Quarterly Report • Nov 7, 2016
Quarterly Report
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PFLEIDERER GROUP S.A. QSr 3/2016
quarter / year
(prepared in accordance with Par. 82.2 and Par. 83.3 of the Regulation of the Minister of Finance dated February 19th, 2009 – Dz.U. No. 33, item 259) For issuers conducting manufacturing, construction, trade or services business
For the 3rd quarter of the financial year 2016, covering the period from January 1st to September 30st, 2016,
including condensed consolidated financial statements prepared in accordance with the IFRS Currency: EUR
and condensed non-consolidated financial statements in accordance with IFRS Currency: PLN
Date of filing: November 7th, 2016
Pfleiderer Group Spólka Akcyjna (previously Pfleiderer Grajewo Spólka Akcyjna) (full name)
ul. STRZEGOMSKA 42AB (street) (number)
+48 71 747 11 00 +48 71 747 11 41 (telephone number) (fax number)
[email protected] www.pfleiderer.pl (e-mail) (web site)
Pfleiderer Group SA Wood products (abbreviated name) (sector according to the Warsaw Stock Exchange's classification)
53-611 Wrocław (postal code) (registered office)
719-10-00-479 450093817 (NIP – Tax Identification Number) (REGON – Industry Registration Number)
| Jan. 1 - | Jan. 1 - | ||
|---|---|---|---|
| '000 EUR | Sep. 30, 2016 | Sep. 30, 2015 | |
| I. | Sales revenue | 695 804 | 279 294 |
| II. | Operating profit | 23 261 | 26 078 |
| III. | Profit before taxes | 9 712 | 24 733 |
| IV. | Net profit | 16 546 | 19 834 |
| V. | Net profit attributable to equity holders of the parent | 16 546 | 19 834 |
| VI. | Net cash provided by operating activities | 79 272 | 26 671 |
| VII. | Net cash used in investing activities | -41 279 | -13 510 |
| VIII. | Net cash provided by / used in financing activities | 18 349 | -12 477 |
| IX. | Total net cash flow | 56 342 | 684 |
| X. | Total assets | 962 941 | 301 664 |
| XI. | Liabilities | 691 677 | 103 319 |
| XII. | Non-current liabilities | 478 609 | 37 172 |
| XIII. | Current liabilities | 213 068 | 66 147 |
| XIV. | Equity | 271 264 | 198 345 |
| XV. | Share capital | 6 692 | 5 573 |
| XVI. | Weighted average number of shares (units) | 63 655 521 | 49 624 000 |
| XVII. | Weighted average diluted number of shares (units) | 63 655 521 | 49 624 000 |
| XVIII. | Earnings per ordinary shares (EUR) | 0,26 | 0,40 |
| XIX. | Diluted earnings per ordinary share (EUR) | 0,26 | 0,40 |
| XX. | Book value per share (EUR) | 4,19 | 4,00 |
| XXI. | Diluted book value per share (EUR) | 4,19 | 4,00 |
| XXII. | Declared or paid dividend per share (EUR) | 0,23 | 0,00 |
| Jan. 1 - | Jan. 1 - | ||
|---|---|---|---|
| '000 EUR | Sep. 30, 2016 | Sep. 30, 2015 | |
| XXIII. | Sales revenue | 90,737 | 112,574 |
| XXIV. | Operating profit/(loss) | 3,511 | 6,097 |
| XXV. | Profit/(loss) before tax | 19,906 | 16,057 |
| XXVI. | Net profit | 18,941 | 15,094 |
| XXVII. | Net cash provided by (used in) operating activities | -5,540 | 9,601 |
| XXVIII. | Net cash provided by (used in) investing activities | -130,291 | 9,498 |
| XXIX. | Net cash provided by (used in) financing activities | 129,368 | -16,851 |
| XXX. | Total net cash flow | -6,463 | 2,248 |
| XXXI. | Total assets | 513,925 | 260,531 |
| XXXII. | Liabilities | 252,501 | 83,789 |
| XXXIII. | Non-current liabilities | 325 | 2,180 |
| XXXIV. | Current liabilities | 252,176 | 81,609 |
| XXXV. | Equity | 261,424 | 176,743 |
| XXXVI. | Share capital | 6,692 | 3,864 |
| XXXVII. | Weighted average number of shares (units) | 63,655,521 | 49,624,000 |
| XXXVIII. | Weighted average diluted number of shares (units) | 63,655,521 | 49,624,000 |
| XXXIX. | Earnings per ordinary shares (EUR) | 0.30 | 0.30 |
| XL. | Diluted earnings per ordinary share (EUR) | 0.30 | 0.30 |
| XLI. | Book value per share (EUR) | 4.04 | 3.56 |
| XLII. | Diluted book value per share (EUR) | 4.04 | 3.56 |
| XLIII. | Declared or paid dividend per share (EUR) | 0.23 | 0.00 |
Letter from the President of the Management Board 7
th November 2016
The project "ONE PFLEIDERER" successfully drove the next stage of full integration of the Group, which has unlocked further grow potential. After 9-month period of 2016, Pfleiderer Group demonstrated a strong financial performance supported also by the growth of the national economies and it shows positive outlook for the construction markets in both DACH and Poland. The Group's business performance is supported by a strong volume demand across all product groups in particular value added products, such as HPL and laminated particleboard.
The Group's sustainable EBITDA – the EBITDA adjusted by non-sustainable issues – increased significantly by 12.9% to EUR 108.4 million. The EBITDA margin was raised to 14.9% of revenue and overachieved our expectations for the reporting period. The Group is well on track and we are expecting the sustainable EBITDA to increase by at least low double-digit percentage over the full year. The results of the 9-month period were influenced by several non-sustainable items: expenses for the re-IPO (EUR 10.2 million), the provisions for necessary reorganization process of the capital group (EUR 7.3 million) - 150 white collar employees leaving German entities in 2017 - 2018, and the provisions for costs related to antitrust claims or for settlements of such claims (EUR 3.8 million). The outcome, i.e. the potential costs that may arise in connection with the cartel claims or the amount of damages that might be required to be paid cannot be assessed yet. We see the Q3 of 2016 as the last extraordinary quarter regarding non-sustainable expenses.
After 9-month period of 2016, the Group's revenues amounted to EUR 726.6 million (on a comparable full 9-month period), slightly below the level posted in the same period last year (EUR 741.9 million). This reduction was mainly affected by lower sales prices and a negative exchange rate effect by EUR 23.6 million, but was compensated by a stable volume growth in Core West (EUR 21.1 million) and overall favorable material prices.
The Western European business has boosted the performance of the Pfleiderer Group from 19 January 2016. The segment increased its revenues by 2.1% to EUR 501.2 million, mainly due to higher volumes sold across all segments, in particular by raw and laminated particleboard, despite ongoing pressure on sales prices. Nevertheless, the overall development in the Eastern Europe segment is less positive – revenues fell from EUR 279.3 million to EUR 251.6 million in 9-month 2016. The main reasons for this development are the drop in turnover of our HDF-plant MDF Grajewo (negative contribution of EUR 13.7 million due to overcapacity in the market) and the pricing pressure in Poland for particleboards imported from Belarus and Ukraine to the Polish domestic market. However, in the Q3, 2016 the sales reduction in HDF-plant MDF Grajewo was only EUR 1.5 million and we foresee that the decrease is stopped. Furthermore, revenues were affected by a negative exchange rate effect by EUR 5.8 million. Quantity-wise, the available capacities at our key production lines were almost
fully-utilized. This enabled an efficient compensation of fixed costs, together with new measures designed to improve operating efficiency in productivity.
Bottom line, the Pfleiderer Group generated for the aforementioned reasons a net profit (after tax) of EUR 13.5 million in the 9-month period of 2016 compared to EUR 15.1 million in the same period 2015.
All our strategic Capex projects are well on track and the capital expenditures amounted to EUR 31.8 million in the 9-month period of 2016. At the end of July this year, we launched a new lacquering line in the Grajewo plant as a part of the "4Pack" project. With this investment we will shift commodities into value-added products and will overcome HDF-plant difficulties. In March this year, the "Worktop Line" project in our Wieruszów plant was finalized, where the new press line will allow a boost sales in volume by improvements in the production process, increasing Pfleiderer's competitiveness in the worktop market. Due to growing residential market in Germany, we have invested in Neumarkt EUR 9 million, to increase our production capacity by 10%. The plant in Neumarkt is the biggest particleboard production plant in Europe.
On 15th September, with effect as of 1st November 2016, Mr. Dirk Hardow was appointed Management Board Member, Chief Operating Officer - a big welcome to Dirk!
On the 30th September Pfleiderer Grajewo S.A. has changed the name under which it does business to Pfleiderer Group S.A. and at the same time the Company's registered office has been relocated from Grajewo to Wrocław. The changes made to the Group's corporate structure are of a strategic nature, its structure will become more transparent and as a consequence, the organization will have three tiers. The Group now consists of the holding company that will be responsible for governing the Pfleiderer Group, operating companies and production companies. New organizational structure will streamlined operations and this will foster Group's further development as an international entity.
Our integration efforts are also contributing as expected. "ONE PFLEIDERER" reached all milestones and reported realized savings of EUR 16.4 million to the end of September 2016. The main objective for Q4, 2016 is a strong focus on the Group's internal integration to push faster decision-making processes and a more streamlined operational structure management in order to confirm previously announced cost savings of at least EUR 30 million by the end of 2018. We are working on new growth strategy till 2020, which we would like to present to the capital market at the end of Q1, 2017.
Yours faithfully
Michael Wolff President of the Management Board
This document is a free translation of the Polish original. Terminology current in Anglo-Saxon countries has been used where practicable for the purposes of this translation in order to aid understanding. The binding Polish original should be referred to in matters of interpretation.
PFLEIDERER GROUP S.A. GROUP (PREVIOUSLY PFLEIDERER GRAJEWO GROUP) DIRECTORS' INTERIM CONDENSED CONSOLIDATED REPORT ON THE OPERATIONS OF THE PFLEIDERER GRAJEWO GROUP FOR THE PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2016
| 1. | Financial highlights 3 | |
|---|---|---|
| 2. | Introduction 4 | |
| 3. | General information 5 | |
| 4. | Structure of the Group 15 | |
| 5. | Pfleiderer Group S.A. shares held by its management and supervisory boards members 17 | |
| 6. | Essential information to assess Group's personnel situation, financial standing and performance, and its changes, as well as to assess Group's ability to fulfil its obligations 17 |
|
| 7. | Material related-party transactions 20 | |
| 8. | Financial instruments 20 | |
| 9. | Security over the Group's assets 23 | |
| 10. | Contingent liabilities 25 | |
| 11. | Management Board's comments on the possibility of realization of previously published financial results 27 |
|
| 12. | Events subsequent to the end of the reporting period 26 |
Directors' Interim Condensed Consolidated Report on the operations of the Pfleiderer Group in the period from January 1 to September 30, 2016
| Jan. 1 - | Jan. 1 - | |
|---|---|---|
| '000 EUR | Sept. 30, 2016 | Sept. 30, 2015 |
| Sales revenue | 695,804 | 279,294 |
| Results from operating activities | 23,261 | 26,078 |
| Profit before taxes | 9,712 | 24,733 |
| Net profit | 16,546 | 19,834 |
| Net profit attributable to equity holders of the parent | 16,546 | 19,834 |
| Net cash provided by operating activities | 79,272 | 26,671 |
| Net cash used in investing activities | -41,279 | -13,510 |
| Net cash provided by / used in financing activities | 18,349 | -12,477 |
| Total net cash flow | 56,342 | 684 |
| Basic earnings per share (in Euro) | 0.26 | 0.40 |
| Diluted earnings per share (in Euro) | 0.26 | 0.40 |
| PLN/EUR average exchange rate | 4.3582 | 4.1560 |
| Sept. 30, 2016 | Dec. 31, 2015 |
|---|---|
| 962,941 | 397,304 |
| 691,677 | 117,996 |
| 478,609 | 42,485 |
| 213,068 | 75,512 |
| 271,264 | 279,307 |
| 6,692 | 5,573 |
| 64,701,007 | 49,624,000 |
| 63,655,521 | 49,624,000 |
| 4.19 | 5.63 |
| 4.3192 | 4.2386 |
On January 19, 2016, the District Court in Białystok registered the share capital increase of Pfleiderer Group S.A. (former name Pfleiderer Grajewo S.A.) from the amount of PLN 16,376 thousand to the amount of PLN 21,351 thousand through the issuance of 15,077,007 ordinary shares of series E with a nominal value of PLN 0.33 each, issued pursuant to Resolution No. 3 of the Extraordinary General Shareholders Meeting of July 27, 2015, concerning the increase in the share capital of the Company by way of issuing of new shares, a public offering of newly issued shares, the exclusion of all the preemptive rights of the existing shareholders with respect to all the newly issued shares, the dematerialization and seeking of the admission of the rights to shares and the newly issued shares to trading on a regulated market operated by the Warsaw Stock Exchange and the amendment to the Company's statute, as well as authorizing the Supervisory Board of the Company to adopt the consolidated text of the Company's statute.
The aforementioned new shares of E series were issued by the Company at an issue price of PLN 24.00 for one share.
In connection with the registration of the share capital increase of Pfleiderer Group S.A., the Parent Company and Atlantik S.A. entered on January 19, 2016, into an agreement under which the Company acquired the sole share in Pfleiderer GmbH, with the nominal value of EUR 30,000 thousand, representing 100% of the share capital of Pfleiderer GmbH and authorising the exercise of 100% of voting rights at the general meeting of shareholders of Pfleiderer GmbH.
The aforementioned agreement was concluded based on a conditional sale agreement entered into on October 5, 2015, by the Parent Company and Atlantik S.A.
Moreover, on January 19, 2016, along with the completion of the Capital Group's reorganization, the Parent Company Pfleiderer Group S.A. and the subsidiaries Pfleiderer Prospan S.A., Pfleiderer MDF Sp. z o.o. and Silekol Sp. z o.o. became borrowers under the Revolving Facility Agreement – the "RCF Agreement" - (along with Pfleiderer GmbH and Pfleiderer Holzwerkstoffe GmbH). Moreover on July 8, 2016 two more Polish subsidiaries - Pfleiderer Grajewo Sp. z o.o. and Pfleiderer Polska Sp. z o.o. (previously Pfleiderer Services Sp. z o.o.) - acceded RCF-Agreement.
On January 21, 2016, Parent Company Pfleiderer Group S.A. received notifications from Atlantik S.A., Pfleiderer Service GmbH and Pfleiderer GmbH concerning the reduction of share in the total number of voting rights at the General Meeting of shareholders of the Company. On January 25, 2016, and February 4, 2016, Parent Company Pfleiderer Group S.A. received a notification from Strategic Value Partners, LLC, concerning an increase in the total number of voting rights at the General Meeting of shareholders of the Company.
The shareholder structure directly after Public Offering is as follows:
| Number of | Ownership | Number of | % of votes at | |
|---|---|---|---|---|
| Shareholder structure | shares | interest | votes at GM | GM |
| Strategic Value Partners LLC | 16,772,896 | 25.92% | 16,772,896 | 25.92% |
| Atlantik S.A. | 16,374,497 | 25.31% | 16,374,497 | 25.31% |
| Avivia OFE Aviva BZ WBK | 4,928,816 | 7.62% | 4,928,816 | 7.62% |
| Nationale Nederlanden OFE | 2,639,144 | 4.08% | 2,639,144 | 4.08% |
| Other shareholders | 23,985,654 | 37.07% | 23,985,654 | 37.07% |
| Total | 64,701,007 | 100.00% | 64,701,007 | 100.00% |
The subsidiaries of Strategic Value Partners LLC directly holding shares of Pfleiderer Group S.A. (previously Pfleiderer Grajewo S.A.) as follows:
| Number of | Ownership | Number of | % of votes at | |
|---|---|---|---|---|
| Shareholding structure | shares | interest | votes at GM | GM |
| Yellow Saphire S.a.r.l. | 6,172,705 | 9.54% | 6,172,705 | 9.54% |
| Brookside S.a.r.l. | 5,076,738 | 7.85% | 5,076,738 | 7.85% |
| Field Point IV S.a.r.l. | 3,079,810 | 4.76% | 3,079,810 | 4.76% |
| Kings Forest S.a.r.l. | 1,745,520 | 2.70% | 1,745,520 | 2.70% |
| Field Point V S.a.r.l. | 449,409 | 0.69% | 449,409 | 0.69% |
| Field Point Acquisitions S.a.r.l. | 248,714 | 0.38% | 248,714 | 0.38% |
| Total | 16,772,896 | 25.92% | 16,772,896 | 25.92% |
Additionally, Pfleiderer Group S.A. (previously Pfleiderer Grajewo S.A.) received notification on the purchase of shares by:
1) Strategic Value Partners LLC (direct purchase of shares),
2) Brookside S.a.r.l. oraz Yellow Saphire S.a.r.l. (indirect purchase of shares).
The table below presents the change in the structure of the shareholders from December 31, 2015 to the reporting date September 30, 2016:
| Sept. 30, 2016 | Dec. 31, 2015 | |||
|---|---|---|---|---|
| Number of | Ownership | Number of votes | % of votes at | |
| Changes in the shareholding structure | shares | interest | at GM | GM |
| Strategic Value Partners LLC | 16 772 896 | 25,92% | 0 | 0,00% |
| Atlantik S.A. | 16 374 497 | 25,31% | 0 | 0,00% |
| Nationale Nederlanden OFE | 6 400 000 | 9,89% | 2 639 144 | 5,32% |
| Avivia OFE Aviva BZ WBK | 6 000 000 | 9,27% | 4 928 816 | 9,93% |
| Pfleiderer Service GmbH | 0 | 0,00% | 32 308 176 | 65,11% |
| Other shareholders | 19 153 614 | 29,60% | 9 747 864 | 19,64% |
| Total | 64 701 007 | 100,00% | 49 624 000 | 100,00% |
Until the date of the publication of this report the Company did not receive further information about a change in the structure of the main shareholders.
