecting the result on disposal real estate in Scheldestroom NV.
The cash inflow from the decrease in working capital amounted to € +124.4 million in 2020 (2019: € +168.5 million) (see organic decrease in note 6.8. 'Operating working capital'). This was a combined effect of lower stock level resulting mainly from strict stock level control, lower trade receivables and higher trade payables resulting from the continuous efforts on payment term adjustment to mirror customer payment terms.
Other operating cash flows mainly related to swings in other receivables and payables not included in working capital and not arising from investing or financing activities.
In 2020, € 56.5 million income taxes were paid. Most taxes were paid mainly in China (€ 19.4 million), Belgium (€ 12.9 million), Turkey (€ 6.5 million) and Indonesia (€ 4.9 million).
New business combinations relate to the investments in new joint ventures in 2020.
Cash-outs from capital expenditure for property, plant and equipment increased from € 94.5 million in 2019 to € 104.5 million in 2020.
In 2019 the earn-out for the disposal of the drying activities is presented in 'Proceeds from disposals of investments'. Proceeds from sales of fixed assets in 2020 related to the sale of (1) Bekaert sites in Belgium, (2) land and buildings due to restructuring in Belgium and (3) the Belton, Texas factory due to the restructuring in the United States. In 2019 there was only a minor amount for the sale of assets.
The following table presents more details on selected investing cash flows:
| Details of selected investing items 2019 in thousands of € |
2020 |
|---|---|
| Other portfolio investments | |
| New business combinations - |
-978 |
| Total - |
-978 |
| Proceeds from disposals of fixed assets | |
| Proceeds from disposals of property, plant and equipment 1 349 |
48 199 |
| Proceeds from disposals of RoU Land - |
3 861 |
| Total 1 349 |
52 060 |
New long-term debt issued (€ 201.3 million) mainly related to a new retail bond (2019: € 585.7 million, related to the retail bond issued in October 2019 (€ 200.0 million), the cash-in from the Schuldschein loans (€ 320.5 million) and financing transactions in China, Chile and Peru (€ 66,5 million)). Repayments of long-term debt (€ -247.7 million) mainly related to the repayment of a bond (€ -45.6 million) and refinancing of local loans in Belgium (€ -75.0 million), China (€ -91.3 million), in Chile (€ -9.1 million) and in the United Kingdom (€ -2.6 million). Cash-ins from short-term debt amounted to € 41.4 million in 2020 (2019: cash-outs € -76.7 million). For an overview of the movements in liabilities arising from financing activities, see note 6.18. 'Interest-bearing debt'.
In 2020 the treasury shares transactions amounted to € 1.1 million (2019: almost none) and consisted of proceeds from options being exercised.
In 2020 'Sales and purchases of non-controlling interests' concerned the acquisition of the (20%) shares previously held by Continental Global Holding Netherlands BV in Bekaert Slatina SRL in Romania (€ -9.0 million). In 2019, it consisted of Maccaferri's 50% share in Bekaert Maccaferri Underground Solutions BVBA (€ -9.5 million). As for other financing cash flows, cash-ins resulted from new shares issued following exercise of subscription rights (€ 0.2 million vs nil in 2019), capital paid in by noncontrolling interestholders (nil vs € 0.7 million in 2019), and net receipts from loans and receivables (€ -0.2 million vs € 11.9 million in 2019). Other financial income and expenses mainly related amongst others to taxes and bank charges on financial transactions (€ -3.4 million vs € -3.8 million in 2019).
The following table presents more details about selected financing items:
| Details of selected financing items | |
|---|---|
| 2019 in thousands of € |
2020 |
| Other financing cash flows | |
| New shares issued following exercise of subscription rights - |
153 |
| Capital paid in by non-controlling interestholders 652 |
- |
| Increase (-) or decrease in current and non-current receivables 11 902 |
-211 |
| Increase (-) or decrease in current financial assets -3 |
-46 |
| Other financial income and expenses -5 012 |
-4 215 |
| Total 7 540 |
-4 319 |
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, Risk 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, Risk 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 and pound sterling. 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 - 2019 | |||
|---|---|---|---|
| in thousands of € | Total exposure | Total derivatives | Open position |
| AUD/USD | 1 614 | -6 044 | -4 431 |
| BRL/EUR | 25 900 | - | 25 900 |
| CLP/EUR | -20 164 | - | -20 164 |
| CZK/EUR | 870 | -820 | 50 |
| EUR/CNY | -81 668 | 39 553 | -42 116 |
| EUR/GBP | -8 033 | 6 101 | -1 932 |
| EUR/INR | -33 154 | - | -33 154 |
| EUR/MYR | -15 551 | 15 000 | -551 |
| EUR/RON | -42 080 | 7 473 | -34 607 |
| EUR/USD | -2 043 | 6 212 | 4 169 |
| IDR/USD | 8 199 | - | 8 199 |
| JPY/CNY | 4 792 | -2 657 | 2 135 |
| JPY/USD | 4 158 | -2 478 | 1 680 |
| NOK/GBP | 9 547 | - | 9 547 |
| NZD/USD | -9 347 | -859 | -10 206 |
| RUB/EUR | 32 263 | -32 256 | 8 |
| TRY/EUR | 25 074 | - | 25 074 |
| USD/BRL | -20 256 | - | -20 256 |
| USD/CLP | 8 004 | - | 8 004 |
| USD/CNY | -59 157 | 68 126 | 8 968 |
| USD/COP | -10 586 | 18 359 | 7 773 |
| USD/EUR | 230 415 | -254 001 | -23 587 |
| USD/GBP | 100 058 | - | 100 058 |
| USD/INR | -42 405 | 18 539 | -23 866 |
| in thousands of € | Total exposure | Total derivatives | Open position |
|---|---|---|---|
| BRL/EUR | 2 104 | - | 2 104 |
| CZK/EUR | 11 317 | 3 908 | 15 225 |
| EUR/CNY | -27 568 | -2 500 | -30 068 |
| EUR/GBP | -4 047 | 2 464 | -1 583 |
| EUR/INR | -33 691 | 18 530 | -15 161 |
| EUR/MYR | -23 277 | - | -23 277 |
| EUR/RON | -31 373 | - | -31 373 |
| EUR/RUB | -28 520 | 21 866 | -6 654 |
| EUR/USD | -2 648 | 4 014 | 1 365 |
| IDR/USD | 2 497 | - | 2 497 |
| JPY/CNY | 5 143 | -2 554 | 2 589 |
| JPY/USD | 3 504 | -2 042 | 1 462 |
| NOK/GBP | 11 878 | - | 11 878 |
| NZD/USD | -9 585 | -765 | -10 350 |
| RUB/EUR | 21 869 | - | 21 869 |
| TRY/EUR | 14 378 | - | 14 378 |
| USD/BRL | -17 094 | - | -17 094 |
| USD/CLP | 1 586 | - | 1 586 |
| USD/CNY | 17 752 | 8 300 | 26 052 |
| USD/COP | 2 515 | 11 744 | 14 259 |
| USD/EUR | 140 981 | -82 843 | 58 138 |
| USD/GBP | -2 438 | - | -2 438 |
| USD/INR | -48 221 | - | -48 221 |
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.
If rates had weakened/strengthened by such changes with all other variables constant, the result for the period before taxes would have been € 1.6 million lower/higher (2019: € 7.3 million).
At 31 December 2020 the Group does not apply hedge accounting (also none at 31 December 2019).
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, excluding the effects of any swaps, at the balance sheet date.
