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Prima Industrie Interim / Quarterly Report 2020
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Interim / Quarterly Report
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Resoconto Intermedio di Gestione Interim Financial Report March 31, 2020 al 31 Marzo 2019
| INDEX | |
|---|---|
| ------- | -- |
| CHAPTER 1. PRIMA INDUSTRIE SPA MANAGEMENT AND CONTROL _______ 5 | |
|---|---|
| CHAPTER 2. PRIMA INDUSTRIE GROUP STRUCTURE _______ 7 | |
| CHAPTER 3. PRIMA INDUSTRIE GROUP PROFILE _________ 9 | |
| CHAPTER 4. INTRODUCTION ___________ 12 | |
| CHAPTER 5. GROUP INTERIM MANAGEMENT REPORT __________ 14 | |
| GROUP RESULTS SUMMARY ______________ 14 | |
| ECONOMIC PERFORMANCE _______________ 15 | |
| FINANCIAL PERFORMANCE _______________ 18 | |
| BUSINESS PERFORMANCE __________ 18 | |
| FORESEEABLE DEVELOPMENTS OF MANAGEMENT _______ 19 | |
| EVENTS OCCURRING AFTER THE REFERENCE DATE OF THE FINANCIAL STATEMENT____ 19 | |
| CHAPTER 6. PRIMA INDUSTRIE GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, 2020 _____ 21 | |
| CONSOLIDATED STATEMENT OF FINANCIAL POSITION __________ 21 | |
| CONSOLIDATED INCOME STATEMENT ____________ 22 | |
| CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME _______ 23 | |
| CONSOLIDATED STATEMENT OF CHANGES ON SHAREHOLDERS' EQUITY _______ 24 | |
| CONSOLIDATED CASH FLOW STATEMENT _________ 25 | |
| CHAPTER 7. EXPLANATORY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ______ 27 | |
| AT MARCH 31, 2020 ___________ 27 | |
| ACCOUNTING TABLES FORM AND CONTENT ___________ 27 | |
| DRAFTING PRINCIPLES AND CRITERIA ____________ 27 | |
| EXPLANATORY NOTES _____________ 28 | |
| ANNEXES ______________ 36 | |
| ANNEX 1 – CONSOLIDATION AREA _________ 36 | |
| ANNEX 2 – "NON-GAAP" PERFORMANCE INDICATORS ___________ 37 | |
| ANNEX 3 – CURRENCY EXCHANGE RATE __________ 38 | |
| ATTESTATION OF THE CONSOLIDATED FINANCIAL STATEMENTS AT MARCH 31, 2020 ___ 39 |
CHAPTER 1. PRIMA INDUSTRIE SPA MANAGEMENT AND CONTROL
| Board of Directors | Strategic Committee |
|||||
|---|---|---|---|---|---|---|
| EXECUTIVE CHARIMAN | Gianfranco Carbonato |
CHAIRMAN | Gianfranco Carbonato | |||
| MANAGING DIRECTORS | Ezio G. Basso Domenico Peiretti |
MEMBERS | Ezio G. Basso Domenico Peiretti Paolo Cantarella |
|||
| INDEPENDENT DIRECTORS | Donatella Busso Paolo Cantarella Carla Patrizia Ferrari Paola Gatto Mauro Mauri |
Mauro Mauri Michael R. Mansour Marina Meliga |
||||
| Marina Meliga | Statutory Auditors Committee | |||||
| OTHER DIRECTORS | Rafic Y. Mansour Michael R. Mansour |
CHAIRMAN | Franco Nada | |||
| AUDITORS | Maura Campra Roberto Petrignani |
|||||
| Internal Control Committee | ||||||
| CHAIRMAN | Donatella Busso | DEPUTY AUDITORS | Roberto Coda Gaetana Laselva |
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| MEMBERS | Paolo Cantarella Carla Patrizia Ferrari |
|||||
| Remuneration Committee | Audit Company PricewaterhouseCoopers S.p.A. |
|||||
| CHAIRMAN | Mauro Mauri | |||||
| MEMBERS | Paola Gatto Rafic Y. Mansour |
Expiry of Mandates and Appointments The Board of Directors shall remain in office until the approval of 2019 Financial Statements. |
||||
| Parties Committee | Operation with Related | The Statutory Auditors Committee shall remain in office until the approval of 2019-2020-2021 Financial Statements. |
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| CHAIRMAN MEMBERS |
Donatella Busso Paola Gatto Marina Meliga |
The Audit Company period 2017-2025. |
was appointed by the Stockholders' Meeting held on April 11, 2017 for the |
|||
CHAPTER 2. PRIMA INDUSTRIE GROUP STRUCTURE
The statement on this page represents the corporate situation of PRIMA INDUSTRIE Group on March 31, 2020. Group Branch offices/business units are identified with dashed lines.
(1) FINN-POWER OY holds 78% of PRIMA POWER IBERICA SL (the remaining 22% is held by PRIMA INDUSTRIE SpA).
(2) PRIMA INDUSTRIE SpA holds 70% of PRIMA POWER SUZHOU Co. Ltd. (the remaining 30% is held by third parties).
CHAPTER 3. PRIMA INDUSTRIE GROUP PROFILE
The PRIMA INDUSTRIE Group is a market leader in the development, manufacture and sale of laser systems for industrial applications and of machines to process sheet metal, besides in the fields of industrial electronics and laser sources.
The Parent Company PRIMA INDUSTRIE SpA, established in 1977 and listed in the Italian Stock Exchange since 1999 (currently MTA - STAR segment), designs and manufactures high-power laser systems for cutting, welding and surface treatment of three-dimensional (3D) and flat (2D) components, panel bending and bending machines as well as turnkey solutions for the main Additive Manufacturing technologies: Powder Bed Fusion - PBF and Direct Metal Deposition – DMD.
The PRIMA INDUSTRIE Group is present on the market over 40 years and boasts over 13,000 machines installed in more than 70 Countries and its business is structured in the following three divisions:
- PRIMA POWER for laser machines and sheet metal processing;
- PRIMA ELECTRO for industrial electronics and laser technologies;
- PRIMA ADDITIVE for additive manufacturing systems for metal applications.
The PRIMA POWER division includes the design, manufacture and sale of:
- cutting, welding and punching machines for three-dimensional (3D) and two-dimensional (2D) metallic components;
- sheet metal processing machines that use mechanical tools (punchers, integrated punching and shearing systems, integrated punching and laser cutting systems, panel bending, bending machines and automated systems).
This division owns manufacturing plants in Italy (PRIMA INDUSTRIE SpA), in Finland (FINN-POWER OY), in the United States (PRIMA POWER LASERDYNE Llc), in China (PRIMA POWER SUZHOU Co. Ltd.) and has direct sales and customer service facilities in France, Switzerland, Spain, Germany, the United Kingdom, Belgium, Poland, Czech Republic, Lithuania, Hungary, Russia, Turkey, USA, Canada, Mexico, Brazil, China, India, South Korea, Australia and the United Arab Emirates.
The PRIMA ELECTRO division includes the development, construction and sale of electronic power and control components, and high-power laser sources for industrial applications, intended for the machines of the Group and third customers. The division has manufacturing plants in Italy (PRIMA ELECTRO SpA) and in the United States (CONVERGENT - PHOTONICS), as well as sales facility in China.
The PRIMA ADDITIVE division, established in the second half of 2018 and dedicated to the design, production and sale of turnkey solutions for the main Additive Manufacturing technologies: Powder Bed Fusion – PBF and Direct Metal Deposition – DMD, and the relative support and services for its applications .The division boasts a strong team of highly specialised young experts, qualified managers and engineers. The purpose of this new division is to support the development of these new technologies and enter the market with new machine ranges. Thanks to this investment, the new activities will be focused on additive manufacturing and, more generally, the pursuit of technological innovation.
The financial and equity data of PRIMA ADDITIVE are currently negligible and do not meet the thresholds set out in IFRS 8 for disclosure purposes and therefore this division's information is, currently, aggregated to the data for PRIMA POWER Division.
Over 40 years after its establishment, the mission of the PRIMA INDUSTRIE Group continues to be that of systematically expanding its range of products and services and to continue to grow as a global supplier of laser systems and sheet metal processing systems for industrial applications, including industrial electronics, markets that demand top-range technology and where growth rates are quite good, though in the presence of a cyclical context.
This Interim Financial Report has been approved by the Board of Directors on May 8, 2020.
CHAPTER 4. INTRODUCTION
The Interim Financial Report at March 31, 2020 of the PRIMA INDUSTRIE Group was prepared in accordance with the provisions of article 154-ter, paragraph 5 of Consolidated Law on Finance and subsequent amendments, in accordance with the International Financial Reporting Standards (IFRS), as well as by Italian legislation and regulations.