The Pfleiderer Group consists of one-platform enterprises. The Group's parent Company i.e. Pfleiderer Group S.A. (the Parent) operates in Wrocław.
The Parent Company, under its former name of Zakłady Płyt Wiórowych S.A. in Grajewo, was registered on July 1, 1994, by the Direct Court, Commercial Court of Łomża, in section B of the Commercial Register under entry No. 270. Subsequently, on May 9, 2001, it was registered by the District Court of Białystok, XII Commercial Division of the National Court Register, under entry No. KRS 0000011422. On September 18, 2002, the Group's Management Board received the decision of the District Court of Białystok on entering the Parent Company's new name: Pfleiderer Grajewo S.A., in the National Court Register. The Company's registered office was at 1 Wiórowa Street, Grajewo, Poland.
The Ordinary General Shareholders' Meeting adopted on June 29, 2016, a resolution on the change of the name and registered office of the Parent. On September 30, 2016, the District Court in Białystok entered into the National Court Register the change of the business name and registered office of the Company. Due to the above registration, the business name of the Company has been changed from "Pfleiderer Grajewo Spółka Akcyjna" to "Pfleiderer Group Spółka Akcyjna" and the registered office has been changed from Grajewo to Wrocław.
Pfleiderer Group S.A. shares are publicly traded. In accordance with the Polish Classification of Business Activities, the Parent Company's business is registered under No. 1621Z. Tax Identification Number
(NIP): 719-10-00-479, Industry Identification Number (REGON): 450093817.
In connection with the implementation of the resolution No. 8 of the Company's Ordinary General Shareholders' Meeting of June 29, 2016, on the consent to transfer the Company's enterprise, on August 31, 2016, the Company concluded with its subsidiary Pfleiderer Grajewo sp. z o.o., in which the Company is a sole shareholder, an agreement on making contribution in-kind to the increased share capital of Pfleiderer Grajewo sp. z o.o. and related agreement of the transfer of rights of perpetual usufruct to the land and ownership right of buildings (the "Agreements"), on the basis of which the Company transferred to Pfleiderer Grajewo sp. z o.o. the enterprise used for carrying out an operational activity.
The Agreements were concluded in connection with the adoption on August 31, 2016, of the resolution of the Extraordinary Shareholders Meeting of PGPL on the share capital increase of Pfleiderer Grajewo sp. z o.o. to PLN 40,000,000.00, i.e. by the amount of PLN 39,995,000.00 by way of issuing 799,900 new shares with a nominal value of PLN 50.00 each, which were taken up by the Company.
Due to the transfer of the operational activity and its contribution to Pfleiderer Grajewo sp. z o.o., as of September 1, 2016, the Company ceased to conduct the operational activity and became holding company of Pfleiderer Group.
The Pfleiderer Group relies on long-term experience on the market of wood based products. The Group has a strong presence in the Eastern, Western and Central Europe and grows steadily, attempting to enter new markets, targeting new segments as well as adding new products to its portfolio.
The mission of the Group is to build a long-term relationship with the clients. In the business context, the Company desires to gain and maintain customer's full confidence and achieve maximum professionalism at all levels of cooperation.
As a result of the acquisition of Pfleiderer GmbH by Pfleiderer Group S.A. (as described in details in point 2), the new Group structure was created. Pfleiderer GmbH was the indirect parent of the Parent Company prior to January 19, 2016. The acquisition of the share in Pfleiderer GmbH by the Parent Company was the final part of the process of reorganization of the Capital Group Pfleiderer, as a result of which the Pfleiderer Group S.A. became the Parent Company of Pfleiderer Group. At the end of the reporting period, the structure of the Capital Group is as follows:
Directors' Interim Condensed Consolidated Report on the operations of the Pfleiderer Group in the period from January 1 to September 30, 2016
The Pfleiderer Group consists of production plants of various profiles of the activity. The list of Group's entities with their activities:
Pfleiderer Group S.A., Wrocław, Poland, the Parent Company being a holding company of Pfleiderer Group:
A company entered in the National Court Register by the District Court of Białystok, XII Commercial Division of the National Court Register in Białystok, under entry no. KRS 0000621539 on June 3, 2016.
| Industry Identification Number (REGON): | 364479779 |
|---|---|
| Tax Identification Number: | 719-15-68-458 |
| Registered address: | Wiórowa 1, PL-19-203 Grajewo, Poland |
Principal business activity:
Pfleiderer Grajewo sp. z o.o. on August 31, 2016, took over the operational activity conducted previously by Pfleiderer Group S.A. pursuant to the resolution No. 8 of the Ordinary General Meeting of Shareholders of Pfleiderer Group S.A. dated June 29, 2016.
A joint-stock company entered as Zakłady Płyt Wiórowych Prospan S.A. in the Commercial Register maintained by the District Court of Kalisz, under entry no. RHB1754 on September 23, 1997. The company was registered with the District Court of Łódź-Śródmieście in Łódź, 20th Division of the National Court Register, under entry no. KRS 0000042082 on September 17, 2001.
| Industry Identification Number (REGON): | 250744416 |
|---|---|
| Tax Identification Number: | 619-17-42-967 |
| Registered address: | Bolesławiecka 10, PL-98-400 Wieruszów, Poland |
Principal business activity:
A company entered in the National Court Register by the District Court of Opole, VIII Commercial Division of the National Court Register of Opole, under entry no. KRS 0000225788 on January 6, 2005.
| Industry Identification Number (REGON): | 160003017 |
|---|---|
| Tax Identification Number: | 749-19-69-061 |
| Registered address: | Mostowa 30K, post box 163, PL-47-220 Kędzierzyn Koźle, Poland |
The company ensures steady supplies of adhesives used in chipboard manufacture to the Parent and its subsidiaries.
Principal business activity:
manufacture of glues and gelatines.
A company entered in the National Court Register by the District Court of Białystok, XII Commercial Division of the National Court Register in Białystok, under entry no. KRS 0000174810 on October 9, 2003.
Industry Identification Number (REGON): 330994545 Tax Identification Number: 719-13-99-317
Registered address: Wiórowa 1, PL-19-203 Grajewo, Poland
Principal business activity:
A company entered in the National Court Register by the District Court of Katowice, Commercial Division of the National Court Register, under entry no. KRS 0000149282 on November 24, 1999.
Industry Identification Number (REGON): 276746151 Tax Identification Number (NIP): 629-21-58-514
Registered address: Wiórowa 1, PL-19-203 Grajewo, Poland
Principal business activity:
A company entered in the National Court Register by the District Court of Białystok, Commercial Division of the National Court Register, under entry no. KRS 0000237233, on June 29, 2005.
Industry Identification Number (REGON): 200021250 Tax Identification Number (NIP): 719-149-38-49 Registered address: Bolesławiecka 10, PL-98-400 Wieruszów, Poland
Unifloor Sp. z o.o. is currently in liquidation.
A company entered in the National Court Register by the District Court of Białystok, XII Commercial Division of the National Court Register in Białystok, under entry no. KRS 0000247423 on December 20, 2005.
Industry Identification Number (REGON): 200052769 Tax Identification Number (NIP): 719-15-03-973
Registered address: Wiórowa 1, PL-19-203 Grajewo, Poland
Principal business activity:
The business of the Western European entities consists of:
A company entered in the Commercial Register of Nürnberg, Germany, under entry no. HR B 30135.
| Tax Identification Number: | 201/116/20203 |
|---|---|
Registered address: Ingolstädter Straße 51, 92318 Neumarkt, Germany
Principal business activity:
holding company for the German entities.
A company entered in the Commercial Register of Nürnberg Germany, under entry no. HR B 25279.
| Tax Identification Number: | 201/116/21099 |
|---|---|
| Registered address: | Ingolstädter Straße 51, 92318 Neumarkt, Germany |
Principal business activity:
A company entered in the Commercial Register of Nürnberg Germany, under entry no. HR B 19661.
Tax Identification Number: 201 / 116 / 20904
Registered address: Ingolstädter Straße 51, 92318 Neumarkt, Germany
Principal business activity:
A company entered in the Commercial Register of Nürnberg Germany, under entry no. HR B 19716.
Tax Identification Number: 201 / 116 / 20882
Registered address: Ingolstädter Straße 51, 92318 Neumarkt, Germany
Principal business activity:
A company entered in the Commercial Register of Ulm, Germany, under entry no. HR B 610151.
Tax Identification Number: 91080/23247
Registered address: Wurzacher Straße 32, 88299 Leutkirch, Germany
Principal business activity:
Directors' Interim Condensed Consolidated Report on the operations of the Pfleiderer Group in the period from January 1 to September 30, 2016
A company entered in the Commercial Register of Nürnberg, Germany, under entry no. HR B 21658 .
Tax Identification Number: 201/116/21072
Registered address: Ingolstädter Straße 51, 92318 Neumarkt, Germany
Principal business activity:
A company entered in the Commercial Register of Potsdam, Germany, under entry no. HR B 12965 P.
Tax Identification Number: 201 / 116 / 21153
Registered address: An der Birkenpfuhlheide 3, 15837 Baruth/Mark, Germany
Principal business activity:
manufacture of HDF/MDF.
A company entered in the Commercial Register of Nürnberg, Germany, under entry no. HR B 21788.
Tax Identification Number: 201 / 116 / 20963
Registered address: Ingolstädter Straße 51, 92318 Neumarkt, Germany
Principal business activity:
purchasing and distribution of recycled wood and other wood.
A company entered in the Commercial Register of Nürnberg, Germany, under entry no. HR B 19659.
Tax Identification Number: 201 / 116 / 20890
Registered address: Ingolstädter Straße 51, 92318 Neumarkt, Germany
Principal business activity:
A company entered in the Commercial Register of Nürnberg, Germany, under entry no. HR B 32971.
| Tax Identification Number: | 201 / 116 / 21277 |
|---|---|
| Registered address: | Ingolstädter Straße 51, 92318 Neumarkt, Germany |
Principal business activity:
dormant company
A company entered in the Commercial Register of Reims, France, under entry no. 441480530 RCS.
| Tax Identification Number: | 312919 |
|---|---|
Registered address: 12 Rue Clement Ader, 51100 Reims, France
Principal business activity:
sales agency.
A company entered in the Commercial Register of Brabant, Netherlands, under entry no. 8082957.
Tax Identification Number: 808535920
Registered address: De Ketting 16 a, 5261 LJ Vught, Netherlands
Principal business activity:
sales agency.
A company entered in the Commercial Register of St. Gallen, Switzerland, under entry no. CH-320.3.043.856-5.
Tax Identification Number: 17966
Registered address: Neue Jonastrasse 60, 8640 Rapperswil SG, Switzerland
Principal business activity:
sales agency.
A company entered in the Commercial Register of United Kingdom, under entry no. 01330499.
Tax Identification Number: 168 601 8948
Registered address: Oakfield House, Springwood Way, Tytherington Business Park, Macclesfield, Cheshire SK 10 2XA. Great Britain
Principal business activity:
sales agency.
A company entered in the Commercial Register of Nürnberg, Germany, under entry no. H RA 16384.
Tax Identification Number: 235 / 172 / 07004
Registered address: Ingolstädter Straße 51, 92318 Neumarkt, Germany
Principal business activity:
holding company.
Pfleiderer Infrastrukturtechnik GmbH & Co. KG, Düsseldorf (in insolvency), Germany:
A company entered in the Commercial Register of Düsseldorf, Germany, under entry no. HR A 21946.
Tax Identification Number: 235 / 186 / 00109 Registered address: Cecilienallee 54/55, 40474 Düsseldorf, Germany
Principal business activity:
the company has suspended its operations.
Pfleiderer Infrastrukturtechnik Verwaltungs-GmbH, Düsseldorf (in insolvency), Germany: A company entered in the Commercial Register of Düsseldorf, Germany, under entry no. HR B 67504.
Tax Identification Number: 201 / 116 / 20467
Registered address: Cecilienallee 54/55, 40474 Düsseldorf, Germany
Principal business activity:
the company has suspended its operations.
Allgäuer Holzindustrie und Imprägnierwerk Aulendorf GmbH, Aulendorf (in liquidation), Germany: A company entered in the Commercial Register of Ulm, Germany, under entry no. HR B 600102.
| Tax Identification Number: | unknown |
|---|---|
| Registered address: | unknown |
Principal business activity:
the company has suspended its operations and is in liquidation.
A company entered in the Commercial Register of Nürnberg, Germany, under entry no. HR B 28166.
Tax Identification Number: 201/116/21366
Registered address: Ingolstädter Straße 51, 92318 Neumarkt, Germany
Principal business activity:
the company has suspended its operations.
As at September 30, 2016, the composition of the Pfleiderer Group S.A. Management Board was as follows:
| Michael Wolff | President of the Management Board |
|---|---|
| Richard Mayer | Member of the Management Board |
| Rafał Karcz | Member of the Management Board |
| Wojciech Gątkiewicz | Member of the Management Board |
The Company's Supervisory Board elected on March 2, 2016, Mr. Richard Mayer to the Management Board and entrusted him a function of Member of the Management Board – Chief Financial Officer (CFO) and changed the function of Mr. Rafal Karcz in the Management Board by recalling Mr. Rafal Karcz from a function of Member of Management Board – Chief Financial Officer (CFO) and appointing him a function of Member of Management Board – Chief Administration Officer (CAO).
Mr. Dariusz Tomaszewski submitted resignation from the position of Member of Management Board – Sales Director on March 2, 2016.
Mr. Gerd Schubert, performing the function of Member of the Management Board of the Company, Chief Operating Officer until the date hereof, was recalled from the Company's Management Board on June 1, 2016.
On September 15, 2016, with effect as of November 1, 2016, Mr. Dirk Hardow was appointed the Member of Management Board of the Company, Chief Operating Officer.
As at September 30, 2016, the composition of the Supervisory Board was as follows:
| Zbigniew Prokopowicz | Chairman of the Supervisory Board |
|---|---|
| Michael F. Keppel | Vice-Chairman of the Supervisory Board |
| Jason Clarke | Vice-Chairman of the Supervisory Board |
| Krzysztof Sędzikowski | Member of the Supervisory Board |
| Jan Woźniak | Member of the Supervisory Board |
| Stefan Wegener | Member of the Supervisory Board |
| Tod Kersten | Member of the Supervisory Board |
Mr. Richard Mayer (Member of the Supervisory Board of the Company), Mr. Gerd Hammerschmidt (Member of the Supervisory Board of the Company) and Jochen Schapka (Member of the Supervisory Board of the Company) submitted their resignation from their respective positions of the Company's Supervisory Board on January 19, 2016.
Mr. Zbigniew Prokopowicz, Mr. Krzysztof Sędzikowski and Mr. Stefan Wegener were appointed to the Company's Supervisory Board on February 19, 2016.
Mr. Christoph Mikulski (Member of the Supervisory Board of the Company) submitted his resignation from the position of the Company's Supervisory Board on June 22, 2016. Mr. Paolo G. Antonietti (Chairman of the Supervisory Board) resigned from the position of the Chairman of the Company's Supervisory Board on June 23, 2016. Their resignations became effective as of the date of appointment of new members in their place by the General Meeting of Shareholders. Mr. Jason Clarke and Mr. Tod Kersten have been appointed to Company's Supervisory Board on June 29, 2016. The Company's Supervisory Board elected from its members Mr. Zbigniew Prokopowicz as the Chairman of the Company's Supervisory Board on June 29, 2016.
Directors' Interim Condensed Consolidated Report on the operations of the Pfleiderer Group in the period from January 1 to September 30, 2016
Pfleiderer Group S.A. is the Parent Company with respect to the following subsidiaries:
| Sep. 30, | Dec. 31, | ||
|---|---|---|---|
| 2016 | 2015 | ||
| Eastern Europe | |||
| Jura Polska Sp. z o.o. | Grajewo | 100.00% | 100.00% |
| Pfleiderer Grajewo Sp. z o.o. | Grajewo | 100.00% | 0.00% |
| Pfleiderer MDF Sp. z o.o. | Grajewo | 100.00% | 100.00% |
| Pfleiderer Prospan S.A. | Wieruszów | 100.00% | 100.00% |
| Pfleiderer Polska Sp z o.o. (previously Pfleiderer Services Sp. z o.o.) | Grajewo | 100.00% | 100.00% |
| Silekol Sp. z o.o. | Kędzierzyn-Koźle | 100.00% | 100.00% |
| Unifloor Sp. z o.o. w likwidacji | Wieruszów | 100.00% | 100.00% |
| Western Europe | |||
| Pfleiderer GmbH, Neumarkt | Neumarkt, Germany | 100.00% | 0.00% |
| Pfleiderer Holzwerkstoffe GmbH | Neumarkt, Germany | 100.00% | 0.00% |
| Pfleiderer Neumarkt GmbH | Neumarkt, Germany | 100.00% | 0.00% |
| Pfleiderer Gütersloh GmbH | Neumarkt, Germany | 100.00% | 0.00% |
| Pfleiderer Leutkirch GmbH | Leutkirch, Germany | 100.00% | 0.00% |
| Pfleiderer Erwerbergesellschaft mbH | Neumarkt, Germany | 100.00% | 0.00% |
| Pfleiderer Arnsberg GmbH | Neumarkt, Germany | 100.00% | 0.00% |
| Pfleiderer Baruth GmbH | Baruth, Germany | 100.00% | 0.00% |
| Heller Holz GmbH | Neumarkt, Germany | 100.00% | 0.00% |
| JURA-Spedition GmbH | Neumarkt, Germany | 100.00% | 0.00% |
| Pfleiderer France S.A.S. | Reims, France | 100.00% | 0.00% |
| Pfleiderer Benelux B.V. | Deventer, Netherlands | 100.00% | 0.00% |
| Pfleiderer Suisse AG | Rapperswil, Switzerland | 100.00% | 0.00% |
| Pfleiderer UK Ltd. | Macclesfield, United Kingdom | 100.00% | 0.00% |
| Pfleiderer Vermögensverwaltung GmbH & Co. KG | Neumarkt, Germany | 100.00% | 0.00% |
| Pfleiderer Infrastrukturtechnik GmbH & Co. KG (in Insolvenz) | Düsseldorf, Germany | 100.00% | 0.00% |
| Pfleiderer Infrastrukturtechnik Verwaltungs-GmbH (in Insolvenz) | Düsseldorf, Germany | 100.00% | 0.00% |
| Allgäuer Holzindustrie und Imprägnierwerk Aulendorf GmbH (i.L.) | Aulendorf, Germany | 100.00% | 0.00% |
| Blitz 11-446 GmbH | Neumarkt, Germany | 100.00% | 50.00% |
On January 19, 2016, Pfleiderer Group S.A. acquired from Atlantik S.A. the only share in Pfleiderer GmbH and its subsidiaries, representing 100% of the share capital and authorizing the exercise of 100% of voting rights at the general meeting of shareholders. The purchase price amounted to EUR 257,403 thousand. The acquisition was an integral part of project "ONE Pfleiderer" aimed at creation a fully integrated Capital Group.