The convertible bond (EUR) is carried at amortized cost using the effective interest method so as to spread the separate recognition of the conversion option and any transaction fees over time via interest charges. This results in effective interest charges exceeding the nominal interest charges. 7.2 Risk mgmt and derivatives
| Long-term | |||||
|---|---|---|---|---|---|
| 2019 | Fixed rate | Floating rate | Total | Short-term | Total |
| US dollar | 4.65% | 4.12% | 4.28% | 2.77% | 3.06% |
| Chinese renminbi | - | 4.63% | 4.63% | 4.13% | 4.44% |
| Euro | 1.26% | 1.40% | 1.32% | 1.25% | 1.32% |
| Other | 6.74% | - | 6.74% | 5.22% | 5.72% |
| Total | 1.65% | 2.06% | 1.75% | 3.57% | 2.16% |
| 7.2 Risk mgmt and derivatives |
| Long-term | |||||
|---|---|---|---|---|---|
| 2020 | Fixed rate | Floating rate | Total | Short-term | Total |
| US dollar | 4.69% | 3.50% | 4.10% | 1.72% | 2.06% |
| Chinese renminbi | - | 3.71% | 3.71% | 3.80% | 3.79% |
| Euro | 1.39% | 1.48% | 1.43% | 0.55% | 1.43% |
| Other | 6.31% | - | 6.31% | 3.92% | 4.83% |
| Total | 1.72% | 1.67% | 1.71% | 2.82% | 1.92% |
As disclosed in note 6.18. 'Interest-bearing debt', the total financial debt of the Group as of 31 December 2020 amounted to € 1 609.7 million (2019: € 1 608.5 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), including the effect of any swaps. 7.2 Risk mgmt and derivatives
| Long-term | Short-term | |||
|---|---|---|---|---|
| 2019 | Fixed rate | Floating rate | Floating rate | Total |
| US dollar | 1.00% | 2.20% | 14.10% | 17.30% |
| Chinese renminbi | - | 1.90% | 1.20% | 3.10% |
| Euro | 54.70% | 14.70% | 0.20% | 69.60% |
| Other | 3.30% | - | 6.70% | 10.00% |
| Total | 59.00% | 18.80% | 22.20% | 100.00% |
| Long-term | Short-term | |||
|---|---|---|---|---|
| 2020 | Fixed rate | Floating rate | Floating rate | Total |
| US dollar | 0.80% | 0.80% | 9.10% | 10.70% |
| Chinese renminbi | - | 0.50% | 4.40% | 4.90% |
| Euro | 62.10% | 13.00% | 0.30% | 75.40% |
| Other | 3.40% | - | 5.60% | 9.00% |
| Total | 66.30% | 14.30% | 19.40% | 100.00% |
On the basis of the annualized daily volatility of the 3-month Interbank Offered Rate in 2020 and 2019, the reasonable estimates of possible interest rate changes, with a 95% confidence interval, are set out for the main currencies in the table below.
| 2019 | Interest rate at 31 December |
Reasonably possible changes (+/-) |
|---|---|---|
| Chinese renminbi 1 | 2.64% | 0.44% |
| Euro | 0.00% | 0.00% |
| US dollar | 1.91% | 0.28% |
| 2020 | Interest rate at 31 December |
Reasonably possible changes (+/-) |
|---|---|---|
| Chinese renminbi 1 | 2.53% | 0.42% |
| Euro | 0.00% | 0.00% |
| US dollar | 0.24% | 0.24% |
1 For 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 € 3.9 million higher/lower (2019: € 1.7 million higher/lower). Since the EURIBOR was negative and Bekaert has a 0% floor in place, reasonably possible changes in the EURIBOR will not generate any effect except for the fair value remeasurement of the interest rate swap at reporting date.
At 31 December 2020, the Group does not apply hedge accounting (2019: none) and no sensitivity analysis was required.
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 2020, 57.3% (2019: 64.7%) 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. In accordance with the IFRS 9 'expected credit loss' model for financial assets, a general bad debt allowance is made for trade receivables to cover the unknown bad debt risk at each reporting date. This general allowance constitutes of a percentage on outstanding trade receivables at each reporting date. The percentages are taking into account historical information on losses on trade receivables and are reviewed year-on-year. In the view of the Covid-19 pandemic, the outstanding trade receivables were monitored bi-weekly, taking a close look at the evolution of the Days Sales Outstanding (DSO). As the DSO decreased per 31 December 2020 compared to last year and there were no indicators for an increased bad debt risk, no extra general allowance has been put in place in 2020.
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 € 200 million (2019: € 200 million) at floating interest rates with fixed margins. At year-end, nothing was outstanding under these facilities (2019: nil). In addition, the Group has a commercial paper and medium-term note program available for a maximum of € 123.9 million (2019: € 123.9 million). At the end of 2020, no commercial paper notes were outstanding (2019: nil). At year-end, no external bank debt was subject to debt covenants (2019: nil). The Group has discounted outstanding receivables per 31 December 2020 for a total amount of € 145.3 million (2019: € 121.3 million) under its existing factoring agreements. In 2020, the Group has entered into new factoring agreements in Indonesia and China under which at the end of 2020, € 7.0 million was withdrawn. Under these agreements, substantially all risks and rewards of ownership of the receivables are transferred to the factor. As a consequence, at the end of 2020, the factored receivables are derecognized.
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. 7.2 Risk mgmt and derivatives
| 2019 | 2025 and | |||
|---|---|---|---|---|
| in thousands of € | 2020 | 2021 | 2022-2024 | thereafter |
| Financial liabilities - principal | ||||
| Trade payables | -652 384 | - | - | - |
| Other payables | -7 375 | -150 | - | - |
| Interest-bearing debt | -427 578 | -452 771 | -349 021 | -416 826 |
| Derivatives - gross settled | -196 609 | - | -4 930 | - |
| Financial liabilities - interests | ||||
| Trade and other payables | - | - | - | - |
| Interest-bearing debt | -24 786 | -13 917 | -35 708 | -13 895 |
| Derivatives - net settled | -596 | -809 | -982 | -21 |
| Derivatives - gross settled | -5 150 | -539 | -581 | - |
| Total undiscounted cash flow | -1 314 478 | -468 186 | -391 222 | -430 742 |
| 2020 | 2026 and | |||
|---|---|---|---|---|
| in thousands of € | 2021 | 2022 | 2023-2025 | thereafter |
| Financial liabilities - principal | ||||
| Trade payables | -668 422 | - | - | - |
| Other payables | -9 939 | -150 | - | - |
| Interest-bearing debt | -649 314 | -42 990 | -490 011 | -450 037 |
| Derivatives - gross settled | -103 678 | -18 530 | - | - |
| Financial liabilities - interests | ||||
| Trade and other payables | - | - | - | - |
| Interest-bearing debt | -24 001 | -18 041 | -45 128 | -17 087 |
| Derivatives - net settled | -348 | -348 | -609 | - |
| Derivatives - gross settled | -2 825 | -2 059 | - | - |
| Total undiscounted cash flow | -1 458 527 | -82 118 | -535 748 | -467 124 |
All instruments held at the reporting date and for which payments had been contractually agreed are included. Forecasted data relating to future, new liabilities have 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 IFRS 9 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.
The Group did not apply hedge accounting in 2020 (2019: none) so there were no fair value hedges nor cash flow hedges in 2020 (2019: none).
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 IFRS 9 'Financial Instruments' 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. In the case that derivatives are designated for hedge accounting as set out in IFRS 9, a distinction will be made depending on whether these are part of a fair value hedge (FVH) or cash flow hedge (CFH). At 31 December 2020, Bekaert does not apply hedge accounting: 7.2 Risk mgmt and derivatives
| 2019 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 | 192 025 | - | - |
| Interest-rate swaps | - | 196 500 | - |
| Cross-currency interest-rate swaps | 312 895 | 4 930 | - |
| Conversion derivative | - | 380 000 | - |
| Total | 504 920 7.2 Risk mgmt and derivatives |
581 430 | - |
| 2020 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 | 71 063 | - | - |
| Interest-rate swaps | - | 196 500 | - |
| Cross-currency interest-rate swaps | 108 665 | 18 530 | - |
| Conversion derivative | 380 000 | - | - |
| Total | 559 728 | 215 030 | - |
The following table summarizes the fair values of the various derivatives carried. In the case that derivatives are designated for hedge accounting as set out in IFRS 9, a distinction will be made depending on whether these are part of a fair value hedge (FVH) or cash flow hedge (CFH). At 31 December 2020, Bekaert does not apply hedge accounting:
| Fair value of current and non-current derivatives | Assets | Liabilities | ||
|---|---|---|---|---|
| in thousands of € | 2019 | 2020 | 2019 | 2020 |
| Financial instruments | ||||
| Held for trading | ||||
| Forward exchange contracts | 1 602 | 570 | 1 424 | 1 618 |
| Interest-rate swaps | - | - | 496 | 1 081 |
| Cross-currency interest-rate swaps | 3 902 | 5 264 | 197 | 234 |
| Conversion derivative | - | - | 115 | 34 |
| Other derivative financial assets | 2 492 | 3 178 | - | - |
| Total | 7 997 | 9 012 | 2 231 | 2 967 |
| Non-current | 3 374 | 3 762 | 610 | 1 081 |
| Current | 4 623 | 5 250 | 1 621 | 1 885 |
| Total | 7 997 | 9 012 | 2 231 | 2 967 |
In 2020, the other derivative financial assets related to the VPPA derivative for € 3.2 million (2019: € 2.5 million).