These financial statements were approved by the Board of Directors on May 8, 2020 and were published in accordance with the provisions of article 2.2.3 of Borsa Italiana SpA Regulations applicable to issuers listed in the STAR segment.
Quarterly data were not audited by the independent auditors.
It should be noted that, to improve disclosure of its financial results, the Group has presented the income statement according to functional area, rather than by expenditure type. The cost presentation is based on cost destination and is considered more representative than expenditure type. The form chosen conforms to internal reporting and business management procedures and is in line with international practice within the sector in which the Group operates.
"Cost of goods sold" includes costs relating to the functional areas that participated directly or indirectly to the generation of revenues with the sale of goods and services. It includes all costs for materials, processing and overheads directly attributable to production.
CHAPTER 5. GROUP INTERIM MANAGEMENT REPORT
GROUP RESULTS SUMMARY
| Values in Euro thousand | March 31, 2020 | March 31, 2019 | Variations | % |
|---|---|---|---|---|
| ORDER INTAKE | 72,825 | 97,251 | (24,426) | -25.1% |
| BACKLOG | 141,289 | 166,754 | (25,465) | -15.3% |
| REVENUES | 75,051 | 98,444 | (23,393) | -23.8% |
| EBITDA | 3,100 | 7,386 | (4,286) | -58.0% |
| EBITDA % | 4.1% | 7.5% | -3.4% | - |
| EBIT | (2,544) | 2,051 | (4,595) | -224.0% |
| EBIT % | -3.4% | 2.1% | -5.5% | - |
| NET RESULT | (3,524) | 408 | (3,932) | -963.7% |
| FCF | (26,491) | (17,462) | (9,029) | -51.7% |
| NET FINANCIAL DEBT | (133,452) | (117,632) | (15,820) | -13.4% |
| HEADCOUNT | 1,770 | 1,861 | (91) | -4.9% |
( % calculated over the revenues, headcount expressed in units)
| Values in Euro thousand | March 31, 2020 | March 31, 2019 | Variations | % |
|---|---|---|---|---|
| REVENUES AT COSTANT EXCHANGE RATES | 74,340 | 98,444 | (24,104) | -24.5% |
| EBITDA Adj | 3,783 | 8,002 | (4,219) | -52.7% |
| EBITDA Adj % | 5.0% | 8.1% | -3.1% | - |
| EBIT Adj | (1,861) | 2,667 | (4,528) | -169.8% |
| EBIT Adj % | -2.5% | 2.7% | -5.2% | - |
( % calculated over the revenues)
(Performance indicators adjusted, as shown in Annex 2 of this document, correspond to the same indicators net of non-recurring items)
SIGNIFICANT EVENTS OF THE PERIOD
COVID-19 PANDEMIC
The trend of the first quarter of the year was heavily influenced by the spread of the COVID-19 pandemic which, as is known, starting from China in January 2020, has spread rapidly all over the world.
The resulting health emergency, in addition to the dramatic costs in social and human terms, is also causing an unprecedented contraction in world economic activity, causing very strong uncertainties also on the outlook for the coming months.
The capital goods sector in which the Group operates is derivative with respect to the macroeconomic trend and therefore is penalized even more significantly.
The restrictive and containment measures of the epidemic (lockdown) caused everywhere a very strong slowdown in the machine tool market which had already entered a slowdown phase for over 12 months.
In particular, the Group was penalized, in addition to the closure of its production plants in Italy and China (and only partially in the United States), by the limitations on journeys and travel, which negatively affected in particular the installation of new machines at customers and after-sales assistance and maintenance activities, generating a significant slowdown in revenues.
Despite this, the Group, which has put in place all the protocols and measures necessary to protect the health and safety of its employees, suspending production activities where required, strengthening the hygiene and safety protocols and encouraging remote work as much as possible, managed to maintain a gross operating profitability (EBITDA) of over 4% on turnover in the first quarter. This is also thanks to the results deriving from the first cost reduction measures already started from the end of 2019 and which will continue during the year.
ORDINARY SHAREHOLDERS' MEETING
On March 17, 2020 PRIMA INDUSTRIE SpA informed that, following the provisions of the Law Decree c.d. "Cura Italia" being published due to the Covid-19 emergency, the Ordinary Shareholders' Meeting, scheduled for April 27, 2020 (1st call) and May 25, 2020 (2nd call) would not have taken place. On March 30, 2020 PRIMA INDUSTRIE SpA informed that the Ordinary Shareholders' Meeting will take place on May 11, 2020 (1st call) and May 12, 2020 (2nd call).
ECONOMIC PERFORMANCE
The Group closed the first quarter of 2020 with a turnover of Euro 75,051 thousand, a decrease of 23.8% compared to the first quarter of 2019.
The main economic indicators of the Group are shown below, divided by Division, compared with the corresponding period of the previous year.
| Values in Euro thousand | ||||||||
|---|---|---|---|---|---|---|---|---|
| March 31, 2020 | Revenues | Gross Margin | Gross Margin % |
EBITDA | EBITDA % | EBIT | EBIT % | NET RESULT |
| PRIMA POWER | 69,356 | 14,646 | 21.1% | 3,187 | 4.6% | (1,238) | -1.8% | (2,539) |
| PRIMA ELECTRO | 11,668 | 1,340 | 11.5% | 57 | 0.5% | (1,162) | -10.0% | (879) |
| ELIMINATIONS | (5,973) | (150) | -2.5% | (144) | -2.4% | (144) | -2.4% | (106) |
| GROUP | 75,051 | 15,836 | 21.1% | 3,100 | 4.1% | (2,544) | -3.4% | (3,524) |
( % calculated over the revenues)
Values in Euro thousand
| March 31, 2019 | Revenues | Gross Margin | Gross Margin % |
EBITDA | EBITDA % | EBIT | EBIT % | NET RESULT |
|---|---|---|---|---|---|---|---|---|
| PRIMA POWER | 90,457 | 20,233 | 22.4% | 6,149 | 6.8% | 2,099 | 2.3% | 616 |
| PRIMA ELECTRO | 13,796 | 2,683 | 19.4% | 1,000 | 7.2% | (285) | -2.1% | (398) |
| ELIMINATIONS | (5,809) | 133 | 2.3% | 237 | 4.1% | 237 | 4.1% | 190 |
| GROUP | 98,444 | 23,049 | 23.4% | 7,386 | 7.5% | 2,051 | 2.1% | 408 |
( % calculated over the revenues)
Values in Euro thousand
| Variations | Revenues | Gross Margin | Gross Margin % |
EBITDA | EBITDA % | EBIT | EBIT % | NET RESULT |
|---|---|---|---|---|---|---|---|---|
| PRIMA POWER | (21,101) | (5,587) | -26.5% | (2,962) | -14.0% | (3,337) | -15.8% | (3,155) |
| PRIMA ELECTRO | (2,128) | (1,343) | -63.1% | (943) | -44.3% | (877) | -41.2% | (481) |
| ELIMINATIONS | (164) | (283) | -172.6% | (381) | -232.3% | (381) | -232.3% | (296) |
| GROUP | (23,393) | (7,213) | -30.8% | (4,286) | -18.3% | (4,595) | -19.6% | (3,932) |
( % calculated over the revenues)
Following is the consolidated revenues geographical breakdown at March 31, 2020 compared with same period of the previous year:
| Revenues | March 31, 2020 | March 31, 2019 | |||
|---|---|---|---|---|---|
| Euro thousand | % | Euro thousand | % | ||
| EMEA | 44,609 | 59.4 | 62,684 | 63.7 | |
| AMERICAS | 24,269 | 32.3 | 22,302 | 22.7 | |
| APAC | 6,173 | 8.3 | 13,458 | 13.6 | |
| TOTAL | 75,051 | 100.0 | 98,444 | 100.0 |
The table above shows the Group's turnover at March 31, 2020 (compared with the same period of the previous year) has suffered a decline in the EMEA area (-28.8%) and in APAC (-54.1%) and, instead, recorded a growth in AMERICAS (+8.8%).
The Group generated consolidated revenues in the EMEA area for Euro 44,609 thousand; the most relevant destination countries have been Italy (13.4% of consolidated revenues), Russia and Eastern Europe (11.9% of consolidated revenues), the countries of Northern Europe (10.1% of consolidated revenues) and Germany, Austria and Switzerland (as a whole 6.5% of consolidated revenues).
The share of revenues achieved in the AMERICAS has increased by 8.8% compared to the same period of 2019, going from Euro 22,302 thousand to Euro 24,269 thousand.