The acquisition-date-fair value of the total consideration was EUR 261,707 thousand (PLN 1,164,215 thousand). The consideration compiled as follows:
The consideration was reduced by the amount of the effective portion of cash flow hedge of EUR 4,304 thousand.
| Cash consideration | 261,707 |
|---|---|
| Effective portion of cash flow hedge - gains | -4,304 |
| Consideration | 257,403 |
The Group incurred acquisition related costs of EUR 3,274 thousand (PLN 14,469 thousand) on legal fees and advisory costs of which EUR 865 thousand (PLN 3,643 thousand) was incurred in the previous year (2015) and the remaining costs of EUR 2,409 thousand (PLN 10,826 thousand) have been incurred in the current reporting period. The costs were recognized as general and administrative expenses in profit or loss in the periods in which these expenses were incurred.
Since the acquisition occurred only in January 2016 the determination of fair values of acquired assets and liabilities has not been finalized yet and thus has been recorded on a provisional basis. The fair value of the acquired assets and liabilities on a provisional basis:
| '000 EUR | Fair value |
|---|---|
| Intangible assets | 96,116 |
| Property, plant and equipment | 396,012 |
| Inventories | 59,858 |
| Receivables (incl. "PSG-claim" of EUR 134,979k) | 145,195 |
| Cash and cash equivalents | 109,661 |
| Other assets (incl. tax receivables) | 15,341 |
| Deferred tax assets | 47 |
| Total assets | 822,230 |
| Pension provisions | -49,911 |
| Other provisions | -5,532 |
| Financial liabilities | -343,662 |
| Trade payables | -65,152 |
| Other liabilities (incl. intercompany) | -59,219 |
| Tax liabilities | -9,866 |
| Deferred tax liabilities | 4,547 |
| Total liabilities | -528,795 |
| Deferred tax assets | 8,075 |
| Deferred tax liabilities | -83,248 |
| Deferred taxes on fair value adjustments | -75,173 |
| Total identifiable net assets acquired | 218,262 |
The Group expects significant synergies through the integration and the alignment of all operating and administrative processes to result in double-digit savings (in million EUR) per year.
Goodwill in the amount of EUR 39,141 thousand arising from acquisition has been recognized as follows (on a provisional basis):
| Determination of goodwill | 218,262 | 257,403 | 39,141 |
|---|---|---|---|
| '000 EUR | (fair value) | transferred | goodwill |
| net assets | Consideration | Residual | |
| Acquired |
None of the goodwill recognized is expected to be deductible for tax purposes.
The amounts of revenue and profit of the Pfleiderer GmbH since the acquisition date included in the consolidated statement of profit and loss and other comprehensive income for the nine month period ended September 30, 2016, are as follows:
The revenue and profit of the combined entity for the current reporting period as though the acquisition date for the business combination that occurred during the year had been as of January 1, 2016, is as follows:
In the period from January 1, 2016 to the date of this Director's Interim Condensed Consolidated Report, the number of the Company's shares held by its members of the Management and Supervisory Boards has not changed as in comparison to the end of the prior financial year and as for the date of this Director's Interim Condensed Consolidated Report was as follows:
| Number of | ||
|---|---|---|
| Function | Name | shares |
| Member of the Management Board | Wojciech Gątkiewicz | 5,400 |
| Member of the Management Board | Rafał Karcz | 3,472 |
As at September 30, 2016 other members of the Management and Supervisory Boards did not hold any shares of the Parent Company.
As at the reporting date, a structure of financing of the Group's assets was as follows:
| '000 EUR | Sept. 30, 2016 | Dec. 31, 2015 |
|---|---|---|
| Equity (attributable to owners of the Company) | 271,264 | 279,307 |
| Total equity | 271,264 | 279,307 |
| Non-current liabilities | 478,609 | 42,485 |
| Long-term capital (total equity + non-current liabilities) | 749,872 | 321,792 |
| Current liabilities | 213,068 | 75,512 |
Pfleiderer Group finances its operations through own funds as well as a revolving credit facility and a socalled High Yield Bond. On January 19, 2016, an amendment to Revolving Credit Facility Agreement came into force which provided Pfleiderer Group S.A. and Polish material subsidiaries the limit of PLN 200 million (Tranche B) for financing of working capital and other corporate needs. Moreover on July 8, 2016 next two Polish subsidiaries Pfleiderer Grajewo Sp. z o.o. and Pfleiderer Polska Sp. z o.o. (previously Pfleiderer Services Sp. z o.o.) acceded RCF-Agreement. At the balance sheet date this financing wasn't drawn in cash form while some bank guarantees and letter of credits were issued within this line for the total amount of EUR 143 thousand and PLN 6,559 thousand. The Revolving Credit Facility
Agreement provides Pfleiderer Holzwerkstoffe GmbH and Pfleiderer GmbH with up to EUR 60.0 million (Tranche A). This Tranche A is partially drawn by bank guarantees with EUR 2,097 thousand and PLN 1,040 thousand (EUR 241 thousand). Pfleiderer GmbH issued Senior Secured Notes with EUR 321,684 thousand in July 2014 which is due 2019. The total credit limit available under the facilities and the bond secures the financial liquidity of the Parent Company and its subsidiaries.
As at September 30, 2016, the Group's financial liabilities totalled EUR 335,102 thousand (previous year: EUR 14,696 thousand). The financial liabilities consist mainly of the High Yield Bond with EUR 330,555 thousand (previous year EUR 0) plus accrued interest for the High Yield Bond with EUR 4,222 thousand (previous year EUR 0).
For detailed information on the bank loans see Note 11 in this Condensed Consolidated Report.
Moreover, the Polish companies of the Group are party to factoring agreements without recourse rights within which the insured receivables are sold to PEKAO Faktoring Sp. z o.o. and BZ WBK Faktor Sp. z o.o. This financing facility is available for Pfleiderer Grajewo Sp. z o.o., Pfleiderer MDF Sp. z o.o., Pfleiderer Prospan S.A., Pfleiderer Grajewo Sp. z o.o. as well as Silekol Sp. z o.o. for the aggregate amount, which may not exceed PLN 265,000 thousand. The factoring agreements with BZ WBK Faktor Sp. z o.o. are concluded for an indefinite period, while the terms of the agreements with PEKAO Factoring Sp. z o.o. are definite for 1 year. Agreements are automatically rolled by another 12 months if neither party notifies the other party of its intention not to extend an agreement, provided that such notice will be sent no later than two months before the expiry of a given agreement.
The German companies - Pfleiderer Holzwerkstoffe GmbH, Pfleiderer Arnsberg GmbH, Pfleiderer Neumarkt GmbH, Pfleiderer Leutkirch GmbH, Pfleiderer Gütersloh GmbH, Jura - Spedition GmbH and Heller Holz GmbH - are party to an Asset Backed Commercial Paper Transaction Structure without recourse rights. The aforementioned companies sell their insured trade receivables to Wood Finance Inc., Grand Cayman / Cayman Islands within the scope of the Receivables Purchase Agreement up to a volume of EUR 60.0 million (Transaction Limit).
The internal financing in the Polish part of the Pfleiderer Group comprises mainly loans advanced by Pfleiderer Group S.A. to its subsidiary Pfleiderer MDF Sp. z o.o. as well as short-term bond program (commercial papers). The bonds are usually issued by Pfleiderer Group S.A. and purchased by Pfleiderer Prospan S.A. The aim of bond program as well as borrowings agreements with related parties is to finance and optimization of liquidity management within the entire Group.
The internal financing in the German part of the Group is conducted by intercompany loans and a cashpool.
Revenues from sales of the Group in the period from January 1 to September 30, 2016, amounted to EUR 695,804 thousand compared to EUR 279,294 thousand the same period of the previous year. The increase is to be attributed to the first consolidation of Pfleiderer GmbH and its subsidiaries on January 19, 2016:
| '000 EUR | Sept. 30, 2016 | Sept. 30, 2015 |
|---|---|---|
| Western Europe | 470,415 | 0 |
| Eastern Europe | 251,635 | 279,294 |
| Consolidation | -26,246 | 0 |
| Net revenue | 695,804 | 279,294 |
The table below presents revenues by product group:
| Jan. 1 - Sept. 30, 2016 | Jan. 1 - Sept. 30, 2015 | |||
|---|---|---|---|---|
| '000 Euro | %-share | '000 Euro | %-share | |
| Chipboards | 453,897 | 65.2% | 171,323 | 61.3% |
| MDF/HDF-Boards | 82,493 | 11.9% | 30,910 | 11.1% |
| HPL / Elements | 111,955 | 16.1% | 7,731 | 2.8% |
| Glues | 29,932 | 4.3% | 34,795 | 12.5% |
| Other | 6,862 | 1.0% | 7,805 | 2.8% |
| Sale of products | 685,139 | 98.5% | 252,564 | 90.4% |
| Electricity | 24,998 | 3.6% | 0 | 0.0% |
| Merchandise and materials | 2,670 | 0.4% | 3,422 | 1.2% |
| Other (incl. intercomapny sales, sales deductions) | -17,002 | -2.4% | 23,308 | 8.3% |
| Other incl. sales dedecutions | 10,666 | 1.5% | 26,730 | 9.6% |
| Total revenue | 695,804 | 100.0% | 279,294 | 100.0% |
Chipboards = raw boards, melamine-faced boards, fibre mats MDF/HDF-Boards = raw and laminated MDF and HDF, fibre mats Glues = basic resin, specialised resin Other = films, foils, edge banding, packaging, and other
Percental shares of product- and other sales changed due to the new Group-structure. Approximately two-thirds of the Group revenues are now generated by the Western European segment and one-third from the Eastern European segment. Electricity sales came from the three power plants in Germany. The significant increase in HPL / Elements sales is attributable almost entirely on the acquired German companies.
The gross margin increased from 19.6% to 23.3% of net sales due to a growing share of value-added products.
The operating profit EUR 23,261 thousand is thus hardly comparable to the prior year's operating profit (EUR 26,078 thousand) and burdened by several non-sustainable items as well as accounting-related issues with no cash-impact (e.g. additional depreciation and amortization on fair value adjustments on tangible and intangible assets (EUR 19,890 thousand) and the release of the fair value adjustments on inventories (EUR 2,345 thousand) and order backlog (EUR 1,712 thousand)).
All-in-all the Group generated net profits with EUR 16,546 thousand compared to EUR 19,834 thousand in the last year's period.
As at September 30, 2016, the number of headcounts of the Group was 3,486 (Full Time Equivalents, "FTE", including apprentices) including management as well as employees hired based on managerial agreements or appointed by the Supervisory Board (as at December 31, 2015, 3,463 FTE).
The Group's employment structure as at the end of the reporting period:
| Full time equivalents (FTE) | Sept. 30, 2016 | Dec. 31, 2015 |
|---|---|---|
| Western Europe | 2,229 | 2,194 |
| Eastern Europe | 1,257 | 1,269 |
| Total | 3,486 | 3,463 |
According to the new organizational structure the Management Board consists of Michael Wolff (President and CEO), Dirk Hardow (COO, appointed on September 15, 2016 with effect as of November 1, 2016), Rafal Karcz (CAO), Richard Mayer (CFO) and Wojciech Gatkiewicz (CSO).
For the German members of the Board a split contract is in place. They receive two-thirds of their fixed remuneration in Germany and by a service contract one third paid out in Poland. The remuneration of the
German members is to pay out in Euro.
The Polish Board members are paid totally in Polish PLN in Poland.
The yearly target remuneration at 100% target achievement of the German Board Members total EUR 2,075 thousand and of Polish Board Members at PLN 2,719 thousand.
The contracts of the German Board Members are limited contracts, Michael Wolff's contract ends December 31, 2017 and Richard Mayer's contract ends December 31, 2018. In case of termination before end of the term all German Board Members are entitled of a severance payment of their fixed monthly salary for the rest of their term, at maximum 20 months. By Supervisory Board resolution Dr. Gerd Schubert was removed from office as managing director of Pfleiderer GmbH since June 2, 2016. His contract is therefore terminated as per July 31, 2016.
The managerial contract between Pfleiderer Group S.A. and Wojciech Gątkiewicz, a member of the Management Board, was concluded for an unlimited period with a notice period of 12 months first time June 2016. Based on the agreement in case of termination of his contract Wojciech Gątkiewicz is entitled to get remuneration for the period until the end of his notice period.
The contract of Rafal Karcz is also unlimited with a notice period of 12 months but December 2018 at earliest time. The managerial contract of Rafał Karcz provides, in case of termination of the contract prior to December 31, 2018, a contractual penalty amounting to twice the basic salary in effect as at the date of the termination the contract and the number of months in the period from the date of the termination of this contract to December 31, 2019, which would have constituted the date of termination of the contract had the notice of termination of the Agreement been submitted by the Company on December 31, 2018 .
Remuneration paid to members of the Supervisory Board of Pfleiderer Grajewo S.A. for the period from 1 January to September 30, 2016 amounted to EUR 405 thousand (prior year EUR 122 thousand).
For the information regarding related-party transactions as at September 30, 2016 and for the period from January 1 to September 30, 2016, see Note 15 in supplementary notes to the interim condensed consolidated financial statements of the Pfleiderer Group Group.
In the period from January 1 to September 30, 2016, all related-party transactions were executed on an arm's length basis.
Forward and swap agreements are forward foreign currency transactions conducted at a predetermined exchange rate.
The Group applies hedge accounting, which results in that the effective portion of gains or losses on fair value of hedging instruments (forward transactions) is included in other operating income and presented as a separate equity position "cash flow hedge". The gains or losses previously recognized in other operating income are transferred to profit or loss for the current period over the same period and in the same position in which the hedged cash flows are recognized in the statement of comprehensive income. The ineffective portion of changes in the fair value of the derivative is recognized immediately in profit or loss. The effective portion of cash flow hedge with respect to the firm purchase commitment to acquire shares in Pfleiderer GmbH was included in the amount of goodwill recognized on the acquisition date.
As at September 30, 2016, the Group did not carry any borrowings from related parties.
On June 26, 2013, the Parent Company and the subsidiaries: Pfleiderer Prospan S.A. and Silekol Sp. z o.o. concluded current credit facility agreements with four banks: Bank Millennium S.A., Alior Bank S.A. and Bank Zachodni WBK S.A. The total credit limit available under the facilities provided by those banks amounts to PLN 260,000 thousand and secures the financial liquidity of the Parent Company and its subsidiaries. All these bank lines were repaid fully on February 11, 2016, by owned cash surplus and replaced by new RCF agreement with consortium of 4 German and 4 Polish banks with sublimit for Pfleiderer Group S.A. and Polish material subsidiaries amounting to 200 million PLN and for Pfleiderer GmbH and Pfleiderer Holzwerkstoffe GmbH amounting to EUR 60 million. On June 27, 2014, Pfleiderer GmbH issued a 7.875% Senior Secured Notes due 2019 with a face value of EUR 321,684 thousand.
On January 15, 2007, Pfleiderer MDF Sp. z o.o., a subsidiary, entered into a PLN 235,022 thousand investment facility agreement with PKO BP S.A. It is a special-purpose facility obtained to finance the construction of the MDF board production plant in Grajewo. This bank loan was repaid fully on February 11, 2016.
On August 29, 2007, Pfleiderer MDF Sp. z o.o., a subsidiary, entered into a PLN 65,000 thousand multipurpose facility agreement with PKO BP S.A. The original value of the loan amounted to PLN 65,000 thousand and involved overdraft of PLN 30,000 thousand, working overdraft facility of PLN 30,000 thousand as well as limit on guarantees and letters of credit in the amount of PLN 5,000 thousand.
Under the amendment, the amount of the multi-purpose facility loan was reduced to PLN 54,000 thousand.
On June 10, 2015, Pfleiderer MDF Sp. z o.o., a subsidiary, signed an amendment to the multi-purpose facility agreement with PKO BP S.A. According to the amendment, the terms of multi-purposes facility agreement was extended until May 31, 2018. This bank loan was repaid fully on February 11, 2016.
For information on the interest rates applicable to the loans please refer to Note 11 of supplementary notes to the interim condensed consolidated financial statements of the Group.
The Group manages all types of financial risk described below which may have a significant effect on its future operations; in particular, the Group puts emphasis on management of:
The aim in management of credit risk is to minimise the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. In order to reduce the risk of customers' insolvency, the Group insures receivables to a highest possible extend.