The Group has no financial assets and financial liabilities that are presented net in the balance sheet due to set-off in accordance with IAS 32. The Group enters into ISDA (International Swaps and Derivatives Association) master agreements with its counterparties for some 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 € | 2019 | 2020 | 2019 | 2020 |
| Total derivatives recognized in balance sheet | 7 997 | 9 012 | 2 231 | 2 967 |
| Enforceable netting | -197 | -234 | -197 | -234 |
| Net amounts | 7 800 | 8 778 | 2 034 | 2 733 |
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 IFRS 9 'Financial Instruments'.
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 the IFRS 9 categories:
| Abbreviation | Category in accordance with IFRS 9 |
|---|---|
| AC | Financial assets or financial liabilities at amortized cost |
| FVTOCI/Eq | Equity instruments designated as at fair value through OCI |
| FVTPL/Mnd | Financial assets mandatorily measured at fair value through profit or loss |
| HfT | Financial liabilities Held for Trading |
| FVTPL | Financial liabilities measured as at fair value through profit or loss |
| 31 December 2019 | 31 December 2020 | ||||
|---|---|---|---|---|---|
| Carrying amount vs fair value in thousands of € |
Category in accordance with IFRS 9 |
Carrying amount |
Fair value | Carrying amount |
Fair value |
| Assets | |||||
| Non-current financial assets | |||||
| - Financial & other receivables | |||||
| and cash guarantees | AC | 9 026 | 9 026 | 10 365 | 10 365 |
| - Equity investments | FVTOCI/Eq | 13 152 | 13 152 | 13 372 | 13 372 |
| - Derivatives | |||||
| - Held for trading | FVTPL/Mnd | 3 374 | 3 374 | 3 762 | 3 762 |
| Current financial assets | |||||
| - Financial receivables and cash | |||||
| guarantees | AC | 8 779 | 8 779 | 7 707 | 7 707 |
| - Cash and cash equivalents | AC | 566 176 | 566 176 | 940 416 | 940 416 |
| - Short term deposits | AC | 50 039 | 50 039 | 50 077 | 50 077 |
| - Trade receivables | AC | 644 908 | 644 908 | 587 619 | 587 619 |
| - Bills of exchange received | AC | 59 904 | 59 904 | 54 039 | 54 039 |
| - Other current assets | |||||
| - Other receivables | AC | 17 831 | 17 831 | 17 830 | 17 830 |
| - Derivatives | |||||
| - Held for trading | FVTPL/Mnd | 4 623 | 4 623 | 5 250 | 5 250 |
| Liabilities | |||||
| Non-current interest-bearing debt | |||||
| - Lease liabilities | AC | 68 525 | 68 525 | 60 760 | 60 760 |
| - Cash guarantees received | AC | - | - | 171 | 171 |
| - Credit institutions | AC | 232 019 | 232 019 | 187 511 | 187 511 |
| - Schuldschein loans | AC | 319 368 | 319 368 | 319 635 | 319 635 |
| - Bonds | AC | 564 399 | 567 749 | 400 000 | 401 693 |
| Current interest-bearing debt | |||||
| - Lease liabilities | AC | 19 728 | 19 728 | 19 746 | 19 746 |
| - Credit institutions | AC | 358 843 | 358 843 | 246 817 | 246 817 |
| - Bonds | AC | 45 614 | 46 523 | 375 092 | 377 929 |
| Other non-current liabilities | |||||
| - Conversion option | HfT | 115 | 115 | - | - |
| - Other derivatives | HfT | - | - | 1 081 | 1 081 |
| - Other payables | AC | 150 | 150 | 150 | 150 |
| Trade payables | AC | 652 384 | 652 384 | 668 422 | 668 422 |
| Other current liabilities | |||||
| - Conversion option | HfT | - | - | 34 | 34 |
| - Other payables | AC | 26 165 | 26 165 | 25 621 | 25 621 |
| - Derivatives | |||||
| - Held for trading | HfT | 2 116 | 2 116 | 1 851 | 1 851 |
| Aggregated by category in accordance with IFRS 9 | |||||
| Financial assets | AC | 1 356 662 | 1 356 662 | 1 668 053 | 1 668 053 |
| FVTOCI/Eq | 13 152 | 13 152 | 13 372 | 13 372 | |
| FVTPL/Mnd | 7 997 | 7 997 | 9 012 | 9 012 | |
| Financial liabilities | AC | 2 287 195 | 2 291 454 | 2 303 925 | 2 308 454 |
| HfT | 2 231 | 2 231 | 2 967 | 2 967 | |
| FVTPL | - | - | - | - |
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 fair value measurement of financial assets and financial liabilities can be characterized in one of the following ways:
| 31 December | 31 December | 31 December | ||
|---|---|---|---|---|
| Convertible bond issued in 2016 | Issue date | 2018 | 2019 | 2020 |
| Level 1 inputs | ||||
| Share price | € 37.97 | € 21.06 | € 26.50 | € 27.16 |
| Level 2 inputs | ||||
| Reference swap rate | 0.03% | -0.13% | -0.31% | -0.54% |
| Level 3 inputs | ||||
| Volatility | 29.00% | 22.00% | 22.00% | 33.90% |
| Credit spread | 225 bps | 200 bps | 190 bps | 175 bps |
| Outcome of the model (in thousands of €) | ||||
| Fair value of the convertible debt | 380 000 | 363 432 | 371 564 | 377 963 |
| Fair value of the plain vanilla debt | 339 509 | 363 212 | 371 449 | 377 929 |
| Fair value of the conversion option | 40 491 | 220 | 115 | 34 |
| Derivative in VPPA arrangement | 31 December 2020 |
|---|---|
| Level 2 inputs | |
| Discount rate | Weighted average of investment grade corporate bond curves |
| Level 3 inputs | |
| Power forward sensitivity | Estimated on peak/off peak price forecasts |
| Production sensitivity | Based on wind studies in the area |
| Outcome of the model (in thousands of €) | |
| Fair value of the VPPA derivative | 3 178 |
The carrying amount (i.e. the fair value) of the level-3 liabilities/(assets) has evolved as follows:
| Level-3 Financial liabilities / (assets) | ||
|---|---|---|
| ------------------------------------------ | -- | -- |
| in thousands of € | 2019 | 2020 |
|---|---|---|
| At 1 January | 11 253 | -2 378 |
| Extinguished | -11 033 | - |
| (Gain) / loss in fair value | -2 597 | -766 |
| At 31 December | -2 378 | -3 144 |
Gains and losses in fair value are reported in other financial income and expenses.
The following table shows the sensitivity of the fair value calculation to the most significant level-3 inputs for the conversion option and the VPPA agreement.
| in thousands of € | Change | Impact on conversion option | |
|---|---|---|---|
| Volatility | 3.5% | increase by | 57 |
| -3.5% | decrease by | -27 | |
| Credit spread | 25 bps | increase by | - |
| -25 bps | decrease by | - |
| in thousands of € | Change | Impact on VPPA derivative | |
|---|---|---|---|
| Power forward sensitivity | +10% | increase by | 1 385 |
| -10% | decrease by | -1 385 | |
| Production sensitivity | +5% | increase by | 407 |
| -5% | decrease by | -407 |
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:
| 2019 | ||||
|---|---|---|---|---|
| in thousands of € | Level 1 | Level 2 | Level 3 | Total |
| Financial assets at fair value through profit or loss | ||||
| Derivative financial assets | - | 5 505 | 2 492 | 7 997 |
| Financial assets at fair value through OCI | ||||
| Equity investments | 5 745 | 7 407 | - | 13 152 |
| Total assets | 5 745 | 12 912 | 2 492 | 21 149 |
| Financial liabilities held for trading | ||||
| Conversion option | - | - | 115 | 115 |
| Other derivative financial liabilities | - | 2 116 | - | 2 116 |
| Total liabilities | - | 2 116 | 115 | 2 231 |
| 2020 | ||||
|---|---|---|---|---|
| in thousands of € | Level 1 | Level 2 | Level 3 | Total |
| Financial assets mandatorily measured as at fair value | ||||
| through profit or loss | ||||
| Derivative financial assets | - | 5 834 | 3 178 | 9 012 |
| Equity instruments designated as at fair value through OCI | ||||
| Equity investments | 5 833 | 7 538 | - | 13 372 |
| Total assets | 5 833 | 13 372 | 3 178 | 22 384 |
| Financial liabilities held for trading | ||||
| Conversion option | - | - | 34 | 34 |
| Other derivative financial liabilities | - | 2 932 | - | 2 932 |
| Total liabilities | - | 2 932 | 34 | 2 967 |
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 2019.