As for APAC Countries revenues decreased compared to the same period of 2019 passing by Euro 13,458 thousand to Euro 6,173 thousand (-54.1%). This drop is to be attributed to revenues recorded on the Chinese market which passed from Euro 11,611 thousand (at March 31, 2019) to Euro 3,867 thousand (at March 31, 2020). It should be noted that in the first quarter of the year China was hit hard by the pandemic COVID-19 which started in January from that country and then spread to the rest of the world.
| Revenues | March 31, 2020 | March 31, 2019 | |||
|---|---|---|---|---|---|
| Euro thousand | % | Euro thousand | % | ||
| PRIMA POWER | 69,356 | 92.4 | 90,457 | 91.9 | |
| PRIMA ELECTRO | 11,668 | 15.5 | 13,796 | 14.0 | |
| Inter-sector revenues | (5,973) | (7.9) | (5,809) | (5.9) | |
| TOTAL | 75,051 | 100.0 | 98,444 | 100.0 |
Below is a breakdown of revenues by segment gross of inter-sector transactions:
As can be seen from the above table, the overall revenues decrease is attributable both to the PRIMA POWER division for Euro 21,101 thousand and to the PRIMA ELECTRO division for Euro 2,128 thousand.
Group Gross Margin at March 31, 2020 is equal to Euro 15,836 thousand, a decrease of Euro 7,213 thousand compared to Euro 23,049 thousand in the same period of 2019; the margin accounted for 21.1% of sales and was down from March 31, 2019 (23.4%).
The EBITDA of the Group at March 31, 2020 amounts to Euro 3,100 thousand equal to 4.1% of revenues against Euro 7,386 thousand, equal to 7.5% of revenues of March 31, 2019.
The EBITDA has been affected by non-recurring costs amounting equal to Euro 683 thousand (as of March 31, 2019 these costs were equal to Euro 616 thousand); therefore the adjusted(*) EBITDA amounts to Euro 3,783 thousand (equal to 5.0% of revenues), decreasing by Euro 4,219 thousand compared to the same period of the previous year (Euro 8,002 thousand equal to 8.1% of revenues).
The EBIT of the Group at March 31, 2020 is negative for Euro 2,544 thousand equal to -3.4% of revenues against the positive Euro 2,051 thousand equal to 2.1% of revenues of the same period of the previous year.
This result is affected by:
- the amortization of intangible assets for Euro 2,782 thousand (of which Euro 2,089 thousand relating to development costs and Euro 469 thousand to the trademark registered as part of the business combination of the FINN-POWER Group);
- the amortization of tangible assets for Euro 2,863 thousand.
The EBIT at March 31, 2020 is penalized by non-recurring costs; consequently, the adjusted(*) EBIT is negative for Euro 1,861 thousand (-2.5% of revenues), decreasing compared to March 31, 2019 (equal to Euro 2,667 thousand).
The EBT of the Group at March 31, 2020 is negative for Euro 4,116 thousand against the positive Euro 867 thousand of March 31, 2019.
Group's EBT is affected by net financial charges (including foreign exchange losses and gains) negative for Euro 1,540 thousand (at March 31, 2019 were equal to Euro 1,184 thousand).
| Financial results (€/000) | March 31, 2020 | March 31, 2019 |
|---|---|---|
| Bond expenses | (229) | (226) |
| Loans 2018 expenses | (315) | (358) |
| Derivatives expenses (CRS) | (101) | (323) |
| Derivatives expenses (IRS) | (90) | (96) |
| Lease expenses | (340) | (314) |
| Write-down of financial receivables | - | (118) |
| Other financial expenses | (290) | (415) |
| Net financial expenses | (1,365) | (1,850) |
| Net exchange differences | (175) | 666 |
| TOTAL | (1,540) | (1,184) |
The net result of investments accounted for using the equity method presented a loss of Euro 32 thousand and refers to the related 3D NT.
The Group's NET PROFIT as at March 31, 2020 is negative for Euro 3,524 thousand against the positive Euro 408 thousand at March 31, 2019; the Net Profit pertaining to the Parent Company is negative for Euro 3,293 thousand.
(*) Note that, as illustrated in Annex 2 to this report, the adjusted performance indicators are the same indicators net of nonrecurring items only.
FINANCIAL PERFORMANCE
| Values in Euro thousand | March 31, 2020 | March 31, 2019 | Variations |
|---|---|---|---|
| Net Financial Indebtedness Opening | (107,343) | (74,639) | (32,704) |
| Financial liabilities deriving from IFRS 16 first application | - | (27,066) | 27,066 |
| Cash from operating activities before TWC | (3,637) | 1,554 | (5,191) |
| Change in Trade Working Capital | (15,591) | (15,568) | (23) |
| Cash from operating activities | (19,228) | (14,014) | (5,214) |
| Investments in development costs | (1,190) | (1,369) | 179 |
| Other investments | (6,073) | (2,079) | (3,994) |
| Cash from investment activities | (7,263) | (3,448) | (3,815) |
| FREE CASH FLOW (FCF) | (26,491) | (17,462) | (9,029) |
| Net result of investments accounted for using the equity method | (32) | - | (32) |
| Cash from financing activities | (32) | - | (32) |
| Net exchange differences | 414 | 1,535 | (1,121) |
| CASH FLOW - TOTAL | (26,109) | (15,927) | (10,182) |
| Net Financial Indebtedness Closing | (133,452) | (117,632) | (15,820) |
At March 31, 2020 the Group's Net Financial Indebtedness(*) was equal to Euro 133,452 thousand compared to Euro 107,343 thousand at December 31, 2019 and Euro 117,632 thousand at March 31, 2019.
Below is a breakdown of net financial indebtedness:
| Values expressed in Euro thousand | March 31, 2020 | December 31, 2019 | March 31, 2019 |
|---|---|---|---|
| NON CURRENT FINANCIAL ASSETS | (4,243) | (4,243) | (4,904) |
| CASH & CASH EQUIVALENTS | (32,161) | (55,136) | (54,294) |
| CURRENT FINANCIAL ASSETS | (473) | (532) | (78) |
| CURRENT FINANCIAL LIABILITIES | 43,367 | 43,326 | 38,273 |
| NON CURRENT FINANCIAL LIABILITIES | 85,496 | 85,056 | 103,335 |
| NET FINANCIAL DEBT (before leasing) | 91,986 | 68,471 | 82,332 |
| LEASING LIABILITIES | 41,466 | 38,872 | 35,300 |
| NET FINANCIAL DEBT | 133,452 | 107,343 | 117,632 |
BUSINESS PERFORMANCE
During the first quarter of 2020 the Group's order acquisition (including after-sale service) amounted to Euro 72.8 million, decreasing of 25.1%, compared to Euro 97.3 million at March 31, 2019.
PRIMA POWER sector's order acquisition amounted to Euro 67.3 million, while the PRIMA ELECTRO ones, considering the ones from customers outside the Group, amounted to Euro 5.5 million.
The consolidated order backlog (not including the after-sale service) at March 31, 2020 amounts to Euro 141.3 million (compared to Euro 166.8 million at March 31, 2019), substantially stable compared to order backlog at December 31, 2019 (Euro 142.3 million). The portfolio includes Euro 136.0 million relating to the PRIMA POWER sector and Euro 5.3 million relating to the PRIMA ELECTRO sector.
At April 30, 2020 order backlog is equal to Euro 144.5 million.
(*) Reconciliation between Group Net Financial Indebtedness (used as a performance indicator) and net financial position required by CONSOB Communication no. DEM/6064293 of 28 July 2006 is provided in the Explanatory Notes.
FORESEEABLE DEVELOPMENTS OF MANAGEMENT
In an unprecedented historical moment the PRIMA INDUSTRIE Group closed the first quarter with a significant business contraction, despite recording a largely positive EBITDA.
The virus containment measures implemented in the various countries, together with the situation of general market uncertainty, are likely to produce a contraction in turnover also in the second quarter of the year. However, we are confident of an improvement in profitability as an effect of the important cost reduction measures implemented in all Group companies.
The high uncertainty relating to the evolution of the crisis worldwide does not currently allow us to provide reliable estimates for the second half of the year; we therefore believe it is correct to wait for the market signals in the coming months to be able to provide an update on expectations.
EVENTS OCCURRING AFTER THE REFERENCE DATE OF THE FINANCIAL STATEMENT WITHDRAWAL OF THE PROPOSAL FOR AUTHORIZATION TO PURCHASE TREASURY STOCK
On April 17, 2020 the Board of Directors, met in a extraordinary session, resolved to withdraw, without changing the agenda of the Shareholders' Meeting called for May 11-12, 2020, the proposal to approve the authorization to purchase treasury stock.