The purpose of market risk management is to reduce the unfavourable effects of changes in market risk to set appropriate risk limits and controls and to monitor risks and adherence to limits. The objective of
currency risk management is to minimise losses arising from unfavourable changes in foreign exchange rates. The Group monitors its currency position in order to protect its cash flows. To manage the currency risk, the Group primarily relies on natural hedging and, where necessary, forward contracts. The time horizon adopted for position monitoring and hedging transactions is up to 24 months.
The objective of financial liquidity management is to protect the Group from insolvency. This is achieved through regular projection of debt levels for a five-year horizon and arrangement of appropriate financing.
In accordance with the Management Board's policy, credit risk exposure is monitored on an ongoing basis. Credit rating is carried out in relation to all customers who required credit over the limits granted.
The credit risk which relates to trade receivables is limited due to the large and diversified customer base. Moreover, the Group runs a strict receivables management policy, whereby the risk of customer insolvency is mitigated through the use of insurance and factoring agreements. As at September 30, 2016, approx. 90% of total trade receivables from non-related parties were covered with credit insurance in Eastern Europe and in Western Europe approx. 96%. Insurance agreement secures credit risk and in the event of non-payments, insurance company covers the losses (the Group's own share in these losses is 10% in Eastern Europe and in general 20% for domestic customers and 10% for abroad customers in Western Europe.
In the period from January 1 to September 30, 2016, the Group did not incur any significant losses resulting from failure to collect receivables from customers. Based on detailed analysis allowances are recognised on uninsured receivables, as well as on the own share in losses.
The Group holds cash at banks and has liabilities under bank borrowings, under Factoring Agreements and under Senior Secured Notes (High Yield Bond). Interest rate risk relates to the cash flow of interests related with financial liabilities dependent on the floating interest rates. Group did not hedge against the interest rate risk.
The Group is exposed to currency risk through trade transactions denominated in foreign currencies, including both purchases of materials and merchandise, and sales of finished goods. Therefore, in the event of any exchange rate fluctuations the exchange gains and losses are partially offset. The Group monitors its currency position on an ongoing basis and if needed, primarily relies on natural hedging and, where necessary, forward, swap contracts. The Group monitors its risk exposure in terms of cash flow.
In the nine months period of 2016, the Group entered into a number of EUR/PLN forward contracts to hedge against currency risk related to contracted or planed trade transactions (sale of products, purchase of raw materials, capital expenditures in foreign currencies). As at September 30, 2016, the Group possessed 35 open EUR/PLN forward contracts with an exposure amounting to EUR 40,250 thousand. The fair value of the open contracts amounted to EUR 1,225 thousand (asset)
The Parent Company and its subsidiaries are protected against any material distortion of cash flow, thanks to extensive credit facilities available at any time. All extraordinary expenditures are always planned in advance and applied in the management process.
As at September 30, 2016, the Group possessed debt under bank borrowings and senior secured notes of EUR 335,102 thousand – mainly from the senior secured notes with a book value of EUR 330,555 thousand and a face value of EUR 321,684 thousand, due 2019 and on the same time, it also had unused credit facilities of PLN 190,732 thousand and EUR 57,662 thousand. In addition, the Group also held cash of EUR 77,073 thousand.
The Group maintains full payment capacity as well as a relatively high creditworthiness in the assessment of the key lenders. Consequently, even taking into account the possible deterioration of macroeconomic conditions, in the management assessment, there are no possible material liquidity risk factors.
The exposure to the currency, credit and interest rate risks did not materially change from the release of the Group's most recent full-year report for 2015 financial year.
As at September 30, 2016, certain members of the Group have established the following security for the repayment of claims of Commerzbank Aktiengesellschaft, Filiale Luxemburg acting as security agent (the "Security Agent") arising from the parallel debt in accordance with the intercreditor agreement dated July 4, 2014 (as amended and restated) entered into in connection with the EUR 60,000,000 and PLN 200,000,000 revolving facilities agreement dated July 4, 2014 (as amended and restated) among, inter alios, Pfleiderer Group S.A. and certain of its subsidiaries as borrowers, the Security Agent and certain financial institutions as original lenders and EUR 321,684,000 (nominal value) 7.875% senior secured notes due 2019 issued by Pfleiderer GmbH:
Pfleiderer Group S.A. has entered into the agreements for financial and registered pledges over shares in Pfleiderer Prospan S.A., Pfleiderer MDF sp. z o.o., Pfleiderer Grajewo Sp. z o.o., Pfleiderer Polska Sp. z o.o. and Silekol sp. z o.o. and has granted powers of attorney to exercise corporate rights from the pledged shares in these companies in favour of the Security Agent. The registered pledges over shares were established up to the maximum secured amount of EUR 1,286,228,472.
Pfleiderer Group S.A., Pfleiderer Prospan S.A., Pfleiderer MDF sp. z o.o. , Pfleiderer Grajewo Sp. z o.o., Pfleiderer Polska Sp. z o.o. and Silekol sp. z o.o. have entered into the agreements for financial and registered pledges over bank accounts and have granted the powers of attorney to dispose funds from their bank accounts in favour of the Security Agent. The registered pledges over bank accounts were established up to the maximum secured amount of EUR 1,286,228,472.
Pfleiderer Group S.A., Pfleiderer Prospan S.A., Pfleiderer MDF sp. z o.o. , Pfleiderer Grajewo Sp. z o.o., Pfleiderer Polska Sp. z o.o. and Silekol sp. z o.o. have entered into the agreements for registered pledges over movable property and rights (zbiór rzeczy ruchomych i praw). The registered pledges over movable property and rights were established up to the maximum secured amount of EUR 1,286,228,472.
Pfleiderer Group S.A., Pfleiderer Prospan S.A., Pfleiderer MDF sp. z o.o. , Pfleiderer Grajewo Sp. z o.o., Pfleiderer Polska Sp. z o.o. and Silekol sp. z o.o. have entered into the agreements for security assignment of rights under commercial contracts, intercompany loan agreements and insurance agreements.
The following mortgages up to the amount of EUR 1,286,228,472 (each) have been established in favour of the Security Agent:
(d) Mortgage over properties and perpetual usufructs of Silekol Sp. z o.o. in Kędzierzyn-Koźle.
Pfleiderer Group S.A., Pfleiderer Prospan S.A., Pfleiderer MDF sp. z o.o. , Pfleiderer Grajewo Sp. z o.o., Pfleiderer Polska Sp. z o.o. and Silekol sp. z o.o. have executed the submissions to enforcement (oświadczenie o poddaniu się egzekucji) in favour of the Security Agent up to the amount of EUR 1,286,228,472.
As at September 30, 2016, certain members of the Group have established the following securing the liabilities under the senior secured revolving credit facility of EUR 60,000,000 and PLN 200,000,000 as well as the liabilities under Pfleiderer GmbH EUR 321,684 thousand 7.875% Senior Secured Notes due 2019 and certain hedging arrangements.
Pfleiderer Group S.A., Pfleiderer GmbH, Pfleiderer Holzwerkstoffe GmbH and Pfleiderer Vermögensverwaltung GmbH & Co. KG as pledgors have granted pledges over shares in Pfleiderer GmbH, Pfleiderer Holzwerkstoffe GmbH, Pfleiderer Neumarkt GmbH, Pfleiderer Leutkirch GmbH, Pfleiderer Gütersloh GmbH, Pfleiderer Arnsberg GmbH, Pfleiderer Baruth GmbH and Jura-Spedition GmbH and over partnership interests in Pfleiderer Vermögensverwaltung GmbH & Co. KG.
Pfleiderer GmbH, Pfleiderer Holzwerkstoffe GmbH, Pfleiderer Neumarkt GmbH, Pfleiderer Leutkirch GmbH, Pfleiderer Gütersloh GmbH, Pfleiderer Arnsberg GmbH, Pfleiderer Baruth GmbH, Jura-Spedition GmbH and Pfleiderer Vermögensverwaltung GmbH & Co. KG as pledgors have granted pledges over their bank accounts.
Pfleiderer GmbH, Pfleiderer Holzwerkstoffe GmbH, Pfleiderer Neumarkt GmbH, Pfleiderer Leutkirch GmbH, Pfleiderer Gütersloh GmbH, Pfleiderer Arnsberg GmbH, Pfleiderer Baruth GmbH, Jura-Spedition GmbH and Pfleiderer Vermögensverwaltung GmbH & Co. KG as assignors have assigned as security their receivables under the intercompany loans, trade and insurance receivables.
Pfleiderer Holzwerkstoffe GmbH, Pfleiderer Neumarkt GmbH, Pfleiderer Leutkirch GmbH, Pfleiderer Arnsberg GmbH and Pfleiderer Baruth GmbH as transferors have transferred as security their moveable assets (including, plant and machinery, inventory).
Pfleiderer GmbH, Pfleiderer Holzwerkstoffe GmbH, Pfleiderer Neumarkt GmbH, Pfleiderer Leutkirch GmbH and Pfleiderer Arnsberg GmbH as assignors have assigned as security their intellectual property rights.
Land charges (Grundschulden) over real estate owned by Pfleiderer Holzwerkstoffe GmbH and Pfleiderer Baruth GmbH have also been granted as security.
As at September 30, 2016, certain members of the Group have guaranteed the liabilities under the senior secured revolving credit facility of EUR 60,000,000 and PLN 200,000,000 as well as the liabilities under
7.875% senior notes of EUR 321,684,000 issued by Pfleiderer GmbH and due in 2019, such members of the Group are: Pfleiderer Group S.A., Pfleiderer GmbH, Pfleiderer Holzwerkstoffe GmbH, Pfleiderer Neumarkt GmbH, Pfleiderer Leutkirch GmbH, Pfleiderer Gütersloh GmbH, Pfleiderer Arnsberg GmbH, Pfleiderer Baruth GmbH, Jura-Spedition GmbH, Pfleiderer Vermögensverwaltung GmbH & Co. KG, Pfleiderer Prospan S.A., Pfleiderer MDF sp. z o.o., Pfeiderer Grajewo Sp. z o.o., Pfleiderer Polska SP. z o.o. and Silekol sp. z o.o.
Following a dawn-raid in October 2011, on March 30, 2012, the Polish Office of Competition and Consumer Protection (the "OCCP") commenced proceedings against Kronospan Szczecinek Sp. z o.o., Kronospan Mielec sp. z o.o., Kronopol sp. z o.o., Pfleiderer Group S.A. and Pfleiderer Prospan S.A., regarding possible horizontal price fixing and exchange of information on conditions of sale in the chipboard and fibreboard markets in Poland, which may constitute breaches of Article 6 of the Act on Competition and Consumer Protection and Article 101(1)(a) of the Treaty on the Functioning of the European Union. The maximum fines that the OCCP may impose on Pfleiderer Group S.A. and/or Pfleiderer Prospan S.A. in these proceedings amount to 10% of their respective tax revenues in the year preceding the issuance of the infringement decision. The end date of the proceedings is still uncertain.
At the date of the publication of these condensed interim consolidated financial statements it is unclear whether OCCP will determine any breaches of Article 6 of the Act on Competition and Consumer Protection and Article 101(1)(a) of the Treaty on the Functioning of the European Union. At this stage, given the fact-intensive nature of the issues involved and the inherent uncertainty of such investigation, it is not possible to evaluate the outcome and potential financial consequences of this still pending and longlasting investigation, management has determined that not all of the conditions have been met to require a provision for this matter. Therefore as at September 30, 2016 no provision has been recognized by the Group in these condensed interim consolidated financial statements.
An earlier investigation by the German Federal Cartel Office in 2009 concluded in 2011 that Pfleiderer GmbH (then, Pfleiderer AG) and certain competitors had, for a period from at least 2004 through 2007, violated German competition law by coordinating price increases and minimum prices in the German market. As a result, the German Federal Cartel Office in September 2011 fined this group of market participants and certain individuals a total of EUR 42 million on the grounds of violating German and European competition laws by entering into anticompetitive agreements. Pfleiderer GmbH's share of the fine is settled in yearly installments.
Two of the Pfleiderer Group's customers have sued the Pfleiderer Group for damages in connection with these antitrust violations. There are other companies seeking compensation in connection with these antitrust violations. The outcome of the respective extrajudicial negotiations or proceedings is difficult to predict. Depending on the outcome of the negotiations and/or the proceedings, the Group could be obligated to make substantial payments.
There is a risk that additional follow-on claims for damages might be raised by third parties, including customers, against the Group in respect thereof. The amount of any such follow-on claims for damages cannot currently be determined with any certainty, but could be substantial. The realization of any of these risks could have a material adverse effect on the Group's business, financial condition and results of operations.
In December 2012, W. Classen GmbH & Co. KG ("Classen"), one of the Pfleiderer Group's current customers, filed an action against the custodian (Sachwalter) of Pfleiderer GmbH (then Pfleiderer AG) seeking the acceptance of its claim to the insolvency schedule (Insolvenztabelle) filed in May 2012. After the lifting of insolvency proceedings, which became legally effective on December 31, 2012, Classen extended its claim to Pfleiderer GmbH. Classen claims damages amounting to EUR 22 million (plus interest) on the same grounds as in the claim against Pfleiderer Baruth GmbH, as described below. Any claim against
Pfleiderer GmbH would in general be reduced to the applicable insolvency quota (Insolvenzquote) according to the insolvency plan (Insolvenzplan) of Pfleiderer AG.
In December 2012, Classen also filed an action for damages with the regional court of Düsseldorf (Landgericht Düsseldorf) against Pfleiderer Baruth GmbH (then: Pfleiderer Faserplattenwerk Baruth GmbH) amounting to approximately EUR 67 million (plus interest). The plaintiff claims to have suffered damages due to the Chipboard Cartel. Plaintiff has reduced claim from ca. € 67 million to € 55,4 million in its latest statement dated May 11th 2016. The proceeding is still pending and the outcome, i.e. the potential costs that may arise in connection with this litigation or the amount of damages that might be required to be paid, cannot be assessed yet.
In December 2014 Alno AG ("Alno"), one of the Pfleiderer Group's customers, has claimed substantial damages from Pfleiderer GmbH on its own behalf and on behalf of two of its subsidiaries. Alno claims to have suffered damages due to the Chipboard Cartel and has filed actions for damages against Pfleiderer GmbH and another party in late December 2015 (in total EUR 32.9 million plus interest). The proceeding is still pending and the outcome, i.e. the potential costs that may arise in connection with this litigation or the amount of damages that might be required to be paid, cannot be assessed yet. Plaintiff has announced another expert opinion to clarify its claim until the end of 2016; it is intended that parties try to negotiate an out-of-court settlement.
In December 2012, Oeseder Möbel-Industrie Mathias Wiemann GmbH & Co. KG ("Oeseder"), one of the Pfleiderer Group's customers, filed an action for damages with the regional court of Hanover (Landgericht Hannover) against Glunz AG amounting to approximately EUR 26 million (plus interest). The plaintiff claims to have suffered damages due to the Chipboard Cartel. Following a third party notice (Streitverkündung) by Glunz, Pfleiderer GmbH has joined the legal proceedings as an intervener (Nebenintervenient). The court has passed a judgement on May 31st 2016 according to which the claim are justified on the merits but subject to further discussion regarding quantum. Pfleiderer GmbH cannot assess the likelihood of success or the potential costs that may arise in connection with this litigation nor the amount of damages that it might be required to pay. Pfleiderer GmbH's obligation for substantial payments may result from a claim based on joint and several liability (Gesamtschuld), if Glunz or any other third party is obligated to pay compensation to Oeseder.
Hüls group seeks damages for all chipboards supplied Pfleiderer and other producers from 2002 to 2008. Pfleiderer has given a waiver of statute of limitations until 31 December 2016. A preliminary assessment of Hüls' expert opinion provided by Pfleiderer's expert says that Hüls' expert disregards the capacity utilization (omitted variable bias) and aggregates all products and suppliers. Parties are trying to negotiate a settlement until the end of 2016. The outcome, i.e. the potential costs that may arise in connection with this claim or the amount of damages that might be required to be paid, cannot be assessed yet.
The Western European segment is subject to certain tax risks. In light of the change in shareholders in 2012, there are certain risks with regard to the amount of tax loss utilized by the Group. Due to the acquisition of all shares in Pfleiderer GmbH (formerly Pfleiderer AG) by Atlantik S.A. in November 2012, tax losses generated by the German subsidiaries in 2012 may not be utilized in full. The extent to which this also applies to an entity with joint tax-filing status has yet to be fully determined. It cannot be ruled out that the fiscal authorities will reject the position taken by Pfleiderer Holzwerkstoffe GmbH, which could in turn lead to an assessment requiring payments of tax arrears. As a result of the change in shareholders of Pfleiderer GmbH that occurred as of January 19, 2016, it is possible that the tax losses for the financial year 2016 may also not be recovered. It cannot be ruled out that the fiscal authorities will reject the position taken by Pfleiderer GmbH, which could in turn lead to an assessment requiring payment of tax arrears. In addition, there was a change in shareholders at the level of the shareholder of Pfleiderer GmbH in December 2015, which may lead to uncertainty with regard to the possibility of tax loss utilization for the 2015 financial year.
In 2014 Pfleiderer GmbH (and its subsidiaries) recognized valuation allowances on receivables to the socalled "Non Core"- companies of the former Pfleiderer Group on account of interest receivable and foreign currency gains on these receivables and treated these valuation allowances as tax-deductible. It cannot be ruled out that the fiscal authorities will reject the position taken by Pfleiderer GmbH, which could cause additional tax payments.
The Pfleiderer Grajewo Group did not publish any forecasts for the 2016 financial year. Due to the current market situation, the Group suspended to publish its financial forecast for 2016 until the situation on the furniture market in Poland and Eastern Europe in general will be stabilised.