The capital structure of the Group consists of net debt, as defined in note 6.18. 'Interest-bearing debt', and equity (both attributable to equity holders of Bekaert and to non-controlling interests).
The Group's Audit, Risk 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. To realize this target (excluding the impact of IFRS 16 'Leases'), the Group is following systematically a number of guidelines, a.o.
» strict cost control to improve profitability;
| Gearing | ||
|---|---|---|
| in thousands of € | 2019 | 2020 |
| Net debt | 976 984 | 604 081 |
| Equity | 1 531 540 | 1 535 055 |
| Net debt to equity ratio | 63.8% | 39.4% |
As at 31 December, the important contingencies and commitments were:
| in thousands of € | 2019 | 2020 |
|---|---|---|
| Contingent liabilities | 8 830 | 12 105 |
| Commitments to purchase fixed assets | 50 072 | 45 690 |
| Commitments to invest in venture capital funds | 10 835 | 8 246 |
At year-end 2020, there were no outstanding bank guarantees linked to environmental obligations.
Apart from the leases, there are no restrictions to realize assets or settle liabilities. The lease liabilities are effectively secured as the rights to the leased assets recognised in the financial statements revert to the lessor in the event of default. The contingencies, commitments and assets pledged as security in joint ventures are disclosed in note 6.5.'Investments in joint ventures and associates'.
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.
| in thousands of € 2019 |
2020 |
|---|---|
| Sales of goods 17 377 |
12 117 |
| Purchases of goods 23 998 |
18 621 |
| Services rendered 282 |
177 |
| Royalties and management fees received 12 944 |
10 074 |
| Interest and similar income - |
1 |
| Dividends received 19 439 |
24 706 |
| in thousands of € | 2019 | 2020 |
|---|---|---|
| Non-current receivables | 24 | - |
| Trade receivables | 5 817 | 4 554 |
| Other current receivables | 1 499 | 2 060 |
| Trade payables | 5 134 | 4 271 |
| Other current payables | - | 1 181 |
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 (BGE) and the Senior Vice Presidents (see last page of the Financial Review).
| in thousands of € | 2019 | 2020 |
|---|---|---|
| Number of persons | 34 | 34 |
| Short-term employee benefits | ||
| Basic remuneration | 7 607 | 7 621 |
| Variable remuneration | 792 | 3 103 |
| Remuneration as directors of subsidiaries | 596 | 563 |
| Post-employment benefits | ||
| Defined-benefit pension plans | 517 | 419 |
| Defined-contribution pension plans | 721 | 1 276 |
| Share-based payment benefits | 4 991 | 6 280 |
| Total gross remuneration | 15 224 | 19 262 |
| Average gross remuneration per person | 448 | 567 |
| Number of performance share units granted (cash-settled and equity-settled) | 156 026 | 156 021 |
| Number of matching share units acquired | - | 10 766 |
| Number of shares granted | 13 787 | 23 475 |
The disclosures relating to the Belgian Corporate Governance Code are included in the Corporate Governance Statement of this annual report.
During 2020, the statutory auditor and persons professionally related to him performed additional services for fees amounting to € 1 044 806.
These fees essentially relate to further assurance services (€ 53 200), tax advisory services (€ 771 136) and other non-audit services (€ 220 470). The additional services were approved by the Audit, Risk and Finance Committee.
The audit fees for NV Bekaert SA and its subsidiaries amounted to € 2 171 941.
| Industrial companies | Address | FC1 | %2 |
|---|---|---|---|
| EMEA | |||
| Bekaert Advanced Cords Aalter NV | Aalter, Belgium | EUR | 100 |
| Bekaert Bohumín sro | Bohumín, Czech Republic | CZK | 100 |
| Bekaert Bradford UK Ltd | Bradford, United Kingdom | GBP | 100 |
| Bekaert Combustion Technology BV | Assen, Netherlands | EUR | 100 |
| Bekaert Figline SpA | Milano, Italy | EUR | 100 |
| Bekaert Heating Romania SRL | Negoiesti, Brazi Commune, Romania | RON | 100 |
| Bekaert Hlohovec as | Hlohovec, Slovakia | EUR | 100 |
| Bekaert Izmit Çelik Kord Sanayi ve Ticaret AS Bekaert Kartepe Çelik Kord Sanayi ve Ticaret AS |
Izmit, Turkey Kartepe, Turkey |
EUR EUR |
100 100 |
| Bekaert Petrovice sro | Petrovice, Czech Republic | CZK | 100 |
| Bekaert Sardegna SpA | Assemini, Italy | EUR | 100 |
| Bekaert Slatina SRL | Slatina, Romania | RON | 100 |
| Bekaert Slovakia sro | Sládkovičovo, Slovakia | EUR | 100 |
| Bekintex NV | Wetteren, Belgium | EUR | 100 |
| Bridon International GmbH | Gelsenkirchen, Germany | EUR | 100 |
| Bridon International Ltd | Doncaster, United Kingdom | GBP | 100 |
| Industrias del Ubierna SA | Burgos, Spain | EUR | 100 |
| OOO Bekaert Lipetsk | Gryazi, Russian Federation | RUB | 100 |
| North America | |||
| Bekaert Corporation | Wilmington (Delaware), United States | USD | 100 |
| Bridon-American Corporation | New York, United States | USD | 100 |
| Wire Rope Industries Ltd/Industries de Câbles d'Acier Ltée | Pointe-Claire, Canada | CAD | 100 |
| Latin America | |||
| Acma SA | Santiago, Chile | CLP | 52 |
| Acmanet SA | Talcahuano, Chile | CLP | 52 |
| BBRG - Osasco Cabos Ltda | São Paulo, Brazil | BRL | 100 |
| Bekaert Costa Rica SA | San José-Santa Ana, Costa Rica | USD | 58 |
| BIA Alambres Costa Rica SA Grating Perú S.A.C. |
San José-Santa Ana, Costa Rica Lima, Peru |
USD USD |
58 38 |
| Ideal Alambrec SA | Quito, Ecuador | USD | 58 |
| Industrias Chilenas de Alambre - Inchalam SA | Talcahuano, Chile | CLP | 52 |
| Prodimin SAC | Lima, Peru | USD | 38 |
| Prodinsa SA | Maipú, Chile | CLP | 100 |
| Productora de Alambres Colombianos Proalco SAS | Bogotá, Colombia | COP | 80 |
| Productos de Acero Cassadó SA Vicson SA |
Callao, Peru Valencia, Venezuela |
USD USD |
38 80 |
| Asia Pacific | |||
| 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 Ltd Bekaert (Chongqing) Steel Cord Co Ltd |
Jiangyin (Jiangsu province), China Chongqing, China |
CNY CNY |
100 100 |
| Bekaert Heating Technology (Suzhou) Co Ltd | Taicang City (Jiangsu province), China | CNY | 100 |
| Bekaert (Huizhou) Steel Cord Co Ltd | Huizhou (Guangdong province), China | CNY | 100 |
| Bekaert Industries Pvt Ltd | Taluka Shirur, District Pune, India | INR | 100 |
| Bekaert (Jining) Steel Cord Co Ltd | Jining City, Yanzhou district (Shandong Province), China |
CNY | 60 |
| 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 |