The withdrawn proposal refers to Point 5 of the Agenda ("Resolutions regarding the purchase and disposal of treasury stock pursuant to articles 2357 and 2357-ter of the civil code, subject to revocation of the shareholders' resolution of April 16, 2019"). In particular, the request for authorization to purchase treasury stock is withdrawn and the request for authorization to dispose of treasury stock already in the portfolio is maintained, pursuant to article 2357-ter of the civil code. The request to revoke the Shareholders' Meeting resolution of April 16, 2019 on treasury stock is also unchanged. This decision was dictated by reasons of prudence, following the emergency situation created by the Covid-19 pandemic, which requires a greater focus of the company on industrial and business aspects. In addition, this will eventually allow the Company to take advantage of the SACE guarantees provided by Law Decree April 8, 2020 n. 23 ("Liquidity Decree") should the Company decide to make use of it.
CHAPTER 6. PRIMA INDUSTRIE GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, 2020
| CONSOLIDATED STATEMENT OF FINANCIAL POSITION | ||
|---|---|---|
| Values in thousand euro | March 31, 2020 | December 31, 2019 |
|---|---|---|
| Property, plant and equipment | 72,251 | 69,180 |
| Intangible assets | 133,387 | 134,705 |
| Investments accounted for using the equity method | 36 2 |
394 |
| Other investments | 6,492 | 6,458 |
| Non current financial assets | 4,243 | 4,243 |
| Deferred tax assets | 15,832 | 14,671 |
| NON CURRENT ASSETS | 232,567 | 229,651 |
| Inventories | 142,552 | 127,818 |
| Trade receivables | 81,671 | 85,406 |
| Other receivables | 9,341 | 9,298 |
| Current tax receivables | 7,375 | 8,057 |
| Derivatives | 28 | - |
| Financial assets | 445 | 532 |
| Cash and cash equivalents | 32,161 | 55,136 |
| CURRENT ASSETS | 273,573 | 286,247 |
| Assets held for sale | 4,229 | 4,229 |
| TOTAL ASSETS | 510,369 | 520,127 |
| Capital stock | 26,208 | 26,208 |
| Legal reserve | 5,213 | 5,213 |
| Other reserves | 68,534 | 68,557 |
| Currency translation reserve | 4,709 | 4,003 |
| Retained earnings | 68,000 | 58,954 |
| Net result | (3,293) | 9,046 |
| Stockholders' equity of the Group | 169,371 | 171,981 |
| Minority interest | 2,920 | 3,132 |
| STOCKHOLDERS' EQUITY | 172,291 | 175,113 |
| Interest-bearing loans and borrowings | 120,537 | 117,740 |
| Employee benefit liabilities | 7,004 | 7,017 |
| Deferred tax liabilities | 5,410 | 5,366 |
| Provisions | 222 | 222 |
| Derivatives | 682 | 600 |
| NON CURRENT LIABILITIES | 133,855 | 130,945 |
| Trade payables | 73,533 | 81,290 |
| Advance payments | 37,880 | 34,715 |
| Other payables | 20,629 | 22,061 |
| Interest-bearing loans and borrowings | 49,084 | 48,914 |
| Current tax payables | 3,552 | 6,445 |
| Provisions | 19,519 | 20,644 |
| Derivatives | 26 | - |
| CURRENT LIABILITIES | 204,223 | 214,069 |
| TOTAL STOCKHOLDERS' EQUITY AND LIABILITIES | 510,369 | 520,127 |
CONSOLIDATED INCOME STATEMENT
| Values in euro thousand | March 31, 2020 | March 31, 2019 |
|---|---|---|
| Net revenues | 75,051 | 98,444 |
| Cost of goods sold | (59,215) | (75,395) |
| GROSS MARGIN | 15,836 | 23,049 |
| Research and Development costs | (5,619) | (7,121) |
| Sales and marketing expenses | (6,501) | (7,382) |
| General and administrative expenses | (6,260) | (6,495) |
| OPERATING PROFIT (EBIT) | (2,544) | 2,051 |
| Financial income | 97 | 28 |
| Financial expenses | (1,462) | (1,878) |
| Net exchange differences | (175) | 666 |
| Net result of investments accounted for using the equity method | (32) | - |
| RESULT BEFORE TAXES (EBT) | (4,116) | 867 |
| Taxes | 592 | (459) |
| NET RESULT | (3,524) | 408 |
| - Attributable to Group shareholders | (3,293) | 407 |
| - Attributable to minority shareholders | (231) | 1 |
| RESULT PER SHARE - BASIC (in euro) | (0.31) | 0.04 |
| RESULT PER SHARE - DILUTED (in euro) | (0.31) | 0.04 |
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
| Values in euro thousand | March 31, 2020 | March 31, 2019 |
|---|---|---|
| NET RESULT (A) | (3,524) | 408 |
| Gains/ (Losses) on actuarial defined benefit plans | - | - |
| Tax effect | - | - |
| Total other comprehensive gains/(losses) not to be classified in the Income Statement, net of tax effects (B) |
- | - |
| Gains /(Losses) on cash flow hedges | (30) | (55) |
| Tax effect | 7 | 13 |
| Gains/(Losses) on exchange differences on translating foreign operations | 725 | 1,633 |
| Total other comprehensive gains/(losses) to be classified in the Income Statement, net of tax effects (C) |
702 | 1,591 |
| TOTAL COMPREHENSIVE INCOME (A) + (B) + (C) | (2,822) | 1,999 |
| - Attributable to Group shareholders | (2,610) | 1,850 |
| - Attributable to minority shareholders | (212) | 149 |
CONSOLIDATED STATEMENT OF CHANGES ON SHAREHOLDERS' EQUITY
from January 1, 2019 to March 31, 2019
| Valu es in o th nd eur ousa |
Cap ital k stoc |
Add ition al p aid- al in c apit |
Trea ck sto sury |
Lega l res erve |
Cap ital incr ease - exp ense s |
Stoc ant rese k gr rve |
Cha in th e FV nge of h ing deri edg vati ves |
Oth er r eser ves |
Cur y tran renc ion rese slat rve |
Reta ined earn ings |
Net lt resu |
kho lder Stoc s' equ ity o f th e Gro up |
Min ority inte rest |
STO CKH ' EQU OLD ERS ITY |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Bala t Ja n 01 , 20 19 nce as a |
26,2 08 |
57,5 07 |
(1,9 66) |
4,99 2 |
(1,2 86) |
13 | ) (465 |
15,3 51 |
2,70 6 |
39,3 22 |
24,0 56 |
166 ,438 |
3,33 4 |
169 ,772 |
| Alloc atio n of prio ult t res r yea r ne |
- | - | - | - | - | - | - | - | - | 24,0 56 |
(24, 056 ) |
- | - | - |
| Resu lt of preh ensi ve I com ncom e |
- | - | - | - | - | - | (42) | - | 1,48 5 |
- | 407 | 1,85 0 |
149 | 1,99 9 |
| Bala t Ma r 31 , 20 19 nce as a |
26,2 08 |
57,5 07 |
(1,9 66) |
4,99 2 |
(1,2 86) |
13 | ) (507 |
15,3 51 |
4,19 1 |
63,3 78 |
407 | 168 ,288 |
3,48 3 |
171 ,77 1 |
from January 1, 2020 to March 31, 2020
| es in Valu o th nd eur ousa |
Cap ital stoc k |
Add al p aid- ition in c apit al |
Trea sto ck sury |
Lega l res erve |
ital Cap incr ease - exp ense s |
k gr Stoc ant rese rve |
Cha in th e FV nge of h ing deri edg vati ves |
Oth er r eser ves |
Cur renc y tran ion rese slat rve |
ined Reta earn ings |
Net lt resu |
Stoc s' equ kho lder ity o f th e Gro up |
Min ority inte rest |
STO CKH ' EQU OLD ERS ITY |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Bala t Ja n 01 , 20 20 nce as a |
26,2 08 |
57,5 07 |
(1,9 66) |
5,21 3 |
(1,2 86) |
13 | ) (439 |
14,7 28 |
4,00 3 |
58,9 54 |
9,04 6 |
171 ,98 1 |
3,13 2 |
175 ,113 |
| Alloc atio n of prio t res ult r yea r ne |
- | - | - | - | - | - | - | - | - | 9,04 6 |
(9,0 46) |
- | - | - |
| lt of preh Resu ensi ve I com ncom e |
- | - | - | - | - | - | (23) | - | 706 | - | (3,2 93) |
(2,6 10) |
) (212 |
(2,8 22) |
| Bala t Ma r 31 , 20 20 nce as a |
26,2 08 |
57,5 07 |
(1,9 66) |
5,21 3 |
(1,2 86) |
13 | ) (462 |
14,7 28 |
4,70 9 |
68,0 00 |
(3,2 93) |
169 ,37 1 |
2,92 0 |
172 ,29 1 |
CONSOLIDATED CASH FLOW STATEMENT
| Values in Euro thousand | March 31, 2020 | March 31, 2019 |
|---|---|---|
| Net result | (3,524) | 408 |
| Adjustments (sub-total) | (15,887) | (13,714) |
| Depreciation, impairment & write-off | 5,645 | 5,335 |
| Net change in deferred tax assets and liabilities | (1,117) | (712) |
| Change in employee benefits | (13) | (38) |
| Change in inventories | (14,734) | (16,658) |
| Change in trade receivables | 3,735 | 16,756 |
| Change in trade payables and advances | (4,592) | (15,666) |
| Net change in other receivables/payables and other assets/liabilities | (4,811) | (2,731) |
| Cash Flows from (used in) operating activities | (19,411) | (13,306) |
| Cash flow from investments | ||
| Acquisition of tangible fixed assets (*) | (1,900) | (1,286) |
| Acquisition of intangible fixed assets | (113) | (267) |
| Capitalization of development costs | (1,190) | (1,369) |
| Net disposal of fixed assets (**) | - | 143 |
| Net result of investments accounted for using the equity method | 32 | - |
| Cash Flows from (used in) investing activities | (3,171) | (2,779) |
| Cash flow from financing activities | ||
| Change in other financial assets/liabilities and other minor items | 141 | 432 |
| Increases in loans and borrowings (including bank overdrafts) | 6,498 | 9,036 |
| Repayment of loans and borrowings (including bank overdrafts) | (6,170) | (9,892) |
| Repayments in financial lease liabilities | (1,406) | (1,179) |
| Cash Flows from (used in) financing activities | (937) | (1,603) |
| Cash Flows from (used in) change of minority shareholders | - | - |
| Foreign exchange translation differences | 544 | 904 |
| Net change in cash and equivalents | (22,975) | (16,784) |
| Cash and equivalents beginning of period | 55,136 | 71,078 |
| Cash and equivalents end of period | 32,161 | 54,294 |
| Additional Information to the Consolidated Statement of Cash-Flow | March 31, 2020 | March 31, 2019 | |
|---|---|---|---|
| Values in euro thousand | |||
| Taxes paid | 461 | 205 | |
| Interests paid | 626 | 872 |
(*) Not included leases and included assets held for sale.