No events of special significance occurred following the close of the first three quarters of 2016 that – if they had occurred prior to the close of the end of the reporting period – would have called for a different presentation of the Company's net assets, financial position and results of operations.
President of the Management Board, Chief Executive Officer Member of the Management Board, Chief Financial Officer
Michael Wolff Richard Mayer
Wojciech Gątkiewicz Rafał Karcz
Member of the Management Board, Chief Sales Officer Member of the Management Board, Chief Administration Officer
Dirk Hadrow
Member of the Management Board, Chief Operations Officer
Wrocław, November 7, 2016
This document is a free translation of the Polish original. Terminology current in Anglo-Saxon countries has been used where practicable for the purpose of this translation in order to aid understanding. The binding Polish original should be referred to in matters of interpretation.
THE PFLEIDERER GROUP S.A. GROUP (PREVIOUSLY PFLEIDERER GRAJEWO GROUP) UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 2016
| Unaudited interim condensed consolidated statement of financial position 3 | |
|---|---|
| Unaudited interim condensed consolidated statements of profit and loss and other comprehensive income 4 | |
| Unaudited interim condensed consolidated statement of changes in equity 5 | |
| Unaudited interim condensed consolidated statement of cash flows 7 | |
| Notes to the unaudited interim condensed consolidated financial statements 8 |
(all amounts in EUR thousand unless otherwise stated)
| '000 EUR | Note | Sep. 30, 2016 | Dec. 31, 2015 |
|---|---|---|---|
| Property, plant and equipment | 7. | 533,963 | 163,895 |
| Intangible assets | 2. | 92,359 | 958 |
| Goodwill | 2. | 64,551 | 25,303 |
| Other long-term investments | 534 | 30 | |
| Investment property | 894 | 906 | |
| Deferred tax assets | 5,289 | 4,773 | |
| Advances paid for property, plant and equipment and intangible assets | 10,531 | 7,083 | |
| Government grants receivables | 19,580 | 21,165 | |
| Non-current assets | 727,701 | 224,113 | |
| Inventories | 95,856 | 36,656 | |
| Trade receivables and other | 9. | 57,384 | 113,148 |
| Income tax receivable | 2,074 | 101 | |
| Government grant receivables | 1,848 | 1,147 | |
| Cash and cash equivalents | 77,073 | 20,731 | |
| Fair value of hedging instruments | 284 | 640 | |
| Other short term financial assets | 721 | 768 | |
| Current assets | 235,240 | 173,191 | |
| Total assets | 962,941 | 397,304 |
| '000 EUR | Sep. 30, 2016 | Dec. 31, 2015 | |
|---|---|---|---|
| Share capital | 10. | 6,692 | 5,573 |
| Share premium | 10. | 146,374 | 68,250 |
| Reserves | 10. | 76,675 | 164,331 |
| Retained earnings | 10. | 41,523 | 41,153 |
| Total equity attributable to owners of the Company | 271,264 | 279,307 | |
| Total equity | 271,264 | 279,307 | |
| Loans and borrowings | 11. | 330,555 | 9,604 |
| Provisions for employee benefits | 62,119 | 2,268 | |
| Provisions | 1,853 | 201 | |
| Deferred tax liabilities | 57,487 | 3,751 | |
| Fair value of hedging instruments | 56 | 107 | |
| Deferred income from government grants | 25,142 | 26,554 | |
| Other non-current liabilities | 1,397 | 0 | |
| Non-current liabilities | 478,609 | 42,485 | |
| Loans and borrowings | 11. | 4,547 | 5,092 |
| Income tax payable | 11,448 | 853 | |
| Trade payables and other | 12. | 169,566 | 62,511 |
| Employee related payables | 26,097 | 5,627 | |
| Deferred income from government grants | 1,410 | 1,429 | |
| Current liabilities | 213,068 | 75,512 | |
| Total liabilities | 691,677 | 117,997 | |
| Total equity and liabilities | 962,941 | 397,304 |
(all amounts in EUR thousand unless otherwise stated)
| Jan. 1 - | Jan. 1 - | Jul. 1 - | Jul. 1 - | ||
|---|---|---|---|---|---|
| '000 EUR | Note | Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 |
| Revenue | 695,804 | 279,294 | 237,343 | 89,365 | |
| Cost of sales | -533,990 | -224,695 | -178,023 | -71,761 | |
| Profit on sales | 161,814 | 54,599 | 59,320 | 17,604 | |
| Other income | 6,055 | 4,959 | 1,366 | 1,594 | |
| Distribution expenses | -81,638 | -19,853 | -28,400 | -6,469 | |
| General and administrative expenses | -37,735 | -11,379 | -12,931 | -4,129 | |
| Other expenses | -25,235 | -2,248 | -12,220 | -1,224 | |
| Result from operating activities | 23,261 | 26,078 | 7,135 | 7,376 | |
| Financial income | 6. | 2,581 | 486 | 822 | 23 |
| Financial expenses | 6. | -21,598 | -1,831 | -8,109 | -424 |
| Exchange differences | 6. | 5,468 | 0 | 4,889 | 0 |
| Net financial result | -13,549 | -1,345 | -2,398 | -401 | |
| Profit before tax | 9,712 | 24,733 | 4,737 | 6,975 | |
| Income tax expense | 8. | 6,834 | -4,899 | 4,699 | -1,613 |
| Net profit for the period | 16,546 | 19,834 | 9,436 | 5,362 |
| Other comprehensive income | ||||
|---|---|---|---|---|
| Actuarial gains and losses net of related tax | -5,687 | 0 | -1,268 | 0 |
| Exchange differences | -8,651 | 2,186 | 0 | 0 |
| Items that will not be reclassified subsequently to profit or loss | -14,338 | 2,186 | -1,268 | 0 |
| Cash flow hedge on acquisition of the subsidiary reclassified to goodwill | 917 | 0 | 0 | 0 |
| Translation difference on foreign operations | 0 | 107 | 0 | 0 |
| Cash flow hedge - effective portion of changes in fair value net to related tax | -426 | 1,637 | 656 | -184 |
| Cash flow hedge - reclassified to profit or loss net of related tax | 174 | -1,289 | 463 | -260 |
| Items that are or may be reclassified subsequently to profit or loss | 665 | 455 | 1,119 | -444 |
| Other comprehensive income | -13,673 | 2,641 | -149 | -444 |
| Total comprehensive income for the period | 2,873 | 22,475 | 9,287 | 4,918 |
| Profit for the period attributable to: | ||||
| Shareholders of the Company | 16,546 | 19,834 | 9,436 | 5,362 |
| Profit for the period | 16,546 | 19,834 | 9,436 | 5,362 |
| Total comprehensive income attributable to: | ||||
| Shareholders of the Company | 2,873 | 22,475 | 9,287 | 4,918 |
| Total comprehensive income for the period | 2,873 | 22,475 | 9,287 | 4,918 |
| Number of shares at the end of the reporting period | 64,701,007 | 49,624,000 | 64,701,007 | 49,624,000 |
| Average number of shares during the reporting period | 63,655,521 | 49,624,000 | 64,701,007 | 49,624,000 |
| Basic and diluted earnings per share | 0.26 | 0.40 | 0.15 | 0.11 |
| Jan. 1 - | Jan. 1 - | Jul. 1 - | Jul. 1 - | ||
|---|---|---|---|---|---|
| Weighted-average number of ordinary shares (basic and diluted) | days | Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 |
| 31.12.2015 | 49,624,000 | 49,624,000 | 64,701,007 | 49,624,000 | |
| 19.01.2016 (Capital increase) | 19 | 15,077,007 | 0 | 0 | 0 |
| 30.09.2016 | 255 | 64,701,007 | 49,624,000 | 64,701,007 | 49,624,000 |
| Average number of shares | 274 | 63,655,521 | 49,624,000 | 64,701,007 | 49,624,000 |
Unaudited condensed consolidated interim financial statements for the three and nine month periods ended September 30,
2016
(all amounts in EUR thousand unless otherwise stated)
Unaudited interim condensed consolidated statement of changes in equity
For the nine month period ended September 30, 2016:
| Un |
|||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| ist d reg ere |
Re se rve |
St atu tor y |
Ex ha c ng e |
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|||||||
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||
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| Co he ive inc fo he io d r t mp re ns om e p er |
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| Tr ion it h o ise d in ity ct an sa s w wn er s r ec og n eq u |
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| S ha iss re ue |
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0 | 0 | 0 | 0 | 0 | 0 | 0 | 3, 6 6 9 |
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0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 1 4, 5 8 5 - |
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4 2, 1 2 1 |
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2016
(all amounts in EUR thousand unless otherwise stated)
| Ex ha c ng e f fer d i en ce s |
||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| '0 0 0 E U R |
S ha re i l ta ca p |
S ha re ium p rem |
S ta tu tor y res erv e fun ds |
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on la ing tra t ns for ig e n ion t op era s |
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| As Ja 1, 2 0 1 5 t a n. |
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0 | 2 8 5 |
2 8, 8 1 1 |
1 7 7, 4 5 7 |
| Co he ive inc fo he io d t m p re ns om e r p er |
||||||||||
| Ne f i t p t ro |
0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 1 9, 8 3 4 |
1 9, 8 3 4 |
| O he he ive inc t r c om p re ns om e |
0 | 0 | 0 | 0 | 1 0 7 |
2, 1 8 6 |
0 | 3 4 8 |
0 | 2, 6 4 1 |
| ive inc fo io To ta l c he t he d om p re ns om e r p er |
0 | 0 | 0 | 0 | 1 0 7 |
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| Tr ion i h o ise d in i t t ty an sa c s w wn er s r ec og n eq u |
||||||||||
| Ca i ta l inc p rea se |
0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Tra fer f p f 2 0 1 4 n f i fun d t o t p t to ta tu tor ns o ar e ro s y res erv e |
0 | 0 | 1 4, 4 6 7 |
0 | 0 | 0 | 0 | 0 | 1 4, 4 6 7 - |
0 |
| Tra fer for ha to ns res erv e ow n s res |
0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Tra la ing f for ig ion in E U R t t to ns o e n c urr en cy op era s |
0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Tr ion i h o ise d in i t t ty an sa c s w wn er s r ec og n eq u |
0 | 0 | 1 4, 4 7 6 |
0 | 0 | 0 | 0 | 0 | 1 4, 4 7 6 - |
0 |
| Se As 3 0, 2 0 1 5 t a p. |
5, 5 7 3 |
6 8, 2 5 0 |
9 0, 8 1 7 |
1 4 5 |
0 | 3 4 5 |
0 | 6 3 3 |
3 4, 1 6 9 |
1 9 9, 9 3 2 |
(all amounts in EUR thousand unless otherwise stated)
| Jan. 1 - | Jan. 1 - | |
|---|---|---|
| '000 EUR | Sep. 30, 2016 | Sep. 30, 2015 |
| Net profit for the reporting period | 16,546 | 19,834 |
| Depreciation and amortisation | 52,896 | 11,409 |
| Foreign exchange gains | -5,468 | -1,369 |
| Interest for the period | 19,017 | 1,466 |
| Profit on investing activities | 0 | -44 |
| Income tax disclosed in profit or loss of the period | -6,834 | 4,899 |
| Amortisation of government grants | -1,679 | -811 |
| Result on forward contracts | -1,555 | 1,334 |
| Increase in exchange differences on translating foreign operations | -446 | 110 |
| Net result from discontinued operations | 0 | 0 |
| Other adjustments | 0 | 141 |
| Changes in | ||
| trade and other receivables | -8,407 | -16,334 |
| inventories | 627 | 2,300 |
| trade and other payables | 13,970 | 6,913 |
| employee benefit obligations | -1,712 | -191 |
| provisions | 7,599 | 5 |
| Cash generated from operating activities | 84,554 | 29,662 |
| Interest received | 0 | 29 |
| Income tax (paid)/received | -5,282 | -3,020 |
| Net cash provided by operating activities | 79,272 | 26,671 |
| Disposal of property, plant and equipment | 135 | 64 |
| Income from disposal of discontinued operations | 0 | 3,527 |
| Interest received | 71 | 83 |
| Repayment/(granting) loan to other entities | 0 | 481 |
| Acquisition of intangible assets and property, plant and equipment | -31,793 | -17,665 |
| Acquisition of subsidiary, net of cash acquired | -9,692 | 0 |
| Net cash used in investing activities | -41,279 | -13,510 |
| Repayment of borrowings and other debt instruments | -21,446 | -9,694 |
| Increase of borrowings and other debt instruments | 0 | 0 |
| Share issue | 80,864 | 0 |
| Dividend payments | -14,585 | 0 |
| Acquisition of non-controlling interests | 0 | 0 |
| Prepaid costs related to the planned capital increase | 0 | -1,139 |
| Interest paid | -26,587 | -1,666 |
| Other financing activities | 103 | 22 |
| Net cash used in financing activities | 18,349 | -12,477 |
| Total cash flows | 56,342 | 684 |
| Increase in cash | 56,342 | 684 |
| Cash at beginning of the period | 20,731 | 4,332 |
| Cash at the end of the period | 77,073 | 5,016 |
The cash flow from share issue resulted from the issuance of 15,077,007 new shares. The cash flow from acquisition of subsidiary resulted mainly from the cash-payment to the seller of Pfleiderer GmbH and its subsidiaries (EUR 119,353 thousand) after deducting the cash and cash equivalents held by the acquire (EUR 109,661 thousand). The cash flow from repayment of borrowings reflects the extinguishment of financial debts in the course of the refinancing on January 19, 2016 (please refer to note 11).
| 1. | General information 9 |
|---|---|
| 2. | Structure of the Group 9 |
| 3. | Basis of preparation 12 |
| 4. | Operating segments 14 |
| 5. | Seasonality of operations 15 |
| 6. | Finance income and costs 15 |
| 7. | Property, plant and equipment 16 |
| 8. | Income tax expense 16 |
| 9. | Trade receivables and other 17 |
| 10. | Equity 17 |
| 11. | Borrowings and other debt instruments 18 |
| 12. | Trade payables and other 20 |
| 13. | Financial instruments 20 |
| 14. | Contingent liabilities and security 20 |
| 15. | Significant related parties transactions 25 |
| 16. | Events subsequent to the end of the reporting period 26 |
(all amounts in EUR thousand unless otherwise stated)
Pfleiderer Group S.A. (the "Company"; the "Parent") is a company domiciled in Poland, which shares are publicly traded. The Company until September 30, 2016, acted under a business name Pfleiderer Grajewo S.A.
The Company was registered by the District Court of Białystok, XII Commercial Division of the National Court Register, under entry No. KRS 0000011422.
The Company's registered office is at Strzegomska 42AB Street, Wrocław, Poland. Until September 30, 2016, the Company's registered office was at 1 Wiórowa Street, Grajewo.
In accordance with the Polish Classification of Business Activities, the Parent Company's business is registered under No. 1621Z.
These interim condensed consolidated financial statements of the Pfleiderer Group comprise the interim condensed financial information of the Company and its subsidiaries (collectively the "Group"). They were authorized for issue by the Company's Management Board on November 7, 2016.
The Pfleiderer Group S.A. Group (the "Group" or "Pfleiderer Group") is primarily involved in manufacturing and veneering of wood and wood-based products and paper finishing, as well as domestic and foreign trade.
Pfleiderer Group S.A. is the Parent Company with respect to the following subsidiaries:
| Sep. 30, | Dec. 31, | ||
|---|---|---|---|
| 2016 | 2015 | ||
| Eastern Europe | |||
| Jura Polska Sp. z o.o. | Grajewo | 100.00% | 100.00% |
| Pfleiderer Grajewo Sp. z o.o. | Grajewo | 100.00% | 0.00% |
| Pfleiderer MDF Sp. z o.o. | Grajewo | 100.00% | 100.00% |
| Pfleiderer Prospan S.A. | Wieruszów | 100.00% | 100.00% |
| Pfleiderer Polska Sp. z o.o.( prev. Pfleiderer Services Sp. z o.o.) | Grajewo | 100.00% | 100.00% |
| Silekol Sp. z o.o. | Kędzierzyn-Koźle | 100.00% | 100.00% |
| Unifloor Sp. z o.o. w likwidacji | Wieruszów | 100.00% | 100.00% |
| Western Europe | |||
| Pfleiderer GmbH, Neumarkt | Neumarkt, Germany | 100.00% | 0.00% |
| Pfleiderer Holzwerkstoffe GmbH | Neumarkt, Germany | 100.00% | 0.00% |
| Pfleiderer Neumarkt GmbH | Neumarkt, Germany | 100.00% | 0.00% |
| Pfleiderer Gütersloh GmbH | Neumarkt, Germany | 100.00% | 0.00% |
| Pfleiderer Leutkirch GmbH | Leutkirch, Germany | 100.00% | 0.00% |
| Pfleiderer Erwerbergesellschaft mbH | Neumarkt, Germany | 100.00% | 0.00% |
| Pfleiderer Arnsberg GmbH | Neumarkt, Germany | 100.00% | 0.00% |
| Pfleiderer Baruth GmbH | Baruth, Germany | 100.00% | 0.00% |
| Heller Holz GmbH | Neumarkt, Germany | 100.00% | 0.00% |
| JURA-Spedition GmbH | Neumarkt, Germany | 100.00% | 0.00% |
| Pfleiderer France S.A.S. | Reims, France | 100.00% | 0.00% |
| Pfleiderer Benelux B.V. | Deventer, Netherlands | 100.00% | 0.00% |
| Pfleiderer Suisse AG | Rapperswil, Switzerland | 100.00% | 0.00% |
| Pfleiderer UK Ltd. | Macclesfield, United Kingdom | 100.00% | 0.00% |
| Pfleiderer Vermögensverwaltung GmbH & Co. KG | Neumarkt, Germany | 100.00% | 0.00% |
| Pfleiderer Infrastrukturtechnik GmbH & Co. KG (in Insolvenz) | Düsseldorf, Germany | 100.00% | 0.00% |
| Pfleiderer Infrastrukturtechnik Verwaltungs-GmbH (in Insolvenz) | Düsseldorf, Germany | 100.00% | 0.00% |
| Allgäuer Holzindustrie und Imprägnierwerk Aulendorf GmbH (i.L.) | Aulendorf, Germany | 100.00% | 0.00% |
| Blitz 11-446 GmbH | Neumarkt, Germany | 100.00% | 50.00% |
(all amounts in EUR thousand unless otherwise stated)
On January 19, 2016, Pfleiderer Group S.A. acquired from Atlantik S.A. the only share in Pfleiderer GmbH and its subsidiaries, representing 100% of the share capital and authorizing the exercise of 100% of the voting rights at the general meeting of shareholders. The purchase price amounted to EUR 261,707 thousand. The acquisition was an integral part of the "ONE Pfleiderer" project aimed at the creation a fully integrated Group. The new group structure is presented above.