| Bekaert (Qingdao) Wire Products Co Ltd | Qingdao (Shandong province), China | CNY | 100 |
| Bekaert (Shandong) Tire Cord Co Ltd Bekaert (Shenyang) Advanced Cords Co Ltd |
Weihai (Shandong province), China Shenyang (Liaoning province), China |
CNY CNY |
100 100 |
| Bekaert Shenyang Advanced Products Co Ltd | Shenyang (Liaoning province), China | CNY | 100 |
| Bekaert Toko Metal Fiber Co Ltd | Tokyo, Japan | JPY | 70 |
| Bekaert Vietnam Co Ltd | Son Tinh District, Quang Ngai Province, Vietnam | USD | 100 |
| Bekaert Wire Ropes Pty Ltd | Mayfield East, Australia | AUD | 100 |
| Bridon (Hangzhou) Ropes Co Ltd | Hangzhou (Zhejiang province), China | CNY | 100 |
| China Bekaert Steel Cord Co Ltd | Jiangyin (Jiangsu province), China | CNY | 90 |
| PT Bekaert Indonesia PT Bekaert Wire Indonesia |
Karawang, Indonesia Karawang, Indonesia |
USD USD |
100 100 |
| PT Bridon | Bekasi, West Java, Indonesia | USD | 100 |
2 Financial interest percentage
| Sales offices, warehouses and others | Address | FC1 | %2 |
|---|---|---|---|
| EMEA Sales offices, warehouses and others |
Address | FC1 | %2 |
| Bekaert AS | Hellerup, Denmark | DKK | 100 |
| Bekaert Emirates LLC | Dubai, United Arab Emirates | AED | 49 |
| EMEA Bekaert France SAS |
Lille, France | EUR | 100 |
| Bekaert Gesellschaft mbH | Vienna, Austria | EUR | 100 |
| Bekaert AS | Hellerup, Denmark | DKK | 100 |
| Bekaert GmbH | Neu-Anspach, Germany | EUR | 100 |
| Bekaert Emirates LLC | Dubai, United Arab Emirates | AED | 49 |
| Bekaert Middle East LLC | Dubai, United Arab Emirates | AED | 49 |
| Bekaert France SAS | Lille, France | EUR | 100 |
| Bekaert Norge AS | Oslo, Norway | NOK | 100 |
| Bekaert Gesellschaft mbH | Vienna, Austria | EUR | 100 |
| Bekaert Poland Sp z oo | Warsaw, Poland | PLN | 100 |
| Bekaert GmbH | Neu-Anspach, Germany | EUR | 100 |
| Bekaert (Schweiz) AG | Baden, Switzerland | CHF | 100 |
| Bekaert Middle East LLC | Dubai, United Arab Emirates | AED | 49 |
| Bekaert Svenska AB | Gothenburg, Sweden | SEK | 100 |
| Bekaert Norge AS | Oslo, Norway | NOK | 100 |
| Bridon-Bekaert ScanRope AS | Tonsberg, Norway | NOK | 100 |
| Bekaert Poland Sp z oo | Warsaw, Poland | PLN | 100 |
| Bridon Scheme Trustees Ltd | Doncaster, United Kingdom | GBP | 100 |
| Bekaert (Schweiz) AG | Baden, Switzerland | CHF | 100 |
| British Ropes Ltd | Doncaster, United Kingdom | GBP | 100 |
| Bekaert Svenska AB | Gothenburg, Sweden | SEK | 100 |
| Leon Bekaert SpA | Milano, Italy | EUR | 100 |
| Bridon-Bekaert ScanRope AS | Tonsberg, Norway | NOK | 100 |
| OOO Bekaert Wire | Moscow, Russian Federation | RUB | 100 |
| Bridon Scheme Trustees Ltd | Doncaster, United Kingdom | GBP | 100 |
| Rylands-Whitecross Ltd | Bradford, United Kingdom | GBP | 100 |
| British Ropes Ltd | Doncaster, United Kingdom | GBP | 100 |
| Scheldestroom NV | Zwevegem, Belgium | EUR | 100 |
| Leon Bekaert SpA | Milano, Italy | EUR | 100 |
| Twil Company | Bradford, United Kingdom | GBP | 100 |
| OOO Bekaert Wire | Moscow, Russian Federation | RUB | 100 |
| Rylands-Whitecross Ltd Latin America Scheldestroom NV |
Bradford, United Kingdom Zwevegem, Belgium |
GBP EUR |
100 100 |
| Twil Company | Bradford, United Kingdom | GBP | 100 |
| Bekaert Guatemala SA | Ciudad de Guatemala, Guatemala | GTQ | 58 |
| Bekaert Specialty Films de Mexico SA de CV Latin America |
Monterrey, Mexico | MXN | 100 |
| Bekaert Trade Mexico S de RL de CV | Mexico City, Mexico | MXN | 100 |
| Inversiones BBRG Lima SA | Lima, Peru | PEN | 96 |
| Bekaert Guatemala SA | Ciudad de Guatemala, Guatemala | GTQ | 58 |
| Procables SA | Callao, Peru | PEN | 96 |
| Bekaert Specialty Films de Mexico SA de CV | Monterrey, Mexico | MXN | 100 |
| Prodac Contrata SAC | Callao, Peru | USD | 38 |
| Bekaert Trade Mexico S de RL de CV | Mexico City, Mexico | MXN | 100 |
| Prodalam SA | Santiago, Chile | CLP | 52 |
| Inversiones BBRG Lima SA | Lima, Peru | PEN | 96 |
| Prodicom Selva SAC | Ucayali, Peru | USD | 38 |
| Procables SA | Callao, Peru | PEN | 96 |
| Specialty Films de Services Company SA de CV | Monterrey, Mexico | MXN | 100 |
| Prodac Contrata SAC | Callao, Peru | USD | 38 |
| Prodalam SA Asia Pacific Prodicom Selva SAC |
Santiago, Chile Ucayali, Peru |
CLP USD |
52 38 |
| Specialty Films de Services Company SA de CV | Monterrey, Mexico | MXN | 100 |
| Bekaert Architectural Design Consulting (Shanghai) Co Ltd | Shanghai, China | CNY | 100 |
| Bekaert Japan Co Ltd Asia Pacific |
Tokyo, Japan | JPY | 100 |
| Bekaert Korea Ltd | Seoul, South-Korea | KRW | 100 |
| Bekaert Malaysia Sdn Bhd | Kuala Lumpur, Malaysia | MYR | 100 |
| Bekaert Architectural Design Consulting (Shanghai) Co Ltd | Shanghai, China | CNY | 100 |
| Bekaert Management (Shanghai) Co Ltd | Shanghai, China | CNY | 100 |
| Bekaert Japan Co Ltd | Tokyo, Japan | JPY | 100 |
| Bekaert Shah Alam Sdn Bhd | Kuala Lumpur, Malaysia | MYR | 100 |
| Bekaert Korea Ltd | Seoul, South-Korea | KRW | 100 |
| Bekaert Singapore Pte Ltd | Singapore | SGD | 100 |
| Bekaert Malaysia Sdn Bhd | Kuala Lumpur, Malaysia | MYR | 100 |
| Bekaert Taiwan Co Ltd | Taipei, Taiwan | TWD | 100 |
| Bekaert Management (Shanghai) Co Ltd | Shanghai, China | CNY | 100 |
| Bekaert (Thailand) Co Ltd Bekaert Shah Alam Sdn Bhd |
Tambol Pluakdaeng, Amphur Pluakdaeng, Kuala Lumpur, Malaysia Thailand |
USD MYR |
100 100 |
| Bekaert Singapore Pte Ltd | Singapore | SGD | 100 |
| BOSFA Pty Ltd | Mayfield East, Australia | AUD | 100 |
| Bekaert Taiwan Co Ltd | Taipei, Taiwan | TWD | 100 |
| Bridon Hong Kong Ltd | Hong Kong, China | HKD | 100 |
| Bekaert (Thailand) Co Ltd | Tambol Pluakdaeng, Amphur Pluakdaeng, | USD | 100 |
| Bridon New Zealand Ltd | Aukland, New Zealand | NZD | 100 |
| Bridon Singapore (Pte) Ltd | Thailand Singapore |
SGD | 100 |
| BOSFA Pty Ltd | Mayfield East, Australia | AUD | 100 |
| Bridon (South East Asia) Ltd | Hong Kong, China | HKD | 100 |
| Bridon Hong Kong Ltd | Hong Kong, China | HKD | 100 |
| PT Bekaert Trade Indonesia | Karawang, Indonesia | USD | 100 |
| Bridon New Zealand Ltd | Aukland, New Zealand | NZD | 100 |
2 Financial interest percentage
| Financial companies | Address | FC1 | %2 |
|---|---|---|---|
| Acma Inversiones SA | Santiago, Chile | CLP | 100 |
| BBRG Finance (UK) Ltd | Doncaster, United Kingdom | EUR | 100 |