(**) Included assets held for sale.
Explanatory Notes to Consolidated Financial Statements March 31, 2020 tatements
7
CHAPTER 7. EXPLANATORY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AT MARCH 31, 2020
ACCOUNTING TABLES FORM AND CONTENT
The Interim Financial Report of the Prima Industrie Group at March 31, 2020 was prepared on the basis that it is an ongoing concern and in accordance with the International Financial Reporting Standards (IFRS) and with applicable Italian statutory regulations.
The report includes the Consolidated Financial position, the Income Statement, the Comprehensive Income Statement, the Cash Flow Statement, the Changes in Shareholders' Equity and the Explanatory Notes.
The Group presents the income statement according to functional areas, otherwise referred to as "at cost of the sale". This cost analysis is based on cost destination and is considered more representative than expenditure type. The form chosen conforms to internal reporting and business management procedures and is in line with international practice within the sector in which the Group operates.
"Cost of goods sold" includes costs relating to the functional areas that participated directly or indirectly in the generation of revenues with the sale of goods or services. It includes all costs for materials, processing and overheads directly attributable to production.
DRAFTING PRINCIPLES AND CRITERIA
ACCOUNTING CRITERIA AND PRINCIPLES OF CONSOLIDATION
The accounting criteria and principles of consolidation adopted for setting out the condensed consolidated balance sheet at March 31, 2020 are compatible with those used for the consolidated annual balance sheet at December 31, 2019, to which reference is made subject to the new standards/interpretations adopted by the Group starting from January 1, 2020, as well as the adjustments required by the nature of the interim findings.
ON-GOING CONCERN
The condensed consolidated balance sheet at March 31, 2020 has been set out on the assumption of the company continuing trading in that it is reasonably expected that PRIMA INDUSTRIE will continue with its operational activities in the foreseeable future.
USE OF ACCOUNTING ESTIMATES
The drawing up of an interim balance sheet requires the carrying out of estimates and assumptions which have effect on the values of revenues, costs, assets and liabilities of the balance sheet and on the information report relating to the potential assets and liabilities on the date of the interim balance sheet. If in the future, such estimates and assumptions which are based on the best evaluation by management, should differ through effective circumstances, they will be modified in an appropriate manner in the period in which the circumstance themselves vary. In particular, with regard to the condensed consolidated balance sheet of March 31, 2020, the taxes on income for the period of the individual consolidated companies are determined on the basis of the best estimate possible in relation to the available information, and on a reasonable forecast of the progress of the financial year up to the end of the tax period.
EXPLANATORY NOTES
The data shown in the explanatory notes, if not shown otherwise, are expressed in Euro thousand.
SECTOR REPORT
In accordance with IFRS 8, and in line with the Group's management and control model, the Group's management has identified PRIMA POWER and PRIMA ELECTRO as the operating divisions that are subject to sector reports.
The PRIMA POWER Division includes the design, manufacture and sale of:
- laser machines to cut, weld and punch metallic components, three-dimensional (3D) and twodimensional (2D), and
- sheet metal processing machines that use mechanical tools (punchers, integrated punching and shearing systems, integrated punching and laser cutting systems, panel bending, bending machines and automated systems).
The PRIMA ELECTRO Division includes the development, construction and sale of electronic power and control components, and hi-power laser sources for industrial applications, intended for the machines of the Group and third customers.
The PRIMA ADDITIVE division, established in the second half of 2018 and dedicated to the design, production and sale of turnkey solutions for the main Additive Manufacturing technologies: Powder Bed Fusion – PBF and Direct Metal Deposition – DMD, and the relative support and services for its applications .The division boasts a strong team of highly specialised young experts, qualified managers and engineers. The purpose of this new division is to support the development of these new technologies and enter the market with new machine ranges. Thanks to this investment, the new activities will be focused on additive manufacturing and, more generally, the pursuit of technological innovation.
The financial and equity data of PRIMA ADDITIVE are currently negligible and do not meet the thresholds set out in IFRS 8 for disclosure purposes and therefore this division's information is, currently, aggregated to the data for PRIMA POWER Division.
The following tables show the financial information directly attributable to the two divisions PRIMA POWER and PRIMA ELECTRO, as described above
| Prima Power | Prima Electro | Elimination | Prima Industrie Group | |||||
|---|---|---|---|---|---|---|---|---|
| Values in euro thousand | Mar 31, 2020 | Mar 31, 2019 | Mar 31, 2020 | Mar 31, 2019 | Mar 31, 2020 | Mar 31, 2019 | Mar 31, 2020 | Mar 31, 2019 |
| Net revenues | 69,356 | 90,457 | 11,668 | 13,796 | (5,973) | (5,809) | 75,051 | 98,444 |
| Cost of goods sold | (54,710) | (70,224) | (10,328) | (11,113) | 5,823 | 5,942 | (59,215) | (75,395) |
| GROSS MARGIN | 14,646 | 20,233 | 1,340 | 2,683 | (150) | 133 | 15,836 | 23,049 |
| Research and Development costs | (4,203) | (5,849) | (1,416) | (1,374) | - | 102 | (5,619) | (7,121) |
| Sales and marketing expenses | (6,163) | (6,767) | (338) | (615) | - | - | (6,501) | (7,382) |
| General and administrative expenses | (5,518) | (5,518) | (748) | (979) | 6 | 2 | (6,260) | (6,495) |
| OPERATING PROFIT (EBIT) | (1,238) | 2,099 | (1,162) | (285) | (144) | 237 | (2,544) | 2,051 |
| Net financial expenses | (1,297) | (1,666) | (67) | (184) | (1) | - | (1,365) | (1,850) |
| Net exchange differences | (259) | 657 | 84 | 9 | - | - | (175) | 666 |
| Net result of investments accounted for using the equity method | (32) | - | - | - | - | - | (32) | - |
| RESULT BEFORE TAXES (EBT) | (2,826) | 1,090 | (1,145) | (460) | (145) | 237 | (4,116) | 867 |
| Taxes | 287 | (474) | 266 | 62 | 39 | (47) | 592 | (459) |
| NET RESULT | (2,539) | 616 | (879) | (398) | (106) | 190 | (3,524) | 408 |
| - Attributable to Group shareholders | (2,308) | 615 | (879) | (398) | (106) | 190 | (3,293) | 407 |
| - Attributable to minority shareholders | (231) | 1 | - | - | - | - | (231) | 1 |
| Prima Power | Prima Electro | Elimination | Prima Industrie Group | |||||
|---|---|---|---|---|---|---|---|---|
| Values in euro thousand | Mar 31, 2020 | Dec 31, 2019 | Mar 31, 2020 | Dec 31, 2019 | Mar 31, 2020 | Dec 31, 2019 | Mar 31, 2020 | Dec 31, 2019 |
| Property, plant and equipment | 58,570 | 55,275 | 13,681 | 13,905 | - | - | 72,251 | 69,180 |
| Intangible assets | 119,780 | 121,443 | 13,819 | 13,474 | (212) | (212) | 133,387 | 134,705 |
| Investments accounted for using the equity method | 36 2 |
394 | - | - | - | - | 362 | 394 |