The acquisition-date-fair value of the total consideration was EUR 261,707 thousand (PLN 1,164,215 thousand). The consideration was comprised as follows:
The consideration was reduced by the amount of the effective portion of the cash flow hedge of EUR 4,304 thousand.
| '000 EUR | |
|---|---|
| Cash consideration | 261,707 |
| Effective portion of cash flow hedge - gains | -4,304 |
| Consideration | 257,403 |
The Group incurred acquisition related costs of EUR 3,274 thousand (PLN 14,469 thousand) on legal fees and advisory costs of which EUR 865 thousand (PLN 3,643 thousand) was incurred in the previous year (2015) and the remaining costs of EUR 2,409 thousand (PLN 10,826 thousand) have been incurred in the current reporting period. The costs were recognized as general and administrative expenses in profit or loss for the periods in which these expenses were incurred.
Since the acquisition only occurred in January 2016 the determination of fair values of acquired assets and liabilities has not been finalized yet and thus has been recognized on a provisional basis. The fair value of the acquired assets and liabilities on a provisional basis are as follows:
(all amounts in EUR thousand unless otherwise stated)
| '000 EUR | Fair value |
|---|---|
| Intangible assets | 96,116 |
| Property, plant and equipment | 396,012 |
| Inventories | 59,858 |
| Receivables (incl. "PSG-claim" of EUR 134,979k) | 145,195 |
| Cash and cash equivalents | 109,661 |
| Other assets (incl. tax receivables) | 15,341 |
| Deferred tax assets | 47 |
| Total assets | 822,230 |
| Pension provisions | -49,911 |
| Other provisions | -5,532 |
| Financial liabilities | -343,662 |
| Trade payables | -65,152 |
| Other liabilities (incl. intercompany) | -59,219 |
| Tax liabilities | -9,866 |
| Deferred tax liabilities | 4,547 |
| Total liabilities | -528,795 |
| Deferred tax assets | 8,075 |
| Deferred tax liabilities | -83,248 |
| Deferred taxes on fair value adjustments | -75,173 |
| Total identifiable net assets acquired | 218,262 |
The Company acquired trade receivables with a gross nominal amount of EUR 5,794 thousand, with a fair value of EUR 5,268 thousand and thus contractual cash flows not expected to be collected amounting to EUR 526 thousand.
The Group expects significant synergies through the integration and the alignment of all operating and administrative processes to result in double-digit savings (in million EUR) per year.
Goodwill in the amount of EUR 39,141 thousand arising from acquisition has been determined as follows (on a provisional basis):
| Determination of goodwill | 218,262 | 257,403 | 39,141 |
|---|---|---|---|
| '000 EUR | (fair value) | transferred | goodwill |
| net assts | Consideration | Residual | |
| Acquired |
None of the goodwill recognized is expected to be deductible for tax purposes.
The amounts of revenue and profit of the former Pfleiderer GmbH Group since the acquisition date included in the consolidated statement of profit and loss and other comprehensive income for the nine month period ended September 30, 2016, is as follows:
The revenue and profit of the combined entity for the current reporting period as though the acquisition date for the business combination had occurred as of January 1, 2016, is as follows:
(all amounts in EUR thousand unless otherwise stated)
These interim condensed consolidated financial statements were prepared in accordance with the requirements of IAS 34 "Interim financial reporting" as adopted for use by the European Union and in the scope required under the Minister of Finance Regulation of February 19, 2009, on current and periodic information provided by issuers of securities and conditions of recognition as equivalent information required by the law of a non-member state (consolidated text: Official Journal 2014, item 133) (the "Regulation").
These interim condensed consolidated financial statements have been prepared in accordance with the accounting policies described in the audited consolidated financial statements of the Pfleiderer Grajewo S.A. Group for the financial year ended December 31, 2015. These interim condensed consolidated financial statements do not contain all information required in annual financial statements; therefore, they should be read in conjunction with the Group's audited annual consolidated financial statements for the year ended December 31, 2015.
A number of new standards, amendments to standards and interpretations are not yet effective for annual periods beginning on or after January 1, 2016 and have not been applied in these interim condensed consolidated financial statements. The Group intends to apply them for the periods for which they are effective for the first time.
The following amendments to the existing standards, endorsed by the European Union, are applicable to the Group's financial statements for the financial year beginning January 1, 2016:
These amendments contain rules on the recognition and profit and loss treatment of joint ventures and joint operations. These changes did not have a material impact on the Group's consolidated financial statements.
These amendments relate to a variety of reporting issues. They clarify that disclosures in the notes are necessary only if their content is not insignificant. This is also explicitly the case if an IFRS stipulates a list of minimum disclosures. The amendments also provide explanatory notes on the aggregation and disaggregation of items in the statement of financial position and the statement of comprehensive income. These changes did not have a material impact on the Group's consolidated financial statements.
With these amendments, the IASB provides further guidance for determining an acceptable method of depreciation and amortization. These changes did not have a material impact on the Group's consolidated financial statements.
To date, under IAS 41, all biological assets have been measured at fair value less estimated selling costs. Under the new requirements, bearer plants should be accounted for in the same way as property, plant and equipment in IAS 16, because their use is similar to that of manufacturing. These changes did not have a material impact on the Group's consolidated financial statements.
These amendments clarify the rules dealing with allocation of employee or third-party contributions to periods of service in circumstances in which the contributions are linked to the term of service. They also allow simplifications for cases in which contributions are independent of the years of service. These changes did not have a material impact on the Group's consolidated financial statements.
(all amounts in EUR thousand unless otherwise stated)
Changes were made to seven standards as part of the annual improvement project. Revisions in the wording of individual IFRSs are intended to clarify existing provisions. There are also changes with an effect on disclosures in the notes. The standards affected are IFRS 2, IFRS 3, IFRS 8, IFRS 13, IAS 16, IAS 24 and IAS 38. These changes did not have a material impact on the Group's consolidated financial statements.
Changes were made to four standards as part of the annual improvement project. Revisions in the wording of individual IFRSs/IASs are intended to clarify existing provisions. The standards affected are IFRS 5, IFRS 7, IAS 19 and IAS 34. These changes did not have a material impact on the Group's consolidated financial statements.
These interim condensed consolidated financial statements have been prepared on the historical cost basis, except for derivative financial instruments and investment properties, which are measured at fair value.
These interim condensed consolidated financial statements were prepared under the assumption that the Pfleiderer Group S.A. Group will continue to operate as a going concern for the foreseeable future.
These interim condensed consolidated financial statements are presented in Euro (EUR) and all amounts have been rounded to the nearest thousand (EUR'000) unless stated otherwise.
The functional currency of the parent Company, Pfleiderer Group S.A. is the Polish Zloty. Nevertheless approximately two-third of the Group's revenues are generated by the West European segment in Euro and additionally a more than insignificant share of the Polish sales and sourcing is conducted in Euro as well. The Western European segment accounts for more than two-thirds of the Group's assets (such as tangible and intangible assets and inventories) and most of the group's liabilities. In view of the share of the Euro-denominated business and assets as well as liabilities, with effect from January 1, 2016 Pfleiderer Group selected the EUR as the presentation currency for its consolidated financial statements.
In preparing these interim financial statements, management has made judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Any change in accounting estimates is recognised in the period in which such change occurred or in the current and future periods if the estimate change relates to both the current and future periods.
The Group reviews its assets on an ongoing basis and, if necessary, recognises impairment losses in profit or loss. Allowances are primarily recognised on trade receivables and inventories i.e. materials and finished goods. In addition, the Group reviews the useful life of fixed assets and factors influencing the recoverable amount of non-current assets. The retirement provision is calculated based on assumptions using an actuarial method.
Significant judgements and estimates applied in these interim financial statements are substantially unchanged to those applied in the Group's consolidated financial statements as at and for the year ended December 31, 2015 except for the judgements and estimates related to the acquired business as described in note 14.2 Contingent liabilities.
Contingent liabilities in relation to the described risks (note 14.2 Contingent liabilities) relating to prior antitrust violations could not be measured reliable. The contingent liabilities include potential damages and payments for out-of-court settlements. As the potential damage caused by the alleged or actual viola-
(all amounts in EUR thousand unless otherwise stated)
tion of the competition law is uncertain (on the merits and to the extent) the damage cannot be measured reliably by the Group. At this stage, given the nature of the issues involved and the inherent uncertainty of such issues, it is not possible to evaluate the outcome and the financial consequences of the corresponding law suits and the out-of-court negotiations. Management has determined that not all of the conditions have been met to require a provision for these matters. Therefore and as at September 30, 2016 no provision has been recognised by the Group in the condensed consolidated interim financial statements.
The extended Grajewo Group presently consists of two former largely independent business segments which are currently subject to an overall integration project. The project is still ongoing and is planned to result in a fully integrated European company. The Group is taking steps towards creating a fully integrated company and is still regionally and legally broadly separated into business segments which however will coalesce more and more into one integrated company in the future.
The Group has determined two operating segments – Western Europe and Eastern Europe. Both are components of the Company that engage in business activities from which they earn revenues and incur expenses, whose operating results are regularly reviewed by the Company's chief operating decision maker and for which discrete financial information is available.
| Jan. 1 - Sep. 30, 2016 | Western | Eastern | Others / | |
|---|---|---|---|---|
| '000 EUR | Europe | Europe | Consolidation | Group |
| External revenues | 466,229 | 229,575 | 0 | 695,804 |
| Intersegment revenues | 4,186 | 22,059 | -26,245 | 0 |
| Profit/loss before income taxes | -8,759 | 18,620 | -149 | 9,712 |
| Financial result | 13,965 | -416 | 0 | 13,549 |
| Result from operating acitivities (EBIT) | 5,206 | 18,204 | -149 | 23,261 |
| Depreciation and amortisation | 40,543 | 12,353 | 0 | 52,896 |
| Impairment | 0 | 0 | 0 | 0 |
| Segment earnings EBITDA | 45,749 | 30,557 | -149 | 76,157 |
| Cash and cash equivalents | -64,965 | -11,743 | -365 | -77,073 |
| Current financial liabilities | 4,547 | 0 | 0 | 4,547 |
| Non-current financial liabilities | 330,555 | 0 | 0 | 330,555 |
| Net debt | 270,137 | -11,743 | -365 | 258,029 |
| Receivables before factoring | 62,376 | 44,808 | 0 | 107,184 |
| Inventories | 60,740 | 35,116 | 0 | 95,856 |
| Liabilities | -55,538 | -39,177 | 0 | -94,715 |
| Net working capital before factoring | 67,578 | 40,747 | 0 | 108,325 |
| Segment capital expenditure | 11,318 | 21,214 | 0 | 32,532 |
(all amounts in EUR thousand unless otherwise stated)
| Jan. 1 - Sep. 30, 2015 | Western | Eastern | Others / | |
|---|---|---|---|---|
| '000 EUR | Europe | Europe | Consolidation | Group |
| External revenues | 0 | 279,294 | 0 | 279,294 |
| Intersegment revenues | 0 | 0 | 0 | 0 |
| Profit/loss before income taxes | 0 | 24,733 | 0 | 24,733 |
| Financial result | 0 | 1,345 | 0 | 1,345 |
| Result from operating acitivities (EBIT) | 0 | 26,078 | 0 | 26,078 |
| Depreciation and amortisation | 0 | 11,409 | 0 | 11,409 |
| Impairment | 0 | 0 | 0 | |
| Segment earnings EBITDA | 0 | 37,487 | 0 | 37,487 |
| Cash and cash equivalents | 0 | -5,016 | 0 | -5,016 |
| Current financial liabilities | 0 | 5,122 | 0 | 5,122 |
| Non-current financial liabilities | 0 | 10,935 | 0 | 10,935 |
| Net debt | 0 | 11,041 | 0 | 11,041 |
| Receivables before factoring | 0 | 43,116 | 0 | 43,116 |
| Inventories | 0 | 40,451 | 0 | 40,451 |
| Liabilities | 0 | -103,319 | 0 | -103,319 |
| Net working capital before factoring | 0 | -19,752 | 0 | -19,752 |
| Segment capital expenditure | 0 | -17,665 | 0 | -17,665 |
Chipboard sales are subject to seasonal changes, in particular changes relate to the seasonal nature of the construction cycle. The highest sales can be observed in the second half of the year whereas the lowest sales are normally generated in the second quarter of the calendar year.
| Jan. 1 - | Jan. 1 - | Jul. 1 - | Jul. 1 - | |
|---|---|---|---|---|
| '000 EUR | Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 |
| Interest income | 2,581 | 200 | 822 | 24 |
| Net foreign exchange gains (non-operating) | 0 | 31 | 0 | 0 |
| Gains on forward contracts | 0 | 95 | 0 | 0 |
| Investments revaluation | 0 | 0 | 0 | 0 |
| Other finance income | 0 | 160 | 0 | -1 |
| Finance income | 2,581 | 486 | 822 | 23 |
| Interest expense | -21,595 | -1,601 | -8,109 | -408 |
| Loss on sale of subsidiary | 0 | -165 | 0 | 1 |
| Other finance costs | -3 | -64 | 0 | -16 |
| Finance costs | -21,598 | -1,830 | -8,109 | -423 |
| Exchange differences | 5,470 | 0 | 5,472 | 0 |
| Losses on translation of foreign currency financial position | -2 | 0 | -583 | 0 |
| Other financial result | 5,468 | 0 | 4,889 | 0 |
| Net finance costs | -13,549 | -1,344 | -2,398 | -400 |
The increase of the interest expenses derives from the interest on the 7.875% Senior Secured Notes issued by Pfleiderer GmbH in 2014. The gains on translation of foreign currency financial positions resulted from the translation of intercompany loans denominated in EUR granted by Pfleiderer Services GmbH to Pfleiderer Grajewo S.A. within project Pinehurst.
(all amounts in EUR thousand unless otherwise stated)
| Jan. 1 - | Jan. 1 - | Jul. 1 - | Jul. 1 - | |
|---|---|---|---|---|
| '000 EUR | Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 |
| Cash flow hedge - effective portion of changes in fair value net | ||||
| of related tax | -426 | 1,637 | 656 | -184 |
| Cash flow hedge - reclassified to profit or loss net | ||||
| of related tax | 174 | -1,289 | 463 | -260 |
| Cash flow hedge on aquisition of subsidiary reclassified to goodwill | ||||
| net of related tax | 917 | 0 | 0 | 0 |
| 665 | 348 | 1,119 | -444 |
In 2016 the Group continues a long-term investment program designed to align its production capacities to market needs and to enhance its cost effectiveness and productivity. The capital expenditures for the nine month period ended September 30, 2016 were EUR 31,802 thousand (including advance payments), while the capital expenditures including advance payments for the nine month period ended September 30, 2015, were EUR 14,745 thousand and EUR 27,290 thousand for the entire financial year 2015.
As at September 30, 2016, the Group has purchase commitments for the property, plant and equipment and intangible assets. These commitments relate to the signed agreements by the members of the Group with respect to future investments plans.
| '000 EUR | Sep. 30, 2016 | Dec. 31, 2015 |
|---|---|---|
| Property, plant and equipment | 11,742 | 8,472 |
| Intangible assets | 108 | 2 |
| Commitment to purchase | 11,850 | 8,474 |
Income tax expense comprises both current income tax and deferred taxes. Income tax expense is recognized as the best estimate of the weighted-average annual income tax rate expected for the whole year multiplied by the pre-tax income for the interim reporting period.
The Polish Group companies are taxed at a corporate tax rate of 19% (previous year: 19%). The German Group companies are taxed at a corporate tax rate of 15%, plus solidarity surcharge of 5.5% on the corporate tax rate (+0.83%-points) plus an average trade tax rate of 13.02%, thus 28.85% all-in-all. The respective local tax rates apply for other foreign companies.
Current and deferred taxes are recognized on the basis of an overall tax rate of 19% (previous year: 19%) for Polish companies and of an overall tax rate of 28.85% (in previous year 28.85%) for German companies.
The fluctuation of the tax rate compared to prior year's tax rate is caused mainly by local differences in tax rate, in particular in Germany with an average tax rate of 28.85%, and numerous permanent differences in the German tax group.