| 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 | Zwevegem, Belgium | EUR | 100 |
| Bridon-Bekaert Ropes Group Ltd | Doncaster, United Kingdom | EUR | 100 |
| Bridon Holdings Ltd | Doncaster, United Kingdom | GBP | 100 |
| Bridon Ltd | Doncaster, United Kingdom | GBP | 100 |
| Industrias Acmanet Ltda | Talcahuano, Chile | CLP | 52 |
| Inversiones Bekaert Andean Ropes SA | Santiago, Chile | CLP | 100 |
| InverVicson SA | Valencia, Venezuela | USD | 80 |
| Procercos SA | Talcahuano, Chile | CLP | 52 |
| Industrial companies | Address | FC1 | %2 |
|---|---|---|---|
| Latin America | |||
| Agro-Bekaert Colombia SAS Belgo Bekaert Arames Ltda BMB-Belgo Mineira Bekaert Artefatos de Arame Ltda Servicios Ideal AGF Inttegra Cia Ltda |
Malambo - Atlántico, Colombia Contagem, Brazil Vespasiano, Brazil Quito, Ecuador |
COP BRL BRL USD |
40 45 45 29 |
| Sales offices, warehouses and others | Address | FC1 | %2 |
| EMEA | |||
| Netlon Sentinel Ltd | Blackburn, United Kingdom | GBP | 50 |
| Asia Pacific | |||
| Bekaert Engineering (India) Pvt Ltd | New Delhi, India | INR | 40 |
| Financial companies | Address | FC1 | %2 |
| EMEA | |||
| Agro - Bekaert Springs SL | Burgos, Spain | EUR | 40 |
| 2. Subsidiaries acquired through business combinations Joint ventures |
Address | %1 |
|---|---|---|
| Agro-Bekaert Colombia SAS | Malambo – Atlántico, Colombia | 40 |
| Subsidiaries | Address | %1 |
| Grating Perú S.A.C. 2. Subsidiaries acquired through business combinations |
Lima, Peru | 38 |
| Subsidiaries 3. Changes in ownership without change in control |
Address | %1 |
| Grating Perú S.A.C. | Lima, Peru | 38 |
| Subsidiaries | Address | %1 |
| Bekaert Slatina SRL 3. Changes in ownership without change in control |
Slatina, Romania | From 80 to 100 |
| Subsidiaries 4. Name changes |
Address | %1 |
| Bekaert Slatina SRL | Slatina, Romania | From 80 to 100 |
| New name | Former name | |
| Bekaert Coördinatiecentrum NV Bekaert Malaysia Sdn Bhd 4. Name changes |
Bekaert Coördinatiecentrum Bekaert Ipoh Sdn Bhd |
|
| Bekintex NV New name |
Bekintex Former name |
|
| Bekaert Coördinatiecentrum NV | Bekaert Coördinatiecentrum | |
| 5. Liquidated Bekaert Malaysia Sdn Bhd |
Bekaert Ipoh Sdn Bhd | |
| Bekintex NV | Bekintex | |
| Companies Bekaert Maccaferri Underground Solutions BV |
Address Aalst (Erembodegem), Belgium |
|
| Bridon Ropes NV/SA 5. Liquidated |
Zwevegem, Belgium | |
| Companies | Address | |
| 6. Active proposal to strike off Bekaert Maccaferri Underground Solutions BV |
Aalst (Erembodegem), Belgium | |
| Bridon Ropes NV/SA | Zwevegem, Belgium | |
| Companies BBRG Holding (UK) Ltd |
Address Doncaster, United Kingdom |
|
| BBRG Operations (UK) Ltd 6. Active proposal to strike off BBRG Production (UK) Ltd |
Doncaster, United Kingdom Doncaster, United Kingdom |
|
| BBRG (Purchaser) Ltd Companies |
Doncaster, United Kingdom Address |
|
| BBRG (Subsidiary) Ltd BBRG Holding (UK) Ltd |
Doncaster, United Kingdom Doncaster, United Kingdom |
|
| Bridon-Bekaert Ropes Group (UK) Ltd BBRG Operations (UK) Ltd |
Doncaster, United Kingdom Doncaster, United Kingdom |
| Companies BBRG (Subsidiary) Ltd |
Address Doncaster, United Kingdom |
|---|---|
| BBRG Holding (UK) Ltd Bridon-Bekaert Ropes Group (UK) Ltd |
Doncaster, United Kingdom Doncaster, United Kingdom |
| BBRG Operations (UK) Ltd | Doncaster, United Kingdom |
| BBRG Production (UK) Ltd | Doncaster, United Kingdom |
| BBRG (Purchaser) Ltd | Doncaster, United Kingdom |
| BBRG (Subsidiary) Ltd | Doncaster, United Kingdom |
| In accordance with Belgian legislation, the table below lists the registered numbers of the Belgian companies. Bridon-Bekaert Ropes Group (UK) Ltd |
Doncaster, United Kingdom |
Bekaert Advanced Cords Aalter NV BTW BE 0645.654.071 RPR Gent, division Gent In accordance with Belgian legislation, the table below lists the registered numbers of the Belgian companies.
| Company number BTW BE 0550.983.358 RPR Gent, division Kortrijk |
|---|
| BTW BE 0452.746.609 RPR Gent, division Dendermonde BTW BE 0645.654.071 RPR Gent, division Gent |
| BTW BE 0405.388.536 RPR Gent, division Kortrijk BTW BE 0426.824.150 RPR Gent, division Kortrijk |
| BTW BE 0403.676.188 RPR Gent, division Kortrijk BTW BE 0406.207.096 RPR Gent, division Kortrijk |
| BTW BE 0550.983.358 RPR Gent, division Kortrijk |
| BTW BE 0452.746.609 RPR Gent, division Dendermonde |
| BTW BE 0405.388.536 RPR Gent, division Kortrijk |
| BTW BE 0403.676.188 RPR Gent, division 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 | 2019 | 2020 |
|---|---|---|
| Sales | 319 403 | 281 052 |
| Operating result before non-recurring items | -2 950 | -14 004 |
| Non-recurring operational items | 386 | -3 430 |
| Operating result after non-recurring items | -2 564 | -17 434 |
| Financial result before non-recurring items | 101 126 | 1 763 |
| Non-recurring financial items | -40 472 | -73 711 |
| Financial result after non-recurring items | 60 654 | -71 947 |
| Profit before income taxes | 58 089 | -89 381 |
| Income taxes | 3 237 | 2 492 |
| Result for the period | 61 327 | -86 890 |
| in thousands of € - 31 December | 2019 | 2020 |
|---|---|---|
| Fixed assets | 2 167 321 | 2 000 915 |
| Formation expenses, intangible fixed assets | 76 888 | 66 449 |
| Tangible fixed assets | 40 577 | 32 588 |
| Financial fixed assets | 2 049 856 | 1 901 878 |
| Current assets | 322 614 | 461 406 |
| Total assets | 2 489 935 | 2 462 321 |
| Shareholders' equity | 1 100 900 | 957 368 |
| Share capital | 177 793 | 177 812 |
| Share premium | 37 751 | 37 884 |
| Revaluation surplus | 1 995 | 1 995 |
| Statutory reserve | 17 779 | 17 779 |
| Unavailable reserve | 102 636 | 103 467 |
| Reserves available for distribution, retained earnings | 762 945 | 618 430 |
| Provisions and deferred taxes | 56 887 | 77 510 |
| Creditors | 1 332 148 | 1 427 443 |
| Amounts payable after one year | 1 025 650 | 845 650 |
| Amounts payable within one year | 306 498 | 581 793 |
| Total equity and liabilities | 2 489 935 | 2 462 321 |
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 € 281.1 million, a decrease of -12% compared to 2019. The operating loss before non-recurring items was € -14.0 million, compared with a loss of € -3.0 million last year. The decrease of the operating result was a combined effect of lower sales volumes and costs from the announcement of the restructuring in 2020.