| Other investments | 17,387 | 17,353 | 50 | 49 | (10,945) | (10,944) | 6,492 | 6,458 |
| Non current financial assets | 2,728 | 2,728 | 1,515 | 1,515 | - | - | 4,243 | 4,243 |
| Deferred tax assets | 10,722 | 9,957 | 4,769 | 4,413 | 341 | 301 | 15,832 | 14,671 |
| NON CURRENT ASSETS | 209,549 | 207,150 | 33,834 | 33,356 | (10,816) | (10,855) | 232,567 | 229,651 |
| Inventories | 117,954 | 103,473 | 25,801 | 25,404 | (1,203) | (1,059) | 142,552 | 127,818 |
| Trade receivables | 77,083 | 80,310 | 14,141 | 14,991 | (9,553) | (9,895) | 81,671 | 85,406 |
| Other receivables | 6,933 | 7,497 | 2,406 | 1,797 | 2 | 4 | 9,341 | 9,298 |
| Current tax receivables | 6,009 | 7,253 | 1,779 | 1,217 | (413) | (413) | 7,375 | 8,057 |
| Derivatives | 28 | - | - | - | - | - | 28 | - |
| Financial assets | 11,021 | 9,066 | - | - | (10,576) | (8,534) | 445 | 532 |
| Cash and cash equivalents | 30,529 | 52,611 | 1,632 | 2,525 | - | - | 32,161 | 55,136 |
| CURRENT ASSETS | 249,557 | 260,210 | 45,759 | 45,934 | (21,743) | (19,897) | 273,573 | 286,247 |
| Assets held for sale | 229 | 229 | 4,000 | 4,000 | - | - | 4,229 | 4,229 |
| TOTAL ASSETS | 459,335 | 467,589 | 83,593 | 83,290 | (32,559) | (30,752) | 510,369 | 520,127 |
| STOCKHOLDERS' EQUITY | 146,778 | 148,902 | 37,589 | 38,180 | (12,076) | (11,969) | 172,291 | 175,113 |
| Interest-bearing loans and borrowings | 110,506 | 107,958 | 20,607 | 18,239 | (10,576) | (8,457) | 120,537 | 117,740 |
| Employee benefit liabilities | 5,364 | 5,333 | 1,640 | 1,685 | - | (1) | 7,004 | 7,017 |
| Deferred tax liabilities | 3,554 | 3,541 | 1,856 | 1,825 | - | - | 5,410 | 5,366 |
| Provisions | 222 | 222 | - | - | - | - | 222 | 222 |
| Derivatives | 682 | 600 | - | - | - | - | 682 | 600 |
| NON CURRENT LIABILITIES | 120,328 | 117,654 | 24,103 | 21,749 | (10,576) | (8,458) | 133,855 | 130,945 |
| Trade payables | 69,632 | 79,995 | 13,359 | 11,224 | (9,458) | (9,929) | 73,533 | 81,290 |
| Advance payments | 37,473 | 34,232 | 95 | 171 | 312 | 312 | 37,880 | 34,715 |
| Other payables | 18,368 | 19,232 | 2,262 | 2,829 | (1) | - | 20,629 | 22,061 |
| Interest-bearing loans and borrowings | 44,149 | 41,080 | 5,021 | 7,867 | (86) | (33) | 49,084 | 48,914 |
| Current tax payables | 3,874 | 6,550 | 98 | 315 | (420) | (420) | 3,552 | 6,445 |
| Provisions | 18,707 | 19,944 | 1,066 | 955 | (254) | (255) | 19,519 | 20,644 |
| Derivatives | 26 | - | - | - | - | - | 26 | - |
| CURRENT LIABILITIES | 192,229 | 201,033 | 21,901 | 23,361 | (9,907) | (10,325) | 204,223 | 214,069 |
| TOTAL STOCKHOLDERS' EQUITY AND LIABILITIES | 459,335 | 467,589 | 83,593 | 83,290 | (32,559) | (30,752) | 510,369 | 520,127 |
CONSOLIDATED FINANCIAL POSITION
Property, plant and equipment on March 31, 2020 are equal to Euro 72,251 thousand an increase of Euro 3,071 thousand compared with December 31, 2019.
The intangible assets on March 31, 2020 are equal to Euro 133,387 thousand and decreased by Euro 1,318 thousand compared with December 31, 2019. The most significant item is represented by Goodwill, which on March 31, 2020 amounts to Euro 97,937 thousand.
Goodwill accounted for refers to the larger value paid with respect to the fair value of the net assets acquired.
The table below shows the book value of the goodwill allocated to each of the units generating financial flow.
| CASH GENERATING UNIT | BOOK VALUE GOODWILL March 31, 2020 |
BOOK VALUE GOODWILL December 31, 2019 |
||
|---|---|---|---|---|
| PRIMA POWER | 97,784 | 97,741 | ||
| PRIMA ELECTRO - BU Electronics | 153 | 153 | ||
| TOTAL | 97,937 | 97,894 |
Goodwill (being an asset with an undefined life) is not subject to depreciation and is subject to verification at least annually of the reduction of value (impairment test). On December 31, 2019 the Group carried out the impairment test on the value of the main elements of goodwill, for which attention is drawn to the Consolidated Financial Statements at December 31, 2019. Regarding the above mentioned goodwill, as no indicators of loss in value have appeared compared with the financial statements closed on December 31, 2019, it was not considered necessary to update the related impairment tests.
The item Investments accounted for using the equity method refers to the shareholding in 3D NT held by PRIMA INDUSTRIE SpA (19.9%) and amounts to Euro 362 thousand. The change of Euro 32 thousand compared to the previous year refers to the share of the result for the period.
Other investments amounted to Euro 6,492 thousand; the increase of Euro 34 thousand relates to the positive exchange rate differences for the stake in Lead Laser held by Prima Power Suzhou.
The deferred tax assets amounts to Euro 15,832 thousand, showing an increase compared with the previous financial year of Euro 1,161 thousand. The accounting statement of prepaid taxes has been carried out, only where suppositions of recoverability exist. The valuation on the recoverability of anticipated taxes takes into account the expected profits in future financial years. The anticipated taxes calculated on the losses carried forward have been recognized in the measure at which it is probable that a future taxable income against which they might be recovered. In light of the above no elements have been identified which could modify the valuations made with regard to the recoverability of deferred tax assets.
The following table shows the composition of inventories at March 31, 2020 and at December 31, 2019.
| INVENTORIES | March 31, 2020 | December 31, 2019 |
|---|---|---|
| Raw materials | 47,080 | 42,603 |
| Semi-finished goods | 27,000 | 24,260 |
| Finished goods | 77,814 | 70,787 |
| (Inventory provisions) | (9,342) | (9,832) |
| TOTAL | 142,552 | 127,818 |
The net value of inventories on March 31, 2020 shows an increase equal to Euro 14,734 thousand compared with December 31, 2019.
Trade receivables at March 31, 2020 amounted to Euro 81,671 thousand in decrease of Euro 3,735 thousand compared to December 31, 2019.
Other receivables on March 31, 2020 are equal to Euro 9,341 thousand and increased by Euro 43 thousand compared with December 31, 2019. These receivables mainly refer to advance payments to suppliers, R&D grants due for receipt, accrued income and prepaid expenses and advances to employees.
The current tax receivables amount to Euro 7,375 thousand and are decreased of Euro 682 thousand compared with December 31, 2019. Tax assets mainly include VAT receivables for Euro 3,182 thousand (Euro 2,663 thousand at December 31, 2019), tax credit for R&D for Euro 841 thousand (Euro 2,151 thousand at December 31, 2019), direct tax advances for Euro 2,268 thousand (Euro 2,168 thousand on December 31, 2019), a tax receivable amounting to Euro 970 thousand following the submission of claims for IRES reimbursement (IRAP deductions for IRES purposes for the years 2007-2011) which arose in February 2013, other receivables for minor tax assets for Euro 67 thousand (Euro 59 thousand on December 31, 2019) and withholding taxes for Euro 47 thousand (Euro 46 thousand on December 31, 2019).
On March 31, 2020 the net financial position (*) of the Group was negative for an amount of Euro 137,695 thousand increasing of Euro 26,109 thousand compared to December 31, 2019 (negative for Euro 111,586 thousand).
For a better understanding of the variation in the net financial position achieved during the first three months of 2020, refer to the consolidated cash flow statement of the period.