(all amounts in EUR thousand unless otherwise stated)
| '000 EUR | Sep. 30, 2016 | Dec. 31, 2015 |
|---|---|---|
| Trade receivables | 43,779 | 9,703 |
| Current prepayments and accrued income | 4,820 | 3,616 |
| Current VAT receivables | 3,476 | 4,555 |
| Trade receivables from related parties | 2 | 9,801 |
| Receivables related to capital increase | 0 | 84,911 |
| Other receivables | 5,307 | 562 |
| Total | 57,384 | 113,148 |
The par value of the share is denominated in PLN and thus is disclosed in its local currency (last line of the following table) and is translated into EUR at its historical exchanges rates:
| Sep. 30, 2016 | Dec. 31, 2015 | |
|---|---|---|
| Par value of share capital (PLN) | 21,351,332 | 16,375,920 |
| Number of shares at beginning of period (fully paid up) | 49,624,000 | 49,624,000 |
| Number of shares at end of period (fully paid up) | 64,701,007 | 49,624,000 |
| Par value per share (PLN) | 0.33 | 0.33 |
The par value of the share capital translated into Euro at its historical exchange rates was as follows:
| Sep. 30, 2016 | Dec. 31, 2015 | |
|---|---|---|
| Par value of share capital ('000 EUR) | 6,692 | 5,573 |
| Number of shares at beginning of period (fully paid up) | 49,624,000 | 49,624,000 |
| Number of shares at end of period (fully paid up) | 64,701,007 | 49,624,000 |
All shares issued by the Group are ordinary shares. Holders of ordinary shares are entitled to dividends as declared from time to time and are entitled to one vote per share at general meetings of the Company. All shares are entitled to the same rights to share in the distribution, if any, of the Company's assets.
Pfleiderer Group S.A. (the Parent) issued 15,077,007 new ordinary shares on January 19, 2016. The shareholder structure after issuing the new shares and as of the reporting date is as follows:
| Shareholding structure | Number of | Ownership | Number of | % of |
|---|---|---|---|---|
| as at June 29, 2016* | shares | interest | votes at GM | votes at GM |
| Strategic Value Partners LLC | 16,772,896 | 25.92% | 16,772,896 | 25.92% |
| Atlantik S.A. | 16,374,497 | 25.31% | 16,374,497 | 25.31% |
| Nationale-Nederlanden OFE | 6,400,000 | 9.89% | 6,400,000 | 9.89% |
| Aviva OFE Aviva BZ WBK | 6,000,000 | 9.27% | 6,000,000 | 9.27% |
| Other shareholders | 19,153,614 | 29.60% | 19,153,614 | 29.60% |
| Total | 64,701,007 | 100.00% | 64,701,007 | 100.00% |
* according to the latest available information
The Ordinary General Meeting of the Company adopted a resolution concerning distribution of net profit for the period of January 1, 2015 to December 31, 2015, providing for a dividend payment for the Company's shareholders in the amount of EUR 14,585 thousand (PLN 64,701 thousand) representing PLN 1.00 per share. Additionally, the Ordinary General Shareholder Meeting set the following dates:
(all amounts in EUR thousand unless otherwise stated)
The remaining part of the profit for 2015 in the amount of EUR 993 thousand (PLN 4,405 thousand) was allocated to the Company's reserves.
| '000 EUR | Sep. 30, 2016 | Dec. 31, 2015 |
|---|---|---|
| Non-current portion of interest-bearing bonds | 330,555 | 0 |
| Bank borrowings | 0 | 9,604 |
| Total | 330,555 | 9,604 |
| '000 EUR | Sep. 30, 2016 | Dec. 31, 2015 |
|---|---|---|
| Current portion of interests–bearing bonds | 4,222 | 0 |
| Bank liabilities due within one year | 148 | 5,092 |
| Other interest bearing liabilities | 177 | 0 |
| Total | 4,547 | 5,092 |
On June 27, 2014, Pfleiderer GmbH issued 7.875% Senior Secured Notes due 2019 with a face value of EUR 321,684 thousand.
On June 26, 2013, the Parent Company and the subsidiaries: Pfleiderer Prospan S.A. and Silekol Sp. z o.o. concluded credit facility agreements with the following banks: Bank Millennium S.A., Alior Bank S.A. and Bank Zachodni WBK S.A. The total credit limit available under the facilities provided by those banks amounted to PLN 260 million and secured the financial liquidity of the Parent Company and its subsidiaries. All these bank credit lines were repaid fully on February 11, 2016, from own cash reserves and were replaced by new Revolving Credit Facilities ("RCF") Agreement with a consortium of four German and four Polish banks with a sublimit for Pfleiderer Group S.A. and significant Polish subsidiaries amounting to PLN 200 million and for Pfleiderer GmbH and Pfleiderer Holzwerkstoffe GmbH amounting to EUR 60 million.
On January 19, 2016, an amendment to the RCF Agreement came into force which provided Pfleiderer Group S.A. and Polish subsidiaries a limit of PLN 200 million (Tranche B) for financing of working capital and other corporate needs. Moreover on July 8, 2016 two more Polish subsidiaries - Pfleiderer Grajewo Sp. z o.o. and Pfleiderer Polska Sp. z o.o. (previously Pfleiderer Services Sp. z o.o.) - acceded RCF Agreement. At the reporting date this financing was not drawn in cash whilst bank guarantees and letters of credits were issued within this credit line for the total amount of EUR 143 thousand and PLN 6,559 thousand respectively. The RCF Agreement provides Pfleiderer Holzwerkstoffe GmbH and Pfleiderer GmbH with up to EUR 60.0 million (Tranche A). This Tranche A is partially drawn for bank guarantees of EUR 2,097 thousand and PLN 1,040 thousand (EUR 241 thousand). This RCF expires on April 30, 2019. Interest on cash drawings is accrued at EURIBOR (for EUR-drawings) plus margin, WIBOR (for PLNdrawings) plus margin, LIBOR (for drawings in other currencies) plus margin.
The terms and repayments schedule of the bank borrowings, beside the aforementioned RCF, as at September 30, 2016 and December 31, 2015, was as follows:
(all amounts in EUR thousand unless otherwise stated)
| '000 PLN | Sept. 30, 2016 | Dec. 31, 2015 | |||||||
|---|---|---|---|---|---|---|---|---|---|
| Lender | Currency | Interest rate | Maturity date*** |
Security | Credit limit |
Current portion |
Non current portion |
Current portion |
Non current portion |
| Millenium S.A. | PLN | 1M WIBOR + margin |
June 2, 2018 | mortgage | 75,000 | ---- | ---- | 0 | 0 |
| Millenium S.A. | PLN | 1M WIBOR + margin |
June 25, 2016 mortgage | 25,000 | ---- | ---- | 0 | 0 | |
| Alior Bank S.A. | PLN | 1M WIBOR + margin |
June 2, 2018 | mortgage | 75,000 | ---- | ---- | 0 | 0 |
| Alior Bank S.A. | PLN | 1M WIBOR + margin |
June 25, 2016 mortgage | 25,000 | ---- | ---- | 0 | 0 | |
| Bank Zachodni WBK S.A. | PLN | 1M WIBOR + margin |
June 2, 2018 | mortgage | 45,000 | ---- | ---- | 0 | 0 |
| Bank Zachodni WBK S.A. | PLN | 1M WIBOR + margin |
June 25, 2016 mortgage | 15,000 | ---- | ---- | 0 | 0 | |
| PKO Bank Polski S.A. | PLN | 1M WIBOR + margin |
May 31, 2018 mortgage, registered pledge, assignments |
54,000 | ---- | ---- | 0 | 0 | |
| PKO Bank Polski S.A. | PLN | 3M WIBOR + margin |
Oct. 15, 2018 mortgage, registered pledge, assignments |
n/a | ---- | ---- | 21,700 | 40,926 | |
| Total | 314,000 | ---- | ----- | 21,700 | 40,926 |
****all above bank loans fully repaid in February 2016
The credit facility with Bank Ochrony Środowiska SA was fully repaid on October 14, 2015. All the other bank loans and credit loans were repaid in full on February 11, 2016.
On January 15, 2007, Pfleiderer MDF Sp. z o.o., a subsidiary, entered into a PLN 235,022 thousand investment facility agreement with PKO BP S.A. This is a special-purpose facility obtained to finance the construction of the MDF board production plant in Grajewo. This bank loan was fully repaid on February 11, 2016.
On August 29, 2007, Pfleiderer MDF Sp. z o.o., a subsidiary, entered into a PLN 65,000 thousand multipurpose facility agreement with PKO BP S.A. The original value of the loan amounted to PLN 65,000 thousand and included an overdraft of PLN 30,000 thousand, a working overdraft facility of PLN 30,000 thousand as well as a facility for guarantees and letters of credit with a limit of PLN 5,000 thousand.
On June 10, 2015, Pfleiderer MDF Sp. z o.o., a subsidiary, signed an amendment to the multi-purpose facility agreement with PKO BP S.A. According to the amendment, the terms of the multi-purposes facility agreement was extended until May 31, 2018. Under the amendment, the amount of the multi-purpose facility loan was reduced to PLN 54,000 thousand. This bank loan was repaid fully on February 11, 2016.
(all amounts in EUR thousand unless otherwise stated)
| '000 EUR | Sep. 30, 2016 | Dec. 31, 2015 |
|---|---|---|
| Trade payables | 94,689 | 34,285 |
| Trade payables to related parties | 0 | 1,828 |
| Liabilities under factoring agreements | 27,352 | 14,130 |
| Insolvency-related liabilities of Pfleiderer GmbH | 10,328 | 0 |
| VAT liabilities | 2,677 | 0 |
| Penalty for past antitrust violations Pfleiderer GmbH | 2,189 | 0 |
| Liabilities for capital expenditures | 1,510 | 3,508 |
| Liabilities for capital expenditures to related parties | 0 | 478 |
| Prepaid deliveries | 200 | 412 |
| Other liabilities | 30,621 | 7,870 |
| Total | 169,566 | 62,511 |
The fair value of financial assets and liabilities approximate their carrying amounts as at September 30, 2016 and December 31, 2015 with the exception of the High Yield Bond, listed at the Irish Stock Exchange, quoted at 103.6% (level 1) on September 30, 2016, equal to EUR 333,233 thousand (carrying amount of EUR 330,555 thousand, plus accrued interest of EUR 4,222 thousand).
As at September 30, 2016, the Group held 35 open forward contracts with a nominal exposure amounting to EUR 40,250 thousand. The fair value of the open contracts amounted to EUR 1,225 thousand (asset), based on level 2 input factors.
As at December 31, 2015, the Group held 37 open forward contracts for sales of EUR for PLN with nominal exposure amounting to EUR 67,800 thousand and for the purchase of EUR for PLN in the nominal amount of EUR 119,353 thousand. The fair value of the open contracts amounted to EUR 521 thousand (asset), based on level 2 input factors.
Market comparison techniques are used in measuring fair value of currency forward. The fair value are based on brokers quotes. Similar contracts are traded in an active market and the quotes reflect the actual transactions in similar instruments.
As at September 30, 2016, certain members of the Group have established the following security for the repayment of claims of Commerzbank Aktiengesellschaft, Filiale Luxemburg acting as security agent (the "Security Agent") arising from the parallel debt in accordance with the intercreditor agreement dated July 4, 2014 (as amended and restated) entered into in connection with the EUR 60 million and PLN 200 million RCF Agreement dated July 4, 2014 (as amended and restated) between, inter alios, Pfleiderer Group S.A. and certain of its subsidiaries as borrowers, the Security Agent and certain financial institutions as original lenders and the EUR 321,684 thousand 7.875% Senior Secured Notes due 2019 issued by Pfleiderer GmbH.
(all amounts in EUR thousand unless otherwise stated)
Pfleiderer Group S.A. has entered into agreements for financial and registered pledges over shares in Pfleiderer Prospan S.A., Pfleiderer MDF sp. z o.o., Pfleiderer Grajewo Sp. z o.o., Pfleiderer Polska Sp. z o.o. and Silekol sp. z o.o. and has granted powers of attorney to exercise corporate rights from the pledged shares in these companies in favour of the Security Agent. The registered pledges over shares were established up to the maximum secured amount of EUR 1,286 million.
Pfleiderer Group S.A., Pfleiderer Prospan S.A., Pfleiderer MDF sp. z o.o. , Pfleiderer Grajewo Sp. z o.o., Pfleiderer Polska Sp. z o.o. and Silekol sp. z o.o. have entered into agreements for financial and registered pledges over bank accounts and have granted powers of attorney to dispose of funds from their bank accounts in favour of the Security Agent. The registered pledges over bank accounts were established up to the maximum secured amount of EUR 1,286 million.
Pfleiderer Group S.A., Pfleiderer Prospan S.A., Pfleiderer MDF sp. z o.o. , Pfleiderer Grajewo Sp. z o.o., Pfleiderer Polska Sp. z o.o. and Silekol sp. z o.o. have entered into agreements for registered pledges over movable property and rights (zbiór rzeczy ruchomych i praw). The registered pledges over movable property and rights were established up to the maximum secured amount of EUR 1,286 million.
Pfleiderer Group S.A., Pfleiderer Prospan S.A., Pfleiderer MDF sp. z o.o. , Pfleiderer Grajewo Sp. z o.o., Pfleiderer Polska Sp. z o.o.and Silekol sp. z o.o. have entered into agreements for assignment of rights under commercial contracts, intercompany loan agreements and insurance agreements.
The following mortgages up to the amount of EUR 1,286 million (each) have been established in favour of the Security Agent:
Pfleiderer Group S.A., Pfleiderer Prospan S.A., Pfleiderer MDF sp. z o.o. , Pfleiderer Grajewo Sp. z o.o., Pfleiderer Polska Sp. z o.o. and Silekol sp. z o.o. have executed the submissions to enforcement (oświadczenie o poddaniu się egzekucji) in favour of the Security Agent up to the amount of EUR 1,286 million.
As at September 30, 2016, certain members of the Group have established the following securing the liabilities under the RCF Agreement of EUR 60 million and PLN 200 million as well as the liabilities under the Pfleiderer GmbH with nominal value of EUR 321,684 thousand 7.875% Senior Secured Notes due 2019 and certain hedging arrangements:
(all amounts in EUR thousand unless otherwise stated)
Pfleiderer GmbH, Pfleiderer Holzwerkstoffe GmbH and Pfleiderer Vermögensverwaltung GmbH & Co. KG as pledgors have granted pledges over shares in Pfleiderer GmbH, Pfleiderer Holzwerkstoffe GmbH, Pfleiderer Neumarkt GmbH, Pfleiderer Leutkirch GmbH, Pfleiderer Gütersloh GmbH, Pfleiderer Arnsberg GmbH, Pfleiderer Baruth GmbH and Jura-Spedition GmbH and over partnership interests in Pfleiderer Vermögensverwaltung GmbH & Co. KG.
Pfleiderer GmbH, Pfleiderer Holzwerkstoffe GmbH, Pfleiderer Neumarkt GmbH, Pfleiderer Leutkirch GmbH, Pfleiderer Gütersloh GmbH, Pfleiderer Arnsberg GmbH, Pfleiderer Baruth GmbH, Jura-Spedition GmbH and Pfleiderer Vermögensverwaltung GmbH & Co. KG as pledgers, have granted pledges over their bank accounts.
Pfleiderer GmbH, Pfleiderer Holzwerkstoffe GmbH, Pfleiderer Neumarkt GmbH, Pfleiderer Leutkirch GmbH, Pfleiderer Gütersloh GmbH, Pfleiderer Arnsberg GmbH, Pfleiderer Baruth GmbH, Jura-Spedition GmbH and Pfleiderer Vermögensverwaltung GmbH & Co. KG as assignors, have assigned as security their receivables under the intercompany loans, trade and insurance receivables.
Pfleiderer Holzwerkstoffe GmbH, Pfleiderer Neumarkt GmbH, Pfleiderer Leutkirch GmbH, Pfleiderer Arnsberg GmbH and Pfleiderer Baruth GmbH as transferors, have transferred as security their moveable assets (including machinery and equipment, inventory).
Pfleiderer GmbH, Pfleiderer Holzwerkstoffe GmbH, Pfleiderer Neumarkt GmbH, Pfleiderer Leutkirch GmbH and Pfleiderer Arnsberg GmbH as assignors, have assigned as security their intellectual property rights.
Land charges (Grundschulden) over real estate owned by Pfleiderer Holzwerkstoffe GmbH and Pfleiderer Baruth GmbH have also been granted as security.
As at September 30, 2016, certain members of the Group have guaranteed the liabilities under the RCF Agreement of EUR 60 million and PLN 200 million as well as the liabilities under the 7.875% senior notes with the nominal value of EUR 321,684 thousand issued by Pfleiderer GmbH and due in 2019. These members of the Group are: Pfleiderer Group S.A., Pfleiderer GmbH, Pfleiderer Holzwerkstoffe GmbH, Pfleiderer Neumarkt GmbH, Pfleiderer Leutkirch GmbH, Pfleiderer Gütersloh GmbH, Pfleiderer Arnsberg GmbH, Pfleiderer Baruth GmbH, Jura-Spedition GmbH, Pfleiderer Vermögensverwaltung GmbH & Co. KG, Pfleiderer Prospan S.A., Pfleiderer MDF sp. z o.o., Pfleiderer Grajewo Sp. z o.o., Pfleiderer Polska Sp. z o.o. and Silekol sp. z o.o.
(all amounts in EUR thousand unless otherwise stated)
Following a dawn-raid in October 2011, on March 30, 2012, the Polish Office of Competition and Consumer Protection (the "OCCP") commenced proceedings against Kronospan Szczecinek Sp. z o.o., Kronospan Mielec Sp. z o.o., Kronopol Sp. z o.o., Pfleiderer Group S.A. and Pfleiderer Prospan S.A., regarding possible horizontal price fixing and exchange of information on conditions of sale in the chipboard and fibreboard markets in Poland, which may constitute breaches of Article 6 of the Act on Competition and Consumer Protection and Article 101(1)(a) of the Treaty on the Functioning of the European Union. The maximum fines that the OCCP may impose on Pfleiderer Group S.A. and/or Pfleiderer Prospan S.A. in these proceedings amount to 10% of their respective taxable revenues in the year preceding the issuance of the infringement decision. The end date of the proceedings is still uncertain.