Non-recurring items included in the operating result amounted to € -3.4 million in 2020 (mainly accelerated depreciation and realisation of tangible fixed assets), compared to € 0.4 million last year.
The financial result before non-recurring items was € 1.8 million compared to € 101.1 million last year. The lower dividend income in 2020 was the main element explaining this evolution.
The non-recurring financial items amounted to € -73.7 million in 2020, against € -40.5 million in the previous year, which was mainly driven by write-downs on portfolio.
The income taxes of € 2.5 million were positive due to tax credit receivable on intangible fixed assets, similar to last year.
This led to a result for the period of € -86.9 million compared with € 61.3 million in 2019.
The provisions for environmental programs decreased to € 17.2 million (2019: € 17.8 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%. In 2020, the Company did not receive any transparency notifications. On 31 December 2020, the total number of securities conferring voting rights was 60 414 841.
Detailed information can be found on: www.bekaert.com/other-regulated-information.
The after-tax result for the year was € -86 889 620 compared with € 61 326 822 for the previous year.
The Board of Directors has proposed that the Annual General Meeting to be held on 12 May 2021 appropriate the above result as follows:
| in € | |
|---|---|
| Result of the year to be appropriated | -86 889 620 |
| Transfer from reserves | 143 684 803 |
| Profit for distribution | 56 795 183 |
The Board of Directors has proposed that the Annual General Meeting approve the distribution of a gross dividend of € 1.00 per share (2019: € 0.35 per share).
The dividend will be payable in euros on 14 May 2021 by the following banks:
The term of office of the independent Directors Henriette Fenger Ellekrog and Eriikka Söderström will expire at the Annual General Meeting of Shareholders of 12 May 2021.
The Board of Directors proposes that the General Meeting:
In the context of the statutory audit of the consolidated financial statements of NV Bekaert SA ("the company") and its subsidiaries (jointly "the group"), we hereby submit our statutory audit report. This report includes our report on the consolidated financial statements and the other legal and regulatory requirements. These parts should be considered as integral to the report.
We were appointed in our capacity as statutory auditor by the shareholders' meeting of 8 May 2019, in accordance with the proposal of the board of directors ("bestuursorgaan" / "organe d'administration") issued upon recommendation of the audit committee and presentation of the works council. Our mandate expires on the date of the shareholders' meeting deliberating on the annual accounts for the year ending 31 December 2020, in view of Article 41 of EU Regulation nr. 537/2014 that states that as from 17 June 2020, an audit mandate can no longer be prolonged for those audit mandates running 20 years or more at the date of entry into force of the regulation. Due to a lack of online archives dating back prior to 1997, we have not been able to determine exactly the first year of our appointment. We have performed the statutory audit of the consolidated financial statements of NV Bekaert SA for at least 24 consecutive periods.
We have audited the consolidated financial statements of the group, which comprise the consolidated balance sheet as at 31 December 2020, the consolidated income statement, the consolidated income statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flow for the year then ended, as well as the summary of significant accounting policies and other explanatory notes. The consolidated statement of financial position shows total assets of 4 288 100 (000) EUR and the consolidated statement of comprehensive income shows a profit for the year then ended of 148 037 (000) EUR.
In our opinion, the consolidated financial statements give a true and fair view of the group's net equity and financial position as of 31 December 2020 and of its consolidated results and its consolidated cash flow for the year then ended, in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union and with the legal and regulatory requirements applicable in Belgium.
1
We conducted our audit in accordance with International Standards on Auditing (ISA), as applicable in Belgium. In addition, we have applied the International Standards on Auditing approved by the IAASB applicable to the current financial year, but not yet approved at national level. Our responsibilities under those standards are further described in the "Responsibilities of the statutory auditor for the audit of the consolidated financial statements" section of our report. We have complied with all ethical requirements relevant to the statutory audit of consolidated financial statements in Belgium, including those regarding independence.
We have obtained from the board of directors and the company's officials the explanations and information necessary for performing our audit.
We believe that the audit evidence obtained is sufficient and appropriate to provide a basis for our opinion.
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
| Key audit matters | How our audit addressed the key audit matters |
|---|---|
| Valuation of goodwill - BBRG cash-generating unit | |
| At 31 December 2020, goodwill amounts to 149 million EUR. The majority of this goodwill (127 million EUR) relates to the Bridon Bekaert Ropes group ('BBRG') cash-generating unit. |
In our audit, we assessed and tested, with the assistance of our valuation experts, management's critical assumptions used in the discounted cash flow model. |
| The company defines annually the carrying amounts of non-current assets allocated to the BBRG cash-generating unit. |
We challenged the key drivers of the projected future cash flows, including estimated sales growth, estimated gross margin and the applied discount rate. Our procedures furthermore include the |
| Bekaert assesses the recoverable amount by calculating the value in use of the assets within the cash-generating unit, using a discounted cash flow method ("DCF"). This method is complex and requires significant judgement in making estimates of cash flow projections, sales growth, margin evolution and the discount rate. Due to the inherent uncertainty involved in forecasting and discounting cash flows, we consider this assessment as a key audit matter. The company disclosed the nature and the value of the assumptions used in the impairment analyses in note 3.2 and 6.2 to the consolidated financial statements. |
evaluation of the design and implementation of controls over the preparation and approval of BBRG's budget, which serves as the basis in the DCF model. We critically assessed the budgets considering historical budgeting accuracy of management. Moreover, we specifically focused on the sensitivity in the available headroom of BBRG's cash-generating unit and whether a reasonable possible change in assumptions could cause the carrying amount to exceed its recoverable amount. We assessed the adequacy of the company's disclosure note to the consolidated financial statements. |
| Control Assumption Venezuelan operations | |
| The group equity shows translation adjustments amounting to 59,7 million EUR (debit) relating to the Venezuelan subsidiaries Vicson and Invervicson. The group periodically evaluates the assumption of control over the Venezuelan subsidiaries considering the political and |
We assessed and challenged the group's assessment of control over the Venezuelan subsidiaries and evaluated the design and implementation of internal controls over the related process. |
Venezuelan subsidiaries considering the political and monetary instability in the country. A loss of control over the Venezuelan subsidiaries would lead to a disposal of controlling interest and the relating adjustments in this respect in accordance with IFRS 10 including, amongst others, the reclassification to income statement of the translation adjustment.
Given the uncertainty of the Venezuelan business environment and the potential material impact on the group result, we consider the company's assumption of control over the Venezuelan subsidiaries to be a key audit matter.
We assessed and challenged the group's position supporting the assumption of control over the Venezuelan subsidiaries taking into consideration the restrictions to transfer funds to the parent company. More specifically, we assessed the ability of the Venezuelan subsidiaries to source raw materials, steer the local production and operations and generate cash flows.
The group disclosed the outcome of this evaluation in 3.1 and note 6.14 to the consolidated financial statements.
Uncertain tax positions recognized as income taxes payable amount to 31,7 million EUR as at 31 December 2020.
The group operates across a number of different tax jurisdictions and is subject to periodic challenges by local tax authorities in the normal course of business, including transaction-related taxes and transfer pricing arrangements. In those cases where the amount of tax payable is uncertain, the group accrues based on its judgement of the probable amount of the liability. Management exercises judgement in assessing the level of accruals for uncertain tax positions.
The group disclosed the outcome of its assessment in note 3.2 and 6.21 to the consolidated financial statements.
The group has recognized deferred tax assets for an amount of 124,2 million EUR. The group is required to estimate the recoverability of its deferred tax asset position. The assessment of the recoverability of deferred tax assets depends on key assumptions applied by the group, such as budgeted and forecasted profitability on an entity-by-entity basis, including assumptions about the applicable tax rates.
The recoverability of deferred tax assets is considered a key audit matter as the amount is material to the financial statements and the assessment process is judgemental and requires careful consideration of the expected future market and economic conditions.