As required by the Consob communication No. DEM/6064293 of July 28, 2006, the net financial debt at March 31, 2020 and December 31, 2019 is shown in the following table, determined with the indicated criteria in the CESR (Committee of European Securities Regulators) Recommendations of February 10, 2005 "Recommendations for the uniform activation of the European Commission Regulation on Information Sheets" and quoted by Consob itself.
| NET FINANCIAL POSITION | March 31, 2020 | December 31, 2019 | Variations | |
|---|---|---|---|---|
| A | CASH | 32,161 | 55,136 | (22,975) |
| B | OTHER CASH AND CASH EQUIVALENTS | - | - | - |
| C | SECURITIES HELD FOR TRADING | - | - | - |
| D | CASH ON HAND (A+B+C) | 32,161 | 55,136 | (22,975) |
| E | CURRENT FINANCIAL RECEIVABLES | 473 | 532 | (59) |
| F | CURRENT BANK DEBTS | 4,464 | 4,141 | 323 |
| G | CURRENT PART OF NON-CURRENT INDEBTEDNESS | 35,782 | 35,250 | 532 |
| H | BOND ISSUED | 34 | 691 | (657) |
| I | OTHER CURRENT FINANCIAL DEBTS | 8,830 | 8,832 | (2) |
| J | CURRENT FINANCIAL INDEBTEDNESS (F+G+H+I) | 49,110 | 48,914 | 196 |
| K | NET CURRENT FINANCIAL INDEBTEDNESS (J-D-E) | 16,476 | (6,754) | 23,230 |
| L | NON-CURRENT BANK DEBTS | 53,487 | 53,059 | 428 |
| M | BOND ISSUED | 24,817 | 24,806 | 11 |
| N | OTHER NON-CURRENT FINANCIAL DEBTS | 42,915 | 40,475 | 2,440 |
| O | NON-CURRENT FINANCIAL INDEBTEDNESS (L+M+N) | 121,219 | 118,340 | 2,879 |
| P | NET FINANCIAL POSITION (K+O) | 137,695 | 111,586 | 26,109 |
Reconciliation with the Group's net financial debt (used as performance indicator) shown in the Interim Management Report is as follows:
| March 31, 2020 | December 31, 2019 | |
|---|---|---|
| Net financial position com. CONSOB n. DEM/6064293 | 137,695 | 111,586 |
| Term deposit Smilla | (4,233) | (4,233) |
| Loan Caretek | (10) | (10) |
| Net financial indebtedness | 133,452 | 107,343 |
(*) Reconciliation between Group net financial position required by CONSOB Communication no. DEM/6064293 of July 28, 2006 and net financial debt (used as a performance indicator) is provided in a specific table in this Explanatory Note.
| Dec 31, 2019 | Variations from cash flow |
Variations not in cash | ||||
|---|---|---|---|---|---|---|
| Values in Euro thousand | Issues | Exchange rate effect |
Fair value | March 31, 2020 | ||
| Financial debts | 102,286 | 974 | - | 44 | - | 103,304 |
| Bond issued | 25,497 | (646) | - | - | - | 24,851 |
| Leasing | 38,871 | (1,406) | 4,092 | (91) | - | 41,466 |
| Derivatives | 600 | - | - | - | 108 | 708 |
| TOTAL | 167,254 | (1,078) | 4,092 | (47) | 108 | 170,329 |
As required by the amendment to IAS 7, the following table shows the changes in liabilities arising from loan activities, whether arising from changes in cash flows or changes not in cash.
At March 31, 2020, the value of non-current assets held for sale amounts to Euro 4,229 thousand. The non-current assets for sale at March 31, 2020 refers to some properties under construction, owned by the parent company Prima Industrie SpA in Mantua, Italy and a building in Brescia and an investment for Euro 4,000 thousand in OSAIcnc held by Prima Electro SpA.
The net equity of the PRIMA INDUSTRIE Group has decreased compared to the end of last financial year of Euro 2,822 thousand. For more details, see the table consolidated statement of changes on shareholders' equity
The item employee benefit liabilities on March 31, 2020 is equal to Euro 7,004 thousand and is decreased compared to December 31, 2019 of Euro 13 thousand, this item includes:
- the Severance Indemnity (TFR) recognized by Italian companies for employees;
- a loyalty premium recognized by the Parent Company and by PRIMA ELECTRO for their own employees;
- a pension fund recognized by PRIMA POWER GmbH and by PRIMA POWER France Sarl to their employees;
- a liability for employee benefits accounted for by PRIMA INDUSTRIE SpA relevant the South Korea branch office.
The deferred tax liabilities amounts to Euro 5,410 thousand, showing an increase of Euro 44 thousand compared with December 31, 2019.
The provisions are equal to Euro 19,741 thousand and decreased by Euro 1,125 thousand compared with December 31, 2019.
Non-current provisions refer exclusively to the agent client indemnity provision and amounts comprehensively to Euro 222 thousand.
Current provisions mainly relate to product warranties (equal to Euro 12,818 thousand) and to the best estimate of costs still to be incurred for the completion of certain activities ancillary to the sale of machinery already sold (equal to Euro 6,207 thousand). The warranty provision relates to the provisions for technical interventions on the Group's products and is considered appropriate in comparison to the warranty costs which have to be provided for.
The other provisions amounting to Euro 494 thousand refer to legal, fiscal procedures and other disputes; these provisions represent the best estimate by management of the liabilities which must be accounted for with regard to legal, fiscal proceedings occasioned during normal operational activity with regard to dealers, clients, suppliers or public authorities.
The value of trade payables decreased compared to December 31, 2019 by Euro 7,757 thousand.
The heading advance payments increased compared to December 31, 2019 by Euro 3,165 thousand. The heading other payables is decreased by Euro 1,432 thousand compared to December 31, 2019 and includes social security and welfare payables, payables due to employees, accruals and deferrals and other minor payables.
Current tax payables on March 31, 2020 amounts to Euro 3,552 thousand which results in a reduction of Euro 2,893 thousand compared with December 31, 2019.
CONSOLIDATED INCOME STATEMENT
As already stated above, the Group presents the income statement by ""function". In accordance with paragraph 104 of "IAS 1 – Presentation of Financial Statements", personnel costs amount to Euro 25,889 thousand (Euro 29,656 thousand at March 31, 2019). Depreciation and impairment at March 31, 2020 amount to Euro 5,645 thousand (at March 31, 2019 amount to Euro 5,335 thousand).
The revenues from sales and services have been commented on Chapter 5 of this document "Group Interim Management Report" in the paragraph "Economic performance".
The financial management of the first three months of 2020 shows a negative result of Euro 1,540 thousand.
| FINANCIAL RESULTS | March 31, 2020 | March 31, 2019 |
|---|---|---|
| Financial income | 97 | 28 |
| Financial expenses | (1,462) | (1,878) |
| Net financial expenses | (1,365) | (1,850) |
| Net exchange differences | (175) | 666 |
| Total Financial Results | (1,540) | (1,184) |
The net result of investments accounted for using the equity method presented a loss of Euro 32 thousand and refers to the share of the result for the period of the related 3D NT.
Taxes in the first three months of 2020 result in a positive net balance of Euro 592 thousand. The balance of current and deferred taxes is positive by Euro 597 thousand, and other taxes including those relating to prior years, are equal to Euro -5 thousand.
The result per share on March 31, 2020, negative by Euro 0.31 (positive by Euro 0.04 on March 31, 2019) is calculated by dividing the profits attributable to the shareholders of the parent company by the average number of ordinary shares in circulation during the financial year equal to 10,467,500.
Diluted result per share at March 31, 2020 were negative for Euro 0.31 (positive for Euro 0.04 at March 31, 2019), calculated by dividing the result attributable to the shareholders of the Parent Company by the weighted average number of shares in circulation, adjusted to take account of the effects of all potential ordinary shares with a diluting effect. Shares linked to the stock grant plan were considered to have a potential diluting effect.