At the date of the publication of these condensed interim consolidated financial statements it is unclear whether OCCP will determine any breaches of Article 6 of the Act on Competition and Consumer Protection and Article 101(1)(a) of the Treaty on the Functioning of the European Union. At this stage, given the fact-intensive nature of the issues involved and the inherent uncertainty of such investigation, it is not possible to evaluate the outcome and potential financial consequences of this still pending and longlasting investigation, management has determined that not all of the conditions have been met to require a provision for this matter. Therefore as at September 30, 2016, no provision has been recognized by the Group in these condensed interim consolidated financial statements.
An earlier investigation by the German Federal Cartel Office in 2009 concluded in 2011 that Pfleiderer GmbH (then, Pfleiderer AG) and certain competitors had, for a period from at least 2004 through 2007, violated German competition law by coordinating price increases and minimum prices in the German market. As a result, the German Federal Cartel Office in September 2011 fined this group of market participants and certain individuals a total of EUR 42 million on the grounds of violating German and European competition laws by entering into anticompetitive agreements. Pfleiderer GmbH's share of the fine is settled in yearly installments.
Two of the Pfleiderer Group's customers have sued the Pfleiderer Group for damages in connection with these antitrust violations. There are other companies seeking compensation in connection with these antitrust violations. The outcome of the respective extrajudicial negotiations or proceedings is difficult to predict. Depending on the outcome of the negotiations and/or the proceedings, the Group could be obligated to make substantial payments.
There is a risk that additional follow-on claims for damages might be raised by third parties, including customers, against the Group in respect thereof. The amount of any such follow-on claims for damages cannot currently be determined with any certainty, but could be substantial. The realization of any of these risks could have a material adverse effect on the Group's business, financial condition and results of operations.
In December 2012, W. Classen GmbH & Co. KG ("Classen"), one of the Pfleiderer Group's current customers, filed an action against the custodian (Sachwalter) of Pfleiderer GmbH (then Pfleiderer AG) seeking the acceptance of its claim to the insolvency schedule (Insolvenztabelle) filed in May 2012. After the lifting of insolvency proceedings, which became legally effective on December 31, 2012, Classen extended its claim to Pfleiderer GmbH. Classen claims damages amounting to EUR 22 million (plus interest) on the same grounds as in the claim against Pfleiderer Baruth GmbH, as described below. Any claim against Pfleiderer GmbH would in general be reduced to the applicable insolvency quota (Insolvenzquote) according to the insolvency plan (Insolvenzplan) of Pfleiderer AG.
In December 2012, Classen also filed an action for damages with the regional court of Düsseldorf
The notes are an integral part of these unaudited condensed consolidated interim financial statements.
(all amounts in EUR thousand unless otherwise stated)
(Landgericht Düsseldorf) against Pfleiderer Baruth GmbH (then: Pfleiderer Faserplattenwerk Baruth GmbH) amounting to approximately EUR 67 million (plus interest). The plaintiff claims to have suffered damages due to the Chipboard Cartel. Plaintiff has reduced claim from ca. € 67 million to € 55,4 million in its latest statement dated May 11th 2016. The proceeding is still pending and the outcome, i.e. the potential costs that may arise in connection with this litigation or the amount of damages that might be required to be paid, cannot be assessed yet.
In December 2014 Alno AG ("Alno"), one of the Pfleiderer Group's customers, has claimed substantial damages from Pfleiderer GmbH on its own behalf and on behalf of two of its subsidiaries. Alno claims to have suffered damages due to the Chipboard Cartel and has filed actions for damages against Pfleiderer GmbH and another party in late December 2015 (in total EUR 32.9 million plus interest). The proceeding is still pending and the outcome, i.e. the potential costs that may arise in connection with this litigation or the amount of damages that might be required to be paid, cannot be assessed yet. Plaintiff has announced another expert opinion to clarify its claim until the end of 2016; it is intended that parties try to negotiate an out-of-court settlement.
In December 2012, Oeseder Möbel-Industrie Mathias Wiemann GmbH & Co. KG ("Oeseder"), one of the Pfleiderer Group's customers, filed an action for damages with the regional court of Hanover (Landgericht Hannover) against Glunz AG amounting to approximately EUR 26 million (plus interest). The plaintiff claims to have suffered damages due to the Chipboard Cartel. Following a third party notice (Streitverkündung) by Glunz, Pfleiderer GmbH has joined the legal proceedings as an intervener (Nebenintervenient). The court has passed a judgement on May 31st 2016 according to which the claim are justified on the merits but subject to further discussion regarding quantum. Pfleiderer GmbH cannot assess the likelihood of success or the potential costs that may arise in connection with this litigation nor the amount of damages that it might be required to pay. Pfleiderer GmbH's obligation for substantial payments may result from a claim based on joint and several liability (Gesamtschuld), if Glunz or any other third party is obligated to pay compensation to Oeseder.
Hüls group seeks damages for all chipboards supplied Pfleiderer and other producers from 2002 to 2008. Pfleiderer has given a waiver of statute of limitations until 31 December 2016. A preliminary assessment of Hüls' expert opinion provided by Pfleiderer's expert says that Hüls' expert disregards the capacity utilization (omitted variable bias) and aggregates all products and suppliers. Parties are trying to negotiate a settlement until the end of 2016. The outcome, i.e. the potential costs that may arise in connection with this claim or the amount of damages that might be required to be paid, cannot be assessed yet.
The Western European segment is subject to certain tax risks. In light of the change in shareholders in 2012, there are certain risks with regard to the amount of tax loss utilized by the Group. Due to the acquisition of all shares in Pfleiderer GmbH (formerly Pfleiderer AG) by Atlantik S.A. in November 2012, tax losses generated by the German subsidiaries in 2012 may not be utilized in full. The extent to which this also applies to an entity with joint tax-filing status has yet to be fully determined. It cannot be ruled out that the fiscal authorities will reject the position taken by Pfleiderer Holzwerkstoffe GmbH, which could in turn lead to an assessment requiring payments of tax arrears. As a result of the change in shareholders of Pfleiderer GmbH that occurred as of January 19, 2016, it is possible that the tax losses for the financial year 2016 may also not be recovered. It cannot be ruled out that the fiscal authorities will reject the position taken by Pfleiderer GmbH, which could in turn lead to an assessment requiring payment of tax arrears. In addition, there was a change in shareholders at the level of the shareholder of Pfleiderer GmbH in December 2015, which may lead to uncertainty with regard to the possibility of tax loss utilization for the 2015 financial year.
In 2014 Pfleiderer GmbH (and its subsidiaries) recognized valuation allowances on receivables to the socalled "Non Core"- companies of the former Pfleiderer Group on account of interest receivable and foreign currency gains on these receivables and treated these valuation allowances as tax-deductible. It cannot be ruled out that the fiscal authorities will reject the position taken by Pfleiderer GmbH, which could cause additional tax payments.
(all amounts in EUR thousand unless otherwise stated)
No transactions with related parties other than described below were conducted in the reporting period.
According to the new organizational structure the Management Board consists of Michael Wolff (President and CEO), Dirk Hardow (COO, appointed on September 15, 2016 with effect as of November 1, 2016), Rafal Karcz (CAO), Richard Mayer (CFO) and Wojciech Gątkiewicz (CSO). Mr. Gerd Schubert performed the function of Member of the Management Board of the Company, Chief Operating Officer until June 1, 2016.
Remuneration of members of the Company's Management Board as well as the Company's Supervisory Board, including bonuses, paid and payable, for the reporting period:
| Jan.1 - | Jan.1 - | |
|---|---|---|
| '000 Euro | Sept. 30, 2016 | Sept. 30, 2015 |
| Remuneration of Management Board | 3,460 | 1,002 |
| Remuneration of Supervisory Board | 405 | 122 |
| 3,865 | 1,124 |
Beside the regular remuneration of Mr. Gerd Schubert, the Group recorded a provision for severance payment (termination benefits) due to his dismissal in the amount of EUR 630 thousand.
The aforementioned remuneration includes all payments from all Group companies to the Board. No member of the Company's Management Board had outstanding loan-related debt towards the Group.
As at September 30, 2016, members of the Management and Supervisory Boards held the following number of Pfleiderer Group S.A. shares:
| Number of | ||
|---|---|---|
| Function | Name | shares |
| Member of the Management Board | Wojciech Gątkiewicz | 5,400 |
| Member of the Management Board | Rafał Karcz | 3,472 |
The other members of the Company's Management Board and Supervisory Board had no shares in the Company.
(all amounts in EUR thousand unless otherwise stated)
No events of special significance occurred following the close of the first three quarters of 2016 that – if they had occurred prior to the close of the end of the reporting period – would have called for a different presentation of the Company's net assets, financial position and results of operations.
Michael Wolff Richard Mayer
President of the Management Board, Chief Executive Officer Member of the Management Board, Chief Financial Officer
Wojciech Gątkiewicz Rafał Karcz
Member of the Management Board, Chief Sales Officer Member of the Management Board, Chief Administration Officer
Dirk Hadrow
Member of the Management Board, Chief Operations Officer
Wrocław, November 7, 2016
| 30 Sep 2016 | 31 Dec 2015 | |
|---|---|---|
| Assets | ||
| Property, plant and equipment | 364 | 162,348 |
| Intangible assets | - | 4,045 |
| Investments in subsidiaries | 2,109,553 | 785,743 |
| Other non-current financial assets | 75 | 75 |
| Non-current loans granted to subsidiaries | 101,725 | 10,473 |
| Non-current receivables – advances paid on fixed assets | - | 814 |
| Non-current assets | 2,211,717 | 963,498 |
| Inventories | - | 55,161 |
| Trade receivables and other | 5,213 | 415,454 |
| Income tax receivables | - | 375 |
| Cash and cash equivalents | 2,815 | 30,983 |
| Fair value of hedging instruments | - | 2,436 |
| Current assets | 8,028 | 504,409 |
| TOTAL ASSETS | 2,219,745 | 1,467,907 |
| Equity | ||
| Share capital | 21,351 | 16,376 |
| Share premium | 625,240 | 289,806 |
| Reserves | 376,923 | 676,532 |
| Retained earnings | 105,629 | 92,188 |
| Total equity | 1,129,143 | 1,074,902 |
| Liabilities | ||
| Employee related payables | 275 | 7,773 |
| Deferred tax liabilities | 1,129 | 587 |
| Fair value of hedging instruments | - | 455 |
| Total non-current liabilities | 1,404 | 8,815 |
| Loans and borrowings | 786,339 | - |
| Income tax payable | 925 | - |
| Liabilities to related parties under debt securities | 275,146 | 233,767 |
| Fair value of hedging instruments | - | 51 |
| Trade and other payables | 24,819 | 137,020 |
| Employee related payables | 1,969 | 13,352 |
| Total current liabilities | 1,089,198 | 384,190 |
| Total liabilities | 1,090,602 | 393,005 |
| TOTAL EQUITY AND LIABILITIES | 2,219,745 | 1,467,907 |
(all amounts in PLN thousand)
| Nine months ended |
Nine months ended |
Three months ended |
Three months ended |
|
|---|---|---|---|---|
| 30 Sep 2016 | 30 Sep 2015 | 30 Sep 2016 | 30 Sep 2015 | |
| Revenue | 395,450 | 468,140 | 95,029 | 152,721 |
| Cost of sales | (327,412) | (402,586) | (75,709) | (129,119) |
| Profit on sales | 68,038 | 65,554 | 19,320 | 23,602 |
| Other income | 3,411 | 9,728 | 809 | 2,528 |
| Distribution expenses | (25,895) | (25,873) | (7,202) | (8,262) |
| General and administrative expenses | (28,445) | (21,285) | (9,023) | (8,777) |
| Other expenses | (1,808) | (2,771) | (319) | (1,441) |
| Results from operating activities | 15,301 | 25,353 | 3,585 | 7,650 |
| Financial income | 94,207 | 47,043 | 22,157 | 116 |
| Financial expenses | (22,752) | (5,624) | (8,175) | (1,561) |
| Net financing income | 71,455 | 41,419 | 13,982 | (1,445) |
| Profit before tax | 86,756 | 66,772 | 17,567 | 6,205 |
| Income tax expense | (4,209) | (4,005) | (3,453) | (1,216) |
| Net profit for the reporting period | 82,547 | 62,767 | 14,114 | 4,989 |
| OTHER COMPREHENSIVE INCOME Items that are or may be reclassified to profit or loss Cash flow hedge – effective portion of changes in fair |
||||
| value | (3,972) | 6,942 | 2,832 | (582) |
| Cash flow hedge – reclassified to profit or loss Cash flow hedge – settlement of the forward hedging the |
994 | (5,358) | (268) | (1,099) |
| purchase of shares Other comprehensive income (loss) |
23,048 | - | - | - |
| 20,070 | 1,584 | 2,564 | (1,681) | |
| Total comprehensive income for the period | 102,617 | 64,351 | 16,678 | 3,308 |
| Basic and diluted earnings per share (PLN) | 1.30 | 1.26 | 0.22 | 0.10 |
(all amounts in PLN thousand)
For the nine month period ended 30 September 2016
| Share capital |
Share premium |
Statutory reserve funds |
Other reserves |
Cash flow hedges |
Retained earnings |
Total | |
|---|---|---|---|---|---|---|---|
| 1 Jan 2016 | 16,376 | 289,806 | 538,398 | 140,000 | (1,866) | 92,188 | 1,074,902 |
| Comprehensive income for | |||||||
| the period | |||||||
| Net profit | - | - | - | - | - | 82,547 | 82,547 |
| Other comprehensive income for the period |
- | - | - | - | 20,070 | - | 20,070 |
| Total comprehensive income for the period |
- | - | - | 20,070 | 82,547 | 102,617 | |
| Transactions with owners recognised in equity |
|||||||
| The registration of new share capital |
4,975 | 335,434 | (324,084) | - | - | - | 16,325 |
| Transfer of 2015 net profit to statutory reserve funds |
- | - | 4,405 | - | - | (4,405) | - |
| Dividend payment | - | - | - | - | - | (64,701) | (64,701) |
| Total transactions with owners recognised in equity |
4,975 | 335,434 | (319,679) | - | - | (69,106) | (48,376) |
| 30 Sep 2016 | 21,351 | 625,240 | 218,719 | 140,000 | 18,204 | 105,629 | 1,129,143 |
For the nine month period ended 30 September 2015
| Statutory | ||||||
|---|---|---|---|---|---|---|
| Share capital |
Share premium |
reserve funds |
Cash flow hedges |
Retained earnings |
Total | |
| 1 Jan 2015 | 16,376 | 289,806 | 293,765 | 1,213 | 83,631 | 684,791 |
| Comprehensive income for the period |
||||||
| Net profit | - | - | - | - | 62,767 | 62,767 |
| Other comprehensive income for the period |
- | - | - | 1,584 | - | 1,584 |
| Total comprehensive income for the period |
- | - | - | 1,584 | 62,767 | 64,351 |
| Transactions with owners recognised in equity |
||||||
| Transfer of 2014 net profit to statutory reserve funds |
- | - | 60,549 | - | (60,549) | - |
| Total transactions with owners recognised in equity |
- | - | 60,549 | - | (60,549) | - |
| 30 Sep 2015 | 16,376 | 289,806 | 345,314 | 2,797 | 85,849 | 749,142 |
(all amounts in PLN thousand)
| Nine months ended 30 Sep 2016 |
Nine months ended 30 Sep 2015 |
|
|---|---|---|
| Net profit for the reporting periods | 82,547 | 62,767 |
| Adjustments for: | (105,801) | (17,194) |
| Depreciation and amortisation | 16,497 | 16,076 |
| Foreign exchange gains | (23,732) | (5,166) |
| Dividends and interests for the period | (46,767) | (40,634) |
| Gain on investing activities | (121) | (28) |
| Income tax disclosed in profit or loss of the period | 4,209 | 4,005 |
| Result on forward contracts | (994) | 5,358 |
| Other | - | (658) |
| Changes in: | ||
| - trade and other receivables | 23,625 | (25,263) |
| - inventories | (351) | 5,615 |
| - trade and other payables | (77,415) | 24,088 |
| - employee benefit obligations | (752) | (587) |
| Cash generated from operating activities | (23,254) | 45,573 |
| Interest received | 86 | 37 |
| Interest paid | (1) | (26) |
| Income tax paid | (2,207) | (5,657) |
| Net cash from operating activities | (25,376) | 39,927 |
| Cash flows provided by investing activities | ||
| Disposal of property, plant and equipment | 121 | 69 |
| Dividend received | 65,076 | 45,366 |
| Acquisition of non-controlling interests | (532,798) | - |
| Settlement of forward contract hedging the acquisition of financial interests | 21,330 | - |
| Disposal of a subsidiary | - | 18,098 |
| Acquisition of intangible assets and property, plant and equipment | (33,064) | (24,037) |
| Granting of loan to subsidiaries | (98,000) | - |
| Repayment of loan by subsidiaries | 9,500 | - |
| Net cash (used in)/ provided by investing activities | (567,835) | 39,496 |
| Cash flows from financing activities | ||
| Inflows from share issue | 336,345 | - |
| Prepaid costs related to the planned capital increase | - | (4,734) |
| Increase in borrowings and other debt instruments | 193,919 | - |
| Repayment of borrowings and other debt instruments | - | (11,137) |
| Redemption of debt securities | (1,084,150) | (763,011) |
| Issue of debt securities | 1,125,537 | 713,781 |
| Interest paid | (6,608) | (4,973) |
| Net cash provided by/ (used in) financing activities | 565,043 | (70,074) |
| Total cash flows | (28,168) | 9,349 |
| (Decrease)/ Increase in cash | (28,168) | 9,349 |
| Cash at beginning of the period | 30,983 | 4,527 |
| Cash at end of the period | 2,815 | 13,876 |
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