The group disclosed deferred tax assets in note 5.6 and 6.7 of the consolidated financial statements.
We obtained a detailed understanding of the group's tax strategy as well as key technical tax issues and risks related to business and legislative developments. We assessed the status of ongoing local tax authority audits. We evaluated and challenged management's judgement in relation to uncertain tax positions and the determination of related tax accruals. We considered advice received by management from external parties to support their position. We evaluated the process and internal controls framework around uncertain tax positions, including how judgement and estimates are derived, approved and accounted for.
As part of our audit procedures, we assessed and challenged management's assumptions to determine the probability to recover the recognized deferred tax assets through future taxable income. During these procedures, we evaluated management's budgets and forecasts and considered relevant tax laws. Where applicable, we critically assessed the consistency of the group's budgets and forecasts as well as the assessment of tax rates.
The board of directors is responsible for the preparation and fair presentation of the 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.
In preparing the consolidated financial statements, the board of directors is responsible for assessing the group's ability to continue as a going concern, disclosing, as applicable, matters to be considered for going concern and using the going concern basis of accounting unless the board of directors either intends to liquidate the group or to cease operations, or has no other realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue a statutory auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISA will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.
During the performance of our audit, we comply with the legal, regulatory and normative framework as applicable to the audit of consolidated financial statements in Belgium. The scope of the audit does not comprise any assurance regarding the future viability of the company nor regarding the efficiency or effectiveness demonstrated by the board of directors in the way that the company's business has been conducted or will be conducted.
As part of an audit in accordance with ISA, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
conclude on the appropriateness of the use of the going concern basis of accounting by the board of directors and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our statutory auditor's report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our statutory auditor's report. However, future events or conditions may cause the group to cease to continue as a going concern;
evaluate the overall presentation, structure and content of the consolidated financial statements, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
We communicate with the audit committee regarding, amongst other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide the audit committee with a statement that we have complied with relevant ethical requirements regarding independence, and we communicate with them about all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated to the audit committee, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our report unless law or regulation precludes any public disclosure about the matter.
The board of directors is responsible for the preparation and the content of the directors' report on the consolidated financial statements, the statement of non-financial information attached to the directors' report on the consolidated financial statements and other matters disclosed in the annual report on the consolidated financial statements.
As part of our mandate and in accordance with the Belgian standard complementary to the International Standards on Auditing (ISA) as applicable in Belgium, our responsibility is to verify, in all material respects, the director's report on the consolidated financial statements, the statement of non-financial information attached to the directors' report on the consolidated financial statements and other matters disclosed in the annual report on the consolidated financial statements, as well as to report on these matters.
In our opinion, after performing the specific procedures on the directors' report on the consolidated financial statements, this report is consistent with the consolidated financial statements for that same year and has been established in accordance with the requirements of article 3:32 of the Code of companies and associations.
In the context of our statutory audit of the consolidated financial statements we are also responsible to consider, in particular based on information that we became aware of during the audit, if the directors' report on the consolidated financial statements is free of material misstatement, either by information that is incorrectly stated or otherwise misleading. In the context of the procedures performed, we are not aware of such material misstatement.
The non-financial information as required by article 3:32, § 2 of the Code of companies and associations, has been disclosed in a separate report, attached to the directors' report on the consolidated financial statements. This statement on non-financial information includes all the information required by article 3:32, § 2 of the Code of companies and associations and is in accordance with the consolidated financial statements for the financial year then ended. The non-financial information has been established by the company in accordance with the GRI standards. In accordance with article 3:80 § 1, 5° of the Code of companies and associations we do not express any opinion on the question whether this non-financial information has been established in accordance with the GRI standards mentioned in the directors' report on the consolidated financial statements.
This report is consistent with our additional report to the audit committee referred to in article 11 of Regulation (EU) No 537/2014.
Signed at Gent.
____________________________________________________ Deloitte Bedrijfsrevisoren/Réviseurs d'Entreprises CVBA/SCRL Represented by Charlotte Vanrobaeys
Deloitte Bedrijfsrevisoren/Réviseurs d'Entreprises Coöperatieve vennootschap met beperkte aansprakelijkheid/Société coopérative à responsabilité limitée Registered Office: Gateway building, Luchthaven Brussel Nationaal 1 J, B-1930 Zaventem VAT BE 0429.053.863 - RPR Brussel/RPM Bruxelles - IBAN BE86 5523 2431 0050 - BIC GKCCBEBB
Member of Deloitte Touche Tohmatsu Limited
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| Envelope Id: DCCDE8D9A8144013A01B941AE8C99FB3 Status: Completed |
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| Subject: Please DocuSign: conso-PIE-opinion - NV Bekaert SA 31.12.2020 (ENG) (25-03-2021).docx Source Envelope: |
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| Document Pages: 7 | Signatures: 1 | Envelope Originator: | ||
| Certificate Pages: 2 | Initials: 0 | Isabel Eggermont | ||
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| Record Tracking | ||||
| Status: Original 25-Mar-21 11:41 |
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| Signer Events | Signature | Timestamp | ||
| Charlotte Vanrobaeys | Sent: 25-Mar-21 11:42 | |||
| Viewed: 25-Mar-21 11:45 | ||||
| Partner Audit & Assurance | Signed: 25-Mar-21 11:46 | |||
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| Isabel Eggermont | Sent: 25-Mar-21 11:46 | |||
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| Certified Delivered | Security Checked | 25-Mar-21 11:45 |
| Signing Complete | Security Checked | 25-Mar-21 11:46 |
| Completed | Security Checked | 25-Mar-21 11:46 |
| Payment Events | Status | Timestamps |
| Oswald Schmid1 | Chief Executive Officer & Chief Operations Officer |
|---|---|
| Juan Carlos Alonso | Chief Strategy Officer |
| Kersten Artenberg | Chief Human Resources Officer |
| Taoufiq Boussaid | Chief Financial Officer |
| Arnaud Lesschaeve | Divisional CEO Rubber Reinforcement |
| Jun Liao1 | Divisional CEO Specialty Businesses & country manager China |
| Curd Vandekerckhove | Divisional CEO BBRG |
| Stijn Vanneste | Divisional CEO Steel Wire Solutions |
| Jan Boelens | Senior Vice President Steel Wire Solutions EMEA |
|---|---|
| Bruno Cluydts | Chief Strategy Officer BBRG |
| Philip Eyskens | Senior Vice President General Counsel, Legal, IP & GRC |
| Lieven Larmuseau | Executive Vice President Strategy, Sales & Marketing Rubber Reinforcement |
| Patrick Louwagie | Senior Vice President Global Engineering |
| Dirk Moyson | Senior Vice President Global Operations Rubber Reinforcement |
| Steven Parewyck | Senior Vice President Latin America |
| Raf Rentmeesters | Senior Vice President Building Products |
| Adam Touhig | Senior Vice President Rubber Reinforcement Asia |
| Gunter Van Craen | Chief Digital & Information Officer |
| Piet Van Riet | Executive Vice President Steel Wire Solutions South & Central America |
| Luc Vankemmelbeke | Senior Vice President Procurement |
| Geert Voet | Chief Operations Officer Ropes BBRG |
| Zhigao Yu | Senior Vice President Technology |
Isabelle Vander Vekens
Deloitte Bedrijfsrevisoren
Katelijn Bohez
www.bekaert.com [email protected] T +32 56 76 61 00 [email protected] [email protected]
The annual report for the 2020 financial year is available in English and Dutch on annualreport.bekaert.com
Editor & Coordination: Katelijn Bohez, VP Investor Relations & External Communications
1 On April 2021 Yves Kerstens will join Bekaert as Divisional CEO Specialty businesses and Chief Operations Officer and become a member of the BGE. Jun Liao will take up the role of China CEO and lead the China Transformation Office in addition to his current responsibilities as country manager for China.
The undersigned persons state that, to the best of their knowledge:
On behalf of the Board of Directors:
Oswald Schmid Jürgen Tinggren
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 forward-looking 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: www.bekaert.com/financialcalendar
www.bekaert.com
Bekaertstraat 2 BE-8550 Zwevegem Belgium T +32 56 76 61 00
[email protected] www.bekaert.com
© Bekaert 2021
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