SIGNIFICANT NON-RECURRING EVENTS AND TRANSACTIONS
The table below summarises non-recurring items that have had a negative impact on the Income Statement during the first quarter of 2020 for a total of Euro 683 thousand. The item COVID-19 concerns the expenses incurred by the Group mainly for the purchase of safety devices, environments sanitizing and any costs incurred for the cancellation of business trip (both international and national) of the employees and commercial events.
| Significant non-recurring events and transactions (values expressed in Euro thousand) |
Gross Margin | Sales and marketing expenses |
General and administrative expenses |
Total as at Mar 31, 2020 |
Total as at Mar 31, 2019 |
Variation between 2020 and 2019 |
|---|---|---|---|---|---|---|
| COVID-19 | (98) | (17) | (12) | (127) | - | (127) |
| Reorganization/Restructuring | (61) | - | (88) | (149) | (473) | 324 |
| Disputes tax/legal and customer penalties | (312) | (30) | (65) | (407) | (135) | (272) |
| Other items | - | - | - | - | (8) | 8 |
| EBIT | (471) | (47) | (165) | (683) | (616) | (67) |
| Financial receivables devaluation | - | - | - | - | (118) | 118 |
| EBT | (471) | (47) | (165) | (683) | (734) | 51 |
ANNEXES
ANNEX 1 – CONSOLIDATION AREA
| PRIMA POWER | REGISTERED OFFICE | SHARE CAPITAL | OWNERSHIP | CONSOLIDATION METHOD |
|---|---|---|---|---|
| FINN POWER OY | Nuppiväylä 7, 60100 Seinäjoki, FINLAND | € 30.000.000 | 100% Line-by-line method | |
| PRIMA POWER LASERDYNE LLC | 7105, Northland Terrace North, Brooklyn Park, MN 55428, U.S.A. | USD 200.000 | 100% Line-by-line method | |
| PRIMA POWER SUZHOU Co. LTD. | 459 Xingrui Road, Wujiang Ec. & Tech. Develp. Zone, Suzhou City Jiangsu Prov. CHINA |
USD 15.850.000 | 70% Line-by-line method | |
| PRIMA POWER NORTH AMERICA Inc. | 555W Algonquin Rd., Arlington Heights, IL 60005, U.S.A. | USD 10.000 | 100% Line-by-line method | |
| PRIMA POWER CANADA Ltd. | 1500 Upper Middle Rd W Suite 313, Oakville Ontario , L6M 0C2, Canada | CAD 200 | 100% Line-by-line method | |
| PRIMA POWER MEXICO S DE RL DE CV | Campo Real, 121 FRACC. Valle Real, Saltillo, Coahuila C.P. 25198 MEXICO |
USD 250 | 100% Line-by-line method | |
| PRIMA POWER GmbH | Am Gfild 9, 85375 Neufahrn, GERMANY | € 500.000 | 100% Line-by-line method | |
| PRIMA POWER IBERICA S.L. | C/Primero de Mayo 13-15, 08908 L'Hospitalet de Llobregat, Barcelona, SPAIN |
€ 6.440.000 | 100% Line-by-line method | |
| PRIMA POWER CENTRAL EUROPE Sp.z.o.o. | Ul. Holenderska 6 - 05 - 152 Czosnów Warsaw, POLAND | PLN 350.000 | 100% Line-by-line method | |
| OOO PRIMA POWER | Ordzhonikidze str., 11/A - 115419, Moscow - RUSSIAN FEDERATION | RUB 4.800.000 | 100% Line-by-line method | |
| PRIMA POWER FRANCE Sarl | Espace Green Parc , Route de Villepècle, 91280 St. Pierre du Perray, FRANCE |
€ 960.015 | 100% Line-by-line method | |
| PRIMA POWER MAKINA TICARET LIMITED SIRKETI | Soğanlık Yeni Mah. Balıkesir Cad. Uprise Elite Teras Evler B2 A Dubleks Gül Blok Daire:4 Kartal – Istanbul, TURKEY |
TRY 1.470.000 | 100% Line-by-line method | |
| PRIMA POWER UK LTD | Unit 1, Phoenix Park, Bayton Road, Coventry CV7 9QN, UNITED KINGDOM |
GBP 1 | 100% Line-by-line method | |
| PRIMA POWER INDIA PVT. LTD. | Plot No A-54/55, H Block, MIDC, Pimpri, Pune - 411018, Maharashtra, INDIA |
Rs. 7.000.000 | 99,99% Line-by-line method | |
| PRIMA POWER SOUTH AMERICA Ltda | Av Fuad Lutfalla, 1,182 – Freguesia do Ó - 02968-00, Sao Paulo BRAZIL | R\$ 7.698.699 | 99,99% Line-by-line method | |
| PRIMA POWER CHINA Company Ltd. | Room 2006, Unit C, Tower 1, Wangjing SOHO, Chaoyang District, Beijing, P.R. CHINA |
RMB 2.038.778 | 100% Line-by-line method | |
| PRIMA POWER AUSTRALASIA Pty. LTD. | Suite 2, First Floor, 100 Queen street, PO Box 878, Campbelltown, NSW, 2560 AUSTRALIA |
A\$ 1 | 100% Line-by-line method |
| PRIMA ELECTRO | REGISTERED OFFICE | SHARE CAPITAL | OWNERSHIP | CONSOLIDATION METHOD |
|---|---|---|---|---|
| PRIMA ELECTRO S.p.A. | Strada Carignano 48/2, 10024 Moncalieri, (TO) ITALY | € 15.000.000 | 100% Line-by-line method | |
| CONVERGENT - PHOTONICS | 711 East Main Street, Chicopee, MA 01020, U.S.A. | USD 24.119.985 | 100% Line-by-line method | |
| PRIMA ELECTRO SUZHOU Co.Ltd. | 459 Xingrui Road, Wujiang Ec. & Tech. Develp. Zone, Suzhou City Jiangsu Prov. CHINA |
€ 300.000 | 100% Line-by-line method |
ANNEX 2 – "NON-GAAP" PERFORMANCE INDICATORS
The Management of PRIMA INDUSTRIE assesses the performance of the Group and its business segments using a number of non-IFRS indices. Below are described the components of each of these indices:
ORDERS: includes agreements entered into with customers during the reference period than can be considered part of the order books.
BACKLOG: this is the sum of orders from the previous period and current confirmed orders, net of revenues in the reference period.
EBIT: Operating Profit.
EBITDA: the Operating Profit, as shown in the income statement, gross of "Amortization", "Write-downs and Impairment". This index is also referred to as "Gross Operating Margin".
Adjusted EBITDA, EBIT and EBT (hereinafter "Adj") correspond to the same alternative performance indicators net of non-recurring items.
EBITDA Margin: calculated as the ratio between EBITDA and revenues.
FCF (Free Cash Flow): is the cash flow from operations that is available after the company has made the necessary reinvestment in new fixed assets; it is the sum of cash flow from operations and the cash flow from investments.
Workforce: is the number of employees on the books on the last day of the reference period.
Net financial indebtedness includes cash and cash equivalents, financial receivables (current and noncurrent), net of financial payables (current and non-current) and the fair value of derivatives. Reconciliation with the net financial position required by CONSOB Communication no. DEM/6064293 of 28 July 2006 is provided in the Notes to the Interim Financial Report.
Revenues at constant exchange rates are stated by applying the average exchange rates of the previous year to the revenues of the current year in the local currency.
ANNEX 3 – CURRENCY EXCHANGE RATE
The exchange rates applied in converting the financial statements to a currency other than the Euro are, for the purpose of consolidation, the following:
| AVERAGE EXCHANGE RATE | SPOT EXCHANGE RATE | |||
|---|---|---|---|---|
| CURRENCY | March 31, 2020 | March 31, 2019 | March 31, 2020 | December 31, 2019 |
| US DOLLAR | 1.1023 | 1.1356 | 1.0956 | 1.1234 |
| CHINESE RENMINBI | 7.6936 | 7.6619 | 7.7784 | 7.8205 |
| RUSSIAN RUBLE | 73.7020 | 74.8842 | 85.9486 | 69.9563 |
| TURKISH LIRA | 6.7391 | 6.1079 | 7.2063 | 6.6843 |
| POLISH ZLOTY | 4.3226 | 4.3020 | 4.5506 | 4.2568 |
| POUND STERLING | 0.8616 | 0.8723 | 0.8864 | 0.8508 |
| BRAZILIAN REAL | 4.9111 | 4.2768 | 5.7001 | 4.5157 |
| INDIAN RUPEE | 79.8511 | 80.0730 | 82.8985 | 80.1870 |
| AUSTRALIAN DOLLAR | 1.6778 | 1.5943 | 1.7967 | 1.5995 |
| CANADIAN DOLLAR | 1.4808 | 1.5098 | 1.5617 | 1.4598 |
| MEXICAN PESO | 22.0446 | 21.8038 | 26.1772 | 21.2202 |
ATTESTATION OF THE CONSOLIDATED FINANCIAL STATEMENTS AT MARCH 31, 2020
Declaration pursuant to article 154-bis, paragraph 2 of Part IV, Title III, Chapter II, Section V bis of Legislative Decree of February 24, 1998, no. 58: Consolidated Law on Financial Intermediation, pursuant to Articles 8 and 21 of the Law of February 6, 1996, No. 52.
The manager responsible for preparing the company accounting documents of the PRIMA INDUSTRIE Group, Davide Danieli, declares, in accordance with the provisions of the second paragraph of Art. 154 bis, Part IV, Title III, Chapter II, Section V bis of Legislative Decree of February 24, 1998, No. 58, that the accounting information contained in this Interim Financial Report at March 31, 2020 corresponds to the document results, books and accounting records.